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April 25 2012 issue

Wednesday, April 25, 2012
Sandler, Travis & Rosenberg Trade Report

Better Trade Statistics Can Help Improve Trade Policy Decisions, WTO Says

The World Trade Organization has recently made available to the public a new tool aimed at helping countries make more accurate and more beneficial trade policy decisions. “Instead of counting the gross value of goods and services exchanged,” the WTO states, the World Input-Output Database “reveals the value-added embodied in these goods and services as they are traded internationally.” The WTO asserts that these findings are significant because they “change the perception of the competitiveness of certain sectors in some countries,” which could lead to trade policy changes.

At an April 16 conference sponsored by the European Commission to mark the launch of the WIOD, WTO Deputy Director-General Alejandro Jara said this new tool provides “the means to measure the strength and complexity of the internationalization of global supply chains” and “also allows us to better understand the complementarities and rivalries between the worlds of yesterday and today.” He pointed out that developing countries account for an ever-larger share of world trade and are continuing to experience economic growth rates above those of most developed countries, in part due to the “increasingly pervasive and prominent” practice of “slicing up production processes internationally.” This situation has yielded accusations of “shipping jobs overseas” and “unfair competition” that in turn have increased pressures for policymakers to impose new trade barriers and restrictions.

Jara indicated that these tensions are exacerbated by a reliance on trade statistics that do not accurately reflect the modern globalized supply chain. Whereas current data focuses on gross trade flows (imports vs. exports), in fact the value of many of today’s products includes activities performed in multiple countries. “This reality has enormous implications for the way we think of trade impacts,” Jara said. “From an economy-wide perspective, it is wrong to think uni-dimensionally of imports sucking jobs out of the economy and exports creating them. The picture is far more complicated than that.”

A proper measurement of trade flows can thus have a profound impact on trade policy. For example, it may show that politically sensitive trade imbalances are not as large as otherwise believed. European Union Trade Commissioner Karel de Gucht confirmed this by noting that “when we look at trade in value as opposed to traditional statistics, our trade deficit with China is reduced by 36%,” and China therefore “starts to look like less of a problem.” More accurate trade data can also lead to a greater understanding that imports are often a key component of exports and thus an important factor in a country’s international competitiveness, Jara said. It can also show that the amount of jobs generated by international trade is greater than initially thought. As OECD Secretary-General Angel Gurria put it at an April 19 meeting of G-20 trade ministers, the WIOD can help officials “avoid policy-based evidence and focus on evidence-based policy.”

De Gucht and Gurria said the continued growth of globalized supply chains and an improved understanding of their impacts should lead to several conclusions. One is that removing barriers to trade, preferably on a multilateral rather than a bilateral basis, is a key factor in global economic growth and that government officials must strengthen their efforts to show the public that “protectionism is not the answer.” Gurria explained that “tariffs on intermediate inputs increase the cost of production and reduce overall competitiveness” and “are thus likely to induce firms closings and job losses – the very outcomes they are designed to prevent.” As a result, he said, “when talking about trade, we should talk imports, not just exports.” Another conclusion is that more emphasis must be placed on trade facilitation, which de Gucht said is “an area where we have a chance to make real progress in the WTO this year.” Third is the need to re-evaluate “how to determine the origin of products,” a subject de Gucht also said should be discussed in more detail at the WTO.

FDA Using Wide Range of Methods to Ensure Safety of Imported Foods and Drugs

A new Food and Drug Administration report finds that imports of FDA-regulated goods have increased exponentially in recent years and that the agency’s ability to ensure the safety and quality of these products “will depend on its execution of a myriad of global engagement strategies.” These strategies aim to increase FDA’s engagement in the global public health community, integrate its knowledge of how products are devel¬oped, manufactured and delivered worldwide, and improve its ability to ensure that the imported products available to U.S. consumers are safe and effective. The report also outlines some of the initiatives anticipated in the future as imports and the need to regulate them continue to grow.

Among the ongoing efforts detailed in this report are the following.

International Offices and Posts. FDA’s interna¬tional offices and posts build partnerships with counterparts abroad, serve as a portal for other countries to the agency, col¬lect and leverage local and regional knowledge, and provide a platform for the inspection of foreign facilities. The FDA recently issued a separate report on the operation of its foreign posts (

Leveraging Knowledge and Resources. Regulatory authorities must utilize finite resources strategically and efficiently, and arrangements to share knowledge and information offer powerful and mutu¬ally beneficial leveraging tools for FDA and other countries and organizations. For example, under the Food Safety Modernization Act FDA is studying how regulatory controls and inspectional oversight in other countries compare to FDA’s system to help determine when the agency may be able to rely on foreign inspection and testing data as a cost-effective alternative to direct inspections. FDA has also been exploring joint inspections with authorities from other countries and regions and using accredited third parties to conduct audits and inspections.

Risk-Based Monitoring and Inspection. To make the most of its resources for monitoring and inspecting imported products, FDA is developing strategies and tools that take advantage of the latest developments in science, engineering and information technology. One example is the Predictive Risk-Based Evaluation for Dynamic Import Compliance Targeting (PREDICT) system, which helps screen the millions of imported food and medical products that enter the U.S. each year to rapidly identify those that pose the greatest risk to public health. Another is the use of portable analytical instruments to screen FDA-regulated products overseas, which are currently being pilot tested in China and India to look for toxic metals, diethylene glycol, melamine and sibutramine.

Global Surveillance, Preparedness and Emergency Response. Working with partners in the U.S. and around the globe, FDA helps monitor, prepare for and respond to global public health challenges such as international pandemics or widespread distribution of tainted FDA-regulated products. One initiative is the Coordinated Outbreak Response and Evaluation (CORE) Network, which was launched in August 2011 and among other things is charged with streamlining and strengthening the FDA’s efforts to prevent, detect, investigate, respond to and learn from incidents and outbreaks.

Strengthening Regulatory Capacity. Keeping in mind that the capac¬ity of governments to manage, assess and regulate products within increasingly complex supply chains is a fundamental factor affecting product safety and efficacy, FDA is working strategically with a range of countries to provide information, tools, training and exchange programs that contribute to building or strengthening regulatory capacity. Efforts in this area include the following.

- working with the University of Maryland’s Joint institute for Food Safety and Applied Nutrition to conduct in-country food safety training programs, participate in APEC’s Partnership Training Institute Network to strengthen food safety capacity, provide food safety risk analysis training to enhance the global use of risk analysis principles, and provide laboratory hands-on training

- supporting the development of information networks that can help strengthen capacity in different countries and organizations, including a medical products information hub for the Pan American Health Organization and a global surveillance and monitoring system for the World Health Organization to combat counterfeit and substandard drugs

Harmonizing Science-Based Standards. As a result of efforts over the past few years by FDA and its foreign counter¬parts to harmo¬nize regulatory standards, participating countries increasingly share a common foundation of science-based goals for product safety, quality and efficacy. As of 2011 FDA had worked with regulators from more than 180 countries to develop food standards and guidelines and with many countries to develop harmonized standards for pharmaceuticals, medical devices and veterinary medicines. FDA also contin¬ues to work toward harmonization on other related priorities, including product labeling and medical device identifiers. As science, technol¬ogy and society continue to evolve, new regulatory areas ripe for harmonization will emerge, such as nanotechnology.

Future Efforts

The report predicts that the need for effective global engagement will become more pronounced as the forces propel¬ling globalization continue or even accelerate. Emerging markets will continue to grow, fueling increased worldwide competition for scarce natural resources and raw materials. Intense market pressures to lower costs will likely prompt U.S. compa¬nies manufacturing FDA-regulated products to move more of their operations abroad. The distinction between foreign and domestic products will continue to blur, with goods flowing through complex, multi-step supply chains that make the source of a product difficult to identify. Growing access to the global marketplace and increased Internet commerce will expose the public to increasingly sophisticated threats of fraud, product adulteration and even terrorism, threats that likely will grow as resource scarcity renders fraud and adulteration more profitable.

To meet these challenges, FDA plans to “transform itself over the next ten years from a domestic agency operating in a globalized economy to a truly global agency fully prepared for the regulatory pressures of globalization.” To achieve this transformation, FDA is developing an international operating model with four core building blocks: (1) global coalitions of regulators dedicated to build¬ing and strengthening the product safety net around the world, (2) a global data information system and network in which regulators worldwide can regularly and pro¬actively share real-time information and resources across markets, (3) expanded FDA capabilities in intelligence gath¬ering and use, with an increased emphasis on risk analytics and thoroughly modernized information technology capabilities, and (4) allocation of resources based on risk, leveraging the combined efforts of government, in¬dustry and public- and private-sector third parties. FDA plans to work with global regulators, industry, academia and other stakeholders in this effort and also anticipates the need for Congress to modernize the agency’s authorities.

Click here for FDA report

Another $20 Million in Fines in Auto Parts Price Fixing Case

The Department of Justice announced April 23 that a Tokyo-based company has agreed to plead guilty and pay a $20 million criminal fine for its role in a conspiracy to fix prices of automotive wire harnesses and related products installed in U.S. cars. The company will also cooperate with the department’s ongoing investigation. A DOJ press release notes that to date eight executives and five companies have been charged and agreed to plead guilty, with criminal fines totaling more than $748 million and prison sentences totaling more than 122 months.

Export Restrictions on Dual-Use Goods Revised

The Bureau of Industry and Security has issued a final rule that, effective April 25, makes several changes to the Entity List. First, BIS is adding two persons located in France based on evidence of a direct physical and corporate nexus with a company already on the Entity List. Second, on the basis of the annual review by the End-User Review Committee, this rule removes three entities (one each in Germany, Korea and the United Arab Emirates, although the UAE entity is being added as an alias to another listed entity), adds four entities (one each in Canada, Egypt, France and the United Kingdom), and amends the entries for 17 entities located in Armenia, Germany, Iran, Lebanon, Syria and the UAE.

For entities on the Entity List there is an export license requirement for all items subject to the Export Administration Regulation and a license application review policy of a presumption of denial. The license requirement applies to any transaction in which items are to be exported, reexported or transferred (in-country) to such persons or in which such persons act as purchaser, intermediate consignee, ultimate consignee or end-user. In addition, no license exceptions are available for exports, reexports or transfers (in-country) to persons on the Entity List.

Shipments of items removed from eligibility for a license exception or export or reexport without a license (NLR) as a result of this rule that were en route aboard a carrier to a port of export or reexport on April 25 pursuant to actual orders for export or reexport to a foreign destination may proceed to that destination under the previous eligibility for a license exception or NLR.

Click here for BIS notice

No AD/CV Duty Orders on Galvanized Steel Wire from China and Mexico

For the third time in a week, the International Trade Commission voted April 23 not to impose antidumping or countervailing duty orders on certain imported goods. By a 4-2 vote, the ITC made final negative AD injury determinations on galvanized steel wire from China and Mexico and a final negative CV injury determination on galvanized steel wire from China. As a result, U.S. Customs and Border Protection will be directed to refund AD cash deposits or bonds on entries of this merchandise, which ranged from 99.87% to 235% for China and 37.87% to 61.54% for Mexico.

Advance Notice Required for Imports of 23 Chemical Substances

The Environmental Protection Agency has issued a direct final rule imposing new import restrictions on 23chemical substances. Under this rule, persons who intend to import, manufacture or process any of these substances for an activity that is designated as a significant new use by this rule must notify EPA at least 90 days before commencing that activity. This notification will provide EPA with the opportunity to evaluate the intended use and, if necessary, to prohibit or limit that activity before it occurs.

This rule will be effective as of June 25. Written adverse or critical comments, or notice of intent to submit adverse or critical comments, must be received on or before May 25.

Click here for EPA rule

CBP Proposes to Expand Indianapolis Port of Entry, Closes Exam Station in Charlotte

Indianapolis Expansion. U.S. Customs and Border Protection is proposing to extend the geographical limits of the port of entry of Indianapolis, Ind. Currently the port limits are generally understood to be the corporate limits of the city of Indianapolis, but members of the trade community have expressed a need for CBP services in areas west and south of the city limits. CBP would therefore like to extend the boundaries of the port to include all the territory within the boundaries of Marion County, Ind., as well as portions of the neighboring counties of Boone, Hendricks and Johnson. Comments on this proposal are due no later than June 25.

Closing of Centralized Examination Station in Charlotte. CBP announced in an April 24 administrative message that the centralized examination station in Charlotte, N.C., will be closed after April 27. From April 30 until a new CES is selected, cargo will be examined at the FIRMS code location indicated on the CBP 3461 (entry/immediate delivery). Those who would like their cargo examined at a different location will need to bring a delivery ticket or a permit to transfer to the CBP port office in Charlotte (permits to transfer will also be accepted by fax). The exam facility must be within a reasonable distance from the port office and have the ability, staffing, equipment and space to completely strip, open and present freight for exam and to repack the freight after exam.

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 #003129F: Traffic Care International Corp., El Monte, Calif.
- license #019289N: Aramex International Courier Ltd. d/b/a Aramex, Springfield Gardens, N.Y.
- license #020597N: Ferrara International Worldwide Inc., Hillside, N.J.
- license #021797N: Four Points Ocean Inc., Woodridge, N.J.
- license #022539F: Preferred Movers International LLC, Nashville, Tenn.

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

- license #013552N: Boston Shipping Enterprise Inc., Brooklyn, N.Y.
- license #014169N: Expedited Transportation Services Inc., Loganville, Ga.
- license #020849N: Master Freight America Corp., Miami, Fla.
- license #021797F: Four Points Ocean Inc., Woodbridge, N.J.
- license #022238F: Grimes Supply Chain Services Inc., Jacksonville, Fla.

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.

- Caicos Caribbean Lines Inc., Medley, Fla.
- Chartwell Navigation Inc., Belle Mead, N.J.
- Choiceone Logistics Inc., Medley, Fla.
- Concord Express Inc., Inglewood, Calif.
- Onsite Global Logistics LLC, Houston, Texas
- Toyo Logistics America Inc., Torrance, Calif.
- USA Tomcargo Corp., Miami, Fla.
- Yuexin Global Logistics (USA) Co. Ltd., Arcadia, Calif.

Foreign Regulatory Changes Could Affect Exports of Chemicals, Cosmetics, Electronics

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 information on how these restrictions may affect your business, contact ST&R.

China – revised regulation on safety management of hazardous chemicals

China – administrative measures on the application, examination, approval, supervision and management of cosmetics manufacturers’ licenses (comments due by June 20)

China – national standard on sulfur-coated urea (comments due by June 20)

China – national standard on chemical reagent packaging and marking (comments due by June 20)

China – national standard on elastomeric cups and seals for cylinders for hydraulic braking systems (comments due by June 20)

Switzerland – draft revised ordinance on risk reduction related to chemical products (comments due by June 20)

Turkey – draft regulation on control of waste electrical and electronic equipment

CBP Updates Informed Compliance Publication on Cane and Beet Sugar

U.S. Customs and Border Protection has posted to its Web site an updated informed compliance publication that covers the quota, classification and entry requirements of sucrose derived from sugar cane and sugar beets.

According to the publication, sugars may be classified in HTSUS chapter 17, chapter 21 or chapter 29. The sugars of chapter 17 include products such as sucrose, glucose, fructose, lactose and maltose, the sugars of chapter 21 include syrups that contain added coloring or flavoring matter, and the sugars of chapter 29 include products such as chemically pure galactose, sorbose, xylose and raffinose. Classification depends on the type of sugar, the form of the sugar and the source of the sugar.

The publication adds that while there are many types of sugar, only sucrose is subject to a quota. Sucrose can be obtained from a variety of sources, including sugar cane, sugar beets, maple sugar, sorghum, carob beans and palms.

Sugar Quota Under Colombia FTA to be Administered Using Certificates of Quota Eligibility

The Office of the U.S. Trade Representative has provided notice that the tariff-rate quota for sugar established in the U.S.-Colombia free trade agreement will be administered using certificates of quota eligibility, which will be issued by the Department of Agriculture to the government of Colombia. As a result, as of May 15 when the FTA enters into force, no sugar that is the product of Colombia may be permitted entry under the in-quota tariff rate established for imports of sugar from Colombia unless at the time of entry the person entering such sugar presents to the appropriate customs official a valid and properly executed CQE.

New and Amended 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 May 7.

Trans-Pacific American Flag Berth Operators Agreement – The amendment deletes the reference to Maersk Line Limited.

Trans-Atlantic American Flag Liner Operators Agreement – The amendment deletes the reference to Maersk Line Limited.

MOL/ELJSA Slot Exchange Agreement – The amendment adds a new service between Vietnam, China, Singapore, Spain, Morocco and the U.S. East Coast and modifies the number of slots to be exchanged in other existing services.

MOL/APL/HMM Asia/USEC Slot Charter Agreement – The agreement authorizes MOL to charter space to APL and HMM on certain vessels MOL operates or on which MOL has space in connection with the carriage of cargo between Vietnam, China, Singapore and the U.S. East Coast.

MOL/Hanjin Space Charter Agreement – The agreement would authorize MOL and Hanjin to charter space on their respective vessels in connection with the carriage of cargo between China, Korea, Vietnam, Singapore, Sri Lanka, Egypt, the United Arab Emirates, Spain, Morocco and the U.S. East Coast.

KL/PIL Space Charter and Sailing Agreement – The agreement authorizes K Line and PIL to charter space on their respective vessels, coordinate their sailings, and cooperate in the carriage of cargo between China and the U.S. West Coast.

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