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May 4 2012 issue

Friday, May 04, 2012
Sandler, Travis & Rosenberg Trade Report

TPP Negotiations Continue as Japan, Canada, Mexico Await Decision on Joining

As participants prepare for the next round of negotiations on the Trans-Pacific Partnership Agreement May 8-18 in Dallas, it remains unclear whether they will be able to meet their goal of finalizing a deal by the end of 2012. In the meantime interested groups continue to advocate for specific provisions and Japan, Canada and Mexico still await a decision on whether they will be allowed to join.

Timeline. The Wall Street Journal recently quoted a Singaporean official as saying the TPP talks are “very, very advanced” and about 75% done. However, an International Trade Daily article cited former U.S. Trade Representative official Jay Eizenstat as saying “there is so much more to do in this negotiation,” including in the areas of textiles, apparel, footwear, agricultural and industrial goods market access, government procurement and intellectual property rights. National Foreign Trade Council President Bill Reinsch added that “we need to get into some serious talks in Dallas … or it will be hard to [conclude an agreement] in 2012.”

Additional Participants. Japan, Canada and Mexico requested to join the TPP negotiations in November 2011 and have been holding bilateral discussions with existing participants since then. There has been concern that allowing these three countries to come on board could slow the process for months or even years because each has sensitive issues that would take time to work through. For Japan the concerns center on market access for automobiles, agriculture and insurance, while in Canada the primary obstacle is the supply management system for dairy, eggs and poultry. Mexican Economy Minister Bruno Ferrari was cited in a recent Bloomberg News report as saying Mexico is “closer to winning approval” than the other two, ostensibly because there are fewer substantive concerns with its participation.

Both Japan and Canada have pledged to put their issues on the table in the TPP talks, suggesting a willingness to make tradeoffs under the right circumstances. However, there has been some skepticism that any real improvements would result, which would be inconsistent with the stated commitment to a “high-standard, 21st century” agreement. For example, Canadian trade minister Ed Fast recently pointed out that Canada has negotiated 14 free trade agreements since the late 1980s, that none of those deals has resulted in the elimination of the supply management system and that Canada would “continue to defend” this system in the TPP talks. Similarly, Japan continues to resist opening up its agricultural market in talks on bilateral FTAs with countries like Australia. While there could be a greater willingness to make concessions in a multilateral deal with broader benefits like the TPP, it is perhaps instructive that Japan is still debating within itself not only when but if to participate in those talks.

Some observers therefore hold that it would be easier and quicker to conclude a TPP agreement with the existing participants and then invite others to decide whether or not they are willing to abide by its rules. “For a large number of countries, to be frank, that’s the best way that they can join,” International Trade Daily quoted Australian Ambassador Kim Beazley as saying, “because if they try to be bold in negotiations, it can be enormously destabilizing in their internal politics.”

Staking Out Positions. In the meantime the TPP negotiations are continuing, with discussions of some of the most sensitive topics likely to heat up in the coming months. Ahead of those talks interested parties have been ramping up efforts to make their voices heard.

Intellectual property rights – CQ Today reports that some members of the U.S. Congress are working to make sure that the TPP includes sufficient protections for IPR but does not incorporate the approach of the Stop Online Piracy Act (SOPA), which was rejected by lawmakers earlier this year due to concerns that it could open the way for online censorship. The article quoted Deputy USTR Demetrios Marantis as saying the U.S is “trying to seek the highest standard intellectual-property protection that we can while recognizing that there are legitimate
exceptions to that, such as fair use.”

State-owned enterprises – The U.S. tabled proposed text on the treatment of state-owned enterprises several months ago, Inside US Trade reports, and observers expect this month’s round of talks in Dallas to “include the first serious, in-depth bargaining” on that proposal.

Sugar – Fifteen trade organizations wrote to U.S. officials April 30 making the case that “all products and subject areas should be on the negotiating table” and that in particular “sugar should not be excluded from the TPP as it was in the U.S.-Australia FTA.” The letter asserted that leaving this issue out of the Australia FTA “has resulted in serious adverse consequences that continue to plague other segments of our economy,” including carve-outs for other countries’ sensitive items in their FTAs with the U.S. and the resulting reduced export opportunities for U.S. commodities.

Textiles and apparel – A May 1 letter from 15 senators, and a virtually identical October 2011 letter from 30 members of the House, calls on President Obama to liberalize trade in textiles and apparel under the TPP to a greater extent than has been the case in other recent FTAs. They argue that the current U.S. proposal on rules of origin “takes an overly broad approach in advocating a yarn-forward position for nearly all apparel products” and “would require originating yarns, fabrics, sewing thread and other inputs for all apparel products even if there is insufficient availability of quality inputs and a reliable supply chain within the TPP countries.” Instead, they suggested that the administration adopt “a flexible general rule of origin for apparel” and then work with industry to develop criteria to determine when it would be appropriate to include rules of origin that require more U.S. or TPP content; e.g., for specific products for which there is significant U.S. production.

The same day, however, 76 members of the House asked USTR Ron Kirk to ensure that the TPP includes “strong textile rules” that reflect “the trade sensitivities of an agreement with Vietnam” and respect “the economic investments that past trade and preference agreements have made in the establishment of global textile and apparel supply chains.” They specifically expressed support for the yarn-forward rule of origin, which “ensures that the benefits in the agreement accrue to workers and companies in the United States and other TPP partner countries” and not to third parties like China. They also called for special rules, such as extended tariff phase-outs, safeguard provisions and prohibitions on goods from state-owned enterprises, that take into account what they see as unfair advantages enjoyed by Vietnamese producers. The letter also urged that customs enforcement rules be updated to include “electronic tracking of yarn and fabric inputs as well as other measures that target fraudulent activity.”

President Seeks to Boost Trade Through International Regulatory Cooperation

President Obama issued May 1 an executive order that aims to foster international trade by promoting greater cooperation with other countries on the development and implementation of regulations that affect global commerce. The order notes that foreign regulatory approaches may differ from those taken by U.S. agencies and that in some cases the differences might be unnecessary and impair the ability of U.S. businesses to export and compete internationally.

Interagency Coordination. The order directs the Office of Management and Budget’s Regulatory Working Group to serve as a forum for federal agencies to discuss, coordinate and develop a common understanding of U.S. government positions and priorities with respect to (a) international regulatory cooperation activities that are reasonably anticipated to lead to significant regulatory actions, (b) efforts across the federal government to support significant, cross-cutting international regulatory cooperation activities, such as the work of regulatory cooperation councils (e.g., those currently in place with Canada and Mexico), and (c) the promotion of good regulatory practices internationally as well as in the U.S. The working group will be headed by the head of OMB’s Office of Information and Regulatory Affairs and will include representatives from the Office of the U.S. Trade Representative and other appropriate agencies.

Responsibilities of Federal Agencies. The order directs executive branch agencies (and encourages independent regulatory agencies) to take the following actions.

- include in their required regulatory plans a summary of their international regulatory cooperation activities that are reasonably anticipated to lead to significant regulations

- in selecting which regulations to include in their retrospective review plans, consider reforms to existing significant regulations that address unnecessary differences in regulatory requirements between the U.S. and its major trading partners

- ensure that significant regulations identified as having significant international impacts are designated as such in their semiannual regulatory agendas

- for significant regulations identified as having significant international impacts, consider any regulatory approaches by a foreign government that the U.S. has agreed to consider under a regulatory cooperation council work plan

The order defines “international impact” as a direct effect that a proposed or final regulation is expected to have on international trade and investment or that otherwise may be of significant interest to U.S. trading partners. “International regulatory cooperation” refers to a bilateral, regional or multilateral process in which national governments engage in various forms of collaboration and communication with respect to regulations, and in particular a process that is reasonably anticipated to lead to the development of significant regulations.

Haiti HOPE Act Benefits, Labor Requirements Subject of Free Webinar

The Department of Commerce’s Office of Textiles and Apparel and the Labor Department’s Bureau of International Labor Affairs are co-hosting a free webinar May 9 on labor eligibility requirements under the Haiti HOPE Act. This law provides trade preferences for Haitian textile and apparel goods but establishes as an eligibility requirement compliance with specific international labor standards and worker rights by both the Haitian government and individual apparel producers. The webinar will examine these topics and will include a question and answer session. Advance registration (( is required to participate and closes at 5:00 pm EDT on May 8. Those unable to participate will later be able to obtain an audio recording of the webinar and a copy of the PowerPoint presentation on the OTEXA Web site.

Customs Commercial Operations Committee to Meet May 22

The Advisory Committee on Commercial Operations of U.S. Customs and Border Protection (COAC) will hold an open meeting May 22 in Savannah, Ga. Those interested in attending in person or viewing this meeting via live webcast should register with CBP no later than May 18. Click here for more information.

At this meeting COAC will hear from the following subcommittees on the topics listed and will then review, deliberate and formulate recommendations on how to proceed on those topics.

Land Border Security Subcommittee – recommendations on the expansion of the Customs–Trade Partnership Against Terrorism and the National Strategy for Global Supply Chain Security

Trade Facilitation Subcommittee – recommendations on CBP’s trade transformation initiatives

One U.S. Government at the Border Subcommittee – updates on subcommittee discussions with the Food and Drug Administration, the Environmental Protection Agency, the Food Safety Inspection Service and the Consumer Product Safety Commission

Role of the Broker Subcommittee – recommendation to continue educational webinars on current topics for the trade community

COAC will also receive an update and discuss the following initiatives and subcommittee topics that were discussed at its Feb. 21 meeting.

- the committee’s effort to solicit, consolidate and provide input on the implementation of the National Strategy for Global Supply Chain Security

- the Automated Commercial Environment and the International Trade Data System

- the Air Cargo Advance Screening pilot

- proposed modifications to CBP Form 5106, single transaction bond centralization and liquidated damages mitigation guidelines

- distribution chain management project

- educational webinars for the trade community and feedback on CBP’s draft five-year antidumping/countervailing duty enforcement strategy

$850,000 Penalty for Illegal Exports of Controlled Goods

The Bureau of Industry and Security has entered into a settlement agreement in which a California company will pay an $850,000 civil penalty to settle charges that it knowingly committed 47 violations of the Export Administration Regulations in connection with the exportation of pressure transducers controlled for nuclear nonproliferation reasons to Israel, Malaysia, China, Singapore and Taiwan without the required export licenses. The company voluntarily self-disclosed these violations, and BIS is suspending $600,000 of the penalty for a year (and waiving it thereafter) provided the company commits no further export violations during that time. If the company fails to timely pay the other $250,000 BIS may suspend its export privileges for one year. 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.

AD Notices: Steel, Carbon, Valves, Tires, Refrigerators, Garlic

Agency: USTR.
Commodity: Hot-rolled carbon steel flat products.
Country: India.
Nature of Notice: Opportunity to comment by May 22 on issues raised in World Trade Organization dispute filed by India concerning CV duty proceedings on this product, including the original investigation and administrative and sunset reviews.

Agency: ITA.
Commodity: Activated carbon.
Country: China.
Nature of Notice: Preliminary results of administrative review of AD duty order for the period April 1, 2010, through March 31, 2011.
Details: Weighted average dumping margins range from zero to 2.42%.

Agency: ITA.
Commodity: Frontseating service valves.
Country: China.
Nature of Notice: Preliminary results of administrative review of AD duty order for the period April 1, 2010, through March 31, 2011.
Details: Neither respondent found to have made sales of subject merchandise in the U.S. at prices below normal value.

Agency: ITA.
Commodity: New pneumatic off-the-road tires.
Country: China.
Nature of Notice: Initiation of new shipper review of AD duty order for the period Sept. 1, 2011, through Feb. 29, 2012.
Details: Until the completion of this review U.S. Customs and Border Protection may allow the posting of a bond or security in lieu of a cash deposit for each entry of subject merchandise both produced and exported by Trelleborg Wheel Systems (Xingtai) China Co. Ltd.

Agency: ITA.
Commodity: Bottom mount combination refrigerator freezers.
Country: Mexico.
Nature of Notice: Filing of first request for NAFTA panel review of final affirmative AD duty determination.

Agency: ITC.
Commodity: Fresh garlic.
Country: China.
Nature of Notice: Sunset review determination that revocation of AD duty order would be likely to lead to continuation or recurrence of material injury to an industry in the U.S. within a reasonably foreseeable time.
Details: This order will soon be continued by the ITA for another five years.

Foreign Regulatory Changes Could Affect Exports of Gloves, Vehicles, Safety Belts, Contact Lenses, Appliances Etc.

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.

Albania – draft technical regulation on essential requirements and conformity assessment of measuring instruments

Canada – proposed regulations on heavy-duty vehicle and engine greenhouse gas emissions (comments due by June 13)

China – national standards on oral care and cleansing products, protective gloves against chemicals and microorganisms, seamless steel tubes, welding machines, liquefied petroleum gas used as automotive fuel, various types of boats, vehicle safety belts, electric sockets, electronic switches, contact lenses, playpens and cribs, green sand mixers and school buses (comments due by June 23)

China – basic rules for production and quality management of health food (comments due by June 25)

Colombia – withdrawal of technical regulation on safety devices used in swimming pools

Colombia – draft technical regulation on labeling of ceramic tiles (comments due by July 17)

Korea – proposed revision to technical requirements concerning electrical appliances (comments due by June 3)

Paraguay – draft technical regulations on (a) cellulosic materials, packaging and equipment that comes into contact with food and (b) paper for baking and hot filtration (comments due by June 20)

IPR Enforcement Actions on Circuit Interrupters, TV Guide Products, CMOS Sensors, Consumer Electronics

New Import Restrictions on Ground Fault Circuit Interrupters. The International Trade Commission has determined that the importation, sale for importation and sale within the U.S. after importation of certain ground fault circuit interrupters are violating Section 337 of the 1930 Tariff Act by reason of patent infringement. The ITC has therefore issued the following remedial orders against the remaining respondents, which are located in China and the U.S.

- a general exclusion order prohibiting the unlicensed entry of infringing GFCIs and products containing the same

- cease and desist orders prohibiting 12 defaulting respondents from conducting any of the following activities in the U.S.: importing, selling, marketing, advertising, distributing, offering for sale, transferring (except for exportation) and soliciting U.S. agents or distributors for infringing GFCIs and products containing the same

A bond of $0.25 per unit is required to permit temporary importation of these articles during the 60-day presidential review period, which began April 27.

New IPR Infringement Petitions on TV Guide Products, CMOS Sensors, Consumer Electronics. The International Trade Commission has received petitions requesting that it institute separate Section 337 investigations regarding the following products.

- products containing interactive program guide and parental control technology (complaint filed on behalf of Rovi Corporation, Rovi Guides Inc., Rovi Technologies Corporation, Starsight Telecast Inc., United Video Properties Inc. and Index Systems Inc.; respondents located in Korea, Japan and the U.S.)

- CMOS image sensors and products containing same (complaint filed on behalf of California Institution of Technology; respondents located in Switzerland, Finland, Canada and the U.S.)

- electronic devices, including mobile phones and tablet computers, and components thereof (complaint filed on behalf of Nokia Corporation, Nokia Inc. and Intellisync Corporation; respondents located in China and the U.S.)

The ITC recently terminated a similar investigation on program guide products (requested by some of the same complainants) based on a settlement agreement.

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.

Waiver of Discriminatory Purchasing Requirements for Colombia

The Office of the U.S. Trade Representative will waive discriminatory purchasing requirements for eligible products and suppliers from Colombia beginning May 15, the date the United States’ free trade agreement with that country takes effect. Specifically, having determined that Colombia will provide appropriate reciprocal competitive government procurement opportunities to U.S. products and services and suppliers of such products and services, beginning May 15 the U.S. will waive the application of any law, regulation, procedure or practice regarding government procurement that would, if applied to eligible products of Colombia and suppliers of such products, result in treatment less favorable than that accorded to (a) U.S. products and suppliers of such products or (b) eligible products of another foreign country or instrumentality that is a party to the World Trade Organization Government Procurement Agreement and suppliers of such products.

Monthly Surface Trade with Canada and Mexico Accelerated in February

U.S. monthly surface transportation trade in goods with NAFTA partners Canada and Mexico rose 3.4% in February following a 1.8% gain in January, according to statistics released May 1 by the Department of Transportation. The February total of $78.1 billion was also up 17.4% from a year before. Over the last ten years total surface transportation trade with Canada and Mexico has risen 87.3%, including a 102.8% gain for exports and a 75.9% increase for imports.

Surface transportation includes freight movements by truck, rail, pipeline, mail, foreign-trade zones and other modes and in February accounted for 87.4% of U.S. trade by value with Canada and Mexico. Surface trade between the U.S. and Canada totaled $45.4 billion, up 3.0% from January and 13.7% from a year before. Exports gained 7.1% for the month and 14.8% from the previous February, while imports saw a 0.5% monthly drop but a 12.8% rise year-on-year. U.S.-Mexico surface transportation trade totaled $32.7 billion, up 4.1% from January and 23.0% from the previous year. Exports fell 0.5% while imports rose 8.1% for the month, but both categories saw increases from January 2011 (25.2% and 21.3%, respectively).

Ex-Im Bank Considers Financing Exports of Sulfur Purification Equipment to Iraq

The Export-Import Bank of the United States has received an application for a $35 million transaction-specific working capital guarantee to support the export of approximately $63.5 million worth of sulfur purification equipment and services to Iraq. These exports will enable an Iraqi mining company to establish a maximum production capacity of 500,000 metric tons of sulfur per year, and available information indicates that all of this production will be sold in Iraq. Interested parties may submit comments ( ) on this transaction no later than May 17.

Amended Test Procedures for Electric Motors

The Department of Energy has issued a final rule amending the test procedures used to measure the energy efficiency of electric and small electric motors. This rule clarifies the scope of regulatory coverage for electric motors and ensures the accurate and consistent measurement of their energy efficiency. It also clarifies certain regulatory terms and language, clarifies the scope of energy conservation standards for electric motors, updates references to several industry and testing standards, incorporates by reference and updates alternative test methods that manufacturers may use when certifying polyphase and single-phase small electric motors as compliant, and specifies the determination of efficiency requirements for small electric motors.

This rule will be effective as of June 4. The changes incorporated in this rule will be required for equipment testing starting 180 days after publication; i.e., approximately Nov. 4. Also on that date representations in writing or any broadcast advertisement respecting energy consumption must be made using the revised test procedure. Finally, DOE is establishing a June 4, 2015, compliance date for energy conservation standards for IEC 100 mm frame series electric motors as well as motors built in a frame that is not necessarily a NEMA-equivalent but otherwise covered under EISA 2007.

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