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May 2 2012 issue

Wednesday, May 02, 2012
Sandler, Travis & Rosenberg Trade Report

Making the Change from ATPDEA to Colombia TPA for Apparel

Sandler, Travis & Rosenberg recommends that apparel importers take note of a few important points when switching from claims for duty-free treatment under the Andean Trade Promotion and Drug Eradication Act to claims under the U.S.-Colombia Free Trade Agreement (a/k/a U.S.-Colombia Trade Promotion Agreement or CTPA) when that agreement comes into effect on May 15, 2012.

First, stitch it up with originating sewing thread! ATPDEA did not require the use of originating sewing thread, but CTPA requires apparel to be assembled with U.S.- or Colombia-origin sewing thread in many circumstances. This requires cotton and manmade fiber filament sewing thread to be formed and finished in the U.S. or Colombia. The exception is that manmade fiber staple sewing thread can be sourced from anywhere.

Second, under ATPDEA, “elastic strips” were considered findings or trimmings and could be sourced from anywhere as long as they remained within the 25% value allowance. CTPA requires knit or woven narrow elastics to be formed and finished in the U.S. or Colombia. This requirement applies regardless of how and where the narrow elastics are used in the garment, including cuffs, waistbands, etc.

Third, apparel manufacturers were able to use up to 7% foreign spandex in ATPDEA qualifying garments. In most cases that will not be an option under CTPA. Most garments have a yarn-forward rule of origin, meaning all yarns and fabrics must be formed in the U.S. or Colombia for apparel to qualify for duty-free treatment. There is a de minimis allowance of up to 10% foreign fibers or yarns, but that allowance cannot be used for spandex. However, gimped yarn of HTSUS heading 5606 is not required to originate in CTPA apparel.

That raises the fourth point: the de minimis allowance for foreign fibers or yarns increases from 7% under ATPDEA to 10% under CTPA.

Fifth, under CTPA only the component that determines the classification of the apparel must meet the tariff shift requirements, plus certain visible linings, narrow elastics, sewing thread and pocketing fabric. This is a different standard than under ATPDEA, which required all fabrics in a garment to originate but with a 25% allowance for foreign findings or trimmings. No longer is there a need to assess whether a component is a trimming or a fabric.

Finally, watch your paperwork! The certification format is different under CTPA than under ATPDEA. Be sure to update your recordkeeping practices and make the appropriate changes to the certification, along with keeping documents to substantiate the origin of all required materials.

If you have any questions about qualifying garments for duty-free treatment under the CTPA, feel free to email Elise Shibles in our San Francisco office at eshibles@strtrade.com.

IPR Report Notes Improvements in Malaysia and Spain, Downgrades Ukraine

The Office of the U.S. Trade Representative has released its annual Special 301 report on the adequacy and effectiveness of U.S. trading partners’ protection of intellectual property rights. This year’s report identifies a wide range of concerns, including “indigenous innovation” policies that may unfairly disadvantage U.S. rights holders in China, copyright piracy over the Internet in countries such as Canada, Italy and Russia, and other ongoing, systemic IPR enforcement issues presented in many other countries. However, the report makes clear that efforts to address those concerns will focus on “extensive discussions” and offers of U.S. assistance rather than punitive or enforcement measures.

Positive Developments. The 2012 Special 301 report identifies the following positive developments over the past year.

Malaysia passed copyright amendments that significantly strengthen its protection of copyrights and its enforcement against piracy, established mechanisms to facilitate rights holder assistance in IPR enforcement efforts, and promulgated regulations designed to provide protection against the unfair commercial use and unauthorized disclosure of test or other data generated to obtain marketing approval of pharmaceutical products. Concerns remain regarding the implementation of Malaysia’s pharmaceutical data protection regulations and regarding border enforcement, in particular with respect to transshipment.

Spain adopted regulations implementing a law to combat copyright piracy over the Internet, but the U.S. still has serious concerns with respect to criminal IPR enforcement.

Israel enacted a law protecting against the unfair commercial use and unauthorized disclosure of test or other data generated to obtain marketing approval of pharmaceutical products.

The Philippines promulgated long-awaited specialized IPR procedural rules designed to improve judicial efficiency in IPR cases.

Russia enacted a law to establish a specialized IPR court by February 2013 and amended its criminal code to revise criminal thresholds for copyright piracy. Russian law enforcement authorities led several significant actions against pirated optical disc distributors and the Savelovskiy Market, which had been included on USTR’s Notorious Markets List, was removed as a result of its adoption and implementation of an action plan to stop the distribution of infringing goods.

China has established a State Council-level leadership structure to lead and coordinate IPR enforcement across the country. In addition, China’s leadership committed to increased political accountability, as the performance of provincial level officials will be measured based on enforcement of IPR in their regions.

Priority Watch List. USTR reviewed 77 trading partners for this year’s report and listed 40 of them as meriting particular concern. Thirteen countries were placed on the Priority Watch List for failing to provide an adequate level of IPR protection or enforcement or market access for persons relying on IPR protection: Algeria, Argentina, Canada, Chile, China, India, Indonesia, Israel, Pakistan, Russia, Thailand, Ukraine and Venezuela. All of these countries were also on the PWL in 2011 except Ukraine, which is being moved up from the Watch List in light of “serious and growing concerns relating to counterfeiting and rampant piracy, including piracy over the Internet.”

Watch List. Another 27 trading partners are on the Watch List and will receive heightened attention: Belarus, Bolivia, Brazil, Brunei, Colombia, Costa Rica, Dominican Republic, Ecuador, Egypt, Finland, Greece, Guatemala, Italy, Jamaica, Kuwait, Lebanon, Mexico, Norway, Peru, Philippines, Romania, Tajikistan, Turkey, Turkmenistan, Uzbekistan and Vietnam. Malaysia and Spain have both been removed from the WL in this year’s report.

Out-of-Cycle Review. The only out-of-cycle review USTR is planning in 2012 is a review of notorious markets in the fall.

Click here for Special 301 report
http://www.ustr.gov/sites/default/files/2012%20Special%20301%20Report_0.pdf

Export Controls to be Eased on Some Energetic Materials and Related Articles

The Bureau of Industry and Security has issued a proposed rule describing how certain energetic materials and related articles that the president determines no longer warrant control under the U.S. Munitions List would be controlled under the Commerce Control List. Concurrently, the State Department’s Directorate of Defense Trade Controls has issued a proposed rule that would revise USML Category V (explosives and energetic materials, propellants, incendiary agents and their constituents) to describe more precisely those types of such articles that warrant continuing control on the USML. Comments on these proposed rules are due no later than June 18.

Under the BIS rule subject articles moved from the USML would be controlled on the CCL in new export control classification numbers 1B608, 1C608, 1D608 and 1E608. ECCN 1B608 would cover equipment not elsewhere specified on the CCL or the USML that is specially designed for commodities in ECCN 1C608 or articles in USML Category V. ECCN 1C608 would cover energetic materials and related commodities not listed elsewhere in USML Category V or the CCL. ECCN 1D608 would cover software specially designed for commodities controlled by 1B608 or 1C608, and ECCN 1E608 would cover technology required for equipment controlled in 1B608 or materials controlled by 1C608.

This rule would also (a) control under ECCN 1C111 some of the aluminum powder and hydrazine and derivatives thereof that are now controlled under category V; (b) control equipment for the production of explosives and solid propellants, currently controlled under ECCN 1B018.a, and related software, currently controlled under ECCN 1D018, under new ECCNs 1B608 and 1D608, respectively; and (c) control commercial charges and devices containing energetic materials, currently controlled under ECCN 1C018, under new ECCN 1C608.

Click here for BIS proposed rule
http://www.ofr.gov/OFRUpload/OFRData/2012-10456_PI.pdf
Click here for State Dept. proposed rule
http://www.ofr.gov/OFRUpload/OFRData/2012-10455_PI.pdf

White House Cracks Down on Evasion of Sanctions on Iran and Syria

President Obama signed May 1 an executive order providing the Treasury Department with a new authority to further tighten U.S. sanctions on Iran and Syria. Treasury states that among other things this order will help prevent U.S. persons from unwittingly engaging in transactions with foreign individuals and entities that pose a particular risk of running afoul of these sanctions.

According to a Treasury press release, the executive order targets foreign individuals and entities that have violated, attempted to violate, conspired to violate or caused a violation of U.S. sanctions against Iran or Syria or have facilitated deceptive transactions for persons subject to U.S. sanctions concerning Syria or Iran. Once Treasury identifies and lists a foreign sanctions evader it will be able to prohibit all transactions or dealings involving such person, whether direct or indirect, including any exporting, reexporting, importing, selling, purchasing, transporting, swapping, brokering, approving, financing, facilitating or guaranteeing, in or related to (i) any goods, services or technology in or intended for the United States or (ii) any goods, services or technology provided by or to U.S. persons, wherever located.

Treasury notes that this new authority complements the Department of Commerce’s authority to impose denial orders on persons (both foreign and U.S.) who have committed violations of the Export Administration Regulations by addressing at least two types of sanctions violations that are outside the scope of the EAR. Specifically, Treasury may prohibit the provision of services (in addition to goods and technology) to or from identified or listed persons as well as transactions or dealings involving goods and technology that are not subject to the EAR. Unlike DOC’s authority, however, Treasury’s new authority may be implemented only with respect to foreign individuals or entities.

Of Note: Report Examines Cost of Tire Safeguards, India to Resume Cotton Exports

Price of a Job Saved by China Tire Duties: Nearly $1 Million
http://blogs.wsj.com/economics/2012/04/30/price-of-a-job-saved-by-china-tire-duties-nearly-1-million/?mod=google_news_blog

India delays meeting on farm exports, OKs cotton
http://in.reuters.com/article/2012/04/30/india-cotton-idINDEE83T04G20120430?type=economicNews

Price Fixing Nets Executive $25,000 Fine, Six Months in Prison

The Department of Justice reports that an executive of a Korean-based company will pay a $25,000 criminal fine and serve six months in prison after agreeing to plead guilty to participating in a series of conspiracies to rig bids for the sale of optical disk drives. The DOJ states that it has now charged four individuals and one company as a result of its ongoing investigation into the optical disk drive industry, all of whom have pleaded guilty. The company will pay a $21.1 million criminal fine and the other individuals are awaiting sentencing.

New Patent Infringement Investigations of Computers, Peripherals, Mobile Devices

The International Trade Commission has instituted the following investigations to determine whether the importation, sale for importation and sale within the U.S. after importation of the products indicated are violating Section 337 of the 1930 Tariff Act by reason of patent infringement.

- investigation 337-TA-841 of certain computers and computer peripheral devices and components thereof and products containing the same that are, or incorporate, certain memory card readers; e.g., desktop computers, laptop computers and printers (complaint filed by Technology Properties Limited LLC; respondents located in Taiwan, Japan, France, Korea and the U.S.)

- investigation 337-TA-842 of certain cameras and mobile devices, related software and firmware, and components thereof and products containing the same that are used in 3D mosaic imaging and displaying (complaint filed by HumanEyes Technologies Ltd.; respondents located in Japan, the United Kingdom and the U.S.)

In each case the complainant requests that after the investigation the ITC issue an exclusion order, which would direct U.S. Customs and Border Protection to prohibit the entry of the infringing products into the U.S., and cease and desist orders, which would require the named respondents to cease actions that violate Section 337, including selling infringing imported articles out of U.S. inventory.

Ocean Transportation Intermediary License Revocations, Reissuances, Applicants

OTI License Revoked. The Federal Maritime Commission has given notice that the following ocean transportation intermediary license has been revoked. A revocation may occur after a license is surrendered voluntarily by the OTI or for failure to maintain a valid bond.

- license #022268NF: USI-USA Inc., Reno, Nev.

OTI License Reissued. The FMC has given notice that the following OTI license has been reissued.

- license #021062F: International Trade Compliance Group LLC, Pompano Beach, Fla.

OTI License Applicants. The FMC has provided notice that the following applicants have filed applications for licenses as non-vessel-operating common carrier and/or ocean freight forwarder OTIs. Persons knowing of any reason why any of these applicants should not receive a license are requested to contact the FMC.

- AOG International Inc., Houston, Texas
- Azimuth Lines Inc., Bridgewater, N.J.
- Berto L. Batista Urena and Juan A. Rodriquez d/b/a Embarque San Miguel, Passaic, N.J.
- CLN Worldwide LLC, Charlotte, N.C.
- Conceptum Logistics (USA) LLC, The Woodlands, Texas
- Falcon Maritime and Aviation Inc., Jamaica, N.Y.
- Global Forwarding Enterprises Limited d/b/a Global GlobalForwarding.com d/b/a ForwardingServices.com d/b/a Global Forwarding Enterprises LLC d/b/a ContainerQuote.com, Manalapan, N.J.
- I.T. Freight Corporation, Miami, Fla.
- Lorden International Inc., West Covina, Calif.
- Master Transportation Cargo LLC, Miami, Fla.
- Multimodal Container Consulting LLC d/b/a World Maritime NVOCC, Scotch Plains, N.J.
- Orion SLM LLC, Cutler Bay, Fla.
- Schooner Lines Company, Leola, Pa.
- Transmarine Shipping Inc., Inglewood, Calif.
- Webgistix Corporation, Las Vegas, Nev.

CBP Reviewing Bonded Warehouse Proprietor Submission

U.S. Customs and Border Protection is extending through June 1 the period for public comments on the proposed extension without change of 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. Comments should evaluate whether this form is necessary for the proper performance of CBP’s functions, how the quality, utility and clarity of the information collected could be enhanced, the accuracy of the estimate of the burden associated with this form and ways to minimize that burden.

Foreign Regulatory Changes Could Affect Exports of Foods, Drugs, Appliances, Cosmetics, 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 – technical regulation on non-automatic weighting instruments (comments due by June 30)

Ghana – prohibition on import and export of used and secondhand goods

Hungary – amended decree on construction products used in town planning and building (comments due by July 16)

Indonesia – amended regulation on food packaging substances (comments due by June 30)

Israel – revised mandatory standards on electric water heaters, mattresses and bumpers for infants, incandescent lamps and self-ballasted lamps (comments due by May 30)

Japan – proposed designation of substances with probable effects on central nervous system (comments due by May 30)

Korea – revised safety criteria of BB guns (comments due by June 30)

Korea – proposed regulation on substantiation of cosmetics labeling and advertisement (comments due by June 22)

South Africa – proposed regulations on quality, packing and marking of dried fruit (comments due by June 30)

Uganda – draft standards on raw cane sugar, instant coffee and safety matches (comments due by June 30)

Export Committees to Discuss Wassenaar Meetings, Bird Flu Virus

The Bureau of Industry and Security’s Materials Processing Equipment Technical Advisory Committee will hold a partially open meeting May 22 in Washington, D.C. This committee advises BIS on technical questions that affect the level of export controls applicable to materials processing equipment and related technology. The open session of this meeting will include a discussion of the results of the last Wassenaar meeting and proposals for the next one as well as a report on proposed and recently issued changes to the Export Administration Regulations.

BIS has also announced that its Materials Technical Advisory Committee will hold a partially open meeting May 17 in Washington, D.C. This committee advises BIS on technical questions that affect the level of export controls applicable to materials and related technology. The open session of this meeting will include a report from the Composite Working Group and other working groups, a report on regime-based activities and a discussion on the BIS role in the export of avian influenza virus and related technology.

Temporary Exports of Chemical Agent Protective Gear for Personal Use Allowed

The State Department has issued a final rule that, effective June 1, will amend the International Traffic in Arms Regulations to add an exemption allowing the temporary export of chemical agent protective gear to destinations not subject to restrictions and to Afghanistan and Iraq under specified conditions. Such gear must be for the U.S. person’s exclusive use and must be returned to the United States. The U.S. person may not reexport the protective gear to a foreign person or otherwise transfer ownership, and the gear may not be exported to any country where the importation would be in violation of that country’s laws.

This rule also (a) expands the exemption for body armor to cover helmets when they are included with the body armor, (b) clarifies that individuals who are U.S. persons seeking to use the exemptions of §123.17 are not required to be registered with the State Department, (c) clarifies an exemption for firearms and ammunition by removing extraneous language, and (d) corrects an error in the authorities for part 126.

Click here for final rule
http://www.ofr.gov/OFRUpload/OFRData/2012-10599_PI.pdf

Softwood Lumber Subsidy Programs Subject of Comment Request

The International Trade Administration is inviting public comments by June 1 on any subsidies provided by certain countries exporting softwood lumber or softwood lumber products to the U.S. during the period July 1 through Dec. 31, 2011. Comments should include the name of the country that provided the subsidy, the name of the subsidy program, a brief (3-4 sentence) description of the subsidy program and the government body or authority that provided the subsidy.

The ITA states that given the large number of countries that export softwood lumber or softwood lumber products to the U.S. it is only interested in subsidies provided by countries whose exports accounted for at least 1% of total U.S. imports of softwood lumber by quantity, as classified under HTSUS 4407.10.01. Official U.S. import data published by the International Trade Commission indicates that only exports of softwood lumber from Canada met this criterion during the period at issue.

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