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May 7 2012 issue

Monday, May 07, 2012
Sandler, Travis & Rosenberg Trade Report

U.S. Touts Progress in Economic and Trade Talks with China

At the conclusion of the fourth meeting of the U.S.-China Strategic and Economic Dialogue in Beijing May 3-4, the Obama administration released a fact sheet detailing the progress officials made on a range of trade-related issues. Many of these topics were identified as areas of particular concern by lawmakers, business groups and others prior to the meeting. Others, however, such as sanitary and phytosanitary standards, illegal subsidies to state-owned enterprises, technology transfer requirements, export restraints and retaliatory use of trade remedy measures, were not mentioned in a wrap-up of the meeting from the U.S. Treasury Department.

Market Access. One of the major points of emphasis for Washington in its trade relations with China has been securing additional access to that country’s growing market. According to a Treasury fact sheet, China agreed at the S&ED meeting to the following measures designed to further reduce barriers to U.S. exports.

- participate in multilateral negotiations for new rules on the terms and conditions of official export financing, which “is critical to making sure that competitive U.S. exports are not undercut by subsidized foreign government financing” (first meeting set for this summer in Washington, D.C.)

- increase the number of state-owned enterprises that pay dividends as well as the amount of dividends actually paid so as to be in line with market levels, which “will help boost China’s domestic consumption, creating new opportunities for U.S. producers”

- submit this year a revised comprehensive offer to join the WTO Agreement on Government Procurement (a step the U.S. has been pushing China to take for some time)

- intensify negotiations on a U.S.-China Bilateral Investment Treaty (the U.S. recently completed an update to its model BIT, which observers believe will allow efforts to negotiate such agreements with China and other countries to again move forward)

- open new sectors to foreign investment, further simplify and enhance the transparency of its investment approval system, and focus its security reviews of foreign investment solely on national security concerns

Increasing Domestic Demand. China is an important part of the Obama administration’s goal of doubling U.S. exports by the end of 2014 in order to increase domestic employment. The fact sheet notes that since early 2009 U.S. exports of goods to China have almost doubled, growing twice as fast as exports to the rest of the world, and that in 2011 U.S. exports of goods and services to China totaled $130 billion. However, a recent USA Today article ( points out that China’s economic expansion is slowing and that U.S. exports to that country are following suit, with growth rates falling into the single digits at the end of 2011 and slipping behind the growth of U.S. exports to the rest of the world.

One way to reverse this trend would be to increase domestic demand in China and reduce the country’s dependence on exports and investment, and the fact sheet notes the following developments toward this goal.

- China has cut import tariffs on certain consumer goods in recent months and has committed to another round before the end of 2012.

- China agreed to expand its pilot program to reduce taxes on services to other regions and sectors.

- China’s exchange rate is up about 13% against the U.S. dollar (when accounting for differences in inflation) since June 2010 and 40% since 2005. The government recently announced that it is widening its trading band to allow market forces to play a greater role in setting the exchange rate and has committed to further enhancing exchange rate flexibility and moving more rapidly to a more market-determined exchange rate system.

(The value of the yuan has been a longstanding irritant, with critics in the U.S. alleging that Beijing manipulates its currency to gain a trade advantage. Chinese officials have rejected those charges, and last week Chinese trade minister Chen Deming pointed to the figures cited above in asserting that the yuan is close to being at an appropriate level. According to a New York Times article, Deming noted that China’s global trade surplus has dropped sharply in recent months (as has its surplus with the U.S.), which “shows the exchange rate plays a minimal role in trade.” Even so, Treasury Secretary Tim Geithner was quoted by International Trade Daily as saying recently that the process of “correcting the misalignment of the exchange rate remains incomplete.”)

Financial Products. Another issue the U.S. has been pursuing in the context of increasing demand within China is financial sector reform, which will “give Chinese households higher income on their savings and better access to a range of financial products.” The fact sheet states that some progress has already been made, as China has amended its regulations to allow foreign insurance companies to sell mandatory auto liability insurance. In addition, China made a number of commitments at last week’s meeting, including allowing foreign and domestic auto financing companies to issue bonds regularly, increasing the total dollar amount that foreigners can invest in China’s stock and bond markets under its Qualified Foreign Institutional Investor program, allowing foreign investors to take up to 49% equity stakes in domestic securities joint ventures, and promoting more market-based interest rates.

IPR. Intellectual property rights protection is also a major concern for U.S. businesses operating in China, and the fact sheet indicates that the S&ED saw progress in this area as well. For example, China agreed to extend efforts to promote the use of legal software by Chinese enterprises and to conduct more regular audits of software on government computers. Beijing will also prioritize trade secrets in its IPR protection policies and increase enforcement against trade secret misappropriation. The fact sheet suggests that the U.S. is dissatisfied with China’s implementation of its commitment to take a more hands-off approach on technology transfer requirements by noting that China has agreed to “intensive discussions” on this issue.

U.S., Japan Pledge Closer Cooperation on Supply Chain Security

Following a recent meeting of heads of state in Washington, the U.S. and Japan issued a joint statement pledging closer cooperation on ensuring the security of global supply chains. Stating that “there is an urgent need to better address manmade and natural disruptions which could adversely impact our security, economic prosperity, and ways of life” while also facilitating trade, the two countries said they intend to take the following bilateral actions.

- enhance the trade facilitation benefits provided to members of the Customs-Trade Partnership Against Terrorism and Japan’s authorized economic operator program

- accelerate discussions on an air cargo security mutual recognition arrangement

- coordinate capacity-building in the Asia-Pacific region to strengthen border, port, maritime and aviation security, within existing resources

- support the development and deployment of new technologies to enhance global supply chain security

- pursue joint counterproliferation investigations through relevant law enforcement agencies

- promote dialogue, information exchange and sharing of best practices between public and private sectors

The joint statement also commits the U.S. and Japan to multilateral efforts within the World Customs Organization, the International Civil Aviation Organization, the International Maritime Organization, the Universal Postal Union and the Asia-Pacific Economic Cooperation forum on global supply chain issues, including the following.

- supporting the development and maintenance of risk management guidelines

- assisting in the development of robust global pre-departure information requirements in alignment with the discussions on the WCO SAFE Framework of Standards

- developing common definitions, standards and recommended practices for high-risk air cargo

- actively reporting shipping information and intelligence through the WCO’s Global Shield program and facilitating the expansion of regional participation in this program

- advancing the development of AEO programs consistent with the WCO SAFE Framework of Standards

- guiding the establishment of international standards for trade recovery collaboration and information requirements

Final Affirmative AD/CV Duty Determinations on High-Pressure Cylinders from China

The International Trade Administration has made final affirmative antidumping and countervailing duty determinations on high-pressure steel cylinders from China. The weighted average dumping margins range from 6.62% to 31.21%, and U.S. Customs and Border Protection will require AD cash deposits or bonds at these rates. There is also a net countervailable subsidy rate of 15.81% for all exporters/manufacturers, and CV cash deposits at this rate will be required if the International Trade Commission issues a final affirmative CV injury determination. The ITC’s final AD and CV injury determinations are due no later than June 11.

The merchandise covered by these investigations is seamless steel cylinders designed for storage or transport of compressed or liquefied gas. These cylinders are fabricated of chrome alloy steel, including chromium-molybdenum steel or chromium-magnesium steel, and have permanently impressed into the steel, either before or after importation, the symbol of a U.S. Department of Transportation-approved high-pressure steel cylinder manufacturer as well as an approved DOT type marking of DOT 3A, 3AX, 3AA, 3AAX, 3B, 3E, 3HT, 3T or DOT-E (followed by a specific exemption number). Covered cylinders have a water capacity up to 450 liters and a gas capacity ranging from 8 to 702 cubic feet, regardless of corresponding service pressure levels and regardless of physical dimensions, finish or coatings. Subject cylinders are classifiable under HTSUS 7311.00.0030, 7311.00.0060 or 7311.00.00.90.

Excluded from these investigations are high-pressure steel cylinders manufactured to UN-ISO-9809-1 and 2 specifications and permanently impressed with ISO or UN symbols. Also excluded are acetylene cylinders, with or without internal porous mass, and permanently impressed with 8A or 8AL in accordance with DOT regulations.

Foreign Regulatory Changes Could Affect Exports of Consumer Products, Hot Water Bottles, Appliances, Foods

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.

Canada – proposed regulations implementing administrative monetary penalty system under Canada Consumer Product Safety Act (comments due by June 7)

Chile – draft test protocols for LED lighting chains and electric hot water bottles (comments due by June 15)

Czech Republic – draft regulation establishing veterinary requirements for establishments, plants and other facilities that handle animal products originating from crocodiles (comments due by Sept. 1)

Korea – proposed amendment of safety criteria for electrical appliances

Malaysia – revised orders on definition, certification and marking of halal foods

Thailand – draft notification on production processes, production equipment and food storage for prepared foodstuffs (comments due by July 2)

Uganda – final draft standards specifying requirements and methods of sampling and test for milled rice and pearl millet (comments due by July 2)

Cosmetics Production Activity Proposed for New Jersey Foreign-Trade Zone

The Foreign-Trade Zones Board has received from Cosmetic Essence Innovations LLC a notification of proposed production activity for its fragrance blending and bottling facility within FTZ 235 in Holmdel, N.J. CEI uses various components and materials sourced from abroad, and production under FTZ procedures could exempt CEI from customs duty payments on foreign status components used in export production. On its domestic sales, CEI would be able to choose the duty rates that apply to bottles of fragrance (zero) for foreign status inputs. Customs duties also could possibly be deferred or reduced on foreign status production equipment. Comments on this notification are due no later than June 18.

IPR Enforcement Actions on Semiconductor Chips, CMOS Sensors, TV Guide Products

Import Restrictions Lifted on Semiconductor Chips. The International Trade Commission has rescinded the exclusion order and cease and desist orders it issued in July 2010 in patent infringement investigation 337-TA-661 of certain semiconductor chips having synchronous dynamic random access memory controllers and products containing same. This action, which removes the import restrictions in place on these items, follows the settlement of the patent dispute between complainant Rambus Inc. and the principal respondent.

Potential IPR Probes of CMOS Sensors, TV Guide Products Evaluated for Public Interest Issues. The International Trade Commission is requesting comments no later than May 15 on any public interest issues raised by separate Section 337 intellectual property rights infringement complaints against (a) certain CMOS image sensors and products containing same and (b) certain products containing interactive program and parental control technology.

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.

CBP Reviewing Declaration of Persons Who Performed Repairs or Alterations

U.S. Customs and Border Protection is extending through June 6 the period for public comments on the proposed extension of the “Declaration of Persons Who Performed Repairs or Alterations.” This declaration is used in connection with the entry of articles under HTSUS 9802.00.40 and 9802.00.50, which are goods exported temporarily from the U.S. for repairs. Upon their return, duty is only assessed on the value of the repairs performed abroad and not on the full value of the article. The declaration includes information such as a description of the article and the repairs, the value of the article and the repairs, and a declaration by the owner, importer, consignee or agent having knowledge of the pertinent facts.

Third Annual Compilation of Reports on Textile and Apparel Imports from China

The International Trade Commission released May 4 its third annual compilation of bi-weekly reports on textile and apparel imports from China. The data in this report is shown on an annual and quarterly basis, by category and by Harmonized Tariff Schedule 10-digit subheadings. By category, annual data are provided from 2005 through 2011 and quarterly data are provided from first quarter 2010 through fourth quarter 2011. By HTS10 subheading, annual data are provided from 2009 through 2011 and quarterly data are provided from first quarter 2010 through fourth quarter 2011. Click here for a copy of the report (

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