Print PDF

May 25 2012 issue

Friday, May 25, 2012
Sandler, Travis & Rosenberg Trade Report

Legislative Update: Lacey Act Changes May Move Soon, Customs Reauthorization Could Follow

Several trade-related initiatives are moving forward in Congress, including business-friendly changes to wood product import rules, a long-awaited measure addressing a wide range of customs issues and funding for federal trade agencies. Other measures on export promotion, trade remedy evasion and satellite export controls could see action later this year.

Lacey Act. Industry sources believe Congress may move within the next few weeks on legislation that would make various changes to the Lacey Act amendments of 2008. A House subcommittee recently held a hearing on two such bills: the Freedom from Over-Criminalization and Unjust Seizures (FOCUS) Act of 2012 (H.R. 4171 and S. 2062), which would remove liability for violations of foreign laws pertaining to wildlife, fish and plants, remove a provision allowing a federal prison sentence of up to five years and reduce the maximum fine from $500,000 to $200,000; and the Retailers and Entertainers Lacey Implementation and Enforcement Fairness (RELIEF) Act (H.R. 3210), which would exempt any plant product imported or manufactured before May 22, 2008, from the requirements of the Lacey Act amendments, limit the import declaration requirement to solid wood and items imported only for commerce, and limit the penalty for violating the Lacey Act the first time as it pertains to plants.

Customs Reauthorization. The House Ways and Means Trade Subcommittee held a hearing May 17 to aid in its development of a customs reauthorization bill, which is expected to address a wide range of topics (wti/wti.asp?pub=0&story=36992&date=&company=) and which Chairman Kevin Brady, R-Texas, said he plans to pass this year.

Testifying at this hearing, Executive Vice President of Sandler & Travis Trade Advisory Services George Weise lamented the lack of progress on key U.S. Customs and Border Protection modernization initiatives. He noted that when he was named Customs commissioner in 1993 he was told that the Automated Commercial System “was nearing collapse due to the sheer volume of trade” and that “a new automation system was critical.” It was also clear, he said, that “we had to find a way to consolidate the data requirements placed on importers by the numerous government agencies involved in regulating imports.”

Twenty years later, Weise said, “it is extremely disappointing” that “we are still far from completion” of the systems being designed to respond to those problems, the Automated Commercial Environment and the International Trade Data System. As a result, “the commercial operations of CBP are lagging vis-à-vis the security mission of CBP” and the business community believes “the entry and clearance process is still too cumbersome and costly.” Weise opined that CBP’s top priority should therefore be to “bring ACE and ITDS to a successful conclusion and retire ACS as soon as possible,” and he emphasized that Congress needs to provide sufficient funding to accomplish this goal. The American Association of Exporters and Importers echoed those points and added that particular attention should be given to developing the cargo release function, which “will be the foundation of the ACE system.”

Other points of interest from the May 17 hearing include the following.

- CBP is working to establish a comprehensive trusted trader program that encompasses all aspects of compliance, which could include merging the Customs-Trade Partnership Against Terrorism and the Importer Self-Assessment program.

- CBP its revitalizing its trade enforcement and revenue collection activities by aligning efforts with ICE Homeland Security Investigations to expand the scope of the National Intellectual Property Rights Coordination Center to cover commercial fraud enforcement.

- CBP’s intellectual property rights distribution chain management program, a partnership with the private sector, will enable the agency to identify and release shipments of authentic goods without inspection because it will move the shipment into the trusted segment of imports.

- IPR enforcement efforts by HSI “increased dramatically” from FY 2009 to FY 2011, including a 115% increase in arrests to 574, a 206% increase in indictments to 355 and a 77% increase in convictions to 291.

- HSI’s commercial fraud enforcement efforts increased as well, including a 24% rise in arrests to 112, a 53% rise in indictments to 66, and a 5% gain in convictions to 62.

- Over the past 12 months CBP has advanced efforts to build ITDA by (a) developing the capability to collect data elements required by other agencies through a PGA (participating government agency) message set, which will be tested this year; (b) testing a Document Image System that will allow it to accept electronic transmissions of imaged documents; and (c) implementing a standard protocol for transferring data to other agencies’ electronic systems.

Miscellaneous Trade Bill. Both the House and Senate are moving forward with assembling a miscellaneous trade bill, which will remove or reduce import duties on hundreds of manufacturing inputs and other products, but the process could stall later this year due to efforts by some lawmakers to reform the MTB process. Press sources indicate that Sen. Jim De-Mint, R-S.C., is working to secure changes similar to those set forth in legislation he introduced in 2010 (wti/wti.asp?pub=0&story=35880&date=&company=).

AD/CV Duty Evasion. Rep. Charles Boustany, R-La., introduced May 10 the Preventing Recurring Trade Evasion and Circumvention Act (H.R. 5708,) which he said would increase cooperation between federal agencies to “efficiently combat” the evasion of antidumping and countervailing duties. This bill appears to address some of the challenges that CBP has experienced in detecting and deterring such evasion, as outlined in a recent Government Accountability Office report ( House Ways and Means Chairman Dave Camp, R-Mich., signaled that the bill could move through the committee this year.

Trade Agency Funding. The Senate Appropriations Committee announced May 22 its approval of a fiscal year 2013 appropriations bill for the Department of Homeland Security that includes the following provisions.

- $7.633 billion for the Transportation Security Administration (down $208 million from FY 2012), including “critical investments” and “expenditure plans” for air cargo security

- $11.973 billion for CBP (up $378 million), including $10 million for the expansion of preclearance operations at foreign airports for people traveling to the U.S. and $4.5 million for the expansion of the Global Entry program to five additional airports

- $5.642 billion for U.S. Immigration and Customs Enforcement (down $220 million)

Export Promotion. Reps. Jim McDermott, D-Wash., and Dave Reichert, R-Wash., introduced May 17 the Efficient Export Promotion to Help American Businesses Act of 2012 (H.R. 5798). This bill would (1) require the Office and Management and Budget to use its budget authority to ensure that federal agencies coordinate their export efforts and eliminate inefficiencies among their different export promotion activities, (2) adds information required to be in the annual report of the Trade Promotion Coordinating Council, including analyses of U.S. export promotion efforts in comparison to those of other countries, how U.S. export efforts are doing compared to annual goals set out at the beginning of each year, and issues that inhibit export growth (either regulatory or market issues), and (3) gives the Commerce Department’s Bureau of Economic Analysis access to data on the international trade activities of partnership and sole proprietorships with the goal of improving statistics on the U.S. balance of payments.

Separately, Sens. Jeanne Shaheen, D-N.H., and Kelly Ayotte, R-N.H., introduced May 22 the Small Business Export Growth Act (S. 3218), which seeks to better promote exports by (a) placing a representative of state trade agencies on the TPCC, (b) requiring the Small Business Administration to conduct greater outreach to small businesses, including export events in each state, about the opportunities in exporting and federal resources available for small businesses, (c) requiring the SBA to survey businesses about ways to improve the Web site to ensure that it serves as a comprehensive resource for small businesses, (d) directing the TPCC to identify opportunities to consolidate unnecessary government offices, and (e) requiring the TPCC to incorporate recommendations from the GAO, including those pertaining to eliminating duplication and overlap.

Satellite Exports. Sen. Michael Bennet, D-Colo., introduced May 22 the Safeguarding United States Leadership and Security Act of 2012 (S. 3211). This bill would give the president the discretion to transfer certain less-sensitive satellites and satellite components from the U.S. Munitions List to the Commerce Control List, thus regulating them “in a manner consistent with other items that could serve both a commercial and military purpose.” It would also prohibit the transfer of any satellite or related item (either directly or indirectly) to China, North Korea, Cuba, Iran, Sudan, Syria or any state sponsor of terrorism identified under the Export Administration Act. Similar provisions have been added to the National Defense Authorization Act for fiscal year 2013 in the Senate. In both cases the changes are based on recommendations from a joint report from the departments of Defense and State (

Other. Following is a list of additional trade-related legislation that has been introduced recently. The texts of these bills are or will shortly be available on the Library of Congress Web site (

S. 3073 - to clarify the classification of recreational performance outerwear (introduced May 8 and referred to Senate Finance Committee)

H.R. 5651 - to amend the Federal Food, Drug and Cosmetic Act to revise and extend the user-fee programs for prescription drugs and medical devices and to establish user-fee programs for generic drugs and biosimilars (introduced May 8 and referred to the House Committee on Energy and Commerce)

H.R. 5710 – to establish minimum efficiency standards for self-contained commercial refrigerators and freezers and to direct the Department of Energy to establish standards for other related products (introduced May 10 and referred to the House Committee on Energy and Commerce)

S. 3183 – to require the use of domestic property to be eligible for certain tax incentives for solar energy (introduced May 15 by Sen. Schumer and referred to the Senate Committee on Finance)

H.R. 5749 – to prohibit the transfer of defense articles and defense services to the governments of foreign countries that are engaging in gross violations of internationally-recognized human rights (introduced May 15 by Rep. Grijalva and referred to the House Committee on Foreign Affairs)

H.R. 5802 – to authorize the use of port security grant funds for the replacement of certain security equipment or facilities (introduced May 17 by Rep. Richardson and referred to the House Committee on Homeland Security)

H.J. Res. 109 – a joint resolution approving the renewal of import restrictions contained in the Burmese Freedom and Democracy Act of 2003 (introduced May 18 by Rep. Crowley and referred to the House Committee on Ways and Means)

S. 3225 – to require the U.S. Trade Representative to provide documents relating to trade negotiations to members of Congress and their staff upon request (introduced May 23 by Sen. Wyden and referred to the Senate Committee on Finance)

S. 3227 – to enable concrete masonry products manufacturers and importers to establish, finance and carry out a coordinated program of research, education and promotion to improve, maintain and develop markets for concrete masonry products (introduced May 23 by Sen. Nelson and referred to the Senate Committee on Commerce, Science and Transportation)

Dates and Deadlines in the Week Ahead

Following are highlights of regulatory effective dates and deadlines and federal agency meetings coming up in the next week.

May 29 – comments on TSA information collections associated with Certified Cargo Screening Program

May 29 – comments on Certificate of Registration, CBP forms 4455 and 4457

May 29 – comments on request for new foreign-trade zone in Vermont

May 30 – ST&R webinar on marking and labeling laws and regulations

May 31 – ST&R webinar on NAFTA basics for textiles and apparel

June 1 – comments on CBP form 300, bonded warehouse proprietor’s submission

U.S.-Bolivia Bilateral Investment Treaty to be Terminated as of June 10

The State Department and the Office of the U.S. Trade Representative have announced that the bilateral investment treaty between the U.S. and Bolivia will be terminated effective June 10. As of that date the BIT will cease to have effect except that it will continue to apply for another 10 years to covered investments existing at the time of termination.

BITs provide protections to cross-border investment between two countries and the option to resolve investment disputes through international arbitration. The U.S.-Bolivia BIT was signed on April 17, 1998, and entered into force June 6, 2011. Bolivia notified the U.S. that it was terminating the BIT on June 10, 2011, and pursuant to the terms of the treaty termination takes effect one year from the date of such notice.

Of Note: U.S.-Mexican Truck Deal Underutilized, Report Links Open Markets and Economic Growth

Mexican Truckers Avoid Border, Imperil Deal

Trade-induced economic growth boosts employment and wages,3746,en_21571361_44315115_50424378_1_1_1_1,00.html

Iran Sanctions Violation Nets $112,500 Penalty

According to the Treasury Department’s Office of Foreign Assets Control, a U.S. asset management company has agreed to remit $112,500 to settle potential civil liability for an apparent violation of the Iranian Transactions Regulations that OFAC has determined was not egregious. The company at issue is the investment manager of a United Kingdom-organized investment fund. Pursuant to the authority delegated to it in an investment advisory agreement, a London-based subsidiary of this company purchased approximately $3 million of shares for the investment fund in a Cayman Islands company that invests exclusively in Iranian securities.

OFAC considered the following to be aggravating factors in this case: the U.S. company failed to exercise a minimal degree of caution or care in the conduct that led to the apparent violation, company officers were aware of the conduct giving rise to the apparent violation, substantial economic benefit was conferred to Iran, and the company did not have an OFAC compliance program in place at the time of the apparent violation.

However, OFAC considered the following to be mitigating factors in this case: the company has not received a penalty notice or finding of violation from OFAC for substantially similar violations; has substantially cooperated with OFAC’s investigation by responding promptly and completely to requests for information, voluntarily self-disclosing the apparent violation in question and agreeing to settle this matter without the issuance of a pre-penalty notice; took appropriate remedial action; and may not have fully understood its OFAC obligations under U.S. law.

FMC Considers Developing Container Freight Indices for U.S. Agricultural Exports

The Federal Maritime Commission is requesting comments no later than July 9 on its possible development of container freight indices for U.S. agricultural exports.

The FMC states that published containerized freight rate indices have proliferated in the past several years but that most focus only on the U.S. import leg. Most of these indices were developed in the wake of recent rate volatility in the major international liner shipping markets and, at least in principle, allow shippers and ocean carriers an opportunity to manage freight rate risk. The FMC responded this past March with the implementation of new regulations allowing service contracts to reference freight indices or other outside terms so long as they are readily available to the contracting parties and the Commission.

However, the FMC has since received informal requests from several large U.S. agricultural shippers, intermediaries and derivative brokers to consider issuing an index based on service contracts filed with the Commission because they have not found the available indices for U.S. export routes useful for the level of market intelligence they need, for adjusting rates in contracts or for hedging freight rate risk. Some exporters have said that a properly constructed index would help them increase exports by allowing them to use contracting and hedging strategies to increase the certainty of their transportation costs. Exporters and derivative brokers have also said that the lack of a reliable container rate index for export grain shipments in particular disadvantages container shipping relative to bulk shipping because of the superior pricing transparency of the latter.

FMC staff has conducted some initial testing of the technical feasibility of using service contract data to develop a container rate index for a few targeted major U.S. export commodities such as grains, cotton, hay and frozen meat. This concept is still in its formative stages and the FMC wants to hear the views of all parties before deciding whether or not to produce it. The FMC is therefore seeking input from U.S. exporters, intermediaries, ocean carriers and any other interested parties on the following issues.

- whether and to what extent the shipping public would find targeted U.S. export rate indices beneficial

- whether the FMC should extract rate information from service contracts or whether suitable alternatives exist

- the positive and negative influences on the export commodities and ocean transportation marketplaces of the greater transparency such indices might provide

- whether these indices, if developed, should be commodity-specific for different prescribed routes or whether more broadly based indices would meet U.S. exporters’ needs

Export Council Subcommittee on Export Administration to Hold Open Meeting June 4

The President’s Export Council Subcommittee on Export Administration will hold an open meeting June 4 in Washington, D.C. The PECSEA provides advice on matters pertinent to those portions of the Export Administration Act that deal with U.S. policies of encouraging trade with all countries with which the U.S. has diplomatic or trading relations and of controlling trade for national security and foreign policy reasons.

The June 4 meeting will include updates from the subcommittee’s working groups, an update on export control reform efforts and a panel on deemed exports. This meeting will be accessible via teleconference to 25 participants on a first come, first served basis, and requests to participate in this manner are due no later than May 30. There will also be a limited number of seats available at this meeting but reservations are not accepted.

Regulations on Imports of Cotton Woven Fabric, Short Supply Procedures Withdrawn

The International Trade Administration has issued a final rule that, effective June 25, will withdraw its regulations pertaining to imports of cotton woven fabric and short supply procedures, which it states are obsolete. The regulatory provisions titled “Imports of Cotton Woven Fabric,” codified at 15 CFR 336.1–336.5, provide for the administration of allocation of tariff-rate quotas for cotton woven fabric that expired as of Dec. 31, 2009. In addition, the regulations titled “Short Supply Procedures,” codified at 19 CFR 357.101–111, pertain to voluntary restraints on certain steel imports that expired March 31, 1992.

New IPR Infringement Petitions on Electronic Imaging Devices, Rubber Resins

The International Trade Commission has received separate petitions requesting that it institute Section 337 investigations regarding the following products.

- certain electronic imaging devices (complaint filed on behalf of FlashPoint Technology Inc.; proposed respondents located in Taiwan, Korea, China and the U.S.)

- certain rubber resins and processes for manufacturing same (complained filed on behalf of SI Group Inc.; proposed respondents located in China, the British Virgin Islands, Hong Kong and Canada)

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.

FTZ Expansions Sought in Texas, Wisconsin

The Foreign-Trade Zones Board is accepting comments through July 24 on the following applications.

- The Board of Trustees of the Galveston Wharves, grantee of FTZ 36, is requesting authority to reorganize and expand this zone under the alternative site framework with a proposed service area of Galveston County, Texas, within and adjacent to the Houston U.S. Customs and Border Protection port of entry.

- The Port of Milwaukee, grantee of FTZ 41, is requesting authority to reorganize and expand this zone under the alternative site framework with a proposed service of area of Kenosha, Milwaukee, Racine, Dodge, Fond du Lac, Jefferson, Ozaukee, Rock, Sheboygan, Walworth, Washington and Waukesha counties in Wisconsin, adjacent to the Milwaukee CBP port of entry.

Updated Trigger Levels for WTO Safeguard Measures on Agricultural Goods

The Department of Agriculture’s Foreign Agricultural Service has issued a notice listing the updated quantity trigger levels for products that may be subject to additional import duties under the safeguard provisions of the World Trade Organization Agreement on Agriculture. This notice also includes the relevant period applicable for trigger levels on each of the affected products, which include beef, mutton, cheese, dairy products, peanuts and peanut butter, sugar and sugar products, cocoa powder, chocolate crumb, infant formula, mixes and doughs, condiments, ice cream and cotton.

Under the WTO Agreement on Agriculture, additional import duties may be imposed on imports of products subject to tariffs as a result of the Uruguay Round if the price of an individual shipment of imported products falls below the average price for similar goods imported during the years 1986-1988 by a specified percentage. It also permits additional duties to be imposed if the volume of imports of an article exceeds the average of the most recent three years for which data are available by 5%, 10% and 25%, depending on the article. These additional duties may not be imposed on quantities for which minimum or current access commitments were made during the Uruguay Round negotiations, and only one type of safeguard (price or quantity) may be applied at any given time to an article.

Click here for USDA notice

39 Nations, One Economy Certified to Export Shrimp to U.S.

The State Department has certified 39 nations and one economy as meeting the requirements set by Section 609 of Public Law 101-162, which prohibits the importation of shrimp and products of shrimp harvested in a manner that may adversely affect sea turtle species. As a result of this certification, these countries and economy may continue to export shrimp to the U.S.

The Section 609 ban does not apply when the State Department certifies to Congress that (a) the harvesting nation has adopted a program governing the incidental capture of sea turtles in its commercial shrimp fishery that is comparable to that of the program in effect in the U.S. and has an incidental take rate comparable to that of the U.S. or (b) the fishing environment in the harvesting nation does not pose a threat of the incidental taking of sea turtles. State makes certifications annually and bases them in part on verification visits to exporting countries.

According to State, 13 nations have sea turtle protection programs that are comparable to that of the U.S.: Colombia, Costa Rica, Ecuador, El Salvador, Guatemala, Guyana, Honduras, Mexico, Nicaragua, Nigeria, Pakistan, Panama and Suriname. This list reflects the recertification of Costa Rica based on improvement in the implementation and enforcements of its turtle excluder device regulatory program in its commercial shrimp trawl fishery.

In addition, 26 nations and one economy have fishing environments that do not pose a danger to sea turtles. Of these, the Bahamas, Belize, China, the Dominican Republic, Fiji, Hong Kong, Jamaica, Oman, Peru, Sri Lanka and Venezuela only harvest shrimp using small boats with crews of less than five that use manual rather than mechanical means to retrieve nets, or catch shrimp using other methods that do not threaten sea turtles. Another 16 nations have shrimping grounds only in cold waters, where the risk of taking sea turtles is negligible: Argentina, Belgium, Canada, Chile, Denmark, Finland, Germany, Iceland, Ireland, the Netherlands, New Zealand, Norway, Russia, Sweden, the United Kingdom and Uruguay.

State is also confirming the requirement for all DS-2031 forms accompanying shrimp imports from uncertified nations to be originals and signed by the competent domestic fisheries authority.

For shrimp harvested with turtle excluder devices in an uncertified nation to be eligible for importation into the U.S. under the exemption for shrimp harvested by commercial shrimp trawl vessels using TEDs comparable in effectiveness to those required in the U.S., State must determine in advance that the government of the harvesting nation has put in place adequate procedures to ensure the accurate completion of the DS-2031 forms. At this time, State has made such a determination with respect to Australia, Brazil and France. For Brazil, only shrimp harvested in the northern shrimp fishery are eligible for entry under this exemption. For Australia, shrimp harvested in the Exmouth Gulf Prawn Fishery, the Northern Prawn Fishery, the Queensland East Coast Trawl Fishery and the Torres Strait Prawn Fishery are eligible for entry under this exemption. For France, shrimp harvested in the French Guiana domestic trawl fishery are eligible for entry under this exemption. The importation of TED-caught shrimp from any other uncertified nation will not be allowed.

State has also determined that shrimp harvested in the Spencer Gulf region in Australia may be exported to the U.S. using a DS-2031 form under the exemption for shrimp harvested in a manner or under circumstances determined not to pose a threat of the incidental taking of sea turtles. An official of the government of Australia still must certify that form.

Test Procedures for Dishwashers, Dehumidifiers, Ovens, Stoves Proposed for Amendment

The Department of Energy is inviting public comments through June 25 on a proposal to amend its test procedures for residential dishwashers, dehumidifiers, and conventional cooking products (which includes cooktops, ovens and ranges) to address the measurement of active mode fan-only energy use. This supplemental proposed rule also addresses energy and water use associated with dishwasher water softeners, the energy test cycle for dishwashers with a separate soil-sensing cycle, and the normal cycle definition, power supply and detergent dosing for dishwashers. Finally, this proposal would update the industry test method specified in the dehumidifier test procedure, eliminate measurement of gas pilot light energy use in the cooking products test procedure, and remove an obsolete energy efficiency metric in the dishwasher test procedure.

Click here for proposed rule

USDA Reviewing Information Collections on Avocadoes, Poultry, Papaya

The Department of Agriculture is inviting public input on the following information collections. Comments should address whether the collections are necessary for the proper performance of the functions of the agency, ways to enhance the quality, utility and clarity of the information to be collected, the accuracy of USDA’s estimate of the burden associated with these collections and ways to minimize that burden.

Avocados – Imports of Hass avocados from Peru are subject to certain conditions before entering the U.S., including phytosanitary certificates, trust funds, work plans, recordkeeping, inspection of packinghouses, box marking and shipping documents. (comments due by June 22)

Poultry – USDA regulations allow the importation of live poultry, poultry meat and other poultry products from specified regions, including Argentina and the Mexican states of Campeche, Quintana Roo and Yucatan, that are free of exotic Newcastle disease. The conditions for importation require certification from a full-time salaried veterinary officer of the national government of the exporting region that the poultry and poultry products to be exported originated in that region (or in another region recognized by APHIS as free of END) and that before the export to the U.S. the poultry and poultry products were not commingled with poultry and poultry products from regions where END exists. (comments due by June 25)

Papaya – USDA regulations allowing the importation of commercial shipments of fresh papaya from Colombia and Ecuador into the continental U.S. include certain requirements for approved production locations, field sanitation, hot water treatment, procedures for packing and shipping, and fruit fly trapping in production areas. To document that these requirements have been met the regulations require the use of phytosanitary certificates and recordkeeping. (comments due by June 25)

To get news like this in your inbox daily, subscribe to the Sandler, Travis & Rosenberg Trade Report.

Customs & International Headlines