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June 1 2012 issue

Friday, June 01, 2012
Sandler, Travis & Rosenberg Trade Report

Drug Safety Overhaul Advances in House and Senate

The Senate approved May 25 the Food and Drug Administration Safety and Innovation Act (S. 3187), a wide-ranging bill that includes provisions aimed at improving the safety of imported drugs. The House of Representatives passed similar legislation (the FDA Reform Act, H.R. 5651) May 30, and a conference to resolve differences in the two measures is expected later this summer. The White House has signaled that President Obama will sign the final bill, which will follow similar regulatory overhauls for imports of consumer products (the Consumer Product Safety Improvement Act) and foods (the FDA Food Safety Modernization Act).

Facility Registration. S. 3187 would require electronic annual registration by foreign facilities that manufacture, prepare, propagate, compound or process drugs by deeming drugs from an unregistered facility misbranded. Information submitted at registration would include (a) with respect to drugs, a unique facility identifier and point-of-contact e-mail address as well as similar information about each drug importer and the importer’s establishments, and (b) with respect to medical devices, the name of each U.S. importer known to the establishment and the name of each person who imports or offers for import such device to the U.S.

H.R. 5651 would require commercial drug importers to include in their registration a unique identifier for their principal place of business.

Entry Restrictions. Under both bills the FDA would be required to carry out foreign drug facility inspections according to a schedule based on various risks, including the compliance history of the facility; the record, history and nature of recalls linked to the facility; the inherent risk of the drugs associated with the facility; and whether the facility has been inspected within the preceding four years. U.S. Customs and Border Protection, upon request from the FDA, would be required to deny entry to a drug product manufactured in an establishment that has refused to permit an FDA inspection.

Both measures would also authorize the FDA to require the electronic submission of certain information by a drug importer as a condition of granting entry. Such information could include regulatory status (e.g., new drug application), facility information (e.g., proof of registration or unique facility identifier), and inspection and compliance information. The FDA would have to take into consideration the type of import, such as whether the drug is for use in preclinical or clinical investigation.

Under the House bill, the FDA would be able to require the destruction without opportunity for export of any drug that has been refused admission and has a reasonable probability of causing serious adverse health consequences or death.

Expedited Entry. H.R. 5651 would require the FDA to issue regulations establishing good importer practices that specify the measures an importer should take to ensure that imported drugs are compliant with applicable requirements. The FDA would be able to provide expedited clearance for drug importers that volunteer to participate in partnership programs for highly compliant companies.

Supply Chain Security. Lawmakers are still working to develop language giving the FDA authority to establish a uniform, comprehensive national system to secure the pharmaceutical distribution supply chain.

Increased Penalties. Under S. 3187 the penalty for knowingly and intentionally adulterating a drug if the drug has a reasonable probability of causing serious adverse health consequences or death to humans or animals would be increased to not more than 20 years imprisonment, a fine of not more than $1 million or both. In addition, the penalty for knowingly and intentionally committing certain prohibited acts related to forging and counterfeiting of drugs, including selling and dispensing, would be increased to not more than 20 years imprisonment, a fine of not more than $4 million or both.

H.R. 5651 would also impose a 20 year prison sentence for drug counterfeiting, along with a fine in accordance with title 18 of the U.S. Code, except that this term could be increased up to life if the counterfeit drug is the proximate cause of death of a consumer.

Extraterritorial Enforcement. S. 3187 would subject extraterritorial violations of the Federal Food, Drug and Cosmetic Act to enforcement in the U.S. if either (1) the article related to the violation was intended for import into the U.S. or (2) an act in furtherance of the violation was committed in the U.S.

Counterfeit Drugs. The Senate bill would allow the FDA to require notification by persons required to register as establishments engaged in the manufacture, preparation, propagation, compounding or processing of a drug, as well as persons engaged in wholesale distribution, if they know (1) of a substantial loss or theft of the drug or (2) the drug has been or is being counterfeited and the counterfeit product is either in U.S. commerce or is offered for import into the U.S. Failure to notify the FDA would be a prohibited act and thus subject to penalties.

Generic Drugs. Both the House and Senate bills would authorize a new generic drug user fee program, allowing the FDA to collect fees from industry to support human generic drug approval activities. Among other things, the bill provides for risk-based biennial inspections, parity of domestic and foreign inspection schedules by fiscal year 2017, a $15,000 to $30,000 higher inspection fee for a foreign versus domestic facility to reflect cost differences, streamlined hiring authority, and annual performance and fiscal reports. The generic drug user fee authority would sunset on Oct. 1, 2017.

Third-Party Audits. The FDA would be required by S. 3187 to establish within two years an accreditation system, to include the recognition of accreditation bodies and the development of model standards, for third-party auditors to conduct drug safety and quality audits that may be used to certify compliance with good manufacturing practices, documentation requirements at the border and other purposes. The FDA would use the results of these audits to inform its drug risk-based inspection schedule.

Sharing of Trade Secret Information. S. 3187 would protect drug-related information obtained by the FDA from disclosure under the Freedom of Information Act and other laws when such information is provided by a federal, state, local or foreign government agency that has requested that the information be kept confidential. In specified circumstances, however, the FDA could share certain drug-related trade secret information through written agreement with foreign governments that it has certified as able to protect trade secret information from disclosure.

No Slowdown in New Trade Restrictions, WTO/OECD Report Finds

A joint report from the World Trade Organization and the Organization for Economic Cooperation and Development warns that members of the so-called G-20 are continuing to impose new trade restrictions amid a still-uncertain global economic situation and that “the promised removal of existing restrictions is very slow.” The report calls on these countries to “redouble their efforts to resist protectionist pressures” and “the temptation to move toward more nationalistic and inward-looking policies,” which not only “will not solve their problems” but also risks “generating tit-for-tat reactions by their trading partners.”

The report expresses concern about a “revival of protectionist rhetoric” in some countries. For example, some G-20 leaders have made statements in favor of import substitution policies as the pillar of economic growth in their countries, a stance that is “generating regional and global trade tensions which have largely been absent since the coordinated policy responses to the global financial crisis were launched.” Some G-20 governments have raised import barriers, such as procedural or administrative actions to slow down border clearances, to protect domestic industries from what they may consider to be unfair competition. There has also been a reported increase in restrictions placed on government procurement activities in some countries. “With tight government budgets, high unemployment, slower growth, and the prospects of further multilateral market opening seemingly slipping away,” the report states, “the threat of protectionist pressures looms even larger.”

This increase in rhetoric has been accompanied by the “unabated” implementation of new trade restrictions. The report states that since mid-October 2011, 124 new trade restrictive measures have been recorded, affecting around 1.1% of G-20 merchandise imports or 0.9% of world imports, and that the main measures are trade remedy actions, tariff increases, import licenses and customs controls. In addition, these new restrictions seem to no longer be aimed at combating the temporary effects of the global crisis but rather at trying to stimulate recovery through national industrial planning. Many of these plans also envisage the granting of tax concessions and the use of government subsidies as well as domestic preferences in government procurement and local content requirements.

The report also points out that with the addition of these most recent barriers “the accumulation of trade restrictions is now a matter of concern.” Specifically, the trade coverage of the 802 restrictive measures put in place since October 2008, excluding those that have been terminated, is estimated to be almost 3% of world merchandise trade and almost 4% of G-20 trade. This accumulation is aggravated by the relatively slow pace of removal of existing measures, which is not only fairly low (18% as of this report) but is also slowing down.

Click here for WTO/OECD report

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.

June 5 – ST&R webinar on making and protecting duty-free claims under GSP

June 6 – meeting of President’s Export Council

June 6 – comments on proposed extension of CBP Form 7507, General Declaration (Outward/Inward)

June 6 – ST&R webinar on taking advantage of the U.S.-Korea FTA

June 7 – ST&R webinar on distinctions between ATPDEA and U.S.-Colombia FTA on textiles and apparel

U.S. Business Jet Industry Hit Hard by Economic Downturn, ITC Reports

The U.S. business jet manufacturing industry is facing new challenges as it competes in a market environment characterized by tightened credit, uncertain government funding for research and development, and new entrants into the industry, according to an International Trade Commission report issued May 30. This report provides an overview of the structure of the U.S. and global business jet industry; discusses the global market for business jet aircraft and the effects of the recent economic downturn on demand; reviews government policies and programs involving the business jet industry, including those related to financial support, aircraft R&D and certification; and examines factors that may affect the future competitiveness of the industry, particularly in the United States, Europe, Brazil, Canada and China.

An ITC press release lists the following highlights from this report.

- Three of the world's six leading business jet producers are headquartered in the U.S., but all six conduct at least one production-related activity in the U.S., which is where most production occurs. These six firms are part of larger corporations, most of which have diversified interests, varied manufacturing experience and a broader resource base.

- Global deliveries of business jets fell sharply during the period 2006-2011, with customers for very light and light business jets, the market segments in which U.S. producers are most active, being the hardest hit.

- The U.S. and European markets continued to account for the largest number of business jet deliveries during the period studied despite declines in total business jet deliveries. The share of global deliveries to emerging markets such as China, India and Russia grew, but prospects for continued growth in these markets may be limited by inadequate airport infrastructure and regulatory and tariff concerns.

- In addition to funding from business jet manufacturers and suppliers, financial support for aeronautics R&D is provided by most governments to foster important national goals. The business jet sector, however, reportedly has had the least government R&D participation among aerospace sectors globally, a trend exacerbated by recently constrained government budgets.

- Export credit agencies are available sources of funding for export sales of business jets and are likely to play an increasing role in providing sales finance to the industry.

- The future competitiveness of the U.S. business jet industry may be influenced by changes in such factors as regional demand, new entrants into the industry, workforce characteristics, government regulations pertaining to the environment, airspace usage and aircraft user fees. In some cases the impact of these changes, such as the opening of airspace in China, may benefit U.S. industry, whereas other changes, such as a proposed aircraft user fee in the U.S., may pose challenges.

Click here for full report

AD/CV Duties to be Distributed Under Byrd Amendment

U.S. Customs and Border Protection has announced its intent to distribute assessed antidumping and countervailing duties available for distribution in fiscal year 2012 pursuant to the Continued Dumping and Subsidy Offset Act, or Byrd Amendment. CBP has issued a notice listing the individual AD/CV duty orders and findings for which funds may become available for distribution, together with the affected domestic producers associated with each order or finding that are potentially eligible to receive a distribution. This notice also provides instructions for such producers (and anyone else alleging eligibility to receive a distribution) to file written certifications claiming a distribution, which must be done by July 31.

Although the CDSOA was repealed in 2005, the effect of the repeal will be delayed for several years. First, CBP will continue to distribute AD and CV duty revenues assessed on entries filed before Oct. 1, 2007. Second, because the AD/CV duty on an entry is not available for distribution until the entry is liquidated pursuant to the direction of the Department of Commerce, the distribution process will continue until all entries made before Oct. 1, 2007, are liquidated and the AD/CV duties are collected. While the distribution process will thus be continued for an undetermined period, the amount of money available for distribution can be expected to diminish over time. In addition, amounts distributed may be subject to recovery as a result of reliquidations, court actions, administrative errors and other reasons. CBP states that with the diminishing of the amounts available over time, the likelihood that these events will require the recovery of funds previously distributed will increase.

Canada Issues Guidance on Use of Customs Brokers’ Business Numbers

The Canada Border Services Agency issued May 30 a notice confirming that non-commercial casual and one-time commercial importers are not entitled to a business number and that when acting on behalf of these clients customs brokers must account for the goods using their own broker BN with an RM account identified for the program under which they are importing. Circumstances in which brokers will use their BN RM account include the following.

Low-value shipments – Customs brokers who act for one-time importers of commercial goods or importers of non-commercial casual goods can process shipments using an RM account number under the broker's BN. The broker's importer/exporter account number must be identified as “LVS one-time importer.”

Courier/LVS program – Customs brokers accounting for shipments released under the courier/LVS program may process consolidated entries using an RM account number under their own BN. This account should be identified as “Courier/LVS program.”

Importation of high-value non-commercial (casual) goods – Such goods imported under the commercial process should be accounted for under an RM account assigned to the customs broker's BN. This account should be identified as “High Value, Casual Importations.”

Temporary importation – Importers who temporarily import commercial goods into Canada on Form E29B, Temporary Admission Permit, and then export the goods do not need a BN. However, if the goods are temporarily imported but subsequently remain in Canada, the goods must be accounted for using the importer’s BN and RM account. If the importer does not have an existing BN it must obtain a BN with an RM account to account for the duties and taxes owing.

Convention and trade shows – Customs brokers may register a convention or trade show under their BN using the name of the convention or trade show as the RM account name. However, importers of commercial goods for display or sale at a convention or trade show should register for a BN.

The CBSA notes that as an alternative to using a broker’s BN the importer may account for these goods themselves using a B15 or B15-1, Casual Goods Accounting Document, at the CBSA office closest to where the goods are held for release.

AD/CV Notices: Request Admin Reviews, Steel Cylinders, Wind Towers, Clothes Washers, Hangers, Etc.

Agency: ITA.
Nature of Notice: Opportunity to request no later than June 30 administrative reviews of the AD duty orders on the following goods for the period June 1, 2011, through May 31, 2012.
- carbon and alloy seamless standard, line and pressure pipe from Japan under 4.5”
- carbon and alloy seamless standard, line and pressure pipe from Japan over 4.5%
- chlorinated isocyanurates from Chin and Spain
- helical spring lock washers from Taiwan
- artist canvas from China
- folding metal tables and chairs from China
- furfuryl alcohol from China
- polyester staple fiber from China
- prestressed concrete steel wire strand
- silicon metal from China
- tapered roller bearings from China

Agency: ITC.
Commodity: High-pressure steel cylinders.
Country: China.
Nature of Notice: Final affirmative AD and CV injury determinations.
Details: The ITA will soon issue AD and CV duty orders on subject merchandise.

Agency: ITA.
Commodity: Utility scale wind towers.
Country: China.
Nature of Notice: Preliminary affirmative CV duty determination.
Details: The ITA will instruct U.S. Customs and Border Protection to begin collecting CV cash deposits at rates ranging from 13.74% to 26.00%.

Agency: ITA.
Commodity: Large residential washers.
Country: Korea.
Nature of Notice: Preliminary affirmative CV duty determination.
Details: Countervailable subsidies range from 0.22% to 70.58%. The ITA will instruct CBP to begin collecting CV cash deposits at these rates, except LG Electronics Inc. will be excluded because its 0.22% rate is de minimis.

Agency: ITA.
Commodity: Steel wire garment hangers.
Country: Vietnam.
Nature of Notice: Preliminary affirmative CV duty determination.
Details: The ITA will instruct CBP to begin collecting CV cash deposits at rates ranging from 11.03% to 21.25%.

Agency: ITA.
Commodity: Lined paper products.
Country: China.
Nature of Notice: Preliminary results of administrative review of AD duty order for the period Sept. 1, 2010, through Aug. 31, 2011.
Details: Weighted average dumping margin of 258.21%. Preliminary rescission of review with respect to Shanghai Lian Li Paper Products Co. Ltd., which claims it had no shipments of subject merchandise to the U.S. during the period of review.

Agency: ITA.
Commodity: Polyester staple fiber.
Country: Taiwan.
Nature of Notice: Preliminary results of administrative review of AD duty order for the period May 1, 2010, through April 30, 2011.
Details: Weighted average dumping margin of zero for sole reviewed respondent Far Eastern New Century Corporation. If this rate is finalized no AD duties will be assessed on, and no AD cash deposits will be required for, entries of subject merchandise from this company.

Agency: ITA.
Commodity: Hot-rolled flat-rolled carbon-quality steel products.
Country: Russia.
Nature of Notice: Preliminary results of administrative review of AD suspension agreement for the period July 1, 2010, through June 30, 2011.
Details: The Russian government is in compliance with this agreement, but the agreement is not meeting its statutory requirement to prevent undercutting of domestic prices. If these preliminary results are finalized the ITA expects to terminate the suspension agreement.

Agency: ITA.
Commodity: Circular welded carbon steel pipes and tubes.
Country: Turkey
Nature of Notice: Preliminary results of administrative review of AD duty order for the period May 1, 2010, through April 30, 2011.
Details: Weighted average dumping margins of zero for two reviewed respondents. If these rates are finalized no AD duties will be assessed on, and no AD cash deposits will be required for, entries of subject merchandise from these companies.

Agency: ITA.
Commodity: Stainless steel plate in coils.
Country: Belgium.
Nature of Notice: Preliminary results of administrative review of AD duty order for the period May 1, 2010, through April 30, 2011.
Details: Weighted average dumping margin of 10.46% for sole reviewed company. If these results are finalized AD duties at this rate will be assessed on entries of subject merchandise during the period of review and AD cash deposits at this rate will be required for future entries.

Agency: ITA.
Commodity: Tapered roller bearings and parts thereof, finished and unfinished.
Country: China.
Nature of Notice: Preliminary results of new shipper review of AD duty order for the period June 1, 2010, through May 31, 2011.
Details: Weighted average dumping margin of zero for GGB Bearing Technology (Suzhou) Co. Inc. If this rate is finalized no AD duties will be assessed on, and no AD cash deposits will be required for, entries of subject merchandise from this company.

Agency: ITA.
Nature of Notice: Scope rulings completed between July 1 and Sept. 1, 2011, and requests for scope rulings and anticircumvention determinations pending as of Sept. 30, 2011.

Agency: ITA.
Commodity: Brass sheet and strip.
Country: Germany.
Nature of Notice: Rescission of administrative review of AD duty order for the period March 1, 2011, through Feb. 29, 2012, due to petitioners’ withdrawal of requests for review.
Details: AD duties on entries of subject merchandise will be assessed at rates equal to the cash deposit required at the time of entry or withdrawal from warehouse for consumption.

Agency: ITA.
Commodity: Frozen warmwater shrimp.
Country: Brazil.
Nature of Notice: Rescission of administrative review of AD duty order for the period Feb. 1, 2011, through Jan. 31, 2012, because there were no entries, exports or sales of subject merchandise during that period.

Agency: ITA/ITC.
Commodity: Solid agricultural grade ammonium nitrate.
Country: Ukraine.
Nature of Notice: Initiation of sunset reviews of AD duty order.

Agency: ITC.
Commodity: Pure magnesium.
Country: China.
Nature of Notice: Scheduling of expedited sunset review of AD duty order.

New FTZ Subzone at Wind Turbine Facility in Arkansas

The Foreign-Trade Zones Board has granted authority for subzone status for activity related to the manufacturing of wind turbine nacelles and generating sets at the Mitsubishi Power Systems Americas Inc. facility in Fort Smith, Ark. (subzone 14H). This facility will be used to manufacture and distribute wind turbine nacelles, generating sets and related components (up to 250 nacelles, 250 generating sets and 750 nacelle components annually) for the U.S. market and export.

Foreign Regulatory Changes Could Affect Exports of Wines, Appliances, Electrical Items, 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.

European Union – March 9 publication of amended regulation on organic wines

Israel – amended mandatory standard on domestic electrical appliances (comments due by July 25)

Saudi Arabia – standards on fixed storage tanks, thermometers, ships’ tanks, atomic absorption spectrometers, portable heating tools, stationary circulation pumps, oral hygiene appliances, electrical appliances for use with aquariums and garden ponds, whirlpool baths and spas, foot warmers and heating mats, lawn trimmers, hose sets, low-voltage fuses, sewing machine couplers, electrical conduits, boxes and enclosures for electrical accessories, drivers for vertically moving garage doors, and cord switches (comments due by July 25)

Quarterly Update on Foreign Cheese Subsidies

The International Trade Administration has issued its quarterly update (covering the period Jan. 1 through March 31, 2012) to the list of foreign government subsidies on articles of cheese subject to an in-quota rate of duty. This list indicates that during this period only the government of Canada provided such subsidies, at a rate of $0.35 per pound. The governments of Norway, Switzerland and the 27 member countries of the European Union are also on this list but provided no such subsidies during this period.

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