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June 12 2012 issue

Tuesday, June 12, 2012
Sandler, Travis & Rosenberg Trade Report

Prospects for U.S.-EU FTA Unclear; Preliminary Recommendations Due This Month

A U.S.-European Union working group is due to deliver by the end of June a preliminary report on ways to increase bilateral trade and investment. The joint High Level Working Group on Jobs and Growth established in late 2011 was tasked with conducting a comprehensive review of existing trade barriers and making recommendations on policies to reduce or remove them, from enhanced regulatory cooperation to the negotiation of one or more bilateral trade agreements. Business groups have used the opportunity to reiterate their support for a transatlantic free trade agreement, but comments from U.S. and EU officials suggest that they may have to settle for something less ambitious.

In a May 22 speech to the London School of Economics and Political Science, U.S. Trade Representative Ron Kirk said that in the aftermath of the global economic downturn “a consensus has emerged on both sides of the Atlantic that we can – and we should – do even more to tap the full potential of this extraordinary relationship to boost our growth, support more and better jobs, and to help meet the competitive challenges of the coming decades.” As a result, he said, U.S. and EU negotiators “are working together to examine a wide range of possibilities, including: eliminating conventional barriers to trade in goods, such as tariffs and tariff-rate quotas; reducing barriers to trade in services and to transatlantic investment; promoting regulatory approaches that facilitate trade; reducing, eliminating or preventing in the first place behind-the-border barriers to trade in all categories; and developing rules and principles on other global issues that are of common concern.”

Kirk stated that any new transatlantic trade negotiation “would need to achieve full liberalization of market access for all categories of goods and expand transatlantic flows of services and investment” and should also “identify new approaches to non-tariff barriers” such as health- and safety-related measures. Specifically, he added, the U.S. would want any such agreement to be “at least as broad and ambitious” as existing U.S. trade agreements. He added that this approach could serve as a model for advancing the Doha Round or other multilateral trade liberalization negotiations by providing an alternative to “the negotiating dynamic that existed before.”

EU Trade Commissioner Karel de Gucht made a similar call in a May 30 speech to the European Parliament Workshop on Transatlantic Economic Relations, stating that “Europe and the United States should reshape our economic relationship through a comprehensive bilateral trade initiative” that covers “all relevant economic issues.” For instance, he said, the two sides should get as close as possible to the removal of all duties on transatlantic trade in industrial and agricultural goods, open services markets that are currently closed and put in place a framework for better cooperation between regulators, attempt to secure national treatment at all levels of government procurement, improve regulatory cooperation on both food and non-food products, and “establish state of the art rules in key areas like competition, trade facilitation, labor, the environment and intellectual property.”

De Gucht made several arguments in favor of negotiating a wide-ranging deal. In addition to paving the way for greater trade efficiencies, he opined, such an agreement would be “a bold move” that could help restore confidence in “governments’ ability to make tough but necessary decisions” that will “deliver recovery.” It would also position the U.S. and the EU to be more competitive with emerging economies such as China, India, Russia, Brazil, Indonesia, Mexico and South Africa.

The Trans-Atlantic Business Dialogue has come out in support of a comprehensive U.S.-EU trade deal, calling it a “Transatlantic Partnership” in an apparent effort to draw a parallel with the Trans-Pacific Partnership the U.S. is currently negotiating with an eye toward the eventual creation of a free trade agreement comprising dozens of countries in the Americas and Asia. In a report issued in April the TABD asserted that “a standard bilateral free trade agreement … is insufficient to meet the broader economic challenges we face” and that negotiators should focus on three core objectives: (1) renewing and opening more deeply the 21st century transatlantic market by addressing issues such as those enumerated by de Gucht; (2) positioning the U.S.-EU partnership to better compete with and engage third countries on the fundamental rules underpinning 21st century trade and investment (e.g., by aligning their existing free trade agreements with third countries); and (3) strengthening the World Trade Organization and deepening the multilateral commitment to open markets.

De Gucht expressed confidence that the two sides will be able to overcome problem areas and achieve a comprehensive agreement, but Kirk was more cautious. De Gucht acknowledged that if there is to be “meaningful progress both sides will have to face down vested interests and take difficult political decisions,” but he said that “a broad package that delivers new liberalization would make that process easier because there will be many more who will see the opportunities we are creating.” He added that while it is “unrealistic” to expect an agreement to “tackle all of our differences” he believes both the U.S. and the EU understand that “the difficult issues are the ones that will deliver most results.” Kirk, on the other hand, raised the prospect that “acute domestic sensitivities or statutory limitations” could prove too high a hurdle and prompt the Working Group to determine that “the most ambitious outcomes are not likely to be achieved through full-fledged trade negotiations.” In that case, he said, “the United States will be ready to explore how the U.S. and the EU could reach agreements in areas where we have shared ambitions.”

ST&R’s Marcus Cohen Quoted in FCPA Enforcement Article

Sandler, Travis & Rosenberg attorney Marcus Cohen was quoted in a June 7 article appearing in the publication Law360 concerning the changing nature of corporate responses to alleged violations of the Foreign Corrupt Practices Act. The article highlights how major oil companies were quick to initiate investigations following “anonymous claims” of illicit payments to customs officials in Kazakhstan, which the article says is a “once-unlikely reaction that suggests companies have learned the perils of sleeping on” potential FCPA violations. Cohen noted that “oil companies have been in the crosshairs [with respect to FCPA enforcement] for a long time” and said he is unsurprised the oil companies and their logistics providers “are reacting as quickly and proactively as they are because of their experience” with enforcement authorities in the Department of Justice and the Securities and Exchange Commission.

Monthly Trade Deficit Falls on Decline in Imports and Exports

Trade statistics released June 8 by the Department of Commerce show that the monthly U.S. trade deficit in goods and services fell 4.8% in April to $50.1 billion. Exports sank $1.5 billion to $182.9 billion and imports dropped $4.1 billion to $233.0 billion a month after an $11.7 billion gain. Compared to a year earlier, the April trade deficit was down $6.5 billion as exports climbed $7.2 billion (4.1%) and imports rose $13.8 billion (6.3%).

According to DOC, the goods trade deficit fell $2.7 billion in April to $64.8 billion after a $6.5 increase in March. The services surplus edged down $0.1 billion to $14.8 billion, erasing the gain of a month earlier. Exports of goods were down $1.5 billion to $130.7 billion and imports were down $4.1 billion to $195.5 billion. Services exports lost $0.1 billion to $52.2 billion while imports gained $0.1 billion to $37.5 billion.

The bilateral trade deficit with China was up sharply for the second month in a row, climbing 13.4% to $24.6 billion. The U.S. also saw higher deficits with Canada (up 10% to $3.3 billion), Korea (up 200% to $1.8 billion), Nigeria (up 70% to $1.7 billion) and Taiwan (up 85.7% to $1.3 billion) while deficits declined with the European Union (11.2% to $8.7 billion), Japan (11.3% to $6.3 billion), Mexico (11.5% to $5.4 billion), Germany (16.7% to $4.6 billion), Venezuela (22.2% to $2.1 billion) and Ireland (9.5% to $1.9 billion).

The U.S. ran trade surpluses with Hong Kong (up 10% to $3.3 billion), Australia (down 20% to $1.6 billion), Singapore (down 22.2% to $0.7 billion) and Egypt (unchanged at $0.2 billion).

Customs Advisory Panel Seeks New Members

U. S. Customs and Border Protection is accepting through July 27 applications for appointment to the Advisory Committee on Commercial Operations of CBP (COAC). COAC provides advice and recommendations to CBP and the departments of Homeland Security and the Treasury on all matters involving the commercial operations of CBP and related DHS and Treasury functions. During its upcoming two-year term COAC will be expected to consider issues relating to enhanced border and cargo supply chain security, CBP modernization and automation, informed compliance and compliance assessment, account-based processing, commercial enforcement and uniformity, international efforts to harmonize customs practices and procedures, strategic planning, northern border and southern border issues, and import safety.

COAC consists of 20 members who are selected from representatives of the trade or transportation community served by CBP or others who are directly affected by CBP commercial operations and related functions. Members represent the interests of either importers (and their agents) or those associated with the carriage of international freight as well as major regions of the country. Not more than 10 of the 20 committee members may be affiliated with the same political party, and neither those registered as agents or representatives of a foreign principal nor federal registered lobbyists may serve on the committee.

Textile and Apparel Imports Rise Again in April

The Department of Commerce’s Office of Textiles and Apparel reported June 8 that monthly U.S. textile and apparel imports rose 2.9% in April compared to a year earlier after a 1.7% gain in March. Imports of cotton, wool, manmade fiber, silk blends and non-cotton vegetable fiber textile and apparel products totaled 4.35 billion square meter equivalents. Textile imports climbed 6.2% from a year before to 2.57 billion SME while apparel imports fell 1.4% to 1.78 billion SME.

For the year to date as of April 2012, compared to the same period in 2011, imports of textiles and apparel were down 0.5% to 16.68 billion SME. Textile imports saw a 1.8% gain to 9.49 billion SME while apparel imports dropped 3.3% to 7.20 billion SME. For the 12-month period ending in April total imports were down 4.4% to 53.6 billion SME as textile imports slid 2.8% to 29.99 billion SME and apparel imports declined 6.3% to 23.62 billion SME.

With respect to specific sources, imports of textile and apparel products (except cotton and silk blend textiles) saw a year-on-year increase in April from China (12.7% to 2.02 billion SME), Vietnam (8.0% to 273.4 million SME), Taiwan (72.9 million SME), Hong Kong (32.7% to 6.2 million SME), Canada (1.3% to 100.4 million SME), ASEAN (0.9% to 621.4 million SME), the EU15 (4.5% to 117.4 million SME) and Turkey (34.2% to 54.9 million SME). On the other hand, imports declined from South Korea (3.2% to 115.6 million SME), Mexico (7.7% to 200.9 million SME), DR-CAFTA (18.9% to 211.9 million SME), CBI (17.1% to 234.8 million SME), South Asia (6.5% to 637.3 million SME) and Israel (18.2% to 34.2 million SME).

Cotton Import Fee Could See Increase

The Department of Agriculture’s Agricultural Marketing Service is seeking comments by July 12 on a proposed rule that would increase the assessments paid by importers of cotton and cotton-containing products under the Cotton Research and Promotion Order. These assessments would be raised from $0.012665 per kilogram to $0.014109 per kilogram, reflecting an increase in the average weighted price of upland cotton received by U.S. farmers during calendar year 2011. The revenues generated by these assessments are used to finance research and promotion programs designed to increase consumer demand for upland cotton in the U.S. and international markets.

This rule would also reflect the removal of some Harmonized Tariff Schedule statistical reporting numbers from the list of those on which such assessments are levied.

Click here for USDA notice

New Electronic Application System for FDA Certificates of Free Sale

The Food and Drug Administration has unveiled a new automated system for companies exporting food from the U.S. to file electronically for certificates of free sale. Such certificates are often requested by international customers or governments to verify that the products being exported meet certain standards.

The FDA Unified Registration and Listing Systems Certificate Application Process allows exporters of conventional foods, including seafood, to apply online for a CFS, reducing the amount of time required for the FDA to process requests and issue certificates. Exporters who create a CAP account will be able to apply for new certificates, modify existing applications and check the status of pending applications. To create an account, companies will need to enter the food facility registration number and passcode they received when they registered under the Bioterrorism Act of 2002.

The FDA notes that while companies will now be able to apply for a CFS electronically they can still request certificates by mail. In addition, even if the application is made electronically, at this time certificates are available only as hard copies that are mailed to the applicant.

AD Notices: Xanthan Gum, Steel Pipe, Garlic, Shrimp, Honey, Brass Sheet, Tin Mill Products

Agency: ITC.
Commodity: Xanthan gum.
Country: Austria and China.
Nature of Notice: Institution and scheduling of preliminary phase of AD injury investigations.
Details: Conference to be held June 26; requests to appear at conference due June 22; written submissions due by June 29.

Agency: ITA.
Commodity: Circular welded non-alloy steel pipe.
Country: Korea.
Nature of Notice: Final results of administrative review of AD duty order for the period Nov. 1, 2009, through Oct. 31, 2010.
Details: Weighted average dumping margins of 0.59% for one manufacturer/exporter and 2.69% for another. These rates will be used to determine AD duties assessed on entries of subject merchandise made during the period of review, and AD cash deposits at these rates will be required for entries of subject merchandise made on or after June 11.

Agency: ITA.
Commodity: Fresh garlic.
Country: China.
Nature of Notice: Final results of administrative review of AD duty order for the period Nov. 1, 2009, through Oct. 31, 2010.
Details: Weighted average dumping margins range from $0.14/kg to $0.68/kg. These rates will be used to determine AD duties assessed on entries of subject merchandise made during the period of review, and AD cash deposits at these rates will be required for entries of subject merchandise made on or after June 11.

Agency: ITA.
Commodity: Frozen warmwater shrimp.
Country: Vietnam.
Nature of Notice: Amended final results of administrative review of AD duty order for the period Feb. 1, 2007, through Jan. 31, 2008, pursuant to court decision.
Details: Revised weighted average dumping margin of 0.26% (de minimis) for all reviewed manufacturer/exporters.

Agency: ITA.
Commodity: Honey.
Country: China.
Nature of Notice: Rescission of administrative review of AD duty order for the period Dec. 1, 2009, through Nov. 30, 2010, with respect to last remaining respondent.
Details: The AD cash deposit rate for this company will continue to be the rate established in the most recently completed administrative review.

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

Agency: ITA.
Commodity: Tin mill products.
Country: Japan.
Nature of Notice: Continuation of AD duty order.
Details: Subject merchandise is currently classified under HTSUS 7210.11.0000, 7210.12.0000, 7210.50.0000, 7212.10.0000 and 7212.50.0000 if of non-alloy steel and under HTSUS 7225.99.0090 and 7226.99.0180 if of alloy steel.

Assembly and Programming Results in Substantial Transformation, CBP Says

U.S. Customs and Border Protection has issued separate final determinations concerning the country of origin of certain digital projectors and multi-function peripherals that may be offered to the U.S. government under undesignated government procurement contracts. CBP issues country of origin advisory rulings and final determinations as to whether an article is or would be a product of a designated country or instrumentality for the purposes of granting waivers of certain “Buy American” restrictions in U.S. law or practice for products offered for sale to the U.S. government. Comments on these determinations are due no later than July 12.

Projectors. Major functional parts originating in Taiwan are pre-assembled in China with other non-Taiwanese components into modules or subassemblies. They are then shipped to Taiwan for final assembly into the projectors. The projectors were designed and developed in Taiwan, and the firmware files used to control various functions were developed, coded and programmed into the corresponding integrated circuits in Taiwan .

CBP has concluded that the assembly and programming operations performed in Taiwan are sufficiently complex and meaningful as to create new articles with a distinct name, character and use. As a result, the country of origin of the projectors at issue for purposes of U.S. government procurement is Taiwan.

Peripherals. These machines perform imaging, scanning, faxing and printing functions, and each model is primarily composed of the same major components and assemblies and manufactured using essentially the same processes performed in the same locations. First, most of the subassemblies are assembled in China in a process that accounts for about 60% of the total time it takes to manufacture a finished machine. After testing is complete the subassemblies are shipped to Singapore for additional manufacturing, programming and testing, which the manufacturer states is far more complicated and requires a higher degree of skill and technology than the testing performed in China. Once this testing is completed the machines are packaged for shipment.

CBP states that while substantial manufacturing operations are performed in both China and Singapore, the last substantial transformation occurs in Singapore because it is the assembly in that country that completes the machines. As a result, the country of origin of these machines for purposes of U.S. government procurement is Singapore.

IPR Enforcement Actions on Integrated Circuits, Cigarette Wrappers

New IPR Infringement Investigation of Integrated Circuits. The International Trade Commission has instituted investigation 337-TA-848 to determine whether imports of certain radio frequency integrated circuits and devices containing same are violating Section 337 of the 1930 Tariff Act by reason of patent infringement. The products at issue are RF circuits, including RF switches, that allow users to transmit and/or receive wireless signals more efficiently while consuming less power, as well as cellular handsets incorporating such RF circuits.

The complainant, Peregrine Semiconductor Corporation, requests that after this 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. The respondents in this investigation are located in Taiwan and the U.S.

No Import Restrictions on Cigarette Wrappers. The International Trade Commission has determined that the importation, sale for importation and sale within the U.S. after importation of certain reduced ignition proclivity cigarette paper wrappers and products containing same are not violating the patents specified by petitioner Schweitzer-Mauduit International Inc. The ITC has therefore terminated patent infringement investigation 337-TA-756 and will not impose any import restrictions on these products.

Export Privileges Denied for Illegal Exports to China

The Bureau of Industry and Security has issued three separate export denial orders in connection with illegal exports to China. These orders suspend until Jan. 28, 2021, all export privileges for a Massachusetts company, its Chinese parent company and a Hong Kong branch office; a Massachusetts woman; and a Chinese man currently incarcerated in Massachusetts. All of these entities were convicted of illegally exporting various electronic components and other items subject to the Export Administration Regulations to end-users in China, including entities on the Entity List, and for military end-uses, and for illegally exporting military electronic components designated on the U.S. Munitions List to China and Hong Kong. The woman and the man were also convicted of filing false shipping documents with the Department of Commerce.

Previously the company was ordered to pay a $15.5 million fine and a $10,400 special assessment, the woman was sentenced to a $1,300 special assessment and 36 months in prison, and the man was given a $15,00 fine, a $1,700 special assessment, 97 months in prison and 24 months of supervised release. All have also been added to the State Department’s Debarred List.

None of the export denial orders prohibit any export, reexport or other transaction subject to the Export Administration Regulations where the only items involved that are subject to the EAR are the foreign-produced direct product of U.S.-origin technology.

Foreign Regulatory Changes Could Affect Exports of Electrical Equipment, Refrigerators, Paint Thinner, 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.

Denmark – executive orders on construction products in contact with drinking water (comments due by Aug. 1)

Ecuador – April 12 publication of amended conformity assessment procedures on household refrigerating appliances

Ecuador – April 24 publication of technical regulation on paint thinner

Saudi Arabia – regulations specifying requirements for independently mounted switches, change-over selectors, cable trunking and ducting systems for electrical installations, flat quick-connect terminations for electrical copper conductors, cable reels for household and similar purposes, industrial cable reels, conduit systems for cable management, power track systems (comments due by Aug. 6)

Switzerland – partial revision of decree on telecommunications installations (comments due by Aug. 1)

Uganda – final draft standards specifying requirements and methods of sampling and testing for cassava crisps, potato chips and crisps, and brown sugar (comments due by Aug. 8)

FTZ Board Gets Arizona Reorganization Application, Approves Wind Turbine Component Manufacture

The Foreign-Trade Zones Board has recently announced the following actions.

- received an application from the Sierra Vista Economic Development Foundation Inc., grantee of FTZ 139, requesting authority to reorganize this zone under the alternative site framework with a proposed service area of Cochise County, Ariz., within and adjacent to the Naco U.S. Customs and Border Protection port of entry (comments due no later than Aug. 13)

- approved through June 7, 2014, temporary/interim manufacturing authority for Siemens Energy Inc. to manufacture wind turbine nacelles and hubs under FTZ procedures within FTZ 161 sites 3 and 4 in Hutchinson, Kan.

Tomatoes from West Africa to be Allowed Into U.S.

The Department of Agriculture’s Animal and Plant Health Inspection Service has issued a final rule that, effective July 12, will allow the importation of tomatoes from the Economic Community of West African States into the continental U.S. As a condition of entry, such tomatoes will be subject to a systems approach that includes requirements for pest exclusion at the production site, fruit fly trapping and monitoring, and packing procedures. The tomatoes will also be required to be accompanied by a phytosanitary certificate issued by the national plant protection organization of the exporting country with an additional declaration that the tomatoes have been produced in accordance with these requirements.

USDA May Ease Prohibition on Some Bird Imports Due to Avian Influenza

The Department of Agriculture’s Animal and Plant Health Inspection Service is reopening through July 12 the comment period on a January 2012 interim rule that prohibits or restricts the importation of bird and poultry products from regions where any subtype of highly pathogenic avian influenza is considered to exist. The interim rule also imposed restrictions on imports of live poultry and birds that have been vaccinated for any H5 or H7 subtype of avian influenza (including hatching eggs) or that have moved through regions where any subtype of HPAI is considered to exist.

APHIS states that since the publication of the interim rule it has become aware of several peer-reviewed scientific studies establishing that pigeons and other Columbiform species such as doves have a very low risk of being infected by HPAI viruses and would therefore contribute little to the risk of transmission and spread of such viruses. APHIS is therefore considering revising its regulation to allow the importation of such birds that have originated in or transited regions considered to have HPAI. Such birds and other poultry from regions considered to have exotic Newcastle disease would remain prohibited.

Wooden Handicraft Imports from China Subject of USDA Information Collection Review

The Department of Agriculture’s Animal and Plant Health Inspection Service is accepting through Aug. 13 comments on the proposed extension of an information collection concerning the importation of wooden handicrafts from China. On March 1, 2012, APHIS issued a final rule providing for such imports that imposed a requirement for the identification tagging of packages but did not include a proposed requirement for Chinese exporters to complete a phytosanitary certificate. Comments are being sought on whether the identification tags are necessary for the proper performance of APHIS’ functions, ways to enhance the quality, utility and clarity of the information collection, the accuracy of APHIS’ estimate of the burden associated with this requirement and ways to minimize that burden.

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