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July 13 2012 Issue

Friday, July 13, 2012
Sandler, Travis & Rosenberg Trade Report

Legislative Update: MTB, TPA, Supply Chain Security, Russia PNTR

As Congress approaches its month-long summer recess, trade-related legislation continues to advance. Two supply chain security bills were recently approved in the House, and lawmakers could act soon on permanent normal trade relations status for Russia. A miscellaneous trade bill and legislation to reauthorize trade promotion authority could see action later this fall, along with measures aimed at boosting the domestic economy by improving the U.S. trade balance.

MTB. Both the House and Senate are continuing to assemble a miscellaneous trade bill, which will remove or reduce import duties on hundreds of manufacturing inputs and other products. On July 9 House Minority Whip Steny Hoyer, D-Md., called for Congress to approve the MTB as part of a broader initiative to foster increased manufacturing in the U.S. (see below for more details). Some House Republicans are opposing the MTB as an earmark, which is prohibited under current House rules, but Republican leaders in that chamber have voiced support for it.

On July 11 Sens. Rob Portman, R-Ohio and Claire McCaskill, D-Mo., proposed to add MTB reform legislation as an amendment to a small business tax credit bill. This legislation, which was introduced as a standalone bill June 13, aims to streamline the process of assembling the MTB by allowing companies to submit their proposals directly to the International Trade Commission and retaining final approval authority for Congress. This process would be used for the next three MTB cycles in 2012, 2015 and 2018. 

Trade Promotion Authority. Sen. Sherrod Brown, D-Ohio, and others introduced June 27 legislation intended to “put a stake in the ground” concerning an expected future debate over granting trade promotion authority, which allows the president to negotiate trade agreements that Congress cannot amend and must approve or reject within a certain timeframe. TPA expired several years ago but Obama administration officials have said they intend to request it again once they are closer to concluding negotiations on the Trans-Pacific Partnership agreement. Brown said his 21st Century Trade Agreements and Market Access Act would delegate new TPA authority to the administration “while re-asserting the role of congressional oversight into the substance of negotiations.” Among other things, a press release from his office states, this bill would streamline trade and export promotion activities and require additional reporting on potential trade agreement partners. It would also set binding negotiating objectives that would have to be met and verified by Congress before an administration signs a trade agreement. 

Supply Chain Security. The House approved June 28 two measures designed to further improve the security of U.S. ports and maritime supply chains. H.R. 4005, the Gauging American Port Security Act, directs the Department of Homeland Security to submit to Congress a report that identifies remaining gaps in port security in the U.S., prioritizes those gaps and creates a plan to address them. H.R. 4251, the Securing Maritime Activities through Risk-based Targeting for (SMART) Port Security Act (H.R. 4251), aims to improve cooperation and coordination among federal agencies with maritime security responsibilities, support and enhance risk-based supply chain programs, and reduce costs.

PNTR for Russia. The lower chamber of the Russian legislature approved the country’s entry into the World Trade Organization this week and the upper chamber and President Vladimir Putin are expected to follow suit shortly. Russia’s membership will become official 30 days after final approval, at which point the trade liberalization commitments Moscow made as part of its accession bid will begin to take effect. However, U.S. businesses will only be able to take advantage of those measures if Congress repeals the Jackson-Vanik Amendment and grants permanent normal trade relations status to Russia. The Senate Finance Committee will hold a hearing July 17 on legislation to make this change, at which point Chairman Max Baucus is expected to attach a bill addressing human rights violations in Russia and other countries. Russia has expressed opposition to such a measure but it is widely seen as necessary to pass PNTR.

“Make It In America” Plan. The domestic manufacturing promotion initiative unveiled by congressional Democrats this week also calls for lawmakers to approve legislation to: 

- improve the tools available to federal agencies to prevent the evasion of antidumping and countervailing duties (H.R. 3057

- increase exports of U.S.-made goods and services by improving the functioning of U.S. export promotion programs (H.R. 4041

- create a public-private partnership to provide specialized training to U.S. Customs and Border Protection agents to prevent mislabeled or transshipped items from entering the U.S.

- develop a National Freight Strategic Transportation Plan (H.R. 1338)

- promote increased textile exports (H.R. 2275)

- eliminate the tax deduction for moving expenses for companies sending jobs overseas and providing a new tax credit for companies that bring jobs back to the U.S. (H.R. 5542)

- allow a tax credit for the purchase of new products certified as assembled in the U.S. and consisting of at least 60% components assembled in the U.S.; and 

- give preferences in government contracting and a 5% reduction on taxable income to companies that voluntarily produce at least 90% of their goods and services in the U.S. 

In theory, one or more of these bills could gain bipartisan support in the coming months given that they are aimed at further improving the health of the U.S. economy, which is likely to be the dominant issue in this fall’s presidential and congressional elections. However, it is equally possible that none of these initiatives will advance because both political parties are traditionally hesitant to do anything to give the other side a “win” in an election year. 

Drug Safety. President Obama signed into law July 9 the Food and Drug Administration Safety and Innovation Act (S. 3187) following a conference resolving differences in the House and Senate passed versions of this bill.

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. 3343 – to require residential carbon monoxide detectors to meet the applicable ANSI/UL standard by treating that standard as a consumer product safety rule (introduced June 27, referred to the Senate Committee on Commerce, Science and Transportation) 
H.R. 6055 – to authorize the commissioner of U.S. Customs and Border Protection to enter into reimbursable fee agreements for the provision of customs services (introduced June 28, referred to the House committees on Ways and Means and the Judiciary) 

H. Res. 719 – a resolution expressing the sense of the House of Representatives that the United States should initiate negotiations to enter into a free trade agreement with Tunisia (introduced June 29, referred to the House Committee on Ways and Means) 

S. 3364 – to provide an incentive for businesses to bring jobs back to America (introduced July 9, read the first time)

U.S. Eases Financial and Investment Sanctions on Burma

The State Department implemented July 11 several actions to ease financial and investment sanctions on Burma, which President Obama said will “allow U.S. companies to responsibly do business” in that country. These steps reflect “the historic reforms that have taken place in that country over the past year,” the department states, as well as the belief that “the participation of U.S. businesses in the Burmese economy will set a model for responsible investment and business operations as well as encourage further change, promote economic development, and contribute to the welfare of the Burmese people.”

According to a State Department fact sheet, the Office of Foreign Assets Control has issued General License No. 16 authorizing the exportation of U.S. financial services to Burma, subject to certain limitations. Reflecting particular human rights risks with the provision of security services, GL 16 does not authorize, in connection with the provision of security services, the exportation of financial services to the Burmese Ministry of Defense, state or non-state armed groups (which includes the military), or entities owned by the foregoing. In addition, U.S. persons are still prohibited from dealing with blocked persons, including both listed specially designated nationals as well as any entities 50% or more owned by an SDN. Transfers of funds to or from an account of a financial institution that is blocked under the Burma sanctions program are authorized, however, provided that the account is not on the books of a U.S. financial institution. 

OFAC has also issued General License No. 17 authorizing new investment in Burma, subject to certain limitations and requirements. GL 17 does not authorize new investment pursuant to an agreement, or pursuant to the exercise of rights under such an agreement, that is entered into with the Burmese Ministry of Defense, state or non-state armed groups (which includes the military), entities owned by the foregoing, or any person blocked under the Burma sanctions program. Any U.S. person (both individuals and entities) engaging in new investment in Burma pursuant to GL 17 whose aggregate new investment exceeds $500,000 must provide State with certain information, including policies and procedures with respect to human rights, workers’ rights, environmental stewardship, land acquisitions, arrangements with security service providers, and aggregate annual payments exceeding $10,000 to Burmese government entities, including state-owned enterprises. These reporting requirements apply to any new investment, whatever corporate form it might take.

Also on July 11 President Obama issued a new executive order that will allow the U.S. government to sanction individuals or entities that threaten the peace, security or stability of Burma, including those who undermine or obstruct the political reform process or the peace process with ethnic minorities, those who are responsible for or complicit in the commission of human rights abuses in Burma, and those who conduct certain arms trade with North Korea. 

The U.S. continues to maintain other economic sanctions against Burma, including a ban on all products of Burma that are imported directly or indirectly into the U.S. This prohibition applies to merchandise intended for commercial and personal use, including gifts or informational materials; merchandise landed, but not entered for consumption, in the U.S. (e.g., goods placed in a foreign-trade zone or bonded warehouse); and imports for transshipment or in-transit movements of products of Burma intended or destined for a third country. The ban does not apply to merchandise for which the Office of Foreign Assets Control has issued an import license, which may be entered for consumption or in-transit movement through the U.S., or importations for U.S. or foreign diplomatic and consular officials.

Dates and Deadlines in the Week Ahead

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

July 16 – comments on CBP information collection on cargo containers and road vehicles for transport under customs seal

July 18 – FDA meeting on requirements for importing regulated products

July 18 – ST&R webinar on CBP regulatory audits

July 18 – STTAS webinar on challenges and opportunities in trading with Brazil

July 20 – comments on information collections concerning FDA pilot program for expedited entry of drugs and drug ingredients

Of Note: Argentina Hits Back, East Coast Ports Could Shut Down

Argentina protests over U.S., Japan at WTO

Shippers begin to plan for U.S. east coast port closures

Illegal Sale of Imported Goods to Federal Agencies Nets $1 Million Penalty

The Department of Justice has announced that a U.S. telecommunications firm will pay $1 million to resolve allegations that it submitted false claims to federal agencies when it sold telecom goods manufactured in countries prohibited by the Trade Agreements Act. Goods purchased under General Services Administration Multiple Award Schedule contracts must be manufactured in one of a list of designated countries deemed to trade fairly with the U.S., but the company disclosed that it knowingly sold to various federal agencies telecom hardware such as modems, extender modules and shelf adapters that had been manufactured in countries such as China that do not have reciprocal trade agreements with the U.S. and are not on the list of designated countries.

AD Notices: Xanthan Gum, Hot-Rolled Steel

Agency: International Trade Commission.
Commodity: Xanthan gum.
Country: Austria and China.
Nature of Notice: July 19 meeting for vote on preliminary antidumping injury determinations.

Agency: International Trade Administration.
Commodity: Hot-rolled carbon steel flat products.
Country: India.
Nature of Notice: Amended final results of administrative review of antidumping duty order for the period Dec. 1, 2005, through Nov. 30, 2006, pursuant to court decision. Revised weighted average dumping margin of 9.01% for one exporter.

Monthly Trade Deficit Falls on Decline in Imports and Exports

Trade statistics released July 11 by the Department of Commerce show that the monthly U.S. trade deficit in goods and services fell 3.8% in May to $48.7 billion following a 4.8% drop in April. Exports edged up $0.4 billion to $183.1 billion, the second-highest amount ever, while imports fell $1.6 billion to $231.8 billion. Compared to a year earlier, the May trade deficit was up $1.0 billion as exports climbed $7.4 billion (4.2%) and imports rose $8.4 billion (3.8%).

According to DOC, the goods trade deficit fell $1.6 billion in May to $63.5 billion after a $2.7 billion drop in April. The services surplus saw a $0.3 billion gain to $14.8 billion. Exports of goods were virtually unchanged at $130.7 billion and imports were down $1.6 billion to $194.3 billion. Services exports rose $0.3 billion to a record $52.4 billion and imports gained $0.1 billion to $37.5 billion.

The bilateral trade deficit with China increased for the third month in a row, up 5.7% to $26.0 billion. Deficits also increased with the European Union (20.7% to $10.5 billion), Japan (1.6% to $6.4 billion), Mexico (16.7% to $6.3 billion), Germany (6.5% to $4.9 billion), Ireland (33.3% to $2.7 billion) and Korea (11.1% to $2.0 billion). Deficits fell with Canada (33.3% to $2.2 billion), Venezuela (23.8% to $1.6 billion) and Nigeria (17.6% to $1.4 billion). The deficit with Taiwan was unchanged at $1.3 billion.

The U.S. ran trade surpluses with Hong Kong (down 12.1% to $2.9 billion), Australia (up 6.3% to $1.7 billion), Singapore (up 42.9% to $1.0 billion) and Egypt (down 50% to $0.1 billion). 

Nuclear Regulatory Commission Joins IPR Coordination Center

The Nuclear Regulatory Commission became this week the 21st partner agency in the National Intellectual Property Rights Coordination Center led by U.S. Immigration and Customs Enforcement’s Homeland Security Investigations. IPR Center members share information, develop initiatives, coordinate enforcement actions and conduct investigations to identify and dismantle the criminal organizations that seek to profit from the manufacturing, importation and sale of counterfeit items. The NRC regulates commercial nuclear power plants and other uses of nuclear materials, such as in nuclear medicine, through licensing, inspection and enforcement.

The other IPR Center members are U.S. Customs and Border Protection, the Federal Bureau of Investigation, the U.S. Postal Inspection Service, the Food and Drug Administration’s Office of Criminal Investigations, the International Trade Administration, the Naval Criminal Investigative Service, the Defense Criminal Investigative Service, the Major Procurement Fraud Unit of the Army’s Criminal Investigative Command, the Defense Logistics Agency’s Office of Inspector General, the Air Force Office of Special Investigations, the U.S. Patent and Trademark Office, the General Services Administration’s Office of Inspector General, the Consumer Product Safety Commission, the National Aeronautics and Space Administration’s Office of Inspector General, the State Department’s Office of International Intellectual Property Enforcement, the International Criminal Police Organization, the Mexican Revenue Service, the Royal Canadian Mounted Police and the European Police Office.

Foreign Regulatory Changes Could Affect Exports of Ladders, Wires, Valves, Vehicles, Lighters

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.

Brazil – technical regulations on quality of metal ladders and wires, cables and electric flexible cords (comments due by Sept. 10)

Israel – amended mandatory standard on metal wedge gate valves (comments due by Sept. 11)

Japan – revised requirements for containers and packages for milk and milk products (comments due by Sept. 10)

New Zealand – revised vehicle exhaust emissions rule 

Saudi Arabia – draft technical regulations on lighters and rubber hoses and hose assemblies 

CBP Extends Import Restrictions on Cyprus Material for Five Years

U.S. Customs and Border Protection has issued a final rule that, effective July 16, extends for an additional five years the import restrictions on pre-Classical and Classical archaeological objects and Byzantine ecclesiastical and ritual ethnological material from Cyprus. This action follows the State Department’s determination that the cultural heritage of Cyprus continues to be in jeopardy from the pillage of certain archaeological objects and ethnological materials. 

This rule amends the list of subject articles to extend the historical timeframe of the restricted ecclesiastical and ritual ethnological materials to include the post-Byzantine period, c. 1500 A.D. to 1850 A.D. In addition, the section of the list pertaining to the covered ethnological materials has been revised to clarify coverage of certain mosaics of stone and wall hangings (specifically, to include images of saints among images of Christ, archangels and the apostles). The full list can be found here.

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