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July 27 2012 Issue

Friday, July 27, 2012
Sandler, Travis & Rosenberg Trade Report

Legislative Update: Uncertain Fate for Trade Measures, Toxic Chemicals Overhaul Advances

Prospects for several trade-related measures to advance before the congressional summer recess are more uncertain now than they were just a few weeks ago. Permanent normal trade relations status for Russia could make it through both the House and Senate, but a bill affecting Africa, Central America and Burma has been stalled. In the meantime lawmakers have taken action on reforming legislation on toxic substances and illegally harvested wood products. 

PNTR for Russia. Repealing the Jackson-Vanik Amendment and extending permanent normal trade relations status to Russia is necessary to allow U.S. businesses to take advantage of the trade liberalization measures Russia will implement beginning Aug. 22, when its accession to the World Trade Organization becomes official. PNTR legislation was approved by the Senate Finance Committee July 18 and by the House Ways and Means Committee July 26. Provisions designed to address concerns about human rights violations in Russia, which were added to the Senate bill before the Finance Committee passed it, are expected to be grafted into the House bill before a floor vote. The full House could take up the bill the week of July 30 and supporters, including the White House, will likely urge the Senate to follow suit before Congress leaves for its month-long recess on Aug. 3. 

AGOA/DR-CAFTA/Burma. Senate Finance approved July 18 legislation extending through September 2015 the third-country fabric provision under the African Growth and Opportunity Act, adding the Republic of South Sudan to the list of countries eligible for AGOA benefits, making technical corrections and modifications to the DR-CAFTA rules of origin for certain textile and apparel products, and reauthorizing import sanctions against Burma for three years. In the House a scheduled July 24 vote on a companion bill was postponed and has not yet been rescheduled. 

Further Senate action on this bill is uncertain because two separate holds have been placed on it, one by Sen. Robert Menendez in an effort to secure a reauthorization of the Cotton Trust Fund (see below) and the other by Sen. Tom Coburn over concerns about how the bill is funded. On July 26 Sen. Coburn attempted to strip out the AGOA provisions, stating that the mechanism being used to offset the revenue loss was just a gimmick, but that effort was denied. He also sent a letter to Sens. Harry Reid and Mitch McConnell warning that he will block any other bill that comes to the floor with similarly “fuzzy” payment provisions. 

There is some speculation that this bill could come up for a vote in September, the same month that the AGOA third-country fabric provision expires. Considering that the House is only in session for eight days that month, the two chambers will have to coordinate closely if this bill is to be passed and sent to the White House before the third-country fabric provision expires. 

Trade Remedy Enforcement. Senate Finance has also approved a modified version of the Enforcing Orders and Reducing Customs Evasion (ENFORCE) Act (S. 1133), which would create a set of procedures for U.S. Customs and Border Protection to investigate allegations of evasion of antidumping and countervailing duty orders. However, Inside US Tradereports that this measure is unlikely to advance in the House, where Republicans oppose certain provisions and may instead want to take up this issue “as part of a larger customs reauthorization package” that may be considered later this year. 

Trust Funds. Another measure approved by Senate Finance July 18 would create a federal trust fund to support research on diseases affecting the citrus industry; reauthorize through 2015 the Cotton Trust Fund, which temporarily suspended duties on certain cotton shirting fabrics; and fully restore wool trust fund payment levels in calendar years 2010 through 2012 and ensure that the Wool Trust Fund is fully funded through 2014. Again, however, Inside US Trade cites legislative sources as saying that neither the House nor the Senate is likely to advance this bill on its own. 

Toxic Substances Reform. The Senate Committee on Environment and Public Works narrowly approved July 25 the Safe Chemicals Act of 2011 (S. 847), which would reform and modernize the Toxic Substances Control Act. However, several committee Republicans criticized Democrats for abandoning an ongoing joint effort to effect an even broader overhaul of TSCA, which they said could have resulted in a draft bill as early as September, and instead advancing this “highly partisan” bill. 

According to a fact sheet, the Safe Chemicals Act would require chemical companies to demonstrate the safety of industrial chemicals and encourage the development of safer alternatives to existing chemicals. It would also direct the Environmental Protection Agency to evaluate the safety of chemicals based on the best available science. Evaluations would be conducted in stages, chemicals would be screened to limit the number that require a full safety standard determination, and priority would be given to chemicals in need of safety standard determinations. The EPA would be directed to rely on existing information first and require additional testing only to the extent necessary to determine safety. In addition, companies would be able to bring new chemicals quickly into commerce through a process that is similar to existing TSCA requirements but with enhanced data and safety requirements. 

Lacey Act. The Retailers and Entertainers Lacey Implementation and Enforcement Fairness (RELIEF) Act (H.R. 3210) was reported by the House Natural Resources Committee and placed on the House calendar on July 17. This bill would exempt any plant product imported or manufactured before May 22, 2008, from the requirements of the Lacey Act amendments and limit the import declaration requirement to solid wood and items imported only for commerce. It would also clarify that the Lacey Act only prohibits the importation of wood products harvested in violation of foreign laws that pertain to plants. 

Several committee Democrats expressed opposition to this bill in the committee report, stating that it would “invit[e] organized crime to gravitate toward illegal logging, … allow people and companies to retain illegally harvested, imported, or stolen wood or other plant products … [and] ‘grandfather’ any plant products assembled or imported before the 2008 amendments, creating a massive loophole that criminals will exploit.” 

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

H.R. 6110 – to establish educational seminars at United States ports of entry to improve the ability of U.S. Customs and Border Protection personnel to classify and appraise articles that are imported into the United States in accordance with the customs laws of the United States (introduced July 12 by Rep. Lipinski, referred to the House Committee on Ways and Means) 

S. 3389 – to provide federal jurisdiction for theft of trade secrets (introduced July 17 by Sen. Kohl, referred to the Senate Committee on the Judiciary) 

H.R. 6149 – to require the U.S. Trade Representative to take action to obtain Russia’s full compliance with its commitments under its protocol of accession to the World Trade Organization (introduced July 18 by Rep. Michaud, referred to the House Committee on Ways and Means) 

H.R. 6152 – to amend the Internal Revenue Code of 1986 to encourage domestic insourcing and discourage foreign outsourcing (introduced July 19 by Rep. Pascrell, referred to the House Committee on Ways and Means) 

S. 3425 – to amend the Worker Adjustment and Retraining Notification Act to provide a notice requirement regarding offshoring (introduced July 24 by Sen. McCaskill, referred to the Senate Committee on Health, Education, Labor and Pensions) 

H.R. 6200 – to strengthen federal consumer protection and product traceability with respect to commercially marketed seafood (introduced July 25 by Rep. Markey, referred to the House committees on Energy and Commerce, Agriculture, Ways and Means, and Natural Resources) 

CBP to Focus on Upgrading Inspection and Other Systems Along Northern Border

U.S. Customs and Border Protection has made available a final programmatic environmental impact statement that analyzes the potential environmental and socioeconomic effects associated with its activities along the U.S.-Canada border. CBP is also accepting through Aug. 27 comments on a draft decision concerning the specific approach it plans to adopt. 

The PEIS analyzes the environmental and socioeconomic effects of current and potential future CBP border security activities along the northern border from the Atlantic Ocean to the Pacific Ocean, including an area extending approximately 100 miles south of that border but excluding the Alaska-Canada border. Due to the diverse and natural environments along the border, the PEIS analyzes four regions: New England, the Great Lakes, east of the Rocky Mountains and west of the Rocky Mountains. 

The final PEIS is intended to provide CBP with information on the potential for direct, indirect and cumulative environmental impacts that could result from any future proposals to secure and otherwise facilitate legal trade and travel through the northern border. It does not define effects for a specific or planned action but instead analyzes the overall effects of activities supporting CBP’s homeland security mission and looks at the following alternatives for enhancing those activities. 

No Action – CBP would continue with the same facilities, technology, infrastructure and approximate level of personnel currently in use, deployed or currently planned. Normal maintenance of existing facilities is included, along with previously planned or started projects. However, this alternative would not allow CBP the flexibility to improve its capability to interdict cross-border violators and to identify and resolve threats at ports of entry in a manner that avoids adverse effects on legal trade and travel. 

Facilities Development and Improvement – This alternative would provide new permanent facilities or improvements to existing facilities, including ports of entry, to allow CBP officials to operate more efficiently and respond to situations more quickly. Among other things, this alternative would divert traffic from or increase the capacity of the more heavily used ports of entry. However, the applicability of this alternative would be limited because most roads crossing the northern border already have a crossing facility. 

Detection, Inspection, Surveillance, and Communications Technology Expansion – This alternative would involve utilizing upgraded systems that would enable CBP to focus on identifying threat areas, improving agent and officer communication systems, and deploying personnel to resolve incidents with maximum efficiency. 

Tactical Security Infrastructure Deployment – This alternative would focus on constructing additional barriers, access roads and related facilities. It would discourage cross-border violators and improve CBP’s capacity to respond to threats but would not assist in identifying and classifying threats. 

Flexible Direction – This alternative would allow CBP to follow any of the above directions in order to employ the most effective response to the changing threat environment along the northern border. 

CBP has issued a draft record of decision selecting the Detection, Inspection, Surveillance and Communications Expansion alternative as the one that is most representative of the approach the agency will employ in the next five to seven years. However, changes in the nature, intensity or locations of cross-border threats, or changes in national security or trade, travel and economic priorities, may compel CBP to adopt the Flexible Direction alternative in the future. The draft ROD also clarifies CBP’s recognition that the actual level of activities that might be required could very likely be substantially lower than what is addressed in the PEIS. 

Apparel Exports from Dominican Republic Falling Despite Program Allowing Non-U.S. Fabric

The International Trade Commission released July 26 a report finding that three years after its implementation the Earned Import Allowance Program is not providing enough incentives to help boost the competitiveness of Dominican apparel exports in the U.S. market. 

The EIAP allows apparel manufacturers in the Dominican Republic who use U.S. fabric to produce certain apparel to earn a credit that can be used to ship eligible apparel made with non-U.S.-produced fabric into the United States duty-free. However, the ITC states, these incentives have not been sufficient to curtail the ongoing declines in the Dominican Republic's production and exports of woven cotton bottoms (pants and trousers, bib and brace overalls, breeches and shorts, and skirts and divided skirts). Although U.S. exports of cotton bottom-weight fabrics grew in 2011, the rate of growth slowed significantly from the first two years of the EIAP. 

The ITC notes that industry and other sources continue to offer the same recommendations for improving the EIAP: lowering the 2-for-1 ratio of U.S. to foreign fabric to a 1-for-1 ratio, including other types of fabrics and apparel items in the program, and changing the requirement that dyeing, finishing and printing of eligible fabrics take place in the U.S. 

Dates and Deadlines: Valuing AD Inputs, Transaction Value, “Specially Designed,” Import/Export Compliance

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

July 30 – comments on proposal to change method of valuing inputs in antidumping cases involving non-market economy countries  

July 30 – effective date of policy change on applicability of transaction valuein the context of post-importation adjustments  

July 30 – comments on proposed rules moving some military training equipment from the U.S. Munitions List to the Commerce Control List  

July 31 – requests for administrative review of AD or CV duty orders  

July 31 – ST&R webinar on identifying and resolving export compliance issues  

Aug. 1 – STTAS webinar on identifying and receiving duty, tax and fee refunds through drawback  

Aug. 2 – ST&R webinar on import and export compliance and enforcement  

Aug. 3 – comments on Federal Trade Commission’s Used Auto Parts Guides  

Aug. 3 – comments on proposed common definition of “specially designed”in Export Administration Regulations and International Traffic in Arms Regulations  

USDA Revises Factors Considered in Evaluating Animal Health Status of Foreign Regions

The Department of Agriculture’s Animal and Plant Health Inspection Service has issued a final rule that, effective Aug. 27, will amend the regulations that govern the importation of animals and animal products by revising the list of factors APHIS considers when evaluating the animal health status of a foreign region. This rule also establishes new factors for considering a region to be historically free of a specific disease. 

Current APHIS regulations set forth the process by which a foreign government may request recognition of the animal health status of a region. Such requests must be accompanied by 11 specific types of information. However, APHIS has said that its evaluation process is often hindered because the initial information is incomplete, requiring the agency to contact the requesting government for additional information. APHIS is therefore clarifying what information is necessary for it to initiate an evaluation of risk by consolidating the 11 factors into eight and making available more detailed guidance as to the specific types of information encompassed by each factor. 

The World Organization for Animal Health’s (OIE) Terrestrial Animal Health Code recommends that a region may be recognized as historically free of a disease if it has never occurred there or has not occurred for at least the past 25 years if the following conditions have been met for at least the past 10 years: the disease has been a notifiable disease, an early detection system has been in place for all relevant species, measures to prevent disease/infection introduction have been in place and no vaccination against the disease has been carried out unless otherwise provided in the Code, and there has been no evidence of infection in wildlife in the region. APHIS concurs with these recommended criteria and is therefore adding a new paragraph to its regulations that lists the factors it will consider in evaluating whether to recognize a region as historically free. Consistent with OIE guidelines, APHIS’ evaluations for historically free status will focus on verifying an effective early detection system for the disease under consideration, disease reporting requirements and measures in place to prevent introduction. 

AD Notice: Corrosion-Resistant Steel from Germany and Korea

Agency: International Trade Administration. 
Commodity: Corrosion-resistant carbon steel flat products. 
Country: Germany and South Korea. 
Nature of Notice: Preliminary sunset review determination that revocation of these orders would be likely to lead to continuation or recurrence of dumping at margins of 9.35% for Germany and at least 12.85% for all Korean producers and exporters except one. 

Foreign Regulatory Changes Could Affect Exports of Foods, Cotton, Pest Control Products

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. 

Albania – draft rules on production, denomination and marketing of olive oil and wine (comments due by Sept. 23) 

Canada – proposed amendments to pest control products regulations (comments due by Sept. 20) 

China – administrative measures on inspection and supervision of imported cotton (comments due by Sept. 23) 

Israel – revised mandatory standards on roofing sheets, milk, cream, sour cream, butter and cheese (comments due by Sept. 23) 

Mauritius – regulations specifying conditions for imports of basmati rice (comments due by Sept. 23) 

Qatar – draft technical regulations on apples and tomato concentrates (comments due by Sept. 19) 

Saudi Arabia – draft technical regulation on tomato concentrate (comments due by Sept. 19) 

South Africa – proposed regulations on edible ices (comments due by Oct. 11) 

Uganda – final draft standard on dry split beans (comments due by Sept. 19) 

CBP Reviewing Information Collections on Exportation of Used Self-Propelled Vehicles

U.S. Customs and Border Protection is accepting comments through Sept. 25 on the proposed extension without change of information collections associated with the exportation of used self-propelled vehicles. CBP regulations require an individual attempting to export a used self-propelled vehicle to furnish to CBP at the port of export the vehicle and certain documentation, including a certificate of title or a salvage title, the vehicle identification number (or product identification number if there is no VIN), a manufacturer’s statement of origin, etc. This requirement does not apply to vehicles that were entered under an in-bond procedure, a carnet or a temporary importation bond. 

Information Collections on Imported Animal Products Under Review

The Department of Agriculture’s Animal and Plant Health Inspection Service is soliciting public comments through Aug. 27 on the proposed extension of information collections concerning restrictions on imports of milk and eggs, fresh (frozen and chilled) pork or pork products, hams, and animal and poultry products and byproducts. APHIS collects information concerning the origin and history of these items to ensure that they do not present a disease risk to the livestock and poultry populations of the U.S. 

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