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July 31 2012 Issue

Tuesday, July 31, 2012
Sandler, Travis & Rosenberg Trade Report

FMC Issues Controversial Report on Diversion of West Coast Containerized Cargo

The Federal Maritime Commission released July 27 a study asserting that a significant amount of containerized cargo imports moving through the U.S. ports of Oakland, Seattle, Tacoma and Portland “may be vulnerable to Canada routing.” However, two commissioners took issue with this study, which they said “fails to assist or advance meaningful discussion or debate” because it is “a political policy paper developed to justify a predetermined conclusion.” 

The FMC study was prompted by requests from members of Congress to evaluate the extent to which the Harbor Maintenance Tax, other U.S. policies and other factors may incentivize U.S.-bound container cargo to shift from U.S. seaports to those located in Canada and Mexico. It examines the competitiveness of Mexican and Canadian ports with U.S. West Coast ports; discusses the history and theories of cargo diversion and the HMT; reviews ocean freight rates, transit times and rail charges; summarizes responses to an FMC inquiry; and examines other potential relevant factors influencing the movement of cargo. The study concludes that carriers shipping cargo through Canadian and Mexican ports do not violate any U.S. law, treaty, agreement or FMC regulation and that numerous factors account for why shippers engage in this practice, including overall shipment savings, risk mitigation through port diversification, perceived transit time benefits, avoidance of the HMT, and rail rate disparities. 

However, the study also states that the HMT places U.S. ports at a competitive disadvantage and that “removal of the HMT would drive some U.S. discretionary cargo going through Canadian ports back to U.S. west coast ports.” The study thus supports consideration of some sort of amendment to the current HMT structure and summarizes a number of existing legislative proposals. It also backs a more comprehensive effort to develop a national transportation policy that addresses all parts of the supply chain infrastructure, including highways and bridges as well as ports. 

FMC Commissioner Michael Khouri said he “could not join in the decision to release and publish” this study due to a number of concerns. For example, the study cites a single study suggesting that up to half of the U.S. containers coming into Canada’s west coast ports could revert to U.S. ports if the HMT were eliminated or an identical fee were imposed on such containers when they cross from Canada into the U.S. Khouri asserts that this figure is too high and is closer to 25%, which would translate into 59,110 containers or “slightly more than one-half of one percent of total TEUs [twenty-foot equivalent units] entering North American west coast ports.” With an average HMT per TEU of $54.50, Khouri’s estimate results in a maximum potential estimated loss of HMT revenue of $3.2 million per year, which he said calls into question any assertion that the U.S. needs to “level the playing field.” 

FMC Commissioner Rebecca Dye also criticized the study, which she said “is not based on an independent economic model designed to isolate the effect of the Harbor Maintenance Tax and other factors.” She pointed out that the study does not evaluate “some of the most important competitive factors” affecting the increased use of foreign ports for U.S.-bound cargo, including the numerous user fees collected from shippers and vessel operators; port services, policies and charges; individual port efficiency and reliability; and government actions related to trade or tariffs, including NAFTA. Like Khouri, Dye claims that the study overemphasizes the small percentage of U.S. cargo imported via Canadian ports, which she says has averaged less than 2.5% per year for most of the past decade. 

Customs Advisory Committee to Discuss ACE Transitions, Transformation Initiatives, Etc.

The Advisory Committee on Commercial Operations of U.S. Customs and Border Protection (COAC) will hold an open meeting Aug. 15 in Seattle, Wash. Unlike several previous COAC meetings, this one will not be broadcast via the Web. 

At the Aug. 15 meeting the COAC will hear from the following subcommittees on the topics listed and will then review, deliberate and formulate recommendations on how to proceed. 

- ACE Strategic Communications Working Group: how CBP should proceed in communicating with the trade community as the agency shifts from the Automated Commercial System when ACE becomes fully functional 

- Trade Facilitation Subcommittee: recommendations and resolutions on CBP’s Trade Transformation initiatives, report of findings from the COAC industry survey regarding the expected benefits of the Centers of Excellence and Expertise and recommendations on next steps based on survey results, and conclusions from the Instruments of International Trade Residue Work Group on its study of the various concerns regarding establishing a test on the manifesting and entry of ITTs containing residue with no commercial value 

In addition, the COAC will receive an update and discuss the following initiatives and subcommittee topics. 

- the National Strategy for Global Supply Chain Security as it relates to an effort to solicit, consolidate and provide to the Department of Homeland Security sector and stakeholder input on implementation of the strategy 

- the Air Cargo Advance Screening pilot, including international outreach efforts and a list of frequently asked questions 

- proposed modifications to the CBP Form 5106 (Importer Identification Input Record), input on single transaction bond centralization, liquidated damages/mitigation guidelines and the use of STBs when additional security is merited 

- providing CBP guidance on new tools to be used at ports of entry to help identify counterfeit products, the distribution chain management and serialization pilot projects, and modifications to the CBP recordation database of federally registered trademarks, trade names and copyrights 

- CBP’s recent implementation of policy regarding use of single transaction bonds as an enforcement tool, efforts to work with various industries on obtaining trade intelligence, and a draft five-year antidumping/countervailing duty enforcement strategy 

- C-TPAT survey and the National Strategy for Global Supply Chain Security, to include trusted trader programs and Beyond the Border initiatives 

- CBP’s efforts to update the customs broker regulations in 19 CFR Part 111 

- the possible formation of an Export Subcommittee 

Exception to Ban on Phthalates in Toys and Child Care Articles Subject of Proposed Guidance 

The Consumer Product Safety Commission is accepting comments no later than Oct. 1 on a proposed guidance on inaccessible component parts in children’s toys or child care articles. The CPSC is proposing to make this guidance effective upon publication of a final version in the Federal Register

Section 108 of the Consumer Product Safety Improvement Act of 2008 permanently prohibits the sale of any children's toy or child care article containing more than 0.1% of three specified phthalates: di-(2-ethylhexyl) phthalate (DEHP), dibutyl phthalate (DBP) and benzyl butyl phthalate (BBP). It also prohibits, on an interim basis, toys that can be placed in a child's mouth or child care articles containing more than 0.1% of three additional phthalates: diisononyl phthalate (DINP), diisodecyl phthalate (DIDP),and di-n-octyl phthalate (DnOP). 

More recently, Congress amended this section to exclude from this ban any component part of a children’s toy or child care article that is not accessible to a child through normal and reasonably foreseeable use and abuse. A component part is not accessible if it is not physically exposed by reason of a sealed covering or casing and does not become physically exposed through reasonably foreseeable use and abuse of the product, which includes swallowing, mouthing, breaking or other children's activities, as well as the aging of the product. 

The CPSC is now proposing to adopt the same guidance on inaccessibility with respect to phthalates as it did with respect to lead, with the exception of polyvinyl chloride or other plasticized materials covering mattresses and other sleep surfaces designed or intended by the manufacturer to facilitate sleep of children age 3 and younger. Among other things, the proposed guidance provides that paint, coatings and electroplating may not be considered a barrier that would render phthalate-containing component parts of toys and child care articles inaccessible. However, the CPSC is inviting comments, information and data on whether certain paint, coatings or electroplating could ever be considered a barrier in the context of phthalates and whether such materials could result in sealed covering or casing that would not become physically exposed through reasonably foreseeable use and abuse of the product. 

Risk-Based Sampling of Imported Plants for Planting Postponed Until Further Notice 

The Department of Agriculture’s Animal and Plant Health Inspection Service has postponed indefinitely the full implementation of risk-based sampling procedures on shipments of plants for planting (formerly known as nursery stock) at plant inspection stations. As of July 18 PIS managers were instructed to return to the use of traditional sampling methods until further notice in order to provide the industry time to adjust commercial shipping and handling practices to facilitate the clearance of imported plants under RBS procedures. 

To better protect against the introduction and spread of invasive plant pests and diseases, APHIS announced in October 2011 an RBS protocol and a Propagative Monitoring and Release Program for use at PISes. The PMRP was fully implemented on April 9, 2012, and requires only periodic monitoring of certain plant/country combinations that had been determined to pose a very low risk. RBS procedures, under which APHIS employed a sampling level intended for high-risk commodities, were implemented beginning July 16 for all imported plants except those included in the PMRP. However, because the high level RBS rate is more intensive than the sampling level used previously, significant delays in shipment clearance occurred. 

As a result, full implementation of the RBS procedures has been postponed until further notice. APHIS will resume the use of RBS procedures after the sampling rates are re-evaluated, necessary modifications are made to the sampling protocol to reduce adverse impact to commerce while assuring appropriate inspection levels, and stakeholders have been notified. 

Of Note: Arms Trade Treaty, Hong Kong Customs Charges, Next WTO Ministerial 

United Nations fails to agree landmark arms-trade treaty
Import and export declaration charges to be halved from August 1 
WTO agrees to hold 9th Ministerial Conference in Bali, Indonesia

AD/CV Notices: Wind Towers, Hangers, New Admin Reviews, Wood Flooring, Honey, Vanadium, Transformers, Gift Boxes 

Agency: International Trade Administration. 
Commodity: Utility scale wind towers. 
Country: China and Vietnam. 
Nature of Notice: Preliminary affirmative dumping determinations. 
Details: Dumping margins range from 20.85% to 72.69% for China and 52.67% to 59.91% for Vietnam. 

Agency: International Trade Administration. 
Commodity: Steel wire garment hangers. 
Country: Taiwan and Vietnam. 
Nature of Notice: Preliminary affirmative dumping determinations. 
Details: Dumping margins range from 69.98% to 125.43% for Taiwan and 135.81% to 187.51% for Vietnam. 

Agency: International Trade Administration. 
Nature of Notice: Initiation of administrative reviews of antidumping duty orders on the following products for the period Jun 1, 2011, through May 31, 2012. 
- carbon and alloy seamless standard, line and pressure pipe (over 4.5”) 
- carbon and alloy seamless standard, line and pressure pipe (under 4.5”) 
- chlorinated isocyanurates from Spain and China 
- polyester staple fiber from China 
- silicon metal from China 
- tapered roller bearings from China. 

Agency: International Trade Administration. 
Commodity: Multilayered wood flooring. 
Country: China. 
Nature of Notice: Initiation of new shipper review of antidumping duty order for the period May 26, 2011, through May 31, 2012. 
Details: ITA will instruct U.S. Customs and Border Protection to allow, at the option of the importer, the posting, until the completion of the review, of a bond or security in lieu of a cash deposit for each entry of the subject merchandise produced by Guangzhou Homebon Timber Manufacturing Co. Ltd. and exported by Power Dekor Group Co. Ltd. 

Agency: International Trade Administration. 
Commodity: Honey. 
Country: Argentina. 
Nature of Notice: Preliminary rescission of new shipper review of antidumping duty order. 

Agency: International Trade Commission. 
Commodity: Ferrovanadium and nitride vanadium. 
Country: Russia. 
Nature of Notice: Aug. 8 open meeting for vote in sunset review of antidumping duty order. 

Agency: International Trade Commission. 
Commodity: Large power transformers. 
Country: Korea. 
Nature of Notice: Aug. 9 open meeting for vote in final antidumping injury determination. 

Agency: International Trade Administration. 
Commodity: Folding gift boxes. 
Country: China. 
Nature of Notice: Extension from July 23 to Oct. 19 of time limit for preliminary results of administrative review of antidumping duty order. 

IPR Enforcement Actions on Digital TVs, LCD Devices, Semiconductor Chips, LEDs 

No Import Restrictions on Digital Televisions, LCD Devices, Semiconductor Chips. The International Trade Commission has terminated in their entirety, without the imposition of import restrictions, the following patent infringement investigations. 

- investigation 337-TA-789 of certain digital televisions and components thereof, based on settlement agreements between complainant Vizio Inc. and the three remaining respondents 

- investigation 337-TA-741/749 of certain liquid crystal display devices, including monitors, televisions, modules, and components thereof, based on a joint motion by complainant Thomson Licensing SAS and Thomson Licensing LLC to terminate with respect to the one remaining patent at issue 

- investigation 337-TA-753 of certain semiconductor chips and products containing same after ruling against a complaint by Rambus Inc. that the importation, sale for importation, and sale within the United States after importation of these items are violating specified patents 

Limited Exclusion Order Considered on LEDs. In patent infringement investigation 337-TA-784 of certain light-emitting diodes and products containing the same, the presiding administrative law judge has recommended the issuance of a limited exclusion order against infringing LEDs manufactured or imported by LG Electronics Inc., LG Innotek Co. Ltd., LG Electronics U.S.A. Inc., and LG Innotek U.S.A. Inc. The International Trade Commission is therefore inviting public comments through Aug. 22 on whether the issuance of a limited exclusion order would affect the public health and welfare in the U.S., competitive conditions in the U.S. economy, the production of like or directly competitive articles in the U.S., or U.S. consumers. In particular, the ITC is interested in comments that: 

- explain how the articles potentially subject to the recommended orders are used in the U.S.; 

- identify any public health, safety or welfare concerns in the United States relating to the recommended orders; 

- identify like or directly competitive articles that the complainant, its licensees or third parties make in the U.S. that could replace the subject articles if they were to be excluded; 

- indicate whether the complainant, its licensees and/or third party suppliers have the capacity to replace the volume of articles potentially subject to the recommended exclusion order and/or a cease and desist order within a commercially reasonable time; and 

- explain how the order would impact consumers in the U.S.

Promoting Environmental Goods Exports is Aim of ITA Toolkit for Foreign Buyers 

The International Trade Administration is developing a Web-based “U.S. Environmental Solutions Toolkit” to be used by foreign environmental officials and foreign end-users of environmental technologies. This toolkit will outline U.S. approaches to a series of environmental problems and highlight participating U.S. vendors of relevant U.S. technologies. 

U.S. companies capable of exporting goods or services relevant to groundwater remediation, mercury emissions control from power plants, emissions control from large marine diesel engines, and nutrient removal from municipal wastewater that are interested in participating in the toolkit should notify the ITA no later than Aug. 17. The ITA notes that for purposes of participation in the toolkit “U.S. exporter” means (a) a U.S. citizen; (b) a corporation, partnership or other association created under the laws of the U.S. or of any state; or (c) a foreign corporation, partnership or other association more than 95% of which is owned by persons described in subparagraphs (a) and (b) that exports, or seeks to export, goods or services produced in the U.S.

Foreign Regulatory Changes Could Affect Exports of Electronics, Rebar, Coffee, Vehicles 

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. 

Argentina – draft amended resolution on maté (comments due by Aug. 10) 

Foreign-Trade Zones in California, Tennessee Reorganized 

The Foreign-Trade Zones Board has approved the reorganization under the alternative site framework of the following FTZs. 

- FTZ 18, which will have a service area of San Jose, Calif., within the San Jose U.S. Customs and Border Protection port of entry 

- FTZ 148, with a service area of Anderson, Blount, Campbell, Claiborne, Cocke, Cumberland, Grainger, Jefferson, Knox, Loudon, Monroe, Morgan, Roane, Scott, Sevier and Union counties in Tennessee, within and adjacent to the Knoxville CBP port of entry

Chile – safety certification procedure for electronic home theater products (comments due by Sept. 12) 

Colombia – July 16 issuance of technical regulation on corrugated bars for concrete reinforcement in earthquake-resistant buildings 

Dominican Republic – standard on green coffee (comments due by Aug. 20) 

Japan – amended minimum requirements for radiopharmaceuticals (comments due by Aug. 24) 

Mexico – draft official standard on carbon dioxide emissions in new vehicles (comments due by Sept. 10)

Safety Rules for Infant Bath Seats and Full-Size Cribs Revised to Reflect Current Standards 

The Consumer Product Safety Commission has issued a direct final rule revising its standards for infant bath seats and full-size cribs to incorporate by reference more recent versions of the applicable ASTM standards. Because the changes to the ASTM standards make them essentially identical to the standards that the CPSC has issued previously, no changes to the products are required. This rule will become effective Nov. 12 unless the CPSC receives significant adverse comment by Aug. 30. 

The CPSC also received notification of an updated ASTM standard for toddler beds but has determined that it does not improve the safety of these products because it does not include several of the modifications that the Commission made in its mandatory standard at 16 CFR part 1217. As a result, the CPSC will retain its existing standard as is. 

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