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August 2 2012 Issue

Thursday, August 02, 2012
Sandler, Travis & Rosenberg Trade Report

Nuclear Smuggling Detection Efforts at U.S. Borders Need Improvement, GAO Says 

In testimony before a House subcommittee July 26, the Government Accountability Office reported on efforts by the Department of Homeland Security to combat nuclear smuggling. The GAO noted that these efforts have largely focused on established ports of entry, such as seaports and land border crossings, but that DHS has also been examining nuclear detection strategies along other potential pathways, including land border areas between ports of entry, international general aviation, and small maritime craft such as recreational boats and commercial fishing vessels. 

According to the GAO, 95% of the radiation detection monitors DHS plans to deploy at land and sea ports are in service, and since 2009 DHS has scanned nearly all of the containerized cargo and conveyances entering via these ports for nuclear and radiological materials. However, challenges remain in developing a similar scanning capability for railcars entering from Canada and Mexico, including the fact that rail companies are often hesitant to use their land for screening activities and the subsequent need for close governmental cooperation to enable the scanning of at least some rail traffic on foreign soil. A DHS study analyzing technological and operational options is due this September. DHS has made less progress scanning air cargo and commercial aviation because the deployment of radiation portal monitors is not feasible at many locations and would require significant investment in equipment, staffing and maintenance resources. 

The GAO also offers a number of factors for DHS to consider as existing radiation portal monitors approach the end of their expected service lives. These include the possibility of deploying a higher percentage of new equipment to locations other than land and sea ports, testing new equipment “rigorously” prior to acquisition and deployment, and making sure that CBP can effectively use the new equipment. 

U.S. Tightens Sanctions on Iran, More On the Way 

On July 31 President Obama signed an executive order authorizing additional economic sanctions against Iran. The president said these measures are designed to deter Iran from establishing payment mechanisms for the purchase of Iranian oil to circumvent existing sanctions. Also on July 31 the Treasury Department imposed the first sanctions under the Comprehensive Iran Sanctions, Accountability and Divestment Act of 2010. Finally, legislation to further strengthen U.S. sanctions against Iran advanced in Congress this week. 

Executive Order. According to the Treasury Department’s Office of Foreign Assets Control, the executive order: 

- authorizes Treasury to impose financial sanctions on foreign financial institutions found to have knowingly conducted or facilitated certain significant financial transactions with the National Iranian Oil Company or Naftiran Intertrade Company or for the purchase or acquisition of petroleum or petroleum products from Iran through any channel; 

- provides Treasury new authority to impose sanctions on foreign financial institutions found to have knowingly conducted or facilitated significant transactions for the purchase or acquisition of petrochemical products from Iran; and 

- provides authority for Treasury to block the property and interests in property of any person determined to have materially assisted, sponsored or provided financial, material or technological support for, or goods or services in support of, NIOC, NICO or the Central Bank of Iran, or the purchase or acquisition of U.S. bank notes or precious metals by the government of Iran. 

A White House fact sheet notes that countries determined to have significantly reduced their volume of purchases of Iranian crude oil (which all major purchasers have done) will be excepted from this new measure. 

CISADA Sanctions. OFAC also announced the imposition of sanctions under CISADA against two financial institutions – Bank of Kunlun in China and Elaf Islamic Bank in Iraq – for knowingly facilitating significant transactions or providing significant financial services for designated Iranian banks. As a result, financial institutions may not open correspondent or payable-through accounts for either of these institutions in the United States and any financial institutions that currently hold such accounts must close them within 10 days. 

Legislation. Earlier in the week House Foreign Affairs Committee Chair Ileana Ros-Lehtinen, R-Fla., announced an agreement between House and Senate negotiators on legislation that updates and expands U.S. sanctions and counters Iran’s efforts to evade them. Ros-Lehtinen said this bill contains expanded energy sanctions that “effectively blacklist the Iranian energy sector and anyone doing business with it.” It also includes new and expanded sanctions targeting financial institutions, shipping companies and insurers doing business with Iran to “close major loopholes that the regime was taking advantage of to avoid the sting of sanctions.” Finally, the bill “blocks Iran’s ability to insulate itself from sanctions through oil-for-gold swaps, other trading and bartering schemes, and selling energy bonds and issuing government debt.” Both the House and Senate could vote on the measure before they begin a five-week recess at the end of this week.

CBP to Modify Classification of Wax Additive, Thermal Insulation Blanket, Grills 

In the Aug. 1, 2012, Customs Bulletin and Decisions, U.S. Customs and Border Protection proposed to revoke classification rulings on the following products. Comments are due by Aug. 31. 

Product: Ultralube D-806, a wax additive used to improve the surface qualities of coatings, inks and lacquers. 
Proposed action: Revocation of NY N063739. 
Current classification: HTSUS 3901.10.5010, linear low density polyethylene (6.5% duty). 
Proposed classification: HTSUS 3901.20.10, polyethylene having a specific gravity of 0.94 or greater and a relative viscosity of 1.44 or more (6.5% duty). 

Product: Thermal insulation blanket consisting of ceramic fiber (mineral wool) pads encapsulated in one-inch woven textile squares covered with an outer cladding of stainless steel. 
Proposed action: Revocation of NY N125656. 
Current classification: HTSUS 6806.10.00, mineral wools in bulk, sheets or rolls (3.9% duty). 
Proposed classification: HTSUS 6806.90.00, other mineral wools (duty-free). 
Explanation: The article at issue is in the shape of a ring with a large hole in its middle and can therefore not be described as a sheet. 

Also in the Aug. 1, 2012, Customs Bulletin and Decisions, CBP revoked a classification ruling on the following product, effective Oct. 1. 

Product: Terracotta grills. 
Action: Revocation of NY N025431. 
New ruling: HQ H141335. 
New classification: HTSUS 6912.00.50, other ceramic household articles (6% duty). 
Explanation: This grill is a ceramic outdoor grill intended for backyard cooking, and ceramic products intended for use outdoors, in the immediate vicinity of a home, fall within the scope of “other household articles.” 

CBP is also withdrawing a proposal to modify ruling NY B83505 concerning the classification of plastic toilet seats with bidet apparatuses and heating elements because issues pertaining to such classification are currently pending before the Court of International Trade. 

C-TPAT Conference Slated for September in Washington 

U.S. Customs and Border Protection has announced that its 2012 C-TPAT Conference is scheduled for Sept. 24-26 in the Washington, D.C., metropolitan area. Registration will open at noon EST on Aug. 7 and there will be a limit of two representatives per company. Further information, including the registration link, conference fees and hotel location, will be available soon on CBP’s Web site.

Updated: Textile and Apparel Enforcement Actions for First Half of FY 2012 

U.S. Customs and Border Protection officials recently provided an update on the statistics posted to CBP’s Web site concerning the agency’s textile and apparel enforcement efforts in the first half of fiscal year 2012. The complete statistics are set forth below, with new information highlighted in bold. 

115 smuggling seizures valued at $5.25 million (compared to 66 seizures totaling $1.08 million in FY 2011) 

- 3,654 intellectual property seizures valued at $5.21 million (roughly on pace to match FY 2011) 

- 10 commercial fraud penalties totaling $27.76 million (more than in all of FY 2011) 

- 531 liquidated damages claims associated with textiles (compared to 746 total for FY 2011), the vast majority of which were related to entry 

- 57 factories in three countries have been visited to investigate concerns about illegal transshipment and trade preference claims (less than half the FY 2011 total), with the percentage of discrepant factories at 19% for the former and 32% for the latter 

- 3,668 examinations conducted (well under the pace of FY 2011) with an average 12% discrepant rate 

20 audits initiated and 17 completed, with recommended recoveries of $962,000 (compared to 36, 40 and $6.5 million for FY 2011) 

- 543 samples tested in CBP labs (less than half the FY 2011 total) and 295 found to be discrepant 

two special enforcement operations initiated and one completed (versus eight and seven in FY 2011) 

FDA Revises Regulations on Medical Device Registration and Listing 

The Food and Drug Administration has issued a final rule that, effective Oct. 1, will amend its regulations to reflect a number of changes made by the FDA Amendments Act of 2007. 

Electronic Submission. Domestic and foreign medical device establishments must submit their registration and device listing information by electronic means through the FDA Unified Registration and Listing System. The FDA notes that device establishment owners and operators having been using FURLS since it became operational on Oct. 1, 2007. The FDA is only granting waivers from this requirement for those owners or operators for whom electronic registration and listing is not reasonable. 

Information from Foreign Establishments. This rule reflects the requirement in the Bioterrorism Act of 2002 that foreign establishments whose medical devices are imported or offered for import into the U.S. must identify all importers known to them and the name of each person who imports or offers to import their device into the U.S. Specific definitions for these two new categories of information are being added to the regulations.

Exemptions Eliminated. The FDA is eliminating the exemptions from the registration and listing requirements for (1) foreign establishments whose medical devices enter a foreign-trade zone and are re-exported from the FTZ without entering U.S. commerce and (2) devices imported under 21 USC 381(d)(3). 

Contract Manufacturers and Sterilizers. All contract manufacturers and contract sterilizers are required to register their establishments and list their devices. 

Identification of Exempt Devices. FURLS requires exempt devices to be identified by product code rather than by classification name and number. The product code is already requested for such devices, and this change to the regulation codifies the existing practice. 

Operations Reporting. Owners or operators only need to identify the operations or activities their establishments engage in as part of their device listings, not as part of their registrations, because FURLS has been designed to automatically migrate the information provided in the device listing to the registration.

AD/CV Notices: Sinks, Magnesium, Carboxymethylcellulose 

Agency: International Trade Administration. 
Commodity: Drawn stainless steel sinks. 
Country: China. 
Nature of Notice: Preliminary affirmative countervailing duty determination. 
Details: Net countervailable subsidies range from 2.12% to 13.94%. CV cash deposits based on these rates will now be required. 
Linkhttp://ia.ita.doc.gov/download/factsheets/factsheet-prc-dsss-cvd-prelim-20120731.pdf 

Agency: International Trade Administration. 
Commodity: Pure magnesium in granular form. 
Country: China. 
Nature of Notice: Preliminary results of administrative review of antidumping duty order for the period Nov. 1, 2010, through Oct. 31, 2011. 
Details: Weighted average dumping margin of 305.56% for sole reviewed producer/manufacturer. 

Agency: International Trade Administration. 
Commodity: Purified carboxymethylcellulose. 
Country: Netherlands. 
Nature of Notice: Preliminary results of administrative review of antidumping duty order for the period July 1, 2010, through June 30, 2011. 
Details: Weighted average dumping margin of zero for one manufacturer/exporter. Intent to rescind review with respect to another that had no shipments of subject merchandise to the U.S. during the period of review. 

New FTZ Proposed in Upstate New York, Authority Sought for Ohio Factory 

New York Zone Proposed. The Foreign-Trade Zones Board has received an application to establish an FTZ at sites in Chenango County, N.Y., under the alternative site framework. The proposed zone would be the second for the Syracuse U.S. Customs and Border Protection port of entry, which also hosts FTZ 90 in Onondaga County. Comments on this application are due no later than Oct. 1. 

Ohio Washing Machine Factory. The FTZ Board is accepting through Sept. 12 comments on a notification of proposed production activity at the Whirlpool Corporation facility in Clyde and Green Springs, Ohio. This facility, which is designated as subzone 8I, is used for the manufacturing and distribution of washing machines. 

Production under FTZ procedures could exempt Whirlpool from customs duty payments on the foreign status components used in export production. On its domestic sales, Whirlpool would be able to choose the duty rates that apply to finished standard and high capacity washing machines (1.0-1.4%) for foreign status inputs. Customs duties also could possibly be deferred or reduced on foreign status production equipment.

New FTZ Proposed in Upstate New York, Authority Sought for Ohio Factory 

New York Zone Proposed. The Foreign-Trade Zones Board has received an application to establish an FTZ at sites in Chenango County, N.Y., under the alternative site framework. The proposed zone would be the second for the Syracuse U.S. Customs and Border Protection port of entry, which also hosts FTZ 90 in Onondaga County. Comments on this application are due no later than Oct. 1. 

Ohio Washing Machine Factory. The FTZ Board is accepting through Sept. 12 comments on a notification of proposed production activity at the Whirlpool Corporation facility in Clyde and Green Springs, Ohio. This facility, which is designated as subzone 8I, is used for the manufacturing and distribution of washing machines. 

Production under FTZ procedures could exempt Whirlpool from customs duty payments on the foreign status components used in export production. On its domestic sales, Whirlpool would be able to choose the duty rates that apply to finished standard and high capacity washing machines (1.0-1.4%) for foreign status inputs. Customs duties also could possibly be deferred or reduced on foreign status production equipment.

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