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August 31 2012 Issue

Friday, August 31, 2012
Sandler, Travis & Rosenberg Trade Report

U.S. to Emphasize IPR, Government Procurement, Rules in Trade Relations with China  

A senior State Department official said recently that the United States is pursuing four primary objectives in its trade relations with China. Conspicuously absent from this list is the continued appreciation of China’s currency, although a Treasury Department official said this would be among the issues the U.S. will raise with China at upcoming meetings under the aegis of the Asia-Pacific Economic Cooperation forum. 

Jose Fernandez, assistant secretary of State for economic and business affairs, told the American Chamber of Commerce in Hong Kong that to “address challenges to our common goals of prosperity and economic growth” the U.S. is focused on four areas with respect to trade with China: a strong commitment to the protection and enforcement of intellectual property rights, adherence to the full array of norms that govern international trade and finance, the creation of a level playing field in which all companies can compete under the same rules, and expanding mutual investment. “While these problems aren’t new,” Fernandez said, “they can’t continue forever.” He noted that China made specific commitments on these issues at the Strategic and Economic Dialogue meeting in May and that U.S. is looking forward to “concrete steps in the right direction in the near future.” 

IPR. Fernandez said that “no issue is more fundamental to maintaining a mutually beneficial trade relationship between both our countries” than improving the protection and enforcement of IPR. Such efforts are “vital to bilateral trade and investment” and “critical to ensuring that safe products reach both U.S. and Chinese citizens” but can also make an important contribution to U.S. economic recovery, which is “why we are so adamant that this is an issue that needs to be addressed.” Fernandez cited a 2010 report showing that Chinese IPR infringement and 
indigenous innovation policies cost the U.S. economy nearly $50 billion in sales, royalties or license fees in 2009, and he added that “corporate spying or trade secret theft has led to a huge number of losses for U.S. companies operating in China in recent years.” On the other hand, he said, the 2010 report found that “if China raised its intellectual property rights standards to those of the United States, it could translate into well over 900,000 new jobs in U.S. intellectual property intensive firms.” 

Government Procurement. The U.S. will continue to “insist that China adhere to the full array of norms and standards that govern international trade and finance,” Fernandez said, including fulfilling its commitment to join the World Trade Organization’s Government Procurement Agreement. “Government procurement represents one of the most rapidly expanding areas of opportunity for traders of goods and services,” he noted, and “in many countries the government typically is the biggest single buyer of goods and services, with the value of these government purchases worth, on average, 10 to 15 percent of a country's GDP.” More than ten years after joining the WTO, however, China has still not acceded to the GPA as it committed to do. Most recently Beijing said it would submit “a new and comprehensive revised offer that responds to the requests of all the GPA parties before the end of the year,” Fernandez said, and the U.S. is “focused on ensuring that China’s offer is in line with coverage offered by other parties to this agreement.” 

Competitive Neutrality. The U.S. also remains concerned about unfair advantages enjoyed by China’s state-owned enterprises. “No company should be given special benefits, such as subsidized export credit, discounted factory inputs like cheaper energy or land, below-market loan rates, or exemption from antitrust laws, unless all companies have access to those benefits,” Fernandez said, conditions that do not always obtain in China. To meet this challenge the U.S. is working to deploy “a robust set of policy tools that will level the playing field and open markets for fair competition,” including implementation of free trade agreements, bilateral investment treaties and WTO accession commitments. 

Investment. “We want U.S. companies to expand their businesses to China and we want Chinese investment in the United States,” Fernandez asserted, and there is “great opportunity for more investment from China and Hong Kong.” From 2005 to 2010 China was the fastest-growing source of foreign direct investment in the U.S., with over 50% average growth per year, and Hong Kong’s $4.3 billion of FDI in the U.S. is only slightly less than mainland China’s $6 billion. Fernandez acknowledged the “misperception” that the Committee on Foreign Investment in the United States is designed to impede foreign investment but pointed out that CFIUS only considers the national security implications of proposed investments (not economic or other policies) and “regularly clears investments from both private and state-owned Chinese companies, often within a month.” He added that “of the thousands of foreign investments into the United States from 2008 to 2010, only 313 deals required CFIUS review” and of those “only 16 required any form of mitigation or adjustment to be approved.”

Is the End Near for U.S. Trade Preferences for Andean Countries?  

With the Office of the U.S. Trade Representative conducting its annual review of the trade preferences made available under the Andean Trade Preference Act, as amended by the Andean Trade Promotion and Drug Eradication Act, it is worthwhile to consider the future of this program. Two of the original four beneficiary countries have been removed from eligibility after implementing separate bilateral free trade agreements with the U.S. and the other two are on thin ice with Washington diplomatically. Could these frictions prompt policymakers to end the ATPA after more than 20 years, or will the program be retained in hopes of avoiding a further deterioration of ties? 

There are a number of factors weighing in favor of calling it quits. Colombia and Peru, for years the two biggest users of the ATPA to ship products duty-free to the U.S. market, instead have opted for a more permanent arrangement through FTAs. Bolivia was suspended from the program in 2009 based on its failure to meet the counternarcotics cooperation criteria and reinstatement seems an unlikely prospect, at least anytime soon. Ecuador is the only beneficiary still able to take advantage of ATPA’s preferential terms, but there have been calls to end its eligibility as well after a series of actions critics say are antagonistic to the U.S. These include the termination of a long-standing agreement allowing U.S. military aircraft to use a base in Ecuador for counterdrug operations, efforts to collect billions of dollars from Chevron after it was deemed liable for a predecessor’s environmental missteps, and a stated intent to withdraw from a bilateral investment treaty with the U.S. In addition, the International Trade Commission has consistently reported that the ATPA has had only a “small and indirect” effect on drug crop eradication, crop substitution and job growth in export-oriented industries in the Andean region, which has been one of the primary objectives of the program. 

The USTR has set a Sept. 17 deadline for interested parties to submit comments on whether Ecuador continues to meet the ATPA’s eligibility criteria. These criteria cover topics such as illegal expropriation, enforcing arbitral awards in favor of U.S. citizens or companies, upholding internationally recognized workers’ rights and working to eliminate the worst forms of child labor, overall economic conditions and adherence to the accepted rules of international trade, protection of intellectual property rights, and cooperation with counternarcotics and antiterrorism efforts. 

Opponents of continuing preferences for Ecuador will no doubt assert violations in several of these areas. And while Congress last year renewed the ATPA through July 2013, the current challenges could make lawmakers less amenable to another extension. Indeed, Senator Richard Lugar, R-Ind., suggested recently that Ecuador’s behavior might warrant its removal from the program. 

Given these factors, companies interested in preserving ATPA benefits for Ecuadorian goods that currently enjoy them – mostly petroleum products but also cut flowers and fruits, primarily fresh mangoes and pineapples – should act now. Please contact a member of our Government Relations Practice for more information. 

Merchandise Trade Slower in Major Economies in Second Quarter, OECD Reports  

The Organization for Economic Cooperation and Development reported Aug. 30 that in the second quarter of 2012 merchandise trade contracted in all major European economies, India, Russia and South Africa. Imports and exports fell in India (by 13.0% and 4.3%, respectively), France (4.7% and 2.5%), Russia (4.6% and 8.3%), Germany (3.5% and 2.5%), Italy (2.8% and 2.4%), the United Kingdom (1.1% and 4.2%) and South Africa (by 0.7% and 8.3%). Imports also fell in Canada (by 0.3%) and the United States (by 0.5%) but exports in both countries showed moderate growth (0.6% and 1.1%, respectively). Exports from China grew by 12.8%, the highest rate since the first quarter of 2007, following two consecutive quarters of contraction but imports grew by a more moderate 2.5%. Imports and exports also grew in Japan (by 0.4% and 1.6%) but the rate of growth of imports slowed to its lowest level in three years.

Dates and Deadlines: Import Assessments, TPP Talks, Classification, IT Goods  

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

Sept. 4 – effective date for increase in assessment rate on imports of mangos 

Sept. 4 – comments on TPP negotiating objectives with respect to Canada and Mexico 

Sept. 4 – comments on changed circumstances review of suspended AD duty investigation on fresh tomatoes from Mexico 

Sept. 5 – effective date of import assessment on processed raspberries 

Sept. 6 – ST&R webinar “Back to School” tariff classification refresher  

Sept. 6 – comments for ITC report on expansion of Information Technology Agreement  

Sept. 6 – meeting of President’s Export Council Subcommittee on Export Administration

Of Note: FCPA Guidance Could Come Soon, Gulf Coast Ports Reopen  

FCPA Guidance to Be Released by October 
Hurricane Isaac: CBP Port Operations Status


AD/CV Notices: Transformers, Lined Paper Products, Cased Pencils  

Agency: International Trade Administration. 
Commodity: Large power transformers. 
Country: Korea. 
Nature of Notice: Issuance of antidumping duty order, effective Aug. 31. 
Details: This order covers large liquid dielectric power transformers having a top power handling capacity greater than or equal to 60,000 kilovolt amperes (60 megavolt amperes), whether assembled or unassembled, complete or incomplete. Incomplete large power transformers are subassemblies consisting of the active part and any other parts attached to, imported with or invoiced with the active parts of large power transformers. The “active part” of the transformer consists of one or more of the following when attached to or otherwise assembled with one another: the steel core or shell, the windings, electrical insulation between the windings, the mechanical frame for a large power transformer. The product definition encompasses all such large power transformers regardless of name designation, including step-up transformers, step-down transformers, autotransformers, interconnection transformers, voltage regulator transformers, rectifier transformers and power rectifier transformers. Large power transformers subject to this order are currently classifiable under HTSUS 8504.23.0040, 8504.23.0080 and 8504.90.9540. 

Agency: International Trade Administration. 
Commodity: Lined paper products. 
Country: Indonesia. 
Nature of Notice: Revocation of antidumping and countervailing duty orders, effective Sept. 28, 2011. 
Details: Products that had been subject to these orders are composed of or include paper that incorporates straight horizontal and/or vertical lines on ten or more paper sheets, including such products as single- and multi-subject notebooks, composition books, wireless notebooks, looseleaf or glued filler paper, graph paper, and laboratory notebooks, with the smaller dimension of the paper measuring 6 inches to 15 inches (inclusive) and the larger dimension of the paper measuring 8-3/4 inches to 15 inches (inclusive). Subject merchandise is typically imported under HTSUS 4810.22.5044, 4811.90.9050, 4820.10.2010, 4820.10.2020, 4820.10.2030, 4820.10.2040, 4820.10.2060 and 4820.10.4000. 

Agency: International Trade Administration. 
Commodity: Cased pencils. 
Country: China. 
Nature of Notice: Final results of changed circumstances review of antidumping duty order and revocation of order with respect to novelty drumstick pencils, effective June 1, 2011. 

Agency: International Trade Administration. 
Commodity: Lined paper products. 
Country: China. 
Nature of Notice: Continuation of antidumping and countervailing duty orders for five years, effective Aug. 31. 
Details: Covered products are products composed of or including paper that incorporates straight horizontal and/or vertical lines on ten or more paper sheets, including such products as single- and multi-subject notebooks, composition books, wireless notebooks, looseleaf or glued filler paper, graph paper, and laboratory notebooks, and with the smaller dimension of the paper measuring 6 inches to 15 inches (inclusive) and the larger dimension of the paper measuring 8-3/4 inches to 15 inches (inclusive). Subject merchandise is typically imported under HTSUS 4810.22.5044, 4811.90.9050, 4820.10.2010, 4820.10.2020, 4820.10.2030, 4820.10.2040, 4820.10.2060 and 4820.10.4000.

IPR Enforcement Actions on Communication Equipment, Circuit Interrupters  

No IPR-Related Import Restrictions on Communication Equipment. The International Trade Commission has terminated without the imposition of import restrictions patent infringement investigation 337-TA-817 of certain communication equipment, components thereof and products containing the same, including power over Ethernet telephones, switches, wireless access points, routers and other devices used in LANs, and cameras. The investigation was terminated with respect to one respondent based on a settlement with complainant ChriMar Systems Inc. and in its entirety based on ChriMar’s subsequent withdrawal of its complaint. 

Enforcement Proceeding Sought on Ground Fault Circuit Interrupters. The International Trade Commission received Aug. 29 a letter filed on behalf of Leviton Manufacturing Co. Inc. requesting that it conduct an enforcement investigation concerning the general exclusion and cease and desist orders issued in May against certain ground fault circuit interrupters. The proposed respondents are located in China and the U.S.

Ex-Im Bank Asked to Support Export of Wire Rod Mill to Czech Republic  

The Export-Import Bank of the United States has received an application for a $21 million guarantee to support the $19 million export of a wire rod mill to the Czech Republic. The U.S. export will replace an existing facility and enable the Czech company to expand its production of wire rod by approximately 50,000 metric tons annually during the 8.5-year repayment term. Available information indicates that the additional production will be sold in the Czech Republic, Slovakia, Germany and Italy. Interested parties may submit comments on this transaction no later than Sept. 14.

Air Transport of Dangerous Goods Subject of Oct. 10 Meeting  

The Department of Transportation will hold a public meeting Oct. 10 in Washington, D.C., to gather information and viewpoints from stakeholders in preparation for the International Civil Aviation Organization's Dangerous Goods Panel’s fall working group meeting, which will be held Oct. 15-19 in Montreal. The agenda for the working group meeting is as follows. 

- development of proposals, if necessary, for amendments to Annex 18 – The Safe Transport of Dangerous Goods by Air 

- development of recommendations for amendments to the Technical Instructions for the Safe Transport of Dangerous Goods by Air for incorporation in the 2015-2016 edition 

- development of recommendations for amendments to the Supplement to the Technical Instructions for the Safe Transport of Dangerous Goods by Air for incorporation in the 2015-2016 edition 

- development of recommendations for amendments to the Emergency Response Guidance for Aircraft Incidents involving Dangerous Goods for incorporation in the 2015-2016 edition 

- issues related to lithium batteries

Foreign Regulatory Changes Could Affect Exports of 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. 

Taiwan – draft regulations governing the country of origin labeling for pre-packaged foods, bulk foods, and beef and edible cattle offal for food service locations



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