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October 30 2012 Issue

Tuesday, October 30, 2012
Sandler, Travis & Rosenberg Trade Report

Prospects for Increasing U.S. Trade with Latin America

Republican presidential candidate Mitt Romney has asserted that if elected he will do more to expand trade between the U.S. and Latin America. Romney believes there is a “huge opportunity” for U.S. businesses in Latin America, where the U.S. share of the region’s imports has fallen from 50% to 33% as China and others have increased their competitiveness. However, there appear to be few options for fulfilling Romney’s pledge.

The U.S. already has free trade agreements in place from its southern border nearly all the way down the length of Central and South America. U.S. trade relations in the region are anchored by NAFTA, the nearly 20-year-old free trade agreement that includes Mexico, one of the United States’ largest trading partners. Over the last decade the U.S. has added to its FTA partner list the Dominican Republic, Guatemala, Honduras, El Salvador, Nicaragua, Costa Rica, Panama, Colombia, Peru and Chile. The U.S. also extends preferential trade benefits to Ecuador, Haiti and most Caribbean nations. And in fact the removal of tariffs and other barriers as part of these initiatives has generally increased U.S. trade with these countries.

In evaluating future options it is instructive to look first at what is unlikely to happen. Despite U.S. efforts to pursue trade liberalization on a broader scale in Asia, through the Trans-Pacific Partnership, and Europe, through a potentially forthcoming FTA with the 27-member European Union, there is little to no anticipation of a similar initiative in Latin America. An attempt to create a Free Trade Area of the Americas that would have brought together 34 nations was put on ice in 2005 largely due to intractable differences between the region’s two major economic powers, the U.S. and Brazil. In the meantime those bilateral differences appear to have widened and the region as a whole has cooled to the idea of greater cooperation with the U.S. for various reasons.

With no regional deal likely, what about individual FTAs or similar arrangements? For the reasons given above Brazil is not likely to accept such an invitation, nor is the continent’s other economy of significant size, Argentina, which has turned sharply inward in terms of trade policy. Venezuela does a fair amount of oil-related business with the U.S. but closer economic relations are a non-starter as long as perennial U.S. antagonist Hugo Chavez remains president. Ecuador, the last remaining beneficiary under the Andean Trade Preferences Act, is under scrutiny for possibly violating the program’s terms of eligibility, Bolivia is currently suspended from the ATPA for similar reasons, and neither seems overly eager to cultivate closer economic ties to the U.S. at the moment. Cuba is out of the equation entirely for the present time, although the recent experiences of Libya and Burma show that U.S. policies can change course quickly under the right circumstances.

Of the Latin American countries not yet mentioned, only Uruguay and Paraguay appear to present a realistic option of negotiating an FTA with the U.S. Both have expressed an interest in such an arrangement in the past, and the increasing protectionism of their fellow Mercosur members Brazil and Argentina, not to mention the internal squabbles that have prevented that bloc from achieving the trade liberalization goals set more than two decades ago, could push them more firmly in that direction. The U.S. has held quiet talks on the possibility of FTAs with these countries in the past but little has been said publicly. On the other hand, neither offers a particularly sizeable market: U.S. exports to Paraguay totaled $2.0 billion in 2011 while shipments to Uruguay amounted to $1.3 billion.

Aside from negotiating new trade agreements, a Romney administration could take steps to make existing pacts work better or lower barriers in other ways. Businessweek quoted a Romney campaign spokeswoman as saying the former governor “is committed to expanding America’s trading relationships in the region by working to deliver on the promise of signed agreements.” An Inside US Trade article cited John Herrmann, co-chair of Romney’s Trade Policy Advisory Group, as saying one option would be to “build consistency and coherence” between the FTAs the U.S. already has in place throughout Latin America, which could further boost partner countries’ trade not only with the U.S. but between each other as well. 

ABI Air In-Bond Functionality Goes Live Nov. 5

Somewhat surprisingly, U.S. Customs and Border Protection has announced that ABI functionality to electronically transmit in-bonds for air cargo (QX/WX) will be deployed to production on Nov. 5. This functionality will allow air cargo transported in-bond from the port of arrival to a port of destination (e.g., for entry into a bonded warehouse or foreign-trade zone) to move seamlessly and without delay.

CBP had abandoned a previous attempt to deploy this functionality due to technical problems and officials had said afterward that it was not a priority, even though CBP’s proposed in-bond regulations would require electronic reporting for all in-bonds. In the meantime importers moving air cargo in-bond have had to complete and submit a paper form to CBP, where approval can be delayed. Under QX/WX, however, electronic approval from CBP will take only a matter of minutes.

CBP states that as of Nov. 5 ABI in-bond requests may only be transmitted for air waybills that have been transmitted and accepted in the Air Automated Manifest System. In addition, the following points should be kept in mind.

- air in-bonds must be requested at the simple and house bill levels

- when applicable, previous in-bond numbers must be transmitted with subsequent in-bond requests

- previous in-bonds must be arrived before a subsequent in-bond request is transmitted

- partial piece counts are not permitted with QX (either space fill or zero fill)

- in-bond requests for split air waybills must match the arrival information transmitted by the air carrier for each part

- in-bond requests for split air waybills must have a unique in-bond control number for each part arrival 

Business Groups File Lawsuit Against Conflict Mineral Disclosure Requirements

Three major U.S. business groups have filed a lawsuit asking the U.S. Court of Appeals for the District of Columbia Circuit to modify or set aside in whole or in part the Securities and Exchange Commission’s final regulations requiring companies to publicly disclose their use of conflict minerals that originate in the Democratic Republic of the Congo or an adjoining country.

Under the final rule companies that file reports with the SEC under the Securities and Exchange Act of 1934, whether foreign or domestic, will have to use a new Form SD to disclose their use of tantalum, tin, gold or tungsten originating in the DRC or an adjoining country if those minerals are necessary to the functionality or production of a product they manufacture or contract to manufacture. The minerals at issue are used in the manufacture of a wide range of goods such as cell phones, computers and video game systems, medical equipment, high-speed tools, machine parts, glass and lamps. Subject companies will have to comply with this rule for calendar year 2013 and the first reports will be due May 31, 2014.

The business groups said they are challenging the SEC rule because it “imposes an unworkable, overly broad and burdensome system that will undermine jobs and growth and may not achieve Congress’s overall objectives.” The cost of compliance, which the SEC itself estimated at $3-4 billion initially and $200 million a year thereafter, is likely one of the major factors that spurred the case. However, no specific arguments were made in the petition filed with the CAFC. 

USTR Soliciting Input for Annual Reports on SPS and Technical Barriers to Trade

The Office of the U.S. Trade Representative is accepting through Nov. 15 public comments that identify significant sanitary and phytosanitary and standards-related barriers to U.S. exports of goods. USTR will use this input to help decide which such barriers to include in its 2013 reports on these issues, which are designed to facilitate negotiations aimed at reducing or eliminating these barriers. The 2012 reports are available here and here.

USTR states that SPS measures are generally those applied to protect the life or health of humans, animals and plants from risks arising from additives, contaminants, pests, toxins, diseases or disease-carrying and causing organisms. SPS measures can take such forms as specific product or processing standards, requirements for products to be produced in disease-free areas, quarantine regulations, certification or inspection procedures, sampling and testing requirements, health-related labeling measures, maximum permissible pesticide residue levels, and prohibitions on certain food additives.

Standards-related measures comprise standards, technical regulations and conformity assessment procedures, such as mandatory process or design standards, labeling or registration requirements, and testing or certification procedures. These measures can be applied to industrial as well as agricultural products, such as food nutrition labeling schemes and food quality or identity requirements.

Commenters should place particular emphasis on any practices that may violate U.S. trade agreements. In addition, each comment should include an estimate of the potential increase in U.S. exports that would result from removing any foreign trade barrier the comment identifies as well as a description of the methodology used to derive the estimate. Estimates should be expressed within the following value ranges: Less than $5 million; $5 to $25 million; $25 million to $50 million; $50 million to $100 million; $100 million to $500 million; or over $500 million. 

AD/CV Notices: Crawfish, Glycine, Honey, Bearings, Aluminum, Pipe

Agency: International Trade Administration.
Commodity: Freshwater crawfish tail meat.
Country: China.
Nature of Notice: Initiation of new shipper review of antidumping duty order for the period Sept. 1, 2011, through Aug. 31, 2012. The company under review, which asserts that it is both a producer and exporter of subject merchandise, is Deyan Aquatic Products and Food Co. Ltd.

Agency: International Trade Administration.
Commodity: Glycine.
Country: China.
Nature of Notice: Initiation of new shipper review of antidumping duty order for the period March 1 through Aug. 31, 2012. The company under review, which identifies itself as both a producer and exporter of the subject merchandise, is Hebei Donghua Jiheng Fine Chemical Co. Ltd.

Agency: International Trade Administration.
Commodity: Honey.
Country: Argentina.
Nature of Notice: Rescission of new shipper review of antidumping duty order for the period Dec. 1, 2010, through Nov. 30, 2011, after determining that respondent Apícola Danangie sold subject merchandise into the U.S. prior to this period and therefore does not qualify as a new shipper.

Agency: International Trade Administration.
Commodity: Tapered roller bearings and parts thereof, finished and unfinished.
Country: China.
Nature of Notice: Final results of new shipper review of antidumping duty order for the period June 1, 2010, through May 31, 2011.
Details: Weighted average dumping margin of 12.64% for GGB Bearing Technology (Suzhou) Co. Ltd.

Agency: International Trade Administration.
Commodity: Aluminum extrusions.
Country: China.
Nature of Notice: Partial rescission of administrative review of countervailing duty order for the period Sept. 7, 2010, through Dec. 31, 2011.

Agency: International Trade Administration.
Commodity: Circular welded carbon quality steel pipe.
Country: China.
Nature of Notice: Corrected notice of amended antidumping duty cash deposit rates.
Details: Merchandise produced by Huludao Steel Pipe Industrial Co. Ltd. and exported by Shanghai Metals and Minerals Import & Export Corp. has a weighted average dumping margin of 69.20% and a revised cash deposit rate of 45.35%.

Agency: International Trade Commission.
Commodity: Circular welded carbon-quality steel pipe.
Country: Vietnam.
Nature of Notice: Termination of countervailing injury investigation, effective Oct. 22, due to negative final CV duty determination. 

Foreign Regulatory Changes Could Affect Exports of Drugs, Foods, Electric Meters

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.

Japan – designated substances and their proper uses under the Pharmaceutical Affairs Law (comments due by Nov. 24)

Korea – amended law on environment-friendly agricultural and fishery products, processed organic foods, and materials for organic farming and fish farming (comments due by Dec. 25)

South Africa – regulations on grading, packing and marking of fresh vegetables (comments due by Dec. 31)

Taiwan – revisions to technical specification for verification and inspection of electricity meters 

Ex-Im Bank Asked to Finance Exports of Gas Turbine Generators to Russia

The Export-Import Bank of the United States has received an application for a $14 million loan guarantee to support the export of approximately $13 million worth of gas turbine generator set and services to Russia. These exports will enable the Russian company to produce approximately 475,000 cubic meters of medium density fiberboard per year. Available information indicates that the majority of this new production will be sold in Russia, with the remainder sold in Ukraine and other former Soviet countries. Interested parties may submit comments on this transaction no later than Nov. 13. 

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