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November 1 2012 Issue

Thursday, November 01, 2012
Sandler, Travis & Rosenberg Trade Report

Footwear Industry Prods CBP to Issue Guidance on Textile Outer Sole Issue

Several prominent footwear trade associations have asked U.S. Customs and Border Protection to issue as quickly as possible guidance on the interpretation of a provision added to the Harmonized Tariff Schedule of the U.S. in December 2011 concerning the classification of footwear with textile outer soles. The groups, which represent domestic manufacturers of rubber and plastic footwear as well as importers of most footwear into the U.S., said that while they understand that “CBP must use caution and be confident in the conclusions that it reaches” the “ongoing delay” in issuing the guidance “is causing serious concerns.”

The new provision was intended to further define the application of Note 4(b) to Chapter 64 regarding the determination of outer sole material for purposes of tariff classification. This note provides that “the constituent material of the outer sole shall be taken to be the material having the greatest surface area in contact with the ground, no account being taken of accessories or reinforcements such as spikes, bars, nails protectors or similar attachments.” New Additional U.S. Note 5 states: “For the purposes of determining the constituent material of the outer sole pursuant to Note 4(b) to this Chapter, no account shall be taken of textile materials which do not possess the characteristics usually required for normal use of an outer sole, including durability and strength.” In a general sense, CBP has said, the new note stands for the proposition that textile material that does not hold up to the wear of a shoe should be disregarded for the purposes of ascertaining the constituent material of the outer sole.

In January CBP asked for public comments on the interpretation of the phrase “characteristics usually required for normal use of an outer sole, including durability and strength” and how to determine whether such characteristics are possessed by imported footwear. CBP also requested comments on whether laboratory testing would be useful or necessary to administer Note 5 and, if so, what the appropriate test would be and how to apply it to imported footwear. Industry groups responded by indicating that there are no commonly accepted standards for determining outer sole durability and strength for general use footwear by which to apply this new rule.

In their Oct. 26 letter the trade groups indicated that it is past time for CBP to issue a final guidance on this issue. In the absence of such guidance “CBP has refused to rule on countless classification requests regarding Additional U.S. Note 5” and “the net result is an industry in a state of flux regarding what has constituted a significant part of the trade.” Specifically, the letter said, “there is little or no consistency in the way that importers are classifying the goods subject to Note 5 or in the way that CBP officials are reviewing and classifying the imported items for tariff purposes.”

The letter called for CBP to issue a final guidance at its annual Trade Symposium, which was to have been held Oct. 29-30 in Washington, D.C. However, that event was postponed due to bad weather and has not yet been rescheduled. 

WTO Sees Slowdown in Trade Restrictive Measures but Warns of Protectionism

Several prominent footwear trade associations have asked U.S. Customs and Border Protection to issue as quickly as possible guidance on the interpretation of a provision added to the Harmonized Tariff Schedule of the U.S. in December 2011 concerning the classification of footwear with textile outer soles. The groups, which represent domestic manufacturers of rubber and plastic footwear as well as importers of most footwear into the U.S., said that while they understand that “CBP must use caution and be confident in the conclusions that it reaches” the “ongoing delay” in issuing the guidance “is causing serious concerns.”

The new provision was intended to further define the application of Note 4(b) to Chapter 64 regarding the determination of outer sole material for purposes of tariff classification. This note provides that “the constituent material of the outer sole shall be taken to be the material having the greatest surface area in contact with the ground, no account being taken of accessories or reinforcements such as spikes, bars, nails protectors or similar attachments.” New Additional U.S. Note 5 states: “For the purposes of determining the constituent material of the outer sole pursuant to Note 4(b) to this Chapter, no account shall be taken of textile materials which do not possess the characteristics usually required for normal use of an outer sole, including durability and strength.” In a general sense, CBP has said, the new note stands for the proposition that textile material that does not hold up to the wear of a shoe should be disregarded for the purposes of ascertaining the constituent material of the outer sole.

In January CBP asked for public comments on the interpretation of the phrase “characteristics usually required for normal use of an outer sole, including durability and strength” and how to determine whether such characteristics are possessed by imported footwear. CBP also requested comments on whether laboratory testing would be useful or necessary to administer Note 5 and, if so, what the appropriate test would be and how to apply it to imported footwear. Industry groups responded by indicating that there are no commonly accepted standards for determining outer sole durability and strength for general use footwear by which to apply this new rule.

In their Oct. 26 letter the trade groups indicated that it is past time for CBP to issue a final guidance on this issue. In the absence of such guidance “CBP has refused to rule on countless classification requests regarding Additional U.S. Note 5” and “the net result is an industry in a state of flux regarding what has constituted a significant part of the trade.” Specifically, the letter said, “there is little or no consistency in the way that importers are classifying the goods subject to Note 5 or in the way that CBP officials are reviewing and classifying the imported items for tariff purposes.”

The letter called for CBP to issue a final guidance at its annual Trade Symposium, which was to have been held Oct. 29-30 in Washington, D.C. However, that event was postponed due to bad weather and has not yet been rescheduled. 

$17.7 Million Criminal Fine for Auto Parts Price Fixing

The Department of Justice reports that a Japanese company has agreed to plead guilty and pay a $17.7 million criminal fine for its role in a conspiracy to fix the prices of heater control panels installed in cars sold in the United States and elsewhere. As part of the plea agreement, which will be subject to court approval, the company will also cooperate with the DOJ’s ongoing investigation into price fixing and bid rigging in the auto parts industry.

The company has also agreed to plead guilty to a charge of obstruction of justice related to the investigation of its antitrust violation. The DOJ explains that after the company and its executives and employees became aware that the FBI had executed a search warrant on the company’s U.S. subsidiary, a company executive directed employees to delete electronic data and destroy paper documents likely to contain evidence of antitrust crimes.

A total of nine companies and 11 executives have now pleaded guilty or agreed to plead guilty in this investigation and more than $790 million in criminal fines have been assessed. 

In the News: Panama FTA Proclamation, Hurricane Update

Presidential proclamation implements Panama FTA, corrects errors for Korea, Colombia and Peru FTAs

Travelers, cargo stranded as U.S. airports, rails assess damage

AD/CV Notice: Hot-Rolled Steel

Agency: International Trade Commission.
Commodity: Hot-rolled steel products.
Country: China, India, Indonesia, Taiwan, Thailand and Ukraine.
Nature of Notice: Institution of sunset reviews of antidumping and/or countervailing duty orders. These reviews will lead to either the revocation or continuation of these orders. 

ITC Investigating Possible Violation of Import Restrictions on Ground Fault Circuit Interrupters

The International Trade Commission has instituted a formal enforcement proceeding relating to remedial orders issued in patent infringement investigation 337-TA-739 of certain ground fault circuit interrupters and products containing same. Complainant Leviton Manufacturing Co. Inc. alleges that three respondents are violating the ITC’s cease and desist orders by selling infringing goods, selling GFCIs during the 60-day presidential review period without posting an appropriate bond, and failing to file accurate reports with the ITC. Leviton also asserts that three other respondents have violated the ITC’s general exclusion order, which prohibits the entry of GFCIs that infringe one of Leviton’s patents. 

CBP Considering Extension of Delivery Ticket

U.S. Customs and Border Protection is accepting comments through Dec. 31 on the proposed extension of CBP Form 6043, Delivery Ticket. This form is used to document transfers of imported merchandise between parties and is filled out by warehouse proprietors, carriers, foreign-trade zone operators and others. It collects information such as the name and address of the consignee, the name of the importing carrier, lien information, the location where the goods originated and where they were delivered, and information about the imported merchandise.

FTZ Authority Transferred, New Production Activity Sought in North Carolina

The Foreign-Trade Zones Board has approved an application from the North Carolina Department of Commerce, grantee of FTZ 66 in Wilmington, N.C., and FTZ 67 in Morehead City, N.C., to reissue the grants of authority for those two zones to the North Carolina Department of Transportation.

The FTZ Board has also received from Revlon Consumer Products Corporation, operator of subzone 93G, a notification of proposed production activity for its facility in Oxford, N.C. This facility was granted subzone authority in 2006 for the production of certain cosmetics and personal care products (hair products, fragrances and skincare products). Revlon is now requesting to add a foreign-status component (oleic acid) to its FTZ production authority. Comments on this proposal are due no later than Dec. 10. 

New Energy Test Procedures for Dishwashers, Dehumidifiers, Cooking Products

The Department of Energy has issued a final rule that establishes new test procedures for residential dishwashers and dehumidifiers and amends the current test procedure for conventional cooking products. The new test procedures include provisions for measuring standby mode and off mode energy consumption and update the provisions for measuring active mode energy consumption and, for dishwashers, water consumption. This rule also amends the certification, compliance and enforcement requirements for dishwashers, dehumidifiers and conventional cooking products, amends certain provisions in the current dishwasher test procedure, and eliminates an obsolete energy efficiency metric in the dishwasher test procedure as well as provisions in the cooking products test procedure that have become obsolete due to the elimination of standing pilot lights.

The new test procedures for dishwashers and dehumidifiers and the changes to the test procedure for conventional cooking products will be mandatory to demonstrate compliance with the applicable energy conservation standards starting on the compliance date of any amended standards for dishwashers, dehumidifiers and conventional cooking products. For dishwashers this date will be May 30, 2013, the compliance date of the direct final rule published May 30, 2012, unless that rule is withdrawn as a result of adverse comment. Use of the replacement items for obsolete dishware, flatware and food items in the current dishwasher test procedure will be required on Dec. 17. Voluntary early use of the new dishwasher and dehumidifier test procedures and revised test procedure for conventional cooking products to demonstrate compliance with applicable energy conservation standards or for representations of energy use (including the new standby mode and off mode provisions) is permissible on or after Dec. 17. 

USDA Information Collections on Pork, Poultry, Oranges, Irradiation Under Review

The Department of Agriculture’s Animal and Plant Health Inspection Service is accepting through Dec. 31 comments on the proposed extension of information collections associated with regulations on the following.

- Importation of Live Swine, Pork and Pork Products, and Swine Semen from the European Union: Breeding swine, pork and pork products, and swine semen from a defined region of the EU must be accompanied by certificates stating that certain requirements related to origin, movement, testing and other matters specified in the regulations have been met.

- Importation of Products of Poultry and Birds: Poultry meat that originates in the U.S. may be shipped, for processing purposes, to a region where exotic Newcastle disease exists and then returned to the U.S. provided that (1) a certificate of origin is issued, (2) serial numbers are recorded, (3) certain records are maintained and (4) cooperative services agreements are signed.

- Importation of Unshu Oranges from the Republic of Korea: Unshu oranges from Cheju Island may be imported into the continental U.S. under certain conditions that involve the use of information collection activities, including packinghouse registration and a phytosanitary certificate with an additional declaration stating that the fruit has undergone surface sterilization and was inspected and found free of the plant pathogen that causes sweet orange scab.

- Irradiation Phytosanitary Treatment of Imported Fruits and Vegetables: APHIS regulations provide for the use of irradiation as a phytosanitary treatment for fruits and vegetables imported into the United States. The regulations concerning irradiation treatment involve the collection of various information, including a compliance agreement, 24-hour notification, labeling, dosimetry recordings, requests for dosimetry device approval, requests for facility approval, trust fund agreement, and annual work plan, as well as recordkeeping. 

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