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November 2 2012 Issue

Friday, November 02, 2012
Sandler, Travis & Rosenberg Trade Report

FDA Should Consider Changes to Leverage Foreign Food Safety Efforts, GAO Says

The Food and Drug Administration faces significant challenges in complying with a new law aimed at improving the safety of imported foods, according to a recent report from the Government Accountability Office. The Food Safety Modernization Act directs the FDA to establish a system for accrediting third parties, which may include foreign governments and private auditing firms, to certify foreign food facilities’ compliance with U.S. food safety requirements. The FSMA also allows the FDA to determine if foreign food safety systems provide the same level of public health protection as the U.S. system.

Third-Party Certifications. Third-party certifications would serve as (a) certifications for a voluntary program that offers expedited entry for food products certified by accredited third parties and (b) certifications as a condition for entry into the U.S. of certain articles of food if the FDA determines such certifications or assurances are necessary for the food based on, among other things, the known safety risks.

The GAO identified five major actions the FDA is to complete under the FSMA to establish a reliable third-party certification system. FDA officials and others report that each of these actions presents challenges that must be addressed.

- The FDA is to develop new preventive controls and related guidance for all of the foods under its jurisdiction – such as produce, milk, cheese, spices, soft drinks and processed foods – and will need to develop appropriate training, particularly for foreign producers and processors. This poses a challenge because the FDA is responsible for a variety of food industries.

- The FDA is to establish a voluntary user fee program for importers that encourages the use of third-party certifications, but the agency faces a challenge in developing a program that encourages importers to participate.

- The FDA has to develop a system for recognizing accreditation bodies that can accredit third parties to certify foreign food facilities and is likely to face a challenge in addressing foreign governments’ concerns about being evaluated by an entity other than the FDA.

- The FDA is to develop model standards for accreditation bodies to use in evaluating and accrediting third parties and faces challenges in, among other things, determining third-party auditors’ competency and deciding how to avoid potential conflicts of interest.

- The FDA is to oversee the third-party accreditation system, including periodically evaluating accreditation bodies and third parties, and faces a challenge in deciding the level of oversight it will provide to the multiple parties involved.

Comparability Assessments. Given the numerous challenges the FDA faces in developing and implementing a third-party accreditation system, the GAO states, it could reduce the need for accrediting and using third parties by using comparability assessments; i.e., assessments of whether a foreign country has a regulatory food safety system (laws, regulations and an implementation strategy) that is comparable with that of the U.S. and provides the same level of public health protection. This approach could enable the FDA to leverage other countries’ oversight capacity and enforcement authority, yielding some of the same advantages as the equivalence approach used by the U.S. Department of Agriculture and the European Union before specific food products can be imported; e.g., having a foreign competent authority address any identified problems and take regulatory actions across the supply chain, as necessary. The FDA developed a comparability assessment tool in 2010, has completed an onsite review for a comparability assessment pilot with New Zealand and is currently engaged in another such pilot with Canada.

However, the report states, the FDA will find few countries with comparable systems because it would require comparability with a foreign government’s entire domestic and export food safety systems for all food products. According to FDA documents, some countries have robust export certification programs for a specific food product but their overall food safety systems may not be comparable with that of the U.S. Consequently, the FDA would be unable to leverage the resources of countries with comparable systems for just one food product, such as seafood, which the FDA has experience in assessing through its foreign country assessments. Representatives from major seafood exporting countries said they would like to have agreements with the FDA covering seafood that are similar to those they have with the EU, which uses a targeted approach through equivalence to determine whether certain exported food products are safe for domestic consumption.

The GAO concludes that the FDA can only take full advantage of comparability assessments if it allows for the flexibility of assessing foreign food safety systems for particular food products when a full comparability assessment of foreign countries’ food safety systems may not be feasible.

EU Finalizes Major Overhaul of Duty Preference Scheme

The European Union announced Oct. 31 a number of significant changes to its Generalized System of Preferences programs for developing countries. The new GSP provisions will take effect Jan. 1, 2014, and remain in place for ten years instead of the usual three. The EU notes that under the new GSP benefits will be limited to those countries most in need and more support will be provided to those that are serious about implementing international conventions on human rights, labor rights, the environment and good governance.

GSP. The number of GSP beneficiaries is being reduced from 176 to 89, with benefits being removed from the following.

33 countries and territories that have their own market access regulation and thus do not use GSP to enter the EU market: Anguilla, Netherlands Antilles, Antarctica, American Samoa, Aruba, Bermuda, Bouvet Island, Cocos Islands, Christmas Islands, Falkland Islands, Gibraltar, Greenland, South Georgia and South Sandwich Islands, Guam, Heard Island and McDonald Islands, British Indian Ocean Territory, Cayman Islands, Northern Mariana Islands, Montserrat, New Caledonia, Norfolk Island, French Polynesia, St. Pierre and Miquelon, Pitcairn, Saint Helena, Turks and Caicos Islands, French Southern Territories, Tokelau, United States Minor Outlying Islands, British Virgin Islands, U.S. Virgin Islands, Wallis and Futuna, Mayotte

34 countries that enjoy another trade arrangement with the EU (such as a free trade agreement) that provides substantially equivalent coverage as GSP: Algeria, Egypt, Jordan, Lebanon, Morocco, Tunisia, Belize, St. Kitts and Nevis, Bahamas, Dominican Republic, Antigua and Barbuda, Dominica, Jamaica, St. Lucia, St. Vincent and the Grenadines, Barbados, Trinidad and Tobago, Grenada, Guyana, Surinam, Seychelles, Mauritius, Zimbabwe, Papua New Guinea, Côte d'Ivoire, Ghana, Cameroon, Kenya, Namibia, Botswana, Swaziland, Fiji, Mexico, South Africa

Eight countries listed by the World Bank as high-income economies for the past three years: Saudi Arabia, Kuwait, Bahrain, Qatar, United Arab Emirates, Oman, Brunei Darussalam and Macau

12 countries listed by the World Bank as upper middle-income economies for the past three years: Argentina, Brazil, Cuba, Uruguay, Venezuela, Belarus, Russia, Kazakhstan, Gabon, Libya, Malaysia and Palau

The EU notes that the last 54 countries remain eligible for GSP but are no longer beneficiaries, meaning that if their situation changes (i.e., they are no longer listed as high- or upper middle-income or their trade arrangement expires) they can become beneficiaries again.

Product coverage. The new GSP expands duty-free benefits to the following products, which the EU states were selected to avoid negative impacts on least-developed countries that already have duty-free/quota-free access to the EU for all products.

- fresh cut carnations and buds, of a kind suitable for bouquets or for ornamental purposes (0603.12.00)
- sun-cured oriental type tobacco, unstemmed or unstrapped (2401.10.60)
- alkali/alkaline-earth metals other than sodium and calcium (2805.19)
- are-earth metals, scandium and yttrium, whether or not intermixed or interalloyed (2805.30)
- aluminum oxide, excluding artificial corundum (2818.20)
- ammonium sulfate (3102.21)
- mixtures of ammonium nitrate with calcium carbonate/other inorganic non-fertilizing substance (3102.40)
- sodium nitrate (3102.50)
- double salts and mixtures of calcium nitrate and ammonium nitrate (3102.50)
- wattle extract (3201.20)
- polyethylene terephthalate in primary forms, having a viscosity number of => 78 mi/g (3907.60.20)
- unwrought lead other than refined, not elsewhere specified in 7801 (7801.99)
- unwrought tungsten (wolfram), including bars and rods obtained simply by sintering (8101.94)
- unwrought magnesium, containing at least 99.8% by weight of magnesium (8104.11)
- unwrought magnesium, excluding of 8104.11 (8104.19)
- unwrought cadmium; powders (8107.20)
- unwrought titanium; powders (8108.20)
- titanium waste and scrap (8108.30)
- video recording or reproducing apparatus, excluding magnetic tape-type; video recording or reproducing apparatus, whether or not incorporating a video tuner, excluding magnetic tape-type and video camera recorders (8521.90.00)

GSP+. GSP+ grants additional, mostly duty-free preferences to support vulnerable developing countries in implementing international conventions on human and labor rights, sustainable development and good economic governance. Countries eligible for this program as of Dec. 31, 2011, included Armenia, Azerbaijan, Bolivia, Colombia, Costa Rica, Ecuador, El Salvador, Georgia, Guatemala, Honduras, Mongolia, Nicaragua, Peru, Paraguay and Panama.

Any GSP+ beneficiary must be considered vulnerable in terms of its size or the limited diversification of its exports. Currently, a country is only eligible if its GSP-covered exports represent less than 1% of the EU’s imports from all GSP beneficiaries. For the non-diversification criterion, the country’s five largest product sections must cover at least 75% of its total exports to the EU. As of Jan. 1, 2014, the import-share criterion will be relaxed from 1% to 2% (which the EU states would make Pakistan, the Philippines and Ukraine eligible) while the diversification criterion will remain at 75% of a country’s exports to the EU but for its seven (not five) largest sections.

GSP+ participants must also ratify certain international conventions and subscribe to binding commitments to ensure implementation. The EU is deleting one of the 27 conventions, on apartheid, and adding the United Nations Framework Convention on Climate Change. In addition, beneficiaries will bear the burden of proving they are abiding by their commitments instead of the EU having to prove they are in violation.

Everything but Arms. There will be no change to the Everything but Arms arrangement, which provides for duty-free and quota-free access to the EU for all goods except arms and ammunition from 49 least-developed countries. However, the EU expects that the effectiveness of EBA will be strengthened because eliminating GSP beneficiaries will reduce competitive pressure and make preferences for LDCs more meaningful.

Graduation. Graduation, or removing preferences for particular groups of products (sections), is currently required when average imports of a section from a country exceed 15% (12.5% for textiles and apparel) of GSP imports of the same products from all GSP beneficiary countries during a three-year period. The EU is now increasing the graduation thresholds to 14.5% for textiles and apparel and 17.5% for all other goods, expanding the product sections used for graduation from 21 to 32, and eliminating graduation with respect to GSP+ countries. A list with all graduated product sections will be published by the beginning of 2013.

Other. Other revisions being made to increase the predictability, transparency and stability of the GSP programs include (a) making explicit that unfair trading practices that could warrant withdrawal from GSP eligibility include those affecting the supply of raw materials, (b) clarifying the procedures that trigger the general safeguard clause, and (c) expanding the special safeguards to cover all textiles and ethanol. 

Dates and Deadlines: In-Bonds, Footwear, Drawback, IT Agreement, Medical Devices

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

Nov. 5 – ABI air in-bond functionality operational

Nov. 5 – comments on procedures for considering requests for safeguard actions against textile and apparel imports from Korea

Nov. 6 – ST&R webinar on classification of footwear, accessories and bags

Nov. 7 - meeting of Shipping Coordinating Committee re: electronic cargo clearance, electronic certificates, etc.

Nov. 7 – STTAS webinar on customs duty drawback

Nov. 8 – hearing on ITC report on proposed expansion of Information Technology Agreement

Nov. 8 – comments on proposal to require most medical devices distributed in U.S. to carry a unique device identifier

Nov. 8 – ST&R webinar on eligibility and documentary requirements under U.S.-Panama FTA

Nov. 9 – comments on proposed revocation of classification rulings on cooler bags

Nov. 9 – comments on possible extension of CBERA/CBTPA benefits to additional countries 

Advance Notice Required for Imports of 78 Chemical Substances

The Environmental Protection Agency has issued a direct final rule imposing new import restrictions on 20 chemical substances that were the subject of premanufacture notices. Under this rule, persons who intend to import, manufacture or process any of these substances for an activity that is designated as a significant new use by this rule must notify EPA at least 90 days before commencing that activity. This notification will provide EPA with the opportunity to evaluate the intended use and, if necessary, to prohibit or limit that activity before it occurs.

This rule will be effective as of Jan. 2, 2013. Written adverse or critical comments, or notice of intent to submit adverse or critical comments, must be received on or before Dec. 3. 

Export Committee Meeting on Sensors and Instrumentation Rescheduled

The Bureau of Industry and Security has rescheduled for Nov. 8 a meeting of the Sensors and Instrumentation Technical Advisory Committee, which advises BIS on technical questions that affect the level of export controls applicable to sensors and instrumentation equipment and technology. The public session of this meeting will include remarks from BIS management and industry presentations. This session will be accessible via teleconference to 20 participants on a first come, first served basis. In addition, a limited number of seats will be available at this session, but reservations are not accepted. 

U.S.-Iraq Business Dialogue Seeks Members

The International Trade Administration is accepting through Nov. 15 applications for membership in the U.S. section of the U.S.-Iraq Business Dialogue. The U.S. section provides policy advice and counsel that reflect private sector views, needs and concerns regarding private sector business development in Iraq and enhanced bilateral commercial ties that would form the basis for expanded trade between the two countries. Specific areas of discussion include the following.

- factors that affect the growth of private sector business in Iraq, including disincentives to trade and investment and regulatory obstacles to job creation and investment growth

- initiatives that the government of Iraq might take, such as enacting, amending, enforcing or repealing laws and regulations, to promote private sector business growth in Iraq

- promotion of business opportunities in both Iraq and the United States and identification of opportunities for U.S. and Iraqi firms to work together

- attracting U.S. businesses to opportunities in Iraq and serving as a catalyst for Iraqi private sector growth

Candidates for membership in the U.S. section will be evaluated based on their interest in the Iraqi market; export/investment experience; contribution to diversity based on the size of their company, geographic location and sector; and ability to initiate and be responsible for activities in which the Dialogue will be active. Candidates must be a U.S. citizen; the president or CEO of a private sector company, a person having substantial responsibility for their company’s commercial activities in Iraq or the head of a non-profit entity; and not a registered foreign agent. 

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