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November 13 2012 Issue

Tuesday, November 13, 2012
Sandler, Travis & Rosenberg Trade Report

Trade Measures Could be Announced on Upcoming Obama Visit to Asia

The White House announced last week that President Obama will travel to Thailand, Burma and Cambodia Nov. 17-20. An official statement said that in Cambodia the president will attend the East Asia Summit and meet with the leaders of the Association of Southeast Asian Nations. In Thailand the president will “mark 180 years of diplomatic relations and reaffirm the strength of our alliance,” while in Burma he will meet with government leaders and “speak to civil society to encourage Burma’s ongoing democratic transition.”

The announcement indicates that among the topics of discussion during Obama’s trip to the region will be “economic prosperity and job creation through increased trade and partnerships.” Observers say that in Thailand this could take the form of an expanded dialogue under the existing Trade and Investment Framework Agreement or even some sort of agreement on Bangkok eventually participating in the Trans-Pacific Partnership. A resumption of talks on a bilateral free trade agreement, which were suspended a number of years ago following a political upheaval in Thailand, is not expected. In Burma the president could announce the lifting of the United States’ ban on imports from that country or the designation of Burma as eligible for benefits under the Generalized System of Preferences. 

Centers of Excellence and Expertise Beginning to Show Results, CBP Says

U.S. Customs and Border Protection announced Nov. 9 that through its Centers of Excellence and Expertise it is leading a national operation to target, interdict and investigate the importation of counterfeit, unapproved or otherwise illegal pharmaceuticals that pose health and safety risks to U.S. consumers. As part of this operation the Pharmaceutical, Health and Chemical CEE in New York City has coordinated major seizures in several cities, including Los Angeles and Chicago.

CBP has said that by using account management principles and focusing on industry-specific issues each CEE offers one-stop processing in an effort to lower the trade community’s cost of business, provide greater consistency and predictability, and enhance CBP enforcement efforts. The centers are coordinated from strategic locations but are manned by CBP personnel across the country. CEE staff answer questions, provide information and develop trade facilitation strategies to address uniformity and compliance concerns. They also serve as a single point of processing for businesses enrolled in the Customs-Trade Partnership Against Terrorism and Importer Self-Assessment programs.

In addition to the New York CEE, other CEEs currently in operation cover automotive and aerospace (Detroit), electronics (Los Angeles), and petroleum, natural gas and minerals (Houston). CBP officials have said they plan to have CEEs for several other sectors – base metals and machinery, consumer products and mass merchandising, industrial and manufacturing materials, and textiles, wearing apparel and footwear – up and running by the end of 2013. 

Court Rules Carrier Liable for Duties on Missing Transshipped Goods

The Court of International Trade ruled Nov. 7 that a bonded carrier owes duties, taxes and fees for three entries of wearing apparel from China that were made as transportation and exportation entries covering merchandise destined for Mexico after passing through the U.S. The court concluded that these items are missing and that under U.S. Customs and Border Protection regulations the carrier is responsible for the associated charges.

The apparel at issue was to have been transported from Los Angeles to Laredo for ultimate delivery to Mexico. A licensed U.S. customs broker in Laredo documented its receipt of the proper T&E documents (CBP form 7512) from the carrier but did not record any date of exportation for the associated entries. According to the court, the broker never saw or took possession or delivery of the merchandise or brought it to the U.S. Customs and Border Protection export lot in Laredo, nor did CBP physically inspect or take possession of it.

During a subsequent audit conducted by CBP to verify the exportation of the apparel the carrier submitted three documents purporting to be Mexican import documents (“pedimentos”), but CBP found numerous discrepancies with the information on those documents and concluded that the apparel could not have been exported. The carrier has since been unable to obtain a financial trail for the subject merchandise (e.g., purchase orders, confirmation of a funds transfer by the importer of record, information from a warehouse ledger showing that the subject merchandise had shipped, or documentation from the Mexican customs broker), to locate a record of any taxes or fees paid by the importer to its Mexican customs broker for services of clearing Mexican customs, to present any evidence to demonstrate delivery of the subject merchandise in Mexico, or to show that another party relieved it of its responsibility to export the subject merchandise.

Despite the carrier’s efforts to first show that the apparel was exported and then suggest that it had been smuggled into Mexico, the court has concluded based on documentary evidence and credible testimony that the apparel is in fact missing. CBP regulations provide that the carrier is responsible to account for missing merchandise, the court states, and there is no law or regulation conferring that responsibility on the government. Under CBP regulations a bonded carrier’s liabilities for any missing T&E merchandise include liquidated damages on the bond as well as any internal revenue taxes, duties or other taxes accruing to the U.S. on the missing merchandise.

The court notes that carriers wishing to limit their liability in situations involving transshipments can choose several options, including using an immediate transportation without appraisement entry or having the goods entered into a warehouse or for consumption.

EU, Latin America End 20-Year Dispute on Bananas

The World Trade Organization reports that on Nov. 8 the European Union and nine Latin American countries signed an agreement officially concluding the longest-running series of disputes in the history of the multilateral trading system. The agreement replaces the EU’s “complicated and WTO-illegal” system for importing bananas, which was repeatedly struck down by the WTO, with a system that imposes a steadily decreasing tariff on such imports. This tariff is currently €136/ton and will be reduced annually until it reaches €114/ton as of Jan. 1, 2017. However, the WTO states, if there is no agreement on a framework deal in the Doha Round agriculture negotiations by Dec. 31, 2013 (and it appears unlikely there will be), the tariff cuts for the remaining years can be delayed by up to two years.

The countries signing the new agreement with the EU were Brazil, Colombia, Costa Rica, Ecuador, Guatemala, Honduras, Mexico, Nicaragua, Panama and Venezuela. They, along with Peru and the U.S., signed in December 2009 the Geneva Banana Agreement, under which the EU pledged not to reintroduce measures that discriminate among banana distributors based on the ownership or control of the distributors or the source of the bananas and to instead maintain a non-discriminatory tariff-only system (i.e., no quotas, tariff-rate quotas or import licensing requirements) for banana imports. Since then a number of legal steps have been required, including each country ratifying the 2009 agreement and the EU introducing legislation and regulations to implement it. 

Landlocked Paraguay Accuses Argentina of Delaying its Exports

Paraguayan President Federico Franco has accused Argentina of delaying his landlocked country’s exports through Argentine ports. According to Franco, Paraguayan exporters say that Argentina has without prior notice begun requiring their shipments to be opened and examined. Franco said he plans to take the issue to the World Trade Organization, first to obtain its advice and then possibly by filing a dispute settlement case.

The neighboring countries have been at odds in recent months over a decision to suspend Paraguay from the Mercosur trade bloc following the removal of its president. Paraguayan lawmakers had been the sole impediment to approving the accession of Venezuela to Mercosur, which was accomplished shortly after Asuncion’s Mercosur membership was suspended. 

Textile and Apparel Imports Down 1.3% but Shipments from Asia and Caribbean Rise

The Department of Commerce’s Office of Textiles and Apparel reports that monthly U.S. textile and apparel imports fell 1.3% in September compared to a year earlier. Imports of cotton, wool, manmade fiber, silk blend and non-cotton vegetable fiber textile and apparel products totaled 4.81 billion square meter equivalents for the month, with textile imports down 1.6% at 2.52 billion SME and apparel imports falling 0.9% to 2.29 billion SME.

For the year to date as of September 2012, compared to the same period in 2011, imports of textiles and apparel were 0.1% lower at 40.97 billion SME. Textile imports saw a 2.1% gain to 23.1 billion SME while apparel imports fell 2.9% to 17.9 billion SME. For the 12-month period ending in September total imports were down 2.2% to 53.6 billion SME as textile imports edged up 0.8% to 30.3 billion SME but apparel imports slumped 5.8% to 23.3 billion SME.

With respect to specific sources, imports of textile and apparel products (except cotton and silk blend textiles) saw a year-on-year increase in September from Taiwan (16.9% to 76.9 million SME), Hong Kong (5.9% to 6.1 million SME), the DR-CAFTA region (3.4% to 266.1 million SME), the Caribbean Basin Initiative area (2.1% to 291.6 million SME), the EU 15 (15.1% to 99.5 million SME) and Israel (65.5% to 40.7 million SME). On the other hand, imports declined from China (0.7% to 2.51 billion SME), Vietnam (3.9% to 254.3 million SME), South Korea (9.8% to 101.1 million SME), Canada (10.8% to 94.5 million SME), Mexico (13.9% to 185.8 million SME), ASEAN (6.3% to 583.1 million SME), South Asia (0.2% to 633.9 million SME), and Turkey (2.0% to 49.8 million SME). 

Foreign Regulatory Changes Could Affect Exports of Foods, Oil, Perfumes

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.

Argentina – draft resolution amending Argentine Food Code on sunflower seed oil

Kuwait – draft regulation on lubricating oil for internal combustion engines (comments due by Jan. 11, 2013)

United Arab Emirates – draft technical regulation on perfumes and related products (comments due by Jan. 9, 2013) 

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