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November 28 2012 Issue

Wednesday, November 28, 2012
Sandler, Travis & Rosenberg Trade Report

Exchange Rate Report Again Excludes China from Designation as Currency Manipulator

In its semiannual report on foreign exchange rate policies released Nov. 28, the Treasury Department again declined to name China or any other major trading partner as a currency manipulator. This report reviews the exchange rate policies of nine economies accounting for 70% of U.S. foreign trade and finds that while all of the major advanced economies have fully flexible exchange rates there are several major emerging market economies that manage their exchange rates to varying degrees.

The report emphasizes the need for greater exchange rate flexibility in China, stating that despite some encouraging developments the process of adjustment remains incomplete. On the positive side, estimates of the degree to which the yuan is undervalued have narrowed, and in July the International Monetary Fund put the figure at 5-10%. The report attributes this improvement to a significant decline in China’s current account surplus over the past four years, a 12.6% appreciation of the yuan against the dollar since June 2010 (and 40% since China initiated currency reform in 2005, although this trend briefly reversed itself earlier this year), a substantial reduction in the level of official intervention in exchange markets since the third quarter of 2011, and steps taken to liberalize controls on capital movements. On the other hand, the report states, “China’s exceedingly high foreign exchange reserves relative to those of other economies, the persistence of its current account and trade surpluses, and the insufficient degree of appreciation of the [yuan], especially given rapid productivity gains in the traded goods sector, suggest that the real exchange rate for the [yuan] remains significantly undervalued.”

However, some observers downplayed the report’s conclusions. “I would like to point out that the ratio of China’s current account surplus to GDP has been on a steady decline over the years, and the exchange rate of the yuan is approaching an equilibrium level,” Foreign Ministry spokesman Hong Lei said, according to The Wall Street Journal. “The exchange rate has little to do with the U.S. trade balance or employment,” added U.S.-China Business Council President John Frisbie, and “we need to move on to more important issues with China, such as removing market access barriers and improving intellectual property protection.”

With respect to other economies reviewed, the Treasury report makes the following observations.

- It remains important that Japan take fundamental and thoroughgoing steps to increase the dynamism of the domestic economy by easing regulations that unduly deter competition in its domestic economy.

- The U.S. will continue to press Korean authorities to limit their foreign exchange interventions to the exceptional circumstances of disorderly market conditions and to commit to greater foreign exchange market transparency, including through the publication of intervention data.

- European authorities have taken “very significant steps” to reduce financial stress in the region and the success of the next phase of the crisis response will hinge on rapid implementation of institutions that strengthen the euro and continued progress on economic reforms that support growth. 

FDA Imposes First-Ever Suspension of Food Facility Registration

The Food and Drug Administration announced this week the first-ever use of its authority under the Food Safety Modernization Act to suspend the registration of a food facility. The FDA issued a suspension order against a New Mexico facility of a producer of nuts and nut and seed spreads due to its history of violations as well as the fact that peanut butter made by this company has been linked to an outbreak of salmonella. As long as this order remains in effect no person can import or export food into or from the U.S. from this facility, offer to import or export food into or from the U.S. from this facility, or otherwise introduce food from this facility into interstate or intrastate commerce in the U.S.

Registration with the FDA is required for any domestic or foreign facility that manufactures, processes, packs or holds food for consumption in the U.S. Under FSMA all such facilities are required to renew their registration before the end of 2012 and to re-register every two years thereafter. This law also allows the FDA to suspend a facility’s registration when food manufactured, processed, packed, received or held by that facility has a reasonable probability of causing serious adverse health consequences or death to humans or animals, and other conditions are met.

An FDA press release notes that the affected company will now have an opportunity to request an informal hearing on the actions required for the reinstatement of its facility’s registration. If the FDA subsequently determines that the suspension remains necessary it will require the company to submit a corrective action plan to address the immediate problems and to implement a sustainable solution to those problems in a sound scientific manner. The FDA will reinstate the facility’s registration only when it determines that the company has implemented procedures to produce safe products. 

List of Entities Restricted from Receiving Exports of Dual-Use Goods Amended

The Bureau of Industry and Security has issued a final rule that, effective Nov. 29, adds two persons in Pakistan to the Entity List and revises one existing entry in the United Arab Emirates by providing an additional alias and alternate address.

Certain exports, reexports and transfers (in-country) of items subject to the Export Administration Regulations to entities identified on the Entity List require licenses from BIS but are usually subject to a policy of denial because BIS considers such entities to present significant risks of diversion to weapons of mass destruction programs, terrorism or other activities that are contrary to U.S. national security or foreign policy interests. In addition, license exceptions are unavailable for such transactions in most instances.

Shipments of items removed from eligibility for a license exception or export or reexport without a license (NLR) as a result of this rule that were en route aboard a carrier to a port of export or reexport on Nov. 29 pursuant to actual orders for export or reexport to a foreign destination may proceed to that destination under the previous eligibility for a license exception or NLR.

AD/CV Notices: Wood Flooring, Folding Metal Tables and Chairs

Agency: International Trade Administration.
Commodity: Multilayered wood flooring.
Country: China.
Nature of Notice: Amended countervailing duty order pursuant to court decision.
Details: Eswell Enterprise and Elegant Living are removed from the list of non-cooperating companies and will be subject to the “all others” CV cash deposit rate of 1.50%.

Agency: International Trade Administration.
Commodity: Folding metal tables and chairs.
Country: China.
Nature of Notice: Revocation of antidumping duty order, effective Nov. 6, 2012, after no domestic interested parties filed notice of intent to participate in a sunset review.  

DOT Notes Hazmat Special Permit Applications, Decisions, Delays in Processing

The Department of Transportation’s Pipeline and Hazardous Materials Safety Administration has issued the following concerning exceptions from the Hazardous Materials Regulations.

- a list of applications for special permits for exceptions from the HMR, including for motor vehicles, rail freight, cargo vessels, cargo aircraft and passenger-carrying aircraft (comments due no later than Dec. 28)

- a list of applications to modify previously issued special permits; e.g., to provide for additional hazardous materials, packaging design changes, additional mode of transportation, etc. (comments due no later than Dec. 13)

- a list of actions taken on special permit applications, including modified, new and emergency permits granted or withdrawn and permits denied

- a list of special permit applications that have been in process for 180 days or more, including the reason(s) for delay and the expected completion date 

FTZ Receives Production Notification for Transmission Plant, Approves Two Others

The Foreign-Trade Zones Board is accepting through Jan. 7, 2013, comments on a notification of proposed production activity at the ZF Transmissions Gray Court LLC facility in Gray Court, S.C., which is used for the production of automatic transmissions for motor vehicles. Production under FTZ procedures could exempt ZFTGC from customs duty payments on the foreign status components and materials used in export production. On its domestic sales, ZFTGC would be able to choose the duty rate that applies to automatic transmissions (2.5%) for foreign status inputs. The company would also be exempt from customs duty payments on foreign components used in the production of automatic transmissions that would be shipped to auto assembly plants operating under FTZ authority. Finally, customs duties could possibly be deferred or reduced on foreign status production equipment.

Separately, the FTZ Board has authorized the production under zone procedures of (a) fragrances at the Takasago International Corporation facility located within site 10 of FTZ 37 in Harriman, N.Y. and (b) pharmaceutical and related preparations at the Novartis Consumer Health Inc. facilities within sites 3 and 4 of FTZ 59 in Lincoln, Neb. 

Foreign Regulatory Changes Could Affect Exports of Motorcycles, Inks, Foods, Lighting

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.

Israel – mandatory standard on smoke doors (comments due by Jan. 23, 2013)

Japan – partial amendment of safety regulations for motorcycles (comments due by Jan. 20, 2013)

Kenya – specification for printing inks for use on food wrappers, packaged and receptacles (comments due by Jan. 23, 2013)

Kenya – specification of requirements, methods of sampling and tests for certain fertilizers (comments due by Jan. 23, 2013)

Korea – regulations for the classification of medical devices (comments due by Jan. 23, 2013)

Korea – proposed revision of labeling standards for foods to alleviate certain restrictions (comments due by Dec. 9)

Slovenia – act regulating construction products (comments due by Feb. 15, 2013)

South Africa – regulations on the classification, packing and marking of fruit juices, nectars, drinks and fruit flavored drinks (comments due by Jan. 31, 2013)

United Arab Emirates – draft technical regulation on approval and registration of lighting products (comments due by Jan. 26, 2013)

New and Amended Maritime Agreements Filed

The Federal Maritime Commission has issued notice that the following new or amended agreements have been filed. Interested parties may submit comments by Dec. 10.

CSAV/SSI Cooperative Working Agreement – The amendment removes rate discussion authority, authorizes the parties to charter space to each other on an ad hoc, case by case basis, updates both parties’ address and makes various other changes.

Siem Car Carrier Pacific AS/Hoegh Autoliners Inc. Space Charter Agreement – The agreement authorizes the parties to charter space to each other in the trade between China, Japan and Korea, on the one hand, and the U.S. West Coast on the other hand.

Matson/Kyowa Space Charter Agreement – The agreement authorizes the parties to charter space to each other in the trade between ports in Japan and Korea, on the one hand, and ports in Guam and the Commonwealth of the Northern Mariana Islands, on the other hand.

Matson/Kyowa Space Charter Agreement for Guam and Pacific Islands – The agreement authorizes the parties to charter space to each other in the trade between ports of Guam, on the one hand, and ports in the Commonwealth of the Northern Mariana Islands, the Republic of the Marshall Islands, the Federated States of Micronesia and the Republic of Palau, on the other hand.

HSDG-GWF Space Charter Agreement – The agreement authorizes Hamburg Sud to charter space to Great White Fleet in the trade between ports in California and ports in Guatemala, Panama, Ecuador and Peru. 

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