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December 21 2012 Issue

Friday, December 21, 2012
Sandler, Travis & Rosenberg Trade Report

U.S., Canada Advance Efforts to Facilitate Trade, Improve Perimeter Security

The U.S. and Canada have released the first of three annual reports on implementation of the Beyond the Border Action Plan, which outlines specific initiatives designed to speed legitimate trade and travel while improving security throughout North America. According to the report, efforts to implement the Action Plan in 2012 included the following.

Addressing Threats Early

- achieved mutual recognition of the two countries’ respective air cargo security programs for passenger aircraft, eliminating the need for rescreening except for cause

- developed a common and streamlined set of required data elements for advance security screening of cargo for all modes of transport

- developed an Integrated Cargo Security Strategy to address risks associated with offshore shipments as early as possible and initiated pilot programs to validate and shape the implementation of this strategy, including an inbound marine cargo pilot at the port of Prince Rupert for cargo destined to the U.S. by rail, a Canadian pre-load air cargo targeting pilot, and (soon) an inbound marine cargo pilot at the port of Montreal for cargo destined to the U.S. by truck

Trade Facilitation

- launched a pilot extending Free and Secure Trade benefits at the Sarnia, Ontario, border crossing into Canada to members of the Customs-Trade Partnership Against Terrorism and Canada’s Partners in Protection program

- initiated harmonization of C-TPAT and PIP including mutual recognition of each other’s onsite validations of participating companies

- conducted a detailed comparison and review of Canada’s Customs Self-Assessment and the U.S. Importer Self- Assessment programs in anticipation of eventual alignment (to the extent possible) and extending new benefits to tier-two members, such as facilitating border and accounting processes and further reducing risk-based examination rates

- conducted a one-year pilot in Canada’s processed food sector providing facilitated clearance and compliance processes

- initiated a joint entry/exit pilot project starting with foreign nationals and permanent residents at four land border ports of entry whereby the record of entry into one country is shared and becomes the record of exit from the other

- initiated a one-year sector-based pilot to provide for advance review and clearance of official certification and alternative approaches to import inspection activities

- initiated negotiations for a new preclearance agreement for the land, rail and marine modes as well as an update to the existing preclearance agreement for the air mode

- initiated a wood packaging material feasibility study to identify and address any policy, program or operational changes required to move inspections for wood packaging material away from the border to the perimeter

- began converting the data requirements of all participating government departments and agencies to electronic form as an initial step toward providing a single window through which importers can electronically submit all information to comply with customs and other government regulations

- completed a preliminary inventory of fees and charges at the border, with release anticipated in the first quarter of 2013

- installed new sensor technology at approaches to and on the customs plazas of the Peace Bridge and Queenston-Lewiston Bridge in the Niagara region to test a system that is expected to provide reliable, real-time information to travelers and enable them to time and select their crossing

Critical Infrastructure

- launched the first cross-border Regional Resilience Assessment Program project to improve the security of cross-border critical infrastructure

- finalized and released a document outlining best practices and considerations for land border traffic management in the event of an emergency

- developed joint planning and communications guides to facilitate maritime commerce recovery

Future Initiatives

According to the report, the Action Plan includes deliverables due in 2013, 2014 and 2015. Key initiatives include harmonizing trusted trader programs, making significant infrastructure investments at key land border crossings, fully implementing an entry/exit program at the land border, expanding preclearance operations to the land, rail and marine domains, and an update to the existing preclearance agreement for the air mode.

Jayson Myers, president of the trade group Canadian Manufacturers and Exporters, said that while “there is a lot of very good progress that is being made … it is also very clear that there is much more to do.” Myers said CME’s priorities for 2013 include harmonizing and expanding trusted trader programs, harmonizing security and release procedures at the Canada-U.S. border, aligning regulations and regulatory reporting processes across government agencies and departments, implementing coordinated perimeter border security and processing requirements, expanding and improving existing logistics infrastructure, reducing barriers to the movement of business personnel, and eliminating transactional reporting for trusted traders. 

Earned Import Program for Haitian Apparel Sees Surge in Utilization

The Government Accountability Office reports that utilization of the Earned Import Allowance Program created to aid the apparel industry in Haiti saw a significant increase in 2012. Under the EIAP, for every two square-meter equivalents of U.S. or other qualifying fabric a firm imports into Haiti that firm earns a credit to export one SME of apparel produced in Haiti to the U.S., duty-free, regardless of the fabric’s source.

According to the report, for the period January through August 2012 nearly $18 million in Haitian apparel was exported under the EIAP, about 4% of all Haitian apparel exported to the U.S. By contrast, during the same eight-month period in 2011 EIAP exports totaled only about $350,000, or 0.07% of total shipments. The report further states that while only three of the five account holders are actively earning credits and two have begun to use them (up from one last year), in the 12-month period ending Nov. 19, 2012, the number of credits issued increased to about 42 million SMEs, compared to approximately 8 million a year earlier. Similarly, the number of credits redeemed (used by account holders) during this period increased to about 25 million SMEs from approximately 6 million.

The GAO cites a Commerce Department official as stating that this increased use may be due to the growing awareness of companies that the EIAP can complement their ongoing export activities under other U.S. trade preference provisions. The official also noted that the remaining two EIAP account holders may not be earning credits because they prefer to export their products under other provisions of U.S. trade preference programs for Haiti, including the HOPE II law and the Caribbean Basin Trade Partnership Act. 

Mexico to Drop WTO Case Against Argentina After New Auto Trade Deal

Mexican Economy Minister Ildefonso Guajardo said this week that his government will withdraw a World Trade Organization complaint against Argentinean import restrictions after the two sides reached a new agreement on trade in automobiles. Argentina suspended the previous deal (known as ACE-55) in June after a 162% increase in its automotive trade deficit with Mexico. Under the new pact Mexico will be able to ship about $600 million worth of automobiles to Argentina duty-free over the next three years, or about two-thirds of what was allowed previously. In addition, each country will raise the regional content requirements for automobiles imported from the other from 30% to 40%. 

Japanese Company Fined $45 Million to Settle Charges It Avoided AD/CV Duties

The Department of Justice announced this week that a Japanese printing ink company and various affiliated entities have agreed to pay $45 million plus interest to settle allegations that they violated the False Claims Act by knowingly failing to pay antidumping and countervailing duties. The U.S. government alleged that over an eight-year period this company knowingly misrepresented Japan and Mexico as the countries of origin for shipments of the colorant carbazole violet pigment 23 that were in fact from China and India. A DOJ press release states that although this product underwent a finishing process in Japan and Mexico before it was imported into the U.S., this process was insufficient to constitute a substantial transformation to render these countries as the countries of origin.

DOJ states that the allegations resolved by this settlement were initially alleged in a whistleblower lawsuit filed under the False Claims Act by the president of a domestic producer of CVP-23. Under the FCA private citizens can sue on behalf of the U.S. and share in any recovery. In this case the individual will receive more than $7.86 million. 

$12.3 Million in Penalties to Settle Charges of Bribery in Indonesia

The Securities and Exchange Commission reports that a Germany-based insurance and asset management company will pay more than $12.3 million to settle SEC charges that it violated the books and records and internal controls provisions of the Foreign Corrupt Practices Act by making improper payments to goverment officials in Indonesia during a seven-year period. According to Kara Brockmeyer, chief of the SEC Enforcement Division’s FCPA Unit, the company’s subsidiary in Indonesia “created an ‘off-the-books’ account that served as a slush fund for bribe payments to foreign officials to win insurance contracts.” An SEC investigation uncovered 295 such contracts on large government projects that were obtained or retained by improper payments of $650,626 to employees of state-owned entities. The SEC states that the company made more than $5.3 million in profits as a result of the improper payments.

An article in The Wall Street Journal notes that a separate Department of Justice investigation of the company for criminal violations of the FCPA was dropped earlier this year. 

In the News: Mexican Truck Program, WTO Case on Renewable Energy, Costa Rica-EFTA Deal

Mexican truckers' lack of interest threatens to derail safety program

WTO rules against Canada in renewable energy case 

Costa Rica concludes negotiations with European Free Trade Association

AD/CV Notices: Residential Washers, Silica Bricks and Shapes

Agency: International Trade Administration.
Commodity: Large residential washers.
Country: Korea and Mexico.
Nature of Notice: Affirmative final antidumping (Korea and Mexico) and countervailing (Korea) duty determinations.
Details: Dumping margins from 9.29% to 82.41% for Korea and 36.52% to 72.41% for Mexico. Net subsidy rates from 0.01% to 72.30% for Korea. Two producers/exporters in Korea benefited from an export subsidy, so if an AD duty order is issued AD cash deposit rates will be reduced accordingly. The International Trade Commission is scheduled to make its final AD/CV injury determinations no later than Feb. 1, 2013.

Agency: International Trade Commission.
Commodity: Silica bricks and shapes.
Country: China.
Nature of Notice: Dec. 28 open meeting for vote on preliminary antidumping injury determinations.

New FTZ in Upstate New York, Expanded Authority for Arizona and Illinois Facilities

The Foreign-Trade Zones Board has recently taken the following actions.

- established FTZ 284 under the alternative site framework with a service area of Genesee County, N.Y., adjacent to the Rochester U. S. Customs and Border Protection port of entry

- approved an application from the Greater Maricopa Foreign Trade Zone Inc., for manufacturing authority at the Suntech Arizona Inc. facility within FTZ 277 in Goodyear, Ariz., which is used for the manufacture of 275 and 290 watt solar panels for industrial use

- received a notification of expanded production authority within subzones 22F and 22S at Abbott Laboratories Inc. facilities in the North Chicago and Lake County, Ill., area that are used for the production of a wide variety of pharmaceutical and diagnostic products, medical devices and equipment (comments due by Jan. 30, 2013) 

No IPR Import Restrictions on Video Analytics Software

The International Trade Commission has terminated without the imposition of import restrictions patent infringement investigation 337-TA-852 of certain video analytics software, systems, components thereof and products containing same. This termination is based on a settlement agreement between complainant ObjectVideo Inc. and a respondent in California. 

Foreign Regulatory Changes Could Affect Exports of Helmets, Clothing, Electrical Devices

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.

Canada – Dec. 5 publication and effective date of amended regulations on transportation of dangerous goods

Israel – revised mandatory safety standards on industrial safety helmets, protective clothing, children’s drinking equipment, cement, lighting chains, playground equipment, low-voltage fuses, electrical couplers, electric planers, electric hedge trimmers, electric routers and trimmers, and electric transformers and reactors (comments due by Feb. 17, 2013)

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