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January 14 2013 Issue

Monday, January 14, 2013
Sandler, Travis & Rosenberg Trade Report

Canada Proposes Substantial Changes to Trade Preference Program

[Editor’s note: The following article originally appeared in the Jan. 10, 2013, issue of the Advisor, a weekly publication of ST&R's STR-TAP service, and is reprinted here with permission.]

The Canadian government launched consultations in December 2012 as part of a comprehensive review of the General Preferential Tariff, which provides preferential duty treatment to a range of imports from developing countries. This program was originally established in 1974 and its last review took place almost 20 years ago. Canadian authorities observe that the global economy has undergone considerable changes since that last review and a number of developing countries have greatly increased their competitiveness and even joined the ranks of the developed world. Accordingly, Canadian authorities have initiated a review of the GPT program “to better reflect the current global economy and to ensure that the GPT aligns with Canada’s international development objectives.” The Canadian government indicates that it does not contemplate any changes to the least developed country tariff, which provides duty-free treatment to imports from least-developed countries.

As part of this reform effort the Canadian government is proposing to remove from the GPT program countries that (i) are classified for two consecutive years as high income or upper middle income economies according to the latest World Bank income classifications, or (ii) have a share of world exports that is equal to or greater than 1% for two consecutive years according to the latest World Trade Organization trade statistics. Based on these criteria, the Canadian government intends to withdraw GPT eligibility from 72 countries or territories effective July 1, 2014, including Brazil, China, the Dominican Republic, Hong Kong, India, Indonesia, Malaysia, Russia, Thailand and Turkey, among others.

The GPT program currently offers duty-free or preferential duty treatment to products classified under more than 80% of tariff lines, with most apparel, footwear and certain agricultural products excluded from coverage. While only a handful of lightly-traded apparel products currently benefit from the program, least-developed countries like Haiti may cumulate origin with GPT countries in order to benefit from duty-free treatment in Canada under the LDCT. As a result, the removal of a country like the Dominican Republic from GPT treatment could potentially affect apparel cut and sewn in Haiti with DR inputs that is subsequently exported to Canada under the LDCT.

Canadian authorities will consider any changes to product coverage as well as possible modifications to the current requirement that at least 60% of the value of a product contain inputs originating in one or more GPT beneficiaries or Canada. The government is also seeking input from interested parties on whether (i) the GPT safeguard mechanism (which provides a process by which tariff preferences under the GPT could be withdrawn if it is determined that imports under the GPT injure, or threaten to injure, a domestic industry) should be formally incorporated into law in order to increase predictability and transparency for stakeholders, and (ii) country coverage should be amended on an annual basis according to the economic criteria set out above.

Interested parties may submit input on any of these issues to the Department of Finance’s International Trade Policy Division no later than Feb. 15. Any changes stemming from this review will be publicly announced in advance of the proposed implementation date of July 1, 2014. For additional information, please contact Alvaro Ferreira

Changes Sought to Proposal for 180-Day Limit for Self-Disclosures of Export Violations

Several business groups are seeking further changes to a Bureau of Industry and Security proposed rule that would affect administrative enforcement proceedings. Under this proposal the final, comprehensive narrative account required in voluntary self-disclosures of violations of the Export Administration Regulations would have to be submitted to the Office of Export Enforcement within 180 days of the initial VSD notification. This 180-day deadline could be extended if warranted, although OEE would be able to place conditions on an extension such as a requirement for the disclosing person to undertake specific interim remedial compliance measures. Failure to meet either the 180-day deadline or an extended deadline would not be an additional violation of the EAR but could reduce or eliminate the mitigating impact of the VSD.

Comments on the proposed rule focused on the following issues.

Proposed Deadline. Boeing said that “fixed time limits for compliance processes enable exporters and the Office of Export Enforcement to efficiently perform diligence and conclude investigations.” Tech America added that the proposed 180-day period “is sufficient for compliance officers to investigate any history of export violations and gain a better understanding of operations within the company or acquisition target” and “will benefit those not as familiar with the EAR by mandating comprehensive and timely reporting of suspected violations.”

General Electric, however, said that while 180 days would be sufficient in many cases, more complex cases may require more time. GE said that if a final narrative cannot be completed within 180 days BIS should allow companies to submit instead a substantive supplemental filing indicating the status of their review, including interim remedial measures already taken and an action plan with a timeline for completion of the review and submission of the final narrative.

MKS Instruments Inc. added that clearer guidance is needed on what constitutes the official date of initial notification and recommended that it be defined as the date when BIS receives the initial notification.

Deadline Extensions. GE asserted that giving the OEE discretion to grant requests for an extension of the 180-day deadline “doesn't afford the exporter any regulatory right to an extension of time, even if circumsances warrant an extension.” The proposal also asserts that “requests for extensions will normally not be necessary or justified,” a position that GE called “not comforting” given that it can “envision many scenarios where more than 180 days may be required to conduct a complete investigation and prepare a thorough final narrative.” GE therefore recommended that BIS revise the rule to state that requests for extensions will normally be granted when properly justified by the VSD filer.

MKS noted that there is no guidance on when or under what conditions an extension may be requested by an exporter (e.g., as part of the initial notification), the consequences if a request is received on time but not acted upon until after the 180-day window closes, and the circumstances that would serve to justify an extension.

Conditions for Deadline Extensions. GE expressed concern that the proposed conditions that may be imposed for granting a deadline extension may be open-ended and called for the implementation of a “reasonableness” standard. MKS asked for the creation of a set of standard conditions than an exporter may be asked to accept before an extension is granted, recognizing that OEE would still be able to impose additional conditions based on the unique circumstances of a VSD.

Timeline for BIS Decisions. Asserting that an exporter acting in good faith deserves some measure of certainty after its VSD is submitted, MKS recommended that the OEE be required to acknowledge such submissions within a reasonable timeframe (e.g., 30-45 days after receipt) and provide a status report to the exporter within 180 days of receipt. Tech America noted its support for the latter recommendation.

Potential Consequences. GE and MKS warned that a reluctance to allow exporters the right to a reasonable extension when required could subvert the proposal’s aim of compelling the timely submission of VSDs. For example, if the scope of a VSD is sufficiently complex the exporter may sacrifice thoroughness in order to submit the narrative on time, or it could delay the submission of its initial notice until it feels comfortable it can meet the proposed deadline. 

U.S. Files WTO Complaint Against Indonesian Import Restrictions on Plants and Animals

The U.S. filed a dispute settlement case at the World Trade Organization Jan. 10 concerning trade-restrictive measures Indonesia applies to horticultural products, animals and animal products. The Office of the U.S. Trade Representative states that Indonesia “has created a complex web of import licensing requirements that have the effect of unfairly restricting U.S. exports” and “appear to be designed to protect Indonesia’s domestic agriculture industry.”

A USTR press release asserts that in late 2011 Indonesia passed regulations establishing strict non-automatic import licensing requirements for horticultural products. Those regulations were revised in September 2012 to include even more onerous requirements for horticultural imports, including fruits, vegetables, flowers, dried fruits, vegetables and juices. Indonesia also continues to maintain a similar non-automatic import licensing and quota regime for beef and other animal product imports and recently announced “drastic reductions” in import quotas for beef and other animal products. USTR states these licensing regimes do not appear to be administered in a uniform, impartial and reasonable manner because measures are applied inconsistently and unpredictably. 

Meat Imports, Electronic Import and Export Systems Among Topics of Forthcoming USDA Rules

The Department of Agriculture recently issued its semiannual regulatory agenda. This document lists proposed and final regulations affecting international trade in agricultural goods that could be issued within the next year, as well as rulemaking proceedings that have been in process for some time and are not as likely to see further progress in the near term.

Regulations Possible in 2013

- an advance notice of proposed rulemaking requesting comments on various aspects of the Dairy Import Licensing Program (January)

- a proposed rule adding Namibia to the list of countries eligible to export meat products to the U.S. (March)

- a final rule amending the regulations regarding the importation of bovines and bovine products (March)

- a final rule repealing all references to the GSM-103 (Intermediate Term Guarantee) program and incorporating improvements and changes to the implementation and operation of the GSM-102 (Export Credit Guarantee) program (April)

- a proposed rule allowing the importation of fresh (chilled or frozen) beef from a region in Brazil (April)

- a final rule prohibiting the importation of dogs for resale, research, or veterinary treatment unless the dogs are in good health, have all necessary vaccinations and are six months of age or older (April)

- a final rule (a) providing for an electronic export application and certification system, which will be a component of the Public Health Information System, (b) providing establishments that export meat, poultry and egg products with flexibility in the official export inspection marks, devices and certificates, and (c) amending the egg product export regulations to parallel the meat and poultry export regulations (April)

- a proposed rule adding Korea the list of countries eligible to export poultry products to the U.S. (June)

- an interim final rule requiring firewood of all species imported from Canada, including treated lumber (furniture scraps) sold as kindling, and all spruce logs imported from Nova Scotia to be heat-treated and accompanied by either a certificate of treatment or an attached commercial treatment label (July)

- a final rule that would (a) provide for the Public Health Information System Import Component, which provides an electronic alternative to the paper-based import inspection application and imported product foreign inspection and foreign establishment certificate processes, (b) delete the discontinued “streamlined” import inspection procedures for Canadian product and (c) require sanitation standard operating procedures at official import establishments (July)

Regulations in Process

- a proposed rule to amend the bovine spongiform encephalopathy and scrapie regulations to make further clarifications regarding the importation of live sheep, goats and wild ruminants and their embryos, semen, products and byproducts

- a final rule prohibiting or restricting the importation of birds, poultry, and bird and poultry products from regions that have reported the presence in commercial birds or poultry of highly pathogenic avian influenza other than subtype H5N1

- a final rule establishing definitions for the terms “common cultivar” and “common food crop” under the Lacey Act amendments

- a final rule removing the exemption allowing wood packaging material from Canada to enter the U.S. without first meeting the treatment and marking requirements of the regulations that apply to wood packaging material from all other countries 

Next Customs Broker License Exam to be Held April 1; STR Offers On-Demand Prep Course

U.S. Customs and Border Protection will conduct its next customs broker license examination April 1. Interested individuals may submit applications through this Web site from Jan. 28 through Feb. 28 but are encouraged to complete their applications well before the deadline. A license exam fee of $200 must be paid at the time of application. Applicants will be notified of specific exam locations approximately two weeks prior to the exam and may contact the relevant service port for additional information after March 15.

The broker license exam consists of 80 multiple-choice questions and a score of 75% is required to pass. Exam topics typically include entry, classification, country of origin, trade agreements, antidumping and countervailing duties, value, broker responsibilities, fines, penalties and forfeitures, protests, marking, prohibited and restricted merchandise, drawback, intellectual property rights and other subjects pertinent to a broker’s duties.

If an applicant achieves a passing score and wishes to apply to become a licensed customs broker, an application for customs broker license (form 3124), fingerprints, a current credit report and a license application fee of $200 will be required.

To take the broker's license exam, applicants must be a U.S. citizen and be at least 18 years old as of the date of the exam. To apply for a license once the exam is passed, applicants must be a U.S. citizen and be at least 21 as of the date the application is filed. In neither case may the applicant be an officer or employee of the U.S. government.

Sandler, Travis & Rosenberg offers a broker exam preparation course via webinar. This course includes nearly 15 hours of on-demand content that can be accessed at your convenience and as often as necessary. In addition, ST&R professionals will be available to field test-related questions and provide guidance on exam topics. As a further benefit, the course provides test-taking strategies for each category of CBP law covered by the exam as well as techniques on how to utilize the time allowed for the exam. Click here for more information and registration. 

Textile Imports Down, Apparel Imports Up in November

The Department of Commerce’s Office of Textiles and Apparel reports that monthly U.S. textile and apparel imports slipped 0.3% in November compared to a year earlier. Imports of cotton, wool, manmade fiber, silk blend and non-cotton vegetable fiber textile and apparel products totaled 4.23 billion square meter equivalents for the month, with textile imports down 1.3% to 2.44 billion SME and apparel imports up 1.0% to 1.80 billion SME.

For the year to date as of November 2012, compared to the same period in 2011, imports of textiles and apparel were 0.2% higher at 50.0 billion SME. Textile imports gained 1.8% to 28.1 billion SME while apparel imports fell 1.8% to 21.9 billion SME. For the 12-month period ending in November total imports were down 0.5% to 53.8 billion SME as textile imports rose 1.3% to 30.3 billion SME but apparel imports fell 2.6% to 23.5 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 November from Vietnam (5.1% to 251.9 million SME), Hong Kong (12.0% to 5.2 million SME), South Korea (3.4% to 106.8 million SME), the Caribbean (2.0% to 263.3 million SME), South Asia (16.6% to 694.8 million SME), the EU-15 (11.7% to 105.3 million SME) and Israel (35.2% to 36.1 million SME). Imports fell from China (5.3% to 1.94 billion SME), Taiwan (25.4% to 50.9 million SME), Canada (15.1% to 84.7 million SME), Mexico (3.9% to 197.1 million SME), DR-CAFTA (0.3% to 236.8 million SME), ASEAN (3.1% to 544.2 million SME) and Turkey (0.4% to 52.8 million SME). 

Texas FTZ Seeks to Expand, Aircraft Turbine Request Moves Forward

Request to Add Site to Texas Zone. The Foreign-Trade Zones Board is seeking public comments through Feb. 25 on a request from The Alliance Corridor Inc., grantee of FTZ 196, for authority to include temporary site 2 in subzone 196A in Fort Worth, Texas, on a longer-term basis. No authorization for production activity has been requested at this time.

Revised Recommendation on Aircraft Turbine Parts Facility. The FTZ Board received in April 2011 an application from Monroe County, N.Y., grantee of FTZ 141, requesting authority on behalf of Firth Rixson Inc. to manufacture aircraft turbine components under FTZ procedures within FTZ 141. In January 2012 the Board examiner preliminarily recommended approval of this request provided that foreign-origin titanium was admitted in privileged foreign status. In December the examiner reversed that recommendation and called for allowing unrestricted FTZ benefits on foreign titanium used in production for the U.S. market and export for five years, which the examiner believes should result in significant public benefits (e.g., maintained or increased U.S. employment) without negative economic effects (e.g., would not result in increased imports of titanium alloy that otherwise would not have occurred). Comments on this revised recommendation are due no later than Feb. 13. 

Free Webinars on Submitting Annual FTZ Reports

The Foreign-Trade Zones Board is offering several free webinars on submitting FTZ reports for 2012 via the Online FTZ Information System. Each zone operator’s report to its zone’s grantee is due by the deadline set by the grantee, which must then submit its report to the FTZ Board by March 31.

Webinars to be held Jan. 22 and Feb. 21 will covers operators’ use of OFIS to fill out and submit their annual report to their grantees. A webinar scheduled for March 14 will cover grantees’ use of OFIS to finalize and submit their annual report to the FTZ Board. RSVPs are required and are due by Jan. 18, Feb. 19 and March 12, respectively. 

Anti-Bribery Efforts to be Discussed at Economic Policy Meeting

The State Department’s Advisory Committee on International Economic Policy will meet Jan. 30 at State Dept. headquarters in Washington, D.C. This meeting will examine the Anti-Bribery Convention, the OECD Working Group on Bribery and related anti-corruption issues. The meeting is open to public participation but seating is limited. Those planning to attend should notify State by Jan. 25.

CPSC Reviewing Information Collection on Cigarette Lighter Safety Standard

The Consumer Product Safety Commission is accepting comments through March 15 on the proposed extension of a collection of information from manufacturers and importers of disposable and novelty cigarette lighters. CPSC regulations implementing the Safety Standard for Cigarette Lighters prescribe requirements for a reasonable testing program to support certificates of compliance with the standard. Manufacturers and importers must submit a description of each model of lighter, results of surrogate qualification tests for compliance with the standard, and other information before the introduction of each model of lighter into commerce. Manufacturers, importers and private labelers of disposable and novelty lighters must also establish and maintain records to demonstrate successful completion of all required tests to support the certificates of compliance they issue. 

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