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February 12 2013 Issue

Tuesday, February 12, 2013
Sandler, Travis & Rosenberg Trade Report

Brazil Continuing to Postpone Sanctions Against U.S. in Cotton Dispute

Brazil has agreed to continue postponing trade sanctions against the U.S. in retaliation for its noncompliance with a World Trade Organization ruling against its cotton subsidies, according to an Inside US Trade article. However, a senior U.S. official warns that Brazil will not stay its hand indefinitely and that legislative action is needed soon.

The WTO has authorized Brazil to impose sanctions in the form of both higher tariffs on goods imported from the U.S. and the suspension of U.S. intellectual property rights. The annual amount of countermeasures authorized has two parts, a fixed amount of $147.3 million for cotton payments and an amount for the GSM-102 export assistance program that varies based on program usage (which as of June 2012 was more than $800 million).

In 2010 Brazil took steps to impose these measures, including more than $560 million in higher tariffs against 102 specific U.S. products. Shortly before the tariffs were to have taken effect, however, the two sides reached an agreement under which Brazil postponed retaliation in return for various U.S. actions, including establishing an annual fund of $147.3 million to aid Brazilian cotton producers and reforming the GSM-102 program. This agreement acknowledged that the more substantial reforms to U.S. cotton subsidies that Brazil wants were to be taken up in the next farm bill.

Last summer Brazil sought to increase pressure on U.S. lawmakers by updating its list of U.S. goods that could be hit with higher tariffs as well as the total amount of U.S. exports that could be penalized. However, Congress failed to pass a new farm bill and instead extended the previous one through September 2013. The article indicates that while this was not welcome news in Brasilia, officials have agreed to keep the current pact in place for now.

At the same time, Southeast Farm Press reports, Agriculture Secretary Tom Vilsack said recently that “it is important that Congress resolve this issue.” Vilsack warned that the “nearly $800 million of retaliation” that Brazil could impose would affect more than U.S. agricultural exports, noting specifically that Brazil has “a particular interest in our intellectual property.” That issue has taken on renewed significance with the recent announcement that Antigua and Barbuda is planning to suspend concessions concerning U.S. copyrights, trademarks, patents, etc., in the first-ever cross-retaliation imposed in a WTO dispute, which could set a precedent for similar action by Brazil.

Report Identifies Needed Improvements in Radiation Scanning of Cargo Containers

The Department of Homeland Security’s Office of Inspector General released recently a report identifying several improvements needed in the utilization of radiation portal monitors to scan inbound cargo containers at U.S. seaports. U.S. Customs and Border Protection and the DHS’ Domestic Nuclear Detection Office, which each bear some responsibility for the RPM program, are currently working to implement the IG’s recommendations.

DNDO reports that there are currently 444 RPMs operating at seaports throughout the U.S., thus meeting the requirement under the Security and Accountability for Every Port Act of 2006 for all containers entering the U.S. at the 22 ports through which the greatest container volume enters the country by vessel to be screened for radiation. However, the report identifies the following issues that may be hindering the most efficient use of these machines.

- CBP does not consistently gather and review utilization information to ensure that it is fully utilizing all RPMs. CBP receives and reviews monthly utilization reports but there is no indication that these reports were used to determine how RPMs are utilized or affect deployment decisions. At seven ports the IG visited, 24 of 185 RPMs were used infrequently or not at all.

- CBP does not always monitor and promptly evaluate changes in the screening environment at seaports to relocate RPMs as necessary.

- DNDO and CBP do not accurately track and monitor their inventory of RPMs. This is a concern due to the machines’ average useful life expectancy of ten years and the lack of any plan to replace them.

The report recommends that CBP and DNDO identify a single program office responsible for fully coordinating and centrally managing the RPM program (for which the agencies say they will identify a completion date by next January), establish guidelines to track and report the utilization of RPMs at every seaport to ensure that minimally used equipment is reported and relocated promptly for more efficient utilization (which the agencies say will be done by May), and develop and document a formal collaborative process to ensure that RPM relocation is effectively planned and implemented to meet security needs at seaports (which will be done by September). 

Senators Criticize CBP for “Apathy” in AD Duty Collection Efforts

Sens. Ron Wyden, D-Ore., and John Thune, R-S.D., wrote to U.S. Customs and Border Protection Feb. 7 looking for further information on what they said was CBP’s “failure to collect massive amounts of duties” due under antidumping duty orders against honey, mushrooms, garlic and crawfish tail meat from China. The senators called a previous CBP response “deeply troubling and glaringly incomplete” and asked for a detailed plan for addressing this issue.

According to the letter, CBP’s own data show that the agency failed to collect almost $1 billion in AD duties assessed under the four orders from 2003 to 2011. The bulk of these duties are owed by importers who entered goods from exporters that were undergoing new shipper reviews before 2006, and most of the duties are secured by single entry bonds that have a face value of two to four times the total value of the covered imports. “In the wake of the importers’ massive and ongoing defaults,” the letter continues, the sureties that issued the bonds “have, with rare exception, refused to pay CBP despite their legal obligation to do so.” A federal court dismissed a case seeking to compel such payment, and CBP has filed “only a relatively small number” of collections lawsuits against the sureties.

The senators were sharply critical of what they termed CBP’s “apathy” in pursuing the missing AD duties, asserting that “the agency appears less and less interested” in performing its central mission of collecting revenue and enforcing U.S. trade laws. The amount of duties owed “could approach $500 million,” they said, a not insignificant sum “at a time when the nation faces unprecedented fiscal challenges.” It is also “disturbing,” the letter said, that CBP appears to have “given up” trying to collect these AD duties even as it “repeatedly and conspicuously claims that vigorous enforcement of the trade remedy laws is one of its highest priorities.”

The senators therefore reiterated their request for “a complete accounting of each single entry bond accepted and held by CBP as security specifically for the payment of AD duties on liquidated and unliquidated entries made during FY 2000 through FY 2007 and subject to one of the four orders” at issue. They also asked CBP for a detailed plan for collecting the AD duties due under the new shipper bonds, with timetables for accomplishing specific actions designed to achieve collection. 

Numerous Changes Proposed in USDA Regulations on Plants for Planting

The Department of Agriculture’s Animal and Plant Health Inspection Service is proposing to make a number of changes to its regulations on importing plants for planting (formerly known as nursery stock) to relieve restrictions that appear unnecessary, update existing provisions and make the regulations easier to understand and implement. Comments on this proposed rule are being accepted through April 15. Among the changes proposed are the following.

Disposal of Articles Refused Importation. If a regulated article is denied entry into the U.S. for noncompliance with the regulations the importer must destroy, ship to a point outside the U.S. or apply treatments or other safeguards to the article in the manner and within the time period prescribed by an inspector to prevent the introduction of quarantine pests. In choosing which actions to order and in setting the time limit for the actions the inspector must consider the degree of pest risk presented by the quarantine pest associated with the article, whether the article is a host of the pest, the types of other host materials for the pest in or near the port, the climate or season at the port in relation to the pest’s survival range, and the availability of treatment facilities for the article. This rule would specify that an inspector may also consider any other factors pertaining to the risk that the article may present to plants, plant parts or plant products within the U.S. that he or she considers necessary in order to choose an action and set a time limit.

Imports from Turkey. This rule would add Turkey to the list of countries from which the importation of restricted articles of Chrysanthemum spp., Leucanthemella serotina and Nipponanthemum nipponicum is prohibited due to the presence of chrysanthemum white rust.

Permits. APHIS is proposing to codify in its regulations the following longstanding practices.

- bulbs and dormant herbaceous perennials that have not been precleared by APHIS must be accompanied by a permit

- restricted articles that must be accompanied by a phytosanitary certificate of inspection containing an additional declaration that the articles are free of specified quarantine pests or have been produced in accordance with certain requirements must also be accompanied by a written permit

- permits are required for the importation of seed of herbaceous plants for planting that is coated, pelleted or embedded in a substrate that obscures visibility

Inspections. The proposed rule would clarify that all restricted articles must be presented for inspection by the importer and that the USDA inspector then determines whether to sample and inspect the articles.

Potato Cyst Nematodes. Restricted articles could be imported from countries in which potato cyst nematodes are known to occur if they are accompanied by a phytosanitary certificate with the current additional declaration or with an additional declaration that the articles have been grown within a secure environment in a production area that is free of PCN, in a soil-less growing medium, or in vitro, within a secure environment, and have not been grown in soil nor come in contact with soil.

The proposed rule would also update the list of countries in which PCN are known to exist to include Albania, the Falkland Islands, Indonesia, Libya, Liechtenstein, Medeira, Mallorca, Romania, Sierra Leone, Sri Lanka and Turkey, as well as all areas of Canada that are regulated by the national plant protection organization of Canada for PCN.

Imports from Canada. This rule would provide conditions for the importation of Prunus spp. articles from Canada that address the presence of plum pox potyvirus in that country.

Carnations. The importation of Dianthus spp. (carnations) from the Netherlands would be allowed under the same conditions provided for Great Britain.

Invoices and Packing Lists. An invoice or packing list would have to indicate the scientific names of the restricted articles, at least to the level of genus, and the quantity of plants for planting in the shipment. When the regulations place restrictions on individual species or cultivars within a genus, the invoice or packing list would also have to identify the species or cultivar of the articles.

AD/CV Notices: Carboxymethylcellulose, Pasta

Agency: International Trade Administration.
Commodity: Purified carboxymethylcellulose.
Country: Netherlands.
Nature of Notice: Final results of administrative review of antidumping duty order for the period July 1, 2010, through June 30, 2011.
Details: Weighted average dumping margin of 9.03% for producer Akzo Nobel Functional Chemicals B.V. Importer-specific AD duties based on this rate will be assessed on entries of subject merchandise made during the period of review, and AD cash deposits at this rate will be required for shipments of subject merchandise entered or withdrawn from warehouse for consumption on or after Feb. 12.

Agency: International Trade Commission.
Commodity: Pasta.
Country: Italy and Turkey.
Nature of Notice: Scheduling of full sunset reviews of antidumping and countervailing duty orders, which will result in either the continuation or revocation of those orders.
Details: Hearing scheduled for July 9, requests to appear at hearing due July 1, pre-hearing briefs due by June 27, post-hearing briefs due by July 18, final comments due by Aug. 12. 

New IPR Infringement Petition on Integrated Circuit Devices

The International Trade Commission received Feb. 8 on behalf of Tela Innovations Inc. a petition requesting that it institute a Section 337 investigation regarding certain integrated circuit devices and products containing the same. The proposed respondents are located in Taiwan, Korea, Finland and the U.S.

Section 337 investigations primarily involve claims regarding intellectual property rights violations by imported goods, including the infringement of patents, trademarks and copyrights. Other forms of unfair competition involving imported products, such as misappropriation of trade secrets or trade dress and false advertising, may also be asserted. The primary remedy available in Section 337 investigations is an exclusion order that directs U.S. Customs and Border Protection to stop infringing imports from entering the U.S. In addition, the ITC may issue cease and desist orders against named importers and other persons engaged in unfair acts that violate Section 337, including selling infringing imported articles out of U.S. inventory. 

ITC Terminates Longstanding Investigation of Ethanol Imports

The International Trade Commission has terminated investigation 332-288 relating to imports of fuel ethyl alcohol (ethanol) that benefited from duty-free treatment upon entry into the U.S. Under this investigation the ITC determined annually an amount (expressed in gallons) equal to 7% of the U.S. domestic market for ethanol during the 12-month period ending on the preceding Sept. 30. This determination was used to establish the base quantity of imports of ethanol produced in U.S. insular possessions and Caribbean Basin Initiative beneficiary countries with foreign feedstock that were subject to a tariff-rate quota. Ethanol imports entered under the TRQ benefitted from duty-free treatment in the U.S.

ITC sources explained that the TRQ was only effective as long as was the secondary duty on ethanol imposed under HTSUS 9901.00.50. When that provision expired Dec. 31, 2011, so did the TRQ. Sources noted that technically the secondary duty is merely inactive and could be reinstated at some point but that this appears to be unlikely. Sources added that the TRQ was never filled and opined that it had little effect on ethanol import volumes. 

Foreign Regulatory Changes Could Affect Exports of Phones, Foods

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 – radio standards specifications for cellular telephone systems and personal communications services (comments due by May 26)

Kuwait – draft technical regulations for (a) hot sauce and (b) nutritional and health claims on foodstuffs (comments due by April 7)

Saudi Arabia – draft technical regulation for nutritional and health claims on foodstuffs (comments due by April 7)

United Arab Emirates – draft technical regulations on fried potatoes, black tea, plastic packaging, chilled marinated meats, frozen dough and instant pudding powder (comments due by April 7) 

New FTZ Subzone at Puerto Rico Medical Device Facility

The Foreign-Trade Zones Board has approved subzone status (subzone 163A) for the Zimmer Manufacturing BV facility in Ponce, Puerto Rico, which is used for the production, warehousing and distribution of orthopedic implants for knee and hip reconstruction as well as trauma devices. 

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