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February 14 2013 Issue

Thursday, February 14, 2013
Sandler, Travis & Rosenberg Trade Report

Obama Gives Green Light to U.S.-European Union FTA

In his Feb. 12 State of the Union address President Obama announced plans to launch negotiations on a Transatlantic Trade and Investment Partnership with the European Union. A joint statement with EU leaders said that based on recommendations from the High Level Working Group on Jobs and Growth the two sides will each initiate the internal procedures necessary to begin these talks.

Working Group Report. The Working Group’s final report concluded that a comprehensive trade and investment agreement would provide the most significant mutual benefit of the options it considered. The report said such an agreement should aim to achieve ambitious outcomes in the areas of market access, regulatory issues and non-tariff barriers, and rules, principles and new modes of cooperation.

Regulation. Frequently cited as the most challenging issue involved in the pending negotiations is regulation, where some observers believe the two sides may not be able to reach sufficient compromise due to fundamental philosophical differences. However, the report points out that “a significant portion of the benefit of a potential transatlantic agreement turns on the ability of the United States and EU to pursue new and innovative approaches to reduce the adverse impact on trade and investment of non-tariff barriers, with the aim of moving progressively toward a more integrated transatlantic marketplace.” Toward this end the Working Group recommends that during negotiations the two sides:

- explore new means of addressing NTBs;

- seek to make early and continuing progress on sanitary and phytosanitary measures affecting bilateral trade;

- seek to strengthen upstream cooperation by regulators and increase cooperation on standards-related issues;

- establish disciplines on regulatory coherence and transparency that include early consultations on significant regulations and periodic review of existing regulatory measures;

- consider approaches relating to regulatory harmonization, equivalence or mutual recognition in specific, mutually agreed goods and services sectors;

- establish a framework for identifying opportunities for and guiding future regulatory cooperation, including provisions that provide an institutional basis for future progress; and

- meet periodically at senior levels to review progress made on the above elements with the aim of ensuring that the horizontal and sectoral elements of the negotiations proceed expeditiously and in parallel and that the two sides are able to achieve ambitious outcomes by the end of the negotiations.

Global Standards. The report also highlights the potential for an U.S.-EU agreement to strengthen the rules-based multilateral trading system by setting de facto global standards on a number of increasingly important issues, including customs and trade facilitation, competition policy, state-owned enterprises, localization barriers to trade (i.e., measures designed to protect, favor or stimulate domestic industries, service providers or intellectual property at the expense of imports), raw materials and energy, small and medium-sized enterprises, and transparency. This point was also made by European Commission President Jose Manuel Barroso and House Ways and Means Committee Ranking Member Sander Levin, D-Mich.

U.S. Concerns. The final Working Group report was delayed approximately six weeks due to what many observers characterized as the Obama administration’s hesitance to proceed without a fair amount of confidence that negotiations would yield a resolution of what have proven to be some of the most intractable trade irritants between the world’s two largest economies. Those problems have short-circuited trade liberalization efforts at both the bilateral and multilateral levels for years. No U.S. official indicated following the FTA announcement whether sufficient assurances had been received, but Barroso emphasized on Feb. 13 that the decision “provides an assurance that ‘we mean business’” and demonstrates a willingness to “go the extra mile.”

In a Feb. 12 letter Senate Finance Committee Chair Max Baucus, D-Mont., and Ranking Member Orrin Hatch, R-Utah, said that “broad bipartisan congressional support” for an FTA depends on outcomes including “increased agricultural market access and firm [EU] commitments to base sanitary and phytosanitary measures on sound science.” They added that a successful agreement will have to “promote the highest standards of intellectual property protection,” although the report appeared to downplay prospects for progress on this issue by recommending only that the two sides “explore opportunities to address a limited number of significant IPR issues of interest to either side.” The two senators also warned against weakening U.S. regulatory protections through any regulatory harmonization efforts.

Timing. The president is likely to send a formal notification of intent to negotiate to Congress within the next several weeks. Talks could then begin as soon as 90 days thereafter, although the U.S. has yet to name a replacement for U.S. Trade Representative Ron Kirk and the EU must still obtain a negotiating mandate from its member states.

How long the talks will take once they begin is unclear. Administration officials have said they would like to wrap up an agreement “on one tank of gas,” and Trade Commissioner Karel de Gucht said Feb. 13 that the EU would “like to complete this work in about two years from now.” It is worth noting, however, that the ongoing Trans-Pacific Partnership negotiations will soon begin their fourth year and have yet to make much progress on the most politically sensitive issues. 

CBP Sees Increase in Imports, AD/CV Duties, Use of Trusted Trade Programs in FY 2012

U.S. Customs and Border Protection has issued a report on import trade trends for fiscal year 2012. Among other things this report includes the following statistics on import value, revenue, source countries, entry summaries, consignees, compliance rates and trade partnership programs for the period Oct. 1, 2011, through Sept. 30, 2012.

- records were set in total import value at $2.38 trillion (up 5% from FY 2011) and total revenue collected at $39.4 billion (up 6%)

- 53% of total import value was imported from China ($418 billion), Canada ($320 billion), Mexico ($275 billion), Japan ($145 billion) and Germany ($105 billion)

- total duty collections also hit a record at $31.2 billion (up 4.7%) but estimated duty undercollections jumped 41.5% to $484 million

- $20 billion in duties were paid on imports from the top five duty-paying source countries (China, Japan, Germany, Vietnam and Indonesia), up from $19 billion

- antidumping duty deposits jumped 12.8% to $371 million and countervailing duty deposits soared 160% to $69 million

- the percentages of imports that were of dutiable value (31%), conditionally free value (21%) and duty-free value (47%) were virtually unchanged from FY 2011 and have varied only slightly over the past five years

- a total of 30.4 million entry summaries were filed (up 3.1%), the paperless entry summary rate rose to 92.6% and has increased 4.4% since FY 2008, and the paperless cargo rate was unchanged at 57.8%

- approximately 2.2 million entry summaries were filed in the Automated Commercial Environment, compared to about 400,000 in FY 2011, and 7.3% of all entry summaries are now filed in ACE

- the Center of Excellence and Expertise for pharmaceuticals, health and chemicals processed 46,688 entries and 660,000 entry lines worth $18.8 billion, while the CEE for electronics processed 9,189 entries and 1.53 million entry lines worth $52.2 billion

- there were 3.4 million entry summaries filed by Importer Self-Assessment participants (11.3% of the total), up 9.7%, covering $571 billion in import value (24% of the total), up 8.1%

- there were 7.2 million entry summaries filed by Customs-Trade Partnership Against Terrorism members (24% of the total), the same as in FY 2011, covering $728 billion in import value (31% of the total), up 2.5%

- the total number of consignees was up 2.6% to 747,664

- the major transactional discrepancy trade compliance measurement rate was 96.5%, down slightly from FY 2011 

Inspections of Meat, Poultry and Egg Products Could be Suspended Beginning March 1

Dozens of trade associations wrote to Agriculture Secretary Tom Vilsack Feb. 11 to express concern about a plan the USDA is reportedly considering that would result in furloughing all the Food Safety and Inspection Service’s meat, poultry and egg products inspectors for 15 days beginning March 1. This plan is associated with so-called sequestration, a series of mandatory federal spending reductions that could take effect that day.

The letter asserted that because federal establishments may not produce meat, poultry or egg products without federal inspection, furloughing inspectors would effectively close these facilities for more than two weeks. Such a move would impose a “significant hardship” on those employed at these facilities as well as farmers and ranchers that “would have nowhere to send their animals.” In addition, the letter said, “the robust U.S. export trade in meat, poultry and egg products would all but dry up, and imports would be halted at the border.” The end result could include the “first widespread shortage of meat, poultry and egg products in generations.”

The trade groups pointed out that even during previous federal government shutdowns FSIS inspectors were among the essential employees who stayed on the job because of their role in protecting food safety. The groups therefore pressed USDA to “examine all options available to meet its obligations under sequestration while upholding its commitment to ensuring that American consumers have access to the safe, wholesome, and nutritious protein sources they have come to expect from the nation’s meat, poultry, and egg products industries.” 

Potential IPR Probe of Integrated Circuit Devices Evaluated for Public Interest Issues

The International Trade Commission is requesting comments no later than Feb. 22 on any public interest issues raised by a Section 337 intellectual property rights infringement complaint filed on behalf of Tela Innovations Inc. against certain integrated circuit devices and products containing the same. Comments should address whether the issuance of exclusion orders and/or cease and desist orders pursuant to this complaint would affect the public health and welfare in the U.S., competitive conditions in the U.S. economy, the production of like or directly competitive articles in the U.S., or U.S. consumers. In particular, the ITC is interested in comments that:

- explain how the articles potentially subject to the orders are used in the U.S.;

- identify any public health, safety or welfare concerns in the U.S. relating to the potential orders;

- identify like or directly competitive articles that the complainant, its licensees or third parties make in the U.S. that could replace the subject articles if they were to be excluded;

- indicate whether the complainant, the complainant’s licensees and/or third-party suppliers have the capacity to replace the volume of articles potentially subject to the requested orders within a commercially reasonable time; and

- explain how the requested orders would impact U.S. consumers. 

No Changes to International Boycott Country List

The Treasury Department has published its semiannual list of countries that require or may require participation in, or cooperation with, an international boycott. No changes are being made to this list, which comprises Iraq, Kuwait, Lebanon, Libya, Qatar, Saudi Arabia, Syria, the United Arab Emirates and Yemen.

AD/CV Notice: Stainless Steel from Mexico

Agency: International Trade Administration.
Commodity: Stainless steel sheet and strip in coils.
Country: Mexico.
Nature of Notice: Dismissal of NAFTA binational panel review of final antidumping duty determination. 

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