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March 22 2013 Issue

Friday, March 22, 2013
Sandler, Travis & Rosenberg Trade Report

U.S.-EU FTA Talks Could Start in June

Acting U.S. Trade Representative Demetrios Marantis formally notified Congress March 20 of the Obama administration’s intent to launch negotiations on a comprehensive trade and investment agreement with the European Union, which it is calling the Transatlantic Trade and Investment Partnership. Talks will begin no earlier than June 20.

According to Marantis’ letter, the plan to launch the TTIP negotiations “reflects the broadly shared conviction that transatlantic trade and investment,” which are already at significant levels, “can be an even stronger driver of mutual job creation, economic growth and competitiveness.” To achieve that goal, however, the TTIP “would need to break new ground to create additional bilateral market openings and establish new trade rules that are globally relevant.” In that context the letter outlines specific negotiating objectives in the areas of goods, services, e-commerce, investment, customs, government procurement, labor, environment, intellectual property rights and other issues, including the following.

- elimination of all tariffs and other duties and charges on trade in agricultural, industrial and consumer products, with substantial duty elimination on entry into force of an agreement, transition periods where necessary for sensitive products, and safeguard mechanisms to be applied if and where necessary

- fully reciprocal access to the EU market for U.S. textile and apparel products, supported by effective and efficient customs cooperation and other rules to facilitate bilateral trade in this sector

- elimination or reduction of non-tariff barriers such as sanitary and phytosanitary restrictions that are not based on science, unjustified technical barriers to trade, restrictive administration of tariff-rate quotas, and permit and licensing barriers

- greater compatibility of U.S. and EU regulations and related standards development processes, including by promoting transparency in the development and implementation of regulations and good regulatory practices, establishing mechanisms for future progress, and pursuing regulatory cooperation initiatives where appropriate

- improved market access for services on a comprehensive basis, including by addressing the operation of any designated monopolies and state-owned enterprises

- provisions that facilitate the movement of cross-border data flows

- disciplines to ensure the transparent, efficient and predictable conduct of customs operations and ensure that customs measures are not applied in a manner that creates unwarranted procedural obstacles to trade

• appropriate commitments that reflect the shared objective of high-level IPR protection and enforcement

- new opportunities to advance and defend the interests of U.S. creators, innovators, businesses, farmers and workers with respect to strong protection and effective enforcement of IPR, including their ability to compete in foreign markets

- the establishment of appropriate, globally relevant disciplines on state trading enterprises, state-owned enterprises and designated monopolies, such as disciplines that promote transparency and reduce trade distortions 

Unauthorized Uses of Exported Defense Articles Declined in FY 2012, Report Says

The State Department’s Directorate of Defense Trade Controls has posted to its Web site a report outlining the fiscal year 2012 performance of its “Blue Lantern” end-use monitoring program for defense exports. The report reveals that in FY 2012 about 20% of all Blue Lantern cases closed were unfavorable (compared to 27% in FY 2011 and 21% in FY 2010), indicating that the findings of fact were not consistent with the information in the authorization request.

The Blue Lantern program monitors the end-use of commercially exported defense articles, defense services and brokering activities subject to licensing or other authorizations under section 38 of the Arms Export Control Act and the International Traffic in Arms Regulations. Blue Lantern monitoring entails pre-license, post-license or post-shipment checks undertaken to verify the bona fides of proposed foreign consignees and end-users to confirm the legitimacy of proposed transactions and to provide reasonable assurance that (a) the recipient is complying with U.S. government requirements with respect to use, transfers and security of defense articles and defense services and (b) such articles and services are being used for the purposes for which they are provided.

According to the report, in FY 2012 the Blue Lantern program initiated 820 checks in 103 countries, up from 783 checks in 88 countries the year before. East Asia accounted for the largest share of these initiations at 34%, followed by Europe at 24%, the Americas at 16%, the Near East at 12%, Africa at 6% and South Central Asia at 5%.

Of the 706 Blue Lantern cases closed in FY 2012 (down from 592 in FY 2011), 144 (20%) were determined to be unfavorable. Unfavorable cases may result in the rejection, denial or revocation of a license application, removal of a party, update of the Office of Defense Trade Controls Compliance Watch List, or referral to the Enforcement Division for appropriate action. The report provides the following statistics regarding such actions in FY 2012.

- DTCC denied 13 authorization requests and returned 20 without action as a result of pre-license checks. DTCC also revoked five authorizations as a result of checks conducted after export authorizations were approved.

- Unfavorable Blue Lanterns referred to END resulted in nine directed disclosure cases involving potential civil violations of the ITAR (down from 19 in FY 2011) and nine referred to federal law enforcement, of which six assisted ongoing criminal investigations, one resulted in the reopening of an investigation and one resulted in an outreach visit to the exporter.

- Europe and South Central Asia had the highest rate of unfavorable checks at about 27%. Europe typically has the lowest unfavorable rate and this year’s findings are primarily due to 30 unfavorable checks involving a single entity that failed to sufficiently cooperate with DTCC’s inquiries and also revealed stockpiling concerns. The lowest unfavorable rate was in the Near East, which previously held the highest.

- The primary commodities involved in unfavorable checks included aircraft parts and military electronics in East Asia and firearms/ammunition/armor in the Americas.

- Omitting the 30 checks referred to above, the leading causes of unfavorable results were “derogatory information/foreign party deemed unreliable recipient” (41 cases, down from 76), “unable to confirm order or receipt of goods by end-user” (31 cases, down from 43), “foreign party involved in transaction but not listed on license/application” (28 cases, down from 30), and “indications of diversion or unauthorized retransfer or reexport” (11 cases, down from 34). 

Dates and Deadlines: Food Facilities, GSP, Classification, Drawback, Rules of Origin

Following are highlights of regulatory effective dates and deadlines and federal agency meetings coming up in the next week.

March 25 – deadline for comments on FDA registration form used by foreign and domestic food facilities

March 26 – meeting of BIS Materials Processing Equipment Technical Advisory Committee

March 27 – STTAS webinar on duty drawback

March 28 – ST&R webinar on textiles and apparel rules of origin

March 28 – USTR hearing on recent developments pertinent to GSP country practice reviews regarding worker rights and/or child labor in Bangladesh, Georgia, Niger, the Philippines and Uzbekistan and IPR protection in Russia and Uzbekistan

March 29 – deadline for comments on proposed modification or revocation of classification rulings

Growth in Annual Surface Trade with Canada and Mexico Slowed in 2012

Annual surface transportation trade between the U.S. and its NAFTA partners Canada and Mexico totaled $960 billion in 2012, the Bureau of Transportation Statistics reports. This figure was the highest recorded since NAFTA took effect in 1994 and represented a 6.2% increase over the previous year, compared to a 14.3% jump from 2010 to 2011. U.S. imports from Canada and Mexico via truck, rail and pipeline were up 5.6% while exports rose 6.9%.

The BTS notes that surface trade with Mexico has rebounded faster from the recent economic recession than surface trade with Canada. The value of U.S.-Mexico surface trade declined 14.4% in 2009 but then increased by 61.0% over the next three years to reach a level in 2012 that was 37.8% higher than in 2008. The value of U.S.-Canada surface trade declined 28.1% in 2009 and then increased by 44.2% over the next three years to reach a level in 2012 that was only 3.6% higher than in 2008. As a result, the share of U.S.-Mexico trade in North American surface freight trade rose from 35.3% in 2008 to 42.1% in 2012.

U.S. surface transportation trade with Canada totaled $556.2 billion in 2012, up 3.6% from 2011. Imports rose 2.7% to $290.1 billion and exports advanced 4.6% to $266.1 billion. The value of goods transported by rail had the largest year-to-year increase, with a 7.4% gain in imports and an 11.8% rise in exports. Truck imports and exports were up 2.5% and 3.8%, respectively, but pipeline imports and exports fell 4.3% and 2.3%. The top commodity category transported between the U.S. and Canada via surface modes was vehicles and vehicle parts, which accounted for $107.4 billion in trade (up from $96.1 billion a year before) and was roughly split between exports and imports.

Total surface transportation trade between the U.S. and Mexico climbed 10% in 2012 to $403.9 billion. Exports rose 10.6% to $180.3 billion while imports gained 9.6% to $223.6 billion. Here also the value of goods transported by rail had the highest year-to-year increase, with gains of 14.3% in imports and 11.1% in exports. Truck exports were not far behind with a 10.3% increase, followed by imports with an 8.9% increase. The value of U.S.-Mexico pipeline trade declined, including 23.8% in imports and 2.1% in exports. The top commodity transported between the two countries via surface modes was electrical machinery at $85.7 billion (up from $80.5 billion in 2011). 

Court Rules on Classification of Imported Beef Jerky

The Court of International Trade ruled March 20 that certain beef jerky products are properly classified as cured beef under HTSUS 1602.50.09 (4.5% duty). The plaintiff had argued for classification as other prepared or preserved beef under HTSUS 1602.50.2040 (1.4% duty).

The plaintiff acknowledged that the jerky undergoes a curing process in its initial stages of production but said the jerky is more than simply cured beef and that the further processing that gives the product its unique identity (e.g., dehydrated, shelf-stable) should not be ignored. The court responded that while the plaintiff made “strong arguments” they are not sufficient to overcome “the otherwise simple and straightforward HTSUS classification for ‘cured’ beef,” which encompasses all sorts of beef products and does not draw distinctions based on other processing. 

AD/CV Notices: Pipe, Innerspring Units, Polyester Fiber, Steel Sheet

Agency: International Trade Administration.
Commodity: Circular welded non-alloy steel pipe.
Country: Mexico.
Nature of Notice: Amended final results of administrative review of antidumping duty order for the period Nov. 1, 2007, through Oct. 31, 2008, pursuant to settlement agreement.
Details: The ITA will order liquidation of the unliquidated entries of subject merchandise produced and/or exported by Mueller Comercial de Mexico and entered or withdrawn from warehouse for consumption during the period of review at the rate of 40.475%.

Agency: International Trade Administration.
Commodity: Uncovered innerspring units.
Country: China.
Nature of Notice: Final results of administrative review of antidumping duty order for the period Feb. 1, 2011, through Jan. 31, 2012.
Details: Weighted average dumping margin of 234.51% for Tai Wa Hong Group. AD duties based on this rate will be assessed on entries of subject merchandise 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 on or after March 22.

Agency: International Trade Administration.
Commodity: Polyester staple fiber.
Country: Taiwan.
Nature of Notice: Preliminary results of administrative review of antidumping duty order for the period May 1, 2011, through April 30, 2012.
Details: Weighted average dumping margins of zero for Far Eastern New Century Corporation, which did not sell subject merchandise at less than normal value, and Nan Ya Plastics Corporation, which had no shipments of subject merchandise during the period of review.

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

Piece Dyed Three-thread Fleece Fabric Added to DR-CAFTA Short Supply List

The Committee for the Implementation of Textile Agreements has determined to add to the short supply list in Annex 3.25 of DR-CAFTA in unrestricted quantities a certain piece dyed three-thread fleece fabric, classified under HTSUS 6001.21. CITA found that this fabric, which will be used in the production of children’s playwear, is not available in commercial quantities in a timely manner from a supplier in the DR-CAFTA countries.

Unlicensed Export to Company on BIS Entity List Yields Training Requirement

The Bureau of Industry and Security has issued an order directing one of the owners of an Illinois freight forwarder charged with violating the Export Administration Regulations to complete an export control compliance training course or program on the EAR within six months. The company was charged with arranging the export of a 125 kilowatt generator (an item subject to the EAR and designated as EAR99) to an entity in Pakistan listed on the BIS Entity List.

The BIS order also suspends the company’s export privileges for four years but then suspends that provision provided the training course or program is completed and the company commits no other violation of the EAR or any order, license or authorization issued thereunder during that time. 

FTZ Board Receives Requests for Pennsylvania Subzone, New Authority at N.C. Facility

The Foreign-Trade Zones Board is accepting through April 1 comments on the following.

- an application from the Philadelphia Regional Port Authority, grantee of FTZ 35, requesting special-purpose subzone status for the facilities of Teva Pharmaceuticals USA Inc. in North Wales, Chalfont, Kutztown and Sellersville, Pa. (no authorization for production activity has been requested at this time)

- a notification from the Triangle J Council of Governments, grantee of FTZ 93, of proposed production activity at the Southern Lithoplate Inc. facility in Youngsville, N.C., which is used for the production of aluminum offset printing plates for the printing industry 

Foreign Regulatory Changes Could Affect Exports of Foods, Car Seats, Footwear, Electronics

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.

Brazil – orange juice and grape juice

Canada – proposed reduction in variety registration requirements for oilseed soybean and forage varieties (comments due by May 22)

Chile – draft amendment to decree on seats for children under four years of age traveling in the rear of light vehicles (comments due by May 13)

Colombia – Aug. 27 effective date of resolution on imperfect, used, repaired, remanufactured, reconditioned or discontinued products

Colombia – Aug. 9, 2016, effective date of sanitary requirements for (a) meat and edible meat products of bovine, bubaline and porcine animals and (b) meat and edible meat products of poultry

Indonesia – draft regulation on mandatory enforcement of Indonesian national standard for white crystal sugar (comments due by May 20)

New Zealand – April 1 publication of more stringent minimum energy performance standards for televisions, air conditioners and heat pumps

New Zealand – Oct. 1 introduction of new minimum energy performance requirements for computers and computer monitors

Nicaragua – labeling requirements for new footwear and parts thereof when sold separately (comments due by May 8)

Panama – standards on cereals, pulses and derived products (comments due by March 25)

Paraguay – draft technical regulations on carrots and bell peppers (comments due by April 12)

Uganda – final draft standard on production, storage, packaging and transportation of fresh cassava (comments due by May 19)

United Arab Emirates – draft technical regulations on tires and domestic refrigerating appliances (comments due by May 20) 

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