Print PDF

November 27 2012 Issue

Tuesday, November 27, 2012
Sandler, Travis & Rosenberg Trade Report

Proposed Changes Aim to Clarify Commerce Control List

The Bureau of Industry and Security is inviting comments through Jan. 28, 2013, on a proposed rule that would implement numerous changes designed to make the Commerce Control List clearer. BIS notes that while this rule would only implement changes that can be made without requiring changes to multilateral export control regime guidelines or lists, it has also identified changes that would require a decision of a multilateral regime to implement and is developing some of those into proposals for consideration by regime members.

According to BIS, the proposed changes include the following.

Existing Controls. BIS is proposing a number of clarifications to existing CCL controls, including by providing clearer definitions of the terms “parts” and “components” and adding or revising “related controls” paragraphs. Most of these changes would amend the CCL without changing the scope of the controls and serve only to provide additional regulatory guidance to those classifying items subject to the Export Administration Regulations. However, the proposal would remove Export Control Classification Number 8A918 and add certain marine boilers to ECCN 8A992, where they would be controlled for AT and UN reasons.

Multilateral Regimes. Several changes would conform the CCL to the multilateral export control regime control lists and previous amendments to the EAR. These include adopting a standardized list of 36 countries for which the use of license exception TSR is limited with respect to nine specified ECCNs.

Structural Changes. The proposed rule includes various structural changes to improve the clarity of the CCL. For example, the license exceptions section heading would be revised to add greater specificity, the license exception STA paragraph in the license exceptions section of 49 ECCNs would be removed, and a new section heading called “Reporting Requirements” would be added to certain ECCNs.

Removal of ECCNs. This rule would remove 14 ECCNs subject to the exclusive export licensing authority of the Nuclear Regulatory Commission. 

Court Says CBP Wrong to Liquidate Entry Contrary to Prior Ruling

The Court of International Trade ruled Nov. 20 in International Custom Products Inc. v. U.S. that U.S. Customs and Border Protection acted contrary to law in liquidating an entry of white sauce under a tariff provision with a duty rate 2400% higher than that claimed by the plaintiff.

According to the court, the white sauce at issue conformed to a binding ruling issued by CBP in January 1999 because it contained the ingredients specified in that ruling. The court also found that this ruling was properly obtained. CBP argued that its ruling was void from the start because the plaintiff made material misrepresentations and omissions when it applied for the ruling in an effort to sneak large amounts of milk fat into the U.S. without paying the properly applicable duties or being subject to the applicable quotas. However, the CIT found that the plaintiff adequately informed CBP of the typical uses of white sauce, the common, commercial and technical designations for white sauce, and the purpose of the ingredients in white sauce when it applied for the ruling.

The court states that the Notice of Action CBP issued to the plaintiff reclassifying the white sauce was an interpretive ruling or decision that effectively revoked a previous ruling contrary to law. Further, CBP violated its own regulation at 19 CFR 177.2(b)(2) by not applying the previous ruling to the entry at issue despite its conformance with that ruling. The court is therefore ordering CBP to reliquidate that entry at the lower duty rate established in that ruling and to refund any overpayment of duties with interest. However, this decision provides no relief with respect to ten other entries of white sauce that were also subject to the higher duty rate but were not explicitly challenged in this case. 

Import Inspection Regulations for Meat, Poultry and Eggs Proposed for Amendment

The Department of Agriculture’s Food Safety and Inspection Service is proposing to make several amendments to its meat, poultry and egg products import regulations. Comments on this proposal may be submitted through Jan. 28, 2013.

Import Paperwork. FSIS is proposing the following revisions to, among other things, provide for the Public Health Information System Import Component, which replaced the Automated Import Inspection System and integrated and automated its paper-based business processes into one comprehensive and automated data-driven import inspection system.

- Foreign Establishment Certification: A foreign government official must determine and certify the foreign establishments that are eligible to export their products into the U.S. This rule would amend the meat and poultry (but not egg) import inspection regulations to provide concise regulatory language, delete the prescriptive narrative statement on the certificate, and require the type of operations conducted at the foreign establishment and its eligibility status to be included on the certificate. FSIS is also proposing to provide for the electronic transmittal of foreign establishment certifications.

- Imported Product Foreign Inspection Certificates: A foreign inspection certificate is required for every shipment of meat, poultry and egg products imported into the U.S. To clarify and simplify this requirement, FSIS is proposing to:

• require the same information for meat, poultry and egg products;

• delete the prescriptive narrative and format requirements for meat and poultry certificates;

• delete the requirement that the meat certificates bear the official seal of the government agency responsible for the inspection of the product, be in the language of the foreign country of origin and identify the foreign city;

• require the identity and address of the consignee, consignor, exporter and importer for meat, poultry and egg product inspection certificates;

• require the source country and foreign establishment number for the source material when it originates from a country other than the exporting country;

• require the product’s description, including the process category, product category and product group;

• provide for the electronic transmittal of foreign inspection certifications; and

• allow itself to specifically request any additional information necessary to determine whether the product is eligible to be imported into the U.S.

- Import Inspection Application: FSIS is proposing to (a) require applicants to submit this form to import inspection personnel for the inspection of any product offered for entry into the U.S. and (b) provide the option of submitting the form electronically or on paper.

- Prior Notification of Imported Product: FSIS requires importers to provide notice as far in advance as possible before the anticipated arrival of each consignment. FSIS will continue to require such notification but is proposing to clarify that applicants must submit electronic or paper import inspection applications in advance of the shipment’s arrival but no later than when the entry is filed with U.S. Customs and Border Protection.

Canadian Product. FSIS is proposing to delete from its regulations the streamlined import inspection procedures for Canadian product, which were suspended in 1992 after the General Accounting Office raised concerns about their effects. Under these procedures Canadian officials contacted FSIS import offices directly for reinspection assignments. If the shipment was not designated for reinspection it could proceed to the consignee for further distribution. If it was designated for reinspection Canadian officials selected the samples and identify and placed them in the vehicle for easy removal and reinspection by an FSIS import inspector.

Sanitation SOPs. This rule would require official import inspection establishments to develop, implement and maintain written sanitation standard operating procedures in order to receive a grant of inspection. For currently operating establishments this requirement would have to be met within 60 days of the publication of a final rule. FSIS is also proposing to amend the poultry products regulations to parallel the meat import regulations and require that all imported poultry products be inspected only at an official establishment or at an official import inspection establishment approved by FSIS. A sanitation SOP requirement for egg products is included in a separate proposed rule currently under development.

Reinspection. When an official foreign inspection certificate is lost in transit or contains errors, importers may request that the foreign country replace the certificate. The foreign country can guarantee the replacement within 30 days of the request, and when FSIS receives such a guarantee it proceeds with reinspection and permits accepted imported product to enter U.S. commerce. FSIS intends to discontinue this practice and to only reinspect imported product upon the receipt of the foreign inspection certificate.

FSIS is also clarifying its policy of addressing imported product that is not presented for reinspection, which may enter commerce to be further processed into other products or offered for sale to the consumer. FSIS states that when a shipment has been identified as FTP (failure to present) it will request, through CBP, a re-delivery and appropriate penalties. If FSIS finds FTP product in distribution channels it will control the product (e.g., retain or detain it) or request a recall. If FSIS finds FTP product in an official establishment that is being used in further processed product it will condemn the FTP product and any further processed product that contains it. The FTP product that is contained intact in the original cartons from the foreign country can return to an official import inspection establishment, where FSIS import inspection personnel will stamp the product as “refused entry.” 

No NAFTA Eligibility for Plasma TVs and Video Monitors, Court Rules

The Court of International Trade ruled Nov. 21 in Samsung International Inc. v. U.S. that certain plasma televisions and video monitors imported from Mexico are ineligible for duty-free treatment under NAFTA. The court states that this case turns on the classification of the plasma display panel module manufactured in Korea. Once in Mexico, these modules are combined with a main board manufactured in Mexico as well as front and rear covers, cables, and various connectors, fasteners and other parts to produce the finished goods.

U.S. Customs and Border Protection ruled that these modules are flat panel screen assemblies classifiable under HTSUS 8529.90.53. Because the NAFTA rules of origin prohibit a tariff shift from an FPSA originating from a non-NAFTA country to a video monitor or TV reception apparatus, CBP concluded that the goods at issue were not entitled to duty-free treatment and denied Samsung’s request for NAFTA post-importation duty refunds. Samsung asserted that the modules are properly classified as other parts of television receivers under HTSUS 8529.90.89.

Under a definition agreed by both sides, FPSAs must consist of at least drive electronics, control electronics and a display device. The CIT ruled that the logic boards in Samsung’s FPSAs are control electronics because they execute a control function over the drivers by receiving a signal from the main board, processing it and then using the instructions and timing information contained in the signals to know when and where to send the appropriate signals to the drivers. The CIT thus concluded that the plasma display panel modules are classified as FPSAs and that the TVs and monitors that contain them are therefore not NAFTA-originating goods and not entitled to NAFTA preferential treatment.

Military Electronic Equipment Proposed for Transfer to Commerce Control List

As part of President Obama’s Export Control Reform Initiative the Bureau of Industry and Security has issued a proposed rule making the following changes concerning controls on exports of military electronic equipment.

- military electronic equipment and related items that the president determines no longer warrant control under U.S. Munitions List Category XI would be controlled on the Commerce Control List under new Export Control Classification Numbers 3A611, 3B611, 3D611 and 3E611

- cryogenic and superconducting equipment for military vehicles and related items covered by Category ML20 Munitions List of the Wasenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies, which are currently controlled as non-specific parts, components, accessories of and attachments to items controlled under USML Categories VI, VII, VIII and XV, would be controlled under new ECCNS 9A620, 9B620, 9D620 and 9E620

- ECCNs 7A001 and 7A101 would be amended to apply the missile technology reason for control only to items in those ECCNs that are on the Missile Technology Control Regime Annex

BIS states that military electronic equipment, certain cryogenic and superconducting equipment, and parts, components, and test, inspection and production equipment therefor currently on the USML that this rule would place on the CCL would become eligible for several license exceptions, including STA, which would be available for exports to certain government agencies of NATO and other multi-regime close allies. BIS notes that the exchange of information and statements required under STA is substantially less burdensome than are the license application requirements currently required under the International Traffic in Arms Regulations. Further, this proposed rule would not move any items currently on the CCL to a 600 series ECCN and would therefore not narrow the scope of license exception eligibility for any items currently on the CCL.

Concurrently, the State Department’s Directorate of Defense Trade Controls has issued a proposed rule ( that would revise USML category XI to describe more precisely those types of such articles that warrant continuing control on the USML.

Comments on both proposed rules are due no later than Jan. 28, 2013. 

Korea Could Export Poultry Products to U.S. Under USDA Proposal

The Department of Agriculture’s Food Safety and Inspection Service is proposing to add South Korea to the list of countries eligible to export poultry products to the United States. Under this proposal slaughtered poultry or parts or other products thereof processed in certified Korean establishments would be eligible for export to the United States. All such products would be subject to reinspection at U.S. ports of entry by FSIS inspectors.

The government of Korea has stated that if this proposal is finalized it intends to export two types of ginseng chicken stew products to the U.S. However, under a final rule Korea would be able to export any poultry product, not just these two, to the U.S.

FSIS notes that under a final rule the government of Korea would have to certify those establishments that wish to export poultry products to the U.S. and that operate in accordance with requirements equivalent to those of the U.S. FSIS would verify that the certified establishments are meeting U.S. requirements through verification audits of Korea’s poultry inspection system.

Comments on this proposal are due no later than Jan. 28, 2013. 

Foreign Regulatory Changes Could Affect Exports of Cosmetics, Foods, Gas Meters

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.

Argentina – incorporation into domestic legislation of Mercosur technical regulation on substances prohibited from personal hygiene products, cosmetics and perfumes

Colombia – Nov. 2 issuance of technical regulation on edible meat products and byproducts

Ecuador – draft technical regulation on transportation, storage and handling of hazardous materials (comments due by Feb. 11, 2013)

Guatemala – technical regulations establishing correct use of dairy terms and establishing general requirements for milk (comments due by Jan. 20, 2013)

Paraguay – incorporation into domestic legislation of technical regulations on establishing the identity and quality of potatoes and onions

Peru – draft metrology standard on gas meters (comments due by Jan. 10, 2013) 

To get news like this in your inbox daily, subscribe to the Sandler, Travis & Rosenberg Trade Report.

Customs & International Headlines