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December 17 2012 Issue

Monday, December 17, 2012
Sandler, Travis & Rosenberg Trade Report

Legislative Update: Russia PNTR Enacted, MTB in the Works, Customs Bills Introduced

As the legislative year winds down some trade bills, like permanent normal trade relations status for Russia and a miscellaneous trade bill, are moving forward while others, including a customs reauthorization measure, are being lined up for potential action in 2013.

Russia PNTR. President Obama signed Dec. 14 legislation that will allow him to repeal the Jackson-Vanik Amendment with respect to Russia and extend permanent normal trade relations status to that country, which will enable U.S. businesses to take advantage of the trade liberalization measures associated with Russia’s accession to the World Trade Organization. The president must now issue a proclamation to actually put those changes into effect. The House approved the bill Nov. 16 and the Senate followed suit Dec. 6 after agreeing to scale back a provision imposing sanctions on human rights abusers so that it applies only to Russia. This bill also extends PNTR to Moldova.

Moscow has criticized the human rights section of the bill and taken at least two actions in apparent response. One is to impose a new requirement that U.S. beef and pork exports to Russia be tested and certified free of the feed additive ractopamine, which one press source said will effectively ban such shipments and U.S. officials say appears to be inconsistent with Russia’s obligations as a WTO member. The second step has been to introduce human rights legislation targeting U.S. citizens.

MTB. Both the House and Senate have been working to assemble a miscellaneous trade bill, which will remove or reduce import duties on manufacturing inputs and other products that are not produced or available domestically. If the more than 600 existing duty breaks passed as part of the last MTB are not extended before the end of this year they will expire, increasing (at least temporarily) costs for importers of those goods.

In November the Obama administration expressed opposition to a number of measures proposed for inclusion in the MTB on the grounds that they could hinder negotiations on a Trans-Pacific Partnership agreement. The White House subsequently dropped its objections to some of them but remains opposed to others. Inside US Trade reports that the process of making adjustments to reflect the administration’s position has delayed the issuance of a draft MTB.

Customs Reauthorization. In the House, both Republicans and Democrats have recently released their own versions of a customs reauthorization bill, setting markers for a debate that could begin in earnest next year.

Republican Bill. Trade Subcommittee Chairman Kevin Brady, R-Texas, said he was introducing the Customs Trade Facilitation and Enforcement Act of 2012 (H.R. 6642) now to give stakeholders an opportunity to comment. Brady said this bill seeks to further modernize and automate customs operations, create new initiatives to increase trade compliance, improve revenue collection and trade enforcement, and heighten the transparency of federal trade programs. Specific provisions include the following.

- requires the establishment by Dec. 30, 2014, of a Certified Importer Program for importers certified as the most compliant and a report on facilitation benefits to reduce costs for moving highly compliant cargo

- initiates drawback modernization by allowing the use of eight-digit HTSUS numbers for determining eligibility for certain types of drawback claims and makes most timeframes for filing drawback claims consistent

- establishes a Commercial Targeting Division within U.S. Customs and Border Protection and allows advance trade data now used for security purposes to also be used for commercial risk assessment targeting

- moves the import specialist function at the ports from CBP’s Office of Field Operations to the Office of International Trade to centralize trade policy, targeting, and the classification and valuation of imported goods and to improve consistency in the implementation of trade facilitation and enforcement measures

- requires CBP to develop criteria for assigning importer of record numbers, establishing an accurate database of IOR numbers and improving the accuracy of existing numbers

- requires customs brokers to collect information on the identity of importers, with penalties for failure to comply

- authorizes CBP to strengthen international controls over new importers to ensure the collection of revenue through risk-based bonding for duties, fees and penalties

- requires CBP to collect additional information and levy financial requirements on non-resident importers to increase revenue protection

- establishes an interagency board to ensure the consistency of CBP rulemakings and other significant actions with U.S. international trade obligations

- sets a March 31, 2013, deadline for the 48 agencies with border responsibilities that now participate in the International Trade Data System to enter into a memorandum of understanding or take other action to provide for electronic information sharing so that all U.S. government import (and ultimately export) requirements are fulfilled at one window

- establishes trade enforcement training, using industry expertise, for port personnel to improve appraisal, valuation and classification

- provides CBP with the authority to provide intellectual property rights holders with samples to determine if imported products are counterfeit

- includes H.R. 5708, which addresses the evasion and underpayment of antidumping and countervailing duties

- codifies and expands the role of the Advisory Committee on Commercial Operations (COAC)

Democrat Bill. The Customs Enhanced Enforcement and Trade Facilitation Act (H.R. 6656) is largely identical to H.R. 6642 but according to its sponsors “includes stronger enforcement measures” and “seeks increased funding for USTR.” Reps. Sander Levin (Mich.), Jim McDermott (Wash.), Linda Sanchez (Calif.) and Dan Lipinski (Ill.) emphasized in particular their bill’s provisions on combating the evasion of antidumping and countervailing duties. For example, this bill would establish a process for the submission of evidence and allegations of duty evasion, timelines for investigation by CBP (which the agency opposes), and transparency and accountability for CBP’s actions. There is also a requirement for CBP to collect single transaction bonds where there is evidence indicating that duty evasion may be taking place.

New Committee Members. Four new Republicans will join the House Ways and Means Committee in the 113th Congress, which will be seated in January: Tim Griffin (Ark.), Mike Kelly (Pa.), Tim Scott (S.C.) and Todd Young (Ind.). Three Republicans on the committee in the 112th Congress will not return – Reps. Rick Berg (N.D.), Wally Herger (Calif.) and Geoff Davis (Ky.) – and the GOP picked up one seat for the 113th Congress.

On the Democratic side, Reps. Allyson Schwartz (Pa.), Danny Davis (Ill.) and Linda Sanchez (Calif.) will be rejoining the committee. Reps. Pete Stark (Calif.) and Shelley Berkley (Nev.) are not returning and Democrats picked up one additional seat for the next two-year term.

In the Senate, Democrats Sherrod Brown (Ohio) and Michael Bennet (Colo.) will be joining the Finance Committee, replacing Kent Conrad (N.D.) and Jeff Bingaman (N.M.), who are both retiring. Republicans Jon Kyl (Ariz.) and Olympia Snowe (Maine) will also not be back but their replacements have not yet been named. 

Drawback Can be Claimed on Merchandise Destroyed by Hurricane Sandy

U.S. Customs and Border Protection is allowing duty drawback claims to be made on imported merchandise that was damaged or destroyed by Hurricane Sandy. Sandler & Travis Trade Advisory Services’ team of duty drawback professionals can assist your company in recovering import duties, taxes and fees on goods that were either exported or destroyed during this natural disaster.

CBP has issued guidance on filing such drawback claims that includes the following provisions.

- The importer will have to provide documentation with details about the condition of the merchandise as well as any insurance claims filed. If the importer has been reimbursed for duties and taxes via an insurance claim the merchandise is not eligible for drawback.

- CBP will waive the requirement to file a CBP Form 7553, Notice of Intent to Export or Destroy, as long as the importer provides detailed supporting documents showing the movement of the merchandise from import through to its destruction. This documentation must include any comprehensive insurance claim filed by the claimant that indicates to CBP that duties and taxes were not included, as well as third-party destruction documentation that demonstrates to CBP that the merchandise was completely destroyed and will no longer be an article of commerce.

- All drawback claims should be clearly marked as “Hurricane Sandy” filings to allow for acceptance of the claim with these special requirements.

STTAS can help you take advantage of this cost-saving opportunity by estimating your company’s potential for drawback from goods damaged or destroyed by Hurricane Sandy, gathering the necessary import/export documentation from third parties, and preparing and filing drawback claims with CBP on your behalf.

STTAS also offers a comprehensive suite of services to help you obtain duty drawback in the course of your regular business operations, including developing, implementing, maintaining and improving a drawback program that will improve your bottom line while ensuring compliance with applicable laws and regulations.

For additional information on these services please contact STTAS Director of Drawback Operations Dawn Olesky at 248.957.5142 or via e-mail

FDA Makes First Determination of Comparability of Foreign Food Safety System

The U.S. and New Zealand have signed an agreement recognizing each other’s food safety systems as comparable to each other, which the Food and Drug Administration reports is the first time it has made such a determination. An FDA press release states that this development should lead to a new level of regulatory cooperation to enhance food safety while facilitating two-way trade. At the same time, both countries retain the right to conduct inspections of each other’s products as appropriate.

According to the FDA, systems recognition (previously referred to as comparability) involves reviewing a foreign country’s food safety regulatory system to determine if it provides a similar set of protections. Outcomes of these reviews may be used by the FDA to make risk-based decisions regarding the type and frequency of inspections of foreign manufacturing establishments and imported food shipments as well as follow-up actions when food safety incidents occur.

In this case the FDA worked with New Zealand to pilot test a systems recognition process using the draft International Comparability Assessment Tool that included a comprehensive review of the country’s relevant laws and regulations, inspection programs, response to food-related illness and outbreaks, compliance and enforcement, and laboratory support. This process, which goes beyond the FDA’s previous commodity-specific evaluation strategy, is also currently being tested with Canada.

The FDA notes that systems recognition is voluntary and not required for a country to export foods to the U.S. but that “any country that believes it can meet the very high bar will have the option of seeking recognition.” 

CBP Agricultural Inspections, Enforcement Actions Trending Down

U.S. Customs and Border Protection has released a summary report on its fiscal year 2012 inspections and enforcement activities with respect to imported agricultural products. Highlights of the information in this report includes the following.

- cargo inspections, which include commercial commodities referred as regulated for agriculture (i.e., fresh fruits and vegetables) as well as miscellaneous cargo commodities (e.g., tile and auto parts), were up from 705,869 to 720,208

- the total number of conveyance inspections in all environments (air, land and sea) and all pathways (cargo and passenger) was down from 1.49 million to 1.23 million

- package inspections were up from 33.8 million to 54.5 million

- agriculture inspections in FY 2012 resulted in 101,466 enforcement actions, down from 102,185 in FY 2011

- there were 47,046 emergency action notifications (i.e., reexportation, destruction, treatment or other stipulated remedial action), down from 48,260

- there were 54,420 violations and penalties, up from 53,925 (these include cargo violations, which can result from the unauthorized movement of cargo without CBP approval, conveyance violations, which range from failure to provide advance notification to breaking CBP seals on conveyance storerooms, and compliance violations, which are issued for failure to abide by agreement stipulations)

- the number of quarantine materials intercepted (i.e., plant material, animal products and byproducts, and soil) dropped from 1.69 million to 1.62 million

- pest interceptions submitted (the actual number forwarded to Department of Agriculture specialists for identification and disposition) fell from 177,690 to 173,345

- actionable pest interceptions (which reflect the number of pests that USDA specialists identified and determined are of special importance) dropped from 78,228 to 76,597, and 60% originated in the cargo/commercial environment 

Foreign-Trade Zones Board Offers Free Training

The Foreign-Trade Zones Board has scheduled two free outreach events for Feb. 13 in Washington, D.C. From 9:00 a.m. to noon there will be a general training session open to anyone interested in attending (including grantees) that will cover the submission of the annual report and the provisions of the 2012 regulations. From 1:00 p.m. to 4:00 p.m. there will be a session for officials of grantee organizations that will focus on the grantee’s submission of the annual report as well as regulatory provisions that have a direct impact on the grantee role (including zone schedule requirements). Each session will also include a question and answer period. RSVPs are required and can be made via email or phone at (202) 482-2862 no later than Feb. 8, 2013.

Eight Removed from USTR’s List of Notorious Markets for IPR Infringing Goods

The Office of the U.S. Trade Representative released Dec. 13 the results of its Special 301 out-of-cycle review of notorious markets. This review identifies more than 30 physical and Internet marketplaces that have been the subject of enforcement actions connected with counterfeiting and piracy or may merit further investigation for possible intellectual property rights infringements. Physical markets on this list are located in Ecuador, China, Paraguay, Indonesia, Argentina, India, Ukraine, Mexico, Thailand, Colombia and Pakistan.

This year’s review reflects the removal of eight markets due to law enforcement actions against them, or significant voluntary actions by market operators, aimed at addressing the problems identified. However, USTR will continue to monitor these markets and could reinstate them to the list if corrective actions prove inadequate or short-lived. The review also enumerates several positive developments in China and the Philippines since the last out-of-cycle review.

USTR notes that inclusion on the Notorious Markets List does not reflect a finding of a violation of law or the U.S. government’s analysis of the general IPR protection and enforcement climate in the country concerned, which is contained in the annual Special 301 report issued at the end of April. However, the U.S. does urge responsible authorities to intensify efforts to combat piracy and counterfeiting in these and similar markets and to use the information contained in this review to pursue legal actions where appropriate. 

AD Notice: Oil Country Tubular Goods from China

Agency: International Trade Administration.
Commodity: Oil country tubular goods.
Country: China.
Nature of Notice: Final results of administrative review of antidumping duty order for the period May 19, 2010, through April 30, 2011.
Details: Weighted average dumping margin of 172.54% for The Chengde Group. 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 Dec. 17. 

Change in CBP Port Code for Casper, Wyo.

U.S. Customs and Border Protection has announced that effective Dec. 11 port code 3382 should no longer be used for Casper, Wyo. Instead, all CBP transactions for this location should be filed using port code 3332.

Duty-Free Sugar Product Imports from FTA Partners

The Office of the U.S. Trade Representative has determined that certain sugar and syrup goods and sugar-containing products from Chile, Morocco, Panama and Peru may not enter the U.S. duty-free or at preferential tariff rates in 2013. Under the free trade agreements the U.S. has in place with these countries, USTR is allowed to take this action because they did not have trade surpluses in these products in 2012.

However, USTR has determined that Colombia, Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras and Nicaragua did have trade surpluses in sugar and syrup goods and sugar-containing products in 2012. As a result, the following aggregate quantities of such goods may be entered duty-free under HTSUS 9822.05.20 in 2013.

- Colombia: 50,750 metric tons
- Costa Rica: 12,540 metric tons
- Dominican Republic: 3,066 metric tons
- El Salvador: 31,000 metric tons
- Guatemala: 42,000 metric tons
- Honduras: 9,120 metric tons
- Nicaragua: 25,080 metric tons 

Ex-Im Bank Approves $1 Billion Loan to Finance Manufacturing Equipment Exports

The Export-Import Bank of the United States announced Dec. 13 that it has approved a $1.03 billion loan to finance the export of U.S.-made semiconductor manufacturing equipment to Germany. This credit will support the expansion of a silicon wafer fabrication facility that will increase the manufacturer’s capacity to produce semiconductor products used in personal computers, tablets and smart phones. The bank estimates that the transaction will support 9,700 U.S. high-tech jobs.

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