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December 20 2012 Issue

Thursday, December 20, 2012
Sandler, Travis & Rosenberg Trade Report

Progress Seen on First Anniversary of U.S.-Canada Regulatory Cooperation Plan

The Canada-U.S. Regulatory Cooperation Council recently issued its first progress report on implementation of a December 2011 joint action plan that aims to promote economic growth and job creation through increased regulatory transparency and cooperation. The report notes that this plan “is neither about creating a single regulatory system for both countries, nor for one country to make regulatory decisions on behalf of the other.” Instead, “it targets existing or emerging misalignments and focuses on creating systemic mechanisms to secure regulatory alignment into the future … in areas where Canada and the United States have similar goals, similar systems, or similar regulatory approaches with respect to traded goods (final goods or intermediate inputs).” In the absence of such alignment the goal is to encourage the adoption of other measures that make it easier to conduct business between the two countries.

This report shares the actions taken or being taken under work plans for 29 separate initiatives, highlights of which include the following.

- the initiation of a pilot project for the joint inspection of non-Canadian and non-U.S. flagged vessels entering the Great Lakes-St. Lawrence Seaway, focusing on security and pollution prevention and monitoring living and working conditions for workers on these vessels

- discussion of common policy principles that would guide an aligned approach to the regulatory oversight of nanotechnology and nanomaterials

- a framework for information sharing on food safety systems is expected to be presented to senior officials in January 2013

- while work on meat and poultry products export certification has not advanced as quickly as anticipated, each country has conducted an independent internal review of its import and export requirements to identify redundancies and further bilateral discussions are planned for early 2013

- a framework for a perimeter approach to plant protection is under development and pilot projects to enhance the concepts of a perimeter approach are underway in two areas: coordinating approaches to regulatory oversight for chrysanthemum white rust and streamlining the commodity certification process for the Greenhouse Certification Program

- an arrangement for the mutual recognition of zoning decisions in the event of a highly contagious foreign animal disease outbreak – to collectively protect both countries from disease while allowing for continued bilateral trade from areas located outside of the disease control and eradication zone(s) – has been developed and signed

- a deployment plan has been established for the implementation of border wait-time measurement systems and installations have been completed at the Queenston-Lewiston (Niagara Falls) and Peace (Fort Erie-Buffalo) bridges

- Transport Canada and the U.S. Coast Guard are currently working to align marine transportation security requirements to prevent duplication of services and remove impediments to cross-border trade

- Transport Canada has been progressing on the development of approvals that will be aligned with a Hazardous Materials Guidance Document issued by the U.S. Department of Transportation and facilitate the cross-border movement of dangerous goods by rail

- efforts are underway to create a system allowing companies to make online regulatory submissions (e.g., marketing applications/market authorizations for approval of pharmaceutical products) to Health Canada as they currently can to the U.S. Food and Drug Administration.

- Health Canada and the FDA are working to increase mutual reliance on each other’s routine surveillance of drug and personal care product manufacturing facilities

- joint work in developing systemic alignment mechanisms, including in setting regulatory standards, cooperating in product reviews, approvals and systems reliance, and managing third-country import risk, is “still in its infancy” 

Israel Signs Customs Cooperation Agreements with U.S., Canada

U.S. Customs and Border Protection recently signed a joint work plan with Israel that establishes a pathway to signing a mutual recognition agreement between the Customs-Trade Partnership Against Terrorism and the Israeli Tax Authority’s authorized economic operator program. According to International Trade Daily, an Israeli official said his government “has already certified about a dozen of the largest Israeli exporting companies as AEOs … with double that number currently in the approval pipeline.”

In addition, Israeli customs officials visited San Diego, Los Angeles, Long Beach and Buffalo to gain a better understanding of how CBP manages its ports in these locations. Discussions during these visits focused on topics such as port operations, cargo processing, C-TPAT, radiation portal monitoring systems, Merchandise Enforcement Team warehouse inspections, technology used by field personnel, anti-tunneling operations, cross-border communication and coordination, and collaboration with other government agencies.

Israel also recently signed a Customs Mutual Assistance Agreement with Canada that Public Safety Minister Vic Toews said “strengthens our countries' mutual abilities to investigate and prosecute customs offences and enhance global security.” An Israeli Tax Authority statement said that under this agreement bilateral cooperation will include “knowledge and information sharing to facilitate trade, mutual assistance on enforcement to prevent smuggling, and more.” 

$8.6 Million Penalty for Concealing Transactions in Violation of Economic Sanctions

The Treasury Department’s Office of Foreign Assets Control announced recently that a Japanese bank has agreed to remit $8.57 million to settle potential civil liability for apparent violations of U.S. economic sanctions against Burma, Iran, Sudan and Cuba. OFAC alleges that the bank’s Tokyo operations engaged in practices designed to conceal the involvement of these countries in transactions that the bank processed through financial institutions in the U.S. These practices included the systematic deletion or omission from payment messages of any information referencing U.S. sanctions targets that would cause the funds to be blocked or rejected.

OFAC states that when the bank’s senior management learned of these practices they commenced an internal review of historical transaction data and made a voluntary self-disclosure. Aggravating factors include that the bank is a large, commercially sophisticated financial institution and that its conduct displayed reckless disregard for U.S. sanctions and conferred a substantial economic benefit to targets of those sanctions. On the other hand, the bank has undertaken significant remediation to improve its OFAC compliance policies and procedures; substantially cooperated with OFAC’s investigation, including providing detailed information regarding the apparent violations, and entered into a tolling agreement with OFAC; and has no history of prior OFAC violations. 

AD/CV Notices: Garment Hangers, Wind Towers

Agency: International Trade Administration.
Commodity: Steel wire garment hangers.
Country: Vietnam.
Nature of Notice: Affirmative final antidumping and countervailing duty determinations.
Details: Dumping margins range from 157% to 220.68% and net subsidy rates range from 31.58% to 90.42%. Critical circumstances exist with respect to all companies in the AD investigation and all companies except the Hamico Companies in the CV investigation. AD cash deposits at the applicable rates (less the 6.17% export subsidy rate) will be collected by U.S. Customs and Border Protection. CV cash deposits at the applicable subsidy rates will be required if the International Trade Commission issues a final affirmative CV injury determination.

Agency: International Trade Administration.
Commodity: Utility scale wind towers.
Country: China and Vietnam.
Nature of Notice: Affirmative final affirmative antidumping and/or countervailing duty determinations.
Details: Dumping margins for Vietnam range from 51.50% to 58.49%, dumping margins for China range from 44.99% to 70.63%, and net subsidy rates for China range from 21.86% to 34.81%. AD cash deposits at the applicable rates (less the appropriate export subsidy rates) will be collected. CV cash deposits at the applicable subsidy rates will be required if the International Trade Commission makes a final affirmative CV injury determination.

No IPR-Related Import Restrictions on Food Containers, Software, Electronic Devices, LEDs

The International Trade Administration has recently terminated the following Section 337 intellectual property rights infringement investigations.

- trademark infringement investigation 337-TA-835 of certain food containers, cups, plates, cutlery and related items and packaging thereof, with respect to three respondents on the basis of a settlement agreement with complainant Fabri-Kal Corporation

- patent infringement investigation 337-TA-795 of certain video analytics software, systems, components thereof and products containing same on the basis of a license agreement between respondents and complainant ObjectVideo Inc.

- patent infringement investigation 337-TA-843 of certain electronic devices having a retractable USB connector after complainant Anu IP LLC found that the last remaining respondent is no longer in existence

- patent infringement investigations 337-TA-784, 337-TA-785 and 337-TA-802 of certain light-emitting diodes and products containing same based on settlement agreements between OSRAM AG, OSRAM GmbH, LG Electronics Inc. and LG Innotek Co. Ltd. 

Proposed Production Activity Under FTZ Procedures at Georgia Engine Plant

The Foreign-Trade Zones Board has received a notification of proposed production activity for the Perkins Shibaura Engines LLC facility within site 6 of FTZ 26. This facility is used for the production of diesel engines used in off-road vehicles. Comments on this notification are due no later than Jan. 28, 2013.

Production under FTZ procedures could exempt Perkins Shibaura from customs duty payments on foreign status components and materials used in export production. On its domestic sales, the company would be able to choose the duty rate that applies to diesel engines (zero) for foreign status inputs, which include plastic hoses, gaskets, copper washers/gaskets, sign plates, relief valves, hose assemblies, thermostat covers/cases, valve bodies, sensors, resistors, radiators, and electronic control units (duty rates range from zero to 5%). Customs duties also could possibly be deferred or reduced on foreign status production equipment. 

Energy Dept. Considers Labeling Requirements for Commercial and Industrial Equipment

The Department of Energy is requesting no later than March 20 information on the potential for establishing labeling requirements for certain commercial and industrial equipment. The DOE is particularly interested in the technical and economic feasibility of such labeling, the extent to which labeling would assist consumers in making purchasing decisions, the potential for significant energy savings resulting from labeling, the potential content and format of prospective labels for each type of equipment, the ideal location of placement for any such labels, and prospective burdens on manufacturers.

The products potentially subject to labeling include the following.

- electric motors and pumps

- commercial HVAC and water heating equipment (small, large and very large commercial package air conditioning and heating equipment, packaged terminal air conditioners and packaged terminal heat pumps, warm air furnaces, packaged boilers, storage water heaters, instantaneous water heaters, and unfired hot water storage tanks)

- commercial refrigerators, freezers and refrigerator-freezers

- automatic commercial icemakers

- commercial clothes washers

- walk-in coolers and walk-in freezers

- high-intensity discharge lamps

- distribution transformers

- small electric motors

- refrigerated beverage vending machines

- illuminated exit signs

- low voltage dry-type distribution transformers

- traffic signal modules and pedestrian modules

- commercial pre-rinse spray valves

The DOE notes that any labeling rule it may prescribe for these goods would not apply to equipment manufactured before the effective date of any final rule. In addition, compliance with any final labeling rule would not be required until three months following its publication. 

Advance Notice Required for Imports of Nine Chemical Substances

The Environmental Protection Agency has issued a direct final rule imposing new import restrictions on nine chemical substances that were the subject of premanufacture notices. These substances are used in asphalt, industrial cleaning solutions, illuminating phosphors, adhesive formulations, cellulosic fabrics, ultraviolet release coatings, specialty polymers, and wastewater treatment.

Under this rule, persons who intend to import, manufacture or process any of these substances for an activity that is designated as a significant new use by this rule must notify EPA at least 90 days before commencing that activity. This notification will provide EPA with the opportunity to evaluate the intended use and, if necessary, to prohibit or limit that activity before it occurs.

This rule will be effective as of Feb. 19, 2013. Written adverse or critical comments, or notice of intent to submit adverse or critical comments, must be received on or before Jan. 22. 

Annual Review of Impact of Chemical Weapons Convention on Schedule 1 Chemicals

The Bureau of Industry and Security is seeking comments by Jan. 18, 2013, regarding the impact that implementation of the Chemical Weapons Convention, through the Chemical Weapons Convention Implementation Act and the Chemical Weapons Convention Regulations, had on commercial activities involving Schedule 1 chemicals through calendar year 2012.

The CWC imposes a number of obligations on countries that have ratified it, including the enactment of legislation to prohibit the production, storage and use of chemical weapons. It also requires states parties to implement a comprehensive data declaration and inspection regime to provide transparency and to verify that both the public and private sectors are not engaged in prohibited activities. Comments received in response to this inquiry will assist BIS in the preparation of its annual certification that the legitimate commercial activities and interests of chemical, biotechnology and pharmaceutical firms in the U.S. are not being significantly harmed by the CWC’s limitations on access to and production of those chemicals and toxins listed in Schedule 1. 

Commercial Labs and Gaugers Approved

U.S. Customs and Border Protection has announced that the following companies have been accredited as commercial laboratories and/or approved as commercial gaugers.

- effective Sept. 13, 2011, Intertek USA Inc. of St. Croix, V.I., was approved to gauge petroleum, petroleum products, organic chemicals and vegetable oils for customs purposes

- effective Feb. 22, 2012, Intertek USA Inc. of Texas City, Texas, was approved to gauge and accredited to test petroleum, petroleum products, organic chemicals and vegetable oils for customs purposes

- effective Aug. 23, 2011, Intertek USA Inc. of Gonzales, La., was approved to gauge and accredited to test petroleum, petroleum products, organic chemicals and vegetable oils for customs purposes

- effective Sept. 21, 2011, NMC Global Corporation of Kenner, La., was approved to gauge and accredited to test petroleum, petroleum products, organic chemicals and vegetable oils for customs purposes

- effective July 1, 2011, NMC Global Corporation of Pasadena, Texas, was approved to gauge and accredited to test petroleum, petroleum products, organic chemicals and vegetable oils for customs purposes 

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