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December 27 2012 Issue

Thursday, December 27, 2012
Sandler, Travis & Rosenberg Trade Report

EU Proposes Stronger Rules to Enforce Trade Agreements

The European Commission announced this week a proposed regulation that would establish a “clear and predictable framework” to enhance the European Union’s ability to enforce its rights in the international trading system. According to a Commission press release this proposal would “remedy the current situation where the EU does not have a single horizontal framework to react swiftly and efficiently on enforcing international trade rulings” by allowing the EU to implement trade responses in a quicker and more flexible, streamlined and efficient manner. The regulation will now be discussed by the European Council and the European Parliament under the ordinary legislative procedure.

The Commission states that this proposal would empower it to take the following measures allowed by international trade rules.

- When a WTO member or a party to an agreement with the EU fails to implement a dispute settlement panel ruling or an arbitration procedure outcome and no settlement or satisfactory compensation is agreed, the EU may respond with temporary defensive measures against the offending country; e.g., increased customs duties, restrictions on the volume of imports or exports, or restrictions concerning access to government procurement markets.

- When the EU is adversely affected by a safeguard measure (i.e., increased import duties intended to provide a domestic industry with relief from an unexpected increase in imports) and the country involved does not provide adequate compensation, the EU may take unilateral defensive measures under very short timelines and specific conditions; e.g., increased duties or volume restrictions such as temporary quotas that are equivalent to the negative impact of the safeguard

- When a WTO member modifies its concessions to the EU under Article XXVIII of the General Agreement on Tariffs and Trade 1994 and fails to provide compensation to the EU, the EU may take reciprocal action within six months. 

Trade Preference Program Changes Include Three Removals, One Addition

President Obama issued Dec. 20 a proclamation making several changes to the coverage of the Generalized System of Preferences and the African Growth and Opportunity Act. Other changes could come in the future as a result of ongoing efforts by beneficiary countries and interested parties. The president also extends an agricultural agreement with Israel and makes certain other technical changes.

AGOA. The proclamation designates South Sudan as an eligible sub-Saharan African country and a beneficiary SSA country under AGOA, meaning this country can now take advantage of the trade preferences available under this program. The proclamation also removes Mali and Guinea-Bissau from AGOA eligibility effective Jan. 1, 2013, due to what U.S. Trade Representative Ron Kirk called “political instability, human rights abuses and corruption.”

GSP. The proclamation terminates the GSP eligibility of St. Kitts & Nevis effective Jan. 1, 2014, because that country has become a high-income country as defined by the official statistics of the World Bank. St. Kitts will continue to be eligible for benefits under the Caribbean Basin Economic Recovery Act.

Separately, a dozen Democratic members of the House of Representatives sent a letter to USTR Kirk on Dec. 18 asking him to complete a long-running review of Bangladesh’s compliance with the GSP requirement to take steps to afford internationally recognized worker rights. The lawmakers argued that a lethal fire that occurred recently in an apparel factory symbolizes ongoing concerns about the failure of Bangladeshi authorities to enforce labor, health and safety laws, “not only with respect to fire safety but also in many other respects, such as payment of minimum wages, mandatory contributions to social security funds and election of worker representatives.” USTR officials responded that they are “carefully reviewing this situation to determine next steps,” which could include suspending Bangladesh’s GSP eligibility.

Finally, Ecuador is requesting that the U.S. extend GSP eligibility to fresh cut roses, broccoli, tuna, pantyhose and tights, pineapples and artichokes imported from that country. These products are currently eligible for duty-free treatment when shipped to the U.S. under the Andean Trade Preferences Act, but Ecuador is the sole remaining beneficiary of that program and there seems a good chance it will expire July 31, 2013. The government of Ecuador is therefore seeking GSP eligibility for these products “to ensure that they can continue competing with similar products exported to the United States (under other trade preference programs)” should ATPA expire.

Israel. In 2004 the U.S. entered into an agreement with Israel that provides duty-free access to specified quantities of certain agricultural products of that country. The proclamation extends this agreement through Dec. 31, 2013, to allow time for further negotiations on an agreement that will replace the original.

Other. This proclamation corrects certain errors in the Harmonized Tariff Schedule with respect to GSP and U.S. free trade agreements with Chile, Korea and Panama.

EPA Withdraws Reporting Requirement for Importers of Cadmium-Containing Products

The Environmental Protection Agency will reportedly soon withdraw a final rule that would have imposed a new requirement as of Jan. 2, 2013, for manufacturers (including importers) of cadmium or cadmium compounds, including as part of an article, that have been or are reasonably likely to be incorporated into consumer products to report certain unpublished health and safety studies to the EPA. For purposes of this rule, which was issued under section 8(d) of the Toxic Substances Control Act, “consumer product” was defined to mean any product that is sold or made available to consumers for their use in or around a permanent or temporary household or residence, in or around a school, or in or around recreational areas. The EPA said that due to the potential health effects of exposure to cadmium or cadmium compounds it is concerned about the possible presence and bioavailability of these substances in consumer products generally and especially those used by or around children.

In its final rule the EPA said it has reviewed the Consumer Product Safety Commission’s recalls of cadmium-contaminated children’s products and found that most of them were produced in and imported from other countries. The EPA hoped to capture through this new reporting requirement health and safety studies conducted by importers of such products. These parties may be subject to CPSC certification requirements, the EPA noted, and depending on the product may be conducting testing using Standard Consumer Safety Specification for Toy Safety, ASTM International (ASTM) F–963 (Ref. 7).

According to multiple sources, an EPA official announced Dec. 14 that the final rule will be withdrawn due to “significant confusion and uncertainty within certain industrial sectors.” The agency will consider the questions and concerns raised in response to the rule in determining what its next steps should be. It will also continue to work with the CPSC to reduce exposure to cadmium in consumer products, including children's jewelry. 

FDA Wants Electronic Submission of Lab Reports from Importers

U.S. Customs and Border Protection has circulated a message from the Food and Drug Administration stating that the agency prefers that private laboratory analytical reports be submitted electronically. These reports are frequently submitted by importers of products subject to detention without physical examination as testimony to overcome apparent violations.

While the FDA will continue to accept private laboratory analytical reports in hard copy it prefers to receive them in an electronic format for greater ease and speed of processing. The FDA explains that in the near future it intends to automate its process of reviewing these reports and that once this is accomplished it will be able to process reports submitted electronically more quickly than those submitted on paper. The FDA notes that at this time the Import Trade Auxiliary Communication System is not an acceptable means of submitting these reports.

In general, reports should be submitted to FDA districts as per established district contact points. Some districts have set up special email accounts for the purpose of accepting private laboratory analytical reports and other testimony in the detention and hearing process. Absent any other instructions from the district handling the entry, submissions of testimony should be routed to the contact point(s) listed in the specific Notice of FDA Action referencing the detention of the entry/line. 

Bahrain “Acted Inconsistently” with FTA Labor Provisions, U.S. Says

The Labor Department’s Bureau of International Labor Affairs released Dec. 20 a report concluding that Bahrain acted inconsistently with the labor chapter of the U.S.-Bahrain Free Trade Agreement in response to a March 2011 general strike. While the report finds that Bahrain “has made significant efforts to ensure reinstatement” of the workers fired after this unrest, it also finds that the government of Bahrain “did not take steps to remedy shortcomings in its laws on freedom of association and employment discrimination, applied those laws to the detriment of workers' rights in the wake of the March 2011 general strike and subsequently passed amendments that weaken freedom of association protections.” Specifically, the report states, trade unionists and leaders were targeted for firing and at times criminal prosecution for their role in the strike, and some workers and political critics of the government faced discrimination.

The report recommends bilateral consultations under the FTA and “offers recommendations to serve as a road map for a collaborative discussion and a positive resolution of the issues.” Labor Secretary Hilda Solis expressed hope that “through engagement with our trading partner we will find a solution that is good for workers both in the United States and Bahrain.”

Bahrain responded to the report with a statement pointing out that 98% of the more than 4,600 workers involved have been reinstated or re-employed or otherwise have had their cases resolved, with remaining issues to be addressed through “the normal administrative or judicial procedures.” In that respect the ILAB report appears not to be up to date, the statement said. In addition, the government believes that with the issuance of a new labor law this year it has met all of its FTA obligations concerning “the freedom of forming societies, regulations and collective labor negotiation.” 

WTO Case on Argentinian Import Restrictions Subject of USTR Inquiry

The Office of the U.S. Trade Representative is accepting through Jan. 18, 2013, comments on the issues raised in a World Trade Organization dispute the U.S. has brought against measures imposed by Argentina affecting the importation of goods.

USTR states that Argentina subjects the importation of all goods to approval of a non-automatic import license through the Declaración Jurada Anticipada de Importación system. It also subjects the importation of certain categories goods to other product-specific, non-automatic import licenses, or Licencias No Automáticas de Importación, in the form of Certificados de Importación. The issuance of CIs and the approval of DJAIs are systematically delayed or denied by Argentine authorities on non-transparent grounds.

In addition, USTR alleges, Argentina often requires importers to undertake certain commitments, including limiting imports, balancing imports with exports, making or increasing investments in production facilities in Argentina, increasing the local content of products manufactured in Argentina (thereby discriminating against imported products), refraining from transferring revenue or other funds abroad and/or controlling the price of imported goods. Argentine authorities often make the issuance of CIs and the approval of DJAIs conditional upon importers undertaking to comply with these commitments. 

More Time to Comment on FTZ Procedures for Carbon Fiber Plant

The Foreign-Trade Zones Board is extending from Jan. 11 to Feb. 11 the period for public comments on new evidence submitted in response to its staff’s preliminary recommendation not to authorize Toho Tenax America Inc. to manufacture carbon fiber for the U.S. market under zone procedures within subzone 148C in Rockwood, Tenn. Rebuttal comments may be submitted through Feb. 26.

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