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January 8 2013 Issue

Tuesday, January 08, 2013
Sandler, Travis & Rosenberg Trade Report

USTR Sets Out Trade Policy Priorities with China for 2013

The Office of the U.S. Trade Representative has posted to its Web site its annual report on China’s compliance with its World Trade Organization commitments. The report states that despite the “remarkable results” that have resulted from China’s accession to the WTO in 2001, “the overall picture currently presented by China’s WTO membership remains complex.”

The report reiterates ongoing concerns about the direction of China’s economic and trade policies. “For much of the past decade, the Chinese government has been re-emphasizing the state’s role in the economy, diverging from the path of economic reform that drove China’s accession to the WTO,” USTR states. “With the state leading China’s economic development, the Chinese government has pursued new and more expansive industrial policies, often designed to limit market access for imported goods, foreign manufacturers and foreign service suppliers, while offering substantial government guidance, resources and regulatory support to Chinese industries, particularly ones dominated by state-owned enterprises. This heavy state role in the economy, reinforced by unchecked discretionary actions of Chinese government regulators, has generated serious trade frictions with China’s many trade partners, including the United States.” USTR calls on China to reverse these trends and notes that “there were some positive signs in 2012 that China may be focused on re-energizing its economic reforms.”

Looking ahead, the report identifies the following priority issues.

Intellectual Property Rights. Despite repeated anti-piracy campaigns and an increasing number of civil IPR court cases, counterfeiting and piracy remain at unacceptably high levels and continue to cause serious harm to U.S. businesses across many sectors of the economy. Some critical changes to China’s legal framework are still needed in a few areas, such as further improvement of measures for copyright protection on the Internet following China’s accession to the World Intellectual Property Organization Internet treaties and correction of continuing deficiencies in China’s criminal IPR enforcement measures.

Industrial Policies. Having achieved “major progress in de-linking indigenous innovation policies at all levels of the Chinese government from government procurement preferences” in 2011 the principal challenge for the U.S. in 2012 “was to begin addressing a range of discriminatory indigenous innovation preferences proliferating outside of the government procurement context.” Discussions on this issue are expected to intensify in 2013.

In other areas, the U.S. plans to continue pursuing WTO dispute settlement cases against Chinese export restraints on rare earths, tungsten and molybdenum and government aid to automobile and automobile-parts enterprises, hold “serious discussions” to work toward a mutual understanding of China’s VAT system and the concepts on which a trade-neutral VAT system is based, and maintain pressure on China to take concrete steps toward fulfilling its commitment to accede to the WTO’s Government Procurement Agreement.

Trading Rights and Distribution Services. In most sectors China has implemented its commitments to fully liberalize trading rights (the right to import and the right to export) and distribution services (wholesale, retail, direct selling and franchising services). However, the U.S. will continue to press China to resolve one outstanding concern; i.e., even though China has become a major market for U.S. direct sellers it continues to subject foreign direct sellers to “unwarranted restrictions on their business operations, such as overly burdensome service center requirements.”

Agriculture. China is now the United States’ largest agricultural export market but “remains among the least transparent and predictable of the world’s major markets for agricultural products, largely because of selective intervention in the market by China’s regulatory authorities.” Specific complaints include “seemingly capricious practices by Chinese customs and quarantine agencies” that can delay or halt shipments of agricultural products as well as “SPS measures with what seem to be questionable scientific bases and a generally opaque regulatory regime.” In 2013 the U.S. will continue to urge China to lift its restrictions on imports of U.S. beef and poultry products.

Services. The U.S. continues to enjoy a substantial surplus in trade in services with China but there are still numerous challenges in a range of sectors, including the use of “discriminatory regulatory processes, informal bans on entry, overly burdensome licensing and operating requirements and other means to frustrate efforts of U.S. suppliers of banking, insurance, express delivery, telecommunications, legal and other services to achieve success.”

Transparency. “China has made important strides to improve transparency across a wide range of national and provincial authorities,” USTR states, but “still has more work to do if it is to fully implement some of its commitments.” For example, China still has not made available translations of all its trade-related laws, regulations and other measures in one or more of the WTO languages (English, French and Spanish) and indeed has not yet even established an infrastructure to undertake these translations. 

Exports from Foreign-Trade Zones Up Sharply in FY 2011

The annual report issued Jan. 2 by the Foreign-Trade Zones Board shows that zone activity saw substantial increases in fiscal year 2011. Among the statistics included in this report are the following.

- Exports from FTZs shot up 56% to a record-high $54.3 billion. Over 76% of these exports originated from U.S.-based manufacturing and processing operations, with the rest originating from warehousing and distribution operations.

- The amount of merchandise received in FTZs rose 20% to $640.9 billion, the second-highest total ever after $692.6 million in FY 2008. Approximately 83% was used in manufacturing and production operations, with the rest sourced by warehousing and distribution operations.

- About 57% of the shipments received at zones involved domestic status merchandise, indicating that FTZ activity tends to involve domestic operations that combine foreign inputs with significant domestic inputs.

- The main industries participating in FTZ manufacturing and production activities included the oil refining, automotive, electronics, pharmaceutical and machinery/equipment sectors.

- The leading foreign-status products received in FTZs for warehouse and distribution operators were oil and petroleum ($36.8 million), vehicles ($11.5 million), machinery and equipment ($6.67 million), vehicle parts ($4.7 million) and textiles and footwear ($2.9 million).

- The leading foreign-status inputs received in FTZs for manufacturing and production operators were oil and petroleum ($194.9 million), vehicle parts ($8.7 million), consumer electronics ($8.0 million), pharmaceuticals ($7.1 million), and machinery and equipment ($3.3 million).

- Approximately 340,000 people were employed in FTZs during 2011, up 6% from the previous year, and the number of firms participating rose to 2,800.

- The FTZ Board approved three new zones, reorganized 38 zones under the alternative site framework and approved nine applications for new or expanded manufacturing authority. 

FTC Amends Appliance Labeling Rule to Ease Burdens on Businesses

The Federal Trade Commission has announced a final rule that, effective Feb. 15, will make a number of changes to the Appliance Labeling Rule, which will now be known as the Energy Labeling Rule and requires energy efficiency labels for major household appliances and other consumer products. The FTC is also seeking public comment on proposed changes to the EnergyGuide labels for refrigerators and clothes washers in the wake of new Department of Energy tests for measuring energy costs.

Under this final rule, manufacturers can meet FTC reporting requirements by using the DOE’s new Web-based tool for energy reporting (the Compliance and Certification Management System) in lieu of submitting data to the FTC and by providing the same report content that DOE requires under its certification regulations for most covered products. The rule also clarifies the DOE testing requirements that manufacturers must follow for obtaining the energy use information on their labels. The FTC states that by harmonizing the requirements of the two agencies this rule eliminates duplicative requirements and eases the reporting burden on manufacturers.

The final rule also requires online sellers to post label images for products bearing the EnergyGuide or Lighting Facts label. To enable sellers to easily download such labels from manufacturers the rule requires manufacturers to post their labels online and to continue to do so for six months (not two years, as proposed) after discontinuing production of a model. Manufacturers will have until July 15 to comply with this requirement and online retailers will have until Jan. 15, 2014.

Separately, the FTC is seeking public comments through March 1 on a proposed rule that would update the comparability ranges and national average energy cost figures for many EnergyGuide labels (but not those for refrigerators, clothes washers, furnaces and central air conditioners, and televisions). Manufacturers would have to begin using this new information within 90 days after publication of a final rule. This proposal would also grant an exemption related to EnergyGuide labeling requirements for refrigerators and clothes washers to address recent DOE test procedure changes. 

Bangladesh Could See Withdrawal or Limitation of GSP Benefits

The Generalized System of Preferences Subcommittee of the Trade Policy Staff Committee is considering whether to recommend that duty-free treatment accorded to imports from Bangladesh under GSP be withdrawn, suspended or limited on the grounds that the government of Bangladesh is not taking steps to afford to workers in that country the right of association and the right to organize and bargain collectively. Based on the most recent available information, including updated reports from the AFL-CIO, the Subcommittee believes that the lack of progress on this issue warrants consideration of these actions. Comments are due no later than Jan. 31.

The Subcommittee notes that in 2011 U.S. imports from Bangladesh under GSP totaled $26.3 million. Among the leading such imports were tobacco products, sports equipment, china kitchenware and plastic articles. 

AD/CV Notices: Xanthan Gum, Light-Walled Pipe, Diamond Sawblades

Agency: International Trade Administration.
Commodity: Xanthan gum.
Country: Austria and China.
Nature of Notice: Preliminary affirmative antidumping duty determinations.
Details: Preliminary dumping margins of 17.18% for Austria and 21.69% to 154.07% for China. The ITA will instruct U.S. Customs and Border Protection to require AD cash deposits on entries of subject merchandise based on these rates.

Agency: International Trade Administration.
Commodity: Light-walled rectangular pipe and tube.
Country: Mexico.
Nature of Notice: Final results of administrative review of antidumping duty order for the period Aug. 1, 2010, through July 31, 2011.
Details: Weighted average dumping margins of zero for two reviewed manufacturer/exporters. No AD duties will be assessed on entries of subject merchandise made during the period of review, and no AD cash deposits will be required for shipments of subject merchandise entered or withdrawn from warehouse on or after Jan. 8.

Agency: International Trade Administration.
Commodity: Diamond sawblades and parts thereof.
Country: China.
Nature of Notice: Initiation of changed circumstances review of antidumping duty order to determine if Husqvarna (Hebei) Co. Ltd. is the successor-in-interest to Hebei Husqvarna Jikai Diamond Tools Co. Ltd. 

No Change in Quarterly IRS Interest Rates Relating to Customs Duties

U.S. Customs and Border Protection has updated its list of the quarterly Internal Revenue Service interest rates used to calculate interest on overdue accounts (underpayments) and refunds (overpayments) of customs duties. For the quarter beginning Jan. 1, 2013, the interest rates for overpayments are 2% for corporations and 3% for non-corporations, and the interest rate for all underpayments is 3%. These rates are unchanged from the previous quarter.

Foreign-Trade Zones in Ohio, Florida Reorganized

The Foreign-Trade Zones Board has approved the reorganization of two zones under the alternative site framework.

- FTZ 8 in the Toledo, Ohio, area has been reorganized and expanded to include a service area of Sandusky, Henry, Wood, Lucas and Defiance counties, in and adjacent to the Toledo-Sandusky U.S. Customs and Border Protection port of entry, with an additional subzone designated as subzone 8I.

- FTZ 32 in the Miami, Fla., area has been reorganized to cover a service area that includes a portion of Miami-Dade County within the Miami CBP port of entry. 

No IPR Import Restrictions on Computing Devices

The International Trade Commission has terminated without the imposition of import restrictions patent infringement investigation 337-TA-812 of certain computing devices with associated instruction sets and software. This termination is based on a settlement between complainants VIA Technologies Inc., IP-First LLC and Centaur Technology Inc. and respondent Apple Inc. 

Export Committees on Information Systems, Sensors and Instrumentation to Meet

The Bureau of Industry and Security has announced the following two partially open meetings.

- The Information Systems Technical Advisory Committee will meet Jan. 23 and 24 in San Diego, Calif. This committee advises BIS on technical questions that affect the level of export controls applicable to information systems equipment and technology. The agenda for this meeting will include industry presentations on space qualification, rad-hard semiconductors and trends in cellular/mobile telecommunications.

- The Sensors and Instrumentation Technical Advisory Committee will meet Jan. 29 in Washington, D.C. This committee advises BIS on technical questions that affect the level of export controls applicable to sensors and instrumentation equipment and technology. The agenda for this meeting will include remarks from BIS management and industry presentations.

The open sessions of these meetings will be accessible via teleconference to 20 participants on a first come, first served basis. In addition, a limited number of seats will be available at each public session but reservations are not accepted. 

Foreign Regulatory Changes Could Affect Exports of Wires and Cables, Matches, Tequila

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 – amended mandatory conformity assessment procedures for air conditioning, wires, electrical cables, flexible cords, lifting platforms used in urban public transport, and safety matches

France – contents of applications for, and conditions for the awarding of, “high energy performance” labels for buildings (comments due by Feb. 3)

Mexico – official standard on specifications for tequila (effective approx. Feb. 13) 

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