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February 6 2013 Issue

Wednesday, February 06, 2013
Sandler, Travis & Rosenberg Trade Report

Still No Announcement on Possible U.S.- EU Trade Agreement

Five weeks after it had been expected there has still been no announcement on whether the U.S. and the European Union will launch negotiations on a comprehensive trade and investment agreement. While both sides have said that any effort to further liberalize trans-Atlantic trade should be as wide-ranging as possible, they have also cautioned that political and economic sensitivities could limit the scope of that effort. Further discussions are taking place this week and officials say a decision could come at any time.

Goals of Negotiation. In its preliminary report issued in June 2012 the High Level Working Group on Jobs and Growth determined that a comprehensive agreement that addresses a broad range of bilateral trade and investment policies would provide the most significant benefits of the various options it considered. The working group envisioned a pact that includes the following elements.

Tariffs – Eliminate all duties on bilateral trade, with a substantial elimination of tariffs upon entry into force, a phasing out of all but the most sensitive tariffs in a short time frame, and options for the treatment of the most sensitive products.

Regulatory Issues and Non-Tariff Barriers – Progressively move to a more integrated transatlantic marketplace while respecting fully the right of each side to regulate in a manner that ensures the protection of health, safety and the environment at the level each side deems appropriate. The two sides would therefore seek to negotiate:

- provisions that go beyond World Trade Organization rules on sanitary and phytosanitary measures, including a bilateral forum for improved dialogue and cooperation on SPS issues;

- provisions that go beyond WTO rules on technical barriers to trade, including a forum for addressing bilateral trade issues arising from technical regulations, conformity assessment procedures and standards;

- horizontal disciplines on regulatory coherence and transparency for goods and services, including early consultations on significant regulations, impact assessment, upstream regulatory cooperation and good regulatory practices; and

- provisions or annexes containing additional commitments or steps aimed at promoting regulatory compatibility over time in specific, mutually agreed sectors.

The working group recommends that the two sides gather concrete proposals that address the impact of regulatory differences on trade and use those proposals in developing during the course of negotiations on a trade agreement specific action plans to reduce unnecessary regulatory costs and promote regulatory compatibility while respecting legitimate regulatory objectives.

Services – Bind the existing autonomous level of liberalization of both parties at the highest level captured in existing free trade agreements while seeking to achieve new market access through efforts to address remaining market access barriers, taking into account the sensitive nature of certain sectors.

Investment – Secure investment liberalization and protection provisions on the basis of the highest levels that both sides have negotiated to date.

Procurement – Substantially improve access to government procurement opportunities at all levels of government on the basis of national treatment.

Rules – Develop a set of 21st century rules that could not only be of relevance for bilateral commerce but also contribute to rulemaking in third-country policies and trade agreements and at the multilateral level. The following areas have been provisionally identified as possible components of a comprehensive agreement: trade facilitation/customs, trade-related aspects of competition and state-owned enterprises, trade-related aspects of labor and environment, horizontal provisions on small and medium-sized enterprises, strengthening supply chains, and access to raw materials and energy.

Intellectual Property Rights – The two sides already cooperate extensively on this issue and have concluded that it would not be feasible in negotiations to seek to reconcile across the board differences in the IPR obligations that each typically includes in its comprehensive trade agreements.

EU and Business Groups Back FTA. EU member states, even those that typically take a more protectionist stance in trade policy matters, have been consistently enthusiastic about the prospects of negotiating a trans-Atlantic FTA, likely due to the assumption that it would yield enormous economic benefits to an EU continuing to struggle to break out of an economic slump. Two-way trade already accounts for one-third of the world total with some $2 billion in goods and services traded daily. With that kind of volume, EU Trade Commissioner Karel de Gucht said, “every tariff we remove, even the lowest ones, will result in millions of euros of savings to companies, money that can then be plowed back into creating new opportunities.” Other observers point out that with the U.S. and EU accounting for about half of global economic output, a joint FTA could set regulatory standards and international trade rules that could become de facto global norms, which former Secretary of State Hillary Rodham Clinton said recently could help “shore up our global competitiveness for the next century.”

Similarly, business interests on both sides of the Atlantic are gearing up to push their respective governments to conclude a broad agreement as rapidly as possible. As of Jan. 1 the European-American Business Council and the TransAtlantic Business Dialogue merged to form the Transatlantic Business Council, which will focus on advocating for “the timely negotiation of a comprehensive EU-US economic agreement that further liberalizes trade and investment and promotes greater regulatory convergence, while setting benchmark standards for trade in the 21st century.” Even labor unions have left open the possibility of supporting an agreement with the EU, which, as opposed to many of the countries with which the U.S. has previously concluded FTAs, has labor and environmental standards that are as good or better than those in the U.S.

U.S. Still Not Sure. Washington, however, has been more cautious, backing the idea of concluding an FTA as quickly as possible but warning that it has little desire to commit extensive resources to that effort if Brussels does not have the political will to resolve longstanding trade barriers in areas such as food and product safety and agriculture. The White House has reportedly pressed the EU to take certain steps that would signal a serious commitment to compromise on these sensitive issues before agreeing to move ahead with FTA talks, and it appears that at least some of those steps have been concluded. Inside US Trade reports that in a further sign of wariness the two sides “are considering an approach that would allow different areas [of the negotiations, once launched] to progress at different speeds.”

Others are explicitly warning against a bilateral FTA altogether given past experiences and future developments. Iain Murray, vice president for strategy at the Competitive Enterprise Institute, has argued against any effort at regulatory harmonization and said an FTA should be kept simple. Murray also theorized that in light of the ongoing Eurozone crisis the EU is likely to either break up entirely or go the other way and evolve into a political union that encompasses fewer countries and therefore represents a smaller overall economy. Murray therefore urged the U.S. to conclude FTAs with individual EU member states rather than the bloc as a whole. 

DOT Working to Designate National Freight Network by End of 2013

The Department of Transportation’s Federal Highway Administration has issued a notice defining the planned process for the designation of the national freight network. This designation, which is expected to occur before the end of the year, is required by the Moving Ahead for Progress in the 21st Century Act to assist states in strategically directing resources toward improved system performance for the efficient movement of freight on the highway portion of the freight transportation system. This law also establishes the policy of the U.S. to improve the condition and performance of this national freight network to ensure that it provides the foundation for the U.S. to compete in the global economy and achieve the goals of the national freight policy. Strategies to improve system performance on the national freight network should consider solution sets that effectively integrate the entire freight transportation system, including non-highway modes of freight transport, in order to maximize efficiency.

The national freight network will consist of the primary freight network, the portions of the interstate system not designated as part of the primary freight network, and critical rural freight corridors. This notice defines the process for the initial designation of the primary freight network, the designation of additional miles critical to future efficient movement of goods on the primary freight network, and how data on the state-designated critical rural freight corridors will be collected.

Primary Freight Network. The primary freight network will be composed of not more than 27,000 centerline miles of existing roadways that are most critical to the movement of freight. The designation of the primary freight network will be based on measureable and objective data, including origins and destinations of freight movements; total freight tonnage and value of freight moved by highways; percentage of annual average daily truck traffic in the annual average daily traffic on principal arterials; AADTT on principal arterials; land and maritime ports of entry; access to energy exploration, development, installation or production areas; population centers; and network connectivity. Scenarios will be analyzed using various weighting configurations and may target a range of tonnage or commodity values that are transported, a range of truck traffic volumes, or a range of percentages of truck traffic on principal arterials. Scenarios will also analyze ranges of service and access to significant ports of entry/exit for international trade; access to energy areas; access to population centers; and network connectivity that includes multimodal aspects of the freight transportation system, such as rail lines parallel to principal arterials that carry trailer-on-flatcar, container-on-flatcar and doublestack payloads of typically high-value, time-sensitive cargo, and rail lines and waterways that carry significant bulk cargo.

Additional Miles. The 27,000 mile cap on the primary freight network may be increased by 3,000 centerline miles of existing and planned roadways that the DOT deems critical to the future efficient movement of goods. In determining whether a route meets this criterion the DOT will consider the factors identified above as well as one or more additional factors, which may include supply chain/distribution network considerations including flows of key commodities; connections to major intermodal connectors; global and national economic and growth trends and growth areas; length of haul and its effect on tonnage on the primary freight network; designation on the national network without restrictions or clearance issues; availability of truck amenities; current or planned waterway, rail, port or intermodal terminal infrastructure developments that may impact future freight flows; freight bottlenecks; connection to international border crossings; and consideration of planned unbuilt highway facilities.

Rural Freight Corridors. A state may designate a road within its borders as a critical rural freight corridor if the road is a rural principal arterial roadway and has at least 25% of the AADT of the road measured in passenger vehicle equivalent units from trucks; provides access to energy exploration, development, installation or production areas; or connects the primary freight network, a roadway described above or the interstate system to facilities that handle more than 50,000 20-foot equivalent units per year or 500,000 tons per year of bulk commodities. The designation of critical rural freight corridors will be performed by state DOTs and provided to DOT after designation of the primary freight network is complete. 

In the News: Wood Exports to EU, Korea Trade Office Reshuffle, Cargo Efficiency

Stricter Enforcement of EU Phyto Rules 

Park stands firm on transfer of trade negotiating roles from foreign ministry 

Carriers strike back in the fight against no-show cargo

AD/CV Notice: Wooden Bedroom Furniture from China

Agency: International Trade Administration.
Commodity: Wooden bedroom furniture.
Country: China.
Nature of Notice: Preliminary results of administrative review of antidumping duty order for the period Jan. 1 through Dec. 31, 2011.
Details: Weighted average dumping margins of 41.75% for three reviewed exporters and 216.01% for the China-wide entity. 

CBP’s Regulations and Rulings Relocates

U.S. Customs and Border Protection has announced that Regulations and Rulings in its Office of International Trade has relocated from the U.S. Mint Annex Building at 799 9th Street NW in Washington, D.C., to 90 K Street NE. All correspondence directed to this office, including mailed comments regarding section 1625 modifications or revocations, should be sent to the new address, which has a zip code of 20229-1177. The main office phone number (202-325-0100) remains the same.

Expanded FTZ Authority Sought for Texas Facility, Oregon Solar Panel Plant

The Foreign-Trade Zones Board has received an application from the Port of Houston Authority, grantee of FTZ 84, requesting authority to expand this zone to include the Texas Triangle Park in Brazos County, Texas. No specific production authority is being requested at this time. Comments on this request are due no later than April 8.

The FTZ Board has also received a notification of proposed production activity at the SoloPower Inc. facility in Portland, Ore., which is located within site 1 of FTZ 45 and is used for the production of thin film photovoltaic solar panels. FTZ activity would be limited to the specific foreign-status materials and components and specific finished products described in the submitted notification and subsequently authorized by the FTZ Board. One of the foreign-status materials listed is cold-rolled stainless steel foil, which is subject to antidumping and countervailing duty orders, and FTZ Board regulations require that such merchandise be admitted into FTZs in privileged foreign status. Comments on this notification are due no later than March 18. 

Ocean Transportation Intermediary License Revocations, Reissuances and Applicants

OTI Licenses Revoked. The Federal Maritime Commission has given notice that the following ocean transportation intermediary licenses have been revoked. A revocation may occur after a license is surrendered voluntarily by the OTI or for failure to maintain a valid bond.

- license #4483NF: Hag International LLC, Ramsey, N.J.
- license #004580F: Express Lanes International Inc., New York, N.Y.
- license #009799N: Cargo One Inc. d/b/a Cargo One, Great Neck, N.Y.
- license #16841N: FRS Freight Services Inc., Woodside, N.Y.
- license #017697F: Ireh Logistic Services Inc., Long Beach, Calif.
- license #017719F: Sunjin Shipping (U.S.A.) Inc., Jamaica, N.Y.
- license #019164N: TMMAA Line (USA) Inc., Torrance, Calif.
- license #019308N: MMI Logistics Inc., Hawthorne, Calif.
- license #019744NF: Cargo Link Air Freight Inc., Jamaica, N.Y.
- license #022179N: Alnour Investments, Orange, Calif.
- license #022214N: Bernuth Express LLC, Miami, Fla.
- license #022581NF: Cargostream LLC., Moncks Corner, S.C.
- license #022682NF: NC Cargo LLC, Miami, Fla.
- license #023476N: AV Logistics LLC, Orange Park, Fla.
- license #023656N: Ask-Ark LLC, Leesburg, Va.

OTI License Reissued. The Federal Maritime Commission has given notice that the following ocean transportation intermediary license has been reissued.

- license #020252F: Sobe Enterprises Inc., Miami Gardens, Fla.

OTI License Applicants. The Federal Maritime Commission has provided notice that the following applicants have filed applications for licenses as non-vessel-operating common carrier and/or ocean freight forwarder ocean transportation intermediaries. Persons knowing of any reason why any of these applicants should not receive a license are requested to contact the FMC.

- Atlanta Customs Brokers & Intl Freight Forwarders Inc. d/b/a ACB Ocean Services, Atlanta, Ga.
- AZ Freight Inc., Flushing, N.Y.
- Engineering & Trade Inc., Doral, Fla.
- Estes Forwarding Worldwide LLC, Richmond, Va.
- Goldstar Global Logistic LLC, Jamaica, N.Y.
- Hercules Packing Shipping & Moving Co. Inc., Astoria, N.Y.
- Jumbo Transport International Inc., Elizabeth, N.J.
- M E Dey Cargo Corporation d/b/a Orient Grace Container Line, Atlanta, Ga.
- McLimex LLC, Carson City, Nev.
- Pole Star Shipping Inc., Manalapan, N.J.
- Roadrunner Holdings LLC d/b/a Roadrunner Ltd. d/b/a Roadrunner Moving & Storage, Houston, Texas 

USDA Considers Potentially Significant Changes to Dairy Import Licensing Program

The Department of Agriculture’s Foreign Agricultural Service is soliciting comments through April 8 on a number of possible changes to the Dairy Tariff-Rate Import Quota Licensing Program. Among other things these changes could shift current quota allocations, change the annual license fee and water down a pending requirement concerning the reduction of certain license amounts.

The FAS issues licenses to import certain dairy articles under TRQs set forth in the Harmonized Tariff Schedule of the United States. These dairy articles may only be entered at the low-tier tariff by or for the account of a person to whom such licenses have been issued and only in accordance with the terms and conditions of the regulation. Licenses are issued on a calendar year basis and each license authorizes the licensee to import a specified quantity and type of dairy article from a specified country of origin.

USDA issues three types of licenses: historical, non-historical (lottery) and designated. Historical licenses are reissued each year only to importers who originally qualified by importing the product during representative base periods. If an importer with a historical license meets all requirements, the license will be issued to the same importer for the following year. Licensees must have imported at least 85% of the final license amount from the previous year. To avoid ineligibility due to the 85% rule licensees may surrender up to 100% of the license but must import 85% of any quantity not surrendered.

Section 6.25(b)(i) of the program regulations provides that beginning with the 2016 quota year there will be an additional import requirement that any historical licensee who surrenders more than 50% of the license amount for the same item from the same country during at least three of the most recent five years will be issued a license thereafter in an amount equal to the average amount imported under that license for those five quota years. However, many importers holding historical licenses have requested the elimination of this requirement. As an alternative they propose that the standard against which historical license fill rates are measured should not be 50% but rather the industry overall average fill rate for each year; i.e., a historical license for a particular item would only be reduced if the licensee imported less than 50% of the industry’s average imports of that item for three out of the most recent five years.

FAS has also received requests for changes to some of the timelines and deadlines in the current regulations. For example, some would prefer that reallocation be done prior to Oct. 1 of each year to provide more time to identify supplies and arrange shipping and handling for entry before the quota year ends Dec. 31. Others have requested a review of the method for calculating the annual fee, which is currently levied per license but could be levied in other ways such as per kilogram. In addition, given the length of time since the initial historical allocations were made almost 60 years ago (resulting in a situation in which a small number of importers control a large percentage of the quota allocations), it has been suggested that a more equitable license allocation system could be implemented.

USDA is therefore requesting public comments on the following questions.

- Does the historical and non-historical license system still serve a purpose?
- Should any provisions of the current regulation be modified in light of significant advances in technology and telecommunications?
- Should methods be developed for issuing licenses that would increase competition among importers?
- Should licenses be auctioned or issued on another basis?
- Should section 6.25(b)(i) regarding historical license reductions be eliminated, revised or indefinitely suspended?
- Should the basis upon which license fees are assessed be changed from the current flat fee per license?
- Should the deadlines for the surrender and reallocation of licenses be changed to allow earlier reallocations? 

Fresh Citrus Fruit from Uruguay May be Allowed Into U.S.

The Department of Agriculture’s Animal and Plant Health Inspection Service is proposing to allow the importation of several varieties of fresh citrus fruit from Uruguay into the continental United States. The covered fruits include sweet oranges, lemons, four species of mandarins, hybrids of the genus Citrus and two species of the genus Fortunella. Comments on this proposal are due no later than April 8.

As a condition of entry this fruit would have to be produced in accordance with a systems approach that would include requirements for importation in commercial consignments, pest monitoring and pest control practices, orchard sanitation and packinghouse procedures designed to exclude the quarantine pests, and treatment. The fruit would also be required to be accompanied by a phytosanitary certificate issued by the national plant protection organization of Uruguay with an additional declaration confirming that the fruit is free from all quarantine pests and has been produced in accordance with the systems approach. The proposed rule details each of these proposed requirements.

APHIS notes that Uruguay has historically produced less than 3% of total U.S. citrus production, including processed citrus, and that total exports of fresh citrus from Uruguay to world markets have been equivalent to less than 3% of the combined U.S. production of fresh orange, lemon, tangerine and mandarin varieties. APHIS anticipates that exports directed to the U.S. market would be a small fraction of Uruguay’s total exports of these fresh citrus fruits based on availability and currently established export markets in Europe and Russia.

Amended Maritime Agreements Filed

The Federal Maritime Commission has issued notice that the following amended agreements have been filed. Interested parties may submit comments by Feb. 18.

Dole Ocean Cargo Express/King Ocean Services Limited Space Charter Agreement – The amendment would add Guatemala, Honduras and ports in Costa Rica other than Puerto Moin and Puerto Limon to the geographic scope of the agreement.

Crowley/Dole Space Charter Agreement – The amendment would expand the geographic scope of the agreement to include all of the U.S. Atlantic and Gulf coasts and all ports and inland points in Costa Rica, Guatemala and Honduras.

U.S. Supplemental Agreement to HLC Agreement – The amendment would delete Safmarine Container Lines N.V. and add Safmarine MPV N.V. as a party to the U.S. agreement and to the worldwide agreement of the Heavy Lift Club.

EUKOR Car Carriers Inc. /FOML Space Charter – The amendment revises the geographic scope of the agreement to include ports in South Korea and makes corresponding changes.

HSDG-GWF Space Charter Agreement – The amendment adds Mexico to the geographic scope of the agreement, clarifies language and makes technical corrections. 

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