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March 20 2013 Issue

Wednesday, March 20, 2013
Sandler, Travis & Rosenberg Trade Report

Parallel Market Imports of Foreign-Made Goods Allowed Under U.S. Law, Court Says

A March 19 Supreme Court decision concerning so-called parallel market products is good news for discount retailers and will expand consumer choice and lower prices, according to ST&R founding member Lee Sandler. The court ruled that the first sale doctrine in U.S. copyright law, which provides that manufacturers lose the right to control the sale of copyrighted goods after their first authorized sale, applies to copies lawfully made overseas and then imported into the U.S. This decision follows a 1998 Supreme Court ruling that the first sale doctrine also applies to goods reimported after having been produced in the U.S. and then exported.

“This is a great decision for the U.S. economy,” said Sandler, who filed an amicus brief in the case on behalf of a major U.S. trade association. “Any other decision would have been shocking to our common sense. U.S. law should support production in the U.S., not production abroad.”

Business groups supporting the court’s decision had asserted that without it U.S. manufacturers could be driven to move their operations overseas to secure copyright protections that would enable them to exercise more control over the distribution and price of their goods in the U.S. According to a Bloomberg article, supporters also argued that “taken to its logical extreme, elimination of the first-sale doctrine for foreign-made goods would prevent libraries from lending books, bar consumers from reselling items and even stop museums from displaying artwork in violation of the copyright owner’s rights.” While Sandler said “this threat from the court is now over,” one of the Supreme Court justices said Congress might want to revisit the issue.

This case arose after a Thai national attending college in the U.S. had friends and family ship him textbooks that he subsequently resold on the Internet. Those books had been produced overseas by a U.S. publishing company using a wholly-owned foreign subsidiary and were intended solely for sale to non-U.S. markets. The individual was sued by the publishing company for violating its exclusive right to distribute its copyrighted works and importing a copy made abroad without its permission. Upholding a district court decision, the Second Circuit Court of Appeals ruled that in this case the first sale doctrine (17 USC § 109(a)) does not provide a valid exception from the ban on unauthorized imports of copyrighted materials (17 USC § 602(a)(1)) because it specifically applies to goods “lawfully made under this title” and the books at issue do not meet that description because they were manufactured overseas where the U.S. law does not apply.

The Supreme Court overturned those decisions by pointing out that section 109(a) “says nothing about geography” and that other provisions clearly extend protection under the Copyright Act beyond U.S. borders. The court also noted that reliance on the first sale doctrine is “deeply embed¬ded in the practices of booksellers, libraries, museums, and retailers” and that “the prac¬tical problems described by petitioner and his amici are too serious, extensive, and likely to come about to be dismissed as insignificant—particularly in light of the ever-growing importance of foreign trade to America.”

Trade Facilitation Measures Recommended for DR-CAFTA Region

A report prepared with the help of two Sandler, Travis & Rosenberg professionals has identified a number of steps that should be taken to further facilitate trade in the DR-CAFTA region. The report states that lowering barriers such as inefficient customs procedures, redundant paperwork, and a lack of adequate infrastructure and technological capabilities can be a significant tool for boosting trade flows and economic growth and development. In this context, the Inter-American Development Bank, the U.S. Chamber of Commerce and the Association of American Chambers of Commerce in Latin America (which sponsored this report) “place the highest priority on trade facilitation measures for realizing the vision of a more competitive, economically integrated and prosperous Latin America and the Caribbean region.”

ST&R’s Nicole Bivens Collinson, president of the firm’s trade negotiations and legislative affairs practice, and Ned Steiner, senior director for trade negotiations and legislative affairs, provided technical support and input for the report. Collinson explained that while the benefits of facilitating trade throughout the global supply chain far outweigh those associated with the removal of tariffs, countries are finding it difficult to change the way they have traditionally conducted customs business. “This report is a stellar example of a group of countries willing to look in the mirror to reflect on what they need to do to be more globally competitive,” Collinson said, “and that work involves addressing domestic and regional hurdles to facilitating trade.” Steiner added that with trade facilitation also the subject of substantive work at the World Trade Organization and among Asian nations, the DR-CAFTA nations must now develop a road map on how to implement the report’s recommendations to remain competitive in today’s global economy.

The report points out that while DR-CAFTA has had a positive effect on trade in the region since implementation began in 2006, it has also highlighted deficiencies in commercial logistics and infrastructure issues that prevent the region from attracting more investment and business. Problems are identified in areas such as customs administration (e.g., lack of information and training, inadequate staffing and technological infrastructure, and corruption), complexity of import requirements, communication between customs administrations and consumer protection organizations, coordination between national customs administrations, dispute settlement, timely release of goods (particularly express shipments), and implementation of trusted trader programs.

The report therefore recommends adoption of the following measures.

- greater follow-up on trade facilitation commitments, including permanent channels for private sector input into the drafting of legislation and regulation and independent evaluation of progress in trade facilitation issues

- implementation of a fully electronic entry documentation system, beginning with those countries ready to do so and extending to the entire region when appropriate

- harmonization of border controls, with the International Convention on the Simplification and Harmonization of Customs Procedures as a foundation and the goal of ensuring uniform interpretation and application of customs rules and regulations within countries and across the region (e.g., by developing a regional model similar to the Centers of Excellence and Expertise being rolled out in the U.S.)

- implementation of a harmonized tariff system in the region, including promoting the use of advance rulings and determining whether the time for issuing such rulings can be lowered to 30 days

- mutual recognition of sanitary and phytosanitary and SPS-related registrations, beginning with one or two priority products in areas such as cosmetics, food or medicines that could serve as a pilot project

- adoption of authorized economic operator programs and risk systems, including consideration of different programs for different modes of transportation, an AEO program for low-risk goods, and negotiations to achieve mutual recognition agreements

- transparency and capacity building, including permanent capacity building mechanisms taking into consideration all the different public sector agencies involved in international trade issues 

New Trade Restrictions Agreed on Timber, Marine Species, Other Plants and Animals

At the triennial Conference of the Parties to the Convention on International Trade in Endangered Species of Wild Fauna and Flora held in Thailand earlier this month, CITES members adopted a number of measures to further regulate global commerce in various plant and animal species. A CITES press release notes that four species were transferred from Appendix II (which allows regulated trade in listed species) to Appendix I (which prohibits trade in listed species), an additional four species were transferred from Appendix I to Appendix II, and 343 new species were added to Appendix II. Further, 11 species were removed from Appendix II and six were removed from Appendix I. More details on these decisions can be found here.

Other developments at this meeting included a decision to explore the possibility of making the Global Environment Facility a financial instrument for CITES and the first global meeting of wildlife enforcement networks, which focused on improving regional enforcement capacity and coordination to respond to the serious threat posed to wildlife by criminal networks. Member states also adopted provisions to refine the standards for making scientific findings, determine the country responsible for issuing documentation for marine species harvested in international waters, assess the impact of CITES decisions on the livelihoods of rural communities, and address potential conflicts of interest that could significantly impair the impartiality, objectivity or independence of members of CITES committees.

Highlights of the species-specific actions taken at this meeting include the following.

Timber. International trade in a range of rosewoods and ebonies from Asia, Central America and Madagascar will now be regulated by CITES. Rapidly rising demand for these tropical hardwoods has led to serious concerns that unregulated logging is depleting populations of already rare species. Special procedures have been agreed for musicians and institutions travelling with musical instruments containing these woods and other products of species listed under CITES.

Sharks. Five commercially valuable shark species – oceanic whitetip, scalloped hammerhead, great hammerhead, smooth hammerhead and porbeagle – that are harvested in large numbers for their fins and, in some cases, meat have been added to Appendix II. As a result, such species will have to be traded with CITES permits and evidence will have to be provided that they are harvested sustainably and legally.

Elephants. The general “rules of the game” for trading in elephants or elephant products were thoroughly revised, modernized and strengthened (e.g., addressing e-commerce, systematically using forensics, monitoring ivory stockpiles, controlling live elephant trade, dealing with countries that are persistently involved in illegal trade in ivory, etc.). A suite of targeted actions focusing on the 30 countries mostly involved in or affected by the illegal killing of elephants and the illegal trade in ivory was approved, and an agreement to continue debating the future of trade in ivory and keep management options open was reached.

Rhinoceros. The Conference requested parties concerned to prosecute members of organized crime groups implicated in rhinoceros related crimes under a combination of relevant legislation that carries appropriate penalties that will act as an effective deterrent. Countries were also asked to consider stricter domestic measures to regulate the re-export of rhino horn products from any source and to develop and implement demand reduction strategies aimed at reducing the illegal movement and consumption of rhino horn products. Member states have agreed to convene a Rhinoceros Enforcement Task Force to develop strategies to improve international cooperation.

Big cats. Range states were requested to organize national seminars on Appendix I Asian
big cats to promote a multi-disciplinary approach that will facilitate improved coordination and cooperation in the detection, investigation and prosecution of wildlife crime offences. An agreement was also reached to undertake a study on cheetahs to determine how best to address the alleged illegal trade in live specimens. Better rules were adopted to refine the leopard trophy hunting system. 

FDA Corrects Proposed Food Safety Rules for Foreign and Domestic Facilities

The Food and Drug Administration has corrected two proposed rules issued in January under the Food Safety Modernization Act. The first rule would establish science-based minimum standards for the safe growing, harvesting, packing and holding of fruits and vegetables grown for human consumption. The second rule would apply to human food and require domestic and foreign facilities that are required to register under the Federal Food, Drug and Cosmetic Act to have written plans that identify hazards, specify the steps that will be put in place to minimize or prevent those hazards, monitor results, and act to correct problems that arise.

The FDA states that these rules were published with various errors, including typographical errors, errors in cross references and reference numbers, stylistic errors (such as incorrect indentation of bulleted paragraphs and a gap in the sequential numbering of tables), and an appendix in which all references were numbered incorrectly. The corrections may be found here and here

AD/CV Notices: Wooden Bedroom Furniture from China

Agency: International Trade Administration.
Commodity: Wooden bedroom furniture.
Country: China.
Nature of Notice: Amended final scope ruling pursuant to court decision.
Details: A specific type of bench is excluded from the scope of this antidumping duty order. The ITA will instruct U.S. Customs and Border Protection that there will be no AD cash deposits on these benches. In the event the court ruling is not appealed or is upheld on appeal, the ITA will instruct CBP to liquidate entries of these benches without regard to AD duties and to lift the suspension of liquidation of such entries. 

Ocean Transportation Intermediary License Revocations, 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 #4035F: Dynamic International Cargo Corp., Miami, Fla.
- license #16044F: Atlas International Freight Forwarding (USA) Inc. d/b/a Atlas Cargo, Miami, Fla.
- license #17641N: Best Raider Cargo Express Ltd., Valley Stream, N.Y.
- license #18134N: KSO Container Inc., Los Angeles, Calif.
- license #018789N: Cargo Agents Inc., Flushing, N.Y.
- license #019990NF: TMO Global Logistics LLC, Charlottesville, Va.
- license #020526NF: Gamma International Logistics Inc. d/b/a Logistix Container Line, Miami, Fla.
- license #021485N: Global Link Express Corp., Hialeah Gardens, Fla.
- license #022088NF: CNS Logistics Inc., La Mirada, Calif.
- license #023685N: Florida International Enterprises Inc., Miami, 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.

- All Express Cargo LLC, Miami, Fla.
- Brookfield Relocation Inc., Shelton, Conn.
- Covenant Global Logistics Inc., Houston, Texas
- EXL Logistics Inc., Miami, Fla.
- Global Parcel System LLC, Miami, Fla.
- Graylion Logistics LLC, Jacksonville, Fla.
- Innocent Peter Ajaroh, Houston, Texas
- Innglo Global Shipping LLC, Kirkland, Wash.
- Sea Marine Transport LLC d/b/a Sea Marine Freight Forwarding, Houston, Texas
- Tripoli Shipping Services Inc., Houston, Texas 

Foreign Regulatory Changes Could Affect Exports of Tires, Foods, Rice Cookers, Lighting

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.

Thailand – certificate requirement for importation of new pneumatic tires of rubber, fans, rice cookers and lighting products

Uganda – final draft standards on sweet potato flour, sweet potato crisps and potatoes (comments due by May 15) 

Amended Maritime Agreement Filed

The Federal Maritime Commission has issued notice that the following amended agreement has been filed. Interested parties may submit comments by April 1.

West Coast of South America Discussion Agreement – The amendment deletes Peru from the geographic scope of the agreement. 

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