Print PDF

March 25 2013 Issue

Monday, March 25, 2013
Sandler, Travis & Rosenberg Trade Report

Legislative Update: MTB Poised to Advance, TPA on the Horizon

Ahead of a two-week Easter recess Congress is beginning to see some forward momentum on various trade issues. A miscellaneous trade bill could be assembled in the coming weeks and lawmakers have started to discuss in more detail the Obama administration’s trade liberalization initiatives for this year.

MTB. March 28 is the deadline for submitting disclosure forms for bills that were introduced in the 112th Congress to be included in the 113th Congress miscellaneous trade bill process. The House Ways and Means Committee has said that individual bills will not have to be reintroduced and that no new bills are being accepted at this time. On March 18 a number of businesses wrote to House and Senate leaders urging them to “work in a bipartisan and bicameral manner to ensure expeditious passage of the MTB” because the Dec. 31 expiration of the last such bill has increased import duties on over 600 products, “adding to the 20 percent cost differential that U.S. manufacturers already face.”

European Union FTA. The White House formally notified Congress this week of its intent to launch negotiations, no earlier than late June, on a Transatlantic Trade and Investment Partnership with the European Union. Lawmakers have made clear that there are several objectives they want U.S. negotiators to pursue in these talks, and it can reasonably be expected that the House Ways and Means and Senate Finance committees will hold hearings to communicate those objectives in the relatively near future.

Trade Promotion Authority. The last congressional grant of TPA (also known as fast track), which allows the president to submit trade agreements to Congress for a straight up-or-down vote, expired in 2007. Though some lawmakers have called for a reinstatement of this authority since that time, it remains a divisive issue and until recently there has been little practical reason to pursue it. Now, however, with the U.S. aiming to conclude the Trans-Pacific Partnership negotiations by the end of this year and about to embark on the TTIP talks, the prospects for legislative action on TPA are looking up. Both Republicans and Democrats are urging the White House to be more actively engaged on this issue, and acting U.S. Trade Representative Demetrios Marantis said last week that the administration is “ready to begin our work with you on TPA.”

Currency. A bipartisan bill introduced in the House last week seeks again to address the practice of currency manipulation by foreign countries, specifically in the context of countervailing duty investigations of imported goods. Previous versions of such legislation have been targeted primarily at China based on the argument that Beijing has manipulated the value of its currency, resulting in a growing U.S. trade deficit with China that in turn has led to a decline in domestic employment. However, many economists have rejected that link and in the meantime the U.S. economy has slowly improved and the alleged undervaluation of the yuan has steadily decreased, yielding a political environment perhaps less favorable for congressional action than has been the case in previous years.

It thus appears that supporters of this year’s Currency Reform for Fair Trade Act are taking a broader approach, pointing out that in addition to China there are other countries, including some with which the U.S. is or may soon be engaged in trade liberalization negotiations, that have been guilty of currency manipulation themselves (Japan) or have similar concerns about others engaging in this practice (the EU). An Inside US Trade article notes that currency issues have not heretofore been a major concern for the U.S. in these negotiations but that Acting USTR Demetrios Marantis told a March 19 Senate Finance Committee hearing that USTR is “giving careful consideration to the potential benefits and the potential risks of addressing currency as ... one of our trade negotiating objectives in ongoing negotiations.”

Other. Following is a list of additional trade-related legislation that has been introduced recently. The texts of these bills are or will shortly be available on the Library of Congress Web site (

S. 523 – to require that the federal government procure from the private sector the goods and services necessary for the operations and management of certain government agencies (introduced March 12 by Sen. Thune and referred to the Senate Committee on Homeland Security and Governmental Affairs)

H.R. 1063 – to require the Department of the Interior to conduct an assessment of the United States’ capability to meet its current and future demands for the minerals critical to U.S. manufacturing and agricultural competitiveness and economic and national security in a time of expanding resource nationalism (introduced March 12 by Rep. Lamborn and referred to the House Committee on Natural Resources)

H.R. 1073 – to provide for protection of maritime navigation and prevention of nuclear terrorism (introduced March 12 by Rep. Sensenbrenner and referred to the House Committee on the Judiciary)

H.R. 1085 – to extend to 2025 the production certificate program that allows refunds of duties on certain articles produced in U.S. insular possessions (introduced March 12 by Rep. Christensen and referred to the House Committee on Ways and Means)

H.R. 1086/S. 561 – to provide for the taxation of income of controlled foreign corporations attributable to imported property (introduced March 12 by Rep. Cicilline and referred to the House Committee on Ways and Means; introduced March 14 by Sen. Whitehouse and referred to the Senate Committee on Finance)

H.R. 1094 – to prohibit the sale or transport of equines and equine parts in interstate or foreign commerce for human consumption (introduced March 12 by Rep. Meehan and referred to the House committees on Energy and Commerce and Agriculture)

S. 544/H.R. 1127 – to require the president to develop a comprehensive national manufacturing strategy (introduced March 13 by Sen. Harkin and Rep. Braley and referred to the Senate Committee on Commerce, Science and Transportation and the House Committee on Energy and Commerce)

H.R. 1108 – to provide for alternative financing arrangements for the provision of certain services and the construction and maintenance of infrastructure at land border ports of entry (introduced March 13 by Rep. Cuellar and referred to the House committees on Ways and Means, Transportation and Infrastructure, and the Judiciary)

H.R. 1189 – to amend the Natural Gas Act with respect to the exportation of natural gas (introduced March 14 by Rep. Markey and referred to the House Committee on Energy and Commerce)

H.R. 1276 – to clarify that countervailing duties may be imposed to address subsidies relating to a fundamentally undervalued currency of any foreign country (introduced March 20 by Rep. Levin and referred to the House Committee on Ways and Means)

H.R. 1298 – to permit the export of apples to Canada in bulk bins without certification by the Department of Agriculture (introduced May 20 by Rep. Owens and referred to the House Committee on Agriculture) 

C-TPAT Members Warned of Increase in Smuggling in Commercial Shipments from Mexico

U.S. Customs and Border Protection sent to members of the Customs-Trade Partnership Against Terrorism March 22 a message stating that in the past few weeks it has detected an increase in narcotic and human smuggling seizures in commercial shipments (both C-TPAT and non-C-TPAT) originating in Mexico and entering through several southwest border ports. CBP is cautioning importers, foreign manufacturers, Mexican long-haul carriers and U.S./Mexico highway carriers that drug trafficking organizations may target all entities involved in the supply chain regardless of the commodity being transported. CBP is therefore recommending that C-TPAT members reassess the risk of shipments coming from Mexico and mitigate vulnerabilities through actions such as the following.

- conducting risk assessments on business partners, including monitoring their status verification interfaces, conducting site visits and highly scrutinizing new business partners

- conducting random and unannounced container inspections

- ensure that GPS in conveyances is being utilized correctly and efficiently and maintaining constant communication with the driver, tractor and trailer while en route to the border

- ensuring that managers and appropriate personnel understand company procedures on reporting suspicious activities, discrepancies and anomalies to local law enforcement agencies, CBP port(s) and assigned supply chain security specialists

- periodically conducting thorough background checks of employees, especially those who come in contact with cargo

- conducting refresher training for employees handling cargo, especially truck drivers, and training managers to detect internal conspiracies

CBP also notes that C-TPAT members have developed several best practices to defeat security breaches, including the following.

- requiring drivers to report the time at each specific area along the route

- minimizing or eliminating unnecessary stops by drivers

- ability of the highway carrier to shut off a truck’s engine remotely in the event of route deviations or lost contact with driver

- using tamper-indicative security labels bearing an actual photo of the seal and a serial number, attached to the hinges and between the two doors of the vehicle

- using multiple ISO/PAS 17712 certified high security seals on all shipments bound to the

- utilizing spot welded bolts and other hardware (such as hinge covers) and attaching a cast iron J-bar device to the locking bar (which requires a specialized tool for removal) to avoid tampering 

Football Clothing Not Classified as Sports Equipment, Court Says

The Court of International Trade ruled March 20 that certain football jerseys, pants and girdles are properly classified as articles of apparel rather than as sports equipment. The court upheld U.S. Customs and Border Protection’s classification of the pants under HTSUS 6114.30.30 (14.9% duty) and the jerseys under HTSUS 6110.30.30 (32% duty) and determined that the girdles are more appropriately classified under HTSUS 6212.20.00 (20% duty). The plaintiff had argued for classification under HTSUS 9506.99.20 (duty-free).

The plaintiff cited a 2004 decision by the Court of Appeals for the Federal Circuit in which hockey pants with both removable and non-removable padding were classified as sports equipment because they were specially designed and intended for use only while playing ice hockey. CBP responded by highlighting a subsequent 2011 decision in which the CAFC determined that sports equipment is defined as non-apparel-like merchandise that is necessary, useful or appropriate for a sport and that if the items are worn by a user they are almost exclusively protective in nature and would complement or be worn in addition to apparel worn for a particular sport.

The CIT concluded that under the framework of the 2011 decision the pads inserted into or worn under the jerseys, pants and girdles at issue would be classifiable as football equipment but those apparel items themselves, because they contain no protective padding on their own, are not. The court stated that while these items are specifically designed to accommodate the pads, this design feature does not change their identity under the HTSUS from apparel to sports equipment, nor does it qualify them as parts and accessories of football equipment. 

Company Penalized for Conducting Fuel Inspection Services on Iranian Vessels

A Louisiana company has agreed to pay $20,800 to settle potential civil liability for alleged violations of the Weapons of Mass Destruction Proliferators Sanctions Regulations, according to the Treasury Department’s Office of Foreign Assets Control. This company provided fuel inspection services on board five vessels affiliated with the Islamic Republic of Iran Shipping Lines that had been identified as blocked property. OFAC states that IRISL, which is known to engage in deceptive practices in an attempt to evade sanctions, had changed the names of four of the five vessels prior to the alleged violations but that the vessels remained identifiable by their IMO numbers, which are permanently and visibly marked on vessels.

The base penalty for the alleged violations was $32,000. OFAC states that the company acted with reckless disregard by failing to screen the names or IMO numbers of any of the vessels to which it provided services, had no sanctions compliance program in place, and did not voluntarily self-disclose its conduct. On the other hand, the company is small, had no prior OFAC sanctions enforcement history and has instituted a system to screen against OFAC’s list of specially designated nationals. 

More Fleece Fabric Added to DR-CAFTA Short Supply List

The Committee for the Implementation of Textile Agreements has determined to add to the short supply list in Annex 3.25 of DR-CAFTA in unrestricted quantities certain three-thread fleece fabric with soft hand pigment, classified under HTSUS 6001.21. CITA found that this fabric, which will be used in the production of children’s playwear, is not available in commercial quantities in a timely manner from a supplier in the DR-CAFTA countries. As a result, garments cut and assembled in a DR-CAFTA country from such fabric, regardless of where it is sourced, may be imported duty-free into the U.S.

More Fleece Fabric Added to DR-CAFTA Short Supply List

The Committee for the Implementation of Textile Agreements has determined to add to the short supply list in Annex 3.25 of DR-CAFTA in unrestricted quantities certain three-thread fleece fabric with soft hand pigment, classified under HTSUS 6001.21. CITA found that this fabric, which will be used in the production of children’s playwear, is not available in commercial quantities in a timely manner from a supplier in the DR-CAFTA countries. As a result, garments cut and assembled in a DR-CAFTA country from such fabric, regardless of where it is sourced, may be imported duty-free into the U.S.

Potential IPR Probe of Surgical Devices Evaluated for Public Interest Issues

The International Trade Commission is requesting comments no later than April 2 on any public interest issues raised by a Section 337 intellectual property rights infringement complaint filed on behalf of MAKO Surgical Corp. against certain computerized orthopedic surgical devices, software, implants and components thereof. Comments should address whether the issuance of exclusion orders and/or cease and desist orders pursuant to this complaint would affect the public health and welfare in the U.S., competitive conditions in the U.S. economy, the production of like or directly competitive articles in the U.S., or U.S. consumers. In particular, the ITC is interested in comments that:

- explain how the articles potentially subject to the orders are used in the U.S.;

- identify any public health, safety or welfare concerns in the U.S. relating to the potential orders;

- identify like or directly competitive articles that the complainant, its licensees or third parties make in the U.S. that could replace the subject articles if they were to be excluded;

- indicate whether the complainant, the complainant’s licensees and/or third-party suppliers have the capacity to replace the volume of articles potentially subject to the requested orders within a commercially reasonable time; and

- explain how the requested orders would impact U.S. consumers. 

Defense Trade Advisory Group to Meet May 9 on Technical Data, Cloud Computing

The State Department’s Defense Trade Advisory Group will hold an open meeting May 9 in Washington, D.C., to review the following issues.

- the current definitions of technical data, as well as the control language applied in each regulation, with an eye toward harmonized definitions and controls in the International Traffic in Arms Regulations and the Export Administration Regulations

- cloud computing and its various implementation arrangements as well as a report on the implications for regulators and possible guidance that might be promulgated for use by exporters consistent with regulatory controls

- the current definitions of fundamental research, with an eye toward a harmonized definition that can be used in both the ITAR and the EAR

Members of the public wishing to attend this meeting must notify the DTAG no later than May 3. 

New Defense Trade Forms to be Used Starting March 29

The State Department’s Department of Defense Trade Controls has announced that a new version of forms 5, 6, 61, 62, 73 and 74 will be implemented March 29 following the completion of an update to the DTrade2 system scheduled to begin that day. DDTC states that these forms have undergone minor revisions to (1) update the applicant's statement with new verbiage to correct text and ensure consistency across publications, (2) update the DSP-5 form title to read “APPLICATION FOR PERMANENT EXPORT OF UNCLASSIFIED DEFENSE ARTICLES, RELATED TECHNICAL DATA, AND DEFENSE SERVICES,” (3) correct spelling and formatting and (4) update each form's OMB approval expiration date. DDTC notes that the new forms will be rejected if they are submitted prior to March 29 and that the current versions will no longer be accepted after March 29. 

To get news like this in your inbox daily, subscribe to the Sandler, Travis & Rosenberg Trade Report.

Customs & International Headlines