SSTradeAlertFR021006

This bulletin has been prepared especially for clients of A. N. Deringer, Inc. by:

SERKO & SIMON LLP – Customs & International Trade Law

February 7, 2006

CUSTOMS and BORDER PROTECTION ("CBP")

CBP Announces Quick Response Audits: CBP announced its program of Quick Response Audits (QRA) which focuses audits on single issues. A QRA allows CBP to cover more of the importing community, as the focus is much narrower and the audit timeframe is much shorter. Some of the individual issues which may be targeted by QRA’s are: agriculture; antidumping (AD)/countervailing (CVD); intellectual property rights (IPR); special preferential programs; and transshipment. CBP notes that importers who are approved for the Importer Self Assessment (ISA) program, along with its inherent benefit of not being subject to a comprehensive Focused Assessment (FA) audit, may still be subject to a QRA, if a high-risk issue is identified by CBP.

Periodic Monthly Payment Test: CBP announced that it is modifying its National Customs Automation Program test regarding "periodic monthly payments" and by noting that CBP must receive payment up to the 15^th working day in order for the payment to be considered as timely.

Regulations for Rulemaking Petitions: The U.S. Department of Agriculture’s Food Safety and Inspection Service (FSIS) is proposing to set standard regulations to govern the submissions of petitions for rulemaking. The standards would ensure the filing of well supported petitions, which in turn, would help the FSIS respond in a timely manner; comments are due by March 13, 2006.

Quota Exclusions Under the U.S.-China Textile Agreement: CBP indicates that it will strictly review and enforce imports claiming specific quota exclusions under the new U.S.-China Textile Agreement. CBP instructed its ports of entries to either pull a sample to ensure that the merchandise conforms to the quota exclusion, or to only accept the merchandise as entered if it is covered by a prior ruling. The merchandise may be subject to inspection and possible seizure in the event that quota circumvention is suspected.

New CBP Commissioner: President Bush nominated Ralph Basham, currently the Director of the U.S. Secret Service, as the new CBP Commissioner.

Ceramic Dinnerware Sets: CBP is revoking two prior rulings of ceramic dinnerware "available in specified sets", as they failed to comport to the maximum measurement restrictions as noted in Additional U.S. Note 6 to Chapter 69. Additional U.S. Note 6 sets out the maximum dimensions for certain ceramic dinnerware of heading 6911 and 6912. Regardless of value, if the maximum measurement of any of the components exceed the measurements noted in Additional U.S. Note 6, they are classified under heading 6911.10.8010 (20.8% duty) or 6912.004810 (9.8% duty) (depending on their composition), the provisions for "Ceramic tableware…Other: Other: Other: Other."

TRADE TALK

U.S. Free Trade Developments: 1) The U.S. and Oman signed the U.S.-Oman Free Trade Agreement (FTA). Before it can come into effect, the FTA must be approved by Congress, signed by the President, and be the subject of a Presidential Proclamation. All industrial and consumer goods will become duty free upon implementation; 100% of Omani agricultural products will enter the U.S. duty free immediately while 87% of U.S. agricultural products will immediately be duty free; and a majority of eligible bilateral textile and apparel products will become duty free upon implementation; 2) the U.S. Trade Representative (USTR) announced the U.S. administration’s intent on starting negotiations for a FTA with South Korea. Calling it the most significant FTA embarked by the U.S. in 15 years, the USTR noted that South Korea is the world’s 10^th largest economy and the U.S.’ 7^th largest trading partner; 3) the USTR indicated that FTA talks with Malaysia may begin in the near future; 4) talks toward reaching a FTA between the U.S. and Switzerland have been postponed.

Brazil, Ukraine & Pakistan GSP Developments: 1) The USTR has closed its investigation of possible intellectual property rights (IPR) violations in Brazil. As a result, there will be no change to Brazil’s GSP eligibility resulting from these allegations; 2) in recognition of Ukraine’s efforts to combat IPR violations, the U.S. will reinstate GSP benefits for Ukraine; 3) the USTR also closed its IPR investigation of Pakistan, resulting in no changes to its GSP eligibility.

AD/CVD Developments: The U.S. International Trade Administration (ITA) recently: 1) issued an affirmative preliminary AD determination on certain metal calendar slides from Japan; 2) determined to continue its AD order on certain forged stainless steel flanges from India and Taiwan; 3) decided to continue the AD order on certain paper clips from China; 4) received an AD petition on certain activated carbon from China; 5) issued a preliminary determination to revoke the existing AD order of certain cased pencils from China as it relates to certain novelty jumbo pencils; 6) announced that it received a request for a NAFTA Panel Review for the final administrative review results of certain softwood lumber from Canada.

The U.S. International Trade Commission (ITC) announced that it: 1) issued a limited exclusion order for certain lead frame patents and terminated its Section 337 investigation into certain light-emitting diodes and products containing same; 2) received Section 337 petitions for alleged patent violations regarding imports of certain scrolling wheel computer mice and components thereof; certain combination motor and transmission systems and products containing same; and certain dental positioning appliances and methods for producing same.

The U.S. and Mexico reached a preliminary three year agreement to govern the cement trade between Mexico and the U.S. The preliminary agreement calls for: the resolution of all outstanding bilateral litigation; a three million metric ton cap of Mexican cement to be distributed throughout the southern U.S. with an AD rate of $3 per metric ton; a special import provision for natural disasters; and the revocation of the AD order upon conclusion of the agreement, with the AD monies split between the two governments.

BUSINESS BRIEFS

Move to Expand Food Safety Practices: A recent report in the Wall Street Journal indicates that a group at the FDA is highlighting the importance of expanding certain food safety practices with regard to fresh produce. As the food supply chain has steadily grown longer, covering growers, harvesters, packers, shippers, and sellers, the potential for food-borne illnesses has increased to such an extent, that fruits and vegetables now account for more large-scale food poisoning outbreaks than meat, poultry, or eggs. The FDA’s Center for Food Safety and Applied Nutrition is urging that imports should come with production dates and more farm information.

Miscellaneous Briefs: 1) China’s Yuan closed at its highest level against the U.S. dollar since its revaluation last year. The Yuan closed Monday, February 2, 2006 at 8.0555 to the dollar; 2) the EU is considering whether to file a suit with the World Trade Organization (WTO) over China’s lax enforcement of IPR as they relate to auto manufacturers. The EU also criticized new Chinese legislation that levy the same tariffs on spare parts as on those for finished products; 3) effective January 1, 2006, China has implemented the ISPM requirements for imported wood packaging materials (WPM); 4) the U.S. Animal and Plant Health Inspection Services’ (APHIS) list of WPM requirements for different countries can be accessed at: http://www.aphis.usda.gov/ppq/wpm/export/requirements.html.

EAR Violations: The U.S. Bureau of Industry and Security (BIS) recently announced the following actions against individuals and companies accused of violating the Export Administration Regulations (EAR): 1) a Wisconsin individual was sentenced to five years prison, a $50,000 fine, and the forfeiture of his home and $329,000 in cash, for conspiring to illegally export certain electronic components to China without the proper license. His wife and a third co-conspirator were also sentenced to prison terms and fines as part of the same conspiracy; 2) an Oklahoma company plead guilty to conspiring to provide Iran with engineering and procurement services in contravention of the embargo against Iran; 3) a Houston partnership plead guilty and received probation, a $50,000 penalty, loss of export violations, and forfeiture of the seized goods, for the attempted illegal export of specialty alloy pipes to Iran.

Recent CPSC Developments: 1) The U.S. Consumer Product Safety Commission (CPSC) recently signed separate cooperative agreements with India and Israel to improve the safety of consumer products traded between the U.S. and these trading partners. The agreements call for the exchange of information and experts to enhance the safety of products; 2) the CPSC is seeking comments by March 27, 2006 regarding the extension of children’s sleepwear testing requirements for fabric, seams, and trim, and the requirement for maintaining records of the testing results; 3) the CPSC also announced the following voluntary product recalls: certain sportswear and windbreaker jackets, as the hood drawstring can cause a choking hazard; certain motor routers, as the insulations can wear away by vibration and become a shock hazard; certain sunroom roof glass and skylights, as sunlight reflecting off the glass onto adjacent wood shingles may pose a fire hazard.

TRANSPORTATION TIDBITS

EU Votes Against Port Liberalization: Following protests throughout the EU, EU lawmakers overwhelmingly voted against an EU proposal which would have allowed for the liberalization of port services.

India Requires Bullet Seals: India Customs is requiring the use of bottle or bolt tamper evident seals (bullet seals) on all cargo containers entering or departing its ports. India also requires the serial numbers to be documented on the shipping manifests. Failure to follow these requirements may result in refusing movement of the container.

LEGISLATIVE DEVELOPMENTS

Congress Finally Repeals Byrd Amendment: After several attempts, both houses of the U.S. Congress voted to repeal the Continued Dumping and Subsidy Offset Act (CDSOA), also known as the Byrd Amendment. The Byrd Amendment calls for the disbursement of all collected AD and CVD monies to affected domestic companies. The Amendment was ruled inconsistent with WTO rules and has lead to sanctions against certain U.S. exports by the EU, Canada, Japan, and Mexico (subsequently removed). However, the repeal is only effective for entries as of October 1, 2007, and it is not known whether this delay will cause the reimposition of sanctions.

Reauthorization of Export Control Enforcement: A bill (H.R. 4572) was recently introduced in the U.S. Congress that would renew the authority for export restrictions of certain sensitive dual-use goods technology. The bill would reauthorize the Export Administration Act (EAA) for two years, and raise the cap on penalties for violators.

COURT CASES

Broker’s Actions Costly to Importer: In U.S. v. Pan Pacific Textile Group, Inc., et al, (slip Op. 06-18) the U.S. Court of International Trade (CIT) set an amount of over $3,600,000 for lost duties and interest due by an importer for the fraudulent actions of its broker. Pan Pacific is the first time the CIT held an importer liable for customs violations committed by its agent, even if the importer was unaware of the agent’s actions. The agent’s scheme involved making itself the importer of record, entering the merchandise using a classification with a lower duty rate, and charging the importer as if it had used a higher duty rate. The CIT ruled that as long as the importer has some end benefit of the scheme (here the importer still paid the broker less than actually required), "it is irrelevant whether or not defendants authorized the specific unlawful conduct which constituted the violation." The court noted that extending the liability to defendants for unpaid duties "serves an additional public policy interest by creating proper incentives for importers in the future."

Valid Protests Require Specificity: In Saab Cars USA, Inc. v. U.S., the U.S. Court of Appeals for the Federal Circuit (CAFC) affirmed a CIT finding that Saab’s protests of defective merchandise failed to satisfy the regulatory requirements for a valid protest. Saab’s claims were based on defects found on its imported cars both at the actual time of import and at later dates. On the submitted spreadsheets attached to the protests, the importer described the defects associated with each vehicle in simple 2-5 word descriptions. Although the court’s questioned whether the protests met the three requirements to successfully claim an allowance for defects under the statutes, i.e., 1) show it contracted for "defect-free" merchandise; 2) link the defective merchandise to specific entries; and 3) prove the amount of allowance for each entry, it nevertheless denied most of the protests because the importer could not prove with a preponderance of the evidence that the imports were defective at the time of import. In addition, the courts reiterated that for a protest to be valid, it "must contain a distinct and clear specification of each substantive ground of objection" and a requirement of "specificity" must exist so that the protest is "sufficient to notify the collector of its true nature and character, to…ascertain the precise facts, and have an opportunity to correct the mistake and cure the defect."

Misdescribed Imports: CBP filed a civil action against an importer of Canadian softwood lumber for misdescribing its imports by means of material and false statements, and/or omissions of Customs laws. In falsely describing the softwood lumber, the importer caused the merchandise to be classified under a provision which is not subject to the Softwood Lumber Agreement (SLA) between the U.S. and Canada. Under the SLA, certain Canadian lumber is subject to a quota limit, requires a permit, and is subject to a Canadian collection fee.

Serko & Simon LLP
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Phone (212) 775-005 Fax (212) 839-9103
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E-mail address: serko-simon@customs-law.com On the internet at: www.customs-law.com

This Trade Alert has been prepared by Chaim Appel, Technical Advisor.