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

March 2006

• CAFTA Operational for First Partner: El Salvador is the first country to enjoy preferential treatment under the Dominican Republic-Central America Free Trade Agreement (DR-CAFTA). Bilateral duty-free treatment for originating U.S. and El Salvadoran goods became effective March 1, 2006. Commensurate with the implementation of CAFTA, goods from El Salvador are no longer eligible for preferential treatment under the GSP, CBTPA, and CBERA programs. Sources indicate that Honduras has ratified CAFTA and approved implementing legislation required before they can benefit from the FTA. It is expected that the agreement will become effective for each of the above countries on a rolling basis, as soon as each country finalizes the necessary legislative changes. It is the importer’s responsibility to exercise reasonable care when relying on an exporter or other third party in claiming that the imported merchandise qualifies for preferential treatment.
• Free Trade Developments:

1. The U.S. announced that formal negotiations for a FTA with South Korea will start on June 5, 2006 with the intent of getting approval by June 2007, when presidential authority for a simple Congressional up or down vote expires.
2. The U.S. Trade Representative (USTR) announced that the U.S. and Malaysia agreed to begin negotiations for a FTA.
3. Thailand announced that it is suspending free trade talks with the U.S. until after its elections, scheduled for April 2, 2006.
4. The U.S. and Colombia concluded FTA negotiations.
5. President Bush extended permanent normal trade relations (PNTR) to Ukraine.

• AD/CVD Developments: The U.S. Commerce Department recently instituted a Sunset Review of its antidumping (AD) investigation of canned pineapple from Thailand.
• ITA to Abandon Zeroing: Following a World Trade Organization (WTO) finding that the U.S. International Trade Administration’s (ITA) use of "zeroing" is inconsistent under its rules, the ITA announced that it will cease using the method when calculating AD duties. Zeroing occurs when the ITA calculates a dumping rate by using average-to-average comparisons, comparing the average export price against the average normal price, but fails to offset (zero) any above average export prices against the dumping margins. The ITA is seeking comments by April 6, 2006 on alternative AD weighted average methodologies.
• Miscellaneous Trade Briefs:

1. The U.S. House Ways and Means Committee requested the U.S. International Trade Commission (ITC) to conduct a Section 332 investigation into the tariff and trade issues relating to U.S. medical devices and equipment in foreign markets.
2. President Bush renewed benefits for Liberia under the Generalized System of Preferences (GSP) program. Liberia was suspended from the program in 1990 due to worker rights concerns.
3. As a result of change in EU rules, the U.S. lifted sanctions imposed on 11 EU countries in 1993 for discriminating against U.S. companies in government telecommunications procurement; the EU lifted its counter sanctions.

• U.S. Files with WTO Against Canadian Corn Tariffs: The U.S. filed a complaint with the WTO against Canada’s import tariffs on U.S. corn. Canada assesses $1.65 per bushel on U.S. corn, claiming that the U.S. subsidizes its exporters and the corn is dumped at below-market value; the U.S. claims that Canada has not proven its case.
• Appellate Body Sides with U.S. in Sweetener Case: A WTO Appellate Body found for the U.S. in a case it filed against Mexico over its 20% tax on soft drinks and other beverages made with sweeteners other than cane sugar, i.e., imported high-fructose corn syrup (HFCS). While Mexico’s lower house of Congress voted to scrap the tax, its Senate refused to go along.
• EU May Reinstate Sanctions on U.S. Exports: The EU notified the WTO that unless the U.S. repeals the transition clause of the now repealed Foreign Sales Corporation (FSC) tax law by May 13, 2006, it will reimpose retaliatory sanctions (textiles, foodstuffs, automotive parts, and steel) it suspended from January 1, 2006, a WTO Dispute Settlement Body found that the transition clause is illegal under WTO rules.
• USTR Seeks Input for DSB: The U.S. Trade Representative (USTR) is seeking comments from interested parties by May 19, 2006 regarding Argentina’s request for a WTO Dispute Settlement Body claiming that the U.S. DOC’s re-determination in the AD case involving oil country tubular goods is inconsistent with WTO rules.

• U.S. and EU Sign Wine Agreement: The U.S. and the EU signed the recently concluded wine agreement. The agreement provides for mutual recognition of wine making processes, recognition of certain name labels, simplification of the certification process, and calls for additional talks on geographical indicators.
• EU Geographical Indicators: Following a WTO ruling against its current regime covering geographical indicators (GI), the EU agreed to allow foreign companies to register their GI claims directly with the EU, regardless of whether the company’s country has their own registration process. This grants non-EU companies the same protection as EU companies.
• India Trade Developments:

• Container Security Initiative: 1) CBP announced that the ports of Salalah, Oman and Cortes, Honduras have become operational under the Container Security Initiative (CSI); 2) Pakistan recently agreed to have its port of Qasim will join the CSI program.
• Bill Would Allow Only Scanned Containers: A bill (H.R. 4899) recently introduced in the U.S. House of Representatives would allow entry to containers only if they have been scanned and sealed prior to loading for import to the U.S. The bill asks the Secretary for Homeland Security to require scanning all containers set standards for container seals.
• LA-Long Beach Pier Pass Raises Fees: Effective April 24, 2006, Pier Pass fees for truckers using the ports of Los Angeles-Long Beach during peak hours (3 AM-6 PM) will increase to $50 per TEU (20" container) and $100 per FEU (40" container).

• Federal Food Safety Oversight to Trump State Oversight: The "National Uniformity for Food Act of 2005" (H.R. 4167) recently passed in the U.S. House of Representatives will position the federal government, and not individual states, with oversight authority for food safety. The bill will require uniform food safety labeling and will void any state food safety law, which does not conform to federal standards. The bill is aimed at the myriad state food safety laws, especially California’s Proposition 65, but will allow states with tougher laws to petition the FDA for exemption from the new federal labeling laws. Sources indicate that at this time it is doubtful whether the U.S. Senate will approve the bill.
• Miscellaneous Trade Bill Passed: The U.S. House of Representatives recently passed the "Miscellaneous Trade and Technical Corrections Act of 2006" (H.R. 4944), which contains amendments to tariff regulations as well as temporary duty reductions for a host of merchandise. The bill now goes to the U.S. Senate for approval.
• Counterfeiting Law Signed: President Bush recently signed the "Stop Counterfeiting in Manufactured Goods Act" (H.R. 32), which makes it a crime to deal in counterfeit labels, patches, stickers, badges, emblems, hangtags, etc., in order to stop the practice of importing cheap merchandise and affix a counterfeit mark once the merchandise arrived in the U.S., thus avoiding charges of importing a finished counterfeit product. The bill also requires forfeiture of all proceeds from trade in counterfeit goods and requires restitution to the owner of the genuine trademark.
• Miscellaneous Legislation: 1) A bill (S.2227) recently introduced in the U.S. Senate calls for the removal of the 100% tariffs imposed on certain roasted chicory and other roasted coffee substitutes; 2) A bill (H.R. 4689) recently introduced in the U.S. Congress would ban the use of quality grade labels issued by the U.S. Secretary of Agriculture for any imported beef or lamb.

• Improper Protest Costs Importer: The U.S. Court of International Trade (CIT) recently ruled in favor of Customs requiring an importer to pay $1,359,172, an assessment which could have been avoided had a proper protest been filed upon liquidation. In U.S. v. Golden Gate Petroleum Co., the CIT considered the case where an importer purchased Soviet-origin gasoline and toluene in the amount of $4,966,000, and made an initial entry in Portland, Oregon. Only 44% of the gasoline was off-loaded in Portland, with the proper duties paid on the value of the off-loaded gasoline, which was classified as "motor oil." The remaining portion of the gasoline and the toluene were off-loaded in San Francisco, where Customs reclassified the merchandise as "a mixture…of hydrocarbons derived …from petroleum" with a column 2 tariff rate of 30%. However, instead of assessing duties only on the remaining portion off-loaded in San Francisco, due to an apparent error on the CF-7501, duties were assessed on the value of the entire shipment, i.e., $4,996,885, resulting in an over-assessment of $1,359,172. Although the importer protested the classification of the merchandise, it failed to protest the appraisement of duties on the incorrect value. The importer failed to pay the duties plus interest, now totaling over $2 million, as demanded by Customs, resulting in Customs filing this court action. Aside from a question as to who the actual importer of record was, the defendant argued that the value error should have been apparent to both the government and broker and should have resulted in the liquidation being voided. However, the CIT ruled that because the value error was a protestable issue, and alternatively corrected through the filing of a 1520 (c) petition, the statutory provision that Customs liquidations are "final and conclusive" cannot be waived. Although "the result is unfortunate," the CIT ruled that Customs is entitled to summary judgment, and that the defendant is liable for unpaid duties of $1,359,172 plus interest.