May 2005

• Prominence of Calories Label Proposal: The U.S. Food & Drug Administration ("FDA") is requesting comments by June 20, 2005 on a proposal to make changes to its nutrition labeling regulations to give more prominence to calories on food labels. Possible changes include: 1) increasing the font size for calories; 2) providing for a %DV for calories; and 3) eliminating the "Calories from fat" listing, as this may take the emphasis away from the listing of "Calories".
• Plain Language Food Labeling: The "Food Allergen Labeling and Consumer Protection Act of 2003," requiring the use of "plain language" on food labeling becomes effective January 1, 2006. The act is intended to make it easier for consumers with allergies by requiring the use of plain and common language to indicate the presence of any of the following eight major food allergens: milk, eggs, peanuts, tree nuts, shellfish, soy, and wheat. The act also requires the listing of any major food allergens used in additives, colorings, flavorings, and spices, which up to now has been exempt from being listed.
• Waiver of Inspection and Weighing for Certain Grain: The U.S. Department of Agriculture ("USDA") is requesting comments by June 27, 2005 on an interim final rule to waive for a five year period the inspection and weighing requirements for container exports of certain high quality specialty grain.
• Global Food Traceability Reports: The USDA issued a report titled "Global Traceability and Labeling Requirements for Agricultural Biotechnology-Derived Products: Impact and Implications for the United States" which can be accessed at:

• Miscellaneous Developments: 1) The USDA and FDA issued a joint proposed rule to establish a set of general principles to update and modernize existing food identity standards; 2) the FDA issued a guidance document on pre-consultations for food and color additives; 3) the USDA's Food Safety and Inspection Service ("FSIS") issued a document titled "Industry Self-Assessment Checklist for Food Security", intended to help facilities determine the extent of security at their facilities.

• Countries Impose Retaliatory Sanctions on U.S. Exports: Effective May 1, 2005, the EU and Canada imposed retaliatory tariffs of 15% on certain U.S. exports over the Continued Dumping and Subsidy Offset Act, also known as the Byrd Amendment, which was ruled illegal by the World Trade Organization ("WTO"). The EU levied additional 15% tariffs on a variety of U.S. agricultural, machinery, paper and textile products, while Canada imposed tariffs on U.S. cigarettes, oysters, and live swine exports. Other countries are expected to announce similar tariffs shortly.
• Free Trade Developments: 1) The U.S. and Morocco agreed to amend and postpone the effective date of the U.S.-Morocco Free Trade Agreement ("FTA") from January 1, 2005 until July 1, 2005; 2) India and Japan took a first step toward a FTA, which will be the first FTA for India with a developed country and only the third FTA for Japan; 3) following Australia's recognition of China as a "market economy", China and Australia signed a memorandum of understanding toward establishing a FTA; 4) the EU, Israel, and Jordan signed a declaration updating the Pan Euro-Med rules of origin for joint Israeli-Jordanian exports from free trade zones to the EU; 5) China and India will enhance cooperation in the agricultural area and jointly research new agricultural technology.
• New USTR: The U.S. Senate confirmed Robert Portman as the new U.S. Trade Representative ("USTR"). In his testimony before the Senate Finance Committee, Mr. Portman indicated he will take a tougher approach to trade with China and order "an immediate top to bottom review" of various trade complaints against China.
• Fair Trade Developments: The International Trade Commission ("ITC") recently: 1) issued a final negative determination in its antidumping ("AD") and countervailing ("CV") investigation of polyethylene terephthalate ("PET") resin from India, Indonesia, and Thailand; and 2) revoked its AD order on sebacic acid from China.
• Intellectual Property Rights Report: The USTR released the results of its annual report of intellectual property rights ("IPR") protection around the world. Ukraine, currently subject to $75 million in sanctions, will remain the only country subject to sanctions. China, along with thirteen other countries, has been put on the "Priority Watch List" and faces the threat of possible sanctions should their IPR protections not improve.
• National Emergencies: President Bush continued the national emergency with regard to Burma and Syria for an additional year.

• Final Rule Against EU Sugar Subsidies: The WTO's appellate court upheld a WTO lower body decision which found the EU's sugar subsidy regime to be illegal under WTO rules. In a case brought by Brazil, the WTO found that the EU sugar subsidies encouraged overproduction of sugar, which was subsequently dumped around the world. The EU has 180 days to bring its sugar subsidies into compliance with WTO rules.
• U.S. to Comply with WTO Cotton Ruling: The U.S. administration notified the WTO of its intent to fully comply with the recent WTO Dispute Settlement Body ("DSB") finding against the U.S.' cotton subsidies.
• Iran Starts WTO Membership Process: WTO members agreed by consensus to allow Iran to open negotiations to join the WTO.
• Saudi Arabia Seeks WTO Membership: Saudi Arabia is finalizing a WTO trade deal with the U.S. which should increase its chances of joining the WTO in the near future.
• New WTO Chief: Pascal Lamy, the former EU Trade Commissioner, was elected as the next Director General of the WTO.

• Chinese Monetary Policy: In its semiannual report to Congress on foreign exchange rate policies, the U.S. Treasury Department warned China over its continued refusal to move its currency to a more flexible exchange rate. The Treasury Department found that China's current currency policies "are highly distortionary and pose a risk to China's economy, its trading partners and global economic growth." "If current trends continue without substantial alteration, China's policies will likely meet the technical requirements of the statute for designation," referring to designation as a currency manipulator, which automatically triggers required negotiations, and eventually sanctions if unsuccessful. The U.S. administration clarified that it does not seek an immediate move to a full flexible monetary policy but is seeking intermediate steps which will lead to a more flexible exchange rate.
• China Introduces Agricultural Monitoring System: China introduced an agricultural early warning system to monitor and analyze the production, storage, import, export, and ingredient costs of corn, cotton, oil plant, rice, soybean, sugar plant, and wheat to help to better plan supply and demand, imports, and profits.
• BIS Announces Settlements and Penalties: The Bureau of Industry and Security ("BIS") announced the following penalties for companies violating the Export Administration Regulations ("EAR"): 1) a $16,500 civil penalty to a company that exported power plant technical data to an organization on the BIS' Entity List; 2) a $17,500 penalty to a U.K. company for failure to comply with recordkeeping requirements; 3) a $10,000 civil penalty for exportation of optical devices to Canada in violation of the EAR; 4) a $10,000 civil penalty for exportation of an aluminum plate to an entity on the BIS' Entity List without the proper export permits; 5) a Pennsylvania company was sentenced to five years probation and was fined over $550,000 for violating the EAR and the Iranian Transactions Regulations by knowingly exporting banned miniature photo labs to Iran and making false statements on the Shipper's Export Declarations; and 6) denied export privileges for three years to a company who allegedly aided the exportation of gas compression spare parts to Iran in violation of the EAR.

• Cold Medicine Sales Restricted: With 45 states having imposed or considering restrictions on the sale of cold medicines containing pseudoephedrine as an active ingredient, and pending legislation in the U.S. Senate, some of the nation's largest retailers and drug store chains are taking steps to restrict access to these medicines. Retailers are moving these medicines behind the counter and are in discussions with drug manufacturers to possibly reformulate cold medicine ingredients in an effort to restrict the use of pseudoephedrine, which is used as a precursor in producing methamphetamine.

• EU Votes for 48-Hour Maximum Work Week: The EU Parliament recently voted to scrap an "opt-out" option and make the 48-hour maximum work week obligatory. The new EU Working Time Directive will be phased in over a three year period.
• GMO Food Developments: 1) India's Engineering Approval Committee recently approved the cultivation expansion of genetically modified ("GMO") cotton in its northern region, until now only allowed to be grown in the south; 2) China is expected to soon become the first country to approve the mass production of genetically engineered rice; 3) the EU posted a change to its register of GMO foods legally allowed to be sold in the EU to clarify that those GMO foods approved prior to the inception of the register in April 2004 do not have to undergo new scientific safety assessments and approvals.
• Recent Innovations: 1) Researchers at the Technion in Israel have developed a flexible needle which guides it to its objective target. The needle, attached to a robot guided by sensors, maneuvers around obstacles in the body and negates any patient movement in order to reach its intended target; 2) a major retailer has redesigned the standard medication pill box, the first in about 40 years. Target Corp's redesign encompasses a flatter bottle which rests on its cap, easy to read labels wrapped over the top, and color coded ring options to help identify the medication between different family members. The flattened bottle has a card slot for additional important medical information and bottles for liquid medicines contain a receptacle for oral syringes.

• Denied Ports Update: The U.S. Coast Guard announced that effective May 23, 2005, absent certain security measures, ineffective anti-terrorism procedures in certain countries will result in denial of entry to U.S. ports to ships calling in the following countries during their last five port calls: Democratic Republic of Congo, Guinea-Bissau, Liberia, Mauritania, and Nauru.
• CSI Ports: The ports of Dubai, Shanghai, and Buenos Aires have recently become operational under the Container Security Initiative ("CSI") program.

• Drug Imports: Proposed legislation to allow drug imports recently introduced in the U.S. Senate by Senators Dorgan (D-N.D.) and Snowe (R-Maine) reportedly has the greatest chance of passage and approval, as it addresses some of the shortcoming of others drug import proposals. Addressing safeguard concerns, the proposed legislation would only allow the importation of drugs on an FDA approved list, would require pharmacists and drug wholesalers to register with the FDA to participate in the program, would give FDA inspectors access to foreign production and distribution facilities, and impose a 1% sales fee on wholesalers to fund the program.

• Supreme Court Upholds Beef Checkoff Program: In a closely watched decision, the U.S. Supreme Court ruled that the beef checkoff program is constitutional. The beef checkoff program (a research and promotion program) is a targeted tax assessing $1 per head on each cattle sold, imported, or exported and is used to fund a marketing campaign to increase awareness and sales of beef products. Opponents of the program argued that the mandatory nature of the tax assessment is akin to "compelled speech" which is a violation of their first amendment right of free speech. Several lower courts agreed with the "compelled speech" argument and ruled that the beef checkoff program violated the petitioner's free speech and was unconstitutional. Similarly, the Supreme Court previously found that the mandatory mushroom checkoff program was unconstitutional, comparing it with the ability of union and association members being able to withhold their dues from advocacy they disagree with. However, in Johanns v. Livestock Marketing Association, the Supreme Court used a new analysis in finding that the beef marketing campaign, run by the government, is essentially "government speech", and thus, is not subject to ordinary first amendment review. The court stated that "citizens may challenge compelled support of private speech, but have no First Amendment right not to fund government speech." This ruling throws into question challenges to similar checkoff programs for pork, soybeans, lamb, wool, cotton, dairy, eggs, fruits, vegetables, and specialty crops.
• Salt Should be Regulated: Claiming that salt is more prevalent in the food supply chain than ever before, a consumer group recently re-filed a 1983 lawsuit seeking to force the FDA to declare sodium as a food additive and set salt intake limits.
• Chondroitin Sulfate is Duty Free: In Inabata Specialty Chemicals v. United States, the Court of International Trade ("CIT") considered whether there must be "conclusive proof" of efficacy for a substance to be considered as a "therapeutic" treatment of Chapter 30 (duty free), HTSUS. Inabata involved the classification of chondroitin sulfate, imported in bulk powder form and packaged for retail sale as a dietary supplement. CBP classified the merchandise under subheading 3913.90.20 (5.8%), HTSUS, the provision for "Natural polymers…Other:...Polysaccharides and their derivatives," while the importer claimed that the proper classification in under subheading 3001.90.00 (duty free), HTSUS, the provision for "other human or animal substances prepared for therapeutic or prophylactic uses…Other." At trial, the importer provided expert testimony, scientific and market evidence showing that chondroitin sulfate is prepared for and used to alleviate symptoms of Osteoporosis ("OA"), while CBP claimed that although chondroitin sulfate is used in the marketplace to alleviate OA symptoms, it is not yet "proven" to work as claimed. The court found that for classification purposes it is not required to determine how effective a reliever the merchandise is so long as the marketplace recognizes the use of the merchandise as a therapeutic substance. Should it be shown in the future that the merchandise does not have the relieving propertied it claims to have, its market as a therapeutic substance will cease to exist, and with it, its classification as a therapeutic substance. As a result of the court's ruling importers of chondroitin sulfate should consult customs counsel in order to safeguard their rights to any potential duty refunds.
• Dental Hygiene Products: In Warner-Lambert Company v. U.S., the U.S. Court of Appeals for the Federal Circuit ("CAFC") reversed the CIT's ruling with regard to the proper classification of Warner-Lambert's Certs® Powerful Mints. CBP classified the mints under subheading 2106.90.99 (6.4% duty), HTSUS, as a "food preparation not elsewhere specified or included." Warner-Lambert contended that as the mints are used to freshen breath and eliminate oral malodor, they should be classified under subheading 3306.90.00, HTSUS, as "Preparations for oral or dental hygiene…Other" (duty free). The CIT, relying on a U.S. Food & Drug Administration ("FDA") monograph on oral health care which stated that "hygienic measures" to control malodor contain antimicrobial active ingredients, concluded that because the mints do not contain any antimicrobial active ingredients they can't be classified as preparation for oral hygiene under HTSUS 33.06. However, the CAFC disagreed and found that although antimicrobial agents are linked to hygienic measures, "preparation for oral or dental hygiene" is not defined in any standard and hygienic activity may take place without the use of antimicrobial agents. In the case at issue, testimony was offered that Certs® Powerful Mints stimulate salivary flow which controls malodor by purging, while the flavoring masks the malodor as well. In addition, the CAFC noted that because Customs' prior rulings on this merchandise neglected to analyze the chemical composition of the mints, which help achieve the cleansing effect and purging activity, Customs' position does not merit Skidmore deference.

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