This bulletin has been prepared especially for clients of A. N. Deringer, Inc. by:
SERKO & SIMON LLP – Customs & International Trade Law
September 7, 2005
CUSTOMS and BORDER PROTECTION ("CBP")

• China Textile Developments: 1) The second round of meetings between U.S. and Chinese officials held last week in an effort to reach a broad agreement regarding the rapid increase of Chinese textile and apparel exports to the U.S., has not produced any acceptable agreement. Following the collapse of those talks, the U.S. Committee for the Implementation of Textile Agreements (CITA) announced, that effective August 31, 2005, it is reimposing quota on Chinese cotton and MMF brassieres (cat. 349/649), and other synthetic filament fabric (cat. 620). The new quota will be effective through 2005 at a pro-rated level of 7.5% above the first 12 months of the previous 14-month period; 2) in an effort to keep up the pressure on China to reach a bilateral agreement to govern textile and apparel exports, CITA is postponing until October 1, 2005 its decision on special safeguard petitions it received on Chinese cotton and MMF knit fabric (cat. 222), cotton and MMF sweaters (cat. 345/645/646), cotton and MMF dressing gowns and robes (cat. 350/650), and men's and boy's wool trousers (cat. 447); 3) the agreement reached between the EU and China to manage Chinese exports of sensitive textiles and apparel has been widely criticized in Europe, as the quota limits quickly filled, leaving upwards of 75 million pieces of goods embargoed at EU ports. After tough negotiations with China, it has been agreed that half the excess garments will be allowed into the EU outside the new quota rules while the other half will be deducted from China's 2006 quota allotment. China has also agreed not to issue any new export licenses for the affected merchandise this year for the EU market.
• China Currency Development: Officials at the People's Bank of China announced that they are not expecting any additional revaluations of the Yuan anytime soon. A deputy governor at the bank indicated that China is content with letting the foreign exchange marketplace dictate the value of the Yuan, albeit within its allowable trading band. Officials indicate that they are going slow with regard to the Yuan's value so as to protect China's businesses from exchange rate volatility, and as businesses learn more about the foreign exchange marketplace, they may expand the Yuan's trading band.
• AD/CV Liquidations for Destroyed Documents: CBP issued a notice allowing for the reconstruction of any entries subject to antidumping (AD) or countervailing (CV) duties which may have been destroyed on September 11, 2001. CBP will accept reconstructions up to 30 days after release of notice that the suspension of liquidations has been lifted.
• New Sock Labeling Requirements: Certain socks sold after March 3, 2006 will be subject to new country of origin labeling requirements, as spelled out in the Miscellaneous Tariff Bill of 2004 (H.R. 1047, P.L. 108-429). Under the new law, certain socks of heading 6111 and 6115, will be required to be marked with the country of origin in English, on the front of the package adjacent to the product size and as legible and permanent as possible. Packages which include the covered socks along with other products will be exempt for these requirements.
• Countries Allowed to Trade in Diamonds: The U.S. Department of State issued a Federal Register Notice listing the countries and their respective importing and exporting authorities eligible to trade in rough diamonds, as set forth in the Clean Diamond Trade Act of 2003.
• Electronic Organizers: CBP posted to its web site a new Informed Compliance Publication (ICP) on PDA's, electronic organizers, and similar hand-held electronic devices titled "Personal Digital Assistants (PDA's) and Electronic Organizers."

TRADE TALK

• Sanctions Lifted on Ukraine: In recognition of Ukraine's recent legislative work to improve intellectual property rights (IPR) protections, the U.S. Trade Representative (USTR) announced that the U.S. is removing the 100% retaliatory tariffs on certain Ukrainian fuel oils, chemicals, fertilizers, paper products, footwear, diamonds, metals, refrigerating equipments, and pumps. The USTR will also conduct a Special 301 out of cycle investigation, with an eye toward reviewing Ukraine's GSP eligibility.
• Fair Trade Developments: The U.S. International Trade Commission (ITC) recently: 1) voted to maintain the antidumping duty order on certain fresh and chilled Atlantic salmon from Norway; 2) opened a special Section 337 investigation into alleged patent infringement on certain ink sticks for solid ink printers.
• The EU announced that it opened an investigation into claims that exports of Chinese CD's and DVD's are unfairly affecting the EU's producers.

WORLD TRADE ORGANIZATION ("WTO")

• Softwood Lumber: While successive NAFTA panels have found in favor of Canada, in an interim decision, the WTO ruled that the CV duties imposed by the U.S. on Canadian softwood lumber does not violate international rules. While the NAFTA findings were based on the ITC's 2002 CV order, the WTO ruling was based on a revised ITC order from 2004. It is unclear whether NAFTA's previous findings will change as a result of the ITC's revised 2004 CV order. Canada recently filed suit at the U.S. Court of International Trade (CIT) over U.S. refusal to eliminate the CV duties as ordered by the NAFTA panels. In addition, Canada asked the WTO to allow it to levy sanctions over a previous WTO ruling that the U.S. countervailing (CV) duties were miscalculated.
• U.S. Wins Case Against Mexico Sweetener Tax: The WTO recently ruled in favor of the U.S. against Mexico's 20% sales tax and 20% distribution tax on U.S. beverage sweeteners, other than from cane sugar. The Mexican tax came as retaliation after the U.S. limited Mexican exports of sugar.
• WTO Rules Against EU Banana Policy: The WTO recently ruled that the proposed EU tariff-only regime for bananas of 230€ per ton is too high, and will not guarantee total market access to all banana suppliers. The EU will move to a tariff-only banana regime starting January 1, 2006.

BUSINESS BRIEFS

• State Safety Regulations v. International Trade Agreements: A NAFTA arbitration tribunal recently dismissed a $970 million claim by a Canadian methanol producer who claimed that California's ban on MTBE in gasoline additives harmed its business and violated NAFTA's investment protections. The tribunal found that trade agreements and investment treaties can not encroach on government's legitimate right to protect public health and the environment.
• Study Questions U.S. Chemical Safety Mechanisms: In conjunction with the recent introduction of the Kids Safe Chemicals Act of 2005, the U.S. Government Accounting Office (GAO) released a study which found that the government has provided only "limited" assurance regarding the safety of the roughly 700 new chemicals entering the marketplace every year. The recently introduced bill would require that manufacturers prove that each new chemical is safe prior to their release rather than waiting for the Environmental Protection Agency (EPA) to show that an existing chemical is unsafe, as is the case today.
• Medicines Containing Pseudoephedrine Banned in Oregon: Oregon became the first U.S. state to require a doctor's prescription for standard allergy medicines containing pseudoephedrine, because they may be used to produce methamphetamine. Oregon and other states already require identification and signing of a log when purchasing medicines containing pseudoephedrine, and expect the industry to eventually develop alternate medications which do not contain ingredients that may be used for illicit purposes.
• Recent India Developments: 1) The government of India recently released a 13-point draft National Strategy for Manufacturing to strengthen its manufacturing sector and increase its manufacturing global market share. Among others, the new strategy will be reached by: enhancing the government's focus on manufacturing, improving manufacturing conditions, lowering costs of manufacture, improve regulations, upgrade competitiveness, and improve infrastructure; 2) the Indian state of Maharashtra banned the manufacture, sale, or use of all plastic bags, whose indiscriminate use was blamed for the failure of its drainage system during the recent monsoon rains.
• BIS Fines: The U.S. Department of Commerce's Bureau of Industry and Security (BIS) recently announced a five year probationary sentence and an $8,000 fine for a defendant who attempted to export to Iran night vision equipment in defiance of a U.S. embargo and for making a false statement on the export documents.
• Recent CPSC Actions: The U.S. Consumer Products Safety Commission (CPSC) recently announced recalls of the following items: 1) certain mountain buggy strollers, as the handlebar may crack or break; 2) certain Pokemon plush toys, as the stuffing may contain tips of sewing needles; 3) certain toddler walking wagons, as their clickers may detach and pose a hazard; 4) certain shell candles, as they may burn at excessive heights or cause the outer shell to catch fire; 5) certain cordless drills/drivers, as the battery pack may overheat or rupture.

TRANSPORTATION TIDBITS

• Gulf Ports Update: Hurricane Katrina has forced the closure of all ports from New Orleans eastward through the Florida Panhandle. In an update on the operability of the Gulf ports, CBP advised that it designated the Atlanta Field Office to oversee all cargo clearance and related import processing for the entire region. The Port of Memphis has been designated to receive all entry related items and correspondence concerning fines, penalties & forfeitures, while protests are to be filed with CBP's Atlanta office.
• Oakland Pilot Project to Extend Gate Hours: Sources indicate that in an effort to ease congestion, the Port of Oakland initiated a pilot project to extend its export gate hours.

COURT CASES

• Assembled v. Unassembled Goods: The U.S. Court of Appeals for the Federal Circuit (CAFC) recently affirmed a CIT ruling regarding the parameters of when two combined products are considered as one assembled article. In ABB, Inc. v. U.S., the CIT reviewed the proper classification of two high voltage direct current (HVDC) cables and one fiber optic cable. The three cables were manufactured and imported individually, then "bundled" together with metal straps onboard and laid in Long Island Sound for the Cross Sound Project. The HVDC cables were classified at entry under heading 8544.60.40 (3.5% duty), HTSUS, the provision for "Other electric conductors…Other: Of copper", while the fiber optic cable was classified under heading 8544.70.00 (duty free), HTSUS, as "Optical fiber cables." Plaintiff protested CBP's classification and argued that because of the "bundling", the three cables should be considered as assembled pieces of a single fiber optic cable of heading 8544.70.00 (duty free), HTSUS. The CIT found that the term "assembled" includes two components: "(a) to have fit together, (b) parts", and that "to have fit together" requires a "relatively standardized procedure with a minimum of discretion exercised by the assembler", and "parts does not include objects that are distinct and separate commercial entities." Because the laying of the cables was extremely project specific, with alterations to be made as conditions warranted, and each of the cables were fully manufactured, functional, distinct and separate commercial entities at import, ABB's cables failed both components of the term "assembly." In upholding the CIT ruling, the CAFC stated that "the mere fact that a plurality of articles may be used together does not necessarily make each article in the plurality a constituent 'part' of a single article."

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Note: This information is not, nor is it intended to be, legal advice, which can only be provided by Serko & Simon LLP on a case-by-case basis. ©2005