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

• Costa Rica Legislature to Debate CAFTA: The legislature of Costa Rica, the only signatory yet to ratify the Dominican Republic-Central America Free Trade Agreement (DR-CAFTA), is set to consider the agreement for ratification in the near future. Sources expect that the FTA will take effect on January 1, 2006, pending a Presidential Proclamation to that effect.
• Other Trade Developments: 1) The EU and the six nations of the Gulf Cooperation Council (GCC), Bahrain, Kuwait, Oman, Saudi Arabia, Qatar, and the United Arab Emirates, are expected to conclude a FTA by the end of 2005; 2) China recently held a third round of negotiations towards reaching a FTA with the six-nation GCC; 3) the European-Mediterranean Cumulation of Origin Zone has been extended to Israel, allowing Israeli goods worked in third countries to be exported to the EU without losing their duty-free status; 4) the U.S. has designated an eighth Qualified Industrial Zone (QIZ) in Egypt’s Nile Delta. Goods shipped from Egypt’s QIZ’s to the U.S. may enjoy duty free treatment if they contain at least 11.7% input from Israel; 5) the U.S. Trade Representative (USTR) released its annual report under the U.S.-Japan Regulatory Reform and Competition Policy Initiative highlighting recent progress in eliminating regulatory hurdles affecting business opportunities in Japan. The report notes the reforms made in the mobile wireless sector, trade in fruits and vegetables, intellectual property rights (IPR) protection, and relaxing impediments to the introduction of new medical devices and drugs.
• AD/CV Developments: The U.S. International Trade Commission (ITC) recently: 1) instituted a preliminary antidumping (AD) investigation of liquid sulfur dioxide from Canada; 2) voted to keep in place the AD order on glycine from China; 3) announced the resumption of its AD review of uranium from Russia; 4) voted to conduct a sunset review of the countervailing (CV) duty on magnesium from Canada; 6) voted to continue its AD investigation of certain lined paper from China and the AD and CV investigation from India and Indonesia; 7) the ITC recently instituted a special Section 337 investigation of certain laser bar code scanners, scan engines, components thereof, and products containing same, over alleged patent violations; 8) the ITC also issued a general exclusion order for certain ink markers and packaging thereof over alleged trademark infringement.

• Saudi Arabia: Following 12 years of negotiations, Saudi Arabia won approval from a WTO working party to become the organizations 149^th member, likely in time for the December 2005 WTO ministerial meeting in Hong Kong. WTO membership is expected to bring new export opportunities for the Saudi petrochemical industry.
• China IPR Protection: The U.S. Trade Representative announced that the U.S., joined by Japan and Switzerland, filed a request with the WTO seeking information from China regarding its enforcement of IPR.

• Recent Patent Developments: The U.S. Patent & Trademark Office (PTO) recently implemented an overhaul of its patent reexamination program. The PTO, touting the program as a low cost alternative to patent litigation, promised to finish reexaminations within defined timeframes, and assign them to a special team of senior patent examiners with knowledge of relevant patent case law.

• Expansion of Haiti Preferential Treatment: The Haiti Economic Recovery Opportunity Act (S. 1937) was recently introduced in the U.S. Senate calling for the extension of the preferential treatment to Haiti under the Caribbean Basin Economic Recovery Act (CBERA). The new benefits would allow duty free entry for textile and apparel articles assembled or knit-to-shape in Haiti without regard to the country of origin of the fabric or components, subject to certain limitations.
• Machinery Parts for Molding and Forming Certain Articles: A series of bills (H.R. 3877 through H.R. 3881) were recently introduced in the U.S. House of Representatives that call for the temporary duty suspension for certain parts of machinery for molding and forming certain rubber or plastic articles of Heading 8477, HTSUS. The parts covered by these bills include: base, bed, weldments, fabrications, barrel screws, hydraulic assemblies (incorporating more than one of the following: manifold, valves, pumps, oil coolers), and certain other parts.

• CIT to Rule on Irreparable Harm Case: In the latest chapter of Heartland By-Products, Inc. v. U.S. (Heartland), the U.S. Court of Appeals for the Federal Circuit (CAFC) sent the case back to the U.S. Court of International Trade (CIT) to determine the reach of its decision in Heartland I. In a 1995 binding ruling obtained by the importer (Heartland) for sugar syrup including non-sugar solids imported from Canada, CBP classified the sugar syrup under subheading 1702.90.40 (0.7¢ per liter), HTSUS, not subject to tariff rate quotas (TRQ). In 1999, under pressure from the domestic sugar industry, CBP revoked its previous ruling and reclassified the sugar syrup under a provision subject to TRQ’s, thus increasing the duties by ten thousand-fold, at which point, the importer ceased its imports and operations. In Heartland I, co-argued by Serko & Simon LLP, the CIT found in favor of the importer and upheld CBP’s initial ruling. In Heartland II, the CAFC overturned the CIT ruling, restoring CBP’s revocation and reclassification. Soon after, but before the CAFC’s decision became final, CBP began to liquidate all unliquidated shipments (whose entries were all made prior to the CAFC’s decision) at the higher TRQ rate. In Heartland III, the importer, invoking the special 1581(h) jurisdiction found by the CIT in Heartland I, challenged CBP’s retroactive liquidation of its entries under the higher TRQ duty rate. Heartland asked the CIT to determine the effect of its ruling in Heartland I on entries made in reliance on the CIT’s decision in Heartland I and imported before the CAFC’s decision reinstating the revocation of Heartland’s ruling. The CIT affirmed that it continued to have jurisdiction over Heartland’s entries under 1581(h), but declined to exercise it, as the CIT found that it was unclear which entries were subject to its jurisdiction and which were not. After failing to negotiate a settlement with the Government, or to reach an agreement on how to bring the issue back before the CIT, the importer returned to the CIT arguing that it still had 1581(h) jurisdiction to decide the issue of the proper treatment of Heartland’s entries. In Heartland IV, the CIT dismissed Heartland’s actions, ruling that it no longer had 1581(h) jurisdiction over Heartland’s entries. Heartland appealed that decision to the CAFC. In Heartland V, decided on September 26, 2005, the CAFC found in favor of the importer, stating that it was correct to ask the CIT to "determine the legality of Customs’ liquidations and reliquidations" in view of the CIT’s judgment setting aside the ruling revocation in Heartland I and that "it would defy reason for Congress to permit Heartland to obtain pre-importation relief from the CIT under 1581(h), yet require it to invoke an entirely separate and less favorable jurisdictional basis" to adjudicate the status of entries made pursuant to the Heartland I decision. Thus, the CAFC remanded the case back to the CIT to rule on the legality of CBP’s application of the ruling revocation to imports into the U.S. made prior to the CAFC’s decision in Heartland II reinstating the revocation of Heartland’s ruling.
• CBP Requires Importer to Produce Manufacturer’s Records: A court case filed in the U.S. District Court for the Eastern District of Michigan Southern Division may have an effect on importer recordkeeping. In Ford Motor Company v. U.S., et al., the importer filed a complaint for declaratory relief against a CBP penalty of over $21 million for failure to produce records prepared and/or maintained by a Mexican exporter relating to the country of origin and classification claims of component parts and materials used in the importer’s NAFTA eligible imports. CBP demanded that the importer provide it with Bills of Material (BOM) for over 300 products for which preferential treatment was claimed, as well as product information relating to country of origin and tariff classification for each part and material of those products, i.e., certificates of origin, manufacturer’s affidavits, or other proof of origin. Although the importer provided CBP with the certificates of origin as required under NAFTA regulations, CBP notified the importer that as it did not comply with its request for information, it is subject to recordkeeping penalties. The importer argues that under NAFTA Article 506, the sole means by which a NAFTA party may determine whether imports qualify for preferential treatment is by: 1) written questionnaires; 2) visits to the manufacturer’s premises; or 3) other procedures as the NAFTA parties may agree. To date, the NAFTA parties have not agreed to additional verification procedures. In addition, the importer claims that the NAFTA regulations indicate that a failure to produce additional information, except the required certificate of origin, shall not constitute grounds for denying NAFTA preferential treatment. Although CBP added "NAFTA Certificate of origin and supporting records" to those documents required to be maintained by law in 1996, the importer argues that this addition was not subject to a notice and comment period as required by law. As a result, among others, the importer is seeking: 1) a declaration that the assessed recordkeeping penalties can not be applied to entries prior to 2000, when CBP properly finalized its recordkeeping requirements with a notice and comment period; and 2) CBP can not require an importer to maintain or produce business records maintained by exporters.
• Duty Deferral Program Challenged: A case has recently been filed at the CIT challenging duties collected upon export to Canada or Mexico on certain qualifying goods imported subject to a duty deferral program under NAFTA. Under certain conditions, importers of goods entering the U.S. for further processing may elect to enter them under a temporary bond, free of duties, subject to the subsequent re-exportation of those goods. Under 19 C.F.R. 181.53(a), goods imported into the U.S. pursuant to a duty deferral program are subject to duty upon re-export to Canada or Mexico. This new case argues that the duties triggered upon export to Canada or Mexico are a violation of the Export Clause of the U.S. Constitution, which states that "No Tax or Duty Shall be Laid on Articles exported from any State." Importers should take action to protect their potential for refunds in the event of a favorable ruling. Please feel free to contact Serko & Simon LLP with any questions regarding this litigation.

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