A. N. Deringer Trade Alert 11/16/05 (00145600.DOC;1)

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

SERKO & SIMON LLP – Customs & International Trade Law

November 16, 2005

CUSTOMS and BORDER PROTECTION ("CBP")

U.S. and China Reach Textile Agreement: 1) Following months of negotiations, the U.S. and China reached a broad agreement governing textile and apparel exports from China. The agreement runs through 2008 (the EU-China agreement runs through 2007) and covers 34 textile and apparel categories (only 19 are currently subject to safeguard quotas). The agreement allows for a 10%-12.5% import increase in 2006; 12.5% in 2007; and 15%-17% in 2008. The agreement covers the following categories:

200/301 (sewing thread/combed cotton yarn) 222 (knit fabric)

229 (special purpose fabric) 332/432/632pt (socks, baby socks)

338/339pt (cotton knit shirts) 340/640 (woven shirts)

345/645/646 (sweaters) 347/348 (cotton trousers)

349/649 (brassieres) 352/652 (underwear)

359S/659S (swimwear) 363 (cotton pile towels)

666pt (window blinds & shades) 443 (wool suits)

447 (wool trousers) 619/620 (poly., other filament yarn)

622 (lass fabric) 638/639pt (knit shirts)

647/648pt (trousers) 847 (silk & other veg. fiber trousers)

2) Although no quota will be required, every shipment of goods covered under the new agreement must be accompanied with an electronic visa (ELVIS) issued by the government of China. If no ELVIS visa is presented or if the visa is wrong, the shipment will be denied entry; 3) the agreement stipulates that merchandise subject to safeguard quotas that were embargoed prior to the signing of the agreement on November 8, 2005 will promptly be released; 4) irrespective of the new agreement, the U.S. Committee for the Implementation of Textile Agreements (CITA) imposed new safeguard quotas on Chinese socks (cat. 332/432/632pt) from November 1, 2005 until December 31, 2005; 5) Chinese socks exported in excess of the safeguard levels will be allowed entry under staged entry procedures starting one-month following the close of the safeguard period; 6) CITA postponed until November 30, 2005 its decision on whether to request safeguard consultations with China on woven shirts/blouses (cat. 341/641), skirts (cat. 342/642), nightwear and pajamas (cat.351/651), and swimwear (cat. 359S/659S). These categories are not covered by the U.S.-China Textile agreement.

The new U.S. – China Textile Agreement can be accessed at the following web address: http://www.ustr.gov/assets/World_Regions/North_Asia/China/asset_upload_file91_8344.pdf

Insular Possession Watch and Jewelry Programs: The U.S. Department of Commerce’s Office of Insular Possessions is adapting a final rule effective December 8, 2005 regarding its watch duty exemption allocations and watch and jewelry duty refund benefits for imports from the U.S. Insular Possessions, i.e., the U.S. Virgin Islands,, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands. The final rule makes clarifications and technical changes to the program, and increases and extends certain duty refund benefits available to manufacturers and importers.

Home Appliance Energy Consumption Requirements: The U.S. Federal Trade Commission published a final rule effective January 23, 2006 amending its Appliance Labeling Rules regarding the required energy consumption and efficiency information for central air conditioners, heat pumps, and compact dishwashers.

Optic Fiber Glass Rods/Preforms: In reevaluating its previous treatment of glass preforms used in the creation of optic fibers, CBP is reclassifying the glass preforms under subheading 7002.20.10, HTSUS (duty free), the provision for "Glass in balls…rods or tubes, unworked: Rods:…." While the preforms are created by using a multi-stepped process, those processes can not be considered as "working" the glass, as the term "working," for tariff purposes, reflects a process of mechanical or physical alteration of a finished article while the multi-stepped process used to create the preforms are only a means to get to the finished preform; the current classification under subheading 7020.00.60, HTSUS, (5% duty) is revoked.

TRADE TALK

Free Trade Developments: 1) Momentum toward reaching an agreement on the Free Trade Agreement of the Americas (FTAA) has been stalled at the recent Summit of the Americas held in Argentina. Although 29 nations agreed to put the talks back on track by April 2006, Argentina, Brazil, Paraguay, Uruguay, and Venezuela insisted that the talks wait until the results of the Doha Round trade talks are better known; 2) The U.S. Senate Finance Committee approved the draft implementing legislation for the U.S.-Bahrain FTA; 3) U.S. officials indicate that the U.S. and Panama are close to concluding negotiations on a bilateral FTA.

International Trade Developments: 1) Canada and the Dominican Republic agreed to start negotiations toward a bilateral FTA; 2) Bangladesh, China, India, Laos, South Korea, and Sri Lanka agreed to rename the Bangkok Agreement as the Asia-Pacific Trade Agreement (APTA) and expand preferential duties enjoyed between them; 3) India set itself an ambitious agenda by planning to have FTA’s with most of its Asian neighbors, except China, by the end of 2006. In addition, India has also begun FTA talks with the Gulf Cooperation Council countries, while talks with South Korea and Israel are on the horizon.

Tariff on Multi-Chip Packages Eliminated: The U.S. reached an agreement with the EU, Japan, Korea, and Taiwan to eliminate all tariffs on multi-chip packages (MCP).

AD/CV Developments: The U.S. International Trade Commission (ITC) recently: 1) issued its preliminary affirmative antidumping (AD) determination on certain artists canvas from China (55.78%-264.09%); 2) determined to keep the AD order in place for certain cut-to-length carbon steel plate from India, Indonesia, Italy, Japan, and Korea, and the countervailing (CV) order from India, Indonesia, Italy, and Korea. The existing AD order for France will be revoked; 3) determined not to review a determination by a presiding administrative law judge to effectively terminate the Special 337 investigation of certain voltage regulator circuits, components thereof, and products containing same.

The U.S. International Trade Administration (ITA) will to keep in place the existing AD order on certain cased pencils from China.

WORLD TRADE ORGANIZATION ("WTO")

U.S. Sunset Policy Bulletin Upheld: A WTO Appellate Body recently upheld the ITC’s sunset review of oil-country tubular goods (steel pipes) from Mexico, affirming that the Sunset Policy Bulletin, which provides guidance on sunset reviews, is consistent with WTO rules.

Saudi Arabia Cancels Embargo on Israel: As a condition of joining the WTO on December 11, 2005, Saudi Arabia cancelled its primary, secondary, and tertiary boycott of Israel.

BUSINESS BRIEFS

Miscellaneous EU Developments: 1) The European Commission will soon issue a proposal for a Single European Payments Area intended to remove legal and technical barriers to efficient payment throughout the EU Internal Market; inefficient cross-border payments are estimated to cost the EU 2%-3% of its GDP; 2) starting in December 2005, EU businesses and citizens will be allowed to register internet domain names ending in ".eu". While not replacing existing national domains, it will allow registrars to opt for a European internet identity for their web sites; 3) the EU Trade Commissioner pledged to impose dumping margins on Chinese footwear only if such action is "warranted" and "justified"; 4) the EU and China recently signed a Memorandum of Understanding on Product Safety. The agreement seeks to increase the safety of products by forging a common view on safety standards, standardizing safety rules and procedures, increase inspections and market surveillance, and enforcing product safety legislation.

Intellectual Property Rights: Several recent developments bring to the forefront the U.S. administration’s increased emphasis on the protection of intellectual property rights (IPR). Developments include: 1) a new program, the China Intellectual Property Rights Advisory Program, will help small and medium U.S. companies protect and enforce their IPR by making available free of charge consultations to protect their IPR in China; 2) following a similar bill passed by the U.S. Congress, the U.S. Senate passed the Stop Counterfeiting in Manufactured Goods Act (S. 1699), which establishes criminal penalties for trafficking in counterfeit badges, boxes, containers, hangtags, emblems, patches, stickers, wrappers, etc. In addition, the bill allows for the forfeiture of property derived from proceeds of IPR violations and calls for restitution to be made to victims of IPR crimes; 3) the U.S. Senate also passed the Protecting American Goods and Services Act (S. 1095) which clarifies and defines trafficking and outlaws any bartering of counterfeiting goods, regardless of whether money, benefits, or future benefits have been received in return.

Recent CPSC Developments: The U.S. Consumer Product Safety Commission (CPSC) is requesting comments by December 12, 2005 on a petition it received to amend its ban on infant pillows if they were designed and intended for use during nursing and requested by a certified lactation consultant or pediatrician.

The CPSC announced the following recent recalls: 1) certain angle grinders, as the guards do not fully cover the grinding wheel; 2) certain fairy wand party favors made of beads, feathers and ribbons, as they can break apart exposing sharp wires; 3) certain gas ball shut-off valves, as they can leak and a risk of fire or explosion; 4) certain lithium ion rechargeable laptop battery packs, as they may overheat.

In related news, the CPSC announced that 2005 was a record year for voluntary recalls (almost to 400) and civil penalties ($8.8 million) imposed on companies for failure to report defective consumer products to the agency. The surge in recalls may stem from a joint CPSC - Wal-Mart program where Wal-Mart reports weekly to the CPSC about complaints it receives from consumers regarding defective merchandise.

Export Violations: The Department of Commerce’s Bureau of Industry and Security (BIS) recently announced the following actions taken for violations of the Export Administration Regulations (EAR): 1) denial of export privileges of a Texas individual and his company and any of their representatives for taking elaborate steps to avoid detection of and conspiring to illegally ship certain computers to Syria; 2) initiated administrative proceedings against an individual who conspired to export fingerprinting imaging equipment and accessories to Hong Kong without the proper license; 3) a Pennsylvania company agreed to pay a $17,500 civil penalty for violating the EAR by exporting technical data to South Korea regarding coating, brazing, and repair welding gas turbines without the required export license; 4) a Swiss subsidiary of a U.S. company agreed to pay a $6,000 civil penalty for complying with the boycott against Israel.

COURT CASES

Commerce Can Reopen Long Closed Dumping Case: The U.S. Court of International Trade (CIT) recently allowed the U.S. Commerce Department to self-initiate an AD "changed circumstances" review on large newspaper printing presses from Japan after Commerce had already revoked that AD order in 2002. Commerce’s action followed a civil action in the U.S. District Court for the Northern District of Iowa against a U.S. subsidiary of a Japanese company for hiding a secret agreement imposing a fraudulent increase in price in exchange for later rebates on a large newspaper printing press sold to a U.S. customer. A jury found that the defendant intended to destroy or injure a domestic industry and returned a verdict of over $10 million in favor of the injured party. In Tokyo Kikai Seisakusho, Ltd. and TKS (USA), Inc. v. U.S., plaintiffs invoked 1581(i) jurisdiction (residual jurisdiction) asking the CIT to declare Commerce’s action unlawful as there was no AD order in effect at the time of Commerce’s self initiation. However, in finding that the self initiation process is not an agency "final judgment" action and that plaintiffs have additional recourse to contest any final decision which may result from the self initiation (under 1581(c)) process, coupled with the fact that plaintiffs will not suffer undue hardships by filing briefs and partaking in Commerce’s dumping review, the CIT found that this action is not ripe for judicial review at this time and dismissed the case.

U.S. Sues Lumber Company: In U.S. v. Banks Lumber Co., Inc. et al, the U.S. government asked the CIT to award it liquidated damages amounting to $100,000, the full amount available under the executed bonds. The defendant imported angle cut lumber and dado (softwood lumber) from Canada, which was subject to the Softwood Lumber Agreement (SLA) between the U.S. and Canada. The agreement requires Canada to issue an export permit and collect an appropriate export fee. Upon importation, defendant entered the lumber under an HTSUS classification which was not subject to the SLA. CBP notified the importer of the correct classification as well as the requirements of the SLA for all future shipments, but defendant allegedly continued to import softwood lumber using a classification not subject to the SLA and has refused payment of CBP’s liquidated damages request.

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