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

SERKO & SIMON LLP – Customs & International Trade Law

March 8, 2005

CUSTOMS and BORDER PROTECTION ("CBP")

Staged Entry for Quota Overshipments: CBP is reporting that after the first two stages of staged entry for overshipments of 2004 quota merchandise, only category 369S from Pakistan oversubscribed at opening moment; all other quota merchandise were approved for release. Staged entry for category 369S from Pakistan will reopen on April 1, 2005.

Injunction Against APHIS' Minimal Risk Rule: The U.S. District Court for the District of Montana issued an injunction barring the U.S. Department of Agriculture's Animal and Plant Health Inspection Service ("APHIS") from implementing its "minimal risk final rule," which would have allowed the resumption of Canadian beef exports to the U.S. after the discovery of cattle infected with bovine spongiform encephalopathy. The U.S. Cattle Association argued that APHIS' final rule does not follow internationally accepted scientific procedures and endangers U.S. consumers and cattle. A trial has been scheduled by the judge to decide the case.

EU's New Wood Packaging Material Requirements: With certain exemptions, effective March 1, 2005, the European Union ("EU") is requiring all imported raw wood packaging material ("WPM") to be heat treated or fumigated and marked, as required by international standard ISPM 15; the requirement for debarking was postponed until March 1, 2006.

Chinese Wooden Craft Items to be Banned: Beginning April 1, 2005, due to the threat of introduction of the longhorn beetle, APHIS will ban imports of certain Chinese decorative and craft items which contain wood products greater than 1 cm. in diameter. The ban will be in effect until adequate control measures are adapted by China.

China Institutes New Textile Licensing System: In an effort to ease fears of flooding the global textile and apparel markets after the expiration of the quota regime, effective March 1, 2005, China instituted an automatic license system for textile and apparel exports that is expected to allow for better monitoring of sensitive exports, and provide specific breakdowns by country or region. The license system will allow China to send warnings to traders who distort the orderly export process. In addition, sources indicate that China is considering setting minimum prices for certain textile and apparel products. Companies selling below the set price will be put on a blacklist, which may eventually result in the loss of trading rights.

Treasury to Crack Down on Suspect Trade Activity: Expanding on its success against money laundering and financial crimes in its fight against terrorist financing, the U.S. Treasury is calling for application of the same analysis used to ferret out illegal textile and gold shipments and combat the ever increasing use of "commodity trading" used to finance terrorist activity. As an example, the Treasury claimed that although the introduction of the Kimberley Process, which regulates trade in precious metals, stones, and jewels, is a success in slowing the trade of "conflict diamonds" in Africa, loopholes exist that may be exploited for terrorist financing. To this end, the Treasury is calling for the implementation of effective ways to analyze and investigate suspect trade-based activity and monitor imports and exports to and from specific countries.

Pressure Switches: Automatic and Manual Reset Pressure Switches which close an electrical circuit when an extreme pressure rise is detected, and reopen the electrical circuit when the increased pressure recedes, are not to be classified as "Automatic regulating or controlling instruments…..Other: Other" under HTSUS 9032.89 (1.7% duty). As the pressure switches do not automatically "control" and "regulate" the pressure within the refrigeration (they only react to the pressure fluctuations), they fail to meet the requirements for classification under Heading 9032; CBP states that the proper classification for the pressure switches is under HTSUS 8536.50.90 (2.7% duty), as "Electrical apparatus for switching or protecting electrical currents….Other switches: Other: Other.

Foam Filter Ring: A reticulated foam filter ring ("pre-filter"), intended to fit around the outside of a primary radial air filter ring, is composed of a cellulose, resin impregnated paper inside a plastic and metal screening case, and is installed in an automotive engine in combination with the primary filter, was previously classified by CBP as a "part" under HTSUS 8421.39.8015 (duty free) as "filtering or purifying …..Other: Other: Other;" CBP now states that as the pre-filter actually removes unwanted particles prior to their reaching the primary filter, it is in itself a filter, and should not be classified as a "part" under a basket provision, but under HTSUS 8421.31.0000 (2.5% duty) as "centrifuges…filtering and purifying machinery…: intake air filters for internal combustion engines."

TRADE TALK

Recent Trade Developments: 1) Preferential duty free treatment can now be claimed for certain "third country" eligible textile and apparel products from Mauritius, as it has been designated a "least developed" AGOA country; this designation expires on September 30, 2005; 2) the U.S. and Pakistan recently held the first round of negotiations aimed at signing a Bilateral Investment Treaty between the two countries; 3) Romania and Israel signed an upgraded trade agreement allowing them to jointly market goods duty free in the EU under a "pan-European accumulation agreement." The trade agreement between Israel and Jordan already allows for such duty free trade with the EU, and Israel and Bulgaria are set to sign a similar agreement in the near future.

U.S. and EU Reach Rice Agreement: The U.S. and the EU reached an agreement on the expansion of imports for U.S. brown (husked) rice to the EU. The agreement eliminates the need for retaliatory tariffs against certain EU origin fruits, vegetables and seasoning, which were scheduled to take effect on March 1, 2005.

Fair Trade Developments: The International Trade Administration ("ITA") announced: 1) the termination of the antidumping ("AD") investigation on certain circular welded carbon quality line pipe from Korea and Mexico; 2) its final AD determination on live swine from Canada with an AD margin up to 18.87%, and issued a negative determination in the countervailing ("CV") swine investigation; 3) the initiation of five-year sunset reviews for certain electroluminescent flat panel displays and internal combustion industrial forklift trucks from Japan, porcelain-on-steel cooking-ware from China and Taiwan, raw in-shell pistachios from Iran, top-of-the-stove stainless steel cooking-ware from South Korea and Taiwan; 4) President Bush continued the national emergency for one year with regard to Zimbabwe.

The U.S. Department of Commerce initiated an anti-circumvention investigation of the AD duty order on certain mixed wax candles composed of petroleum wax and either palm or vegetable-based wax under the "minor alteration" or the "later developed merchandise" provisions.

USTR Designate: President Bush designated Peter F. Allgeier, the current deputy U.S. Trade Representative ("USTR"), as the acting USTR in place of Robert Zoellick.

WORLD TRADE ORGANIZATION

WTO Appellate Body Rules Against U.S. Cotton Subsidies: The World Trade Organization's ("WTO") appellate body upheld a previous ruling which found that U.S. cotton subsidies violated WTO rules. The case, brought by Brazil, who argued that U.S. subsidies unfairly depressed world prices and hurt poor farmers, will force the U.S. to revamp its cotton subsidies to conform to WTO rules.

BUSINESS BRIEFS

No Federal Minimum Wage Increase: On March 7, 2005, the Senate defeated two amendments to raise the federal hourly minimum wage, currently $5.15 an hour.

Cartels Fined: The Commerce Department's Bureau of Industry and Security ("BIS") announced settlements with two companies accused of violating the Export Administration Regulations by exporting sensitive articles without the proper licenses. BIS announced civil penalties in the amount of $45,000 to a medical equipment company and $183,500 to a company selling optical sighting devices in settlement of the alleged export violations.

EU Developments: 1) The EU recently sent the European Parliament a bill aimed at promoting software innovations by allowing software which is part of a mechanical device to be patented. The bill, intended to harmonize all EU members' patent laws, tries to strike a compromise by awarding patent protection to "computer implemented inventions," while differentiating from U.S. patent laws which allow patents for business methods and computer programs; 2) the European Commission ("EC") recently adapted a proposal to expand the existing tax deferrals for mergers, acquisitions and restructuring across the EU's internal borders. The proposal will expand the tax-deferral benefits to new types of company structures, i.e., "European Company" (available from October 2004) and "European Co-operative Society" (available in 2006), as well as new types of operations, i.e., "partial division" or "split off"; 3) Italy joined France, Greece, Portugal, and Spain in calling for the EU to impose restrictions on Chinese exports of textile and apparel. In a meeting scheduled for next week in Beijing, EU officials are expected to advise China of the limit of textile and apparel exports above which the EU will impose special trade barriers.

CPSC Developments: The Consumer Product Safety Commission ("CPSC") recently announced the following recalls: 1) certain metal charms used as decorations, as they may pose a lead poisoning hazard; 2) certain infant and toddler cardigan sweaters, as the zipper mechanism may detach and pose a choking hazard; 3) certain battery-powered flying saucer toys, as they may overheat; 4) certain stuffed yarn bunnies, as the eyes may detach and pose a choking hazard; 5) certain baby pacifiers, as they fail federal safety standards because the nipple may separate from the base and pose a choking hazard; 6) certain teether rattles containing beads and farm animals attached to a cross-bar, as the joints of the bar may break and release the beads, thus posing an aspiration hazard to children.

COURT CASES

U.S. Seeks Lost Duties and Penalties: The U.S. recently filed several cases against importers and their sureties in order to recover lost duties and penalties resulting from misrepresentation of imported merchandise. In U.S. v. Bois JLY Joyal, the U.S. is seeking over $550,000 in penalties plus interest and other costs for allegedly misrepresenting softwood lumber from Canada as aspen wood. Although there was no effect on the assessment of duties, softwood lumber was nevertheless subject the Softwood Lumber Agreement ("SLA"), while aspen wood was not.

In U.S. v. Aegis Security Insurance Co., the U.S. is seeking to recover $216,000 from the surety defendant resulting from a scheme to deprive the U.S. of antidumping duties on silicon metal from China. The defendant's insured client misrepresented Chinese origin silicon metal as originating in Korea, resulting in an actual loss of AD duties amounting to over $5,094,000. The U.S. is seeking to recover the lost duties up to the maximum of the bonds written by the defendant, plus mandatory interest, costs, and attorney's fees.

In U.S. v. XL Specialty Insurance Company, the U.S. is seeking to enforce its claim for lost duties resulting from entries allegedly containing false statements indicating that the imported merchandise qualified for duty free treatment under the Agreement on Trade and Civil Aircraft ("ATCA") when the imports allegedly did not qualify for duty free treatment. The U.S. is seeking lost duties in the amount of $101,607, plus interest.

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