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

June 28, 2005

• Additional China Safeguard Petition Filed: The Committee for the Implementation of Textile Agreements ("CITA") announced that on June 22, 2005, the domestic industry filed a petition to impose special safeguard quotas on imports of cotton and man-made fiber curtains and drapes (category 369 part and category 666 part) from China. If CITA determines that the petition includes all required information, it will announce a 30-day public comment period, after which it will have up to 60 days to decide whether to accept or deny the safeguard petition.
• China Sets New Textile Quota Regime: In an effort to control its textile and apparel exports to the U.S. and the EU, effective July 20, 2005, China will impose quota requirements on textiles and apparel merchandise which are subject to either safeguard measures imposed by the U.S. or quantitative limits set through bilateral negotiations with the EU. The quotas will be allocated directly to manufacturers, based on the quantity and value of their exports over the previous 12 months. The quota allocations are geared to encourage exports of value added products, and will be non-transferable and valid for a 6 month period only. The quotas are a unilateral measure by China and are not required by either the U.S. or EU.
• Coated Leather Bags: CBP is proposing to reclassify certain plastic covered cosmetic bags to allow them to retain their classification as "leather." Under previous classification rulings, if a leather bag was coated with rubber or a plastic film, the bag was classified as a "plastic bag" under subheading 4202.12, HTSUS, carrying a duty rate of 20%. CBP is now proposing to retain the bag's classification as that of "leather bag" under subheading 4202.11, HTSUS (8% duty), as long as the coating layer is: 1) invisible to the naked eye, and 2) present to protect the leather surface.
• RFL-Coated Textile Materials: CBP recently reconfirmed its previous classification of certain woven fabric impregnated or coated with resorcinol formaldehyde latex ("RFL") as woven fabrics of synthetic filament yarn under subheading 5407.10.0090 (13.6% duty), HTSUS. The RFL-coated fabric's texture promotes its bonding to rubber, which is then used in the manufacture of carcasses for power transmission and for conveyor belts, hoses, gaskets, and tire rods. An importer argued that the coated textile's ability as an adhesive to the rubber makes it a "technical use" under heading 5911, HTSUS, which covers "textile products and articles …as being for use in various types of machinery, apparatus, equipment or instruments or as tools or parts of tools." However, CBP states that the fabric's adhesion to the rubber occurs only after importation, thus the essential character of the textile at the time of importation is not that for "technical uses."
• Alcohol Beverage Labeling: The U.S. Department of Treasury's Alcohol and Tobacco Tax and Trade Bureau ("TTB") is extending to September 26, 2005 the comment period for advanced notice of proposed rulemaking regarding alcohol beverage labeling and advertising requirements; comments should provide whether nutrition and ingredient information should be voluntary or mandatory, and whether the labeling requirements should be harmonized with other federal agencies and nations.

• CAFTA Sent to Congress: On June 23, 2005, President Bush sent to the U.S. House of Representatives' ("House") House Ways and Means Committee the implementing legislation for the Dominican Republic-Central America Free Trade Agreement ("CAFTA"). Both the House and U.S. Senate previously passed CAFTA "draft" legislation. The House now has up to 60 legislative days to pass the CAFTA implementing legislation, after which the Senate will have an additional 30 legislative days to pass CAFTA. The bill would then be sent to the President for his signature.
• Free Trade Developments: 1) Pakistan has approached the U.S. regarding the possibility of negotiating a bilateral FTA. In addition, Pakistan raised the possibility of creating Qualifying Industrial Zones between Pakistan and Afghanistan, based on those between Israel, Jordan, and Egypt; 2) the U.S. and Mozambique signed a Trade and Investment Framework Agreement ("TIFA"). A TIFA agreement provides a framework to discuss bilateral trade issues and is often used as a precursor to an eventual FTA.
• Fair Trade Developments: The International Trade Administration ("ITA") recently: 1) issued a final affirmative antidumping ("AD") determination on certain purified carboxymethylcellulose ("CMC") from Finland (6.65%), Mexico (12.61%), Netherlands (13.39%-14.88%), and Sweden (25.29%); 2) initiated an AD investigation on imports of diamond sawblades and parts thereof from China (164.09%) and Korea (63.61%-67.59%).

• Additional Fair Trade Developments: 1) China recently initiated an AD investigation on wear resistant overlay from the U.S. and EU; 2) the EU Trade Commission recommended the initiation of an AD investigation into certain shoes and slippers from China; 3) Mexico recently dropped one AD investigation into certain apples from the U.S., while reporting that it will launch a new AD investigation on certain apples from the U.S.

• USTR Announces New WTO Ambassador: The U.S. Trade Representative ("USTR") announced that the current Deputy USTR Peter Allgeier will be the new U.S. ambassador to the WTO.

• CPSC Developments: The Consumer Product Safety Commission ("CPSC") recently announced the recalls of: 1) certain hand-carry air compressors, as a wiring defect can cause a shock hazard; 2) certain serenity votive candles, as the wax may catch fire resulting in a large flame; 3) certain doorway baby jumpers, as the plastic attachment clamp may break and result in an injury to children; 4) certain batteries sold with portable DVD players and GPS navigation systems, as they may overheat and explode.
• Recent Innovations: 1) U.S. and Egyptian scientists recently developed a process to develop textiles with permanent antimicrobial properties in a cost-effective and environmentally friendly way. Using atmospheric plasma and a chemical compound to open the molecular bond of the fibers, scientists attached antimicrobial agents to the molecular structure of the fibers, thus avoiding the problem of efficacy when the textile is continuously washed. The process eliminates chemical waste and is designed to be plugged into an existing production line without disruption to the manufacturing processes; 2) scientists at the U.S. Department of Agriculture announced the perfection of a sugar-based pesticide which is safe for humans as well as the environment. By adding an ester to sugar sucrose, the new pesticide enters an insect's trachea and suffocates them as well as disrupting the insect's cuticle by causing rapid water loss, shriveling, and dehydration.

• Cargo Security Provisions: The recently passed Department of Homeland Security Authorization bill (H.R. 1817) included provisions requiring the establishment of standards and procedures for cargo container seals and locks. The bill also requires the Secretary of Homeland Security to consolidate the various security programs relating to cargo containers in order to achieve maximum security and efficiency.
• CSI: The port of Santos, Brazil agreed to join the Container Security Initiative ("CSI"). CBP agents will be stationed at the port to pre-screen cargo destined for the U.S. In addition, the port of Shenzhen, China has become operational under the CSI program.

• Recently Introduced Legislation: 1) The Currency Harmonization Initiative through Neutralizing Action (CHINA) Act of 2005 (H.R. 3004) recently introduced in the House calls for the automatic imposition of tariffs on Chinese exports if the secretary of the Treasury determines that China manipulates its currency under WTO rules. The automatic tariffs would be commensurate with the level of manipulation as determined by the Treasury Secretary; 2) a bill (S. 1123) was recently introduced in the Senate to temporarily suspend the duty on certain microphones used in automotive interiors; 3) the House recently approved the renewal of import restrictions contained in the Burmese Freedom and Democracy Act of 2003.

• Loss of Revenue and Civil Penalties: The U.S. recently filed a case at the U.S. Court of International Trade ("CIT") against an importer and its surety seeking to recover lost duties and a civil penalty for material false statements and/or omissions presented on the importer's entry documents. CBP alleges that the importer omitted the value of display boxes, overstated freight charges, failed to list part of the imported merchandise, and falsely declared that some of the merchandise was eligible for duty free treatment, thus depriving the U.S. government of its lawful right to import duties. The U.S. is seeking $131,000 in lost duties and $263,000 in civil penalties due to the negligence on the part of the importer.
• Beta-Carotene Litigation: In BASF Corp. v. U.S., the CIT issued a confidential decision reportedly finding in favor of the importer with regard to the proper classification of synthetic beta-carotene mixtures. In finding for the plaintiff, the CIT effectively reduced the duty on certain beta-carotene mixtures to 0%. Importers who wish to protect their rights to any potential refunds will need to file protests and other protective court filings as may be needed should the government decide to ultimately appeal the case.
• Chondroitin Sulfate Case Appealed: In Inabata Specialty Chemicals v. United States, the Court of International Trade ("CIT") considered whether chondroitin sulfate, imported in bulk powder form and packaged for retail sale as a dietary supplement, is classified under subheading 3913.90.20 (5.8%), HTSUS, the provision for "Natural polymers…Other:" or under subheading 3001.90.00 (duty free), HTSUS, the provision for "other human or animal substances prepared for therapeutic or prophylactic uses…Other" as the importer argued. The CIT ruled that because the marketplace recognizes the use of chondroitin sulfate as a therapeutic substance, it is properly classified under the duty free provision for therapeutic substances. The CIT said it is not the court's duty to determine the extent of the substance's effectiveness, so long as its therapeutic properties are recognized in the marketplace. The U.S. appealed the CIT's decision to the Court of Appeals for the Federal Circuit ("CAFC"). Importers should consult customs counsel to safeguard their rights to any potential duty refunds.

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