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

May 16, 2005

• CITA Imposes Safeguard Quotas: The Committee for the Implementation of Textile Agreements ("CITA") made affirmative decisions in several of its safeguard investigations of Chinese textile and apparel exports to the U.S. CITA determined that Chinese exports of cotton knit shirt blouses (cat. 338/339), cotton trousers (cat. 347/348), and cotton and man-made fiber ("MMF") underwear (cat. 352/652) are creating domestic market disruptions. CITA's affirmative decisions covered its self-initiated investigations of actual market disruptions. CITA will request consultations with China to try and reach an agreement regarding the increased exports of the affected merchandise. Barring an agreement, it is expected that quota will be re-imposed on the affected merchandise at the end of May, 2005.
• Other Textile and Apparel Developments: 1) In addition to the above three merchandise categories found to be disrupting the U.S. domestic market, CITA is considering additional safeguard measures on the following textile and apparel exports from China: MMF trousers (cat. 647/648), cotton/MMF woven shirts (cat. 340/640), MMF knit shirts (cat. 638/639), cotton/MMF sweaters (cat. 345/645/646), cotton/MMF dressing gowns and robes (cat. 350/650), brassieres (cat. 349/649), knit fabric (cat. 222), combed cotton yarn (cat. 301), and synthetic filament fabrics (cat. 620). The public comment periods of the safeguard investigations for each of the above are up by the first week of June, 2005 and it is possible that CITA will re-impose quotas on all of the above shortly thereafter; 2) Secretary of Homeland Security Michael Chertoff recently stated that although quota has been eliminated as of January 1, 2005, CBP is in the process of hiring 72 additional agents to focus on textile transshipment issues. CBP will use the additional personnel to add additional overseas investigative agents, increase the number of import specialists, and increase the number of transshipment investigations, inspections and enforcement actions; 3) quota for Chinese cotton, wool, and MMF socks, which has been re-imposed on October 29, 2004 for a one year period, has been filled as of May 12, 2005. Entry for this merchandise will be denied until November 29, 2005, after which, entry will be resume using the staged entry process.
• Motor Support Bearings, Oil Filler Caps, and Felt Wick Lubricators: Motor support bearings, oil filler caps, and felt wick lubricators packaged together and sold as a set to support motor traction were originally classified under subheading 8302.30.30, HTSUS (2% duty), the provision for "Base metal mountings,…: other mountings, fittings and similar articles suitable for motor vehicles; and parts thereof…; CBP now claims that the set is more properly classified under subheading 8483.30.80, HTSUS (4.5% duty), the provision for "transmission shafts…bearing housing…,parts thereof: bearing housing; plain shaft bearings: Other.

• Countries Impose Retaliatory Sanctions on U.S. Exports: Effective May 1, 2005, the EU and Canada imposed retaliatory tariffs of 15% on certain U.S. exports over the Continued Dumping and Subsidy Offset Act, also known as the Byrd Amendment, which was ruled illegal by the World Trade Organization ("WTO"). The EU levied additional 15% tariffs on a variety of U.S. agricultural, machinery, paper and textile products, while Canada imposed tariffs on U.S. cigarettes, oysters, and live swine exports. Other countries are expected to announce similar tariffs shortly.
• Yearly GSP Product and Country Review: The Office of the U.S. Trade Representative ("USTR") published a Federal Register Notice regarding the initiation of the 2005 Annual Generalized System of Preferences ("GSP") Product and Country Eligibility Practices Review; comments are due by June 15, 2005.
• Syria Emergency Continued: President Bush continued the national emergency for an additional year with regard to trade restrictions imposed on Syria.
• Fair Trade Developments: The International Trade Commission ("ITC") recently: 1) issued its affirmative determination in the five year Sunset Review of its antidumping ("AD") order on greigh polyester/cotton printcloth from China; 2) revoked its AD order on sebacic acid from China; 3) issued a report which found few barriers existing in the market for air and noise pollution abatement services.
• Intellectual Property Rights Report: The USTR released the results of its annual report of intellectual property rights ("IPR") protection around the world. Ukraine, currently subject to $75 million in sanctions, will remain the only country subject to sanctions. China, along with thirteen other countries, has been put on the "Priority Watch List" and faces the threat of possible sanctions should their IPR protections not improve.

• Saudi Arabia Seeks WTO Membership: Saudi Arabia is finalizing a WTO trade deal with the U.S. which should increase its chances of joining the WTO in the near future.
• New WTO Chief: Pascal Lamy, the former EU Trade Commissioner, was elected the next Director General of the WTO.

• BIS Announces Settlements and Penalties: The Bureau of Industry and Security ("BIS") announced the following actions against companies who allegedly violated the Export Administration Regulations ("EAR"): 1) denied export privileges for three years to a company who allegedly aided the exportation of gas compression spare parts to Iran in violation of the EAR; 2) a $170,000 civil penalty along with denial of export privileges for the illegal re-exportation of oil field chemical testing equipment supplies to Libya without the required license.
• Cold Medicine Sales Restricted: With 45 states having imposed or considering restrictions on the sale of cold medicines containing pseudoephedrine as an active ingredient as well as pending legislation in the U.S. Senate, some of the nation's largest retailers and drug store chains are taking steps to restrict access to these medicines. Retailers are moving these medicines behind the counter and are in discussions with drug manufacturers to possibly reformulate cold medicine ingredients in an effort to restrict the use of pseudoephedrine, which is used as a precursor in producing methamphetamine.
• EU Votes for 48-Hour Maximum Work Week: The EU Parliament recently voted to scrap an "opt-out" option and make the 48-hour maximum work week obligatory. The new EU Working Time Directive will be phased in over a three year period.
• CPSC Developments: The Consumer Product Safety Commission ("CPSC") instituted the following recalls: 1) certain gas valves, as they may leak; 2) certain orthodontic pacifiers, as the nipple may easily separate from the base (a failure of federal safety requirements); 3) certain wooden push toys, as small parts may break off and pose a choking hazard; 4) certain metal pendants, as they contain high levels of lead.

• Recent Innovations: 1) Using advances in photovoltaic technology, the U.S. army is ordering flexible plastic sheeting that converts light into energy in order to replace the need for disposable batteries and recharging devices that soldiers need to carry. The sheeting can also be woven into sunlight-absorbing tents and reduce the need for diesel fuel for noisy, polluting generators; 2) a major retailer has redesigned the standard medication pill box, the first redesign in 40 years. Target Corp's redesign encompasses a flatter bottle which rests on its cap, easy to read labels wrapped over the top, and color coded ring options to help identify the medication between different family members. The flattened bottle has a card slot for additional important medical information while bottles for liquid medicines contain a receptacle for oral syringes.

• Denied Ports Update: The U.S. Coast Guard announced that because of ineffective anti-terrorism procedures in certain countries, absent certain security measures, it will deny entry to any ship which has called in the following countries during their last five port calls: Democratic Republic of Congo, Guinea-Bissau, Liberia, Mauritania, and Nauru. Effective May 23, 2005, vessels calling in these ports will only be allowed access to U.S. ports if they carry out specific security procedures during its port calls in the above countries.
• CSI Ports: The port of Buenos Aires, Argentina recently became operational under the Container Security Initiative ("CSI") program.

• Dental Hygiene Products: In Warner-Lambert Company v. U.S., the U.S. Court of Appeals for the Federal Circuit ("CAFC") reversed the CIT's ruling with regard to the proper classification of Warner-Lambert's Certs® Powerful Mints. CBP classified the mints under subheading 2106.90.99 (6.4% duty), HTSUS, as a "food preparation not elsewhere specified or included." Warner-Lambert contended that as the mints are used to freshen breath and eliminate oral malodor, they should be classified under subheading 3306.90.00, HTSUS, as "Preparations for oral or dental hygiene…Other" (duty free). The CIT, relying on a U.S. Food & Drug Administration ("FDA") monograph on oral health care which stated that "hygienic measures" to control malodor contain antimicrobial active ingredients, concluded that because the mints do not contain any antimicrobial active ingredients they can't be classified as preparation for oral hygiene under HTSUS 33.06. However, the CAFC disagreed and found that although antimicrobial agents are linked to hygienic measures, "preparation for oral or dental hygiene" is not defined in any standard and hygienic activity may take place without the use of antimicrobial agents. In the case at issue, testimony was offered that Certs® Powerful Mints stimulate salivary flow which controls malodor by purging, while the flavoring masks the malodor as well. In addition, the CAFC noted that because Customs' prior rulings on this merchandise neglected to analyze the chemical composition of the mints, which help achieve the cleansing effect and purging activity, Customs' position does not merit Skidmore deference.

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