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

May 2006

• GSP Benefits May Lapse at End of 2006: Without action by the U.S. Congress to renew the program, preferential treatment under the general Generalized System of Preferences (GSP) will expire December 31, 2006. GSP benefits specific to the AGOA countries are in effect until September 30, 2015. Reports indicate that several influential U.S. Senators are intent to let the GSP program lapse at the end of the year.
• Bulgaria & Romania to Lose GSP Upon EU Membership: Bulgaria and Romania will automatically lose their GSP benefits upon joining the EU bloc of nations, currently expected to happen on January 1, 2007.
• National Emergency Against Syria to Continue: President Bush continued the national emergency with regard to Syria for another year.
• AD/CVD Developments: The U.S. Commerce Department recently:

1. Initiated a "Sunset Review" of the AD order on fresh garlic from China;
2. Initiated an anti-circumvention inquiry on certain molded or carved articles of wax from China. The petitioner asserts that importers are circumventing the AD order on petroleum wax candles from China by importing essentially wickless candles for final processing in the U.S.

• Section 337 Patent Investigations: The U.S. International Trade Committee (ITC) recently received a petition for a Special 337 patent infringement investigation of: 1) certain insulin delivery devices, cartridges with adaptor tops, and components thereof; 2) certain L-lysine seed products.

• EU Cancels Reimposition of Tariffs over FSC: Following the repeal of the "grandfather clauses" in the now-suspended Foreign Sales Corporation (FSC) and Extraterritorial Income (ETI) tax schemes, the EU announced that it will not reimpose retaliatory tariffs on certain U.S. exports recently approved by the WTO. The "grandfather clauses," which allowed for the continuation of certain benefits, was a major sticking point between EU and U.S. trade negotiators.
• EU Reimposes Sanctions on U.S. Over Byrd Amendment: Effective May 1, 2006, the EU reimposed its trade retaliation of additional 15% duties on certain U.S. exports over the continued distribution of AD and CVD duties to affected domestic producers. Although the Continued Dumping and Subsidy Offset Act (CDSOA), also known as the Byrd Amendment, has been repealed, distributions will continue until October, 2007.

U.S. Beef Imports – China agreed to reopen its market to imports of U.S. beef;

• EC Proposes Standardized IPR Penalties: The EC recently proposed a bloc-wide standardization of penalties for intellectual property rights (IPR) offenses. The EC proposal calls for a minimum four year prison term and a fine starting at €100,000 if the IPR infringements are caused by a criminal organization or become a risk to the health and safety of individuals.
• EU Authorizes Compulsory Licensing: The European Council adapted legislation to implement the recent WTO agreement allowing compulsory licensing of patented medicines for export to countries facing a public health crisis and which lack their own drug manufacturing capacity.
• RFID Enlisted Against Counterfeit Drugs: A major pharmaceutical firm recently began a pilot test using radio frequency identification (RFID) tags attached to medicine bottles to help verify that the bottle actually contains the stated medicine. The pilot test answers a U.S. Food & Drug Administration (FDA) request for the pharmaceutical industry to integrate RFID technology to safeguard the medical supply chain.

• Reduction of Transportation Bottlenecks: The U.S. Secretary of Transportation recently initiated the "National Strategy to Reduce Congestion on America’s Transportation Network," in an effort to reduce transportation bottlenecks that threaten supply chain efficiencies. The U.S. Department of Transportation (DOT) will identify congestion reducing corridors, work for increased transportation funding, and encourage private sector investment in transportation infrastructure.
• Rail Fuel Surcharges Questioned: Some of the country’s major railroad customers recently asked federal regulators to review the way railroads calculate fuel surcharges. The rail customers argue that the current method of basing the surcharge as a percentage of the base freight rate often results in different commodities being charged vastly different surcharges even if they are shipped to the same destination. One alternative method being considered is to base the surcharge on a mileage based formula, which may result in certain customers paying even higher surcharges than they do now.

• Genetically Engineered Foodstuff to be Labeled: A bill (H.R. 5269) was recently introduced in the U.S. Congress that would require all food containing genetically engineered material to be labeled accordingly.

• Court Allows CBP Claim Against Importer to Proceed: In U.S. v. Optrex America, Inc., the U.S. Court of International Trade (CIT) recently denied the defendant/importer’s request to dismiss a civil complaint brought against it by CBP. CBP filed a civil complaint against the importer seeking to recover lost duties of over $1.5 million and a penalty of over $3 million (twice the amount of lost duties). The complaint alleged that the importer falsely declared that its imported liquid crystal display (LCD) products were properly classified using a lower duty rate by making use of material false statements. The importer classified the LCD products under Chapter 85 as "Electric sound or visual signaling apparatus," (1.4%-0.5% duty rate depending on the year of entry), while CBP contends that the importer knew that that the proper classification was in Chapter 90 as "Liquid crystal devices not constituting articles provided for more specifically in other headings" (6.3%-1.6% duty rate depending on the year of entry and heading used). The importer argued that it relied on expert advice from its broker and customs counsel, and cooperated with CBP while it was being investigated. However, CBP argued, and the CIT concurred that: the importer did not follow CBP guidance on the classification of its goods; did not heed advice repeatedly communicated by its customs counsel; it was possible that the documents submitted at the request of CBP were specifically created to mollify the agency; and that the importer maintained a parallel set of books reflecting the higher duty rates. The CIT found that as the preponderance of the evidence points to negligence on the part of the importer in exercising the "reasonable care" required by all importers, it will allow CBP’s civil complaint to go forward.
• EU Court of Justice Rules on Pharma Patent Extensions: A recent ruling (C-431/04) by the European Court of Justice on the extension of pharmaceutical patents will make it easier for generic pharmaceutical companies to market certain drugs at earlier dates. The case was filed in Germany by the Massachusetts Institute of Technology (MIT) after its request for a Supplementary Protection Certificate (SPC) (patent-like protection for an additional five years) to extend patent protection for its brain cancer drug was denied by German authorities. The product involved an implanted wafer which released an active chemotherapy drug along with a second substance to control the release of the first substance. The German appellate court referred to the EU Court of Justice the question whether a non-active component can be part of a "combination of active ingredients of a medicinal product," which is a prerequisite for a SPC. The EU’s highest court ruled that the wording "combination of active ingredients" should be read literally and an SPC can’t be granted for two ingredients if "only one of which has therapeutic effects of its own."
• Judge Rejects California Proposition 65 in Tuna Case: A San Francisco Superior Court Judge rejected California’s attempt under its Proposition 65 environmental law to force the tuna industry to label canned tuna as toxic due to mercury present in tuna. The judge found that: 1) federal labeling laws preempt state labeling requirements; 2) the average serving of tuna does not contain a sufficient amount of mercury to warrant a warning label; and 3) mercury contamination is largely not man-made but naturally occurring, thus being exempt of California’s labeling requirements for man-made toxins.
• Argentine Judge Overturns Beef Export Ban: An Argentine judge recently issued a temporary ruling overturning that country’s ban on beef exports. Beef exports, coupled with increased domestic demand, has contributed to rising inflation rates, and the beef export ban was instituted to keep inflation in check by keeping prices down.