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

February 2006

• Free Trade Developments:

1. several members of the U.S. Congress are seeking support from their colleagues for a bilateral FTA with Malaysia, the U.S.’ 10^th largest trading partner;
2. FTA talks between the U.S. and Egypt have been postponed at this time;
3. Turkey and Egypt recently signed a bilateral FTA;
4. Israel initiated FTA talks with the Mercosur trading bloc, comprising Argentina, Brazil, Paraguay, and Uruguay.

• Market Economy Status:

• AD/CVD Developments: The U.S. Commerce Department recently:

• Argentine Beef Banned for Disease Outbreak: A recent outbreak of foot and mouth disease is expected to result in countries banning imports of Argentine beef. Ironically, this may have an impact on whether Argentina will raise beef export taxes to 15%, as expected prior to the outbreak, in order to control the rise in beef prices. Rising beef prices in Argentina, with the highest per-capita beef consumption in the world, has been a factor in fueling inflation in that country.

• WTO Rules Against U.S. Export Tax Breaks: A WTO Appeals Panel found that the transition period allowed when the U.S. repealed the Foreign Sales Corporation (FSC) tax scheme is still an illegal subsidy to U.S. exporters. The EU Trade Commissioner stated that should the U.S. not comply with this WTO finding within the 90-days allowed, it will reimpose 14% retaliatory tariffs on certain U.S. exports which were lifted upon the initial repeal of the law. The U.S. urged the EU not to reimpose those sanctions as it may hurt bilateral economic relations.
• WTO Finds Against U.S. in EU Customs Procedures: Sources report that in an interim ruling the WTO did not find for the U.S. in its complaint that EU customs procedures were not being applied uniformly, thus resulting in increased costs to U.S. exporters. The WTO found that although there were some differences in customs procedures between EU countries, they were not systemic in nature.
• WTO Sides with U.S. in Biotech Ruling: In another interim finding, the WTO upheld a complaint filed by the U.S., Canada, and Argentina against the effective bans of genetically modified (GMO) crops by certain EU countries. EU consumers’ fears led to the establishment of a six-year moratorium on GMO approvals in 1998. Subsequently, the EU has been approving certain new GMO’s but is still allowing individual countries to effectively ban them. This ruling will make those country-specific bans illegal under WTO rules, and will either force the acceptance of GMO’s throughout the EU or have them accept any resulting retaliatory tariffs for keeping the bans in place.
• DSB Sought for Turkey Rice Dispute: The U.S. requested the establishment of a WTO Dispute Settlement Body alleging that Turkey’s unfair import restrictions are denying fair access to U.S. rice resulting in the loss of two-thirds of U.S. rice exports to Turkey.
• U.S. Asks WTO to Rule on Additional Airbus Aid: The U.S. asked the WTO to determine whether training aid granted by the Welsh Assembly to train Airbus workers is an illegal subsidy. This request is related to the ongoing WTO investigation into alleged subsidies to both Airbus and Boeing.

• Proposal to Eliminate Tariffs on Medicines and Medical Devices: The U.S. joined Singapore and Switzerland in proposing the elimination of tariffs and non-tariff barriers on the $55 billion in medicines and medical devices still subject to bilateral tariffs throughout the world. Some of the poorest countries most in need of medicines and medical devices are the ones bearing the brunt of tariffs and trade barriers.
• U.S.-China Trade Developments: With the U.S. Treasury Department’s announcement of the record-setting 2005 trade deficit ($725 billion), in large part blamed on China ($201 billion), the U.S. administration announced that it will step up enforcement of U.S. trade laws, in particular with regard to China. The administration expects China to live up to its responsibilities and commitments, especially with regard to market access and intellectual property rights (IPR), and will "use all options available" to reach this goal. Several measures taken include: 1) the creation of a new prosecutor for trade disputes; 2) the new trade position of chief counsel to enforce fair trade with China; 3) a bipartisan Senate call to revoke normal trade relation (NTR) status for China; and 4) statements by Senators Graham and Schumer that they are ready to re-introduce their bill for 27.5% across the board tariffs on all Chinese goods if no substantive progress is made with regard to allowing the Yuan appreciate.
• China Currency News: A recent report by China’s central bank gave no indication that it has any intent of giving the Yuan more flexibility in currency markets. The report stated that it will keep the Yuan "basically stable" this year and will not change its policy of allowing the Yuan to trade only with a narrow daily band. A recent report in the Wall Street Journal indicated that U.S. Treasury officials may be ready to label China as a "currency manipulator" in its next review of currency policies (April 2006) by the U.S.’ major trading partners. Such a designation will trigger mandatory negotiations with China over its currency policies.
• Recent Indian Business Developments: 1) India’s Minister of Commerce and Industry announced that the Special Economic Zones (SEZ) Act of 2005 is effective as of February 10, 2006. The new SEZ rules are designed to greatly simplify procedures, provide single-window clearance, and provide a stable SEZ environment. The new law will help to simplify procedures, reduce documentation to a minimum with an emphasis on self-certification, eliminate requirements for bank guarantees, and reduce transaction costs. Approval for 117 SEZ’s have been granted and exports from them are growing 36% annually;

• Miscellaneous Briefs: 1) For the first time in decades, Japan has allowed the temporary import of U.S. fresh potatoes. Japan banned imports of U.S. fresh potatoes due to concerns over potato wart bacteria, which has now been effectively eradicated; 2) the city of Oakland, California became the first city to tax fast food trash. Oakland will assess businesses anywhere from $230 to $3,815, depending on their size, to help pay for removal of fast food wrappers, containers, and cups.

• U.S., EU Investigate Air Cargo Price Fixing: The offices of several international air cargo carriers were raided by authorities in the U.S. and the EU. Sources indicate that the raids are part of an investigation into possible collusion and price fixing of certain surcharges, e.g., fuel surcharges, security charges, and increased war-risk insurance costs, which are set as a fee-per-ton charge.
• Vessel Entry Restrictions: The U.S. Coast Guard announced that as a result of lax port security measures, vessels which visited certain countries during their last five port calls will face entry restrictions at U.S. ports. The countries affected are: Equatorial Guinea (certain ports), Guinea-Bissau, Liberia, and Mauritania.
• Foreign Purchase of U.S. Port Facilities Creates Uproar: The recent approval by the U.S. administration of the sale of six U.S. port facilities to Dubai Port (partly owned by the Government of Dubai) has created uproar among U.S. lawmakers. A bipartisan group of lawmakers promises to introduce legislation banning foreign ownership of U.S. port facilities on the grounds of national security. The sale of port facilities in Baltimore, New Orleans, New Jersey, New York, Miami, and Philadelphia has already prompted the introduction of local legislation to block the sale. However, the administration argues that security at the ports is controlled by various U.S. governmental authorities and that this will not change as the result of any sale.

• Senate Approves Counterfeiting Measures: The U.S. Senate passed an amended version of the Stop Counterfeiting in Manufactured Goods Act (H.R. 32) to broaden counterfeiting laws by establishing criminal penalties for anyone dealing in counterfeit labels, patches, stickers, hangtags, badges, wrappers, packaging, etc. which often are attached to the counterfeit product at the last moment. The bill also requires the forfeiture of any item derived from proceeds of counterfeiting or of any product used to aid in the counterfeiting process, and requires restitution to be paid to the victims.

• Appeals Court Reaffirms NAFTA Claim Requirement: The U.S. Court of Appeals for the Federal Circuit (CAFC) recently reaffirmed its position regarding the statutory requirements of importers claiming NAFTA preferential treatment (Serko & Simon LLP Trade Alert 10/20/05). In Corpora Companies, Inc. v. U.S., the U.S. Court of International Trade (CIT) agreed with the importer that it was originally precluded from filing its NAFTA claim for preferential treatment by a Customs Ruling that indicated its imported merchandise was not subject to preferential treatment and that Customs’ initial classification of the goods was a decision on NAFTA eligibility which can be protested. In reversing the Cat’s decision, the CAFC noted that "in the absence of a written claim for NAFTA treatment, either at entry or within a year of entry…Customs cannot make a protestable decision to deny an importer preferential NAFTA treatment." In the absence of a written claim for preferential treatment at or within a year of entry, neither Customs’ initial classification, nor its decision at liquidation, can be construed to have been an actual decision on the merits of a NAFTA claim, as no such claim existed at that time. As Customs has not yet made any decision on this claim, there is statutory basis on which the importer’s protest can stand.