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

February 22, 2006

• CBP Increases Textile Enforcement: The reintroduction of quota for many Chinese textile products at the beginning of 2006 and the identification of various schemes to circumvent quota requirements and high duty rates has caused CBP to increase the enforcement level of textile import regulations. With duties collected from textile imports totaling 43% of all duty revenue collected, CBP announced the following:

1. Marking – CBP announced that it recently seized several shipments of carpets from Egypt which sported a false or no country of origin marking.

• Handtools, Tool Sets: CBP is proposing to reclassify various handtools such as a torque wrench, ratchet, 53-bit socket set, and a screwdriver bit and socket set as follows:

• Hydraulic Motor/Gearbox Combo: Rotary piston-type hydraulic motors with an additional set of gears and having an outside power source to pump hydraulic fluids into the motor, are properly classified as "axial piston type hydraulic power motors" under heading 8412.29.8045 (duty free) because as the external power source provides the necessary rotation to the gear box, it is this component which provides the essential character to the combination motor, even though the planetary gear box actually powers the application.

• Free Trade Developments:

• Market Economy Status:

1. Effective February 1, 2006, the U.S. Department of Commerce granted Ukraine the status of a "market economy" with regard to all future AD and countervailing duty (CVD) investigations, which will have the effect of lowering duty determinations.

• AD/CVD Developments:

• Section 337 Investigations: The U.S International Trade Commission (ITC) received petitions requesting special Section 337 investigations into alleged patent infringement of certain portable power stations and packaging thereof and certain combination motor and transmission systems. The ITC is also requesting comments on remedy proposals regarding its investigation of certain ink sticks used in printers.

• WTO Rules Against U.S. Export Tax Breaks: A WTO Appeals Panel found that the transition period allowed when the U.S. repealed the Foreign Sales Corporation (FSC) tax scheme is still an illegal subsidy to U.S. exporters.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.
• 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.

• 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 letting the Yuan appreciate.
• 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) a domestic trade organization which has been instrumental in pushing the special safeguard measures against China last year indicated that it will increase its efforts to limit Chinese textile and apparel imports. Among the steps the organization plans are: to work with other organizations around the world to find a permanent solution to the import threat from China; ensure the strict enforcement of U.S. import restrictions; work with the U.S. Congress on legislation to force a revaluation of the Yuan; ensure that Vietnam doesn’t flood the market upon its accession to the WTO; and work to defeat legislation that would grant preferential treatment to many Asian least-developed countries;

• 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.
• Greek Port Strikes: Demanding better employment rights and retirement benefits, Greek farmers staged rolling strikes shutting down port services the last several days.
• 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 an 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 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 protest able 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.