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FDA Meeting on Medical Device Reviews: The U.S. Food & Drug Administration (FDA) will hold a meeting on the possible implementation of certain performance goals for medical device reviews, to be held at its Rockville, MD headquarters on May 22, 2006; registration is required by May 19, 2006.
CAFTA-DR for Honduras & Nicaragua: President Bush issued a Presidential Proclamation implementing the Central America-Dominican Republic (CAFTA-DR) Free Trade Agreement (FTA) with Honduras and Nicaragua, effective April 1, 2006. Most bilateral trade will be duty free as of this date. Commensurate with the implementation of CAFTA, imports from Honduras and Nicaragua will no longer be eligible for entry under the Generalized System of Preferences (GSP), Caribbean Basin Trade Partnership Act (CBTPA), or the Caribbean Basin Economic Recovery Act (CBERA) programs. With El Salvador already eligible for CAFTA, Guatemala and the Dominican Republic will become eligible for CAFTA when they implement the required legislation. Costa Rica is the only eligible country which has not yet ratified CAFTA.
New USTR: President Bush nominated the current U.S. Trade Representative (USTR) Rob Portman as the new director of the Office of Management and Budget (OMB). Susan Schwab, currently a deputy USTR, will become the new USTR. It is not known how the departure of Mr. Portman, who has won praise as a consensus builder, will affect the ongoing trade negotiations, i.e., the World Trade Organization’s (WTO) Doha Round and the free trade agreements (FTA) with Colombia and Peru.
Proposed Changes to NAFTA Rules of Origin: The U.S. Trade Representative (USTR) requested the U.S. International Trade Committee (ITC) to investigate the impact of proposed changes to certain NAFTA rules of origin. Among others, the changes will affect certain: fish and fish oils, herbs and spices, food preparations, oil and petroleum products, leather, aluminum, diesel engines, turbines, valves, electric motors, transformers and generators, batteries, radio telephony, turntables and cassette players, medical appliances and parts, and measuring and controlling devices. Written comments are being sought by the ITC until June 2, 2006.
Country of Origin Determinant May Change: Sources indicate that CBP is considering whether to change the determinant for the country of origin of imported goods in order to make it less subjective and give it a more certain standard. Presently, the country of origin for imported goods is determined using the "substantial transformation" rule, whereby, the country where the goods (different components) are so substantially transformed as to result in a new product with a new name is recognized as the country of origin for the entire product. However, as this process is sometimes subjective, CBP is considering recognition of the "tariff shift" rule as the determinant for country of origin designation. Under the "tariff shift" rule, also used to determine the origin under NAFTA, the country of origin is designated as that country where a processing procedure has taken place which results in the reclassification of an object from one HTSUS chapter, heading, or subheading to another. As the potential impact of any change may be significant for goods sourced in more than one country or which undergo multi-processing steps, importers are urged analyze any impact this change may have on the dutiability and admissibility of their imports, so as to allow for full participation in the rulemaking process in the event CBP goes forward with these changes.
Classification Developments:
1) Antimony Trisulphide – CBP is proposing to reclassify antimony trisulphide (used for brake pad manufacturing) from its current classification under heading 2830.90.0000 (3% duty), HTSUS, the provision for "Sulfides: polysulfides, whether or not chemically defines: other." CBP notes that as the antimony trisulphide is also used in the metallurgical industry and its molecular structure is not altered in any way, it is not precluded from classification in heading 2617.10.0000 (duty free), HTSUS, the provision for "Other ores and concentrates: antimony ores and concentrates."
2) Rhodorsil Emulsion 872 – CBP recently affirmed its previous ruling of Rhodorsil Emulsion 872 (used as a lubricant in web offset printing, mould release, plastics and foundry materials, water repellent, release agent for industrial glassware, and as an additive in maintenance products) in heading 3403.99.0000 (6.5% duty), HTSUS, the provision for "Lubricating preparations… and preparations as a kind used for the oil or grease treatment of textile materials, leather…: Other: Other", rather than in heading 3910, the provision for silicones in primary forms.
TRADE TALK
Peru – The U.S. and Peru recently signed the U.S.-Peru Trade Promotion Agreement (PTPA). While Peru’s exports to the U.S. already enjoy duty free treatment under the Andean Trade Promotion Act (ATPA), 80% of U.S. industrial exports to Peru and 75% of its agricultural exports will enjoy duty free access upon implementation of the agreement, which must still be approved by the U.S. Congress.
Ecuador – FTA negotiations between the U.S. and Ecuador have hit a rough patch, with U.S. negotiators noting that Ecuador must do more with regard to agriculture and intellectual property rights (IPR) issues before negotiations can continue. In addition, it is not known how its recent signing of a FTA with Cuba will affect its negotiations with the U.S.
Venezuela Threatens Barriers – Venezuela has threatened to withdraw from the Community of Andean Nations (CAN) and impose new trade barriers on Colombia and Peru after they signed FTA’s with the U.S.
Indonesia – The U.S. and Indonesia are seeking to broaden and deepen bilateral economic relations and have discussed issues pertaining to textile transshipment as well as environmental issues. The strengthening of economic relations may eventually lead to FTA negotiations.
- AD/CVD Developments:
The U.S. Commerce Department recently:
- Decided to continue its antidumping (AD) investigation of certain activated carbon from China;
- Decided to continue its suspended AD investigation of ammonium nitrate from Russia;
- Determined to keep in place the AD order on certain sulfanilic acid from China and the AD and countervailing duty (CVD) on the same product from India;
- Decided to conduct a full "Sunset" review of the AD order on certain silicon metal from Brazil and China;
- Decided to conduct an expedited "Sunset" review of its AD order on certain silicomanganese from Brazil, China, and Ukraine;
- Decided to institute a "Sunset" review of its AD order on furfuryl alcohol from China and Thailand.
- Section 337 Patent Investigations:
The ITC recently instituted a special 337 patent investigation into chemical mechanical planarization slurries and precursors of same.
WORLD TRADE ORGANIZATION (WTO)
- EU to Reimpose Trade Retaliation Against U.S.: Effective May 1, 2006, the EU intends to reimpose 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 by the U.S., some distributions will continue until October, 2007.
- Trade Negotiators Miss Deadline:
Reports indicate that it is almost certain that WTO trade negotiators will miss an end-of-April deadline for industrial and agricultural trade liberalization. Agricultural subsidies seem to be the major stumbling block with both the U.S. and the EU blaming each other for not easing their respective subsidies.
- Finding Against U.S. Zeroing Method:
A WTO Appellate Body ruled that the U.S. practice of using "zeroing" (ignoring instances where the export price was more than market value) in some of its AD calculations is inconsistent with WTO rules. The finding is limited to the specific cases reviewed. The U.S. has already announced it will no longer use the zeroing method.
BUSINESS BRIEFS
- China Trade Developments:
Chinese President Visits the U.S. – Chinese President Hu Jintao’s recent visit to the U.S. did not result in any progress relating to the major trade issues clouding the U.S. - China trade relationship, i.e., currency valuation and IPR issues. President Jintao reiterated China’s official line that it will ease restrictions and move toward a market driven currency valuation, albeit at a slow and measured pace. As no substantial progress has been made, attention will now focus on the U.S. Treasury Department’s biennial report on the currency regimes of major U.S. trading partners and whether China will be branded a "currency manipulator." In the absence of concrete movement by China on the currency issue, various bills introduced in the U.S. Senate to punish China for its interference in the Yuan’s valuation may now see action.
China Unexpectedly Raises Interest Rates – In an effort to head off an overheating economy, China unexpectedly raised the interest rates it charges banks by 27 basis points. Eschewing its past reliance on various administrative remedies, China chose this time to use a market-based tool to try and arrest the economy’s runaway growth. The U.S. Government and business analysts applauded the move as it indicates that China may be choosing a greater reliance on market-driven solutions to economic problems, which may eventually lead it to allow its currency greater market flexibility. In taking into account this interest rate increase and the recent announcement that it will allow companies and individuals to invest in overseas stocks and bonds, economists believe China will eventually follow with the U.S.’ most desired action to cool its economy, allowing the Yuan to rise against the U.S. dollar.
Intellectual Property Rights – China recently established a Judicial Court of Intellectual Property, its first court to exclusively handle IPR violations.
China Raises Taxes on Energy, Environmental, and Luxury Goods – In an effort to limit environmental damage and do something to narrow the gap between the rich and poor, China has instituted changes in its tax rates on a variety of different goods. Effective April 1, 2006, new or higher taxes will be levied on automobiles with large engines as well as on naphta, solvents, and lubricants. Taxes will also be imposed on wooden chop sticks, wooden floor planks, luxury watches, golf clubs, golf balls, yachts, and refined copper products. Exports of products containing high contents of natural resources will be discriminated against through taxes. Taxes previously imposed on such everyday consumer products such as skin care, hair products, and shampoo were eliminated as of April 1, 2006.
- EU to Allow Early Use of Drugs:
The EU announced that it will allow gravely ill patients to receive drugs during product development if a panel of judges agrees that the early use of a drug will outweigh any risks. "Conditional marketing authorization" would also allow the opportunity to counter a bio-terrorist attack or a pandemic.
- FDA Evaluates Drug Price Promotions:
The FDA is proposing to study the effect of consumer’s perceptions of certain drug promotions, e.g., coupons, free trial offer, or other price promotion, and how they may affect the way a particular product may be viewed. Drug advertising rules require a "balanced" presentation of the risks and benefits of a drug. Information from the proposed study would establish whether future regulatory changes will be required.
- New Electronic Patent Filing:
The U.S. Commerce Secretary recently launched the U.S. Patent and Trademark Office’s new electronic filing system, allowing applicants to file patent applications online. The system allows applicants to file by attaching PDF documents, allows for quick access to each applicant’s files, and starts the shift away from a paper-based system to an electronic-based system.
- Export Violations:
1) The U.S. Department of Justice recently sentenced an executive at a forklift manufacturer to 39 months in prison and fined him $6,000 for conspiring to violate the U.S. trade embargo against Iran; 2) the U.S. Bureau of Industry and Security (BIS) imposed export sanctions on 14 individuals because of their alleged violations of U.S. export laws for financing and shipping an industrial hot press furnace to China without proper license; 3) a New Jersey company agreed to an undisclosed fine and the forfeiture of certain exporting privileges for four years resulting from its attempt to export certain toxins to North Korea in violation of the law; 4) two chemical importers agreed to civil penalties totaling over $56,000 for importing improperly labeled pesticides.
- International Price Fixing Investigations:
Chemical Industry – 1) Two international companies agreed to pay civil penalties totaling over $72 million and agreed to assist a U.S. Department of Justice investigation into price fixing in the hydrogen peroxide and sodium perborate industries; 2) France’s antitrust authority fined several leading perfume and cosmetic companies for colluding to fix distributor’s margins and prices;
Pharmaceutical Industry – 1) Britain’s Serious Fraud Office announced criminal proceedings of various companies and individuals resulting from its investigation of certain price fixing practices in the generic pharmaceutical industry; 2) while the EU’s Court of First Instance recently reduced the fines of two participants of the EU’s largest price fixing investigation for technical reasons, it rejected the companies attempts toannul the original punishment. The case involved several international companies and the price fixing in the vitamin industry, resulting in fines totaling more than $1 billion.
TRANSPORTATION TIDBITS
- LA-Long Beach Pier Pass Raises Fees: Effective April 24, 2006, Pier Pass fees for truckers using the ports of Los Angeles-Long Beach during peak hours (3 AM-6 PM) will increase to $50 per TEU (20" container) and $100 per FEU (40" container).
- Chinese Ports to Charge Security Fees:
Published reports indicate that China will start charging a security fee for all container shipments traveling through its ports. The fee is reported to be around $2.50 for a 20-foot container and $3.75 for a 40-foot container.
LEGISLATIVE DEVELOPMENTS
- Federal Food Safety Oversight to Trump State Oversight: The "National Uniformity for Food Act of 2005" (H.R. 4167) recently passed in the U.S. House of Representatives will position the federal government, and not individual states, with oversight authority for food safety. The bill will require uniform food safety labeling and will void any state food safety law which does not conform to federal standards. The bill is aimed at the myriad state food safety laws, especially California’s Proposition 65, but will allow states with tougher laws to petition the FDA for exemption from the new federal labeling laws. Sources indicate it is doubtful whether the U.S. Senate will approve the bill.
- U.S. Trade Remedies:
"The Restoring America’s Competitiveness Act" (H.R. 5043), recently introduced in the U.S. Congress, seeks to strengthen America’s competitiveness and level the playing field with countries who resort to unfair trading practices. The bill would impose CVD duties on goods from countries which offer export rebates of indirect taxes (e.g. Brazil, China, France, Germany) unlike the U.S. which relies heavily on direct taxes. In an apparent focus on China, the bill would allow CVD duties to be applied to non-market economies and on imports from countries who manipulate their currency.
COURT CASES
- Lead Paint Verdict: Rhode Island became the first state to successfully sue paint manufacturers over lead paint poisoning. A jury recently found several paint companies responsible for creating a "public nuisance" by selling lead paint decades ago. Banned across the U.S. in 1978, the jury found lead paint to be an "environmental hazard" requiring the companies to foot the bill for cleanup across the state. A judge ruled out punitive damages as the companies did not act in an illegal fashion. Similar litigation is pending in several other states.
- Byrd Amendment Doesn’t Apply to Canada and Mexico:
The U.S. Court of International Trade (CIT) recently ruled that the Byrd Amendment, whereby AD and CVD duties collected by CBP are distributed to eligible affected domestic producers, can’t be applied to imports from Canada and Mexico. In Canadian Lumber Trade Alliance v. U.S., the CIT found that the NAFTA Implementation Act provides that any change to the U.S.’ AD or CVD laws apply to Canada and Mexico only if Congress specifically states that the change applies to the NAFTA participants and that the parties are notified in advance in writing so as to allow for consultations prior to the implementation of any changes. As the Byrd Amendment does not specifically state that it applies to Canada and Mexico and these countries were not notified prior to its implementation, it can’t apply to goods from Canada or Mexico. The CIT ordered the parties to reach an appropriate remedy for the AD and CVD duties already collected from Canadian softwood lumber exporters. However, a tentative agreement recently reached between the U.S. and Canada regarding the partial or full refunds of AD and CVD duties collected from Canadian softwood lumber exporters may moot this decision as far as it applies to softwood lumber, the product at the center of the biggest AD/CVD disagreement between the U.S. and Canada.
Serko Simon Gluck & Kane LLP
1700 Broadway, 31st Floor
New York, New York 10019
Phone (212) 775-005 Fax (212) 839-9103
Outside of New York State: 1-800-46-TRADE
E-mail address:
This Trade Alert has been prepared by Chaim Appel, Technical Advisor.