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

March 8, 2006

• DR-CAFTA Operational for First Partner: El Salvador is the first country to enjoy preferential treatment under the Dominican Republic-Central America Free Trade Agreement (DR-CAFTA). Bilateral duty-free treatment for originating U.S. and El Salvador goods became effective March 1, 2006. Retroactive duty free benefits and refunds are available for certain qualifying textile and apparel articles back to January 1, 2004. Requests for refunds must be made in writing no later than the latter of December 31, 2006 or 90 days after the implementation of CAFTA for that particular country. Commensurate with the implementation of CAFTA, goods from El Salvador are no longer eligible for preferential treatment under the GSP, CBTPA, and CBERA programs. The Dominican Republic, Guatemala, Honduras, and Nicaragua have all ratified CAFTA, while Costa Rica has not done so yet. It is expected that the agreement will become effective for each of the above countries on a rolling basis, as soon as each country finalizes the necessary legislative changes. It is the importer’s responsibility to exercise reasonable care when relying on an exporter or other third party in claiming that the imported merchandise qualifies for preferential treatment.
• CBP Inspection Blitz Targets Textiles: In an effort to protect its revenue and maintain an enforcement deterrent, CBP targeted textile imports at the Port of Buffalo for intense inspection. The two week blitz resulted in the seizure of merchandise and the discovery of alleged misclassified merchandise (to avoid quotas), inaccurate marking, intellectual property rights (IPR) violations, and new merchandise being described as used or old.
• Sock Labeling Rules Come into Effect: The new country of origin labeling requirements for socks became effective on March 3, 2006. The new law requires the country of origin to generally be posted in the front of the package in a clear, conspicuous, and accessible manner.
• Electronic Controller Board: CBP recently reaffirmed its classification of an electronic control board used in a washing machine under subheading 8537.10.9000 (2.7% duty), HTSUS, the provision for ""boards, panels, … for electric control or the distribution of electricity… Other." The electronic control board is connected by wiring to the timer and motor and controls all the functions of the machine. The board measures the variation of the tub RPM and the torque variations caused by uneven loads. In the event of an uneven load, the circuit board restarts the spin cycle using an out-of-balance algorithm. Because the out-of-balance algorithm does not correct the uneven load, rather it allows the spin cycle to operate in an out-of-balance mode, it fails the chapter note requirements of heading 9032, and is precluded from classification under that provision.

• Free Trade Developments:

1. The U.S. announced that formal negotiations for a FTA with South Korea will start on June 5, 2006 with the intent of getting U.S. Congressional approval by June 2007, when presidential authority for a simple up or down vote by the U.S. Congress expires;
2. The U.S. Trade Representative (USTR) announced that the U.S. and Malaysia agreed to begin negotiations for a FTA;
3. Thailand announced that it is suspending free trade talks with the U.S. until after its elections, scheduled for April 2, 2006;
4. The U.S. and Colombia concluded FTA negotiations;
5. Singapore and Panama signed a bilateral FTA.

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

1. Decided to revoke the antidumping (AD) and countervailing duty (CVD) order on certain structural steel beams from Japan and South Korea;
2. Made a preliminary determination to revoke the CVD order on certain stainless steel sheet, strip in coils and stainless steel plate in coils from Italy;
3. Initiated a sunset review of the AD order on certain stainless steel bars from Brazil, India, Japan, and Spain;
4. The EU found that certain Chinese and Vietnamese shoes are being dumped at below fair value and recommended that AD duties be applied. The provisional duties are 19.4% for China and 16.8% for Vietnam. However, the AD duties will be phased-in starting at 4%. Children’s shoes and certain sports shoes will not be subject to the AD duties.

• Miscellaneous Trade Briefs:

1. President Bush renewed benefits for Liberia under the Generalized System of Preferences (GSP) program. Liberia was suspended from the program in 1990 due to worker rights concerns;
2. The USTR postponed until May 31, 2006 its decision on most of the petitions it accepted under its annual 2004 and 2005 review of the Andean Trade Preference Act (ATPA);
3. The U.S. Departments of Commerce and Interior allocated 1,866,000 units of watches from the U.S. Virgin Islands for duty free exemptions in 2006;
4. As a result of change in EU rules, the U.S. lifted sanctions it imposed on 11 EU countries in 1993 for discriminating against U.S. companies in government procurement of telecommunications equipment. The EU lifted its counter sanctions.

• 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.
• China Auto Parts: Sources indicate that the U.S. is intent on filing a WTO complaint against Chinese exports of auto parts. The U.S. is seeking EU support on this complaint.

• 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.
• Price Fixing Suits Increase for Chinese Companies: In a reversal of the usual complaints of dumping (selling at less than fair market value), some Chinese companies are now being accused of price fixing, according to several civil antitrust lawsuits filed against Chinese suppliers of goods ranging from vitamin C to minerals used in steel production. Sources indicate that in order to shake off allegations of selling at less than fair market value and dealing with the resultant AD duties, Chinese companies are coordinating efforts to set higher prices, resulting in allegations of price fixing. With the U.S. government and the courts increasingly winning large settlements from companies accused of price fixing, this can become a new issue clouding U.S.-China trade relations. One avenue of defense alluded to by Chinese companies is the fact that as many of them are still technically owned by the Chinese government, they are immune to U.S. antitrust litigation. However, claiming governmental ownership can have an adverse effect on any AD proceedings in which these companies may be involved.
• 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 Patent Developments:

1. BlackBerry case may further call for patent reform – The long running patent infringement battle between the maker of the BlackBerry device and a patent holding firm has been settled with the BlackBerry maker agreeing to pay $612.5 million, one of the largest such settlements ever, to end all outstanding issues. According to reports, this patent battle is spurring big technology companies to call for reform of the current patent system, where patent holding firms are able to extract large payments or obtain injunctions against other companies, even though these patent holding firms themselves do not have actual products which make use of their patents. The U.S. Supreme Court agreed to hear a similar case on whether patent holders are entitled to injunctions when infringement is found;
2. Madrid Protocol – The U.S. Patent and Trademark Office (PTO) is seeking comments by April 7, 2006 regarding the process of filing patent registrations under the Madrid Protocol. The Madrid Protocol allows for the filing of a patent or trademark in one of the participating countries with automatic protection in all participating countries;
3. Trademark Law Treaty to be Updated – The World Intellectual Property Organization (WIPO) meeting in Singapore from March 13, 2006, is expected to update and streamline the application and maintenance of the patent registration process. WIPO is also expected to update the Trademark Law Treaty (TLT) by including provisions to protect visible and non-visible signs (holograms, motion marks, and position marks), approve provisions for electronic filing, and allow for relief measures when filing time limits have been missed;
4. Innovative Twist in Countering Counterfeits – A recent report discussed the impact that the new "Landlord Program" is having in the fight against counterfeiters. The report indicated that several luxury good companies have started suing the landlords of retailers found to be selling counterfeit luxury goods. The report notes that if this program is deemed a success, these companies may start targeting other non-traditional firms who are involved in the supply chain, even though they have no direct involvement with the counterfeit goods;
5. Patent Tax Havens in Danger – Reports indicate that the U.S. Treasury Department is working on rules to tackle the phenomenon whereby U.S. companies transfer intellectual property to overseas subsidiaries so that any resulting tax liabilities are paid in overseas countries, usually at lower tax rates than in the U.S. Some U.S. companies have saved hundreds of millions of dollars in taxes using this process.

• Competitive Export Bill: The Trade Competitiveness Act of 2006 (S. 2317) was recently introduced in the U.S. Senate, calling for the U.S. to help break down barriers to U.S. exports. The bill also calls for the creation of a Chief Trade Enforcement Officer at the Office of the USTR, and calls on the International Monetary Fund (IMF) to strongly oppose and condemn foreign currency manipulation.
• Miscellaneous Tariff Reduction Bills: The following bills calling for the temporary reduction of duties have recently been filed in the U.S. Senate: certain high performance speakers (S. 2323); certain audio headphones (S. 2324, 2325); certain synthetic filament yarns (S. 2328, 2329); and certain R-core transformers (S. 2330).

• Improper Protest Costs Importer: The U.S. Court of International Trade (CIT) recently ruled in favor of Customs requiring an importer to pay $1,359,172, an assessment which could have been avoided had a proper protest been filed upon liquidation. In U.S. v. Golden Gate Petroleum Co., the CIT considered the case where an importer purchased Soviet-origin gasoline and toluene in the amount of $4,966,000, and made an initial entry in Portland, Oregon. Only 44% of the gasoline was off-loaded in Portland, with the proper duties paid on the value of the off-loaded gasoline, which was classified as "motor oil." The remaining portion of the gasoline and the toluene were off-loaded in San Francisco, where Customs reclassified the merchandise as "a mixture…of hydrocarbons derived …from petroleum" with a column 2 tariff rate of 30%. However, instead of assessing duties only on the remaining portion off-loaded in San Francisco, due to an apparent error on the CF-7501, duties were assessed on the value of the entire shipment, i.e., $4,996,885, resulting in an over-assessment of $1,359,172. Although the importer protested the classification of the merchandise, it failed to protest the appraisement of duties on the incorrect value. The importer failed to pay the duties plus interest, now totaling over $2 million, as demanded by Customs, resulting in Customs filing this court action. Aside from a question as to who the actual importer of record was, the defendant argued that the value error should have been apparent to both the government and broker and should have resulted in the liquidation being voided. However, the CIT ruled that because the value error was a protestable issue, and alternatively corrected through the filing of a 1520 (c) petition, the statutory provision that Customs liquidations are "final and conclusive" cannot be waived. Although "the result is unfortunate," the CIT ruled that Customs is entitled to summary judgment as a matter of law, and that the defendant is liable for unpaid duties of $1,359,172 plus interest.