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

April 25, 2006

• 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.
• DR-CAFTA Retroactive Refunds: CBP provided the importing community with instructions on filing retroactive refunds for qualifying textile and apparel goods from Honduras and Nicaragua. Retroactive refunds, back to January 1, 2004, for otherwise qualifying articles, will be available if made in writing by December 31, 2006. Retroactive refunds under DR-CAFTA are now available for El Salvador, Honduras, and Nicaragua.
• CBP Limits Festive Case: Invoking its authority to limit the application of court cases to the merchandise before the court, CBP recently issued a notice announcing that it is limiting the decisions of the U.S. Court of International Trade (CIT) and the U.S. Court of Appeals for the Federal Circuit (CAFC) in Park B. Smith v. U.S. to the specific festive merchandise litigated in the case, i.e., cotton woven table linens and dhurry rugs. CBP is excluding duty-free treatment for festive articles which have a utilitarian function. However, festive articles having a three-dimensional representation and used as a decoration may still enjoy duty-free treatment under heading 9505 following the CIT and CAFC decisions in Midwest of Cannon Falls. CBP’s limiting actions are intended to force the courts to reconsider its decisions in light of the 2003 change in the Explanatory Notes (EN) of HTSUS heading 9505 to exclude festive articles having a utilitarian function. Several pending festive cases are expected to provide the courts with the opportunity to once again rule on the scope the duty-free treatment for festive articles in light of the changes to the EN.
• 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 to 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.
• Textile Transshipment Seizures: CBP recently announced seizures totaling $20 million worth of textile and apparel articles since February of this year. CBP announced that most of the seized goods were from China and were for transshipment (quota) violations. It is not known if the U.S. Committee for the Implementation of Textile Agreements (CITA) will charge the seized goods against China’s 2006 quota allocations.
• Electrical Connector "Blank" Castings: CBP recently reiterated its previous classification of imported aluminum castings and which are further processed in the U.S. by adding plating and coating, under heading 8538.90.8080, HTSUS, the provision for "Parts suitable for use solely or principally with the apparatus of heading 8536, 8536 or 8537: Other: Other: Other." As the castings are advanced to the point where it is recognized and dedicated for use as a part, it is considered a "blank" under the General Rules of Interpretations (GRI), and is not classified under heading 7616.99.50, HTSUS as "Other articles of aluminum", as the importer claimed.

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

1. Made a preliminary affirmative AD determination on certain lined paper products from China with an AD rate from 52.10% to 258.21%, and made the same determination for India with an AD rate of 22.53% to 110.43%.
2. Decided to conduct a sunset review of its AD order on certain stainless steel butt-weld pipe fittings from Italy, Malaysia, and the Philippines.
3. Decided to reconsider its revocation of the AD order on large newspaper printing presses and components thereof from Japan.

• International AD/CVD Developments:

1. The Canada International Trade Tribunal (CITT) announced its negative final injury determination in its investigation of unprocessed grain corn from the U.S., resulting in no AD or CVD imposed.
2. Mexico recently extended its AD order on a variety of apparel and textile made-ups and certain yarns and fabrics from China.

• Section 337 Patent Investigations: The ITC recently:

1. Issued a limited exclusion order and a cease and desist order in its Section 337 investigation of certain ink sticks for solid ink printers.
2. Rescinded its limited exclusion order and its cease and desist order with regard to certain optical disk controller chips, chipsets, and products containing same.
3. Received a petition to institute a Section 337 patent investigation of certain imported foam footwear.

• 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.

• 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." Various bills introduced in the U.S. Senate to punish China for its interference in the Yuan’s valuation may now see action in the absence of any concrete movement by China on this issue.

• Recent CPSC Developments:

• 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.

• 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 addition, in an apparent focus on China, the bill would allow CVD duties to be applied to non-market economies as well as on imports from countries who manipulate their currencies.
• Miscellaneous Trade Bills: 1) The "Truth in Fur Labeling Act of 2006" (H.R. 4904) was recently introduced in the U.S. Congress and calls for removing the exemption of the garment fur labeling requirements when the fur is only of a relatively small quantity or value; 2) the "Infant and Toddler Durable Product Safety Act" (H.R. 4896) calls for the independent testing of each durable infant and toddler product; 3) the "Unfair Chinese Automotive Tariff Equalization Act" (H.R. 4808) would bar imports of Chinese automotives so long as China’s tariff rates on imported cars (currently 28%) are not the same as those charged by the U.S. (currently 2.5%).

• Essential Character Analysis of Lighting Fixtures: In a lengthy ruling following a bench trial, the CIT recently decided the essential character and classification of 124 different lighting fixtures on a case by case basis. In Home Depot U.S.A., Inc. v. U.S., the plaintiff proposed having the court look at the visible surface of the styles while the defendant posited to have the court look at the structural framework to decide whether the lighting fixtures are to be classified as being made of base metal (9405.10.60; 7.6% duty) or of non-base metal (9405.10.80; 3.9% duty). The Court noted that "an essential character inquiry requires a fact intensive analysis" and proceeded to review each different styles for its essential character and proper classification. The court put each style in one of three categories: those with a surface area of 50% or more of non-metallic material were classified as non-base metal (3.9% duty); those with 40% or less of non-metallic material were classified as of base metal (7.6% duty); and those containing between 40% and 50% surface area of non-metallic material had factors such as weight, value, and consumer preference factored into deriving their essential character and classification. While an appeal to the CAFC is possible, importers may still protect their entries for potential refunds by filing protests and protective summonses.