08.01.2008 Highlights in International Trade and Commerce

The International Law Section of Williams Mullen prepared the following brief descriptions of selected issues in international trade and commerce for general information purposes and use by clients and friends of the firm.

1. USTR Seeks Comments on Trade Barriers and China’s WTO Compliance.
2. As Doha Talks "Collapse" (Again!), New Hemispheric Alliance Rises from Ashes.
3. Tariff-Shift Proposal Could Shift Your Tariffs.
4. New Regs Affect Defense Contractors Handling Export-Controlled Items.
5. Import Safety Legislation Looks to Clear Final Hurdles.

1. USTR Seeks Comments on Trade Barriers and China’s WTO Compliance: On July 31, the Office of the U.S. Trade Representative (USTR) published two notices, inviting comments on: (1) China's compliance with World Trade Organization (WTO) commitments; and (2) the Annual National Trade Estimate Report on Foreign Trade Barriers (NTE). The first set of comments will help the USTR prepare its annual report to Congress regarding China's compliance with commitments it made when acceding to the WTO. Agreed to after more than 15 years of negotiations, China’s commitments supposedly included systemic reforms to facilitate business dealings, to remove trade barriers and open markets to foreign companies and their exports, to eliminate or significantly reduce restrictions on the rights of foreign companies to import and export goods and to distribute goods in China, and to rectify numerous trade-distortive industrial and agricultural policies. The hearing on China’s WTO compliance will take place on October 2 in Washington, DC. Those wishing to testify orally must provide notice by September 18. Written comments are due September 22. The second set of comments sought by the USTR does not restrict itself to China and will help the USTR prepare an annual report identifying significant barriers to U.S. exports of goods, services and overseas direct investment. The USTR wants particular information concerning impediments materially affecting the actual and potential financial performance of industry sectors. Public comments on the NTE are due November 6.

2. As Doha Talks "Collapse" (Again!), New Hemispheric Alliance Rises from Ashes: As widely reported in the international press on July 30, the Doha Round of talks at the WTO in Geneva have collapsed. Generally, China and India sought European and U.S. tariff and subsidy cuts on farm products, while Europe and the United States sought to have China and India lower their tariffs on industrial goods. The two sides agreed that China and India could, by means of “safeguard” clauses, raise tariffs on cotton, sugar, rice and other important agricultural goods if, after tariffs were lowered or eliminated, imports from other countries suddenly surged. The two sides disagreed, however, over whether to set the import-surge level triggering the safeguard measure at 10 percent, as China and India wished, or 40 percent, as the United States proposed. Interestingly, Brazil allied itself with the United States, thereby signaling a new relationship between two trade warriors that had previously butted heads over agricultural subsidies. First, note that the Doha Round "collapsed" following the Seattle talks, the Cancun talks and so on. Concluding the negotiations may take longer than originally planned, but talks are likely to continue. Second, anticipate new support for regional free trade agreements in this hemisphere, particularly if the U.S. and Brazil can agree on agriculture.

3. Tariff-Shift Proposal Could Shift Your Tariffs: On July 25, a notice from the Departments of the Treasury and Homeland Security proposed to amend U.S. Customs and Border Protection (CBP) Regulations to establish uniform rules governing the country of origin of imported merchandise. Under current regulations, two primary methods determine the country of origin of imported goods processed in, or containing materials from, more than one country. Both methods seek to determine whether goods have been “substantially transformed” in a particular country. One method employs case-by-case adjudication. The other looks for specific changes in tariff classification ("tariff shifts"). Unless another trade agreement specifies otherwise, the new proposal would extend to all imports originating in countries other than Canada or Mexico the same tariff-shift rules that currently determine the origin of goods imported under the North American Free Trade Agreement (NAFTA). While the proposal will standardize origin determinations for some importers, for others it will change the outcomes of previous origin determinations. Comments are due September 23.

4. New Regs Affect Defense Contractors Handling Export-Controlled Items: On July 21, the Department of Defense (DoD) invited comments on an Interim Rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to address requirements for complying with export control laws and regulations when performing DoD Contracts. The rule recognizes contractor responsibilities to comply with existing Department of Commerce Export Administration Regulations (EAR) and Department of State International Traffic in Arms Regulations (ITAR). The rule also adds two new clauses to be used when export-controlled items, including information or technology, are expected to be involved in the performance of a contract, or when export-controlled items, including information or technology, may come to be involved during the period of the contract’s performance. Although the Interim Rule is already effective, comments are due before September 19.

5. Import Safety Legislation Looks to Clear Final Hurdles: Long-awaited revisions to previously proposed import safety legislation, the Consumer Product Safety Commission Reform Act (H.R. 4040), could reach votes on the Senate and House floors soon, as on July 28 conferees from both chambers said they had reached a deal, and on July 31 a message on Senate action was sent to the House. In the wake of recalls of lead-containing toys from China, the House passed an early version of H.R. 4040 by 407 to 0 on December 19. The Senate on March 6 passed its own substitute bill (S. 2663) by 79 to 13. While conferees have not yet released the final compromise provisions, observers expect to see language that protects whistleblowers, makes toy safety standards mandatory, regulates manufacturing of all-terrain vehicles and gives state attorneys general certain decision-making powers. Importers are eager to see also the final bill’s provisions regarding third-party product testing, inspection of proprietary laboratories and funding authorization levels.

If you have any questions concerning the subject matter addressed above, please feel free to contact any of the attorneys listed on the left.
Highlights in International Trade and Commerce by WM is prepared for information purposes only and does not constitute legal advice. Persons seeking legal advice concerning the issues addressed in this issue are encouraged to contact competent legal counsel.

For comments or suggestions, please contact the publication editor, Jimmie V. Reyna, Esq.