TRADE AND CUSTOMS DEVELOPMENTS2008

THE CHANGING LANDSCAPE OF WASHINGTON

Matthew T. McGrathInternational Trade Club of Chicago

October 24, 2008

LEGISLATIVE DEVELOPMENTS

> Renewal of Preferential Trade Programs> Free Trade Agreements and Trade Negotiating

authority> Duty suspensions and miscellaneous trade

measures> Customs reauthorization and Duty Drawback> What’s happening in the Lame Duck session?

ADMINISTRATIVE DEVELOPMENTS

> 10 + 2 reporting requirements> Lacey Act implementation> Origin Rules proposal> Commerce Department administration of

countervailing duty law against China> Other -- Consumer Product Safety

Improvements Act implementation

EXECUTIVE BRANCH DEVELOPMENTS

> Doha Round of WTO trade negotiations> FTA negotiations> WTO Trade Disputes> Impact of the Financial Rescue program on

trade

THE DIFFERENCES BETWEEN THE CANDIDATES

> Multilateral Trade negotiations> FTAs – Implementation of Agreements,

negotiation of new agreements> NAFTA> Enforcement Activity> I tell you who will win

Legislative – Trade Preference Renewal

> One year extension of GSP, AGOA, ATPDEA> Signed October 16, 2008> Permanent GSP reform still under discussion

between Congress and Administration > Andean Program extended a full year for

Colombia and 6 months for Bolivia (drug interdiction) and Ecuador (investor treatment)

Legislative – Trade Preference Renewal

> 2 for 1 textile apparel allowance program for Dominican Republic

> Repeal of Abundant Supply provision for AGOA, which created technical impediments to LDDCs

> Reinstatement of LDC AGOA status for Mauritius (lapsed in 2005)

> New administration – no effect

Legislative – Free Trade Agreement Approval

> Pending legislative approval: Colombia, Korea, Ecuador, Panama

> Colombia FTA issues – labor union treatment> KORUS issues – beef import restrictions,

automotive tariff treatment> Lame duck session – could include FTA

approval as part of stimulus package

Legislative – Tariff Suspensions and Miscellaneous Trade Measures

> MTB partially advanced in 2008 – must be reintroduced> Miscellaneous customs modifications and reliquidations> Legislative suspension process

> Ways & Means and Finance Committees> Revenue limits> Non-controversial> “Administrable”> Administrative review and report> 4 year, renewable

Legislative – Tariff Suspensions and Miscellaneous Trade Measures

> Miscellaneous customs measures> Reliquidations for CBP or importer error> Process for introduction and limitations> Administrative review of legislative proposals

> Procedure unlikely to change in new Administration; priority will drop for either

Legislative – Trade Promotion Authority

> Congressional consideration of trade agreements reached by the President under fast track procedures, 60 day up-or-down vote, without amendment

> Expiration: July 2007> Terms of renewal likely to change

Legislative – Customs Reauthorization

> Duty Drawback simplification will be included in the bill> CBP goals to make administration of drawback easier,

“protect the revenue”, and be consistent with automation efforts

> Claimant’s goals of simplifying the claims documentation process

> Terms unlikely to change in new Administration

Legislative – Duty Drawback (cont.)

> Drawback may be claimed under proposed new law if > imported and exported article have the same

8-digit HTS, or> Imported and exported article have different 8

digit HTS, and the claimant provides a bill of materials showing how imported article is incorporated into exported article

Legislative – Duty Drawback (cont.)

> Main distinctions between current and proposed law:> “same kind and quality” replaced by 8 digit HTS match> “commercially interchangeable” replaced by simple

tracking at the 8 digit level> Tracking of substitution at the invoice level replaced

by BOM bridge record> 5 year limitation, from import to claim

Legislative – Duty Drawback (cont.)

> Additional distinctions between current and proposed law:> No requirement for rulings or approvals under new

law> Receipt and use requirement eliminated – claimant

need not “use” imported merchandise> Therefore, no distinction between unused

merchandise and manufacturing drawback

Legislative – Duty Drawback (cont.)

> Drawback for 8-digit substitution calculated on lesser of average duties paid per unit on entry line item, or average duties paid using the declared export value

> Drawback for change in HTS calculated on average duties per unit on import entry line item

Administrative – Importer Security Filing

> 10 + 2 – Data elements to be required prior to loading of vessel for transport to the US

> Implementation of the SAFE Ports Act of 2006> Publication and comment period completed in

2008> Publication expected in the next few weeks, in

force within 60 days

Administrative – 10 + 2

> Importer data elements> Name and address of manufacturer> Name and address of seller> Name and address of buyer> Ship-to> Container stuffing location> Consolidator name and address

Administrative – 10 + 2 (cont.)

> Importer data elements> Importer or FTZ identification number> Identity of consignee> Country of origin> HTSUS classification

Administrative – 10 + 2 (cont.)

> Carrier data elements> Vessel stow plan> Container status messages showing any

change in status of container in transit> CBP will send acceptance code to importer

Administrative – 10 + 2 (cont.)

> Incomplete or inaccurate filing will result in no load message, delays, potential penalties up to value of cargo

> Data mining used to identify higher risk cargo; 10+2 may result in fewer inspections

> Procedure to correct errors> Unaffected by change in Administration

Administrative – Lacey Act Amendments

> Amendments to Farm Bill, law designed to restrict illegal logging and taking of wild plants.

> Import declaration required> Scope: “any wild member of the plant

kingdom, including roots, seeds, parts or products thereof”

Administrative – Lacey Act Amendments

> Potential coverage: lumber, wood furniture, textile and apparel products of rayon, paper products, cellulose fiber-containing products, pharmaceuticals, printed matter, other products with wood or plant components.

> Effective date – Technically December 15, 2008; enforcement commencing after electronic declaration implementation, April 1, 2009

Administrative – Lacey Act Amendments

> Declaration must contain:> Scientific name of plant> Value> Quantity> Country from which plant was taken (as opposed to

article’s county of origin) (special focus on Indonesia, Russia, and Brazil)

> Percentage recycled material (paper and paperboard)

Administrative – Lacey Act Amendments

> Specific exclusions:> Common cultivars (not yet defined)> Common food crops> Scientific specimens for research> Plants for re-planting> Packaging material used to support, protect or carry

another item. But it does include hangtags, labels, and instruction booklets.

Administrative – Lacey Act Amendments

> Implementation team: APHIS, CBP, Fish & Wildlife, DOJ, State, USTR

> APHIS FR notice 10/8/08: Enforcement phase in schedule:> April 1 – Ch. 44 (wood and articles of wood); Ch. 6

(live trees and plants)> July 1 – Ch. 47 (wood pulp), 48 (paper and articles of

paper), 92 (musical instruments), 94 (furniture)

Administrative – Lacey Act Amendments

> APHIS notice (cont.)> After September 30, 2009 – “including but not limited

to” Ch. 12 (seeds and fruits), Ch. 13 (gums, lacs, resins), 14 (vegetable plaiting materials), 45 (cork), 46 (basketware), 66 (umbrellas), 82 (tools), 93 (guns), 95 (toys and games), 96 (brooms and pencils), 97 (works of art).

> No deminimis level

Administrative – Lacey Act Amendments

> Oct. 10 Sponsor and leadership letter interagency group:> Highlights agency discretion to define

inclusions and exclusions> Paperless processing is critical for trade> Legacy F&W system is available for

certification

Administrative – Lacey Act Amendments

> Approve delayed enforcement and phasein> Suggest further limitation of coverage, consider risk> Suggests 6 month phases: (1) wood (2) furniture and

flooring (3) paper, blinds, billiard cues, instruments> Proposed exemption for the first two years:

beverages, cosmetics, footwear, textiles and apparel, rubber and cork

> Exclude tags, labels, manuals as excluded “packaging materials”.

Administrative – Origin Rules

> CBP proposed application of NAFTA origin marking rules to all non-preferential trade

> This change has been debated for 15 years, since NAFTA was implemented

> Would replace substantial transformation test with a tariff shift rule of origin

Administrative – Origin Rules

> Would change origin in some instances, overturning rulings and court decisions

> Would require significant resources to document “reasonable care” by classifying all articles, as well as upstream articles, to prove “tariff shift”

> Impact of new administration questionable

Administrative – Trade Remedies

> Department of Commerce assessment of countervailing duties against China

> DOC antidumping calculation methodology: “zeroing” increases margins

> DOC antidumping methodology: targeted dumping increases incidence of zeroing

Administrative – Other

> Consumer Product Safety Improvements Act – August 14, 2008

> Importer and manufacturer must have Certification of compliance with specific rules of Consumer Product Safety Act applicable to article, based on reasonable testing program, for articles covered by CPSC rules

> check website for regulated and excluded articles

Administrative -- CPSIA

> Applies to goods manufactured after November 12, 2008

> Lower lead content levels applicable to goods manufactured after February 14, 2009

> Tracking labels and registration for children’s products

Administrative -- CPSIA

> Independent third party testing for children’s products

> State attorneys general may enforce CPSC laws through civil enforcement action

> Implementation underway at CPSC> Views from staff – children’s products

defined as 12 or younger – label intent

Executive – Doha Round Negotiations

> Trade Promotion Authority – under what conditions will it be renewed?

> Scope of Doha/DDA – more ambitious than past rounds

> The impact of new major players> The role of FTAs

Executive – Doha Round Negotiations

> Status of the Round through June 2008> Standoff at the Ministerial meeting July 2008> The issues in Agriculture> The issues in NAMA> Other issues > Next steps

Executive – FTA Negotiations

> Thailand> Malaysia> P4 – US, New Zealand, Singapore and

Chile

The Candidates’ Positions on Trade Issues

> FTA approval – sooner vs. later> Obama – no quick votes on Colombia and

Korea – wants progress on anti-union violence in Colombia and improvement on automotive sector provisions in KORUS

> McCain – prefers earlier consideration but realizes Congress is run by the opposition

The Candidates’ Positions on Trade Issues

> Trade Adjustment Assistance – a difference of perception> Obama – expand TAA to include service

workers and job loss due to non-FTA trade> McCain – fold TAA into single, non-import

dependent job relief program

The Candidates’ Positions on Trade Issues

> Doha Round – the sunset of multilateralism> Obama – US was right to reject the deal

proposed in July, consistent with majority view that current deal is beyond rescucitation. No agriculture subsidy cuts proposed.

> McCain – Doha should be closed quickly. US agriculture subsidies should be cut, but avoids listing which cuts.

The Candidates’ Positions on Trade Issues

> Enforcement focus vs. new agreements> Obama – shift focus from new agreements to

enforcement of existing deals. WTO disputes underway; add dispute or legislation on Chinese currency manipulation

> McCain – Renew TPA immediately, avoid adding new labor and environment conditions

The Candidates’ Positions on Trade Issues

> NAFTA renegotiation – past as prologue> Prior revisions to NAFTA – investors rights, origin

rules, tariff acceleration; ruling on reduced value not expropriation

> Obama – labor, environment, investment, and energy provisions on trilateral basis.

> McCain – opposes NAFTA renegotiation > Obama for COOL, McCain opposed