This Month In International Trade - November 2011

THIS MONTH'S TOP FIVE DEVELOPMENTS

1) New Sanctions Against Iran and Syria

On November 21, the United States imposed a new round of sanctions against Iran, targeting the country's financial and petrochemical sectors. President Obama signed Executive Order 13590, authorizing sanctions on persons providing, among other specified services or support, aid of $1 million or more to the development of the petrochemical industry in Iran.

On November 27, the Arab League member states agreed to economic sanction against Syria. The restrictions include freezing Syrian government assets, suspending business involving Syrian state-owned banks, and imposing a travel ban on certain Syrian government officials. Earlier in November, the European Union (EU) added 18 additional people to its list of sanctioned people, imposing travel bans and freezing assets; the EU list currently covers 74 people including Syrian President Assad.

2) C-TPAT and AEO Mutual Recognition in 2012

The Transatlantic Economic Council (TEC), comprised of EU Commissioners, U.S. Cabinet officials and other senior policy and regulatory officials, met on November 29, 2010 acknowledging that the preparatory work for mutual recognition of trade partnership programs namely the EU Authorised Economic Operator (AEO) programs and the U.S. Customs-Trade Partnership against Terrorism (C-TPAT) programs had been completed. It is anticipated that once the mutual recognition decision is signed, reciprocal benefits to qualified AEOs and C-TPAT members may begin as of July 2012. Both programs have similar goals of eliminating security risk and increasing trade facilitation within a company's international supply chain.

3) Russia One Step Away from WTO Accession

Russia is expected to become a World Trade Organization (WTO) member after the Working Party on its accession approved Russia’s entry package containing certain commitments and reforms to Russia’s trade industry.  The reform package includes, among other things, commitments to lower or eliminate tariffs on a wide range of goods, increasing market access to services such as banking and insurance, eliminating other restrictions including certain quotas and permit requirements, modifying and eliminating agricultural subsidies, and enhancing trade-related intellectual property rights enforcement. 

During the December 2011 Ministerial Conference, Ministers will likely adopt Russia’s accession package; if adopted, Russia must ratify the accession package by June 15, 2012. The Russian Federation would become a full WTO member thirty days after ratification.  Russia’s entry into the WTO highlights the need for the United States to eliminate the restrictions currently applied to Russia under Title IV of the Trade Act of 1974 including the Jackson-Vanik amendment “freedom-of-emigration” requirements.  Jackson-Vanik would need to be repealed for Russia to have “permanent normal trade relations” (PNTR) with the United States.  Without the repeal, the United States granting of “most favored nation” (MFN) treatment to Russia will not be “unconditional” as required by WTO rules.

4) Drawback Compliance Measurement Program to be Tested in 2012

U.S. Customs and Border Protection (CBP) will run a year-long test of its Drawback Compliance Measurement (DCM) program in fiscal year 2012. CBP states that the DCM program was developed in response to repeated audit findings by the Department of Homeland Security's Office of Inspector General that drawback is a material weakness for CBP internal controls over financial reporting. During 2012, CBP will evaluate DCM procedures and results by sampling drawback claims reviewed under DCM which have liquidated in the previous month. CBP explains that the evaluation of liquidated claims will enable it to fully assess compliance with drawback requirements since all the underlying import entries will be finalized. However, CBP also emphasizes that this program is not an audit and that DCM reviews will be conducted by a drawback specialist.

The DCM test may result in an increase in requests to drawback filers for constructed paperless entries. However, CBP does not believe that DCM reviews will be an additional burden for claimants in terms of substantiating documentation. CBP also notes that under DCM certain drawback claims may be reviewed by offices other than those at which they were filed.

5) South Korea Ratifies Free Trade Agreement

On November 22, South Korea's Parliament ratified the United States-Korea Free Trade Agreement (KORUS) by a vote of 151-7. The FTA implementation legislation was signed by President Obama in October. With $88 billion in two-way trade, South Korea is the United States' 7th largest trading partner, making the FTA the largest enacted by the U.S. since the passage of the North American Free Trade Agreement. Key benefits include tariff reduction and elimination, investor and intellectual property protections, and opening Korea service industry markets. Implementation of the agreement is anticipated to begin in the 2nd quarter of 2012.

OTHER NEWS

Export Control Reform Update

As part of the President’s Export Control Reform initiative, on November 7 the Departments of Commerce and State each published proposed rules addressing export controls on aircraft and related items.  The Department of State’s Directorate of Defense Trade Controls (DDTC) proposed revisions to Category VIII of the International Traffic in Arms Regulations’ (ITAR) U.S. Munitions List, and the Department of Commerce’s Bureau of Industry and Security (BIS) published a companion proposal addressing how items previously controlled under Category VIII would be controlled under the Export Administration Regulations (EAR).

Separately, on November 22 the Department of State published a proposed rule to amend the ITAR to implement the Defense Trade Cooperation Treaties between the U.S. and Australia and the United Kingdom, respectively.  Comments on each of these three proposed rules are due by December 22, 2011.

Relaxed ITAR Controls for the United Kingdom and Australia

Separately, on November 22 the Department of State published a proposed rule to amend the ITAR to implement the Defense Trade Cooperation Treaties between the U.S. and Australia and the United Kingdom, respectively. When finalized, these proposed rules will finally implement the treaties signed with those allies intended to provide defense trade benefits similar, but not identical to, those Canada has received under the Canadian Exemption.

CITA Adds Certain Raschel Knit Fabric to CAFTA-DR Annex; Considering Commercial Availability Request for Circular Knit Fleece Fabric

The Committee for the Implementation of Textile Agreements (CITA), an interagency group chaired by the Department of Commerce, determined certain cotton/nylon/spandex raschel knit open work crepe fabric is not available in commercial quantities in a timely manner in the territory of any of the CAFTA-DR (Dominican Republic-Central America-United States Free Trade Agreement) countries CITA modified the list of fabrics, yarns and fibers in Annex 3.25 of the CAFTA-DR Agreement to include the subject raschel knit fabric. CITA is also considering a commercial availability request for certain 100% polyester circular knit three end fleece fabrics (solid color). Entities wishing to respond to the request, either with an Offer to Supply or with a Rebuttal to a Response, should review the modified commercial availability request procedures Responses are due by December 13 and rebuttals to responses by December 19.

USTR Seeks Comments Regarding TTA

On November 18, the Office of the United States Trade Representative (USTR) published a notice in the Federal Register seeking comments regarding various agreements involving telecommunications products and services in the United States. The agreements covered by the notice include the WTO General Agreement on Trade in Services ("GATS"), NAFTA, various Free Trade Agreements (FTAs), and CAFTA-DR. Specifically, the USTR seeks comments on WTO member action inconsistent with obligations under GATS, whether various countries have failed to comply with obligations under various trade agreements, and evidence of measures impeding or denying access to telecommunications markets. Comments must be submitted no later than December 16, 2011.

CBP Seeks Comment On Information Collection Activities

On November 25, U.S. Customs and Border Protection (CBP) published notice in the Federal Register seeking comments regarding information collection requirements concerning the Cargo Manifest/Declaration, Stow Plan, Container Status Messages and Importer Security Filing. CBP is soliciting comments to determine the necessity of various forms and other information collection as part of its effort to reduce burden on importers under the Paperwork Reduction Act of 1995 (Pub. L. 104-13).

CROWELL AND MORING SPEAKS

On November 2, Ted Posner spoke on the topic of trade rules for state-owned enterprises at the International Bar Association (IBA) Annual Conference in Dubai.

On November 15, Crowell & Moring hosted a strategy session on the Rise of Trade Secret Theft. The event covered a wide range of topics, including multilateral trade secret agreements. Speakers included Peter Allgeier, Ted Posner and Laurent Ruessmann.

On November 24, Laurent Ruessmann spoke at a roundtable panel on legal and regulatory challenges to Chinese and Indian investments in the EU at the International Capital Conference (ICC) in Paris, France.