This Month In International Trade - September 2011

Top Five Trade Developments

1) Landmark EU Court Ruling Annuls Anti-Dumping Measures For Lack of Injury Causation

In a landmark decision concerning the methodology used to establish injury causation in EU trade remedy investigations, the EU's General Court annulled anti-dumping measures that had been imposed on EU imports of bed linen from Pakistan since 2003. In Case T-199/04, the Court accepted the arguments brought on behalf of the largest Pakistani exporting producer of cotton-type bed linen, Gul Ahmed Textile Mills Ltd., by the head of Crowell & Moring's EU international trade practice, Laurent Ruessmann.

The General Court annulled Regulation (EC) No 397/2004 as far as Gul Ahmed is concerned on the grounds of a failure to establish properly a causal link between the imports subject to the investigation and injury suffered by the EU industry. More specifically, the General Court agreed with Gul Ahmed that the Council made an error of law by failing to examine whether the abolition of previous anti-dumping duties on bed linen imports from Pakistan, and the implementation of tariff preferences in favour of Pakistan at the start of 2002, had the effect of breaking any causal link between injury suffered by the EU industry and the imports from Pakistan.

The failure of the EU institutions to examine all 'known factors other than the dumped imports which at the same time are injuring the Community industry', in accordance with the Basic Anti-dumping Regulation, meant that the injurious effects of the targeted imports would not be correctly separated and distinguished from the injurious effects of those other known factors. As a result, the EU institutions could not conclude that the injury attributed to the targeted imports was actually caused by those imports, rather than by other factors, thus calling into question the basis for imposition of the anti-dumping measures.

Overall, the decision is remarkable as only the third time the EU courts have annulled trade remedy measures due to a failure to establish properly injury causation. In terms of substance, the ruling serves to highlight and clarify the obligations of the Community institutions to perform a concrete analysis of the nature and importance of factors known to be causing injury, and to separate the injurious effects of other known factors from the impact of the targeted imports.

2) CBP Seeks Comments on Transfer Pricing Adjustments

Customs and Border Protection (CBP) is seeking advance public comments regarding its proposed acceptability of transaction value when a transfer pricing policy results in post-importation adjustments between related parties, with certain requirements.CBP proposes to revoke Headquarters Ruling Letter (HRL) 547654 and modify other CBP decisions, to allow importers to use the transaction value appraisement in transactions between related parties when the post-importation transfer price is determined pursuant to a pre-existing transfer pricing policy also used by the importer in its corporate tax return filings with the I.R.S.. Importers with established transfer pricing policies involving related parties should send their pre-proposal comments, even if only to indicate support for CBP to issue the proposal, to CBP by October 22, 2011. Formal notice and comment through the Federal Register are expected to follow.

CBP’s notice is good news for multinational importers with intercompany pricing policies because the proposal indicates CBP’s willingness to accept transaction value in related party transactions when post-importation adjustments are made and also recognizes that certain downward adjustments can be declared, which can result in refunds of duties paid to the importer. However, the CBP notice is proposing that importers must enter into the CBP Reconciliation program to utilize transaction value for these post-importation adjustments.

3) OFAC Sanctions Update

In response to geopolitical changes in September, the Office of Foreign Assets Control (OFAC) issued several general licenses under both the Libya and the Syria sanctions, effectively removing most restrictions with respect to Libya, and authorizing the winding down of business with Syria.

With the ouster of Qadhafi and the international recognition of the National Transitional Council as the Government of Libya, OFAC all but lifted the Libya sanctions, first imposed in February 2011, through issuance of several key general licenses. Effective September 19, OFAC issued General License No. 8a, authorizing all transactions with the Government of Libya; its agencies, instrumentalities and controlled entities; and the Central Bank of Libya. OFAC also issued General License No. 7a on September 19, authorizing transactions with, and unblocking the funds of, the Libyan National Oil Corporation and its subsidiaries. In light of these General Licenses, the Libya sanctions program has effectively been reduced to a blocking program against Qadhafi and other members of his regime, named in the Annex to General License No. 8a. Additionally, all previously-blocked funds, with the exception of those within the scope of General License No. 7a, remain blocked.

OFAC also recently issued a number of general licenses under the Syria sanctions, which it had expanded in August 2011 in response to President Assad’s crackdown on protestors. In General License No. 7, dated September 9, 2011, OFAC took the unusual step of authorizing all transactions and activities ordinarily incident to the winding down of contracts with Syria or the Syrian government, and divestiture of investments in Syria. This winding-down authorization applies to contracts and investments in effect prior to August 18, 2011, and remains effective through November 25, 2011. Certain transactions related to winding down business do remain prohibited, and persons invoking the General License must file a written report with OFAC within ten days of the transaction.

4) Senate Passes GSP and TAA; What’s Next?

The combined Generalized System of Preferences (GSP) bill and Trade Adjustment Assistance (TAA) amendment will go back to the House of Representatives after passing the Senate.  Passage of GSP/TAA should clear the way for the pending Colombia, Korea and Panama free trade deals.  The House vote has not yet been scheduled.

5) New ACE Post Entry Adjustment Requirements

As of September 22, importers using the Automated Commercial Environment (ACE) to file entry summaries may not use the hard copy (paper) Post Entry Amendment (PEA) process. Importers using ACE and the Automated Broker Interface (ABI) should file post-summary corrections (PSC) for entry summary types 01 and 03. 

OTHER NEWS

CBP Withdraws Uniform Country-of-Origin Rules; Adopts Rules for Certain Imported Goods

In its September 2 Federal Register notice, Customs and Border Protection (CBP) withdrew proposed uniform country-of-origin rules from 2008 and instead adopted a final rule amending the 19 CFR Part 102 country of origin rules for five product categories:  pipe fittings and flanges, greeting cards, glass optical fiber, rice preparations, and certain textile and apparel products.  Importers of the goods listed above should review the changes which can affect marking requirements, duty rates, quotas and special program eligibility for these products.

Pilot Program for Mexican Trucks Off to A Slow Start

The first Mexican trucking company clears the pre-authorization audit as part of the pilot program allowing Mexican long-haul trucks to operate on U.S. roads.  Comments submitted to the Federal Motor Carrier Safety Administration regarding the audit focused primarily on safety issues.   Meanwhile, Teamsters file suit alleging statutory violations in the implementation of the pilot program.  Pursuant to the July 6, 2011 memorandum of understanding, Mexico agreed to suspend the remaining retaliatory tariffs when the first Mexican trucking company is authorized to operate in the United States.

How Healthy Is Your (Imported) Dog?

The USDA Animal and Plant Health Inspection Service (APHIS) is seeking comments regarding new health regulations for imported dogs.  The regulations would require certifications that dogs imported into the U.S. are in good health, have received all necessary vaccinations and are at least six months old.  Comments are due by October 31, 2011.

CROWELL AND MORING SPEAKS

On September 20, Laurent Ruessmann spoke on the current EU dual-use export control system at the 2011 Dual-use Exporter Conference organized by the European Commission.

On October 20, John Brew will speak on customs enforcement and litigation of intellectual property rights at the International AntiCounterfeiting Coalition (IACC) Annual Fall Conference.