Volume 23 No. 48 -- December 8, 2003

IN  THIS ISSUE:

* Customs Advance Notice Rules Could Cost Industry Billions
* Industry Accord on Textiles Will Help Move CAFTA Talks
* FDA Will Commission Customs Officers to Inspect Imports
* Northern Revolt May Block U.S.-Canada Deal on Lumber
* Mild Reaction Supports Bush Decison of Steel 201
* WTO Likely to Unbundle Singapore Issues, Keep Talks Technical
* BRIEFS: Chemical Exports, Kosher Chickens, Aluminum, Burma
 

CUSTOMS ADVANCE NOTICE RULES COULD COST INDUSTRY BILLIONS

In the final advance notification rules for imports and exports in the Federal Register Dec. 5, Customs has conceded the new requirements will impose significant costs on the trade community and might cost air carriers as much as $4.7 billion annually.  The final cost for air carriers will depend on what Customs decides to do about advance notice requirements for document shipments, but even the least burdensome option could cost $345 million a year, it admitted.

In the preamble to the final rules, Customs offers a sketchy outline of how it determined the cost of the new regulation to the trucking, rail, air carrier and sea cargo industries.  It said it would make its complete Regulatory Impact Analysis available on its website, but it apparently was still not posted as of press time.

The agency looked at the cost and benefit of the advance notice rule on trucking and determined it would impose new costs of $91 million a year but save the industry $142 million annually.  This produced a net saving of $78 million.  This calculation was based on the expectation that trucks would move more quickly across the Canadian and Mexican borders, saving time and fuel.  Customs said it found no impact on rail and vessel modes.  "Because virtually all vessels and railroads are already filing electronically, costs were estimated for these sectors to be insignificant," it claimed (see WTTL, Nov. 24, page 1)..

Customs intends to publish separate reporting requirements for documents carried by express services and air carriers.  An original proposal would have required advance reporting for all documents inbound and outbound regardless of weight.  The high-end estimate for complying with that requirement would be $4.736 billion, it said.  If the rule were limited to documents weighing more than 16 ounces, the cost would still be $930 million to $3.770 billion.  If documents were excluded from the requirement, remaining requirements for cargo would cost $422 million to $2.244 billion, Customs calculated.  A proposal from industry advisors for reducing requirements for air carriers would still cost $345 million to $1.889 billion, it found.
 

INDUSTRY ACCORD ON TEXTILES WILL HELP MOVE CAFTA TALKS

U.S. textile and apparel manufacturers and retailers reached agreement Dec. 3 on a common position on key provisions of the proposed U.S. free trade agreement with five Central American countries (CAFTA).   The agreement will help bridge one of the last major hurdles facing what should the final round of CAFTA talks which begins Dec. 8 and is scheduled to be completed by Dec. 16.

Settlement of the position on textiles and apparel leaves agriculture as the main remain stumbling block to completing the talks on schedule by the end of the year.  It also could lessen the opposition the CAFTA deal is expected to face from textile-state lawmakers when the accord comes up for congressional approval next year.

Representatives of the three industry segments agreed that the CAFTA deal should allow cumulation of the value of components from all five Central American countries as well as with the three NAFTA members under CAFTA rules of origin to determine eligibility for free-trade treatment.  This would allow the sourcing of yards, fabrics and components from any CAFTA or NAFTA member

 They also agreed CAFTA should include a mechanism for extending cumulation benefits to future free trade agreement partners who agree to adopt stringent anti-circumvention and transshipment rules.  This would allow the Dominican Republic and Andean nations to participate in this textile and apparel trade, if they adopt these rules.  The industry groups said they support "strict enforcement of rules against illegal transshipment, including severe penalties for countries failing to implement effective enforcement of these provisions."
 

FDA WILL COMMISSION CUSTOMS OFFICERS TO INSPECT IMPORTS

The Food & Drug Administration (FDA) will give food importers at least six months to come into full compliance with new prior notification requirements, which officially go into effect Dec. 12, FDA Commissioner Mark McClellan promises.  "There will be a discretionary period of about six months and perhaps a little bit longer," he told reporters Dec. 3.  "It's very important to have an initial period that focuses on education to make sure that people who are importing products know exactly what they need to do so they can get it right," he added.

McClellan's promise came at a ceremony where he signed a memorandum of understanding with Customs under which FDA will be allowed to commission Customs officers to act on behalf of FDA to conduct inspections and take legal actions under FDA statutes.  While the main purpose for giving Customs officers this authority is to help FDA implement its prior notice requirements for foods under the Bioterrorism Act, Customs personnel also will be examining drug and device imports and other products under FDA jurisdiction.

About 1,500 Customs officers have received training in FDA enforcement requirements and are likely to among those commissioned, when needed.  At least two Customs officers will be assigned as liaison to FDA at each of the 300 ports of entry that Customs serves.  There are about 900 FDA investigators assigned to import operations.  Customs Dec. 1 issued its instructions to port staff on procedures for implementing the FDA prior notice requirements. [Editor's Note: A copy of the directive will be sent to WTTL subscribers on request.]
 

NORTHERN REVOLT MAY BLOCK U.S.-CANADA DEAL ON LUMBER

Strong negative reaction from Canadian provinces and some Canadian lumber producers may scuttle a tentative deal Canada and the U.S. were about to initial at press time Dec. 5 to settle the long-running dispute over softwood lumber.  Ottawa is reportedly rushing to sign the accord before Dec. 12 when Canadian Prime Minister Jean Chretien is scheduled to step down.  The provinces and many small Canadian lumber firms claim the deal gives too much to the U.S., while continuing to restrict lumber trade.  Sources warned that the details of the agreement were still not completed and information that has already leaked out could change.

The main elements of the deal would restrict lumber imports from Canada, including the Maritime Provinces, to 31.5% of the U.S. market.  A tariff of $200 per thousand board feet would be imposed on all lumber above that amount.  The accord would distribute under the Byrd Amendment 48% of collected antidumping and countervailing duties paid on imports so far to members of the Coalition for Fair Lumber Imports who participated in bringing the cases and give 52% back to importers and Canadian producers.

The supposedly "interim agreement" would stay in place until Canadian provinces could demonstrate they have revised their stumpage fee systems for selling government timber to remove alleged subsidies.  To get a changed circumstances decision, they would have to meet the conditions in a Commerce Policy Bulletin that would be issued in final form as part of the deal.  One proposal would require the quotas to stay in place for a minimum of three years before any province can be ruled to have met the changed-circumstances requirements.

Critics of the agreement identify numerous shortcomings, including the market-share limits.  Because the proposed accord would give the Maritimes, which have been excluded from the current CVD order, a guaranteed 3.5% share of the quota, the rest of Canadian lumber would be restricted to 28% of the U.S. market.

There are also questions about how Ottawa would implement a new Softwood Lumber Agree-ment (SLA), how quotas will be allocated among the provinces and producers, and what time period would be used to determine allocations.  Some Canadians also object to giving U.S. industry 48% of collected duties.  A broader objection comes from Canadians who want to continue to fight the U.S. actions through the NAFTA and WTO dispute-settlement process.  But that process could drag on for another year before final judgments are enforced.
 

MILD REACTION SUPPORTS BUSH DECISION ON STEEL 201

U.S. Trade Representative (USTR) Robert Zoellick's insistence Dec. 4 that the decision to lift the Section 201 tariffs on steel was based solely on the changed economic conditions of the industry and not on politics or threats of retaliation wasn't just an attempt to be disingenuous.  He was stating the legal standard the president had to use under Section 204 of the Trade Act to revoke or modify a safeguard action.

President Bush didn't use the other option available to him -- asking the International Trade Commission (ITC) under Section 129(a) of the statute for advice on how to come into compliance with the World Trade Organization (WTO) ruling that the steel safeguards violated WTO rules (see WTTL, Nov. 17, page 3).  Section 204 (d) of the trade law, however, still requires the ITC to issue a report in 180 days evaluating the effectiveness of the safeguard relief.

Bush's decision was not unexpected, so reaction to it was tempered.   Consolidation of the industry, the renegotiation of major union contracts and the federal assumption of pension liabilities for failed steel firms have reduced the pressure to maintain the safeguard tariffs and dulled the political backlash dropping them could have triggered.

Politically, the White House may have decided it wasn't going to win steelworker votes regardless of what it did with the 201 case.  The United Steelworkers Union has already endorsed Democrat Dick Gephardt for president.  President Bush appears to be betting that a recovering economy and the expected growth in jobs in the next 12 months will offset the resentment to lifting of the tariffs.

What was surprising was how little Bush gave the steel industry to soften the blow of the lost import relief.  He has ordered Commerce to maintain the licensing and monitoring system that was imposed as part of the safeguard regime.  As long the current licensing procedures aren't made more burdensome, steel importers and foreign firms said they would not object to their continuation.  That reaction, however, was based on the assumption the licensing system would stay in place only for the balance of time that was left for the original 201 order.

Meanwhile, as the 201 decision was being made in Washington, representatives of 11 steel-producing countries held another round of talks at the Organization for Economic Cooperation and Development (OECD) in Paris on a multilateral agreement.  Commerce Deputy Assistant Secretary Joseph Spetrini reported Dec. 5 that the talks made enough progress to warrant the start of drafting over the weekend of legal language on a mechanism to enforce the proposed disciplines to restrict future subsidization of the steel industry.

The steel negotiators are aiming to have a draft accord on disciplines and enforcement ready for the annual OECD ministerial in May.  Even if the accord isn't adopted by then, negotiators hope the political-level meeting will give them guidance for reaching a final agreement later in the year.
 

WTO LIKELY TO UNBUNDLE SINGAPORE ISSUES, KEEP TALKS TECHNICAL

The World Trade Organization (WTO) is likely to adopt an idea that was floated before the Cancun Ministerial Meeting in September to unbundle the four so-called Singapore Issues in the Doha Round and take different approaches to each topic.  Sources in Geneva expect the trade group to agree on bringing the subject of trade facilitation into the round, while allowing countries to seek pluralateral deals on investment and competition.  These talks might take place outside the WTO through the OECD, source suggest.

Trade facilitation would remain in the round because it is seen as an anti-corruption mechanism.  Transparency in government procurement, the fourth Singapore topic, is likely to fall by the wayside, however, because it touches too closely to the politics and patronage of national governments.

The revised plan modifies the approach in the draft ministerial declaration that was left on the table in Cancun.  The European Union (EU), the primary champion of the Singapore issues, has signaled its willingness to divide up the subjects (see WTTL, Dec. 1, page 1). Japan and Korea have pushed for keeping all four topics in the talks, but may accept this approach as well.

Although the chairman of the WTO General Council, Carlos Perez del Castillo, had to postpone a scheduled briefing for heads of delegations from Dec. 5 to Dec. 9, he reportedly is putting together a work plan for getting the Doha Round talks restarted in February or March.  Castillo is expected to recommend that negotiating committees -- with new chairmen to be named in February -- resume work at the technical level on all of the key subjects in the round.  "It's obvious we're not going to get anything too ambitious," one source noted.

On agriculture, Castillo is likely to propose more technical work aimed at filling in the blanks on how liberalization would be implemented.  This would be a "number-crunching" exercise to give countries a better picture of how various modalities or formula for reducing trade distort-ing practices would actually translate in their agriculture-support programs, as well as how it would reduce supports in the EU and U.S.
 

 * * * BRIEFS * * *

CHEMICAL EXPORTS: BIS in Dec. 1 Federal Register issued correction to new export control rules it published in June on implementation of Australia Group restrictions on chemicals.  It also issued notice calling for comment on impact of compliance with Chemical Weapons Convention.

KOSHER CHICKENS: Empire Kosher Poultry of Mifflintown, Pa., filed antidumping complaints at ITA and ITC Dec. 1 against ready to cook kosher chicken from Canada.

ALUMINUM: In preliminary ruling Dec. 1, ITC voted 6-0 that allegedly dumped imports of aluminum plate from South Africa may be injuring U.S. industry.
 
CHINA SAFEGUARD: In latest Section 421 effort to stem surge of imports from China, ITC Dec. 4 ruled that imports of ductile iron waterworks fittings from China are injuring U.S. industry.

BURMA: OFAC has issued guidance saying it is up to Customs to determine whether products made with Burmese lumber in third countries qualify under "substantial transformation" rules and would thus not be subject to import restrictions mandated by Congress in July.

INSULATORS: U.S. industry is being injured by dumped imports of ceramic station post insulators from Japan, ITC ruled by 6-0 vote in final determination Dec. 2

TRADE PEOPLE: Former chair of BIS Operating Committee, Carol Kalinoski, has established own consulting firm, Carol A. Kalinoski & Associates.  She can be reached at 1-866-217-2372 (PIN 2708).

Copyright 2003 by Gilston-Kalin Communications, LLC.  Reproduction or retransmission in any form is prohibited.  Washington Tariff & Trade Letter is published weekly 50 times a year. 
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