March 2004 - Issue 23
In This Issue:
Ten New Members to Enter the European Union – Seven to Lose GSP Status
U.S. – Australia Reach Free Trade Agreement
Final Rule Expected on Solid Wood Packing Material
Safety Inspection Program Proposed for Inter-modal Chassis
Updates on C-TPAT’s Smart Box Initiative
CBP Targets Documentation Exams on Textiles and Apparel
ITA to Establish Procedures and Sanctions for False Statements
Transportation News
Trade Industry News
Ten New Members to Enter the European Union – Seven to Lose GSP Status
On May 1, 2004 the largest expansion of the European Union to date will take place with the addition of ten new members. The countries expected to join the EU are:
Cyprus
Czech Republic *
Estonia *
Hungary *
Latvia *
Lithuania *
Malta
Poland *
Slovakia *
Slovenia
* Denotes current GSP (Generalized System of Preferences) country.
The USTR (United States Trade Representative) GSP desk has advised that the statute governing GSP forbids GSP treatment for EU member countries. A presidential proclamation covering this topic is expected to be issued within the next few weeks. This cancellation of preferential duty treatment will not take effect until the accession of these countries into the EU.
The U.S. Bureau of Customs and Border Protection (CBP) Headquarters has confirmed that once these current GSP countries become a member of the European Union, their GSP status will be rescinded. Any preferential treatment enjoyed in the past will be terminated upon entrance into the EU. CBP fully expects this proclamation to be issued by the President.
Importers bringing in commodities from these countries currently listed as GSP countries must consider their importations and determine what duty amount will apply once the GSP status is rescinded.
The main governmental sites for each country expected to join the EU can be accessed at: http://europa.eu.int/abc/governments/index_en.htm#newmembers
For more information, please contact compliance@shapiro.com.
Source: “Ten new Member States set to join EU” appearing on Europa – European Governments On-Line website http://europa-eu-un.org/article.asp?id=2310
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U.S. – Australia Reach Free Trade Agreement
On February 8, 2004, the Office of the U.S. Trade Representative (USTR) declared that the U.S. and Australia reached a free trade agreement (FTA) with the purpose of reducing and eliminating tariff rates in addition to other trade barriers. This is the first FTA between the U.S. and a developed nation since 1988 when the U.S.-Canada FTA was established. The USTR notes that Australia was the United States’ 13th largest export market for goods in 2002, making Australia a major trade and investment partner for the U.S.
Here are the highlights of the U.S.-Australia FTA:
- The USTR noted that at least 99% of U.S. manufactured exports would become duty free upon implementation of the AFTA, which could result in a $2 billion annual increase in U.S. exports.
- The USTR stated that all U.S. agricultural exports to Australia, which total more than $400 million, would become duty free as soon as AFTA becomes effective. Furthermore, the U.S. and Australia will collaborate in order to settle sanitary and phytosanitary obstacles to agricultural trade.
- The USTR noted that stringent rules of origin would be in place to assure that only U.S. and Australian goods take advantage of the AFTA.
- According to the USTR, textile and apparel tariffs will be phased out over the duration of a 15-year period for eligible goods meeting the yarn-forward rule of origin. USTR’s objective is to promote further opportunities for U.S. and Australian fiber, fabric, yarn, and apparel manufacturing concerns.
- The USTR stated that higher standards are expected to be in place in order to protect intellectual property rights (IPR) such as patents, trademarks, and copyrights. AFTA requires each government to adopt high-tech protection devices for digital materials such as music and videos, and supports the implementation of measures that promote trade via electronic commerce.
- According to the USTR, Australia will ensure that improvements are made in its Pharmaceuticals Benefits Scheme (PBS) procedures to boost its accountability and transparency. U.S. and Australia have agreed on the establishment of a Medicines Working Group as well as an independent process to analyze product listings.
For more information, please visit the USTR’s link below: http://www.ustr.gov/new/fta/australia.htm
Source: “U.S. and Australia Reach Agreement on a Free Trade Agreement” appearing in International Trade Today dated February 10, 2004.
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Final Rule Expected on Solid Wood Packing Material
The Animal and Plant Health Inspection Service (APHIS) issued a proposed rule to require all imported solid wood packing material (SWPM) to be heat-treated or fumigated with methyl bromide, and marked in accordance with the international standard.
The propose rule states that SWPM includes wood packing materials other than loose wood packing materials, used or for use with cargo to prevent damage, including, but not limited to, dunnage, crating, pallets, packing blocks, drums, cases, and skids.
SWPM and other un-manufactured wood articles from Canada and Mexico are exempt from most of the requirements of the un-manufactured wood article regulations.
The final rule on SWPM is expected to take effect in April or May of 2004. The final rule will have an enforcement phase-in period of at least six months. Ample time will be allowed to become compliant and disciplinary action will not be taken during the phase-in period.
“APHIS is the government agency responsible for implementing ISPM 15 for exports of SWPM and has designated the National Wood Pallet and Container Association (NWPCA) to oversee the fumigation (methyl bromide) program while the American Lumber Standards Committee (ALSC) has been designated to oversee the heat treatment program.”
One hundred and twenty countries will implement ISPM 15 for SWPM. China, Korea, and the European Union have notified agreed to incorporate the ISPM 15 measures. The European Union is targeting July 2004 as their start date, while China may commence measures as soon as March 2004.
Parties interested in fumigation should contact NWPCA at (703) 519-6104 or visit the website at http://www.nwpca.com/ExportTreatment/ExportTreatmentProg.htm.
Parties interested in heat treatment should contact ALSC at (301) 972-1700 or visit the website at http://www.alsc.org/WPM_summary_mod.htm.
APHIS SWPM website is available at http://www.aphis.usda.gov/ppq/swp/.
Source: “APHIS Still Expected to Issue Final Rule on Imported SWPM in April/May 2004(with Six Months or Longer Phase-In Period)” appearing in International Trade Today dated February 13, 2004.
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Safety Inspection Program Proposed for Inter-modal Chassis
The U.S. Department of Transportation (DOT) will launch a safety inspection program for inter-modal container chassis. The inspection program will provide added oversight to help ensure that the trailer beds used by truckers to haul cargo containers are safe.
Inter-modal container chassis are the flat trailer beds that cargo containers are loaded onto when being transported by truck. They are used to transport more than $450 billion in cargo value entering and leaving the United States annually. Cargo containers being hauled by rail and shipping companies are regularly transferred to trucks before final delivery.
Federal Motor Carrier Safety Administration (FMCSA) issued a press release and advised that, within the coming weeks, DOT will outline specific details and a timeline for a notice of proposed rulemaking on the issue.
FMCSA states that the new inspection program will be modeled on the compliance review program already in place for the nation's trucking community. Chassis providers will be required to obtain a USDOT number and display it on their chassis so that data can be captured electronically.
It also states that it will apply the same penalty structure and enforcement actions for equipment, including issuing out-of-service orders and revoking USDOT numbers when needed.
For more information, please contact compliance@shapiro.com.
Source: “DOT Intends to Issue Rulemaking To Launch Safety Inspection Program For Inter-modal Container Chassis” appearing in International Trade Today dated February 6, 2004; and “U.S. Department of Transportation to Begin Safety Inspections of Truck Container Chassis” appearing on FMCSA website http://www.fmcsa.dot.gov/contactus/press/2004/012604.htm
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Updates on C-TPAT’s Smart Box Initiative
On February 6, 2004, the Departmental Advisory Committee on Commercial Operations of the Bureau of Customs and Border Protection (COAC) discussed several issues, including C-TPAT, during its quarterly meetings held in Washington, DC.
C-TPAT is a voluntary initiative designed by the Bureau of Customs and Border Protection, focusing on the development of cooperative relationships between Customs and the business community. C-TPAT members are expected to review current security procedures, discover areas in need of improvement, and develop and implement security enhancements. C-TPAT participation is believed to have many benefits, including a reduced number of inspections and eligibility for bi-monthly or monthly duty payments.
Currently, five C-TPAT partners are working towards implementing the “Smart Box” initiative. The Smart Box initiative encourages C-TPAT members to utilize containers equipped with security devices, ensuring safe movement into U.S. territory. According to CBP, C-TPAT members utilizing smart containers will receive the “green lane” of commerce. At the moment, over 80 containers have been transported under this initiative and a minimum of 500 boxes is projected to move under the program by April 2004.
The Department of Homeland Security, in conjunction with CBP, indicated that over 700 validations are in progress. The purpose of the validation process is to ensure that the information provided in the organization’s security profile is accurate and that measures noted on the application are being followed and implemented accordingly. C-TPAT validation usually occurs within three years of becoming a C-TPAT member. According to CBP, 141 C-TPAT members have gone through validation while the goal for 2004 is to complete 300 of the 711 pending C-TPAT validations.
CBP noted that 20 new trained Supply Chain Security personnel are now ready to handle C-TPAT validations while the objective for 2004 is to have an additional 40 to 60 new personnel trained and operational. CBP declared that its intention is to continually train managers to perform validations with the ultimate goal of having over 100 people trained by the end of 2004.
CBP stated that it would start testing the C-TPAT status verification interface (SVI) in February 2004, allowing consenting C-TPAT members to query SVI for information on other consenting C-TPAT partners. While the program is likely to be operational in late March or early April 2004, questions and answers regarding the plan will be posted to the CBP website two weeks prior to its launch.
COAC informed CBP and other government officials that it would continue to review the C-TPAT program and offer recommendations for possible improvement by the next COAC meeting in April 2004. According to CBP sources, C-TPAT currently has 5,300 members that have signed a Memorandum of Understanding, which includes 3,300 importers, 800 carriers, over 1,000 Customs brokers and freight forwarders, and other members of the international trade community.
Our Consulting Team can provide you with assistance in becoming a certified C-TPAT partner. For more information on how we can help you, please contact our Consulting Team at consulting@shapiro.com.
Source: “CBP Updates COAC on C-TPAT’s Smart Box Initiative and Other C-TPAT Issues” appearing in International Trade Today dated February 12, 2004 and “CBP’s 2003 Trade Symposium Part I – DHS, CBP Highlights” appearing in International Trade Today dated December 1, 2003.
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CBP Targets Documentation Exams on Textiles and Apparel
U.S. Customs and Border Protection (CBP) has been conducting “target” documentation exams on selected textile and apparel shipments for more than a year, and will continue to do so. CBP has found numerous cases in which counterfeit documents were used in an attempt to circumvent textile quotas.
Within the last six months, government sources state that CBP has found documentation for $75 million in apparel of Chinese origin, which falsely claimed another country as the “country of origin.” In addition, CBP has stopped $30 million in textiles and apparel claiming Russian origin from entering the United States, as the “country of origin” could not be proved. In the last twelve months, CBP has discovered over $200 million in textiles and apparel that were smuggled into the United States.
According to government sources, some of the above schemes have involved individuals and/or companies in various countries, in various capacities (either witting or unwitting), including the following “partial list”:
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Mexico
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Uzbekistan
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Vietnam
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Maldives
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Kenya
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Botswana
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Russia
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South Africa
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Swaziland
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Hong Kong
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China
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Sources explain that these documentation exams were “targeted,” and were not “blanket sweeps” as was CBP’s June 2003 “document accuracy test.” During June 2003, CBP conducted a “document accuracy test” of textiles and apparel that are entered as quota-free and visa-free using entry type 01 (regular consumption entry). During June 2003, approximately 80,000 entries containing textiles and/or apparel subject to quota and/or visa requirements (entry type 02, used for quota/visa entries, or “live” entries) were examined in order to assess the accuracy and quality of the entry data and its associated documents. The June test resulted in 13% reject rates, with 60% of the rejects due to “simple error,” 40% of the rejects were due to inaccurate description, misclassification, etc. Of the entries rejected, 1.5% were subject to enforcement action. CBP states that as a result of the June test, $1.2 million in revenue was recovered.
Sources: "CBP Has Been Conducting Documentation Exams on Textiles and Apparel” appearing in International Trade Today dated January 29, 2004. “CBP Expected to Conduct Document Accuracy Test of Non-Quota Textiles and Apparel in March 2004” appearing in International Trade Today dated January 28, 2004.
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ITA to Establish Procedures and Sanctions for False Statements
According to the International Trade Administration (ITA), any person who provides factual information to the Import Administration (IA) during an antidumping (AD) or countervailing (CV) duty proceeding must certify to the accuracy and completeness of such information. While the Import Administration (IA) regulations set forth the specific content requirements for such certification, and may refer allegations of fraud regarding these certifications to the Department of Commerce’s (DOC) Office of Inspector General (OIG) or to U.S. Customs and Border Protection (CBP) for appropriate action, the IA currently has no regulations setting forth procedures for investigating or potentially imposing sanctions against persons who certify and submit false statements to the IA during AD/CV duty proceedings.
Import Administration is now considering proposing regulations that would establish procedures that the agency would follow when it has reason to believe that a person has certified and submitted false statements, or engaged in a scheme to certify and submit false statements, in the course of an antidumping (AD) or countervailing (CV) duty proceeding.
The ITA has issued a notice to collect information from members of the bar, as well as from interested members of the general public, in order to assist ITA in determining whether to issue regulations pertaining to false statements and, what those regulations should address.
ITA is interested, in part, in comments relating to:
- Are the current certification requirements sufficient to protect the integrity of ITA’s administrative processes?
- What should be the definition or scope of the terms “fraud” or “false statements” as they may relate to any regulations which ITA may disseminate?
- Who should be subject to these regulations? Should they cover only fraud or false statements committed by attorneys and other professionals appearing before the agency, or should they also cover the foreign and domestic companies subject to the ITA’s determinations?
- What type of remedial sanctions should be imposed upon finding that a person committed fraud?
ITA notice, docket number 031120285-3285-01 appears in the Federal Register, Vol. 69, No. 16 / Monday, January 26, 2004 and can be viewed at the following location: http://ia.ita.doc.gov/download/false-statements/04-1573.txt
Written comments must be received within 60 days of January 26, 2004. Written comments (original and six copies) should be sent to James J. Jochum, Assistant Secretary for Import Administration, U.S. Department of Commerce, Central Records Unit, Room 1870, Pennsylvania Avenue and 14th Street, N.W. Washington, D.C. 20230.
For additional information contact: Elizabeth C. Seastrum, Senior Counsel, or Philip J. Curtin, Attorney Advisor, Office of the General Counsel, Office of Chief Counsel for Import Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, N.W., Washington, D.C. 20230, 202-482-0834 or 202-482-4224.
Sources: “ITA Considers Regulations to Establish Procedures and Sanctions for False Statements Submitted During AD/CV Duty Proceedings” appearing in International Trade Today dated January 27, 2004.
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Transportation News
IMPORT
The Currency Adjustment Factor from Northern Europe will rise again from 5% to 7% as of March 15, 2004. The continuing weakness in the U.S. dollar has resulted in the introduction of the CAF.
Italy and Spain added a CAF in February. In Italy, the CAF ranges from 7% to a flat fee of $45-60.00 per container. Some, but not all, carriers have introduced the Spanish CAF.
The Bunker Surcharge on shipments from the Mediterranean region (Italy, Spain, and Portugal) actually went down in February from $176.00 per TEU to $ 135.00 per TEU for most carriers. We had reported last month it would go down to $131.00 per TEU.
The Bunker Surcharge from Northern Europe remained the same to North America. The rate to the Atlantic and Gulf ports remains at $158.00 per TEU. The rate to Pacific Coast ports remains at $237.00 per TEU.
Ocean freight rates from Asia are going to rise on May 1, 2004. The official General Rate Increase (GRI) amount is as follows:
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To West Coast ports:
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To U.S. destinations other than West Coast ports:
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20’ container
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$ 340.00
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$ 450.00
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40’ container
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$ 450.00
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$ 600.00
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40’ High Cube container
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$ 510.00
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$ 675.00
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45’ container
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$ 570.00
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$ 760.00
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Per 1000 kilos
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$ 17.00
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$ 12.00
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Per cbm
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$ 9.00
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$ 23.00
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Carriers have begun negotiations with major importers who tend to dictate market conditions, and are expected to maintain the Peak Season Surcharge (PSS) even though there was no real peak season in 2003. The PSS amount is expected to be $400.00 per 40’ container.
There is an expected increase in freight rates from Turkey in February. The amount of the increase is not known as of this writing. It might be as high as $200.00 per container.
It is our belief that there will be an increase in May; however, it will probably not be as high as the carriers are asking at this time. The major importers (Wal-Mart, Target, etc.) will have a large impact on the final increase amounts. An April 2004 decision is expected.
The Panama Canal Surcharge will increase for all import and export traffic utilizing the canal. The rate will change from $105.00 per container to $115.00 per container effective March 15, 2004.
There have been wide spread strikes in India. There is also major congestion at the Nasha Sheva International Container Terminal (NSICT). This has lead to a backlog of containers at Inland Container Depots (ICD) in northern and western Indian states.
EXPORT
As of this writing it is not known whether the carriers will follow through on the General Rate Increase (GRI) to Asia. It appears that the market is still soft and it will be hard for carriers to raise rates in this trade lane.
Space continues to be tight from Europe to North America. Even with the higher euro, there is still a strong demand for airfreight from Europe. Most carriers will be adding flights to and from Europe as they begin the summer season. This will help with the space crunch. Airfreight rates from the U.S. to points around the world are still in a slump.
Rates have dropped considerably from Asia, notably from Hong Kong and Shanghai. The slack season should remain in place barring any sudden change until early summer.
DOMESTIC
There has been some congestion in Chicago and Montreal that has effected inter-modal movement of containers. The cold weather in Canada has caused a slowdown on import containers from Europe to the Midwest. A strike by the Canadian National Railway, at this writing, may delay containers arriving in the U.S. via Canada.
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