Shap Talk 27 - July, 2004

"Shap" Talk

July 2004 - Issue #27

In This Issue:

Final Rule Delayed for the Importation of Solid Wood Packing Material
American Association of Exporter and Importers Conference Update
COAC Meeting Update
Visa Weights and Visa Over-weights
Penalty and Mitigation Guidelines under the Bio-terrorism Act (BTA)
AES Commodity Redesign Implemented on June 8, 2004
United States and Morocco Sign Free Trade Agreement
Customs Budget Authorization Hearing
Transportation Update
Preliminary Antidumping Determination

Trade Industry News

Final Rule Delayed for the Importation of Solid Wood Packing Material

The Animal and Plant Health Inspection Service (APHIS) published a proposed rule for new requirements concerning the importation of solid wood packaging material (SWPM). APHIS sources do not know when the SWPM final rule will be published in the Federal Register. USDA advises that the web page will contain the current information once the details have been finalized.

The U.S. Department of Agriculture (USDA) is still encouraging all exporting countries to meet the conditions of ISPM 15
http://www.ippc.int/servlet/BinaryDownloaderServlet/ISPM_15_English.pdf?filename=1055161712885_ISPM15_e.pdf
and the Proposed Rule which require that all wood packaging material be appropriately treated and marked under an official program developed and overseen by the National Plant Protection Organization (NPPO) in the country of export. APHIS will follow its current requirements for imported wood packaging material until the published implementation date. USDA states there will be a delayed implementation period once the final rule is published in the Federal Register.

We invite you to visit the USDA wood packaging material web page
(http://www.aphis.usda.gov/ppq/manuals/pdf_files/50Miscellaneous.pdf)
(page 168 through 170 --posted April 22, 2004). Information regarding the proposed rule, comments, and public hearing transcripts can be viewed on the USDA website at: http://www.aphis.usda.gov/ppq/swp/import.html.

Sources: Animal and Plant Health Inspection Service Website - USDA Import Section http://www.aphis.usda.gov/ppq/swp/import.html.

American Association of Exporter and Importers Conference Update

The annual conference of the American Association of Exporters and Importers was held once again in New York City on June 13 – 15, 2004. Many topics were touched upon in the three day gathering that were of particular interest to the Trade community. The theme for this year’s event was “Trade Creates Possibilities and Possibilities Create Freedom”.

Global Sourcing and Global Supply Chains were discussed by the panel which included overseas suppliers and manufacturers, overall supply chains, flow of financial transactions, logistics and transportation, flow of goods, subcontractors, and how supply chain restructuring may significantly reduce associated company costs. The panel addressed the utilization of global Foreign Trade Zones for the procurement, distribution, and security of goods, as well as to minimize the costs associated with a company’s supply chain. The interrelationship of tax and transfer pricing issues with global procurement and indirect tax reduction strategies to ensure the most complete, tax effective supply chain structure was also discussed.

Panelists held a guidance session entitled Internal Controls and Systems for Classification where discussions of various methods of building procedures and implementing trade compliance systems to ensure that the importer classifies merchandise using reasonable care. Panelists described how their companies have identified classification errors and the changes they have made to their trade compliance process, either through personnel assignments or standard operating procedures (SOP’s), in order to increase their company’s trade compliance on tariff classification.

Internal Controls and Systems for Classification:

Internal Control Components
Control the Environment
Risk Assessment
Information and Communication
Control Activities
Monitoring

Keys to a Compliant Classification Process

Metrics
Systems
Interdepartmental Coordination
Documented Procedures and Internal Controls
Functional Expertise
Quality Service Providers

Classification Risks

Correct Payment of Customs Duties
Correct Application of Special Trade Programs
Correct Application of Anti-Dumping and Countervailing Duty
Import Statistics are Accurately Reported
Export Licensing and Reporting Requirements
Informed Worldwide Purchasing Decisions

The Internal Controls for Valuation session included panel discussions that identified valuation trade compliance issues and ways to ensure that various corporate personnel communicate effectively so that imported merchandise is correctly appraised with reasonable care. An outline of common valuation trade compliance issues that are pitfalls for most importers was provided and corporate representatives discussed valuations issues that applied to their companies. Panelists also described the corporate personnel who became part of the trade compliance process, how their company worked with foreign suppliers to ensure that commercial invoices accurately reflect value information, and changes that were made to their trade compliance systems to account for valuation issues.

Internal Controls and Systems for Valuation:

Common Valuation Problems for Importers Include:
Payment of License fees, royalties or other payments to foreign suppliers
Tracking and declaring assists, including foreign research and development charges
Failure to report post-importation price adjustments
Capital equipment purchases
Progress Payments
Related-party Transactions

-How can an importer determine whether there are valuation issues?

Conduct an internal review or risk assessment of import activities
Communicate with other functional areas within the company
Conduct training
Prepare for a formal audit by Customs
Respond to a general or specific Customs’ inquiry – example: Request for Information or Notice of Action.

-What challenges does an importer face when addressing valuation issues?

Lack of general awareness regarding the implications of value-related determinations – example: inadequate training.
Lack of established channels of communication between the trade compliance department and other functional areas.
Little or no visibility regarding the roles and responsibilities of the trade compliance department.
Lack of necessary resources for the purpose of establishing adequate internal controls.
Lack of dedicated support from financial and / or accounting to track and report relevant payments or adjustments.
Gain the cooperation and support of foreign vendors

-How can an importer gain support from upper management in order to acquire needed visibility and / or resources to address valuation issues?

Rely on “scare tactics” – example: threat of audit, calculation of loss of revenue and penalty exposure, threat of other enforcement action.
Link Sarbanes-Oxley financial reporting requirements to valuation declarations made to Customs.
Address visibility and credibility issues by seeking assistance from internal and / or external experts.

Leverage specific events – example: penalty, audit, seizure, and national sanctions.

-How can the prior disclosure mechanism be used as an effective risk management tool?

Protect the importer from costly penalty exposure
Demonstrate importer’s commitment to compliance
Customs’ official policy is to encourage prior disclosures
Importer Self Assessment (ISA) program element.

-Describe specific steps to achieve compliance objectives.

Establish formal channels of communication with Finance, Tax, and other departments for the purpose of identifying transfer pricing issues, royalties, cost sharing payments, etc.
Join Customs reconciliation prototype
Develop pre and post-entry review process
Provide customs brokers with detailed information and / or instructions on making entry declarations on behalf of company
Develop SOP’s for customs broker
Conduct training
Form internal customs compliance team
Adopt regular audit plan with key metrics

The Internal Controls and Systems for Special Duty Programs session described the additional trade compliance burdens posed by utilizing duty preference programs. An overview of the duty savings potential that special duty programs offer U.S. importers was also discussed. The importer’s decision to take advantage of special duty programs, the additional procedures and trade compliance systems supplementing the company’s tariff classification process to ensure the goods qualify for preferential treatment, and the importer’s ability to substantiate duty preferences claims were also exposed.

Internal Controls and Systems for Special Duty Programs:

-Risk Assessment: How do you identify potential compliance gaps or risks?

Analysis of import and trade data
Internal audit
Risk assessment review by outside consultant
Periodic testing and internal review programs
Customs inquiry – example: CF 28, CF29
Pending Focus Assessment
Benchmarking practices

-What are the primary compliance issues for managing your duty preference program?

Managing and issuance of NAFTA certificates
Validation of 9801 claims
U.S. origin
Not advanced in value of improved in condition
Validation of 9802.00.80
U.S. fabricated components
Simple assembly abroad
Tariff classification
Cost benefit analysis
Reconciliation issues

-How does one identify the extent of the problem?

Sampling methodology
One year review
Comprehensive five year review
Analysis of internal control deficiencies
Sampling of each duty preference program
Outside assistance

-What resources are necessary to address the problem and how does one obtain upper management support?

Support from upper management via

Pending audit or enforcement action
Sarbanes-Oxley reporting requirements
Scare tactics related to potential noncompliance
Outside expert
Resources necessary to implement / correct internal controls
Dedicate import compliance staff
Coordinate with Finance, Global Sourcing, and IT groups
Outside assistance
Maquiladora staff and training

-Risk Assessment: How does one address the compliance gaps identified?

Develop or enhance internal controls
Increase general and targeted import training
Turn off duty preference programs
Post NAFTA claims
Flagging for 9802, NAFTA, value
Increase coordination with Finance and Global Sourcing
Obtain IT support and develop new database fields or system safeties
Increase compliance staff
Revise and reissue customs broker instructions
Conduct vendor training

-What other options are available to the company?

Classification review determine errors and duty savings, inefficient use of duty preference program
Use of duplicate duty preference claims – NAFTA and 9802
Review potential sourcing changes to maximize NAFTA eligibility
IT solutions to more closely monitor NATFA program and potential sourcing changes and tariff shifts
Additional vendor education and communication
Coordinate across Maquiladoras

-Monitoring: How does one know if the new / revised internal controls are working?

Additional internal reviews and testing risk areas
Additional training
Enhancement of pre and post-entry review process
Coordinate with other functional areas
Reconciliation
Internal audit
Outside expert review
Reduction in Customs inquiries
Favorable audit report or Compliance Improvement Plan approval

The Global Supply Chain Security Trends: Issues for Importers and Exporters panel discussion addressed issues regarding global supply chain security trends from both the importer and exporter perspectives. Special was placed on the global component of supply chain security. Some of the topics covered included: Canadian Borders, Mexican and South American challenges and developments, European Union & Asian programs and developments, data collection, technology and standards, and controversies.

The Free Trade Agreement Update session provided an update on the status of Free Trade Agreements (FTA’s) and trade negotiations in order to educate attendees on the FTA provisions most likely to impact their operations.

-Until 2003, the U.S. had Free Trade Agreements with Israel, Canada (Suspended under NAFTA, Canada and Mexico (NAFTA), and Jordan

-In 2003, the U.S. completed agreements with Chile and Singapore, concluded negotiations with five CAFTA countries, Australia, the Dominican Republic, Morocco.

-The U.S. began negotiations with the South African Customs Union (South Africa, Lesotho, Swaziland, Namibia, Botswana), Columbia, Peru and Ecuador with Bolivia as an observer, Bahrain, Panama.

-Negotiations with Thailand were scheduled to begin in June 2004.

-Negotiations for a Free Trade Area of the Americas (34 democracies in the Western Hemisphere) formally launched in 1998 and expected to be completed by 2005.

-Useful websites:
For full texts, press releases, fact sheets, and advisory committee reports for recent FTA’s http://www.ustr.gov
For older FTA’s http://www.tcc.mac.doc.gov/cgi-bin/doit.cgi?218:54:1:5
For Agriculture issues http://www.faz.usda.gov/itp/ftas.html

The Recent Developments in U.S. Export Control Requirements and the Impact of National Security Concerns session included a panel discussions which assisted exporters in understanding the variety of government agencies responsible for export control, the relationship to homeland security, and the current national security and regulatory enforcement environment. Panelists explored the impact of today’s environment on corporate export compliance programs and the new export requirements and provided information on how these requirements integrate into the reporting framework. Panelists also addressed industry “best practices” with regard to internal processes and controls, and discussed the impact that U.S. homeland security measures have had on U.S. export trade, port security and movement of cargo.

The Export Management Systems: Practical Strategies for Remaining Compliance session discussed what happened when individuals and / or companies violate export regulations and what can be done to prevent your company from making the same mistakes. The panel discussed what can go wrong, reviewed questionable activities, and offered guidance such as working with industry and various enforcement agencies to develop practical strategies for doing business and remaining compliant.

Export Compliance Program includes the following:

-Due Diligence
A strong compliance program reduces the likelihood of export control violations, thus limiting further Government scrutiny.

Restricted Parties Screening

• Check all parties against the Government’s prohibitive lists –example: Denied Persons List, Entity List, Specially Designated Nationals List, Unverified List, Debarred Parties List.

Recordkeeping

• Good Recordkeeping provides an audit trail and satisfies regulatory mandate

§ Export Control Procedures for Daily Operations

•Standardized export control processes and procedures for export department, subsidiaries and other parties, sales, human resources, shipping, legal, R&D, other technical staff, etc.

Technology Control Plan

Avoid technology transfer risks – example: Deemed exports, subsidiaries, outsource partners, vendors, and customers etc.

Manage and control the release of technology

HR Hiring Process
IT access Control
Physical Security Control/Vendor and Customer Access
Employee Access

Training

Train all personnel including subsidiaries, outsourcers, and other business partners

Audit

Compare written procedures with actual practices and regulatory requirements

• Review Classification and Licensing Applicability
• Customer Screening
• Technology Transfer / Deemed Exports
• Recordkeeping Review

-Mitigating Factors

May reduce or eliminate any penalties imposed by the Government

-Satisfies Sarbanes – Oxley

Implementation of an export compliance program is part of an effective, mandatory internal control program.

Sources: American Association of Exporters and Importers (AAEI) Convention held in New York City on June 13 – 15, 2004. Samuel Shapiro & Company, Inc. in attendance.

COAC Meeting Update

C-TPAT Update
COAC, the Advisory Committee on Commercial Operations of the Bureau of Customs and Border Protection, held a meeting on June 18, 2004 in Washington, DC which focused on trade and Customs issues.

Certified C-TPAT partners are three to five times less likely to be examined for trade or compliance related reasons and five to eight times less likely to be examined for enforcement related reasons.

Seven hundred and twenty C-TPAT validations have been initiated, oh which, 288 have been completed. The C-TPAT validation process is used to confirm that the security measures outlined in the C-TPAT partner’s security profile have been implemented. Customs hopes to complete 400 validations by the end of 2004.

C-TPAT currently has 6,565 participants. This number includes:

3,873 importers
1,236 carriers
1,203 Customs brokers, consolidators, forwarders, and non-vessel operating common carriers
208 foreign manufacturers in Mexico
4 C-TPAT field offices in Miami, New York, Los Angeles, and Washington, DC.

CBP Update on Truck and Other Advance Electronic Cargo Information Requirements

CBP expects to implement the advance electronic cargo information requirements for inbound truck cargo geographically, over a certain period of time. The implementation for inbound truck cargo will probably begin in fall 2004.

45 Port Authorities/Terminal Operators

CBP officials state that of those 6,565 C-TPAT participants, over 4,000 participants are certified. C-TPAT benefits are not realized until the participant becomes a certified partner.

C-TPAT was extended in August 2003 to include foreign manufacturers in Mexico. At this time, however, there is no timetable for expanding C-TPAT to foreign manufacturers around the world. Customs is considering various options and would probably first expand C-TPAT to foreign manufacturers in related-party type situations involving U.S. importers.

CBP rejects 16% of the C-TPAT security profiles it receives. Of the security profiles it receives as part of the C-TPAT application process, CBP officials state that approximately 16% are rejected for reasons such as insufficient information, or the company does not qualify for C-TPAT. Customs stated that many of the C-TPAT security profiles originally rejected are subsequently corrected and resubmitted and are then generally accepted by CBP.

The COAC subcommittee presented the Department of Homeland Security (DHS) and Customs with a draft document containing recommendations for improvements to C-TPAT. The committee is looking for input from these agencies and after such input has been received, the subcommittee hopes to present a final draft that reflects at the next COAC meeting.

A second group of C-TPAT Supply Chain Security Specialists have completed training. Customs now has a C-TPAT Supply Chain Security Specialist staff of 41 that are located throughout the
A notice announcing the implementation details for the advance electronic cargo information requirements for inbound truck cargo is undergoing agency review and is expected to be published soon. CBP has been holding public meetings at several of the major land borders across the U.S. regarding the advance electronic cargo information requirements for inbound truck cargo.

CBP reiterated its plans to implement the advance electronic cargo information requirements, in the summer of 2004, for both inbound air and rail cargo. CBP has previously stated that it will implement the advance electronic cargo information requirements for inbound air cargo on three separate dates, depending on the location of the airport where the cargo arrives in the U.S: August 13, 2004 (Eastern states and Puerto Rico), October 13, 2004 (Central states), and December 13, 2004 (Western states). CBP has also previously stated that it plans to implement the advance electronic cargo information submission requirements for inbound rail cargo on three separate dates – July 12, 2004, August 10, 2004, or September 9, 2004 - depending on the port of entry at which the rail carrier will be arriving in the U.S.

CBP has not yet published in the Federal Register its implementation schedule for the advance electronic cargo information requirements for outbound cargo. Outbound cargo implementation will be done in conjunction with the Bureau of Census and additional details will be available in fall 2004.

CBP’s December 5, 2003 final rule states that CBP’s advance electronic information presentation requirements for outbound shipments in all modes of transportation, including the pre-departure time frames for reporting export cargo information for required shipments, and the requirement of the ITN, will be implemented concurrently with the completion of the Automated Export System (AES) Commodity Redesign and the effective date of Census’ mandatory AES filing regulations. Although AES Commodity Redesign was implemented on June 7, 2004, Census does not expect its mandatory AES filing regulations to go into effect until January 2005.

CBP Update on the January 1, 2005 Elimination of Most Textile and Apparel Quotas

COAC asked CBP to continue the quota preprocessing program (QPP) test for apparel on/after January 1, 2005. CBP stated that it would take the issue under advisement and that they did not think that COAC’s request would be a problem.

CBP had no plans to extend QPP beyond its December 31, 2004 expiration date, but will be willing to listen to the trade community if there was interest in maintaining QPP for apparel that will remain subject to quota on/after January 1, 2005 (i.e., non-WTO countries like Vietnam, etc.)

QPP permits certain quota entries (currently merchandise in HTS Chapters 61 and 62) to be filed, reviewed for admissibility, and to have their quota priority and status determined by CBP prior to arrival of the carrier; this is similar to the method of preliminary review by which non-quota entries are currently processed.

Three meetings between CBP and the Committee for the Implementation of Textile Agreements (CITA) were held recently. Two Federal Register notices related to the January 1, 2005 elimination of most textile and apparel quotas are expected to be published within the next few weeks.

Source: COAC meeting held on June 18, 2004 in Washington, D.C. Samuel Shapiro & Company, Inc. in attendance.

Visa Weights and Visa Over-weights

On May 28, 2004 the Bureau of Customs and Border Protection (CBP) issued a directive to Field Operations (TBT-04-013) regarding visa over-weights and the weight to be shown in the visa stamp. Highlights of this new directive follow:

The trade community does not have a uniform definition for reporting quota “net weights” or “net net weights”. For visa reporting purposes, importers are advised to use the weight of the article “as it is used”; packaging materials such as plastic wrappers, tissue paper, cardboard, pins, and hangtags are to be excluded when determining visa weight.
For overages of 10 percent or less by weight (kilos) or, overages of 5 percent or less by quantity (pieces, number, dozens), the port director may accept the visa presented to CBP and allow destruction, exportation, or abandonment of the excess quantities. If the importer refuses to destroy, export, or abandon the excess amount, the only alternative is to secure a new visa or visa waiver for the entire quantity before any portion of the shipment is released from the custody of CBP. The importer will not be allowed to release the visaed amount and later release the excess amount under a new visa or visa waiver.
For overages greater than 10 percent by weight (kilos) or 5 percent by quantity (pieces, number, dozen), the visa presented with the entry is invalid, and the importer must get a new visa, or a visa waiver, to cover the entire amount of the shipment before any amount of the merchandise is released from the custody of CBP.

The Customs and Border Protection memorandum TBT-04-013 is available to all port directors, assistant port directors, import specialists, entry specialists, inspectors, brokers, importers and other interested parties and can be viewed at:
http://www.cbp.gov/ImageCache/cgov/content/import/textiles/tbt/
tbt2004/tbt_5f04_5f013_2edoc/v1/tbt_5f04_5 f013.doc

If you have any questions concerning the CBP guidance document, the contacts are Ms. Susan Thomas, at (202) 927-3719, Ms. Jackeline Martel, at (202) 927-5397, or Mr. Robert Abels, at (202-927-1959.

Sources: Customs and Border Protection Memorandum TBT-04-013 entitled “Visa Weights and Visa Overweight” posted to CBP website dated May 28, 2004.

Penalty and Mitigation Guidelines under the Bio-terrorism Act (BTA)

The U.S. Customs and Border Protection has posted information to its website regarding enforcement, penalty assessment, and mitigation guidelines under the Bio-terrorism Act (BTA). Any imported food products that are not in compliance with the prior notice (PN) requirements of the BTA may be held at the port of arrival or at a secure facility until such time as they are brought into compliance with the BTA, exported from the United States, or destroyed.

The FDA and CBP identify three categories of violations:

Category 1 – available credible evidence or information indicates the article presents a threat of serious adverse health consequences or death to humans and/or animals.
Category 2 – a violation that reflects a history of repeated conduct of a similar nature by a person who has been notified of such violations or appears to be intentional or flagrant.
Category 3 – all violations other than those that fall within categories 1 or 2.

BTA requirements became effective on December 12, 2003. The Food and Drug Administration (FDA) and the U.S. Customs and Border Protection (CBP) agreed to an 8-month phase-in period.

During the first phase-in period of the BTA, which lasted from December 12, 2003 to March 12, 2004, the FDA and CBP focused their attention on educating the trade community to achieve compliance with the prior notice requirements.

During the second phase-in period of the BTA, which began on March 13, 2004 and closed on June 3, 2004, all types of Category 1, 2, or 3 violations could have been subject to the assessment of civil penalties. During the second phase, CBP and the FDA were committed to pursuing informed compliance efforts prior to the issuance of any BTA-related penalty action. FDA provided information to CBP regarding entities that failed to file PN data and CBP issued informed compliance notices to those entities.

Phase 3 of the BTA enforcement plan began on June 4, 2004 and will continue until August 12, 2004. FDA will continue to notify CBP of violators who have committed BTA violations. Informed compliance will generally be offered to violators who commit a Category 3 violation involving inaccurate or untimely filing of PN, or importation from an unregistered facility. During this time, all Category 1 and 2 violations involving the failure to provide PN, will be subject to refusal of admission and possible civil monetary penalties. Any category 3 violations involving failure to provide prior notice will be subject to refusal of admission but will not be subject to civil monetary penalties. Category 2 violations involving inaccurate or untimely PN, or importation from an unregistered facility, will be subject to civil monetary penalties but will not be subject to refusal of admission.

Phase 4 will mark the completion of the BTA enforcement and will take effect on August 13, 2004. All violations, regardless of category or type, may be subject to civil monetary penalties, and the associated merchandise will be refused admission into the United States.

The procedures for implementation of enforced compliance and guidelines for penalty assessment for the Bio-terrorism Act is available to port directors, assistant port directors, import and entry specialists, inspectors, importers, brokers, and other interested parties. The Customs memorandum, including guidelines for penalty assessment and mitigation can be viewed at:
http://www.cbp.gov/ImageCache/cgov/content/import/commericial_5fenforcement/bioterrorism/external_5fbt_5f aprocedures_2edoc/v1/external_5fbt_5faprocedures.doc

Sources: Customs and Border Protection Memorandum entitled “Procedures for Implementation of Enforced Compliance and Penalties for the Bioterrorism Act” posted to the CBP website on June 21, 2004.

AES Commodity Redesign Implemented on June 8, 2004

The Automated Export System Branch (AES) of the U.S. Census Bureau has implemented all of the new commodity redesign changes in the AES system. We have seen more warnings on commodities asking us to confirm with the exporter information such as weight, pieces, value, and quantity. When using HTS (Harmonized Tariff Schedule) numbers or Schedule B numbers to report the commodity being exported, Customs and Border Protection (CBP) has specific reporting quantities required for each tariff number. Many times the reporting quantity asks for the net weight in kilograms. Depending on the commodity, the reporting quantity could be square meters, number of pieces, metric tons, cubic meters, etc. Each tariff number has parameters that have been set up based on the historical statistical averages for that item. When the quantity, value, or weight is out of range for the tariff number being used for the commodity, a verification message is issued. We are contacting our exporters to confirm various elements of the information reported to AES. Please review your tariff numbers to be certain that they best describe your commodity being exported. Along with these tariff numbers, please check the reporting quantity that is listed to be sure your export invoice has the required information to submit to AES. If you need any assistance with this, please contact compliance@shapiro.com.

AES has also changed the export information codes that previously allowed exporters to report limited information on certain commodities. This has now changed; complete shipment details must be reported on all commodities with the exception of household goods. For complete information on the AES commodity redesign, please refer to the U.S. Census Bureau, Foreign Trade Statistics website at:
http://www.census.gov/foreign-trade/aes/documentlibrary/commodityredesign.html#question1

For further information, please contact compliance@shapiro.com.

United States and Morocco Sign Free Trade Agreement

On June 15, 2004, the United States signed a free trade agreement (FTA) with Morocco in order to expand economic opportunities for both countries. Morocco currently imports $11 billion in goods annually, while the U.S. exports an average of $475 million worth of products to Morocco every year.

Presently, American commodities pay an average of 20 percent in tariffs, while Moroccan products face an average tariff of 4 percent. The FTA seeks to eliminate 95 percent of bilateral trade tariffs in consumer and industrial goods while all other tariffs would be eradicated within nine years.

The new agreement offers new agricultural opportunities as it provides U.S. farmers with tariff rate quotas that increase over time. Tariffs on commodities such as corn, soybean, and soybean products will be considerably reduced or eliminated completely allowing U.S. exporters to meet Morocco’s increasing demand to expand its agricultural sector.

The FTA provides for no Customs duty on digital products as well as ensuring strict copyright protection. The agreement calls for Intellectual Property Rights (IPR) enforcement through severe penalties for piracy and counterfeiting. In order for the agreement to work, both countries must assure transparency and efficiency in Customs administrations to include rapid clearance of express delivery shipments.

According to Ambassador Robert B. Zoelick, “A free trade agreement with Morocco will expand our already strong relationship with a key economic and political partner in the Middle East. This agreement will create economic opportunities for America's farmers, workers, and businesses, as well as bolster economic reforms and foreign investment in Morocco."

For more information, please click on the following link:
http://www.ustr.gov/new/fta/morocco.htm

Source: USTR at http://www.ustr.gov/new/fta/morocco.htm

Customs Budget Authorization Hearing

The Subcommittee on Trade of the Committee on Ways and Means announced that the Subcommittee will hold a budget hearing for the 2005 and 2006 fiscal years (FY). The hearing will discuss budget issues for the Bureau of Customs and Border Protection (CBP) of the U.S. Department of Homeland Security (DHS) and the Bureau of Immigration and Customs Enforcement (ICE) of DHS.

The President’s proposal encompasses FY 2005 funding at $6.2 billion for CBP and $4 billion for ICE. Since the creation of DHS in 2002, Customs was divided into two new agencies: the Bureau of CBP and the Bureau of ICE. The Subcommittee will address the issues of whether the agencies are functioning efficiently, whether trade functions are considered a priority, and whether suitable resources are being dedicated to customs functions.

The C-TPAT program will be another target issue during the hearing. The Committee’s goal is to ensure that the program is effectively achieving its goal of improving security and facilitating trade. C-TPAT is a voluntary initiative designed by CBP that focuses 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, develop, and implement security enhancements. C-TPAT participants are believed to have many benefits, including a reduced number of inspections and eligibility for bi-monthly or monthly duty payments. The Subcommittee will attempt to ensure that performance measures exist to verify the effectiveness of the program as well as whether C-TPAT members are receiving benefits accordingly.

The Subcommittee will also be evaluating issues relating to customs modernization and whether the new Automated Commercial Environment (ACE) is going to be able to meet CBP’s objectives. CBP is in the process of replacing the existing Automated Commercial System (ACS) with ACE while integrating ACE with the International Trade Data System (ITDS). The Subcommittee will consider whether ACE’s design and architecture will enable CBP to meet potential requirements, and whether the existing participation by Federal agencies in the ITDS program is satisfactory. It will also consider the timing for ACE’s development, and the responsibility of the trade industry in building ACE.

For more information, click on the following link:
http://waysandmeans.house.gov/hearings.asp?formmode=view&id=1620

Source: Committee on Ways and Means website at
http://waysandmeans.house.gov/hearings.asp?formmode=view&id=1620

Transportation Update

FAR EAST
Carriers implemented the Peak Season Surcharge (PSS) on June 15, 2004. The amount of the PSS is $300.00 per 20’ container, $400.00 per 40’ container, $ 450.00 per 40’HC, and $510.00 per 45’HC container.

Space is very tight from the Far East to the U.S., especially for all-water service to the East Coast. Carriers did not add additional all-water capacity to the East Coast and ships are leaving Asia fully loaded.

Carriers are also looking to turn their equipment more quickly and are trying to keep the equipment closer to the U.S. East and West Coasts. The longer the container is in the U.S., the less profit is being made. This is a new perspective for analyzing potential cargo to be carried.

A container shortage in Asia is a further threat. Due to increases in the price of steel, carriers have delayed manufacture of new containers. There is great concern that there may be equipment shortages in the near future if volumes continue to surge. Importers are recommended to advise their suppliers to book shipments at least two weeks in advance of sailing to secure space. We are hopeful that the space crunch will ease a bit in July; however, all signs point to a very difficult season from Asia to the U.S.

BRAZIL
The situation in Brazil has still not stabilized since the new services were inaugurated this month. In fact, the situation is worse than expected. Carriers have announced major increases on northbound rates in July. Most carriers will increase rates by as much as $500.00 per 40’ container.
The situation is very grave in Santa Catarina state, where the ports of Sao Francisco do Sul and Itajai are domiciled; the infrastructure is not in place to handle the volume coming out of these ports. A major shift in production in the furniture industry from China to Brazil has resulted in a surge of exports from this area. Suppliers have cargo ready but cannot receive a confirmed booking from ocean carriers. It’s a very difficult situation. The ocean carriers are trying to clean up all the old bookings and ease the congestion at the ports. We are told that Mediterranean Shipping will add a vessel to “sweep up” containers that have been sitting in port awaiting export from Brazil.

The recent strikes by Brazilian customs have finally ended.

ARGENTINA & URUGUAY
Rates from Argentina and Uruguay will increase on par with the rates from Brazil. Space is also tight from both countries.

EUROPE
NORTHERN EUROPE
Increases announced from Northern Europe to the U.S., effective July 1, 2004, will not be implemented. On July 16, 2004 the bunker surcharge will increase from Northern Europe. The new level will be $198.00 per 20’ container and $396.00 per 40’ container to East Coast and Gulf ports. This is an increase of $40.00 per 20’ container and $80.00 per 40’ container.

Shipments to West Coast ports will rise to $297.00 per 20’ container and $594.00 per 40’ container. This is an increase of $60.00 per 20’ container and $120.00 per 40’ container.

MEDITERRANEAN
Carriers have announced increases of $200.00 per 20’ container and $250.00 per 40’ container effective July 1, 2004. Most carriers will also increase their bunker surcharge on July 1, 2004 from $192.00 per 20’ container and $384.00 per 40’ container. Mediterranean Shipping will have an increase on July 15, 2004 to $195.00 per 20’ container and $390.00 per 40’ container.

Carriers will increase rates from Turkey to the U.S. In addition, the bunker surcharge will be raised to the same level as the Mediterranean ports.

AIR NEWS
Fuel Surcharges have risen worldwide. During late May and early June, carriers moving cargo to and from Europe raised rates twice. Amounts vary by origin; importers and exporters are paying the highest level of fuel surcharges -- as high as .34/kg from Asia and EUR .25/kg from Europe. Fuel Surcharges from the U.S. is.25/kg.

EXPORT OCEAN
Carriers are trying to raise rates effective July 1, 2004 to all destinations. It remains to be seen what the final amounts will be. Fuel Surcharges to Europe will go up by the same amount as import. Vessels are leaving at full capacity to some destinations, especially to China. There has been a surge in shipments to China due to the shortage of raw materials there.

GENERAL NEWS:
Carriers are reducing the amount of free time at the rail ramps all over the U.S. The amount of free time will vary by railroad; however, most have reduced the free time to two or three days after notification of arrival at the rail ramp.

Carriers are also increasing their demurrage rates and per diem rates. As an example, Maersk Sealand announced that, on June 15, 2004, the demurrage charges for dry containers will be $125.00 per day, reefer containers $225.00 per day, and all other equipment types $200.00 per day. Detention and per diem charges will rise to $75.00 per day for dry containers, $150.00 per day for reefer containers, and $100.00 per day for all other equipment types.

Most carriers are doing whatever they can to keep equipment in their possession. Importers can expect an increase in these charges from all of the ocean carriers in the future.

DOMESTIC U.S.
There have been major rail delays from the West Coast to the East Coast due to personnel issues, a shortage of rail cars, and surges in volume from Asia. Containers are backing up from Long Beach/L.A. to the East Coast. There have been delays reported from Oakland and Seattle/Tacoma as well. Mini-landbridge (MLB) transit time is not as fast as usual due to these delays. To make matters worse, there are still truck driver shortages, inland rates are climbing, and fuel surcharges are increasing.

DOMESTIC EUROPE
We have been advised that many truckers are implementing a 3% fuel surcharge within Europe.

Preliminary Antidumping Determination for Chinese Wooden Bedroom Furniture

On June 18, 2004, the Department of Commerce announced its preliminary determination in the antidumping duty (ADD) investigation of wooden bedroom furniture from the People's Republic of China (PRC). Antidumping duties are imposed upon imported merchandise that the U.S. Department of Commerce has found is, or is likely to be, sold in the U.S. at less than its fair market value. The preliminary dumping margins vary from 4.90 to 198.08.

Effective June 24, 2004, U.S. Customs and Border Protection (Customs) will begin to suspend liquidation of entries of subject merchandise and to collect a bond or cash deposit based on the margins in the Department's preliminary determination.

The wooden bedroom furniture covered by the scope of this investigation is generally, but not exclusively, designed, manufactured, and offered for sale in coordinated groups, or bedrooms, in which all of the individual pieces are of approximately the same style and approximately the same material and/or finish. The subject merchandise is made substantially of wood products, including both solid wood and also engineered wood products made from wood particles, fibers, or other wooden materials such as plywood, oriented strand board, particle board, and fiberboard; with or without wood veneers, wood overlays, or laminates; with or without non-wood components or trim such as metal, marble, leather, glass, plastic, or other resins; and whether or not assembled, completed, or finished.

For more information, please visit the following Website links:

International Trade Administration:

http://www.ita.doc.gov/media/FactSheet/0604/furniture_061804.html

Sources: “Fact Sheet-Preliminary Determination of Antidumping Duty Investigation: Wooden Bedroom Furniture from the People's Republic of China” appearing on International Trade Administration’s website and “ADD-4182201-WOOD BED FURN-CN” from Administrative Message 04-1565 on 07/01/2004.