U.S., Chinese Agencies Agree on Efforts to Improve Product Safety - During the second U.S.-Sino Safety Summit this week, the Consumer Product Safety Commission and China’s General Administration of Quality Supervision, Inspection and Quarantine took several steps designed to improve the safety of consumer products exported from China to the U.S. The measures respond to some of the problems behind this year’s increase in recalls of China-made goods but also follow up on bilateral product safety efforts that have been underway for some time. The two sides signed an agreement providing that AQSIQ will immediately take action to eliminate the use of lead paint on Chinese-manufactured toys exported to the U.S. Lead paint on toys sold in the U.S. has been banned since 1978, but millions of toys made in China have been recalled this year because they did not comply with this prohibition. The plan’s effectiveness will be reviewed within a year to identify possible areas for improvement. The two agencies also announced work plans that outline further efforts to improve the safety of toys, fireworks, cigarette lighters and electrical products under the auspices of a joint memorandum of understanding signed in 2004. These work plans envision greater information sharing on applicable laws, regulations and standards; increased follow-up on product recalls with U.S. importers and Chinese manufacturers; more inspections for issues and products of particular concern; and training and technical exchanges. It is worthwhile to note that while much of the blame for the recent rash of recalls has been placed on Chinese manufacturers, the CPSC is making clear that under existing law U.S. importers bear a substantial amount of responsibility for product safety as well. The commission is urging importers to become familiar with the standards that apply to their products and ensure that foreign manufacturers know exactly what standards need to be met. As part of its agreement with AQSIQ, the CPSC pledged to undertake additional outreach efforts to U.S. importers, stressing their role in quality and safety assurance through thoroughly evaluated product designs and specifications, testing, training, and the communication of U.S. regulations and standards to their Chinese suppliers.

China May Offer Financial Aid to Domestic Companies Named in IPR Cases
The State Intellectual Property Office within China’s Ministry of Commerce is considering the establishment of a reserve fund to aid domestic companies named in intellectual property rights cases brought in foreign countries. Separately, Chinese companies are filing more patent applications abroad in an effort to slow the number of IPR cases against their products.

EPA Proposes to Extend Exemption for Ozone-Depleting Substance Imports
The Environmental Protection Agency is seeking comments by Nov. 13 on a proposed rule that would extend from Dec. 31, 2007, to Dec. 31, 2015, the global laboratory and analytical use exemption for the import and production of class I ozone-depleting substances. This exemption allows persons in the U.S. to import and produce controlled substances for laboratory and analytical uses that have not been already identified by the EPA as non-essential.

Senate Approves Measure to Suspend Mexican Truck Project - The Senate approved a fiscal year 2008 transportation spending bill this week that includes a provision to suspend the year-long Mexican truck project the Department of Transportation launched last week. The House of Representatives passed a similar measure earlier this year. The DOT’s demonstration project will allow up to 100 Mexican trucking companies to operate throughout the U.S. and a similar number of U.S. carriers to operate in Mexico. The agency implemented the project last week after a federal court in California denied a request by several public interest groups for an emergency injunction to stop it.

House Approves Bill to Provide More Trade Assistance to Small Businesses
The House of Representatives approved last week a bill (H.R. 2992) that would make a number of revisions to the Small Business Act in an effort to give small businesses new tools to expand their exports and benefit from increased international trade. According to a committee report and a press release from Rep. John Hall, the bill’s sponsor, the Small Business Administration Trade Programs Act of 2007 would require the SBA’s Office of International Trade to: work with the U.S. Trade Representative to develop and implement trade policies aimed at expanding opportunities for small businesses; develop an annual trade strategy for small businesses that includes specific ways to increase competitiveness, protect against unfair trade practices, increase exports and expand the role of small business representatives in creating federal trade policy; provide technical assistance, counseling services and reference materials to help small businesses involved in trade remedy investigations or prosecuting trade dispute cases; provide financial and counseling assistance to small businesses taking legal action to secure their intellectual property rights in foreign countries; develop and implement a system to track small business exports and the use of federal trade promotion resources; and establish a comprehensive set of services, including technical and financial resources, to help small businesses readjust to global economic conditions; and increase the number of trade finance specialists at Export Assistance Centers.

Working Group Outlines Strategic Framework for Improving Import Safety
The Interagency Working Group on Import Safety established by President Bush earlier this summer has issued its initial report. This report is characterized as a strategic framework outlining an approach that can build on existing efforts to improve the safety of imported goods while also facilitating trade. The group plans to submit by mid-November a follow-on action plan that will provide recommendations on specific short-term and long-term steps that should be taken. The report’s primary recommendation is to shift the existing import safety system from an intervention, border-focused strategy to one of prevention throughout the entire import cycle. Specifically, the report calls for the implementation of a cost-effective, prevention-focused strategy that identifies those points in the import cycle where the risks are greatest and then targets the application of controls to those points to minimize the likelihood of unsafe products reaching U.S. consumers. What policymakers should not do, working group members said, is mandate physical inspections of every product entering the U.S., which would not only bring international trade to a standstill but also divert limited resources from those imported goods that pose the greatest risk.

CIT Says Sports Sandals Not Classifiable as Athletic Shoes
The Court of International Trade has issued a ruling upholding U.S. Customs and Border Protection’s classification of certain sports sandals as footwear with open toes or heels under HTSUS 6404.19.35 (37.5 percent duty). Plaintiff Deckers Corp. had argued for classification as tennis shoes, basketball shoes and the like under HTSUS 6404.11.80 (90 cents/pair + 20 percent duty). Deckers asserted that this subheading covers all athletic footwear and that the sandals at issue fall within that description because they are used for a variety of sporting and athletic purposes. However, the court found that the sandals are properly classified as such and cannot be considered shoes. “While it may well be, as this matter has discovered, that forms of human athletic activity have engendered more-propitious types of footwear,” the court concluded, “the law governing their classification has yet to follow suit.”

Proceeding Initiated on Toxicity Testing by Importers and Manufacturers. The Environmental Protection Administration has granted a petition seeking the initiation of a proceeding for the issuance of a rule under the Toxic Substances Control Act regarding chronic aquatic toxicity testing on certain nonylphenol ethoxylates by importers and manufacturers. However, the EPA has denied similar requests regarding certain other TSCA testing, stating that the petitioners have not provided facts to support the conclusion that these other tests are necessary to permit a reasoned evaluation of NPEs. The EPA has also rejected the petitioners’ request that it require labeling on all products containing nonylphenol and NPEs, ban the use of these chemicals in industrial and consumer detergents in favor of existing, less-toxic alternatives, and limit the use of NP and NPEs where their use presents an unreasonable risk to public health and the environment.

Think Tank Study Says Trade Boosting Domestic Manufacturing Sector
A recent study issued by the Cato Institute asserts that the U.S. manufacturing sector is thriving and that a good deal of its success is attributable to international trade. Study author Dan Ikenson, associate director of the institute’s Center for Trade Policy Studies, said this conclusion challenges the rhetoric of many lawmakers that domestic manufacturing is continuing to decline and that trade bears a large part of the blame. The study notes that a number of “antagonistic or protectionist” trade bills are now pending in Congress. These measures are based on “a mistaken trio of assumptions: that U.S. manufacturing is on the decline, that unfair foreign competition explains that decline, and that failure to formulate a policy response to arrest and reverse that trend imperils the nation’s future.” The truth, Ikenson states, is that the U.S. has “a robust manufacturing sector that has thrived on account of greater international trade.” While there are a handful of industries that are struggling, the U.S. lacks comparative advantage in most of these and measures to protect them would thus divert resources from more competitive industries. Statistics bear out the overall health of domestic manufacturing, the study asserts. Since a low point in 2002, the sector has experienced robust and sustained output, revenue and profit growth. In fact, 2006 was a record year for exports, revenues, profits, profit rates, return on investment and output, as U.S. factories produced two and a half times more than those in China. The U.S. share of world manufacturing output, on a value-added basis, has remained steady for more than a decade. The rate of manufacturing job loss has leveled off to historic averages after an acceleration in 2000 through 2003 that saw the elimination of three million jobs. While it is true that real wage growth in manufacturing has been anemic for several years and that the sector’s contribution to gross domestic product has been shrinking, these data “are not evidence of a declining manufacturing sector or unfair trade competition.” Contrary to assertions by “trade bashers,” Ikenson states, international trade is beneficial to domestic manufacturers. For example, trade data shows that increases in manufacturing imports directly correspond to gains in manufacturing exports. This is because U.S. factories are prodigious users of raw materials, components and other intermediate goods from overseas in the production of value-added final goods, which helps them keep costs down and improve profitability. In fact, nearly 55 percent of all U.S. imports in 2006 were destined for U.S. factories, not consumers. Trade restrictions of the kind proposed by some of the bills that have been introduced in Congress would thus harm the very domestic manufacturers they are ostensibly designed to protect by limiting input supplies and driving up prices.

Chile, Japan Sign FTA. Chilean President Michelle Bachelet and Japanese Prime Minister Shinzo Abe signed an FTA between their two countries earlier this month. The agreement is only the second of its kind for Japan in Latin America, and Abe said that as a result of the deal he expects Chile to become his country’s biggest trading partner in the region. The FTA envisions tariffs on about 90 percent of bilateral trade, excluding sensitive products like rice, being phased out over ten years.

New Chinese Law on Mergers and Acquisitions Involving Foreign Companies
The Standing Committee of China’s National People’s Congress approved last week the country’s first-ever antitrust legislation. Once the new law takes effect Aug. 1, 2008, mergers and acquisitions involving foreign companies will have to be evaluated against national security as well as anti-monopoly concerns before being approved. Press reports indicate that this requirement was added this past summer because such transactions now account for nearly 20 percent of foreign direct investment in China, up from five percent just a few years ago.