Textile Quotas Eliminated Among WTO Countries
For more than three decades, countries like
the United States and many members of the European Union have
been using quotas
to limit imports of textiles and apparel. These limit in detail
the number of T-shirts, blouses and other items that may be
imported from a particular country.
That all changed on January 1 when all WTO countries agreed
to end the use of import quotas on goods in the textile and clothing
sector. Despite dropping these quotas, countries will still be
allowed to collect tariffs on such imports, although international
trade rules limit the level of the tariffs. Countries will also
be allowed to impose safeguard quotas if imports soar in particular
categories of garments or textiles from China.
Source: www.joc.com
U.S. – Australia Free Trade Agreement Takes Effect on Schedule
The U.S.-Australia Free Trade Agreement took effect on January
1, 2005. The U.S. currently enjoys a $9.1 billion trade surplus
with Australia. The agreement will eliminate 99% of Australian
tariffs on U.S.-manufactured goods as soon as the pact takes
effect. By 2015, all trade in goods will become duty-free.
The agreement was signed after Australia finally agreed to
changes in intellectual property rules involving pharmaceutical
patents, and copyright piracy in connection with the reproduction
of movies. The U.S. believes the accord could lead to an increase
of $2 billion a year in exports of manufactured goods.
Source: www.joc.com
U.S. Makes Progress Toward Free Trade Agreements with Middle
East
In 2005, Congress is expected to approve the free trade agreement
(FTA) signed by the U.S and Bahrain last September. The U.S.
has signed similar agreements with Jordan and Morocco. In mid-February,
the U.S. will begin to negotiate FTAs with the United Arab Emirates
and Oman. In addition, a first step has been made toward a future
FTA with Egypt through the creation of Qualified Industrial Zones
from which certain goods may be imported into the U.S. duty-free.
The Bush administration hopes to create a comprehensive Middle
East Free Trade Area by 2013, part of a long-term strategy to
bring peace and prosperity to the region.
Source: www.joc.com
Asia Free Trade Pacts Progress
Japan and ministers from the Association of Southeast Asian Nations (ASEAN)
agreed to open negotiations on a free trade pact in April 2005, targeting
an implementation date of 2012 with the association's more developed countries
- Singapore, Thailand, Malaysia, the Philippines, Indonesia and Brunei.
ASEAN and China have already been working on a deal that could
result in the world's biggest free trade zone of nearly two billion
people with a combined gross domestic product of $2 trillion
by 2010.
Source: www.xporta.com
Cambodia Joins WTO
Cambodia's legislature voted August 31st to approve the nation's
entry into the World Trade Organization, a step forced by new
rules for international textile and apparel trade that could
otherwise have smothered the country's garment industry. Four-fifths
of Cambodia's exports are garments, and the rules for the international
garment trade could have shut down much of these exports if
Cambodia had not joined the trade group.
Cambodia is joining the WTO even though it lacks many laws usually
regarded as the underpinnings of a modern economy, like bankruptcy
and incorporation statutes. But business leaders have welcomed
Cambodia's entry as helping guide the country to the creation
of a modern legal framework for commerce.
Cambodia's ratification increases the pressure on Vietnam in
particular to join the WTO. Vietnam could otherwise risk losing
much of its garment industry to countries that are members, notably
China.
Source: www.channelnewsasia.com
Japan Signs FTA with Mexico
Japanese Prime Minister Junichiro Koizumi signed a free trade
agreement (FTA) with Mexico on September 17th, during a meeting
with Mexico President Vicente Fox.
Japan
and Mexico reached accord on the FTA in March following a 16-month
negotiation. The Japanese parliament must give its
final approval for the agreement to enter into force. The
FTA is expected to go into effect in April 2005.
This is the second FTA that Japan has signed; the first was
with Singapore. Mexico has entered into 11 FTAs with a total
of 42 countries, including the European Union. Japan plans to
gain greater access to the U.S. market through the NAFTA partner.
Source: www.mofa.go.jp/region/latin/mexico/agreement/joint.html
Central America Free Trade Agreement Update
In May 2004, the Bush administration signed the Central American
Free Trade Agreement (CAFTA) with Costs Rica, El Salvador,
Guatemala, Honduras and Nicaragua, and inserted the Dominican
Republic into the pact in August. A vote on the agreement is
expected before August 2005.
In October, the Dominican Republic signed a law that included
a 25% tax on drinks made with corn-based sweeteners, a major
U.S. export. Because the provision is in violation of CAFTA,
some critics would like to see the Dominican Republic removed
from CAFTA if the tax is not repealed.
Source: www.joc.com
WTO Doha Round Back on Track
The World Trade Organization's 147 member states formally agreed a framework
that lays down the guidelines for its Doha Round, which has been in trouble
since the collapse of talks over a year ago in Cancun, Mexico. Rich and poor
nations struck a historic deal to slash billions of dollars in farm subsidies,
create more open industrial markets, and revive stalled world trade talks
that could boost global growth.
Rich nations welcomed the deal, which commits them to a plan
to cut back on the huge subsidies they lavish on farmers and
give developed nations better access to world markets. Agreement
in the sensitive field of agriculture opened the way for a similar
accord in industrial goods trade and development issues, areas
in which the WTO sought a framework accord to serve as a basis
for future more detailed negotiations under the Doha Round.
The
World Bank says the round could help lift more than half a
billion people out of poverty through increased trade, and
boosting growth by injecting billions of dollars into the world
economy. The agreement makes clear that the poorest countries
will not be forced to contribute to market opening in any area,
including services.
For more details on the Doha Round, please visit:
www.wto.org/english/tratop_e/dda_e/draft_text_gc_dg_31july04_e.htm.
Poll Lists Favorite Places for Multinationals to Invest
The latest Foreign Direct Investment Confidence Index, prepared
annually by A.T. Kearney Inc., shows that China and India run
neck-and-neck as the favorite places for multinationals to
invest overseas. Asked to identify the kinds of activities
that will be sent to China and India, respondents said China
leads for manufacturing and assembly, but India leads for IT,
business processing, and R&D investments. Investors favored
China over India for its market size, access to export markets,
government incentives, favorable cost structure, infrastructure
and macroeconomic climate. The same investors favored India
for its highly educated work force, management talent, rule
of law, transparency, cultural affinity and regulatory environment.
Source: www.joc.com
World Bank Compares Business Regulations in 145 Countries
The World Bank has published a report entitled "Removing
Obstacles to Growth" and features the Top 10 Reformer Countries
and the Top 20 Economies for Doing Business. The series is designed
to investigate the scope and manner of regulations that enhance
or constrain business activity.
Quantitative indicators on business regulations and their enforcement
can be compared, over a period of time, across 145 countries.
Similar to the 2004 report, indicators cover topics such as starting
a business, hiring and firing workers, enforcing contracts, obtaining
credit, and closing a business. The 2005 edition has added two
additional topics: registering property and protecting investors.
A
copy of the report may be purchased at
http://publications.worldbank.org/ecommerce/catalog/product?item_id=1384970.
China
Workers' Per Capita Annual Salary on the Rise
China’s State Statistics Bureau indicated that the per capita
annual salary of the full-time workers in China was USD 1,699
(RMB 14040) in 2003, USD 1,503 (RMB 12422) in 2002, and USD
1,315 (RMB 10870) in 2001.
According to the Bureau, the Ministry of Labor and Social Security
released a survey indicating that in 2003, the annual average
monthly work days and hours of the full-time employees in cities
and towns were 20.92 days and 167.4 hours respectively. The converted
daily and hourly salary based on this fact were USD 6.76 (RMB
55.93) and USD 0.85 (RMB 6.99) respectively.
Source: Beijing Daily
USDA Announces Final Regulations on Wood Packaging Materials
During the past 15 years, governments have focused on preventing
the introduction of pests in logs and wood packaging materials.
The U.S. has been specifically concerned about the introduction
of the pine shoot beetle and the Asian long-horned beetle.
The U.S. Department of Agriculture has now published its final
regulations on this subject in the Federal Register. These new
regulations will come into full force on September 16, 2005,
and will affect all imports into the United States. The regulations
apply to all types of wood packaging materials including pallets,
crates, boxes, skids and wood used to support, block or brace
cargo.
The
new regulations do not cover:
-
Manufactured
wood materials such as plywood and particleboard. These
products undergo sufficient
heat in their manufacturing
process to eliminate parasites.
-
Wood
less than six millimeters (0.24 inches) thick in any dimension.
This is too thin to carry
insects.
Key
points:
-
Regulations
apply to all solid wood over six millimeters in any dimension,
not processed wood such as particleboard
or plywood.
-
Regulated
packaging materials should be either heat treated or fumigated
with methyl bromide according to
the approved methods
in the final regulations.
-
Materials
so treated must be marked according to the approved methods
in the final
regulations.
-
Customs
inspectors may order the immediate re-export of regulated wood
packaging material which does not have the
required marking.
Because of the risk of re-exportation, importers may wish to
implement, in either their contracts or purchase orders, a clause
requiring that all wood packaging conform to the new U.S. standard,
and a statement that the vendor agrees to bear any cost of re-export
or other costs incurred by the importer as a result of their
having shipped non-conforming packaging.
Source: www.i-b-t.net
Countries Retaliate Against U.S. Byrd Amendment
The European Union (EU) and Japan announced on November 10 that
they are moving to impose retaliatory tariffs against more
than $135 million of U.S. exports. They plan to take the action
in response to U.S. inaction to repeal the Continued Dumping
and Subsidy Offset Act (CDSOA, also known as the Byrd Amendment).
Under the CDSOA all antidumping (AD) and countervailing duties
(CVD) are distributed to the complainants, rather than being
returned to the treasury. U.S. payouts totaled $231 million in
2001, $330 million in 2002 and $190 million in 2003.
The European Union, Japan, Canada, Brazil, India, Mexico, Chile
and South Korea argued successfully at the WTO that those payments,
to U.S. ball bearing, steel, candle, pasta, seafood and other
companies, amounted to an illegal subsidy. They had asked for
sanctions for the same amount as U.S. firms receive, but arbitrators
set the figure at 72 percent.
Japan has listed 371 U.S. exports to Japan, worth $1.18 billion,
from which Japan will select the sanction targets. Almost two-thirds
of the products on the list are steel and ball bearings, as well
as textiles and machinery. The European Union has established
a list of items on which it will apply retaliatory duty in HS
Chapters 07, 48, 61, 62, 63, 64, 84, 87, 90, 94 and 96.
Source: www.xporta.com and www.wto.org/english/news_e/news_e.htm
EU Lifts U.S. Export Sanctions after U.S. Exporter Tax Break
is Repealed
The European Union announced October 28th it would lift sanctions
on U.S. goods in January after Congress repealed $5 billion Extraterritorial
Income (ETI) program that the World Trade Organization had ruled
an illegal export subsidy. The ETI is the successor to the Foreign
Sales Corporation (FSC) program, also ruled illegal.
The penalties on U.S. imports, which began in March at 5% of
the value of the goods, and rose to 12% in October, was removed
on January 1, when the U.S. legislation took effect.
"This
has been the biggest of the trans-atlantic disputes that we
have experienced in the last five decades," EU Trade
Commissioner Pascal Lamy said. "We're lifting the sanctions,
and that is the essential part of the agreement, but we still
have a few doubts about a small part of the system." The
Europeans asked for talks with the U.S. to question why some
of the biggest American corporations should be given a three-year
grace period or transition before the original tax cut was ended.
Affected
taxpayers can still claim 100 percent of their FSC/ETI tax
benefits for 2004; 80 percent for 2005; and 60 percent for
2006. After 2006, the repeal will be complete.
In general, full FSC/ETI tax benefits will still be available
for income from binding contracts that were in effect as
of September 17, 2003.
In place of the former ETI and FSC regimes is The American Jobs
Creation Act, which makes major changes in the federal income
tax rules applicable to income earned from foreign activities.
Most importantly, the foreign tax credit provisions have been
liberalized and streamlined, and a temporary 85-percent-dividends-received
deduction has been installed to encourage U.S. companies to bring
home cash now held in controlled foreign corporations. There
are many other new rules that will be important for various business
taxpayers, depending on their specific circumstances.
Source: www.xporta.com & Mountjoy & Bressler,
LLC
Anti-Bribery Accord Reviewed after Five Years
The U.S. Commerce Department released a report called "Addressing
the Challenges of International Bribery and Fair Competition
2004". The report assesses the current status and effectiveness
of the Organization for Economic Cooperation and Development
(OECD) Convention on Combating Bribery of Foreign Public Officials
in International Business Transactions, since its entry into
force five years ago.
All 35 signatories to the convention, including the United States,
adopted legislation that criminalizes the bribery of foreign
public offices by persons within their jurisdiction. The convention
was signed in December, 1997 and entered into force in February
1999. It includes all 30 OECD member countries as well as non-member
countries Argentina, Brazil, Bulgaria, Chile, and Slovenia.
The study
found uneven enforcement of the anti-corruption convention
among the signatories. For example, only the U.S., South Korea,
and Sweden have won convictions for the bribery of a foreign
public official, although Canada, France, Italy, and Norway have
also initiated investigations or other legal proceedings. The
other signatories "have been slow to apply enforcement resources
to address transnational bribery," the report noted.
Commerce cited U.S. government estimates that between May 1,
2003, and April 30, 2004, the competition for 47 contracts worth
$18 billion may have been affected by bribery by foreign firms
of foreign officials. The report noted that, although this represents
an increase over last year's report of 40 contracts, the value
of the contracts dropped from $23 billion to $18 billion. U.S.
firms are known to have lost at least eight of the contracts,
worth $3 billion, the report said.
Source: www.tcc.mac.doc.gov/pdf/2004bribery.pdf
BIS Announces Revisions To The Export Administration Regulations
The Bureau of Industry and Security (BIS) issued a proposed rule
expanding the knowledge standard and increasing the number
of red flags that exporters should check before shipping. At
the same time, the agency will provide a safe harbor from liability.
Reasonable
Person Standard
The new rule would adopt an objective reasonable person standard.
It does not matter that a person actually knew of a
violation. If the person should have known, then that is sufficient
to
find him or her liable. Currently it needs to show
that the person, with high probability, knew or should have
known based
on the existing circumstances. The BIS wants to replace
high probability with more likely than not.
New Red Flags
The BIS will also be increasing the number of red flags found
in Part 732, Supplement 3 of the EAR from 12 to 23. Most
importers check the twelve red flags when they screen shipments,
but often
those twelve red flags are completely irrelevant to the
type of transaction or exporter. The proposed rule also provides
needed
guidance of what companies and individuals should do
upon finding a red flag.
Here are the proposed red flags:
