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A Turbulent Year Ahead in 2004
for China-US Trade Relations?
Special
Report - China Northeast updated on Oct 14, 2004
EDITORIAL:
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Business people must keep their eyes open
Detail Info
Old Trade
Issues Page BEFORE July 8, 04
July 9 - Dec
31, 04
Jan 1 - Mar 31, 05
Hawaii Ethic Commission
- To preserve public
confidence in government by administering and enforcing State of Hawaii
governmental ethics laws to ensure the highest standards of ethical conduct
among state officials and employees. Daniel J Mollway,
Executive Director, Hawaii State Ethics Commission,
Pacific Tower, Suite 970,
1001 Bishop Street, Honolulu, Hawaii 96813, USA, Phone: (808) 587-0460, Fax:
(808) 587-0470, Email:
dmollway@hawaiiethics.org
The ICAC
(Independent Commission Against Corruption)
of Hong Kong and 13 professional
organizations/chambers of commerce have collaborated to produce the captioned
Guide. It is tailor-made for managers who are not trained IT experts but who
have to supervise their teams in the use of computers and the Internet. The
Guide offers managers practical advice on how to identify integrity risks in the
workplace and proactively reduce them by ethical management. Free copies are now
available for collection by business organizations. Contents of the Guide include:
Case illustrations from the ICAC's investigation files / An analytical
framework for addressing corruption from the legal and ethical perspectives / An
ethical management model and some practical measures / A directory of services provided by publishers, particularly the ICAC....Click here to read the Guide
All roads in
the global supply chain run through China but appearances can be deceptive.
Editorial Director Neil Shister went there to see for himself what's going on -
By Neil Shister
China Legal
Issues
March 30, 2005
Yemen has developing demand for food products
Yemen's population, currently in excess of 15.8 million and expected to double
every 19 years, is in the grip of a huge demand cycle, which local producers are
unable to fill. Primary foods such as rice and wheat are expected to see major
peaks in demand, according to a report from Dubai's Expolink Exhibitions.
Rice imports currently arrive from China and other Asian countries but further
demand is growing, particularly in the country's southern and eastern regions.
As for wheat and wheat flour, price instabilities are expected to continue after
the country recently eliminated subsidies.
As matters of preference and to meet the growing urban communities, fruit and
vegetables are very much on the menu, with an accent on packaged or canned
goods. There has also been an upward trend for fish and shellfish processed
foods while Yemen's local honey and poultry producers cannot contain demand, and
in turn poultry farmers are consumers for imports of maize and soybean meal
(being prime ingredients in poultry feed).
The latest uptick in demand has been for food processing equipment, including
frozen food processing equipment for fish and shellfish.
March 24, 2005
China stresses protection
of well-known foreign trademarks
Chinese government has adopted a series of effective measures to step up
investigation and punishment of infringement cases and expand the scope of
protection of well-known trademarks.
Enhanced investigation and punishment
In accordance with relevant provisions of the Trademark Law protection of
trademarks in China adopts dual-track system, that is, both the law enforcement
departments and the industry and commerce administrative departments have the
right to handle trademark infringement cases. Meanwhile China has formed local
trademark infringement case collaboration networks such as those in the Huaihai
economic zone, the northern twelve provinces and cities, northeast three
provinces, east China three provinces and one city.
China has launched a one-year special campaign centered on intellectual property
rights starting from September, 2004.
In 2004 a total of 5,401 foreign-related trademark infringement cases were
investigated and punished, increasing by nearly 160 percent over the 2,092 cases
in 2003. Moreover, strengthening legal protection shows the determination of the
Chinese government to protect well-known foreign trademarks.
The Supreme People's Court has issued 25 legal explanations and legal
explanation documents since 2000, which form a relatively complete IPR legal
protection system. In December 2004 the Supreme People's Court and the Supreme
People's Procuratorate issued the Interpretation of the Supreme People's Court
and the Supreme People's Procuratorate Concerning Some Issues on the Specific
Application of Law for Handling Criminal Cases of Infringement upon Intellectual
Property Rights.
In 2003 Chinese courts at various levels adjudicated a total of 9,271 IPR cases
covering all the areas covered by the WTO IPR agreements relating to trade. From
2000 to 2004 Chinese procuratorial departments brought more than 1,500 cases to
the court in accordance with the law, which related to more than 2,400 persons.
Expanded protection scope
As a member of the Paris Convention for the Protection of Industrial Property
China actively assume the responsibility of protecting well-known foreign
trademarks. As to those trademarks which have not applied for registration in
China they can seek protection once they have been recognized by the trademark
departments as well-known brands. In another word, plagiarism and preemption
applications will be turned down and unauthorized use of well-known trademarks
are also banned.
Well-known trademarks are the only brand marks protected worldwide by
international laws. China began to protect well-known trademarks in 1985. In
2004 China recognized 28 well-known foreign trademarks according to the law.
China also for the first time protected foreign-related trademarks in the form
of issuing public notices.
The Beijing Administration of Industry and Commerce recently issued the No.2
public notice, which involves 23 registered trademarks of 13 well-known
companies in seven countries including the United States, Germany, France,
Britain, Italy, Switzerland and Holland. These trademarks are mainly used on
consumer goods such as cosmetics, garment and accessories, leather products and
wristwatch. The notice requires all garment markets and markets of small
commodities to refrain from selling, effective as of the date of announcement.
In July, 2004 the BAIC issued the No.1 notice, which involves 25 well-known
trademarks of four companies in three countries including France, Britain and
Luxemburg.
At the request of parties concerned the Shanghai Administration of Industry and
Commerce has issued a public notice in October 2004 to carry out emphasized
protection of 40 well-known trademarks of 10 companies in six countries
including France, Holland, Switzerland, Luxemburg, Britain and Germany.
March 23, 2005
China Lowers Capital
Requirement for Foreign Investment in Leasing
According to the Measures for the Administration of Foreign-Invested Leasing
Business promulgated by the Ministry of Commerce, the threshold for foreign
investment in the leasing sector is lowered effective March 2005. Under China’s
WTO commitments, foreign leasing companies are permitted to set up wholly-owned
subsidiaries in China within three years of accession. The new measures were put
into trial implementation on 5 March.
The measures allow foreign investors to set up wholly foreign-owned leasing and
financial leasing enterprises and their entry threshold has also been lowered.
The minimum capital requirement on the foreign investor is reduced to US$5
million while the minimum registered capital of foreign-invested financial
leasing companies is reduced from US$20 million to US$10 million.
The administration of leasing companies is also changed. The authority to
examine and approve limited liability leasing companies is delegated to the
local governments. In order to keep a tab on their activities and achieve
effective control, the Ministry of Commerce requires all financial leasing
companies to submit business reports and audited financial reports of the
previous year before 31 March each year.
Book selling turns a page for Eastern China's wholesale mart
With its modern facilities, advanced marketing and highly organized layout, the
Yangtze River Delta Publications book mart in Nanjing strikes visitors as no
conventional wholesale market. For a start, it is larger and very modern - but
it is also more easily negotiated and books are easy to find. The building that
houses the book mart is filled with the smell of books, old and new. But the
centrally air-conditioned main hall is bright and spacious, with publicity
posters everywhere. Shops packed with books and customers create an impression
of a market bustling with activity and enthusiasm.
The mart has three levels. The first two are for new and general literature from
different publishers and wholesalers, while the third level is for gift sets and
printed matter, such as calendars. The mart was built with a total investment of
Rmb10 million (HK$9.3 million). It has a gross area of 10,000 sqm and a floor
area of 7,000 sqm, with 134 shops employing nearly 700 people.
State-owned and commercial bookstores account for over 50%, while 70% of the
shops' owners are from the Jiangsu area. Jiangsu publishers produce books on
social sciences, teaching, self-learning tools for examinations, books for
adolescents and children, periodicals and art books - indeed all have outlets in
this mart. Many publishers have total assets exceeding Rmb10 million (HK$9.4
million).
 Sino-Russian border trade includes
currency exchange swings
Although local currency settlement is now acceptable in Sino-Russian border
trade, it has so far had little effect on the long-term practice of making
settlements in US dollars. But the fluctuation of the rouble and regulation
practices have cast doubts on the implementation of the "local currency" policy.
There is indeed an indirect impact produced by the signing of an agreement
between the central banks of China and Russia to introduce local currency
settlement in border trade in Xinjiang. Wang Defu, secretary and deputy director
of the border trade administrative bureau of the Xinjiang Uyghur Autonomous
Region, said that local currency settlement between China and Russia is eye
opening and will set an example for Xinjiang's ventures into Kazakhstan,
Kyrgyzstan and other neighbouring countries.
Wang, who has been in the fur garment business for eight years, learned about
local currency settlements for Sino-Russian border trade from the newspaper. To
him, this policy is not of much use because his foreign clients prefer doing
business in renminbi and the US dollar. Currencies such as the rouble and the
euro are not usually traded. In his opinion, the rouble depreciates too quickly.
Although it has now stabilised, he is still apprehensive because he has had some
difficult experiences with rouble-denominated trades. Also, since Wang is mainly
involved in business with Kazakhstan, local currency settlements in any
Sino-Kazakh border trade is more helpful to him.
The person running a foreign trade company at the Alataw Pass said that
Sino-Russian local currency settlement does not mean much to his company, which
only handles a small volume of Sino-Russia trade and mainly deals with Central
Asian countries. Besides, both sides accept and are accustomed to US dollar
settlements. It will take time to get used to local currency settlements, he
said. Chen Zhifeng, general manager of Xinjiang Yema Trading Co, said Xinjiang
Province's trade with Russia only amounted to US$300 million in 2003. Although
this is not considered a large amount, he still thinks it is a good idea to
adopt local currency settlements as this will reduce the cost of buying foreign
currencies. Chen's company may consider using this method of settlement in
future, he said. However, more enterprises are concerned about the possibility
of local currency settlement with Kazakhstan.
According to statistics published by Urumqi Customs, the volume of import and
export in Xinjiang's border trade amounted to US$3.14 billion in the first 11
months of 2004. Kazakhstan accounted for the bulk of this trade with a share of
over 70%.
According to Wang Hui from the international business section of the Bozhou
central branch of the Industrial and Commercial Bank of China (ICBC), the bank
is quite willing to conduct direct currency exchange with neighboring countries.
The bank has started offering service for the payment and receipt of the
Kyrgystani som since the end of last year. The local currency business has
proved useful and successful, because currencies like the renminbi are "soft
currencies" and are not in international circulation. The Bank of China (BOC) is
the bank handling the largest amount of international settlement currency
transactions. Wei Jianling, deputy head of the settlement department of BOC's
Xinjiang branch, believed that policy alone is not enough to make local currency
settlements successful. For local currency settlement to work, central bank
policy executors need to see not only the signing of contracts between the two
central banks concerned but also the demand from enterprises on both sides, said
Wei. According to an official of the accounting and financial section of
Xinjiang's foreign trade department, Xinjiang does not have the kind of border
environment that Yunnan and Guangxi have, with the latter regions heavily
reliant on the renminbi.
Both Yunan and Guangxi border Vietnam where people have high regard for the
renminbi, which is easily convertible and traders are willing to accept the
currency. By contrast, in Xinjiang the opening of border trade more than 10
years ago has served to see local currencies in the lead for cross border
trading. This practice will only change when the countries concerned introduce
policies providing a mandatory provision on acceptable currencies for exchange.
Approval by affected countries is vital. Xinjiang could have implemented the
policy of local currency settlement with its neighboring countries in 2003. The
branches of various banks in Xinjiang have also started business in this
respect. However, there is no overarching policy relating to currencies to be
used.
The Chinese government has all along attached importance to the question of
renminbi settlement in its border trade areas. The Department of Finance led a
delegation which included members from the Xinjiang sub-bureau of the State
Administration of Foreign Exchange on a four-day tour to Kazakhstan in November
last year. Local currency settlement between banks on both sides was on the
agenda although no agreement was signed. The policy should provide a new channel
for foreign trade when both sides find it acceptable.
March 17, 2005
Stiglitz says current RMB
debate irony
Former Nobel Prize winner in economics Joseph Stiglitz described the current RMB
debate as "irony" on a forum held Tuesday in Hong Kong.
"China was urged not to devalue (RMB) in 1997, and it was argued that greater
flexibility would destabilize global financial markets", he said, adding the
current pressure on China to appreciate its currency is of certain irony.
He said it is necessary to "recognize that there are problems with all exchange
rate systems", noting that even if China adopts an exchange rate system in
accordance with what other countries have asked, it could not be a perfect one.
According to him, on the real side, prospect of stronger dollar remains slim. He
said central banks may further diversify away from US dollar as reserve
currency, and he argued that the end of dollar as the reserve currency is
coming.
March 16, 2005
Guangdong Requires
Liability Insurance for High-Risk Sectors
Liability insurance for mining, firework and firecracker enterprises can provide
better coverage for workers in these high-risk sectors. Recently, the Guangdong
bureau of the China Insurance Regulatory Commission and the Guangdong Provincial
Administration of Production Safety jointly issued a set of guiding opinions on
liability insurance for high-risk enterprises, requiring such enterprises to
take out insurance for employer liability and public liability.
The guiding opinions point out that high-risk enterprises should take the
following types of insurance coverage: employer liability insurance for mining
enterprises; employer liability and public liability insurance for firework and
firecracker production enterprises; and employer liability and public liability
insurance for enterprises engaged in the production and sale of dangerous
chemicals. Operators of high-risk enterprises are recommended to insure each of
their employees for no less than Rmb100,000. Compensation for injuries should be
set in accordance with the social security standards for industrial injuries.
For public liability insurance, it is recommended that minimum liabilities be
set at three levels according to the annual output value or turnover of the
enterprise. For example, an enterprise with an annual output value of less than
Rmb1 million should insure itself for no less than Rmb500,000 for each accident
and annual accrued claims.
The guiding opinions aim at using commercial insurance to increase compensation
for casualty accidents in manufacturing and business units and protect the
rights and interests of their employees. Provisions are made for compensation
ceiling, premium rates, compensation for casualty accidents, risk control,
organizational structure and supervision.
Some 86,115 accidents occurred in Guangdong in 2004, killing 12,154 people and
causing direct economic losses of Rmb507 million. Among these, there were 1,232
industrial and mining accidents, which claimed 857 lives. The accidents mostly
took place in non-public-owned enterprises, accounting for 82.98% of the total.
Most of these accidents occurred in the manufacturing, mining and building
construction sectors.
 Shanghai experiences digital
animation boom
Competition between digital animation product exhibitions has picked up
dramatically in China, with Shanghai at the centre of the rush to find better
and more attractive digital software. Twelve national or international
exhibitions were registered in Shanghai by the end of February, all scheduled to
take place in the city during the year. The exhibitions will be held in venues
of no less than 4,000 sqm and are extensive in scope. Even in exhibitions for
related trades, such as audio-visual products and online games and toys, more
than one-third of the exhibition space tends to be devoted to digital animation.
The business covers many different industries, including film and television,
publishing and manufacturing, making it difficult to decide which ministry
should supervise and promote the industry as a whole. For instance, the
exhibitions scheduled to take place in Shanghai this year are sponsored by the
State Press and Publication Administration, the Ministry of Culture, the Central
Committee of the Communist Youth League and even the Beijing Organizing
Committee of the Olympic Games. One of these exhibitions has 20 ministries and
commissions as sponsors, reflecting the attention paid by the government to
digital animation possibilities. Nearly everyone wants to get in on this
highly-regarded and potentially lucrative sector. Events in recent years show
that Shanghai has become a hotbed for digital animation exhibitions. Such zeal
is rarely seen in other Chinese cities and there are a number of reasons for
this.
For a start, digital animation exhibitions tend to be products combining both
cultural and technical elements as well as a talent for storylines and
financing. Only those with a thorough understanding of the ties between
different links of the digital animation chain and a knack for organizing and
promoting large cultural events are able to take on such exhibitions. Also, such
exhibitions have to be held in cities with sufficient spending power, because
they mainly rely on exhibition booth rentals and admission fees for revenue.
Rentals depend on the size and financial muscle of participating enterprises
while the fee income relies on effective marketing to consumers such as parents
(who in the case of online games, control the purse strings of the ultimate
consumer, their children).
For both financing clout and a high demographic profile, Shanghai has a
distinctive edge over other mainland cities. A successful digital animation
exhibition also needs professional coordination from different parties. It seems
that only an executive team with cultural sensitivity, business acumen and
experience for organizing large events will make a success at putting on such
exhibitions.
March 11, 2005
CBP Discusses Security
Issues with Representatives from US Trade Community
Members of the US trade community had a chance to discuss a wide range of
security and other trade issues with officials from US Customs and Border
Protection (CBP) at the most recent meeting of the Departmental Advisory
Committee on Commercial Operations of US Customs and Border Protection and
Related Functions (COAC), held on 15 February in Washington, DC. The purpose of
the COAC is to provide advice to the Secretary of the Treasury and the Secretary
of Homeland Security on all matters involving the commercial operations of CBP
and related functions within DHS or Treasury. The COAC provides a unique forum
for distinguished representatives of various US industry sectors to present
their views and advice directly to senior government officials in an open and
straightforward fashion. Highlights of the proceedings of the 15 February
meeting are given below.
C-TPAT - CBP officials continued to press for input from the trade community on
the benefits that should be associated with participation in the Customs-Trade
Partnership Against Terrorism (C-TPAT), particularly in light of the tougher
criteria CBP is currently developing for the program. Some of these potential
modifications include defining the point of stuffing criteria, particularly for
importers, their vendors, and foreign manufacturers; and increasing the number
of validations performed, which assure that security commitments by C-TPAT
participants are being met.
CBP has made a stronger effort in recent months to enumerate the specific
benefits that importers are already receiving through C-TPAT participation. For
example, CBP has often claimed that C-TPAT shipments are subject to six times
fewer enforcement examinations and four times fewer compliance exams. However,
with the trade community continuing to press for tangible benefits, particularly
relating to expedited commercial operations, CBP seems to be casting a wider
net. For example, C-TPAT importers could receive head-of-the-line treatment
during secondary exams, mitigation of certain penalties, or expedited rulings.
Other possibilities include benefits from other government agencies (e.g., the
Food and Drug Administration (FDA), which committee members said has at least
some jurisdiction over nearly 33% of all US imports) or tax breaks.
Looking to the future, CBP is expected to adhere to the following fundamental
principles as it strengthens C-TPAT while providing more substantial benefits to
users:
1) C-TPAT will continue to operate as a voluntary partnership between the
government and the private sector.
2) Customized application of security requirements will remain a fundamental
feature.
3) CBP will continue to improve the requirements of C-TPAT to enhance the
security and efficiency of the supply chain.
4) As it enhances the requirements of the program, CBP will frequently consult
with the trade community to ensure that its priorities and concerns are being
addressed.
5) CBP will seek to partner with foreign customs administrations and the World
Customs Organization to better align C-TPAT with other existing supply chain
security and trade facilitation programs.
Contingency planning - COAC members expressed concern about the state of efforts
to develop a plan for restoring trade flows if ports are shut down in response
to a terrorist incident. DHS officials said in January that they have only
recently begun to focus on such contingency planning, but the committee said it
is already worried that this process is going awry. For example, there appears
to be no single and coordinated government effort thus far. In addition, current
efforts are focused on the maritime environment, to the virtual exclusion of
air, lorry, and rail shipments. CBP has said it is focusing on the maritime
environment first due to its complexity and global importance. Contingency plans
for the rail, lorry, and air transportation environments are expected to be
developed in time. Importers also want to know what the priority of entry of
goods will be as trade is re-opened after an incident.
CBP has so far only developed what seems to be a preliminary contingency
planning framework. According to Kevin McAleenan, Director of CBP's Office of
Anti-Terrorism, "the first, fundamental step in responding to a serious threat
or terrorist attack in the maritime environment is to assess the specific event
that is triggering the response." In other words, the government's response to a
serious maritime attack will not be the same in all cases. The responsibility to
deal with the response would fall to the Secretary of Homeland Security, and
both CBP and the Coast Guard would have the ability to make joint
recommendations swiftly to the Secretary and other DHS officials.
McAleenan has suggested several key decision-making principles that should be
taken into consideration when developing a contingency plan for continuity of
trade, namely: (i) security and the prevention of attack(s) must be the
paramount concern in determining a process for responding to a serious threat or
an actual terrorist attack; (ii) a shutdown of US maritime trade - whether
partial or complete - should be avoided if at all possible; (iii) restoration of
trade in the event of a partial or complete shutdown must be undertaken as
expeditiously as possible and in a manner that comports with the current
business practices of the trade; and (iv) if the government is forced to
initiate a partial or complete shutdown, it must have an expeditious,
coordinated, joint process for the decision to begin recovery and reinstitute
the flow of trade.
In addition, McAleenan said, CBP would have to develop a risk-based
prioritization process for re-starting trade. Consideration of risk should be
based on the following criteria: (i) information provided as part of the advance
cargo information requirement; (ii) membership in C-TPAT; (iii) whether the ship
or cargo has moved through a Container Security Initiative (CSI) certified port,
and whether the last port of lading was a CSI port; and (iv) whether previous
ports of call were compliant with the International Ship and Port Facility
Security (ISPS) code.
McAleenan has also highlighted the need to build fluid communication channels
with the trade community through C-TPAT, trade associations, the Area Maritime
Security Committees, the media, and other outlets. Obviously, these channels
would be especially useful in case of an attack that forces a partial or total
shutdown of US ports.
ACE According to CBP, the Automated Commercial Environment (ACE) is expected to
be completed by 2010, with full deployment taking place by 2011. While ACE was
originally intended solely to enhance trade processing, its core objectives have
since been modified to also reflect CBP's heightened anti-terrorism
responsibilities. As a result of this change, it will take more time than
previously envisioned to develop the program, whose total cost is now projected
at about US$3.5 billion. Nevertheless, CBP officials said they are hoping to
move these dates up by focusing on primary functions and possibly eliminating
several less important features.
To achieve CBP's dual goals of enhanced security and trade facilitation, ACE is
being built as an integrated, fully automated information system that will
enable the efficient collection, processing, and analysis of commercial import
and export data. Acting Assistant CBP Commissioner for Information and
Technology Rod MacDonald elaborated on this concept at the Customs Symposium
held on 13-14 January in Washington, DC. According to MacDonald, ACE will be the
portal for exchanging a standard set of trade information that will meet the
cargo security and trade statistics needs for all components of the US
government. To this end, ACE will support a full set of Electronic Data
Interchange (EDI) protocols and a secure web portal for the capture of this data
and for interaction between the federal government and the trade community.
MacDonald stressed the need to build partnerships within the government to
ensure a "coordinated reliance on ACE to support our Cargo Security Strategy." A
mechanism known as the International Trade Data System (ITDS) has already been
created to build and maintain those partnerships.
ACE is being released in stages, with Release 3 issued during the summer of
2004. Release 3 implemented the ACE Secure Data Portal, which provides a single,
web-based consolidated screen for a broad array of functions designed mostly to
manage trade accounts and some of the associated trade compliance and revenue
functions. Release 4 is expected to include, among other things, an electronic
lorry manifest and enhanced import processing. Release 5 will focus on
post-release processing while Release 6 will add full entry processing and cargo
release functionality tied to a multi-modal manifest. Finally, Release 7 will
complete the ACE program by providing Foreign Trade Zone and warehouse support,
as well as various other functions.
Lastly, it is worth noting that CBP has decided to no longer require C-TPAT
participation by importers or brokers as a pre-requisite for establishing an ACE
account. CBP will continue to press for participation in both programs, but on
separate tracks.
Other Security Issues - The COAC meeting addressed various other
security-related issues. For example, there was lively discussion on the kind of
parameters that should be utilized to measure the effectiveness of cargo
security programs. The private sector claimed that compliance figures are not an
accurate measurement of security enhancements and requested more input from the
government to determine the benefits of the programs implemented to date. COAC
members argued that the government should use risk management to determine
screening priorities and asked DHS to provide information it has already
gathered on how security programmes developed after the terrorist attacks of 11
September 2001 have actually affected security.
CBP also advised that a draft regulation on mandatory container security seals
is in the works. The seal requirements for these so-called "smart" containers
are currently undergoing economic analysis and it is expected that 2-3 months
will pass before draft regulations on this matter are published for public
comment.
Textiles and Apparel - Although not directly related to security, the COAC
meeting also addressed textile and apparel trade in a quota-free environment.
With the elimination of textile and apparel quotas, importers said they want CBP
to conditionally release shipments of such goods without the submission of paper
documents. However, they added, CBP does not seem to be moving in that
direction, in part due to an apparent desire to continue receiving paper textile
country of origin declarations for enforcement purposes.
A CBP official responded that the agency is working with the Committee for the
Implementation of Textile Agreements (CITA) to eliminate the paper declaration
requirement within the next several months. The official added that CBP is
already allowing some paperless entries for non-quota/non-visa goods, and that
more are likely in the near future once remaining 2004 over-shipments are
resolved.
Bush Administration Resists Industry Calls for WTO Case over
China's IPR Practices
Effective protection of US intellectual property rights (IPR) in China has long
been one of the defining pillars of the bi-lateral trade relationship and its
relevance is only likely to grow further this year. A number of US business
associations have stepped up their lobbying and public outreach efforts in
recent months in order to increase awareness of both the systematic violation of
patents and copyrights in China and the alleged failure by Chinese authorities
to effectively deter further violations by pirates and counterfeiters. According
to various estimates, US companies lost approximately US$2.5 billion in 2004 to
piracy in China.
In its recently released China-specific trade
agenda for 2005, the National Association of Manufacturers (NAM) welcomed the
progress that the Chinese government has achieved in tightening IPR enforcement
but still urged the Bush Administration to file a WTO case against China by
early 2005 if Beijing does not show sufficient progress in meeting the
commitments made within the framework of the US-China Joint Commission on
Commerce and Trade (JCCT) and the WTO.
The US Chamber of Commerce (USCC), the world's largest business association,
representing more than three million US businesses, argued on 10 February that
China "has failed to adequately enforce its own laws and regulations when it
comes to piracy and counterfeiting" and called on the Bush Administration to
pursue WTO action if Chinese authorities do not provide clear evidence that the
IPR climate is improving on the mainland. Such evidence would include recent
figures showing the number of prosecutions, convictions, and incarcerations for
IPR violations. The USCC has also asked the Office of the US Trade
Representative (USTR) to list China as a priority watch country in the context
of the ongoing Special 301 out-of-cycle review of China's IPR practices.
The International Intellectual Property Alliance (IIPA), a coalition of six
trade associations representing 1,500 US copyright-based companies, is following
a similar line. The IIPA is also recommending that the USTR designates China as
a priority watch country but has urged the Administration to conduct another
out-of-cycle special 301 review at the end of July to assess any progress and
determine whether further bi-lateral or multi-lateral action (including a WTO
case) would be appropriate. In the meantime, the IIPA has asked the USTR to
commence immediate WTO consultations with the Chinese government in an attempt
to move the entire IPR enforcement process forward. The IIPA has also expressed
its wish to form an alliance with Europe, Japan, and South Korea to establish a
multi-lateral forum to address IPR issues in China.
The Administration has so far resisted the repeated calls by these and other
domestic business groups in favour of a WTO case, opting instead for a policy of
active and constructive engagement with Chinese authorities. On 16 February,
Deputy (now Acting) USTR Peter Allgeier reaffirmed the Administration's
longstanding commitment to work closely with Chinese officials to improve
China's IPR enforcement regime. In Allgeier's own words, "sometimes you have to
sue somebody, take them to court, take them to dispute settlement, if they're
not really following through on their commitments, but our strong first
inclination is […] to work with countries to have more effective enforcement of
the existing obligations. So that is the approach to China." This statement
strongly suggests that the US will not file a WTO case against China in the
foreseeable future. Although it remains to be seen whether Robert Zoellick's
yet-to-be-nominated replacement as USTR will adopt a more forceful position on
this and other issues vis-à-vis China, a deviation from current practice appears
highly unlikely. In addition, Zoellick is expected to continue to play a visible
role in trade matters in general, and China-related issues in particular, from
his new post as Deputy Secretary of State.
Although both the Clinton and Bush Administrations have preferred to resolve any
trade disagreements with other countries through more amicable bi-lateral
channels, the US has certainly not shied away from using the WTO dispute
settlement mechanism to settle nagging IPR disputes. In fact, the US has
initiated 15 of the 24 dispute settlement cases filed to date at the WTO for
alleged violations of the Agreement on Trade-Related Aspects of Intellectual
Property Rights (TRIPS). These cases targeted 12 different WTO members
(Argentina, Brazil, Canada, Denmark, the European Union (EU), Greece, India,
Ireland, Japan, Pakistan, Portugal, and Sweden) and involved a broad spectrum of
issues, ranging from compulsory licensing of test data in Argentina to
geographical indications for agricultural products in the EU. Three of these
cases, against Denmark, Greece, and the EU, were filed specifically for alleged
failures to fully comply with the enforcement requirements of TRIPS.
Should the US eventually decide to bring a WTO case against China's IPR
practices, it is likely to contend, inter alia, that the Chinese government has
failed to adhere to the general requirements of TRIPS Article 41.1. That
provision requires WTO members to ensure that IPR enforcement procedures are
available under their law so as to permit "effective action against any act of
infringement of intellectual property rights covered by [TRIPS], including
expeditious remedies to prevent infringements and remedies which constitute a
deterrent to further infringements."
In a potential case, the US may very well build its case on the allegations that
the Chinese prosecutorial and judicial system neither is "effective" in
preventing IPR violations nor provides remedies "which constitute a deterrent to
further infringements." The US would also be expected to rely heavily on TRIPS
Article 61, which requires that available remedies in criminal procedures
include "imprisonment and/or monetary fines sufficient to provide a deterrent,
consistent with the level of penalties applied for crimes of a corresponding
gravity," especially when the IPR violations are committed "wilfully and on a
commercial scale."
DOC Action Could Subject Virtually All Candles from China to
AD Duties
A new US Department of Commerce (DOC) action could result in the imposition of
anti-dumping (AD) duties against virtually all candles imported from China. The
DOC currently maintains an AD duty order against certain scented or unscented
petroleum wax candles from China that have fibre or paper-cored wicks. These
candles are sold in the following shapes: tapers, spirals, and straight-sided
dinner candles; round, columns, pillars, and votives; and various wax-filled
containers.
On 28 February, the DOC launched two anti-circumvention inquiries to determine
whether traders are attempting to avoid AD duties under this order by shipping
mixed wax candles composed of petroleum wax and varying amounts of either palm
or vegetable-based waxes. These two inquiries are being conducted under the
"minor alterations" provision - i.e., whether the addition of vegetable and/or
palm-based wax results in a minor alteration and thus a change so insignificant
as to render mixed wax candles subject to the AD duty order - and the
"later-developed merchandise" provision - i.e., whether mixed wax candles were
developed after the AD investigation on petroleum wax candles was initiated and
can therefore be considered subject to the AD duty order.
If the DOC makes a preliminary affirmative decision in either case, it will
require importers to begin making cash deposits of AD duties on these mixed wax
candles.
The Coalition for Free Trade in Candles, a group represented by the US law firm
of Sandler, Travis & Rosenberg, P.A. is set up to oppose the DOC's
anti-circumvention investigations.
March 9, 2005
China Announces Tax Policy
on Debt-turned-Equity
With the approval of the State Council, the Ministry of Finance and State
Administration of Taxation recently issued a circular concerning value-added
tax, consumption tax and corporate income tax policy for enterprises approved by
the State Council to conduct debt-turned-equity. Under this policy, an
enterprise which transfers property assets as investment to a recipient company
according to a debt-turned-equity agreement signed with a financial asset
management company will be exempt from value-added tax.
An enterprise which transfers dutiable consumer goods as investment to a
recipient company in a debt-turned-equity deal will be exempt from consumption
tax but will still have to pay corporate income tax. Corporate income tax paid
on additional profits generated by the recipient company as a result of not
distributing interest will be refunded to the original enterprise by the central
and local financial authorities in accordance with existing corporate income tax
regulations regarding revenue sharing. Such refund has to be used specifically
on the purchase of shares held by the asset management company in the recipient
company, thereby increasing the state capital of the original enterprise.
The method of revenue refund is based on the relevant provisions of the joint
circular issued by the Ministry of Finance, State Administration of Taxation and
People's Bank of China on the administration of refunds for income tax following
the income tax revenue sharing reform. The buy-back of equity from the asset
management company will be handled in accordance with the relevant regulations
of the Ministry of Finance regarding asset management. People in the industry
pointed out that the implementation of the new policy will help boost the
debt-turned-equity trend and render support to enterprise reform.
 Central Asian investment
flows from Xinjiang on the rise
Growing economic developments in Central Asian countries have brought investment
opportunities to small- and medium-sized enterprises in Xinjiang. With their
strategic geographical advantage between more prosperous Chinese provinces and
the Central Asian plains, these thrusting and flexible companies are actively
looking for business opportunities. The Foreign Economic and Trade Relations
Department of Xinjiang reports that 11 enterprises entered into offshore
investment deals in 2003 and another 20 did so in 2004. With the exception of a
few large enterprises, such as petroleum companies, most of these businesses are
small- and medium-sized enterprises and the majority of their investment goes to
Kazakhstan and Kyrgyzstan.
According to a local foreign economic and trade relations official, contractual
investment abroad from the autonomous region totalled US$12.5 million in 2004,
averaging about US$600,000 per enterprise, far lower than the national average
but nevertheless significant as a benchmark for future activity. Between 60% and
70% of the investor enterprises are engaged in light industry and only about 25%
are trading firms.
By the end of 2004, 62 Xinjiang enterprises (including those from other parts of
China actually investing in Xinjiang) were engaged in investment cooperation
projects abroad, mostly in neighbouring Central Asian countries, with
contractual investment totalling US$42.7 million. However, these firms have made
little attempt to invest through Hong Kong, except for a few import-export
companies doing business in the SAR.
According to the Xinjiang trade official, there are not many large enterprises
in the autonomous region, and big investment projects are few and far between.
Major enterprises are more inclined to cast their eye on the domestic market.
Also, while Central Asia is said to be a burgeoning market, the political
situation there is still unstable and risks are high.
Bolder, more sophisticated investment approach - Large enterprises not familiar
with the situation in these countries are ill-prepared (or advised) to take
risks. State-owned enterprises, in particular, are reluctant to venture into
Central Asia because they have only a slight understanding of the region and its
business patterns. Most large enterprises that do go in set up production
facilities near entry-exit ports and sell their products to Central Asian firms
or agents.
However, the bigger firms are getting bolder and are beginning to embark on
offshore ventures. The TV assembly plant set up by Xinjiang Yema Trading Co Ltd
in Kazakhstan has begun production and is going through the process of filing
for registration as an offshore investor. Such larger enterprises are being
encouraged to draw on the successful experience of South Korean and Japanese
companies that successfully took a position in the China market over the past
few years.
In other words, Xinjiang firms are similarly being urged to make a foray into
Central Asia by capitalising on their leading edge in branding, capital and
technology, building their own industrial parks, integrating with the Central
Asian market, and striving to upgrade the position of Chinese products in these
markets.
According to people in the trade, the legal and trade systems in Central Asian
countries have continued to improve. By directly investing in their export
markets, Chinese enterprises can effectively steer clear of anti-dumping
sanctions against Chinese exports and overcome technical trade barriers imposed
by European countries, so bringing about a substantial increase in exports.
A successful case in point is Xinjiang Dacheng Asia-Europe Investment Co Ltd,
which has bought a chicken farm in Kyrgyzstan for poultry breeding and the
export of chicken meat to Europe. Xinjiang enterprises are also turning their
attention to well-developed economies such as Hong Kong and Singapore for
offshore investment and cooperation.
According to Xinjiang's foreign economic and trade relations department,
geographical distance and differences in cultural and business environments have
led enterprises to aim for financing through public listing only. Meanwhile,
some large manufacturing and processing enterprises plan to set up trade
outposts in Hong Kong to pick up overseas market information and expand the
volume and geographical scope of their foreign trade.
March 5, 2005
The
upcoming 15th session of China (Guangzhou) International Furniture Fair
will put an impetus on the export business of the furniture suppliers of the
nation and provide them with access to the latest global industrial information,
market insiders said. "The event, to be held at two
phases, will provide furniture suppliers with more space for their product
display and will attract more global professional buyers than ever," Wang said.
"That will mean much greater business potential for both furniture suppliers and
buyers," he added. The first phase of the fair, set from Friday to next
Monday, will highlight home furniture, while the second phase, scheduled from
March 26 to 29, will focus on office furniture and commercial furniture. To
be held at the same time as the first phase is the Interzum Guangzhou 2005,
jointly organized by Koelnmesse BmbH, a leading global exhibition giant based in
Germany; and the Hometextile China 2005, co-organized with the China Home
Textile Trade Association, will be held concurrently with the second phase of
the fair. Intermzum Guangzhou 2005 will focus on the latest innovations in
manufacturing and production machinery, equipment, tools, electronics and
software, as well as the latest manufacturing techniques for furniture
production; and the Hometexitle China 2005 will concentrate on beddings, and
linens for bathroom and kitchen. Some 410 renowned furniture suppliers will show
off their latest products at the first phase of the fair; and another 400-odd
suppliers will seek business opportunities at the second phase of the event.
March 2, 2005
Hong Kong and Macau Service
Providers Step Up Investment in Guangdong
The lowering of market access thresholds since the implementation of CEPA has
made it easier for Hong Kong and Macau service providers to extend their
business to Guangdong. Through the implementation of measures aimed at promoting
CEPA, Guangdong’s foreign economic and trade relations department has helped
accelerate investment by Hong Kong and Macau service companies in the province.
The following are some of the measures.
First, building databases for investment projects. Through this measure, Hong
Kong companies can find projects in various sectors that are suitable for their
investment. Based on Guangdong’s need to develop its service sectors, the
departments concerned have optimized imported services in the light of
Guangdong’s industrial structure to organize service trade projects and
publicise them in investment project databases and in all large investment
promotion activities. Information is also provided on Guangdong-Hong Kong
service sector cooperation websites.
Second, accelerating the examination and approval procedures. At present,
approval for foreign-invested service companies are granted by the provincial
authorities or by the central authorities. For projects requiring the approval
of the provincial foreign economic and trade relations department, the
department will delegate the approval authority and do away with prior approval.
Guarantee is also given that applications will be approved or submitted to the
Ministry of Commerce for approval within five working days.
Third, providing convenient service. Foreign investment service centers,
administrative service centres and offices are established in various parts of
the province to provide one-stop service to investors.
According to figures published by Guangdong’s department of industrial and
commercial administration, 1,259 Hong Kong and Macau service companies with
total investment amounting to US$2.89 billion and registered capital of US$1.77
billion registered for business in the province in 2004, up 56.9%, 10.7% and
16.5% respectively year-on-year. As at the end of 2004, there were 7,705 Hong
Kong and Macau service companies in Guangdong with a total investment of
US$57.06 billion and a registered capital of US$27.31 billion, accounting for
19.6%, 35.1% and 28.2% respectively of the total number of Hong Kong and Macau
enterprises in Guangdong.
 Qingdao appliances become
"replacement" models
In Qingdao, product innovation is heading in a number of different, profitable
directions. At the high-end, the marketing strategy for home appliance
manufacturers is to upgrade their core technologies and place emphasis on
cutting edge products - and the approach can work well. Hisense, China's leading
home appliance manufacturer, disclosed that its sales increased by a large
margin during the holidays, thanks to the excellent sales performance of
high-definition TVs, convertible air-conditioners, Blue Lady refrigerators and
other high-end products.
Among these products, total sales of TVs increased by 40% year-on-year for 2004,
with plasma and high-definition TVs showing a 100% increase. Hisense's deluxe
4211 plasma TVs, with a price tag of nearly Rmb30,000 (HK$28,000), couldn't keep
up with demand. Meanwhile, sales of air-conditioners increased by 58% over the
same period in 2004, with sales of convertible models showing an increase of
82%. Sales of refrigerators rose by 63% year-on-year for 2004, with the upper
market Blue Lady model accounting for 45% of the total.
Health concerns turned out to be another issue worthy of innovative product
options. Catering to people's health worries, developing products that can
reduce air pollution and promote healthy living has become a serious direction
for research and development in appliance manufacture.
The growing popularity of bacteria-resistant, CFC-free and all-purpose
refrigerators, healthy separate action washing machines, health-care electric
fans, green air-conditioners and eco-TVs all suggest that health is indeed a
popular trend and a potential sales agent for products.
As consumers become more aware of the need to conserve energy, more
energy-saving appliances are becoming available on the market, to comply with
regulations and requirements. Modified stoves are 30% more energy efficient than
traditional models; intelligent ovens can shorten cooking time from seven
minutes to about 2.5 minutes. Many refrigerators also claim to be able to save
energy.
Simple operation has also become an effective weapon for the marketing of home
appliances. Many automatic fuzzy logic washing machines claim that they can work
with just "one touch". Home theatre products make extensive use of digital
audio-visual technology and can be "controlled with one finger". Closely related
to simplicity, manufacturers have done a lot of work in the area of multi
functions to satisfy consumers' growing demand. For example, a new computer with
a floppy drive has both VCD player and other functions. Washing machines with
separate wash function are in demand because they can wash different types of
fabric.
Home appliances that combine advanced technology with health, energy saving or
other concepts are indeed likely to be far better sought after in the Chinese
mainland market.
 Xiamen sees changing
fortunes of China's TV set producers
Xiamen made remarkable progress in its development of color TVs in 2004. Not
only does the thrusting producer Xoceco continue to lead the country in the
domestic sales and export of flat panel TVs, even newcomer Amoi Electronics has
made up ground. In fact, TV set production has become the second biggest
industry in the city, after mobile phones.
According to a report published by Sino Marketing Research Co on the sales of
flat panel TVs in 2004, Xoceco's LCD TVs topped national sales for five
consecutive months to December, accounting for the largest market share of 11.7%
for the year and ranking top in the domestic market, outside Hong Kong and
Taiwan. Xoceco's share of the plasma TV market was second only to that of
Panasonic. Since Sharp does not produce plasma and Panasonic does not have LCD,
Xoceco naturally captures the largest market share of flat panel TVs in China.
According to Sun Guangrong, Xoceco's manager for branding, figures compiled by
the Chinese customs showed that Xoceco exported TVs worth US$203 million last
year. Its plasma TVs accounted for 23.53% and LCD TVs with a screen of 22 inches
or more accounted for 23.5% of China's total TV exports, which both rank top
nationally. Further, Xoceco has become the top manufacturer of flat panel TVs in
China. Sales of flat panel TVs now account for 80% of Xoceco's total TV sales
while kinescope TVs only account for 20%. The company is expected to increase
its proportion of flat panel TV production and has already made the transition
from an enterprise that mainly produced CRT TVs to one that now mainly produces
flat panel TVs.
Another company has meanwhile quietly emerged in Xiamen's TV manufacturing
sector. Amoi Electronics has embarked on the production of flat-panel TVs and
has built a 200,000 sqm LCD production base at Haicang with an investment of
Rmb600 million (HK$566 million), with the hope of clinching an 8% market share.
According to an Amoi executive, the company has accumulated a great deal of
technological experience in the production of LCD TVs and can progress without
the "burden" of CRT TVs. TV set production has become the second largest
business for Amoi outside of its mobile phone division.
Amoi first embarked on TV set production in 2001 and its first was a LCD flat
panel TV. While traditional TVs attract only a small profit margin, flat panel
TVs command profit margins of over 20%, obviously the main reason why Amoi
ventured into this area. According to people in the TV industry, Amoi has become
one of the "four new manufacturers" along with Hisense, Haier and Shinco. As
heroes of the new age, they are said to have overtaken the "four old
manufacturers", being Changhong, Skyworth, Konka and TCL.
Feb 26, 2005
Chinese models dress up in
the latest traditionally-designed wedding costumes at a wedding fair in Beijing
on Friday. Modern Chinese couples spend 1,000 times more than their parents'
generation on lavish weddings and other expenses linked to starting a family,
with most couples easily spending 200,000 yuan (US$24,000), equivalent to the
life savings of the previous generation. Twenty-five years ago, the shopping
list of young couples planning to get married consisted of a wardrobe, bed and
bedding, some candy and cigarettes.
Feb 25, 2005
USCC Hearing Elicits
Discussion on US-China Trade Relations
The US-China Economic and Security Review Commission (USCC), a commission of US
Congress, held a two-day hearing on 3-4 February to examine China's ongoing
efforts to comply with its World Trade Organization (WTO) commitments and
explore options for using US trade remedy laws and WTO mechanisms to address
nagging problems. The hearing considered several issues of particular interest,
although it focused specifically on the undervaluation of the yuan and China's
protection of intellectual property rights (IPR). USCC Chairman Richard D'Amato
emphasized the importance of these two issues in his opening statement at the
hearing, as he contended that "the viability of the WTO itself, as a pre-eminent
global trade organization, depends on whether it can deal with issues of the
magnitude of China's IPR and exchange rate practices." D'Amato also conveyed his
opinion that China "is a far, far cry from a market economy" and expressed his
concern that market economy status for China might be treated as a "bargaining
chip to be traded away as part of a political strategy."
The hearing had decidedly protectionist
overtones, although it offered a voice to proponents of a more open and less
confrontational bilateral relationship. As expected, National Association of
Manufacturers (NAM) Vice President Franklin Vargo criticised the longstanding
undervaluation of the yuan and noted that, while a free-floating yuan would be
the most desirable option, China could take several other actions immediately to
alleviate the mounting pressures on the US trade balance. For example, the tight
peg on the dollar could be replaced with a "soft" peg (i.e. a peg with a
relatively wide fluctuating band) on a basket of major trading partner
currencies. Alternately, China could revalue its currency and re-peg the yuan to
the dollar at a higher rate. Vargo urged the Bush Administration to work with
Chinese officials to re-align exchange markets in order to "avoid the dangers
that misaligned exchange rates pose to the United States, China, Asia and the
global financial system."
Senators Lindsey Graham (R-NC) and Charles Schumer (D-NY) also blasted China on
the currency issue and formally announced the re-introduction of a bill in the
Senate that would establish a compensatory tariff of 27.5% on all US imports
from China if the Chinese government refuses to eliminate the peg on the dollar
following a 180-day negotiating period with US officials. Graham and Schumer
have vowed to attach this bill to the first "must pass" piece of legislation
that is considered by the Senate this year. The measure has so far received the
backing of nine other senators: Harry Reid (D-NV); Herb Kohl (D-WI); Elizabeth
Dole (R-NC); Jim Bunning (R-KY); Debbie Stabenow (D-MI); Christopher Dodd
(D-CT); Carl Levin (D-MI); Hillary Clinton (D-NY); and Evan Bayh (D-IN).
Randal Quarles, Assistant Secretary of the Treasury for International Affairs,
countered by reiterating the Bush Administration's position on the valuation of
the yuan. Quarles acknowledged that China should move towards a floating
exchange rate system but noted that "financial diplomacy" is the most effective
way to achieve this objective. Quarles mentioned that the US Department of the
Treasury is providing active assistance to China on various technical matters,
including the mechanics of exchange rate flexibility, banking supervision,
credit analysis and assessing and supervising currency risks in banking systems
and developing financial instruments to manage that risk. This assistance will
continue in 2005, focusing on the more practical aspects of exchange rate
flexibility. Quarles also highlighted some of the steps that the Chinese
government has taken to move towards a floating exchange rate, including (i)
reducing barriers to capital flows to deepen markets involving foreign currency
transactions and (ii) working to strengthen domestic banks, bank supervision,
and regulatory structures (for example, last year China's central bank
eliminated a ceiling on bank lending rates, which will give greater scope to
pricing credit risks). This year China is expected to concentrate on banks'
capital adequacy ratios, the accuracy of non-performing loan classifications,
and whether banks have sufficient provision coverage.
Beijing was also criticized for its alleged failure to enforce IPR protections.
According to Eric Smith, President of the International Intellectual Property
Alliance (IIPA), China's copyright law is generally good, the "low risk and high
profits associated with pirate activities can only be countered with coordinated
and effective criminal enforcement." On 8 February, IIPA submitted a
recommendation that the Office of the US Trade Representative (USTR) immediately
request WTO consultations with China over its IPR enforcement practices. The
group said that, if another Special 301 out-of-cycle review does not find that
Beijing has made adequate progress on this issue by late summer, the USTR should
request the establishment of a WTO dispute settlement panel.
For his part, Timothy Trainer, President of the International
Anti-Counterfeiting Coalition (IACC), reiterated that the Chinese criminal
enforcement system must be willing to impose higher penalties on counterfeiters
and pirates "so that the penalty is higher than the rewards of returning to the
illegal activity." Trainer welcomed the recent move by the Chinese government to
lower the criminal thresholds for criminal liability, although he stressed that
the new judicial interpretations "still leave many previous questions unanswered
and contain vague, ambiguous and undefined terms."
Deputy Assistant Secretary of State Shaun E. Donelly praised the efforts of the
Chinese leadership to bring China into compliance with its WTO obligations but
also expressed the Bush Administration's ongoing concern with China's inadequate
protection of US intellectual property. In Donelly's own words, "simply put, we
must see substantial improvement in 2005, and the State Department will work
with the new IP Negotiator as well as the IP Policy Coordinator, both created by
Congress in 2005 budget legislation, to ensure that China makes progress on this
vital front."
There was also an energetic discussion in the area of textile and apparel trade,
with apparel importers and domestic textile manufacturers trading punches on a
variety of subjects. Cass Johnson, President of the National Council of Textile
Organizations (NCTO), fired the first round with a vigorous attack on the
"pervasive intervention of the Chinese government throughout its textile and
apparel sector." Johnson repeated what he and his NCTO colleagues have often
condemned over the past year, namely: (i) China's unfair currency advantage,
estimated by NCTO at 40%; (ii) the unending supply of loans to the textile
industry from China's state-owned banks; and (iii) the heavy subsidization of
the textile industry by the Chinese government. As expected, Johnson called on
the Administration to move quickly to implement the textile safeguards and
self-initiate additional safeguard actions if necessary. He also urged the
Administration to:
1)
advocate a permanent textile safeguard mechanism for China during the ongoing
Doha Round;
2)
impose punitive sanctions if China does not move quickly to float its currency;
3)
initiate WTO cases to combat China's use of government banks to finance its
exports;
4)
adopt tougher measures to fight illegal transshipment and smuggling of Chinese
textile and apparel products; and
5)
allow the industry to file countervailing (CV) actions against Chinese products.
Erik Autor, Vice President of the National Retail Federation, fired back by
placing the blame for the increase in imports from China squarely on the US
textile manufacturing industry, saying its actions have encouraged retailers to
source an increasingly large share of their products from China. He claimed that
the textile industry has tried to make it as difficult as possible to do
business in countries or regions that would be alternatives to China, by: (i)
opposing preference programs; (ii) insisting on the inclusion of "unworkable"
rules of origin in free trade agreements; (iii) pushing for new quotas on
countries like Vietnam; and (iv) goading US Customs and Border Protection (CBP)
into "harassing textile and apparel imports under the claim that everything is
really transshipped from China." He urged the industry to follow the example of
Milliken & Co. and International Textile Group by phasing out the production of
low-cost commodity yarns and fabrics used in the manufacture of apparel and
instead focusing on specialized, high-performance, high value-added products.
Julia Hughes, Vice President of USA-ITA, conceded that the China textile
safeguard may be appropriate in certain cases, provided the following three
pre-requisites are met: (i) the targeted product is no longer subject to quota
when the safeguard is requested; (ii) the US actually produces the product at
hand; and (iii) there is a legitimate demonstration of market disruption. Hughes
argued that "an increase in imports by itself does not equal market disruption"
and noted that such disruption has historically been demonstrated after a
comprehensive review of a wide range of economic factors. Hughes did not provide
any new information on USA-ITA's lawsuit against CITA, which is now on appeal
before the US Court of Appeals for the Federal Circuit (CAFC), although she
asked whether CITA was "above or outside the law" by choosing not to follow its
own safeguard regulations.
Although agriculture was featured less prominently at the USCC hearing, two
panellists provided useful insights as to China's progress in implementing its
WTO commitments in this area. Gary Martin, President and Chief Executive Officer
(CEO) of the North American Export Grain Association, referred to China's
implementation record as "mixed," with notable progress in tariff reduction on
the one hand and failure to remove several onerous non-tariff barriers (NTBs) on
the other. Some of these NTBs include requirements for (a) the use of permits
for soybean imports and (b) approval of quarantine import permits prior to
contract signing.
Update on China Safeguard Litigation: CIT Denies Government's
Request for a Stay
On 30 December 2004, the US Court of International Trade (CIT) temporarily
enjoined CITA from taking any further action on any threat-based safeguard
petitions on Chinese apparel products, including the petitions to re-apply the
three safeguards that expired on 24 December 2004. The US government submitted a
notice of intent to appeal to the US Court of Appeals for the Federal Circuit (CAFC)
on 26 January, and one day later filed a motion with the CIT requesting a "stay"
of the injunction pending conclusion of the appellate proceedings. The CIT denied
the stay request four days after it was filed, leaving the injunction in place.
The CIT also refused to respond to a request by the US Sock Manufacturers and
Distributors Coalition to clarify the scope of the preliminary injunction. The
initial suit covered the safeguard action on socks and the Coalition requested
that the judge force CITA to lift the associated quota. The safeguard limit on
socks therefore remains in place.
The US government has filed an additional motion to stay the preliminary
injunction with the CAFC, and is also requesting an expedited briefing schedule
at that court for its appeal of the injunction. USA-ITA, the plaintiff in this
case, has announced that it will "strongly oppose the stay motion" and advised
the US government that "it supported an expedited schedule, but not the schedule
proposed by the Government. The US Government filed an appeal brief with the
CAFC on 14 February 2005.
CBP Allows Entry to Textile and Apparel Over-Shipments
On 24 January, CBP began to process entries for textile and apparel merchandise
exported during 2004 in excess of 2004 quotas (over-shipments). As was
previously reported, CITA had directed CBP not to allow entry of any
over-shipments in safeguard quota categories until 24 January, and any
over-shipments in regular quota categories until 1 February. On those dates,
entry was to be permitted for goods in an amount equal to 5% of the applicable
base quota limit. This procedure would be repeated each succeeding month until
all over-shipments were entered.
As required, the three safeguard limits for
categories 222 (knitted fabric), 349/649 (cotton and man-made fibre brassieres
and other supporting garments), and 350/650 (cotton and man-made fibre robes and
dressing gowns) re-opened on 24 January in amounts equal to 5% of the embargoed
limits. The limits for categories 222 and 350/650 did not oversubscribe at
re-opening. Thus, all merchandise presented for entry in these limits was
allowed entry. Additional merchandise subject to the quota limit (i.e., exported
before 24 December 2004) and presented for entry after the quota re-opening will
also be allowed entry until the limit is filled, although it is not likely that
there will be any additional entries for these limits. By contrast, the limit
for category 349/649 was oversubscribed at re-opening. CBP came up with a
pro-rata distribution factor of 99.45% for entries in this category, which means
that 99.45% of the total quantity in each entry presented to CBP has been
allowed entry and the remaining 0.55% will be released on 24 February.
CBP began to process over-shipments in regular quota categories on 1 February,
with only three limits oversubscribing at re-opening: China category 326 (cotton
sateen fabric); Pakistan category 369-S (cotton shop towels); and India Group
II. CBP determined the following pro-rata distribution rates: 78.48% for China
326; 85.01% for Pakistan 369-S; and 82.025% for India Group II. These categories
will be increased by an additional 5% of their respective base limits on 1
March, and it is very likely that all remaining embargoed merchandise will be
released at that time.
Feb 23, 2005
New Rules for Registration
and Management of International Freight Forwarders
According to a circular issued jointly by the Ministry of Commerce (MOFCOM) and
State Administration for Industry and Commerce (SAIC) in February 2005,
international freight forwarders can now directly register with the local
administration for industry and commerce. Following the abolition of the
requirement on the examination and approval of the qualifications of
international freight forwarders by the State Council last year, new measures
are introduced by MOFCOM and SAIC to strengthen supervision and administration
and to ensure the sound and orderly development of the international freight
forwarding business:
After the cancellation of the qualifications approval procedures, MOFCOM will no
longer be responsible for approving the qualifications of enterprises applying
for permission to engage in international freight forwarding business.
Applicants may directly register with the local industrial and commercial
administration and enterprises that are not registered may not engage in such
business.
When handling registration formalities, the industrial and commercial
administration must strictly implement the provisions of the Regulations on the
Administration of International Freight Forwarders regarding minimum registered
capital of enterprises engaging in international land, sea or air freight
forwarding. An enterprise with international freight forwarding as its principal
business should have a name that reflects its "international freight forwarding"
business. Its scope of business should in principle be ratified in accordance
with the relevant provisions. If approval by the competent department is
required by law and administrative regulations, approval documents by the
competent department must also be submitted. After the abolition of the
qualifications approval procedures, registered enterprises that do not measure
up to the said requirements should be made to meet the requirements.
Departments of commerce will strengthen the regulation and administration of the
international freight forwarding sector by actively exploring ways and means of
management. In the administration of the sector, support will be given to the
work of the industry association, fully bringing its role into play,
strengthening self-discipline, regulating the business conduct of members, and
safeguarding their legitimate rights and interests.
Life of leisure a coming Shanghai trend
Leisure is becoming part of the lexicon of life in Shanghai, China's most
vibrant commercial city. Shanghai is said to have grossed Rmb5.6 billion (HK$5.2
billion) from movies, other performances, entertainment, cyber café attendances
and cultural venues in 2002.
Some 2.7 million foreign and 87 million domestic tourists visited Shanghai and
spent Rmb118.2 billion (HK$111.9 billion) in the city in 2002 (2002 figures are
a better indication of developments, as concerns about SARS had deterred many
visitors in 2003).
The retail turnover of the catering industry actually reached Rmb21.5 billion
(HK$20.2 billion) in 2003, an increase of 3.2 times 1995 turnover and
representing an annual growth rate of 20%. The leisure scene is a constantly
changing, dynamic environment in the city, which is intensely demand driven but
subject to quite dramatic changes of direction. Bowling for example, which just
a few years used to be a highly popular leisure pastime, has now been rapidly
overtaken by tennis, badminton and snooker, to suit changes of mood and venue
where people like to socialize or do business, and forcing many bowling centres
in Shanghai to change.
The same is true for the catering industry. The popularity of Cantonese cuisine,
Hangzhou cuisine, morning tea, hot pots, buffets, western fast food, western and
other cuisines is also helping to swing the demand in the areas of foods and
beverages, cooking, seating and interior décor, among many other sectors. While
people try to make time for leisure and even hire domestic helpers to do so, DIY
has still emerged as a surprisingly popular pastime. Small holding or gardening
is another area to be tapped for leisure consumption, while sight-seeing and
tourism agriculture hold immense appeal to urban dwellers. For office workers,
going to the countryside to be "one-day farmers" can be the best way to spend a
day off. Changes in leisure patterns mostly find expression in the changes and
upgrade of popular consumer goods, such as from radios to hi-fis, from LCDs to
VCDs, super VCDs and DVDs; from black-and-white TVs to colour TVs, flat panel
TVs, projector TVs and OLEDs.
Mobile phones are everywhere, as are digital and video cameras, while MP3
players are picking up the pace. People are getting about more easily too, with
their new cars and motor bikes.
While supply and demand for consumer goods can be regulated by adjusting stock,
it is more difficult for leisure services. There is often heightened demand on
long holidays and a quiet market after them. How to regulate leisure demand in
high and low seasons, so that quality and profitability can be sustained, is an
issue that is even now worthy of study.
On the one hand, leisure demands boost the development of consumer goods. For
example, electronic audio-visual products, home appliances, communications
products, and cultural and sporting goods have seen rapid growth in recent years
in Shanghai because of the growing leisure demand in the city.
On the other hand, new types of consumer goods, such as new technologies, have
in turn opened new areas of leisure consumption and even changed Shanghai
residents' way of life. For example, mobile phones and SMS, computers and the
Internet, and private cars have brought tremendous changes to leisure
consumption.
There is also a growing trend for combining work with leisure, which hitherto
had been the antithesis, one to the other. In some work, such as research,
design, writing and other areas which require creative and cognitive skills,
work can very easily be combined with leisure. Indeed, the new thinking is that
working in a relaxed environment is more stimulating and can often produce
unexpected and successful results. For home office workers and freelancers, the
traditional boundaries between work and leisure are getting blurred, and the
development of the Internet has helped to accelerate this trend. In addition,
leisure consumption also has the characteristics of putting greater emphasis on
spiritual rather than simple material needs and so is becoming more personal and
diversified.
Foreign tourists are major spenders - Tourism forms the most important part of
the leisure market. Shanghai receives over 3 million foreign tourists and 90
million domestic tourists each year. According to a sample survey by the
statistical department in 2002, tourists spent a total of Rmb118.2 billion
(HK$111.5 billion) in Shanghai, with domestic tourists spending Rmb99.4 billion
(HK$93.7 billion) and foreign tourists spending Rmb18.8 billion (HK$17.7
billion).
There is quite a big disparity in per-capita spending between domestic and
foreign tourists. Spending by foreign tourists is six times that of domestic
tourists. Speaking of disparity, some people have become well-off ahead of
others since reform and opening up, and a higher-income societal level has taken
shape in Shanghai. These better-off people have greater ability and awareness of
leisure consumption.
New ways of spending one's leisure are constantly emerging. High-income earners
go after comfort and enjoyment in their leisure and revel in the status and
achievement associated with their leisure consumption. For example, the gold
card membership launched by Phase One of Luodian Xinzhen Golf Course in Baoshan
district was sold out as soon as it was launched.
Travel freedom and demographics broaden buying impulse - The development of
private cars has opened new horizons for leisure and multiplied the scope of
activities by car owners. New ways of spending one's leisure, such as camping,
vacationing in resorts and going out for a drive, are constantly emerging. The
growing middle class will become the main force and mainstream of leisure
consumption. In particular, young people have a greater awareness of the need
for leisure and hope to enjoy each day to the full. They also go after the
latest leisure activities.
The popularity of mobile phones and networks have also opened up new horizons
for leisure, especially for young people.
Payment by installments and credit spending (using credit cards) for travels and
other types of leisure consumption are more readily acceptable to younger
consumers. By contrast, older people who have plenty of free time also have
their leisure needs. Shanghai is becoming an aging society. There were 2.55
million people aged over 60 in Shanghai at the end of 2003. Better living
conditions mean people can live a longer life.
In 2003, the average life expectancy of people in Shanghai was 79.8 years. The
number and percentage of old people continues to be on the rise. A longer life
expectancy means people have a leisure time of between 20 and 30 years or even
longer after their retirement.
Of course, leisure demand cannot be measured by income alone. The differences in
the leisure demands of different income groups are basically reflected in the
quality of the activity. At present, old people's leisure activities mainly
include Tai Chi, jogging and other types of morning exercise, chess games,
dancing, fashion shows for the elderly, singing, going to traditional Chinese
operas or ballad singing concerts, and attending calligraphy, painting, musical
instrument or flower arrangement classes at old people's universities. The
venues are mostly in their own communities.
The quality and increasing demands by old people for leisure activities will
increase as their income and requirement for leisure increase. The market
potential is big. Shanghai is an international metropolis with a large transient
population, which stood at 4.9 million at the end of 2003, equivalent to 37% of
local households. The fashionable leisure consumption pattern brought in by
foreign businessmen, foreign employees of foreign-invested enterprises and
foreign students in Shanghai (the foreign population amounted to 73,000 at the
end of 2003) is emulated by many.
Business can be done in leisure - and indeed the idea of corporate hospitality
is just taking off in Shanghai, with the growth of a golf and tennis culture,
for example.
Leisure is also a new area of business growth within itself, with higher regard
being paid to consultancy, management and professional expertise, particulary in
the entertainment, shopping and catering sectors.
 Hong Kong's Dickson Concepts ventures into
Chengdu
Hong Kong's Dickson Concepts (International) is making a strategic push into the
Chinese mainland, with the choice of Chengdu rather than Shanghai and Beijing as
the best site available. The new store will be a seven-storey building at the
heart of the city's commercial district and is due to open at the end of this
year or early next year.
Dickson Concepts has two Seibu stores in Shenzhen and has indicated its
intention to expand its Seibu chain on the mainland in addition to its new
venture.
Earlier, there were media reports that Seibu plans to venture into Chengdu also.
Industry experts believe that Dickson's new store could indeed be named Seibu
too, to leverage a recognizable brand.
Dickson indicated that its Chengdu store will carry men's and women's clothing,
leather goods, accessories and cosmetics for leading international brands to
ensure a place for the company in the high-end retail market in western areas of
China.
Shenzhen Seibu is seen by local people as an upmarket store that sets fashion
trends. Luxury brands all over the world, such as Louis Vuitton and Cartier, all
have specialized counters at the store.
Dickson's Chengdu store will likely carry on this style of retail and sell top
international brands alongside other leading stores in Chengdu, such as Meimei
Licheng and Renhe Spring.
Feb 18, 2005
Stung by Our (Hawaii) Reputation
(Letter to Pacific Business News - Honolulu, Hawaii USA)
In
PDF Format
When I left Hong Kong to attend the UH School
of Travel Industry Management in 1973, friends and family questioned whether I
was in Hawaii for fun, hula girl, beaches or really getting a college degree? I
have proved them wrong that I got my BBA and MBA in 5 1/2 years.
32 years later, Hawaii as a tourist destination associated with fun, hula girl,
sun and beaches has not changed. Hawaii as a serious place to do business still
questioned by many.
If you live in Hawaii long enough, it is rather confusing who promote trade,
business, tourism and film festival. After doing business with Asia for more
than 25 years, almost any group going to Asia from Hawaii involved a lot of
parties. Parties is an important element of networking and business, but should
not be the chief component. Few, if any serious business actually get done.
Many of the decision makers who had enjoyed the Hawaiian parties during the past
25 years are decision makers today. For the same decision makers, the table is
now turned that decisions must be made whether to go to the Hawaiian parties or
to talk business with serious business delegations from throughout USA and
around the world. Post Enron era and with Company's interest first, it has
become an easy choice not to engage Hawaii or to stay away from Hawaii.
It is really regretful that many of us that are serious about doing business in
Hawaii and in Asia continue to face questions on our real intension - business
or pleasure in the name of businesses!? It may be a wake up call for some, but
probably business as usual for many.
Feb 17, 2005
Guangzhou Invites Bids for
Phase II of Baiyun International Airport
According to the Guangdong Airport Management Corp, phase II of Guangzhou Baiyun
International Airport will involve a total investment of Rmb7.5 billion. Public
bidding started on 26 January and will end in March, after which construction
will begin.
As one of the three air hubs on the Chinese mainland, Guangzhou Baiyun
International Airport has seen rapid growth since its opening in August 2004.
The airport handled 180,000 takeoffs and landings and 20 million passengers last
year, both record breaking figures.
At this rate, Baiyun Airport’s passenger handling capacity could break the 25
million mark this year, the designed capacity for 2010. Thus, there is an urgent
need to start work on phase II of the airport.
Phase II of the airport is expected to handle 36-38 million passengers and 1.2
million tonnes of cargos by 2010, by which time the functions of the new airport
as an air hub would be further enhanced.
Phase II will feature considerable changes to the airport’s original design.
While retaining its large framework, glass curtain walls and ringed roof, it
will have a more modern appearance, more practical functions and more scientific
design.
Phase II mainly comprises a number of projects. First, an additional 31 gates.
The design has been completed and approved by experts and the government.
Construction would commence after the Spring Festival and is slated for
completion in the second half of 2007.
Second, a 40,000 sqm cargo terminal, 88,000 sqm of cargo aircraft parking area
and three gates. Construction is expected to commence in the second half of
March. When completed, this new cargo terminal capable of handling 400,000
tons of cargoes annually will further increase Baiyun Airport’s cargo
throughput. The new terminal will provide cargo owners with one-stop service
from storage and safety inspection to loading.
Third, the international section of Terminal Two and three corridors, with a
total floor area of 320,000 sqm. The design has been completed and approved. It
is planned that construction will begin in the second half of 2006 and complete
by the first half of 2010 to meet the needs of the Guangzhou Asian Games.
 2010 Asian
Games spurs huge investment
The Olympic Council of Asia approved Guangzhou's bid to host the 16th Asian
Games in 2010, as it met in Athens for last year's Olympic events. According to
the constitution of the Olympic Council of Asia, the host city must set up an
Asian Games Organising Committee within six months after winning the bid.
In fact, the relevant committee has not yet been set up, and matters of
cooperation relating to the Games will have to be left until after the
organizing committee and its functional departments have been established.
The government of Guangzhou plans to invest over Rmb220 billion in the next few
years in the run-up to the 2010 Asian Games, to improve its sports facilities
and urban infrastructure. In addition to government investment, funds will be
raised from the private sector to finance a variety of projects.
For a start, the city will need 88 competition and training venues for the 34
events of the Games. The Asian Games Village is expected to cover an area of 120
hectare for the accommodation of 11,000 athletes and coaches. Also, although
there are about 80 star-level hotels in Guangzhou today, the number will have to
be increased to 300 by 2010, providing over 50,000 additional rooms.
Guangzhou will start its development of rail transport and intelligent transport
to bring the Asian Games Village within a 30-minute distance of all competition
venues. In addition, the city will also further develop its telecom and
television industries and promote its tourism, convention and exhibition,
advertising, catering, retail and other services.
Time "box" for licensing - Asian Games licensed products will be marketed
between 2006 and 2010. There will be three levels of sponsorships, namely "Asian
Games partners", "Asian Games sponsors" and "Asian Games suppliers".
A benchmark price is fixed for sponsorships at different levels, each with its
own entitlement of marketing rights, including advertising and marketing using
the emblem and name of the Asian Games Organising Committee, exclusive rights to
particular products and services, priority to buy television airtime and outdoor
advertising space during the Games, and priority options to sponsor cultural
events, torch relaying and other theme activities.
The organizing committee will authorize qualified enterprises to produce and
sell intellectual property rights which are protected products bearing the Asian
Games emblem or mascot.
The franchised enterprises will pay royalties to the organizing committee. This
program is divided into different parts, with the domestic program beginning in
the second half of 2005 while the international one will start after the East
Asian Games in Doha in 2006.
Guangzhou enterprises do not have any special privileges and will compete with
other enterprises on an equal footing.
Broadcasting rights will be franchised. Broadcasters will be allocated their own
broadcasting rooms at the International Broadcasting Centre to be built by the
organizing committee, as well as basic television signals provided by the
principal TV relay station. Projects for the authorized issuance of
commemorative stamps and coins will start later this year.
Plan for construction - Guangzhou will renovate 37 existing sports facilities
and build a new Asian Games Village, a media centre and a number of large
stadiums before 2008.
In addition to government investment, venue naming rights, BOT and other means
will be adopted to attract investment. Separation of ownership from operating
contracts will be practiced for large and medium-sized sports venues, and people
from all sectors will be encouraged to operate these venues through cooperation,
contracting out, transfer and franchising.
Feb 11, 2005
Agri-products giants eye
local farms
A purchasing conference was held at farms near Dalian City in Liaoning Province,
rather than in expo centers or hotels as usual. The conference, jointly
organized by the Dalian Commercial Bureau and Dalian Agricultural Development
Bureau, and has attracted many foreign purchasing giants such as Wal-mart and
Carrefour.
In the workshops in the Zoujia Village of Changcheng County, Sanjianbao County
and Xiaolianpo Village, all kinds of vegetables, fruits and grains were exposed
to domestic and international purchasers. "It is the first time that I have
driven so far and come so close to farmers to purchase products for our company.
It left a strong impression on me," said a purchasing representative of a
company. At the workshops, representatives from the city's vegetable planting
association gave vivid introduction of the planting to visitors and gave
detailed answers to their questions in planting.
After the conference, some of the organic food producers signed contracts with
some supermarkets such as Haoyouduo and Xinmate. Chen Yu, director of the
Jinzhou Houshi Development Company, said: "It gives me a valuable chance to
showcase the planting conditions and technique for our bases." At the Jinke
Organic Food Park, the non-soil planted oranges and grapes attracted many
purchasing representatives.
A purchasing representative from the Wal-mart said the company is expected to
establish long-term partnerships with some of the farms and invite them to
showcase their products in the supermarkets of the company.
Feb 4, 2005
China Safeguard Litigation: US Government
Appeals Preliminary Injunction Order
On 30 December 2004, the Court of International Trade (CIT) temporarily enjoined
the Committee for the Implementation of Textile Agreements (CITA) from taking
any further action on any threat-based safeguard petitions on Chinese apparel
products. On 26 January 2005, the US government filed a notice of intent to
appeal the preliminary injunction order to the Court of Appeals for the Federal
Circuit (CAFC). Upon the filing of an appeal, the rules allow the respondent,
i.e. the US Association of Importers of Textiles and Apparel (USA-ITA), 40 days
to file a response and the government would have 14 days to file a reply. The
rules also require the reply to be filed at least 3 days before a hearing on the
appeal. Thus if a hearing is promptly held, and given a few days after the
hearing before the court issues its decision, the normal rules and expected
government actions would result in a decision approximately 2 months after the
appeal is filled. However, it is reported that the US government intends to
request expedited appellate proceedings, which could shorten the proceeding time
to about one month.
Additionally, the US filed a motion in the CIT on 27 January 2005 requesting a
stay of the preliminary injunction pending conclusion of the appellate
proceedings. The USA-ITA would then have eight days to respond and the
government would have five days to reply. This request asks the CIT to allow the
US government to continue to: (i) gather and analyze data on threat-based
petitions; (ii) meet with interested parties, including the government of China;
(iii) request and enter into consultations with China under its WTO Accession
Agreement; and (iv) self-initiate consideration of consultations with China,
provided that CITA does not impose any safeguards on imports of textiles or
apparel from China in response to threat-based petitions pursuant to CITA's May
2003 procedures. If granted, the stay would essentially allow CITA to proceed
with its consideration of the 12 threat-based safeguard petitions filed to date.
According to the US government, a stay is necessary to "eliminate any impediment
to communications between the United States and [China]" concerning potential
market disruption from trade in textile and textile and apparel products, and
"to protect domestic textile producers from the irreparable harm they could
suffer as a result of the injunction's bar upon even the consideration of
safeguards, pursuant to existing procedures, until imports from China have
caused actual market disruption." The plaintiff, the US Association of Importers
of Textiles and Apparel (USA-ITA), has already stated that it will "strongly
oppose" the government's motion for stay of the injunction.
In another development, the CIT refused to respond to a request by the United
States Sock Manufacturers' and Distributors' Coalition (USSMDC), a non-party to
the case which had filed an amicus curiae brief supporting the injunction, for
the court to clarify its preliminary injunction order regarding whether it is
sufficiently broad to cover CITA's action in imposing safeguard quotas on cotton
socks from China last fall. USSMDC is currently considering an application to
formally intervene in the case in order to gain proper standing as a party and
have the issue addressed. However, the court has discretion to allow or not to
allow intervention by a new party in the case.
Finally, the USA-ITA filed its brief in opposition to the government's motion to
dismiss the USA-ITA's complaint. That motion remains pending before the CIT.
The National Textile Association (NTA) urged the Bush Administration on 19
January to "promptly get the threat-based China safeguard petitions back on
track, to self-initiate safeguards based on market disruption, and streamline
import data reporting so the US textile industry can file safeguard petitions
promptly when disruption begins to occur." The NTA had requested that the
Administration appeal the court's injunction as quickly as possible and called
for the development of a system to tally import data in real time. Such a system
would theoretically enable the US textile industry to file safeguard petitions
based on market disruption in a more timely fashion.
CBP Symposium Stresses Security; Stronger C-TPAT Planned
The unmistakable message from US Customs and Border Protection (CBP) officials
speaking at the Customs Symposium held on 13-14 January in Washington, DC was
that security issues will continue to dominate the agency's approach to trade
policy in the years to come. Senior managers repeatedly called on the trade
community to re-capture the sense of urgency that prevailed immediately after
the 11 September 2001 terrorist attacks. This message was clearly part of an
effort to prepare traders for the expansion and tightening of cargo security
programs. Virtually all of the two-day conference was dedicated to the various
aspects of supply chain security, with traditional customs issues such as
compliance, regulations, and rulings all but ignored. Indeed, one official said
plainly that all of CBP's constituent branches have as a primary focus the issue
of how their traditional missions affect the agency's priority mission of
homeland security. Within this context, it was no surprise that much of the
discussion at the symposium centered on two topics: (1) the development of a
national cargo security strategy (NCSS), a draft of which was circulated by the
Department of Homeland Security (DHS) in December 2004; and (2) overhauling the
Customs-Trade Partnership Against Terrorism (C-TPAT).
CBP Commissioner Robert Bonner described his plans for an NCSS in a speech
delivered at the Cargo Security Summit on 12 December 2004. CBP plans to base
this strategy on five inter-related, mutually-reinforcing initiatives: (i) the
24-hour rule, which requires advance electronic notification of all shipments 24
hours before containers are loaded on ships bound for the US; (ii) the National
Targeting Centre, which uses CBP's Automated Targeting System to evaluate all
cargo shipments headed to the US and identify shipments that pose a potential
terrorist threat; (iii) mandatory anti-terrorism security inspections using
detection technology; (iv) the Container Security Initiative (CSI), which
evaluates and targets high-risk containers moving from foreign ports to the US;
and (v) C-TPAT, a programme designed to enhance the security of the supply chain
in exchange for expedited processing at US ports.
Bonner emphasised the role of technology in the NCSS as he noted that CBP has
tripled the number of large-scale gamma ray and x-ray imaging systems in
operation and has installed approximately 300 highly sensitive radiation portal
monitors and 400 radiation isotope identifying devices at US ports of entry
since 11 September 2001.
Far from being complete, Bonner stressed that the NCSS must be strengthened with
at least seven additional initiatives:
The development of "smart" containers with embedded electronic tamper detection
devices. The seal requirements for "smart" containers are currently undergoing
economic analysis and it is expected that 2-3 months will pass before draft
regulations on this matter are published for public comment.
Expanding CSI to cover 95% of the total volume of US-bound containers, up from
70% currently. At the symposium, Commissioner Bonner noted that CBP plans to
expand CSI to 40 ports by the end of 2005 and 50 by the end of 2006. This
expansion is expected to include Buenos Aires (Argentina), Santos (Brazil),
Balboa and Colón (Panama), Shanghai and Shenzhen (China), Colombo (Sri Lanka),
Kaohsiung (Taiwan), Izmir (Turkey), Dubai (United Arab Emirates), Lisbon
(Portugal), and Barcelona and Valencia (Spain).
Improving C-TPAT in three specific ways: (i) defining the point of stuffing
criteria, particularly for importers, their vendors, and foreign manufacturers;
(ii) increasing the number of validations performed, which assure that security
commitments by C-TPAT participants are being met; and (iii) improving the
facilitation benefits in the form of reduced inspections or even no inspections
in certain cases.
Expanding the advance information available to CBP to better identify high-risk
cargo.
Developing a "continuity of trade" contingency plan whereby inbound trade to the
US would be restored as quickly as possible after any decision to halt trade in
the aftermath of a terrorist incident.
Creating one single portal or window into the US government for all trade data
and enabling key DHS agencies to access such data. This window could potentially
be CBP's Automated Commercial Environment (ACE).
Internationalizing the core elements of the NCSS to secure and facilitate global
trade and to avoid the development of multiple standards that businesses would
be expected to comply with. This initiative would logically be pursued under the
auspices of the World Customs Organization.
CBP officials stressed that they plan to maintain C-TPAT as a voluntary program
for the foreseeable future, rather than one governed by regulatory requirements.
A strategic plan released during the symposium noted that C-TPAT needs to remain
"a dynamic, flexible program designed to keep pace with the evolving nature of
the terrorist threat and the changes in the international trade industry." The
plan added that because C-TPAT has "security requirements that allow for
customized application," most participating companies not only meet but exceed
the minimal standards of the program.
However, CBP is also planning a major effort to strengthen the criteria for C-TPAT
participation. In short, CBP is looking to push the program all the way back
down the supply chain to the point of manufacture so that it can obtain more and
better information about every step of an item's journey to the US market. It is
clear, though, that CBP is in the early stages of this effort. The agency is
therefore looking for input from the trade community as to what additional data
can and ought to be provided and how to expand C-TPAT participation to other
entities in the supply chain.
Over 8,000 companies have now enrolled in C-TPAT. CBP says 40% of total US
imports by value are entered by C-TPAT companies, a figure it hopes to increase
to 60% by the end of 2005. Mexican manufacturers are currently the only foreign
manufacturers allowed to enrol, but CBP plans to expand eligibility to Canadian
firms soon.
Officials at the symposium spent a good deal of time outlining the benefits of
C-TPAT participation, something the trade community has consistently pressed CBP
to quantify. The most cited statistic was that C-TPAT shipments are subject to
six times fewer enforcement examinations and four times fewer compliance exams.
Other benefits that CBP continues to assert but has done little to quantify
include streamlined company operations and reductions in cargo theft and
pilferage. However, nearly three years after the programme's inception, CBP has
still not come up with a firm plan for when and how to implement one of the
primary benefits it has pledged for C-TPAT companies, expedited cargo
processing. It is in this area that CBP will apparently focus its efforts this
year, reasoning that it will have to offer concrete, money-saving results in
return for the additional measures it plans to ask participants to take.
Specifically, CBP will engage the trade community in developing a "green lane"
for imports. This concept envisions a process whereby approved cargo can enter
the US virtually unimpeded. However, CBP is also considering a system of tiered
benefits where only shipments that meet the most stringent criteria would
receive the fastest processing. These criteria would likely include: validated
C-TPAT participation for all of the importer's supply chain partners;
transportation of goods in a "smart box" equipped with tamper-evident seals; and
shipment of goods through foreign ports participating in CSI. As was mentioned
previously, some type of security standard regarding con |
