International Affiliates Update: December 2012www.usaita.com 1

U.S. Makes New TPP Textiles & Apparel Proposal

During the recent Trans-Pacific Partnership (TPP) talks in Auckland, New Zealand—which USA-ITA and a number of member companies participated in—the U.S. made a new proposal for benefits for textiles and apparel. The U.S. negotiators met with several apparel brands and retailers and made a detailed presentation about their new concept of “short supply” in TPP. In brief, the new U.S. proposal is to create two separate short supply lists: one for permanent benefits, and one for temporary benefits. The U.S. says they want this concept to be: • Simplified,• Consolidated,• Logical, and• Efficient.

They encourage industry to take different approaches to submissions than those from any previous short supply program. As an association, we will work with members to submit as many products as possible for consideration. The U.S. wants to receive requests as quickly as possible, with the hope to receive comments by January 15.

The Office of the U.S. Trade Representative stated in a release that the U.S. made progress in other areas, as well, including the “mutual priority of concluding a state-of-the-art, comprehensive agreement as quickly as possible and of smoothly integrating the newest members, Canada

A PUBLICATION OF THE UNITED STATES ASSOCIATION OF IMPORTERS OF TEXTILES & APPAREL

December 2012

International Affiliates

IN THIS UPDATE

PAGE 1: U.S. Makes New TPP Textiles & Apparel Proposal; Comprehensive Overview of Customs Trade Facilitation & Enforcement Act of 2012

PAGE 2: Congressional Update

PAGE 3: East Coast/Gulf Coast Port Labor Update; Follow-Up to Lifting of Burma Sanc-tions: Burma Entities on the SDN List

PAGE 4: Social Compliance Update

and Mexico, into the negotiations.” The 16th round of TPP negotiations will be held in Singapore from March 4-13.

Comprehensive Overview of Customs Trade

Facilitation & Enforcement Act of 2012

By John Pellegrini, USA-ITA Customs Counsel, McGuireWoods LLP

The following addresses some of the more important issues in H.R. 6642 the Customs Trade Facilitation and Enforcement Act of 2012 (“the Bill”). For the most part, the description of the various provisions in the Ways and Means Committee summary distributed recently is adequate. However, there are other provisions i.e. those described below, which are more problematic and which seem to me to deserve a more complete description.

H.R. 6642 is the Committee bill. The Democrats introduced a second bill, H.R. 6656, which in large measure mirrors the Committee bill. The major differences are in regard to enforcement of trade remedies particularly antidumping. This memo does not address the antidumping provisions of either bill.

As previously indicated, the chances of the Bill becoming law before year end are slim. Nevertheless it seems worthwhile to take a look at those provisions which could be problematic for importers and exporters.

Section 211 establishes a commercial targeting division

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within Customs and Border Protection (“CBP”), and codifies targeting for a series of what are referred to as primary trade issues (“PTI’s”). The PTI’s are agriculture programs, antidumping and countervailing duties, import safety, intellectual property rights, penalty, revenue, textiles (of course), and trade agreements. Nothing very surprising here. The provision is very detailed and can be accurately described as “micro managing” the targeting activities of CBP. For example, the Commissioner would be required to compile an annual public summary of all determinations by port directors not to follow a trade alert (a notice that particular products or issues are enforcement concerns). Given this requirement, the likelihood that a port director will make such a determination seems remote. Another provision in Section 211 allows the use of trade data (cargo safety and security) for commercial enforcement purposes.

Section 221 requires CBP to establish an importer of record (“IOR”) program. The purpose of which is to assign and maintain IOR numbers. The Bill also requires that CBP develop criteria that importers must meet in order to obtain an IOR. These would include sufficient information to allow CBP to verify the existence of the importer; to ensure that sufficient information is collected to allow CBP to identify linkages or affiliations between importers that have requested or have been assigned IOR’s, and criteria to allow CBP to identify changes in address and in corporate structures. The Bill would also require that CBP maintain a centralized database of IOR numbers including a history of IOR numbers associated with each importer.

Section 222 requires customs brokers to collect data on the identity of importers and their income. Brokers must also maintain records of the information used to substantiate an entity’s identity including name, address and other identifying information. Brokers who fail to obtain and maintain this information would be subject to penalties.

Section 223 requires that CBP establish a new importer program. The program must include risk assessment guidelines appropriate to adjust bond amounts and to increase screening of entries filed by as new importers particularly when the products are within one of the PTI’s.

New requirements for non-resident importers are set forth in Section 224. Non-resident importers will be required, as at present, to designate a resident agent for the service of process. However, as proposed, the resident agent could be held liable for the payment of duties and penalties or fines

if CBP is not able to collect such duties and penalties or fines from the non-resident importer. This provision would authorize CBP to require the resident agent to post a bond. These requirements will not be applicable to non-resident importers who are validated Tier II or Tier III participants in C-TPAT. This is a change from previous legislation on this issue and seems to recognize that some non-resident importers, multi-nationals for example, do not engender the same risks as other non-resident importers.

Section 225 creates an interagency committee to establish a certified importer program. The purpose of this program is to permit the expedited release of cargo imported by such importers. This applies to documentation, declaration and licensing required by other federal agencies, such as Fish and Wildlife.Section 402 raises the de minimis amount to $800. The Ways and Means Committee summary is a bit misleading. The $2,500 informal entry limit appears in existing law. The change here is really a reordering of the section and, as far as I can see, it does not reflect a substantive change.

Section 405 amends subheading 9801.00.10 to allow the return of previously-imported goods which have returned within three years of having been exported free of duty. At present, this provision is limited to the products of the United States. This is the only provision in the Bill that unequivocally benefits importers.

Congressional Update: Appointee Tim Scott (SC) Has Strong Pro-Trade Record; Lawmakers Question GSP for Bangladesh

Appointee Tim Scott (SC) Has Strong Pro-Trade RecordAfter Senator Jim DeMint (R-SC) resigned to take charge at conservative Washington think tank the Heritage Foundation, South Carolina Governor Nikki Haley (R) appointed Tim Scott, a Republican from the state’s 1st District, covering Seabrook Island to the North Carolina border, to take the seat. This is a historic move, as Scott will be the only African-American member of the United States Senate, and the seventh to ever serve. After being elected to the U.S. House in 2010, Scott voted “yes” on the Korea FTA, “yes” on the Colombia FTA, “yes” on the Panama FTA, and “yes” on PNTR for Russia—the major “free trade” votes during the 112th Congress—so it seems he is likely to be a pro-trade friend of the industry and quite different than others from his state who have long fought for domestic textile interests.

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Lawmakers Question GSP for BangladeshOn December 18th, 12 lawmakers sent a letter addressed to U.S. Trade Representative Ambassador Ron Kirk urging USTR to review Bangladesh’s compliance with labor eligibility requirements under the Generalized System of Preferences (GSP). The letter comes after over 100 workers were killed in the Tazreen garment factory fire.

The letter states, “Under GSP, a country must demonstrate that it is “taking steps to afford internationally recognized worker rights.” This requirement is central to the development goals of the GSP program and helps ensure that GSP promotes sustainable growth that can be shared broadly. We believe it is vital that your office complete your assessment of Bangladesh’s compliance with these requirements.”

The letter was signed by Congressmen Joseph Crowley (NY), Sander M. Levin (MI), Jim McDermott (WA), Bill Pascrell, Jr.(NJ), Charles B. Rangel (NY), Fortney Pete Stark (CA), John Lewis (GA), Richard E. Neal (MA), Ron Kind (WI), Chris Van Hollen (MD), Betty McCollum (MN), and James P. Moran (VA).

To read more and the full letter, please click here.

East Coast/Gulf Coast Port Labor Update

On December 20th, USA-ITA joined 107 local, state, and national trade associations in sending a letter to President Obama expressing concern over a potential East and Gulf Coast port strike. The letter urges immediate action by the White House to ensure that the lack of progress in ongoing labor contract negotiations between the International Longshoremen’s Association (ILA) and the U.S. Maritime Alliance, LTD (USMX) does not result in a strike.

The latest talks between the parties broke down December 18th, less than two weeks before the current contract expires on December 29th. Both the ILA and the USMX have posted their contract issues online. They are available on their websites:

ILA Contract IssuesUSMX Contract Issues

A new letter will be sent to the White House next Friday asking the President to invoke Taft-Hartley if the strike does begin.

Follow-Up to Lifting of Burma Sanctions: Burma Entities on the SDN List

By David Spooner, USA-ITA Washington Counsel, Squire Sanders

As USA-ITA members know, on the eve of President Obama’s trip to Burma last month, the State Department and the Treasury Department jointly announced that he had exercised his authority under the Burmese Freedom and Democracy Act to waive the ban on imports from Burma. The waiver comes officially in the form of a new Treasury “General License No. 18.”

Nevertheless, as we’ve previously reported, U.S. persons are still prohibited from engaging in transactions with persons included on the Treasury Department’s SDN list, as well as any entity in which such a person owns, directly or indirectly, a 50 percent or greater interest. The SDN list is available at www.treasury.gov/resource-center/sanctions/SDN-List/Pages/default.aspx.

Because the above link takes readers to a lengthy list of SDN entities worldwide that is difficult to sort, some USA-ITA member companies have asked for greater detail about persons and entities in Burma that are on the SDN list and that are in the apparel sector. We have therefore included four documents:1. A list of the persons and entities on the Treasury

Department’s Burma SDN list (basically the entire Burma “bad guy” list)

2. A list of the persons and entities on the Treasury Department’s Burma SDN list that had “textile,” “garment,” and/or “apparel” in their description. Actually, there are no references to “apparel” or “garment,” but several references to companies with “textile” in their moniker.

3. A list of the persons or entities on the Treasury Department’s Burma SDN list that had “trading” in their description

4. A list of the persons or entities on the Treasury Department’s Burma SDN list that had “export” in their description

Please keep in mind that the SDN list changes. Also, please forgive the disclaimer: Treasury OFAC/SDN issues are fraught with danger. As you know, there are serious consequences to running afoul of the Office of Foreign Assets Control. Basically, violations can lead to civil and criminal penalties, with long prison sentences and crippling fines. So, while we are confident that the attached lists are

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accurate, please do not hesitate to call counsel with any questions. The attached lists are meant as a guide, but it’s important to note that there may, of course, be entities on the SDN list that traffic in textiles and apparel, though their link to the textile and apparel sector is not evident by their name.

Social Compliance Update: UGF Issues Report on 2011 Cotton Harvest in Uzbekistan; ILAB Releases Toolkit to Help Businesses Combat Child & Forced Labor in Global Supply Chains

UGF Issues Report on 2011 Cotton Harvest in UzbekistanThe Uzbek-German Forum for Human Rights (UGF) just released a report on the 2011 cotton harvest in Uzbekistan and found evidence of a “system of forced labor in Uzbekistan’s cotton sector.” The report “documents in vivid detail the coercive mobilization of over 2 million Uzbek school children, college and university students, government employees, private business employees, and farmers. Based on extensive field research, the UGF report concludes that forced labour in the Uzbek cotton sector will only end when the Karimov regime faces problems exporting cotton and sees lower cotton revenues.”

ILAB Releases Toolkit to Help Businesses Combat Child & Forced Labor in Global Supply ChainsThe U.S. Department of Labor’s Bureau of International Labor Affairs (ILAB) recently introduced a new guide titled, “Reducing Child Labor & Forced Labor: A Toolkit for Responsible Business.” This is the first such guide developed by the U.S. government, and provides practical, step-by-step guidance on eight critical elements that will be helpful for companies that do not have a social compliance system in place or those needing to strengthen existing systems. The free toolkit is available online at http://www.dol.gov/ChildLaborBusinessToolkit.

THIS IS THE LAST USA-ITA INTERNATIONAL AFFILIATE COMMUNICATION FOR THE YEAR. YOU WILL RECEIVE THE INTERNATIONAL AFFILIATE NEWSLETTER FOR JANUARY 2013 ON OR AROUND JANUARY 11TH. WE WISH YOU AND YOUR FAMILIES A WONDERFUL HOLIDAY SEASON AND HAPPY NEW YEAR!