Tuesday, October 23, 2007

From the News

It is funny how market segments you might not think of as "industries" in and of themselves can sometimes turn into important players in the trade debate. Take, socks, for example. This article discusses the plight of a Canadian company that invested in a sock factory in Honduras in part to take advantage of access to the U.S. market afforded under the CAFTA-DR. Unfortunately for them, there is now a lobbying battle going on over whether socks should be subject to safeguards. Under the safeguard provisions of most free trade agreements, a party can put duties back onto a newly duty-free product if there has been a surge in duty-free imports causing harm to domestic producers. The point of safeguards is to serve as an escape valve for the unintended consequences of free trade agreements. The problem is that imposing safeguards has a negative impact on U.S. investments in Honduran sock factories and also on U.S. cotton growers who supply those factories. This is why trade negotiations are complicated and why you can't just clone a velociraptor and expect it to go smoothly: too many variables.

I don't really have much to add to this story. Chris Walla is in a band called Death Cab for Cutie, which, despite the heavy metal name, is a probably more of a power pop band. It seems someone crossed from Canada to the U.S. with a hard drive containing music files belonging to Walla. CBP apparently seized the merchandise as a commercial importation that was not properly declared. According to CBP, this had something to do with entering at the wrong port although I am not sure why one could not properly declare it at any port, but I rarely deal with passenger issues. Walla seems to have gone a bit ballistic and unfairly tarred CBP with the spectre of a political motive. Walla has the data, if not the HDD and, I assume, everyone is now playing nice.

Lastly, CBP pushed out another notice on how to support a claim under an FTA. If you read this blog reasonably often, you know this is making me nuts. This one relates to textiles and includes this gem:

Upon the request of CBP, importers who make trade preference claims for textiles and wearing apparel must provide sufficient records to substantiate their claims that goods meet the preference rule of origin for a country that has a FTA or legislated trade program.

The document then goes on to detail the documents necessary to support a yarn-forward, fabric-forward, cut to shape, or other rule of origin. According to CBP, importers should gather affidavits in support of these claims.

I get it: CBP wants importers to do this as part of exercising reasonable care. I also get that it makes verification much easier for CBP if they can get to the importer rather than the have to deal with the exporter. Finally, I get that CAFTA-DR, Australia, Chile, and other agreements have this sort of importer centered certification. But it is not true for NAFTA. Unless I missing something fundamental, NAFTA remains an exporter-based verification system.

I have said this before, but it strikes me that the U.S. should go back to Canada and Mexico and ask to change the rule to be consistent with the other trade agreements. I suspect Canada and Mexico are not interested. If that is true, maybe we should all proceed with the rules that were negotiated and let the importer rely on a reasonable review of the information within the four corners of the Certificate of Origin and leave it to the exporter to prove the claim.

I am willing to be convinced that I am wrong about this. If I am missing something, let me know.

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