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Wednesday, November 27, 2013

The Consumer Product Safety Commission (CPSC) and International Trade: Legal Issues

Brandon J. Murrill
Legislative Attorney

Most consumer products within the jurisdiction of the U.S. Consumer Product Safety Commission (CPSC) are imported into the United States. The CPSC is the central, federal authority for the promotion and enforcement of consumer product safety. In 2008, following several well-publicized national recalls of toys and children’s products, many of which contained lead, Congress passed the Consumer Product Safety Improvement Act (CPSIA), which included provisions addressing the CPSC’s role in ensuring the safety of imported and exported consumer products.

With regard to import safety, the CPSC acts in coordination with U.S. Customs and Border Protection (CBP), Department of Homeland Security, to evaluate the safety of consumer products offered for import into U.S. customs territory. Working together with CBP, the CPSC attempts to identify shipments that are likely to contain consumer products which violate import provisions that the agency enforces. The CPSC also determines whether to admit certain consumer products offered for import into U.S. customs territory. Importers of products manufactured outside of the United States must certify that finished products comply with all rules, bans, standards, or regulations applicable to the product under any act enforced by the CPSC.

The export of consumer products from the United States to foreign countries may also be subject to regulation by the CPSC. In the CPSIA, Congress provided that, among other things, the CPSC may prohibit the export from the United States for the purpose of sale any consumer product that violates a safety rule under the Consumer Product Safety Act (CPSA) unless the importing country informs the CPSC that it accepts the importation of the consumer product.

In addition to domestic laws pertaining to the CPSC’s regulation of the import and export of consumer products, the United States has also agreed to undertake certain international obligations with respect to the promulgation of standards-related measures (e.g., product safety regulations) by its central government bodies, including the CPSC. These obligations are found in several international agreements to which the United States is party, including the multilateral World Trade Organization (WTO) Agreement on Technical Barriers to Trade (TBT Agreement), as well as bilateral and regional U.S. free trade agreements (FTAs). Among other things, the TBT Agreement establishes rules pertaining to the promulgation of technical regulations by central government bodies like the CPSC, including rules concerning nondiscrimination, transparency, and reliance on international standards as a basis for regulations. U.S. FTAs also contain additional obligations for certain parties with regard to transparency. Standards-related trade obligations have been implemented in U.S. law, particularly in the Trade Agreements Act of 1979.

In the 113
th Congress, H.R. 1910, the Foreign Manufacturers Legal Accountability Act of 2013, would require the Chairman of the CPSC to mandate that certain foreign manufacturers and producers of consumer products distributed in commerce establish a registered agent in the United States to accept service of process on behalf of such manufacturer or producer for the purpose of any state or federal regulatory proceeding or civil action related to the product.

Date of Report: November 5, 2013
Number of Pages: 20
Order Number: R43297
Price: $29.95

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Monday, November 25, 2013

U.S. Foreign-Trade Zones: Background and Issues for Congress

Mary Jane Bolle
Specialist in International Trade and Finance

Brock R. Williams
Analyst in International Trade and Finance

U.S. foreign-trade zones (FTZs) are geographic areas declared to be outside the normal customs territory of the United States. This means that, for foreign merchandise entering FTZs and reexported as different products, customs procedures are streamlined and tariffs do not apply. For products intended for U.S. consumption, full customs procedures are applied and duties are payable when they exit the FTZ.

In 1934, in the midst of the Great Depression, Congress passed the U.S. Foreign-Trade Zones Act. It was designed to expedite and encourage international trade while promoting domestic activity and investment. The U.S. FTZ program offers a variety of customs benefits to businesses which combine foreign and domestic merchandise in FTZs. Similar types of “zones” exist in 135 countries, employing about 66 million workers worldwide. Though some aspects differ, all have streamlined customs procedures and no duties applicable on components and raw materials combined in zones and then exported. Use of the zones can facilitate cooperative international production for a substantial share of the global supply chain.

U.S. FTZs can affect the competitiveness of U.S. companies by allowing savings through (1) duty reduction on “inverted tariff structures” (where tariffs are higher on imported components than on finished products); (2) customs and inventory efficiencies; and (3) duty exemption on goods exported from, or consumed, scrapped, or destroyed in, a zone. Though difficult to achieve, other possible alternatives, such as broad-based tariff reductions through multilateral negotiations, and overall customs reform might provide some of the same competitive advantages as zone use in a more efficient manner, while also ensuring that all importers have equal access.

Zone activity represents a significant share of U.S. trade. In 2012, over 13% of foreign goods entered the United States through FTZs or bonded warehouses—72% of them as crude oil. Most shipments arriving through FTZs were consumed in the United States; the rest were exported. Crude oil byproducts such as gasoline, diesel, jet fuel, kerosene, and petrochemicals dominate FTZ output. Other key products include autos, consumer electronics, and machinery. U.S. zone activity occurs primarily in FTZ manufacturing operations.

Administration of the U.S. FTZ system is overseen by the Secretaries of Commerce and the Treasury, who constitute the U.S. FTZ Board. The Board is responsible for the establishment of zones, the authorization of specific production activity, and the general oversight of zones. It also appoints an Executive Secretary, who oversees the Board’s staff. Homeland Security’s Customs and Border Protection (CBP) directly oversees FTZs. It activates the zones and secures and controls dutiable merchandise moving into and out of them. CBP oversight also includes both protection of U.S. tariff revenue and protection from illegal activity through screening, targeting, and inspections.

In 2012, the U.S. FTZ Board issued new regulations. They focused primarily on streamlining the application procedures and shortening, generally from a year to four months, the time for FTZ approval for manufacturing. 

Congressional Interest 

Congress has demonstrated a continuing interest in U.S. Foreign Trade Zones (FTZs), as they (1) may help to maintain U.S. employment opportunities and the competitiveness of U.S. producers;
(2) encompass a portion of U.S. trade; and (3) affect U.S. tariff revenue. U.S. FTZs account for less than one-half of 1% of all world zone workers and a small share of the U.S. workforce. However, most of this employment is in manufacturing, which has lost a significant share of its workers over the past several decades. Today, every state has at least one FTZ, and many have numerous manufacturing operations.

Current issues for Congress relating to the U.S. FTZ program may include (1) whether U.S. FTZs encourage a misallocation of U.S. resources; (2) data availability issues; (3) security concerns; and (4) the U.S. employment and global competitiveness impact of FTZs. Broader considerations relating to the world zone network include (5) the effectiveness of trade zones worldwide as a tool for economic development; and (6) trade zones worldwide and worker rights.

Date of Report: November 12, 2013
Number of Pages: 32
Order Number: R42686
Price: $29.95

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Friday, November 22, 2013

The Organization for Economic Cooperation and Development

James K. Jackson
Specialist in International Trade and Finance

The Organization for Economic Cooperation and Development (OECD) celebrated its 50th anniversary in 2011, a time when the global economy was struggling to recover from the financial crisis and slow economic growth. The OECD is an intergovernmental economic organization in which the 34 member countries discuss and develop key policy recommendations that often serve as the basis for international standards and practices. In addition, the OECD members analyze economic and social policy and share expertise and exchanges with more than 70 developing and emerging economies. The 34 member countries include Australia, Austria, Belgium, Canada, Chile, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea, Luxembourg, Mexico, The Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, United Kingdom, and the United States. While all of the member countries are considered to be economically advanced and collectively produce 60% of the world’s goods and services, membership is limited only by a country’s commitment to a market economy and a pluralistic democracy. The OECD also has extended an invitation to the Russian Federation for membership, which includes meeting rigorous best practices relative to anti-bribery and anti-corruption standards. Furthermore, the OECD works with other potential partners such as Brazil, China, India, Indonesia, and South Africa with a view toward possible membership.

The member countries rely on the OECD Secretariat in Paris to collect data; monitor trends; analyze and forecast economic developments; and research social changes and patterns in trade, environment, agriculture, society, innovation, corporate and public governance, taxation, sustainable development, and other areas to inform their discussions and to assist them in pursuing their efforts to develop common policies and practices. Following the financial crisis, the OECD played a major role in providing cross-country analyses of market reforms and programs to stimulate growth. The United States has sparred periodically with other OECD member countries over various issues, including U.S. antidumping laws and the size of the U.S. financial contribution. Karen Kornbluh was appointed in 2009 by President Obama to serve as the U.S. Ambassador to the OECD. She stepped down as Ambassador and Daniel W. Yohannes was nominated to serve as the next U.S. Ambassador to the OECD. Key issues for Congress include OECD work on coordinating national approaches to curtailing bribery and the illicit use of tax havens. Congress appropriated about $82.2 million to the OECD in FY2013; the budget request for FY2014 was $83.2 million. 

Date of Report: October 30, 2013
Number of Pages: 128
Order Number: RS21128
Price: $29.95

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