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PRACTICAL TRADE & CUSTOMS STRATEGIES

October 31, 2012 Volume 1, Number 4

Import Trade Report Shows Positive Mid-Year Growth

By Linda Zhang (Thomson Reuters) Data from the U.S. Customs and Border Protection (CBP) on import trade trends reveal positive signs of growth in the first six months of this fiscal year. By the end of the first half of the fiscal year, which spanned from October 1, 2011 to March 31, 2012, import values reached nearly $1.2 trillion, up by 10 percent over levels at the same point twelve months ago and higher than in the same period two years prior. If the trend continues, total import values by the end of the fiscal year could exceed the $2.27 trillion total of the year prior, said the report. Other highlights indicate cause for expected improved import performance by the end of the fiscal year as well. Total revenue collected reached approximately $19.1 billion by mid-year of 2012, which is about $1.5 billion higher than values at the previous mid-year, suggesting that revenue collections are on their way to exceeding totals in the fiscal year 2011. Majority of the revenue collected each year are from duties; taxes and other fees make up other revenue streams. Specifically, the total amount of duties collected in the first half of the 2012 fiscal year, landed at about $15.3 billion, which, according to the report, is also set to surpass last years levels by the end of the year. In total, the rise in import
Customs, continued on page 2

In This Issue
Mid-Year Import Trade Data
The U.S. Customs and Border Protection released its mid-year report, showcasing import trade highlights for the first half of the fiscal year. Import values, so far, show positive signs of growth compared to the same time last year. Page 1

Effect of Russian Membership in WTO

Though the particular effects of Russias recent entry into the World Trade Organization will unravel over time, the regulatory framework within which Russian businesses operate in export markets will certainly change, presenting both opportunities and challenges for Russian and nonRussian businesses. Page 1

EU, U.S. to Talk FTA Next Spring

Russia in the WTO: Challenges and Opportunities for Businesses

By Renato Antonini and Eva Monard (Jones Day)1 On August 22, 2012, the Russian Federation (Russia) became the 156th member of the World Trade Organization, after 19 years of negotiations. This event marks the accession of the last major world economy to the international trading regime. A lot has been written and said about Russias accession, by Russian and non-Russian persons, by proponents and opponents, by academics and by businessmen. There have been several studies, opinions, assessments and projections about the consequences of accession on Russias economy and on the economy of other WTO members, in the short term and in the long term. Some have questioned the immediate impact of membership on Russia and other WTO members while others state that it cannot be overestimated. Many
Russia, continued on page 13 Practical Trade & Customs Strategies

Rumors confirmed, officials have publically announced that the European Union and United States will launch negotiations for a transatlantic trade agreement starting early next year, a deal aimed to boost much-needed economic growth in both regions. Page 12

WTO Approves Laos Membership

With a final approval to join the WTO, Laos is on its way to become a full member of the international trade organization. While membership would open the land-lacked country access to more markets, Laos may also face potential challenges in meeting its trade ambitions and making the most of its role in the WTO. Page 11

Thomson Reuters/WorldTrade Executive 2012

Trade Deals
of service industry companies in Washington last month. We also know ... where the obstacles are and how to resolve them. But both sides appear likely to leave much of the highly sensitive agricultural sector out of the agreement altogether, diplomats say. Washington maintains a 15-year-old ban on EU beef imports imposed because of American concerns about mad-cow disease. The European Union says the ban breaks World Trade Organisation rules. The United States, in turn, faces prohibitively high tariffs for its beef and pork products, running into Europes complex definitions of high-quality meat. Genetically engineered foods are also contentious, with the United States in favor of developing the industry but with the European Union against. They will not be part of the deal, said one EU diplomat in Brussels. o

Russia Trade
Russia, from page 1

have claimed it will work to the benefit of some Russian industry sectors and to the disadvantage of others. Probably, only time will tell what the exact consequences of the entry into the WTO will be for the Russian economy. However, one thing is for sure. The regulatory framework within which Russian businesses operate in export markets as well as the regulatory framework governing competition from foreign industries on the Russian domestic market will change tremendously. The impact of Russias accession to the World Trade Organization will largely depend on how companies, Russian and non-Russian, will take advantage of this regulatory framework. Indeed, this new reality will at the same time provide businesses with great opportunities and confront them with great challenges. Whether and how Russian companies will reap the benefits of accessing the multilateral trading system will depend to a large extent on whether or not they choose to take and seize these opportunities and whether or not they are willing to face and overcome these challenges. The decisions Russian firms will make in this respect might strongly affect their competitive position vis--vis their domestic and international competitors. The impact of Russias accession on other economies will obviously depend on the approach taken by Russian companies, but will also depend on the way in which non-Russian businesses face competition from Russian firms in their home markets and on the extent to which these non-Russian business will take advantage of the increased access to the Russian market. The New Regulatory Framework By joining the WTO, Russia has committed to abiding to the WTO rules and principles in accordance with its Protocol of Accession and its

specific Schedules of Commitments. Obviously, these WTO rules apply on a reciprocal basis and other WTO members would also have to observe these basic rules and principles in their relations with Russia. Moreover, the WTO Dispute Settlement Body will allow Russia to hold its WTO partners accountable for adhering to these WTO rules. Also, other WTO members will use this system to ensure Russias adherence to these principles in conducting their trade relations. The dispute settlement mechanism enforces the obligations agreed upon within the WTO and aims to give all WTO members confidence that the agreements negotiated and agreed will be respected. These basic rules and principles of the multilateral trading regime include a strong preference for tariff measures, rather than for non-tariff measures. The rules provide for a prohibition to use so-called quantitative restrictions (with some exceptions). Trade protection through import tariffs is certainly allowed, but WTO members commit not to raise these tariffs above the level agreed upon at the time of their accession and to lowering them further to the WTO negotiations. Furthermore, a WTO member may not discriminate between its trading partners who are also WTO members, giving them equally mostfavoured-nation or MFN status. This principle thus provides for nondiscriminatory treatment of imports of goods and services. This also implies that the same tariffs are in principle to be applied with all other WTO members. Furthermore, WTO members may not discriminate between their own and foreign products, services or nationals, giving them national treatment. Consequently, imported and locally-produced goods should be treated equally, at least after the foreign goods have entered the market. This principle also applies to taxation.
Russia, continued on page 14 Thomson Reuters/WorldTrade Executive 2012 13

Practical Trade & Customs Strategies

Russia Trade
Russia, from page 13

Companies operating in industry sectors of economies of other WTO members that were shielded from their Russian competitors by non-trade barriers will thus face increasing competition from Russian companies.

In addition, the WTO imposes rules governing the imposition of anti-dumping, anti-subsidy and safeguard measures, or so-called trade defence measures, that can temporarily increase the duties in force on imports of particular products from particular countries. Also, the use of health and sanitary measures and technical standards is subject to strict rules. The WTO rules go beyond mere trading rules and will affect customs procedures, licensing and certification rules and procedures, the protection of intellectual property, and the area of government procurement. Challenges and Opportunities for Russian Businesses Focused on the Russian Domestic Market and Non-Russian Export-oriented Businesses Russian businesses are likely to be confronted with stronger competition from non-Russian companies on their domestic market. Russias WTO accession will result in increased access to the Russian market for international companies. This relates, inter alia, to the reduction of tariffs and the binding of the tariff levels. WTO accession will require Russia to lower its import tariffs and to rationalize its tariff system. The exact changes will differ significantly depending on the sector concerned. For some sectors, the most important change might not be the reduction in tariffs as such, but rather the fact that the tariff rates will be fixed whereas in the past, tariff changes were often used as a means of shielding the Russian domestic industry from unwanted competition. In addition, some of the most important advantages for companies who import goods into Russia will probably derive from the greater level of transparency which will be achieved through WTO accession. WTO accession of Russia will improve the Russian business climate which has so far often not been transparent and instead, unpredictable. The accession is likely to result in more openness and stability. The accession of Russia significantly expands the geographical coverage of WTO rules. After Russias accession, all major economies are governed by these rules, which will enhance stability and transparency of the international trading system overall. The market access to the Russian economy is, however, not unlimited. There are still legitimate ways to protect certain sectors and industries and there are still WTO-compliant ways for the Russian government to support its domestic businesses. For some of these possibilities, the initiative lies with the Russian companies themselves.
Thomson Reuters/WorldTrade Executive

An anti-dumping or anti-subsidy investigation that can lead to the imposition of important import duties, for instance, will in principle be initiated further to a request by the domestic industry. In addition, the Russian government is likely to maintain certain sector-based protection mechanisms. These might be challenged by other WTO members, further to the request of their exporting companies. Exporters will thus have an important role in scrutinizing Russian compliance with its WTO obligations. Russian companies, in turn, have an interest in supporting their government in demonstrating the WTO-compliance of such mechanisms. Sometimes, certain changes to the exact wording of the mechanism or to the implementation thereof might be sufficient to make these WTO compliant. The challenging environment on the domestic market will in a way also create opportunities for Russian firms. Those firms that analyze the new regulatory framework and the consequences on their business will more easily adapt to the reality and will have an important advantage as compared to their domestic competitors. Challenges and Opportunities for Non-Russian Businesses Focused on their Domestic Market and for Russian Export-oriented Businesses Russias WTO accession provides Russian companies with increased market access on export markets. Tariffs applied by WTO members on imports from Russia have to be lowered and existing trade restrictions (including quotas) on several products will disappear. WTO membership ensures Russia with non-discriminatory treatment of its exporters in the markets of other WTO members. Russian exporters that are being treated differently from other exporters or from domestic companies can, under certain circumstances, call upon their rights under the WTO Agreements. Since Russian exporters already had access to most of the tariff benefits through Russias bilateral trade relations with WTO members, the reduction and/or elimination of nontariff barriers is likely to account for most of the benefits of liberalization for the Russian economy, rather than the decrease in tariffs. Companies operating in industry sectors of economies of other WTO members that were shielded from their Russian competitors by nontrade barriers will thus face increasing competition from Russian companies. The WTO framework, however, still provides for certain mechanisms which allow some sort of protection against
Russia, continued on page 16 October 31, 2012

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In This Issue

In This Issue
Russia Trade Russia in the WTO: Challenges and Opportunities for Businesses By Renato Antonini and Eva Monard (Jones Day).............................................................................................page 1 Trade Report Import Trade Report Shows Positive Mid-Year Growth By Linda Zhang (Thomson Reuters)....................................................................................................................page 1 WTO Year-End Trade and Tariff Data Show Overall Growth in Exports By Linda Zhang (Thomson Reuters)...................................................................................................................page 8 Canada Trade Yogurt Wars: Chobani Enters Canadian Market By Peter Hayden (McDonald & Hayden LLP)....................................................................................................page 3 Trade Deals Colombia and China Agree to Explore Possibility of Negotiating a Bilateral FTA By Justin S. Miller (White & Case LLP)............................................................................................................page 3 EU Opens Door to Japan Trade Talks, New Era of Deals By Robin Emmott and Francesco Guarascio (Reuters).......................................................................................page 7 EU, U.S. to Negotiate Free-Trade Deal in Spring 2013 By Robin Emmott and Doug Palmer (Reuters).................................................................................................page 12 Sanctions Implementation of US Sanctions Against Iran Marks Significant Extraterritorial Expansion ByRonald I. Meltzer,David J. Ross,David M. Horn(WilmerHale LLP)..........................................................page 4 Exclusive: Shell Seeks Iran Sanctions Workaround Via Cargill Grain Barter By Richard Mably (Reuters)................................................................................................................................page 6 Trade Disputes WTO Hands Obama Victory in U.S.-China Steel Case By Tom Miles and Rachelle Younglai (Reuters)..................................................................................................page 9 Mexico Files WTO Dispute over Chinese Textile Subsidies By Reuters...........................................................................................................................................................page 11 Tariffs Brazil Raises Tariffs, Cites Global Economy By American Association of Exporters and Importers......................................................................................page 10 WTO Membership Laos Set to Join World Trade Organization by 2013 By Linda Zhang (Thomson Reuters)..................................................................................................................page 11

Practical Trade & Customs Strategies

Thomson Reuters/WorldTrade Executive 2012

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Russia Trade
Russia, from page 14

imports under certain circumstances, for instance trade defence measures. Such measures were already applied against Russian exports in the past. However, in view of the obligation to remove many other protective mechanisms, the use of trade defence measures against Russian products is likely to increase. The domestic industry in certain sectors might have a strong interest in monitoring imports from Russia closely. The entry into the WTO provides Russian exporters with equal status with other WTO members in such anti-dumping, anti-subsidy and/or safeguard procedures. This element might also result in the possibly of existing discriminatory trade defence measures against Russian exporters. Russian exporters that are being confronted with such trade defence measures might have an interest in asking for a review, to be conducted in accordance with the rules of the WTO.

1 The views adopted in the present article represent the personal opinions of the authors and not the position of Jones Day.

Renato Antonini (rantonini@jonesday.com) is a Partner and Eva Monard (emonard@jonesday.com) is an Associate in the Brussels office of Jones Day. Mr. Antonini focuses on EU trade and WTO laws relatingto trade protection measures and dispute settlements. He has extensive experience in EU and Italian customs and export control law, including tariff classification, customs valuation, dual-use goods, and sanctions. Ms. Monards practice focuses on WTO law and EU trade, export controls, and customs law. She has assisted clients in EU trade defense investigations involving antidumping, anti-subsidy, safeguard, and anti-circumvention issues as well as in a full range of other trade matters.

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October 31, 2012