"First Sale" Rule
In March 2008 we reported that the U.S. Customs and Border Protection agency (CBP) had announced a proposal to eliminate its 20-year old practice of basing import value on the first price paid by the buyer. Known as "first sale" valuation, CBP historically calculated import value based on the price paid to the manufacturer in the exporting country but has now proposed to calculate value based on the last sale of goods before they are imported to the U.S. (e.g. the importer's price). The distinction is important because import value determines customs duties and other fees and taxes, and the "first sale" typically does not include things like mark-up, costs, overhead, and profits often found in the intermediate price. Not surprisingly, U.S. importers and retailers favor the "first sale" method and argue the proposed changes would increase duties by 8-15%.
UPDATE: When we last reported on this issue, INDA was polling members of its International Trade Advisory Board (ITAB) about the possibility of joining an industry coalition of importers, retailers, trade associations and others who oppose the proposed change. Based on input from the ITAB, INDA did join this coalition which, to date, has managed to generate significant press attention as well as strong bipartisan support in Congress. Indeed, 17 Senators and 51 Members of the U.S. House of Representatives have already sent letters to CBP opposing the proposal. More than 100 submissions have been filed in response to the CBP comment request, with opponents outnumbering supporters by 8-to-1. More recently, lawmakers included a provision in the recently passed Farm Bill (H.R. 2419, the Food, Conservation, and Energy Act of 2008) expressing the "sense of Congress" that first-sale valuation should remain in place until 2011 and, after that, CBP could only implement the proposed change after consulting with Congress and the business community, and then gaining approval from the Treasury Department.
CPSC Upholstered Furniture Flammability Standard
In December 2007, we reported that U.S. Consumer Product Safety Commission (CPSC) staff was seeking approval from the agency's commissioners to publish as a proposed rule a new draft national flammability standard for upholstered furniture. The staff's latest version contains performance, labeling and certification requirements and would place all upholstered furniture offered for sale in the U.S. into one of two categories: Type I or Type II. Type I would include furniture made with cover fabrics able to pass a smoldering ignition test, while furniture whose cover fabrics either cannot pass the test, cannot be treated with FR chemicals or if manufacturers do not want to use FR-treated cover fabrics would receive the Type II designation. This furniture would have to incorporate a barrier material able to pass a smolder-resistant test and a small open-flame ignition test.
UPDATE: Since we last reported on this matter, the CPSC unanimously voted to approve the draft, and it was published as a proposed rule in the March 4 Federal Register. At press time, CPSC was accepting public comment on the proposal until May 19, 2008. To view the CPSC's proposed furniture flammability standard online, visit: http://edocket.access.gpo.gov/2008/pdf/08-768.pdf.
CPSC Reform Legislation
In November 2007 we reported that Sen. Mark Pryor (D-AR) had introduced legislation calling for major changes at CPSC in the wake of testimony regarding the Commission's limited ability to prevent dangerous and contaminated imports from entering the U.S. In addition to increasing CPSC funding and staffing, the CPSC Reform Act of 2007 (S 2045) looked to dramatically lower allowable lead thresholds in consumer products, require product labeling and independent third party safety certification, increase civil and criminal penalties for violations, give state Attorney Generals increased civil enforcement authority, limit federal preemption of state and local product safety laws and more. Of particular interest to our industry, the Pryor bill would have also specifically reversed federal preemption language included in the preamble of CPSC's 2006 Mattress Flammability Standard (an obstacle that has prevented states from setting different mattress flammability rules).
UPDATE: In December 2007, the House passed 407-0, its own version of CPSC reform legislation, the Consumer Product Safety Commission Modernization Act (HR 4040). Meanwhile, after S 2045 failed to move to the Senate floor for a vote, Sen. Pryor joined with Sen. Ted Stevens (R-AK) in introducing S 2663, a modified version of his original measure. This bill passed the Senate by a veto-proof margin this March.
Now that the two bills passed their respective chambers, they must go to legislative conference to iron out the differences between the two, which are substantial. For instance, while both bills increase agency funding and staffing, and agency enforcement and civil penalty powers, the Senate bill contains more stringent provisions related to third party testing, whistleblower protections, and calls for the creation of a public database for reports of injuries, illness, death, or risk related consumer products, while the House version does not. Conferees have been appointed in both chambers, but no formal timetable has been set for coming up with a compromise.
Harmonized System Revision for Hygiene Absorbents
Since 2006, INDA has been working to advance a proposal at the World Customs Organization (WCO) to revise the Harmonized System (HS) classification for hygiene absorbent products (i.e. diapers, sanitary pads, etc.) so they are reclassified from their current material-based classification to a function-based heading in the HS. Currently, these products are classified on the basis of their raw material content (i.e. cellulose or plastic), but due to evolution in technology–especially advances in materials science–absorbent products have become composite and, therefore, a material-based classification system is no longer relevant. In the interest of legal certainty and uniformity, INDA is looking to move these products from their current material-based Chapters (48, 56, 61 and 62) to a function-based heading in Chapter 96 of the HS, which covers all miscellaneous products.
When we last reported on this matter in September 2007, U.S. International Trade Commission (ITC) officials had agreed to advance our proposal for consideration by the WCO's Harmonized System Review Subcommittee in November 2007. According to ITC officials, the proposal was generally well-received, although a few questions were raised about the scope of the proposal. After working with INDA to clarify the language, ITC resubmitted the proposal. Although these developments are positive, the HS amendment process is a lengthy one that requires engaging each of the 171 WCO member countries and takes many years. As it stands, INDA members should not expect to see any changes until 2012 at the earliest.
Industrial Wiper Rule
INDA has been informed that the industrial wiper rule that has been under development at the Environmental Protection Agency (EPA) for more than two decades continues to inch along. At present, EPA is finalizing a request for comments that should be published in the Federal Register this fall regarding revised risk data that has been generated during the last two years. According to EPA, these risk data center on the environmental impact that could occur if soiled wipers are disposed of in landfills as regular trash. If the data does not generate controversy, EPA staff hopes to publish a final rule some time next year.
Complicating that timeline, however, is the fact that a new president will take office next January and will likely postpone action until he/she appoints a new EPA administrator.