Fashion Intel & Analysis

In this TDM:

TEXTILE DEVELOPMENT MEMO
(Prepared by Brenda A. Jacobs and Pete Kasperowicz, Sidley Austin LLP)

Treasury Delays April Currency Report

In typical Washington good cop-bad cop fashion, while Congress threatens China over its currency policies, the Administration has called a time-out, delaying by at least three months the report on currency manipulation that was due to be issued April 15.

Treasury has been under pressure from Congress to cite China as a currency manipulator in its April report on foreign currency practices, pressure that includes warnings from the Senate that legislation might be pursued if Treasury failed to cite China. Treasury was under similar pressure during the Bush Administration, and managed to avoid both citing China and legislation. This time, however, Treasury got around the problem at least in the short term by saying meetings over the next few months might lead to some progress in getting China to let the value of the renminbi appreciate.

In a Saturday statement, Treasury cited three reasons for delaying the report: 1) this month's G-20 meeting of finance ministers and central bank governors in Washington, 2) the next Strategic and Economic Dialogue (expected in May), and 3) the G-20 finance and leaders meeting in June. Treasury Secretary Tim Geithner said he thinks these meetings are "the best avenue for advancing U.S. interests at this time." Click here to read the statement.

But there is also speculation that Chinese President Hu Jintao's visit to Washington next week was a factor, as well as China's decision last week to agree to start substantive talks on a United Nations resolution that would tighten sanctions against Iran. While the White House has denied any link between currency and Iran, China’s participation in the UN process is critical and has long been sought by the Obama Administration, and it seems unlikely China would agree to cooperate with this U.S. priority in the wake of a Treasury citation. Another possible factor that went unspoken over the weekend is the expectation that China is about to allow the renminbi to appreciate very soon, and was waiting for its exports to recover before beginning the process.

Treasury's announcement prompted several members of Congress to reiterate their "bad cop" roles, notably Sen. Charles Schumer (D-NY), who said Congress would press ahead with currency legislation. House Ways and Means Committee Chairman Sandy Levin (D-MI), who has resisted legislation, said that if multilateral efforts failed legislation might be needed.

Consumers Groups Seek FTC Investigation into 'Organic' Product Claims

On March 12, the Consumers Union and the Organic Consumer Association filed a petition asking the Federal Trade Commission to investigate misleading claims that personal care products are "organic." The petition argues that the lack of a uniform standard is allowing some manufacturers to inappropriately claim their products as organic, without revealing which standard was used.

The petition has the potential to build momentum for some uniformity of standards. It follows a July 2009 decision from the U.S. Department of Agriculture that said USDA only regulates organic personal care products made with agricultural ingredients, and has "no plans" to develop standards in this area. Last November, the National Organic Standards Board, which advises USDA, voted to require USDA to certify organic personal care products, but USDA has yet to act on that recommendation. For more information, click here to see the Sidley Austin Client Alert on the USA-ITA website.

CPSC Posts More Proposed Rules, Including "15 Month Rule"

The staff of the Consumer Product Safety Commission has posted more proposed rules, including the so-called "15 month rule," which is intended to identify the testing and labeling requirements applicable to products subject to General Conformity Certificates and Third Party Certification. (It is called the 15 month rule because it was supposed to be issued no later than 15 months after enactment of the Consumer Product Safety Improvement Act (CPSIA), which was November 2009, but the CPSC determined that it needed more time to prepare the rule.) The draft proposed rules also include conditions and requirements for testing component parts. These very detailed draft rules are expected to be discussed at a public meeting of the CPSC this Thursday, although what gets published in the Federal Register for public comment may not be decided until later in the month.

Under the CPSIA's "15 month rule," the Commission shall by regulation

(A) initiate a program by which a manufacturer or private labeler may label a consumer product as complying with the certification requirements of subsection [and]
(B) establish protocols and standards— (i) for ensuring that a children’s product tested for compliance with an applicable children’s product safety rule is subject to testing periodically and when there has been a material change in the product’s design or manufacturing process, including the sourcing of component parts; (ii) for the testing of random samples to ensure continued compliance . . . .

The draft Federal Register notice lays out the proposed rule that would establish requirements for a reasonable testing program and for compliance and continuing testing for children's products. The proposal would also address labeling of consumer products to show that the product complies with certification requirements under a reasonable testing program for non-children's products or under compliance and continuing testing for children's products. A lengthy 75 day comment period is proposed – and given the complexity and detail of the proposal, that much time may be necessary for affected manufacturers, importers and sellers to fully consider their implications.

Very briefly, under the draft testing program proposal, a reasonable testing program for non-children’s products consists of five elements:

  1. A product specification that contains a description of the consumer product and lists the applicable rules, bans, standards or regulations to which the product is subject;
  2. Certification tests that provide evidence that a product identified in a product specification complies with the applicable rules, bans, standards, or regulations, based on testing of a sufficient number of samples that are identical in all material respects to the product to be distributed in commerce;
  3. a production testing plan that describes what tests must be performed and the frequency at which those tests must be performed to provide a high degree of assurance that the products manufactured after certification continue to meet all the applicable safety rules, bans, standards, or regulations;
  4. a remedial action plan that identifies the steps to be taken whenever samples of a product or a component part of a product fails a test or fails to comply with an applicable rule, ban, standard, or regulation; and
  5. a recordkeeping system to document the reasonable testing program.

More detailed rules are proposed for children’s products (which are subject to a third party testing requirement), including sufficient and random sampling for testing by an approved assessment body. (Interestingly, the CPSC staff recommends that a low volume for purposes of random testing be defined as less than 10,000 units.) Under the draft, each manufacturer also must establish procedures to safeguard against the exercise of undue influence by a manufacturer on a third party conformity assessment body.

The draft proposed rule also would allow manufacturers and private labelers of a consumer product to indicate, by a uniform label on or provided with the product, that the product complies with any consumer product safety rule, or with any similar rule, ban, standard or regulation under any other act enforced by the CPSC. Specifically, the draft rule would require “the label to be printed in bold typeface, using an Arial font of not less than 12 points, be visible and legible, and state ‘Meets CPSC Safety Requirements.’” The agency decided any other wording would not be adequate.

The proposed Federal Register notice also includes an extensive discussion of the costs of a reasonable testing program, acknowledging that the requirement for third party certification testing could be a barrier to new firms entering the children's product market, unless they expect to have relatively high volume products. The Commission invites comments on alternatives that could provide some relief to small businesses that would be adversely impacted by the proposed rule.

© Copyright 2010 USA-ITA, All rights reserved.

USTR Names New AUSTR for China

The Office of the USTR is expected to announce shortly that the current chief counsel for China trade enforcement, Claire Reade, will become the new assistant USTR for China affairs. Reade has been with the USTR general counsel’s office since 2006, and prior to that was a senior partner at Arnold & Porter LLP.

Clinton Says U.S. Committed To Finalizing ROZ Bill

Following the meeting on March 24-25th between U.S. Secretary of State Hillary Clinton and Pakistan Foreign Minister Shah Mahmood Qureshi, the two countries issued a joint statement on the U.S.-Pakistan Strategic Dialogue. According to the statement, the dialogue has been elevated to the Ministerial level, and a Policy Steering Group has been created to expand the U.S.-Pakistan dialogue on trade, the economy, and other issues. Most importantly, the statement says that the U.S. wants to finalize legislation to establish Reconstruction Opportunity Zones (ROZs), which would provide duty-free treatment for certain U.S. imports -- including apparel -- from Afghanistan and Pakistan. The ROZ legislation has been tied up in the Senate with opposition from U.S. labor groups and negotiations over product coverage and geographic coverage.

USA-ITA Congratulates Bersin and Sanchez

Following the recess appointments by President Obama, USA-ITA sent congratulatory letters to the new Customs Commissioner, Alan Bersin, and the new Commerce Department Under Secretary for International Trade, Frank Sanchez. The Bersin letter mentioned the disparity between duties on textile and apparel versus other manufactured goods, and urged working together towards more harmonized rules of origin and documentation requirements. The Sanchez letter highlighted the US-China trade relationship and the importance of the TPP negotiations. USA-ITA looks forward to working with Customs and Border Protection and the Commerce Department. Copies of the letters are available on the USA-ITA website here.

In preparation for next Wednesday's public meeting, to discuss its notice of proposed rulemaking on the CPSIA-mandated public database, the Consumer Product Safety Commission has now posted the draft notice. It is a hefty 172 pages, including an extensive response to the many comments the agency received earlier this year.

With respect to the public database, the proposal addresses the responsibility of the CPSC to provide information about an incident allegation to the manufacturer (a term that the CPSC uses to include the importer or brand owner) so that the manufacturer can respond before an allegation is made public. The statute requires the CPSC to provide information about the incident allegation to the manufacturer within 5 days of receipt by the CPSC. It also says that information should be publicly posted no later than 10 days after it has been transmitted to the manufacturer. In the draft, the CPSC staff indicates that while as a general rule, a manufacturer will have 10 days to respond, that does not mean that posting of the allegation will occur immediately following the expiration of that period. Instead, the draft notice states:

Two circumstances may delay a report of harm from being published in the public database later than 10 business days after transmission to the manufacturer or private labeler. The first circumstance is a claim of confidential information by the named manufacturer or private labeler. The second is a claim of materially inaccurate information by the named manufacture or private labeler. The staff recommends that the Commission use its discretion to delay such reports of harm to allow completion of the staff's review of the claim, if necessary.

According to the staff draft, manufacturer comments in response to the allegations also would be publicly posted with the incident report – unless they are received by the CPSC more than a year after the information was transmitted to the manufacturer.

At three locations on the website at which the database is housed -- the entrance screen for public users, on all search result displays, and on all reports printed from the public database -- the following disclaimer would appear:

The CPSC does not guarantee the accuracy, completeness, or adequacy of the contents of the database, especially information submitted by non-CPSC sources, including all information submitted on reports of harm and comments submitted by manufacturers and/or private labelers.

USA-ITA members are urged to review the draft notice closely and to provide any comments and concerns to USA-ITA. There will be an opportunity to submit comments in response to the proposed rule. Click here to download the NPRM.

© Copyright 2010 USA-ITA, All rights reserved.

TEXTILE DEVELOPMENT MEMO
(Prepared by Brenda A. Jacobs, Sidley Austin LLP)

CPSC Approves Request For Comments On Children's Products Definition, To Hold Hearing On Toxicity of Heavy Metals

The Consumer Product Safety Commission continues to be very busy. On Wednesday, the five commissioners approved, with some changes that have not yet been publicly identified, a draft proposed guidance document on how it will determine whether an article is a children's product (and thereby subject to all the additional rules that apply to children's products). That proposal will be published in the Federal Register, possibly as soon as next week, kicking off a 60 day public comment period. (Originally only a 30 day comment period was proposed, but the extended time to file comments is among the changes agreed upon so far by the commissioners.)

Also this past Wednesday, the formal notice of the civil penalty factors the CPSC will take into consideration in the event of violations of the Consumer Product Safety Act (CPSA), the Federal Hazardous Substances Act (FHSA) and the Flammable Fabrics Act (FFA) was published in the Federal Register. Therefore, those factors now govern.

Two notable events are scheduled at the CPSC next week. First, on Wednesday morning, April 7, the Commission will hold a public hearing at which it will discuss its notice of proposed rulemaking on the public database. As USA-ITA members will recall, under Section 212 of the Consumer Product Safety Improvement Act, the CPSC is required to create a web-based searchable public repository of alleged product safety failures and allegations. The website that will house this database, to be known as "saferproducts.gov," is currently scheduled to be in place by March 2011. USA-ITA plans to attend the hearing, but you can too, because the meeting will be webcast by the CPSC.

The next morning, Thursday, April 8, the CPSC will hold a hearing on the toxicity of heavy metals, including lead and cadmium. Two expert witnesses are scheduled to testify in what appears to be a step in the process toward establishing CPSC rules on the use of heavy metals in children's products. USA-ITA members with comments or questions that should be addressed during this hearing are urged to contact USA-ITA. This hearing will be accessible via the web.

© Copyright 2010 USA-ITA, All rights reserved.

The United States is the only major economy in the world that employs a "retrospective" system for assessing and collecting antidumping and countervailing duties on imports. At the direction of the U.S. Congress, the Department of Commerce’s International Trade Administration (ITA) is seeking public comment on the relative merits of the existing retrospective system versus a "prospective" system. Given the significance of the potential change to the U.S. duty assessment system suggested by this initiative, interested parties should consider submitting written comments by the deadline of April 20, 2010, and notifying the ITA of their interest in participating in a hearing on this issue by the deadline of April 13, 2010.

Click here to view the update.