OVERCOMING REGULATORY HURDLES IN A GLOBAL MARKET:

MONITORING FOREIGN COMPLIANCE WITH WTO AND U.S.

FTA TECHNICAL BARRIERS TO TRADE (TBT) AGREEMENTS

Bryan O’Byrne

October 16, 2007

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Today’s presentation:

Introduction to trade agreements Trade agreements compliance: a top

priority in the U.S. Department of Commerce.

Role of the Trade Compliance Center (TCC) WTO TBT Agreement and Compliance Concrete examples of TCC strategies in

action U.S. FTA/TBT Agreements Questions & Answers

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What is a trade agreement?What is trade agreements compliance?

Legal commitment to expand commerce between two or more countries and increase predictability in the conduct of international commerce.• Tariffs (customs taxes and fees)• Non-tariff barriers (regulatory barriers)

Ensuring foreign countries comply with U.S. trade agreements to level the international playing field

Top priority for U.S. Department of Commerce

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Trade Compliance Center

Coordinates ITA’s monitoring of and compliance with U.S. trade agreements

Trade Agreements Compliance Program has 3 elements:• Pro-active Monitoring• Compliance Action• Outreach

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What kinds of trade barriers do our clients face?

Excessive tariff and customs barriers

Discriminatory rules of origin, certificates of origin, or import licensing requirements

Burdensome standards, testing, labeling, or certification requirements

Lack of Intellectual Property Rights protection

Non-transparent government procurement contracts

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Compliance Action

Identify unfair treatment

Organize trade compliance team of industry experts, legal counsel, and foreign commercial officers

Apply WTO/FTA agreement analysis

Set success goal and craft action plan

Implement plan

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Other Agencies

Country Desk Officer

Trade Agreement Specialist

General Counsel

Officers at Embassies/Consulates

Trade Specialist at U.S. Export Assistance Center

Market Access and Compliance

Team

Industry Specialist

Case Team is Formed

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Additional Diplomatic Tools: Meetings with foreign officials Phone calls and letters Non-papers Demarches Visits by Washington officials

Team uses leverage of relevant trade agreements: Bilateral discussions Multilateral/ WTO fora FTA negotiations

Implementation of Action Plan

As a last resort: Team may recommend referral to USTR for WTO Dispute Settlement Body when appropriate

Team escalates the issue by bringing the full weight of the U.S Government to resolve

the issue

Working for a Solution

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Spotting Potential Technical Barriers to Trade:

Standards (voluntary): U.S. policy supports a “market-driven approach” to standards development; aversion to governments “choosing winners” (i.e., industrial policy) Documents that lay down product characteristics;

related processes; applicable administrative provisions.

Includes terminology; symbols; packaging; labeling Technical Regulations (mandatory standards):

Potential Compliance Concern Conformity Assessment: (e.g., mandatory testing,

sampling; approvals; inspection, registration, and verification) Potential Compliance Concern

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Key provisions of the WTO Agreement on Technical Barriers to Trade (TBT)

Ensure that technical regulations are not prepared, adopted, or applied with the effect of creating unnecessary obstacles to trade

Provide non-discrimination: national treatment (NT); most favored nation (MFN)

Base technical regulations on relevant international standards as much as possible

Fulfill legitimate regulatory objectives in a manner that is no more trade-restrictive than necessary

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Key provisions of the WTO Agreement on Technical Barriers to Trade (TBT)

Transparency:

• Establish and maintain a national inquiry point• Notify draft regulations to the WTO Secretariat• Provide copies of technical standards and

conformity assessment procedures (upon request)• Allow for a comment period while amendments

can be still be introduced • Take written comments/discussions into account

in the final regulation • Allow producers an interval between publication

and entry into force to adapt to new requirements

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WTO Committee on Technical Barriers to Trade

Monitors the implementation and administration of the TBT Agreement.

Usually meets three times a year.

Provides Members the opportunity to raise specific trade concerns in full Committee or in informal bilateral meetings “on the margins.”

Prepares Triennial Reviews of the Agreement

Conducts Workshops.

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Common TBT compliance problems

No transparency in regulatory process

No notification of proposed regulation

Notified the day before or after implementation

More restrictive measure than necessary

An alternative standard or testing requirement will facilitate trade and meet regulatory requirements

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Case 1: Switzerland Diesel Filter Regulation

A U.S. auto association expressed concern over a draft Swiss ordinance that would create burdensome emissions standards and require the use of special filters on all diesel cars.

The U.S. Government raised the issue at the WTO Committee on Technical Barriers to Trade, questioning if the draft ordinance was based on sound science and its consistency with international standards.

Subsequently, Switzerland retracted the draft ordinance.

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Case 2: Taiwan Excessive Packaging Regulation

Commercial Service (Taipei) reported new draft regulation on excessive packaging.

TCC sent out early warning and advised U.S. industry to comment via U.S. Inquiry Point.

Team raised concern that Taiwan authorities: notify the WTO TBT Committee address comments before final draft

Taiwan agreed to narrow scope of regulation. Team followed-up with Taiwan at the WTO to

ensure full compliance with TBT Agreement.

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Case 3: China Redundant Medical Device Product Registration & Factory Inspections

U.S. industry association complains that two separate Chinese ministries, AQSIQ and SFDA, require duplicative and costly medical device product registration certifications and factory inspections.

Compliance team raises concerns in bilateral meetings in preparation for the 2006 U.S.-China Joint Commission on Commerce and Trade (JCCT).

Team convinces other U.S. agencies that the USG should cooperate with EC. The United States and EC urge China to implement less trade-restrictive rules in the WTO Technical Barriers to Trade Committee.

Success Milestone: Chinese Vice Premier commits to eliminating the duplicative requirements. Team continues to press for specific revisions to regulations.

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Case 4: EC REACH Chemical Regulation:

Under REACH, 30,000 chemicals will require registration, and for the most dangerous, an authorization must be obtained.

Obligations apply not only to chemicals companies, but to any business which uses chemicals in its products and sells into the European Union

Registration: Chemicals manufactured or imported into the EU in volumes above 1 metric ton per year must be registered with the new European Chemicals Agency based in Helsinki, Finland

Companies must submit information on the properties of their substances; their uses; and safe handling in a: 1) technical dossier (for substances of 1 ton or more per year) and/or 2) chemical safety report for substances above 10 tons

Registration applies to substances as such; in preparations (or mixtures); and under certain conditions, in articles (or finished products) incorporating those substances.

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EC REACH Chemical Regulation (continued)

Registrants must be established in the EU. In the case of a non-EU based company, the importer can take care of the registration. Though US-based companies have no direct obligations under REACH, it is important, for compliance, that they understand the obligations of their importer and provide him with all the necessary support to submit relevant information to the Agency.

Non-EU manufacturers also have the option to appoint an EU-based representative for the purpose of registration, called the “only representative.”

Entry into force: June 1, 2008, However, for substances that are already on the EU market (so-called phase-in substances), a temporary exemption from the June 1, 2008 deadline applies. Delayed registration deadlines only apply to pre-registered “phase-in substances” and only to companies that have pre-registered their substances.

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EC REACH Chemical Regulation (continued)

Authorization applies to “substances of very high concern” for human health and the environment (SVHC). The stated objective is for these substances to be adequately controlled and that they are progressively replaced (substitution) by safer alternatives or only used where there is an overall benefit for the society of using them.

Evaluation: The Agency will do a compliance check of at least 5% of the dossiers submitted for registration. As a result, registrants may have to provide additional information.

Restriction: Places burden on industry to prove the safety of chemicals placed on the EU market. As as a result, the regulation allows the EU to take additional measures to control or restrict the use of dangerous substances.

Any substance on its own, in a preparation, or in an article may be subject to EU-wide restrictions.

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U.S. Statement on EC REACH in the WTO

The United States shares the EU's interest in ensuring robust protection of the environment and human health. The United States also appreciates and understands the EU's interest in gaining information on chemicals currently in use, in facilitating the introduction of new, cleaner and safer chemicals, and in striving to improve the EU-wide system for regulating chemicals.

We are concerned, however, that the European Commission's draft chemicals regulation still appears to adopt a particularly costly, burdensome, and complex approach, which could prove unworkable in its implementation, disrupt global trade, and adversely impact innovation. The proposal also appears to discount substantial resource constraints facing governments and industry.

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U.S. Statement on EC REACH (continued)

Small manufacturers, who account for 95% of the EU's chemical firms and the majority of U.S. firms, would face a relatively larger burden in complying with REACH. We remain concerned about the ability of smaller companies, especially non-EU firms, to comprehend and comply with the administrative requirements of REACH. The proposal places all SMEs at a distinct disadvantage because most do not have the resources or the capital to meet REACH's administrative requirements.

Some EU and foreign manufacturers of chemicals and downstream products may simply exit the EU market, reducing competition in the marketplace. Finding ways to reduce regulatory and administrative burdens will be important in assuring continued SME access to this market.

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U.S. Statement on EC REACH (continued)

To better achieve its objectives, we continue to strongly encourage the EU to: 1) reduce the scope of aspects of the regulation to better focus scarce resources on substances that are likely to pose the highest risks and ensure a robust, science-based regulation; 2) develop an EU approach which supplements -- and does not supplant -- ongoing international cooperative efforts to effectively address the risks posed by existing chemicals; 3) clarify, simplify, and enhance transparency concerning the process by which regulatory decisions will be made; and 4) ensure that the EU regulation's impacts -- both positive and negative -- are fully and transparently assessed.

As the EU Council and European Parliament consider and revise the Commission's proposed regulation, these European institutions should also ensure that the approach is fully consistent with the EU's WTO obligations.

Reference: http://useu.usmission.gov/Dossiers/Chemicals/Jul1003_Chemicals_Comments.asp

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U.S. FTA/TBT Agreements

Affirm WTO Agreement plus additional disciplines:• International Standards: ”open, transparent, and impartial”• Trade Facilitation: intensify cooperation for market access• Conformity Assessment: explain non-acceptance (on request)• Transparency:

1) allow persons to participate on non-discriminatory basis 2) send TBT notifications to WTO and FTA partner 3) notification must explain regulatory objectives and approach4) provide additional information (on request)5) publish significant comments in final regulation

FTA/TBT Coordinators or Committee: monitor administration and implementation of the Agreement

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Tools for Monitoring

Official National Register or Gazette WTO Enquiry Point:

http://www.wto.org/english/tratop_e/tbt_e/tbt_enquiry_points_e.htm

National Regulatory Agencies National Standard Development

Organizations American Chamber of Commerce, Local

Trade Associations Foreign Press and Foreign Trade Press Interagency Compliance Team at Post

Trade Complaint “Hotline” Checklist of common trade concerns Over 270 trade and related agreements Exporter Guides: quick, concise explanations of

individual trade agreements Market Access News WTO Standards Notifications—Notify U.S. Mailing List: Subscribers receive weekly

“What’s New” e-mail update on trade-related news

TCC On-Line Websitewww.trade.gov/tcc

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www.trade.gov/tcc

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Summary

Trade agreements Trade Compliance Center services Monitoring and compliance advocacy WTO TBT Agreement Common compliance problems Concrete examples of strategies in acti0n U.S. FTA/TBT Agreements Useful tools and contacts

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Thank You

For questions on WTO and U.S. FTA TBT Agreements and Compliance, contact:

Bryan O’ByrneTrade Compliance CenterBryan_O’Byrne@ita.doc.gov(202) 482-0705