International Trade Law News

By Mel Myers, Esq.

The Department of Defense's (DOD) proposed changes to the Defense Federal Acquisition Regulations Supplement (DFARS) to protect export-controlled information and technology was the subject of withering criticism by commenters from academia, government research institutions and military contractors.

The proposed changes to the DFARS, published in the Federal Register on July 12, 2005 (DFARS 2004-D010), was intended to impose increased controls on the access to export-controlled information and technology by foreign citizens and foreign nationals. Highly publicized cases, such as Dr. Abdul Qadeer (A.Q.) Khan's theft of sensitive technology from a commercial lab in The Netherlands in the 1970s, that gave a huge lift to Pakistan's successful production of a nuclear weapon, have sparked renewed concern among high-technology nations that their foreign-born researchers could be threats to national security. DOD conducted a study that included visits to twenty of the target facilities(federally funded research and development center facilities, military contractors and universities) and determined that export-controls were not being adequately adhered to or were not properly understood (The Bureau of Industry and Security (BIS) has made similar findings), which prompted the proposed changes to the DFARS.

The proposed changes to the DFARS would impose a number of new requirements on government contractors in order to prevent the unauthorized transfer of export-controlled technology or information to foreign nationals in the U.S. In addition, DOD contracting officers would be charged with identifying all export-controlled technology and information in the contract with the federally funded entities.

In their comments on the proposed change, industry and academia (more than 130 comments were submitted) universally condemned the proposed amendment and its implementing language as "unworkable," "unpoliceable" and dangerous to DOD's "ability to access the science and technology needed to defend this nation." Commenter after commenter asserted that the new regulations would be extremely burdensome and costly, cause innumerable conflicts with existing regulatory regimes (e.g,. EAR and ITAR), and would put contracting officers at DOD in positions where they will have to make decisions based on regulations far outside of their area of expertise. Many of the comments noted that trained officers at BIS and the State Department's Directorate of Defense Trade Controls (DDTC) are far more skilled and versed in the intricacies of export controls than those at DOD. Universities were particularly critical of the proposed changes, arguing that it would make impossible the recruitment and open exchange of ideas with foreign scientists that have given the U.S. the technological advantage it enjoys presently. Many universities also noted that foreign scientists have all the technological know-how and access to equipment already to far surpass the U.S. in many if not most technological fields.

Finally, and perhaps most importantly to the fate of the proposed rule, many commentators declared that the proposal was illegal because it violated the Presidential Directive on the Transfer of Scientific, Technical and Engineering Information (Directive NSDD-189) that was implemented during the Reagan Administration and has been embraced by all subsequent administrations. The policy states, in part, that: "No restrictions may be placed upon the conduct . . . of federally-funded fundamental research that has not received national security classification." Many commentators argued that the proposed changes to the DFARS would violate Directive NSDD-189 because they prohibit foreign scientists and foreign nationals (including permanent residents of the U.S) from having access to basic scientific equipment without complying with non-classified export licensing procedures. While DOD has indicated that they will take all comments received into consideration in drafting a final rule, DOD has not announced when such a rule will be issued.

See http://emissary.acq.osd.mil/dar/dfars.nsf to view the public comments submitted to DOD on the proposed rule.

The Bureau of Industry and Security (BIS) today published in the Federal Register a notice announcing the addition of five new entitites to the Unverfied List.

The new additions to the unverified list include: T.Z.H. International Co. Ltd. in the Hong Kong Special Administrative Region; Design Engineering Center in Pakistan; Kantry in Russia; Elaton Company in Russia; and Pskovenergo Service in Russia. As a result of the inclusion of these entities on the Unverified List, a "red flag" now exists for transactions involving these entities. Exporters now have an affirmative duty to inquire, verify, or otherwise substantiate the proposed transaction to satisfy themselves that the transaction does not involve a prohibited proliferation activity and does not violate other provisions of the Export Administration Regulations.

U.S. Customs and Border Protection (CBP) has posted the agenda for this week's sold-out Trade Symposium entitled "Globalizing Trade Security and Facilitation: Realizing the Promise of the WCO Framework." While much of the program will once again be devoted to trade security issues, CBP appears to have received the message from the trade community of the need for CBP to refocus its attention on traditional trade compliance issues. As a result, the first program will feature subject matter experts from several CBP offices involved with trade (OR&R, Fines & Penalties, etc.) to discuss a variety of current compliance issues. The symposium's agenda can be found at the following link (opens as a Word document). CBP has requested participants to submit advance questions to the panelists by sending an e-mail to traderelations@dhs.gov and including the phrase "Question for Trade Symposium" in the subject line and identifying the panel or discussion group the question is intended for. CBP will forward the questions to the panel moderators.

The House Ways and Means Committee has approved repeal of the Byrd amendment on distribution of antidumping duties. By a vote of 22-17, the House Ways and Means Committee on October 26, 2005 forwarded a package of recommendations for reducing "wasteful and unnecessary administrative spending," including repeal of the Byrd amendment, to the House Budget Committee, which is drafting a larger package for consideration by the House of Representatives intended to reduce the federal government budget deficit.

The Bush administration has long requested repeal of the Byrd amendment, but opposition to its repeal remains strong in Congress, especially in the Senate. Repeal would require passage of the legislation by the full House and Senate and signature by the president.

House Republican leaders have indicated they intend to vote in November on the package of measures to reduce the budget deficit including Byrd amendment repeal. The companion Senate package does not include the repeal and Senator Chuck Grassley (R-IA), Chairman of the Senate Finance Committee and a strong supporter of repeal, has said that the outcome is uncertain given Senator Byrd's influence in the Senate.

On October 28, 2005, the U.S. Senate confirmed Karan K. Bhatia and Dr. Susan C. Schwab as Deputy United States Trade Representatives. The nominees were confirmed by voice vote less than six weeks after they were nominated.

Bhatia will lead U.S. efforts to open new markets and enforce existing trade agreements in Asia and Africa. His responsibilities will include leading trade efforts with China, continuing the negotiations on free trade agreements with Thailand and the Southern African Customs Union and strengthening U.S. trade relations with the Asia-Pacific Economic Cooperation (APEC) and South Asian economies. In addition, he will supervise USTR global negotiations on pharmaceuticals, labor and the environment.

Dr. Schwab will be responsible for supervising U.S. trade negotiations with Europe and the Middle East, Latin America and the Caribbean, Mexico and Canada. In addition, she will supervise negotiations on accessions to the World Trade Organization (WTO) and will lead the negotiations for services, investment and intellectual property during the Doha Development Agenda. She will also oversee the Industry, Market Access and Telecommunications and the Intergovernmental Affairs and Public Liaison departments.

On Friday, October 28, 2005, the U.S. department of Commerce (DOC) announced that it had filed motions with the NAFTA Panel reviewing DOC's final determination in the countervailing duty investigation on softwood lumber requesting clarification of the Panel's October 5, 2005 decision and requesting an extension of time.

The NAFTA Panel reviewing the Commerce Department's final determination in the countervailing duty investigation on softwood lumber issued on October 5, 2005 its decision on DOC's July 7, 2005, Fourth Remand Determination. The Panel remanded the Fourth Remand Determination to DOC to review the calculations on log seller profits.

As expected, the Independent Inquiry Committee (IIC) into the U.N. Oil-for-Food Program (OFFP) (commonly known as the "Volcker Commission") today issued its fifth and final report on the manipulation of the program. The report and accompanying tables can be found at the following link: www.iic-offp.org/story27oct05.htm.

The report and tables encompass more than 630 pages of text and tables. The report makes for very interesting reading and provides a roadmap of how Iraq mainipulated the program to receive a total of $11 billon through oil smuggling and $1.8 billion in surcharges and kickbacks. If you don't have all day to read the entire report, the most useful tables are tables V and VII. Table V contains a list of the 139 oil and trading companies that are alleged to have made unlicensed payments (surcharges) in connection with purchases of Iraqi oil. The report names Bayoil Inc. of Texas, Sweden's Taurus Petroleum AB, Glencore International AG of Switzerland and Rotterdam-based Vitol Group as oil traders who paid the largest surcharges in violation of U.N. sanctions. Table VII contains a list of the 2,253 companies that allegedly paid illegal payments (kickbacks) to Iraq in connection with sales of humanitarian products and oilfield spare parts. In most cases, the kickbacks were made to Iraqi officials disguised as after-sale-service-charges (ASSF) and inflated inland transportation fees.

The report indicates that on the oil buying side, only one (0.7%) of the 139 companies named in the report admitted to making unauthorized payments and 18 (12.9%) companies denied making any unauthorized payments. The vast majority (72.7%) of the oil buying companies named did not respond to the IIC's request for information. On the humanitarian sales side, 26 (1.2%) of the 2,253 companies named in the report admitted making payment, 152 (6.7%) denied making payments and 1,785 (79.2%) failed to respond to the IIC's request for information.

No U.S.-based companies are included on the list of companies that made unlicensed payments in connection with sales of humanitarian and oil-field equipment to Iraq under the OFFO. Although a small number of U.S. companies made sales to Iraq (see Table VI), most of the purchases made by Iraq were made from countries that Iraq wanted to curry favor with, such as Russia, France, Germany, etc. The list of companies that made unauthorized payments does, however, include a number of foreign subsidiaries of U.S. companies.

The Conference Committee considering H.R. 2744, the Agriculture, Rural Development, Food and Drug Administration and Related Agencies fiscal year 2006 appropriations bill today agreed to delay the provision requiring mandatory country-of-origin labeling on beef, lamb, pork and other meat products until late-2008.

The meat country-of-origin labeling provision was originally included in the Farm Security and Rural Investment Act of 2002. In January 2004, President Bush signed Public Law 108-199 which delayed the implementation of mandatory country-of-origin for all covered commodities except wild and farm-raised fish and shellfish until September 30, 2006. Today's action will delay the mandatory country of origin labeling provision on meat until September 20, 2008.

The U.S. cattle industry and been pressing for the country-of-origin labels to help sell their beef to U.S. consumers. By contrast, the meatpacking and grocery industries have pressed for repeal of the mandatory country-of-origin labeling program and have advocated a voluntary labeling system. They claim that the costs of compliance with mandatory country-of-origin labeling will be in the billions and that such costs will lead to higher food prices. In addition, many U.S. trading partners have opposed mandatory country-of-origin labeling on grounds that it is a trade barrier disguised as a consumer protection issue.

On October 27, 2005, the Independent Inquiry Committee (IIC) into the United Nations Oil-for-Food Program will issue its final report on the role of private companies and individuals involved in the program. The IIC's final report, which will focus on the private companies that bought oil from Iraq and sold humanitarian goods and oil spare parts to Iraq under the U.N. program, is expected to state that more than half of the 4,000 companies involved in the program made illicit or unauthorized payments to Iraqi officials in connection with contracts for the sale of humanitarian goods. Once released, the report will be found on the following site: www.iic-offp.org.

The text of the remarks made by David H. McCormick, the new Under Secretary for Industry and Security, at the Update 2005 Conference on Export Controls and Policy can be found here.

The text of Secretary of Commerce Gutierrez's keynote speech at Update on U.S.-China trade relations can be found here.

Labels: OFAC

Greetings to all of those that were lucky enough to get a spot at Bureau of Industry and Security's Update 2005. I look forward to seeing you there. For those of you that were not able to attend, I will be providing updates on the major initiatives and news announced during the conference. In addition, I encourage you to check out Scott Gearrity's Export Control Blog, as Scott will be liveblogging from Update.

At this afternoon's opening session, the BIS Export Control Automated Support System (ECASS) Program Team provided an update on the long-promised redesign of the Simplified Network Application Process (SNAP) for the electronic filing of export license applications and classifications. The BIS staff had some bad news and good news on the status of the SNAP redesign.

The bad news is that exporters will have to continue filing license applications and classifications on the current version of SNAP for some time to come. Right now, BIS expects to roll out the final version of SNAP-R (the new and improved version of SNAP) in late 2006 or early 2007. BIS has developed a SNAP-R prototype that will be used in a limited pilot program in 2006. However, because BIS is also engaging in a five-year project to update its 20+ year old internal ECASS system, BIS won't be able to roll out the new version of SNAP until it is sure that it will cooexist with the new version of ECASS, known as ECASS-R.

The good news is that the new version of SNAP looks promising. Most importantly, SNAP-R will allow license applicants to submit PDF versions of supporting documentation, technical specifications and letters of explanation along with their license application or classification request. This will be a major improvement from the current system, since the licensing officers will have the capability to review supporting documents submitted by an application on their own computer screen, rather than having to track down the paper copies that applicants submitted separately.

Update: BIS hopes to have SNAP-R ready for use by exporters by next year's Update (October 2006).

The House International Relations Committee will hold a hearing entitled "The U.S.-India 'Global Partnership': The Impact on Nonproliferation" on October 26, 2005 at 10:30 in room 2172 of the Rayburn House Office Building. The hearing witnesses include: The Honorable Robert J. Einhorn, Center for Strategic and International Studies; Neil Joeck, Ph.D., Lawrence Livermore National Laboratory, Henry Sokolski, Executive Director of the Nonproliferation Policy Education Center; Leonard Spector, Deputy Director of the Monterey Institute of International Studies Center for Nonproliferation Studies; and David Albright, President of the Institute for Science and International Security.

The BBC reports that Virgin Galactic, the personal spaceflight company founded by Sir Richard Branson, has received the required U.S. export licenses for the company's full participation and part ownership of the SpaceShip Company, a joint venture with Burt Rutan's Scaled Composites. The SpaceShip Company intends to build a fleet of commercial sub-orbital spaceships and launch aircraft and market them to space tourism operators, including the launch customer, Virgin Galactic.

In testimony presented to the House Science Committee's Subcommittee on Space and Aeronautics earlier this year, Rutan and Will Whitehorn, president of Virgin Galactic, told the panel that suborbital vehicle developers and operators of personal spacecraft are facing significant regulatory burdens imposed by the U.S., including barriers imposed by the International Traffic in Arms Regulations (ITAR). Whitehorn indicated that uncertainty about possible licensing requirements had prevented Virgin Galactic from even viewing Scaled Composites' designs for the commercial space vehicle that it intends to use, known as SpaceShipTwo. He also indicated the delays had prevented Virgin Galactic from placing a formal order with Scaled Composites for the vehicles.

Now that the export control issues appear to have been resolved, the first flights are planned to begin in 2008. Virgin Galactic is now starting to take reservations and deposit commitments for the first year of operations. The ticket price has been set at US$200,000 and the minimum deposit to secure a seat is US$20,000. The BBC reports that Virgin Galactic has already collected $10 million in deposits.

Bernard Smith, the President and part owner of Stealth Components, Inc., a distributor of computer components, was sentenced today in connection with a scheme to avoid paying over $385,000 in antidumping duties. Federal District Judge Douglas P. Woodlock of the District of Massachusetts sentenced Smith to 3 years of probation, the first 4 months of which are to be spent in community confinement, to be followed by 8 months and 1 day in home detention with electronic monitoring. Smith was also ordered to pay a $30,000 fine.

In May 2005, Smith pleaded guilty to a seven-count indictment charging him with conspiracy and false statements. Smith admitted that from November of 1998 through May of 2000, he and others participated in a scheme to defraud U.S. Custom's in order to minimize the payment of antidumping duties that Stealth was required to make on imported Korean Dynamic Random Access Memory chips (DRAMs). The scheme involved the presentation of false and fraudulent invoices to U.S. Customs that undervalued the purchase price and falsely described the Korean DRAMs that Stealth imported in order to lessen the cash payment amount for antidumping duties that Stealth was required to make. It was alleged that Smith directed foreign suppliers to prepare fraudulent invoices and other false entry documents that would be presented to Customs at the time of entry for each shipment of DRAMs that Stealth imported.

By a 6-0 vote, the Commissioners of the U.S. International Trade Commission (ITC) made an affirmative preliminary injury ruling in the antidumping duty investigations involving certain lined paper products from China, Indonesia and India and in the countervailing duty cases involving certain lined paper products from India and Indonesia.

As a result of the affirmative determinations, the U.S. Department of Commerce will continue to conduct its countervailing duty and antidumping investigations of imports of certain lined paper products, with its preliminary determinations due on or about February 16, 2006.

These petitions were filed on September 19, 2005 by the Association of American School Paper Suppliers, consisting of MeadWestvaco Corp., Norcom, Inc. and Top Flight, Inc. The products subject to this investigation includes certain lined paper school supplies sold in three main forms: spiral-bound or wireless notebooks (with or without pockets and/or dividers); hole-punched filler paper and composition books. The paper is typically white and may be wide-ruled or college-ruled. Notebook covers may be plain or have fashion graphics. The merchandise subject to this investigation is provided for in subheadings 4810.22.5044, 4811.90.9090, and 4820.10.2050 of the Harmonized Tariff Schedule of the United States.

Labels: Antidumping

The U.S. Department of the Treasury today designated eight North Korean entities believed to be contributing to the proliferation of weapons of mass destruction and took action to freeze any assets the entities may have under U.S. jurisdiction. Today's action also prohibits all transactions between the designated North Korean entities and U.S. persons.

As expected, on October 19, 2005 Senator Dorgan (D-ND) introduced an amendment to H.R. 3058, the fiscal year 2006 appropriations bill for the Departments of Transportation, Treasury and Housing and Urban Development, that would prohibit funding to the Treasury Department's Office of Foreign Assets Control (OFAC) that would be used to enforce travel-related sanctions on Cuba. The text of the amendment (amendment number 2133), which was co-sponsored by Senators Craig, Enzi and Baucus read as follows:

The amendment read as follows:

"(Purpose: To restrict enforcement of the Cuban Assets Control Regulations with respect to travel to Cuba)

At the appropriate place in the bill, insert the following:

SEC. __. (a) None of the funds made available in this Act may be used to administer or enforce part 515 of title 31, Code of Federal Regulations (the Cuban Assets Control Regulations) with respect to any travel or travel-related transaction.
(b) The limitation established in subsection (a) shall not apply to--
(1) the administration of general or specific licenses for travel or travel-related transactions;
(2) section 515.204, 515.206, 515.332, 515.536, 515.544, 515.547, 515.560(c)(3), 515.569, 515.571, or 515.803 of such part 515; or
(3) transactions in relation to any business travel covered by section 515.560(g) of such part 515."

In a bizarre series of events, Senator Dorgan withdrew his Cuba travel amendment yesterday after an unrelated amendment (known as a secod-degree amendment) dealing with domestic abortion issues was introduced by Senator Ensign (amendment 2153). In announcing his withdrawal of his amendment on the Senate Floor, Senator Dorgan stated:

We will change [the Cuba travel policy] one day, and there are sufficient votes in the Senate to change it. But because there is now a second-degree amendment dealing with abortion attached to the amendment, I will withdraw the amendment this afternoon and simply tell my colleague who offered this that he will have delayed this a bit. But inevitably, I and my colleagues will come to the floor. We will have a sufficient opportunity to prohibit this kind of legitimate but certainly strange mischief with a second-degree amendment on abortion attached to a Cuba travel amendment. It is going to happen. We are going to vote on this and we will, as we have in the past, vote to eliminate the restriction of the American people's right to travel.

I know why this is happening. This is all about politics. It is about politics in Florida and politics in New Jersey and perhaps a couple other areas, but mostly Florida and New Jersey. It is reaching out to those people who block the vote because the tougher you sound on Cuba, the better for them. So the President, about 3 years ago, decided to tighten it up even further, shut it down. Family vacations, family opportunities to interact, to send money home, he has tightened it all down. . . .

I wanted to explain as I withdraw this amendment for the moment why I am forced to withdraw it: because the majority slaps an abortion amendment on an amendment dealing with the American people's right to travel. It is unbelievable. It is within the rules, but still unbelievable.

Those who have gained a few days respite on this will not apparently have to vote today when I withdraw the amendment, but they will vote. When they vote, the Senate will approve the underlying amendment that I, Senator Craig, Senator Enzi, and Senator Baucus have offered.

Labels: OFAC

U.S. Customs and Border Protection and the Canada Border Services Agency today signed an agreement to establish a Container Security Initiative (CSI) partnership arrangement to help improve the flow of legitimate trade and people across the U.S.-Canada border. The joint press release announcing this initiative can be found at the following link:
www.customs.gov/xp/cgov/newsroom/press_releases/10202005.xml.

The Bureau of Industry and Security has announced the final agenda for next week's Update 2005 conference. Secretary of Commerce Carlos M. Gutierrez will be Update's keynote speaker.

Staples Contract and Commercial, a division of office products company Staples, Inc., has paid the United States $7.4 million to settle allegations that it submitted false claims when it sold office supply products manufactured in countries not permitted by the Trade Agreements Act to U.S. government agencies. The settlement resolves allegations that Staples sold products from countries that do not have reciprocal trade agreements with the U.S., such as China and Taiwan. Staples was required by its contract with the General Services Administration (GSA) to prevent such items from being offered for sale to U.S. government agencies.

Manhattan District Attorney Robert M. Morgenthau today announced that Midway Trading (Midway), a Reston, Virginia-based oil trading company, pleaded guilty to first-degree grand larceny for its involvement in a scheme to pay kickbacks to Iraq in connection with oil purchases made under the United Nations Oil-for-Food Program (OFP). Under the plea agreement, Midway will pay a fine of $250,000.

The indictment alleged that Midway and Bulf Oil, a Romanian company, paid more than $440,000 in kickbacks to Iraqi officials in connection with oil purchases, but falsely represented to the U.N. that no kickbacks were paid. Details concerning Midway's transactions can be found in the Manhattan D.A. Office's press release at www.manhattanda.org/whatsnew/press/2005-10-20.htm.

The President today formally notified Congress that the U.S. intends to commence Free Trade Agreement (FTA) negotiations with the Sultanate of Oman. The President's message to Congress indicated that the FTA will "will generate export opportunities for U.S. companies, farmers, and ranchers, help create jobs in the United States, and help American consumers save money while offering them more choices. Entering into an FTA with Oman will build on the FTAs that we already have with Israel, Jordan, and Morocco, as well as the FTA that we have concluded with Bahrain, and will be an important step on the path to fulfilling my vision of developing economic growth and democracy in the Middle East and creating a U.S. Middle East Free Trade Area (MEFTA) by 2013."

The Center for Nonproliferation Studies (CNS) at the Monterey Institute of International Studies has published the first issue of the International Export Control Observer (IECO). The IECO replaces the Newly Independent States and Asian Export Control Observers and will report on weapons of mass destruction export controls in six regions of the world, the Newly Independent States, Asia, the Balkans, the Middle East, Africa and South America.

Edited by Dr. Sonia Ben Ouagrham, an economist specializing in the conversion of the defense industry in the former Soviet Union, the IECO will be distributed to government officials and nongovernmental organizations in Africa, Asia, the Balkans, Canada, Europe, the Middle-East, South America and the United States, as well as international organizations that follow export control issues.

The inaugural issue of IECO contains a number of interesting articles, including an article describing Russia's new licensing rules that implements the catch-all provision contained in Article 20 of the Russian law On Export Control, a provision that is similar to U.S. EPCI controls.

The House Subcommittee on the Middle East and Central Asia will hold a hearing on U.S. Foreign Policy Challenges Posed by Iran at 1 p.m. on October 18, 2005 in Room 2200 of the Rayburn House Office Building. As of this writing, the only scheduled witness is Ilan Berman, Vice President for Policy, American Foreign Policy Council.

The Washington Times reports today that the Government of Venezuela has made overtures to several countries about obtaining nuclear technology.

The U.S. International Trade Commission (ITC) today published in the Federal Register a notice that it will conduct full sunset reviews to determine whether revocation of the countervailing duty and antidumping duty orders on certain pipe and tube from Argentina, Brazil, India, Korea, Mexico, Taiwan, Thailand and Turkey would be likely to lead to continuation or recurrence of material injury within a reasonably foreseeable time. The ITC will announce the review schedule at a later date.

Labels: Antidumping

U.S. and Customs and Border Protection published a notice in today's Federal Register stating that it has increased the interest rates used to calculate interest on overpayments and underpayments of customs duties. For the calendar quarter beginning October 1, 2005, the interest rates for overpayments will be 6 percent for corporations and 7 percent for non-corporations, and the interest rate for underpayments will be 7 percent.

Labels: Customs

Breaking News: As a result of unexpected delays encountered in drafting the final rule, the Census Bureau does not expect the final rule requiring all Shipper's Export Declarations (SEDs) to be filed electronically through the Automated Export System (AES) and increasing penalties for inaccurate or delinquent filings to be issued until the first quarter of 2006. Since the final rule will provide a 90 day implementation period, paper SEDs will still be permitted to be submitted to Census until mid-2006. Nevertheless, all exporters that are still filing paper SEDs are encouraged to begin the transition to AES as quickly as possible.

A summary of the proposed mandatory AES rule that was published by Census on February 17, 2005 can be found here. The public comments that were submitted to Census on the proposed rule can be found here.

Labels: AES

As part of the Bureau of Industry and Security's (BIS) outreach efforts to the freight forwarding community, BIS's Office of Exporter Services is conducting seminars specifically designed to provide freight forwarders and others in the transportation field the information needed to comply with U.S. export controls. Specialists from BIS and Census will conduct these half day courses on the following dates:

November 8, 2005: Export Controls for Forwarders -- Sunnyvale, CA; and

November 9, 2005: November 9, 2005: Export Controls for Forwarders -- Costa Mesa, CA.

In one of the Bureau of Industry and Security's (BIS) largest recent civil enforcement penalty cases, Pro345 Distribution (Proprietary) Limited and ProChem (Proprietary), Limited, located in Gauteng, South Africa, have agreed to pay a fine of $1,540,000 to settle charges that the companies committed 220 violations of the Export Administration Regulations by reselling U.S.-origin potassium cyanide and sodium cyanide (classified as ECCN 1C350) to end-users in South Africa that did not appear on Department of Commerce export licenses. The charging letter and settlement agreement can be viewed at the following link.

Tomorrow, October 17, 2005, the U.S. Senate will commence debate on H.R. 3058, the fiscal year 2006 appropriations bill for the Departments of Transportation, Treasury and Housing and Urban Development, the Judiciary, the District of Columbia and independent agencies. Senator Byron Dorgan (D-ND) is expected to offer an amendment to the bill that would prohibit funding to the Treasury Department's Office of Foreign Assets Control (OFAC) that would be used to enforce travel-related sanctions on Cuba. This is the same travel amendment that has passed the Senate and the House in the past, but was removed in conference committee under a veto threat from the President.

The version of H.R. 3058 passed by the House contains a provision that would prohibit OFAC from using funds to implement OFAC's February 25, 2005 amendment to the Cuban Assets Control Regulations that imposed restrictions on "payments of cash in advance" for U.S. agricultural exports to Cuba. The Administration'’s Statement of Policy on the bill maintains that the President would veto the bill if the final version contained such a provision.

Labels: OFAC

Alcoa Europe SA (AESA) of Lausanne, Switzerland recently entered into an agreement with the Bureau of Industry and Security (BIS) in which it agree to pay $6,000 to settle charges that the company failed to report certain antiboycott requests received by the company in connection with sales to the Middle East. BIS alleged that AESA committed six violations the U.S. Antiboycott Regulations for failing to report the receipt of a request to engage in Restrictive Trade Practice or Foreign Boycott in connection with six transactions involving the sale and/or transfer of goods from the United States to Dubai.

Specifically, AESA failed to report language received from the customer that read as follows: "The Seller shall not supply goods or materials which have been manufactured or processed in Israel nor shall the services of any Israel organisation be used in handling or transporting the good or materials." Section 760.5 of the Antiboycott Regulations requires U.S. persons (which includes foreign subsidiaries of U.S. companies) to report boycott requests to BIS's Office of Antiboycott Compliance. The charging letter and settlement agreement can be found at the following link.

Labels: Boycotts

The Treasury Department's Office of Foreign Assets Control's (OFAC) has made significant changes to its monthly compilation of civil enforcement actions. In OFAC's monthly civil penalty report issued on October 12, 2005, OFAC, for the first time, released specific details about the alleged violation and other information regarding the terms contained in the settlement agreement. This information, which is being released as part of OFAC's efforts to make the civil penalty process more transparent, will greatly assist counsel, exporters and financial institutions in understanding the types of activities that lead to violations of the sanctions regimes that OFAC administers and enforces.

OFAC's monthly civil penalty report issued on October 12, 2005 notes that the agency entered into the following settlements with four companies since the last report was issued:

Archer Daniels Midland (ADM) Company, of Decatur, Illinois, agreed to remit $13,750 to settle allegations of violations of the Cuban embargo between February and March 2000. OFAC alleged that Finora Canada Ltd. (Finora), a wholly owned subsidiary of ADM, entered into a contract with an entity in which the government of Cuba has an interest. During the performance of the contract, Finora engaged in multiple export transactions. ADM did not voluntarily disclose this matter to OFAC.

Imbsen & Associates of Sacramento, California agreed to remit $2,400 to settle allegations of a violation of the Libyan program in March 2004. OFAC alleged that Imbsen violated the Libyan program then in effect by contracting with an entity in Malta, for the sale of Imbsen software to Al Nibras for Science and Technology, Tripoli, Libya, and accepting payment for the sale. As a term of settlement, Imbsen agreed to enhance its OFAC compliance program. Imbsen did not voluntarily disclose this matter to OFAC.

IndeCorp Corporation, of Chicago, Illinois, agreed to remit $14,520 to settle allegations of violations of the Libyan program between January 2001 and April 2003. OFAC alleged that, at the time prohibitions were in place, IndeCorp exported services, including sales, reservations and marketing support, to an entity, that at the time, was a Specially Designated National of Libya. IndeCorp has represented to OFAC that it has taken remedial measures and made upgrades to its OFAC compliance program. IndeCorp did not voluntarily disclose this matter to OFAC.

Stolt-Nielsen Transportation Group (SNTG), of Greenwich, Connecticut, agreed to remit $16,500 to OFAC in order to settle allegations of violations of the Iran program between December 2000 and February 2001. OFAC alleged that SNTG paid a foreign affiliate’s port expenses in Iran by wire transfer. SNTG has reported upgrades to its OFAC compliance program. SNTG did not voluntarily disclose this matter to OFAC.

The report also indicates that OFAC entered into settlement agreements with six individuals for violating the Cuban embargo (OFAC does not release the names of individuals). In four of the cases, the individuals agreed to pay civil penalties totaling $4,875 for allegedly violating the Cuban embargo by engaging in travel-related transactions incident to travel to Cuba. According to OFAC, the travel-related transactions included, but were not limited to, the purchase of food, drinks, entertainment, lodgings, ground transportation and incidentals. During their travel to and from Cuba, two of the individuals traveled through Toronto, Canada and two traveled through Nassau, the Bahamas. Two other individuals were penalized a total of $4,000 for allegedly violating the Cuban embargo by engaging in travel-related transactions incident to travel to Cuba and importing merchandise of Cuban origin. In addition to the travel-related transactions, OFAC alleged that each individual imported into the U.S. Cuban-origin goods valued at $750 or less per individual. In their travel to and from Cuba, both of the individuals traveled through Toronto, Canada.

Labels: OFAC

The business section of today's Pittsburgh Post-Gazette contains a story on David H. McCormick, the recently confirmed Under Secretary of Commerce for Export Administration. Dr. McCormick, who has Pittsburgh ties, was confirmed by the U.S. Senate by a voice vote on October 7, 2005.

The Cato Institute's Center for Trade Policy Studies has recently published an eye-opening report entitled "Abuse of Discretion: Time to Fix the Administration of the U.S. Antidumping Law." The report states that Import Administration (IA), an agency within the Department of Commerce that administers part of the antidumping law Commerce Department "routinely exploits gray areas in the law to favor the domestic interests that seek protection --and, according to the verdicts of U.S. courts, sometimes violates the law in the process."

The report provides specific details and examples of areas of the antidumping law where IA's discretion has a profound impact on the final result, including issues relating to zeroing, model matching, date of sale, affiliated parties, price adjustments, surrogate values and cost allocations.

The report concludes by advocating the establishment of an oversight board to review IA's antidumping determinations before they are published. Such a board, the report states, "could help buffer antidumping decisions from the results orientation and politicization to which they are currently so prone."

This is a must-read report for anyone interested in or involved with antidumping-related issues. The report can be found at the following link: www.freetrade.org/pubs/pas/tpa-031es.html.

Labels: Antidumping

If you haven't see it yet, I highly recommend Scott Gearrity's Export Control Blog. Scott provides interesting information and analysis on the latest export control news and serves as a good source of supplemental information to International Trade Law News.

In fact, Scott has announced that he will liveblogging at BIS Update. As Scott explains:

For the uninitiated, liveblogging is just a neologism for realtime reporting or commentary during an event of some kind (e.g. last year's presidential debates.) Since you can't watch Update on TV (not even C-SPAN!), I'll actually be blogging live from the suitably swank (and wifi-equipped) Renaissance Hotel throughout the two days of the conference.

The idea is simple -- to bring the conference's proceedings to a wider audience, in particular to exporters who dwell far beyond the DC fishbowl.

The next meeting of the National Council on International Trade and Development (NCITD) will be held on Friday, October 14, 2005 at the University Club in Washington, DC. The speakers include:

• Chris Kessler, the Nonproliferation Policy Office Director at the Department of State. Mr. Kessler will be discussing China and giving an update on the State Department nonproliferation controls.
• Harvey Monk, Chief of the Foreign Trade Division at the U.S. Census Bureau, will be giving an update on the automated export system (AES).
• Michael Ford, of BDP International, will be giving an update on Customs and Border Protection's ACE Portal.
  

On October 10, 2005, the Nicaragua's General Assembly passed the legislation necessary to ratify the U.S.-Central America-Dominican Republic Free Trade Agreement (CAFTA-DR). Costa Rica remains the only CAFTA-DR country that has not ratified the agreement. The U.S. and the other CAFTA-DR members are still aiming for an implementation date of January 1, 2006.

On October 11, 2005, the U.S. International Trade Commission (ITC) announced the remedy proposals it will forward to the President and the U.S. Trade Representative (USTR) in its China safeguard investigation concerning circular welded non-alloy steel pipe (standard pipe) from China.

Chairman Koplan and Commissioner Lane announced that they will propose that the President impose an annual quota of 160,000 short tons on imports of circular welded non-alloy steel pipe from China for a period of three years. They further announced that they will recommend that, if applications are filed, the President direct the U.S. Department of Labor and the U.S. Department of Commerce to provide expedited consideration of Trade Adjustment Assistance for firms and/or workers that are affected by subject imports.

Commi