International Trade Law News

The AP reports that Mexico City officials have shut down the Sheraton Maria Isabel hotel for violations of city ordinances. The Sheraton Maria Isabel is the hotel that recently evicted a Cuban delegation under pressure from the Office of Foreign Assets Control. City officials said the hotel could reopen when it had corrected the violations and paid a $15,000 fine. Signs were posted at the front entrance saying, "Due to infringement of local law, the Sheraton Hotel activities have been suspended." Fifteen violations of city ordinances were cited. More than 500 guests had to be evacuated as a result of the closing.

The State Department's Directorate of Defense Trade Controls (DDTC) has announced that it will soon issue a notice in the Federal Register concerning the export jurisdiction of airframe parts and components common to the C-130 and L-100 aircraft.

DDTC has also stated that as a result of this recent commodity jurisdiction decision that U.S. exporters are advised that any airframe parts and components common to the C-130 (Models A through H) and L-100 aircraft that have no current use on any other commercial aircraft will be subject to the jurisdiction of the Department of State 90 days after the impending publication of the Federal Register notice. Until the publication of this notice, exporters can complete existing transactions under existing authorizations, but should apply to DDTC for the proper export approval for new or subsequent shipments.

The announcement statest that the change in jurisdiction applies only to the airframe parts and components common to the C-130 and L-100 and that DDTC is not asserting jurisdiction over the L-100 aircraft. Any systems employed on the L-100 that are specifically designed, modified, configured, or adapted for a military application remain subject to the jurisdiction of the Department of State. In addition, this determination does not apply to the parts and components for the C-130J model, as this aircraft differs from preceding models of the C-130 so as to be considered a separate military aircraft. All C-130J parts and components are ITAR-controlled.

Labels: DDTC, Export Controls

The Houston Chronicle today published a must-read article on the inner workings of the Treasury Department's Office of Foreign Assets Control (OFAC). The article notes that "former Treasury officials, Capitol Hill staffers, lawyers, business leaders and other OFAC watchers interviewed for this report describe a maddeningly opaque agency long known for being reflexively suspicious of any individual or company seeking its guidance."

Labels: OFAC

The Treasury Department issued a rare Sunday press release stating that "the Committee on Foreign Investment in the United States (CFIUS) today welcomed the announcement by Dubai Ports World that it will submit for review its proposed acquisition of control of U.S. port terminal operations." The press release states that Dubai Ports World "asked for a CFIUS review, including the 45-day investigation under the Exon-Florio amendment, based on a restructured transaction that the company intends to file with the Committee. Upon receipt of the new notification, CFIUS will promptly initiate the review process and fulfill DPW's request for a full investigation."

For those interested in the CFIUS process, see the Treasury Department's website for detailed information on the Exon-Florio law and the CFIUS process.

Customs and Border Protection (CBP) also posted information on its web site with facts on U.S. port security and the DP World transaction. Contrary to the reports in the mainstream press stating that DP World "take over six U.S. ports" the CBP website states that under the proposed transaction DP World operate the following terminals at the following six ports that are currently operated by U.K.-based P&O:

• Baltimore - 2 of 14 total
• Philadelphia - 1 of 5 (does not include the 1 cruise vessel terminal)
• Miami - 1 of 3 (does not include the 7 cruise vessel terminals)
• New Orleans - 2 of 5 (does not include the numerous chemical plant terminals up and down the Mississippi River, up to Baton Rouge)
• Houston – 3 of 12 (P&O work alongside other stevedoring contractors at the terminals)
• Newark/Elizabeth – 1 of 4
• (Note: also in Norfolk - Involved with stevedoring activities at all 5 terminals, but not managing a specific terminal.)

Labels: CFIUS

The U.S. Trade Representative (USTR) today announced that he will recommend the President to issue a proclamation to implement the CAFTA-DR agreement for El Salvador on March 1, 2006. El Salvador is the first country to receive this recommendation from USTR.

The Bureau of Industry and Security today published in the Federal Register a final rule amending the Export Administration Regulations (EAR) to add two cross-references to the General Order Implementing the Syria Accountability and Lebanese Sovereignty Act. This amendment clarifies that provisions of the Syria General Order set forth special controls on exports and reexports to Syria and supersede other provisions in the EAR specific to Syria.

Dubai Ports World announced this evening that it has offered to delay the closing of the U.S. portion of its acquisition of Peninsular and Oriental Steam Navigation Company (P&O) pending a review of the security issues raised by numerous members of Congress. The company said it will move forward with other parts of the deal affecting the rest of the world. In a statement, Dubai Ports World said: "It is not only unreasonable but also impractical to suggest that the closing of this entire global transaction should be delayed." In addition to the six ports in the U.S., the acquisition covers ports in Canada, Argentina, the United Kingdom, France and several Asian countries.

The U.S. Trade Representative today announced that President Bush issued a proclamation reinstaing duty-free trade benefits for the Republic of Liberia under the Generalized System of Preferences (GSP) program. Liberia's GSP benefits were suspended in 1990 because of worker rights concerns.

By Douglas N. Jacobson

The Census Bureau's Foreign Trade Division recently sent "Dear Filer" letters to a number of exporters advising them that they "failed to successfully report Electronic Export Information (EEI) through the Automated Export System (AES) in a timely manner." The letters, which were directed at both Option 2 (pre-departure) and Option 4 (post-departure) filers, were intended to remind exporters that Census monitors AES filings for "data quality, timeliness and accuracy" and that the Foreign Trade Statistics Regulations require complete export information to be submitted in a timely manner. The letter also informed exporters that the late filing of export data results in shipments not being published in the proper statistical month.

The Census Bureau's "Dear Filer" letters serve as an important reminder that all exporters should ensure that they are filing their export data in an accurate and timely manner. While the mandatory filing of export data via AES for items included on the U.S. Munitions List (USML) and Commerce Control List (CCL) has been required since October 2003, Census will soon be issuing the long-anticipated regulation implementing the Security Assistance Act of 2002 (Public Law 107-228, 116 Stat. 1350). The new regulation will require export declarations for ALL shipments to be filed electronically and will significantly increase the fines and penalties for late filings. This regulation, which was published in proposed form by the Census Bureau in February 2005 (70 Fed. Reg. 8,200 (Feb. 17, 2005)) and is now being finalized by Census, will be published in the very near future. Census plans to give exporters a 90-day period to phase-out the filing of all paper Shippers Export Declarations (SEDs) (Form 7525-V).

In addition to requiring the mandatory filing of export-related data via AES, the forthcoming Census regulation will implement several major changes to the nomenclature commonly used by exporters. Not only will the FTSR be renamed the Foreign Trade Regulations (FTR), the term SED will be replaced by the term EEI (Electronic Export Information). The regulation will also rename filing options 2 and 4 as "Pre Departure" filing and "Post Departure" filing, respectively. Current Option 4 filers will be grandfathered into the new system. The mandatory AES rule will also provide specific time and place-of-filing requirements for filing export data.

The Census Bureau's forthcoming regulation will also enhance the penalty provisions associated with the late filing of export data. Because export declaration data is now commonly used by the law enforcement community as an export control tool, exporters will be faced with moving from the current system of virtually no enforcement activity to a system where significant penalties can and will be imposed for late or unfiled export data. Once the new system takes effect, civil penalties will increase from $100 per day to $1,100 per day of delinquency, with a maximum of $10,000 per violation. The civil penalties for the late filing of EEI can be imposed on all of the parties in the transaction, including the U.S. Principal Party in Interest (USPPI), the USPPI's agent (i.e., freight forwarder) and the carrier. These penalty provisions will be enforced by the Bureau of Industry and Security's Office of Export Enforcement (OEE) and by U.S. Customs and Border Protection (CBP) and Immigration and Customs Enforcement (ICE) at the Department of Homeland Security.

While a high percentage of export declarations are now being filed electronically (96%, according to the Census Bureau), many exporters have not yet completed their migration to the electronic system of filing export declarations. Exporters are encouraged to review their export documentation procedures to ensure that they are filing their export declarations electronically and are doing so in a timely manner. There are several ways for companies to comply with mandatory electronic filing requirements. Although carriers and freight forwarders can submit export declarations to Census electronically on an exporter's behalf, exporters can also file their own export declarations via AES using AES Direct, the Census Bureau's free, internet-based system. Census also offers free PcLink software that allows companies to manage their AES filings from their own computers. Many vendors of international trade documentation software also offer their customers the ability to submit AES data to Census electronically.

While the final migration to mandatory AES for the filing of all export data presents a number of technical and practical issues for shippers, the increased penalties for the inaccurate or untimely filing of export information should be of even greater concern to exporters, forwarders and carriers alike.

At Congress' request, U.S. Customs and Border Protection (CBP) recently hired 45 additional staff members to assist the agency in enforcing U.S. laws on imported textile products.

In addition, CBP has updated the agency's list of Frequently Asked Questions on the U.S.-China Memorandum of Understanding (MOU) on Trade in Textile and Apparel. The MOU establishes quotas on certain textile products exported from China to the U.S. during the three-year period beginning on January 1, 2006.

Labels: Customs

Japan's export control crackdown continues as Japanese police conducted yet another raid on a company thought to have violated Japan's Foreign Exchange and Foreign Trade Control Law. On Friday, police searched 10 locations linked to Seishin Shoji Co., Ltd., a Tokyo-based trading company, that allegedly exported to North Korea a freeze-dryer that can be used in biological weapons development applications. The U.S. classifies certain freeze-drying equipment as ECCN 2B352 on the Commerce Control List.

The rhetoric heated up this weekend regarding the recent purchase of U.K. -based Peninsular and Oriental Steam Navigation Co. (P&O), by United Arab Emirates-based DP World.

The U.S. International Trade Commission has published a notice in the Federal Register that it will conduct full five-year reviews ("sunset reviews") on the countervailing and antidumping duty orders on certain carbon steel products from Australia, Belgium, Brazil, Canada, Finland, France, Germany, Japan, Korea, Mexico, Poland, Romania, Spain, Sweden, Taiwan and the United Kingdom.

Labels: Antidumping

It's not too late to register for the Bureau of Industry and Security's (BIS) "Export Control Forum" to be held in Newport Beach, California on March 13, 2006. This streamlined event responds to numerous requests for an Update-like program on the West Coast. The program will feature key BIS officials presenting information on the most important export control topics of the day. The agenda and registration information can be found at the following link: www.bis.doc.gov/seminarsandtraining/Newport_Beach_Mar_13_06.htm#agenda.

Today the Office of Foreign Assets Control (OFAC) issued the following bulletin:

All property and interests in property of the following entity, wherever located, are blocked pending investigation pursuant to Section 106 of the U.S.A. Patriot Act of 2001, 107 Public Law 56 (October 26, 2001). Although the entity is not now an "[SDGT]," its name has been integrated into OFAC's SDN list with the descriptor "[BPI-PA]" to indicate that all of its property and interests in
property are currently blocked:

KINDHEARTS FOR CHARITABLE HUMANITARIAN DEVELOPMENT, INC., P.O. Box 1248, Gaza, Palestinian; P.O. Box 23310, Toledo, OH 43623; 3450 West Central Avenue, #366,
Toledo, OH 43606; Ramallah, West Bank, Palestinian; Jenin, West Bank,
Palestinian; Mar Elyas Street, Hiba Center, 1st Floor, Beirut, Lebanon; Pakistan
[BPI-PA].

According to press reports, the Treasury Department claims that KindHearts is connected with the Hamas-affiliated Holy Land Foundation and the al-Qaida-affiliated Global Relief Foundation, which have previously been included on OFAC's list of SDGTs (Specially Designated Global Terrorists).

Labels: OFAC

The Miami Herald reports that representatives from the Treasury Department's Office of Foreign Assets Control (OFAC) and the State Department met yesterday with representatives of Starwood Hotels & Resorts Worldwide (Starwood) to discuss Cuba sanctions-related policy isssues. Starwood is the owner of the Sheraton Maria Isabel Hotel in Mexico City that was ordered by OFAC to evict 16 Cubans who were staying there to attend a conference earlier this month.

Labels: OFAC

The Bureau of Industry and Security (BIS) recently imposed a $14,000 civil penalty on South Africa's STAT Medical (Pty), Ltd. to settle allegations that the company violated the Export Administration Regulations by participating in the transshipment of unlicensed U.S. origin medical defibrillators to Iran in July 2000 and by making a false statement to investigators in connection with the exports.

This is the third civil penalty imposed by BIS in connection with this particular shipment of unlicensed defibrillators to Iran. In August 2005, BIS assessed an $82,500 civil penalty on U.S.-based Zoll Medical Corporation, for exporting defibrillators to Iran via South Africa. In October 2005 BIS also imposed an $8,000 civil penalty on the freight forwarder that was involved in this transaction.

In testimony presented by Secretary of State Condoleezza Rice to the House International Relations Committee yesterday she stated that the U.S. intends to implement additional provisions of the Syrian Accountability and Lebanese Sovereigny Restoration Act of 2003 (Public Law 108-175) to strengthen sanctions against Syria. The Secretary of State also indicated that the U.S. is trying to line up multilateral support before it takes any further action.

The Commerce Department announced yesterday that Ukraine is operating as a market-economy country and that this finding will apply to all antidumping and countervailing duty investigations or administrative reviews that are commenced after February 1, 2006. This decision represents a significant change, as Commerce will no longer use the nonmarket economy methodology in calculating antidumping margins on products from Ukraine. In addition, products from Ukraine may now also be subject to countervailing duty investigations.

Higher antidumping duties are normally imposed on goods imported from nonmarket economies than on those from market economies. According to a Congressional Budget Office report, the mean and median initial duty rates imposed on goods from nonmarket economies between July 1, 1979, and December 31, 1995, were 76% and 119% higher, respectively, than the rates for goods from market economies. For an excellent overview of the nonmarket economy methodology, see the Cato Institute's briefing paper entitled Nonmarket Nonsense: U.S. Antidumping Policy toward China.

Labels: Antidumping, Countervailing Duties

U.S. Customs and Border Protection (CBP) has issued an administrative message advising that the latest news and developments for pilot bond centralization has been updated on the CBP's website.

Labels: Customs

Treasury Secretary John W. Snow today announced that Robert W. Werner will be the new Director of the Financial Crimes Enforcement Network (FinCEN). Werner currently serves as the Director of the Office of Foreign Assets Control (OFAC). Werner replaces William Fox, who departed FinCEN in January to pursue a career in the private sector. Barbara Hammerle, OFAC's Assistant Director, will serve as Acting OFAC Director.

Update: Robert Werner's testimony on OFAC's role in blocking weapons of mass destruction funding pursuant to Executive Order 13382 that was presented last week at a hearing held by the Oversight Subcommittee of the House Committee on Financial Services can be found at the following link.

Labels: FinCen, OFAC

U.S. Customs and Border Protection (CBP) announced that it recently seized a large number of carpets exported from Egypt to Savannah, Georgia that contained false markings of "Crafted with pride in USA" or no country of origin markings at all. CBP discovered the carpets in five container shipments that held a total of 25,349 carpets. The carpets have a total value of $360,544. According to CBP, the importer falsely marked or failed to mark the carpets with the country of origin to mislead potential consumers to think that the carpets were made in the USA. (photo courtesy of U.S. Customs and Border Protection.)

Labels: Customs

Thursday's Asahi Shimbum reports that Mitutoyu Corporation apparently evaded export restrictions "by understating the precision" of the three-dimensional measuring instruments that were exported to Thailand and Japan. The newspaper also reports that the company is "suspected of changing the name of the exported equipment from the one used in Japan." As previously reported, Mitutoyu's president denied allegations that his company illegally exported high-precision calibrating equipment.

Calgon Carbon Corporation and Norit Americas Inc. have withdrawn their antidumping petition on activated carbon from China.

As we previously advised, Calgon announced it had opened a "state-of-the art" activated carbon processing and packaging facility in Tianjin, China. A reader also observed that "it is ironic that the largest exporter of carbon from China(Calgon) and importer into the USA files a[n antidumping] petition. The other ironic thing about this is that the price of carbon from China has gone up over the past two years, 'not down.' This petition is about margins, not unfair international business practices."

Labels: Antidumping

The president of Japan's Mitutoyu Corporation has denied allegations that his company illegally exported high-precision calibrating equipment and software to China and Thailand. Various media reports have indicated that serial numbers on certain equipment found in Libya matched that on machines sold by a Mitutoyo subsidiary to a Malaysian company regarded as a black market conduit for nuclear weapons components. Japan's Sankei Shimbun newspaper also quoted police sources as saying that some of the equipment was shipped to North Korea.

The U.S. Trade Representative (USTR) today released a report containing the results of the U.S. Government's "top-to-bottom review" of U.S.-China Trade Policy. The report, entitled "U.S. - China Trade Relations: Entering a New Phase of Greater Accountability and Enforcement", is the first comprehensive statement of U.S. trade policy towards China since it joined the World Trade Organization in 2001.

The report announces that the USTR will take the following actions to "ensure meaningful progress in achieving the key objectives outlined in the report":

• Expanding USTR trade enforcement capacity to better ensure China’s compliance with trade obligations, including through establishment of a China Enforcement Task Force at USTR, to be headed by a Chief Counsel for China Trade Enforcement;

• Expanding USTR capability to obtain and apply comprehensive, forward-looking information regarding China’s trade regime and practices to U.S. trade policy formulation and implementation, by: (1) adding personnel to USTR’s China office to coordinate collection and integration of information on current and potential China trade issues from other U.S. government agencies and other sources; and (2) establishing an Advisory Committee for Trade Policy and Negotiation (ACTPN) China Task Force to provide strategic advice and recommendations related to U.S.-China trade policy;

• Expanding U.S. trade policy and negotiating capacity in Beijing and other resources in China to more effectively pursue top priority issues, especially the protection of intellectual property rights;

• Increasing coordination with other trading partners on China trade issues of common interest, such as enforcement of intellectual property rights;

• Deepening and strengthening trade relations with other Asian economies, and within the Asia-Pacific Economic Cooperation (APEC) forum, to maintain and enhance U.S. commercial relationships in the region;

• Increasing the focus on regulatory reform in China, including through initiating a high-level dialogue on steel with China under the U.S.-China Joint Commission on Commerce and Trade (JCCT), deepening and expanding the State Department’s high-level dialogue with China’s economic planners regarding structural reform, launching an initiative to evaluate, assess and engage on China’s subsidies issues, expanding initiatives led by the U.S. Department of Agriculture (USDA) to improve China’s transparency and compliance with its sanitary and phytosanitary (SPS) obligations under the WTO, and focusing intensive interagency efforts to address China’s development of standards and of an anti-monopoly law;

• Increasing effectiveness of high-level meetings with China’s leaders, including through holding annual, elevated meetings of the JCCT prior to presidential-level meetings where possible and conducting mid-year reviews of goals and progress under the JCCT at the Vice Minister/Deputy level;

• Strengthening and expanding US-China dialogue on numerous other specific issues of significance to the global trading system and on bilateral trade issues that pose potential problems for the relationship, including, e.g., China’s participation in global institutions; market access and standards issues related to telecommunications, financial services, healthcare and direct sales; subsidies and structural issues, especially in the steel industry; standards; labor; environmental protection; and transparency and the rule of law;

• Strengthening U.S. government interagency coordination, including through monthly review, by the Trade Policy Review Group and Trade Policy Staff Committee, of strategies and progress made in achieving the key objectives identified in this report; and

• Strengthening the Executive-Congressional partnership on China trade, through initiation by USTR of a program of regular briefings for Congressional members and staff, to update them on progress in pursuing the objectives outlined in this report and to ensure that the Administration’s China trade policy is informed by Congressional priorities.

A spokesman of China's Ministry of Foreign Affairs has responded to two recent cases involving allegations of illegal shipments of defense and dual-use items to China.

In response to the recent indictment in Florida of two men for attempting to ship defense articles to China, the spokesman rejected accusations that China had covert agents operating in the U.S. The spokesman said that the "accusation that China is collecting scientific and military intelligence is groundless." "China‘s military imports go through strict surveillance. Chinese enterprises will never purchase any military goods that cannot provide legal documents," the spokesman said.

In addition, the Foreign Ministry attempted to distance China from an investigation involving Japan‘s Mitutoyo Corporation, which was recently accused by the Japanese Government of exporting equipment to China that could be used to produce nuclear weapons. The spokesman said that "we investigated this issue and found it has nothing to do with China."

Reuters reports that the Treasury Department has no plans to reconsider OFAC's decision to require Starwood Hotels and Resorts' Sheraton Maria Isabel Hotel in Mexico City to evict 16 Cubans who were staying there for a conference earlier this month. The article quotes a Treasury Department spokesman as saying that "The law is the law, and OFAC is an enforcement agency that is statutorily required to enforce the law." "It's not a question for the secretary of the Treasury to rethink how the law is enforced -- that's not his role with respect to the activities of OFAC," he said.

The article also states that several business groups have criticized OFAC's extraterritorial enforcement of U.S. sanctions on Cuba. For example, as previously reported in International Trade Law News, USA*Engage, a coalition of business groups opposed to unilateral U.S. sanctions, has called OFAC's action a "counterproductive" move that damaged U.S. ability to push for democratic values and other foreign policy goals.

It should be noted that there has been a great deal of misunderstanding of the legal basis for OFAC's recent actions against Starwood. Many press reports have pointed to the Helms-Burton law as the basis for OFAC's actions. In fact, this case did not directly implicate The Cuban Liberty and Democratic Solidarity (Libertad) Act of 1996, P.L. 104-114, (commonly known as the Helms-Burton Act, most of which has been waived by successive presidents) since the hotel was owned by Starwood, a U.S. company. Rather, the legal basis for OFAC's actions are the provisions of the Trading with the Enemy Act/Cuban Assets Control Regulations which prohibits financial dealings with Cubans by any person subject to U.S. jurisdiction.

Labels: OFAC

The U.S. Attorney for the Southern District of New York has announced that Naji Antoine Abi Khalil, the former Chairman and General Manager of New Line Services, an import/export shipping company in Montreal, Canada, was sentenced to 60 months in prison for attempting to provide material support to Hizballah, a Lebanon-based terrorist organization, attempting to contribute goods in the form of military night-vision equipment and infrared aiming devices to Hizballah, and conspiring to export sensitive military equipment from the U.S. without obtaining the required export licenses.

Iraq has ceased buying wheat from AWB Ltd., Australia's primary wheat exporter, until an Australian Government inquiry examining alleged corruption under the U.N. oil-for-food program is completed. AWB Ltd., which was prominently named in the Volcker Commission report, is alleged to have violated U.N. sanctions by paying millions of dollars to a Jordanian trucking company that was part-owned by the Iraqi government.

Japanese police have raided another company over export control concerns. Mitutoyo Corporation is suspected of exporting three dimensional measurement devices to China and Thailand without the required export licenses. Three dimensional measurement devices are used to spot deformations on a range of equipment and cannot be exported from Japan without an export license because they can also be used in uranium enrichment. There are reports that these items were of the same model that the International Atomic Energy Agency found when the agency inspected Libya's nuclear facilities in 2003 and 2004.

The U.S. Attorney for the Southern District of Florida recently announced the indictment of Ko-Suen Moo, of Taipei, Taiwan, and Maurice Serge Voros, of Paris, France for attemping to acquire and sell defense articles to China. Specifically, the two were charged with violating the Arms Export Control Act for their role in the llegal brokering and attempted export of certain defense articles to China, including one F-16 aircraft engine, Blackhawk helicopter engines, cruise missiles and air to air missiles. They are also charged with conspiracy to export defense articles to China without a license as well as money laundering and conspiracy to commit money laundering.

Defendant Moo was also charged with being a covert agent of the Chinese Government operating in the U.S., obstruction of justice and an additional count of money laundering in connection with his efforts to pay $500,000 through an intermediary purportedly acting on behalf of an Assistant U.S. Attorney in exchange for obtaining Moo’s release from incarceration.

Reuters reports that German prosecutors are preparing criminal charges against a group of Germans living in Germany, Switzerland and South Africa that are suspected of illegally helping Iran obtain technology that could be used to develop nuclear weapons. The article notes that the suspects have been linked to the A.Q. Khan network.

Jake Colvin, director of USA*Engage, wrote the following op-ed piece on the recent sanctions-related events in Mexico. This article appeared in the Miami Herald and several other newspapers:

SANCTIONS CAN ALIENATE ALLIES

By Jake Colvin

Last weekend, the Mexican government and the Starwood Hotels and Resorts learned just how messy U.S. policy on Cuba can be when both were dragged into a dispute over a conference of Cuban officials and U.S. business delegates. To prevent future conflicts with important U.S. allies and to preserve the reputation of U.S. brands worldwide, the U.S. government should reconsider how it applies sanctions.

The controversy began when Starwood, the U.S. parent of Sheraton Maria Isabel Hotel in Mexico City, intervened at the request of U.S. officials and ordered a delegation of Cuban officials to leave its hotel. The Cubans were participating in a conference on energy issues with U.S. business representatives, including myself. A Starwood spokesperson said that the Cubans were asked to leave to comply with the terms of the U.S. embargo against Cuba.

Unintended consequences

This incident highlights the unintended consequences and capriciousness of unilateral U.S. sanctions. By applying U.S. law to a foreign corporation, the United States has strained relations with an important ally.

While the Mexico-based Sheraton hotel shares its name with a division of an U.S. corporate parent, the hotel is organized under the laws of Mexico, which Mexican officials and newspaper editorial boards have angrily noted.

This unnecessary irritant serves to undermine official cooperation on important security and economic issues and damages the goodwill of the United States among the broader population.

Extending U.S. sanctions to foreign corporations also puts these companies between a rock and a hard place by challenging them to comply with conflicting laws. In this case, the Mexican Congress passed a law, called a blocking statute, in response to the Helms-Burton Act passed by the U.S. Congress, which extended U.S. sanctions on Cuba to foreign corporations. This blocking statute prevents companies organized under Mexican laws from complying with these extraterritorial U.S. sanctions. As a result, the Sheraton Maria Isabel is put in the impossible position of having to comply with contradictory U.S. and Mexican laws.

Over the longer term, these sanctions put the reputation of U.S. brands at risk around the world. What conference organizer in his right mind would ever organize a meeting even remotely related to Cuba in a U.S.-branded hotel, let alone a Sheraton? Organizers will look toward companies such as the French-based Sofitel instead to hold future events.

More broadly, the application of U.S. sanctions to disrupt this conference is counterproductive as it limits our ability to project democratic values and advance U.S. foreign-policy goals. This conference provided a forum for dialogue on economic issues and introduced a delegation of American capitalists to Cuban officials. It is disappointing that the U.S. government, which advocates dialogue and engagement in so many other countries around the world, including China, would stifle discussions involving Cuba.

Take a critical look

While it is absolutely necessary to use all of the means at our disposal to advance U.S. foreign-policy goals, current U.S. policy toward Cuba is not making the impact that Congress or the president intended. At the same time, unilateral sanctions have caused unexpected problems with U.S. allies, are harming the reputation of U.S. companies and are being applied unevenly.

The U.S. Commission for Assistance to a Free Cuba, chaired by Secretary of State Condoleezza Rice, will reconvene in 2006 with en eye toward further strengthening sanctions against Cuba. A better idea would be to take a critical look at what the sanctions have really accomplished. This latest incident argues for new approaches, not more of the same.

Jake Colvin is director of the USA*Engage project of the National Foreign Trade Council, a trade association based in Washington.

Reuters reports that Mexico will not lodge a formal diplomatic complaint with the U.S. after the Treasury Department's Office of Foreign Assets Control last week's ordered a U.S.-owned hotel to request a Cuban delegation to leave the hotel. In an interesting twist, it appears that local authorities are likely to close the hotel in the near future after inspectors found the hotel has committted safety and other violations.

The AP reports that the hotel still faces the prospect of monetary penalties in Mexico for complying with U.S. law in Mexico. Mexico's Interior Secretary Carlos Abascal said the Hotel Maria Isabel Sheraton in Mexico City "had without doubt violated Mexican law" by expelling a group of Cuban officials who were meeting with U.S. energy executives.

Mexico enacted the "Law of Protection of Commerce and Investments from Foreign Policies that Contravene International Law" in October 1996 to counteract the U.S. Cuban Liberty and Democratic Solidarity (Libertad) Act of 1996, commonly known as the Helms-Burton Act.

U.S. Customs and Border Protection published in today's Federal Register a notice advising of the interest rates used to calculate interest on overdue accounts (underpayments) and refunds (overpayments) of customs duties. For the calendar quarter beginning January 1, 2006, the interest rates for overpayments will be 6% for corporations and 7% for non-corporations, and the interest rate for underpayments will be 7%. These interest rates are the same as those in the fourth quarter of 2005. The notice also contains historical interest rate data.

Labels: Customs

U.S. processor developer Transmeta Corporation today announced that U.S. export controls forced it to cancel a multi million dollar sale and licensing agreement with a company to make and sell products in China. In a statement, Transmeta's president and CEO said the company's processors subject to the transaction "are still considered very advanced, controlled technology from an export control perspective" and after meetings with U.S. government officials it was determined that "the necessary technology export control approvals could not be obtained for these two agreements within the timeframe necessary to satisfy" the buyer's commercial requirements.

In case you are interested in learning more about what prompted the U.N. and the U.S. to impose sanctions on three individuals from the Ivory Coast, see this article published by the U.N humanitarian news and information service.

The Office of the U.S. Trade Represenative (USTR) today published in the Federal Register a notice announcing that the U.S. intends to initiate free trade agreement negotiations with the Republic of Korea. The notice also states that the interagency Trade Policy Staff Committee (TPSC) will hold a public hearing on March 14, 2006 and seek public comment to assist USTR in determining objectives for the proposed agreement and to provide advice on how specific goods and services and other matters should be treated under the proposed agreement.

China's Ministry of Commerce today terminated the antidumping investigation on ethylene-propylene-non-conjugated diene rubber imports from the U.S., South Korea and the Netherlands.

Labels: Antidumping

Congressman Bill Thomas (R-CA), Chairman of the Committee on Ways and Means, has announced that the Committee will hold a hearing on President Bush's trade agenda on February 15, 2006, in room 1100 of the Longworth House Office Building at 1:30 p.m. The sole witness at the hearing will be U.S. Trade Representative Rob Portman. Individuals or organizations may submit a written statement for consideration by the Committee and for inclusion in the printed record of the hearing.

The hearing is expected to examine current trade-related issues, including the prospect for trade expansion in agriculture, industrial goods, and services through multilateral negotiations in the WTO; the recently concluded FTAs with Oman and Peru; other FTAs that are currently being negotiated or have been notified by the President; management of bilateral trade disputes and concerns; ongoing negotiations with several countries seeking to accede to the WTO; compliance with WTO dispute settlement decisions; and other trade issues.

The State Department's Directorate of Defense Trade Controls (DDTC) has changed the layout and address of its website. The new address is www.pmddtc.state.gov/. Please update your bookmarks.

Labels: DDTC, Export Controls

The Treasury Department's Office of Foreign Assets Control (OFAC) has issued its monthly list of civil penalties imposed against companies and individuals for violating the sanctions programs administered by OFAC. The following is a summary of the settlements announced by OFAC in its February 2006 report:

The Coca-Cola Company of Atlanta, GA, paid a civil penalty of $136,500 to settle allegations of violations of the Sudan Sanctions Regulations occurring between June 2002 and April 2004. OFAC alleged that Coca-Cola exported to its bottler in Sudan services not authorized by its OFAC license and disregarded or evaded certain OFAC license restrictions. The services included financial and market support. Coca-Cola represented to OFAC that it has taken remedial measures and made upgrades to its OFAC compliance program. Coca-Cola voluntarily disclosed this matter to OFAC.

The Chinese American Bank of New York, NY, paid a $7,370 civil monetary penalty to settle alleged violations of the Iran Sanctions Regulations in July 2000. OFAC alleged that the Chinese American Bank exported services to and facilitated a foreign party’s transactions with Iran by initiating an unauthorized funds transfer on behalf of a corporate offshore customer destined for an account at Bank Melli Iran – Dubai Branch, a bank owned and controlled by the government of Iran. The Chinese American Bank did not voluntarily disclose this matter to OFAC.

OFAC imposed a penalty of $2,357.95 against Demars International, Inc. of Jamaica, NY for violations of the Kosovo Sanctions Regulations in December 2000. OFAC claimed that, at the time the prohibitions were in effect, Demars made multiple shipments of merchandise to Belgrade, Yugoslavia without OFAC authorization. Demars did not voluntarily disclose this information to OFAC.

In addition, OFAC imposed $1000 penalties on two individuals for travel-related transactions incident to travel to Cuba. OFAC stated that the travel-related transactions included, but were not limited to, the purchase of food, entertainment, lodgings, ground transportation and incidentals. One of the individuals traveled to and from Cuba through Nassau, The Bahamas, and round-trip between Nassau and Cuba aboard Cubana Airlines, a Specially Designated National of Cuba. The other individual traveled through Montreal, Canada.

OFAC also assessed a civil penalty against an individual for travel-related transactions incident to travel to Cuba and importing Cuban merchandise. The individual paid $1,000 to the U.S. Treasury for Cuban embargo violations. The violations involved the purchase from a Canadian travel company of a tour package that included round-trip airfare between Montreal, Canada, and Cuba aboard Cubana Airlines. Upon returning from Cuba, the individual transported goods of Cuban-origin into the U.S.

Labels: OFAC

President Bush today issued an Executive Order declaring a national emergency to deal with the conflict in Côte d’Ivoire (Ivory Coast). The Executive Order authorized the blocking of property of three individuals and those persons were added to OFAC's SDN list under the designation "COTED."

In addition, the Treasury Department today announced the formal "designation" under Executive Order 13224 of five individuals and four organizations as financial supporters of the Libyan Islamic Fighting Group (LIFG), an organization with links to al-Qaida. The Treasury Department alleges that LIFG supports terrorist activities in Libya and has attempted to overthrow Libyan leader Muammar al-Qadhafi. The designation identifies five British residents of Libyan origin as having links with LIFG: Abd Al-Rahman Al-Faqih, Ghuma Abd'rabbah, Abdulbaqi Mohammed Khaled, Tahir Nasuf and Mohammed Benhammedi. In addition, it lists three real estate companies operated by Benhammedi – Sara Properties, Meadowbrook Investments and Ozlam Properties – and the Sanabel Relief Agency, a U.K.-registered charity, as instruments used to funnel resources to LIFG. These entities are designated on the SDN List as "SDGT" the acronym used to denote Specially Designated Global Terrorists. Treasury's action freezes all assets of the designated individuals and entities under U.S. jurisdiction.