International Trade Law News

We will resume posting in early 2007.

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Doug Jacobson

The Government Accountability Office (GAO) today released a report to Congress entitled Export Controls: Challenges Exist in Enforcement of an Inherently Complex System. Not surprisingly, the report concluded that "export control enforcement is inherently complex, involving multiple agencies that perform various functions using differing authorities." The report found that
the enforcement agencies "have had difficulty coordinating investigations and agreeing on how to proceed on cases." The report also correctly notes the significant problems that exist in the license determination process. The GAO also found that the export enforcement agencies face other challenges, "including balancing priorities and leveraging finite resources."

To correct these problems, the GAO recommends the following:

• Establishment of a task force to evaluate options to improve coordination and cooperation among export enforcement investigative agencies, such as creating new or updating existing operating agreements between and among these agencies, identifying and replicating best practices for routinely collaborating on or leading investigations, and establishing a mechanism for clarifying roles and responsibilities for individual export control cases involving foreign counterintelligence, and report the status of task force actions to Congress.
  

• To ensure discipline and improve information needed for license determinations the Secretary of Homeland Security should direct the Assistant Secretary of Homeland Security for U.S. Immigration and Customs Enforcement and the Secretary of Commerce should direct the Under Secretary for Industry and Security to establish goals for processing license determinations. In addition, U.S. Immigration and Customs Enforcement (ICE), the Bureau of Industry and Security (BIS) and the Directorate of Defense Trade Controls (DDTC) should coordinate with licensing officers, inspectors, investigators and prosecutors to determine what additional training or guidance is needed on license determinations, including the type of information needed to make license determinations.
  

• To ensure systematic reconciliation of shipments with Commerce licenses, BIS and U.S. Customs and Border Protection (CBP) should determine the feasibility of establishing a requirement for CBP to decrement Commerce licenses and an action plan for doing so.
  

• To ensure that State and Commerce have complete information on enforcement actions, the Justice Department should establish formal procedures for conveying criminal export enforcement results to DDTC and BIS.

Labels: BIS, DDTC, Export Controls, OFAC

By Holly Rich*

President Bush today signed the Tax Relief and Health Care Act of 2006 (H.R. 6111), the massive 274 page bill that Congress passed on the final day of the 109th Congress. H.R. 6111 contains a number of important trade-related provisions, which are included in "Division D" of the bill. (Because H.R. 6111 was cobbled together from a number of separate bills, the final legislation is divided into four "Divisions", each having their own title numbers.)

Of significant note to many U.S. importers, Title VIII of Division D of the bill extends the expiring General System of Preferences (GSP) program until December 31, 2008. In addition, the bill tightens rules on competitive need limit (CNL) waivers by eliminating waivers on any product category when a country exports more than $1.5 billion of that product in the prior year. It also eliminates CNL waivers for countries with per capita income more than $3,400.

The bill also contains three regional-specific provisions. Title VI of Division D extends certain provisions of the African Growth and Opportunity Act (AGOA) and provides a tax credit for new U.S. labor and capital investments in AGOA-eligible countries. It also extends fabric benefits for the investment in fabric production in Africa. Division D, Title V creates the Haitian Hemispheric Opportunity through Partnership Encouragement Act (HOPE), that applies to Haiti the same political, economic and labor criteria and the same textile and apparel transshipment requirements that AGOA does to Africa. In addition to current Caribbean Basin Initiative (CBI) benefits, HOPE provides new rules of origin for apparel which would apply on an annual, aggregated basis over five years. Third, Title VII of Division D, includes the Andean Bridge to a Reciprocal Trade Partnership Act, which grants to Peru, Colombia, Ecuador and Bolivia a straightforward six-month GSP extension, followed by an additional six-month extension for an eligible country if the U.S. and that country both complete their legislative process to approve a trade promotion agreement.

Division D, Title IV grants permanent normal trade relations to Vietnam and establishes a subsidies enforcement mechanism if Vietnam grants any prohibited subsidies to its textile and apparel industry in violation of the terms of its WTO accession.

Finally, Division D, Titles I through III include a number of miscellaneous duty suspensions and reductions as well as several technical correction to U.S. trade laws. For example, the bill suspends or reduces the duty rate on more than 500 products, many of which are chemicals not available in the U.S.

The complete text of H.R. 6111 can be found here (this is a large PDF file).

*Ms. Rich is a 2005 graduate of the Hofstra University School of Law and was recently admitted to the New York Bar. Ms. Rich can be reached at hollyrich@gmail.com.

[Editor's Note: The United States Trade Representative (USTR) today announced that it expects to issue a Federal Register notice in late February 2007 that will identify the GSP CNL waivers that meet either of the new thresholds and thus subject to potential revocation. The USTR also stated that based on January through October 2006 import data, a preliminary assessment of the CNL waivers meeting the new statutory thresholds are: Brazil - brakes and brake parts ($242 million) and ferrozirconium ($ 0.7 million); Cote d’Ivoire-kola nuts ($4 million); India-gold jewelry ($1.6 billion) and brass lamps ($20 million); Philippines-wiring harnesses ($329 million); Thailand-gold jewelry ($611 million); and Venezuela-methanol ($242 million)].

Labels: Customs

Today the Bureau of Industry and Security (BIS) published on its website the public comments submitted on the proposed rule on export and reexport controls for the People's Republic of China (commonly, but incorrectly, referred to as the "China Catch-All Rule"). BIS received 55 comments from a wide variety of individuals, companies, associations and organizations. The comments, which run more than 900 pages in length, can be found at the following link: efoia.bis.doc.gov. Be careful when opening and viewing the file in your browser, as the PDF file is very large (approximately 77 MB).

Not surprisingly, most of the comments were critical of many aspects of the proposed rule. A large number of commenters stated that many products included in the 47 ECCNs that would be prohibited from being sold to military end-users in China are readily available in the global marketplace. In fact, many of the commenters provided specific information on products falling within the 47 ECCNs that are currently produced in or available in China (be sure to see the Cross Sector Report of the American Chamber of Commerce-PRC at page 109 of the PDF file). Many of the comments expressed skepticism on the utility of the Validated End-User Authorization and the problems associated with obtaining PRC End-User Certificates from MOFCOM.

It appears, however, that the large number of critical comments from industry are unlikely to cause BIS to withdraw the proposed rule. In a recent speech to the Washington International Trade Association, Christopher A. Padilla, Assistant Secretary of Commerce for Export Administration, stated that BIS will "carefully review and consider the comments we received, and the reaction of our European and Asian allies, and factor all of this into our decisions on how to finalize and implement our new export control policies for China." While Assistant Secretary Padilla mentioned that "there may be some changes to the original proposal" he categorically stated that "scrapping the rule is simply not in the cards." He noted that:

Our proposed rule on China export controls derives from very fundamental tenets of U.S. foreign policy. For more than three decades across seven presidential administrations, the United States has sought to encourage legitimate civilian trade with China. That remains our policy, and the China rule will have the effect of helping to facilitate and streamline legitimate civilian exports, even as we prudently hedge against the rapid, double-digit growth in China’s military capabilities.

Labels: BIS, Export Controls

The Bureau of Industry and Security (BIS) today sent a message to users of the SNAP system reminding them to make the transition to the new and improved SNAP-R, which includes several new functionalities. The message also indicates that "with the positive transition of many companies from SNAP to SNAP-R, SNAP is on schedule to be decommissioned in early 2007."

I have used SNAP-R to obtain a number of export licenses and commodity classifications for clients and have found the system to be far superior than the previous version of SNAP. The ability to upload PDF versions of technical specifications, product brochures and other supporting information, such as letters of explanation, is particularly useful in ensuring that the licensing officer receives the information in a timely manner. The e-mail notification system is also helpful since it is no longer necessary to constantly check SNAP to determine the status of your request and allows the license applicant to receive messages directly from the licensing officer handling your license or classification.

Labels: BIS, Export Controls

The State Department today announced that it will impose sanctions on Fiji as a result of the recent coup by Fiji's military. The sanctions include:

• Suspension of all deliveries and sales of lethal military equipment to Fiji;
• Suspension of official visits to the U.S. and U.S.-sponsored events in third countries by senior Fiji military officials and members of the interim government;
• Suspension of the Fiji military's participation in and planning for joint military exercises and U.S.-sponsored conferences and courses.
  
• Imposition of visa sanctions on coup and interim government leaders.
• Ceasing U.S. assistance to Government of Fiji, including military-related assistance under the Foreign Military Financing (FMF) and International Military Education and Training (IMET) programs.
  
• Termination of new economic assistance programs to the Government of Fiji under the Foreign Operations Appropriations Act, including the Millennium Challenge Account.
  

These measures will remain in place until the President or Secretary of State determines that a democratically elected government has taken office. Other U.S. actions taken in response to the coup are subject to further review as circumstances

Labels: DDTC

The Directorate of Defense Controls (DDTC) recently announced that on or about January 31, 2007 it will no longer accept paper versions of most import and export license applications and amendments, including DSP-5, DSP-6, DSP-61, DSP-62, DSP-73 andDSP-74.

(Application/License for Permanent/Temporary Export or Temporary Import of Classified Defense Articles and Classified Technical Data), The only submissions that will NOT be affected by this change include: DSP-85 General Correspondences (GCs), Agreements/Amendments (AGs, TAAs, MAs, DAs), and Brokering Requests (BAs).

Labels: DDTC

The United States International Trade Commission (ITC) today issued affirmative preliminary injury determinations in the antidumping and countervailing duty investigations on coated free sheet paper from China, Indonesia and Korea.

Vice Chairman Shara L. Aranoff and Commissioners Stephen Koplan, Deanna Tanner Okun, and Charlotte R. Lane voted in the affirmative. Chairman Daniel R. Pearson voted in the negative. Commissioner Jennifer A. Hillman did not participate in these investigations.

As a result of the ITC's affirmative determinations, the Commerce Department will continue to conduct its investigations of imports of coated free sheet paper from China, Indonesia, and Korea, with its preliminary countervailing duty determinations due on or about January 24, 2007, and its preliminary antidumping determinations due on or about April 9, 2007.

As previously reported, this case is unique since the petitioner is requesting the U.S. to impose countervailing duties on China, a country designated as a non-market economy (NME). This is the first countervailing duty investigation involving the PRC since 1991, when the Commerce Department initiated investigations on lugnuts and ceiling fans, which were subsequently terminated.

The Commerce Department recently published a notice seeking public comments on the applicability of the countervailing duty law to imports from the People's Republic of China.

Labels: Antidumping, Countervailing Duties

It appears that the Directorate of Defense Trade Controls (DDTC) has finally pulled the plug on the agency's old website URL at www.pmdtc.org. Be sure to update your bookmarks to DDTC's official website URL at www.pmddtc.state.gov.

Labels: DDTC

On December 11, 2006, the Office of Foreign Assets Control (OFAC) published a notice in the Federal Register requesting comments "on the effectiveness of OFAC's licensing procedures for the exportation of agricultural commodities, medicine, and medical devices to Sudan and Iran" under the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA). The deadline for submission of comments is January 10, 2007.

As many U.S. exporters of agricultural products, medicine and medical devices are aware, OFAC's TSRA licensing process is anything but effective. License applicants are currently experiencing significant delays in obtaining new TSRA licenses from OFAC. In addition, applicants are experiencing significant delays and requests for new information on requests for renewals of TSRA licenses that had been routinely granted in a reasonable amount of time in the past. Many applicants have recently had licenses denied that had been granted in the past. These problems and delays are well known among those exporters and practitioners that handle TSRA licenses on a regular basis.

In addition, OFAC has not complied with section 906(b) of TSRA by failing to issue to Congress the required quarterly reports on license processing times. While the Bureau of Industry and Security (BIS) continues to submit timely quarterly TSRA reports to Congress, as indicated on OFAC's website, the last quarterly report issued by OFAC covered the period July through October 2005. That report indicated that the average processing time for issuing licenses was 25.2 business days (approximately 5 weeks). There is no doubt, however, that OFAC's average processing time to issue TSRA licenses increased dramatically in 2006.

A number of organizations will be submitting comments to OFAC with their concerns regarding the TSRA licensing process. While we have a good deal of information based on the license applications that we have submitted and obtained for clients, the comments will be enhanced if they provide as much specific information as possible regarding the experiences of U.S. exporters in obtaining TSRA licenses, including:

• The number of days (actual days, not business days) that it took to receive a TSRA license from OFAC after the license application was submitted;
• Describe your experience in obtaining renewals of previously issued TSRA licenses. For example, was new information requested that was not requested in the past?
• Has OFAC requested specific information on end-users (e.g., hospitals)?
  
• Have any license applications for renewals of previously issued licenses been denied?
  

Labels: Export Controls, OFAC

U.S. importers and customs brokers should be advised that the U.S. International Trade Commission (ITC), the U.S. agency responsible for issuing the Harmonized Tariff Schedule of the United States (HTSUS), has issued another update regarding the status of the 2007 changes to the HTSUS. These changes are necessary to implement the modifications made to the Harmonized System by the World Customs Organization (WCO). While these changes will go into worldwide effect on January 1, 2007, as noted below the new version of the HTSUS incorporating the changes made by the WCO will not be available until January or February 2007. The complete text of the ITC's announcement is reprinted below:

IMPORTANT NOTE CONCERNING THE 2007 HTS:

Effective January 1, 2007, the USITC will post on this website an electronic version of the 2007 Harmonized Tariff Schedule of the United States (HTS) (Preliminary). This version will include changes occurring since the posting of the 2006 HTS (Supplement 1, Rev. 2), but likely will NOT include the following: (a) tariff legislation recently passed by the Congress and (b) amendments recommended by the World Customs Organization (WCO) for implementation on January 1, 2007. By U.S. law, the President cannot proclaim the implementation of these latter amendments in the HTS until a required Congressional layover period is completed; that layover period was completed during the week of December 4-8, and it is anticipated that the President will sign the implementing proclamation before the end of December, with an effective date yet to be determined. As soon as possible after the President signs the proclamation, the ITC will post an updated electronic version on this website, and the Government Printing Office will publish a hard-copy version of the 2007 HTS.

Labels: Customs, HTS