International Trade Law News

U.S. Customs and Border Protection (CBP) today issued an overview and assessment of the operations of the Customs-Trade Partnership Against Terrorism (C-TPAT) program in 2007.

The year end review contained the following statistics regarding the C-TPAT program during calendar year 2007:

• Supply chain security specialist visited manufacturing and logistics facilities in 79 countries, representing some of the most terrorist prone and high risk areas of the world.
• C-TPAT validated 3,011 supply chains, representing a 27 percent increase from 2006. Of the 3,011 validations conducted, 601 or 20 percent were revalidations. This was the first year that C-TPAT began re-verifying supply chains.
• C-TPAT certified 2,601 new members in accordance with SAFE Port Act requirements.
• C-TPAT Tier III status was granted to 17 companies as a result of the validation process.
• C-TPAT suspended or removed 112 companies from the program for security breaches or failure to meet C-TPAT's minimum security criteria as revealed in the validation process. Of the 112 companies, 47 were either conditionally or fully reinstated in the C-TPAT program after they demonstrated to CBP's satisfaction that immediate and sustained corrective action had been taken.

For more information, the text of the year-end review can be found here.

Labels: C-TPAT, Customs

In an article entitled "High-tech lobby notches victory", today's The Politico, provides a behind-the-scenes look at the efforts leading to last week's Export Controls Directives issued by President Bush. The article notes that:

The directives, announced by the State and Commerce departments, were the result of a yearlong campaign waged by a coalition of powerful business interest groups that lobbied the White House.

And though the reforms are relatively minor, they represent the biggest victory for business on export control in decades of concerted lobbying.

With that notch in the win column, industry groups — the National Association of Manufacturers, Aerospace Industries Association and the U.S. Chamber of Commerce among them — are now looking to claim credit.

The article notes that a lot of the credit for the directives goes to David McCormick, who served as Undersecretary of Commerce for Industry and Security and as Deputy National Security Advisor to the President for International Economic Affairs, before assuming his current post at Treasury.

National Association of Manufacturers President Gordan England is quoted as as saying that McCormick "had the right background and position to deal with reform, and Bush tasked him with moving it through." The article also notes that Engler has suggested that McCormick "deserves a 'bureaucrat of the year' award for his effort in pushing through the reforms . . ."

Finally, the article correctly asks how useful these directives will actually be in reforming the dual-use and military export controls and licensing process. The article quotes Congressman Brad Sherman (D-CA), who serves as the Chairman of the House Foreign Affair's Subcommittee on Terrorism, Nonproliferation and Trade and held an export controls oversight hearing last July, as saying that:

"It looks like the administration has finally taken some steps in the right direction and that it takes the issue of export controls seriously . . . however, many of these initiatives are not actually policies to be implemented; they are really just instructions to solve this or that specific problem."

Labels: BIS, DDTC, Export Controls

The World Customs Organization (WCO) is developing a database of preferential trade arrangements and related rules of origin. To assist the WCO in its development process, the WCO has prepared an online survey in order to obtain the the views of all interested parties and to ensure that the database is an effective resource for the trade community.

To take the short survey, click here.

Labels: Customs, Free Trade Agreements

The Politico, a Washington, DC-based newspaper and website which covers politics and lobbying, reports that the President's efforts to convince Congress to approve the Colombia, Panama and South Korea Free Trade Agreements (FTAs) faces serious resistance from the Democratic leadership.

The article notes that the following significant issues remain with all three FTAs:

Colombia - There is serious resistance due to concerns over violence against workers in Colombia and the need for Congress to overhaul the federal program that gives retraining and other benefits to workers displaced by trade (click here for more information on the Trade Adjustment Assistance Program).

Panama - The State Department and Congress have raised concerns after Pedro Miguel González Pinzón, who was indicted in the U.S. for killing a U.S. soldier, was elected to lead Panama's national assembly.

South Korea - Congress is unlikely to approve a FTA with South Korea until the country permits access to all types of U.S. beef. South Korea prohibited all U.S. beef imports when the first case of mad cow disease was found in the U.S. in 2003. In April 2007 Korea began permitting boneless beef from animals under 30 months of age. However, Korean imports of U.S. beef were suspended again in October 2007.

Labels: Free Trade Agreements

The Treasury Department's Office of Foreign Assets Control (OFAC) imposed new sanctions today on two Zimbabwean entities and two individuals that, according to OFAC, "contribute to the undermining of democratic processes and institutions in Zimbabwe".

Today's designations include ZIDCO Holdings, a financial owned by the Zimbabwe African National Union (Patriotic Front), the political party of President Robert Mugabe. The ZANU-PF's publishing arm, Jongwe Printing and Publishing Company was also designated by OFAC. Both ZIDCO Holdings and Jongwe Printing and Publishing Company are owned or controlled by the Mugabe regime that have already been designated by OFAC.

Also named today are Happyton Bonyongwe and Leo Mugabe. Mr. Bonyongwe is the Director of Zimbabwe's Central Intelligence Organization (CIO), and is considered Zimbabwe's "spy chief." Leo Mugabe is a Member of the Zimbabwe Parliament and the nephew of Robert Mugabe.

These designations were made pursuant to Executive Order 13391, which prohibits U.S. persons, wherever located, or anyone in the United States from engaging in any transactions with any person, entity or organization found to: 1) be undermining democratic institutions and processes in Zimbabwe; 2) have materially assisted, sponsored, or provided financial, material, or technological support to these entities; 3) be or have been an immediate family member of a sanctions target; or 4) be owned, controlled or acting on behalf of a sanctions target. As a result of Treasury's designations, any assets of these individuals and entities that are within the United States or in the possession or control of any U.S. person must be blocked, and U.S. persons are prohibited from dealing with them.

Labels: OFAC, Zimbabwe

The University of Georgia's Center for International Trade and Security (CITS) has announced that the Spring 2008 sessions of its Export Control Academy will take place from March 31-April 4 and April 7-11, 2008

The Academy provides a comprehensive overview of export control concepts, issues and standards from an international perspective. According to the CITS, unlike other export control programs that focus exclusively on the U.S. or one particular country’s export control regulations, the CITS Academy offers a comparative perspective that allows participants to understand the range of “how to” options or tools available to them for implementing export controls.

For more information on the Academy, including registration information and a draft agenda, click here.

Labels: Export Controls

Two individuals were arrested last weekend in Saipan, the capital of the U.S. Commonwealth of the Northern Mariana Islands, for attempting to export certain controlled products and defense articles to the People’s Republic of China.

According to the indictment, Peter Zhu, purportedly with Shanghai Meuro Electronics Company, Ltd., in the Peoples’ Republic of China, requested to buy several products which require an export license from an undercover Immigration and Customs Enforcement agent. Specifically, Zhu requested to purchase amplifiers used in digital radios which are broadband, three-stage devices designed for use in commercial digital radios and wireless local area networks. Zhu also requested to purchase monolithic high-electron-mobility-transistor (HEMT) amplifiers which are included in Category XI(a) of the U.S. Munitions List and therefore subject to the International Traffic in Arms Regulations (ITAR).

The indictment further states that Ding Zhengxing and Su Yang became involved in the negotiations for the delivery of the devices. Zhengxing and Yang traveled to Saipan on or about January 25, 2008, to take possession of the amplifiers and were arrested. They were indicted for conspiracy to illegally export defense articles, aiding and abetting the illegal export of defense articles and conspiracy to launder monetary instruments.

At a federal removal hearing yesterday in Saipan, a federal judge ordered Zhengxing and Yang transferred to El Paso, Texas for trial.

Labels: DDTC, Export Controls

U.S. Customs and Border Protection (CBP) proposed in the Federal Register last week a major change to its method of appraising foreign goods imported into the U.S. in instances involving multiple sales transactions, commonly known as the "first sale rule".

Under U.S. law and international conventions, the method for valuing goods is based on the transaction value, or “the price actually paid or payable for merchandise when sold for exportation to the United States”. 19 U.S.C. 1401a; General Agreement on Tariffs and Trade, Article VII (Valuation Agreement). These sources do not identify the method for determining the price actually paid in circumstances where a foreign producer sells to a foreign distributor, who then sells to a buyer in the U.S.

CBP’s longstanding practice, however, has been to use the price paid by the buyer in the first or earlier sale to compute the “transaction value” in multi-sale transactions. CBP is now proposing to change its interpretation of the term “transaction value” to the price paid in the last sale occurring before goods are imported into the U.S.

This proposal, if adopted, would modify or revoke prior administrative rulings and directives. See e.g., T.D. 96-87, vols. 30/31 Cust. B. & Dec. Nos. 52/1 (January 2, 1997). Moreover, the proposal would greatly affect transactions involving a series of sales by valuing imported products on the basis of the price paid by the U.S. importer, rather than the price paid by a foreign middleman. Under current CBP practice, for example, in a case involving multiple sales transactions, the value of foreign goods is based on the price the foreign intermediary paid for goods he purchased from a foreign producer. Under the proposed rule, if adopted, the value of imports would be based on the price the U.S. buyer paid for goods he purchased from the foreign intermediary.

CBP’s proposal comports with a recent determination of the World Customs Organization's Technical Committee on Customs Valuation (“Technical Committee”), an international body tasked with harmonizing the interpretations of the General Agreement on Tariffs and Trade (GATT) text. The Technical Committee recently assumed the task of reviewing and harmonizing the disparate interpretations of “transaction value” among various countries’ administrations. The Technical Committee concluded that the transaction price is the price paid in the last sale occurring before the goods are shipped to the country of importation, considering the fact that it is more practical to verify relevant price information for such a transaction. CBP announced the proposed change in its application of the term “transaction value” shortly after the release of the Technical Committee’s commentary.

Public comments regarding CBP’s proposal may be submitted to the Trade and Commercial Regulations Branch, Customs and Border Protection, by March 24, 2008.

Labels: Customs

The Commerce Department’s Bureau of Industry and Security (BIS) announced last week that Northrop Grumman Corporation has agreed to pay a $400,000 civil penalty to settle allegations that it committed 131 violations of the Export Administration Regulations, both in its own capacity and as successor to Litton Industries, Inc., which Northrop Grumman acquired in April 2001.

The allegations primarily involved unlicensed exports of specially designed components for navigation equipment and module manufacturing data that were to destinations in the Philippines, Singapore, Malaysia, Italy and the United Kingdom between January 1998 and September 2002.

BIS noted that Northrop Grumman voluntarily self-disclosed the violations and cooperated fully in the investigation.

This case demonstrates the importance of conducting export controls due diligence when buying a company.

Labels: BIS, Export Controls

This past Saturday, January 26th, was International Customs Day, which marks the inaugural session of the Customs Cooperation Council (CCC) that was held in Brussels, Belgium on January 26, 1953. The CCC became known as the World Customs Organization (WCO) in 2004.

The theme of this year's International Customs day is "Combating Illicit Trafficking in Drugs and Psychotropic Substances" and in 2008 the WCO's Secretariat has scheduled a series of activities on this issue.

The speech made by the WCO's Secretary General on International Customs Day can be found here.

Labels: Customs

Pedro Alvarez, the Chairman of Empresa Comercializadora de Alimentos, Cuba's main food importing entity, said last week that the U.S. remains Cuba's largest supplier of food and agricultural products. Alvarez said that in 2007, Cuba purchased more than $600 million in agricultural products from the U.S., which is approximately the same amount purchased from the U.S. in 2006 .

Alvarez's comments came during a joint news conference last week with California Secretary of Food and Agriculture A.G. Kawamura, who led the State of California's first agricultural trade mission to Cuba from January 21 – 24, 2008.

California sold about $700,000 in licensed agricultural products to Cuba in 2007. California officials predict that the figure could be increased to $180 million.

The Commerce Department's Bureau of Industry and Security oversees the export of agricultural commodities to Cuba under the authority of the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA).

Labels: BIS, Cuba

Last week the State Department's Directorate of Defense Trade Controls (DDTC) unveiled a new look to its Web site. In addition to adding a "site map" on the left side of each page and most pages have been updated. These changes enhance the ability for users to find information and navigate the site.

While the changes to the design of the DDTC's Web site are welcome, there are still a few problems with the site. For example, it is not possible to return to the Home Page from any of the other pages. While there appears to be a link to the "DDTC Homepage" at the upper left hand corner of each page, the link does not yet work.

Labels: DDTC

U.S. Customs and Border Protection (CBP) has announced that the next Customs Broker License Examination will be held on Monday, April 7, 2008. The exam application and fee must be submitted to CBP by March 7, 2008.

Labels: Customs; Customs Brokers

The deadlock between the Census Bureau and U.S. Customs and Border Protection regarding certain aspects of the Mandatory Automated Export System (AES) regulation has apparently been resolved. As a result, the Census Bureau should be soon publishing the final rule requiring all Shipper's Export Declarations (SEDs) to be filed electronically through AES and increasing penalties for inaccurate or delinquent filings.

The long delay in issuing the mandatory AES rule has centered on two aspects of the proposed mandatory AES rule that was published by Census in the Federal Register on February 17, 2005. The first issue related to the availability and eligibility criteria for the post-departure filing of export information (currently known as "Option 4"). The second issue involved the sharing of export information provided by AES filers with foreign governments.

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

The President issued a directive yesterday calling for more efficient procedures at the U.S. Department of State for export licensing of military equipment, services and data. The directive is designed to limit the period of time the government is permitted to make license determinations for items on the U.S. Munitions List to 60 days. Although the directive indicates that additional funding will be allocated for defense export licensing, it is unclear how much financial support will be made available for this purpose. Under the directive, the Secretary of State is also required to update U.S. controls on defense exports involving dual and third country nationals from NATO and other allied countries. The likely affect of this reform is a reduction in the number of goods that will require a license.

The President’s directive also calls for an electronic licensing system that permits all agencies access to defense related licenses. With respect to the resolution of jurisdictional issues arising from the licensing of defense articles, the President directs the creation of a formal interagency dispute mechanism, “the Commodity Jurisdiction process”, made up of the Departments of State and Commerce, and assigns oversight jurisdiction to the National Security Council. In the same breadth, the President’s directive reflects a continued commitment to prevent the diversion of defense articles to unauthorized users.

Update: The State Department's fact sheet on the effect of the President's directive as it applies to defense trade issues can be found here. The Bureau of Industry and Security's fact sheet on the President's directive as it applies to dual-use export controls can be found here.

Labels: BIS, DDTC, Export Controls

On January 2, 2008, Customs and Border Protection (CBP or “Customs”) published a notice of proposed rulemaking in the Federal Register that would require both importers and carriers to submit additional data to Customs pertaining to cargo before the cargo is brought to the U.S. by vessel. Under the current regulations any vessel subject to entry is required to submit certain information related to the vessel’s ocean containers (i.e., the cargo manifest) 24 hours before the cargo is laden aboard the vessel at the foreign port. Known as the “24 Hour Rule”, the current regulations also enumerate specific informational elements that are required in the cargo manifest. The proposed rule, if adopted, would expand the nature of information carriers and importers are required to submit to Customs.

The proposed rulemaking is mandated under the Security and Accountability for Every Port Act of 2006, and is one of several actions intended to improve high-risk targeting of marine cargo destined to the United States. Both the 24 Hour Rule and the proposed rule depend on data supplied by carriers, non-vessel operating common carriers, importers and brokers through the Automated Targeting System (ATS). ATS screens 100 percent of cargo shipments to the U.S. at foreign seaports and identifies high risk targets that will subsequently face inspection on arrival at U.S. ports. The proposed rule is aimed at increasing this risk assessment capacity by requiring importers and carriers to submit data electronically, and by expanding the advance data elements required for ocean cargo shipments to the U.S.

The proposed rule would require importers to provide ten data elements, and carriers to provide an additional 2 data elements. As reflected below, many of these data elements are analogous to entry information and manifest data Customs currently receives for ocean cargo.

An importer, or person causing goods to arrive within the limits of a port in the U.S. would be required under the proposed rule to submit an Importers Security Filing within 24 hours before cargo is laden abroad a vessel. The Importers Security Filing for cargo (other than foreign cargo remaining on board) must contain the following data elements:
1) Manufacturer name and address
2) Seller name and address
3) Container stuffing location
4) Consolidator name and address
5) Buyer name and address
6) Ship to name and address
7) Importer of record number
8) Consignee number
9) Country of origin of the goods
10) Commodity Harmonized Tariff Schedule number (6 digits)

The data elements included in the proposed Importers Security Filing are readily available in current logistics processes.

In addition, the proposed rule would require carriers to submit (1) a vessel stow plan revealing the location of the cargo within 48 hours of departing from the foreign port (or for shorter trips, prior to the vessel’s arrival to the first U.S. port); and (2) container status messages.

The information carriers would be required to submit in the proposed vessel stow plan is generally the same information ocean carriers must currently submit as part of their cargo manifest (i.e., data regarding the vessel, each container, and unit of break bulk cargo laden on the vessel). However, carriers would be required to submit under the proposed rule, a stow plan revealing the cargo’s position. Further, the new rule would allow carriers 48 hours after departure from the last foreign port, in certain instances, to submit the stow plan.

With respect to container status messages, the new rule would require carriers (except carriers of bulk and break bulk cargo) to submit updates for certain events relating to all containers laden with cargo destined to arrive within the limits of a port in the U.S. by vessel, on a daily basis. Carriers would be required to report terminal container movements and any change in the status of containers no later than 24 hours after the message is entered into the carrier’s equipment tracking system. Customs would require these messages to be submitted through the Automated Manifest System (AMS). A complete list of events that would trigger these reporting requirements is available in the Federal Register notice.

Carriers would be permitted to use either American National Standards Institute (ANSI) X.12 standard, or the United Nations rules for Electronic Data Interchange For Administration, Commerce and Transport (UNEDIFACT) standard to create container status messages. The following information must be included for each generated message:
1) Event code being reported;
2) Container number;
3) Date and time of the event being reported;
4) Status of the container (empty or full);
5) Location where the event took place; and
6) Vessel identification associated with the message.

Written comments regarding the proposed rule must be submitted to U.S. Customs and Border Protection by March 3, 2008.

Labels: CBP