International Trade Law News

This evening the U.S. House of Representatives held 40 minutes of debate on H.R. 5916, the Security Assistance and Arms Export Control Reform Act of 2008. Following the debate, a vote on the bill was postponed until tomorrow.

If enacted, H.R. 5916, which was introduced by House Foreign Affairs Committee Chairman Howard Berman (D-CA) less than two weeks ago, would make a number of significant changes to arms export control procedures.

For example, Subtitle A of Title I of the bill, referred to as the Defense Trade Controls Performance Improvement Act of 2008, would require the Department of State's Directorate of Defense Trade Controls (DDTC) to institute specified performance goals to improve the review and processing of applications for export licenses (particularly for major allies such as Israel, South Korea, Japan, Australia, New Zealand, and members of NATO).

These performance goals include:

• The processing time for review of each application for a license to export items on the United States Munitions List shall be not more than 60 days from the date of receipt of the application.

• The processing time for review of each application for a commodity jurisdiction determination shall be not more than 60 days from the date of receipt of the application.

In order to meet these goals, the bill would require DDTC to have three staff members dedicated to requests on commodity jurisdiction and one licensing officer for every 1,250 license applications.

The Congressional Budget Office (CBO) has estimated that DDTC would need an additional 55 employees to meet the requirements of the bill: 35 licensing officers, five staff members to review commodity jurisdiction, four staff members to oversee and review processing goals, one person to review regulations and the U.S. Munitions List, and 10 staff members for compliance and enforcement of export controls. The CBO estimates that DDTC would require additional appropriations of $6 million in 2009 and $31 million during the period 2009-2013 period.

To help pay for this increased staff, section 107 of the bill would authorize the State Department to spend up to $10 million in civil penalties collected each year over the 2008-2012 period for DDTC expenses.

In what would be a dramatic change to the commodity jurisdiction (CJ) process, the bill states "that the complete confidentiality surrounding several hundred commodity jurisdiction determinations made each year" by DDTC "is not necessary to protect legitimate proprietary interests of persons or their prices and customers, is not in the best security and foreign policy interests of the United States, is inconsistent with the need to ensure a level playing field for United States exporters, and detracts from United States efforts to promote greater transparency and responsibility by other countries in their export control systems."

Therefore, the bill would require DDTC to publish CJ determinations on DDTC's website within 30 days after the CJ is made. Specifically, the bill would require the following CJ information to be posted:

1. the name of the manufacturer of the item;
2. a brief general description of the item;
3. the model or part number of the item; and
4. the USML category under which the item has been designated.

The bill specifies that the name of the person or business organization that sought the CJ will not be published if the person or business organization is not the manufacturer of the item and the names of the customers, the price of the item, and any proprietary information relating to the item indicated by the person or business organization that sought the CJ will also not be published.

The complete text of H.R. 5916 can be found here. The report accompanying the bill, 110-626, can be found here.

Labels: Congress, DDTC, Export Controls, ITAR

A subcommittee of the U.S. Senate Committee on Homeland Security and Governmental Affairs held a hearing on reforming export licensing agencies today which featured witnesses from the Departments of Commerce, State and Defense, the Government Accountability Office. The private sector witnesses included National Foreign Trade Council (NFTC) President and USA*Engage Co-Chair Bill Reinsch, Daniel B. Poneman from The Scowcroft Group and Edmund B. Rice, President of the Coalition for Employment through Exports.

In his testimony Reinsch outlined key issues plaguing U.S. export control administration, including delay, uncertainty, repetitive licensing requirements and an outdated list of dual use items. In addition to outlining the problems, Reinsch also recommended specific reforms in the interests of U.S. national security and economic competitiveness.

During his testimony, Reinsch addressed a number of export control administration problems, including “delay and uncertainty in decision making and, in the case of weapons, repetitive licensing requirements. Applicants can face these problems initially if there is uncertainty or interagency disagreement over whether their proposed export is a dual use item or a weapon, and then subsequently in the licensing process itself.” Reinsch also pointed out that the dual use list is outdated and that “this, in turn, means more licenses are required in cases where our foreign competitors are not similarly constrained, resulting in loss of competitive advantage for American companies and no damage done to the end user, who simply buys a comparable European or Japanese product.”

While Reinsch endorsed the set of administrative changes to make licensing more efficient proposed by the Coalition on Security and Competitiveness, a group of prominent trade and industry organizations, of which the NFTC is a member, he argued that more fundamental reform is necessary and recommended “a unitary system that operates within an interagency framework,” which would mean combining State and Commerce control processes into a single system that retains the existing agency roles of the current dual use system.

In conclusion, Reinsch stated, “I have not in my comments addressed the question of resources. That is not an oversight. A plea for more resources is the standard response of every federal agency to every problem, and more money would no doubt be helpful, particularly after significant BIS budget cuts this year, but I do not believe it is the most critical issue…Adding money will not clear away the obstacles to efficient export control administration; it will simply allow more people to be inefficient. I would encourage the Committee to address the fundamentals, however difficult that might be, rather than settle for with palliatives.”

The prepared testimony presented by all of the witnesses at today's hearing can be found here.

Labels: Congress, Export Controls

The AFP reports today:

A group of US senators on Thursday threatened to block arms deals with OPEC member countries if they do not boost oil output to help bring down soaring gasoline prices.

Senators Charles Schumer, Byron Dorgan, Bernie Sanders, Bob Casey, and Mary Landrieu issued their warning in a letter to President George W. Bush.

"The Saudis have to understand this is a two-way street. We provide them weapons, our troops provide them protection, and then they rake us over the coals when it comes to oil. The Saudis and Big Oil are in cahoots and this administration has coddled them both for far too long," said Schumer, a New York Democrat.

Labels: Congress

At the request of the Senate Appropriations and Finance Committees, the Government Accountability Office (GAO) was asked us to review the reasons why the duties are uncollected and what the U.S. government has done to address this problem. In addition, the Senate Committees asked GAO to identify options for improving the U.S. antidumping and countervailing duty system.

During its investigation GAO examined (1) the extent and nature of uncollected antidumping and countervailing duties, (2) the key factors contributing to risks for uncollected antidumping and countervailing duties and the steps taken to improve the collection of antidumping and countervailing duties, (3) interagency communications that affect the processing of antidumping and countervailing duties, and (4) potential options for improving antidumping and countervailing collections.

The GAO recently issued a report of its finding entitled "Antidumping and Countervailing Duties: Congress and Agencies Should Take Additional Steps to Reduce Substantial Shortfalls in Duty Collection". The report notes that U.S. Customs and Border Protection (CBP) has been unable to collect over $613 million in antidumping duties since 2001. These uncollected duties are concentrated among a few products, countries of origin, and importers. For example, GAO found that four products account for about 84% of the total amount of uncollected AD/CV duties. These four products, all from China, are crawfish tail meat ($354 million), garlic ($75 million), honey ($43 million), and mushrooms ($41 million).

The GAO also found U.S. importers purchasing products from China are associated with 90% of the total amount of uncollected duties and that a relatively small number of importers owe the majority of uncollected antidumping and countervailing duties. In fact, the GAO found that four companies accounted for more than one-third of the total amount of uncollected antidumping duties and 20 companies account for 63 percent of the total.

The report states that four key factors contribute to uncollected antidumping and countervailing duties, a few of which the U.S. government has partially addressed:

1. Because the U.S. antidumping and countervailing duty system involves the retrospective assessment of duties, the final amount of antidumping and countervailing duties an importer owes can significantly exceed the initial amount paid when the goods entered the country.

2. Companies that did not previously export products subject to antidumping and countervailing duties, i.e., "new shippers," pose two types of risks for collections. For example, new shippers can be assigned an antidumping and countervailing duty rate based on as few as one shipment, which can significantly underestimate the final duty rate. Also, importers purchasing from new shippers were able to provide a bond in lieu of a cash payment to cover the initial AD/CV duties assessed. Congress addressed this risk by temporarily requiring all importers to pay initial antidumping and countervailing duties in cash.

3. All importers must provide a general bond to secure the payment of all types of duties, but CBP's standard practice for setting the amount of this bond inadequately protects antidumping and countervailing duty revenue. CBP addressed this by revising its bonding formula for products subject to antidumping and countervailing duties, but the revision has been tested on only one product and faces domestic and international legal challenges.

4. CBP collects minimal information regarding importers and does not conduct background or financial checks, which creates challenges to locating importers and collecting antidumping and countervailing duties.

The report indicates that there are two sets of options for improving the collection of antidumping and countervailing duties, each of which involves potential advantages and disadvantages:

The first option involves revising U.S. law to eliminate the retrospective component of the U.S. antidumping and countervailing duty system by assessing final duties when the product arrives in the U.S. (i.e., a prospective system as in the European Union and Canada).

The second option involves making adjustments within the existing system. For example, Congress could revise the standards for new shipper reviews and CBP could examine the option of revising bonding requirements to protect additional antidumping and countervailing duty revenue.

A copy of the complete report can be found here: www.gao.gov/new.items/d08391.pdf.

Labels: Antidumping, Congress, Countervailing Duties

Representatives Don Manzullo (R-IL) and Adam Smith (D-WA) recently introduced H.R. 5828, the Securing Exports Through Coordination and Technology Act of 2008. According to the press release issued in connection with the introduction of this bill, H.R. 5828 is intended to "clarify a confusing U.S. export system that often punishes inadvertent mistakes with costly fines" and would "strengthen the government’s ability to crack down on deliberate violators." The bill "would require the federal government to modernize its computerized Automated Export System (AES) to prevent freight forwarders (who facilitated 78 percent of the $1.62 trillion in U.S. exports for 2007) and others from inadvertently making illegal exports to restricted parties or embargoed countries."

The centerpiece of the bill, as contained in section 304, is the authorization of a program that would require companies and users of AES to obtain a license to file AES records. Among other things, the bill authorizes the Census Bureau to conduct examinations and background checks and collect users fees to defray the costs of an AES licensing program. The Census Bureau previously considered establishing an AES Filer Licensing and Permit Program. However, in a 2003 Federal Register notice issued in connection with the advance notice of proposed rulemaking associated with the mandatory AES program Census indicated that it "decided not to move forward with the development and implementation of an AES filer licensing program concurrently with requiring full mandatory electronic filing of export information through the AES. However, the Census Bureau will continue to explore the need for an AES filer licensing program."

The bill would also require AES to provide certain export compliance information, fatal error messages and alerts to AES filers. For example, section 305 of he bill requires AES to provide the following notifications to filers:

(1) Codes entered into the Automated Export System to identify an export, whether by classification under the Harmonized Tariff Schedule or otherwise, will alert the exporter of potential export license requirements under the Export Administration Regulations or the International Traffic in Arms Regulations (ITAR).

(2) Automated Export System will issue a Fatal Error notice when data entered for an export contain any of the following:

(A) The name or address of an individual or legal entity that has been described on any restricted party list and the data are not accompanied by the necessary export authorization.

(B) The intermediate or ultimate country of destination is subject to trade sanctions imposed by the United States and the data are not accompanied by the necessary export authorization.

(C) In the case of defense articles and defense services, the country of the intermediate or ultimate consignee is subject to an arms embargo or prohibition imposed by the United State and the data are not accompanied by the necessary export license.

(3) Automated Export System will issue compliance alerts or other warnings to the filer when data for an export are entered containing any of the following errors or omissions:

(A) The Harmonized Tariff System code is inconsistent with the Export Control Classification Number or the U.S. Munitions List Category.

(B) In the case of a dual use item, the license exception is not available to the country of the ultimate consignee or to the intermediate or ultimate consignee.

(C) In the case of defense articles and defense services, the U.S. Munitions List Category is identified but no license number, exemption, or exception is correctly identified.

(4) Fatal Error notices, compliance alerts, or other warnings are accompanied by references to the applicable regulations and licensing authorities.

Labels: AES, Congress

The U.S. Senate Subcommittee on Oversight of Government Management of the Committee on Homeland Security and Governmental Affairs will hold a hearing entitled "Beyond Control: Reforming Export Licensing Agencies for National Security and Economic Interests" on April 24, 2008 at 2 p.m. in the Dirksen Senate Office Building.

The hearing will examine the structure of federal government agencies that are responsible for licensing controlled exports, the processes in place for licensing, how those structures help or hinder decision making for licenses, human capital challenges of the export control bureaucracy and recommendations for improving the export control processes and personnel. The witnesses at the hearing include the following government and private sector representatives:

Panel 1

• The Honorable Stephen D. Mull, Acting Assistant Secretary for Political-Military Affairs, Department of State
• Ms. Beth M. McCormick, Acting Director, Defense Technology Security Administration, Department of Defense
• Mr. Matthew S. Borman, Acting Assistant Secretary of Commerce, Export Administration, Department of Commerce
• Ms. Ann Calvaresi Barr, Director, Acquisition and Sourcing Management, Government Accountability Office

Panel 2

• The Honorable William A. Reinsch, President, National Foreign Trade Council
• Mr. Daniel B. Poneman, Principal, The Scowcroft Group
• Mr. Edmund B. Rice, President, Coalition for Employment through Exports, Inc.

Labels: Congress, Export Controls

The Senate Finance Committee today held a hearing on S. 970, the Iran Counter-Proliferation Act of 2007. This bill, which has 70 co-sponsors, seeks to tighten and expand economic sanctions on Iran and to deter foreign countries from cooperating with Iran. In addition to banning all imports from Iran (it is currently permissible to import certain Iranian food (including pistachios) and carpets), the most controversial provision of the bill (section 8) would impose sanctions on U.S. parent companies if their foreign subsidiaries engaged in prohibited transactions with Iran.

The witnesses at the hearing included (click on the link to review the PDF versions of their testimony):

Phillip Gordon, Senior Fellow for U.S. Foreign Policy, The Brookings Institution;

William A. Reinsch, President, National Foreign Trade Council;

Orde Kittrie, Visiting Associate Professor, University of Maryland School of Law and Professor of Law, The Sandra Day O’Connor College of Law, Arizona State University;

Danielle Pletka, Vice President, Foreign and Defense Policy Studies, American Enterprise Institute.

Labels: Congress, Sanctions; Iran

Chairman Sander M. Levin (D-MI) and Ranking Member Wally Herger (R-CA) of the House Ways and Means Subcommittee on Trade today announced that the Trade Subcommittee is requesting written comments on the 806 miscellaneous tariff and duty suspension bills that have been introduced in this session of Congress.

The deadline for the submission of public comments is April 10, 2008. After the comment period, the Subcommittee will review all comments and determine which bills should be included in a miscellaneous tariff bill package. The Subcommittee will consider the extent to which the bills create a revenue loss, operate retroactively, attract controversy or are not administrable.

Public comments must be submitted to the Subcommittee in PDF format by e-mail. Click here for details on how to submit comments.

An Excel file containing a summary of the 806 miscellaneous tariff and duty suspension bills can be found here.

Labels: Congress, Customs

Yesterday the Cato Institute unveiled "Free Trade, Free Markets: Rating the Congress", a web site that allows users to examine how Congress and its individual members have voted on bills and amendments affecting trade and investment during the past five sessions of Congress.

The site contains a "free trade matrix" that classifies a member of Congress' voting record into one of four broad categories rather than on the more common one-dimensional scale with free trade at one pole and protectionism at the other. According to the matrix, members of Congress can be classified in one of four categories:

Free Traders-Free traders consistently vote against both trade barriers and international economic subsidies.

Internationalists-Members of this group generally vote for trade liberalization but also support subsidies that they believe promote the same end.

Isolationists-This category includes members of Congress who tend to vote against reducing trade barriers and also oppose international economic subsidies.

Interventionists-Members of this group consistently support government intervention at the expense of the free market, favoring both subsidies and trade barriers.

The Free Trade, Free Markets: Rating the Congress website can be found at the following link: www.freetrade.org/congress.

Labels: Congress

The House Ways and Means Committee will meet at 11 a.m. on February 14, 2008 to mark-up H.R. 5264, the Trade Preference Extension Act of 2008. As previously reported, H.R. 5264 would extend the Andean Trade Preference, Caribbean Basin Initiative and Generalized System of Preferences programs, all of which are scheduled to expire this year, until September 30, 2010.

Update: The hearing has been changed to 9 a.m. on February 14th.

Labels: Congress, GSP

House Foreign Affairs Committee Chairman Tom Lantos (D-CA) passed away this morning due to complications from cancer at Bethesda Naval Medical Center. Congressman Lantos, who was born in Hungary and is the only Holocaust survivor to serve in Congress, was first elected to the U.S. Congress in November 1980.

The House Foreign Affairs Committee has jurisdiction over U.S. export controls and economic sanctions, including those administered by BIS and DDTC. Chairman Lantos' remarks made at the July 26, 2007 hearing entitled ”Export Controls: Are We Protecting Security and Facilitating Exports?” can be found here.

Labels: Congress, Export Controls

The U.S. House of Representatives today passed by voice vote the International Emergency Economic Powers Act (S. 1612), a bill that will significantly increase the penalties for violating IEEPA-based export control laws. Because the Senate passed the identical bill in June, the measure will be sent to the President for signature, which is likely to take place in a matter of days.

The passage of the International Emergency Economic Powers Act ("IIEPA Act") means that the maximum civil penalty for violating IIEPA-based export control laws will increase from $50,000 per violation to $250,000 or twice the amount of the transaction that is the basis of the violation with respect to which the penalty is imposed. The maximum criminal penalties for committing willful violations of IEEPA-based export control laws will increase to $1,000,000, with a maximum jail sentence of 20 years.

The original civil penalty amount was set at $10,000 when IEEPA (P.L. 95-223) was passed in 1977. Other than an inflation adjustment raising the maximum penalty amount to $11,000, there were no increases until the renewal of the USA PATRIOT Act in 2005 (Public Law 109-177) raised the level to $50,000. Thus, once the IEEPA Act is signed into law, the maximum civil penalties for export control violations will have increased more than 2170% in two years.

The IEEPA currently serves as the legal basis for the Export Administration Regulations (EAR) and most of the sanctions regimes administered by the Office of Foreign Assets Control (OFAC). The most notable exceptions are the sanctions programs on Cuba and North Korea which were issued under the authority of the Trading With the Enemy Act.

The changes in penalties will apply to all pending enforcement actions as well as those commenced on or after the date of the IIEPA Act's enactment.

Labels: BIS, Congress, OFAC

Ways and Means Trade Subcommittee Chairman Sander M. Levin (D-MI) and Oversight Subcommittee Chairman John Lewis (D-GA) today announced that the Subcommittees will hold a joint hearing on import safety at 10 a.m. on Thursday, October 4, in Room 1100 of the Longworth House Office Building.

This hearing will focus on the mechanisms and legal authorities under current law for ensuring the safety of food and consumer products imported into the U.S. The hearing will examine how these mechanisms and authorities are functioning, what problems may exist with respect to each mechanism or authority, and what improvements are needed. The hearing will look into the role of the U.S. Customs and Border Protection (CBP) and CBP’s coordination with the Food and Drug Administration (FDA), the Food Safety Inspection Service (FSIS) and the Consumer Product Safety Commission (CPSC) at the ports of entry. In addition, the hearing will address the application of sanitary and phytosanitary measures in the United States and overseas and the consistency of those measures with the World Trade Organization (WTO) rules.

Labels: Congress

Earlier this week Senators Max Baucus (D-MT) and Orrin Hatch (R-UT) introduced the Trade Enforcement Act of 2007, legislation intended to "significantly bolster the U.S. government’s trade enforcement abilities." While the full text of the legislation has not been released, the press release issued by the Senate Finance Committee states that Baucus-Hatch proposal would make the following changes to U.S. trade laws:

• Amends section 701(a)(1) of the Tariff Act of 1930 to clarify that the Commerce Department has the authority to apply countervailing duties to nonmarket economies like China.
• Limits President's authority in China safeguard investigations by providing that the President may decline to provide relief only in extraordinary cases and only if the President determines that the relief would seriously harm U.S. national security or would have an adverse impact on the U.S. economy.
• Overrides the Federal Circuit’s Bratsk Aluminum decision by providing that the ITC must make its material injury determination in antidumping and countervailing duty cases without regard to whether other imports will likely replace imports from the country under investigation.
  
• Requires the United States Trade Representative (USTR) to provide an annual report to
  Congress identifying the most significant market access barriers to U.S. companies abroad
  and to take enforcement action to resolve them.
  
• Creates a Senate-confirmed Chief Enforcement Officer to investigate and prosecute trade enforcement cases. It also establishes an interagency Trade Enforcement Working Group to advise USTR and authorizes $5 million for USTR’s enforcement responsibilities.
• Sets up a WTO Dispute Resolution Settlement Commission of retired judges and international trade law experts to review WTO dispute settlement reports to determine whether they added to the United States’ obligations under the WTO or deviated from the standard of review.

Labels: Antidumping, China, Congress, Trade Policy

The U.S. House of Representatives today passed the following two divestment-related bills by wide margins:

• H.R. 180 - The Darfur Accountability and Divestment Act of 2007 directs the SEC to require all companies trading in registered securities that conduct business in Sudan to disclose the nature of such operations and the GAO to investigate the existence and extent of such companies' Federal Retirement Thrift Investment Board investments. The bill also prohibits U.S. Government contracts with such companies. The bill passed by a vote of 418-1 (Representative Ron Paul (R-TX) cast the only no vote).
  

• H.R. 2347 - The Iran Sanctions Enabling Act of 2007 directs the Secretary of the Treasury to publish a list of any entity that has an investment of more than $20 million in the Iran's energy sector. The bill also states that is U.S. policy to support state and local governments and educational institutions from divesting their assets from entities included on the Treasury Department's list of companies with investments in Iran's energy sector. The bill passed by a vote of 408-6.

The press release issued by the House Financial Services Committee upon passage of these bills can be found here.

Labels: Congress, Divestment

In connection with debate on legislation to extend agricultural programs (H.R. 2419), the U.S. House of Representatives failed to pass, by a vote of 185-245, an amendment offered by Ways and Means Committee Chairman Rangel (D-NY) to modify the "cash in advance" restrictions on U.S. agricultural sales to Cuba under the Trade Sanctions Reform Act of 2000 (TSRA). The amendment would have changed the definition of "cash in advance" to mean payment prior to the transfer of title to the purchaser and the the release of control of the product to the purchaser. Since February 2005, OFAC has taken the position that payment by the Cuban buyers must be made prior to shipment of the goods from the U.S.

The proposed amendment would have also authorized direct transfers between Cuban banks and U.S. banks and allow visas to be issued to Cuban nationals to conduct activities related to purchasing U.S. agricultural goods.

Labels: Congress, Cuba

The House Ways and Means Subcommittee on Trade announced that will hold a hold a hearing on legislative proposals relating to trade with China at 9 a.m. on August 2, 2007 in room 1100 of the Longworth House Office Building.

The hearing will focus on pending legislation relating to trade with China, including bills to address trade-distorting currency practices and legislation to modify U.S. trade remedy laws. The hearing will also address the safety of food imports into the U.S. and issues related to the application of sanitary and phytosanitary measures overseas.

The Trade Subcommittee has not yet announced the witnesses that will appear at the hearing. However, any individual or organization may submit a written statement for consideration inclusion in the printed record of the hearing.

Labels: China, Congress

The House Foreign Affairs Committee's Subcommittee on Terrorism, Nonproliferation, and Trade held a hearing today entitled, "Exports Controls: Are We Protecting Security and Facilitating Exports?"

In his opening statement, House Foreign Affairs Chairman Tom Lantos (D-CA) came out with his guns blazing. Most of his ammunition was directed at the State Department's Directorate of Defense Trade Controls (DDTC). For example, Chairman Lantos said that DDTC:

. . . has been awash in unprocessed applications for licenses to ship military equipment overseas – a whopping 10,000 of them at one point last fall. The State Department is beset by so-called managers who, in fact, area unable to manage this process. Their recommendation: Throw more money at it. I certainly support increasing the resources at the State Department for this crucial job. It is absurd in the extreme that State has only 37 licensing officers to process nearly 70,000 applications, while Commerce boasts over 70 officers for a comparatively-paltry workload of 23,000 licenses. But increased resources alone will not fix the problem of mismanagement. Simply put, the management of arms licensing needs sustained attention and commitment by the senior leadership of the State Department to fix the problems – attention that has been lacking for several Administrations. The Committee on Foreign Affairs will do its part in finding solutions, with or without the Administration’s help. This hearing is an important part of that process.

Below are links to and some highlights of the prepared testimony of the hearing witnesses:

Christopher A. Padilla, Assistant Secretary for Export Administration, Bureau of Industry and Security, U.S. Department of Commerce:

• In Fiscal Year 2006, BIS processed 18,941 export licenses valued at $36 billion, a 13% increase over Fiscal Year 2005 and the highest number of applications reviewed by BIS in over a decade.
• In Fiscal Year 2006, average processing time for dual-use licenses – including full interagency review – was 33 days. Through June 30 of the current fiscal year, the average licensing processing time dropped to 29 days, a decrease from 40 days in FY 2001.
• Said that any new dual-use export control system must have the following three defining features: (1) must become more end-user focused; (2) must be further improved to ensure America’s exporters are able to apply for and receive licenses in a timely, transparent, and efficient way; and (3) must limit the export of sensitive products while still ensuring that controls do not unduly restrict the vast majority of legitimate, civilian high-tech trade.

Stephen D. Mull, Acting Assistant Secretary, Bureau of Political-Military Affairs, U.S. Department of State:

• In FY 2007, [DDTC] expects to license up to $100 billion in authorized exports. On a year-to-year basis, the number of application received have increased 8%, with total licenses completed by [DDTC] anticipated to rise from 66,000 in FY 2005 up to an estimated 80,000 in FY 2007.
• At the beginning of FY07 DDTC had over 10,000 pending applications, but by January 2007 the number was reduced to approximately 5,200. DDTC currently has approximately 7,200 pending applications, with 567 over 60 days old. The complexity of license applications and Technical Assistance Agreements (TAA) is increasing. In FY 2006, more than 7,000 TAAs were received and the value of defense services provided with such agreements is roughly equal to or greater than the value of hardware exports.
• DDTC is initiating the following changes "to manage export control risk": (1) Deputy Assistant Secretary for Defense Trade Control will institute a mandatory DAS-level review of any Operation Iraqi Freedom or Operating Enduring Freedom case that is pending for greater than seven days; (2) will shortly commence with the concurrent review of TAA applications with DOD, which we expect to expedite the review of such items; (3) ill initiate a policy change that will permit employees of foreign companies who are nationals from NATO or EU countries, Japan, Australia and New Zealand to be considered authorized under an approved license or TAA.
  

Ann Calvaresi-Barr, Director of Acquisition and Sourcing Management at the U.S. Government Accountability Office (GAO):

• State and Commerce have yet to clearly determine which department controls the export of certain sensitive items. No one has held State or Commerce accountable for making clear and transparent decisions about export control jurisdiction.
  
• Lack of clarity on exemption use has limited the government’s ability to ensure that unlicensed exports comply with export laws and regulations. At times, State has provided conflicting information to exporters on the proper use of the Canadian exemption, which has resulted in some exporters using the exemption while others applied for licenses to export the same item.
  
• State and Commerce can provide little assurance about the overall effectiveness of their respective export control systems. In managing their systems, neither department has conducted systematic assessments that would provide a basis for determining what corrective actions may be needed to ensure they are fulfilling their missions.
  
• DDTC's streamlining initiatives have generally not been successful and processing times have increased in recent years—from a median of 13 days in 2002 to 26 days in 2006. Also, at the end of 2006, State's backlog of applications reached its highest level of more than 10,000 open cases.
• Anticipated efficiencies of D-Trade have not been realized. GAO's analysis of processing times for permanent export licenses does not show a significant difference between D-Trade and paper processing for fiscal years 2004 through 2006.
  

John W. Douglass, President and CEO, Aerospace Industries Association of America:

• Discussed Coalition for Security and Competitiveness' proposals for development of a modern export control system that is efficient, predictable, transparent and an enabling component of America’s broader national security strategy.
  

• Seeking export control system that can deliver decisions on 95 percent of all license applications in 30 days, not the current 55+ days it often takes.

• Said that Coalition is in beginning stages of discussing and identifying key elements of a “model modern system” to compare with the existing system. The Coalition intends to put forward proposals for a "next generation" system next year for consideration by and discussion with Congress as well as the 2008 Presidential campaigns.
  

Will Lowell, Managing Director Lowell Defense Trade, LLC and Former Director, Directorate of Defense Trade Controls, U.S. Department of State:

• Described three interrelated problems challenging U.S. arms export control system today: (1) Failure to Assess and Reorient Controls against Terrorist Threats; (2) Systemic Vulnerabilities and Risks to U.S. Technology; (3) Declining Levels of Service for U.S. Industry

• Advocated proposal for Congress to work with senior management at DDTC on plan to: (1) clear backlog of license applications within next 120 days; (2) Identify permanent funding sources (e.g., budgetary or license fees) to prevent recurrence of any backlog and assure predictable time lines for U.S. business community; (3) Establish timetable and reporting channel to Congress for a post-9/11 inter-agency review of gaps to be closed or enhancements needed in U.S. export control regulations and policies; and (4) Include plan and timetable for eliminating system vulnerabilities and weaknesses that triggered GAO’s “high risk” designation.

The testimony of Beth M. McCormick, Acting Director Defense Technology Security Administration, U.S. Department of Defense was not available prior to the hearing.

Labels: BIS, Congress, DDTC, Export Controls

Late Tuesday, the Senate unanimously passed S. 1612, the International Emergency Powers Act. As previously reported, the bill would increase significantly the civil and criminal penalty amounts associated with violations of the International Emergency Economic Powers Act.

However, as a result of a last minute amendment introduced by Senator Salazar (D-CO) on Senator Dodd's (D-CT) behalf that was intended to change the effective date of the bill, the final version of the bill that passed the Senate and sent to the House increased the criminal penalties only.

The Senate apparently realized its mistake and, as indicated below, the Majority Leader yesterday requested the House to return the bill so it can be corrected.
-----------------------------------------------------------
[Congressional Record Page: S8638]

REQUEST FOR THE RETURN OF PAPERS--S. 1612 -- (Senate - June 27, 2007)

Mr. REID. Mr. President, I ask unanimous consent the Senate request the return of papers on the bill S. 1612 from the House of Representatives. I further ask consent that upon compliance with this request, the Secretary of the Senate be authorized to make corrections in the engrossment of this bill.

The PRESIDING OFFICER. Without objection, it is so ordered.

Labels: Congress, OFAC

This week Senator Christopher Dodd (D-CT) introduced the International Emergency Economic Powers Act (S. 1612) (IEEPA Act), legislation that would increase the civil penalty amounts associated with violations of the International Emergency Economic Powers Act. The bill would increase the maximum civil penalties for violations of sanctions and dual-use export control laws (EAR violations are currently subject to IEEPA penalty provisions) from $50,000 to $250,000, or twice the amount of the transaction that is the basis of the violation with respect to which the penalty is imposed. The IEEPA Act would increase criminal penalties to $1,000,000 with a maximum jail sentence of 20 years.

One major cause of concern with this proposed legislation is that, in its current form, the bill would apply the increased penalties to any "enforcement action [that] is pending or commenced on or after the date of the enactment of this Act." This retroactive effect is a significant change from previous laws that have increased maximum civil and criminal penalties for violations of sanctions and export control laws.

This proposed legislation, which has the support of the Treasury Department, has been previously been approved by the Senate Banking, Housing and Urban Affairs Committee. The bill has been placed on the Senate calendar for consideration in the near future.

Labels: Congress, OFAC, Sanctions

The Senate Finance Committee will be holding a hearing entitled "Trade Enforcement for a 21st Century Economy" on Tuesday, June 12, at 10:00 a.m. in the Dirksen Senate Office Building. The witnesses include:

• Dan Glickman, Chairman and CEO, Motion Picture Association of America
  
• Jennifer Hillman, Distinguished Fellow, Institute of International Economic Law, Georgetown Law School
• Robert Lighthizer, International Trade Partner, Skadden, Arps, Meagher & Flom
  
• Erik Autor, Vice President and International Trade Counsel, National Retail Federation

Labels: Congress

By a vote of 397-28, the U.S. House of Representatives today passed H.R. 1585, the National Defense Authorization Act for Fiscal Year 2008. Section 1049 of the bill prohibits the Department of Defense from selling any parts for F-14 fighter aircraft (of Top Gun fame), except for those in a museum or preserved for historical purposes. It also prohibits the U.S. Government from issuing any export licenses for any F-14 aircraft parts to a non-U.S. person or entity.

This provision, which was originally introduced earlier this year as the Stop Arming Iran Act by Senator Ron Wyden (D-OR) (S. 387) and Representative Gabrielle Giffords (D-AZ) (H.R. 1441), is aimed at preventing Iran from obtaining spare parts for F-14s. While F-14 Tomcats were retired by the U.S. military in 2006, it estimated that Iran, which acquired 79 F-14s from the U.S. in the 1970s, still has several of the aircraft left in service.

U.S. Customs and Border Protection agents have found F-14 spare parts being shipped to Iran by brokers who bought the items from Department of Defense auctions. Several persons have been convicted for exporting F-14 spare parts to Iran.

Labels: Congress, DDTC, Sanctions; Iran

OFAC Director Adam Szubin will be among the panelists appearing before a joint House hearing on April 18, 2007 on "Isolating Proliferators and Sponsors of Terror: The Use of Sanctions and the International Financial System to Change Regime Behavior."

The hearing will be conducted by the House Foreign Affairs Subcommittee on Terrorism, Nonproliferation and Trade and the House Financial Services Committee's Subcommittee on Domestic and International Monetary Policy, Trade, and Technology.

Several other Treasury and State Department officials will be appearing on the hearing's first panel. The second panel consists of the State of Missouri's Treasurer and speakers from the Heritage Foundation and the private sector.

The hearing will be held at on April 18, 2007 at 2:00 p.m. in Room 2172 of the Rayburn House Office Building.

Labels: Congress, OFAC

House Ways and Means Committee Chairman Charles B. Rangel (D-NY) has announced that the Committee will hold a hearing on trade and globalization on January 30 in in the Longworth House Office Building.

The hearing will "explore the integration of markets brought about by globalization and examine how U.S. trade policy can be used as a tool to shape globalization to maximize its benefits, ensure that they flow evenly throughout society, including to working people, and to ensure that the forces of the global economy are harnessed most effectively and efficiently to generate the maximum amount of broadly based economic growth."

Labels: Congress

The House Committee on Foreign Affairs has formed the following seven subcommittees and elected the following chairmen:

• Africa and Global Health – Donald M. Payne (D-NJ)
• Asia, the Pacific, and the Global Environment – Eni F.H. Faleomavaega (D-American Samoa)
• Europe – Robert Wexler (D-FL)
• International Organizations, Human Rights, and Oversight – Bill Delahunt (D-MA)
• The Middle East and South Asia – Gary L. Ackerman (D-NY)
• Terrorism, Nonproliferation, and Trade – Brad Sherman (D-CA)
• The Western Hemisphere – Eliot L. Engel (D-NY)

Labels: Congress