International Trade Law News

Published by Jacobson Burton Kelley PLLC

Yesterday the Senate Committee on Banking, Housing, and Urban Affairs approved the nominations of Kevin Wolf to serve as Assistant Secretary of Commerce for Export Administration and David Mills to be Assistant Secretary of Commerce for Export Enforcement.

The Senate Banking Committee held a hearing to consider these and other Obama Administration nominees on January 21, 2010. The webcast of the hearing can be viewed here. 

On November 5, 2009, the Senate Banking Committee held a hearing on the nomination of Eric Hirschhorn to serve as Under Secretary of Commerce for Export Administration, the most senior position at the Bureau of Industry and Security. Mr. Hirschhorn's nomination was reported to the full Senate and has been included on the Senate calendar since December 17, 2009. However, the Senate has not yet held a vote on Mr. Hirschhorn's nomination or the nominations of several other nominees.

Labels: BIS, Congress

The Senate Committee on Banking, Housing, and Urban Affairs held a hearing today on the nomination of Eric Hirschhorn to serve as Under Secretary of Commerce for Export Administration, the most senior position in the Bureau of Industry and Security.

Mr. Hirschhorn, who is expected to play a central role in current export control reform efforts, was nominated by President Obama on September 11, 2009.

The hearing, chaired by Senate Banking Committee Chairman Christopher Dodd (D-CT), and included nominees for two other agencies, lasted only an hour and began with prepared statements by Senators Dodd and Ranking Member Richard Shelby (R-AL).

Mr. Hirschhorn was introduced by Representative Stephen Solarz (D-NY). Mr. Hirschhorn worked for Mr. Solarz in the New York Legislature many years ago. Mr. Hirschhorn's prepared remarks, which can be found here, focused on his previous experience work on export control issues at the Department of Commerce in the early 1980s and his many years in private law practice.

Following the prepared remarks, Senators Dodd and Shelby asked several questions. Senator Dodd asked about export control reforms, foreign availability, Iran sanctions and transshipment issues. Senator Shelby asked Mr. Hirschhorn about his past work on behalf of clients opposed to unilateral sanctions as well as export control reform issues.

Mr. Hirschhorn should be easily confirmed by the full Senate in the coming weeks.

Labels: BIS, Congress

The House Foreign Affairs Committee held a hearing today on recent developments in Iran and their implications for U.S. Policy. In his opening statement, Committee Chairman Howard Berman (D-CA) said that if engagement with Iran does not work he is prepared to move forward with the Iran Refined Petroleum Sanctions Act (H.R. 2192) as early as this fall.

Specifically, Representative Berman said:

I agree with the President’s timetable. If by autumn the Iranians are not responsive to US efforts to engage them, it likely will be time to move on, hopefully in close coordination with our allies and other key countries.

That is also my approach regarding H.R. 2194, the Iran Refined Petroleum Sanctions Act, which I introduced with the Ranking Member in April, and which is now co-sponsored by well over half the Members of the House.

My bill would impose sanctions on companies that are involved in exporting refined petroleum products to Iran or in helping Iran to increase or maintain its existing domestic refining capacity.

This legislation would force companies in the energy sector to choose between doing business with Iran, or doing business with the United States.

The Iranian economy is heavily dependent on imports of refined petroleum, so this legislation -- if it becomes law -- would significantly increase economic pressure on Iran, and hopefully persuade the regime to change its current course.

When I introduced H.R. 2194, I said that I did not intend to immediately move it through the legislative process. I wanted – and still want – to give the Administration’s efforts to engage Iran every possible chance to succeed, within a reasonable time frame.

I view the bill as a “sword of Damocles” over the Iranians – a clear hint of what will happen if they do not engage seriously and move rapidly to suspend their uranium enrichment program, as required by numerous UN Security Council resolutions.

If engagement doesn’t work, then I am prepared to mark up the bill in Committee early this fall.

If enacted, the Iran Refined Petroleum Sanctions Act, which currently has 260 co-sponsors, requires any foreign entity that exports refined petroleum to Iran, or otherwise enhances Iran’s ability to import refined petroleum (such as financing, brokering, underwriting or providing ships for such activity), to be subject to a number of financial and other sanctions that would effectively bar the foreign entity from doing business in the United States.

The bill also would impose sanctions on any entity that provides goods or services that enhance Iran’s ability to maintain or expand its domestic production of refined petroleum, including any assistance in refinery constructions, modernization or repair.

Labels: Congress, Sanctions; Iran

The House Foreign Affairs Committee's Subcommittee on Terrorism, Nonproliferation and Trade will hold a hearing on various policy considerations associated with the lapsed Export Administration Act this Thursday at 10 a.m. on July 9th in room 2172 of the Rayburn House Office Building. This hearing was originally scheduled to be held on June 18th and was postponed due to pending House business.

The witnesses scheduled to appear at the hearing are:

• The Honorable John Engler, President and Chief Executive Officer of the National Association of Manufacturers
  

• Arthur Shulman, Esq., Senior Research Associate at the Wisconsin Project on Nuclear Arms Control

• Owen Herrnstadt, Esq., Director of Trade and Globalization Policy at the International Association of Machinists and Aerospace Workers

The Export Administration Act of 1979 lapsed in August 2001 and has not been renewed by Congress. The Export Administration Regulations have remained in effect pursuant to Executive Order 13222 issued on August 17, 2001 pursuant to the International Emergency Economic Powers Act and extended annually by the President.

Labels: BIS; EAR, Congress, Export Controls

Efforts to ease trade with Cuba are beginning to move forward in Congress. Both the House and Senate took steps this week to expand bilateral commerce with the island nation, which has been under a U.S. embargo for over 40 years. Supporters say opening the Cuban market could provide a significant boost to the struggling U.S. economy.

In the Senate, a bipartisan group of 15 senators wrote to Treasury Secretary Timothy Geithner this week to oppose the continuation of a policy that has curtailed exports of agricultural and medical products to Cuba. The letter called on Geithner to reverse the recent action by Treasury’s Office of Foreign Assets Control, which they said runs contrary to the intent of Congress, as expressed in the fiscal year 2009 omnibus appropriations bill, to facilitate agricultural trade with Cuba.

In a March 11 notice, OFAC stated that the Cuba trade provisions in the omnibus bill “directed that none of the funds made available in [that bill] may be used to administer, implement, or enforce” a February 2005 regulatory amendment concerning the definition of “cash in advance,” one of the methods of payment for agricultural exports to Cuba allowed by the Trade Sanctions Reform and Export Enhancement Act of 2000. This amendment stated that “cash in advance” should be given its ordinary commercial meaning, which requires payment to be received by the seller or the seller’s agent prior to the shipment of goods from the port at which they are loaded. OFAC stated last week that because the omnibus bill does not amend the TSRA language, those statutory provisions remain in place, implying that OFAC’s position will not change either.

However, the senators charged that the agency’s interpretation of the term “cash in advance” as requiring payment prior to the shipment of goods is legally inaccurate. The letter cited the American Law Division of the Congressional Research Service as saying that “it appears customary within the international trade and finance community to place the emphasis on the legal transfer of control, rather than on the date of shipment” and that “OFAC’s interpretation appears to limit the available payment options to those that are considered risky, undesirable, and underutilized.” The letter added that prior to OFAC’s regulatory change cash-based sales of agricultural products to Cuba “were taking place and working well,” with no reported instances of a Cuban buyer taking possession of U.S. goods prior to completing payment to the seller.

The letter called on Geithner to stand by a pledge he made during Senate consideration of his nomination earlier this year to take “great care to follow congressional intent … [and] to ensure that OFAC’s activities with regard to Cuba are achieving its important objectives without unnecessary hurdles or unreasonable administrative delays.” Sen. Max Baucus, D-Mont., added that he fully expects Geithner to “revisit this issue to get U.S.-Cuba relations back on track and get our Cuba policy right.”

Baucus said he plans to soon introduce legislation that would ease restrictions on travel to and payment from Cuba, but House Ways and Means Committee Chairman Charles Rangel, D-N.Y., beat him to the punch. On March 16 Rangel introduced three bills to increase economic engagement with Cuba, including one [H.R. 1531] that would overturn OFAC’s interpretation of “payment of cash in advance.” That bill would also establish a government program to promote agricultural exports to Cuba and ease various requirements associated with travel to and doing business with Cuba.

Rangel also introduced a bill (H.R. 1530) that would eliminate the U.S. trade embargo completely within 60 days of its enactment. This bill asserts that the embargo is counterproductive because it adds “to the hardships of the Cuban people while making the United States the scapegoat for the failures of the communist system.” It also states that the best way to support democratic change in Cuba is by promoting trade and commerce, travel, communications and person-to-person exchanges, an approach the U.S is already using in other countries with similar governments.

Labels: Congress, Cuba

Ron Kirk was confirmed by the Senate today to be the next U.S. Trade Representative (USTR). The vote was 92-5. As USTR, Kirk is member of President Obama’s Cabinet and will serve as the President’s principal trade advisor, negotiator and spokesperson on international trade issues.

Separately, this morning the Senate Committee on Commerce, Science, and Transportation held a hearing this morning on the nomination of Governor Gary Locke to be the 36th Secretary of Commerce. The video webcast of the hearing, as well as the prepared testimony of Governor Locke and other participants in the hearing, can be found here.

Labels: Congress, USTR

The House of Representatives today passed by a vote of 245-178 H.R. 1105, the $410 billion Omnibus Appropriations Act of 2009, to fund much of the government for the remainder of fiscal year 2009.

The omnibus appropriations bill makes several changes with respect to Cuba policy. Section 620 of the bill contains language that would amend the Trade Sanctions Reform Act to permit persons to travel to Cuba to market and sell agricultural and medical products under a general license, rather than pursuant to a specific license. Sections 621 and 622 of H.R. 1150 would defund enforcement of the 2005 Bush Administration changes to the rules governing "cash in advance" payments of agricultural sales and travel to visit family members in Cuba.

The bill would also appropriate $83,676,000 to the Bureau of Industry and Security, of which of which $14,767,000 must be used for "inspections and other activities related to national security."

The bill now goes to the Senate, where considerable debate is expected over the bill's high price and numerous earmarks.

Labels: BIS, Congress, Cuba

Today the House Committee on Science and Technology held a hearing to review the impact of current export control policies on U.S. science and technology activities and competitiveness. Witnesses and Members of the Committee also discussed the findings and recommendations of the National Academies’ study, Beyond “Fortress America”: National Security Controls on Science and Technology in a Globalized World.

During the hearing, the panel of witnesses unanimously agreed that the current system of U.S. export control policies, under the International Traffic in Arms Regulations (ITAR) and the Export Administration Regulations are outdated and must be reformed.

In his opening statement, Committee Chairman Bart Gordon (D-TN) said that the "nation’s export controls system . . . were put into place to help protect America’s sensitive technologies from falling into the hands of those who might do harm to this nation. In short, export controls were supposed to help strengthen our national security. However, in recent years there has been a growing chorus of concern about some of the unintended consequences of the current system of export controls for both the nation’s competitiveness in the global economy and for the nation’s science and technology enterprise."

Ranking Member Ralph Hall (R-TX) said that "export controls are crucial and necessary to prevent the proliferation of militarily-useful technologies from falling into the wrong hands, and it’s critically important that we continue, to the best of our abilities, to deny the transfer of these technologies to our adversaries.” He noted, however, that "in today’s global marketplace, it’s equally important that export control regulations recognize technologies that are no longer ours alone to control, and to permit the rapid sharing of emerging R&D technologies with our friends and allies. It is clear to me that the current export control regime fails to meet these standards.”

Representative Dana Rohrabacher (R-CA) noted that "everyone agrees ITAR reform needs to happen. We need to make sure that our hi tech exports aren't strangled by regulations. On the other hand, we need to remain vigilant that our advanced technology doesn't end up in the hands of nations who proliferate weapons of mass destruction. We know exactly who these nations are, and we must make absolutely sure that whatever changes we enact to ITAR and other export regulations, that these scofflaw and rogue nations are barred from receiving our high tech systems." He added that "we can make sensible changes to ITAR and other export regulations, but we must not go so far as to make them at the expense of our national security. Let us reward our friends with openness in trade; and conversely let us be as single-minded as possible in stopping items from the United States Munitions List . . . from falling into the hands of the Peoples Republic of China and other proliferators.

In his testimony, Lt. General Brent Scowcroft, USAF (Ret.), who served as Co-Chair of the Beyond “Fortress America” report, said:

Because science and technology research, development and production have become a global enterprise, the “Fortress America” approach of current controls cuts us off from information and technologies that we need for our national security. If we sustain these export control and visa barriers, we will increasingly lose touch with the cutting edge of science and technology, and we risk missing emerging national security threats.

He also noted that if the reforms proposed in Beyond “Fortress America” are not implemented then:

the [current export controls] system will continue to bog down, with multiplying negative effects to our national security and competitiveness. There will be nothing to prevent the continued erosion of our defense industrial base; the loss of market-share globally in advanced technologies; the off-shoring of knowledge intensive jobs; the bureaucratic wrangling among the agencies to name a few.

In his testimony, Major General Robert Dickman, USAF (Ret.), the Executive Director of the American Institute of Aeronautics and Astronautics (AIAA), said that current U.S. trade and visa policies are adversely affecting America's national security and economic security, by stifling innovation, reducing core sector competencies, weakening the space industrial base and diminishing American competitiveness in the global marketplace.

Dickman also said that "U.S. trade and visa policies put in place to provide additional layers of national security are having severe and long-term effects on advanced systems technology sectors and the professional workforce that serves them." He pointed out that the current trade rules have made the U.S. space research sector more risk adverse, due to the cumbersome certification protocols mandated by current law.

While the House International Relations Committee has primary jurisdiction over export control matters, the House Science and Technology Committee will play an important role in shaping future U.S. export controls policy.

The complete written testimony of all the witnesses at today's hearing can be found here.

Labels: Congress, Export Controls

While a great deal has been written on the "Buy American" provision in the stimulus bill (Section 1605 of H.R. 1) that covers iron, steel, and manufactured goods, it turns out that the bill also contains another "Buy American" provision that applies to uniforms, body armor and other textile products purchased by the Department of Homeland Security.

Section 604 of Title VI of H.R. 1, which covers the Department of Homeland Security (DHS), states that DHS may not procure certain "covered items" if they are not "grown, reprocessed, reused, or produced in the United States." The definition of covered items includes those "directly related to the national security interests" of the U.S. and covers a wide variety of items including clothing, bags, protective equipment (such as body armor), parachutes, bandages and any item of equipment manufactured from or containing "fibers, yarns, fabrics, or materials." While the provision contains some exceptions, such as when the items are not available in the U.S. or if the non-compliant fibers do not exceed 10% of the total purchase price, it requires any exceptions to be posted on the FedBizOpps.gov web site.

Consistent wiht the language added to the "Buy American" provision in section 1605 of the the stimulus bill, section 604(k) states that this provision "shall be applied in a manner consistent with United States obligations under international agreements."

Interestingly, the provision requires the Secretary of Homeland Security to "ensure" that DHS employees that acquire textile products receives training in FY 2009 on this new requirement and that any new training programs includes "comprehensive information" on this new requirement.

This provision, which will require uniforms worn by employees of the Transportation Security Administration, U.S. Customs and Border Protection, the U.S. Border Patrol, the Coast Guard and other DHS units, was sponsored by recently elected Congressman Larry Kissell (D-NC).

While this "Buy American textiles" language was included in the House version of the stimulus billl, it was not included in the version of the bill passed by the Senate. The language was included in the final version of the bill that was agreed to by the Conference Committee and signed today by the President.

The text of section 604 can be found on page 126 of Section A of the PDF version of H.R. 1 that can be found here: http://thomas.loc.gov/home/h1/Recovery_Bill_Div_A.pdf (this is a large file).

Labels: Congress, Miscellaneous

The following is the final text of the "Buy American" provision in H.R. 1, the stimulus bill that passed the House and Senate late last week and is expected to be signed into law by the president on Tuesday. H.R. 1 is formally known as the American Recovery and Reinvestment Act of 2009.

SEC. 1605. Use of American Iron, Steel and Manufactured Goods

(a) None of the funds appropriated or otherwise made available by this Act may be used for a project for the construction, alteration, maintenance, or repair of a public building or public, unless all of the iron, steel, and manufactured goods used in the project are produced in the United States.

(b) Subsection (a) shall not apply in any case or category of cases in which the head of the federal department or agency involved finds that --

(1) applying subsection (a) would be inconsistent with the public interest;

(2) iron, steel, and the relevant manufactured goods are not produced in the United States in sufficient and reasonably available quantities and of a satisfactory quality; or

(3) inclusion of iron, steel, and manufactured goods produced in the United States will increase the cost of the overall project by more than 25 percent.

(c) If the head of a Federal department or agency determines that it is necessary to waive the application of subsection based on a finding under subsection (b), the head of the department or agency shall publish in the Federal Register a detailed written justification as to why the provision is being waived.

(d) this section shall be applied in a manner consistent with United States obligations under international agreements.

The Conference Report on H.R. 1 clarifies the intended use of this provision as follows:

Section 1605 provides for the use of American iron, steel and manufactured goods, except in certain instances. Section 1605(d) is not intended to repeal by implication the President's authority under Title III of the Trade Agreements Act of 1979. The conferees anticipate that the Administration will rely on the authority under 19 U.S.C. 2511(b) [of the Trade Agreements Act of 1979] to the extent necessary to comply with U.S. obligations under the WTO Agreement on Government Procurement and under U.S. free trade agreements and so that section 1605 will not apply to least developed countries to the same extent that it does not apply to the parties to those international agreements. The conferees also note that waiver authority under section 2511(b)(2) has not been used.

Last night's 60 Minutes report on the "Buy American" provision, which focused on Nucor Steel and Caterpillar, is below:

Labels: Congress

The National Foreign Trade Council (NFTC) has release an analysis of what the 2008 congressional election results mean for U.S. trade and engagement policies in the 111th Congress.

The NFTC conducted the analysis to explore whether there is any truth to assertions made over the past few weeks that the composition of the incoming freshman class signals a seismic shift in the future of U.S. trade policy.

The NFTC analysis found that of the eight Senate races analyzed, only four successful candidates mentioned trade explicitly on his or her Web site when discussing campaign issues. Based on these Web sites and other statements, the NFTC estimates that perhaps two of the successful candidates are less inclined towards free trade and engagement than the incumbent based upon his or her historical voting record.

Similarly, in the 52 House races analyzed, only 12 successful candidates made any mention of international trade in the issues section of his or her Web site. Further, of the 12 House races in which trade was featured, only seven successful candidates appear to advocate policies that are clearly less inclined towards free trade and engagement than their predecessors. According to the NFTC, only 23 percent of successful candidates running for a House seat mentioned trade on their Web site, which is a dramatic decline from 2006 when 54 percent of successful candidates mentioned trade.

Labels: Congress

In case you haven't had enough information to make a decision on election day, the National Foreign Trade Council (NFTC) and USA*Engage have issued their 110th Congressional Report Card, grading Members of Congress on key international trade and engagement votes in 2007 and 2008.

The Report Card evaluated Senators based on six key votes: the U.S.-Peru FTA; a cloture vote for immigration reform; an amendment to block Mexican trucks; and bills to renew Burma sanctions, make OPEC illegal and approve the India Nuclear Agreement. Senators Chuck Hagel (R-NE) and Richard Lugar (R-IN) earned the two highest scores in the Senate and Senators Boxer (D-CA), Byrd (D-WV), Dorgan (D-ND) and Sanders (I-VT) received the lowest scores.

Senators McCain and Obama did not cast enough votes to qualify for this year's Report Card.

To evaluate Members of the House, the NFTC and USA*Engage used 12 votes as criteria, including some of those included in the Senate Report Card and others – a vote to expand Trade Adjustment Assistance; bills encouraging divestment from companies with operations in Sudan and Iran; legislation to impose economic sanctions on Iran, prohibit funding for the visa waiver program and better enforce IP protections; and a vote on a rule to block the Colombia FTA from Congressional consideration.

Representative Jeff Flake (R-AZ) received the highest grade in the House, with a bipartisan group of Members following with the second highest scores: Bartlett (R-MD), Camp (R-MI), Cooper (D-TN), Kramer (D-AL), Cuellar (D-TX), Ehlers (R-MI), Gonzalez (D-TX), Hill (D-IN), Johnson (D-IL), Manzullo (R-IL), Matheson (D-UT) and Shays (R-CT).

The following House Members received the lowest scores: Burgess (R-TX), Buyer (R-IN), Aderholt (R-AL), Duncan (R-TN), Gutierrez (D-IL), Hayes (R-NC), Jones (D-NC), Marshall ( D-GA), Shuler (D-NC) and Spratt (D-SC).

Labels: Congress

Late last week House Ways and Means Committee Chairman Charles B. Rangel (D-NY) and Ways and Means Trade Subcommittee Chairman Sander L. Levin (D-MI) introduced H.R. 6530, the Trade Enforcement Act of 2008. The bill contains a number of provisions that would modify existing laws on counterfeiting and piracy, import safety, market access for U.S. goods and services and trade remedies.

For example, the bill would codify the application of countervailing duty (CVD) law to non-market economies, such as China, and would require a stronger congressional oversight over a number of proposed changes to the methodology used by the U.S. in antidumping and CVD cases.

The full text of the bill can be found here.

Given the short time remaining in the current session of Congress, prospects for passage of this legislation remain low this year.

Labels: Antidumping, Congress, Countervailing Duties

With respect to the first-sale rule, Commissioner Basham stated that "while we believe this change would be more consistent with the provisions of the U.S. value law, we have sought input from the trade on this matter through an official public comment period." Significantly, Commissioner Basham stated that:

CBP does not intend to proceed further on the proposal on first sale before January 1, 2011. Nor will we change the current interpretation with respect to first sale without consulting with the Congress and the private sector, or without the explicit approval of the Secretary of Treasury.

Other speakers at the hearing provided updates on activities at their agencies. Among other things, ITC Vice-Chair Pearson indicated that they are projecting that antidumping and countervailing import injury petitions "will remain at relatively high levels in FY 2008 and FY 2009" since such filings increase during economic downturns and due to the increase in the number of countervailing duty petitions filed against products from China.

The hearing testimony presented by each of the witnesses can be found here.

Labels: CBP, Congress, ITC

USA*Engage, a coalition that works to seek alternatives to unilateral U.S. foreign policy sanctions and to promote the benefits of U.S. engagement abroad, today held its annual luncheon on Capitol Hill in Washington, DC to honor Senator Chuck Hagel (R-NE) and Representative Earl Blumenauer (D-OR) for their leadership on issues relating to U.S. diplomacy and global engagement. Senator Hagel and Representative Blumenauer each delivered remarks on the importance of the United States maintaining an open dialogue with the rest of the world.

Senator Hagel was honored by USA*Engage for his strong support of U.S. global engagement, free trade and his efforts to reform the way in which U.S. sanctions are administered. Senator Hagel was one of the original sponsors of the Trade Sanctions Reform and Export Enhancement Act of 2000 (codified at 22 USC § 7201 et seq.) that authorized the licensed export and reexport of medicines, medical devices and agricultural products to countries subject to U.S. unilateral sanctions.

In his remarks, Senator Hagel said that "trade is not just an exchange of goods and merchandise. Trade is the only bridge into other nation’s culture and society. It is the one bridge that gets across the great chasm of differences; it is the one relevant and realistic option for countries to continue to grow and improve." He added that "we can fall prey to the narrowness of politics, but trade will overcome it. I believe free trade will be sustained."

USA*Engage honored Congressman Blumenauer for his commitment to a U.S. diplomacy, including his votes against new unilateral U.S. sanctions efforts against Cuba and Iran. Represenative Blumenauer has sought to promote humanitarian engagement abroad, and as a new member of the House Ways and Means Committee, has been a strong supporter of a bipartisan trade policy. Representative Blumenauer focused his remarks on the need for multilateral cooperation on a range of issues – from environmental protection and global poverty to international trade.

Jake Colvin, Director of USA*Engage, said "Senator Hagel and Congressman Blumenauer each take a thoughtful and nuanced approach to U.S. foreign policy and are champions of international engagement." He added that “their commitment to ensuring that the United States remains a respected diplomatic leader in the world is one reason we honor their public service today."

Editor's Note: Senator Hagel will be speaking tomorrow, June 26, on U.S. foreign and trade policy at the Brookings Institution in Washington, DC. During his speech, Senator Hagel will examine the inventory of global challenges that the next president will inherit and the responsibilities of the presidential candidates to address these challenges.

6/26 Update: The text of Senator Hagel's speech, entitled “Memo to the Candidates" delivered today at the Brookings Institution can be found here. The speech contained the following discussion of trade issues:

Trade is a driving force for sustained economic prosperity and job creation both in the United States and throughout the world. Trade, however, is not a guarantee. The ongoing credit crisis and skyrocketing world food and energy prices are among the recent temptations for countries to restrict markets and veer toward protectionism that leads to dangerous insular thinking. These temptations must be resisted and the hard-earned lessons of history not forgotten. The United States must continue to press for a successful conclusion to the Doha Round of global trade negotiations. America’s leaders should stand behind our trade agreements and support the pending Free Trade Agreements with Colombia, South Korea and Panama as well as renewing Trade Promotion Authority for the next President.

Labels: Congress, Sanctions, TSRA

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.

Update: The House of Representatives did not consider or vote on H.R. 5916 on May 14th.

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