Volume 22, No. 17 -- April 29, 2002

Posted
CHANGE IN CONTROLS SOUGHT FOR EMBEDDED ENCRYPTION

Firms that make Web-based remote network monitoring systems want the Bureau of Industry and Security (BIS) (nee BXA) to liberalize controls on the embedded encryption element of these products to avoid a major increase in classification requests.  Representatives of Compaq and Hewlett-Packard April 24 told the BIS Information Systems Technical Advisory Committee that the market for these products is growing and could require firms to file thousands of initial technical review submissions with BIS for the encryption portion of the equipment.

Network monitoring systems allow operators to use Internet links from remote locations to connect to control equipment that detects such things as power failures, hacker intrusion, performance management and network management.  The applications for these products are growing and include the monitoring of building maintenance and elevator operations from centralized offices or the protection of security systems.   ."AA lot of people are going to have this in their product whether they know it or not," said Don Ames of Compaq.
Because these systems use embedded encryption software and secure socket layers (SSL) to protect transmissions and provide authentication over the Internet, they are subject to BIS encryption regulations and must get an initial classification from the agency before they can be exported.  So far, these encryption elements have been classified as retail products and have not required individual validated licenses.  Nonetheless, the classification requirement is seen as growing more onerous as the use of the systems increases.  Compaq and HP asked for BIS either to allow firms to self-certify this type of product to avoid having to submit classification requests or to decontrol them entirely.
 

SPLIT ITC VOTE LIKELY IN FINAL SOFTWOOD LUMBER RULING

The International Trade Commission (ITC) May 2 is likely to render a divided decision on whether dumped and subsidized softwood lumber imports from Canada are injuring U.S. industry.  With only four of the five current ITC members voting, a 2-2 vote would still go in favor of domestic petitioners.  Whether a third vote would shift to the negative side is the big dramatic question. There is also speculation the commission might find a "threat" of injury rather than current injury and also divide on whether there is more than one domestic industry.

In its preliminary affirmative ruling in May 2001, the ITC voted 5-0 that lumber imports may be "threatening" U.S. industry.  If it again finds threat only, all bonds and cash deposits posted by importers since the International Trade Administration's (ITA) preliminary dumping and subsidy rulings would be vacated, saving lumber importers nearly $1 billion in potential duties.  Duties would be due prospectively only from the date of ITA's final order.
Another issue that could divide the commission is the identification of the industry that is the subject of potential injury.  Petitioners claim there is one industry covering all species of softwood lumber and that is the way ITA defined the industry.  Canadian parties, however, objected to the inclusion of western red cedar in the mix and also argued that there are separate industries producing southern pine, eastern (Canadian) white pine and spruce, fir and pine.

While the potential remains for last-minute negotiations to settle the dispute through a bilateral agreement, chances for a deal slimmed after an April 24 meeting in Toronto of Canadian government and provincial trade and forestry officials.  The meeting reportedly found Canadians still divided over whether to try and reach a deal now or wait until after the final ITC ruling.  "No decision was made to resume negotiations," a Canadian source told WTTL.

Weighing on the side of waiting for the ITC is the prospect of a threat finding, as well as the fact that the U.S. will have to suspend the bonding requirement for imports subject to ITA's dumping determination from May 6 to perhaps May 23, because of WTO rules on how long bonds can be required during the  preliminary stage of an investigation.  The countervailing duty bonding requirement was lifted in December under parallel WTO rules.

U.S. industry sources say they expect Canadians to ship massive amounts of lumber south during this hiatus, providing an economic buffer while negotiations continue and WTO and NAFTA cases proceed.  Canadian producers and Weyerhaeuser have joined Ottawa in requesting a binational NAFTA panel to review ITA's rulings.  Canada has also launched a WTO challenge of the decision (see WTTL, April 22, page 4).

Meanwhile, President Bush has said he will nominate Charlotte Lane to fill the Republican seat on the commission until September 2009.  Since 1997, Lane has been a member of the West Virginia Public Service Commission and served terms in the West Virginia House of Delegates from 1979 to 1992.  She served for two months in 1987 as interim U.S. Attorney for the Southern District of West Virginia and has been in private law practice in Charleston, W.Va.
 

LOSS OF WTO CASES POSES DILEMMA FOR U.S. TRADE AGENCIES

The World Trade Organization's (WTO) rejection of almost every dumping, countervail and safeguard action taken by any country is creating a looming problem for U.S. trade agencies, Congress and for other nations, according to one International Trade Commission (ITC) member.  "For the commission, this presents a tremendous dilemma," said the commissioner, who asked not to be identified.  The ITC must follow U.S. trade law and can't revise its rulings to meet the objections raised by WTO dispute-settlement panels, the commissioner argued.

"We are bound to uphold U.S. law. Period," the ITCer said.  "So it's very hard for us to change our methodology, procedures or data collection absent some direction from Congress."  The commissioner sees no likelihood that lawmakers or the Bush administration will seek changes in the trade law to bring it into conformity with the panels' interpretation of WTO rules.
The U.S. so far is "zero for 14" in defending antidumping, countervailing duty and Section 201 safeguard actions before dispute-settlement panels.  In addition, 16 of 18 pending WTO complaints against the U.S. involve trade remedy actions.  The rest of the world hasn't done any better, with panels overturning every similar trade action by other countries, except for two, which were sustained on technical issues.  "I take only modest comfort in the fact that we are in glad company with the rest of the world," the commissioner said.

"Clearly the WTO is not liking what it is seeing in terms of the cases that are coming before it," the commissioner suggested.  The ITCer noted that 32% of all disputes taken to WTO panels involve dumping, CVD or safeguard actions.  "I think people involved in writing the rules for the dispute-settlement system would be shocked if they really thought a third of the entire case load would have ended up involving dump, countervail and safeguard cases," the commissioner stated.

As a "stop gap" way to address expected WTO objections, the ITC has attempted to prepare data to use in defending its decisions if requested by the U.S. Trade Representative's (USTR) office.  In the steel 201, USTR officials asked the ITC to be prepared to answer questions on how the exclusion of NAFTA countries from final remedy decisions could be justified and whether the increase in imports was an "unforeseen development."  After the commission issued its final ruling, USTR Robert Zoellick wrote to the commission, requesting this additional supporting information (see WTTL, Jan. 7, Page 3).

"No one is entirely happy with this stop gap approach," the commissioner said.  "As we and the rest of the world continue to lose more and more cases, it will come more and more to the forefront that more than this Band-Aid approach will need to be taken not just here but elsewhere," the ITCer added.
 

LICENSE REVIEW TIMES FOR CHINA GOT LONGER IN 2001

It took over 20% more time to get an export license application for China through BIS in 2001 than the year before, according to license reviewing times the agency presented at Update West in Pasadena, Calif., April 15-17 (see table below).  The longer examination may have been due to the caution of new Bush administration export agency officials, which also may explain the decline in the approval rate.  More China licenses, however, were returned without action (RWA'd) than in 2000, mainly because BIS determined that no license was needed.

BIS License Handling For Countries of Concern 2001


                          Total      Approved (%)     Denied(%)         RWA'd(%) Average Processing Days

China                      1,249      897 (72%)         39  (3%)             313 (25%)             77
 
Cuba                         252      210 (83%)          2 (1%)               40 (16)                    35

India                    1,254          849 (68%)         91 (7%)         314 (25%)                  41
 
N. Korea                 15         9 (60%)              0 (0%)               6 (40%)                 55

Pakistan                 40          11 (28%)         11 (28%)             18 (45% )                 68

Syria                  150          104 (69%)         11 (7%)              35 (23%)                 50
 

Licensing requirements for Cuba changed in mid-2001 after BIS implemented legislation intended to allow more food exports to the communist island without licenses.  As a result, the number of licenses handled for Cuba declined from the year before.  Instead of licenses, BIS received 48 required notifications of food shipments under License Exception AGR.  Of these notices, only one was forced to come in for a license.

The slow pace of licensing for China was also experienced for goods going to Russia.  In calendar year 2001, BIS handled 366 applications for Russia, approved 280 (77%), denied 7 (2%), RWA=d 70 (22%) and took an average of 72 days to reach a decision.  The agency only reviews reexport licenses for shipments to Libya.  In 2001 it acted on 12 such applications, approved three (25%), denied two (17%) and RWA'd seven (58%).  No processing times were reported.
 

9/11 PROMPTS U.S. PROPOSALS FOR TIGHTENING CHEMICAL CONTROLS

The impact of September 11 on U.S. export controls continues to expand, with Washington planning to ask the Australia Group (AG), the multilateral export control regime for chemicals, to enlarge its list of controlled items and with the Bureau of Industry and Security (BIS) considering proposals to increase export licensing requirements for AG covered products.  The U.S., for example, is exploring proposals for restricting agriculture sprayers such as crop dusters, which figured prominently in the stories about the terrorists who attacked the U.S.

In addition, the U.S. plans to seek tighter AG controls on fermenters; the expansion of the list of controlled biological agents and chemical precursors; and a definition of export for intangible technology, BIS officials told the agency's Update West in Pasadena, Calif.  They also said BIS is considering requiring licenses for the export of biological agents to Canada and requiring licenses for the export of AG listed items to all destinations except AG members.


 * * * BRIEFS * * *

ANDEAN TRADE PREFERENCES ACT: Senate Democrats and Republicans agreed April 25 to separate ATPA from fight over fast track and Trade Adjustment Assistance.  Bipartisan letter signed by 17 senators, requesting cloture on motion to proceed on H.R. 3009, was presented on Senate floor, and debate began on April 26.  Cloture vote is schedule for 6:00 P.M. April 29.  Senate action on ATPA may help to achieve President Bush's goal of enactment of legislation before May 16 when tariffs on Andean goods will kick in because of expiration of previous ATPA law.  House approval, however, remains uncertain. Decision to go ahead with ATPA without TAA or fast track measure was needed because progress toward deal on worker health insurance provisions of TAA slowed after initial progress earlier in week.

MOROCCO: During visit of King Mohammed VI to Washington April 23, President Bush announced plans for entering talks with Morocco on free trade agreement.  No dates for start or conclusion of negotiations were set (see WTTL, April 1, page 1). U.S. exports to Morocco have averaged $475 million in last six years; imports in 2001 were $450 million.

UREA: Nitrogen Solutions Fair Trade Committee has filed antidumping petitions at ITA and ITC against imports of urea ammonium nitrate solutions from Belarus, Lithuania, Ukraine and Russia.

EU: Spring forecast from EU Commission expects Euro area to grow only 1.4% in 2002, which is below 1.6% rate for 2001.  Growth will accelerate toward end of year, with 2003 expansion of 2.9%, it said.
 
TRADE PEOPLE: Entire 33-person international trade law group of Powell Goldstein moving May 6 to Washington law offices of Sidley, Austin, Brown & Wood.

STEEL: House Ways and Means Committee by voice vote April 24 reported out H.J. Resolution 84 with recommendation that House disapprove measure.  Resolution, sponsored by Rep. William Jefferson (D-La.) would overturn President Bush's Section 201 decision on steel and impose instead ITC's original relief recommendations.  As privileged bill, measure must be acted on by both houses of Congress by Sept. 16, but president could still veto resolution if it passed both bodies.  At committee hearing, Jefferson defended his proposal, noting that stevedore employment in New Orleans has already dropped 35% and barge traffic decline to 15 in April compared to 40-50 per month average.

UKRAINE: ITA is requesting public comment on Ukraine's request to end its status as nonmarket economy under antidumping rules.  Request originally came as part of antidumping investigation into steel wire rod from Ukraine.  Kiev joins Russia in queue waiting ruling on NME status.

AFRICA: U.S. signed Trade and Investment Framework Agreement April 24 with West African Economic Monetary Union (Benin, Burkina Faso, Cote d=Ivoire, Guinea-Bissau, Mali, Niger, Senegal and Togo).

Copyright 2002 by Gilston Communications Group. Reproduction or retransmission in any form is prohibited. Washington Tariff & Trade Letter is published weekly 50 times a year. Editor & Publisher: Samuel M. Gilston, P.O. Box 5325 Rockville, MD 20848-5325. Phone: 301-460-3060. E-mail: Info@WTTLonline.com