The "catch-all" licensing requirement the U.S. is trying to get the Wassenaar Arrangement to adopt is based on the European Union's (EU) catch-all policy but isn't as vigorous, according to Bureau of Industry and Security (BIS) Under Secretary Kenneth Juster. The proposal, which is still "at the nascent stage" in Wassenaar consideration, would be merely a statement of understanding urging members to adopt catch-all rules in their national control systems (see WTTL, May 20, page 1). The U.S. wants to get this policy adopted at the next high-level plenary meeting of Wassenaar members in December, but it has faced resistance from Russia.
Juster said the U.S. will co-sponsor this proposal with the EU, if some changes are made in the language. While the U.S. would like Wassenaar to adopt stronger requirements similar to the EU's, it recognizes that it would be difficult to get support for a tougher policy. "It is our view to at least get the catch-all concept into Wassenaar and then try to work on tightening it a bit," Juster told the Regulations and Procedures Technical Advisory Committee (RAPTAC) June 4.The EU's catch-all requirement includes a "knowledge" provision. "Right now there would be no requirement in the Wassenaar proposal for a company that had suspicions' about a potential export to affirmatively take steps to inquire about those suspicions or to have an obligation to act on those suspicions," Juster explained. Nor will there be a list of end users or countries of concern.
"Because Wassenaar is a national
discretion regime, there's not going to be a clear delineated list that
indicates what are countries of concern or end-users of concern," he said.
Nonetheless, there will be "a core of countries or end users of concern
that will be shared by all Wassenaar countries," he said. Such a
core includes countries subject to UN embargoes.
NAFTA TRIBUNAL UNEARTHS 1,500 PAGES OF CHAPTER 11 DRAFTS
After nearly two years of prodding NAFTA governments to provide background information on the negotiations that led to the final version of the accord's Chapter 11 provisions on investor-state investment rules, a NAFTA tribunal in April received from Canada some 1,500 pages of documents, reflecting 40 different drafts of wording for Article 1105, which covers the "minimum standards of treatment" requirements in the pact.
The disclosure of this negotiating history, or travaux preparatoires, could have a major impact on rulings from future tribunals on this key area of dispute, as well as proposals for Chapter 11 in still pending fast-track legislation. Just as important, the tribunal suggested that an attempt by the NAFTA Trade Commission, comprising U.S., Canadian and Mexican trade ministers, last year to clarify Chapter 11 was not an interpretation but a change in the agreement that might require ratification by another authority, presumably Congress (see WTTL, Aug. 6, page 1)."Were the Tribunal required to make a determination whether the Commission's action is an interpretation or an amendment, it would choose the later," it wrote. Nevertheless, it agreed to consider the Commission's views as an interpretation in making its ruling.
Aiming to curb Chapter 11 tribunals from expanding Article 1105, the NAFTA Commission issued an interpretation which said the "minimum standard of treatment" that should be given to each other's investors is the same standard applied in "customary international law." Article 1105's requirements for "'fair and equitable treatment' and full protection and security' are not in addition to or beyond "customary international law,' the Commission stated.
While the tribunal's initial 2001 decision in the case saw these standards as independent, additive requirements, it bowed to the Commission's interpretation. Nonetheless, it pointed out that: "Nowhere in the over forty negotiating texts submitted does the word customary' appear in qualification of international law' in what eventually became Article 1105."
It still argued that "customary international law" is a subset and narrower part of international law. "This difference is important," it asserted. The tribunal found the concept of fair and equitable treatment widely used in bilateral investment treaties (BITs), including those to which Canada and the U.S. are parties. It found more than 1,800 BITs have been negotiated, which suggests the standard has become the "custom in international law."
The tribunal's ruling, released May
31, responded to a complaint by Pope & Talbot, a U.S. lumber producer
with operations in Canada. The three-member tribunal ruled that Canada
had breached Chapter 11 requirements regarding minimum standards of treatment
in its request to the firm to produce business records for its British
Columbia sawmills as part of Ottawa's audit of the application of quotas
imposed under the 1996 Softwood Lumber Agreement. The tribunal ordered
Canada to pay Pope & Talbot $461,566 in damages. The company
originally sued for $508 million in compensation. The tribunal agreed
with Pope & Talbot's assertion that Canada's behavior was egregious
and "did shock and outrage the Tribunal."
MANDATORY AES FILING FOR ML AND CCL ITEMS FURTHER DELAYED
The congressional mandate for all exports subject Commerce Control List (CCL) and Munitions List (ML) licensing to file Shipper's Export Declarations (SEDs) electronically won't go into effect until early in 2003. Disagreements over data and shipping requirements with State and Customs have delayed implementation of the law's requirement for using the Automated Export System (AES) for these exports, Harvey Monk, director of Census' Foreign Trade Division told BIS's RAPTAC June 4. Census was aiming for a September 2002 implementation deadline.
Because of the interagency disagreement, a draft revision of the Foreign Trade Statistics Regulation has been scrapped and a new one is being prepared, Monk told RAPTAC. To prevent further delays in getting agreement on the rules covering ML items, the Census regulation is likely to refer ML exporters to State's International Traffic in Arms Regulation (ITAR) for guidance on the rules that apply to their shipments and not try to cover them in the FTSR.In particular, Census disagreed with a State proposal that ML exporters had to wait until they received an Internal Transaction Number (ITN) from Customs before filing shipping and bill-of-lading information. Shippers now can use their own self-generated External Transaction Number (ETN) or the ITN, if they have it. Instead of being imposing in the Census regulation, the requirement will be added to the ITAR, Monk explained.
Similarly, Census will let State amend the ITAR to require a 72-hour waiting period between the filing of SEDs and shipment of ML items rather than adding the requirement to the Census regulation (see WTTL, March 11, page 1). In addition, the revised rules will eliminate AES Option 3 for ML items, Monk said. Option 3 allows some exporters to file AES data five or ten days after shipment. The revised notice of proposed rulemaking still needs approval from State and Treasury before it can be published for public comment, Monk said.
Monk noted that 81-82% of SEDs are already being filed electronically, so the shift to mandatory AES filing may not as big a step as some firms fear. The major areas where electronic filing isn't being used is for air carrier shipments and along the Mexican border.
After the new requirement goes into
effect, Census plans to notify exporters when it sees paper SEDs for shipments
that are identified as covering ML and CCL items. This will be in
the form of a reminder not an enforcement action. Meanwhile, Monk
alerted the committee to the expectation that mandatory AES filing for
all exports is coming. Pending legislation, which has passed both
the House and the Senate, would impose that requirement.
BIS ENFORCEMENT CHIEF CREATES INTERNAL ADVISORY BOARD
In an effort to assure more fairness and consistency in enforcement actions, including charging letters and settlement agreements, BIS Assistant Secretary for Export Enforcement Michael Garcia has established an internal advisory board to screen all proposed cases and to make recommendations to him before he gets to review the final action. Garcia has created the Administrative Case Review Board (ACRB) to advise him on all cases requiring his approval.
Garcia told RAPTAC June 4 that he does not expect the board to provide hearings for exporters subject to the cases or for their lawyers, but the ACRB will see all documentation provided by companies or their attorneys. The possibility of allowing oral presentations is still an open issue, Garcia said.ACRB members will include the Deputy Assistant Secretary for Export Enforcement Lisa Prager, who will chair it, plus Commerce Chief Counsel for Exports Jon Dyck. Alternating on the board, depending on the subject of the case, will be Mark Menefee, director of the office of export enforcement, or Dexter Price, director of the office of antiboycott compliance. To provide an impartial review of complaints. Menefee will review antiboycott cases and Price will hear export control cases. The board will meet weekly and more often, if needed.
Garcia said he formed the ACRB because
proposed actions often come to his desk with little time for him to conduct
an extensive review of the material in the case. One goal of the
board is to "give me a comfort level on cases," Garcia said. He noted
that he wanted an additional review mechanism to advise him on proposed
actions. If the board offers a unanimous position, he is likely to
accept it. If it is split, that is when he will delve more deeply
into the issues. In the past, board members may have advised on pending
cases on an ad hoc basis.
RUSSIA'S ENERGY POLICIES TO GET SCRUTINY IN FUTURE TRADE CASES
In deciding that Russia meets the six major criteria for being switched from nonmarket economy (NME) to market economy status, Commerce's International Trade Administration (ITA) found Moscow's energy pricing policies still remain a significant problem that distorts trade. During a briefing June 6 explaining the widely expected announcement of the change, a Commerce official said energy pricing will get close scrutiny in future antidumping and countervailing duty cases involving imports from Russia (see WTTL, June 3, page 2).
"We found that the state no longer controls resource allocations or prices except with respect to certain natural monopolies such as transport or energy," he reported. "The energy issue was one area where we found the most significant problems, where government controls have been effecting price setting in a way that was found to be distortive," he added.In future trade cases, ITA will examine whether prices related to sales "are made outside the normal course of trade or if costs are not recorded in their books in accordance with GATT principles or don't reasonably reflect the costs associated with the production of the merchandise," the official explained. "We will scrutinize that factor very closely," he asserted.
Before its decision, Commerce received no assurances from Russia on its pricing of energy to Russian industries. "There was no commitment and no linkage" between those policies and the NME ruling, the official said. "I know in USTR negotiations with Russia [on WTO accession] energy pricing has been and will be a huge factor," he added. "It's a priority for this administration," he declared.
Russia's switch to market economy
status is effective retroactively to April 1. Any pending or future
cases, for which the period of review is prior to that date, will continue
to be subject to NME rules, including use of surrogate countries for price
and cost information. Cases with periods of investigation after that
date will use actual Russian prices and costs.
PART OF BIS COULD MOVE TO PROPOSED HOMELAND SECURITY DEPARTMENT
Elements of BIS involved in cybersecurity and chemical and biological weapons inspections could be incorporated into a new Cabinet-level Department of Homeland Security that President Bush proposed June 6. Although the details of what parts of the federal government will go into the new department are still evolving, the White House wants the organization to handle border security, nonproliferation countermeasures and infrastructure protection.
For ports and shippers, the proposed department would consolidate many of the agencies and activities that directly control imports, exports and maritime transportation. The proposal calls for joining the Customs Service, Coast Guard, the Immigration and Naturalization Service, the Transportation Security Agency and the Border Patrol, as well as Agriculture's animal and plant inspection responsibilities. The department would have a role also in directing research at the Lawrence Livermore Laboratory and the National Institutes of Health.While there has been bipartisan criticism about the apparent lack of coordination of intelligence and security agencies prior to Sept. 11 and proposals for consolidating many of these functions, Bush's proposal could face extensive revisions when implementing legislation is considered. House and Senate committees have longstanding jurisdiction claims over many of the agencies being considered for consolidation, and some won't give them up without a fight.
* * * BRIEFS * * *
ENCRYPTION: BIS is June 6 Federal Register issued interim final rule clarifying encryption regulation's treatment of "mass market" products. New rules bring EAR into conformity with changes Wassenaar Arrangement adopted to allow mass-market treatment of products with symmetric algorithms with key lengths greater than 64 bits after 30-day BIS review. Revision also covers short-range wireless products with encryption. Industry representatives praised BIS staff for working with them to update regulation. Nonetheless, one executive pointed out: "This is a clarification, not a simplification" of rules.
BIS: As expected, Karan Bhatia was named deputy under secretary June 3 (see WTTL, May 20, page 4). Scott Kamins was appointed director of congressional and public affairs.
UREA: ITC June 3 made preliminary ruling that allegedly dumped urea ammonium nitrate solutions from Belarus, Russia and Ukraine may be injuring U.S. industry. It found Lithuanian imports are negligible.
EX-IM: House June 4 and Senate June 5 passed five-year extension of Bank's charter. Measure give Ex-Im authority to use "market windows" and requires minimum of 20% of financing to go to small firms.
SNAP: BIS' expansion of Web-based licensing system to allow submission of documentation has been delayed due to testing problems and policy issues. No new date set for implementation, BIS staff say.
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.
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