Volume 22, No. 43 -- November 4, 2002

Posted Monday, November 4, 2002 12:00 am

In This Issue:

* Compaq Fined For DEC's Export Control Violations
* U.S. Won't Appeal WTO Ruling on Softwood Lumber
* Customs Issues Final 24-In-Advance Rule for Cargo Manifests
* BIS Imposes $115,000 Fine for False SEDs
* Report Fault's Russia's Compliance with Export Control Regimes
* Briefs: Export privileges, Containers, Actuators, Textiles, Pipe Fittings, Wheat,

COMPAQ FINED FOR EXPORT CONTROL VIOLATIONS

The incorrect classification of exports, the failure to obtain a required license and the violation of conditions placed on an approved license were among the charges the Bureau of Industry and Security (BIS) leveled against Compaq Computer in draft charging letters which led to a settlement agreement Oct. 29. Compaq, which is now part of Hewlett-Packard, has agreed to pay a $39,000 civil fine to settle alleged export control violations perpetrated by Digital Equipment Corp. (DEC) before Compaq acquired it.

The complaints cite actions dating back to 1997, 1998 and 2000 and involve shipments of computers and computer equipment by DEC or its subsidiaries to China and other Asian countries. In reaching the agreement, Compaq neither admitted or denied the BIS charges. Ironically, Compaq paid a $55,000 civil fine in 1997 for allegedly illegal exports to China.

Among the alleged violations was the entry of "NLR" or no license required on six shipments to China, Hong Kong, Singapore and Taiwan. The exports should have gone as License Exceptions CTP or G-CTP, BIS claimed in the charging letter. On another occasion, a shipment to Korea was identified as NLR and CTP when, in fact, a license should have been obtained.

BIS also charged DEC with violating a condition on a license to export computers to China. The condition explicitly prohibited Taiji Computer Corp. from being an intermediate consignee, but DEC used the firm as a consignee anyway, the agency charged. Another charge involved DEC's Digital Equipment Asia Pacific, which is located in Singapore. BIS claimed it shipped nine 700 MHZ CPU modules from Singapore to India without obtaining re-export approval.

U.S. WON'T APPEAL WTO RULING ON SOFTWOOD LUMBER

Although the U.S. continues to disagree with a World Trade Organization (WTO) dispute-settlement panel ruling against the preliminary countervailing duty (CVD) decision on softwood lumber from Canada, it won't appeal the ruling, which the WTO adopted Nov. 1. U.S. trade officials say they will continue to fight the judgment in a separate pending WTO case against the International Trade Administration's final CVD order on Canadian lumber.

In the case involving the final CVD order there is a more extensive administrative record, which supports the American position, one U.S. official said. "Our interests are better served" in the case on the final ruling, the official added. The panel's original finding on the preliminary ruling first became public in July.

The U.S. decision not to appeal the WTO ruling has raised speculation that Canada may decide to withdraw its complaint against the final CVD order and force Washington to conform to the ruling against the preliminary. If Ottawa withdraws the second complaint, the U.S. won't have another chance to defend its cross-border pricing methodology, which the WTO ruled to be inconsistent with the Agreement on Subsidies and Countervailing Measures.

ITA would then have to go back and reach a new preliminary determination from scratch, and the current final CVD order would be voided. Without its cross-border analysis, which used prices of lumber sold in the U.S. as the basis for determining the level of timber subsidies provided by Canadian provinces, ITA would have to recalculate its preliminary and final CVD rates. This might produce a number far below the 19.34% it found in its final ruling. No WTO panel has been named yet to hear the case against the final order.

U.S. officials continue to claim they won a partial, but important, victory in the panel ruling the WTO adopted. The panel agreed with the U.S. that the "rights" Canadian provinces provide to lumber producers to harvest crown lands can constitute a countervailable subsidy just as the provision of a good or service. As far as the panel's ruling on the cross-border pricing system, one U.S. official said Washington takes "strong, strong exception to that finding."

Separately, U.S. trade officials say they plan to distribute by the end of November a draft policy bulletin on how ITA intends in the future to calculate Canadian timber subsidies in "changed circumstances" reviews. The bulletin in intended to provide guidance on how the agency would view any changes the provinces make in their stumpage fee systems to bring them toward a market-oriented pricing system. In particular, ITA is looking for an impartial way to place a value on Canadian timber (see WTTL, Sept. 30, page 4).

Trade lawyers involved in the case, however, doubt that ITA is ready to circulate a draft bulletin. The agency has asked the White House Council of Economic Advisors (CEA) to provide an economic analysis of its proposed plan. The CEA has had difficulty finding support for ITA's proposed methodology and hasn't submitted its report yet, one source reported.

CUSTOMS ISSUES FINAL 24-HOUR-IN-ADVANCE RULE FOR CARGO MANIFESTS

Customs Oct. 31 kept its promise to publish quickly a final rule requiring the 24-hour-in-advance of lading filing of cargo manifests for goods destined for the U.S. Although it expedited the final regulation because of its national security concerns, Custom gave the trade community 90 days to come into compliance with the new requirements. The rule goes into effect Dec. 1, but Customs said it won't take any enforcement action based on the new requirements for 60 days after that.

While Customs generally brushed off most objections to the original proposal, it made several concessions to clarify the continuing role of non-vessel operating common carriers (NVOCCs) and its reliance on the Automated Manifest System (AMS) (see WTTL, Sept. 16, page 2). Customs said it recognizes that the new regulation may force shippers and carriers to change some current commercial practices, but argued that it also will provide benefits.

"Most notably, once a cargo container is pre-screened in a foreign port, in the absence of additional information affecting Customs risk analysis, Customs will rarely need to again screen the container or inspect its contents for security purposes upon arrival in the United States," it said in the preamble to the regulation. The advance filing requirement will be closely tied to the agency's Container Security Initiative (CSI), the agency noted.

The agency's major concession was to exempt bulk cargo from the final rule and to offer exemptions for break bulk shipments on a case-by-case basis. Additional changes could be made to the regulation over time based on actual practice with the new requirements, Customs suggested. It also said it will ask Treasury's Advisory Committee on the Commercial Operations of the Customs Service (COAC) to convene a subcommittee to advise it on implementation of the new rules. Among other key changes and clarifications Customs made in the final rule include:

* Cargo declarations filed in advance won't be considered "manifests" for the purpose of public release and therefore will remain confidential until full manifest information is filed at time of entry.
* It clarified that cargo declaration information filed in accordance with new rule is different from full manifest information that must still be filed on arrival. "Customs is eliminating the requirement for vessel carriers to submit an additional cargo declaration upon arrival in the United States. However, the remaining documents comprising the vessel manifest must be available for presentation upon entry of the vessel," it stated.
* Ships departing from the U.S. Virgin Island to the U.S. are subject to the 24-hour rule.
* When an ultimate consignee is not known because goods may be sold in transit, such as in "to order" shipments, the party holding title to the goods or the owner's representative must be listed as the consignee.
*Until Customs can modify its AMS system, it will not notify carriers to confirm that advance filings had been received on cargo 24 hours in advance. "Until the completion of work in vessel AMS allowing confirmation messages, Customs will not allow lading prior to expiration of the 24-hour period and will utilized the current operating procedures under which filers receive hold messages only," it said.

BIS IMPOSES $115,00 FINE FOR FILING OF FALSE SEDS

BIS has hit a Miami woman with a $115,000 civil fine for her part in a scheme to avoid the filing of Shipper's Export Declarations (SEDs) and apparently to reduce tariffs paid in several African countries through the understating of export values. In a 265-count draft charging letter, the agency detailed the actions of Maria Elena Ibanez, who allegedly provided her freight forwarder with false statements about the value of the computer equipment she shipped to such countries as Kenya, Malawi, Nigeria and Uganda from 1996 to 1998.

At the time of these shipments, Ibanez was the owner and president of Inter-national High Tech Marketing (IHTM). In 2000, IHTM pled guilty in federal court to five counts of illegal exports to Libya and Sudan and was fined $250,000. IHTM is no longer in business, BIS reported.

In March 2002, the Miami U.S. District Court fined Ibanez $5,000 and placed her on five-years probation for conspiring to falsify commercial invoices. BIS imposed a five-year denial of export privileges order against her but suspended it as long as she doesn't violate export control rules during that period. One of the shipments cited in the charging letter showed Ibanez had declared the value of one computer-related item to be $100 but sent an invoice for $4,450. Another shipment with a declared value of $122 was invoiced at $17,817.80.

REPORT FAULTS RUSSIA'S COMPLIANCE WITH EXPORT CONTROL REGIMES

President Bush's efforts to maintain close, friendly ties with Russian President Putin are masking growing administration frustration with Russia's failure to comply with the rules of the multilateral export control regimes to which it belongs and its blocking of U.S. attempts to strengthen those regimes. An Oct. 25 report from the General Accounting Office (GAO) singles out Moscow as one reason for the weakness of these regimes (GAO Report 03-43).

The report was submitted to Sen. Fred Thompson (R-Tenn.), who has gone back to real acting as a co-star on the TV show Law and Order. At his request, the GAO looked at problems with the Missile Technology Control Regime (MTCR), the Australia Group (AG), the Nuclear Suppliers Group (NSG) and the Wassenaar Arrangement. The GAO questioned Russia's compliance with its regime commitments.

It cited Moscow's sales of nuclear fuel to India, despite protests from 32 of 34 NSG members, including the U.S. "We found examples of other questionable exports by Russia involving nuclear exports to Iran and missile technology exports to Iran, India, China and Libya," the GAO said. "Russia does not yet have an effective export control system in place according to U.S. government officials, even though it is a member of three regimes," the GAO reported.

The agency cited proliferation experts who charged that Russia "has impeded consensus on several issues in the three regimes" to which it belongs -- the MTCR, AG and NSG. Moscow has blocked efforts to broaden the information included in denial notifications and increase transparency in the delivery of small arms. "One government stated it is easier to reach consensus in the Australia Group because Russia is not a member," the report stated.

The GAO report also focused on the failure of regime members, including the U.S., to submit required notifications of denials or to submit them slowly. The U.S. "did not report any of 27 export denials to the Australia Group between 1996 and 2001," the GAO reported. U.S. officials claimed the denials, which were for sales to China, India and Syria, weren't based on AG restrictions and therefore weren't reportable. AG officials, however, told GAO investigators the reports were required. The GAO is the investigatory arm of Congress.

"About half of the members of the Wassenaar Arrangement -- the only regime with reporting time frames -- did not submit their export denials on time," the GAO said. "We found that the percentage of members in each regime that have never reported export denials ranged from 45 percent in one regime to 65 percent in another," it noted. The GAO said several countries, especially Australia, France and Japan, use a system of "informal denials" which discourage exporters from seeking licenses that are likely to be denied. These informal denials are not reported and therefore other regime members are not alerted to potential concerns, it said.

* * * BRIEFS * * *

EXPORT PRIVILEGES: BIS in Oct. 29 Federal Register withdrew licensing privileges of Pars, Cary, North Carolina firm convicted in 2001 of violating International Emergency Economic Powers Act by exporting or attempting to export controlled items to Iran. Nine-year denial order ends Sept. 4, 2010.

CONTAINERS: During talks at President Bush's Crawford, Texas, ranch Oct. 25, Chinese President Jiang Zemin said China has agreed in principle to participate in Customs' Container Security Initiative (CSI). Details remain to be worked out.

ACTUATORS: Following up on injury finding in Section 421 antisurge case against imports of pedestal actuators from China, three ITC commissioners who were eligible to make recommendations in remedy phase said Oct. 29 that they would urge President Bush to impose quantitative restrictions on product for three years (see WTTL, Oct. 21, page 4). Commissioners Jennifer Hillman and Marcia proposed quota of 5,626 units in first year, with 15% increase annually in second and third years. Commissioner Stephen Koplan recommended quota of 4,425, 4,514 and 4,604 units from 2003 to 2005.

TEXTILES: Commerce Oct. 29 announced agreement with Energy Department's Oak Ridge Laboratory to work on program to assess technology that might provide "marker system" that could tag U.S.-made fabrics and yarns. Goal is method that Customs could use to detect presence of U.S. fabrics and yarns in apparel imports that seek tariff preferences which require use of U.S. materials.

PIPE FITTINGS: Anvil International and Ward Manufacturing filed antidumping petitions Oct. 30 at ITA and ITC against malleable iron pipe fittings from China.

DURUM WHEAT: ITA has accepted supporting material from U.S. durum wheat farmers that antidumping and countervailing duty complaints they filed against imports of durum and hard red spring wheat from Canada were file "on behalf of" domestic producers (see WTTL, Oct. 21, page 3). Agency initiated investigations in notices published Oct. 29.

MAGNESIUM: Two NAFTA dispute panel rulings published in the Federal Register Oct. 31 ordered ITA to revise two "sunset" review determinations against imports of pure and alloy magnesium from Canada. In particular, it ordered ITA to remove "all others" subsidy rate.