Volume 22, No. 45 -- November 18, 2002

Posted Monday, November 18, 2002 12:00 am

In This Issue:

* Proposal at Wassenaar Could Double Night Vision Licenses
* U.S. Will Lose More International Trade Panel Cases, Official Warns
* ITA Says Vietnam Is Still Nonmarket Economy
* Proposals Seek To Expand Court of International Trade Jurisdiction
* Swiss Firms Pay Fines For Attempted Export to Iran
* Ministers Remain Split on Doha Deal on Drug Patents
* Court of International Trade Ready to Go Electronic
* Briefs: India, Australia, Affiliated Parties, Barium Carbonate, Cambodia, Inversions

PROPOSAL AT WASSENAAR COULD DOUBLE NIGHT VISION LICENSES

A French proposal to the Wassenaar Arrangement to add controls on certain amorphous silicon materials could significantly increase the number of export license applications that firms making optical sensors, including cameras and focal plan arrays, must file with the Bureau of Industry and Security (BIS). If the proposal were adopted, "you are probably looking at an increase in licenses in the United States and in some of the Wassenaar countries," BIS official Bernie Kritzer told the Sensors and Instrumentation Technical Advisory Committee (SITAC) Nov. 12. BIS could see the number of licenses for night vision products go from some 1,350 per year to 3,000 annually, Kritzer told the group.

French representatives made the proposal during a September experts-level meeting of Wassenaar members. All Wassenaar representatives reached consensus on the proposal except Russia, which said it still wanted to study the idea. Russia's action could block the plan from being presented at the annual ministerial-level meeting of the regime in December.

The French proposal covers seven silicon materials that are now excluded from controls under Export Control Classification Number (ECCN) 6A002. While Defense supports adding amorphous silicon to the control list, it "could go either way" on the other materials, a Pentagon official told the meeting. BIS is still seeking industry comments and advice on the change before it takes a final position on the proposal, Kritzer said.

When the original controls on optical sensors were established, products made with these materials were excluded because they were considered low performance. As controls have tightened on night vision products using higher performance materials, industry has turned to these older materials and found ways to enhance their performance.

"These materials did not enjoy a lot of attention or commercialization in the past," explained BIS licensing officer Christopher Costanza. He expressed concern about trying to control materials rather than performance, since new controls will just drive firms toward the use of noncontrolled materials.

U.S. WILL LOSE MORE INTERNATIONAL TRADE PANEL CASES, OFFICIAL WARNS

World Trade Organization (WTO) dispute-settlement panels are giving "no deference" to the rulings of U.S. trade agencies, complained Commerce Chief Counsel for Import Administration John McInerney. "We're losing the war over there," he told the Court of International Trade's (CIT) 12th Judicial Conference in New York Nov. 13. "We are losing a lot and we are going to lose a lot more," said McInerney, who often participates in panel proceedings examining U.S. antidumping and countervailing duty cases.

The overriding reason the U.S. is losing is because the U.S. is the largest market in the world and everyone considers any barrier to this market as something bad, said McInerney, who emphasized that he was expressing his personal views and not the government's. Another key reason is the difference between the common law tradition of the U.S. compared to the civil law approach in most of the rest of the world.

The idea that any law or agreement could have more than one interpretation "is alien to the civil law mind," he told the conference. As a result, panels have not accepted U.S. arguments that different interpretations of WTO rules could be acceptable as long as they were not specifically barred by the text of the accord.

Another reason the U.S. is losing cases is the belief of panelists that WTO members gave up their sovereignty over trade laws, he suggested. Even when the General Agreement on Tariffs & Trade is silent on an issue, panelist still think WTO rulings should dictate trade policy. "I call their paradigm the block-grant transfer of sovereignty approach," McInerney said.

McInerney spoke on a panel examining the increasing dilemma facing the CIT and other U.S. courts about how to apply WTO and NAFTA panel rulings in domestic court cases. For nearly 200 years, U.S. courts have followed an 1804 Supreme Court ruling in Charming Betsy, which said an act of Congress should never be construed as violating an international agreement as long as "any other possible construction remains."

McInerney argued that U.S. laws and regulations are generally more specific than WTO rules so "it is very hard to get to Charming Betsy." Noting recent CIT opinions that have suggested that WTO and NAFTA panel rulings may be given weight in court decisions, he said, "I don't think that is going to please a lot of people, certainly not in Congress."

ITA SAYS VIETNAM IS STILL NONMARKET ECONOMY

Vietnam isn't ready to join the rest of the former communist world in being declared a market economy. Despite economic reforms the country has made in recent years, it will continue to be considered a nonmarket economy (NME) in antidumping and countervailing duty cases, the International Trade Administration (ITA) ruled in pending case against imports of frozen fish fillets from Vietnam. "While Vietnam has made significant progress on a number of reforms, our analysis indicates that Vietnam has not successfully made the transition to a market economy," states an ITA staff memo recommending denial of the request for a status change.

The ITA investigation of Vietnam found that wages are determined by free bargaining and the government has implemented many other economic reforms. "However, the level of government intervention in the economy is still such that prices and costs are not a meaningful measure of value," the staff memo asserted. The Vietnamese currency, the dong, is not fully convertible, the government still seeks to control and direct foreign investment, and private land ownership is not allowed, the agency found (see WTTL, Oct. 7, page 1).

PROPOSALS SEEK TO EXPAND COURT OF INTERNATIONAL TRADE JURISDICTION

Concern that Court of International Trade (CIT) judges and facilities are underutilized has triggered proposals to give the court more to do by expanding its jurisdiction into more trade-related areas, including all seizures at U.S. ports and export control cases. The search for new jurisdiction has been prompted by a steady decline in the number of Customs cases that the court hears annually.

Skeptics have said the proposals are also aimed at giving the Customs bar more work. But suggestions about increasing the CIT's assignment have stirred warnings that an examination of its workload might lead to its merger into the Federal Claims Court.

The decline in Customs cases has been the result of a steady lowering of tariffs over the last 20 years and a change in the agency's enforcement methods. The implementation of tariff cuts from the Tokyo Round and Uruguay Round has made the cost of litigating Customs classification decisions less worthwhile. At the same time, Customs has shifted its enforcement methods from an entry-by-entry review of imports to a post-liquidation auditing approach.

A report from the CIT Advisory Committee on Jurisdiction, made up of attorneys practicing at the court, has suggested the CIT could hear more trade-related cases, including Customs seizures for trademark and copyright violations, the Foreign Corrupt Practices Act, suits against state law violations of WTO rules, all cases seeking judicial review of issues involving international trade agreements, anti-boycott cases, and review of ITC findings in Section 201 actions.

The committee's report, discussed by its chairman, Patrick Reed of Simons and Wiskin, at the CIT's Judicial Conference Nov. 13, said it found only 10 cases of legal challenges of export control rules since 1983 and admitted that most lawyers are satisfied with the current judicial review framework. Nonetheless, it said giving the court jurisdiction in this area "would be consistent with the idea of creating a comprehensive system of judicial review of agency action under statutes affecting international trade."

A key recommendation would amend the Customs statute to allow importers to protest Customs assessments of duties based on post-liquidation audits. Because these claims are often made long after import, importers miss the chance to follow normal protest procedures within the required 90 days post-entry. John Peterson of Neville Peterson suggested the law needs to be amended to give importers the right to challenge audit-triggered assessments post liquidation. He noted that in the European Union importers have up to three years to make such protests.

SWISS FIRMS PAY FINES FOR ATTEMPTED EXPORT TO IRAN

The attempt by two Swiss firms to export 30,000 pounds of Cellulose Solka-Floc to Iran via Switzerland without obtaining approval from Treasury's Office of Foreign Assets Control (OFAC) has resulted in a plea agreement with BIS under which the companies will pay $55,000 in civil fines. According to the charging letters issued to the firms, Oerlikon Schweisstechnik, also known as Oerlikon-Welding of Zurick, conspired with Reweld of Kloten, Switzerland, to buy the material, worth $21,000, in the U.S. and have it shipped to Iran through Switzerland.

Oerlikon was charged with conspiracy, solicitation of a violation and acting with knowledge of a violation of the Export Administration Regulation. It agreed to pay a $33,000 fine to settle the charges. It has had its export privileges denied for one year, with the last six months suspended. Reweld was also charged with conspiracy and with one count of attempted export in violation of the regulation. It paid a $22,000 fine. Neither firm admitted or denied the charges.

MINISTERS REMAIN SPLIT ON DOHA DEAL ON DRUG PATENTS

Trade ministers attending a mini-ministerial in Sydney, Australia, Nov. 14-15 moved closer to a common position on the application of compulsory licensing rules for drug patents in developing countries, but failed to agree on the exact meaning of the deal they made in Doha, Qatar, in 2001 to give those countries greater access to medicines for major public health crises.

The 25 trade ministers attending the meeting, which is one of a series to be held before the WTO's next ministerial in Cancun, Mexico, appear to have agreed that the types of health issues that can trigger compulsory licensing are limited to such diseases as HIV/AIDS, tuberculosis and malaria. Some middle-income nations and health activists are trying to expand that list to include more common health problems such as heart disease, diabetes and cancer (see WTTL, Oct. 28, page 2).

"If this round is really to be the Doha Development Agenda, we must rapidly conclude on access to medicines," European Union Trade Commissioner Pascal Lamy told the meeting. "This is the real acid test -- and we must pass this test," he said. "In today's discussions we have gone a long way and the ministers clearly want Geneva officials to wrap up the final details before the end of the year," he added.

According to Lamy's office, the views of the ministers "largely converged around key issues of the product and disease coverage, eligible exporting countries, beneficiary importing countries and the necessary safeguard mechanisms to ensure that medicines reach the countries in need." The common view of ministers at the meeting, however, doesn't necessarily indicate the position of the other 120 WTO members, and consensus by the end of December still remains elusive.

COURT OF INTERNATIONAL TRADE READY TO GO ELECTRONIC

No more last-minute couriers or cab rides to downtown New York City to file papers at the CIT. In the first half of 2003, the court will implement an electronic Case Management (CM) and Electronic Case Files (ECF) system that will allow law firms to file briefs and motions over the Internet and also track cases and review dockets online. According to a report on the new system at the CIT's Judicial Conference Nov. 13, the CM portion of the system should be operational during the first quarter of 2003 and the ECF part in the second quarter.

The CM system will give attorneys and the public the ability to review dockets and retrieve nonconfidential documents filed in each CIT case. The ECF system will allow lawyers who are registered with the court to file all briefs and motions over the Internet. For the time being, however, filings that require the paying of a fee will still need to be done in person.

The CM/ECF system is based on a model now being used in some 40 federal district and bankruptcy courts, according to Michael Greenwood of the Administrative Office of the U.S. Courts. Some 20,000 lawyers have filed papers electronically in federal courts and have had an error rate of only 2-3%, Greenwood told the CIT meeting. The most common mistake is filing papers in the wrong case, said Greenwood, who worked with the CIT to implement the system.

Clerk of the Court Leo Gordon reminded the conference that the court's "bulky document" rules will apply to electronic filing and cases exceeding a certain byte length won't be accepted. Attorneys in each case will receive an electronic notice of each filing and can elect to have their formal service delivered electronically, he noted.

* * * BRIEFS * * *

INDIA: In India Nov. 13, BIS Under Secretary Kenneth Juster announced formation of U.S.-India High-Technology Cooperation Group. "The group would expeditiously work towards developing a new statement of principles governing bilateral cooperation in high-technology trade that broadly advances our relationship in this area, including addressing ways to increase trade in dual-use' goods and technologies," BIS statement said. Two nations "reaffirmed their shared commitment to and common interest in preventing proliferation of strategic goods and technology," statement added.

AUSTRALIA: USTR Robert Zoellick Nov. 14 announced that he has notified Congress of his plans to launch FTA talks with Australia next year (see WTTL, Oct. 7, page 3).

AFFILIATED PARTIES: ITA has issued final rules amending its methodology for calculating when sales to affiliated parties will be included in determining normal values. Complying with WTO ruling in case on hot-rolled steel from Japan, agency said it will include sales that are between 98% and 102% of prices to unaffiliated customers (see WTTL, Sept. 9, page 2)

BARIUM CARBONATE: ITC Nov. 14, on 5-0 vote, reach preliminary decision that allegedly dumped imports of barium carbonate from China may be injuring U.S. industry.

CAMBODIA: WTO working group on Cambodia's accession to trade body reported Nov. 14 that it is aiming to complete effort so country can join WTO at Cancun ministerial next September.

INVERSIONS: Treasury Nov. 13 issued temporary rules requiring firms to notify IRS and shareholders when they move offshore or are acquired by foreign company. New rule and accompanying proposal on corporate inversion requirements are part of plan to deal with firms shifting offshore for tax reasons.