Volume 23 No. 11 -- March 17, 2003

                                                * Violatoin of Export Denial Order Brings Firm $65,000 Fine
                                                * Appeal Seeks Release of Export Licensing Application
                                                *Offset Trade Is Continuing Downward Trend of 1990s
                                                * U.S., Australia Start FTA Talks on Cautious Note
                                                * USTR Makes Round of New Staff Appointments
                                                * Briefs: Commerce, WTO, Japan, Steel, Russia, Romania
 

VIOLATION OF EXPORT DENIAL ORDER BRINGS FIRM $65,000 FINE

Some firms just don't get the message.  That seems to be the case with Serfilco, a Northbrook, Ill., maker of filtration and pumping equipment.  In a March 3 consent agreement with BIS, Serfilco agreed to pay a $65,000 civil fine  -- $32,500 now and $32,500 in six months -- to settle agency complaints that it violated a 1996 denial order that barred the firm from doing business with most of the countries in the Middle East because of its alleged violations of U.S. antiboycott rules.  As part of the 1996 action, the company and its president, Jack Berg, paid $118,000 in civil fines.

Based on an administrative law judge's review and decision, the-then Bureau of Export Administration (BXA) imposed the fine and one-year denial order on Serfilco for its alleged provision of antiboycott-related information to an Iraqi agent between 1988 and 1990.  BXA claimed the company had been informed prior to then about the antiboycott regulations and Serfilco had ignored the advice in its dealings.

APPEAL SEEKS RELEASE OF EXPORT LICENSING APPLICATIONS

Citing a long list of court precedents, lawyers for the Wisconsin Project on Nuclear Arms Control March 13 asked the full Court of Appeals for the D.C. Circuit, en banc, to review and reverse a three-judge panel ruling which said export licensing information is still exempt from public release despite the lapse of the Export Administration Act (EAA).  The appeal claims the ruling is contrary to previous decisions from the same court, which has held that only explicit statutory language -- known as Exception 3 --  can permit a federal agency from withholding release of information under the Freedom of Information Act (FoIA) (see WTTL, Feb. 3, page 1).

"The panel's decision conflicts with many opinions of this court holding that only the express terms of a statute enacted by Congress can satisfy Exception 3," wrote Wisconsin Project lawyers.  In January, on a 2-1 vote, a court panel agreed with the government's arguments that the use of the International Emergency Economic Powers Act (IEEPA) to retain export controls after the lapse of EAA qualified as the statutory exception required by FoIA.

 Represented by lawyers from Ralph Nader's Public Citizen Litigation Group, the Wisconsin Project cited three specific reasons the three-judge panel's ruling should be reversed.  In the first place, the expiration of EAA left no statute in place on which to base the exception.  "The EAA, an expired statute, can no longer authorize anything....[it] cannot now justify withholding the records at issue."

Second, court precedents require a statute "on its face" to provide the exception regardless of legislative history suggesting it does.  "IEEPA, in short, does not tell the executive branch what to do about releasing or withholding records," the appeal said.  Finally, the Wisconsin Project argued that use of an executive order to invoke IEEPA to maintain export controls after the expiration of EAA doesn't qualify as an exception.  Noting earlier rulings, it said the president has no authority to amend or enact a statute. "Hence, an executive order is not and cannot be a ‘statute' regardless of whether, as here, its terms happen to track a former statute," the brief declared.

The brief acknowledged that the Eleventh Circuit in Times Publishing Co. v. Commerce had also upheld the government's authority to withhold release of licensing data.  Although that opinion came during a short period when the EAA was renewed, "the reasoning of the Eleventh Circuit is just as incompatible with the decisions of this court as that of the panel in this case," it argued.
 

OFFSET TRADE IS CONTINUING DOWNWARD TREND OF 1990s

For defense exporters, the post-Cold War decline in global military spending is continuing in all but a few major markets and is carrying the value of offset agreements down with it.  From 1993, when defense exports totaled $13.95 billion and offsets were valued at $4.79 billion, defense trade dropped to $2.01 billion in 1999 as offset deals declined to $1.45 billion, according to the latest BIS report on Offsets in Defense Trade.  As the value of trade sank, the comparable value of offsets rose, doubling from 34.4% in 1993 to 72.3% in 1999.

The rearview-mirror look at offsets provides another perspective on widening gap between U.S. military capabilities and those of NATO allies.  "U.S. defense exports were negatively affected by both the retrenchment of global military expenditures and the increased enforcement of strict foreign offset policies, the report notes.

The demand for offsets has particularly marked exports to Europe, where governments have increased their support for the shrinking pool of domestic defense suppliers.  As a result, defense sales to Europe often include a 100% offset component, BIS reports.  With aerospace trade accounting for 90% of all offset agreements, the competition in the military aircraft sector is especially intense.  A 2002 sale of F-16 fighters to Poland included a major offset component.

"Most recently, the press and prime contractors have reported examples of European governments offering extra incentives and guarantees on top of their firms' offset packages -- something that the U.S. government has not done and will not do under the current offset policy," the report states.  "This raises the issue of defense offsets to an entirely new and anti-competitive level," it warns.

The economic impact of offsets has been mixed.  "By exporting U.S. defense system, U.S. prime contractors have been able, in many instances, to maintain production lines for systems that would otherwise close due to a lack of sufficient demand from the U.S. military," the report asserts.  At the same time, these agreements have increased foreign competition for U.S. suppliers.  On the employment side, offsets maintained 38,400 work-years in the U.S. annually between 1993 and 1999, while displacing 9,500 work-years, BIS reports.
 

U.S., AUSTRALIA START FTA TALKS ON CAUTIOUS NOTE

The U.S. and Australia begin a week of talks March 17 in Canberra, Australia, on a Free Trade Agreement (FTA) with no deadline for completing negotiations and a U.S. farm community that is cool, if not hostile, to any more bilateral trade deals.  American agriculture groups are increasingly concerned that the growing list of bilateral and regional trade talks are distracting attention from the tougher and more important agriculture talks in the World Trade Organization's Doha Round.

As a result, U.S. negotiators are entering the talks with Australia with a very narrow set of objectives in the agriculture sector.  One of those targets is likely to be Australia's system of farm commodity boards.  In contrast, Australia has made the elimination of U.S. import restrictions on beef, dairy, sugar, peanuts and cotton among its top negotiating objectives.

U.S. FDI in Australia is approximately $116 billion, while Australian FDI in the U.S. is about $70 billion, according to trade officials.  The U.S. Trade Representative's (USTR's) office put the value of services provided by U.S. affiliates in Australia at $13.7 billion in 1999 and the provision of services by Australian affiliates in the U.S. at $8.1 billion.  Therefore, Washington is likely to make reform of the Australian Foreign Investment Review Board (FIRB) one of its top priorities, as well as liberalization of Australian telecommunications and audio-visual industries.
 

USTR MAKES ROUND OF NEW STAFF APPOINTMENTS

USTR Robert Zoellick has filled a host of vacancies on his staff, promoting several individuals, shifting others and bringing in two career ambassadors to handle Latin America and South Asia.  He moved John Veroneau from Assistant USTR (AUSTR) for congressional affairs to general counsel, succeeding Peter Davidson, who is returning to the private sector.  Veroneau's deputy, Matt Niemeyer, will move up to the congressional AUSTR slot.  Deputy General Counsel James Mendenhall will fill the post of AUSTR for services, investment and intellectual property, succeeding veteran Joe Papovich, who has retired after 21 years at the USTR's office.

Ambassador E. Ashley Wills, who currently represents the U.S. in Sri Lanka, will become AUSTR for South Asian Affairs.  Ambassador Ross Wilson, now serving in Azerbaijan, will become senior negotiator for the Free Trade Area of the Americas, reporting to Deputy USTR Peter Allgeier.  Wilson from 1990 to 1992 was a special assistant to Zoellick when he was then under secretary of State for economic affairs.

COMMERCE: Richard Chriss, Republican trade counsel on the Senate Finance Committee, has been named senior counsel to Commerce Under Secretary Grant Aldonas.  He starts March 17.

 ITC: Robert Carpenter has been appointed director of office of investigations.  He has been with ITC since 1983, serving as supervisory investigator since 1984.

WTO: Doha Round negotiators on trade in services reached agreement March 6 on "modalities" for assessing unilateral liberalization steps members have taken since end of Uruguay Round. Members can get "credit" for already opening their services markets as part of request-offer process in talks.

TRADE FIGURES: U.S. goods exports in December were up 3.3% from year ago to $56.8 billion, while services exports rose 11.7% to $25.1 billion.  But positive figures on export side were dwarfed by 14.9% surge in imports from last December to $101.6 billion and 13.7% jump in services imports to $21.4 billion.

JAPAN: 1997 deal that saved Japanese shipping from $100,000 fines for unfair Japanese port practices that discriminate against foreign shippers isn't working, according to Steven Blust, chairman of Federal Maritime Commission.  "Although Japan maintains that its deregulation of shipping has resulted in major improvements, including increased competition in Japanese ports, the U.S. executive agencies with maritime responsibilities and others continue to express dissatisfaction with the results of Japan's deregulation efforts," Blust said in prepared testimony for House Transportation Committee hearing March 13.  "We are hopeful that attempts to address the problem through bilateral talks will be renewed," he added.  Blust also said the commission is reviewing new Chinese regulations on maritime transport that have drawn complaints from U.S. freight forwarders.

FSC: House Ways and Means Committee Chairman Bill Thomas (R-Calif.) March 12 circulated to all House members copy of latest EU proposed list of U.S. goods that could face retaliatory tariffs if U.S. fails to bring FSC/ETI into conformity with WTO subsidy rules.  "Members need to be aware of the latest development which could affect the livelihood of Americans in every district," he told his colleagues.

CAST IRON FITTINGS: ITC March 12 voted 4-0 in final antidumping ruling that imports of non-malleable cast iron pipe fittings from China are injuring U.S. industry.

ELECTRIC STEEL: Acting on December remand from CIT, ITC split 2-2 March 11 in reaching two affirmative "sunset" review decisions on grain-oriented silicon electrical steel (GOSES).  In countervailing duty case on GOSES from Italy and antidumping case on GOSES from Italy and Japan, ITC said domestic industry would face recurrence of injury if orders were revoked.

PLATE STEEL: In another "sunset" ruling March 12, ITC voted 4-0 that revoking antidumping and countervailing duty orders on cut-to-length carbon steel plate from Belgium and Germany would likely lead to recurrence of injury to domestic industry.  Ruling came on second remand from CIT, which sent case back for additional review in December.  Original sunset decision was made in 2000 and CIT remanded case for first time last July.

RUSSIA: Separate and conflicting bills have been introduced to grant Russia permanent-normal-trade-relations status and end its treatment under Jackson-Vanik Amendment.  Sen. Richard Lugar (R-Ind.) March 10 introduced simple measure (S. 580) to remove Russia from Jackson-Vanik and grant PNTR status.  In House, group of Democrats, led by Rep. Charles Rangel (D-N.Y.) March 12 proposed H.R. 1224, which would grant PNTR and end Jackson-Vanik restrictions, but also give Congress right to vote to disapprove Russia's accession to WTO, establish mechanism to monitor human and religious rights in Russia, and maintain safeguard rules on Russian trade.

ROMANIA: Commerce March 10 declared Romania to be market economy for purpose of future antidumping investigations.  Commerce Secretary Don Evans visited Romania at end of February.

ENTERTAINMENT: Trade went "show biz" March 13 with creation of Entertainment Industry Coalition for Free Trade.  New group includes representatives from movie, recording, and television industries.

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