Volume 23 No. 12 -- March 24, 2003

IN THIS ISSUE:

* Most Voluntary Self Disclosures Avoid BIS Sanctions
* Customs May Significantly Cut Advance Notice Proposals
* Separate Export Controls Bills Will Emerge in Senate
* Aldonas Says Lumber Deal Is Up to U.S., Canadian Industries
* Briefs: Steel, WTO, Export Enforcement, Textiles, CVD Rules
 

MOST VOLUNTARY SELF DISCLOSURES AVOID BIS SANCTIONS

Over 97% of the export control or antiboycott violations voluntarily disclosed to the Bureau of Industry and Security (BIS) each year avoid administrative sanctions and may only get a warning letter, according to Mark Menefee, BIS deputy assistant secretary for export enforcement.  "We value voluntary self disclosures.  We view it as a very significant mitigating factor in whether or not to proceed with penalties," he told a conference on global export controls March 18.

"We annually issue 230 to 250 warning letters to companies," he reported.  "A warning letter is a nonpublic document that basically says, ‘We've investigated this matter; we believe you violated the law; we are going to close this without seeking any penalties; we will keep this record for ever; and don't do it again'," Menefee explained.  In some cases, BIS may decided no violation occurred.  "If we find you didn't violate the law, you don't even get a warning letter," he said.

In deciding whether a self-disclosure should be handled with a warning letter or lead to an administrative penalty, BIS considers a matrix of factors, Menefee noted.  "If it is low-level technology and it is self disclosed, that is easy to make a warning letter," he said.  "If it is very high technology, you're not going to get a warning letter, especially if the technology is threatening to the national security.  We can't let that one go," Menefee continued.  The key factors are technology level, end user and the country.  Those factors don't apply to antiboycott cases, which will get an "automatic reduction in penalty," if they are self-disclosed, he stated.

While the greatest benefit of self-disclosure comes when a firm reports the violation before BIS has discovered it, self-disclosure after the fact can still be a mitigating factor, Menefee stated.  "If we have already opened a case and you come in to see me, it's too late. You'll still get credit, but you're not going to get self-disclosure credit," he said.  "Then all you can do is cooperate and hope for the best," the BIS official said.

Although self-disclosure is not legally required, learning about a violation and not reporting it could lead to further trouble if the action involves ongoing trade.  Such behavior may trigger other violations of the law. "If you take further steps in furtherance of a violation or sale, with knowledge that it got there illegally, then you have two violations," Menefee warned..
 

CUSTOMS MAY SIGNIFICANTLY CUT ADVANCE NOTICE PROPOSALS

Officials of what is now the Bureau of Customs and Border Protection in the Department of Homeland Security have signaled privately that they may cut significantly the amount of advance notice that must be given for imports and exports crossing the U.S. border by rail, truck and air.  The move away from the four, eight, 12 and 24 hours in advance proposals that were in the "straw man" papers Customs released in January comes in response to industry comments on the proposals and particularly to the detailed recommendations submitted March 14 by Treasury's Advisory Committee on Commercial Operations (COAC) (see WTTL, March 3, page 1).

Rather than hours in advance, COAC urged Customs to require filings just minutes in advance for some cargoes.  While Customs officials have indicated that some of these recommendations would give them far too little time to process the infor-mation, they reportedly are now talking about moving toward the one-hour time frame for certain imports.  In releasing the straw man proposals, Customs officials admitted they were extreme because they wanted to stir up industry reaction.

COAC emphasized that any final notification rules should closely adhere to legislative require-ments to consider current trade practices, the competitive factors among various transportation modes and the need to protect the confidentiality of submitted information.  It called for Customs to use existing data entry systems, which all should be merged into the Automated Commercial Environment (ACE) eventually, and to provide a single window for the submission of information going to all federal agencies.  In addition, it recommended keeping filling exceptions for shipments under $2,500 and those going to Canada, as well as the Option 4 post-departure filing program.

For rail shipments, COAC recommended notification four hours in advance of arrival at the border for inbound carload traffic and no more than one hour ahead of arrival at the border for outbound cargo.  For intermodal ocean containers from Canada from Canadian seaports, it suggested filing four hours before arrival at the border.  This compares to the Customs straw man proposal, which called for notification 24-hours in advance of departure from foreign point of origin for inbound goods on rail and eight hours in advance of lading for outbound cargo.

COAC's proposals for inbound air cargo doesn't differentiate between express carriers and regular air transportation, reflecting concerns of airlines that separate rules might discriminate against them.  "All carriers and participating freight forwarders will begin submitting cargo data as early as possible after departure of the aircraft, with final declaration not later than one hour prior to actual arrival of the aircraft at the gate," the committee recommended.

For flights from Canada and Mexico or those under two hours, cargo would be held in custody of air carrier on the aircraft or at the gate for 30 minutes after transmission of cargo data.  For outbound air shipments, COAC urged Customs to maintain current reporting rules under the Automated Export System (AES), including Option 4.   The Customs proposal for inbound flights would require 12 hours advance notice before lading for air shipments and eight hours before lading for air couriers.  It would have required outbound AES submissions 24 hour prior to lading.

The Customs proposal for trucking was the most troubling for industry, especially for firms doing cross-border production in Mexico and Canada.  The agency had floated the idea of requiring notice four hours before lading of imports and 24 hours before lading for exports.  COAC proposed a multi-tiered approach based on the participation of the carrier in various security enhancement programs, such as BRASS, PAPS, FAST or C-TPAT.  Depending on the program, inbound notice should be required 15 or 30 minutes before arrival at the border, COAC said.  For exports, the current notification system should continue until ACE is implemented, it proposed.
 

SEPARATE EXPORT CONTROL BILLS WILL EMERGE IN SENATE

Two separate and conflicting bills to renew the Export Administration Act (EAA) are likely to emerge in the Senate, with one measure backed by the Bush administration and the other by a group of senators who are calling for tougher export controls.  One bill is being drafted by the staff of Sen. Mike Enzi (R-Wyo.), who cosponsored EAA legislation (S. 149) in 2001 with Sen. Phil Gramm (R-Texas) (see WTTL, Dec. 16, page 1).  The other is being prepared by the staffs of Sen. Jon Kyl (R-Ariz.) and Senate Banking Committee Chairman Richard Shelby (R-Ala.).

As chairman of the committee with jurisdiction over EAA, Shelby will play a pivotal role in any export control bill that comes out of the committee and probably the full Senate.  His alliance with Kyl and three other senators who favor tougher controls does not bode well for the chances that a final EAA measure will be favorable to the exporting community.  The opposing bills also could mean that EAA legislation will end up stymied again as it has been since 1994.  The two bills will be handled at the full committee level, so Shelby can control the process, one source reported.

The shape of the Shelby-Kyl bill was previewed in a letter the two lawmakers -- along with Sens. Russell Feingold (D-Wis.), John McCain (R-Ariz.) and Jeff Sessions (R-Ala.) --  sent to White House National Security Advisor Condoleezza Rice March 7.  They are also basing their planned legislation on the version of EAA that came out of the House Armed Services Committee (HASC) in 2002.  Kyl has already asked the Senate Legislative Counsel's office to prepare a draft piece of legislation based on the ideas in the letter and the HASC bill.

The main goal of the legislation would be to give State and Defense veto power over any export licensing decisions and to diminish Commerce's ability to direct the course of licensing decisions.  To that end, the five senators want: licensing decisions to require unanimous approval of all agencies that review the license, chairmanship of the interagency Operating Committee to shift to Defense from BIS, deadlines for reviews more easily extended and all commodity classification decisions to be made with interagency approval.  They also want to make it harder to decontrol products and technology, while imposing tougher penalties for foreign buyers and customers to block pre- and post-licensing checks and strengthening "deemed export" requirements.

Although the five senators renewed the old complaint about the role of BIS export licensing and its alleged pro-business bias because it is in Commerce, congressional sources recognize there is little chance that the White House or Congress would support moving it to State, Defense or an independent agency.  "That may be on a wish list, but it is not a realistic goal," one source said.
 

ALDONAS SAYS LUMBER DEAL IS UP TO U.S., CANADIAN INDUSTRIES

Commerce Under Secretary for International Trade Grant Aldonas appears to be getting frustrated with both U.S. and Canadian lumber industries for their failure to reach a compromise on an interim agreement that would allow for the settlement of the bilateral dispute over softwood lumber.  Both sides "need to go back and do some self-reflection," he told reporters March 19 (see WTTL, March 3, page 3).  Yet Aldonas, who was out on sick leave for much of early March, doesn't seem ready to bang heads together to force the two industries to reach a compromise.

Aldonas claimed very good progress has been made in the drafting of a policy bulletin that would explain how Commerce would reach a "changed circumstances" decision in the countervailing duty (CVD) order on Canadian lumber.  "The harder issue, it is turning out, is the interim agreement between the industries," he stated.

The main dividing point is the level of the proposed export tax that Canada would have to impose during the transition period before provincial stumpage fees for lumber reach price levels the U.S. considers fair value.  Under the expected scheme, the interim tax would be imposed on a sliding scale, decreasing as lumber prices rise and increasing when they fall.  The disagreement entails both the taxes at both ends of that spectrum and top and bottom lumber prices.

The industries "have very different expectations of where prices will go," Aldonas said.  Although U.S. industry sources say the U.S. Coalition for Fair Lumber Imports has "dramatically cut" its proposed top tax level half way to the top level offered by some Canadians, bringing it below 25%, producers in Ontario and Quebec say offer is still too high.  The proposal, however, may be more acceptable to British Columbia.

Aldonas claimed many of the issues holding up the policy bulletin have been resolved with most of the Canadian provinces except Quebec.  "With Quebec, things they previously said they were inclined to do started to come off the table, so that slowed the policy paper," he explained.  When the bulletin is published, it will still be a proposal with a 30-day comment period.  The Coalition has written to Aldonas urging him not to publish the bulletin until the interim deal is reach.  The U.S. industry has argued that the bulletin should be part of a complete package.  Publication of the bulletin without a deal in advance might reduce the pressure on the Canadian industry to reach an agreement, one U.S. source suggested.

Aldonas indicated that he has not made a decision on the Coalition's request.  He noted the significant changes British Columbia and Ontario have proposed to make in their lumber pricing systems.  These changes would move those provinces closer to what the U.S. industry has claimed it has always wanted, he said.  "We ought to be willing, in my opinion, to meet those guys half way," Aldonas said.  ‘If that means publishing the paper in advance of an interim agreement, that may be to our advantage," he stated.

Meanwhile, the law firm of Baker & Hostetler March 19 file a Freedom of Information Act (FoIA) law suit in D.C. U.S. District Court seeking a summary judgment order requiring the International Trade Administration (ITA) to release all documents and memos developed after the agency supposedly reached its final antidumping and CVD decisions on March 21, 2002.  ITA rejected the firm's original FoIA request on the grounds the material was part of internal "deliberative process."  Suit claims information produced "after" the decision can't be part of deliberation, and, if it is, then it constitutes an illegal post-hoc rationalization of agency's decisions.
 

 * * * BRIEFS * * *

STEEL: USTR's office and Commerce March 21 granted more exclusions from Section 201 steel import tariffs, approving 295 requests and denying 366.   Of approvals, 208 weren't opposed by U.S. industry.  Many of rejections had been rejected before, Commerce officials noted.  Exclusions were granted for 727 products last year.  On March 20, previously scheduled reductions in Section 201 tariffs also went into effect.  Duties dropped from top level of 30% to top rate of 24%, while other tariffs declined to 12% to 7%.  Separately, House Ways and Means Committee Chairman Bill Thomas (R-Calif.) March 18 asked ITC to conduct Section 332 study into effect of 201 safeguard action on steel consuming industries.

WTO AGRICULTURE: New draft, released March 18 by Stuart Harbinson, chairman of WTO agriculture talks, for addressing "modalities" in negotiations in Doha Round failed to get more enthusiasm than initial draft (see WTTL, Feb. 17, page 4).  "We do not see this draft as bringing the WTO members closer," said EU Trade Commissioner Pascal Lamy and Agriculture Commissioner Franz Fischler in joint statement.  "Harbinson 2 is largely identical to the first draft.  Severe imbalances remain," they said.  Senate Finance Committee Chairman Chuck Grassley (R-Iowa) gave little stronger praise to Harbinson's effort but also found faults.  He complained that market access proposals won't help U.S. farmers, while phase-out period for cuts in export subsidies is too long and reductions in domestic support don't go far enough.

WTO RULES: U.S. March 19 submitted two papers to Doha Round negotiations on trade rules, calling for stricter controls on trade-distorting subsidies, loans, and provision of natural resources, as well as special rules for cyclical and seasonal goods.  Paper urged new rules to address persistent dumping and subsidies.

WTO FISHERIES: In another paper submitted to WTO negotiating group on rules, USTR's office March 19 identified issues to be considered in subsidies that are causing overfishing of world fisheries.

EXPORT ENFORCEMENT: Randolph Engineering of Randolph, Mass., agreed to pay $12,000 civil fine to settle BIS charges that it attempted to export sunglasses to Iran without license and filing false SED.

TEXTILES: Customs in March 21 Federal Register issued new preference rules for knit to shape apparel and other goods from Africa and Caribbean to comply with changes ordered in 2002 Trade Act.

COUNTERVAILING DUTIES: In response to WTO panel ruling which found current methodology for calculating CVD levels for government-owned industries that have been privatized to be GATT-illegal, ITA in March 21 Federal Register proposed amendment to trade regulations to meet panel objections.

PC STRAND: ITC March 17 on 4-0 vote made preliminary ruling that U.S. industry be suffering injury due to imports of allegedly subsidized imports of prestressed concrete steel wire strand from India and allegedly dumped imports from Brazil, India, Korea, Mexico, and Thailand.

STANDARDS: Commerce March 19 launched new initiative to help improve U.S. representation in international standards setting activities and to reduce use of standards as nontariff trade barriers.  ITA will assign staffer to be liaison with industry on standards' issues.

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