Volume 23 No. 14 -- April 7, 2003

IN THIS ISSUE:

* Comments Ask OFAC to Broaden Proposed Use of Warning Letters
* Commerce Ready to Consider Surge of Textiles from China
* Future Course of Doha Round Will Need Political Decisions
* WTO Will Keep Striving For Agriculture Deal By June
* U.S. Offers Broad Opening of Services Sectors in Doha Round
* Aldonas Promises Bigger Role for Puerto Rico in Regional Trade
* BRIEFS: BIS, ITC, Poultry, MTCR, Explosives USTR, State
 

COMMENTS ASK OFAC TO BROADEN PROPOSED USE OF WARNING LETTERS

Treasury's Office of Foreign Assets Control (OFAC) should revise its proposed enforcement guidelines to apply more consistent treatment to financial transactions and exports and imports of goods and services, while recognizing the growing use of electronic commerce, according to comments filed on OFAC's proposed rules for enforcing economic sanctions regulations.  Exporters want OFAC to expand and clarify the situations where it will issue a warning letter instead of taking regulatory action against a firm for minor, unintentional violations.

The guidelines, which were proposed in the Jan. 29 Federal Register, say OFAC may issue a warning in lieu of penalties for violations involving financial transfers that are based on technicalities but where there was a good faith effort at compliance and no aggravating factors, notes comments filed by the Industry Coalition on Technol-ogy Transfer (ICOTT).  Warnings may also be sent for violations involving exports and imports of goods and services valued at $500 or less.

The guidelines should be revised, ICOTT recommended, to treat goods and services trade the same as financial transactions.  Firms that import and export goods and services also should be eligible for a warning letter when violations are unintentional and compliance is in good faith.  There also should be no dollar limit, it wrote.  ICOTT also asked OFAC to revised provisions in the proposed rules to deal with e-commerce trade.  It recommended adding examples in the guidelines to indicate actions that might lead to only a warning.  "These examples should recognize that, where good faith efforts are evident from well-designed electronic filtering systems for e-commerce, OFAC should consider issuing a warning letter in lieu of civil penalties," it suggested.
 

COMMERCE READY TO CONSIDER SURGE OF TEXTILES FROM CHINA

After six months of delay, the Bush administration April 3 said it is finally ready to consider petitions the American Textile Manufacturers Institute (ATMI) filed, seeking the imposition of safeguard quotas on five categories of textiles and apparel from China.  The review of the requests will follow procedures Commerce's International Trade Administration (ITA) will publish in the Federal Register the week of April 7 as an interim final guidance (see WTTL, Nov. 25, page 4).

The administration has dragged its feet on the ATMI petitions because of an interagency debate over how to implement the textiles safeguard provisions in China's WTO accession agreement and whether to take action against China during its first year in the WTO.  The guidance, which will be open for public comment, will explain the procedures ITA will follow in reviewing such petitions, what information petitioners must submit, and the timing for reviews.

The standards for reviewing anti-surge petitions for Chinese products will more closely resemble the procedures and policies the Committee for the Implementation of Textile Agreements (CITA) follows in considering "call" requests than rules governing Section 201 safeguard petitions or antidumping and countervailing duty cases.  For instance, the policy on "standing" will allow organizations such as ATMI to petition on behalf of the apparel industry without having to represent the majority of the industry or makers of "like products."

Although ITA will begin review of the ATMI petitions under the interim guidance, there is no assurance they will be considered adequate or whether safeguard investigations will be initiated, ITA Under Secretary Grant Aldonas said.  If they are considered adequate, ITA will publish a Federal Register notice calling for public comment.  Only 15 days will be allowed for comments, the proposal will say.

The safeguard mechanism is supposed to protect U.S. industry from "market disruption" caused by a surge in imports from China, but the guidance won't include a definition of market disruption. Instead, Commerce will use the standards that CITA now applies in call determinations.  If a final decision is made that the imports are causing market disruption, the U.S. will seek consultations with Beijing to see if an agreement can be reached to limit the imports.  If no agreement can be reached, Washington could unilaterally impose quotas on the Chinese goods.  The ATMI petitions cover knit fabrics, gloves, dressing gowns, brassieres and man-made fabric luggage.
 

FUTURE COURSE OF DOHA ROUND WILL NEED POLITICAL DECISIONS

At press time April 4, the World Trade Organization's (WTO) Trade Negotiations Committee (TNC) was still deadlocked on how to get Doha Round talks back on track after negotiators failed to meet key deadlines in agriculture and other sectors.  Reports on earlier informal and bilateral talks among TNC members showed little progress, and it appears no major political decisions on the round will be made before a mini-ministerial that may be held in Egypt in a few months.

A more likely scenario won't see the direction of the talks clarified until the WTO Ministerial Meeting in Cancun in September.  WTO Director General Supachi told reporters April 4 that he expects no change in the Doha mandate that launched the round at the Cancun meeting but hopes ministers will provide direction on the work program which is supposed to bring the talks to a conclusion by the end of 2004.

Supachai said members may not set new deadlines in each of the sectoral talks because that would just create new deadlines to be missed.  He stressed the importance of making progress before May 31 in talks on non-agriculture market access and on the review of the dispute-settlement understanding.  Supachai also called for work to continue in the deadlocked talks on how to apply the agreement on Trade-Related Intellectual Property Rights (TRIPs) to compulsory licensing of drug patents in least-developed countries.  He said he hoped the TRIPs talks could continue separately from the other negotiations and have a final agreement ready for the Cancun meeting.

At the start of the TNC meetings, Supachai cautioned against putting all decisions off until the Cancun ministerial.  "Every piece of unfinished business is a potential addition to the burden on ministers at Cancun, a burden which is already considerable," he said.  "Let us not be dazzled by speculation about the prospects for success or failure at Cancun.  It is the success or failure of the round itself that should be our primary concern," he added.
 

WTO WILL KEEP STRIVING FOR AGRICULTURE DEAL BY JUNE

Having missed the March 31 deadline for agreeing on the framework for future agriculture talks in the Doha Round, WTO negotiators say they will keep trying and have set new deadlines for reach-ing an accord (see WTTL, March 31, page 2).  Since almost everyone contributed to the failure to meet the deadline, no one was surprised by the lack of progress, and there was little finger pointing about who was to blame.

Hong Kong's ambassador to the WTO, Stuart Harbinson, who chairs the farm talks, said he will resume technical consultations with members after the Easter recess, with a new deadline for an agreement on "modalities" likely to be set for June or July.   "All of us will have to reflect on our respective positions and approaches," he said.  Two efforts by Harbinson to draft a modalities paper were rejected by members.

The European Union (EU), which raised the strongest objections to the drafts, seemed sanguine in its reaction to the missed deadline.  "Missing the deadline is not the end of the world," said EU Agriculture Commissioner Franz Fischler.  "Several other WTO deadlines have been missed.  Now we will have to plough on," he added.

A joint statement by U.S. Trade Representative (USTR) Robert Zoellick and Agriculture Secretary Ann Veneman said the U.S. "is disappointed but not surprised" by the failure of the talks.  They noted that the Harbinson paper "is not completely satisfactory to the United States at this stage."

But the main problem, they stressed, is the inability of EU negotiators to make concessions until the EU agrees internally to revise its Common Agriculture Policy (CAP).   "We hope the member states of the European Union recognize that the European Commission's proposals for reform of Europe's Common Agriculture Policy would serve Europe's own interests for the future and simultaneously give the Commission more flexibility to meet the mandate of the Doha Development Agenda," they stated.  "The Commission's reforms of the CAP may not be sufficient for a good WTO result, but they are absolutely necessary," they added.

WTO Director General Supachai Panitchpakdi also expressed disappointment at the missed deadline and urged members to redouble their efforts.  "I get the strong sense from all sides of a continuing commitment to the Doha mandate," he said.  Supachai also called for work to continue in other committees "so that positive linkages with agriculture negotiations can be established."
 

U.S. OFFERS BROAD OPENING OF SERVICES SECTORS IN DOHA ROUND

The U.S. is ready to give foreign firms greater access to the American telecommunications and financial services markets as part of its broad March 31 offer in the services negotiations in the WTO Doha Round. Recognizing, however, the concerns raised by anti-globalization organizations, it made clear that the offer doesn't seek the privatization of such traditional government-owned monopolies as water, education or health care.

"Some critics of globalization have claimed falsely that an expansion of commitments under GATS [General Agreement on Trade in Services] will lead to privatization of essential services like water, primary education, or healthcare," USTR Robert Zoellick said at a news conference March 31 announcing the U.S. offer.  "In fact, the United States has not asked countries to privatize their services, nor does the GATS in any way require countries to sell public-sector services.  We are not negotiating U.S. privatization," he declared.

The wide-ranging U.S. offer is spelled out in a 120-page service-by-service list of liberalization steps Washington is willing to take, if other countries are also willing to open their markets.  In telecommunications, the U.S. is willing to allow foreign ownership of cable television networks, as well as expanding access for foreign Internet providers and satellite service firms.  In financial services, it is ready to provide more access for insurance underwriting and intermediaries.
 

ALDONAS PROMISES BIGGER ROLE FOR PUERTO RICO IN REGIONAL TRADE

The Dominican Republic will have to end discrimination against goods from Puerto Rico as one of the conditions for being considered a candidate for a free trade agreement with the U.S., Under Secretary of Commerce for International Trade Grant Aldonas told a meeting in San Juan March 31.  "Our Dominican friends are deeply interested in a free trade relationship with the United States," he noted in his prepared speech.  "In my view, we should make clear to our friends that there are a number of problems we need to resolve for Puerto Rican exporters first as a part of the price of admission to a broader and more productive relationship with the United States," he said.

Aldonas urged Puerto Rican firms to play a larger role in U.S. trade talks with Latin and Central America, including being host to U.S. talks with Central America.  He promised to help identify trade barriers Puerto Rican exports face and to work on a plan to increase the island's exports.

 * * * BRIEFS * * *

BIS: As expected, White House April 2 formally announced President Bush's intention to nominate Assistant Secretary for Export Administration James Jochum to be assistant secretary for import administration in ITA (see WTTL, March 31, page 4).  Industry sources say there is no "short list" yet of replacements for Jochum's BIS post, and the White House is seeking suggestions for potential candidates from Congress, business and inside administration.

ITC: After moving quickly through Senate Finance Committee, Senate confirmation of Charlotte Lane and Daniel Pearson to be ITC commissioners has been blocked.  Unnamed senator reportedly has placed "hold" on Senate vote on their confirmations.  While senator placing hold has not been identified, Sen. Jay Rockefeller (D-W.Va.) has publicly criticized naming of Pearson (see WTTL, March 10, page 4).

POULTRY: In separate announcements April 4, USDA said it has reached agreements with Russia and Ukraine on veterinary rules that will allow for resumption of U.S. poultry exports to those nations.

EXPLOSIVES: BIS April 3 published promised rules expanding export controls on equipment to detect explosives, explosive residues and detonators (see WTTL, March 10, page 4).  Rules impose Regional Stability (RS) controls on these items plus their software and technology while also clarifying Anti-Terrorism (AT) controls.  Regulation would allow continued use of License Exceptions RSL, TSU, and GOV.  Notice explains how BIS is sharing AT licensing jurisdiction with OFAC.

UNVERIFIED LIST: Changes to list in March 28 Federal Register include addition of Brilliant Intervest of Kuala Lumpur, Malaysia, and deletion of Xian XR Aerocomponents of Xian, China.

USTR: President Bush intends to nominate Associate USTR Josette Shiner to replace Deputy USTR Jon Huntsman Jr., who is leaving agency to return to Utah to head Huntsman Family Holdings.  Shiner, who has handled policy and communications for USTR Robert Zoellick since start of Bush administration, will hold rank of ambassador.  She is likely to pick up Huntsman's responsibilities for Asia and Africa.

STATE: Department April 2 published notice denying defense export privileges to Pakistani and North Korean entities for their role in illegal missile-related transfers.  It named Pakistan's Khan Research Laboratories and North Korea's Changgwang Sinyong Corp.

MTCR: BIS in April 2 Federal Register revised missile-technology controls to bring MTCR Annex into conformity with styles used for Wassenaar list.  Notice adds new MTCR members Czech Republic, Korea, Poland, Turkey and Ukraine to Country Group A:2.

WHITENING AGENTS: Ciba Specialty Chemicals March 28 filed antidumping and countervailing duty complaints at ITA and ITC against imports of whitening agents from China, India and Germany.

BALL BEARINGS: In final determination April 3, ITC voted 4-0 that imports of dumped ball bearings from China are not injuring U.S. industry.

SINGAPORE: Labor provisions in U.S.-Singapore FTA have "serious flaw," claims April 1 report from Carnegie Endowment for International Peace.  It says accord doesn't apply to workers and labor rules on Indonesian islands of Bintan and Batam, which will be allowed to carry on production sharing activities with Singapore entities under "integrated sourcing initiative" in deal.

TRADE BARRIERS: 2003 National Trade Estimate of Foreign Trade Barriers, released April 1, puts emphasis on non-tariff barriers (NTBs) to trade, including sanitary and phytosanitary standards.  In 422 pages it details restrictions in 56 trading partners, including countries now negotiating FTAs with U.S.

TELECOMMUNICATIONS: Annual Section 1377 report April 2 on foreign restriction in telecommunications sector didn't spark any formal trade complaints, but identified special market access problems caused by high network connection fees and restrictions on access to leased lines.

Copyright 2003 by Gilston Communications Group.  Reproduction or retransmission in any form is prohibited. Washington Tariff & Trade Letter is published weekly 50 times a year.  E-mail: Info@WTTLonline.com