Volume 23 No. 18 -- May 5, 2003

IN THIS ISSUE:

* Post 9/11 Tip Leads to Export Investigation, Fine and Prison
* Vietnamese Letter May Have Swayed Textile Deal
* Closer Ties Between Hong Kong and China Could Affect Licenses
* Government Opposes Appeal for Interest on Harbor Tax
* Customs Plans to Expand FAST Program to Mexican Border
* Ministers Trying to Get Doha Round Back on Track
* BRIEFS:  Services, Cuba, Andes, Antidumping, Hangers, Customs
 

POST 9/11 TIP LEADS TO EXPORT INVESTIGATION, FINE AND PRISON

An anonymous letter, sent by someone who was upset by the terrorist attacks of Sept. 11, 2001, prompted a multi-agency investigation that led to criminal charges against Omega Engineering of Stamford, Conn., and its chief financial officer, Ralph Michel.  In the Hartford U.S. district court April 29, Omega pled guilty to the charges and agreed to pay a $313,000 criminal fine.  Michel, who also pled guilty, will pay a $50,000 fine and accept 10-16 months of imprisonment.

The anonymous letter alerted Commerce and Customs to Omega's 1997 shipment of nuclear-related laboratory equipment to Pakistan after the company had its export license application denied by the then-Bureau of Export Administration.  After the license was denied, Omega exported the goods to its German subsidiary, Newport GmbH., which then shipped the items to Pakistan.

The application had raised the concern of U.S. embassy officials in Pakistan who had conducted a pre-shipment check of the proposed export.  The equipment was to go to the National Development Centre, which is controlled by the Pakistani Defense Ministry.  License reviewers rejected the application because they were worried the equipment could be used to develop nuclear explosives or be diverted to un-safeguarded facilities were nuclear fuel cycle activities were conducted.

"After the denial, Michel, who voiced vehement displeasure with the employees who filed the license application in the first instance, sought reconsideration of the denial and even traveled to Washington to persuade Commerce to authorized the shipment," a Justice press statement reported.  "However, Commerce rejected Michel's appeal and affirmed the denial order.  Notwithstanding the denial, Michel took it upon himself to ship the commodities to Newport," the department said.  Later investigation found the goods were sent to Pakistan.
 

VIETNAMESE THREAT MAY HAVE SWAYED TEXTILE DEAL

A thinly veiled warning from Hanoi about possible retaliation against U.S. exporters may have helped push Bush administration officials to conclude the bilateral textile agreement with Vietnam April 25, despite Commerce objections and protests from the U.S. textile industry (see WTTL, April 28, page 3).  The letter from Vietnamese Deputy Prime Minister Vu Khoan to Commerce Secretary Donald Evans and U.S. Trade Representative (USTR) Robert Zoellick said the failure to reach an accord could cause "serious damage to U.S. business in Vietnam."

While some sources claim the letter wasn't a threat but only an indication of Hanoi's concern about U.S. refusal to sign the deal, it reflected the frustration Vietnam was feeling about Washington's continuing addition of conditions and demands in the talks.  Other sources say the implied target of the letter were such firms as Boeing and New York Life, which have a major stake in Vietnamese trade.

Vu Khoan, who negotiated the U.S.-Vietnam Bilateral Trade Agreement, reportedly saw the blocked textile accord as a pull-back from the spirit of that pact.  He told the U.S. officials Vietnam had entered trade talks with the U.S. to provide "equivalent and mutual benefits" to both countries.  His letter said the failure to initial the agreement as tentatively reached would have "a serious impact on the trust" Vietnam put in the U.S.

 The official's letter was sent early on April 25, when the Vietnamese still weren't sure a deal would get signed that day.  USTR officials had invited the Vietnamese negotiators to come to their offices at 8:00 PM to finish the last details of the pact and to sign it.  U.S. officials reportedly were still calling members of Congress to inform them about the deal and weren't ready to sign when the Vietnamese arrived.  The Vietnamese were told to go home and come back on Saturday.  After they left the USTR's offices, they received a call to come back at 10:00 PM, at which time the deal was finally signed.  Announcement of deal was put off until Saturday.
 

CLOSER TIES BETWEEN HONG KONG AND CHINA COULD AFFECT LICENSES

The favorable treatment the Bureau of Industry & Security (BIS) gives to export licenses for Hong Kong could be threatened if increased economic integration between Hong Kong and China reduces the effectiveness of the Special Administrative Region's export control regime, warned BIS Under Secretary Kenneth Juster April 28.  "To maintain this favorable and preferential status in the U.S. export control system, Hong Kong must continue to ensure that the integrity and autonomy of its customs territory is not compromised and that its actions do not undermine the reality or the perception that Hong Kong is separate from Mainland China," he said.

While praising Hong Kong's current export controls and cooperation with BIS, Juster noted the challenge it will face as it plans for greater economic integration with China, streamlines its border controls and co-locates some customs facilities in China.  "Any weakening of Hong Kong's autonomy would cast doubt on the rationale for its special status under the U.S. export control system," he said.

GOVERNMENT OPPOSES APPEAL FOR INTEREST ON HARBOR TAXES

Some 10,000 exporters who paid the unconstitutional Harbor Maintenance Tax (HMT) are not entitled to receive more than $700 million in interest on the payments they made, the U.S. Solicitor General argued in a brief opposing a petition for a writ of certiorari filed with the Supreme Court, seeking a refund of the interest.  The government's April 23 brief responded to a petition by U.S. Shoe, an original litigant in the HMT legal fight (see WTTL, April 14, page 4).

The U.S. Shoe v. U.S. case, which is supported by the steering committee of law firms and companies that have challenged the HMT, is the lead suit among four different requests to the Supreme Court for a review of a decision by the U.S. Court of Appeals for the Federal Circuit, which denied the right of most HMT-payers to get interest on their refunds.  So far, in the HMT battle, only participants in the Swisher Case have been receiving interest on refunded fees, because they followed their lawyers' advice to file timely protests of the payments under Customs rules.

The government's brief rejects U.S. Shoe's arguments that interest on the HMT fees could be justified under several different statutory and constitutional provisions, including Customs and internal revenue tax rules on interest due on overpayments, as well as under the Constitution's Export Clause and Takings Clause.  Lawyers for the Solicitor General and Justice emphasized the legal doctrine that the government's sovereign immunity bars the payment of interest unless Congress has explicitly provided for it by statute.

In the case of the HMT, the government claims the tax law does not apply and Customs law may not apply to exporters.  "Under its plain text, this statute authorizes interest only in cases in which an ‘importer of record' is seeking to recovera duty or other customs charge paid in connection with the ‘liquidation or reliquidation' of an ‘entry' of goods," the government argued.  It rebutted U.S. Shoe's contention that the Con-stitution's Export Clause supports interest payments, pointing to previous Supreme Court rulings which said only the Takings Clause could be used to provide interest.

The brief noted other High Court decisions, however, that have said interest under the Takings Clause is only available when a claimant is entitled to compensation.  "Only in such cases does the award of compensation included interest," it stated.  "The court of appeals correctly explained that the requirement that exporters, importers and domestic shippers pay a fee for each use of port facilities does not constitute a taking of private property," the government declared.
 

CUSTOMS PLANS TO EXTEND FAST PROGRAM TO MEXICAN BORDER

By the end of 2003, Customs is planning to launch a pilot program that could extend to the Mexican border a process similar to the Free and Secure Trade (FAST) program that speeds the clearance of pre-screened truck drivers and carriers across the Canadian border.  Under the current program, drivers, carriers and importers who volunteer for personal background investigations and registration get special expedited treatment entering the U.S. from Canada.  Fast is now operating at six northern border crossings, and Customs plans to expand the program to six more crossing this year, according to Jay Ahern, Customs assistant commissioner for field operations.

Ahern, who now oversees all field operations of the border agencies consolidated into the new Department of Homeland Security, claims the successful integration of all these agencies in just 60 days helped prevent delays at the border when the national security alert level was raised to orange from yellow in March.  The borders stayed open "because we have invested substantially in the programs we have put in place," he told the Washington International Trade Association April 29.

Among the programs Customs has put in place to speed the entry of travelers are the Nexus program on the Canadian border and the Sentry program on the Mexican border  There are now 40,000 frequent travelers registered in the Nexus program, he reported.  Customs is still in talks with Canada and Mexico on proposals to move into those countries Customs pre-clearance operations for goods destined for entry into the U.S.  Progress in those talks has been slowed by sovereignty and logistics issues, Ahern admitted.  "There is no firm agreement yet," he reported.

Ahern confirmed that Customs plans to propose advance notifications rules on June 1 for imports and exports moving via air, rail, sea and truck, and emphasized that the coming regulations won't look like the "straw man" papers Customs released in January.  "As it looks now, we are very close to some of the recommendations from the trade and especially the COAC [Treasury's Advisory Committee on Commercial Operations]," he said (see WTTL, April 28, page 3).
 

MINISTERS TRYING TO GET DOHA ROUND BACK ON TRACK

Trade ministers want to narrow the scope of decisions they will have to make at the World Trade Organization's (WTO) ministerial meeting in Cancun in September, but the list of topics they have identified for action are the toughest ones they face.  At the April 28-30 annual meeting of the Organization for Economic Cooperation and Development (OECD), trade officials agreed the Cancun meeting should focus on five or six areas where political-level decisions are needed over the coming months to keep the Doha Round on track.

The Cancun agenda "will be broad but the issues requiring ministerial attention must be kept to a minimum, if the conference is to be productive," said Luzius Wasescha, chair of the OECD trade committee.  The key areas of focus will be market access in agriculture, industrial goods and services; helping developing countries benefit from trade accords; WTO dispute settlement; the so-call Singapore agenda on competition, investment and government procurement; as well as trade and the environment.

The OECD meeting is the first of a series of political-level gatherings that will be used to push for a narrowing of the differences in these areas.  A WTO mini-ministerial in Sharm El Shaq, Egypt,  the Asia-Pacific Economic Cooperation (APEC) forum and a U.S.-EU Summit, all in June, are likely to be key meetings where efforts will be made to bridge differences before Cancun and to keep the Doha Round from collapsing.

"Our primary purpose has been to try to use this meeting and one that will follow this afternoon to try to gain some momentum for the Doha Development Agenda, so we can increase the likelihood of a successful meeting in Cancun," said U.S. Trade Representative (USTR) Robert Zoellick.  He said he and European Union (EU) Trade Commissioner Pascal Lamy are giving special attention to coming up with a framework by the end of May for cutting industrial tariffs to give talks a boost.

Rather than across-the-board elimination of all tariffs, which the U.S. still supports, Zoellick said the tariff-cutting plan may be divided into four sectors, including formula reductions for some goods, zero-for-zero tariffs in others, and additional cuts in specific sectors, while maintaining special and differential treatment for developing countries.  But agriculture talks remain the most difficult task facing negotiators.  "This is an area where progress is not what we wished," he said.

 * * * BRIEFS * * *

SERVICES: In effort to win competition with U.S. for developing world support in Doha Round, EU offered to liberalize rules for temporary entry of foreign workers as part of offer it submitted April 29 in round's services negotiations.  EU continues to keep audio-visual services off table.

CUBA: Treasury's Office of Foreign Assets Control April 29 posted Comprehensive Guide-lines for License Applications to Engage in Travel-Related Transactions Involving Cuba.  Advice spells out how agency will apply rules allowing 12 categories of travel to Cuba.

ANDES: First USTR report April 30 under Andean Trade Preferences Act says countries of region are meeting criteria for eligibility but there are several areas they need to continue to address. Report claims law is achieving its goals, although trade with region grew slowly in 2002 due to lapse of program.

ANTIDUMPING: Number of antidumping cases filed by WTO members in second half of 2002 declined sharply from same period year earlier, WTO reports.  In six-month period, 17 members filed 149 com-plaints against exports from 43 countries.  In same months in 2001, 23 members filed 210 antidumping petitions.  India filed most cases (55), followed by Thailand with 14, while U.S. and Australia filed 13 each.  Chinese exports were target of most complaints (27), which was less than 29 in year earlier period.

HANGERS: President Bush's rejection of Section 421 request for import tariffs on steel wire garment hangers from China was published in April 29 Federal Register.  President said invoking anti-surge protection would affect U.S. industry "unevenly" since some firms are adjusting to competition by import-ing, consolidating and modernizing.  Higher tariffs would also hurt family-owned dry cleaners, he said.

CUSTOMS: U.S. has taken several reservations to World Customs Organization's Protocol of Amendment to International (Kyoto) Convention on the Simplification and Harmonization of Customs Procedures, President Bush told Congress April 30 in request for Senate ratification of remaining portions of protocol.  With reservations, ratification of accord won't require any change in current Customs laws.

SPECIAL 301: Ukraine was only country USTR's office identified as Priority Foreign Country in annual Special 301 report May 1 on nations not providing adequate protection of intellectual property rights.  Countries on Priority Watch List were Argentina, Bahamas, Brazil, EU, India, Indonesia, Lebanon, Philippines, Poland, Russia and Taiwan.  China and Paraguay are being monitored separately.

TABD: U.S. and EU officials April 28 restated their support for dormant Trans-Atlantic Business Dialogue (TABD), transatlantic business-to-business effort to support trade reform.  TABD will be "relaunched" June 25 in Washington during annual EU-US Summit.

FSC: Ways and Means Trade subcommittee chairman Phil Crane (R-Ill.) and Ranking Member Charles Rangel (D-N.Y.) April 29 reported that their bill (H.R. 1769) to replace current FSC/ETI tax law has won support of Caterpillar, Boeing, Microsoft, Applied Materials, United Technologies and AFL-CIO.  They issued "Dear Colleague" letter seeking additional co-sponsors (see WTTL, April 14, page 2).

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