Volume 23 No. 31 -- August 4, 2003

 IN THIS ISSUE:

* Cautious Note Raised About Voluntary Disclosures
* Softwood Lumber Deal Slips Away Over Numbers, Goals
* U.S. Losing Disputes at WTO, But Experts Say Rulings Are Fair
* Clearing Backlog Is Boosting Average Licensing Times
* Hopes For WTO Cancun Meeting Growing Dimmer
* Multilateral Export Regimes Move Toward Tighter Controls
* BRIEFS: BIS, Colombia, Export Enforcement, Antiboycott
 

CAUTIOUS NOTE RAISED ABOUT VOLUNTARY DISCLOSURES

Exporters need to be careful when self-disclosing export control violations to the Bureau of Industry & Security (BIS), despite agency claims that such reports mostly avoid legal action, warns John Liebman, an attorney with McKenna, Long & Aldridge.  Liebman, who is a member of the President's Export Council's subcommittee on export administration (PECSEA), told the group's July 31 meeting that his experience with BIS on self-disclosures has not been positive.

Privately, BIS enforcement staffers say there is some validity in Liebman's complaints.  The treatment of such confessions is up to BIS management, they say.

Liebman particularly noted his experience with BIS management's Administrative Case Review Board (ACRB), which was set up earlier this year to review enforcement actions.  "Our early experience with the ACRB process, superimposed on a voluntary disclosure, was of such a nature that I can tell you that we are very cautious in recommending to our clients that they pursue voluntary disclosure to the Commerce Department," he told the PECSEA.

He noted that the treatment of more frequent voluntary disclosures to State is much better.  Liebman urged BIS to deal with this issue in the draft penalty guidelines it is circulating for comment.

The process needs more transparency and predictability, he suggested.  "We have for years urged clients to be as transparent with the government as possible and to enter into the kind of regulatory dialogue with compliance folks that would help their own compliance posture as well as the government's understanding of the problems they have to deal with," he stated.

"But as a result of our early experience with the ACRB, we're very hesitant to recommend such transparency coming out of industry," Liebman said.  "We get published for being open and candid with the government," he asserted.  "Contrary to the folklore that seems to circulate about volun-tary disclosures, which is that 98% of them or whatever the number is, end up with a warning, to come up with results that are so disproportionately distant from that image or impression is unfortunate and should be addressed as soon as possible," Liebman said.
 

SOFTWOOD LUMBER DEAL SLIPS AWAY OVER NUMBERS, GOALS

The U.S.-Canada dispute over softwood lumber has gotten to the point where the sides can't even agree over what they disagree about.  A proposal developed by trade officials from both countries for an interim agreement to lift current antidumping and countervailing duty orders on Canadian lumber was rejected by the U.S. industry July 30.  Representatives of the U.S. Coalition for Fair Lumber Imports contend the numbers in the proposal wouldn't adequately limit imports of Canadian lumber.  But Canadian sources claim the U.S. industry doesn't care about numbers but just wants a managed-trade agreement that will raise prices and restrict Canadian imports.

The proposal would have created a tariff-rate quota (TRQ) that would have allowed Canadian lumber to enter the U.S. with no additional export fees until Canada's share of the U.S. market reached 29.99%.  Fees of $50 per thousand board feet (tbf) would be imposed when imports were 30-30.99% of the market; $75 per tbf at 31-32.5% of the market and $125 per tbf when they exceed 32.5% of the market.  The proposal called for splitting between the U.S. and Canadian industries the antidumping and CVD deposits that have been paid since trade restrictions were imposed.

Coalition sources claim the proposed fees would be equivalent to an average tariff of only 1.6% on imports up to 32.5% of the market.  The Coalition has offered a counter-proposal that would allow fee-free imports up to 28% of the U.S. market and impose a $50 per tbf fee when Canadian imports exceed 28% of the market and $125 when they go over 30.5%.

In addition to differences over the market share and fee structure, U.S. and Canadian industries also disagree over the treatment of lumber from Canada's Maritime Provinces, the length of the interim agreement and when provinces will be able to get "changed circumstances" decisions from Commerce and when their lumber will no longer be subject to the agreement or to antidumping and CVD orders.

"Unfortunately, discussions on an interim agreement for the softwood lumber dispute ended without resolution," said Commerce Under Secretary Grant Aldonas in a July 31 statement.  "We will continue to press forward," he said.  A Canadian government source complained that U.S. lumber producers "are looking for a managed trade deal.  Neither country wants to go back to that."  He said the failure of the Coalition to accept a proposal the U.S. government was willing to support was "not very encouraging."
 

U.S. LOSING DISPUTES AT WTO, BUT EXPERTS SAY RULINGS ARE FAIR

Although U.S. antidumping, countervailing duty and safeguard actions have been hit with more complaints at the World Trade Organization (WTO) than any other country and the U.S. has lost more, it also is the biggest user of these trade laws, the General Accounting Office (GAO) concluded in report released July 30.  The WTO rulings have primarily objected to the way U.S. trade agencies administer the laws, but generally have upheld the laws themselves, the GAO found.

"Experts with markedly divergent views on other issues were in near unanimous agreement that the United States generally was being treated about the same as other WTO members in trade remedy cases," said the GAO, the investigatory arm of Congress.  Some experts said the U.S. loses so many cases because "members only bring trade remedy actions in the WTO that they are confident they can win," it added.

CLEARING BACKLOG IS BOOSTING AVERAGE LICENSING TIMES

BIS officials are preparing the export community to expect a sharp jump in the average export licensing review times for the third quarter of the fiscal year that ends Sept. 30.  The longer times, which will see the average times surge to around 50 days from 42 days during the first two quarters, is due to the clean up of long-pending cases (see WTTL, May 26, page 1).  As these cases are resolved, their long waiting periods get thrown into the agency's statistics, BISers explain.

Many of these cases have been on hold for over a year.  Although most were returned without action (RWA), they get off the BIS books.

"A number of cases are being RWA'd," BIS Director of Exporter Services Eileen Albanese told the President's Export Council's subcommittee on export administration (PECSEA) July 31. "A lot of those cases were entities that were possibly subject to sanctions under the India-Pakistan sanctions, but because of lack of detailed information about either the commodity or the actual activities of the consignee, we weren't able to provide an answer," she explained.

"In all those cases, the exporter was aware that we were holding the case in order to try to resolve the issue," she said.  "We have given exporters guidance when we RWA'd the application.  In most case, that guidance has been that we reviewed the commodity and the consignee and no license is required based upon the information that was presented," Albanese told the PECSEA.

Also contributing to the slowdown in processing times has been an increase in the percentage of cases that require interagency referral, she reported.  Referral is now required for 91% of licenses compared to 82% a few years ago.  The increase is due to several agencies, particularly the Energy Department, reclaiming the delegations of authority they had given Commerce to approve licenses without referral.

The number of licenses being submitted is also growing compared to recent years when filings declined or were flat.  If the current pace continues, BIS will receive over 12,000 licenses for the fiscal year ending Sept. 30, a 1,000 increase from 2002.
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Albanese said BIS is beginning a complete redesign of its automated licensing system, a process that will take several years.  Before then, around Sept. 1, it intends to implement a new automated system to track exporter compliance with license conditions.  The system will send notices to exporters three months after a license is approved and three months before it expires to remind them of conditions that require information to be sent to BIS.  If the agency doesn't receive the information, it will send another notice three months after the license expires to warn licensees that they are delinquent and the matter will be referred to the Office of Export Enforcement.
 

HOPES FOR WTO CANCUN MEETING GROWING DIMMER

The U.S. and European Union (EU) appear to be talking past each other -- at least in public -- about how to resolve the deadlock in agriculture negotiations which is threatening to derail the  World Trade Organization's (WTO) Ministerial Meeting in Cancun, Mexico, in September. Talks at a "mini-ministerial" in Montreal July 28-30 didn't make much progress either.

Although the EU has agreed to reform its Common Agriculture Policy (CAP), it has not significantly improved its offer for reducing domestic subsidies.  In Montreal, EU officials said they are prepared to increase their commitment to reduce domestic subsidies to 60% from 55%.

 Meanwhile, the EU is also demanding that the agriculture talks include proposals to protect "geographic indications," to provide protection for such names as Parmesan cheese, Parma hams, and Stilton cheese.  The EU Commission has circulated a list of 36 names it may seek protection for.  In the package of modalities that will be negotiated in the Doha Round GIs "have to be included," EU Agriculture Commissioner Franz Fischler told reporters in Washington July 28.

At the same time, the U.S. is shifting its focus to market access issues, claiming the EU has to improve its offer to allow in more foreign products.  Market access is the "knottiest issue" in the farm talks, said U.S. Trade Representative (USTR) Robert Zoellick at the end of the Montreal meeting.  The U.S. wants to harmonize agriculture tariffs while the EU is seeking a percentage formula reduction similar to the one used in the Uruguay Round.  "We are waiting for the European Union to say that we can create a hybrid.  We hope they will," Zoellick said.
 

MULTILATERAL EXPORT REGIMES MOVE TOWARD TIGHTER CONTROLS

The trend among the various multilateral export regimes to which the U.S. belongs is toward the tightening of controls and not toward liberalization, according Steven Goldman, director the office of nonproliferation controls in BIS.  "We are not in a liberalization mode," he told the President's Export Council's subcommittee on export administration (PECSEA) July 31.

While in the past these regimes focused on what items could be taken off their control lists, "that is not happening in any of these regimes in a meaningful way," he added.  Goldman's report on developments in the Australia Group (AG), the Nuclear Suppliers Groups (NSG) and the Missile Technology Control Regime (MTCR) noted that the "general trend is in the opposite direction."

Although some technical clarifications are being made, the regimes are tightening controls to deal with threats of terrorism and weapons of mass destruction.  This has meant the addition of more products to the control lists and the tightening of controls on existing items.

 Participants in the NSG are now looking more at so-called "watch list" items that are not on its trigger list or any control list but "still could be useful," Goldman reported.  Watch list products are very similar to the unilateral 999 list of controls the U.S. imposes on North Korea, he explained.

"There is greater concern within the regime regarding which items from the watch list might transit their way to formal controls," Goldman added.  He noted that the AG has adopted "the most sweeping expansion of controls" and is "in an adding mode," putting more toxins and biological products on its control list.  The group has now agreed to add controls on "intangible" technology similar to unilaterally restrictions the U.S. has imposed on such technology.
 
 

 * * * BRIEFS * * *

BIS: Agency July 31 posted vacancy notice seeking candidate to fill post of Operating Committee chairman, although status of incumbent Carol Kalinoski has noted been clarified (see WTTL, July 28, page 1).

COLOMBIA: Five Senate Finance Committee members wrote to USTR Robert Zoellick Aug. 1 urging him to consider initiating FTA talks with Colombia (see WTTL, July 28, page 1).

EXPORT ENFORCEMENT: Voluntary self-disclosure didn't help Hamilton Sundstrand avoid hefty penalty for exporting centrifugal pumps without approved licenses.  Firm had to pay $171,500 civil fine to settle  BIS charges.  Draft charging letter to company cited 49 violations of EAR, including 25 exports between 1997 and 2001 to such countries as China, Taiwan, Israel and Saudi Arabia without approved licenses and filing of false SEDs which claimed no license was required or items were EAR99.

ANTIBOYCOTT: Failing to report to Commerce receipt of eight requests to supply information regarding dealings with Israel cost McMaster-Carr Supply Co. of Elmhurst, IL, $8,000 civil fine as part of settlement agreement with BIS.  Maker of industrial and commercial hardware had self-disclosed violations.

FTAA: USTR Robert Zoellick has asked ITC to conduct fact-finding Section 332 study to examine economic impact of proposed Free Trade Area of the Americas.

CAFTA: Latest round of talks between U.S. and five Central American countries in New Orleans, which was completed Aug. 1, reached tentative agreement on customs administration and e-commerce.  Little progress was apparently made on market access issues.  Central Americans also are objecting to U.S. proposals to use of financial penalties as part enforcement mechanism for labor and environment provisions.  American officials say provision is same as in Chile and Singapore FTAs.
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CHILE/SINGAPORE: Senate July 31 approved U.S.-Chile FTA by 66-31 vote and Singapore FTA 66-32.

JAPANESE BEEF: U.S. has protested Tokyo's July 30 decision to impose safeguard duties of 50% on beef imports.  Issue was also raised at July 31meeting of U.S.-Japan Trade Forum, but Japanese gave no sign they would be willing to change policy or waive duties for U.S. imports, U.S. official reported.

MANGANESE: Kerr-McGee Chemical July 31 filed antidumping petitions at ITC and ITA against imports of electrolytic manganese dioxide from Australia, Greece, Ireland, Japan, South Africa and China.

JAPANESE CONSTRUCTION: Long-running U.S. complaints about Japanese restrictions on foreign participation in government construction projects appears to be making some progress, according to one U.S. official.  At U.S.-Japan Trade Forum meeting July 31, Japanese showed much more positive attitude.  Recent policy changes will allow U.S. design, engineering and construction firms to choose whether they want to operate independently or as part of joint venture with Japanese partner.

CHINA: China July 29 agreed to join Customs' Container Security Initiative, allowing Customs to set up cargo pre-screening operations at ports in Shanghai and Shenzhen.

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