IN THIS ISSUE:
* Controls on Chip Technology Are Impeding R&D, Industry Claims
* International Arbitration Will Be Key to Law for Afghanistan
* No Summer Vacation for House Fight Over FSC/ETI
* OFAC Defends Handling of Licenses for Syria, Iran and Libya
* Trade Talks with Dominican Republic and Bahrain Set
* Census Closes Door on New Applications for Option 4
* BRIEFS: GMOs, Burma, Trade People, Bushnell, Customs
CONTROLS ON CHIP TECHNOLOGY ARE IMPEDING R&D, INDUSTRY CLAIMS
U.S. semiconductor firms are complaining that current low-threshold controls on technology to design and manufacture microprocessors are hurting the industry's efforts to globalize research and manufacturing. Rather than restricting release of this technology to third-party customers, the regulations are limiting the sharing of technology within companies and forcing firms to file an increasing number of deemed export licenses for foreign nationals working for them.
The problems with current technology controls were raised at the July 31 meeting of the President's Export Council subcommittee on export administration (PECSEA) and earlier in July at the Bureau of Industry and Security's (BIS) Systems Information Technical Advisory Committee (SITAC). At issue is the control level in Export Control Classification Number (ECCN) 3E002, which requires licenses for foreign nationals in Country Group D1, which includes China and Russia, two of the countries from which a growing number of engineers are coming.Controls on Group D1 apply to technology for chips above 530 million theoretical operations per second (MTOPS). With several currently marketed chips operating above 5,000 MTOPS and IBM recently marketing one above 24,000 MTOPS, this level is too low, industry argues. R&D programs will be working on microprocessors nearing 100,000 MTOPS in the next few years.
Instead of coming up with a new figure, industry wants BIS and Wassenaar to adopt a new approach that would provide a license exception for intra-company transfer of this technology. They point to encryption exception ENC as the type of approach that should be taken. Industry representatives claim companies are extremely careful about protecting this technology not just because of national security but to prevent release of their own intellectual property.
At the PECSEA
meeting, however, BIS Under Secretary Kenneth Juster cautioned against
expect-ing a significant liberalization of these controls. "To simply
say, with due respect to everyone, that all companies are very concerned
about their intellectual property so you can [transfer technology] within
a company with no other constraints may sound very nice, but it is just
not going to be realistic to expect that is going to happen in the interagency
process," he said. Although the idea sounds good, "it's not one I
would put a great deal of weight on getting enacted," he added.
INTERNATIONAL ARBITRATION WILL BE KEY TO LAW FOR AFGHANISTAN
Until Afghanistan can rebuild its judicial system and laws, foreign firms dealing in the country may have to use international arbitration to settle any legal disputes that arise. With the help of a team of international lawyers who are working on a pro bono basis, Kabul is preparing to join the New York Convention on Arbitral Awards, according to Steve Robinson, a partner with the law firm of Hogan & Hartson which is providing seven of the 40 lawyers working with the Afghanis.
The legal teams are reviewing all the international and bilateral agreements, treaties and conventions to which Afghanistan may have been a party before the war with Russia and the rise of the Taliban in the 1980s. These lawyers are developing recommendations on which accords to rejoin or join for the first time.For example, Afghanistan's membership in the International Telecommunications Union (ITU) lapsed but has already been restored. Just finding records of past agreements has been a difficult task. So far about 150 agreements have been identified.
Other groups of attorneys are working with central government to develop laws for a wide array of areas. A new commercial code has been drafted and could be in place by the end of 2003, Robinson reports. Teams are also working on banking, customs and intellectual property laws. Most of these new statutes will be enacted by presidential decree or orders from Afghanistan's ruling council. A constitutional convention is expected to convene in 2004.
Although the
commercial law may be in place by the end of the year, it may take a while
for the country to establish a judicial system that could hear cases.
During the Taliban regime all courts were run by Muslim clerics.
Moreover, security is only partially assured in Kabul and even less so
in other cities. Travel between cities is still dangerous and most
customs offices are under the control of regional warlords. Thus,
international arbitration is seen as the primary way foreign commercial
disputes will be handled for the foreseeable future.
NO SUMMER VACATION FOR HOUSE FIGHT OVER FSC/ETI
Just because Congress has gone on its August recess, doesn't mean the backbiting at the House Ways and Means Committee has stopped. A battle of press releases is still being waged between Chairman Bill Thomas (R-Calif.) and Reps. Phil Crane (R-Ill.) and Charles Rangel (D-N.Y.) over their opposing plans for replacing the Foreign Sales Corporation (FSC)/Extraterritorial Income Tax (ETI) tax laws for export sales (see WTTL, July 28, page 4).
After Thomas introduced his FSC/ETI bill (H.R. 2896), Crane and Rangel sent a "Dear Colleague" letter July 30 to other House members urging them to question claims that the measure would cut corporate taxes on firms earning less than $10 million in taxable income. "The text of the bill delivers far less than the promises made would lead you to believe," they wrote.Thomas responded with a statement questioning the benefits of the Crane-Rangel bill (H.R. 1769), which he refers to as the Rangel-Levin bill, adding Democratic co-sponsor Sander Levin (D-Mich.) and dropping mention of Republican Crane. The Dear Colleague letter "forgets to mention that Rangel-Levin's manufacturing exclusion goes to less than 5 percent of all business," Thomas wrote, citing six other shortcomings in the opposing legislation.
OFAC DEFENDS HANDLING OF LICENSES FOR SYRIA, IRAN, LIBYA
The slow pace of licensing for exports to Iran, Libya and Syria is due to the need for interagency consultations, contends Richard Newcomb, director of Treasury's Office of Foreign Assets Control (OFAC). Given the events of Sept. 11, 2001, OFAC will not approve any licenses under the Trade Sanctions Reform and Enhancement Act (TSRA) without the agreement of State.
OFAC's handling of licenses is improving, he argued. Average review times have declined to 75.8 business days during the April-June 2003 period from 110.8 business days during the January-March 2003 period, he wrote to Marjorie Searing, vice president of Advamed, the medical device industry trade association. Searing also heads the TSRA Coalition, which has complained about implementation of TSRA (see WTTL, July 14, page 4)."OFAC is not in a position to issue licenses in conformance with the TSRA requirement that license applications be denied for exports to any entity promoting international terrorism without interagency input and clearance," Newcomb wrote. Since 9/11, "much greater scrutiny has been brought to bear by reviewing agencies on items being exported to entities in countries that support international terrorism," he explained.
Although TSRA was intend to speed the licensing of agriculture products, medicines and medical devices to Iran, Libya and Syria, the majority of cases OFAC reviews under the statute are for medical device exports to Iran.
One step that
should help further reduce licensing times is OFAC's hiring of three additional
staffers to review the licenses. Until recently, only one reviewing
officer was examining all TSRA cases, which totaled almost 800 in the fiscal
year that ended Sept. 30, 2002.
TRADE TALKS WITH DOMINICAN REPUBLIC AND BAHRAIN SET
While U.S. trade talks on a Central American Free Trade Agreement (CAFTA) have drawn criticism from Democrats in Congress, the formal notification of Washington's plans for adding the Dominican Republic to those negotiations has won raves from at least one key Democrat. "I'm delighted that the U.S. Trade Representative has decided that it is appropriate to move forward with free trade negotiations with the Dominican Republic," declared Ranking Ways and Means Committee member Charles Rangel (D-N.Y.), whose district includes a large number of Dominican immigrants.
Rangel said he was especially pleased the Bush administration intends to complete the talks with the DR in three months and attach it to the CAFTA (see WTTL, July 28, page 1)USTR Robert Zoellick notified Congress Aug. 4 of plans to start trade talks with the DR later this year and with Bahrain in 2004. He also asked the International Trade Commission to conduct a study of the economic effect of an FTA with the DR.
"The administration will seek to integrate the Dominican Republic into the FTA being negotiated between the United States and five nations in Central America," a USTR statement explained. "The administration could then send Congress one agreement including the six countries," it said.
In 2002, the U.S. exported nearly $4.3 billion in goods to the DR and imported almost $4.2 billion. The close balance in trade reflects the Dominican Republic's role as a low-cost assembler of components imported from the U.S. and shipped back under the Caribbean Basin Initiative (CBI). With a population of more than 8.1 million in 1997, it is one of the largest economies in the Caribbean/Central American region.
In contrast,
Bahrain has a population of only 620,000. It exported just $395 million
to the U.S. in 2002 and imported $420 million. Almost 44% or $172
million of its exports to the U.S. were in one category, cotton household
goods
.
CENSUS CLOSES DOOR ON NEW APPLICATIONS FOR OPTION 4
Census Aug. 8 issued a statement saying that after Aug. 15 it will not accept letters of intent for new applications from firms seeking to participate in the Automated Export System (AES) Post-Departure Filing Program known as Option 4. It is suspending entry into the system until mid-2004 when it expects to issue new rules for Mandatory AES for all exports. Firms that are already qualified for Option 4 will not be affected by the moratorium, it said.
The suspension comes just a few weeks after Census issued its final rules for mandatory AES filing for goods on the Commerce Control List (CCL) and Munitions List (ML). The rules, published in the July 17 Federal Register, include new certification requirements for U.S. Principle Parties in Interest (USPPI), freight forwarders, ocean carriers or services centers that want to file export documentation through AES.Apparently reacting to exporter community concerns, the final rules don't include the detailed training requirements and background checks Census officials said they were considering as a prerequisite for becoming an approved AES user. Users will need to
* * * BRIEFS * * *
GMOs: Not surprisingly, U.S. Aug. 7 said WTO consultations with EU over moratorium on approvals of GMOs have failed to resolve dispute and Washington will now ask WTO to establish dispute-settlement panel to hear complaint. Canada and Argentina are co-complainants with U.S.
BURMA: OFAC July 29 issued first General License enforcing presidential executive order implementing newly enacted Burmese Freedom and Democracy Act. New rules bar imports of goods from Burma and impose restrictions on financial dealings with government and identified Burmese financial institutions.
TRADE PEOPLE: Before leaving for August recess Aug. 1, Senate confirmed Josette Shiner to be Deputy USTR and James Jochum to be assistant secretary of Commerce of import administration.
BUSHNELL: Based on guilty plea entered in April, D.C. U.S. District Court Judge Richard W. Roberts Aug. 5 sentenced Worldwide Sports & Recreation, Inc., which operates under Bushnell brand, to pay $650,000 criminal fine and serve five-years probation for unlicensed exports of night vision products to Japan and 14 other countries. With sentencing, BIS also signed previously reached settlement agreement imposing $223,000 civil fine on firm (see WTTL, April 21, page 1).
CUSTOMS: General Accounting Office, investigatory arm of Congress, issued report Aug. 7, finding Customs doing better job of issuing prospective classification rulings on valuations, tariffs and labeling. After Customs management made fixing system priority, Office of Regulations & Rulings (OR&R) started issuing 75% of its decisions within 120 days and 64% within 90 days. Trend was getting faster at end of 2002, with 94% cleared within 90 days. This compares to 2000, when previous GAO study found OR&R clearing cases within 120 days only 33% of time.
ALCOHOL: ITC Aug. 5 on 4-0 vote made preliminary determination that allegedly dumped imports of tetrahydrofurfuryl alcohol from China may be injuring U.S. industry.
COKE: Acting on CIT remand, ITC Aug. 4 reaffirmed its previous preliminary negative determina-tion that allegedly dumped imports of blast furnace coke from China and Japan are not injuring U.S. industry. Just as in first ruling, Commissioners Jennifer Hillman and Stephen Koplan voted negative and Commissioner Marcia Miller voted affirmative. Chairman Okun didn't participate.
BAGS: Allegedly dumped imports of polyethylene retail carrier bags from China, Malaysia and Thailand may "threaten" to injure U.S. industry, ITC decided in preliminary 4-0 vote Aug. 4.
CHINA: All four ITC members Aug. 5 agreed imports of brake drums and rotors from China are not being imported in such increased quantities as to injure U.S. industry. Vote terminates case filed under Section 421 rules providing special safeguard relief against imports from China.
DIAMONDS: OFAC Aug. 4 published rules implementing U.S. law which bars import of conflict diamonds from Sierra Leone and Liberia that don't have Kimberly Process Certification.
CHINESE PORTS: Trade and Development Agency Aug. 7 announced grant of $585,250 to Chinese Customs Administration to fund study on streamlining and improving operations at Chinese ports. Global Alliance for Trade Efficiency in Washington, D.C., will conduct study.
CHECHEN: State issued notice in Aug. 8 Federal Register identifying Shamil Basayev of Chechnya as foreign national who poses significant threat to U.S. security.
STATE: Department in Aug,. 7 Federal Register imposed trade sanctions on Mohammed al-Khatib of Jordan for engaging in chemical and biological weapons activities.
Copyright 2003 by
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