Volume 23 No. 34 -- September 1, 2003

IN THIS ISSUE:

* BIS Imposes High Fines For Export Violations
* WTO Makes Last-Ditch Try to Reach Deal on TRIPS and Drugs
* WTO Negotiators Drop Toughest Issues Into Laps of Trade Ministers
* Lumber Industry Claims Data Show Higher Canadian Subsidies
* BRIEFS: Export Enforcement, Shrimp, Burma, Iraq, New Shippers
 

BIS IMPOSES HIGH FINES FOR EXPORT VIOLATIONS

The Bureau of Industry & Security (BIS) is stepping up its enforcement profile with large fines for export control violations.  In its latest action it hit W.R. Grace Aug. 28 with a $178,500 civil fine for unlicensed exports of chemicals to several countries in Asia and Latin America.  On Aug. 18 it settled a case with an Israeli firm, E&M Computing, Ltd., imposing a fine of $165,000 and denying the firm export licensing privileges for three years.

The fine on Grace came after it had voluntarily self-disclosed the violations to BIS.  On 51 separate occasions, the company allegedly shipped a controlled chemical, triethanolamine, without approved licenses to Brazil, the Dominican Republic, Hong Kong, Mexico, Philippines, Singapore, Thailand and Venezuela.

The legal run in with BIS wasn't the only trouble Grace had with the government.  On the same day that BIS announced its settlement agreement, the firm lost a federal lawsuit which could force it to pay $54.5 million to clean up environmental waste at one of its mines.  The payment of both fines, however, is on hold pending the outcome of Grace's Chapter 11 bankruptcy proceedings, which company sought to protect itself against massive asbestos claims.

The case against E&M, which is based in Ramat-Gan, Israel, involved 16 charges claiming the firm shipped high performance computers to nuclear research facilities in Israel and serviced them, even though BIS had denied export licenses for the equipment.  In addition, Commerce charged the firm with removing the computers and computer components from the sites in Israel when it learned the agency was about to conduct a post-shipment verification visit.

E&M allegedly shipped and installed computers, including Sun Ultra 5 workstations, or components that could increase the performance of installed computers to over the 2,000 million theoretical operations per second (MTOPS) threshold that triggered high-performance computer (HPC) controls.  The exports went to the SOREQ Nuclear Research Center, Comverse Information Systems, Ltd., and ELTA Electronics Industries.
 

WTO MAKES LAST DITCH TRY TO REACH DEAL ON TRIPS AND DRUGS

At press time Aug. 29, World Trade Organization (WTO) leaders were still trying to salvage an agreement that would open the way for poor developing countries to import a broader spectrum of drugs for national health emergencies while maintaining restrictions that would prevent the widespread violation of drug patents.  The agreement, which appeared ready for adoption by the WTO General Council on Aug. 28, hit a roadblock when several countries raised objections and attempted to place their own interpretation on the accord.

At that meeting, which lasted past midnight, the council failed to adopt the agreement, and it seemed the issue would sent to Cancun for the WTO Ministerial Meeting to resolve.

To avoid putting another load on the ministers, Council Chairman Carlos Perez del Castillo and WTO Director General Supachai Panitchpakdi reconvened the council Friday afternoon with the hope of getting WTO members to agree on the compromise that had been worked out earlier by the U.S. and key developing countries.

 With the support of the U.S. pharmaceutical industry, U.S. negotiators Aug. 27 had reached agreement with a group of countries, including Brazil, India, South Africa and Kenya, to recommend the adoption of the controversial Dec. 16 draft report on the implementation of the compulsory licensing rules in the Agreement on Trade-Related Intellectual Property Rights (TRIPs), but with a pre-agreed statement of interpretation to be issued by Castillo (see WTTL, June 30, page 1). The WTO TRIPS Council recommended adoption of the deal late on Aug. 28.

Under this compromise, least developing countries with no domestic drug production industry would be able to issue compulsory licenses for a broad array of drugs needed for major health emergencies and to import these drugs from other developing countries that produce these medicines.  These poor countries would have discretion to decide what constitutes a health emergency and which drugs they could license.  This armamentarium of medicines could be much more extensive than just drugs for HIV/AIDS, malaria and tuberculosis.

Parallel with the adoption of this amendment to the TRIPS Agreement, the deal called for the chairman to issue a statement clarifying the interpretation of the new language.  This statement was to stress that the exception was not intended as a tool of industrial or commercial policy to expand the drug industries in middle-income countries; that appropriate safeguards would be applied to prevent diversion of these drugs to other countries; that 23 developed countries would immediately opt out of exception to import these drugs; and another 11 nations would opt out partially.  In addition, the 10 countries about to join the European Union (EU) would limit their use of the exception and them opt out once they become EU members.

The deal began to unravel when countries such as Argentina, the Philippines and Venezuela questioned the restrictive language on industrial policy and some wanted to issue their own interpretation of the agreement.  African countries backed the accord.  At the council meeting, Castillo and Supachai were pleading with members to adopt the agreement and not jeopardize the Cancun meeting by leaving another unresolved dispute on the table for ministers to settle.
 

WTO NEGOTIATORS DROP TOUGHEST ISSUES INTO LAPS OF TRADE MINISTERS

With so many deadlines missed and serious compromises only surfacing in the last weeks, it was inevitable that WTO negotiators would leave most of the toughest issues in the Doha Round for political-level ministers to resolve at the Cancun Ministerial Meeting Sept. 9-14.  After two weeks of nearly round the clock negotiations, WTO members were ready to leave Geneva Aug. 29 without agreement on a draft ministerial declaration and with wide gaps remaining in talks on agriculture, market access, TRIPS, and the so-called Singapore issues.

Although a U.S.-EU paper on agriculture had finally gotten talks moving, several opposing position papers have now been offered on how to address the farm talks in the remaining 15 months of the round.  Arriving in Cancun, ministers will face eight different proposals on agriculture, all of which have large bracketed sections without specific numbers, dates and goals.

In addition to consolidating all these conflicting approaches, the ministers will have to fill in the specific percentage cuts and targets that will be expected in domestic supports, export subsidies and market access. One of the hardest issues they face will be whether to set a specific deadline for ending all export subsidies on farm products.

As the Geneva phase of the talks ended, a key development was a growing cohesion among developing countries that were still dissatisfied that the round would not produce the development promised when the talks were named the Doha Development Agenda.  In particular, several developing countries protested the U.S.-EU paper for allowing those two large farm producers to maintain high-levels of domestic support.

A new paper submitted by 20 developing countries Aug. 20 insisted on greater cuts in support and more market access in the U.S. and EU, while also seeking to allow developing countries to maintain high tariffs and support.  The paper seemed to say: "You keep your subsidies and we'll keep our protection," one source in Geneva observed.

Although the U.S. was in the thick of negotiating compromises and deals towards the end of the week, Deputy USTR Peter Allgeier was still insisting the U.S. was maintaining its ambitious goals for the round. "Frankly, as you survey the various countries, the U.S. is practically alone in being an advocate of high ambition across all aspects of trade," he told reporters Aug. 27.
 

LUMBER INDUSTRY CLAIMS DATA SHOW HIGHER CANADIAN SUBSIDIES

The Coalition for Fair Lumber Imports Aug. 27 filed a new analysis with the International Trade Administration (ITA), claiming data in the record in the countervailing duty case against imports of softwood lumber from Canada can be recalculated to meet the objections of a binational NAFTA panel which ruled against ITA's use of cross-border price comparisons.  Using three different approaches, the Coalition says ITA could find subsidy margins of 22% to 30% compared to the 18.8% the agency found in its final CVD order.

The Coalition filing came just ahead of the Aug. 29 release of the final report of a WTO dispute-settlement panel, which found ITA's determination in the CVD case to be inconsistent with the Agreement on Subsidies and Countervailing Measures.  The ruling, which the U.S. will appeal, could further complicate ITA's job of determining whether provincial stumpage fees in Canada are a subsidy and how much they are worth (see WTTL, June 16, page 3).

The analysis submitted to ITA attempts to address the objections the NAFTA panel had to the use of U.S. lumber prices as the basis for claiming the provincial fees constituted a subsidy.  One approach uses prices for U.S. timber immediately below the border and adjusts for variables that the NAFTA panel claimed distorted those prices.

Two other approaches use prices for harvested logs in the U.S. and Canada, calculating the "residual" value of the timber component in the logs. The Coalition said its goal was to use alternative methods contained in ITA regulations to come up with a benchmark price that was "consistent with market principles."

The use of log prices in the analysis seems to contradict separate rebuttal comments the Coalition filed Aug. 22 in defense of ITA's proposed policy bulletin, which will be used to conduct "changed circumstances" reviews in the CVD cases, if Canadian provinces change their method of selling government-owned timber to make the price more market-oriented.

The Coalition criticized several objections to the draft, including those raised by Baker & Hostetler, lawyers for the Ontario lumber industry.  "While there could, if all else failed, be a role for log prices in setting provincial timber prices, the Coalition supports the current draft Policy Bulletin's reliance on sales of actual product at issue, i.e., timber," the Coalition wrote.

The Ontario industry's lawyers attacked the bulletin's premise that the Canadian system isn't market based. "This assumption is being contested before panels of the WTO and the North American Free Trade Agreement," they wrote.

Their comments complained that Commerce was attempting to use the bulletin "as a technique for unilaterally, and without Congress, rewriting the law and creating special bodies of law for specific products from specific countries."

The draft bulletin got support from at least two lawmakers, Sens. Larry Craig (R-Idaho) and Max Baucus (D-Mont.).  In a letter to ITA, they said they support the agency's guidance, but stressed that its goal should be "a means to a settlement, rather than an end in itself."  The two senators said they hoped Canadian parties would see the bulletin as a "good faith explanation" of U.S. policies.  If the Canadians refuse to work within the framework of the bulletin and continue to seek a legal resolution of the dispute, "we would expect and demand a revocation of the Policy Bulletin," they wrote.
 

* * * BRIEFS * * *

EXPORT ENFORCEMENT: BIS has released details of agreements reached in May with Japanese firm and Japanese individual to settle charges that they exported 100 generation II night vision products to Japan without approved export licenses. Hakko Co., Ltd., of Tokyo, and Hideo Nakagama of Kumagaya City, agreed to pay civil fines of $20,000 each to resolve two charges of conspiracy and unauthorized export of equipment between 1995 and 1997. Both were denied export licensing privileges for five years, but denial was suspended contingent on their future compliance.

SHRIMP: Southern Shrimp Alliance Aug. 19 gave go ahead to Dewey Ballantine to work on possible antidumping and countervailing duty petitions against imports of frozen shrimp from as many as 10 countries in Asia and Latin America.  No date set yet for filing of complaints.

GEOGRAPHIC INDICATIONS: EU Council of Ministers Aug. 28 approved list of 41 wines, spirits and foods whose names Europeans will seek to have protected as part of WTO Doha Round agriculture negotiations (see WTTL, Aug. 4, page 3).  List includes 22 wines and spirits that could be subject to protection under pending TRIPS agreements, including Burgundy, Chianti, Port and Sauternes.  But EU also wants to prevent anyone but original source to labels foods such as feta, Gorgonzola, Parmigiano Reggiano and Roquefort.  Some names are already "abused" EU claims, but it also wants to prevent future abuse of names that are still unique.

BURMA: As of Aug. 28, OFAC has issued 10 general licenses implementing legislation and presidential order imposing trade sanctions on Burma (see WTTL, Aug. 11, page 4).  General License No. 8, issued Aug. 22, clarifies rules on exports and financing to non-blocked persons and financial institutions.

AES: BIS issued new rules in Aug. 21 Federal Register, amending EAR to conform to new Census rules on filing of SEDs via Automated Export System (see WTTL, Aug. 11, page 4).

ITC: Using his power to make interim appointments while Congress is recessed, President Bush Aug. 22 named Charlotte Lane and Daniel Pearson to seats on International Trade Commission.  Their nominations have been "held" by some senators for months (see WTTL, April 7, page 4).  Lane was sworn in on Aug. 27 and Pearson's swearing in was imminent at press time.  Because these are recess appointments, pair can hold office only until current 108th Congress ends in 2004.  Separately, veteran ITCer Vern Simpson, director of office of industries, announced his retirement Aug. 29 after 30 years in government.

IRAQ: Following presidential executive order Aug. 28 authorizing financial support for Iraq, Ex-Im said it has opened $500 million insurance program to cover transactions with new Trade Bank of Iraq.

NEW SHIPPERS: ITA Aug. 27 issued new Policy Bulletin (03.3) "clarifying" its position that importers who are subject to bond for CVD and antidumping duties while "new shipper" reviews are underway are subject to interest payment rules, if review is rescinded and bonding privilege is terminated.

WTO ACCESSIONS: Nepal and Cambodia are both slated to have their accession to WTO approved at Cancun Ministerial Meeting Sept. 9-14, WTO reports.

STATE:  Gregory Suchan Aug. 11 became deputy assistant secretary of State for defense trade controls, overseeing Directorate of Defense Trade Controls.  He has been Foreign Service Officer in department since 1973 and DAS for plans and policy in Bureau of Political-Military Affairs since May 2000.  Robert Maggi, who has been acting DAS and managing director of the Directorate, will remain managing director.

STEEL PLATE: Voting in "sunset review," ITC Aug. 18 determined U.S. industry is likely to face recurring injury if suspended antidumping orders on cut-to-length carbon steel plate from China, Russia and Ukraine were terminated.  It found injury unlikely to recur, if order on imports from South Africa were ended.

FERROSILICON: Acting on second remand from CIT, ITC Aug. 18 again made negative determination, finding by 4-0 vote that U.S. industry is not being injured by dumped or subsidized imports of ferrosilicon from Brazil, China, Kazakhstan, Russia, Ukraine and Venezuela.  Long-running case stems from Com-mission decision to reopen original investigation after three domestic producers were convicted or pled guilty to charges of price fixing during investigation period.

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