Volume 23 No. 45 -- November 17, 2003

IN THIS ISSUE:

* BIS Proposes Making SNAP Filing of Documentation Mandatory
* Zoellick Concedes CAFTA Will Face Political Fight Next Year
* Civil Fine Against Omega Completes Double-Play Enforcement Action
* Bush Likely to Delay Decision on Steel Tariffs
* Future Use of Safeguards Will Require Better Justification
* CIA Says Russia's Export Controls Are Still Lax
* U.S. Headed to Miami with No Agreement on Scope of FTAA
* BRIEFS: Export Enforcement cases, Syria, Trade Figures
 

BIS PROPOSES MAKING SNAP FILING OF LICENSE DOCUMENTS MANDATORY

The long-awaited full implementation of a system to file supporting documentation for export licenses electronically is getting closer, and the Bureau of Industry and Security (BIS) Nov. 12 published a proposed change in the Export Administration Regulations (EAR) to make such filing mandatory.  The agency proposes to require use of a revised version of its Simplified Network Application Processing system, which it is calling SNAP+.  Once implemented, all supporting documentation would have to be submitted through this system.

BIS will require use of the web-based SNAP+ system for reexport authorization, classification requests, encryption reviews and License Exception notifications when required.  Advisory opinions also would be issued through the system.

Limited exceptions will be allowed for firms that file no more than three applications a year, that don't have access to the Internet, or for urgent circumstances.  SNAP+ will require firms to establish an internal system for managing submissions and to have individuals assigned specific tasks required for the submission of SNAP+ documentation.  Applicants will be expected to submit their documentation using such formats as PDF provided by Adobe Acrobat.
 

ZOELLICK CONCEDES CAFTA WILL FACE POLITICAL FIGHT NEXT YEAR

Even before the U.S. concludes negotiations with five Central American countries on a free trade agreement (CAFTA), U.S. Trade Representative (USTR) Robert Zoellick admits the accord will face a tough fight getting approved by Congress.  He also appears willing to a point finger at Democrats and unions as the chief opponents of the accord.  "Labor unions are so important to Democratic candidates and the labor unions have put this in their gun sights," he told a group of Latino-American business executives Nov. 12.

"The real work in this country is going to begin after we complete the CAFTA negotiations, because we'll have to convince the Congress about the need to support this," he said.  The biggest issues will be labor and environment, he conceded.  Other specific issues, such as textiles and apparel and agriculture, will be important in some districts, he noted.

Zoellick said a key goal is to keep members from making a commitment against CAFTA.  "A lot of them will be under pressure  from opponents to pledge against it," he said.  The message he wants to sent to these lawmakers is "keep your powder dry," Zoellick said.  Speaking with reporters afterward, Zoellick again noted expected Democratic opposition to trade pact.  "There is no doubt, as you saw when the Chilean and Singapore agreements got done, a lot of members in the minority were putting down their markers on this," he said.  Countering this pressure may be support for CAFTA in the Latino community, he suggested.  "For some interested in the Hispanic community and others, this could be a plus," he said.   "Obviously some this will depend on the state of the economy," Zoellick added.
 

CIVIL FINE AGAINST OMEGA COMPLETES DOUBLE-PLAY ENFORCEMENT ACTION

The Bureau of Industry and Security (BIS) Nov. 12 completed the civil-penalties leg of a government enforcement case against Omega Engineering of Stamford, Conn.  The criminal portion was settled with a plea bargain in April (see WTTL, May 5, page 1).  As part of a settlement agreement with BIS, Omega will pay a $187,000 civil fine and have its export privileges for trade with Pakistan denied for five years.  In a separate deal with BIS, Omega VP Ralph Michel accepted a five-year denial order barring export transactions with Pakistan

In April, Omega paid a $313,000 criminal fine as part of its plea agreement with Justice.  Michel pled guilty also and paid a $50,000 fine, was sentenced to prison for 10 months and placed on supervised probation for three years.

The case against Omega and Michel stemmed from exports in 1997 of laboratory equipment to the National Development Center, which was controlled by the Pakistani Defense Ministry, without an approved export license.  BIS had received a tip about the exports from someone who knew about them and had been upset by the terrorist attacks of September 11, 2001.
 

BUSH LIKELY TO DELAY DECISION ON STEEL TARIFFS

Steel industry sources don't expect President Bush to announce a decision on the future of the Section 201 import tariffs on steel until after Congress goes home for the year at the end of November or in early December.  Although the ruling Nov. 10 by the World Trade Organization's (WTO) Appellate Body against the safeguard relief has stirred up rumors about potential options Bush might choose, industry sources say the administration hasn't begun the interagency or Cabinet-level process of preparing options for the president nor has it begun to present the domestic industry with proposed alternatives to the current 201 relief.

The lack of the interagency vetting process also reflects the general perception that neither economic nor trade law issues will play a major role in the president's decision.  The most important advice, sources contend, will come from Presidential Advisor Karl Rove and will be based on how the steel issue will affect the 2004 presidential campaign.

Even staunch supporters of the tariffs doubt Bush will refuse to abide by the WTO ruling.  While there may be some effort to soften the blow to the industry and steelworkers with some additional help, keeping the safeguards in place in their current form seems unlikely, they admit.  What upsets the industry, however, is the failure of administration officials to be more vocal in supporting the relief or in criticizing European Union (EU) threats of retaliation.  "There has been no criticism of the EU at all from the administration," one source complained.

The domestic industry also believes USTR Robert Zoellick has been the chief proponent in the Cabinet for lifting the 201 tariffs.  "Zoellick wants to trash the tariffs," one source argued.  Zoellick claims the decision is up to the president.

"With the WTO decision, it is now up to the president to decide based on that and on the findings of the ITC on the mid-term review.  That's his call," Zoellick told reporters Nov. 12.  "As I said at the time, I think the safeguard was the right thing to do," he said.   "I think it gave a breathing space.  I think you've seen the industry has taken advantage of that," he added.  "Frankly, the safeguard gave the industry the opportunity to do what we hoped it would do," Zoellick continued.  "That was important with the Congress at that time, but as you've seen there are other people in Congress who resist the safeguards and feel it has a negative effect on their constituents," he said.

One of the opponents of continuing the relief is Senate Finance Committee Chairman Charles Grassley (R-Iowa).  "To continue the steel safeguard tariffs now will only serve to threaten the viability of the customer base that the revitalized U.S. steel industry seeks to service,"Grassley wrote to President Bush Nov. 7.  The job loses in manufacturing in steel-using industries "constitute changed economic circumstances" which would justify modification of the import relief under Section 201, he asserted.
 

FUTURE USE OF SAFEGUARDS WILL REQUIRE BETTER JUSTIFICATIONS

If the dispute over the U.S. Section 201 safeguard action against steel imports were being heard by the Court of International Trade or a NAFTA dispute panel, the case probably would have been remanded back to the International Trade Commission (ITC) to correct the shortcomings in its findings and recommendations.  That is something the wordsmiths at the ITC do regularly.  Since the WTO doesn't have a remand mechanism, the ITC won't have another chance to justify why it agreed the U.S. steel industry needed temporary protection from imports.

But the WTO Appellate Body's Nov. 10 ruling against the U.S. safeguard action may provide guidance for how the ITC should handle future Section 201 cases.  Clearly, any future 201 recommendations will have to spend more time and space explaining the link between the facts in the case and the criteria in the WTO Agreement on Safeguards for the acceptable use of import relief.

The Appellate Body upheld a dispute-settlement panel's ruling that the ITC failed to "provide a reasoned and adequate explanation" of why the safeguard action was warranted.  In particular, it focused on three legal questions: was the rise in steel imports an "unforeseen development?" how did the ITC treat "parallelism" or the exclusion of steel from Canada, Mexico and other FTA countries from its injury determination? and whether there were "increased imports" during the period of investigation?.

The Appellate Body also examined whether these factors were adequately addressed for each of the nine lines of steel given relief.  It claimed the ITC had not shown how unforeseen developments had specifically affected each of the steel categories covered under the 201 action.

It didn't insist that imports must continue to rise throughout the period of investigation to be judge to have increased.  It questioned, however, the magnitude of the decrease from 2000 to 2001.  "The evidence of that decrease is arguably the most relevant of all the data gathered during the investigation," it declared.  The ITC was "required to examine trends in imports" throughout the period, the Body added.  On parallelism and the exclusion of FTA imports, the Body said there is "a gap between the imports that were taken into account in the investigation performed by the USITC and the imports falling within the scope of the measures applied."
 

CIA SAYS RUSSIA'S EXPORT CONTROLS ARE STILL LAX

Although Russia has enacted several pieces of legislation in the last three years to establish an export control system, enforcement of those rules is still lax, the Central Intelligence Agency (CIA) contends in a report sent to Congress Nov. 10.  The report, which partly explains why export licenses for Russia take more than 50 days on average to clear the Bureau of Industry and Security (BIS), says top officials in Moscow "must make a sustained effort to convince exporting entities -- as well as the bureaucracy whose job it is to oversee them -- that nonproliferation is a top priority and that those who violate the law will be prosecuted."

"Despite progress in creating a legal and bureaucratic framework for Russia's export controls, lax enforcement remained a serious concern," the CIA asserts in the report, which provided a broad picture of proliferation risks in several countries of concern.

"During the first half of 2003, Russia's cash-strapped defense, biotechnology, chemical, aerospace, and nuclear industries continued to be eager to raise funds via exports and transfers." the CIA notes.  "Some Russian universities and scientific institutes also showed a willingness to earn much-needed funds by providing WMD or missile-related teaching and training for foreign students," it says.
 

U.S. HEADED TO MIAMI WITH NO AGREEMENT ON SCOPE OF FTAA

After nine years of talks on a Free Trade Area of the Americas (FTAA), U.S. trade officials will arrive in Miami for the Nov. 20-21 meeting of Western Hemisphere trade ministers with no agreement on the scope of the future accord.  Talks in Washington Nov. 7-8 failed to bridge the gap between the U.S. and Brazil on how ambitious the FTAA should be and whether countries would be allowed to opt out of core elements of the pact (see WTTL, Nov. 10, page 1).

"What we agreed after the meeting was that we would say there were some good ideas exchanged, a good step forward, but each country would talk about their own national position," USTR Robert Zoellick told reporters Nov. 12.  "I left that meeting with a positive sense but not underestimating the work to do," he said.

The lack of agreement before the meeting suggests that ministers may be forced to put off a definitive decision on what will be covered in the negotiations as they head toward their December 2004 deadline for conclusion.  Brazil has pushed for a reduction in the scope of the final deal, especially excluding agriculture and services.  This negotiating position may be only a ploy, however, to get the U.S. to promise greater access for Brazilian farm products in the U.S., especially orange juice, sugar and beef.

Zoellick met privately with Brazilian Trade Minister Celso Amorim on Nov. 7 before meeting with about 14 other trade ministers.  "I was pleased that Minister Amorim was talking about how Brazil wants to move forward," Zoellick said.  Amorim has become very successful in pushing Brazilian interests in the multilateral trade talks.  He led the G-20 countries that blocked U.S. and EU agriculture proposals in the Doha Round in Cancun in September and is opposing Washington's goals in the FTAA.  EU Trade Commissioner Pascal Lamy recently complimented Amorim, saying he "is really the cleverest of all us trade ministers."
 

* * * BRIEFS * * *

EXPORT ENFORCEMENT:  BIS imposed $180,000 civil fine on Future Metals of Tamarac, Fla., to resolve complaints that it exported aluminum bars and sheet to India on 40 occasions without obtaining  export licenses.  Among charges was allegation that company in 1999 exported aluminum sheets through Netherlands to India's Hindustan Aeronautics Limited engine division, which was on BIS Entities List at  time, without license.

SYRIA: Trade sanctions against Syria drew closer Nov. 11 with Senate, by 84-4 vote, approving H.R. 1828, which, among other things, would ban dual-use and munitions exports to Syria.  Some technical differences with House need to be clarified, but measure should now move quickly to President Bush for signature (see WTTL, Oct. 13, page 1).

EXPORT ENFORCEMENT: BIS has reached settlement agreements with two firms and individual to resolve charges of conspiracy to export spare parts for hydraulic shears to Libya without license. Sigma Enterprises of London, England, agreed to pay $18,000 civil fine for its participation in conspiracy and evasion of U.S. export control requirements.  Minequip of Miami, Fla., agreed to pay $12,000 civil fine for its role in deal, and Minequip's president, John Clements, agreed to pay $12,000 civil fine.

HAND TRUCKS: Gleason Industrial Product filed antidumping petitions at ITA and ITC Nov. 13 against imports of hand trucks from China.
 
TRADE FIGURES: Services imports surged 10% in September v. September 2002, reaching $21.1 billion, Commerce reported Nov. 13.  Services exports grew 7.5% from year ago to $26.3 billion.  Goods exports were up 3.5% from last year to $59.8 billion, but goods imports rose 6.6% to $106.3 billion.
 

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. 
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