Volume 23 No. 47 -- December 1, 2003

Posted Monday, December 1, 2003 12:00 am

IN THIS ISSUE:

* BIS ISSUES FINAL "BEST PRACTICES" ADVICE FOR TRANSSHIPMENTS
* WTO MEMBERS NOT LIKELY TO AGREE ON DOHA TALKS IN DECEMBER
* COURT SENDS SEMICONDUCTOR REMAND BACK TO ITA AGAIN
* COMMERCE, USTR REORGANIZE INDUSTRY ADVISORY COMMITTEES
* CONFUSION MARKS POST-MIAMI VIEWS ON FTAA DECLARATION
* CHINESE DISSIDENT CHARGED WITH VIOLATION OF EXPORT CONTROLS
* BRIEFS: Steel, BIS, Export Enforcement

BIS ISSUES FINAL "BEST PRACTICES" ADVICE FOR TRANSSHIPMENTS

The Bureau of Industry and Security (BIS) listened to comments and objections from industry, but made few major changes to the advice it released Nov. 24 in the final version of its Best Practices for Transit, Transhipment, and Reexport of Dual-Use Items Subject to the Export Administration Regulations. Rather than changing the text of the advice, the agency offered its interpretation of the best practices in its explanation of its reactions to industry comments.

BIS continued to stress that exporters need only implement "appropriate steps" when they adopt of best practices for exports going through transshipment ports. "The best practices are not intended to change companies' normal business practices, instead, they are intended to outline good business practices. As such, each company should determine, based on its normal business practices, the appropriate steps to know the end-user or to know whether items will be later incorporated or reexported," it stated.

In response to comments that asked whether an exporter would be liable for misrepresentations made by trade facilitators or freight forwarders regarding their adherence to best practices, BIS said its advice doesn't address legal liability. "However, compliance with the best practices will be considered a mitigating factor if a violation of a provision of the Export Administration Regulations applicable to transit, transshipment or reexport occurs," it declared.

BIS disregarded comments it considered outside the scope of the best practices advice. Several comments, for example, urged BIS to consolidate all lists of denied persons or end-users of concern maintained by different government agencies. "BIS agrees that this proposal would be a worthwhile undertaking, but it is beyond the scope of these best practices and beyond BIS's ability to implement within the U.S. government," it conceded. BIS clarified its advice, however, to limit screening to parties subject to "an order denying export privileges, on the Unverified List, on the Entity List, or on any list of U.S. government sanctioned parties."

WTO MEMBERS NOT LIKELY TO AGREE ON DOHA TALKS IN DECEMBER

Despite instructions from trade ministers in Cancun, World Trade Organization (WTO) negotiators are not expected to settle on the future course of Doha Round talks by the Dec. 15 meeting of the WTO General Council. Consultations being conducted by Council Chairman Carlos Perez del Castillo reportedly have made little progress and a decision on how to pick up the pieces from the collapsed ministerial may not be made until the February meeting of the General Council. "On December 15, there will no world shaking announcement," one source in Geneva said.

On Dec. 5, Castillo will report on the consultations he has been holding for the past six weeks to a heads-of-delegation meeting in Geneva. He is expected to spell out the options the Council will be asked to consider at its Dec. 15 meeting. These include a return to special session talks of each of the groups negotiating specific sections of a proposed Doha accord or continued broader consultations at the higher heads-of-delegations level.

Although there were widespread complaints about the draft ministerial declaration prepared by Mexican Foreign Relations Secretary Luis Ernesto Derbez in Cancun, his text is increasingly being considered the starting point for resuming negotiations. At the February meeting of the WTO General Council, the terms of several chairmen of various committees will end and new chairs will be appointed. This may give negotiators a chance to take a fresh look at previous proposals, even if nothing of substance changes (see WTTL, Oct. 20, page 4).

Meanwhile, the European Commission Nov.26 adopted new negotiating proposals aimed at helping get the Doha talks back on track. The paper recognizes that the EU has already conceded that the so-called Singapore issues are not likely to be part of final deal. It partially adjusts EU demands on geographical indications, keeping its main goal of extending protection beyond wine and spirits, but offering flexibility on creation of a multilateral registry of names. The commission also said it is willing to accept a political solution to the link between trade and environment instead of insisting on specific links to trade rules

COURT SENDS SEMICONDUCTOR REMAND BACK TO ITA AGAIN

The International Trade Administration (ITA) still hasn't satisfied a remand order directing it to justify its administrative review decision in the antidumping case against dynamic random access memory semiconductors from Korea. For the second time, Court of International Trade (CIT) Judge Gregory Carman has remanded the case back to ITA, complaining that its use of hypotheticals and theories did not provide substantial evidence to support its redetermination.

The second remand order Nov. 24 told ITA to reconsider its findings regarding the change in the way chip maker Hynix accounted for research and development and whether its semiconductor business benefitted from R&D for other products. Carman also ordered the agency to explain better why it rejected Hynix's claim for the average useful life (AUL) for its semiconductor manufacturing equipment.

ITA used a hypothetical argument to disallow Hynix's change in accounting methods from the expensing of R&D to the amortization of R&D. "The court finds that Commerce's use of hypotheticals, generalizations as to why companies may choose one accounting method over another, and conditional language suggesting possible distortions in antidumping calculations offer conjecture rather than a reasoned explanation founded on substantial evidence for its decision to reject plaintiff's amortized costs in this case," Carman wrote (Slip Op. 03-152).

He also disagreed with ITA's finding that semiconductors benefitted from R&D for other products. "Commerce reiterated its theory of the existence of cross-fertilization in the semiconductor industry," Carman noted. "This is not substantial evidence," he asserted.

Carman also questioned why ITA would not to accept Hynix's AUL calculation for its production equipment in this administrative review but accepted them in a previous review. ITA rejected an appraisal submit by Hynix in Korean because it was not fully translated into English. Carman, however, pointed out that the agency's review instructions called for translations of only "pertinent portions" of non-English documents.

COMMERCE, USTR REORGANIZES INDUSTRY ADVISORY COMMITTEES

Commerce and the U.S. Trade Representative's Office apparently believe that the way to reform the industry advisory committee system is to change the names of the committees. In a joint statement Nov. 25, they announced the restructuring of the committees in response to a General Accounting Office (GAO) report that criticized the old structure for not giving advisors enough policy direction and not matching the committees with the current U.S. economy.

Commerce and the USTR's office have decided to shuffle the 17 Industry Sector Advisory Committees (ISAC) into 16 new Industry Trade Advisory Committees (ITAC). In some cases, the names don't even change or two or more ISACs are combined into one new ITAC.

ISAC 1 (aerospace equipment) becomes ITAC 1(aerospace equipment). ISAC 2 (capital goods) is transformed into ITAC 2 (automotive equipment and capital goods). ISAC 3 (chemicals and allied products) is expanded into ITAC 3 (chemicals, pharmaceuticals, health/science products and services). ISAC 4 (consumer goods) remains ITAC 4 (consumer goods). ISAC 5 (electronics and instrumentation) merges with several groups into ITAC 8 (information and communications technologies, services and electronic commerce). ISAC 6 (energy) becomes ITAC 6 (energy and energy services). ISAC 7 (ferrous ores and metals) is now ITAC 12 (steel). ISAC 8 (footwear, leather and leather products) is eliminated.

ISAC 9 (building products and other materials) joins ISAC 11 (nonferrous ores and metals) in a new ITAC 9 (nonferrouse metals and building materials). ISAC 10 (lumber and wood products) becomes ITAC 7 (forest products). ISAC 12 (paper and paper products) disappears. ISAC 13 (services) grows into ITAC 10 (services and financial industries). ISAC 14 (small and minority business) is renumbered as ITAC 11 (small and minority business). ISAC 15 (textiles and apparel) is transformed into ITAC 13 (textiles and clothing). ISAC 16 (transporation, constuction and agriculture equipment) is dissolved, with its function presumably shifted to ITAC 2. ISAC 17 (wholesaling and retailing) gets a new name as ITAC 5 (distribution services). Industry Functional Advisory Commitee (IFAC) 1 (customs matters) is now ITAC 14 (customs matters and trade facilitation). IFAC 2 (standards) is renumbered as ITAC16 (standards and technical trade barriers). IFAC 3 (intellectual property rights) keeps same name as ITAC 15. IFAC 4 (electronic commerce) is merged with ITAC 8.

CONFUSION MARKS POST-MIAMI VIEWS ON FTAA DECLARATION

Just a week after Western Hemisphere trade ministers met in Miami, the vagueness of the declaration they issued is already causing confusion and disagreement over the meaning of their instructions for the conclusion of an accord on Free Trade Areas of the Americas (FTAA)(see WTTL, Nov. 24, page 2). Officials disagree over whether countries will be able to "opt in" or "opt out" of specific parts of the agreement and whether countries that don't participate in all of the pact will still be able to benefit from all benefits offered in the final deal.

Out of the Miami meeting also has come a new demand from Latin American countries that they should receive some "compensation" if the FTAA doesn't include any reduction of domestic farm support in the U.S. Washington has insisted the issue of domestic subsidies must be negotiated in the WTO Doha Round and not in the FTAA. Latin nations want some offset or alternative benefit for not getting concessions in this area.

Some of the post-Miami confusion stems from conflicting language in the Miami ministerial declaration, which recognized that countries "may assume different levels of commitment" while also calling for "a common and balanced set of rights and obligations applicable to all countries." U.S. officials contend this means nations can agree to greater disciplines than will be imposed by the final FTAA. Some Latin American nations, especially Brazil, have argued this flexibility means a country doesn't have to meet all the commitments in the final accord.

"The most important flexibility is the opportunity for countries that wish to go beyond what is the consensus among 34 to have the explicit option to do so," said Ambassador Ross Wilson, the chief U.S. negotiator in the FTAA talks. "Not all countries are going to be prepared to agree or are likely to agree to the same kinds of provisions," he conceded.

But Wilson disagreed with assertions that any FTAA provisions that all 34 nations can support will have a very low threshold of commitments. "That's not what we think, and to the extent we discussed common rights and obligations with other countries, and it was not a very in depth conversations in Miami, that's not the way others think," Wilson argued.

The U.S. doesn't think this issue will be decided until the very end of negotiations. "Our intention in Miami was that that set of issues ultimately will be a set of issue we will deal with at the end of the day and not to get into an overly structured conversation about those sets of issues before it is necessary to do so," he told reporters Nov. 25.

CHINESE DISSIDENT CHARGED WITH VIOLATION OF EXPORT CONTROLS

One of the two charges to which former Chinese dissident Zhan Gao pleaded guilty Nov. 26 was the violation of the Export Administration Regulations (EAR) for exporting 80 Intel MG80486 DX2-50 microprocessors to China National Electronics Import and Export Company in Nanjing, China, without a license from BIS. The case against Zhan began with a tip to Customs in the fall of 2000 from a firm that refused to sell her the chips because its inquiry into her credentials failed to confirm that she worked for a university as she claimed.

Zhan and her husband also pled guilty to tax evasion. As part of her plea agreement she agreed to forfeit approximately $505,251 from the money she got paid for the microprocessors. She also agreed to be subject to a final sentence under the Federal Sentencing Guidelines for an offense level of 22 with a three-point deduction to level 19 "for acceptance of responsibility" for her actions. (Editor's Note: Copies of information, plea agreement and statement of facts will be sent to WTTL subscribers on request).

* * * BRIEFS * * *

STEEL: U.S. trading partners have agreed to nine day extension of time until Dec. 15 for WTO to approve sanctions against U.S. for safeguard measures against steel. This has raised speculation that President Bush will announce future of steel tariffs at any moment (see WTTL, Nov. 17, page 2).

BIS: Mark Foulon has been named deputy under secretary. He comes to BIS from State where he was member of key policy planning staff and senior speechwriter for Secretary Powell. He previously worked for McKinsey & Co. and was aide to Sen. Bill Bradley. He is graduate of Yale and Oxford and was a Rhodes Scholar.

EXPORT ENFORCEMENT: BIS imposed fines on German and Luxembourg firms for exporting various industrial items to Iran from 1998 to 2002 without Office of Foreign Assets Control licenses under Iran Transactions Regulation. Same individual, Ahmad Katani, serves as managing director of Ahwaz Steel Commercial & Technical Services of Germany, which agreed to pay $50,000 civil fine, and partner in Metal & Mineral Trade, SARL, of Luxembourg, which paid $35,000 fine. Both firms were denied export privileges for five years, with last three years suspended on condition that they comply with export rules. Firms made 11 exports to Germany that actually were diverted to Iran. They were charged with shipping mining equipment, electric motors, vehicle spare parts, rotary hammers and computer components.