Chinese National Convicted of Attemping to Export Thermal-Imaging Cameras to China

Earlier this week, a federal jury in Los Angeles, California convicted Zhi Yong Guo, a resident of China, of conspiracy and exporting and/or attempting to export thermal-imaging cameras to China without the required Commerce Department export licenses.

Guo's accomplice, Tah Wei Chao, also a Chinese national, previously pleaded guilty to one count of conspiracy and two counts of exporting and/or attempting to export restricted items.

According to the Justice Department, in March 2008 Chao ordered 10 thermal-imaging cameras (classified as ECCN 6A003 on the Commerce Control List) from FLIR Systems, Inc. for $53,000. Representatives from FLIR Systems repeatedly warned Chao that the cameras could not be moved outside of the United States without an export license issued by the Department of Commerce. Both Chao and Guo were arrested at Los Angeles International Airport in April 2008 after authorities recovered the 10 cameras that had been hidden in their suitcases, stuffed in shoes and concealed in clothing. Each of the cameras had a warning sticker stating: “This product is an export controlled item. Authorization by the U.S. Government must be obtained prior to any shipment outside of the United States.”

In addition to the 10 cameras intercepted by federal authorities at LAX, Chao admitted that, acting on Guo's behalf, he shipped three cameras to China in October 2007. The evidence presented during the at trial showed that Guo, an engineer and a managing director of a technology development company in Beijing, directed Chao to obtain the cameras for Guo’s clients, the Chinese Special Police and the Special Armed Police.

Guo is scheduled to be sentenced by Judge Walter on May 11. Chao, who faces a statutory maximum penalty of 60 years in prison, is scheduled to be sentenced on March 16.

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Omnibus Spending Bill Passed by House Makes Changes to Cuba Policy

The House of Representatives today passed by a vote of 245-178 H.R. 1105, the $410 billion Omnibus Appropriations Act of 2009, to fund much of the government for the remainder of fiscal year 2009.

The omnibus appropriations bill makes several changes with respect to Cuba policy. Section 620 of the bill contains language that would amend the Trade Sanctions Reform Act to permit persons to travel to Cuba to market and sell agricultural and medical products under a general license, rather than pursuant to a specific license. Sections 621 and 622 of H.R. 1150 would defund enforcement of the 2005 Bush Administration changes to the rules governing "cash in advance" payments of agricultural sales and travel to visit family members in Cuba.

The bill would also appropriate $83,676,000 to the Bureau of Industry and Security, of which of which $14,767,000 must be used for "inspections and other activities related to national security."

The bill now goes to the Senate, where considerable debate is expected over the bill's high price and numerous earmarks.

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France, Germany and UK Preparing Additional Sanctions on Iran

Thursday's Financial Times reports that Germany, France and the United Kingdom have prepared a list of 34 Iranian entities and 10 individuals that could be subject to trade sanctions.

According to the article, the names on the list are "allegedly linked to Iran’s covert nuclear or biological weapons programmes" and some of the entities, such as Bank Tejarat, already appear on the U.S. Treasury Department's Specially Designated Nationals List and on the list of Iranian entities subject to U.N. sanctions.

The article also notes that several EU countries, including Greece, Cyprus, Spain, Austria and Sweden are opposed to the additional sanctions.

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House Science and Technology Committee Holds Export Controls Hearing

Today the House Committee on Science and Technology held a hearing to review the impact of current export control policies on U.S. science and technology activities and competitiveness. Witnesses and Members of the Committee also discussed the findings and recommendations of the National Academies’ study, Beyond “Fortress America”: National Security Controls on Science and Technology in a Globalized World.

During the hearing, the panel of witnesses unanimously agreed that the current system of U.S. export control policies, under the International Traffic in Arms Regulations (ITAR) and the Export Administration Regulations are outdated and must be reformed.

In his opening statement, Committee Chairman Bart Gordon (D-TN) said that the "nation’s export controls system . . . were put into place to help protect America’s sensitive technologies from falling into the hands of those who might do harm to this nation. In short, export controls were supposed to help strengthen our national security. However, in recent years there has been a growing chorus of concern about some of the unintended consequences of the current system of export controls for both the nation’s competitiveness in the global economy and for the nation’s science and technology enterprise."

Ranking Member Ralph Hall (R-TX) said that "export controls are crucial and necessary to prevent the proliferation of militarily-useful technologies from falling into the wrong hands, and it’s critically important that we continue, to the best of our abilities, to deny the transfer of these technologies to our adversaries.” He noted, however, that "in today’s global marketplace, it’s equally important that export control regulations recognize technologies that are no longer ours alone to control, and to permit the rapid sharing of emerging R&D technologies with our friends and allies. It is clear to me that the current export control regime fails to meet these standards.”

Representative Dana Rohrabacher (R-CA) noted that "everyone agrees ITAR reform needs to happen. We need to make sure that our hi tech exports aren't strangled by regulations. On the other hand, we need to remain vigilant that our advanced technology doesn't end up in the hands of nations who proliferate weapons of mass destruction. We know exactly who these nations are, and we must make absolutely sure that whatever changes we enact to ITAR and other export regulations, that these scofflaw and rogue nations are barred from receiving our high tech systems." He added that "we can make sensible changes to ITAR and other export regulations, but we must not go so far as to make them at the expense of our national security. Let us reward our friends with openness in trade; and conversely let us be as single-minded as possible in stopping items from the United States Munitions List . . . from falling into the hands of the Peoples Republic of China and other proliferators.

In his testimony, Lt. General Brent Scowcroft, USAF (Ret.), who served as Co-Chair of the Beyond “Fortress America” report, said:

Because science and technology research, development and production have become a global enterprise, the “Fortress America” approach of current controls cuts us off from information and technologies that we need for our national security. If we sustain these export control and visa barriers, we will increasingly lose touch with the cutting edge of science and technology, and we risk missing emerging national security threats.

He also noted that if the reforms proposed in Beyond “Fortress America” are not implemented then:

the [current export controls] system will continue to bog down, with multiplying negative effects to our national security and competitiveness. There will be nothing to prevent the continued erosion of our defense industrial base; the loss of market-share globally in advanced technologies; the off-shoring of knowledge intensive jobs; the bureaucratic wrangling among the agencies to name a few.

In his testimony, Major General Robert Dickman, USAF (Ret.), the Executive Director of the American Institute of Aeronautics and Astronautics (AIAA), said that current U.S. trade and visa policies are adversely affecting America's national security and economic security, by stifling innovation, reducing core sector competencies, weakening the space industrial base and diminishing American competitiveness in the global marketplace.

Dickman also said that "U.S. trade and visa policies put in place to provide additional layers of national security are having severe and long-term effects on advanced systems technology sectors and the professional workforce that serves them." He pointed out that the current trade rules have made the U.S. space research sector more risk adverse, due to the cumbersome certification protocols mandated by current law.

While the House International Relations Committee has primary jurisdiction over export control matters, the House Science and Technology Committee will play an important role in shaping future U.S. export controls policy.

The complete written testimony of all the witnesses at today's hearing can be found here.

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Invitation to Atttend Networking Reception Prior to BIS Export Controls Program in Newport Beach, California

Persons attending the Bureau of Industry and Security's Annual Export Control Forum in Newport Beach, California from March 16-17 are invited to attend a networking reception that will be held on March 15 from 6-9 p.m. at the Radisson Hotel located at 4545 MacArthur Boulevard, Newport Beach, CA 92660.

The reception, whose sponsors include J.P. Morgan, Chase and The Export Practitioner in cooperation with BIS and the U.S. Commercial Service, will allow trade compliance professionals an opportunity to connect with industry and government counterparts over complimentary appetizers and beverages.

Contact Matt Cunningham at JPMorgan (matthew.p.cunningham@jpmchase.com or 303-532-3833) to RSVP for this event.

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CITS to Celebrate 20th Anniversary; Announces Spring 2009 Export Control Academy

The University of Georgia's well-respected Center for International Trade and Security (CITS) will be celebrating its 20th Anniversary on March 18, 2009.

The event, which will be held in Athens, Georgia, will consist of panels regarding strategic trade control issues, the status of global nonproliferation, and the importance of continued work in the field. Dr. Mohamed ElBaradei, Director General of the International Atomic Energy Agency (IAEA) and other experts will participate. The celebration will also include friends, colleagues and stake-holders of CITS. For more information, contact CITS at 706-542-298

The CITS also announced that the Spring 2009 session of the Export Control Academy will take place from April 13-24, 2009. The Export Control Academy consists of two week-long topical sessions on international export control issues. Click the following links for the Export Control Academy's agenda and course curriculum.

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House Committee to Hold Export Controls Hearing

The House Science and Technology Committee will hold an export controls hearing on February 25, 2009. The hearing, entitled "Impacts of U.S. Export Control Policies on Science and Technology Activities and Competitiveness" will feature the following witnesses:

• Lt. General Brent Scowcroft (USAF, Ret.), President, The Scowcroft Group
  

• Mr. A. Thomas Young, Lockheed Martin Corporation (Ret.)
  

• Professor Claude Canizares, Vice President for Research and Associate Provost, Massachusetts Institute of Technology

The hearing will be held from 10 a.m to noon in room 2318 of the Rayburn House Office Building.

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Society of Corporate Compliance and Ethics Release Benchmarking Survey on Third Party Controls

The Society of Corporate Compliance and Ethics (SCCE) has released the results of a benchmarking survey finding that despite the proliferation of third party relationships in business, relatively few companies set ethics and compliance expectations on the companies that they rely on to act on their behalf.

The SCCE survey found that only about half of companies (47%) disseminate their internal employee code of conduct to third parties. Just 26% require that third parties certify to their codes of conduct, and only 17% of organization have a code of conduct that is applicable to third parties.

The survey data comes from research fielded by the SCCE in January 2009 among compliance and ethics professionals at private, public, non-profit and governmental institutions. More than 400 responses to the survey were filed.

"Companies have really stepped up their activities internally when it comes to compliance and ethics," said SCCE CEO Roy Snell. "But we're just not seeing the same level of commitment by companies when it comes to managing third parties. There's a great deal of risk there, as [recent FCPA] cases have shown. Companies risk both wrong doing occurring on their behalf, and substantial liability that might have been mitigated by a more rigorous approach."

The complete survey can be accessed here (free registration required).

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Census Issues Amended Foreign Trade Letter Clarifying Shipments to International Waters

The Census Bureau's Foreign Trade Division has issued an amended version of its December 3, 2008 Foreign Trade Letter No. 3 explaining the requirement for filing Electronic Export Information (EEI) through the Automated Export System (AES) for shipments located in international waters, including offshore oil rigs and drilling platforms.

The revised version of FTR Letter No. 3 clarifies the scope of U.S. territory for AES filing purposes as follows:

U.S. territory includes the U.S. territorial sea, which extends 12 nautical miles measured from the baselines of the United States. A shipment made within the U.S. territorial sea would not be considered an “export.” The U.S. territory also includes the continental shelf, which, in some cases, extends more than 12 miles from the baseline. As such, shipments to vessels, platforms, or buoys attached permanently or temporarily to the U.S. continental shelf also would not generally be considered exports. The territory of foreign countries would also generally include the territorial seas and continental shelf of those countries.

Under this interpretation, any shipment to an offshore oil platform or vessel located outside U.S. territory involving commodities valued greater than $2,500 per Schedule B number would require the filing of Electronic Export Information.

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Stimulus Bill Contains Overlooked "Buy American" Provision Covering DHS Uniforms, Body Armor and Textiles

While a great deal has been written on the "Buy American" provision in the stimulus bill (Section 1605 of H.R. 1) that covers iron, steel, and manufactured goods, it turns out that the bill also contains another "Buy American" provision that applies to uniforms, body armor and other textile products purchased by the Department of Homeland Security.

Section 604 of Title VI of H.R. 1, which covers the Department of Homeland Security (DHS), states that DHS may not procure certain "covered items" if they are not "grown, reprocessed, reused, or produced in the United States." The definition of covered items includes those "directly related to the national security interests" of the U.S. and covers a wide variety of items including clothing, bags, protective equipment (such as body armor), parachutes, bandages and any item of equipment manufactured from or containing "fibers, yarns, fabrics, or materials." While the provision contains some exceptions, such as when the items are not available in the U.S. or if the non-compliant fibers do not exceed 10% of the total purchase price, it requires any exceptions to be posted on the FedBizOpps.gov web site.

Consistent wiht the language added to the "Buy American" provision in section 1605 of the the stimulus bill, section 604(k) states that this provision "shall be applied in a manner consistent with United States obligations under international agreements."

Interestingly, the provision requires the Secretary of Homeland Security to "ensure" that DHS employees that acquire textile products receives training in FY 2009 on this new requirement and that any new training programs includes "comprehensive information" on this new requirement.

This provision, which will require uniforms worn by employees of the Transportation Security Administration, U.S. Customs and Border Protection, the U.S. Border Patrol, the Coast Guard and other DHS units, was sponsored by recently elected Congressman Larry Kissell (D-NC).

While this "Buy American textiles" language was included in the House version of the stimulus billl, it was not included in the version of the bill passed by the Senate. The language was included in the final version of the bill that was agreed to by the Conference Committee and signed today by the President.

The text of section 604 can be found on page 126 of Section A of the PDF version of H.R. 1 that can be found here: http://thomas.loc.gov/home/h1/Recovery_Bill_Div_A.pdf (this is a large file).

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Philadelphia Area Chemical Engineer Found Guilty of Violating Iran Sanctions

A federal jury in Philadelphia this past Friday convicted a chemical engineer who holds a Ph.D from Stanford University of a number of crimes relating to doing business with Iran.

Dr. Ali Amirnazmi, founder and president of Exton, Pennsylvania-based TranTech Consultants Inc. was found guilty of one count of conspiracy to violate the International Emergency Economic Powers Act (IEEPA), three counts of violating IEEPA, three counts of making false statements to federal officials and three counts of bank fraud.

According to TranTech's website, Dr. Amirnazim is the inventor of ChemPlan, a database/software decision support system for the chemical process industry.

The Justice Department alleged that Amirnazmi, a citizen of the U.S. and Iran, participated in illegal business transactions with Iran between 1996 and 2008. Amirnazmi also allegedly engaged in investments with companies located in Iran, including a chemical company controlled in whole or in part by the government of Iran.

The jury convicted Amirnazmi of lying to the Treasury Department's Office of Foreign Assets Control (OFAC), the FBI and the Internal Revenue Service (IRS) about business deals with Iran in an attempt to cover up that illegal activity. Amirnazmi also allegedly submitted false tax returns to several banks in order to secure loans for which he would not have qualified.

Amirnazmi faces a maximum sentence of 80 years in prison and a $4 million fine when he is sentenced later this year.

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Maryland Woman Accused of Exporting Canadian UAV Autopilots from U.S. to China

The Associated Press reports (story below) that a Silver Spring, Maryland woman has been charged with exporting Canadian manufactured miniature autopilots for unmanned aerial vehicles (UAV) and micro aerial vehicles (MAV) from the U.S. to China. The miniature autopilots were produced by Manitoba-based MicroPilot and exported to the U.S.

While we have not yet seen the indictment, guidance or control systems specially designed for integration into non-military UAVs that are capable of a maximum range of at least 300 kilometers are classified on the Commerce Control List as ECCN 9A012.b. and controlled for export from the U.S. for National Security, Missile Technology and Anti-Terrorism reasons.

Exports of products "subject to" the U.S. Export Administration Regulations (EAR) and that are classified as ECCN 9A012.b. require an export license from the Commerce Department's Bureau of Industry and Security before they can be exported from the U.S. to China. Canadian products located in the U.S. are "subject to" the U.S. Export Administration Regulations.

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Text of Buy American Provision in Stimulus Bill Finalized; 60 Minutes Reports on Retaliation Concerns

The following is the final text of the "Buy American" provision in H.R. 1, the stimulus bill that passed the House and Senate late last week and is expected to be signed into law by the president on Tuesday. H.R. 1 is formally known as the American Recovery and Reinvestment Act of 2009.

BUY AMERICAN

SEC. 1605. Use of American Iron, Steel and Manufactured Goods

(a) None of the funds appropriated or otherwise made available by this Act may be used for a project for the construction, alteration, maintenance, or repair of a public building or public, unless all of the iron, steel, and manufactured goods used in the project are produced in the United States.

(b) Subsection (a) shall not apply in any case or category of cases in which the head of the federal department or agency involved finds that --

(1) applying subsection (a) would be inconsistent with the public interest;

(2) iron, steel, and the relevant manufactured goods are not produced in the United States in sufficient and reasonably available quantities and of a satisfactory quality; or

(3) inclusion of iron, steel, and manufactured goods produced in the United States will increase the cost of the overall project by more than 25 percent.

(c) If the head of a Federal department or agency determines that it is necessary to waive the application of subsection based on a finding under subsection (b), the head of the department or agency shall publish in the Federal Register a detailed written justification as to why the provision is being waived.

(d) this section shall be applied in a manner consistent with United States obligations under international agreements.

The Conference Report on H.R. 1 clarifies the intended use of this provision as follows:

Section 1605 provides for the use of American iron, steel and manufactured goods, except in certain instances. Section 1605(d) is not intended to repeal by implication the President's authority under Title III of the Trade Agreements Act of 1979. The conferees anticipate that the Administration will rely on the authority under 19 U.S.C. 2511(b) [of the Trade Agreements Act of 1979] to the extent necessary to comply with U.S. obligations under the WTO Agreement on Government Procurement and under U.S. free trade agreements and so that section 1605 will not apply to least developed countries to the same extent that it does not apply to the parties to those international agreements. The conferees also note that waiver authority under section 2511(b)(2) has not been used.

Last night's 60 Minutes report on the "Buy American" provision, which focused on Nucor Steel and Caterpillar, is below:

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Census and U.S. Commercial Service Offering Export Compliance Webinars

The U.S. Census Bureau and the U.S. Commercial Service are offering a series of Export Compliance Webinars from February 17, 2009 throughMarch 5, 2009.

The webinars are designed to educate the exporting trade community on the Foreign Trade Regulations. All webinars will be held from 2:00 - 3:00pm ET with a cost of $50.00 per module.

Webinar topics will be divided into the following five modules:

February 17 Filing Requirements
February 19 Export Commodity Classification
February 24 AES Overview
February 26 How to Use AESPcLink
March 5 CBP's Enforcement Guidelines

The Census Bureau's Foreign Trade Regulations, that were issued on June 2, 2008, require all Electronic Export Information (formerly known as Shipper's Export Declarations or SEDs) be filed via the Automated Export System (AES) prior to the departure of the cargo from the U.S.

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A New Era For Export Controls?

The February edition of the American Machinist magazine contains an opinion piece on the challenges the Obama Administration faces in the area of export controls and international technology transfers. The article was written by Paul Freedenberg, Vice President of Government Relations of the Association of Manufacturing Technology. Mr. Freedenberg served as the Commerce Department's first Under Secretary for Export Administration.

Freedenberg writes:

Study after study over the past two decades has called for reform of the U.S. export control structure. Yet it still remains the slowest, the least predictable, and the most restrictive export control system in the world.

But many in our industry, particularly those who make items such as five-axis machine tools and carbon fiber manufacturing equipment, will say that the U.S. policy is one of unilateral control, denying or delaying for inordinate amounts of time, export licenses for their products.

This has seriously undermined our reputation for reliability, not only with regard to controlled products. It has hurt our reputation in non-controlled industrial products as well.

He concludes by noting that:

With a new Administration, it is time for a re-evaluation of the costs and benefits of our export control policy. It is apparent that we are setting an example of self restraint that none of allies are willing to follow.

A new Commerce Department “foreign availability” study of five-axis machine tools is due to be released soon. It is likely to make the points that I am making here. The Obama Administration ought to use it as a guide for redesigning the export control structure to fit the 21st Century.

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BIS Issues Notice on Transfer of Export Licenses

The Bureau of Industry and Security (BIS) today issued the following notice reminding exporters about their responsibilities in cases involving the transfer of export licenses, such as when the party listed on the license no longer exits due to a merger or acquisition.

The full text of BIS's notice is as follows:

Under the Export Administration Regulations (EAR), BIS issues individual export licenses to parties. In some instances, ownership of the party/licensee changes due to mergers and acquisitions. This may result in a change to the license if the party to whom the license was issued no longer exists, or is no longer engaged in exporting.

The EAR contain a procedure under Section 750.10 that provides for the transfer of export licenses in such circumstances. Persons planning corporate mergers, transfers, or acquisitions should consider whether any existing export licenses will need to be transferred and should consult Section 750.10(b) which provides detailed instructions.

Please note that the transfer of an export license must be requested by the licensee, therefore, any request for a transfer of a license that is the result of a corporate transaction in which the licensee will cease to exist as a legal entity must be made prior to the licensee ceasing to exist.

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Professor Convicted of Violating Export Control Laws Requests New Trial

The Knoxville News Sentinel reported today that convicted University of Tennessee Professor J. Reece Roth, who was found guilty of violating the Arms Export Control Act in September 2008, has filed a motion requesting a new trial on grounds that the judge hearing the case refused to allow jurors to consider the "ignorance of the law" defense.

The article quotes that motion as stating:

"The evidence showed that (Roth) had a fundamental misunderstanding of the Arms Export Control Act and its regulatory scheme." * * * "(Roth's) belief although mistaken that he understood the law was used by the government to show (Roth) disregarded the law. Had the jury been instructed on the ignorance of the law (defense), the jury would have likely returned a verdict of not guilty."

The Assistant U.S. Attorneys handling the case countered the defendant's argument by noting that the "majority view (of courts weighing in on the issue) is that a willful violation occurs where a defendant knows his or her conduct violates the law."

Roth's sentencing hearing, which was originally set for January 7, 2009, is now scheduled for February 18th.

[February 10, 2009 Update: A loyal and well informed reader advised that Roth's defense team filed the Rule 29 Motion for Acquittal and new trial several months ago, but the story was just picked by the Knoxville News Sentinel. It also appears that Roth's sentencing will be postponed until March.]

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India Balks at U.S. End-Use Monitoring Requirements for Defense Sales

Defense News has reported that the Government of India has advised U.S. officials that India will not accept the standard End-Use Monitoring (EUM) requirements required by Section 40A of the Arms Export Control Act.

The article states:

Several Indian Defence Ministry officials said privately that New Delhi will not comply with EUMs and other export-control limitations that Washington requires of its weapon customers. They said the government has promised on several occasions not to share U.S. weapon technology with other countries. But they said India will not be told how and where to operate the equipment it buys for its own military.

Among the limitations they cited were the EUM, which would allow U.S. officials to block retransfers of the planes; the Communications and Information Security Memorandum of Agreement, which guides the sharing of sensitive information between two nations; and the Logistics Supply Agreement, which regulates things such as logistics support and fuel for fighter jets and naval warships.

A Defense Security Cooperation Agency (DSCA) spokesman is quoted as saying that the "agency has no plans to change EUM requirements or exempt any country."

The value of U.S. defense sales to India is "is set to soar from tens of millions of dollars to billions this year."

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CPSC Delays Testing and Certification Requirements for Consumer Products

As a result of substantial confusion regarding the Consumer Product Safety Act's new certification requirements, the Commission Product Safety Commission (CPSC) announced in today's Federal Register that it will postpone for one year, until February 10, 2010, the new certification and testing requirements applicable to imported and domestically manufactured consumer products that were required by the Consumer Product Safety Improvement Act of 2008.

The CPSC's testing and certification requirements were published by the CPSC in the Federal Register on November 18, 2008.

The notice states that the CPSC received literally thousands of email, telephone, and written inquiries as to how to comply, when to comply, what is required in support of the various certifications, what form the required certificates must take, and who must issue them.

While the CPSC's decision leaves in place previous certification requirements applicable to certain products and does not affect the new testing and certification applicable to certain children's products, this decision will delay for one-year the certification and testing requirements for most imported and domestically produced consumer products.

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Website Established to Identify Companies Doing Business in Iran

The American Coalition Against Nuclear Iran, recently launched the "Iranian Business Registry" (IBR) website, listing the names of companies around the world that do business in Iran.

The site, which is operated by the United Against Nuclear Iran (UANI) program, is intended to "educate investors, policymakers, and activists about companies reported to be doing business in Iran at this key moment when Iran finds itself uniquely susceptible to financial pressure."

The site includes the company name, the nationality of the company and the ticker symbol for publicly traded companies. The site also includes a Wall Street-style "ticker" containing the listed company names and ticker symbols. The companies are also organized by industry.

According to the site, the data on the companies to include in the IBR was collected from:

a wide variety of reports from major media outlets, trade publications, the government and respected academic sources on business activity in Iran. Additionally, certain sources were located on publicly available company websites and filings; all sources are cited and are available to the public. All sources appear with thorough citations and are not meant to be a complete history of the listed company or its business in Iran but rather examples of their reported business in Iran.

It appears that one of the sources of information was the Securities and Exchange Commission's controversial "List of Companies Doing Business With State Sponsors Of Terror", which was removed by the SEC in mid-2007. The SEC's list was subsequently withdraw after it was widely criticized as containing misleading and inaccurate information.

The site notes that "listings will be added, removed, or edited at the sole discretion of UANI and factors in determining listings include the credibility of the reporting organization, the nature of the report, and the company’s reported history of business in Iran."

Unfortunately, the site does not appear to distinguish those U.S. multinational companies that may be legally operating in Iran, such as pursuant to humanitarian licenses issued by the Treasury Department's Foreign Assets Control (OFAC), from other types of businesses operating in Iran. In the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA), Congress exempted from sanctions certain agricultural products, medicines and medical devices. Based upon a review of the companies listed, it appears that several of the companies listed produce humanitarian products eligible for OFAC licenses. In at least one case, for example, a listed company sells medical diagnostic kits.

Fortunately, the site provides information for listed companies to notify the sponsor where the information provided is inaccurate and allows companies to post a response to the allegations contained on the site.

Companies are encouraged to check the Iranian Business Registry to ensure that the information provided is accurate.

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Next NCITD Meeting to Feature Speakers from DTSA, CBP and National Academies

The next meeting of the National Council on International Trade Development (NCITD) will take place on Wednesday, February 11, 2009 in Washington, DC and will feature the following speakers:

• Michael Laychak, Licensing Director,Defense Technology Security Administration (DTSA)
  Topic: ITAR Exemptions and Department of Defense Initiatives

• John Jurgutis, Chief Program Manager, Secure Freight Initiative (SFI), Customs and Border Protection, Department of Homeland Security
  Topic: Importer Security Filing Requirements ("10 +2")

• Patricia Wrightson, Ph.D., Director, Committee on Scientific Communication and National Security, Policy and Global Affairs Division, National Academies National Research Council
  Topic: "Beyond Fortress America: National Security Controls on Science and Technology in a Globalized World" (recent report and recommended changes to U.S. export control laws)
  

For information on how to join NCITD or to attend the meeting, see www.ncitd.org or contact the NCITD Secretariat at 202-872-9280.

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Nucleonics Week Reports on U.S. Supreme Court's Antidumping Decision

A recent edition of Nucleonics Week [pdf], a leading source of news for the commercial nuclear power business, contains a detailed report on the Supreme Court's recent antidumping decision in United States v. Eurodif S.A., et al. , [pdf] cases involving the imports of low enriched uranium (LEU). In that case, the Supreme Court unanimously held on January 26, 2009 that LEU produced through "separative work unit" (SWU) enrichment contracts are goods and subject to U.S. antidumping duty laws.

In addition to analyzing and discussing the ramifications of the Court's decision, the Nucleonics Week article describes the varied reaction to the decision in the U.S. and abroad.

Importantly, the article notes that this case is far from over. The article quotes counsel for Areva, the current owner of Eurodif, as saying that:

"[The Eurodif] case that the Supreme Court took was only one of a group of related cases. The others were put on hold until the underlying goods-versus-services issue was resolved. Areva will continue to challenge a finding by the US International Trade Commission that the US domestic industry was injured by the imports from Areva . . . and Areva also will pursue cases in which it is questioning the specifics of Commerce’s findings in its review of the case. . . "

The article also indicates that the European Commission will closely examine this decision and that the European Court of Justice "ruled in 2006 that separative work is a service, not a good, mirroring the jurisprudence of US courts at the time" and that is likely "that the difference between US and EU jurisprudence on SWU imports would eventually cause “someone” in Europe to challenge the ECJ decision."

The Eurodif article starts in the center on page one of the publication and continues on to pages 11-13.

Editors Note: Nucleonics Week is published 51 times per year by Platts, a division of McGraw-Hill Companies. The linked article is copyrighted and is reprinted by permission.

Full disclosure: Doug Jacobson, the editor of International Trade Law News is quoted in the article.

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Stuart Levey to Continue as Under Secretary for Terrorism and Financial Intelligence

Treasury Secretary Tim Geithner has announced that Stuart Levey will continue as the first Under Secretary for Terrorism and Financial Intelligence, a role he has held since his Senate confirmation on July 21, 2004.

As Under Secretary, Levey oversees the the Office of Foreign Assets Control ( OFAC), the Financial Crimes Enforcement Network ( FinCEN ), the Office of Terrorist Finance and Financial Crime ( TFFC ), the Office of Intelligence and Analysis ( OIA ) and the Treasury Executive Office of Asset Forfeiture ( TEOAF).

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Deloitte Announces Results of Anti-Corruption Report

Deloitte announced today the results of an anti-corruption study of 329 management, finance, strategy and business development professionals from around the world. The study, entitled Fortifying Anti-Corruption in Today's Corporation, indicated that the vast majority of those surveyed (93 percent) believe that an internal investigation should be conducted if a significant incident of corruption were uncovered and 75 percent support zero tolerance anti-corruption policies with strong disciplinary measures, including firing those responsible for corrupt acts.

The study found that only 41% of respondents indicated that senior management should investigate and deal with matters internally or wait to see if there are consequences rather than make a voluntary disclosure to authorities if a significant incident of corruption was uncovered at their organizations.

The study also found the following:

• Fitting in and gaining business are top motivators for bribery by executives. When asked about the top motivators for an executive to pay bribes in their industry, fitting in with local business cultures (33 percent) and gaining more business (40 percent) garnered the most responses. Key Point: It's human nature to be tempted to adjust ones moral compass to the situation.

• Geographic and industry risks are reportedly being addressed by many. While two-thirds of respondents (67 percent) report that their companies adequately address corruption risks in the geographic regions where they do business and 72 percent say their companies' risks are adequately addressed for their industries, 32 percent would prefer that their organizations spend more on anti-corruption programs. Key point: Corporations have made strides in anti-corruption, but more can be done to address corruption risk

• Anti-corruption programs aren't consistently used around the world. Some companies still lack anti-corruption programs, despite the inherent risks. Geographically, 18.2 percent of Middle Eastern and African, 15.8 percent of Eastern European, 9.1 percent of Asia-Pacific, 8 percent of emerging market and 7.7 percent of U.S. business leaders surveyed reported having no anti-corruption program in place. Key point: Multinational companies considering new cross-border partnerships or transactions should include anti-corruption program reviews as part of overall due diligence.

• Tone at the top should set anti-corruption policy. While senior management (39 percent), general counsel (24 percent) and compliance officers (21 percent) were the first groups identified from which executives would seek advice in handling a corruption incident, 61 percent of respondents said that the most effective role for the CEO is to send out a strong signal and remain personally involved in anti-corruption efforts. Key point: Executives expect committed leadership on this issue from the CEO.

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2008 Marked Highest Number of Export License Applications Received by BIS in Past 10 Years

The Census Bureau's most recent AES Newsletter contains the following FY 2008 export licensing statistics and information from the Bureau of Industry and Security (BIS):

In Fiscal Year (FY) 2008, BIS processed 21,290 export license applications involving trade worth approximately $72.2 billion. This marked an increase of 9% over the 19,504 applications processed in FY 2007 and represented the highest number of applications reviewed by BIS in over a decade.

BIS approved 17,942 license applications, returned 3,171 applications without action, and denied 177 applications. In FY 2008, BIS continued to ensure the timely review of all license applications with an average processing time of 27 days.

Eighty-seven percent of AES transactions involving a license or license exception were reported accurately in FY 2008. The following lists the top compliance problems with EAR-related reporting in AES:

1) Incorrect Use of “No License Required” (NLR) License Type.
2) Missing Export Control Classification Number (ECCN).
3) Incorrect Use of EAR99.
4) Invalid Country Use With Commerce Control List (CCL)-Based License Exception.
5) CCL-Based License Exception Not Applicable to an ECCN.
6) Country Mismatch Between License and AES Destinations.

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HTSUS Updated to Reflect Implementation of U.S.-Peru Trade Promotion Agreement

The United States-Peru Trade Promotion Agreement went into on February 1, 2009.

In order to implement the U.S.-Peru Trade Promotion Agreement, the U.S. International Trade Commission has updated the Harmonized Tariff Schedule of the United States (HTSUS).

The Rules of Origin of the U.S.-Peru Trade Promotion Agreement are found in General Note 32 (starts on page 562 of the General Notes) and the special rate of duty column of the HTSUS has been updated to indicate the letters "PE" for products from Peru eligible for the preferential duty rates.

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Congratulations to Jerry Greenwell on Retirement From Census

The front page of the recent edition of the Census Bureau's AES Newsletter contains the following story on Jerry Greenwell's recent retirement from Census after 36 years of government service:

Yes, the rumors are true! Trade Ombudsman Jerome (Jerry) Greenwell retired in early January 2009, after more than 36 years of federal service, all of it in the Foreign Trade Division (FTD) of the U. S. Census Bureau. At the time of this publication, Mr. Greenwell had not announced his future plans, but hoped to continue in the area of export compliance. We congratulate Jerry Greenwell on his retirement and numerous accomplishments, and thank him for many years of excellent service representing the FTD throughout the trade community.

Ms. Dale Dickerson Kelly has been named Assistant Division Chief for Data Collection Programs and Mr. Joe Cortez is now Branch Chief of the Regulations, Outreach, and Education Branch. Along with Jerry Greenwell and Bill Bostic, Ms. Kelly and Mr. Cortez played major roles in the publication of the new FTR published in the Federal Register last year.

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BIS Imposes Denial Orders and Civil Penalties in Cases Involving Unlicensed Exports From U.S. to Taiwan

In a series of four related cases involving the unlicensed exports of chemicals, metals and electronic components from the U.S. to Taiwan, the Bureau of Industry and Security has imposed civil penalties and denial orders on two companies and two individuals involved in the transactions.

The settlement agreements and related documents associated with these case were recently posted BIS's electronic reading room site and three of the four orders will be published in tomorrow's Federal Register.

The cases involved Taiwan-based, Well Being Enterprise Co. Ltd., Elecmat, Inc., Well Being's San Francisco-based affiliate, Theresa Chang, a U.S.-based employee of Elecmat and Hui-Fen Chen, a.ka., Angela Chen, an employee of Well Being Enterprise in Taiwan.

According to BIS, the two companies and two individuals participated in a scheme in which Well Being requested Elecmat to procure a number of controlled chemicals, metals and electronic components classified under Export Control Classification Numbers (ECCNs) 1C227, 1C299, 1C230, 1C231, 1C234, 1C240, 1C350 and 3A201. BIS alleged that Well Being instructed Elecmat not to tell the U.S. suppliers that Elecmat would export the items. Elecmat subsequently procured the items and exported them to Taiwan without the required export licenses.

BIS charged Well Being with 25 counts, Elecmat with 39 counts, Ms. Chen with one count and Ms. Chang with three of violating the EAR and settled the cases as follows:

• Well Being Enterprise Co., Ltd. was ordered to pay a $250,000 civil penalty, of which $220,000 will be suspended if the company commits no further violations for the next five years. BIS also imposed a 20 year denial order against Well Being that prohibits the company and its employees from involvement in transactions involving export from the U.S.
  

• Electmat Inc. received a 20 year denial order.

• Ms. Chen received a 20 year denial order.

• Ms. Chang received a two year denial order. In 2007, Ms. Chang pleaded guilty in a related criminal proceeding to one count of making false statements related to the export of nickel powder to Taiwan without an export license was sentenced to pay a $5,000 fine and three years of probation.

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New Report Hints at Broken Promises and Trouble Ahead for World Trade

Guest Post: The following article was written by Jake Colvin, Vice President for Global Trade Issues at the National Foreign Trade Council, and was recently posted on the Huffington Post. A copy of the report referred to in the article can be found here.

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By Jake Colvin

A report issued by the World Trade Organization reveals that key U.S. trading partners have taken steps to erect new trade barriers and improve the export performance of domestic industries. While the report is relatively sanguine about the effect of protectionist pressures on international trade thus far, the impact on the trading system of countries' responses to the global economic crisis may not be clear for some time and the current trajectory is not encouraging.

The report, dated January 23 and elegantly titled "Report to the TPRB from the Director-General on the Financial and Economic Crisis and Trade-Related Developments," has not been made public by the WTO though it has been circulated to reports and has appeared on at least one website.

It catalogues a range of measures which countries from Korea to Ecuador have undertaken in recent months which either complicate or restrict trade. Russia, for instance, has increased tariffs on automobile imports while Indonesia has restricted the means of entry of imports into the country. Overall, the WTO concludes that,

to date, most WTO Members appear to have successfully kept domestic protectionist pressures under control. There has been only limited evidence of increases in tariffs and non-tariff barriers, or of increased resort to trade-remedy actions.

But the report does not capture the universe of trade-restricting or distorting measures that have occurred or are likely to occur.

Brazil just announced new measures which require importers of motor vehicles, wheat, capital and other goods to obtain pre-approval prior to receiving goods from overseas. Japan and other Asian countries may intervene in currency markets to stem the appreciation of their currencies against the dollar, which will have an effect on global trade flows. In the United States and around the world, new "buy national" provisions are being debated as part of stimulus and recovery packages which, depending on their scope and how they are implemented, may (or may not) violate global trade rules and could encourage other countries to adopt similar policies when crafting their responses to the economic crisis.

In addition, demands continue to mount for new and higher levels of protection. India's decision to raise steel tariffs, for example, has been met with calls by Indian industry for even higher tariffs.

And while the report notes some efforts by countries including China and Argentina to facilitate trade by lowering export taxes, such policies are consistent with a mercantilist mindset -- one which attempts to promote exports and limit imports. In fact, the report notes that while Argentina has lowered export taxes on wheat and corn, it has also enacted new licensing requirements on sensitive products including auto parts, textiles, televisions, toys and leather goods.

The problem with supporting export-oriented growth while limiting imports is that such behavior encourages similar strategies by other countries, in the end leaving all export markets closed and all economies worse off.

This is not the way it was supposed to be. In November, leaders of the G-20 nations met in Washington to develop policies aimed at mitigating the impact of the global financial crisis. At that meeting, as well as at other gatherings like the Asia-Pacific Economic Cooperation forum, world leaders pledged not to put in place new protectionist tariff and non-tariff barriers to trade. Participants in the G-20 meeting agreed that,

We underscore the critical importance of rejecting protectionism and not turning inward in times of financial uncertainty. In this regard, within the next 12 months, we will refrain from raising new barriers to investment or to trade in goods and services, imposing new export restrictions, or implementing World Trade Organization (WTO) inconsistent measures to stimulate exports.

By the WTO's count, six members of the G-20 - Argentina, Brazil, India, Indonesia, Russia, and South Korea -- have already broken this pledge. (The European Commission has announced its intention to reinstate export subsidies for some dairy products from the end of January, a move that would seem to break the G-20 pledge made by France, Germany, Italy and the United Kingdom.)

Backtracking on pledges made at the G-20 threatens to undermine the credibility of the G-20 and the global trading system. President Obama and other leaders will have another crack at committing to an open trading system in London this April, when British Prime Minister Gordon Brown hosts the next G-20 summit. Heads of state should use that meeting, as well as the current discussions in Davos in and around the World Economic Forum, to find new ways to inject confidence into the global trading and financial systems rather than erecting new walls that jeopardize trade and economic growth.

A good start would be to agree to enforce the "no new tariffs pledge" and redouble efforts to conclude the Doha Round of trade negotiations. Both would help bolster confidence in, and the stability of, international markets as well as the credibility of global institutions like the G-20.

We are not yet living in the era of another Smoot-Hawley, the disastrous U.S. tariff act which is widely blamed for deepening the Great Depression, but the world's response to the global financial crisis has yet to develop fully. The steps countries take over the coming months to respond to the global financial crisis will help determine whether the world is destined to learn from or repeat past mistakes.

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