Latest News on Incoterms 2010 and Seminar Schedule

It appears that the new version of Incoterms®, Incoterms 2010, is on track to go into effect on January 1, 2011.

According to Frank Reynolds, the U.S. Delegate to the International Chamber of Commerce's (ICC) Incoterms Drafting Committee, the final version of Incoterm 2010 is likely to be officially approved in mid-September.

According to Mr. Reynolds, the revisions Incoterms 2010 "is massive" and "the number, presentation and definition of Incoterms rules have changed."

The United States Council for International Business (USCIB) has recently established an Incoterms 2010 website (www.incoterms2010.org) and is now accepting pre-orders for the paperback version of the official Incoterms 2010 book. According to the USCIB website, Incoterms 2010 will include:

• 11 Incoterms 2010 (a reduction from the 13 current Incoterms 2000)

• New classification to help choosing the most suitable rule in relation to the mode of transport; 

• Information on security-related clearances for shipments;

• Advice for the use of Incoterms in domestic trade.

To educate U.S. businesses on the new rules, USCIB will offer a series of one-day seminars starting in late September 2010 entitled: ICC Incoterms 2010 for Americans. These seminars are accredited by ICC and will be taught by Frank Reynolds. Attendees will receive a copy of the official ICC Incoterms® 2010 book and a companion book, Incoterms® for Americans®, as well as comprehensive seminar notes. To view the seminar schedule and to register online click here.

The Washington, DC area Incoterms 2010 program will be held on November 4, 2010 in Arlington, VA and will be co-sponsored by the National Council on International Trade Development (NCITD).

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Today's News and Notes

• President Obama will deliver remarks tomorrow morning at the White House on export promotion and the President's Export Council. He is also expected to name Ford Motor Co.'s President and CEO to the President's Export Council.

•  Reuters: "Iran says planes get fuel; EU bans some for safety" (refutes earlier reports that U.S. sanctions were causing countries not to refuel Iranian commercial aircraft)

• An Iranian-Canadian has been convicted of violating Canadian laws for attempting to export goods to Iran that could be used in nuclear technology. Case marks first time that someone in Canada has been prosecuted for violating Canadian laws implementing U.N. sanctions. Canadian Government press release on this conviction can be found here.
  

• New York Times' lead Op/Ed today: Waiting for a Trade Policy from Obama Administration

• Reuters: China denounces new unilateral U.S. sanctions on Iran

• Heritage Foundation Report- "Unfinished Business: The U.S.-U.K. Defense Trade Cooperation Treaty"
  

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President Obama Signs Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010

This evening President Obama signed into law H.R. 2194, the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010. The text of the President's remarks made at the signing ceremony are as follows:

Good evening everyone. As President, one of my highest national security priorities is to prevent the spread of nuclear weapons. That is why my Administration has aggressively pursued a comprehensive agenda on non-proliferation and nuclear security.

Leading by example, we agreed with Russia to reduce our own nuclear arsenals through the new START Treaty—and I’ve urged the Senate to move forward with ratification this year. And with allies and partners, we’ve strengthened the global non-proliferation regime, including the cornerstone of our efforts—the Nuclear Non-Proliferation Treaty.

Now, in the entire world, there is only one signatory to the NPT—only one—that has been unable to convince the International Atomic Energy Agency that its nuclear program is for peaceful purposes. That nation is Iran. For years, the Iranian government has violated its commitments, defied United Nations Security Council resolutions, and forged ahead with its nuclear program—all while supporting terrorist groups and suppressing the aspirations of the Iranian people.

Since taking office, I have made it clear that the United States was prepared to begin a new chapter of engagement with the Islamic Republic of Iran. We offered the Iranian government a clear choice. It could fulfill its international obligations and realize greater security, deeper economic and political integration with the world, and a better future for all Iranians. Or, it could continue to flout its responsibilities and face even more pressure and isolation.

To date, Iran has chosen the path of defiance. That is why we have steadily built a broader and deeper coalition of nations to pressure the Iranian government. Last month, we joined with our partners at the U.N. Security Council to pass the toughest and most comprehensive multilateral sanctions that the Iranian government has ever faced. And I want to thank our tireless Ambassador to the U.N.—Susan Rice.

As I said last month, we will ensure that these sanctions are vigorously enforced. At the same time, we will work with allies and friends to refine and enforce our own sanctions on Iran. And that is exactly what we have been doing. Here in the United States—and thanks to the efforts of Treasury Secretary Tim Geithner—we have imposed sanctions against more institutions and individuals involved with Iran’s nuclear and missile programs.

Other nations are taking action alongside us, such as Australia, which announced new sanctions, including those against a major Iranian bank and Iran’s shipping company. The European Union is moving ahead with additional strong measures against Iran’s financial, banking, insurance, transportation, and energy sectors, as well as Iran’s Revolutionary Guards. Other countries, such as Canada, have indicated they will also be taking action. In other words, we are ratcheting up the pressure on the Iranian government for its failure to meet its obligations.

Today, we’re taking another step—a step that demonstrates the broad and bipartisan support for holding Iran accountable. I am pleased to sign into law the toughest sanctions against Iran ever passed by the United States Congress—the Comprehensive Iran Sanctions, Accountability, and Divestment Act.

I want to thank all the Members of Congress who worked on behalf of this legislation, including Speaker Nancy Pelosi and Representatives Steny Hoyer and Eric Cantor. Although they weren’t able to join us, I want to acknowledge Senators Harry Reid, Jon Kyl and Richard Shelby. And I want to thank those who led the effort to forge a final bill that received overwhelming bipartisan support—Senator Chris Dodd and Representative Howard Berman.

Consistent with the Security Council mandate, this legislation strengthens existing sanctions, authorizes new ones and supports our multilateral diplomatic strategy to address Iran’s nuclear programs. It makes it harder for the Iranian government to purchase refined petroleum and the goods, services and materials to modernize Iran’s oil and natural gas sector. It makes it harder for the Revolutionary Guards and banks that support Iran’s nuclear programs and terrorism to engage in international finance. It says to companies seeking procurement contracts with the United States government—if you want to do business with us, you first have to certify that you’re not doing prohibited business with Iran.

In short, with these sanctions—along with others—we are striking at the heart of the Iranian government’s ability to fund and develop its nuclear programs. We are showing the Iranian government that its actions have consequences. And if it persists, the pressure will continue to mount, and its isolation will continue to deepen. There should be no doubt—the United States and the international community are determined to prevent Iran from acquiring nuclear weapons.

Finally, even as we increase pressure on the Iranian government, we are sending an unmistakable message that the United States stands with the Iranian people as they seek to exercise their universal rights. This legislation imposes sanctions on individuals who commit serious human rights abuses. And it exempts from our trade embargo technologies that allow the Iranian people to access information and communicate freely. In Iran and around the world, the United States of America will continue to stand with those who seek justice and progress and the human rights and dignity of all people.

So, again, this is not a day that we sought—but it is an outcome that was chosen by the Iranian government when it repeatedly failed to meet its responsibilities. The government of Iran still has a choice. The door to diplomacy is still open. Iran can prove that its intentions are peaceful. It can meet its obligations under the NPT and achieve the security and prosperity worthy of a great nation. It can have confidence in the Iranian people and allow their rights to flourish.

Indeed, Iranians are heirs to a remarkable history. They are renowned for their talents and contributions to humanity. Here in the United States, Iranian-Americans have thrived. And within Iran, there is great potential for the Iranian people to forge greater prosperity through deeper integration with the international community, including the United States. That is the future we seek – one where Iran’s leaders do not hold their own people back by failing to live up to Iran’s international obligations; one where Iran can reclaim its place in the community of nations, and find greater peace and prosperity.

That is the Iranian government’s choice. And it remains our hope that they choose this path, even as we are clear-eyed about the difficult challenges ahead. With that, I will sign this legislation into law.

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International Trade News and Notes for June 30, 2010

• Iran Sanctions - At 6:15 pm EDT tomorrow, July 1st, President Obama will sign into law H.R. 2194, the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010. 

• Export Control Reform - In a speech today before the Senate Aerospace Caucus General James L. Jones announced, that as part of the export reform process, the Obama Administration intends to propose a new, single and independent agency that will merge export licensing activities at the State and Commerce departments under a board of directors reporting to the president. Under the proposal, the new agency’s board of directors would be consist of the secretaries of the departments of Defense, State, Commerce, Treasury and Homeland Security. However, the online DoD Buzz published a story this afternoon noting Congressional opposition to the idea of a single licensing agency. Nobody said that export control reform would be easy.

• Antidumping - The AP published an interesting story on the use of "honey-laundering" to evade antidumping duties on U.S. imports of Chinese honey. 

• The Bureau of Industry and Industry and Security published in today's Federal Register a proposed rule to amend the Export Administration Regulations by adding Export Control Classification Number (ECCN) 6A981 to the Commerce Control List to control passive infrasound sensors because of their military and commercial utility. If finalized, items under this new ECCN would be controlled for Regional Stability (RS) and Anti-Terrorism (AT) reasons. BIS also proposes to control technology and software for the development, production, or use of these items for RS and AT reasons under revised ECCNs 6D991 and 6E991. Comments on this proposed rule must be submitted by August 30, 2010.

• The Directorate of Defense Trade Controls has posted the agenda for the July 7, 2010 Defense Trade Advisory Group (DTAG) meeting. 

• This afternoon the House Committee on Agriculture will mark up H.R. 4645, the Travel Restriction Reform and Export Enhancement Act, which would: 

1. lift the restrictions on U.S. citizens traveling to Cuba, 
2. require agricultural exports to Cuba to have same payment requirements as exports to other countries (i.e., lift cash in advance requirement);
3. eliminate current requirement that payments to U.S. agricultural exporters must pass through banks in third countries. 

[Update: The House Agriculture Committee voted this afternoon to report H.R. 4645 to the House floor with a favorable recommendation by a vote of 25 in favor and 20 against. Prospects for final passage of this bill in this term of Congress remain slim. House Foreign Affairs Chairman Howard Berman (D-CA) released a statement indicating his support for the bill and noting that the "travel ban to Cuba simply has not worked to help the Cuban people in any way. It has not hurt the Castros as it was intended to do, but it has hurt U.S. citizens.]

• National Export Initiative - The Obama Administration, through the interagency Trade Promotion Coordinating Committee (TPCC), published an announcement today seeking comments from exporters, other private businesses, trade associations, academia, labor organizations, non-governmental organizations on export programs and other information as part of the National Export Initiative. Comments are due on July 26, 2010,
  

• SNAP-R Maintenance - BIS will be performing updates that will affect SNAP-R this weekend. SNAP-R users will continue to be able to submit their applications via the SNAP-R system. However applications received after midnight on Friday, July 2, 2010 until midnight Monday July 5, 2010 will not be processed until Tuesday July 6, 2010. In addition, the STELA Web application will be unavailable during this time. 

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BIS Press Release on Revised Encryption Regulation

The Bureau of Industry and Security (BIS) issued the following press release this afternoon regarding the changes made to U.S. export controls on certain encryption items. A summary of the changes made by the new regulation and a link to the text of the Federal Register notice are found below.

BIS Updates Encryption Export Rule;
Revised Rule Streamlines Review Process, Enhances National Security

WASHINGTON - The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) today revised its rules regarding the export of most mass market electronic products that contain encryption functions and other encryption products.

“This revised rule enhances our national security and cuts red tape by eliminating the review of readily available encryption items, like cell phones and household appliances, and allows the Government to focus its resources on more sensitive encryption items,” Assistant Secretary of Commerce for Export Administration Kevin Wolf said.

The new rule ends the U.S. government’s 30-day technical review requirement to export most mass market and other types of encryption products. “Mass market” electronic products containing encryption include cell phones, laptops, and disk drives. Exporters and manufacturers of the encryption products may now self-classify the products and then export them without a license if they register on-line with BIS. BIS also requires that they submit an annual self-classification report. This rule is expected to decrease technical reviews by approximately 70 percent and semi-annual reporting by up to 85 percent.

The rule also extends the scope of License Exception ENC authorizations to most encryption technology exports, following a technical review. In addition, it adds a decontrol note for items that perform “ancillary” cryptography, which covers items such as games, robotics, business process automation, and other products that contain encryption capabilities but do not have communication, computing, networking or information security as a primary function.

“This rule is the first step in the President’s effort to fundamentally reform U.S. encryption export controls,” Assistant Secretary Wolf said. “The Administration will continue to review the encryption rules to further enhance national security and ensure the continued competitiveness of U.S. encryption products. This effort will include a review of the current controls on publicly available encryption software, integrated circuits with encryption functionality, high-speed routers, and other types of restricted encryption products.”

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BIS Issues Regulation Reforming Encryption Export Controls

The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) took the first step in the export control reform process by publishing an interim final rule in today's Federal Register making significant changes to the Export Administration Regulations (EAR) governing the export of hardware and software containing encryption algorithms and functions.

This interim final rule, which goes into effect today, June 25, 2010, implements the President's statement in a speech at the Export-Import Bank's annual conference in March 2010 that the current review-and-wait and semi-annual sales reporting requirements would be replaced with a "more efficient" one-time notification-and-ship process. While today's regulation eliminates the 30 day technical review and waiting requirement for most software and hardware containing encryption functionality eligible for license exception ENC and qualifying for "mass market" treatment, the new regulation establishes a new company registration requirement and an annual self-classification reporting requirement.


Today's interim final rule also implements the significant change to encryption export controls made at the Wassenaar Arrangement's December 2009 Plenary by revising note 4 to Category 5, Part 2 of the Commerce Control List (CCL) to exclude from the scope of encryption controls items where the cryptography's primary function is not related to communications, networking, computing or “information security.”

According to BIS, the changes made in this regulation are intended to enhance national security allowing BIS and other government agencies to focus their resources on more sensitive encryption items. This effort is also intended to enhance U.S. exports by reducing interruptions to business cycles and enhancing product development efforts, manufacturing, and product rollout.

While today's regulation is the first step in the reform of export controls on software and hardware containing encryption, BIS has indicated that it will continue to review encryption export controls to ensure the continued competitiveness of U.S. encryption products. This effort will include a review of the current controls on publicly available encryption software, integrated circuits with encryption functionality, high-speed routers and other types of restricted encryption products.

The following is a summary of the significant aspects of the reforms made today to U.S. export controls on software and hardware containing software and hardware:

A. Changes Made to Encryption Review and Reporting Requirements

Under current encryption controls, three types of items are subject to a 30-day technical review by BIS and the ENC Encryption Request Coordinator at the National Security Agency in Fort Meade:

(1) mass market encryption software (classified as ECCN 5D992.c);
(2) certain less sensitive encryption items (ECCNs 5A992 and 5D992) that can be exported pursuant to License Exception ENC to government and non-government end-users in destinations other than the designated terrorism-supporting countries (License Exception ENC unrestricted - current 15 C.F.R. §740.17(b)(3)); and
(3) sensitive encryption items (ECCNs 5A002 and 5D002) that are made eligible for License Exception ENC to non-government end-users in destinations other than the designated terrorism-supporting countries after review, but for which a license is required for export to government end-users in many countries (License Exception ENC restricted - current 15 C.F.R. § 740.17(b)(2)).

Today's rule removes the review requirement for most mass market and license exception ENC unrestricted items. The items removed from the review requirement include Local Area Network (LAN) products small routers, and most items that meet the multilateral Wassenaar Arrangement “mass market” criteria. Exporters may now self-classify these items and export them following the submission of a company registration with BIS, answering seven questions using a new submission screen in SNAP-R, BIS’s online system (see screenshot of new registration page below). Upon submission of its registration to BIS the exporter will receive an “encryption registration number” (ERN). Upon receipt of the ERN, the export under license exception ENC will be authorized for certain ECCNs and the exporter or reexporter will not be required to submit a separate encryption registration, classification request or self-classification report to BIS. However, the party submitting the company registration to BIS will be required to file a report on an annual basis listing the items it has self-classified and exported.

Certain mass market and unrestricted items remain subject to 30-day technical review requirements. These items include:
(1) encryption components;
(2) items that provide or perform non-standard cryptography;
(3) certain items providing or performing vulnerability analysis, network forensics or computer forensics; and
(4) cryptographic enabling commodities and software.

Certain restricted items, such as network infrastructure items that exceed certain technical performance parameters, such as routers and 3G wireless base stations, remain subject to a 30-day technical review requirements and require semi-annual sales reporting.

This rule also extends the scope of License Exception ENC eligibility to most encryption technology necessary for manufacturing, development or testing of encryption items to all countries, except those of national security concern or subject to anti-terrorism controls, after the submission of a 30-day review.

The new rule eliminates the 30-day technical review requirement to export most "mass market" products containing encryption functionality. Mass market encryption products are those that are sold in large quantities and are generally available to the public through common retail methods. Exporters and manufacturers of mass market encryption products may now self-classify their products and export them without a license after submission of a company registration via SNAP-R. An annual self-classification report will be required to be submitted.

BIS estimates that the changes made by today's regulation should decrease technical review submissions by approximately 70% and semi-annual reporting by up to 85%. While technical review submissions will decrease, the submission of exporter registration and annual reporting will not completely eliminate the export control burdens associated with encryption items.

B. Changes Made to Items Incorporating "Ancillary Cryptography”

In December 2009, the Wassenaar Arrangement's member countries agreed to decontrol items meeting the “ancillary cryptography” criteria. This rule implements this decontrol by adding Note 4 to Category 5, part 2, of the Commerce Control List and by removing all references to "ancillary cryptography" from the EAR. The new note 4 to Category 5 part 2, reads as follows:

Note 4: Category 5, Part 2 does not apply to items incorporating or using “cryptography” and meeting all of the following:

a. The primary function or set of functions is not any of the following:
1. “Information security”;
2. A computer, including operating systems, parts and components therefor;
3. Sending, receiving or storing information (except in support of entertainment, mass commercial broadcasts, digital rights management or medical records management); or
4. Networking (includes operation, administration, management and provisioning);
b. The cryptographic functionality is limited to supporting their primary function or set of functions; and
c. When necessary, details of the items are accessible and will be provided, upon request, to the appropriate authority in the exporter’s country in order to ascertain compliance with conditions described in paragraphs a. and b. above.

As a result, items incorporating or using “cryptography” will no longer be classified under Category 5, part 2 if their primary function is not communications, networking, computing or “information security” and the cryptographic functionality is limited to supporting the primary function. Examples of such items include robotics, household appliances, fire alarm systems, inventory management software and transportation systems. Such items may be classified under another category of the Commerce Control List or as EAR99.

C. Other Changes to Encryption Export Controls

The interim final rule contains a provision grandfathering most items previously reviewed and classified by BIS for export. As a result, such items will not be subject to the new encryption registration or reporting requirements, as long as the encryption functionality has not changed.

This regulation also makes a number of other important changes to encryption export controls and review and reporting requirements. As a result, manufacturers, developers and exporters of software and hardware containing encryption algorithms and code should carefully review today's regulation to review the specific requirements applicable to the export of such products.

SNAP-R Encryption Registration Screen Shot

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Pre-Registration Now Open for BIS Export Controls Update Conference to be Held in Washington, DC From August 31-September 2, 2010

The Bureau of Industry and Security will hold its 23nd annual Update Conference on Export Controls and Policy from August 31, to September 2, 2009 at the Grand Hyatt Hotel. in Washington, DC. Note that this year's Update is being held a month earlier than in previous years and BIS expects the conference to move to July in coming years.

Because the expected number of attendees will likely exceed the number of persons interested in attending, BIS is again holding a registration lottery. Persons interested in attending the conference must first complete and submit the online “Interest Form” between June 15 and June 28 (be sure to click the green button on the lower right hand side to access the interest form).

If there are more potential participants than there is space available, BIS will grant registration through a random selection from the entire list of respondents, regardless of when received during the period. Those selected will be notified and given registration instructions in early July. They must register and submit payment by the designated date or their place will be forfeited and given to someone on the waiting list.

More information on the program agenda will be available in the coming weeks.

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