USTR Issues Annual Reports on Foreign Trade Barriers

On March 30, 2011 the Office of the U.S. Trade Representative issued the following annual reports on foreign trade barriers:

National Trade Estimate Report - The 2011 National Trade Estimate Report on Foreign Trade Barriers is the 26th in an annual series that surveys significant foreign barriers to U.S. exports in various countries. Among the topics covered in the report are corruption-related issues in various countries and a country-by-country assessment on issues regarding the Arab boycott of Israel.

Sanitary and Phytosanitary Measures Report- The second annual SPS Report identifies various sanitary and phytosanitary-related trade barriers to U.S. agricultural products.

Technical Barriers to Trade Report - The second annual TBT Report identifies various non-tariff trade barriers, such as product standards, testing requirements, and other technical requirements.

These reports contain a variety of information that is useful to U.S. exporters trying to sell to existing and new markets.

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First U.S. Antidumping and Countervailing Duty Petitions of 2011 Filed Today

In the first U.S. antidumping (AD) and countervailing duty (CVD) cases of 2011, U.S. companies today filed AD/CVD petitions on imports of steel wheels from China and refrigerators from South Korea and Mexico. These AD/CVD petitions are the first ones filed in the U.S. since AD/CVD petitions were filed against wood flooring from China in October 2011.

Bottom-Mount Combination Refrigerator-Freezers from South Korea and Mexico

In the first case filed today, Whirlpool Corporation filed AD and CVD petitions against bottom-mount refrigerators from South Korea and an AD petition against the same product from Mexico. According to Whirlpool two Korean manufacturers, Samsung Electronics and LG Electronics, export their products to the U.S. from manufacturing facilities in both Korea and Mexico. The Whirlpool products impacted by these imports are made in Amana, Iowa, where Whirlpool employs approximately 2,000 people.

Steel Wheels from China

In the second case filed today, Accuride Corporation, based in Evansville, Indiana, and Hayes Lemmerz International Inc., based in Northville, Michigan,filed AD and CVD petitions on steel wheels from China. Steel wheels are used on passenger cars, light trucks, sport utility and commercial utility vehicles.

Based on the statutory schedule for these trade remedy cases, the U.S. International Trade Commission (ITC) is expected to issue their preliminary injury determinations in mid-May 2011. Assuming an affirmative preliminary injury determination by the ITC, the Department of Commerce’s preliminary decision on the level of subsidies is expected in August 2011 and on dumping in October 2011. The final decisions will be issued by the Department of Commerce and ITC in the second quarter of 2012.

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Welcome Attendees of North Dakota Trade Office's Global Business Connections Conference

Welcome to those attending the North Dakota Trade Office's Global Business Connections 2011 conference in Fargo, North Dakota on March 30 and 31 in Fargo, North Dakota.

Global Business Connections is a two-day event that connects North Dakota businesses with international trade professionals from around the world. The conference includes panel discussions with leading exporters and international business professionals, break-out seminars on export controls and Incoterms 2010, networking events and an industry trade show. The conference also will include the presentation of North Dakota’s most prestigious international business awards by North Dakota Governor Jack Dalrymple to the following award winners:

2010 North Dakota Exporter of the Year - Healthy Oilseeds, a leading grower, processor and exporter of flax.

2010 Service to North Dakota Exporters Award - Bremer Bank

The keynote speakers at the conference include Gregory Page, Chairman and CEO of Cargill, and Michael Hick, Director of Global Business Initiatives and author of Global Deals: Marketing and Managing Across Cultural Frontiers.

Other speakers at the program included Ed Schafer, who served as U.S. Secretary
of Agriculture and Governor of North Dakota.

North Dakota currently has the nation's lowest unemployment rate and is a leading exporting state. In addition to exporting agriculture products, North Dakota is a leading producer and exporter of machinery and has a thriving aerospace sector.

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State Department Sanctions Belarussian Energy Company For Doing Business With Iran

Yesterday, the U.S. Department of State announced that the U.S. will impose sanctions on Belarusneft, a state-owned Belarusian energy company, under the Iran Sanctions Act (ISA) of 1996 as amended by the Comprehensive Iran Sanctions, Accountability, and Divestment Act (CISADA) of 2010, for its involvement in the Iranian petroleum sector. According to the State Department, Belarusneft entered into a $500 million contract with the NaftIran Intertrade Company in 2007 for the development of the Jofeir oilfield in Iran.

The sanctions that will be imposed on Belarusneft include:

1. Denial of U.S. Export-Import Bank assistance in approving, guaranteeing, insuring, extending credit, or participating in the extension of credit regarding the export of any goods or services to Belarusneft;

2. Denial of U.S. government licenses or other approvals required to export or reexport goods or services to Belarusneft;

3. Prohibition of loans or credits to Belarusneft by U.S. financial institution totaling more than $10 million in any twelve-month period, unless the loans or credits are provided to relieve human suffering; and

4. Prohibition on the U.S. Government procuring, or entering into any contract for the procurement of, any goods or services from Belarusneft.

Because Belarusneft is a subsidiary of Belneftekhim and was already to subject to OFAC sanctions, the sanctions imposed under the ISA and CISADA are not likely to impact most U.S. companies. However, as a State Department spokesman indicated, this announcement "sends a message to our partners in Europe as well that this is a company that we've decided to sanction. And I'm sure they have access or would seek access into European markets." 

Because several members of Congress have expressed concern over the Obama Administration's implementation of CISADA, the State Department is likely to announce further Iran-related sanctions in the coming months.

For example, in response to the State Department's announcement Representative Ileana Ros-Lehtinen (R-FL), Chair of the House Foreign Affairs Committee, said that that "the conspicuous absence of any sanctions on Russian and Chinese companies, despite their longstanding involvement in Iran, is deeply troubling." She also noted that in addition "to going after the low-hanging fruit like Belarusneft, the State Department must impose sanctions against energy giants that continue to do business with Iran.”

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Addressing Today’s Most Common Corporate Compliance Gaps

Guest Post

Addressing Today’s Most Common Corporate Compliance Gaps

By Steve Kuzma and Paul Harris, Ernst & Young LLP*

Increased corporate accountability is a top priority for federal regulators and law enforcement agencies. In recent news, several highly publicized investigations have fueled the federal government’s heightened efforts to crack down on schemes involving conflicts of interest, procurement and consumer fraud, antitrust violations, false claims, corruption and bribery, export control violations, and other ethical breaches. An effective compliance program is the first line of defense in this era of increased scrutiny and penalties. Therefore, traditional organizational structures are now transforming under the pressure of ever-increasing laws and regulations that drive greater corporate accountability and transparency.

Today’s companies must adapt to a fluid regulatory environment and recent legislative actions (in health care and financial services reform, for example) and may even require an overhaul of entire processes. Additionally, companies must be able to adapt to constant legal and regulatory changes as the corporate compliance function will not be effective if operating on “auto pilot.”

In today’s market, we see several common compliance gaps that many organizations either have or are currently facing. They are as follows:

1. Corruption and bribery – The overhang of highly-publicized foreign bribery and corruption scandals has pushed the Foreign Corrupt Practices Act (FCPA) to the forefront of federal investigation and law enforcement priorities. It critical in this hyper-enforcement environment for U.S. companies that market overseas to minimize the risk of an FCPA investigation by implementing effective FCPA and international antibribery procedures. The failure to do so could expose companies to significant reputational and financial risks. As the Securities and Exchange Commission and the Department of Justice have stepped up efforts to investigate and prosecute business corruption, it is now more important than ever for U.S. companies to assess and strengthen their FCPA compliance program.

2. Supply chain due diligence – Many companies know their employees, but not all perform thorough third-party due diligence on the representatives, consultants, subcontractors and other third parties with whom they do business. Entities and individuals in the supply chain function may be liable for compliance issues that can create unforeseen criminal law and reputational issues for the company. Thorough and comprehensive third-party due diligence can help identify compliance and reputational risks before they become a regulatory problem.

3. Privacy/Information Security – The ever-increasing amount of electronic data being transmitted creates risks for companies. Many organizations today require consumers to provide personal data in business transactions – everything from a social security number to an email address. The collection and use of data is crucial to many online business models. It is equally important that consumers trust that their privacy is protected and used for its intended purposes only. Both U.S. and international laws require companies to do just that. However, there have been numerous instances where organizations are not paying enough attention to their international operations, where country laws recognize privacy as a fundamental right and has strict prohibitions on the collection and sharing of personal data.

4. Antitrust –Increased antitrust enforcement is a top priority for the Obama Justice Department. In response to a question from the American Antitrust Institute, President Obama stated that he would “direct [his] administration to reinvigorate antitrust enforcement . . . . [and] take aggressive action to curb the growth of international cartels.” Federal Trade Commission (FTC) Commissioner has proposed that the FTC should make subpoenas mandatory at the beginning of every formal investigation, rather than relying on voluntary requests for information. During an economic downturn, antitrust enforcement becomes critical. Fines and penalties in this area are enormous, driven by U.S. and EU programs that provide amnesty to the first person to disclose unlawful antitrust activities.

5. Export compliance – Globalization has pushed many U.S. companies to market overseas. In a rush to capitalize on new “growth areas,” companies often overlook export control requirements. Effective export compliance is viewed by the government as a national security issue. Exporters of defense articles, including technical data, first must be registered and must also comply with such requirements as obtaining the appropriate license, agreement management, vendor certifications and export control markings. Global companies are reporting an increase in federal enforcement activity in the area of export control compliance.

Our nation’s legislators and law enforcement officials have zeroed in on corporate misconduct. Fueled by recent scandals, new legislation and other initiatives have been rolled out to prevent, detect and punish a wide array of conduct. A harried, ineffectual response to investigation, an inadequate defense to prosecution or civil suit and consequential damage to corporate reputation, all await companies with “reactive” compliance and ethics programs. A proactive and robust compliance program that enables a company-wide understanding of and adherence to the many criminal, civil and administrative provisions provides the best armor in this targeted area.


*Messrs. Kuzma and Harris are part of Ernst & Young's Fraud Investigation and Dispute Services Practice and are based in Atlanta and Washington, DC, respectively. The views expressed herein are those of the authors and do not necessarily reflect the views of Ernst & Young LLP.

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BIS Suspends Libya Export and Reexport Licenses

Yesterday the U.S. Department of Commerce's Bureau of Industry and Security (BIS)) announced that it has suspended indefinitely all licenses that it has issued for exports or reexports to Libya.

As a result, no further shipments may be made against BIS licenses for exports or reexports to Libya by any person.

For more information on the current scope of U.S. sanctions and other restrictions on Libya see our prior post "Libya Sanctions and Restrictions: An Update for U.S. Companies" here.

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Libya Sanctions and Restrictions: An Update for U.S. Companies

As a result of the recent events in Libya the United States and United Nations have announced various sanctions and other restrictions on transactions involving Libya. The following is a summary of these actions and their impact on U.S. companies:

Executive Order 13566 and OFAC

On Friday, February 25, 2011 President Obama signed an Executive Order (EO 13566) blocking the property and interests in property on the Gaddafi (Qadhafi) family, senior officials of the Libyan Government and others involved in the human rights abuses in Libya. The members of the immediate family of Colonel Muamar Gaddafi have been added to OFAC's SDN List. OFAC will soon be adding additional persons and entities to the SDN List.

The EO also blocks property and interests in the property of the Government of Libya, including the Government of Libya's "agencies, instrumentalities, and controlled entities." As a result, no transactions involving agencies of the Libyan Government can occur (such as the Ministries of Energy and Health, Civil Aviation Authority, etc.) or companies owned or controlled by the Libyan Government (such as the Libyan National Oil Company (NOC) can take place until further notice. OFAC considers any entity in Libya that is owned 50% or more by the Government of Libya to be owned or controlled by the Government of Libya.

While OFAC issued a General License (Libya General License No. 1) authorizing transactions with third-country financial institutions owned or controlled by the Government of Libya General License it remains to be seen how this General License can used for trade-related transactions.

While the U.S. has not yet reimposed the comprehensive ban on exports/reexports to or imports of commercial items from Libya (although see BIS and DDTC information below), given the large number of state-controlled companies in Libya, particularly in the oil and gas sector, U.S. companies should seek guidance before engaging in future transactions and payments involving companies that may be owned or controlled by the Government of Libya (this also applies to sales of medical products and medical devices to Libya's Ministry of Health and government operated hospitals in Libya). Most items subject to the Export Administration Regulations that are not classified as EAR99 currently require an export or reexport license to Libya.

BIS - Suspension of Export and Reexport Licenses

On March 3, 2011 the U.S. Department of Commerce's Bureau of Industry and Security (BIS) announced that it has suspended indefinitely all licenses that it has issued for exports or reexports to Libya. As a result, no further shipments may be made against BIS licenses for exports or reexports to Libya.

DDTC Suspension of ITAR Licenses and Exemptions

On February 26, 2011, the Directorate of Defense Trade Controls announced the immediate suspension of all export licenses for defense articles and technical data that have been issued under the ITAR. In addition, no ITAR exemptions may be utilized to export items subject to the ITAR to Libya.

The Census Bureau has advised that all such shipments to Libya reported to the Automated Export System will be fatally rejected with the following response message:

Response Code: 5C1 - DDTC License Suspended For Country

While the U.S. does not permit the export of weapons to Libya, section 126.1(k) of the ITAR currently authorizes the issuance of licenses and TAAs to Libya on a case by case basis to export to Libya non-lethal defense articles and services and non-lethal safety of use defense articles as spare parts.



FAA - Notice to Operators of Civil Aircraft

The U.S. Federal Aviation Administration has issued a notice to U.S. operators of civil aircraft to "exercise extreme caution" with respect to flight operations to or from Libya. The notice indicates that "that the ongoing unrest and reported Libyan military operations, to include aerial bombardments and unplanned military flights departing the [Tripoli airports], may a post a hazard to civil aviation.

U.S. companies planning to use corporate aircraft to remove personnel working in Libya should check with their flight handling company and the FAA for further updates.

Financial Crimes Enforcement Network (FinCEN) Advisory to Financial Institutions

FinCEN has issued an advisory to U.S. financial institutions to take "reasonable risk-based steps" with respect to any movement of assets involving Libya and reminding them of their requirement to apply enhanced scrutiny for private banking accounts held by or on behalf of senior foreign political figures and to monitor transactions that could potentially represent misappropriated or diverted state assets, proceeds of bribery or other illegal payments, or other public corruption proceeds.

U.S. financial institutions that know, suspect, or have reason to suspect that a transaction relating to senior foreign political figures in Libya involves illegal or suspicious activity they are required to file a Suspicious Activity Report (SAR).

United Nations Security Resolution 1970

By a 15-0 vote, the U.N. Security Council last night adopted resolution 1970 imposing sanctions and other actions on Libya. Many of these sanctions have already been implemented by the U.S. The full text of S/RES/1970 (2011) can be found here. Among other things, Security Resolution 1970 requires U.N. members to take the following measures with respect to Libya:

1. Arms Embargo and Other Arms Restrictions:

• All U.N. member states are prohibited to provide any kind of arms to Libya and allowing the transit to Libya of mercenaries.
• Libya is prohibited from exporting any arms to any other state.
• U.N. members should inspect suspicious cargo that may contain arms. When such arms are found, states are required to seize and dispose of them.
• Should strongly discourage their nationals from traveling to Libya to contribute to human rights violations.

2. Targeted sanctions on key regime figures

• Seventeen Gaddafi loyalists are subject to an international travel ban.
• Six of these individuals, including Colonel Gaddafi and his immediate family members, are also subject to a freeze of their assets.
• The Security Council committed to ensure that any frozen assets will be made available to benefit the people of Libya.
• A Sanctions Committee is established to impose targeted sanctions on additional individuals and entities who commit serious human rights abuses, including ordering attacks and aerial bombardments on civilian populations or facilities.

Secretary of State Clinton has already directed the State Department to revoke U.S. visas held by certain Libyan officials, others responsible for human rights violations in Libya, and their immediate family members. As a matter of policy, new visa applications for Libyan Government officials will be denied.

3. Humanitarian assistance

• All U.N. members are called upon to work together to facilitate humanitarian assistance and support the return of humanitarian agencies.
• The Security Council expressed its readiness to consider additional measures to achieve the delivery of such assistance.

Other Countries

All U.N. members must implement the multilateral sanctions announced by the U.N. Security Council. The following are some links to these and other sanctions imposed by other countries on Libya:

• United Kingdom - On February 26, 2010 HM Treasury implemented the U.N. sanctions.
• Canada - In addition to the U.N. sanctions, on February 27, 2010 Canada announced that it will impose an asset freeze on, and a prohibition of financial transactions with the Government of Libya, its institutions and agencies, including the Libyan Central Bank. The Canadian implementing regulations can be found here.
• European Union - On February 28, 2011, the Council of the EU announced that it adopted a decision to implement the UN sanctions. In addition, the Council also stated that it would prohibit trade with Libya in equipment which might be used for internal repression.
• Switzerland - On February 24, 2011, Switzerland issued a regulation freezing the assets of 29 Libyans.
  
  

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