Volume 23 No. 40 -- October 13, 2003

IN THIS ISSUE:

* Use of U.S. Service Manual Triggers Export Enforcement Action
* Tougher Trade Sanctions on Syria Loom
* Labor Was Missing Issue at WTO Ministerial in Cancun
* U.S., Canada Agree to Open Sessions of Investment Tribunals
* FDA Issues Final Rules on Advance Notice for Food Imports
* Customs Advance Notice Rules Will Be Late
* BRIEFS: Export Enforcement, ITC, Trade Figures, Customs
 

USE OF U.S. SERVICE MANUALS TRIGGERS EXPORT ENFORCEMENT ACTION

The use of service manuals produced in the U.S. for the maintenance of U.S.-made goods can link a foreign entity to a violation of U.S. export control rules, the Bureau of Industry and Security (BIS) demonstrated in an enforcement action against subsidiaries of American Standard, the giant air conditioning and bath equipment manufacturer.

In a charging letter to Trane Taiwan, the agency claimed the firm on 11 occasions from 1998 to 2000 provided maintenance services on Trane air conditioners "using proprietary service manuals and information which originated in the United States and was produced by Trane soley for maintenance of Trane equipment."  The maintenance was on equipment owned by Realtek Semiconductors, which was the subject of a BIS denial order at the time the service was performed.

As part of an Oct. 8 settlement agreement with BIS to resolve the complaints, Trane Taiwan agreed to pay a $27,000 civil fine.  Trane Export of La Crosse, Wis., which sold the equipment originally to Realtek reached a separate deal to pay a $5,000 fine.

The cases against the firms are the fourth shoes to drop in a long-running BIS enforcement action involving Realtek.  In December 2002, Realtek paid a $44,000 civil fine to settle BIS charges that it violated the terms of a denial order when it obtained the air conditioning equipment.  The firm is no longer under sanctions.  In September, Expeditors International paid a $5,000 fine to BIS for acting as freight forwarder in the deal (see WTTL, Sept. 8, page 4).
 

TOUGHER TRADE SANCTIONS ON SYRIA LOOM

A ban on exports of goods and technology on the Commerce Control List (CCL) and Munitions List (ML) would be mandated under legislation (H.R. 1828) approved Oct. 8 by the House International Relations Committee.  The chances for enactment of the measure, which includes provisions that could trigger broader trade and investment sanctions on Damascus, improved when the White House dropped its opposition to the bill after the committee agreed to amend the legislation to give the president authority to waive the sanctions for six-month periods, if he determines a waiver is "in the vital national security interest of the United States."

The ban on CCL and ML exports, however, is not subject to this waiver and would stay in effect until the president certifies that Syria has ceased supporting Palestinian terrorists, has withdrawn all military forces from Lebanon, has ceased developing weapons of mass destruction and has stopped supporting terrorists in Iraq.  Although the U.S. has imposed an arms embargo on Syria since 1991, the Bureau of Industry and Security (BIS) has continued to approve CCL exports for the last decade even though Syria has been designated an E:1 sponsor of terrorism.

In fiscal year 2002, which ended Sept. 30, 2002, BIS approved 95 licenses with a stated value of $108 million (see WTTL, Feb. 3, page 2).  BIS sources caution, however, that the stated value of approved licenses doesn't mean all the exports were actually shipped.
According to BIS, the majority of licenses were for aircraft parts and components, computers, electronic devices and telecommunications equipment.  Most U.S. exports don't require a license, and total exports to Syria in calendar year 2002 reached $274 million and imports were up to nearly $161 million.

In addition to the ban on CCL and ML exports, the bill would require the president to impose any two of six additional sanctions on Syria, if he determines it is continuing to support terrorism and remain in Lebanon.  These sanctions could include a ban on all exports except food and medicines, a prohibition on investment or operations in Syria or a blocking of transactions in any property in which Syria has an interest.

The bill passed the committee on a strong 33-2 vote and already has 283 co-sponsors in the House, assuring its passage once it gets to the floor.  In the Senate, companion legislation (S. 982), co-sponsored by Sens. Barbara Boxer (D-Calif.) and Rick Santorum (R-Pa.), also has strong backing and is awaiting hearings in the Senate Foreign Relations Committee.

Although the administration opposed the bill in the past, it recently has sharpened its criticism of Syria. "The United States believes that Syria is on the wrong side of the war on terrorism," Ambassador John Negroponte told the U.N. Oct. 5.  Earlier, Under Secretary of State John Bolton delivered a similar message to the House.

"I think it is very helpful that Secretary Bolton came here about a month ago and announced that the administration was no longer opposing the bill and was studying the bill and would take no position on the bill," said Rep. Elliot Engel (D-N.Y.), who co-sponsored the measure with Rep. Eleana Ros-Lehtinen (R-Fla.).  "I think the administration has been very helpful in terms of saying it will sign the bill," he added.
 

LABOR WAS MISSING ISSUE AT WTO MINISTERIAL IN CANCUN

Compared to the World Trade Organization (WTO) ministerials in Singapore in 1996 and Seattle in 1999, the issue of worker rights and labor standards received little attention at Cancun ministerial in September (See WTTL, Sept. 15, page 1). The absence of these subjects from the talks, however, doesn't mean they've gone away completely.  Trade and labor standards have become a major campaign topic for Democratic candidates seeking the 2004 presidential nomination, and unions say they will raise the issue as a key argument against any free trade agreements brought to Congress for approval.

Although organized labor from around the world had over 130 representatives in Cancun, they were only a small segment of the 1,578 participants from non-government organizations (NGOs) who were accredited to attend the meeting.  Labor's goals at the ministerial was overshadowed by the agenda of NGOs pressing the WTO on agriculture, environment and development issues.

Labor had modest aims at Cancun.  It wanted to amend a section of the ministerial declaration on "coherence" -- which called for the WTO to collaborate more closely with the World Bank and IMF -- to refer also to the International Labor Organization (ILO).  In addition, unions wanted ministers to support a study on the impact of the end of the Multifiber Arrangement at the end of 2004.  Neither proposal was accepted.

Although fast-track negotiating authority enacted in 2002 makes the promotion of worker rights and core labor standards an overall American negotiating objective in all trade talks along with effective enforcement of labor laws, U.S. trade officials didn't push the subject in Cancun.  "The United States favors language that would point towards consultations and cooperation with the ILO," Deputy U.S. Trade Representative Josette Shiner told reporters at the meeting.  "That language did not get support from the majority of nations.  Even labor governments would not support it," she said.

"They feared that such a nexus between trade and labor would lead to protectionism on the part of some countries.  So we have not seen the level of support, let alone consensus,  needed to move language forward on that," Shiner said.  "If this was a one-way negotiation, Congress would be very happy, but we have to nego-tiate with a 148 countries and we can't unilaterally get things done here, but we will make our efforts," she stated.

With the collapse of the Cancun meeting, negotiators probably won't have to confront the labor issue in the Doha Round talks for another two or three years.  The subject, however, will be at the center of the fight against approval of a U.S. free trade agreement with Central America and the Dominican Republic (CAFTA), which is expected to reach Congress sometime in 2004.  Unions and their supporters in Congress are already gearing up for a battle over the labor provisions of that pact.  "We're going to make it a big issue," said Thea Lee, assistant director for international economics at the AFL-CIO.
 

U.S., CANADA AGREE TO OPEN SESSIONS OF INVESTMENT TRIBUNALS

In an effort to blunt criticism of the private-investor provisions in NAFTA, the U.S. and Canada agreed Oct. 7 to allow the public to attend meetings of binational tribunals that hear complaints under Chapter 11 of the accord involving the two countries.  They said they will ask private investors to consent to opening hearings in which they are parties as well.  Mexico, so far, has demurred on opening hearings in which it or Mexican investors are involved.  "We will continue to work with Mexico on this matter," the U.S. and Canada said in a joint statement.

While not joining in opening Chapter 11 tribunals, Mexico agreed with the U.S. and Canada to recommend the use of a common form for filing notices of intent to submit claims for arbitration under these rules.  At the Oct. 7 NAFTA Commission meeting in Montreal of the trade ministers from the three countries, they also agreed to recommend that Chapter 11 tribunals adopt procedures to allow the filing of briefs in cases by non-disputing parties.  The acceptance of such "friend of the court" briefs would be up to each panel.

The three also formed a North American Steel Trade Commission, which will work to promote cooperation on steel policies, to exchange information on steel issues and to reduce or eliminate "remaining distortions in the North American steel market," a ministerial statement said.  In other areas, the three also agreed to continue work on trying to liberalize rules of origin under NAFTA and to harmonize their remaining most-favored-nation tariffs.
 

FDA ISSUES FINAL RULES ON ADVANCE NOTICE FOR FOOD IMPORTS

The Food and Drug Administration (FDA) has significantly cut how soon in advance it will require importers to provide the agency advance notice of food entering the U.S. under regulations mandated by the 2002 Bioterrorism Act.  In an interim final rule in the Oct. 10 Federal Register, FDA said it must receive prior notice of imports of food products subject to its jurisdiction two hours before they arrive at a U.S. port by road and four hour before arrival by air or rail.  It must get eight hour advance notice before waterborne food comes to port.

In its original proposal in February, FDA said all notices had to be received no later than noon the day before arrival at a U.S. port.  Although the new prior notice rules will go into effect on Dec. 12, as required by the act, FDA officials say that for the first four months they will be taking an education and training approach to enforcement, rather than imposing harsher penalties.

Even after that period, the primary enforcement tool for late notifications will be to hold shipments at the port until the full notification period has expired.  Later, for more serious violations, FDA could disbar importers or seek injunctions against them or prosecutions.

FDA and Customs continue to promise that food importers will be able to file a single advance notice to fulfill the separate advance notice requirements of both agencies (see story below).  Customs is modifying its Automated Commercial System (ACS) and Automated Broker Interface (ABI) to accept notifications for FDA (see WTTL, June 2, page 3).  That work isn't finished, but FDA officials contend it will be ready when the food rules go into effect in December.
 

CUSTOMS ADVANCE NOTICE RULES WILL BE LATE

Customs has missed the Oct. 1 deadline for having in place final rules requiring advance notice of all exports and imports crossing U.S. borders by land, air, rail and sea.  The agency was under legislative mandate to publish the rules by then and to implement them in early 2004, but it didn't send its draft final rule to the Department of Homeland Security (DHS) until Oct. 1, Customs sources report.

How long DHS will take to approve the regulation for publication is unknown, one Customs source told WTTL.  Depending on how eager it was to publish a rule, DHS has taken a month or more to approve other Customs regulations, the source reported.

Customs was delayed in completing its draft of the final rule because it had to address 135 comments that were submitted on its original proposal (see WTTL, July 28, page 4).  A major concern in many comments was the potential overlap of the notifications requirements imposed by Customs and FDA (see story page 2).  Despite changes Customs made in the proposal from the original "straw man" talking paper it issued in February, objections continued to be raised by air cargo carriers, customs brokers, exporters, auto manufacturers, and express couriers.

Canadian provinces, Japan and the European Union also raised concerns about the impact of the proposed rules on their exports to the U.S.  Even the Defense Logistic Command and the Nuclear Regulatory Commission asked for clarifications to deal with shipments subject to their jurisdiction.

The DHS Advisory Committee on Commercial Operations (COAC) also presented detailed concerns.  While applauding the changes made before the rule was proposed, COAC said: "Given the complexity of the proposed advance electronic information requirement, it is not surprising that the proposed rule requires further clarification and modification."
 
 

* * * BRIEFS * * *

EXPORT ENFORCEMENT: BIS Oct. 9 imposed 20-year denial of export privileges on OTC Refining Equipment Corp. of Markham, Ontario, and its president, Abdulamir Mahdi for illegal export of oil-field and industrial equipment to Iran without licenses. Mahdi had pled guilty to violating U.S. export controls in Orlando, Fla., U.S. District Court in 1999 and was sentenced to 51 months in prison, BIS reported.

ITC: Daniel Pearson, who was given a recess appointment by President Bush in August, was sworn in Oct. 8 as sixth ITC commissioner.  His term expires when the current Congress adjourns at end of 2004.

TRADE FIGURES: U.S. goods exports in August of $57.8 billion were virtually unchanged from August 2003, Commerce reported Oct. 10. Goods imports of $102.2 billion were up 2% from year ago.  Services exports in August reached nearly $26 billion, 5% above last August, while services imports jumped 9.5% to $20.6 billion from same month in 2002.

CUSTOMS: Assistant Commission for Information and Technology S.W. (Woody) Hall Jr. is retiring Nov. 1.  Charles Armstrong was named as acting assistant commissioner.

PORTS: Customs Sept. 26 named 78 new port directors, who will now oversee operations of Customs, former INS and ex-USDA Animal Plant Health Inspection Service, which each used to have own directors at ports.  Three agencies are now all part of Department of Homeland Security.

SRI LANKA: Possibility of U.S.-Sri Lanka FTA will be one of items on agenda for talks when Deputy USTR Josette Shiner goes to Colombo Oct. 14-15, USTR's office reports.

Copyright 2003 by Gilston-Kalin Communications, LLC.  Reproduction or retransmission in any form is prohibited.  Washington Tariff & Trade Letter is published weekly 50 times a year. 
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