Volume 23 No. 41 -- October 20, 2003

IN THIS ISSUE:

* OFAC Improving Handling of TSRA Licenses
* U.S. Has Started Talks with China on End of Textile Quotas
* Washington Sees Nothing New In EU Beef-Hormone Action
* OFAC Restricts Publication of Iranian Authors in U.S.
* NAFTA Panel Gives ITA Extra Three Months to Resolve Lumber Case
* U.S. Will Try to Avoid Battles When "Peace Clause" Expires
* WTO Starts Search for Post-Cancun Path to Agreement
* BRIEFS: Syria, BIS, Aluminum, China, Byrd Amendment
 

OFAC IMPROVING ITS HANDLING OF TSRA LICENSES

The Office of Foreign Assets Control (OFAC) is back to completing a majority of applications for exports to Iran, Libya and Sudan within its own guidelines for processing applications.  In the three-month period from July to September 2003, OFAC says it was able to issue licensing determinations on time for 53% of applications it received.  This compares to only 32.7% completed on time in the April-June period, OFAC says in its quarterly report on its imple-mentation of the Trade Sanctions Reform and Export Enhancement Act (TSRA).

TSRA was intended to ease the export of food, medicines and medical devices to Iran, Libya and Sudan.  Earlier this year members of these industries complained  to OFAC about delays in getting licenses approved (see WTTL, July 14, page 4).

Interagency reviews also are moving more quickly, despite a 14.3% increase in applications compared to the previous quarter.  Although other agencies, primarily State, continue to exceed the 30 days they are supposed to take to review cases, the percentage of licenses caught in the interagency maze beyond that period has declined to 37.3%.  This compares to 50.3% of cases in the immediately prior quarter and 49.6% in the January-March period.

The average number of days OFAC has taken to issue licence determinations had declined steadily in 2003.  In this last quarter, it completed action in an average of 42.8 business days.  This compares to 73.7 business days in the April-June quarter and 98.6 business days in the January-March period.  In the latest period it received 168 applications (67 for agriculture commodities, 40 for medicines and 61 for medical devices).  It issued determinations on 158 cases, including some left over from previous quarters, plus 10 amendments.

While the average time for responding to applications has declined, including for approvals, denials and returned-without actions, denials can still remain stuck for months.  In the last period, denials were in the system on average for 85 business days, which is over four months.  In the April-June period, it took OFAC an average of 115 business days to issue a denial.
 

U.S. HAS STARTED TALKS WITH CHINA ON END OF TEXTILE QUOTAS

The U.S. and China have begun preliminary talks on potentially limiting Chinese textile and apparel exports to the U.S. starting in 2005 after the Multifiber Arrangement (MFA) expires and global quotas on these products are eliminated.  The talks are being driven not only by U.S. concerns that the end of the quotas will lead to a surge of imports and trade complaints, but also by fears of many apparel producing nations that Chinese exports will capture most of this market and put them out of the business.

"There are actually ongoing discussions with the Chinese about this particular issue as to whether or not something should be worked out to keep continuing imports from China from being a major problem," said James Leonard, deputy assistant secretary of Commerce for textiles.  "I think there will be an increase of imports from China, but a lot of that will come from the hides of other countries," he added.

The end of the MFA has raised speculation about how it will affect U.S. imports and whether it will spark a barrage of trade complaints.  The Bush administration has still not released a confidential September report from the International Trade Commission on the economic impact of the end of the quota system.

While apparel importers contend they won't rely solely on China after 2004, many in the industry say only 10-15 countries will remain competitive compared to the 45 or more that now have an almost guaranteed share of the U.S. apparel market because of the quotas they hold.

Commerce is now considering three petitions for safeguard restraints on Chinese apparel imports and more complaints are expected after quotas end.  The textile industry is expected to try to file a massive number antidumping and countervailing duty complaints when the MFA ends.  There is a debate, however, over whether textile firms will have standing to bring complaints that will probably be opposed by the apparel industry, which now relies on imports.

Textile industry representatives say they doubt the bilateral talks will lead to a formal restraint agreement, because China is now a member of the WTO and such voluntary restrictions are not permitted under WTO rules.  But facing numerous safeguard and antidumping complaints, China may accept some controls and monitoring that will mitigate its overwhelming advantage.
 

U.S. SEES NOTHING NEW IN EU BEEF-HORMONE ACTION

The U.S. has rejected European Union (EU) claims that changes the EU announced Oct. 15 in its ban on imports of beef treated with six hormones now bring the restrictions into conformity with WTO requirements.  "We don't see anything that has changed," said Chief U.S. Agricul-ture Negotiator Allen Johnson.  "It's a little baffling to us as to why they think they are now in compliance."  Based on that assessment, the U.S. won't end its retaliation against the EU ban.

The EU says its new directive corrects the old ban which the WTO in 1998 found in violation of the Agreement on Sanitary and Phytosanitary Measures.  After the WTO ruling, the U.S. and Canada retaliated against European exports because the EC didn't change its policy.  "I now call on the United States and Canada to lift their trade sanctions," said EU Trade Commissioner Pascal Lamy.

The new EU directive maintains a ban on the use of a form of oestradiol, except for three medical uses in cattle.  It makes the ban on five other growth hormones "provisional" instead of permanent, trying to use a WTO exception that justifies its "precautionary" approach to approving food chemicals.  One food industry representative called the move "disingenuous" because it continues a policy that's not based on scientific data and is aimed more at resolving the conflict between the European Commission and the European Parliament than with the U.S.
 

OFAC RESTRICTS PUBLICATION OF IRANIAN AUTHORS IN U.S.

In three letters interpreting the Iranian Transactions Regulations (ITR), Treasury's Office of Foreign Assets Control (OFAC) has severely restricted the ability of U.S. book and journal publishers to publish the works of Iranian authors.  OFAC's interpretation of the "information and informational materials" exemption in the ITR would exclude any editing, illustrating, consulting, marketing or enhancement of the work of Iranian authors without an OFAC license.

The agency contends the exemption applies only to material "fully created" and in existence before publication.  Thus, it told the IEEE that it "would not be prohibited from accepting camera-ready copies of manuscripts from persons in Iran for publication in its journal."  Editing and correcting the document, however, would enhance the material "and is therefore prohibited," it said in a Sept. 30 letter that was post and then withdrawn from its website.

In a separate letter Sept. 15, OFAC said an American author could not arrange to have a book translated into Farsi, illustrated, printed and promoted  in Iran.  The work was not yet created and complete before the transaction, OFAC explained.

"The engagement of a publisher in Iran to perform the services describe in the license agree-ment, including but not limited to preparing artwork for publishing, and promoting of the works in Iran, would constitute substantive or artistic alteration or enhancement of the materials being exported and the provision of marketing services," OFAC stated.  "It would be contrary to current licensing policy to authorize such transactions," it declared.

In a third opinion on Sept. 26, OFAC told an author he could not enter an exchange agreement with an author in Iran to have his works published in Iran and the Iranian's in the U.S.  Along  with editing and preparation of copy, the "creation of illustrations for a person in Iran is not permitted as it constitutes a prohibited export," OFAC stated.  "Thus, you may not publish books in the United States on behalf of a person in Iran, nor may a person in Iran publish books on your behalf," it declared.
 

NAFTA PANEL GIVES ITA EXTRA THREE MONTHS TO RESOLVE LUMBER CASE

Hopes have faded that a string of decisions from NAFTA and WTO dispute-settlement panels would help speed up the resolution of the U.S.-Canada dispute over softwood lumber.  The legal and administrative battle now looks like it will drag on for months, and there is no sign of an effort to revive the broken-down talks on an interim agreement.

The longer haul was signaled Oct. 10 when a NAFTA panel -- despite objections from Canadian parties -- gave Commerce 90 extra days to respond to its remand order to correct faults with the International Trade Administration's counter-vailing duty decision on lumber (see WTTL, Sept. 29, page 1).  ITA has reopened the record in the case, and the NAFTA panel has given it until Jan. 12 to respond.

Separately, ITA Oct. 15 responded to another NAFTA panel's remand order to recalculate and justify its antidumping ruling in the case.  Parties in the case have 40 days to comment on and rebut the proposed ruling before it becomes final.  ITA's proposed revisions would barely change the adjusted final margins in its original order.  Its proposes changing the margins for Weyerhaeuser to 12.36% from 12.39%, for Abitibi to 11.85% from 12.44%, for Tembec to 6.66% from 10.21%, for Slocan to 8.77% from 7.71%, for Canfor to 5.74% from 5.96%, for West Fraser to 2.22% from 2.18% and for all others to 8.07% from 8.43%.

While the fight continues over the original antidumping and CVD orders, new legal confronta-tions loom over ITA's handing of the administrative reviews that have begun for these orders.  Among the several briefs ITA has received protesting its handling of the review was one from Canadian Maritime Provinces which complained about ITA's request for them to respond to a new questionnaire in the review even though they were excluded from the original cases.
 

U.S. WILL TRY TO AVOID BATTLES WHEN WTO "PEACE CLAUSE" EXPIRES

As long as Doha Round talks are making progress, the U.S. is unlikely to launch complaints at the World Trade Organization (WTO) against foreign agriculture policies that violate the sub-sidy rules when the so-called "Peace Clause" expires in 2004, says Chief U.S. Agriculture Negotiator Allen Johnson.

The clause, which was part of the Uruguay Round agreement, has kept WTO members from bringing dispute-settlement complaints against domestic farm supports and export subsidies that otherwise would violate international trade rules.  In advance of the  expiration of the clause, the U.S. has started to look at potential cases it might bring against other WTO members and which complaints others might file against the U.S., Johnson told the Washington International Trade Association Oct. 16.

"We are looking at things people might be thinking about doing with us and what we may be thinking about doing with others," he said.  "I think it is safe to say that we feel there are others who are more vulnerable on the issues," Johnson asserted.  "As we looked at it, we don't see there will be a lot of purpose served by pursuing these cases, because we are in a good position on a lot of them," he added.

"What happens next will depend on what countries see happening in the WTO," he said.  "If countries are looking four months from now and don't see the WTO [Doha Round] going anywhere, they may look and see what the litigation options are.  If countries are looking and seeing we are making some progress and there is some opportunity here, then doing some of these cases may be counterproduc-tive in creating an environment that isn't encouraging participation," he said.

When the Peace Clause actually expires is unclear. "From our point of view the timing is clear that it is related to the specific commodity market year," Johnson said.  A proposal to extend the clause while the Doha Round continues was included in the draft ministerial declaration that was never adopted at the WTO Ministerial in Cancun
 

WTO STARTS SEARCH FOR POST-CANCUN PATH TO AGREEMENT

Representatives of WTO members gave cool, but tacit approval Oct. 14 to a plan by WTO General Council Chairman Carlos Perez del Castillo to try and pick up the pieces of the Doha Round talks that collapsed at the Ministerial Meeting in Cancun in September.  Castillo told an informal heads-of-delegation meeting that he intends to hold a series of meetings with members on a bilateral and regional basis to see if agreement can be found on how to continue negotia-tions on agriculture, non-agriculture market access, cotton and Singapore issues.  Talks on all other Doha issues will be suspended while the focus is put on these subjects, he said.

Castillo said he will start two rounds of meetings with the aim of having a report ready by Dec. 15, the deadline the ministers set for working-level negotiators to try to fix the failure in Cancun.  This time around agriculture will be the first issue that will be addressed, Castillo said (see WTTL, Sept. 22, page 3).

The agriculture talks "will allow us to test the will of the members to show flexibility and the possibilities for reaching common ground on a framework for modalities in this sector," he said.  Castillo said he will then engage in a similar exercise in the other sectors.  He is also likely to propose a new schedule and new deadlines for all the key steps in the talks.
 

 * * * BRIEFS * * *

SYRIA: House moved quickly and decisively Oct. 16 to approve new trade sanctions on Syria (see WTTL, Oct. 13, page 1).  By 398-4 vote, it sent measure to Senate for action.

BIS: Senate Banking Committee Oct. 15 approved confirmation of Peter Lichtenbaum to be BIS assistant secretary for export administration and Julie Myers to be assistant secretary for export enforcement.

ALUMINUM: Alcoa Oct. 16 filed antidumping case at ITA and ITC on aluminum plate from South Africa.

CHINA: ITC on 4-1 vote Oct. 16 made negative determination on request for critical circumstances ruling in pending special safeguard action against ductile iron waterworks fittings from China.

BYRD AMENDMENT: CIT Judge Donald Pogue ruled (Slip Op. 03-131) Oct. 14 that ITC didn't abuse its discretion when it didn't give Customs names of two U.S. candle-making firms along with names of other firms that supported antidumping case against candles from China and were eligible for Byrd Amendment payments.  ITC told Customs that Byrd Amendment conflicted with 1930 Tariff Act, which requires it to keep confidential names of parties supporting or opposing petitions.  ITC provides Customs only with names of firms that made their positions public.  Pogue said petitioners had chance to amend record.

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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