Newsletter No. 3                                                              December 2007
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Global Trader Newsletter
In This Issue
EXPORT NEWS
Deemed Export Advisory Committee Issues Report
DDTC Amends Rules on Transfer of Technical Data
DDTC Amends Voluntary Disclosure Rules
SNAP-R Webinar Available Online
Company Fined $470,000 For Illegal Reexports by Subsidiary
Export Penalties Increase to $250,000 or More Per Violation
BIS Expands TMP and BAG License Exceptions
U.S.-China High Technology Agreement Signed
CUSTOMS NEWS
Bush Signs U.S-Peru Free Trade Agreement
Israel Signs Mercosur Free Trade Pact
U.S. Reportedly Working on New Pacific Trade Accord
NYT Article on Foreign Free Trade Zones and Counterfeit Drugs
China and U.S. Sign Food Safety Agreement
CBP Textile Enforcement 2007 Review
Who's Hiring
Calendar of Events
Quick Links
Join Our Mailing List
Greetings!

Welcome to the December addition of Global Trade Expertise's newsletter, the Global Trader. We hope you have a few minutes to scan this newsletter - despite the holiday rush - as there were many international trade news stories to report over the last month.
 
We wish you a happy holiday and a joyful new year!
 
Jennifer Kessinger & Tammie Goldstein Krauskopf
Global Trade Expertise
 
Export News
Deemed Export Advisory Committee Issues Final Report
Commerce Department to review findings and recommendations

On December 20, 2007, the Deemed Export Advisory Committee issued their final report to Secretary of Commerce Carlos M. Gutierrez. The Deemed Export Advisory Committee is a group commissioned by the Commerce Secretary in September 2006 to study the complex issue of deemed exports. Deemed exports occur when foreign nationals are given access to controlled dual-use items or technology while working or studying in the United States.

The Advisory Committee Chairman, Norman Augustine, a retired Chairman and CEO of Lockheed Martin Corporation, delivered the report, entitled, The Deemed Export Rule in the Era of Globalization. The press release can be found here.
DDTC Amends Rules on Transfer of Technical Data
New Rule Allows Easing of Certain Restrictions


ITAROn December 19, 2007, the State Department's Directorate of Defense Trade Controls (DDTC) issued a final rule amending the International Traffic in Arms Regulations (ITAR) to allow access to defense articles and services to certain dual and third country nationals under technical assistance agreements (TAAs) or manufacturing licensing agreements (MLAs) without having to execute individual Non Disclosure Agreements (NDAs).

Previously, section 124.8(5) of the ITAR precluded any retransfer of defense articles (hardware or technical data) or defense services pursuant to an approved TAA/MLA to third countries or nationals of third countries unless specifically authorized in the agreement or for which prior written approval has been granted by the DDTC. The DDTC considers a third country national to be an individual from a country other than the country which is the foreign signatory to the agreement. DDTC also considers a third country national to be a dual national if he holds nationality from more than one country. In addition to citizenship, DDTC considers country of birth a factor in determining nationality. Moreover, prior to the amendment, third country/dual nationals authorized under a TAA/MLA were required to execute NDAs prior to receiving access to the defense articles or services.

Under the amended regulations, the U.S. applicant may request further release of technical data and defense services and access to defense articles exported pursuant to or produced as a result of the TAA/MLA to third country/dual national employees of the foreign signatory who are nationals of countries that are members of the North Atlantic Treaty Organization (NATO), the European Union (EU), Australia, Japan, New Zealand, and Switzerland. These procedural changes would also apply to employees of sub-licensees authorized under the agreement. Furthermore, the execution of a NDA would no longer be required for such third country/dual nationals.

The rule is effective on December 19, 2007.

DDTC Amends Voluntary Disclosure Rules
New Rule Imposes New Restrictions

ITAROn December 13, 2007, the Department of State's Directorate of Defense Trade Controls (DDTC) published a final rule amending the Voluntary Disclosure provisions of the International Traffic in Arms Regulations (ITAR). Section 127.12 of the ITAR governs Voluntary Disclosure. The new rule amends section 127.12 in 4 major respects:


    1    The new rule imposes a 60-calendar day deadline after the initial notification to submit a full disclosure. Previously, there was no set time limit for a party to submit a full disclosure after an initial notification to DDTC. Under the new rule, a party may request an extension to the 60-calendar day extension, and, in certain cases, DDTC may require the requester to certify in writing that the full disclosure will be submitted within a specified time period. Failure to do any of the preceding may result in the DDTC deciding not to consider the initial notification as a mitigating factor in determining the appropriate disposition of the violation.

    2    The new rule requires the party making the disclosure to provide specific information including, but not limited to, names and addresses of individuals involved in the violation, and a precise description of the nature and extent of the violation.

    3    The new rules also require that the disclosing party describe corrective actions already undertaken that clearly identifies the new compliance initiatives implemented to address the causes of the violations set forth in the voluntary disclosure and any internal disciplinary action taken; and how these corrective actions are designed to deter those particular violations from occurring again.

    4    Finally, the new rules provide that, in cases of "a major violation, a systematic pattern of violations, or the absence of an effective compliance program," DDTC may require that the disclosure be signed by a "senior officer."

 
BIS Makes SNAP-R Webinar Available Online

The Bureau of Industry and Security has posted its webinar on the Simplified Network Application Process Redesign (SNAP-R) online for viewing. It can be found here.
Company Fined $470,000 for Export Violations by Subsidiary
Illegal Reexports to Iran Through UAE

BISOn December 7, 2007, the Bureau of Industry and Security (BIS) announced that Mine Safety Appliances Company (MSA) of Pittsburgh, PA agreed to pay a $470,000 civil penalty. The settlement arose from allegations that MSA, through its branch office in Abu Dhabi, MSA Middle East, violated the Export Administration Regulations (EAR) on 107 occasions. The allegations relate to the reexport of safety equipment from the UAE to Iran and Syria without the required export licenses.

"Preventing the diversion of U.S.- origin goods so that they do not support the economies of countries that sponsor terrorism, such as Syria and Iran, is extremely important," said  Darryl Jackson, assistant secretary of commerce for export enforcement. "This case demonstrates that companies must take extra care when implementing compliance programs with foreign subsidiaries."

BIS alleged that between May 2001 and December 2005, MSA Middle East made 107 reexports of EAR99 and controlled items, including helmets, gas masks, detection equipment, filters, and other safety equipment to Iran and Syria from the UAE without required export licenses.
 

BIS stated that MSA voluntarily disclosed these violations to BIS and cooperated fully in the investigation, which was a mitigation factor in calculating the penalty. In addition, MSA received mitigation credit for its compliance efforts.

BIS stated:

Parties who may have been involved in violations of the EAR are encouraged to submit a Voluntary Self Disclosure (VSD) to BIS's Office of Export Enforcement, as provided in Part 764.5 of the EAR.  VSDs are an important indicator of parties' intent to bring themselves into compliance with the EAR, and may provide BIS important information on illicit proliferation networks.  A VSD is considered a "great weight" mitigating factor in the settlement of BIS administrative cases.

 
Export Penalties Increase to $250,000 or More per Violation
New Law also Applies to Antiboycott and Economic Sanction Violations

Image of  warning signsOn October 16, 2007, President Bush signed into law the International Emergency Economic Powers Enhancement Act that dramatically increased the civil penalties for violations of export control under the Department of Commerce's jurisdiction and economic sanctions administered by the U.S. Treasury's Office of Foreign Assets Control (OFAC).

The new law increases civil penalties from $50,000 to the greater of either $250,000 or twice the amount of the transaction that is the basis for the violation. Fines for willful and knowing violations (criminal penalties) were increased from $50,000 to $1,000,000 with the maximum term of imprisonment remaining at 20 years.

Prior to changes brought by the USA PATRIOT ACT Improvement and Reauthorization Act of 2005, which went into effect in March 2006, civil penalties for such violations were limited to only $11,000 per violation and the maximum term of imprisonment was only 10 years. Thus, the new penalties are 250 times the amount of just 2 years ago!

Under the new law, it appears that even low dollar amount transactions could be subject to the maximum civil penalty of up to $250,000. For example, if a violative export transaction of $5,000 occurred, the Department of Commerce's Bureau of Industry and Security (BIS) could impose a penalty of up to $250,000 (the greater) versus a penalty of up to twice the amount of the transaction, or $10,000 (the lesser).

Moreover, BIS or OFAC could impose a much higher penalty in the case of a large dollar amount transaction. For example, in the case of a violative export transaction or wire transfer of $1.5 million, BIS or OFAC would have the authority to impose a maximum penalty of twice the amount of the transaction or $3 million.

It remains to be seen how BIS or OFAC will actually assess maximum penalties in practice.

However, in a November 1, 2007 BIS Fact Sheet, BIS states that it will continue to grant up to a 25% reduction of the amount of penalties to be assessed for the existence of an effective export compliance program in place before the violation and later upgraded. Furthermore, for all valid Voluntary Self-Disclosures, BIS will generally reduce any calculated penalty by at least 50% - and does so after considering the aggravating and mitigating factors in the case.

Keep in mind that penalties may increase even more in the near future. Senator Christopher Dodd introduced bill S. 2000 on August 3, 2007, that is intended to increase the enforcement authority and extend the Export Administration Act of 1979. If that bill is passed, the Export Administration Act of 2007 will increase the maximum civil penalty to $500,000 per violation. It will also increase the maximum criminal penalties to the greater of $5 million or 10 times the value of the transactions involved for corporations and $1,000,000 and 10 years imprisonment for individuals.

BIS Expands TMP and BAG License Exceptions
Temporary Exports of Technology Now Allowed with Exceptions

BISOn December 12, 2007, the Bureau of Industry and Security (BIS) published a final rule to amend the Export Administration Regulations (EAR) to expand the availability of the License Exceptions for Temporary Imports, Exports, and Reexports (TMP) and Baggage (BAG) to allow for certain temporary exports and reexports of technology. Part 740 of the EAR provides for the License Exceptions TMP (� 740.9) and BAG (� 740.14) both contain tools of trade provisions (� 740.9(a)(2)(i) and � 740.14(b)(4), respectively), which authorize certain temporary exports and reexports for usual and reasonable kinds and quantities of tools of trade. Prior to the new rule, TMP and BAG did not authorize temporary exports or reexports of technology.

The new rule expands the availability of TMP and BAG to allow for certain temporary exports and reexports of technology by U.S persons to U.S. persons or their employees traveling or temporarily assigned abroad. However, there are several significant limitations to the license exceptions for technology:

    1    The license exceptions are only available to U.S. persons or non-U.S. persons otherwise authorized to receive the technology (e.g., under a license or license exception) or, alternatively do not require such authorization due to the technology's NLR status. In addition, the employer must demonstrate and document for recordkeeping purposes the reason that the technology authorized under the tools of trade provisions is needed by the non-U.S. employees.

    2    The technology exported under these license exceptions may not be thereafter be disclosed to anyone who is also not a U.S. person or otherwise authorized to receive the data.

    3    If the technology authorized under License Exception TMP is shipped or transmitted in a format that could facilitate a subsequent release of the technology must be returned to the U.S. or disposed of within 12 months from the export pursuant to the License Exception.

    4    The new rule also requires that the exporting or reexporting party and the recipient take adequate security protections to protect against unauthorized access to the technology while the technology is being transmitted and used overseas, such as secure connections (such as VPN) and the use of password systems and/or personal firewalls on electronic devices.

    5    The technology authorized under these provisions may not be used for foreign production purposes or for technical assistance unless authorized by BIS.

    6    Encryption technology under ECCN 5E002 is not authorized for export or reexport under the amended "tools of trade" provisions of License Exception TMP or under BAG � 740.14 to any destination listed in Country Group E:1 of Supplement No. 1 to part 740. for export or reexport of 5E002 technology by companies, their subsidiaries and employees, BIS states that License Exception Encryption Commodities and Software (ENC) in � 740.17 should be used.

Commerce Announces Signing of "Guidelines for U.S.-China High Technology and Strategic Trade Development"
One of Many Agreements Signed with China

China FlagOn December 11, 2007, the U.S. Department of Commerce announced the signing of "Guidelines for U.S.-China High Technology and Strategic Trade Development" ("Guidelines") by the U.S. Department of Commerce and China's Ministry of Commerce (MOFCOM). The Guidelines were signed by Under Secretary of Commerce Mario Mancuso and MOFCOM Vice Minister Wei Jiangguo in Beijing as part of the 18th Joint Commission on Commerce and Trade (JCCT).

Commerce states that the Guidelines outline the importance of working cooperatively to achieve the mutual benefits of promoting U.S. high technology exports to China. Under the Guidelines, the Commerce Department and MOFCOM will continue to review U.S. dual-use policy to identity and implement appropriate processes to streamline the licensing process for legitimate civilian trade. Commerce states that the Guidelines also recognize the critical role of end-use visits in ensuring the protection of U.S. national security interests in the enhancement of high technology trade.

"These Guidelines are a positive step forward for bilateral, civilian high technology trade, " said Secretary of Commerce Carlos M. Gutierrez. "The Guidelines recognize China's status as the fastest growing export market for U.S. exports and memorialize our respective commitments to communicate and cooperate, through such forums as the JCCT, to promote the development of safe, secure high technology and strategic trade between our two countries."

The Guidelines were developed by BIS and MOFCOM under the auspices of the U.S.-China High Technology and Strategic Trade Working Group (HTWG). The HTWG was established at the 2005 JCCT as a mechanism for furthering U.S.-China cooperation on export control and high technology trade issues.

Commerce also signed a Memorandum of Understanding to Expand U.S. Exports to China, which would expand U.S. exports to 14 "second-tier cities" in China - "cities that, like the larger urban centers, are home to China's burgeoning middle class." Under the MOU, China will work with the Commerce Department to strengthen networks to reach more Chinese consumers and bring new technology and services to more regions in China.

In total, 11 agreements were signed at the signing ceremony on December 11, 2007. The complete list can be found here.
 
Customs News

President Bush Signs U.S.-Peru Free Trade Agreement
Agreement will eliminate duties on 80% of U.S. consumer and industrial goods sold in Peru

Peru FlagOn December 14, 2007, President Bush signed the U.S.-Peru Trade Promotion Agreement (TPA) Implementation Act in the presence of Peruvian President Alan Garcia. Once implemented, the agreement will immediately eliminate duties on about 80% of U.S. consumer and industrial goods sold in Peru, and will eliminate all remaining duties within 10 years. It will also immediately eliminate duties on more than two-thirds of U.S. agricultural exports to Peru and eliminate most of the remaining duties over the following 5 to 15 years.

For more details, see the U.S. Customs House Guide's article here.
Israel Signs Free Trade Pact with Latin America's Mercosur Countries
Becoming First Non-Latin American Country to Do So

Israel flagBloomberg.com reported on December 19, 2007 that Israel signed a free trade agreement with Latin America's Mercosur countries (Argentina, Brazil, Paraguay and Uruguay), making it the first country outside of Latin America to do so. Brazilian Foreign Minister Celso Amorim stated that Mercosur will sign several other agreements with countries such as South Africa, India, and nations in the Persian Gulf.
U.S. Reportedly Working on New Pacific Trade Accord
with Chile, Singapore, Brunei, and New Zealand

Bloomberg.com reported on December 18, 2007 that the Bush Administration is preparing to negotiate an agreement linking the U.S., Chile, Singapore, Brunei, and New Zealand in a Pacific-region accord to reduce barriers to trade and foreign investment. According to the USTR, talks with the 4 nations will start as early as January 2008.
New York Times Reports on Free Trade Zones Used by Drug Counterfeiters
Foreign FTZ's Lax Regulatory Oversight Exploited

Counterfeit DrugsOn December 17, 2007, the New York Times prominently featured an article regarding the use of free trade zones outside of the U.S. to "hide - or sanitize - a drug's provenance, or to make, market or relabel adulterated products," according to anticounterfeiting experts. It's an interesting article that can be found here.
China and U.S. Sign Food Safety Agreement

China FlagOn December 11, 2007, the New York Times reported that China and the United States signed an agreement calling for a greater U.S. role in certifying and inspecting Chinese food exports, which includes an increased presence of U.S. officials at Chinese production plants. The agreement imposes new registration and inspection requirements on Chinese food exports for 10 specific products. The U.S. government will maintain a public list of the exporters' records.

The report states that,

Michael Leavitt, Secretary of Health and Human Services, said he expected that officials of the United States Food and Drug Administration would eventually be embedded in China's food safety bureaucracy to help train Chinese officials and keep records on their inspections. He offered no numbers on how many officials would be involved, however.

"The Chinese recognize, as do we, that having F.D.A. personnel here would expedite the process of capacity building and increase cooperation and communication," Mr. Leavitt said. "I am optimistic that it will occur."

Although the agreement was not as sweeping as American officials may have hoped for, they stated that it was a start and could be expanded. The agreement is to cover some preserved foods, pet foods, and farm-raised fish -- all products that have come under suspicion of being tainted recently.

 
CBP Textile Enforcement 2007 Review

Website LogoOn December 17, 2007, the U.S. Customs House Guide posted a review of Customs and Border Protection (CBP) for Fiscal Year 2007. The report states that among this year's accomplishments are:

    �    In FY 2007 CBP increased foreign factory visits by 57%. CBP visited 671 foreign factories to monitor for illegal transshipment by sending textile production verification teams (TPVT) to confirm actual country of origin and compliance with trade preference programs. These teams examine production documents at foreign factories to ensure that potentially violative shipments are stopped before being shipped to the United States;

    �    CBP visited 168 foreign factories in 10 countries in FY 2007 to verify claims involving Free Trade Agreements like the Central America - Dominican Republic Free Trade Agreement and other trade preference programs such as the African Growth and Opportunity Act;

    �    CBP auditors conducted 66 audits on textile importers and recommended additional revenue collections of $5.61 million in FY 2007 - an increase of 57% in audit activity;

    �    CBP officers at the ports of entry examined 13,327 shipments in FY 2007 and found more than 2,300 shipments where discrepancies were identified;

    �    Further, Import Specialists initiated 1,905 reviews of entry documents resulting in 959 detained shipments and 314 seized shipments worth $48.1 million for violations of China quota restraints; and

    �    CBP also initiated 68 actions totaling $50.1 million in penalties for commercial fraud.
 
CBP Plans to Launch New Message Broadcast System

Customs sealOn December 6, 2007, the U.S. Customs House Guide reported that U.S. Customs and Border Protection (CBP) plans to launch a new free message broadcast system called the Cargo Systems Messaging Service (CSMS). CSMS will function as an email listserve and will be used by CBP to provide information to the trade.

U.S. Customs House Guide states:

Currently, the only automated commercial system with an administrative messaging capability is the Automated Broker Interface. CBP has no broadcast mechanism for other commercial systems, such as ocean/rail manifest, air manifest and electronic truck manifest. The new CSMS listserve will allow CBP to broadcast messages not only to ABI users, but to users of all CBP automated commercial systems including the Automated Commercial Environment (ACE), Automated Commercial System (ACS) and more.

To receive messages via CSMS, a user must subscribe and create a subscriber profile with an email address, password (optional), and an indication of subjects of interest. A link to the subscription page will be available at a later date.
 
Who's Hiring?
A Summary of Current Trade Job Opportunities

hand signing formAs a service to the international trade community, Global Trade Expertise compiles links to trade job opportunities from many different sources. New trade job listings are posted frequently at on our website.

Companies
with new listings this month include:

Nissan - Nashville, TN
DHL - Various
Dresser - Milwaukee, WI
Aurora Flight Sciences - Manassas, VA
Bottom Line Marketing - Savannah, GA
Bausch & Lomb - St. Louis, MO
Design Within Reach - San Francisco, CA
ITT Corp. - Kuwait
Cyberscientific - Manhasset, NY
Lockheed Martin - Liverpool, NY
Alcoa Fastening Systems - Torrance, CA
DRS Technologies - Milwaukee, WI
Cybercoders - various
Bearing Point - Afghanistan
Francis Coppola Presents - Napa, CA
KPMG - Various
Deloitte Touche - Various
Garmin - Olathe, KS
MRNINetwork - Milwaukee, WI
Eagle Test Systems - Buffalo Grove, IL
Cost Plus World Market - Oakland, CA
Honeywell Technology Solutions, Inc. - Torrance, CA
Ricoh Electronics - Tustin, CA
JP Morgan Chase - Various

To sort the job opportunities by region, fields, or levels, click on the appropriate category or tag in the right column on our Trade Jobs webpage.
Calendar of Events
Upcoming Industry Events & Seminars

Our website has a comprehensive listing of import and export conferences held throughout the country, as well as Customs training, EAR training, ITAR training, and other training. Below is a small sampling of what's available in January 2008.

Alarm ClockWomen in International Trade - Northern California (WIT-NC) - Empowering Women Entrepreneurs Through Microfinance

  Jan. 9, 6-8pm, Palo Alto, CA

Complying with Export Controls - Bureau of Industry and Security (BIS)
January 15 -17, 2008 - San Jose, CA - $325


Complying with ITAR in the Invigorated Post-9/11 Enforcement Environment - San Diego Area District Export Council
January 18, 2008 - San Diego, CA - $275

American Association of Exporters and Importers (AAEI) Western Regional Conference & Expo
January 20 - 22, 2008 - Newport Beach, CA

3rd National Forum on Export Enforcement and Investigations - American Conference Institute (ACI)
January 29-30, 2008 - Washington, DC


Complying with Export Controls - Bureau of Industry and Security (BIS)
January 29 -30, 2008 - Phoenix, AZ  - $325


Thanks again for your interest in our newsletter!
 
Sincerely,
 
Jennifer Kessinger & Tammie Krauskopf
Attorneys & Consultants
Tel. 925.876.1381 (Jennifer Kessinger)
Tel. 708.707.4087 (Tammie Krauskopf)
www.globaltradeexpertise.com
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