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Greetings!
Welcome to the April 2008 edition of Global Trade Expertise's newsletter, the Global Trader. Highlights from this month's news include: a GAO Report Critical of State & Commerce Export Control Functions, State Department Website Notices, Physicist Pleads Guilty to ITAR Violations, Illegal Reexports from UAE to Iran, U.S.-Colombia FTA & the Future of Free Trade Agreements, International Registered Traveler Pilot Program Announced, and CBP Lists Priority Trade Issues. As always, we would appreciate any comments or suggestions you may have to improve this newsletter either by email to info@globaltradeexpertise or via our feedback survey link in our left column. Thank you for reading! Jennifer Kessinger & Tammie Goldstein Krauskopf
globaltradeexpertise
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GAO Issues Report Critical of State and Commerce's Export Control Functions
Testimony Before U.S. Senate Subcommittee
 The U.S. Government Accountability Office (GAO) issued a report entitled, "Export Controls: State and Commerce Have Not Taken Basic Steps to Better Ensure U.S. Interests Are Protected" on April 24, 2008. A summary can be found here and highlights here.
In the report, the GAO found export licensing inefficiencies, poor interagency cooperation, and limits in the Departments of State's and Commerce's ability to provide a sound basis for changes to the system. In November 2007, the GAO reported that procedural and automation weaknesses, along with workforce challenges, created inefficiencies in State's arms export licensing process. The GAO noted that in less than 4 years, median processing times for license applications nearly doubled (from 14 days in 2003 to 26 days in 2006), with State's backlog of open cases peaking at 10,000.
Specifically, the GAO found procedural weaknesses in that the State Department lacked screening procedures to promptly identify those cases needing interagency review. The GAO also found that State also lacked procedures to expedite certain cases such as exports to the UK and Australia and those to support Operations Iraqi Freedom and Enduring Freedom, as required by law. The GAO also found electronic processing problems with State's D-Trade system and that State has faced challenges in establishing and retaining a sufficient workforce with the experience and skills needed to efficiently and effectively process arms export applications.
In response to these findings, State has informed the GAO that it (1) has implemented procedures to more quickly determine whether referrals to other agencies are needed and instituted senior level reviews of cases that are over 60 days old, (2) is planning future D-Trade upgrades that are expected to facilitate case reviews by licensing officers and allow managers to better oversee the processes, and (3) has restructured its licensing divisions to ensure a more equitable distribution in the workload and skill level of licensing officers based on the GAO's analysis.
From 1998 through 2005, the GAO found that Commerce's overall median processing times have remained stable at around 40 days and are consistent with time frames established by a 1995 executive order. However, the GAO found that Commerce lacks efficiency-related measures and analyses that would allow it to identify opportunities for improvement. For example, Commerce only measures its performance in terms of how long it takes to refer an application to another agency for review but does not have efficiency-related measures for other steps in its review process, such as how quickly a license should be issued once other agencies provide their input, or for the entire process.
The GAO also found vulnerabilities in the export control system due to poor interagency coordination. The GAO noted issues relating to jurisdiction determinations between State and Commerce and license exemption determinations between State and Defense. In addition, the GAO found that State and Commerce do not receive information on criminal export control prosecution outcomes on a timely basis.
Finally, the GAO found that the absence of systematic assessments by State and Commerce limits their ability to identify problems and make improvements to the system.
The GAO concluded its report by stating that, "While the implementation of our recommendations is an important first step for improving the efficiency and effectiveness of the export control system, a sustained commitment on the part of the departments to engage in a continuous process of evaluation, analysis, and coordination is needed."
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Chinese Grad Student Work Leads to Criminal Case
Physicist Pleads Guilty to ITAR Violation in Working with University of Tennessee
 On April 15, 2008, the Department of Justice announced that Daniel Max Sherman, a physicist who formerly worked as the director of plasma research at Atmospheric Glow Technologies, Inc., a Knoxville, Tennessee based company. According the to plea agreement, between January 2004 and May 2006, Sherman and J. Reece Roth, a Professor Emeritus at the University of Tennessee, engaged in a conspiracy to transmit export controlled technical data related to a restricted U.S. Air Force contract to develop plasma actuators for munitions-type Unmanned Aerial Vehicle (UAV) or "drones", to a foreign national from the People's Republic of China.
The Chinese national was a graduate research assistant at the University of Tennessee. The DOJ reported that the University of Tennessee was victimized by the conspirators and cooperated throughout the FBI-led investigation.
Mr. Roth has not been charged in the case. The investigation of Mr. Roth has been watched closely by those in academics since May 2006 when it was reported that Customs agents copied his laptop as he returned from a trip to China and that search warrants were executed at his office and laboratory. University officials who monitor export control compliance believe that the Tennessee case may have arisen due to the involvement of a for-profit company. The International Traffic in Arms Regulations (ITAR) exempts fundamental research done by universities that is ordinarily published and shared broadly within the scientific community. However, when a private company is involved and the research is proprietary or restricted from publication or disclosure, no exemption applies.
A report on the matter in the New York Sun contained these insights from university officials:
"If you're blurring the lines between the work you do at one place and the work you do at another, you can quickly get into trouble," Patrick Schlesinger of the University of California said. Doing only publishable research also allows universities to avoid segregating foreigners, a task that may be impractical in physical science programs where American citizen students are often a minority. "If we want to preserve that safe harbor, we also need to be very vigilant," Steven Eisner of Stanford University said. "This particular case in Tennessee will wake up the university community to export controls if they weren't aware of it already."
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Illegal Reexports from UAE to Iran Reported in New York Times
Efforts to Curb Transshipments Are Slow
 On April 2, 2008, the New York Times reported that the Bush Administration has been concerned about American-made items such as computer circuits, aircraft parts, specialized metals, and gas detectors that are controlled for export purposes and have been found in Iran and Iraq. In general, the controlled items were exported to the United Arab Emirates and then illegally reexported to Iran or Iraq.
The article states that last year, U.S. military investigators discovered American-made computer circuits in bomb detonators used in Iraq against U.S. forces. By reading the serial number of the chip and studying shipping records, investigators determined that the chip had been manufactured by AMD in Sunnyvale, CA and sold to Mayrow General Trading in Dubai. A spokesperson for AMD told the New York Times that the company had cooperated with the investigation and added that its customers are bound by agreements not to re-export its products to Iran. The U.S. did not have jurisdiction over Mayrow, a foreign company, but was angered that UAE counterparts had not immediately moved to close Mayrow.
The report states that the discovery of the computer circuits in the bomb detonators set off a clash when the Bush Administration cited the diversion of computer circuits to Iran and then to Iraq, as proof that the UAE were failing to prevent American technology from falling into the wrong hands. American officials stated that other controlled items have moved through Dubai, one of the emirates, to Iran, Syria, and Pakistan.
The article states:
The diplomatic face-off, which drew little public attention, prompted the United States to threaten tough new controls on exports to the United Arab Emirates, an ally. The nation had invested billions to become a global trading hub and had begun a campaign to burnish its image in the United States after the uproar in 2006 over a proposal to allow a Dubai company manage some American port terminals.
The administration backed down only after the emirates promised to pass their own export control law. But it is unclear that much has changed nearly a year after the confrontation.
Despite the new UAE export control laws, Iranian traders have found little evidence that the law has been broadly enforced. The article states that the U.S. has been concerned about the diversion of exports to the UAE since 2002 when the Commerce Department sent Mary O'Brien, an inspector, to the UAE for end use checks. From her spot checks of factories, freight forwarders, and other companies that had ordered U.S. export controlled products, Commerce officials stated that it was clear that the products were being diverted on a grander scale than imagined.
An entity said to be a woodworking shop, for example, had ordered a sophisticated American machine for making metal parts. The device, Ms. O'Brien knew, could also shape components for a missile system. The supposed factory contained almost no sawdust, and the few employees could not explain how they intended to use the machine.
"This is not right," Ms. O'Brien said she had said to herself, convinced that she had turned up her first "briefcase business"- open for inspection, but closed for good as soon as she walked out.
In Ms. O'Brien's 4 years of end user checks, nearly 40% were unfavorable in that the regulated items were found to be missing or the recipient would not cooperate. These end user checks helped jump start many criminal investigations into the diversion of controlled U.S. commodities diverted to Iran. As of last year, 58 inquiries (about half of the total) involved the United Arab Emirates.
The NYT reports that the Commerce Department had proposed new export controls for "governments unwilling or unable to cooperate with the U.S. in its interdiction efforts," which would require special reviews before certain dual-use items could be exported to such nations. Last year, nearly $12 billion worth of American goods were exported to the UAE. Diplomats and lobbyists from the UAE appealed to the State Department and White House and promised the Commerce Department that the UAE would adopt its own export control law, staving off the new reforms. The export control law was adopted in the UAE last August. In fact, the UAE claims to have shut down 12 companies late last year suspected of illegal exports or money laundering and recently arrested a Jordanian businessman who tried to import a metal used in nuclear reactors with the intention of selling to other countries.
Commerce and State officials say that they are encouraged by the steps taken by the UAE, but said that an export licensing system must still be introduced and other enforcement steps taken. Mario Mancuso, the Commerce Under Secretary for export administration stated, "The UAE has made progress, but more needs to be done."
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Future of Free Trade Agreements
Are pending free trade agreements doomed?
 Is the future of free trade agreements (FTAs) in peril? On April 8, 2008, President Bush sent the U.S.- Columbia Trade Promotion Agreement to Congress for approval within 90 days under "Fast-Track" negotiating authority (also known as Trade Promotion Authority (TPA)). Under fast track negotiating authority, the President of the United States has the authority to negotiate trade agreements that Congress can either approve or reject, but cannot amend or filibuster. Fast track negotiating authority is granted to the President by Congress and was in effect from 1975 to 1994 pursuant to the Trade Act of 1974 and from 2002 to July 1, 2007 pursuant to the Trade Act of 2002. It has not yet been renewed. However, the authority will be available for Congressional consideration of free trade agreements with Peru, Panama, and South Korea, which were all signed by the United States before the deadline.
In an attempt to have the Colombia FTA decided before the November elections, the Bush Administration introduced the agreement to Congress on April 8, 2008. However, in an unprecedented move, the U.S. House of Representatives voted 224-195 on April 10, 2008, to exempt the implementing legislation of the Columbia FTA from the fast-track authority of the Trade Act of 1974 via a one sentence resolution. This removes the fast-track timeline for the Columbia FTA. Although President Bush has accused Speaker Nancy Pelosi of "killing" the agreement with a close U.S. ally, Pelosi has responded by insisting that the White House and Congress agree on a new U.S. aid package before a vote is taken on the Colombia FTA.
Democrats have expressed concern over violence in Colombia against union leaders and would like stronger labor and environmental provisions to be included. However, supporters of the FTA argue that about 90% of imports from Colombia already enjoy duty-free treatment under the Andean Trade Preferences Act while U.S. imports into Colombia do not receive similar treatment. Once the Colombia FTA is signed, 80% of U.S. imports into Colombia will become immediately duty-free, and all remaining tariffs would be eliminated within a decade. Additionally, supporters state that Congress was able to agree upon a very similar free trade agreement with Peru last year that was renegotiated to included stronger labor and environmental provisions. (See this opinion by James Baker III in support of the Colombia FTA.) Support for the Colombia FTA has been strong in newspaper opinion pieces across the nation, with little opposition similarly expressed. (See here for links.)
Both Senator Hillary Clinton and Senator Barack Obama oppose the Colombia FTA, siding with the AFL-CIO, which is fighting the agreement because it believes Colombia has not done enough to stop killings of trade unionists and bring their killers to justice. Republican Senator John McCain supports the Colombia FTA.
Senators Clinton and Obama also oppose the U.S.-South Korea free trade agreement because they say it fails to eliminate trade barriers to imports of American cars, though the U.S. and South Korea recently resolved a 4 year-old trade dispute over beef.
The free trade agreement with Panama became endangered last September when Panama's National Assembly elected Pedro Miguel Gonzalez to lead its legislature. Gonzalez is wanted in the U.S. on charges that he killed a U.S. soldier in 1992. However, Gonzalez has said he will not seek a second term this year, giving the trade community hope that the smallest FTA could still pass.
The political atmosphere with regard to trade agreements will likely affect Congressional consideration of the Doha talks. Trade officials from India and the U.S. are set to meet on May 8, 2008 to brainstorm ways to jump-start the stalled WTO Doha round of talks. A ministerial meeting of WTO representatives will take place in May in Geneva. The Doha Development Round commenced in November 2007 in Doha, Qatar. Its objective is to lower trade barriers and permit free trade while taking into account the differences in development levels of the negotiating countries. Talks have been stalled due to differences between the EU, US, and Japan on one side and India, Brazil, China, and South Africa, on the other. The main source of contention has been the opening up of agricultural and industrial markets in various countries and the cutting of farm subsidies in the developed countries.
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CBP Announces International Registered Traveler (IRT) Pilot Program
Public Comments are Invited
 On April 11, 2008, Customs and Border Protection (CBP) announced in the Federal Register a pilot International Registered Traveler (IRT) program and requested comments. The IRT program will allow for expedited clearance of pre-approved low-risk air travelers into the United States. The pilot program will initially be conducted at three airports: John F. Kennedy International Airport in New York (JFK), the George Bush Intercontinental Airport in Houston (IAH), and Washington Dulles International Airport (IAD). The program may be expanded to other locations as announced.
Applications to be an initial participant in the pilot program should be submitted by May 12, 2008 and the pilot program will commence on June 10, 2008. Applications to participate will be accepted throughout the duration of the pilot and are available through the Global On-Line Enrollment System (GOES) at www.cbp.gov. At this point, applicants must be either a U.S. citizen, national, or lawful permanent resident (LPR).
Expedited clearance will be effected using automated kiosks located in the Federal Inspection Services (FIS) area of each participating airport. IRT uses fingerprint biometrics technology to verify a participant's identity and confirm his or her status as a IRT participant. After arriving at the FIS area, the participant will proceed directly to the IRT kiosk. A sticker affixed to the participant's passport at the time of acceptance into the IRT program will provide visual identification that the individual can be referred tot he IRT kiosk. IRT participants need not wait in the regular passport control primary inspection lines.
In the Federal Register notice, CBP invites public comments concerning any aspect of the pilot program, provides eligibility requirements for voluntary participation in the pilot program, describes the basis on which CBP will select participants, and describes how the IRT program will operate.
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CBP Publishes List of Priority Trade Issues
Seven PTIs Listed
 U.S. Customs and Border Protection (CBP) recently published on its website its current list of Priority Trade Issues (PTIs). CBP states that PTIs are "issues that cause significant revenue loss, economic risk to U.S. industry or represent health and safety concerns to citizens."
They are identified as:
· Agriculture
· Antidumping and Countervailing Duties (ADCVD)
· Import Safety
· Intellectual Property Rights
· Penalties
· Revenue
· Textiles
You can read more about each PTI by clicking on it at CBP's website. |
Who's Hiring?
A Summary of Current Trade Job Opportunities
 As 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 on our website.
Companies with new listings this month include:
Northrop Grumman - El Segundo, CA
Albion Management Resources - Orange County, CA
Raytheon - Marlborough, MA
Superior Industries - Van Nuys, CA
Oasis Corporation - Greensboro, NC
Pioneer Electronics - Long Beach, CA
Maxim/Dallas Semiconductor - Sunnyvale, CA
Taminco - Allentown, PA
Ingersoll Rand - San Diego, CA
SanMar - Bellevue, WA
BCBG Max Azria Group - Vernon, CA
Mazda North America - Irvine, CA
Koch Nitrogen Company - Witchita, KA
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. |
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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 May:
Internal Audit: Best Practices - Women in International Trade - Northern California
May 7, 2008 - Palo Alto, CA $40 Member/$55 Non-Member
Complying with Export Controls - Bureau of Industry and Security (BIS)
May 7-8, 2008 - Newport Beach, CA - $295
Complying with Export Controls - Bureau of Industry and Security (BIS)
May 7-8, 2008 - Louisville, KY - $350/$450 including Deemed Exports seminar on 5/9
Intermediate Deemed Exports - Bureau of Industry and Security (BIS)
May 9, 2008 - Louisville, KY - $125/$100 if attending Complying with Export Controls on 5/7-5/8
Classification Under The Schedule B - Unz & Co.
May 15, 2008 - Long Beach, CA - $675
Complying with Export Controls - Bureau of Industry and Security (BIS)
May 20-21, 2008 - San Jose, CA - $325
Technology Controls - Bureau of Industry and Security (BIS)
May 22, 2008 - San Jose, CA - $225
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Thanks again for your interest in our newsletter!
Sincerely,
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Jennifer Kessinger & Tammie Krauskopf
Attorneys & Consultants
jk@globaltradeexpertise.com
Tel. 925.876.1381 (Jennifer Kessinger)
tk@globaltradeexpertise.com
Tel. 708.707.4087 (Tammie Krauskopf)
www.globaltradeexpertise.com
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