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Greetings!
Welcome to the May 2008 edition of Global Trade Expertise's newsletter, the Global Trader. Highlights from this month's news include: protective "First Sale" language has been included in recently passed Farm Bill; GAO issues a report critical of C-TPAT; BIS forms the Emerging Technology and Research Advisory Committee and seeks members; State Department publishes 17(c) comments; a retired University of Tennessee professor was indicted on 16 counts of ITAR violations; BIS seeks comments on DEAC recommendations; USTR initiates its 2008 annual GSP review; and a company has agreed to pay $22 million for FCPA violations. 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 C-TPAT Progress
GAO Calls for Better Internal Controls
 On April 25, 2008, the U.S. Government Accountability Office (GAO) issued a report entitled, "U.S. Customs and Border Protection Has Enhanced Its Partnership with Import Trade Sectors, but Challenges Remain in Verifying Security Practices." Highlights can be found here and a summary can be found here.
In 2005, GAO reviewed the C-TPAT program and noted operational challenges. Under the program, roughly 8,000 importers are granted benefits such as reduced scrutiny of their cargo. In exchange, the companies submit a security plan that must meet U.S. Customs and Border Protection's (CBP) minimum standards and allow officials to verify their measures are being followed. For this report, GAO was asked to assess the progress CBP has made since 2005 in: (1) improving its benefit award policies for C-TPAT members, (2) addressing challenges in validating members' security practices, and (3) addressing management and staffing challenges.
Among the problems noted in the report were:
· A company is generally certified as safer based on its self-reported security information that Customs employees use to determine if minimum government criteria are met. But due partly to limited resources, the agency does not typically test the member company's supply-chain security practices and thus is "challenged to know that members' security measures are reliable, accurate and effective."
· Customs employees are not required to utilize third-party or other audits of a company's security measures as an alternative to the agency's direct testing, even if such audits exist.
· Companies can get certified for reduced Customs inspections before they fully implement any additional security improvements requested by the U.S. government. Under the program, Customs also does not require its employees to systematically follow up to make sure the requested improvements were made and that security practices remained consistent with the minimum criteria.
"Until Customs overcomes these collective challenges, Customs will be unable to assure Congress and others that C-TPAT member companies that have been granted reduced scrutiny of their U.S.-bound containerized shipments actually employ adequate security practices," GAO stated in its report. "It is vital that Customs maintain adequate internal controls to ensure that member companies deserve these benefits."
Responding in part, CBP officials in the report agreed they could do more to follow up on suggested security improvements but noted that employees often use their expert discretion in assessing the potential danger before certifying a company. CBP also said the program overall has made the nation safer.
In sum, GAO recommends that CBP improve its electronic validation instrument, improve the validation process, enhance its records management system, and establish performance measures for improving supply chain security. CBP concurred with each of its recommendations.
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BIS Forms Emerging Technology and Research Advisory Committee (ETRAC)
Applications for Membership Are Now Available
 On May 23, 2008, the Bureau of Industry and Security (BIS) announced the establishment of the Emerging Technology and Research Advisory Committee (ETRAC). The ETRAC will assist BIS in evaluating currently controlled technologies and emerging technologies which may have national security significance.
BIS stated:
The ETRAC will provide recommendations to BIS on how to help keep the Commerce Control List current with respect to emerging technologies and research and development activities that have dual-use applications. The committee will assess new and existing regulatory controls that are of greatest consequence to U.S. national security and study the implications of the release of dual-use technology to foreign nationals under current deemed exports licensing requirements.
BIS states that the ETRAC was formed in response to the dual-use export control directive issued by the President on January 22, 2008 to the Secretary of Commerce to implement programs to assess whether regulations "control the export and reexport of sensitive items while minimizing the impact on U.S. competitiveness and innovation." The ETRAC was also established in response to a recommendation of the Deemed Export Advisory Committee (DEAC).
BIS encourages qualified leaders in industry, academia, and research who have an in-depth knowledge of U.S. research and emerging technology that could affect U.S. national security to apply for ETRAC membership (information can be found in this Federal Register notice).
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State Department Posts Comments Received on Proposed 17(c) Rule
Individual Company Comments Available for Review
 On April 11, 2008, the State Department's Directorate of Defense Trade Controls (DDTC) published a notice in the Federal Register regarding a proposed rule intended to clarify the control of aircraft parts and components under Section 17(c) of the Export Administration Act of 1979 (EAA). In the notice, the DDTC states that there have been an increasing number of Commodity Jurisdiction (CJ) requests for certain basic parts and components having a long history of use on both civil and military aircraft. DDTC stated, "The intent of this notice is to make it clear that these parts and components are not subject to the jurisdiction of the Department of State and to restate the Department's longstanding practice of using the CJ process of using the CJ process to determine the applicability of the criteria of Section 17(c) of the EAA ("Section 17(c)") in cases where there is uncertainty."
In the notice, DDTC stated it would accept comments to the proposed rule until May 12, 2008. On May 22, 2008, DDTC posted the comments it received to the proposed rule here. Comments were received from the following parties:
· Aerospace Industries Association
· Airbus
· Alcoa
· Aviation Suppliers Association
· The Boeing Company
· Commerce/BIS Transportation and Related Equipment Technical Advisory Committee
· deButts, Thomas, Pillsbury, Winthrop, Shaw, Pittman, LLP
· Emerson Power Transmission
· Goodrich Corporation
· Industrial Fasteners Institute
· Korry Electronics
· Lockheed Martin Corporation
· Rep. Donald Mazullo, U.S. House of Representatives
· Modification and Replacement Parts Association
· William Root
· Safran USA
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Retired Professor Indicted on 16 Counts for ITAR Violations
Deemed Export Violations Lead to a Possible 150 Year Sentence
 On May 20, 2008, the Department of Justice announced that a federal grand jury returned an 18 count indictment charging J. Reece Roth, a professor emeritus who headed University of Tennessee's Plasma Sciences Lab, and Atmospheric Glow Technologies, Inc. (AGT), a Knoxville-based company Roth helped found, of conspiring to defraud the U.S. Air Force and disclose restricted U.S. military data about unmanned aerial vehicles (UAV) or "drones" to foreign nationals without first obtaining the required U.S. government license or approval. (The indictment is available here on Clif Burns' Export Law Blog.) Graduate students from China and Iran are alleged to have been given unfettered access to controlled technology.
Roth, who is 70 and now retired, was charged with one count of conspiracy to defraud the U.S. Air Force and violate the Arms Export Control Act (AECA); 15 counts of violating the AECA; and one count of wire fraud for defrauding the University of Tennessee. AGT is charged in the indictment with one count of conspiracy to defraud the U.S. Air Force and violate the AECA and 10 counts of violating the AECA.
The DOJ announcement states that:
According to the indictment, between January 2004 and May 2006, Roth and AGT engaged in a conspiracy to defraud the U.S. Air Force and transmit export-controlled technical data related to a restricted U.S. Air Force contract to develop plasma actuators for a munitions-type UAV, or "drone," to one or more foreign nationals, including a citizen from the People's Republic of China. The Chinese national was a graduate research assistant at the University of Tennessee. The University of Tennessee was victimized by the conspirators and cooperated throughout with the Federal Bureau of Investigation (FBI) led federal investigation.
United States Attorney Russ Dedrick said, "The protection of United States technology is a continuing priority of the Department of Justice and this District. Whenever restricted U.S. military data is illegally disclosed to foreign nationals, America's security is put at risk. Today's indictment demonstrates just how seriously we view such violations."
Violations of the AECA carry a maximum possibly penalty of 10 years imprisonment and a $1 million fine. Wire fraud carries a maximum penalty of 20 years imprisonment and a $250,000 fine and conspiracy carries a maximum penalty of 5 years imprisonment and a $250,000 fine.
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BIS Seeks Comments on Deemed Export Advisory Committee Recommendations
Comments Sought on Whether CCL Scope Subject to Deeemed Export Licensing Should be Narrowed
On May 19, 2008, the Bureau of Industry and Security (BIS) published a notice in the Federal Register seeking public comments on the Deemed Export Advisory Committee (DEAC) Recommendations. Specifically, BIS is seeking comments on whether the scope of technologies on the Commerce Control List that are subject to deemed export licensing requirements should be narrowed, and if so, which technologies should be subject to deemed export licensing requirements. In addition, BIS is seeking comments on whether a more comprehensive set of criteria should be used to assess country affiliation for foreign nationals with respect to deemed exports.
Comments must be received no later than August 18, 2008. The DEAC report may be accessed here.
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Company Agrees to Pay $22 Million Penalty for FCPA Violations
Prosecution is Deferred for Three Years
 On May 14, 2008, the Department of Justice (DOJ) announced that Willbros Group Inc., a publicly traded company that provides construction, engineering, and other services in the oil and gas industry, and its wholly owned subsidiary, Wilbros International Inc. have agreed to pay a $22 million penalty in connection with corrupt payments to Nigerian and Ecuadorean government officials in violation of the Foreign Corrupt Practices Act (FCPA).
The DOJ stated:
According to the criminal information, from late 2003 through March 2005, Willbros employees agreed to make corrupt payments totaling more than $6.3 million to Nigerian government officials to assist in obtaining and retaining a $387 million contract for work on a major engineering, procurement and construction gas pipeline project known as the Eastern Gas Gathering System (EGGS). In exchange for the EGGS project, the conspirators corruptly paid, promised to pay and authorized payments to officials of the Nigerian National Petroleum Corporation (NNPC), the state-owned oil company in Nigeria; NNPC's subsidiary, the National Petroleum Investment Management Services (NAPIMS); a senior official in the executive branch of the Nigerian federal government; officials of a multinational oil company serving as the operator of the EGGS joint venture; and a political party.
In recognition of Willbros' thorough review of the improper payments, the companies' exemplary cooperation, the companies' implementation of enhanced compliance policies and procedures, and the companies' engagement of an independent corporate monitor, the Department has agreed to defer prosecution of these companies for three years. If Willbros Group and Willbros International abide by the terms of the agreement, the Department will dismiss the criminal information when the term of the agreement ends.
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Protective "First Sale" Language Included in Farm Bill
Congress Votes to Override Presidential Veto
 On May 22, 2008, the U.S. Senate voted 82-13 and joined the U.S. House of Representatives that voted 306-110 to overturn the President's veto of the Food, Conservation, and Energy Act of 2008 (also known as "the farm bill"). Of importance to the international trade community is protective first sale language that was added to the farm bill by Sen. Max Baucus (D. - Mont.), Rep. Charles Rangel (D.-NY) and other key lawmakers. This language was not subject to any hearings and was not considered in committee.
On January 24, 2008, U.S. Customs and Border Protection (CBP) published a notice in the Federal Register setting forth its proposed interpretation of the phrase "sold for exportation to the United States," which would effectively eliminate the use of "first sale" valuation.
CBP's proposed interpretation has drawn bipartisan opposition in the House, where 51 members wrote Department of Homeland Security Secretary Michael Chertoff in an April 18 letter to ask that the CBP proposal be "immediately withdrawn."
The Senate summarizes the protective first sale language as follows:
First Sale. The longstanding practice of "first sale" allows an importer to assess the value of imported goods based on the first sale of goods destined for the United States, regardless of when that sale occurred. Without consulting Congress or the importing industry, U.S. Customs and Border Protection (CBP) has proposed regulatory changes to assess duties on the "last sale" rather than the "first sale" value of goods. Such a change could increase significantly the duties paid by American importers. The farm bill (1) requires CBP to collect information on the number of importers that value imports using the "first sale" methodology; (2) requires the United States International Trade Commission to provide Congress with a report on the number of importers using "first sale" methodology, and the value of those imports; and (3) expresses a sense of Congress that CBP should not implement its change in interpretation until at least January 1, 2011.
Thus, while the language in the farm bill does not prevent CBP from eliminating first sale, it does require CBP to study the change to determine how much more revenue it would collect and companies would be affected. It also includes non-binding "sense of Congress" language that the change should not be implemented until 2011.
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USTR Initiates 2008 Annual GSP Review
Product and Country Eligibility Reviewed
 On May 15, 2008, the United States Trade Representative (USTR) published a notice in the Federal Register announcing that it will receive petitions in 2008 to modify the list of products that are eligible for duty-free treatment under the Generalized System of Preferences (GSP) and to modify the GSP status of certain GSP beneficiary developing countries because of country practices.
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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:
ATK - Mesa, CA
L-3 Communications - Arlington, VA
PRA Corp. - Ridgefield, CT
BAE Systems - Rockville, MD
General Dynamics AIS - Santa Clara, CA
BAE Systems - Santa Clara, CA
Jack Nadel International - Culver City, CA
Spartan Stores - Farmingham, MA
Triumph Group, Inc. - Salt Lake City, UT
Geodis Wilson - Jamaica, NY
NEC - Rancho Dominguez, CA
Sikorsky - Stratford, CT
Cardone Industries - Philadelphia, PA
Orbital Sciences Corp. - Dulles, VA
ADM - Decatur, IL
The Boeing Company - Seattle, WA
Alcoa - San Antonio, TX
Insitu, Inc. - Bingen, WA
Homasote Company - Trenton, NJ
Goodrich - Chula Vista, CA
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 June:
The Role of Trade Compliance in Strategic Sourcing - Women in International Trade - Northern California
Featuring Global Trade Expertise's Tammie Krauskopf with Meredith Covey of Williams Sonoma
June 4, 2008 - Palo Alto, CA - $40 Member/$55 Non-Member
One on One with BIS Undersecretary Mario Mancuso - Women in International Trade - Northern California
June 4, 2008 - Palo Alto, CA - $25 Member/$35 Non-Member
87th Annual Conference & Expo - American Association of Exporters and Importers (AAEI)
June 1-3, 2008 - New York, NY - Online Registration now closed, walk-in registrations available - $800
PACMAN - Import/Export Compliance Certification: Workshop and Exam (Professional Association of Import/Export Compliance Managers) - The World Academy
June 9 - 11, 2008 - Las Vegas, NV - $695 for 2 day workshop on 6/9 - 6/10 & $295 for annual meeting on 6/11
Developing a Technology Control Plan - Florida Institute of Technology
June 9, 2008 - Melbourne, FL - $195
Complying with Export Controls - Bureau of Industry and Security (BIS)
June 11-12, 2008 - Seattle, WA - $325
Compliance Due Diligence and Recordkeeping - Florida Institute of Technology
June 11, 2008 - Melbourne, FL - $195
Advanced Import/Export Operations, Documentation and Compliance Management - The World Academy
June 23-25, 2008 - San Jose, CA - $895
C-TPAT Updates - Professional Association of Exporters and Importers (PAEI)
June 26, 2008 - San Jose, CA - $50 Members, $80 Non-Members
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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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