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Greetings!
Welcome to the July 2008 edition of Global Trade Expertise's newsletter, the Global Trader. Highlights from this month's news include: CBP Proposes Uniform Rules of Origin based on NAFTA-style Tariff Shift Rules, WTO Doha Round of Talks Collapse Without Agreement, CIT Dismisses Gender Discrimination in Tariff Classifications Case, CBP Testifies re: Laptop Border Searches, BIS Update 2008 Dates Announced, DDTC Limits ITAR Registration to 1 Year, and North Korea Designation Changes. 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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BIS Announces Dates for Update 2008 Conference
Those Notified By Email Must Register by August 18th
 On July 24, 2008, the Bureau of Industry and Security (BIS) announced the dates for its Update 2008 conference. Update 2008 will be held from September 29, 2008 - October 1, 2008. Further information can be found here and the agenda can be found here.
BIS states that, "Update activities will begin on Monday, September 29 featuring mini training sessions for those new to Update as well as an Exhibit Hall with industry and government exhibitors. The main conference will begin on Tuesday, September 30 and end on Wednesday, October 1. Please see the Agenda for conference details. A Program Description will be posted in the coming weeks."
BIS had posted information on how to express your interest in attending Update 2008 and will e-mail instructions on how to register on July 25, 2008. BIS states, "Since there was more interest than space available at the conference, those whose names are not drawn will be placed on a waiting list and notified of how to register as space becomes available." For those who receive the registration email, they must register by August 18th, or their spot will be given to those on the wait list.
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USPTO Publishes Notice Reminding Patent Filers of Export Controls
Scope of USPTO's Foreign Filing Licenses Clarified
 On July 23, 2008, the United States Patent and Trademark Office (USPTO) published a notice in the Federal Register regarding the scope of its foreign filing licenses. Through the notice, USPTO reminds applicants and registered patent practitioners that the export of subject matter abroad pursuant to a license from the USPTO, such as a foreign filing license, is limited to the purposes related to the filing of foreign patent applications. The USPTO reminds applicants who are considering exporting subject matter abroad for the preparation of patent applications to be filed in the United States to contact the Bureau of Industry and Security (BIS) of the Department of Commerce for appropriate clearances.
In the notice, the USPTO states that it has become aware that a number of law firms or service provider companies located in foreign countries that are sending solicitations to U.S. registered patent practitioners offering their services in connection with the preparation of patent applications to be filed in the United States. The USPTO states that, "if an invention was made in the United States, technical data in the form of a patent application, or in any form, can only be exported for purposes related to the preparation, filing or possible filing and prosecution of a foreign patent application, after compliance with the EAR or following the appropriate USPTO foreign filing license procedure. See 37 CFR 5.11(c). A foreign filing license from the USPTO does not authorize the exporting of subject matter abroad for the preparation of patent applications to be filed in the United States."
Finally, the USPTO states:
This notice does not change existing laws or regulations. Thus, while the notice is effective on July 23, 2008, this notice does not excuse or otherwise affect the legal consequence of a failure to comply with existing law or regulations that occurred prior to July 23, 2008.
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DOD Issues Interim Rule Amending DFARS re: Complying with Export Controls While Performing DOD Contracts
Comments Are Due By September 19, 2008
 On July 21, 2008, the Department of Defense (DoD) issued an interim rule in the Federal Register amending the Defense Federal Acquisition Regulation Supplement (DFARS) to address requirements for complying with export control laws and regulations when performing DoD contracts. The rule recognizes contractor responsibilities to comply with existing Department of Commerce and Department of State regulations.
DoD published a proposed rule at 70 Fed. Reg. 39,976 on July 12, 2005, to address requirements for preventing unauthorized disclosure of export-controlled information and technology under DoD contracts. In consideration of the public comments received, DoD published a second proposed rule at 71 Fed. Reg. 46,434. In the Federal Register publication today, DoD sets out the changes from the interim rule and addresses the public comments received from 167 persons or organizations in response to the second proposed rule.
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State Department Publishes Final Rule Limiting ITAR Registration to 1 Year
Final Rule Also Limits the Time Frame for Renewing Registrations
 On July 18, 2008, the U.S. Department of State published a final rule in the Federal Register which amends the International Traffic in Arms Regulations (ITAR). The final rule is effective on July 18, 2008 and revises the validity period for registration to one year (from up to 2 years) and limits the time frame in which a registration may be renewed. A registrant must now submit its request for renewal of its registration at least 30 days prior to the expiration of the registration, but no earlier than 60 days prior to the expiration date.
The amended regulation follows:
Sec. 122.3 Registration fees.
(a) A person who is required to register may do so for a period of 1 year upon submission of a completed Form DS-2032, transmittal letter and payment of $1,750.
(b) Expiration of registration. A registrant must submit its request for registration renewal at least 30 days but no earlier than 60 days prior to the expiration date.
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President Bush Changes Designation of North Korea
45 Day Congressional Notification Period Begins for Rescission of State Sponsor of Terrorism Designation
 On June 26, 2008, President Bush announced the lifting of the application of the Trading with the Enemy Act (TWEA) with respect to the Democratic People's Republic of Korea (DPRK or North Korea), and notified Congress of his intent to rescind North Korea's designation as a State Sponsor of Terrorism (SST), which triggers a 45-day congressional notification period prior to formal rescission of the designation. The Executive Order can be found here and the State Department's press release can be found here.
This presidential action was taken following North Korea's submission of a declaration of its nuclear programs, which will now be subject to verification, by the Six Parties. The Six Party talks has been a series of meetings with six party states: the People's Republic of China, the Republic of Korea (South Korea), North Korea, the United States, the Russian Federation, and Japan, which were the result of North Korea's withdrawal from the Nuclear Non-Proliferation Treaty in 2003.
The Administration plans to carry out North Korea's rescission from the SST list only after the Six Parties reach agreement on acceptable verification principles and acceptable verification protocol regarding North Korea's nuclear activities; the Six Parties have established an acceptable monitoring mechanism; and verification activities have begun. |
BIS Posts Q & As on Recent North Korea Presidential Announcement
No Change for U.S. Exporters At This Time
On July 8, 2008, the Bureau of Industry and Security (BIS) posted questions and answers on the recent Presidential announcement with regard to the rescission of North Korea from the State Sponsor of Terrorism (SST) List (here). The questions and answers provide exporters with guidance as to what practical changes they can expect as a result a result of the Executive Order (which can be found here).
In essence, the Q&A states that the President's June 26, 2008 announcement triggered a 45-day congressional notification period prior to the formal rescission of the SST designation. The Administration will carry out the formal rescission only after the Six Parties (along with North Korea - China, Russia, Japan, South Korea, and the United States) reach agreement on acceptable verification and monitoring principles and protocols regarding North Korea's nuclear activities. Following such agreement, and barring further congressional action, BIS plans to publish an amendment to the Export Administration Regulations (EAR) removing North Korea from Country Group E:1 and making other conforming changes to implement the rescission. Removing North Korea from Country Group E:1 will raise the threshold value for calculating the de minimis level of foreign goods destined to North Korea to 25% controlled U.S. content. Currently, as a member of Country Group E:1, the threshold value is 10%.
However, the President's announcement does not signal a change for U.S. exporters currently. BIS states that pursuant to Section 746.4 of the EAR, it will continue to require a license for the export or reexport to North Korea of items subject to the EAR, except food and medicine classified as EAR99. BIS also stated that even after North Korea's SST designation is rescinded, certain export control requirements, in particular those related to North Korea's detonation of a nuclear device on October 9, 2006, proliferation activities, and human rights violations, will continue to apply on the basis of other laws and regulations, and in accordance with United Nations Security Council Resolution 1718.
BIS also stated that its licensing policy for North Korea has not yet changed. Once the rescission takes effect, it will review applicable licensing policy. Currently, the licensing policy for North Korea is as follows:
· The U.S. Government will generally approve applications to export or reexport: (a) Non-food, non-medical humanitarian items meeting subsistence needs and intended for the benefit of the North Korean people; and (b) Items in support of the United Nations and other humanitarian efforts.
· The U.S. Government will generally deny applications to export or reexport to North Korea: (a) Luxury goods (an illustrative list of luxury goods appears on the BIS website); (b) Arms and related materiel, and items controlled under the multilateral export control regimes; and (c) Items that could contribute to North Korea's nuclear-, ballistic missile-, or other weapons of mass destruction-related programs.
· The U.S. Government will review, on a case-by-case basis, applications to export and reexport all other items subject to the EAR, consistent with all applicable licensing policies set forth in the EAR.
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State/DDTC Updates Guidance Documents
Links to Updated Guidance Documents Follow
On July 1 - 3, 2008, the State Department's Directorate of Defense Trade Controls (DDTC) updated its website with new guidance documents. Specifically, the DDTC posted updated Agreements Guidelines on July 1, 2008; a listing of countries by DoS regional bureaus, licensing review checklists, and updated licensing FAQs on July 2, 2008; and updated its DDTC Outreach page on July 3, 2008.
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CBP Proposes New Uniform Rules of Origin for Imported Products
NAFTA-Style Tariff Shift Rules Proposed - Comments due by September 23, 2008
 On July 25, 2008, U.S. Customs and Border Protection (CBP) issued a proposed rule in the Federal Register, which would be a radical departure from its current rules of origin for imported products. The proposed rule would extend the application of the NAFTA-style tariff shift country of origin rules of 19 CFR § 102 to instances when the general "substantial transformation" rules orf origin currently apply. Comments on the proposed rule must be received by CBP by September 23, 2008.
CBP states that under the current regulations, there are two primary methods that CBP uses to determine the country of origin of imported goods that are processed in, or contain materials from, more than one country. CBP states that one method employs a case-by-case adjudication to determine whether goods have been "substantially transformed" in a particular country. CBP states that the other method employs codified rules, also used to determine whether a good has been "substantially transformed" primarily expressed through changes in tariff classification.
CBP states that the case-by-case substantial transformation standard has developed from federal court decisions issued over many years and was first applied by the U.S. Supreme Court in the case of Anheuser-Busch Brewing Association v. United States 207 U.S. 556 (1908). In a drawback decision, the Court held that manufacture requires a "transformation; a new and different article must emerge, 'having a distinctive name, character or use.'" Id. at 562 (quoting Hartranft v. Wiegmann, 121U.S. 609, 615 (1887)).
CBP states:
Despite its heritage and apparent straightforwardness, administration of the substantial transformation standard has not been without problems. These problems derive in large part from the inherently subjective nature of judgements made in case-by-case adjudications as to what constitutes a new and different article and whether processing has resulted in a new name, character, and use. The substantial transformation standard has evolved over many years through numerous court decisions and CBP administrative rulings. Because the rule has been applied on a case-by-case basis to a wide range of scenarios and has frequently involved consideration of multiple criteria, the substantial transformation has been difficult for the courts and CBP to apply consistently and has often resulted in a lack of predictability and certainty for both CBP and the trade community.
CBP goes on to state:
In an effort to simplify and standardize country of origin determinations, Customs developed a codified method that uses specified changes in tariff classification (tariff shifts) and other rules to express the substantial transformation concept. Under this codified method, the substantial transformation that an imported good must undergo in order to be deemed a good of the country where the change occurred is usually expressed in terms of a specified tariff shift as a result of further processing.
After going through the history of Part 102 of the CFR, CBP states that since 1996, the Part 102 rules have applied to all imports from Canada and Mexico, and nearly all textile product, accounting for approximately 40 percent of total U.S. imports. CBP states that it and the trade community have had extensive experience in applying Part 102 origin rules and in CBP's experience administering these rules, it has found that "by virtue of their greater specificity and transparency, codified rules result in determinations that are more objective and predictable than under the case-by-case adjudication method."
Therefore, CBP is proposing "to extend by application of the Part 102 rules of origin to all country of origin determinations made under the customs and related laws and the navigation laws of the United States, unless otherwise specified."
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WTO Doha Talks Collapse Without Agreement
US/EU Would Not Agree to Protectionist Tariffs Wanted by China & India
 After seven years of the Doha round of World Trade Organization (WTO) negotiations and nine days of talks in Geneva, world trade talks collapsed in rancor on July 29, 2008. The nine day talks were the longest trade summit diplomats in Geneva could recall, reported the Wall Street Journal, and were aimed at concluding a simple bargain: The European Union and the United States would lower farm subsidies and tariffs in exchange for China, India, Brazil and other emerging economies opening up their markets for industrial goods such as chemicals and cars. Trade experts stated that the failure of the talks were the result of huge changes in the global economy as countries such as Brazil, China, and India emerge as trading powerhouses.
The Wall Street Journal reports that talks between the 30-some countries almost collapsed last week, but a midnight handshake on Friday between Brazil and the U.S. kept talks going. The U.S. agreed to cap its farm subsidies at $14.5 billion and Brazil accepted cuts in its industrial tariffs. Over the weekend, however, India and China refused to compromise with the U.S. China and India insisted on a safeguard rule that would allow them to impose special tariffs if imports surged in certain products such as sugar, cotton, and rice.
The New York Times reported that the U.S. argued that the safeguard rule, which is not permitted today, would involve moving backwards on existing world trade commitments. Susan Schwab, the United States Trade Representative (USTR), said that success had been "so close" on Friday, adding that, "The U.S. commitments remain on the table, awaiting reciprocal responses." Ms. Schwab challenged the claim of India and other developing countries that the U.S. was the chief obstacle to concluding the deal. "It is unconscionable that we could have come out with an outcome that rolled the global trading system back not by one year or five years but by 30 years," she stated.
The New York Times reported:
The proliferation of bilateral deals and the continuing expansion of exports from both developing and developed countries have raised doubts among some Doha skeptics about the necessity of a global agreement. But experts said it was important, particularly as a bulwark against rising protectionist sentiments.
"There are people who argue that no Doha outcome is better than a weak Doha outcome, but I don't agree," said Katinka Barysch, the chief economist at the Center for European Reform in London.
"With the world economy slowing, you have growing protectionist pressures in many countries," she said. "You want to bind the hands of governments to what they have already agreed to."
Deep skepticism about the advantages of open trade with China and other rising economic powers, on vivid display during the Democratic primaries in the United States, is a growing threat in Europe as well, particularly as France, Italy and other countries have fallen into an American-style economic swoon. A trade deal, economists said, would have been a valuable tonic.
It is now unlikely that there will be any future success for the Doha round. Instead, it is more likely that bilateral agreements will continue to proliferate in the absence of a world trade agreement.
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CBP Commissioner Testifies re: Laptop Border Searches
CBP Defends Its Ability to Conduct Such Searches
 On June 25, 2008, Jayson P. Ahern, Deputy Commissioner of U.S. Customs and Border Protection (CBP), testified before the Senate Committee on the Judiciary Constitution Subcommittee in a hearing entitled, "Laptop Searches and Other Violations of Privacy Faced by Americans Returning from Overseas Travel." His testimony can be found here.
At the outset, the Deputy Commissioner objected to the title of the hearing and stated that, "CBP's efforts do not infringe on Americans' privacy." He stated that CBP is responsible for enforcing over 600 laws at the border, including those related to narcotics, intellectual property, child pornography and other contraband, and terrorism. He stated that CBP's ability to examine what is coming into the country is crucial to its ability to enforce these laws and keep the country safe from terrorism.
Mr. Ahern then discussed the recent Federal Court of Appeals cases from the 9th and 4th Circuits that upheld CBP's suspicionless search of an international traveler's laptop computer that uncovered child pornography. He stated that not only has CBP uncovered child pornography in conducting such searches of computers and electronic devices, but CBP has also limited the movement of terrorists, individuals who support terrorist activities, and threats to national security, stating that CBP has found "violent jihadist material, information about cyanide and nuclear material, video clips of Improvised Explosive Devices (IEDs) being exploded, pictures of various high-level Al-Qaida officials and other material associated with people seeking to do harm to U.S. and its citizens."
He then recounted an investigation where Immigration and Customs Enforcement (ICE) agents worked with CBP to conduct a border search of a laptop computer belonging to a Canadian national who was suspected of stealing ITAR-controlled software from a U.S. company with the intent to sell it to the Chinese. Mr. Ahern stated that the initial border search made possible the joint ICE and FBI investigation which led to the criminal prosecution of this individual.
Mr. Ahern continued to discuss how CBP's ability to search laptop computers and other electronic devices is essential to CBP's ability to ensure that a person entering the United States does not pose a threat to the safety and welfare of the country. He described certain factors that CBP uses to determine whether a search is necessary, such as the individual's travel history to countries with significant terrorist activity, narcotics smuggling or child exploitation or their physical description and behavior (e.g., in response to questioning). In addition, he stated that:
In regards to the privacy of these searches, CBP officers conduct their work in a manner designed to adhere to all constitutional and statutory requirements, including those that are applicable to privileged, personal, and business confidential information. The Trade Secrets Act prohibits federal employees from disclosing, without lawful authority, business confidential information to which they obtain access as part of their official duties. Moreover, CBP has strict policies and procedures that implement constitutional and statutory safeguards through internal policies that compel regular review and purging of information that is no longer relevant. CBP will protect information that may be discovered during the examination process, as well as private information of a personal nature that is not in violation of any law.
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CIT Dismisses Gender Discrimination in Tariff Classifications Case
Plaintiffs May Re-File Complaint or Appeal Decision
 On July 3, 2008, the U.S. Court of International Trade (CIT) dismissed the lead gender discrimination in tariff classifications case, Totes-Isotoner Corporation v. United States, Slip Op. 08-73 (July 3, 2008). In the case, the Totes-Isotoner, an importer of men's gloves, claimed that by setting out different tariff rates for certain men's and other gloves (i.e., 14% duty for men's gloves and 12.6% duty for gloves "for other persons") the Harmonized Tariff Schedule of the United States (HTSUS) violates Totes' right to equal protection under the law because it discriminates on the basis of gender and/or age. A three judge panel decided the case.
The government sought to dismiss the case on the basis of three claims: (1) the complaint presented a political question that was non-justiciable; (2) Totes did not have a sufficient stake in the matter so as to possess standing to bring an equal protection claim; and (3) Totes failed to state a claim upon which relief could be granted. The CIT denied the government's motion to dismiss for lack of jurisdiction on the first two claims, but dismissed the case without prejudice because it found that Totes did not plead sufficient facts to state a claim of unconstitutional jurisdiction.
Specifically, the court found that the case did not involve a non-justiciable political question as ". . . Totes' challenge to the discriminatory operation of the HTSUS properly invokes the Court's traditional role of--and standards for--constitutional review." Thereafter, the court found that Totes had sufficient standing to raise its claim by having both constitutional standing as the payor of an allegedly discriminatory tax and prudential standing as Totes' claim is within the zone of interests protected by the Constitution's Equal Protection guarantee.
Finally, the court found that Totes failed to state a claim upon which relief could be granted. Specifically, the court stated:
In order to state such a claim for violation of the equal protection clause based on gender, Totes must allege that the government has engaged in gender-based discrimination without an exceedingly persuasive justification, or in other words, that the government has used discriminatory means that are not substantially related to important government objectives. In so doing, Totes' complaint must include a factual allegation that demonstrates a governmental purpose to discriminate.
Slip Op. 08-73 at 14 [citations omitted]. The court found that because the tariff provisions Totes challenged were not "actual use" provisions that require the imported gloves to be actually sold or used by people of the same sex or of some age category, but were "chief" or "principal use" provisions, the complaint did not allege sufficient facts to establish the government had engaged in gender-based discrimination. The court stated:
Moreover, the discrimination alleged in Totes' Complaint, results from the imposition of the duty, or tax, imposed by tariff classifications. But, as alleged by the Compliant, that duty or tax falls on importers, and there is not factual indication in the Complaint that the classification results in discriminatory application of the tax. Therefore, Totes' additional allegation of discrimination "on the basis of sex" is simply conclusory . . . .
Slip Op. 08-73 at 17 [citations omitted].
Since the court dismissed the claim without prejudice, Totes may revise the case and re-file with the CIT or appeal the CIT decision to the Court of Appeals for the Federal Circuit. We will keep you posted!
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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:
PDS Technical Services - Stamford, CT
Homeland Security, CBP - Tampa, FL
Lockheed Martin Corp. - Houston, TX
General Atomics - San Diego, CA
United Launch Alliance - Engelwood, CO
BCG Attorney Search - Washington, DC
Nordam - Tulsa, OK
ERSI - Redlands, CA
Hughes Network Systems - Germantown, MD
DRS Technologies - Arlington, VA
Tyco Healthcare - Mansfield, MA
Simon Gluck & Kane LLP - San Francisco, CA
Global International, Inc. - Jamaica, NY
Wacker - Toledo, OH
ITT Aerospace Controls - Rochester, NY
Restoration Hardware - Corte Madera, CA
FOCUS Business Solutions - Taylor, MI
Uline - Waukegan, IL
Nammo Talley, Inc. - Mesa, AZ
SGS North America, Inc. - Doral, FL
Arvinmeritor - Troy, MI
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 Trade 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 August 2008:
Complying with U.S. Export Controls - BIS
August 5-6, 2008 - Orlando, FL - $350
Complying with the ITAR - Exports of Defense Articles and Services - DDTC & BIS
August 7, 2008 - Orlando, FL - $175
INCOTERMS and Related Global Trade Issues - The World Academy
August 12, 2008 - San Jose, CA - $595
Import Best Practices Workshop - Women in International Trade - Northern California
August 13, 2008 - Palo Alto, CA - $45 Member/$60 Non-Member
Townhall Meeting & AES PcLink Workshop - U.S. Census Bureau
August 14 - 15, 2008 - Laredo, TX
Townhall Meeting & AES PcLink Workshop - U.S. Census Bureau
August 18, 2008 - St. Louis, MO
Townhall Meeting & AES PcLink Workshop - U.S. Census Bureau
August 19, 2008 - Miami, FL
Townhall Meeting & AES PcLink Workshop - U.S. Census Bureau
August 20, 2008 - Dallas, TX
Complying with U.S. Export Control - BIS & Southern California Regional District Export Council
August 20-21, 2008 - Universal City, CA - $350
Townhall Meeting & AES PcLink Workshop - U.S. Census Bureau
August 21, 2008 - San Diego, CA
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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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