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Greetings!
This month's import/export news highlights include: updates to DDTC's website, BIS Eases Cuba Restrictions; exporters settle export allegatioins; BIS Advisory Opinion on Anonymous, Free Downloads of Mass Market Software; Customs Ruling on Solar Modules Imposes 2.5% Duty; TSA Rule Requires 100% Cargo Screening for Passenger Aircraft; President Obama Imposes 35% Duty on Tires Imported from China; and Enforcement of Lacey Act is Postponed fro Certain Products. 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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DDTC Publishes Updates on Website
New Forms and Guidance Issued
 The State Department's Directorate of Defense Trade Controls (DDTC) published several updates to its website in September:
· Updated Guidance for Licensing of Foreign Persons Employed by a U.S. Person (9.30.09)
· DDTC announcement that it will no longer process DSP Amendments for Value or Quantity Changes (9.30.09)
· Announcement of a New Commodity Jurisdiction (CJ) Form, DS-4076, is available for use, which will be processed as a paper document, but in the future, will be required to be submitted electronically (9.30.09)
· DSP119 forms may now only be used to amend DSP85 licenses. To amend a DSP-5, DSP-61 or DSP-73 license, the applicant must submit the companion amendment form via DTRADE-2 (9.25.09)
· DSP-83 Requirements for Licensing of Chemical Agent Resistant Coatings (CARC) Paint - Category XIV(f)(5) (9.14.09)
· The List of Statutorily Debarred Parties has been updated (9.14.09)
· Use of USML Category XXI now requires a copy of a DDTC Commodity Jurisdiction identifying USML Cat XXI or an official letter from the Director of the Office of Defense Trade Controls Policy granting permission to use Cat XXI (9.08.09)
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BIS Amends EAR to Ease Restrictions on Gift Parcels and Humanitarian Donations to Cuba
Census Modifies AES to Accomodate License Exception CCD
 On September 3, 2009, the U.S. Department of Commerce's Bureau of Industry and Security (BIS) announced
amendments to the Export Administration Regulations (EAR) making it easier for Americans to visit and send gifts to their family members in Cuba. The amendment concerns primarily 15 C.F.R. §740.12, which authorizes, among other things, certain exports of gift parcels to Cuba pursuant to a License Exception GFT (Gift Parcels and Humanitarian Donations). BIS published Questions and Answers regarding these amendments here.
The new measures remove the requirement that gift parcels be sent only to donor's immediate family members. Instead, an individual in the U.S. may now send a gift parcel to an individual or an independent religious, educational, or charitable organization in Cuba. The same donor can send only one gift parcel to the same donee in any calendar month; however, there is no frequency limit on gift parcels of food to Cuba. The new regulations also require that parcel contents be used by donee or his immediate family; resale of gifts is prohibited. With some exceptions, any items normally exchanged between individuals as gifts may be included in such gift parcels, with the combined total domestic retail value not exceeding $800 (this limit does not apply to food items).
In circumstances outside the scope of the license exception, such as when parties seek to ship gift parcels to Cuba more frequently, or want to consolidate several parcels into one shipment, individuals should file for a license application with BIS.
In addition to the GFT Exception, the licensing policy was also revised to facilitate exports needed to establish telecommunications links between the U.S. and Cuba, including relations established through third countries and provision of satellite radio and television services to Cuba. A new License Exception CCD (Consumer Communications Devices) found in §740.19 of the EAR authorizes exports and re-exports to Cuba of donated personal communication devices such as mobile phones, computers and software, satellite receivers and digital cameras.
With respect to the License Exception BAG (Baggage) found in §740.14, the EAR was amended to remove the 44-pound limit that used to apply to personal baggage of travelers to Cuba.
To accommodate the new License Exception CCD, the U.S. Census Bureau has modified the Automated Export System (AES) by adding the new License Type Code "C58." The AES filers who report "C58" are required to report CCD, regardless of value, in the license number field and the Export Control Classification Numbers 4A994, 4D994, 5A991, 5D991, 5A992, 5D992, or EAR99 corresponding to the License Exception. AES filers must report the country of destination and ultimate consignee as CU. Furthermore, Export Information Codes OS, OI, CH, and CI, and all modes of transportation, except pipeline, are acceptable. |
Exporters Settle Allegations of Unlawful Exports
Companies from Texas, Taiwan, and California Settle
On September 15, 2009, the Commerce Department's Bureau of Industry and Security (BIS) issued press releases announcing companies settling allegations of unlawful exports:
· Five foreign subsidiaries of Thermon Manufacturing Company (Thermon US), a Texas-based firm, have agreed to pay a $176,000 in combined civil penalties to settle allegations that they exported and reexported EAR99 heat tracing equipment to Iran, Syrian, Libya, and listed entities in India without the required BIS or the Treasury Department's Office of Foreign Assets Controls (OFAC) licenses. The foreign subsidiaries were told by the parent company that products manufactured by Thermon US may not be sold to countries on the U.S. trade sanctions list; however, the subsidiaries exported the equipment to prohibited end users without informing the parent company of the ultimate destination for the items. Thermon US voluntarily disclosed the violations to BIS.
· Foxsemicon Integrated Technologies, Inc. (FITI) of Taiwan has agreed to pay $250,000 to settle allegations that between August 2005 and May 2006, the company made unlicensed exports of pressure transducers to China, in violation of the EAR. The transducers are used as spare components of manufacturing systems controlled for nuclear non-proliferation reasons. BIS alleged that FITI knew that licenses were required for the parts but made no attempt to apply for the shipment authorization. FITI was also alleged to have made false statements on export documentation stating that no license was required for the exports. In addition to FITI, FITI's wholly-owned affiliate, Foxsemicon LLC of San Jose, CA, settled allegations that it aided and abetted FITI's violations. Foxsemicon's $160,000 civil penalty was suspended provided no additional violations occur in the next year.
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Free Downloads of Mass Market Software by Anonymous Persons Do Not Violate EAR
BIS Issues Advisory Opinion
 The U.S. Department of Commerce's Bureau of Industry and Security (BIS) released an advisory opinion, dated September 11, 2009, on whether a company would be in violation of the Export Administration Regulations (EAR) if it allowed encrypted software, classified by BIS as "mass market," to be downloaded free of charge from the company's website without restriction.
In the advisory opinion, BIS stated:
Publishing "mass market" encryption software to the Internet where it may be downloaded by anyone neither establishes "knowledge" of a prohibited export or reexport nor triggers any "red flags" necessitating the affirmative duty to inquire under the "Know Your Customer" guidance provided in the EAR. Therefore a person or company would not be in violation of the EAR if it posts "mass market" encryption software on the Internet for free and anonymous download and then at a later time the software is downloaded by an anonymous person in Iran, Cuba, Syria, Sudan or North Korea.
On the issue of whether the same would apply if the user was required by the company to provide a name and email address before download occurs, BIS stated that in such a case the download of the software would not be considered anonymous; thus, allowing the download by a person in a country embargoed under the EAR (15 C.F.R. Part 746) without the necessary licenses would constitute a violation of the EAR.
However, in circumstances where the IP address of the user downloading the software is collected by the software provider at the time of the download and is stored as a "footprint" in the machine code of the software provider's data base but is not tracked or used for any purpose by the software provider, then a violation would not occur.
The advisory opinion was limited to the interpretation of the EAR; the sanctions regulations implemented by the Office of Foreign Assets Control of the U.S. Department of Treasury (OFAC) were not addressed.
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In-Country Transfers of Items Subject to EAR Require Licenses
Final Rule Amends EAR
 On September 8, 2009, the Department of Commerce's Bureau of Industry and Security (BIS) published a final rule in the Federal Register amending three sections of 15 C.F.R. Part 744 of the Export Administration Regulations (EAR) used by the U.S. Government as the regulatory basis for placing persons on the Entity List.
Effective immediately, the new rule specifies that licenses are required for in-country transfers of any items subject to the EAR as they pertain to Certain Entities in Russia (§744.10), Entities Acting Contrary to the National Security or Foreign Policy Interests of the U.S. (§744.11), and Certain Sanctioned Entities (§744.20).
Prior to this amendment, the three sections specified that licenses are required for exports and re-exports to persons listed on the Entity List however, they were silent regarding licenses pertaining to in-country transfers of items subject to the EAR.
As a result of this amendment, all end-use and end-user controls that are used as a regulatory basis for placing persons on the Entity List (15 C.F.R. §§ 744.2-744.4, 744.10-744.11, and 744.20) now include in-country transfers in addition to exports and re-exports.
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Customs Classification Ruling May Cost Solar Energy Industry $70 Billion
Jan. 2009 Ruling Imposes 2.5% Duty on Solar Modules
 On September 30, 2009, the New York Times published an article highlighting the importance of a tariff classification ruling issued by Customs and Border Protection's (CBP) Office of Regulations and Rulings, National Commodity Specialist Division in New York, concerning the tariff classification of a solar module consisting of 72 interconnected monocrystalline silcon cells. In the ruling, issued on January 9, 2009, CBP held that the solar module was dutiable at 2.5% ad valorem, and not duty-free as argued.
The New York Times article states that although the ruling is legally binding on most solar panels imported into the United States, the ruling only came to the attention of the solar energy industry in recent weeks. The articles provides:
The United States exported almost as much solar panel equipment as it imported in the first seven months of this year - $605 million in imports and $555 million in exports, according to Commerce Department data. The Solar Energy Industries Association, a coalition of domestic and foreign companies, argues that American tariffs on solar panels could lead other countries to impose tariffs on American exports. The customs decision is dividing the industry between importers and companies that produce solar equipment in the United States. And with China accounting for a rising share of American imports, the tariff could become a sticking point in bilateral trade relations already troubled by the dispute over tires, autos and chicken parts. Some Chinese solar panel manufacturers are already planning to move final assembly of solar modules to plants in the United States, a step that could allow them to avoid the duty someday, said Rhone Resch, the chief executive and president of the industry association.
The ruling was obtained by the small American subsidiary of a Spanish energy company, GES USA, in preparation for a project that never went through. In the ruling, CBP stated that although the importer argued that the solar module was classifiable under subheading 541.40.6020 of the Harmonized Tariff Schedule of the United States (HTSUS), which provides for "Diodes, transistors and similar semiconductor devices; photosensitive semiconductor devices, including photovoltaic cells whether or not assembled in modules...: Photosensitive semiconductor devices, including photovoltaic cells whether or not assembled in modules or made up into panels...: Other diodes: Other: Solar cells: Assembled into modules or made up into panels," the Explanatory Note (EN) 85.41(B)(i) persuaded CBP that classification under that subheading was inapplicable.
CBP stated that, "EN 85.41(B)(i) states that heading 8541 does not cover panels or modules equipped with elements, however simple, i.e. diodes to control the direction of the current." Because the solar module at issue does contain diodes, CBP stated that the applicable subheading for the product will be HTSUS subheading 8501.31.8000, which provides for "Electric motors and generators: Other DC motors; DC generators: Of an output not exceeding 750 W: Generators," dutiable at 2.5% ad valorem.
Rhone Resch, the chief executive and president of the Solar Energy Industries Association (a coalition of domestic and foreign companies) estimates that the duty would cost the industry $70 million this year, assuming importers will be found negilgent for not properly classifying and paying the duties since January when the ruling was issued and will be assessed the penalty of doubled duties.
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TSA Rule Requires 100% Screening of All Cargo on Passenger Aircraft by Aug. 2010
Only cargo loaded in the U.S. is Affected
 On September 16, 2009, the Transportation Security Commission (TSA) issued an interim final rule in the Federal Register codifying a statutory requirement of the Implementing Recommendations of the 9/11 Commission Act to establish a system to screen 100% of cargo transported on passenger aircraft by August 3, 2010.
The rule applies to U.S. aircraft operators with full programs as defined under 49 C.F.R. §1544.101(a) and foreign air carriers with security programs defined under 49 C.F.R. §1546.101(a) or (b). The same standards are applied to U.S. and foreign aircraft operators however, only cargo loaded in the U.S. is affected. This rule does not apply to U.S. or foreign all-cargo operators or to general aviation operations.
TSA concluded that aircraft operators do not have the capacity to screen all of air cargo which amounts to approximately 12 million pounds of cargo daily. Accordingly, TSA will establish the Certified Cargo Screening Program (CCSP) to allow entities other that aircraft operators to conduct the screenings off-site. Under the CCSP, shippers, manufacturers, warehousing entities, distributors, third party logistics companies, and Indirect Air Carriers (IACs) that are located in the U.S. may apply to become certified cargo screening facilities (CCSFs).
Approved CCSFs will be subject to recertification every 36 months. The facilities will be required to use TSA-approved methods and to implement a chain of custody for the off-site cargo, including the use of tamper evident technology.
The rule becomes effective November 16, 2009. Comments on this rule must be submitted to TSA by the end of November 15, 2009.
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President Obama Increases Duties on Tires Imported from China
WTO Safeguard Imposes 35% Duty on Tires from China
On September 11, 2009, President Obama announced that the United States will impose a 35 percent tariff on passenger vehicle and light truck tires imported from China for a period of three years in order to remedy a market disruption caused by a surge in time imports. The White House stated that:
As part of its accession to the World Trade Organization (WTO), China agreed to a special safeguard mechanism that would allow its trading partners to implement remedies in response to import surges and under other circumstances. The President decided to remedy the clear disruption to the U.S. tire industry based on the facts and the law in this case. The additional duty to passenger vehicle and light truck tires - complementing the existing 4 percent duty- will be set at 35 percent ad valorem for the first year, 30 percent ad valorem the second year, and 25 percent ad valorem the third year.
The New York Times reported that the decision is the first time the United States has invoked the special safeguard provision of China's WTO entry and is a break from the previous administration's practices. Under the safeguard provision, American companies or workers harmed by imports from China can ask the International Trade Commission (ITC) for protection by demonstrating that American producers have suffered a "market disruption" or a "surge" in imports from China. Unlike traditional antidumping cases, the ITC does not have to determine that the country is selling its products at less than fair market value or that the country is competing unfairly.
The ITC determined that Chinese tire imports were disrupting the $1.7 billion market and recommended that the President impose the new tariffs on June 29, 2009. President Obama had until September 17, 2009 to make his decision.
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Enforcement of Lacey Act Declaration Postponed for Certain Products
$600,000 Settled Enforcement Filed
On September 2, 2009, the Department of Agriculture Animal and Plant Health Inspection Service (USDA) issued a notice in the Federal Register that modifies the schedule of enforcement of the declaration requirement for goods of, or containing, plants or plant products. The notice affects the enforcement schedule from December 15, 2008 to August 31, 2010.
Phase III of the enforcement, scheduled to begin on October 1, 2009, was modified by removing certain items from this phase. Thus, beginning October 1, 2009, the declaration requirement will be enforced only for the items in the following HTS Chapter 44 headings:
· 4402 - Wood charcoal;
· 4412 - Plywood, veneered panels, except 4412.99.06 and 4412.99.57;
· 4414 - Wooden frames;
· 4419 - Tableware & kitchenware of wood; and
· 4420 - Wood marquetry, caskets, statuettes.
Phase IV of the enforcement, scheduled to begin April 1, 2009, has been substantially revised. There will be no further additions to phases III or IV.
USDA is seeking comments on the revised enforcement schedule as well as HTS chapters/subchapters currently under consideration to be enforced beginning September 1, 2010. Specifically, USDA seeks comments on the products in the following HTS chapters: 44, 47, 48, 66, 82, 89, 92, 93, 94, 95, and 96. More detailed explanation of the enforcement schedule and included products can be found in the notice.
USDA noted that, while enforcement of the import declaration requirement is being phased in, some of the Lacey Amendments are already effective, and actions to enforce provisions of the Act other than the declaration requirement may be taken at any time.
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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.
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 the coming months:
Satellite and Space Export Controls - American Conference Institute
October 1 - 2, 2009 - Orlando, FL - $2695
Export Control of Equipment, Technology, and Services - Federal Publication Seminars
October 14-15, 2009 - Las Vegas, NV - $995
Export Control of Equipment, Technology and Services - Federal Publications Seminar
October 14 - 15, 2009 - Las Vegas, NV - $995
Basic ITAR Workshop - Federal Publications Seminar
October 16, 2009 - Chicago, IL - $595
ITAR Boot Camp - American Conference Institute
October 20 - 21, 2009 - Orlando, FL - $2195
ITAR Compliance and Audits - Federal Publications Seminar
October 21 - 22, 2009 - Washington, DC - $995
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Basic ITAR Workshop - Federal Publications Seminar
October 27, 2009 - Arlington, VA - $595
Basic ITAR Workshop - Federal Publications Seminar
November 4, 2009 - Las Vegas, NV - $595
Advanced ITAR Workshop - Federal Publications Seminar
November 5 - 6, 2009 - Las Vegas, NV - $995
22nd National Conference on Foreign Corrupt Practices Act - American Conference Institute
November 17 - 18, 2009 - Orlando, FL - $1995 - $4695
Trade Symposium 2009 - U.S. Customs and Border Protection (CBP)
December 8-10, 2009 - Washington, D.C.
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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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