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Greetings!
We hope you all had a wonderful holiday!
This month's import/export news highlights include: Banks Settle OFAC Violation Charges; BIS amends EAR per Wassenaur Arrangement revisions; 2009 CBP Trade Symposium Recap; President Obama Signs GSP and ATPA Bill; Mexican Criminal Organizations try to infiltrate CBP Border Patrol; and U.S. May Implement VAT Taxing Scheme. 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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Banks Settle Charges of Violating OFAC Regulations
Charges Related to Manipulating Information Regarding U.S.-Sanctioned Parties
 On December 11, 2009, the U.S. Department of Justice and Credit Suisse AG (Credit Suisse) entered into a global settlement agreement to settle alleged violations of the International Emergency Economic Powers Act (IEEPA), Trading with the Enemy Act (TWEA), the Executive Orders, and Office of Foreign Assets Control (OFAC) regulations.
Credit Suisse, Lloyds TSB Bank PLC (Lloyds) and several other banks have been investigated for deleting and manipulating wire transfer information to conceal illegal money transfers involving Iran, Burma, Cuba, and Libya from the mid-1990s through 2006. Credit Suisse also instructed Iranian customers on how to format dollar-denominated transactions to avoid detection by the U.S. authorities.
Credit Suisse was fined $536 million after disclosing various apparent violations in a voluntary self-disclosure. According to the Assistant Attorney General, the fine would have been much higher had Credit Suisse not cooperated fully.
Lloyds used a similar technique to manipulate information that disguised clients in Iran and Sudan who were barred from doing business in the U.S. Based on OFAC's analysis of Lloyds' transactions, the bank routed over 4,200 wire transfers in apparent violation of IEEPA and the OFAC regulations related to Iran, Sudan, and Libya from June 2003 through August 2006.
Lloyds indicated that it terminated these illegal activities, including ceasing U.S. dollar clearing activities for Iranian bank customers in 2003, and has cooperated fully with OFAC investigation. Lloyds has settled with OFAC for $217 million, a sum which has been deemed satisfied by its prior payment of a larger amount in satisfaction of penalties assessed by the U.S. Department of Justice.
While Lloyds did not voluntarily self-disclose the apparent violations, OFAC mitigated the total potential penalty based on Lloyds' substantial cooperation and its prompt and thorough remedial response.
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BIS Amends EAR per Wassenaur Revisions
Changes Are Effective December 11, 2009
The Bureau of Industry and Security (BIS) issued a final rule in the Federal Register stating that, effective December 11, 2009, revises the Export Administration Regulations (EAR) to implement changes to the Wassenaar Arrangement's List of Dual-Use Goods and Technologies. The changes were agreed upon by participating countries during Wassenaur Arrangement's plenary session in December 2010. The U.S., as a participating member of the Wassenaur Arrangement, must modify the Commerce Control List (CCL) in order to incorporate these changes.
The final rule amends CCL categories 1, 2, 3, 4, 5 (Parts 1 and 2), 6, 7, 8 and 9, as well as Definitions and Reports sections.
Detailed changes to CCL can be accessed here.
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DDTC Amends Policy on Review Time for ITAR License Applications
 On December 3, 2009, the Department of State's Directorate of Defense Trade Controls (DDTC) issued a notice in the Federal Register adding a sixth national security exception to the general 60 day license adjudication deadline.
National Security Presidential Directive-56 signed on January 22, 2008, instructs the Department of State to complete the review and adjudication of license applications within 60 days of receipt, except in cases where national security exceptions apply. In addition to the five national security exceptions published in April 2008, Department of State's experience has shown that an additional exception to the license review time is required.
Specifically, it has been noted that certain circumstances may require the Department of State to initiate a review of an established export policy relevant to license applications, which might result in cases that have been approvable before the review being returned without action to the applicant while the review is ongoing. In such situations, enforcing the 60-day deadline without ability to account for these types of situations might result in another applicant's license, submitted after the first license but that had not reached the 60-day headline, being approved once the review is complete, thus creating an unlevel playing field. Therefore, the Directorate of Defense Trade Controls (DDTC) issued a notice in the Federal Register adding the sixth exception to account for this issue, and now the following national security exceptions are applicable:
(1) When a Congressional Notification is required (notification thresholds differ based on the dollar value, countries involved in the transaction and defense articles and services);
(2) When required Government Assurances have not been received;
(3) When end-use checks have not been completed;
(4) When the Department of Defense has not yet completed its review;
(5) When a Waiver of restrictions is required; and
(6) When a related export policy is under active review and pending final determination by the State Department.
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2009 CBP Trade Symposium Recap
 The U.S. Customs and Border Protection (CBP) held its 2009 Trade Symposium was from December 8 -10, 2009 in Washington D.C. The symposium, titled "A Decade of Progress through Partnership," marked the 10th anniversary of this event.
The symposium was organized in a workshop setting and also included a number of lectures and presentations. Some of the most important topics included Importer Security Filing (ISF), shared border issues between the U.S., Canada, and Mexico, Customs' intellectual property rights (IPR) policy, and Customs' rulings process.
Regarding the ISF process, CBP reported that from January 2009 through December 2009 it received 3.65 million filings from more than 100,000 ISF importers. CBP reminded that it will begin enforcing ISF requirements beginning January 26, 2010. It was clear from the discussions that Customs has no intention of delaying the enforcement of mandatory ISF filing past the intended enforcement date. However, CBP plans to adopt, at least initially, an informed compliance approach, which, at first, will include use of the least punitive measures.
At the beginning of the ISF enforcement period, Customs expects to use Do Not Load Directives only in the most serious cases. Customs is most interested in receiving the necessary ISF data rather than holding back the cargo or issuing monetary penalties, which range from $5,000 for ISF transmission violations and are capped at $10,000 per filing. The importers must also consider that the cost of Customs withholding cargo is likely to exceed the penalty of $5,000 or $10,000.
The ISF penalty process will be, for now, centralized at the Customs' Headquarters (HQ) level. Individual ports will initiate the penalty proceedings but the review and handling of the violation will be forwarded to Customs HQ.
On the border issues, a panel of Customs officials from the U.S., Mexico and Canada stressed the importance of harmonizing countries' customs processes, including requirements for advance data submission otherwise known as 10+2. The U.S. and Canada continue to work on harmonizing partnership programs like C-TPAT. Mexico will be initiating its own Authorized Economic Operator (AEO) program in 2010.
Overall, the discussions stressed the importance of developing businesses' risk management programs including integration of internal controls related to trade and those involving key business and financial operations.
Regarding Customs' IPR policy, CBP issued over 1,000 fine notices totaling $94 million against importers attempting to import counterfeit merchandise. Of that amount, CBP was able to collect only $2 million from the violators. Therese Randazzo, Customs' IPR Policy and Programs Division Director, indicated that the U.S. Attorney Office is hesitant to bring cases against violators since adding a fine in addition to the seizure and forfeiture of goods may be considered an excessive fine under U.S. law.
With respect to the Customs Rulings process, Customs reminded importers to submit Ruling Requests via CBP's new e-Rulings system (except the Ruling Requests must be submitted by paper if a physical sample is submitted to CBP). Advance Ruling Requests still remain the best way of predicting proper import requirements, including proper classification and valuation.
Customs' failure to timely process ruling requests has been a constant complaint among the practitioners. Headquarters rulings should be issued in 90 days, while New York rulings should be issued in 30 days. While the average ruling processing time at New York port is 22 days, there still remains a significant backlog of the requests.
The event highlights can be accessed on U.S. Customs' website here. Presentations from the trade symposium can be found here.
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President Obama Signs GSP and ATPA Bill into Law
 On December 28, 2009, President Obama signed into law H.R. 4284, which extends the Generalized System of Preferences (GSP) and the Andean Trade Preference Act (ATPA) for one year, through December 31, 2010. Under the GSP treatment, beneficiary developing countries receive certain trade benefits.
According to the Presidential Proclamation, effective January 1, 2011, Croatia and Equatorial Guinea will no longer receive the GSP treatment as they have achieved "high income" classification. Cape Verde will be removed from the list of least-developed beneficiary countries under GSP effective January 1, 2010.
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Mexican Criminal Organizations Try to Infiltrate Border Patrol Ranks
Criminals target CBP agents to aid in drug and human trafficking
According to a New York Times report, anticorruption investigators are worried that Mexican drug organizations are making a concerted effort to infiltrate Customs and Border Protection (CBP) ranks. Facing increased security on the border that now includes miles of new fencing, floodlights, motions sensors and cameras, Mexican traffickers target customs agents with cross-border ties or even solicit some of their own operatives to apply for customs agents' positions.
The report states that while the majority of CBP border patrol agents stay away from crime, cases have been reported where border patrol agents have helped traffickers smuggle drugs and illegal immigrants into the U.S. by tipping smugglers on where the border guards are or by admitting the smugglers' vehicles into the U.S. without checking them.
To tighten the border security between the U.S. and Mexico, the U.S. has spent $11 billion in 2009 building physical barriers and developing the country's largest law enforcement agency to patrol the area. Federal officials believe that drug traffickers are taking advantage of CBP's hiring rush for customs agents. Criminal organizations direct people to apply to CBP positions only to help traffickers smuggle drugs and people into the country.
According to the Department of Homeland Security Inspector General's Office, arrests of CBP agents and officers have increased 40 percent in the last few years as compared to the 24 percent growth in the agency itself. Currently, the office has 400 open investigations which sometimes take years to close.
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U.S. to Implement a VAT Taxing Scheme?
As reported by The New York Times, the topic of establishing a national consumption tax has been discussed by Congress often this year, especially in lieu of a trillion-dollar health coverage reform and an unprecedented federal budget deficit. To solve these long-term budget problems, the U.S. needs a new source of revenue, and the value-added tax ("VAT") is increasingly considered as a viable alternative.
A national consumption tax or VAT is a tax on goods and services that is collected at every step of the production process, from importing and processing of raw materials, to the end consumer. In use in more than 130 countries worldwide, VAT is one of the world's most popular taxes and, among industrialized nations, ranges from 5% in Japan to 25% in Hungary.
While introducing such a tax would require a reform of the entire federal tax code, economists attribute to VAT several significant advantages. Compared to a regular sales tax, VAT has a broader base as it is paid by almost everybody. VAT's broad reach is the reason why the International Monetary Fund (IMF) frequently recommends it to countries that need to raise money quickly.
Furthermore, VAT is hard to escape: if at some point within the production chain a business evades paying the tax, the government will collect it from business at other stages of production. In a VAT system, since businesses usually get credit for taxes already paid by their suppliers, companies will pressure the non-paying business to pay their portion of VAT. In this regard, collecting VAT would be self-policing process.
Earlier this year, the Washington Post reported that the federal budget deficit is projected to reach $1.3 trillion in 2010, which is the highest so far with the exception of this year's $1.8 trillion. On every dollar it spends, the Treasury Department borrows 46 cents of every dollar, primarily from China and other foreign creditors who are starting to get worried about the security of their investments. The national healthcare reform would only add to the budget deficit.
Establishing VAT in the U.S. may be unlikely in the immediate future because of the still-tentative economic recovery and unwillingness of politicians to impose a new tax that would directly affect the revenues of their constituents; however, economists estimate that federal tax revenues need to rise by 20 to 30% in the next few years to cover its expenditures, and VAT may be selected as the least painful alternative.
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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:
C-TPAT Certification Training Workshop - The World Academy
January 20, 2010 - Ft. Lauderdale, FL - $595
INCOTERMS and Related Global Trade Issues - The World Academy
January 22, 2010 - Ft. Lauderdale, FL - $595
Export Finance - American Conference Institute
January 25 - 26, 2010 - New York, NY - $1895 - $2795
U.S. Export Controls Seminar - BSG Consulting
January 25 - 26, 2010 - San Diego, CA - $1050
Complying with U.S. Export Controls - Bureau of Industry and Security
January 26 - 27, 2010 - Phoenix, AZ - $425
Defense Trade Controls Seminar - BSG Consulting
January 27 - 28, 2010 - San Diego, CA - $1050
Export Enforcement & Investigations - American Conference Institute
January 28 - 29, 2010 - Washington, DC - $1895 - 3395
Export Enforcement & Investigations - American Conference Institute
January 28 - 29, 2010 - Washington, DC - $1895 - 3395
Basic ITAR Workshop - Federal Publications Seminar
January 28, 2010 - Atlanta, GA - $595
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Complying with U.S. Export Controls - Bureau of Industry and Security
February 2 - 3, 2010 - New Orleans, LA - (Details not yet posted)
How to Develop an Export Management and Compliance Program- Bureau of Industry and Security
February 4, 2010 - New Orleans, LA - (Details not yet posted)
C-TPAT Certification Training Workshop - The World Academy
February 9, 2010 - Ft. Lauderdale, FL - $595
Managing Harmonized Tariff Schedule - The World Academy
February 10, 2010 - Ft. Lauderdale, FL - $595
INCOTERMS and Related Global Trade Issues - The World Academy
February 11, 2010 - Orlando, FL - $595
ITAR Boot Camp - American Conference Institute
February 24 - 25, 2010 - San Diego, CA - $1895 - 3395
Export Control of Equipment, Technology and Services - Federal Publications Seminar
February 25 - 26, 2010 - Las Vegas, NV - $995
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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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