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Greetings!
May's import/export highlights include: testimony before Congress by DDTC, BIS, and CBP officials; BAE to Pay $79M to Settle ITAR Violations; CBP Instructs Ports Not to Use CF28s to Notify Importers of Formal Investigations; DDTC and BIS publish regulation amendments; Trade Policy Staff Committee Seeks Comments on Possible Expansion of Information Technology Agreement (ITA); and Mexico Joins the ATA Carnet System. As always, thank you for reading! Jennifer Kessinger, Tammie Krauskopf
& Ruta Riley
globaltradeexpertise
info@globaltradeexpertise.com
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BAES Agrees to Pay $79M to State for ITAR Violations
Consent Agreement Requires $10M to be Paid for Remedial Compliance Measures
 On March 2, 2010, in the United States District Court for the District of Columbia, judgment was filed against BAE Systems plc ("BAES") for conspiracy to violate certain U.S. laws, including the Arms Export Control Act ("AECA"). On May 16, 2011, the Department issued an Order after entering into a Consent Agreement with BAES regarding alleged civil violations of the AECA and International Traffic in Arms Regulations (ITAR) committed by BAES. See Proposed Charging Letter here.
Under the Consent Agreement, BAES agrees to pay a total civil penalty of $79 million. Sixty-nine million dollars will be paid through several installments: (1) $18M to be paid within 10 days of the Order; (2) $17M to be paid within 1 year of the Order and then on each of the 2nd and 3rd anniversaries of the order; (3) $3M will be suspended on the condition that BAES has applied this amount to self-initiated, pre-Consent Agreement remedial compliance measures; and (4) $7M will be suspended on the condition that BAES applies this amount to the Consent Agreement authorized remedial compliance measures and for the purpose of defraying a portion of the costs associated with the specified remedial compliance measures.
The Consent Agreement also outlines that as a result of the conviction, BAES was statutorily debarred but there was an immediate lifting of the debarment. The Consent Agreement also outlines a policy of denial concerning certain non-U.S. subsidiaries of BAES involved in activities related to the conviction (BAE Systems CS&S International, Red Diamond Trading Ltd., and Poseidon Trading Investments Ltd., and their subsidiaries, divisions and business units, and successor entities), which means that there will be a presumption of denial of license and other applications involving these entities. DDTC posted guidance on its website to exporters regarding a policy of denial for BAE Systems plc. |
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DDTC Publishes Final Rule on Dual and Third-Country Nationals Employed by Foreign End Users
DDTC Discusses Public Comments on Proposed Rule
On May 16, 2011, the Department of State published a final rule amending the International Traffic in Arms Regulations (ITAR) to establish a policy to address those who are unable to implement the exemption for intra-company, intra-organization, and intra-government transfers of defense articles and defense services by approved end-users to dual national and third-country nationals who are employees of such approved end-users.
Prior to making transfers to certain dual national and third-country national employees under this policy, approved end-users must screen employees, make an affirmative decision to allow access, and maintain records of screening procedures to prevent diversion of ITAR-controlled technology for purposes other than those authorized by the applicable export license or other authorization.
The Department of State is amending parts 124 and 126 of the ITAR to reflect new policy regarding end-user employment of dual nationals and third-country nationals. As a part of the President's Task Force on Export Control Reform, the previous policy regarding the treatment of dual nationals and third-country nationals employed by approved end users was re-evaluated. A proposed rule to eliminate the separate licensing requirement for dual nationals and third-country nationals employed by licensed end-users was presented for public comment. The proposed rule had a comment period ending September 10, 2010. Thirty-two parties filed comments recommending changes, which the DDTC analyzes and addresses in the publication.
The rule is effective August 15, 2011.
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DDTC Posts Testimony of Under Secretary Ellen Tauscher on Export Controls Reform
On May 12, 2011, Department of State posted testimony of Under Secretary for Arms Control and International Security Ellen Tauscher on export controls reform before the House Foreign Affairs Committee.
The Under Secretary testified that the task force created to develop the new export controls regime is currently implementing Phase II. This includes working to revise the U.S. Munitions List (USML) and the Commerce Control List (CCL) so that they use common technologies and structures.
The Under Secretary said that, "State, Commerce, and Treasury are also in the process of adopting the Department of Defense's export licensing computer system, which will be part of a unified, cross-government computer system for export control purposes. As part of this effort, exporters eventually will use a single form for applications to State, Commerce and Treasury. Exporters also will be able to submit those applications through a single electronic portal. This isn't rocket science; we are simply adopting modern business practices."
To address commodity jurisdiction determination issues, the State Department is working with the Departments of Defense and Commerce to create a "bright line" between munitions and dual-use items, which will finally provide clear guidance to exporters on commodity jurisdiction issues. Ellen Tauscher stated that, "this is necessary to update our system that is still designed with the assumption that technologies are developed for the military and only later find their way into the commercial sector, whereas, today, that is often the exception rather than the rule."
As part of the USML review, agencies are developing a process for transferring items from the USML to the CCL which includes deciding on the appropriate licensing requirements on items that are moved to the CCL.
The Under Secretary also noted the Obama Administration also wants to improve the process for notifying Congress about arms sales and the transfer of items from the United USML as over the years the "process has become lengthy and unpredictable."
The Under Secretary concluded that Phase III will complete the reform process by creating the "four singularities" - a single control list, a single information technology system, a single enforcement coordination agency, and a single licensing agency.
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BIS Publishes Final Rule Amending CCL
CCL Amendments Reflect Wassenaar Arrangement Changes
 On May 20, 2011, the Bureau of Industry and Security (BIS) published a final rule in the Federal Register amending the Commerce Control List (CCL) to conform with the Wassenaar Arrangement 2010 Plenary Agreements Implementation.
This final rule revises the CCL to implement changes made to the Wassenaar Arrangement's List of Dual-Use Goods and Technologies (Wassenaar List) maintained and agreed to by governments participating in the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies (Wassenaar Arrangement, or WA) at the December 2010 WA Plenary Meeting (the Plenary). The Wassenaar Arrangement advocates implementation of effective export controls on strategic items with the objective of improving regional and international security and stability. To harmonize the CCL with the changes made to the Wassenaar List at the Plenary, this rule amends entries on the CCL that are controlled for national security reasons in Categories 1, 2, 3, 4, 5 Parts I & II, 6, 7, 8, and 9, revises reporting requirements, and adds and amends definitions in the EAR.
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BIS Publishes Testimony of Under Secretary Hirschhorn on the President's Export Control Reform Initiative
Export Control Reform Efforts Discussed
On May 12, 2011, Under Secretary of Commerce Bureau of Industry and Security (BIS), Eric Hirschhorn, testified before the U.S. House of Representatives' Committee on Foreign Affairs in its Hearing on "Export Controls, Arm Sales, and Reform: Balancing U.S. Interests, Part I."
Hirschhorn testified regarding:
1 The Current Export Control Role of the Department of Commerce
2 Changes at the Department of Commerce
- List Review & Licensing Policy
- Outreach
- Compliance and Enforcement
3 The Export Enforcement Coordination Center
4 The Role of Congress in Export Controls
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Iranian National Pleads Guilty to Illegally Exporting Missile Components and Radio Test Sets to Iran
On May 31, 2011, the Bureau of Industry and Security (BIS) and the U.S. Department of Justice (DOJ) announced that Davoud Baniameri, 38, of Woodland Hills, CA, pleaded guilty to one count of conspiring to export goods and technology to Iran without a license or approval from the U.S. Department of Treasury, in violation of the International Emergency Economic Powers Act (IEEPA) and one count of attempting to export defense articles on the U.S. Munitions List from the United States without a license or approval from the U.S. Department of State in violation of the Arms Export Control Act (AECA).
U.S. District Judge Samuel Der-Yeghiayan set sentencing for Aug. 4. Baniameri, who remains in federal custody, faces a maximum penalty of 10 years in prison for violating IEEPA and a maximum of 20 years in prison for violating AECA and a maximum fine of $250,000 on each count. A written plea agreement contemplates a sentencing guideline range of 46 to 57 months imprisonment.
According to the plea agreement and other court records, sometime before Oct. 10, 2008, Mousavi, based in Iran, contacted Baniameri in California and requested that he purchase and export radio test sets from the United States to Iran, through Dubai. Baniameri agreed and over the next few months negotiated the purchase of three Marconi radio test sets from a company in Illinois. Ultimately, Baniameri arranged for the radio test kits to be sent to him in California, where he shipped them to Dubai, for ultimate transshipment to Iran. At no time did Baniameri obtain or attempt to obtain a license from the U.S. government for the export of the radio test sets.
The plea agreement also states that, sometime before Aug. 10, 2009, Mousavi contacted Baniameri and requested that he purchase and export to Iran via Dubai 10 connector adapters for the TOW and TOW2 missile systems. Baniameri agreed to purchase the items on behalf of Mousavi, and over the next few months, he admitted that he and his co-defendants attempted to purchase 10 connector adaptors from a company in Illinois, which unbeknownst to them, was in fact a company controlled by law enforcement. In September 2009, Baniameri admitted that he directed Telemi to take possession of the connector adaptors in California after having paid $9,450 to a representative of the Illinois company. To further facilitate the export of these items to Iran, Baniameri arranged to fly from the United States to Dubai and then from Dubai to Iran. At no time did Baniameri obtain or attempt to obtain a license from the U.S. government for the export of the connector adaptors. He was arrested before leaving the United States.
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CBP Issues Guidance to Ports on Proper CBP Form 28 and 29 Language
CBP Instructs Ports to NOT Use CBP Form 28 to Notify Importers of Formal Investigations
 On May 24, 2011, Customs and Border Protection (CBP) posted guidance on its website to remind ports of U.S. Customs and Border Protection's (CBP) policy concerning the appropriate issuance of CBP Form 28, Request for Information and CBP Form 29, Notice of Action.
In its guidance, CBP states:
The CBP Form 28 is used by CBP when there is insufficient information in the entry summary package to determine admissibility, appraised value, or classification of imported merchandise. Brochures, descriptive literature, blueprints, samples, proof of payment, affidavits, etc. may be requested.
CBP has advised the field to limit the use of the CBP Form 28 for the purposes stated above and not extend its use as notification that a formal investigation has commenced as a matter of enforcement policy, not a matter of law. The preferred mechanism to inform the importer of the commencement of an investigation is by correspondence on CBP letterhead or the CBP Form 29.
CBP has also advised the field that the CBP Form 28 shall not be used to request proof of a properly executed valid power of attorney. CBP shall request proof of a properly executed valid power of attorney during a broker compliance visit or via an individually drafted letter.
CBP has also advised the field concerning the use of the CBP Form 29. Generally, as stated in 19 CFR 152.2, an entry which is entered at a rate or value of merchandise which is too low, or the import quantity exceeds that of the entered quantity, and the estimated aggregate increase in duties exceeds $15, CBP will notify the importer of the specific nature of the difference. If the rate advance is a proposed action, the importer is afforded 20 days, from the date of CBP mailing the CBP Form 29, to furnish CBP with specific reasons why the rate advance should not be issued.
It is CBP's goal to act uniformly in providing legal notification to the appropriate party when proposing or taking certain actions. CBP should avoid using language on these forms such as "failure to provide information could lead to penalties under 19 USC 1592..." or "this office is investigating the classification of..." if in fact an investigation is not already in process. Such language defeats the goal of informed compliance and may dissuade importers from filing valid prior disclosures. |
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CBP Assistant Commissioner Allen Gina Testifies on AD/CV Duties
On May 6, 2011, Customs and Border Protection (CBP) posted the testimony of CBP Assistant Commissioner Allen Gina, Office of International Trade, before the Senate Finance Committee International Trade, Customs, and Global Competitiveness Subcommittee. Gina discussed CBP's role in detecting and preventing the circumvention of antidumping and countervailing duties (AD/CVD) on imported goods.
Gina's testimony highlighted CBP's enforcement stance, provided examples of actions and initiatives performed in support of U.S. antidumping and countervailing duty laws, and presented some of the challenges CBP faces while enforcing those laws. |
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Trade Policy Staff Committee Seeks Comments on Expansion of the Information Technology Agreement
Comments are due by June 13, 2011 at 12pm
 On May 6, 2011, the interagency Trade Policy Staff Committee (TPSC) posted a notice in the Federal Register seeking comments on whether the U.S. should undertake negotiations to expand the Information Technology Agreement (ITA) and, if so: (1) Which additional information and communications technology (ICT) products the U.S. should seek to include and provide duty-free treatment under the ITA, including both products that existed when the ITA was concluded in 1996 but that were not covered under the agreement as well as products that have been developed since then; and (2) which U.S. trading partners that are significant producers or consumers of ICT products that are not currently participants in the ITA the United States should seek to have join the ITA.
Currently, there are 73 ITA signatories, representing appx. 97 percent of world trade in ITA products. The ITA requires participants to eliminate import duties on covered products. The elimination of duties under the agreement has helped to generate substantial growth in ICT trade. Industry sources estimate that global trade in products currently covered under the ITA grew from $1.2 trillion in 1996 to $4.0 trillion in 2008.
The ITA currently covers computers and computer equipment, semiconductors and integrated circuits, computer software products, telecommunications equipment, semiconductor manufacturing equipment, and computer-based analytical instruments. The list of covered products has not been expanded since the ITA was concluded in 1996.
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Mexico Joins ATA Carnet System
 On May 2, 2011, the International Chamber of Commerce (ICC) announced that Mexico will join the ATA (Admission Temporaire/Temporary Admission) Carnet System on May 16, 2011.
ATA Carnets are international customs documents that allow for the duty and tax-free temporary import and export of goods for up to one year.
ICC emphasized in its press release that Mexico's large economy and geographic position make it both an important international trading partner and transit point for goods. Mexico is the U.S.' second-largest export market and its third-largest trading partner. Mexican exports to the US in 2009 were worth US$185 billion, representing approximately 80% of the country's total exports, according to U.S. State Department figures.
Mexico became 71st country to accept ATA Carnets. According to ICC, more than 160,000 Carnets are issued every year worldwide, for goods with a total value of over US $20 billion. ATA Carnets in Mexico will be administered by the Mexico City National Chamber of Commerce (CANACO). |
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:
AAEI's 90th Annual Conference & Expo - American Association of Exporters and Importers
June 5-7, 2011 - New York, NY
Complying with U.S. Export Controls - Bureau of Industry and Security
June 16 - 17, 2011 - Seattle, WA - $445
Update 2011 - Bureau of Industry and Security
July 19 - 21, 2011 - Washington, DC - $985
Complying with U.S. Export Controls - Bureau of Industry and Security
August 10 - 11, 2011 - Universal City, CA - $430
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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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Thanks again for your interest in our newsletter!
Sincerely,
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Jennifer Kessinger, Tammie Krauskopf & Ruta Riley
Attorneys & Consultants
jk@globaltradeexpertise.com
Tel. 925.876.1381 (Jennifer Kessinger)
tk@globaltradeexpertise.com
Tel. 708.707.4087 (Tammie Krauskopf)
rr@globaltradexpertise.com
Tel. (630) 862-8123
www.globaltradeexpertise.com
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