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Greetings!
January's import/export highlights include: Obama's proposed government consolidation plan includes BIS; FedEx settles EAR violation charges; BIS posts public comments on moving certain gas turbines and military vehicles from USML to CCL; MA man found guilty of ITAR violations for exporting military antennae to Singapore and Hong Kong without ITAR licenses; BIS releases annual reports to Congress and on foreign-based policy export controls; 2012 HTSUS implemented; USTR announces product dispositions from 2010 GSP Annual Review; and CIT rejects CBP's classification of cosmetic retail sets as "fatally flawed." As always, thank you for reading! Jennifer Kessinger, Tammie Krauskopf
& Ruta Riley
globaltradeexpertise
info@globaltradeexpertise.com
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Obama's Proposed Government Consolidation Plan Includes BIS
On January 16, 2012, Main Justice reported that one of the federal agencies that would be consolidated under Obama's proposed government reorganization plan is the Commerce Department's Bureau of Industry and Security (BIS). BIS regulates exports of dual use items. The State Department's Directorate of Defense Trade Controls (DDTC) which regulates exports of defense articles are services, however, is not included in the reorganization plan.
The proposed reorganization would replace the Department of Commerce with a new department that would include the consolidation of the Small Business Administration, the Office of the U.S. Trade Representative, the Export-Import Bank, the Overseas Private Investment Corporation and the U.S. Trade and Development Agency.
BIS would be included in this new department, which would oversee issues related to small business, trade and competitiveness, technology and innovation and statistics.
The White House estimates that the consolidation would save $3 billion over ten years, and trim around 2,000 federal jobs. Obama called on Congress to reinstate Presidential authority to reorganize and consolidate the federal government, including authority to propose agency mergers to be approved or rejected with an up-or-down vote.
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FedEx Settles Charges of EAR Violations
On January 4, 2012, the U.S. Department of Commerce's Bureau of Industry and Security (BIS) announced that FedEx Express (FedEx) of Memphis, TN, has agreed to pay a $370,000 civil penalty to settle allegations that the company committed six violations of the Export Administration Regulations (EAR) relating to FedEx's provision of freight forwarding services to exporters.
Specifically, BIS alleged that on two occasions in 2006, FedEx facilitated the attempted unlicensed export of electronic components from the U.S. to Mayrow in Dubai, UAE. The exports to Mayrow were thwarted when delivery was halted at BIS's direction. On June 5, 2006, BIS had issued a General Order imposing a license requirement with a presumption of denial for the export or reexport of any item subject to the EAR to Mayrow General Trading and related entities. The General Order was issued based on information that Mayrow and the related entities were acquiring electronic components and devices that were being used in Improvised Explosive Devices deployed against Coalition forces in Iraq and Afghanistan.
BIS also alleged that in December 2005, FedEx facilitated acts prohibited by the regulations when it facilitated the unlicensed export of flight simulation software to Beijing University of Aeronautics and Astronautics, a/k/a/ Beihang University, an organization listed on the U.S. Department of Commerce's Entity List and located in the People's Republic of China.
BIS also alleged that in 2004, FedEx caused, aided, and abetted acts prohibited by the regulations when it facilitated the unlicensed export of printer components from the U.S. to end users in Syria, which was prohibited under General Order No. 2 as set forth in Supplement 1 to part 736 of the EAR.
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BIS Posts Public Comments on a Proposed Rule to Add Certain Gas Turbine Engines and Certain Military Vehicles to CCL
On January 23, 2012, the Bureau of Industry and Security (BIS) posted public comments on a proposed rule to add to the Commerce Control List (CCL) certain military vehicles and related items that the President determined no longer warrant control under the United States Munitions List.
In addition, on January 27, 2012, BIS posted public comments on a proposed rule to add to the CCL certain gas turbine engines and related items that the President determined no longer warrant control under the United Munitions List.
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Massachusetts Man Found Guilty of Conspiring to Export Military Antennae to Singapore and Hong Kong
Cheung faces a maximum sentence of five years in prison, a fine of $250,000 and a 3-year term of supervised release. 
On January 20, 2012, the U.S. Department of Justice (DOJ) announced that Rudolf L. Cheung, age 57 and a resident of Massachusetts, pleaded guilty to a conspiracy to violate the Arms Export Control Act (AECA) in connection with the unlawful export of 55 military antennae from the U.S. to Singapore and Hong Kong.
Cheung serves as the head of the R&D Department at a private company that manufactures a wide variety of antennae, many of which have military applications and are used by defense contractors.
According to court documents, in June 2006, Cheung learned that export compliance at his company had blocked export of two types of antennae because the buyer in Singapore would not agree to fill out a U.S. government form attesting that the goods would not be transferred. The antennae are classified by the U.S. government as defense articles and require a Department of State export license.
Cheung then arranged for an individual outside his company to bypass the export controls and arrange for the antennae to be exported to Singapore. This co-conspirator, who operated his own company in Massachusetts, negotiated the purchase of the antennae with two companies in Singapore. Between July and September 2007, the co-conspirator purchased 55 military antennae from Cheung's company, which he then exported to the Singaporean company with addresses in both Singapore and Hong Kong.
Court documents allege that Cheung was aware that the purchases by the co-conspirator were intended for export from the U.S. and that these exports had previously been blocked by his export compliance manager, but took no action to stop the sale of these antennae from his company or their subsequent export from the U.S., even though he knew a license was required for such exports. Cheung did not attempt to obtain any license from the State Department.
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BIS Releases FY2011 Annual Report to the Congress and 2012 Annual Report on Foreign Policy-Based Export Controls
 On January 20, 2012, the Bureau of Industry and Security (BIS) posted on its website Annual Report to the Congress for FY 2011. In addition, BIS posted the 2012 Annual Report on Foreign Policy-Based Export Controls.
The Annual Report to the Congress summarizes BIS' activities during FY2011 (October 1, 2010 through September 30, 2011). It contains information on regulatory changes, export enforcement and criminal cases, approved applications for Country Group D:1 and Cuba, report on domestic impact of U.S. exports to controlled countries, and export control reform fact sheets and testimony.
The 2012 Annual Report on Foreign Export Controls overviews export controls maintained for foreign policy purposes, including anti-terrorism, embargoes, sanctions, and other special controls; toxic chemicals and chemical precursors, encryption, missile technology controls, nuclear nonproliferation, and entity list.
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2012 HTSUS Implemented
 On January 27, 2012, U.S. Customs and Border Protection (CBP) posted a notice on its website informing that the 2012 Harmonized Tariff Schedule of the United States (HTSUS) has been implemented. The World Customs Organization (WCO) amends the Harmonized System, at the six-digit level, every four to six years. The WCO HTSUS amendments went into effect on February 3, 2012.
CBP systems were updated to accept the new 2012 HTS with the WCO amendments. For entry summary transmission purposes, only the tariff numbers in effect on the date of transmission are valid.
Regarding the goods imported under a free trade agreement (FTA) or trade promotion agreement (TPA) whose tariff numbers have changed, the trade is advised that the 2011 tariff change rules (TCRs) govern the TCR analysis until revised TCRs corresponding to the applicable FTA or TPA are published.
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USTR Announces Disposition of the Product Petitions in the 2010 GSP Annual Review
 On January 10, 2012, Office of the U.S. Trade Representative (USTR) posted a notice in the Federal Register announcing the disposition of the product petitions accepted for review in the 2010 Generalized System of Preferences (GSP) Annual Review, and the status of country practices petitions accepted as part of GSP annual reviews, including the 2010 GSP Annual Review.
In the 2010 GSP Annual Review, the Trade Policy Staff Committee (TPSC) reviewed two petitions to change product coverage under GSP. Based on the TPSC's review and the recommendation of the USTR, President Obama removed sleeping bags, not containing 20% or more by weight of feathers and/or down (HTSUS 9404.30.80) from eligibility for duty-free treatment under GSP, effective January 1, 2012, because it is import-sensitive in the context of GSP. A petition to remove GSP duty-free treatment for two types of self-adhesive plastic tape (HTSUS 3919.10.20 and 3919.90.50) was denied.
At this time, there are no changes to the status of those country practice petitions accepted in the 2010 GSP annual review and continued from earlier annual reviews.
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CIT Rejects Customs' Classification of Cosmetic Sets as "Fatally Flawed"
 On January 3, 2012, the United States Court of International Trade (CIT) issued a judgment in Estee Lauder, Inc. v. U.S., holding that cosmetic sets were classifiable as "sets put up for a retail sale" under GRI 3(b) because the items packaged in the set met the particular need of putting on makeup. The Court further determined that the essential character of the set was supplied by the makeup, and under GRIs 1, 3(b), and 6, the set was classifiable under 3304.20.00, HTSUS.
Customs argued that cosmetic sets should not be classified under GRI 3(b) "because the merchandise at issue is classifiable pursuant to GRI 1, [therefore] the classification inquiry ends and there is no need to resort to the remaining successive GRI's to classify the merchandise." The Court rejected Customs' position stating: "The government's facile reading of the GRIs would make the terms of GRI 3(b)'s "retail sets" language inapplicable under any situation. If the government's argument prevailed, the court cannot think of any situation where a group of goods put up as a set for retail sale could not be required to be classified separately "pursuant to GRI 1".
As to the Customs' argument that the sets should not be classified under GRI 3(b) because the items in the set, especially the cosmetic case, did not meet the "particular need or carry out a specific activity" criterion in Explanatory Notes to GRI 3(b) because the cosmetic case "lacked the physical characteristics necessary to allow it to interact with the cosmetic components to carry out the specific activity of applying makeup," the Court stated that requiring set goods to be mutually complementary or adapted to one another effectively joined the Explanatory Notes requirements for composite goods to the Explanatory Notes describing retail sets, which was unsupported in the statute or the Explanatory Notes."
The Court noted that Customs has routinely rejected the GRI 3(b) classification of cosmetic sets based upon a "fatally flawed analysis" in rulings that "rely largely on Customs' own reasoning but little on the statute or the Explanatory Notes."
Finally, CIT declined to adopt CBP's position that the size of a set container can by itself negate a set's qualification under GRI 3(b). The Court rejected Customs' argument that cosmetic sets could not be classified as a GRI 3(b) set because the included case was too large to closely carry all the items in the set, as lacking a rational basis in the language of the statute or the Explanatory Notes.
CIT explained that the Statute in GRI 3(b) provides that a set is classified according to the heading of the good that provides its essential character. "If a set container provides the set with its essential character, then the entire set should be classified under the heading for the container. If not, then the set should be classified according to that other item that provides the essential character." In this case, the essential character of the set was provided by the makeup components rather than the cosmetic case, thus warranting classification under 3304.20.00, HTSUS.
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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:
7th Annual Export Control Forum - Bureau of Industry and Security
February 27 - 28, 2012 - Irvine, CA - $525
Complying with U.S. Export Controls - Bureau of Industry and Security
March 6 - 7, 2012 - Birmingham, AL - $450
Complying with International Traffic in Arms Regulations - Bureau of Industry and Security
March 8, 2012 - Birmingham, AL - $199
Essentials of U.S. Export Controls - Bureau of Industry and Security
March 14, 2012 - Shreveport, LA - $210
Technology Controls- Bureau of Industry and Security
March 15, 2012 - Shreveport, LA - $210
Encryption Controls - Bureau of Industry and Security
March 16, 2012 - Shreveport, LA- $210
Complying with U.S. Export Controls - Bureau of Industry and Security
March 15 - 16, 2012 - San Diego, CA - $210
Complying with U.S. Export Controls - Bureau of Industry and Security
April 4 - 5, 2012 - Denver, CO - $450
Complying with U.S. Export Controls - Bureau of Industry and Security
April 24 - 25, 2012 - Silicon Valley, CA - $475
Encryption Controls - Bureau of Industry and Security
April 26, 2012 - Silicon Valley, CA - $325
Essentials of U.S. Export Controls - Bureau of Industry and Security
April 17, 2012 - Portsmouth, NH - $250
How to Develop an Export Management and Compliance Program - Bureau of Industry and Security
April 18, 2012 - Portsmouth, NH - $250
Complying with International Traffic in Arms Regulations - Bureau of Industry and Security
April 19, 2012 - Boston, MA - $250
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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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