CBP Introduces Online Trade Violation Reporting Tool

Last month, US Customs and Border Protection (“CBP”) announced a new online system called “e-Allegations” for concerned members of the public to report suspected trade violations. The e-Allegations system is limited to possible violations of trade laws or regulations on the importation of goods into the United States and is not meant for security issues. The public now has a convenient tool to report violations such as errors in classification, false country of origin markings, incorrect valuation, and imports infringing on intellectual property rights.

CBP will accept e-Allegations submitted anonymously, however the reporter must provide, at a minimum, a description of the alleged violation, the products or goods involved and the alleged violator’s name and/or company. The reporter may submit other information on a voluntary basis. If the reporter provides an e-mail address, CBP will respond with an e-mail address where the reporter can submit photos or supporting documentation. Because of US laws requiring CBP to keep trade information confidential, the reporter will not be advised by CBP of any questions asked or action taken as the result of an e-Allegation.

With e-Allegations, CBP has now made it extremely easy for anyone to report import violations for any reason. Some e-filers may view this as an opportunity to take aim against a competitor. Former employees could use e-Allegations to criticize a former employer. The impact of e-Allegations on the import community will depend on how CBP evaluates and acts on the information received. Of course, agency procedures may evolve over time as CBP builds experience evaluating the accuracy of the reports received through e-Allegations. However, it seems likely that soon after the announcement, CBP will look to demonstrate that the new program shows results and has identified important errors.

All of these possibilities make the e-Allegations announcement a useful reminder for importers to review their import procedures – especially compliance with CBP’s recordkeeping regulations. Each importer should consider what supporting documents could be provided in response to a request from CBP to demonstrate that critical data such as classification number, value and country of origin were declared according to the requirements of CBP’s regulations, rather than according to “how it has always been done.”

The e-Allegation tool is available online at http://www.cbp.gov/xp/cgov/trade/trade_programs/e_allegations/.

For any issue that poses an immediate threat to the health and/or safety of the public, CBP asks the public to report by phone at 1-800-BE-ALERT.


Sanctions against Zimbabwe

President Bush has expanded sanctions against Zimbabwe in reaction to Zimbabwe’s election, widely condemned as rigged, and the violence and other human rights abuses committed against members of the opposition party and its supporters before, during and after the election. The new sanctions block the property and interests in property, in the United States or in the possession or control of a U.S. person, of a broad range of persons involved directly or indirectly with Zimbabwe’s government.

The most immediate effect of the expanded sanctions will be to prohibit transactions with Zimbabwean parastatal entities and other companies related to the Zimbabwe government. Following the President’s imposition of the new sanctions, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced that it was designating eighteen persons as subject to the expanded sanctions.

More details: refer to http://www.bryancave.com/bulletins/ IRB No. 389 dated on July 28, 2008.


ITAR Registration Renewal Requirements

In the first of what are expected to be multiple changes to the registration provisions of the International Traffic in Arms Regulations ("ITAR"), the Directorate of Defense Trade Controls ("DDTC") today revised ITAR §122.3 to eliminate the two year ITAR registration period. Exporters may now only register for a period of one year, at a cost of $1,750, and must submit a request for registration renewal at least 30 days prior to the expiration date.

While this change ensures a more regular income stream for the Government from registration fees, it adds to the already lengthy list of responsibilities that export personnel must schedule and address. This change does not alter existing expiration dates for registrations issued to exporters by DDTC. However, those exporters will only be permitted to renew their registration for a period of one year when they reach their current registration date.

(Source: [Federal Register: July 18, 2008 (Volume 73, Number 139)] http://edocket.access.gpo.gov/2008/E8-16537.htm )


BIS Modifies June 6 Temporary Denial Order involving Ankair

(Overview of Ankair)
Anka Air, stylised as Ankair, is a charter ariline headquartered in Istanbul, Turkey. Founded in 2005 as World Focus Airlines, the company changed its corporate image to its current form in February 20008 as a result of publicity surrounding the crash of Atlasjet Flight 4203 on 20 November 2007.
The airline operates charter flights to Europe and the Middle East.
Listed on Denied Persons List by BIS on June 6, 2008.

(Denial Order by BIS)
The Bureau of Industry and Security (BIS) has modified its June 6 Temporary Denial Order (TDO) involving Ankair to cover all exports or re-exports of items (involving any commodity, software or technology) subject to the Export Administration Regulations (EAR). BIS increased the scope of the TDO based on evidence that Ankair has violated the TDO and engaged in and/or is about to engage in or attempt further violations of the EAR involving the re-export of additional U.S. origin aircraft to Iran without U.S. Government authorization.

On June 6, 2008, BIS issued an Order, temporarily denying the export privileges for 180 days of Galaxy Aviation Trade Company Ltd., Hooshang Seddigh, Hamid Shakeri Hendi, Hossein Jahan Peyma (Galaxy’s shareholders), and Iran Air. The temporary denial order (“TDO”) also denied certain export privileges of Ankair, specifically, any transactions involving Boeing 747 cargo aircraft, manufacturer serial number 24134, tail number TC-AKZ. The Order was issued based on evidence that the Respondents were attempting to re-export the U.S. origin Boeing 747 from Turkey to Iran without U.S. Government authorization.

(Source: BIS Press Release http://www.bis.doc.gov/news/2008/bis_presstdo071708.htm )


U.S. Companies Need to be Increasingly Careful About What They Tell their Chinese Engineers

Last August J. Reece Roth, an electrical engineering professor at the University of Tennessee, passed along a research paper to Sirous Nourgostar, a graduate student from Iran working under his supervision.  It contained details on refined plasma actuator technology, which uses ionized gas to improve aircraft control.  Roth was doing research on flight performance for a U.S. Air Force contractor and had relied on the assistance of Nourgostar and of Xin Dai, a Chinese national also studying under him. . . . .

Companies and academics that want to conduct restricted research with foreigners in the U.S. need an export license for each person involved.  In 2007 they applied for 1,056 licenses, a 50% increase in five years.  The vast majority of those applications were for Chinese nationals, and only four were rejected.  But the process is burdensome, and things will only get worse with two-thirds of the engineering Ph.D.s granted in the U.S. now going to noncitizens. . . . .

If anything, the U.S. government is considering increasing the regulatory burden.  An advisory committee put together by the Department of Commerce, while making nods to the law's complexity, suggests companies should even conduct a litmus test on an employee's loyalty, like asking if an employee has connections or allegiance to a country of concern such as China.  "It would be a nightmare," says William Reinsch, who runs a trade association that represents companies like Microsoft.

(Source: http://www.forbes.com/global/2008/0721/042.html; notice courtesy of International Trade Law News, http://tradelawnews.com/) [Short excerpt of full article available at Source.]


Japan-Brunei EPA effective from July 31

Japan's 6th bi-lateral EPA with Brunei (JBEPA) will enter into force on July 31, 2008. With this EPA, both import and export with Brunei will be 99.9% zero duty within 10 years.
For Japan, majority of import from Brunei are crude oil and natural gas, and Japan is the number 1 trade country for Brunei. The export to Brunei from Japan are automobile and its parts, more than 70% of export amount is auto-mobile related trade.

JBEPA is similar EPA with other countries in South East Asia. There are two points to take note for this JBEPA, which are the key areas in trade operation.

1) Duty rate reversal with MFN rate
As the EPA negotiation have been done for some years, MFN duty rate of some items have been lowered, then some EPA duty rate are consequently higher than MFN rate. However, with special clause in Japan-Brunei EPA, the EPA rate would b e automatically lowered to same rate as MFN in such a case. People may miss this point, because other bi-lateral EPA with Mexico, Malaysia, Chile, and Thailand don't have such special clause. Thus, people who wish to make use of EPA rate are encouraged to investigate the current MFN rate. Although EPA rate would be reduced to same level as MFN, the time and cost to get EPA Country of Origin documents are troublesome for business operation.
For information in such duty rate reversal, MOF web site provide reversal item list in following web site. http://www.mof.go.jp/jouhou/kanzei/fta_epa/seido_tetsuduki/gyakuten.htm

2) The tariff code for this EPA is based on HS code 2002 version. In Japan, current customs declaration is based on updated HS code 2007 version. The JBEPA continues to be based on HS 2002 code on its country of origin document. If companies apply JBEPA tariff, they need to take care the Country of Origin document, which is mandatory to submit to customs, must show with HS code of 2002. The Japan Chamber of Commerce and Industry handle the issue of Country of Origin documents and they are open to any questions relating to this tariff classification matter.
In addition, in MOF web site, they provide a kind of conversion table of 2002-2007 HS code by each EPA in following web site.


Beware Syrians Bearing Duty-Free

Today OFAC designated [http://www.treas.gov/offices/enforcement/ofac/actions/20080710.shtml] two of Makhluf's most visible business enterprises as SDNs - Syriatel and Ramak Duty Free, a chain of duty free stores that includes Damascus Duty Free at the Damascus International Airport. As a result of that designation, U.S. citizens are prohibited from doing business with either entity. (OFAC's press release on the designation can be found at http://www.treas.gov/press/releases/hp1075.htm.)

This may catch many Americans traveling to Syria unaware. The Damascus Duty Free at the airport is reputed [http://www.airlinequality.com/Airports/Airport_forum/dam.htm] to have a large selection of goods at attractive discounts and is popular among travelers departing the airport. The State Department's guidance page [http://travel.state.gov/travel/cis_pa_tw/cis/cis_1035.html] on travel to Syria has not yet been updated to reflect this new restriction, stating only that, because Syria is a designated state sponsor of terrorism, U.S. citizens "are prohibited from engaging in financial transactions which a U.S. person knows or has reasonable cause to believe pose a risk of furthering terrorists' acts in the United States."

Americans traveling in Syria with unlocked GSM phones might also violate the sanctions if they bought a pre-paid SIM card from Syriatel for use in Syria. Buying telcom services from Syriatel is arguably exempt under the Berman Amendment, but the purchase of the hardware - the SIM card - arguably could overstep the line.

One major American company is currently providing service to Syriatel.Network Solutions is the registrar [http://www.networksolutions.com/whois/results.jsp?domain=syriatel.com] for Syriatel.com [http://www.syriatel.com/], which, as of this posting, was still functioning. Given the increased penalties for violating U.S.sanctions laws, it won't be surprising if that site disappears shortly.


Megaports Initiative between US and Japan

Japan’s Ministry of Foreign Affairs announced July 3 that the U.S. and Japan plan to launch a pilot project under the U.S. Department of Energy’s Megaports Initiative at the Minami Honmoku Terminal at the port of Yokohama in Japan.
Under this project the terminal will install radioactive materials detection equipment to monitor cargo containers for nuclear and other radioactive material. The two governments will exchange information obtained through this project in accordance with their agreement on mutual assistance between customs administrations and other legal frameworks. They will then take the results of the project into account when consulting on future cooperation in this area.
The US Government agreed same initiative with 27 countries, and already implemented with Netherlands, Greece, Bahama, Sri Lanka, Singapore, Spain, Philippines, Belgium and Israel. (as of May 2008)


Japan-Indonesia EPA enter into force on July 01

Starting the preliminary discussion in 2003, and agreed on November 2006 by both countries, the JIEPA (Economic Partnership Agreement between Japan and the Republic of Indonesia) finally entered into force on July 01, 2008.
This EPA will promote liberalization and smooth facilitation of trade and investment and advancing cooperation in such matters as movement of persons, energy and mineral resources, intellectual property and improvement of business environment.  With this EPA, approx. 90% of export from Japan to Indonesia will be zero duty, and approx. 93% of import from Indonesia will be zero duty.

There are some points exporters/importers taken into consideration for using JIEPA operationally.

1) The duty rate negotiation of JIEPA were based on MFN (Most Favorite Nation) rate in 2006. The EPA duty rate was decided by considering the MFN at that time. Since then, Indonesia government reduced MFN rate of certain quantity of items, therefore there are some items MFN rate is more favorable than EPA rate which is effective on July 1st. Companies who use the EPA rate are encouraged to check the latest MFN rate. In JIEPA, if MFN rate is lower than EPA rate, the EPA rate will be adjusted to same rate as MFN.

2) The tariff code for JIEPA is based on HS code 2002 version. In Japan, current customs declaration is based on updated HS code 2007 version. The JIEPA customs operation continue to be based on HS 2002 code. If companies apply JIEPA tariff, they need to take care the Country of Origin document, which is mandatory to submit to customs, must show with HS code of 2002. The Japan Chamber of Commerce and Industry handle the issue of Country of Origin documents and they are open to any questions relating to this tariff classification matter.

Avoiding Unintended Technology Transfers Under The EAR

A major focus of U.S. export enforcement agencies recently has been to prevent the unauthorized export or transfer of technology. While most of us are aware that the United States controls the physical export of goods and technology from the United States [The Export Administration Regulations (15 CFR Part 732 through Part 774) or Section 38 of the Arms Export Control Act (22 U.S.C. § 2778) and the International Traffic in Arms Regulations (ITAR) (22 CFR part 121)], many may not realize that the transfer of technical information or knowledge to a recipient in a foreign country or even to a non-U.S. citizen while here in the U.S. is subject to the same type of controls. We now have enhanced penalties for export violations provided by the International Emergency Economic Powers Enhancement Act (IEEPA Enhancement Act). Under the IEEPA Enhancement Act, civil penalties for violations of the export Administration Regulations can be as much as $250,000 per occurrence.

This article will review the basic rules on the export or transfer of technology and technical data, and provide suggestions on how companies may avoid unintended technology transfers, and the fines or penalties that can result there from.

I. The "Deemed Export" Rule
--Transfers of U.S. Origin Technology And Technical Data To Foreign Nationals In The United States An "export" of U.S. origin technology or technical data can occur even in the United States simply by disclosing information or technology to a foreign national from a country other than the United States. Section 734.2(b) of the EAR provides that the release or disclosure of technology or technical data subject to the EAR to a foreign national of another country is "deemed" to be exported to the home country of the foreign national. For purposes of U.S. export controls, technology is "released" for export through:
i. Visual inspection by foreign nationals of U.S.-origin equipment and facilities;
ii. Oral exchanges of information in the United States or abroad; or
iii. The application to situations abroad of personal knowledge or technical experience acquired in the United States.

II. To Whom Does The Rule Apply?
The "deemed export" rule applies to all non-U.S. citizens, regardless of whether they are employees or visitors, except persons who have been lawfully admitted for permanent residence, or persons who are protected individuals under the Immigration and Naturalization Act (8 U.S.C. §1324b(a)(3)).

III. What Is Technical Data?
When we talk about technical data, we really mean "technology," which is broadly defined by the EAR as information necessary for the "development", "production", or "use" of a product. It can take the form of either "technical data" or "technical assistance". "Technical data" is technology that takes on the form such as blueprints, plans, diagrams, models, formulae, tables, engineering designs and specifications, manuals and instructions written or recorded on media or devices such as disk, tape, or read-only memories. Technical assistance, on the other hand, can take on the form of instructions, skills training, working knowledge, or consulting services. Oftentimes, a transfer of technical assistance includes a transfer of technical data. The export of technology that is "required" for the "development", "production", or "use" of items on the Commerce Control List is controlled according to the provisions in each Category of the Commerce Control List to which the technology belongs.

IV. Not All Transfers of Technology to Foreign Nationals Require a License Like the export or reexport of goods or technology, not all transfers of technology to a foreign national in the United States require a license. In general, whether a license will be required before a transfer of technology can occur will depend on:
a. The nature and control status of the information to be transferred, and
b. The country of citizenship of the foreign national.
The first step in determining whether a license will be required is to classify the information to be communicated to the foreign national. In most cases, this technology will fall under the jurisdiction of the U.S. Export Administration Regulations (the "EAR"), and the Commerce Control list (Supplement 1 to Part 774 of the EAR) (the "CCL"). In other cases, the technology may fall under the jurisdiction of the Arms Export Control Act (22 U.S.C. § 2778) and the International Traffic in Arms Regulations (ITAR) (22 CFR part 121). The CCL is a list of all items subject to the jurisdiction of the EAR and the Bureau of Industry and Security ("BIS") in the Department of Commerce. The coverage of the CCL includes commodities, as well as software, technology, and technical data.

A. How to Determine if Your Technology Requires a License . . . .
B. Publicly Available Technology And Technical Data; Sales Technology . . . .
C. Sales-Related Technology and License Exception TSU . . . .
D. License Exception TSR for Technology Exports . . . .
E. License Exception CIV for Technology Exports . . . .
F. License Exception APP (Computers) . . . .

A Foreign National Review ("FNR") request (see §748.8(s) of the EAR) must be submitted to BIS and approved before the release of any technology or software to a foreign national from any Tier Three computer countries,
including: China (People's Republic of), Egypt, Georgia, India, Iraq, Israel, Jordan, Kazakhstan, Kuwait, Kyrgyzstan, Laos, Lebanon, Libya, Macau, Macedonia (The Former Yugoslav Republic of), Mauritania, Moldova, Mongolia, Montenegro, Morocco, Oman, Pakistan, Qatar, Russia, Saudi Arabia, Serbia, Tajikistan, Tunisia, Turkmenistan, Ukraine, United Arab Emirates, Uzbekistan, Vanuatu, Vietnam, and Yemen. (See EAR § 740.7(d)(1) for a complete list of Tier Three computer countries.)

V. Technology Control Plans:
Avoiding The Unauthorized Transfer Of Technology Unlike hardware and physical materials, technology can leak from a company like water from a colander. Technology can be released by any number means, including phone, fax, e-mail, mail, courier, face-to-face meetings and visual tours. The only way to adequately stem the unauthorized flow of technology from a company is through education of employees and the adoption of a technology control plan (TCP). A sound TCP provides a company with a process to categorize technology and data, and to screen customers, visitors, and employees.

A. Developing A Technology Control Plan . . . .
B. Establishing Technology Control Procedures for Customers, Visitors, and Employees . . . .

Screening employees, both here in the U.S. and abroad, presents unique challenges because of issues associated with possible employment discrimination, or violation of foreign laws. A commonly voiced concern is whether U.S. anti-discrimination employment law prohibits an employer from asking employees information about their country of citizenship. Subsection 1324b(a)(1) of Title 8 of the United States Code provides that it is an unfair immigration-related employment practice for a person or other entity to discriminate against any individual with respect to the hiring or recruitment of an individual for employment, or for the discharging of the individual from employment, because of such individual's national origin. Subsection 1324b(a)(2), however, provides an exception to such practices where it is otherwise required in order to comply with a United States law, regulation, or executive order. It is, therefore, both possible and legal to require employees and potential new hires to verify citizenship information, provided the employee or potential candidate is notified in advance that the job or activity requires access to and/or disclosure of information and data subject to U.S. export control restrictions, and that one condition for consideration for the position is the issuance of a validated export license or other approval. The specifics of any program used to verify citizenship for employment-related purposes should be reviewed carefully with the company's immigration-employment law counsel before implementation.

(Source: Tuttle Law Offices, info@tuttlelaw.com)