Archive for January, 2010

Friday, January 29th, 2010

This article is excerpted from the 28 January 2010 edition of “American Shipper”.

The fact that big importers with large information technology resources are still not able to properly file the Importer Security Filing every time illustrates the compliance challenge facing businesses, a couple of international trade professionals said last week.

The U.S. government this week began enforcing the one-year-old cargo security rule that requires more detailed commercial data from importers before a shipment goes on a vessel. After 12 months in which shippers were encouraged to electronically submit the ISF form without consequences for late filing or other errors, Customs and Border Protection is now closely monitoring shipments, detaining those without the necessary documentation and building a case for damage claims later this year against companies that don’t improve their performance.

The rule, also known as “10+2” for the number of data types that importers and carriers must submit, has arguably caused more far-reaching changes in industry business process than any other U.S. measure related to international cargo security. Importers have had to identify which overseas business partners possesses missing pieces of information, audit themselves to learn where other necessary data internally resides within their far-flung enterprises, and set up software applications to collect and transmit the data. The lift is often more difficult for small and medium-size importers that do not have extensive contacts overseas or the budgets for new technology.

Many importers are able to meet the filing deadline — 24 hours prior to vessel loading — for a portion of their supply chains, but hitting the 100 percent mark is still difficult, Rosanne Esposito, executive vice president of global customs for Expeditors International, said at a trade seminar in Los Angeles.

The 80-20 rule applies to “10+2,” she said, with 20 percent of problem shipments requiring the most resources to track down the necessary data about the shipper, consolidation center or cargo contents.

CBP officials have expressed understanding of the implementation difficulties and said they will be more lenient towards companies that have made a good faith effort to file ISFs and correct
problems.

A big problem for industry is that a significant number of importers have not automated, or only partially automated, supply chain processes that would enable easier information sharing and completion of the ISF, said Matthew Varner, director of trade operations for Nike&hellip.

About 20 percent of Nike’s ISFs are filed by customs brokers because they are in a better position to deal with smaller suppliers who still share information by paper, Varner said.

Despite the growing pains, Nike has determined there is a business case for the rule because it has forced the trade unit to better integrate with other divisions in the company and has improved status updates and security of shipments throughout the supply chain.

Thursday, January 28th, 2010

The following was reported on in today’s edition of “WorldTrade Interactive”.

The Export Control Practitioners Group recently submitted to the Obama administration a number of recommendations for reform of the U.S. export control system, an issue the White House is currently reviewing. The ECPG’s recommendations were drafted by export controls professionals from industry, associations and law firms… They were submitted just ahead of several high-level meetings on export control reform issues that were held in Washington, D.C., this week.

“Many of these recommendations, if enacted, would have a favorable impact on our firm’s clients that produce products subject to the USML and EAR,” Jacobson said. “In particular, reform of the commodity jurisdiction process would be of significant benefit to exporters since it is often difficult for exporters to know with certainty whether their products are subject to the ITAR or EAR. In addition, the EPCG’s recommendations relating to revamping the process and structure for the imposition of penalties for violating export control laws and regulations would be welcome news.”

The group’s recommendations focus on process and policy changes as well as a number of substantive and practical ways to modernize and improve the current system. They include many similarities to, but some substantive differences from, the reforms being advocated by the Coalition for Security and Competitiveness. Among the group’s specific proposals are the following.

Agency Structure

- maintain the overall interagency export control structure but attempt to ensure more cooperation, including physical collocation where possible

- do not add more layers of bureaucracy, including a single point of entry at the front end of the process or an overarching supervisory structure as some have advocated

Commodity Jurisdiction

- establish the national security advisor as the final decision maker to resolve conflicting CJ claims by different agencies

- move items that do not belong on the USML to the Commerce Control List at an
appropriate level of control so that Wassenaar Arrangement Munitions List items are placed on the USML, multilaterally controlled dual-use items are placed on the CCL, and items not controlled by a multilateral regime or treaty are subject to the Export Administration Regulations

- quickly implement a uniform, common sense and objective definition of defense article that focuses on core military functionality

Control List Review and Reduction

- conduct regular annual reviews of export control lists with a “default to decontrol” provision that would require items to be removed in the absence of a timely, documented, genuine review and justification for retaining controls

- create a special mechanism to automatically decontrol certain items based on their anticipated life cycle and the forecast arrival of the next generation

Foreign Availability

- base analyses of foreign availability on controllability; i.e., whether the item is available in sufficient quantity and comparable quality so as to render attempts to control ineffective in achieving their intended purpose

- if foreign availability is determined to exist for an item but the president decides to maintain an export control, that control should clearly be labeled as a unilateral control and the president should have to renew his/her determination pursuant to an automatic foreign availability review every year

Licensing

- with respect to the ITAR: simplify the use of exemptions by locating all of them in one section of the ITAR, combine similar exemptions for transactions with parties in destinations that pose the least risk to national security, allow all exemptions to apply to defense articles, technical data and defense services, and create an exemption for re-exports with less than 10% U.S.-origin ITAR controlled content to relieve pressure to design out U.S.-content

- with respect to the EAR: expand the validated end-user program to include additional countries and end users, implement the long-awaited intra-company transfer rule, eliminate licensing requirements for NATO and other allied countries, consider preferential treatment for trusted exporters, and broaden exemptions for mail and telephone communication to include instant communication technologies, personal communications software and Web services

Enforcement

- establish a civil penalty structure that (a) draws meaningful distinctions among violations resulting from willful or knowing conduct, gross negligence, negligence or strict liability and (b) includes tiers of penalties with caps on the amounts that may be assessed based on levels of culpability as well as significant mitigation for voluntary self-disclosures

- conduct periodic agency review, update and enhancement of enforcement policies and guidelines to establish uniformity in their application, particularly with respect to agency handling of VSDs

- encourage enforcement agencies to improve procedures for sharing information to facilitate global settlements of prosecution and penalty cases

Deemed Exports

- limit deemed export licensing requirements to sensitive, multilaterally controlled technology

Intracompany Transfers

- provide trusted party license exceptions for dual-use intra-company transfers to and among non-embargoed destinations

- grant two distinct intra-enterprise license exceptions for (a) exports, re-exports and retransfers of software and technology, including deemed exports and (b) production and test equipment, parts and products that will be placed in inventory

Encryption

- remove encryption controls on products that do not have cryptography as their core function

- remove review requirements from mass-market and other commodity products and components

- ensure mass-market treatment for components that are designed for use in mass-market products or are otherwise widely available

- eliminate post-export reporting requirements

- eliminate controls on products utilizing only publicly available software

End-User and End-Use Screening

• link end-use/end-user controls and screening requirements (e.g., expectations of due diligence) imposed by OFAC, BIS and DDTC to specific control levels and transaction categories

• consolidate the various end-user lists maintained by the various agencies into one centralized list, including names and data in the end users’ native languages, to afford easier access by exporters and other interested parties

Thursday, January 28th, 2010

The following was reported on in today’s edition of “WorldTrade Interactive”.

The Export Control Practitioners Group recently submitted to the Obama administration a number of recommendations for reform of the U.S. export control system, an issue the White House is currently reviewing. The ECPG’s recommendations were drafted by export controls professionals from industry, associations and law firms… They were submitted just ahead of several high-level meetings on export control reform issues that were held in Washington, D.C., this week.

“Many of these recommendations, if enacted, would have a favorable impact on our firm’s clients that produce products subject to the USML and EAR,” Jacobson said. “In particular, reform of the commodity jurisdiction process would be of significant benefit to exporters since it is often difficult for exporters to know with certainty whether their products are subject to the ITAR or EAR. In addition, the EPCG’s recommendations relating to revamping the process and structure for the imposition of penalties for violating export control laws and regulations would be welcome news.”

The group’s recommendations focus on process and policy changes as well as a number of substantive and practical ways to modernize and improve the current system. They include many similarities to, but some substantive differences from, the reforms being advocated by the Coalition for Security and Competitiveness. Among the group’s specific proposals are the following.

Agency Structure

- maintain the overall interagency export control structure but attempt to ensure more cooperation, including physical collocation where possible

- do not add more layers of bureaucracy, including a single point of entry at the front end of the process or an overarching supervisory structure as some have advocated

Commodity Jurisdiction

- establish the national security advisor as the final decision maker to resolve conflicting CJ claims by different agencies

- move items that do not belong on the USML to the Commerce Control List at an
appropriate level of control so that Wassenaar Arrangement Munitions List items are placed on the USML, multilaterally controlled dual-use items are placed on the CCL, and items not controlled by a multilateral regime or treaty are subject to the Export Administration Regulations

- quickly implement a uniform, common sense and objective definition of defense article that focuses on core military functionality

Control List Review and Reduction

- conduct regular annual reviews of export control lists with a “default to decontrol” provision that would require items to be removed in the absence of a timely, documented, genuine review and justification for retaining controls

- create a special mechanism to automatically decontrol certain items based on their anticipated life cycle and the forecast arrival of the next generation

Foreign Availability

- base analyses of foreign availability on controllability; i.e., whether the item is available in sufficient quantity and comparable quality so as to render attempts to control ineffective in achieving their intended purpose

- if foreign availability is determined to exist for an item but the president decides to maintain an export control, that control should clearly be labeled as a unilateral control and the president should have to renew his/her determination pursuant to an automatic foreign availability review every year

Licensing

- with respect to the ITAR: simplify the use of exemptions by locating all of them in one section of the ITAR, combine similar exemptions for transactions with parties in destinations that pose the least risk to national security, allow all exemptions to apply to defense articles, technical data and defense services, and create an exemption for re-exports with less than 10% U.S.-origin ITAR controlled content to relieve pressure to design out U.S.-content

- with respect to the EAR: expand the validated end-user program to include additional countries and end users, implement the long-awaited intra-company transfer rule, eliminate licensing requirements for NATO and other allied countries, consider preferential treatment for trusted exporters, and broaden exemptions for mail and telephone communication to include instant communication technologies, personal communications software and Web services

Enforcement

- establish a civil penalty structure that (a) draws meaningful distinctions among violations resulting from willful or knowing conduct, gross negligence, negligence or strict liability and (b) includes tiers of penalties with caps on the amounts that may be assessed based on levels of culpability as well as significant mitigation for voluntary self-disclosures

- conduct periodic agency review, update and enhancement of enforcement policies and guidelines to establish uniformity in their application, particularly with respect to agency handling of VSDs

- encourage enforcement agencies to improve procedures for sharing information to facilitate global settlements of prosecution and penalty cases

Deemed Exports

- limit deemed export licensing requirements to sensitive, multilaterally controlled technology

Intracompany Transfers

- provide trusted party license exceptions for dual-use intra-company transfers to and among non-embargoed destinations

- grant two distinct intra-enterprise license exceptions for (a) exports, re-exports and retransfers of software and technology, including deemed exports and (b) production and test equipment, parts and products that will be placed in inventory

Encryption

- remove encryption controls on products that do not have cryptography as their core function

- remove review requirements from mass-market and other commodity products and components

- ensure mass-market treatment for components that are designed for use in mass-market products or are otherwise widely available

- eliminate post-export reporting requirements

- eliminate controls on products utilizing only publicly available software

End-User and End-Use Screening

- link end-use/end-user controls and screening requirements (e.g., expectations of due diligence) imposed by OFAC, BIS and DDTC to specific control levels and transaction categories

- consolidate the various end-user lists maintained by the various agencies into one centralized list, including names and data in the end users’ native languages, to afford easier access by exporters and other interested parties

Monday, January 11th, 2010

The following is excerpted from today’s edition of “The Star”.

Already the biggest auto market and steel maker, China edged past Germany in 2009 to become the top exporter, yet another sign of its rapid rise and the spread of economic power from West to East.

Total 2009 exports were more than $1.2 trillion (U.S.), China’s customs agency said Sunday.

That was ahead of the 816 billion euros ($1.17 trillion) forecast for Germany by its foreign trade organization, BGA.

China’s new status is mostly symbolic but highlights its growing presence as an industrial power, major buyer of oil, iron ore and other commodities and, increasingly, as an investor and key voice in managing the global economy.

Its ability to unseat longtime export leader Germany reflects the ability of agile, low-cost Chinese manufacturers to keep selling abroad even as other exporters have been hammered by a slump in global demand.

China overtook Germany in 2007 as the third-largest economy and is expected to unseat Japan as No. 2 behind the United States as early as this year.

Its trade boom has helped Beijing pile up the world’s biggest foreign currency reserves at more than $2 trillion.

The global crisis speeded China’s rise up the ranks as a 4-trillion yuan ($586-billion) government stimulus kept its economy and consumption growing while the U.S. and other markets struggled with recession.

Chinese economic growth rose to 8.9 per cent in the third quarter of 2009 and the government is forecasting a full-year expansion of 8.3 per cent.

On Friday, data released by an industry group showed China topped the slumping United States in auto sales in 2009 – a status industry analysts a few years ago did not expect it to achieve until as late as 2020….

China’s exports per person are still much lower than those of Germany, which has a much smaller population of 80 million people. China sells low-tech goods such as shoes, toys and furniture, while Germany exports machinery and other higher-value products.

German commentators note their country supplies the factory equipment used by top Chinese manufacturers….

Of course, with 1.3 billion people, China is still one of the world’s poorest countries….

China’s trade ended 2009 with exports rebounding in December, jumping 17.7 per cent after 13 months of declines, the customs agency said.

The upturn was an “important turning point” for exporters, a customs agency economist, Huang Guohua, said on state television, CCTV….

Plunging demand in 2008 forced thousands of factories to close and threw millions of labourers out of work.

China’s trade surplus shrank by 34.2 per cent in 2009 to $196.07 billion, the customs agency said. That reflected China’s stronger demand for imported raw materials and consumer goods….

Economists say the buying binge has been driven in part by a Chinese effort to build up stockpiles while global prices are low.

The United States and other governments complain that part of China’s export success is based on currency controls and improper subsidies that give its exporters an unfair advantage against foreign rivals.

Washington has imposed anti-dumping duties on imports of Chinese-made steel pipes and some other goods, while the European Union has imposed curbs on Chinese shoes.

The U.S. and other governments also complain that Beijing keeps its currency, the yuan, undervalued. Beijing broke the yuan’s link to the dollar in 2005 and it rose gradually until late 2008, but has been frozen since then against the U.S. currency in what economists say is an effort by Beijing to keep its exporters competitive.

The dollar’s weakness against the euro and some other currencies pulls down the yuan in markets that use them and makes Chinese goods even more attractive there, adding to China’s trade surplus.