Mar 2008
CBP and EU Commission Adopt a Joint Roadmap Towards Mutual Recognition of Trade Partnership Programs
On March 27, 2008, U.S. Customs
and Border Protection announced the adoption of the U.S.-EU Joint
Customs Cooperation Committee (JCCC) Roadmap towards Mutual
Recognition of Trade Partnership Programs. Mutual Recognition of
the U.S.'s Customs-Trade Partnership Against Terrorism (C-TPAT) and
the EU's Authorized Economic Operator (AEO) supply chain security
programs would allow companies to receive benefits similar to those
conferred on companies participating in the other country's
program.
The Roadmap outlines six areas that the U.S. and the EU will address to achieve the goal of implementing Mutual Recognition: political, administrative, legal, policy, technical/operational, and evaluation. The Roadmap sets forth key benchmarks for measuring progress in each area.
The U.S. and EU began working towards implementing Mutual Recognition of C-TPAT and AEO in 2007. The initial steps consisted of completing an in-depth comparison of both the U.S. and EU programs and conducting a pilot program in which CBP observed security components of the EU's AEO audit process. The Roadmap was drafted and endorsed based on the conclusions drawn from the initial U.S.-EU effort.
CBP states that, "Throughout the upcoming year, the U.S. and EU will:
The Roadmap outlines six areas that the U.S. and the EU will address to achieve the goal of implementing Mutual Recognition: political, administrative, legal, policy, technical/operational, and evaluation. The Roadmap sets forth key benchmarks for measuring progress in each area.
The U.S. and EU began working towards implementing Mutual Recognition of C-TPAT and AEO in 2007. The initial steps consisted of completing an in-depth comparison of both the U.S. and EU programs and conducting a pilot program in which CBP observed security components of the EU's AEO audit process. The Roadmap was drafted and endorsed based on the conclusions drawn from the initial U.S.-EU effort.
CBP states that, "Throughout the upcoming year, the U.S. and EU will:
- Establish guidelines regarding information exchanges, including the exchange of validation/audit results and legalities associated with the disclosure of membership details
- Perform joint verifications to determine remaining gaps between AEO/C-TPAT and resolve any discrepancies
- Explore and test an export component for C-TPAT
- Exchange best practices through joint visits and conferences
- Continue dialogue on legal and policy developments under the respective administrations
- Endorse and sign a Mutual Recognition Arrangement
- Evaluate Mutual Recognition benefits for AEO/C-TPAT members
California Engineer Sentenced to 24 Years in Prison
03/27/08 05:45 PM Filed in: Export | Enforcement
The Los Angeles Times
reported on March 25, 2008 that a
Chinese-born, naturalized U.S. citizen was sentenced to 24 years
and five months in federal prison and fined $50,000 for conspiring
to export ITAR-controlled technology to China. Chi Mak, 67, was a
former electrical engineer at Power Paragon, Inc. of Anaheim, CA,
which handled Navy contracts. Mak was convicted of conspiracy to
violate export control laws, attempting to violate export control
laws, acting as an unregistered agent of China, and lying to the
FBI.
Mak's conviction was the culmination of an 18-month long investigation of Mak's family that ended in October 2005 when he and four other family members were arrested by the FBI and charged with a scheme to illegally send military information to China. Mak's wife, brother, sister-in-law, and nephew have all pleaded guilty and agreed to jail terms or probation.
The government's case centered around three encrypted computer disks that the family had tried to take with them on a flight to China. Two of the disks contained information about an electrically powered propulsion system for warships and a solid-state power switch for ships. The third disk contained a Powerpoint presentation on the future of power electronics. Witnesses during the trial testified that some of these materials were available for purchase on the website of the American Society of Naval Engineers until the government put a stop to it. In addition, Mak's attorney stated that information contained on one of the disks was discussed at an international conference attended by Chinese engineers and the FBI.
Mak's attorney stated that Mak was "sentenced as a trophy rather than a human being" and the case against Mak was unwarranted. Mak will serve his sentence in a low security federal prison.
Mak's conviction was the culmination of an 18-month long investigation of Mak's family that ended in October 2005 when he and four other family members were arrested by the FBI and charged with a scheme to illegally send military information to China. Mak's wife, brother, sister-in-law, and nephew have all pleaded guilty and agreed to jail terms or probation.
The government's case centered around three encrypted computer disks that the family had tried to take with them on a flight to China. Two of the disks contained information about an electrically powered propulsion system for warships and a solid-state power switch for ships. The third disk contained a Powerpoint presentation on the future of power electronics. Witnesses during the trial testified that some of these materials were available for purchase on the website of the American Society of Naval Engineers until the government put a stop to it. In addition, Mak's attorney stated that information contained on one of the disks was discussed at an international conference attended by Chinese engineers and the FBI.
Mak's attorney stated that Mak was "sentenced as a trophy rather than a human being" and the case against Mak was unwarranted. Mak will serve his sentence in a low security federal prison.
Update on Proposed Re-Interpretation of "First Sale" Valuation
03/27/08 12:20 PM Filed in: Customs | Rulemaking
Comments for the proposed
interpretation of the "First Sale" rule are due on
April 23, 2008. To date, 17 comments have
been posted. Two of the comments support the proposed
change. Comments against the proposed interpretation
include Boeing, Wicked Fashions Inc., RG Barry Corporation,
Northern Tool and Equipment Co., Inc., The New Zealand
Manufacturers and Exporters Association and COAC.
U.S. Customs and Border Protection ("CBP") is proposing that the transaction value (or price paid or payable) for imported goods in a series of sales is the price paid or payable in the last sale occurring prior to the goods' importation into the United States, rather than the price in the first or earlier sale. CBP states that this is based on its proposed revised interpretation of the phrase "when sold for exportation to the United States" such that CBP no longer believes that the first (or earlier) sale qualifies as a sale for exportation to the United States. CBP states that this proposed interpretation is in line with the conclusions of the Technical Committee on Customs Valuation as set forth in Commentary 22.1, entitled, "Meaning of the Expression 'Sold for Export to the Country of Importation' in a Series of Sales."
U.S. Customs and Border Protection ("CBP") is proposing that the transaction value (or price paid or payable) for imported goods in a series of sales is the price paid or payable in the last sale occurring prior to the goods' importation into the United States, rather than the price in the first or earlier sale. CBP states that this is based on its proposed revised interpretation of the phrase "when sold for exportation to the United States" such that CBP no longer believes that the first (or earlier) sale qualifies as a sale for exportation to the United States. CBP states that this proposed interpretation is in line with the conclusions of the Technical Committee on Customs Valuation as set forth in Commentary 22.1, entitled, "Meaning of the Expression 'Sold for Export to the Country of Importation' in a Series of Sales."
China and U.S. Launch Trade Security Pilot Program
On
March 24, 2008, U.S. Customs and Border Protection (CBP)
announced the
start of a validation pilot program in China made possible by
cooperation between CBP and the General Administration of China
Customs. The pilot program involved three Customs-Trade Partnership
Against Terrorism (C-TPAT) importer partners whose supply chains
predominately originate in China.
CBP states that the U.S. companies were invited to participate based upon several factors including volume, product type, and location of their supply chains in China. The companies voluntarily agreed to participate in the pilot program with the concurrence of both administrations.
China Customs led the validations based on C-TPAT minimum security criteria as a guide and with CBP supply chain specialists providing technical assistance. Prior to the validations, the companies were receiving minimal C-TPAT benefits due to CBP's inability to validate their security procedures in China. However, the information gathered during the validation will now allow CBP the ability to assess whether greater C-TPAT benefits are warranted. Both CBP and China Customs will evaluate the success of the pilot program and determine next steps.
C-TPAT Director Brad Skinner stated, "It took several months of intense discussions to get to this point and we look forward to continuing this effort as we explore future cooperation. It is a win-win for all. CBP and China Customs have the knowledge that all parties involved have good security practices in place and the companies can benefit by receiving fewer exams."
CBP states that the U.S. companies were invited to participate based upon several factors including volume, product type, and location of their supply chains in China. The companies voluntarily agreed to participate in the pilot program with the concurrence of both administrations.
China Customs led the validations based on C-TPAT minimum security criteria as a guide and with CBP supply chain specialists providing technical assistance. Prior to the validations, the companies were receiving minimal C-TPAT benefits due to CBP's inability to validate their security procedures in China. However, the information gathered during the validation will now allow CBP the ability to assess whether greater C-TPAT benefits are warranted. Both CBP and China Customs will evaluate the success of the pilot program and determine next steps.
C-TPAT Director Brad Skinner stated, "It took several months of intense discussions to get to this point and we look forward to continuing this effort as we explore future cooperation. It is a win-win for all. CBP and China Customs have the knowledge that all parties involved have good security practices in place and the companies can benefit by receiving fewer exams."
Highlights from BIS's 2008 Export Control Forum in Newport Beach
The Bureau of Industry and
Security (BIS) held its 3rd Annual Export Control Forum in Newport
Beach, CA on March 17, 2008. BIS, Census and Office of Foreign
Assets Control (OFAC) provided updates to the trade. Global Trade
Expertise attended and in case you missed it, we'll recap the
highlights here.
- In a presentation by Gerry Horner, Senior Trade and Industry Analyst, Office of Technology Evaluation, Mr. Horner stated that BIS has been measuring EAR compliance by comparing data elements in AES and license approvals. For example, BIS is comparing approved licenses to licensed exports, comparing license values to licensed export values, and comparing countries on license with licensed exports. BIS is also scrutinizing license exception uses and EAR99 classifications.
- Alex Lopes, Director of BIS' Deemed Exports and Electronics Division, gave a presentation and a half-day seminar on Deemed Exports. Mr. Lopes set forth two general findings of the Deemed Export Advisory Committee (DEAC) Report as: (1) strengthening and streamlining deemed export policy and process; and (2) expanding BIS' outreach. With regard to the second recommendation, BIS will be updating its website, providing more frequent webinars, and tailoring outreach. In fact, BIS will be having a webinar on Deemed Exports on April 15, 2008.
- With regard to implementing the first recommendation: strengthening and streamlining deemed export policy and process, Mr. Lopes set fort the following steps:
- BIS announced in February the establishment of the Emerging Technologies and Research Advisory Committee (ETRAC), which will work on creating a list of technologies that should be regulated for deemed export purposes;
- BIS is creating a license exception for intra-company transfers (ICT) of both commodities and technology that is currently being reviewed by other government agencies;
- BIS is seeking to establish objective licensing criteria when reviewing dual nationals;
- BIS is in the process of redesigning its website to simply and clarify regulatory language and online guidance; and
- BIS is undertaking a comprehensive review of the CCL.
- Darryl Jackson, Assistant Secretary of Commerce for Export Enforcement, stated that the fourth export enforcement priority is now Antiboycott Compliance (after Weapons of Mass Destruction Proliferation, Terrorism and State Sponsorship of Terror, and Diversions to Unauthorized Military End-Use).
- Mr. Jackson also revealed for the first time the 9 Factors to an Effective Compliance Program that would be entitled to great weight mitigation, which will be posted on the BIS website: (1) whether a company has performed a meaningful risk analysis; (2) the existence of formal written compliance program; (3) whether appropriate senior company officials are responsible for overseeing the export compliance program; (4) whether adequate training is provided to employees; (5) whether the company adequately screens its customers and transactions; (6) whether company meets recordkeeping requirements; (7) the existence and operation of an internal system for reporting export violations; (8) the existence and results of internal or external reviews or audits (with associated updates of the EMCP); and (9) whether remedial activity has been taken in response to export violations.
- Todd Willis, Assistant Director, Office of Enforcement Analysis gave an update on BIS' end-use checks. In 2008, BIS will begin conducting end-use checks (EUC) on software and technology. Mr. Willis provided information that BIS will look for during end use checks, which elicited questions from the audience regarding how much control BIS expects exporters to exert over foreign customers and what the effects of an unfavorable EUC will have on future license applications.
BIS Establishes Online Export Control Training Room
On March 19, 2008, the Department
of Commerce's Bureau of Industry and Security (BIS)
announced the creation of an
BIS Online Training
Room.
In its announcement, BIS stated:
The Online Training Room currently provides 3 training modules:
1. Export Control Basics
2. Classifying Your Item and Determining If You Need a License
3. General Prohibitions including Prohibited End-Users and End-Uses & Activities
Also included in the Online Training Room are BIS' previously conducted webinars:
1. Reexport Controls (March 12, 2008)
2. An Introduction to Commercial Export Licensing Requirements (Spanish) (October 18, 2007)
3. Intermediate Deemed Exports (August 29, 2007)
4. Update to China Export Control Policy (June 20, 2007)
5. An Introduct to Commercial Export Licensing Requirements (May 15, 2007)
BIS states, "We wll continue to create and update content for the online training room, and would welcome your suggestions for how to further improve our outreach efforts."
As part of its ongoing efforts to improve outreach, BIS will continue to create and supplement the materials regularly. The initial launch includes the first half of the Essentials of Export Controls seminar that BIS currently offers around the country, as well as five pre-recorded webinars covering a variety of topics. The training modules are presented in a video streaming format. The pre-recorded BIS webinars were conducted over the past year and focus on specific export control issues.
The Online Training Room currently provides 3 training modules:
1. Export Control Basics
2. Classifying Your Item and Determining If You Need a License
3. General Prohibitions including Prohibited End-Users and End-Uses & Activities
Also included in the Online Training Room are BIS' previously conducted webinars:
1. Reexport Controls (March 12, 2008)
2. An Introduction to Commercial Export Licensing Requirements (Spanish) (October 18, 2007)
3. Intermediate Deemed Exports (August 29, 2007)
4. Update to China Export Control Policy (June 20, 2007)
5. An Introduct to Commercial Export Licensing Requirements (May 15, 2007)
BIS states, "We wll continue to create and update content for the online training room, and would welcome your suggestions for how to further improve our outreach efforts."
BIS Requests Comments on EAR Crime Control License Requirements
On March
19, 2008, the Department of Commerce's Bureau of Industry and
Security (BIS) published a notice of inquiry in the
Federal Register
requesting public comments on the
crime control export and reexport license requirements in the
Export Administration Regulations (EAR). BIS is seeking comments on
whether the scope of items currently subject to crime control
license requirements should be revised to add or remove items and
is also seeking comments on whether the destinations to which crime
control license requirements apply should be revised.
The Notice of Inquiry can be found here. Comments must be received no later than June 17, 2008.
The Notice of Inquiry can be found here. Comments must be received no later than June 17, 2008.
Minnesota Company Fined $400,000 for Export Violations
03/13/08 03:07 PM Filed in: Export | Enforcement
MTS Systems Corp. of Eden Prairie,
MN, pleaded guilty and was sentenced on March 12, 2008 in
connection with submitting false export license applications to the
U.S. Department of Commerce for proposed shipments to India. (The
DOJ news release can be found here.) MTS Systems Corp. was sentenced
to two years probation and a $400,000 fine. Pursuant to the plea
agreement, the court also ordered MTS to implement and maintain a
model export compliance program and to sponsor an export compliance
conference to be held at a future date.
The government alleged that MTS submitted a false export license application when it omitted any corporate knowledge of a possible nuclear end-use for seismic testing equipment to be shipped to India. Assistant Secretary of Commerce for Export Enforcement Darryl W. Jackson stated, "Omitting material information to a licensing official about the intended end-use of a controlled technology item is a serious offense. In this case, the omission clearly was an attempt to disguise the end-use of testing structural components of nuclear-power plants."
The case was the result of an investigation by BIS and ICE.
The government alleged that MTS submitted a false export license application when it omitted any corporate knowledge of a possible nuclear end-use for seismic testing equipment to be shipped to India. Assistant Secretary of Commerce for Export Enforcement Darryl W. Jackson stated, "Omitting material information to a licensing official about the intended end-use of a controlled technology item is a serious offense. In this case, the omission clearly was an attempt to disguise the end-use of testing structural components of nuclear-power plants."
The case was the result of an investigation by BIS and ICE.
Passenger Screening at Airports to be Reviewed by Homeland Security
03/03/08 11:03 AM Filed in: DHS
| Transporation
In an interview with
Homeland Security Secretary Michael Chertoff on March 3, 2008
stated that the Department of Homeland Security will be undertaking
a review of passenger screening at airports to explore ways to ease
hassles and possibly paying more attention to screening private
jets from overseas. Mr. Chertoff stated, "We are going to take a
look at the whole system of screening at the airport in the next
month and we're going to see if we can maybe make a couple of
significant changes to remove some of the burden. We may be able to
make some significant changes to the system that may actually be
welcomed by the travelers."
USA Today reported that the review of passenger screening procedures will occur in the next 30 to 45 days. Chertoff has directed Transportation and Security Administration (TSA) chief Kip Hawley to "look at the system" of passenger screening and determine "are there things we can do to reduce hassle." USA Today reports that Chertoff stated that "some screening requirements may be unnecessary because of improvements in aviation security, such as hardened cockpit doors, a growing number of pilots carrying handguns and the deployment of hundreds of TSA screeners who scan airport crowds looking for people who are acting oddly and may pose a security threat."
To protect the U.S. from a private jet carrying a nuclear bomb, a dirty bomb, or biological weapons into the country, it was reported that DHS will issue new rules that will require crews and passengers to provide their names, birth dates, and other personal information one hour before taking off for the U.S. This time will allow authorities to check names against terrorist watch lists. Chertoff stated that the next step could be to require that private planes be scanned and passengers be screened and processed through Customs overseas.
USA Today reported that the review of passenger screening procedures will occur in the next 30 to 45 days. Chertoff has directed Transportation and Security Administration (TSA) chief Kip Hawley to "look at the system" of passenger screening and determine "are there things we can do to reduce hassle." USA Today reports that Chertoff stated that "some screening requirements may be unnecessary because of improvements in aviation security, such as hardened cockpit doors, a growing number of pilots carrying handguns and the deployment of hundreds of TSA screeners who scan airport crowds looking for people who are acting oddly and may pose a security threat."
To protect the U.S. from a private jet carrying a nuclear bomb, a dirty bomb, or biological weapons into the country, it was reported that DHS will issue new rules that will require crews and passengers to provide their names, birth dates, and other personal information one hour before taking off for the U.S. This time will allow authorities to check names against terrorist watch lists. Chertoff stated that the next step could be to require that private planes be scanned and passengers be screened and processed through Customs overseas.