Trade Remedies

TRADE REMEDIES

APHIS Announces Increased Civil Penalties
05/02

USDA's Animal and Plant Health Inspection Service's (APHIS) Plant Protection and Quarantine (PPQ) program has undertaken a review of its penalty provisions in accord with the Plant Protection Act (PPA) which took effect in June 2000. PPQ has now announced increased penalties. Any business or organization which violates the PPA may be fined up to $250,000 per violation but no more than $500,000 per adjudication. Smugglers face fines of up to $250,000 per violation or twice the gross financial loss or gain caused by the violation. PPQ's actions are designed to reach those who do not declare prohibited agricultural products when entering the U.S. as well as those who violate domestic quarantines and other laws.

EU/US BANANA DISPUTE SETTLED
4/01
The settlement includes transition to a tariffonly system by 2006. In the meantime, bananas will be imported into the EU through import licenses distributed on the basis of past trade. Because past history will be the criteria for issuance of these import licenses, Dole has already objected that the agreement favors Chiquita over it.

STEEL INDUSTRY RAMPS UP ANTI-IMPORT EFFORTS
11/00

Trying to head off the damage said to be caused by cheaper products from abroad, steel companies and labor unions have heated up their campaign against imports using both political pressure and existing trade remedies. More anti-dumping cases are expected along with pressure on President Clinton for broader import restraints. The product most often mentioned as the likely cause of the new cases is hot-rolled steel. However, there is also reported to be dissension within the coalition because those who want to proceed immediately versus those who want to take more time to gather broader facts and figures.

One question this effort raises is whether the issue was aired with the hope of extracting promises during the Presidential election? Another question is how well these efforts will be received in a Bush Administration?

FOREIGN SALES CORPORATION RETALIATION
11/00

Still dissatisfied with the latest American efforts revising the tax benefits provided by Foreign Sales Corporations (FSC), the European Union (EU) is seeking WTO relief. The EU has gone to the WTO and asked for imposition of trade sanctions totaling up to $4 billion in retaliation for export subsidies, as found by a WTO appellate body. It is thought the EU is pushing this point in large to offset the trade sanctions gained by the U.S. in the been and banana disputes with the EU.

Trafficking Troubles New Drug Kingpin Act Regulations Affect Exporters, Attorneys
9/00
Published in the Los Angeles Daily Journal, September 26, 2000

In December 1993, President Bill Clinton signed into law the Narcotics Kingpin Designation Act, 21 U.S.C. Sections 1901-1908; 8 U.S.C. Section 1182(a)(2)(C)). It provides authority to the U.S. government to impose sanctions against significant foreign narcotics traffickers and their organizations worldwide.

Section 805(b) of the act blocks all property and interests in property within the United States in the possession or control of any U.S. person or entity as identified by the President (or foreign person or entity as identified by the secretary of the treasury in consultation with specific cabinet officials) that are owned or controlled by significant foreign narcotics traffickers. This person or entity must be:

Materially assisting or providing financial or technological support or goods or services to the international narcotics trafficking activities of a significant foreign narcotics trafficker or designated foreign persons.

Owned, controlled or directed by, or acting on behalf of, a significant foreign narcotics trafficker or designated foreign persons.

Playing a significant role in international narcotics trafficking.

Following the proscribed consultations, the Secretary of the Treasury is empowered to take such actions as he deems necessary to carry out the Act. The Office of Foreign Assets Control (a part of the Treasury Dept.) has promulgated regulations which were published in July. 65 Fed.Reg. 41335-41342 (2000).

These regulations are separate from the Foreign Narcotics Kingpin Sanctions Regulations found at 31 C.F.R. Part 536 which implement Executive Order 12978 and focus on narcotics traffickers located in Columbia.

Executive Order 12978 was signed in October 1995. Through it, President Clinton found the actions of certain foreign narcotics traffickers centered in Columbia to constitute a national-security, foreign-policy and economic threat to the United States. A state of national emergency was declared and all property and interests in property of designated foreign persons who play a significant role in international narcotics trafficking centered in Columbia or materially assist in, provide financial or technological support for or goods or services in support of these traffickers, and of entities as being owned or controlled by these designated persons, was blocked.

The executive order went further and prohibited any dealings by U.S. persons in the property or property interests of such designated persons and also prohibited any transactions by a U.S. person that evades or avoids, or has the purpose of evading, avoiding or attempting to violate, any of the prohibitions.

The definition of a person includes an entity such as a partnership, corporation or group. Actions offshore are prohibited as well. Narcotics trafficking is defined as . any activity undertaken illicitly to cultivate, produce, manufacture, distribute, sell, finance or transport, or otherwise assist, abet, conspire, or collude with others in illicit activities relating to, narcotic drugs, including, but not limited to, cocaine.. The Secretary of the Treasury was directed to promulgate regulations in consultation with the Secretary of State and the Attorney General.

Over the next four years, the state of emergency continued. The first set of regulations were published in June 1996. Therein, the Office of Foreign Assets Control sought to consolidate and organize the various lists of blocked persons it was under authority to administer. The enabling regulations were published in February 1997 and establish when the ownership rights of foreign narcotics traffickers may be blocked by U.S. government regulation and law.

What is important for Americans is the provisions that prohibit transactions and dealings by U.S. persons in the property and property interests of designated narcotics traffickers.

The 1997 regulations quite clearly form the basis for the ones published in 2000, prohibiting similar activities, although the 1997 penalty provisions are modest in comparison. Between 1997 and 2000, various lists were published by Office of Foreign Assets Control naming the specially designated narcotics traffickers, sometimes adding people and entities to the list and other times removing them.

With the 2000 regulations, transactions that are barred by the Act but are nonetheless consistent with U.S. policy may be authorized by a general license issued by the Office of Foreign Assets Control. Because much of the Act and the implementing regulations is foreign-policy related, it is likely many of the underlying records will be not be available under the Freedom of Information Act. See 5 U.S.C. Section 552 et seq.

The Act not only blocks transactions or dealings by a U.S. person but also blocks those activities if they take place outside the United States. See Section 598.407. The property or interest in property may not be transferred, transported, imported, exported or withdrawn. Any transactions or dealings are barred if they evade or avoid the act, have the effect of evading or avoiding the act or are an endeavor, attempt or conspiracy to violate the Act. Any transfers after the effective date are null and void and provide no basis for an ownership claim.

Recognizing that mistakes may be made, the regulations at Section 598.205(d) allow transactions to stand up if: They did not . represent a willful violation. by the person holding or maintaining the property.

The person holding or maintaining the property did not know or could not have known from the surrounding circumstances that the transfer required a license.

The person files a report with the Office of Foreign Assets Control providing full disclosure.

Of particular interest to lawyers is Section 598.205(e), which bars . any attachment, judgment, decree, lien, execution, garnishment or other judicial process,. making them null and void if they occur.

The regulations spend a good deal of time addressing how financial institutions are to handle their accounts if held by a significant foreign narcotics trafficker. Not surprisingly, the definitions in the regulations are generally broadly written so as to bar just about any imaginable activity which could compromise property or a property interest. In fact, legal and accounting services (along with financial, brokering, freight forwarding, transportation and public relations) are specifically mentioned as prohibited.

Section 598.507 addresses providing legal services. A license authorizing providing those legal services is required in advance in all cases except where providing advice about how to comply with the Act or the laws of any jurisdiction within the United States. [Advice provided to evade the Act. s prohibitions is specifically excluded.]

Legal services are also authorized without first obtaining a license if the specially designated narcotics trafficker is named as a defendant or is a party to any U.S. legal, arbitration or administrative proceeding; before any federal or state agency with respect to the imposition, administration or enforcement of U.S. sanctions against the person; or in any other context where U.S. law requires access to legal counsel at public expense.

Even though providing legal services in these limited circumstances does not require first obtaining a license, the lawyer must obtain a license in order to accept payment for his/her services. This section also contains the prohibitions regarding levying on the property of specially designated narcotics traffickers.

Finally, there are the penalty provisions of Section 598.701. The 1997 regulations directed at Columbian narco-traffickers call for a civil penalty not to exceed $11,000 per violation, except in the case of willful actions, where the maximum fine is increased to $50,000 per violation and the maximum jail sentence is ten years.

Willful violations under the 2000 regulations may result in imprisonment up to 10 years, but the maximum fine has been raised to $10 million. Any officer, director or agent of any entity that willfully violates the Act is subject to up to 30 years imprisonment and a fine of not more than $5 million.

A civil penalty of not more than $1 million may be imposed by the Secretary of the Treasury on any violator. Interestingly, these new regulations (and the ones published in 1997) also refer to 18 U.S.C. Section 1001, which allows incarceration where, during the course and scope of an official investigation, someone makes material misrepresentations, verbally or in writing.

Imagine the mess if an exporter orders goods from a third party in a foreign country and looks for payment for those goods from a letter of credit but, in the meantime, that buyer is named as a significant foreign narcotics kingpin. He is in a terrible predicament because, to date, no one has been publicly named under the 2000 regulations. What happens if such a list comes out in the near future and is published between the time the exporter has shipped his goods and the time his bank pays the letter of credit proceeds? He have to go through hoops to get paid.

CUBAN EMBARGO UNDER CHALLENGE AGAIN!
09/00

The EU is has challenged the U.S. embargo of Cuba once more at the WTO. This time the provision under challenge is a U.S. law which prohibits courts from enforcing trademarks used in connection with expropriated property. This dispute arises out of the Havana Club trademark dispute between Bacardi Martini USA and the joint venture headed up by Pernod Ricard.

NORTH KOREAN SANCTIONS EASED
06/00

As the result of the thaw in the political climate in Korea, the Office of Foreign Assets Control will now authorize certain transactions with North Korea. Interim rules were issued effective June 19, 2000. While certain restrictions have been eased, North Korea remains a country subject to column 2 rates of duty.

MORE HEADACHES FOR IMPORTERS
06/00

The Foreign Narcotics Kingpin Designation Act of 1999 has taken effect and requires U.S. companies engaged in international trade to make sure they are not dealing with known drug traffickers. The Act authorizes civil fines up to $1 million.

MASS. LOSES ONCE MORE
06/00

The question of whether anyone but the federal government may determine foreign policy has again been answered by the U.S. Supreme Court with a resounding no! The Massachusetts attempt to sanction those doing business with Burma (Myanmar) failed when the high court again overturned Mass. law finding it to violate the Supremacy Clause, i.e. only the President can make foreign policy; plus Congress had mandated flexibility in dealing with Burma.

RETALIATION PRODUCTS MAY CHANGE
05/00

Part of the Africa-CBI bill which was just enacted (Trade and Development Act of 2000) contains a provision authorizing USTR to rotate the products against which retaliation is taken, called the carousel retaliation process. USTR is currently accepting comments on possible changes to the list of products being retaliated against as part of the banana and beef wars between the U.S. and EU. A decision as to any change is expected by mid-June 2000.

Good Trade - New Law Encourages African and Caribbean Commerce
07/00

Published by Daily Journal on July 10, 2000

The Africa-CBI bill was signed into law on May 18 (Pub.L. 106-200) and provides for duty and quota free treatment for selected textile products from eligible countries effective Oct. 1 through Sept. 30, 2008.

The major aim of the bill is to allow African countries to expand their economy through growth in trade with the United States by granting duty and quota free status to selected goods and giving Caribbean countries greater equality in trade with the United States as was given to Mexico in NAFTA.

The new law also includes a somewhat controversial measure that allows the U.S. Trade Representative to rotate the products against which retaliation is taken, called carousel retaliation. If the U.S. Trade Representative retaliates on behalf of the United States because an adverse decision has been entered against another country through the World Trade Organization dispute-resolution process and the losing country fails to take corrective action, the U.S. Trade Representative will now every six months will now every six (6) months be able to change the products against which retaliation is taken. The U.S. Trade Representative had claimed it already had such power, but one is hard pressed to find instances where the products under retaliation were changed.

Evidence of the new law being quickly embraced is the list recently published by U.S. Trade Representative that proposes to alter the products against which the United States is retaliating in its beef and banana wars with the European Union.

The European Union's response was equally quick. The European Union has already called for a World Trade Organization dispute- resolution panel to address the question of whether carousel retaliation is compliant with World Trade Organization rules and regulations.

Duty and quota-free treatment is granted to apparel assembled from U.S. made and cut fabric, made from United States formed yarn, if the process is undertaken in eligible countries.

Recalling the controversy surrounding oven baking and similar treatments, the new law allows such treatments to remain qualified for partial duty exemption. Specifically listed as acceptable operations not invalidating partial duty exemption are stone-washing, enzyme-washing, acid-washing, perma-pressing, oven-baking, bleaching, garment-dyeing, screen printing and the like.

Fabric that is cut in one or more eligible countries from fabric wholly formed in the United States, from yarns wholly formed in the United States, with U.S. thread, is also eligible. Sweaters cut-to-shape in chief weight, most weight based on weight of each type of fiber, of cashmere and falling in a specific tariff provision of 50 percent of sweaters more by weight of wool measuring 18.5 microns in diameter or finer are also accorded special duty reductions.

If the fabric or yarn is not readily available in commercial quantities in the United States, such as silk and cashmere, the resulting apparel made from such yarns or fabric is eligible provided it is both cut or knit-to-shape (there are special rules for t-shirts and brassieres from a Caribbean country; socks are excluded altogether) and sewn or otherwise assembled in an eligible country.

In addition, the apparel article qualifies if it is wholly assembled in one or more eligible countries, from fabric wholly formed in one or more eligible countries, from yarn originating in the United States or one or more eligible countries. In the latter case, however, there are quantitative limits.

There are also special rules for trimmings plus a di minimus provision allowing no more than 7 percent to be of foreign (non-eligible) origin.

As with other trade agreements, a Certificate of Origin must be in the importer's possession at the time of entry but need only be submitted to U.S. Customs upon request. The eligible countries must adopt an effective visa system accompanied by appropriate enforcement procedures. The rules surrounding the Certificate of Origin mirror NAFTA's Chapter 5. As in NAFTA, the Africa-CBI bill delineates the limited circumstances where a Certificate of Origin is not required, where it must be amended and details the consequences of it being lacking.

Such countries must also be willing to allow U.S. Customs on-site verification visits and otherwise cooperate with American authorities. Suppliers are required to maintain complete records for at least two years after production or export, depending on their role in the transaction.

An exporter who tranships can be barred from importing into the United States. (Transshipment arises when goods are made in one country, shipped to a second country and labeled as though made in that second country and then shipped to destination.) In addition, there are penalties against Caribbean countries which do not take reasonable steps to stop transhipments. Certain footwear, tuna, petroleum or petroleum products, watches and parts, handbags, luggage, flat goods, work gloves, and leather wearing apparel from the Caribbean may be given the same duty treatment as is accorded to the same Mexican products under NAFTA.

The African countries that would be eligible upon meeting the visa, enforcement and related requirements are Angola, Benin, Botswana, Burkina Faso, Burundi, Cameroon, Cape Verde, Central African Republic, Chad, Comoros, Congo, Democratic Republic of Congo, Cote d'Ivoire, Djibouti, Equatorial Guinea, Eritrea, Ethiopia, Gabon, Gambia, Ghana, Guinea, Guinea-Bissau, Kenya, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania, Mauritius, Mozambique, Namibia, Niger, Nigeria, Rwanda, Sao Tome and Principe, Senegal, Seychelles, Sierra Leone, Somalia, South Africa, Sudan, Swaziland, Tanzania, Togo, Uganda, Zambia, and Zimbabwe.

It is expected African apparel imports will grow in equal increments from the current 1.1 percent of the U.S. market to 3.5 percent over eight years. In addition, while the duty-free program, known as the Generalized System of Preferences, has itself has been extended until only Sept. 30, 2001, it is extended through September 30, 2008 for African imports.

Potentially eligible Caribbean countries include Antigua and Barbuda, Aruba, Bahamas, Barbados, Belize, British Virgin Islands, Costa Rica, Dominican Republic, El Salvador, Grenada, Guatemala, Guyana, Haiti, Honduras, Jamaica, Montserrat, Netherlands Antilles, Nicaragua, Panama, St. Kits and Nevis, Santa Lucia, Santa Vincent and the Grenadines, Trinidad and Tobago.

However, one of the more interesting dynamics of this bill is that it is the first bill in ages where there is support from the domestic textile industry, obviously because exports of U.S. textiles are expected to grow significantly as the rules of origin require the use of U.S. textiles to qualify for the duty-free and quota-free status the law provides.

In addition, a long-standing dispute between the United States and Europe was resolved. Effective July 1, 1996, the United States instituted new textile rules of origin. See Section 334 of the Uruguay Round Agreements Act, Pub.L. 103-465, 108 Stat. 4809; and 19 C.F.R. Section 102.21.

Under these rules, the origin of the textile generally was where it was woven, a fact which caused particular problems with countries such as Switzerland, which had world-renown printing, dying and similar operations. Even though substantial value was added by those European operations, the finished article remained marked with the origin of the textile. As a result, for example, Swiss finished goods, such as handkerchiefs, shawls, scarves and mufflers, had to be marked Made in China.

Section 334(b)(2) of the Uruguay Round Agreements Act was amended for silk, cotton, man-made fiber and vegetable fiber products so that origin is determined by where the fabric is both dyed and printed when accompanied by two or more of the following finishing operations: bleaching, shrinking, fulling, napping, decating, permanent stiffening, weighting, permanent embossing or moireing.

Finally, U.S. Trade Representative has already begun the implementation process by virtue of two Federal Register notices. One seeks comments regarding the eligibility of the Carribean countries (see Fed. Reg. Vol. 65, No. 118, Pages 38023-38024, June 19, 2000)). The response deadline is July 17. The one dealing with the eligibility of African countries is found at Fed. Reg., Vol. 65, No. 118, Pages 38021-38022 (June 19, 2000) and carries a July 14 deadline.

FALSE CLAIMS LAWSUIT ENDED
05/00

Domestic industry tried again to stop importations, this time relying on a False Claims Act lawsuit. The goal was to obtain damages from The Limited and its related companies arising out of claims that these businesses imported transhipped goods, i.e. the goods were made in one country, shipped through a second country being relabeled as originating in that second country and then imported into the U.S. stating the first country as conferring origin.

ATMI originally brought its claims to Customs which refused to proceed. ATMI then filed its lawsuit and has lost at every level with the case now finalized as the U.S. Supreme Court refused to grant a review of the dismissal entered by the 6th U.S. Circuit Court of Appeals.

IRANIAN EMBARGO EASED
05/00

On May 3, 2000 the U.S. government announced regulations that allow importations of foodstuff and Iranian carpets. Related services (e.g. banking, brokerage, etc.) were also removed from the embargo list. A general license is required and the prohibition of dealing with debarred persons and entities as well as the Iranian government remains.

WTO RULES DUMPING LAW INVALID
05/00

A WTO dispute resolution panel has ruled the U.S. Antidumping Act of 1916 breaks global trade rules as its specific intent requirement does not satisfy the material injury test accepted by WTO members. In addition, its civil and criminal penalties were found to go beyond acceptable antidumping provisions. The U.S. argued to no avail that the Act was akin to an anti-trust statute as it permits private lawsuits for treble damages as well as the civil and criminal remedies which were found violative, but was seldom relied upon.

IMPORTATION OF IRANIAN CARPETS WILL BE ALLOWED
3/00

On March 17, 2000, it was announced that the terms of the U.S. embargo against Iranian products will be changed to allow the importation of carpets and most foodstuff. Although the change has been announced, the changes in regulations needed to actually allow these products to be imported will take several months to complete.

U.S. UNDER FIRE AT WTO
3/00

The tax benefits to American exporters from using Foreign Sales Corps. (FSC) has been found by a World Trade Organization dispute resolution panel to be an improper export subsidy under Article 3.1 of the Agreement on Subsidies and Countervailing Measure. The U.S. has appealed decision but is also in settlement discussions with the European Union which brought the original complaint. The predecessor Domestic International Sales Corp. was ruled GATT-illegal in the mid-1970s. FSCs allow U.S. companies to set up off-shore subsidiaries which sell product with a high domestic content while enjoying a partial tax exemption on the profits.

The Japanese have complained about the U.S. Anti-Dumping Act of 1916 arguing it allows U.S. firms to sue importers if the intent to injure or put domestic firms out of business can be proven. Jail time for officers of offending companies is also provided in the law. The Europeans have challenged other provisions of the anti-dumping law claiming the U.S. had previously acknowledged the need to repeal the Act as contrary to then newly signed WTO dumping rules. The U.S. position in both cases is the law is seldom enforced and there have been no convictions under it.

USDA POSTS FORM FOR SWPM EXPORTS
1/00

As shipment of goods which contain sold wood packing material is limited to China, USDA has posted to its web site a proposed form to be used by U.S. exporters, see http://www.aphis.usda.gov/oa/chinaswp/hotbutton for the form.

U.S. DUMPING LAW INCOMPATIBLE WITH WTO RULES
3/00

A WTO dispute settlement panel recently found that the U.S. 1916 antidumping law is improper under both the 1994 GATT and the current WTO rules. The EU challenged the law on the grounds that a company rather than the government could bring the claim, and objected to the potential for treble damages and/or criminal penalties. Japan brought a similar challenge which is working its way through the WTO process with a resolution by July 2000 expected. The WTO panel has issued its preliminary report. If its contents become file, the U.S. will have sixty (60) days to appeal once the report is made public.

While the antidumping law was overturned, another dispute resolution panel found against the EU in its challenge to the U.S. 301 law. In that case, the panel found 301 to be an appropriate trade remedy, relying in part of commitments from the Clinton Administration as part of the Uruguay Round implementing bill. The U.S. in general agreed to limit its right to act unilaterally against WTO members in exchange for binding dispute settlement rules. The U.S., however, still feels it can act unilaterally over any trade benefits which exceed WTO obligations as well as act in that manner against non-WTO members and/or in areas not covered by WTO rules.

ATMI APPEALS AGAIN
3/00

The American Textile Manufacturers Institute has lost again, this time before the appellate court, in its case seeking to sue under the False Claims Act against The Limited, Inc. and Tarrant Apparel Group. The case arose as Customs refused to impose penalties for supposed misdeclarations of origin and ATMI sought to step into the shoes of the government to pursue those remedies. ATMI has lost twice and now hopes the U.S. Supreme Court will side with it.

BURMA SANCTIONS CHALLENGE TO BE HEARD IN MARCH
3/00

The U.S. Supreme Court has scheduled oral argument on March 22nd for the case challenging the actions of the State of Massachusetts in imposing sanctions on companies doing business with Burma/Myanmar. The sanctions have twice been overturned by lower courts. The European Union and Japan have also filed complaints at the WTO regarding these sanctions.

DOMESTIC INDUSTRY KEEPS TRYING
11/99

As American trading rules become less restrictive, domestic industry keeps seeking new and different ways to protect itself from foreign competition. For example, the American Textile Manufacturers Association sued The Limited, its related entities and other importers seeking recovery under the False Claims Act alleging that the companies imported goods mismarked as of Hong Kong origin when they were really of Chinese origin. U.S. Customs investigated and declined to act, so ATMA sought relief in the courts. ATMA lost at the trial court level and now the appellate court has reached the same decision. Another appeal is expected.

SECOND SET OF EU SANCTIONS IMPOSED
9/99

As the result of a favorable decision at the WTO regarding the manner in which the European Union bans beef produced with growth hormones, Customs has issued information modify the Harmonized Tariff to impose 100% rates of duty on selected products. See Los Angeles Public Bulletin 99-025.

WTO FINDS EUROPEAN BEEF PRATICES INJURED U.S.
7/99

WTO arbitrators recently found in favor of the U.S. in its claim that European beef practices violated WTO trading rules. As a result, USTR has selected products worth approximately $116.8 million against which 100% rates of duty have been imposed. See http://www.ustr.gov for further details.

BURMA LAW APPEALED AGAIN
7/99

Twice now the State of Massachusetts has been told its attempt to surcharge firms trading with Burma/Myanmar is unconstitutional, once by the lower court and a second time by the appellate court. Nonetheless, the State will appeal the case to the U.S. Supreme Court. The deadline to file the appeal is September 20th.

GOVERNMENT STEPS UP PENALTIES
7/99

The Commerce Dept. is again imposing penalties on companies who violate America's Anti-Boycott regulations. American company are barred from participating in any Arab boycott of Israel or boycotting companies which engage in business with Israel.

Likewise U.S. Customs has just announced a settlement with an importer which involved a payment of $14 million. Recoton Corp. in Florida pled guilty to 15 violations of law. It admitted under reporting values and mislabeling goods as "Made in U.S.A." It also admitted falsely claiming goods were made in Costa Rica to take advantage of special low rates of duty for goods from Caribbean countries. Recoton also imported Chinese Goods, repackaged them in the U.S. and failed to declare dutiable fees paid to suppliers.

The message these recent fines reinforce is that it is critical for companies to have knowledgeable people on staff with authority to make sure companies do business properly. Otherwise, officers and directors could be liable to shareholders for their failure to take proper action to protect the assets of the company.

USEU BANANA WAR HEATS UP
5/99

The World Trade Organization arbitrators hearing the U.S. attempt to impose fines on the European Union for its banana import regime have issued their ruling. Both sides won sort of. The U.S. won in that an award was entered against the EU. However, the EU also won. The U.S. originally sought damages in excess of $520 million. The actual award was in the sum of about $191 million. Look for USTR to issue a revised list of products which will be the subject of 100% rates of duty.

CANADA AND WOOD PACKAGING
4/99

In addition to new U.S. rules regarding the fumigation of wood packaging from Hong Kong or China, Canada has now also enacted new treatment and documentation rules for wood packing materials originating in China or Hong Kong. As with the U.S. rules, the purpose is to prevent the entry and spread of the Asian Long-horned beetle which is also causing problems in the U.S. For more details see Canadian Food Inspection Agency Directive D-98-10.

U.S. - E.U. BANANA DISPUTE
4/99

The question of the way in which the European Union allows bananas to be imported is before a World Trade Organization arbitration panel. The U.S. claims the E.U.. s practice discriminates against American companies. bananas. The arbitration panel considering the issue has requested more information and so more time. The U.S. has been requested to make a further submission focused on the harm it claims to U.S. exports by the E.U.. s banana import regime and is to file that information by March 15th. As a result, the threatened imposition of 100% tariffs on selected E.U. products imported into the U.S. has been stayed until at least mid-month.

In the interim, U.S.T.R. will soon instruct Customs to withhold liquidation of the relevant entries as of March 3, 1999, the day on which the sanctions were originally going to be imposed. For a list of the affected tariff items, consult the U.S.T.R. web site - http://www.ustr.gov/.

USTR THREATENS TO IMPOSE 100% DUTIES ON EU PRODUCTS
12/98

U.S. policy has found the EU is improperly constraining the importation, sale and distribution of non-EU bananas. As a result, USTR has announced a list of products on which it will impose 100% duties. The EU has until January 1, 1999 to implement World Trade Organization recommendations regarding its banana import regime. If it fails to do so, USTR will impose 100% duty rates on selected products unless the EU requests arbitration. If that happens, USTR would delay action until March 3, 1999 or the conclusion of the arbitration, whichever occurs earlier. USTR is also considering imposing restrictions on EU services and service providers. If it elects to implement such restrictions, a further announcement will be published. Details as to the affected products can be obtained from the USTR web site.

UNILATERAL SANCTIONS
11/98

Following a trend popular in many states, Massachusetts (Mass.) enacted a law which penalizes companies doing business with Burma/Myanmar [because of that country. s human rights record] by imposing a surcharge on their contracts with the State. The National Foreign Trade Counsel challenged that law in federal court and recently won on the ground that such a state law improperly impinges on the right of the federal government to determine U.S. foreign policy. The Mass. Attorney General has stated the ruling will be appealed. Mass. can also be expected to request permission to continue enforcing the law while the appeal is pending.

Trade Barricade
The Use of "Dumping" suits to Block Imports

The more things change, the more they stay the same. Over the last few years, rates of duty for goods imported into the United States have fallen dramatically. The average duty rate is now about 4.5 percent. Observers thought this turn of events would leave domestic industry with few ways to raise new barriers to imports. Based on some recent court decisions, it seems nothing could be further from the truth. What these efforts reflect is the increasing reliance by domestic industry on nontraditional remedies in seeking to block imports.

One line of defense for domestic industry has always been "dumping" cases. These cases continue to be filed. While statistically the most claims are filed against European and Canadian trading partners, there has been a dramatic rise in claims against China, too.

In the simplest terms, dumping occurs when goods are imported into the United States at prices that are below their cost of production. See 19 U.S.C. Section 1673. A related theory of recovery is "countervailing duty". See 19 U.S.C. Section 1671. A basis for countervailing duty arises when the exporting country subsidizes production of products to the point where the subsidy distorts the imported price to an artificially low level.

Whether dealing with dumping or countervailing trade distortion, the remedy is the imposition of a surcharge in the form of a rate duty that seeks to raise the product. s cost to where it should have been. Thus, the cost charged to the importer together with the duty surcharge cause the product to be priced at the fair market value of the good. There is a good deal of creativity in the claims being made by domestic industry against importers. A case getting a lot of attention right now is the one filed by the American Textile Manufacturers Insitute against the Limited and its affiliates. Using the False Claims Act, 31 U.S.C. Section 3729, as its weapon of choice, ATMI cvlaimed the defendants failed to properly mark their imported goods with the correct country of origin in order to evade the quantitative restrictions imposed on Chinese apparel. The goods were imported from Hong Kong and Macau with the origin designated accordingly. ATMI claimed the goods were really made in China and were therefore falsely labled.

Because the false country-of-origin designation was allowed to stand, ATMI reasoned the government had been deprived of the statutory 10 persent marking penalty, 19 U.S.C. Section 1304(C), which is assessed if imported goods are not properly marked with the country of origin. ATMI also argued the false country-of-origin designation was sufficiantly egregious so as to warrant the assessment of penalties on top of the marking penalty and that thegovernment was deprived of those sums as well. (This was, presumably, a reference to 19 U.S.C. Section 1592, which allows the imposition of penalties where there are material omissions or material misrepresentations made in conjunction with the entry of goods.) Therefore, ATMI contended that since the government refused to act, the False Claims Act allowed it to step into the government. s shoes and seek redress.

The case was originally filed U.S. District Court in Los Angeles, which granted the defendants. motion defendants to transfer the case to Ohio where the limited has its corporate headquarters. Thereafter, the Ohio court, in a dispositive ruling, found the amount of duty is the same whether the goods originated in Hong Kong, China or Macau, and that the marking penalty should not be taken into account when determining whether monies were owed the government for purposes of a False Claims Act claim.

Relying on the holding in United States ex rel. Sequoia Orange v. Oxnard Lemon Co., 1992 WL 795477 (E.D. Cal. May 4, 1992), the court found the False Claims Act does not allow a private company to step into the government. s shoes based upon the submission of false records to avoid paying forfeitures or fines. The court found that the False Claims Act was intended to cover those circumstances where there was a pre-existing obligation to pay the monies and not situations where the obligation to pay might arise because of a possible violation of a statute administered by the United States. As a result, the case was dismissed with prejudice. ATMI then filed a request that the court reconsider its decision, seeking alternatively that the judge remove himself, asserting he was biased in favor of the Limited. s attorneys because he himself had been represented by an attorney with that same firm in an unrelated drunk driving matter.. The judge agreed to recuse himself while, at the same time, refusing to rule on the motion for reconsideration, saying instead that the newly assigned judge should do so. The case was then assigned to U.S. District Judge Sandra Beckwith in Columbus, Ohio, who is entertaining a request for a rehearing. If she agrees with ATMI. s position, she can order the dismissal overturned. Otherwise, she can rule against ATMI, which is then expected to immediately appeal. ATMI is also seeking permission to amend its complaint. It is not clear when a decision will be made on the pending motions.

Then there is the Utah case involving two domestic steel companies, Geneva Steel Co. and Gulf State Steel Inc., that sued two steel importers, Thyssen Inc. and Ranger Steel Supply Corp., alleging they sold imported steel at below-market value or wholesale prices in the producing countries with the intent to injure the U.S. industry, a classic allegation in dumping claims. Geneva Steel Co. V. Ranger Steel Supply Corp., 980 F. Supp. 1209 (D. Utah 1997).

The case involves cut-to-length steel plate imported from Russia, Ukraine and China. What is remarkable about this case is its reliance on a 1916 anti-dumping law which, in the past, was interpreted by government officials to apply stricty in the antitrust context. See Unfair Competition Act (Anti-Dumping Act, 1916), 15 U.S.C. Section 72. See also 15 U.S.C. Sections 71-77, 18 U.S.C. Section 1905 and 19 U.S.C. Sections 1333, 1335.

The Utah court found the statute was both an antitrust and a dumping law. As result, the European Union and Canada are jointly arguing that as a dumping law, the 1916 act violates recently enacted World Trade Organization international dumping rules. As an antitrust provision, U.S. government officials argued the law was intended to address predatory pricing systematically taken to eliminate competition, thereby imposing penalties on private importers after they have been found to damage an industry, something not within the WTO framework.

However in the dumping context, the 1916 act imposes prospective penalties by levying duties on imports at time of entry, something that indeed falls within the WTO dumping scheme. The ultimate outcome of this case could have far reaching implications as the United States tries to decide whether or not its dumping rules will have to be revised yet again - something to which domestic industry will undoubtedly object vociferously as it did during the Uruguay Round negotiation concluded in the early 1990s.

Another attempted barrier against trade was the effort by some domestic interests to have the North American Free Trade Agreement dispute settlement provisions declared unconstitutional. The American Coalition for Competitive Trade sought a court order finding the dispute resolution scheme contained in NAFTA violated U.S. law because it does not allow private parties the right to sue under its provisions. American Coalition for Competitive Trade v. Clinton, 128 F.3d 761 (D.C. Cir. 1997). The U.S. Circuit Court of Appeals for the District of Columbia found ACCT did not have standing because it could not show any of its members had been damaged by NAFTA. s dispute-resolution provisions.

Domestic interests also filed suit against a veterinary supply importer, arguing his failure to assess the proper rates of duty on his goods at the time of importation deprived the government of revenues. See United State of America ex rel. Alan Felton and ex rel. Phillips USA Inc. v. Allflex USA Inc., Slip Op. 970-147 (Court of International Trade Dec. 3, 1997).

The goods were originally classified under the provisions for agricultural implements, which carry a free rate duty, rather than under a dutiable veterinary syringe provision as plaintiffs contended. The case was originally filed before in U.S. District Court in Missouri, which found it lacked jurisdiction because the underlying claim relied on the customs fraud statute, 19 U.S.C. Section 1592 and as a result, would be exclusively within the juridiction of the Court of International Trade.

The CIT was asked by domestic industry to take juridiction over the case despite the fact that it was not filed by the United States. Allflex argued the CIT had to observe the significant deference owed a coordinated court. s decision regarding transfer. The government responded that if a case is transferred by one court to another, the court to which the case is transferred has an obligation, if it declines jurisdiction, to transfer the case to a court with proper jurisdiction. The argument turned on the holding in Christianson v. Colt Industries, 486 U.S. 800 (1988).

In the end, the CIT declined to enter a finding on the substantive matters raised. Instead it held that since the case was not initiated by the United States, it could not exercise jurisdiction under 28 U.S.C. Section 1582 as requested. Therefore, it had no jurisdiction to hear the case. In early February Allflex filed its appeal of the CIT. s decision.

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