03.19.2008 Highlights in International Trade and Commerce The International Law Section of Williams Mullen prepared the following brief descriptions of selected issues in international trade and commerce for general information purposes and use by clients and friends of Williams Mullen.


1. BIS Considers Expanding Scope of Tiananmen Square Sanctions.
2. BIS Weighs Recommendations on Deemed Export Rule.
3. States Eye Chance to Enforce Federal Product Safety Laws against Importers.
4. WM Clients Win Final AD Duties of up to 188% against Chinese Product.

1. BIS Considers Expanding Scope of Tiananmen Square Sanctions:

A March 19th notice from the Commerce Department’s Bureau of Industry and Security (“BIS”) has invited public comments on “Crime Control” provisions in the Export Administration Regulations. Crime Control provisions require a license for the export and reexport of crime control and detection equipment, related technology and software to certain countries and prohibit such exports entirely to China. The latter restriction arose in the aftermath of the Tiananmen Square protests of 1989 and in light of U.S. foreign policy to promote human rights. Crime Control provisions currently cover such items as saps, police helmets and shields, leg irons, shackles, handcuffs, “implements of torture,” polygraphs and psychological stress analysis equipment. Recent publicity concerning China’s use of mobile phones, the internet, video cameras and other technology for surveillance, however, has increased interest in the Crime Control provisions and Tiananmen Square Sanctions. “In light of the recent significant technological advances in many industries,” BIS writes, it is now considering: (1) whether to add or remove items to the list of those currently subject to Crime Control license requirements; and (2) whether to add or remove destinations to or from the list of those that currently require a license. BIS has expressed particular interest in “whether items such as biometric devices, integrated security systems, and training software, particularly firearms training software, should be subject to crime control license requirements.” This statement is important because a BIS decision to prohibit exports to China of all biometric identification retrieval systems would greatly expand the Crime Control classification to include such technologies as hand geometry, palm vein, iris scan, retina scan, voice analysis or face recognition technology, with no distinction made between surveillance and identification. Although both the 2008 BIS Report on Foreign Policy-Based Export Controls and The New York Times previously announced BIS's current reconsideration of Crime Control provisions, not until now has BIS invited comments. Heightened attention, particularly in an election year, threatens to result in a broader definition of Crime Control technology, thereby preventing U.S. companies from participating in a rapidly expanding market for many years to come. Companies that manufacture potentially affected technologies therefore have a substantial stake. BIS must receive any public comments no later than June 17, 2008.

2. BIS Weighs Recommendations on Deemed Export Rule:

On March 6th BIS announced that it would begin partially implementing reforms proposed in a December 20th report from the Deemed Export Advisory Committee (“DEAC”). A “deemed” export transfers sensitive dual-use technology to a foreign national working or studying in the United States. Because the export of such technology to certain countries requires a license, anyone who fails to obtain a license when transferring the technology to nationals from those countries has violated the law, even when the transfer has occurred in the United States and the foreign nationals have not yet brought the technology back to their home countries. DEAC’s recommendations include, among others: shortening the list of products subject to deemed export rules; establishing a category of “Trusted Entity,” which could make unlicensed transfers to foreign nationals employed by wholly-owned foreign subsidiaries; implementing a seven-step process for granting or denying deemed exports, beginning with “an overall assessment of the probable loyalty of the individual of interest”; and redefining the “fundamental research” licensing exclusion to include only “curiosity-driven” research or research that contracts and regulations do not “preclude” from publication. Critics have argued: that a “risk-of-diversion” analysis would make more sense than the DEAC report’s proposed “loyalty” test; that requirements imposed on companies that became Trusted Entities might eventually become more onerous than the export license application process itself; that the proposed new definition of “fundamental research” as “curiosity-driven” is too broad; and that, in any event, a test for the “fundamental research” exclusion should come first in the seven-step analysis, enabling universities and research institutions often to avoid the “loyalty” test entirely. While certain DEAC proposals under active consideration will require interagency support, BIS has already begun implementing plans to: create an Emerging Technologies Advisory Committee; and improve outreach and engagement efforts toward the academic and technology communities. Stay tuned.

3. States Eye Chance to Enforce Federal Product Safety Laws against Importers:

Import safety legislation that the Senate passed on March 6th would empower state Attorneys General (“AGs”), acting on behalf of residents, to bring civil actions enforcing any statute within the jurisdiction of the federal Consumer Product Safety Commission (“CPSC”). Incorporating provisions from a separate Senate bill (S. 2663, sponsored by Mark Pryor, D-AR), the Senate bill amends a CPSC reform bill passed by the House in December (H.R. 4040, sponsored by Bobby Rush, D-IL). Whereas the House version would authorize state AGs to enforce federal product safety legislation only after the CPSC issued a decision such as a recall, the Senate version would empower state AGs to make their own interpretative decisions before the CPSC acted. A House-Senate conference will now follow. Other provisions of the Senate bill include: more than a tripling of the number of CPSC staff assigned to oversee imports and foreign factories that manufacture consumer goods; a higher civil penalty cap of $20 million per violation (from $1.8 million); an increase in criminal penalties to five years in jail (from one year); whistleblower protections; required third-party certifications of children’s products; required manufacturers’ labeling of children’s products (to track and identify recalled products); and a ban against lead in all children’s products. Whatever bill eventually becomes law, the new requirements will affect importers at least as much as manufacturers, because the CPSC already has authority, and has increasingly exercised it, over companies or persons that bring consumer goods into the United States. During 2006, for example, imports constituted 37% of products under CPSC jurisdiction and 77% of CPSC recalls—of which imports from China and Hong Kong accounted for 51%. In fact, the Consumer Product Safety Act defines a “manufacturer” as “any person who manufacturers or imports a consumer product” and authorizes the CPSC to issue orders prohibiting a company “from manufacturing for sale, offering for sale, distributing in commerce, or importing” a product for which the CPSC has issued an order. Regulations expressly recognize “the critical position of importers in protecting American consumers from unreasonably hazardous products made abroad” and therefore hold importers “subject to the same responsibilities as domestic manufacturers.”

4. WM Clients Win Final AD Duties of up to 188% against Chinese Product:

After a year-long investigation, the U.S. International Trade Commission on February 26th ruled that imports of Sodium Hexametaphosphate (“SHMP”) from China must hereafter pay antidumping duties of up to 188 percent. This ruling concludes an antidumping investigation brought by Williams Mullen on behalf of two clients: Innophos Inc. and ICL Performance Products LP. For Innophos and ICL, the story started in 2000, when low-priced imports from China began to penetrate the U.S. market. By 2003, ICL had closed one plant in Trenton, Michigan, and the company that invented SHMP, Calgon, closed its production facilities altogether (SHMP is a water-softener). Innophos and ICL restructured, cut costs, laid off workers and changed their marketing strategy to no avail. By 2006, Chinese imports had captured nearly half of the entire U.S. market, and both U.S. producers were suffering losses. Innophos and ICL petitioned the Commerce Department and the International Trade Commission to impose duties on Chinese imports. After Commerce made a preliminary decision in September, the Chinese imports virtually stopped. Innophos has already invested in new capacity and both companies have raised prices to sustainable levels.


If you have any questions concerning the subject matter addressed above, please feel free to contact one of our International Attorneys.

Highlights in International Trade and Commerce by Williams Mullen is prepared for information purposes only and does not constitute legal advice. Persons seeking legal advice concerning the issues addressed in this issue are encouraged to contact competent legal counsel.