Global Trade Content Blog

The USDA’s Economic Research Service has issued a report on Karnal bunt (KB), a wheat disease of limited distribution in the United States, as affected areas are quarantined to limit spread of the disease.  Currently, the KB regulatory program allows the USDA to issue phytosanitary export certificates stating that a wheat shipment is from an area where KB is not known to occur.  Some in the wheat marketing chain, particularly elevator operators, find the regulatory program burdensome and advocate ending it.  A model developed by the ERS was used to analyze the market effects of ending the certification.  An average annual loss of 15.1% in export markets for US wheat producers would be only partially offset by increased use of lower priced wheat for domestic livestock feed.

President Obama’s videotaped remarks will be delivered to the Department of Commerce tomorrow, during their annual export control conference.  He will outline the foundation of our new export control system, “including what we control, how we control it, how we enforce those controls and how we manage our controls.”  The goal in reforming our current system is to strengthen national security by focusing on controlling the most critical products and technologies.
  
The current export control system is entirely too complicated.  According to this GovNews article, last year’s inter-agency review of the system resulted in the following observations:

• The current system operates under two different control lists with fundamentally different approaches to defining controlled products, administered by two different departments. This has caused significant ambiguity, confusion and jurisdictional disputes, delaying clear license determinations for months and, in some cases, years.
 
• There are three different primary licensing agencies, each applying their own policies. None sees the others’ licenses, and each operates under unique procedures and definitions, leading to gaps in the system and disparate licensing requirements for nearly identical products.
 
• A multitude of agencies with overlapping and duplicative authorities currently enforce our export controls, creating redundancies and jeopardizing each other’s cases.
 
• All these agencies operate on a number of separate information technology (IT) systems, none of which is accessible to other licensing or enforcement agencies or easily compatible with the other systems, resulting in the U.S. Government not having the capability of knowing what it has approved for export and, more significantly, what it has denied.

 
Under President Obama’s plan, agencies will define new criteria to determine what items need to be controlled.  The criteria will be used to revise lists of munitions and dual use items.  The goal of the revisions is to make sure the lists meet the following criteria:

• are “tiered” to distinguish the types of items that should be subject to stricter or more permissive levels of control for different destinations, end-uses, and end-users
 
• create a “bright line” between the two current control lists to clarify jurisdictional determinations and reduce government and industry uncertainty about whether particular items are subject to the control of the State Department or the Commerce Department
 
• are structurally aligned so that they potentially can be combined into a single list of controlled items.

  
Once a controlled item is assigned to a tier, a corresponding license will be applied.  Restructuring control lists and harmonized licensing policies based on tier will revolutionize our export control system.  This means export enforcement will have to be stepped up.  It is said that “the President will…sign an executive order establishing an Export Enforcement Coordination Center that will coordinate and strengthen the U.S. Government’s enforcement efforts – and eliminate gaps and duplication – across all relevant departments and agencies.”
 
This article goes into detail about the proposed revisions and is definitely worth a read.  The President’s plan sounds great in theory – I guess we’ll soon see how it plays out in reality.

According to our export compliance research, 14.6% of compliance professionals believe that their company’s executive management is not aware of trade compliance.  Global trade regulations are more complex than ever, and your company is required to be compliant.  If it isn’t, major fines (and even prison time) can result.  So, how do you get executives in your company to support your compliance initiatives?
 
Join American Shipper and Management Dynamics for an upcoming educational webinar, “Bringing Compliance into the Boardroom.”  The webinar will feature a panel of global trade experts that will discuss how to get your voice heard when speaking to c-level executives.  This 60 minute roundtable discussion will take place on September 15, 2010 at 2PM ET, and will feature the following expert panelists:

• Beth Peterson, President of BPE
• Nathan Pieri, SVP of Marketing & Product Management for Management Dynamics
• Virginia Thompson, Director of Import/Export Operations and Int. Trade Compliance for Crate and Barrell

The panel will discuss the best strategies for compliance professionals to get executive level cooperation and sponsorship of their initiatives.  Their focus will include:

• The pain points of each member in the boardroom and how they relate to compliance  issues (and key messaging to use when speaking to each board member)
• Tools to use in your presentation, such as quantifying compliance and its effect on the bottom line
• How automation can contribute to your efforts by adding value and saving money

Best of all?  It’s FREE!  Follow this link to register.
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American Shipper is reporting that a private security contractor, Xe Services (formerly known as Blackwater), has been fined $42 million for violating arms export control laws.  The State Department contends that the company committed 288 violations of the International Traffic in Arms Regulations (ITAR), including the “unauthorized export of defense items and provision of defense services to foreign-end users in multiple countries from 2003 to 2009.”  While no sensitive technologies were involved, the items do require a license before they can be exported.  Interestingly enough, many of the violations occurred while Xe was under contract to provide services to the State and Defense departments, as well as other U.S. government agencies.
 
The State Department has said that $12 million of the civil penalty will be suspended if the company corrects internal compliance procedures.  Xe will not be banned from future government work or denied any license applications because the company has taken the necessary steps to identify and resolve compliance problems, including:

• Replacing senior management
• Establishing an Independent Export Compliance Committee to oversee remedial compliance efforts
• Improving ITAR compliance procedures
• Providing ITAR training to employees
• Conducting a targeted ITAR audit to confirm the effectiveness of its compliance measures

They are very lucky.  If this had been handled as a criminal matter, the company would have been barred from future government contracts, just as the supply chain management company Agility has been.  They are suspended from future U.S. government contracts until their criminal fraud case has been resolved.
 
The New York Times reported that Xe Services committed a range of violations, from illegally exporting weapons to Afghanistan, to making unauthorized proposals to train troops in Sudan, to providing Taiwanese police officers with sniper training.  The company also shipped automatic weapons (and other military equipment) to its personnel in Iraq and Afghanistan.  Xe is said to have covered its tracks by hiding their actions in some cases – going so far as to ship weapons inside containers of dog food.  Who thought that one up?

Dustin Hoffman received excellent advice in the movie The Graduate: “Just one word…plastics.”  Every recent college graduate is looking for something similar – that one piece of advice that will provide them will all the answers, and make the future they’ve dreamed of one step closer to reality.  I hate to disappoint, but my advice probably won’t be the key to your future.  It will, however, at least give you something to think about it.  I’ve got one word you: trade.
 
With the way the economy has been going the past few years, it was no surprise when the Commerce Department recently reported that the trade deficit had jumped to nearly $50 billion.  However, rather than signaling a double-dip recession, many are viewing this as quite the opposite – an economic expansion.  According to a recent Slate article, exports were 5% higher in June than they were in December of 2009, with imports up 10.5%.  This should be music to our ears.

The rising volume of trade—more goods and services shuttling in and out of the United States—is good news for many sectors. Companies engaged in shipping, trucking, rail freight, delivery, and logistics have all been reporting better than expected results. The rising numbers signify growing vitality in foreign markets—when we import more stuff, it puts more cash in the hands of people around the world, and U.S. exports are rising because more foreigners have the ability to buy the things we produce and market. The rising tide of trade is also good news for people who work in trade-sensitive businesses, especially those that produce commodities for which global demand sets the price—agricultural goods, mining, metals, oil.

While the number of U.S. imports is currently much higher than that of exports, U.S. exporters are becoming more involved with each passing month.  Programs like The National Export Initiative will surely help even out the trade deficit over the next five years.  However, to ensure change in the immediate future, U.S. companies have to start thinking outside the box.  It’s no longer enough to simply sell to fellow Americans – we must expand our horizons to the global market.  Slate puts it best:

Companies and individuals who don’t have a strategy to export more, or to get more involved in foreign markets, or to play a role in global trade, are shutting themselves out of the lion’s share of economic opportunity in our world.

Now, go forth and prosper…and enjoy having this delightful song stuck in your head the rest of the day!

With new Iran sanctions taking effect September 29, the Treasury Department’s Office of Foreign Assets Control (OFAC) has published a document providing guidance on the import prohibitions concerning Iranian-origin goods and services, which are a result of the Comprehensive Iran Sanctions, Accountability and Divestment Act of 2010.  As described in 31 CFR Part 560 of the bill, no one will be allowed to import commercial goods originating from Iran.  As a result, OFAC cannot authorize general or specific licenses for the importation of such goods on or after September 29, 2010.  According to World Trade\INTERACTIVE, “the general license in section 560.534 of the Iran Transaction Regulations will therefore be eliminated by Sept. 29 and any such goods for commercial importation into the U.S. must be entered for consumption before that date.”

A Federal Register notice published on Wednesday announced that the U.S. State Department has proposed to amend the International Traffic in Arms Regulations (ITAR).  Their plan is to “update policies regarding end-user employment of dual nationals and third-country nationals,” according to an American Shipper article.  The article went on to explain:

President Obama’s Task Force on Export Control Reform warned that the current requirement for the provision of additional information within a license to cover dual national and third-country national foreign employees has ‘created a tremendous administrative burden on approved end-users and has evolved into a human rights issue, which has become a focus of contention between the U.S. and allies and friends without a commensurate gain in national security.’

The State Department feels that most violations involving items on the U.S. Munitions List (USML) occur outside the scope of approved licenses rather than within foreign organizations.  The proposed amendment would place responsibility on the foreign company, government, or international organization because they will operate with the understanding that, by accepting a USML item, they must comply with US laws and regulations to prevent the “diversion” of U.S. defense articles and technology.  According to the State Department,

This change, by no means, reduces the due diligence requirements of the applicant to ensure, to the best of their ability, that the end-use and end-user are consistent with the approved authorization.

Comments regarding the proposed rule are due to the State Department by September 10th.  My advice to exporters?  Check out End-Use Manager.  Better safe than sorry!

The Treasury Department has announced a set of designations targeting the government of Iran for supporting terrorism and terrorist organizations, including Hizballah, Hamas, Palestinian Islamic Jihad (PIJ), the Popular Front for the Liberation of Palestine-General Command (PFLP-GC) and the Taliban, pursuant to Executive Order 13224.  All transactions involving the designees and any U.S. person are prohibited, and any assets the designees may have under U.S. jurisdiction are frozen.  In a recent press release, Treasury also identified 21 entities in Iran’s banking, insurance and investment, mining, and engineering industries that were determined to be owned or controlled by the government of Iran, with which transactions are prohibited under the Iranian Transactions Regulations.

The following US restricted party lists have been updated:
 

1. OFAC Sanctions: adding 32 records and modifying 4
2. Presidential Executive Order (13224): adding 11 records and modifying 3
3. Department of State – Designated Foreign Terrorist Organizations (FTOs): modifying 1 record
4. US Postal Inspection Service – Most Wanted Posters: adding 1 record and modifying 1
5. Food and Drug Administration – Disqualified/Totally Restricted List: adding 1 record
6. World Bank Listing of Ineligible Firms: adding 2 records
7. FBI Wanted Fugitives – Featured Fugitives: adding 2 records

Management Dynamics has announced the release of Trade Planner 3.0, a scenario-based planning tool that helps supply chain teams quickly and accurately evaluate alternative sourcing and distribution strategies to optimize total landed cost while assessing the impact of trade regulations.
 
According to U.S. Customs and Border Protection, companies import nearly $2 trillion worth of products annually from over 150 countries, a number that is expected to triple by 2015. With the increasing pressure to cut costs, accommodate new trade regulations, and take advantage of new preferential trade agreements, businesses need planning tools to improve the design of their global supply chains.
 
Read the full article.