CCL Harmonization with the Wassenaar Arrangement List

Effective June 20, 2013, the Bureau of Industry and Security (“BIS”) issued a final rule that revises the Commerce Control List (“CCL”) of the Export Administration Regulations (“EAR”) to implement modifications made to the Wassenaar Arrangement (“WA”)’s List of Dual-Use Goods and Technologies (“WA List”). The final rule harmonizes the CCL with the WA List, which is maintained and agreed to by states that participated in the December 2012 WA Plenary Meeting.

1. The Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies

The WA is a multinational group of 41 countries that are devoted to organizing export controls of conventional arms and dual-use goods and technologies. The goal of the WA is to promote transparency and responsibility in the global arms trade, prevent destabilizing accumulations of arms, and to provide a level playing field for competitors who are WA-member countries.

2. Amendments to the CCL

The final rule amends Export Control Classification Numbers (“ECCNs”) that are controlled for national security reasons in each category of the CCL, except for Category 8 (Marine). The final rule also amends the General Software Note, WA reporting requirements and the definition section of the EAR. Additionally, the final rule includes unilateral controls to the CCL for the export of certain technology and software for aviation control systems that have been removed from the WA List.

DDTC Amendments to ITAR Brokering Provisions

On August 26, 2013, the State Department’s Directorate of Defense Trade Controls (DDTC) published an interim final rule in the Federal Register that will narrow the scope of persons and activities currently subject to the brokering requirements of the International Traffic in Arms Regulations (ITAR). The interim final rule, summarized below, will become effective on October 25, 2013.

1. The definition of “broker” and related “brokering activities”

The current brokering requirements set by the ITAR have posed major compliance challenges due to the ambiguous definitions of what constitutes a “broker” and related “brokering activities” and the potentially broad and extraterritorial application of the brokering provisions.

The interim final rule attempts to clarify these ambiguities and to narrow the definition of each. The DDTC’s interim final rule revises the definitions of those terms as follows:

a. A “broker” is –

– Any US person wherever located,
– Any foreign person located in the US, or
– Any foreign person outside the US where that person is owned or controlled by a US person, and
– Who engages in “brokering activities.”

b. “Brokering activities” are defined to include –

– Any action on behalf of another to facilitate the manufacture, export, permanent import, transfer, re-export, or re-transfer of a US or foreign defense article or defense service, regardless of its origin, including (but not limited to) the following activities:

– Financing,
– Insuring,
– Transporting,
– Freight forwarding,
– Soliciting,
– Promoting,
– Negotiating,
– Contracting,
– Arranging, and
– Assisting.

2. Specific exclusions from the definition of “brokering activities”

The interim final rule specifically excludes certain activities from the definition of “brokering activities.” Among the excluded activities are non-administrative activities by regular employees acting on behalf of their employer; legal advice, including export compliance services provided by an attorney; and activities performed by an affiliate on behalf of another affiliate.

As a result of these exclusions, and upon the interim final rule becoming effective, many currently registered brokers may no longer be subject to broker registration requirements, or may be eligible to consolidate into their manufacturer/exporter registration.

For more information on the upcoming changes to the brokering provisions, please contact us.

Antidumping and Countervailing Duties: An Overview

An antidumping duty is a protectionist tariff that a domestic government imposes on foreign imports that it believes are priced below fair market value. Antidumping duties come into play when a foreign company is selling an item significantly below the price at which it is being produced. In addition, a countervailing duty is a duty placed on imported goods that are being subsidized by the importing government. The logic behind antidumping and countervailing duties (AD/CVD) is to save domestic jobs, while leveling the playing field between domestic and foreign producers.

The duty rates of imported merchandise that is subject to AC/CVD are set by the U.S. Department of Commerce’s International Trade Administration. They set the AD/CVD rates, as well as establish the scope of AD/CVD orders. These decisions are in turn enforced by U.S. Customs and Border Protection (CBP), who also collect the AD/CVD due on imported goods.

Scope of AD/CVD

In order to determine whether merchandise that are being planned to be imported are subject to antidumping or countervailing duties, the importer must first review the scope of AD/CVD orders to determine whether the merchandise falls under the scope of an order. The scope of an AD/CVD order can be found in several locations such as the Federal Register notices from the U.S. Department of Commerce (Commerce), written instructions from Commerce to CBP, and the website of Commerce’s International Trade Administration. Knowledge of purely the Harmonized Tariff Schedule (HTS) classification of the goods that are being imported is not sufficient to determine whether a product falls under the scope of an AD/CVD order.

A product list is also available to importers to determine whether an import is covered by AD/CVD. List of products covered by AD/CVD orders can be found in two locations: the CBP’s Automated Commercial Environment (ACE), as well as the U.S. International Trade Commission website which publishes a list of every AD/CVD case. ACE contains comprehensive case information on every AD/CVD case, including company-specific case numbers and AD/CVD cash deposit rates. The website of Commerce’s International Trade Administration contains information on AD/CVD cases listed by country, as well as a monthly archive of AD/CVD notices published in the federal register. Federal Register notices issued by Commerce list the case numbers and AD/CVD cash deposit rates. In addition, Commerce instructions to CBP list the case numbers and AD/CVD cash deposit rates.

Importer’s Rights & Obligations

AD/CVD liability on an import does not cease at the moment the importer has paid the AD/CVD duties due. The AD/CVD paid at the time of entry are cash deposits of estimated AD/CVD duties. The final amount of duties owed is not determined until Commerce conducts an administrative review to establish the final AD/CVD rates on past entries. The final AD/CVD amount may increase, decrease, or stay the same from the AD/CVD cash deposit paid at the time of entry. After Commerce sends instructions to CBP on the final AD/CVD rate for the entry, CBP will assess this final duty. CBP will issue a bill for any increase in duty, and refund any decrease of duty. On average, this entire process, from the date of importation, takes approximately three years.

If an importer believes that their imported goods do not fall under the scope of an AD/CVD order, but CBP has required them to pay AD/CVD duties on their imported goods, the importer may apply to Commerce for a scope ruling which clarifies the scope of an AD/CVD order. Also, if the importer believes CBP misapplied the scope of the order as written, they may file a protest with CBP within 180 days after the entry has liquidated. Additionally, the importer may request an administrative review of their imports from Commerce to determine the final AD/CVD duty liability. Commerce will then instruct CBP on the final AD/CVD rates, and CBP will assess final duties based on these instructions.

Additional special requirements exist for imports subject to AD/CVD duties. Prior to liquidation and the assessment of antidumping duties, the regulations require that the importer file a certificate advising whether it has entered into an agreement or otherwise has received reimbursement of AD duties. Failure to provide a statement of reimbursement prior to liquidation from the importer will result in CBP presuming reimbursement and double the duties.

Once merchandise has been released from CBP custody, the importer is not entitled to a refund of AD/CVD duties.