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Vol. I: Issue 16 | October 19, 2006  |


Since the late 1970's, U.S. industry has relied on the antidumping law to guard against imports sold at less than fair value and the countervailing law to guard against imports bolstered by certain government subsidies. The popularity of these petitions proved so great that the United States consistently ranked as one of the top trade remedy proponents for about 25 years. But lately the number of petitions seeking antidumping or countervailing relief has dropped so precipitously – just four antidumping cases and one countervailing case in 2005, and just three antidumping cases and no countervailing cases in 2006 – that some believe their decline is now permanent.

Although it is too early to pronounce the U.S. industry's use of the antidumping and countervailing laws as dead, it is interesting to contrast the absence of these petitions with the recent surge in section 337 complaints. As discussed in previous ITB articles, the number of section 337 complaints jumped from 18 in 2003 to 29 in 2005 and is expected to top 30 complaints by the end of this year. Recent section 337 complainants have also registered as a who's who of American industry; that is, since August 2006, American Honda Motor Co., Inc., Merck & Co., Inc., Caterpillar, Inc., Hewlett-Packard Co., and Microsoft Corp. have each filed a section 337 complaint.

There are likely a number of reasons for the de-emphasis in antidumping and countervailing petitions and the re-emphasis in section 337 complaints. First, U.S. antidumping laws have come under attack by other nations before the WTO, and it is likely that the WTO's latest rulings as to the illegality of ‘zeroing' will significantly decrease the chances that U.S. petitioners will benefit from large antidumping duties in future cases. The growth in multinational enterprises has also made it less likely that a company will petition for relief against imports from a country in which it likely operates production facilities or otherwise values as a current or future market for its goods. By contrast, the multi-nationality of an enterprise has little impact on section 337 complaints as it is likely that the company is working hard all over the globe to protect its intellectual property portfolio. Finally, antidumping and countervailing cases require proof of material injury to the domestic industry, whereas section 337 complaints since the late 1980's generally do not.

So is the end of U.S. antidumping and countervailing petitions in sight? Probably not, but we will likely see less cases over the next few years assuming one policy doesn't change anytime soon: All bets are off if the United States suddenly starts accepting countervailing petitions against imports from China.

For more information, please contact Matthew Jaffe in our Washington, DC office at 202.624.2908 or


With more than two and a half months still remaining before the end of the calendar year, the European Union is on track to establish a seven year high for new anti-dumping investigations. Despite recent statements by EU Commissioner Peter Mandelson calling for the refinement of the EU anti-dumping system to reduce levels of protection granted in this form, the number of new cases started against the EU's trading partners remains extremely high.

With 24 new anti-dumping investigations already under its belt for the first nine months of 2006, the European Union looks likely to exceed its previous best record of 29 new initiations which it established in 2004. A number of additional EU anti-dumping investigations are currently in the pipeline for certain furniture products, specialty chemicals and metal products which should comfortably lift the EU over its 2004 numbers.

The number of EU anti-dumping investigations concluded by the adoption of anti-dumping measures is also running high. In the last few weeks, the European Commission was successful in adopting anti-dumping measures against leather shoes and plastic bags and sacks made by a large number of Far East Asian countries. On the other hand, the EU's major trading partners have not been spared from the attention of the European Commission's anti-dumping unit. Both Japan and the United States have been accused of dumping hi-tech electronic equipment and specialty chemicals respectively.

The European Commission, however, still has some way to go to reach its all-time record of 86 new anti-dumping investigations which was achieved in 1999. The bulk of these cases at that time concerned iron and steel products as well as chemical commodities.

For more information, please contact Robert MacLean or Margareta Djordjevic in our Brussels office at or; or or


The European Union has announced that bilateral trade agreements, protection of intellectual, property rights in third countries and a reinforced market access strategy are to be the building blocks of future EU trade policy. In a major policy review entitled Global Europe: Competing in the World, the European Commission has set out its vision for opening new markets abroad for EU companies and ensuring that European companies are able to compete fairly in those markets. The EU also commits to making certain that its own markets remain open for the simple reason that EU manufacturers increasingly need greater access to raw materials and energy.

In the Commission's Communication, the future corner stones of EU trade policy are set down in an effort to ensure that the EU does not lose further ground in the global competitiveness rankings. Recognizing that the EU has started to lose its global competitive edge to countries like China, the European Commission has identified three key objectives of future EU trade policy. These are:

  • A “new generation” of bilateral free trade agreements with key partners to build on WTO rules by tackling issues which are not ready for multilateral discussion and by preparing the ground for future multilateral liberalization. The key economic criteria for new FTAs will be “market potential”. The emerging markets of Asia are singled out as being especially attractive.

  • The launch of the “next stage” of its global strategy for protecting intellectual property rights, with tougher benchmarks for cracking down on counterfeiting and new co-operation with key trading partners.

  • A renewed Market Access Strategy to focus on non-tariff barriers which will require asking EU industry to identify key sectors and priority problems. A public consultation exercise will be announced at the end of October to facilitate information-gathering on the most painful barrier to trade in third countries for EU industries and enterprises. The revised strategy will include a new element to ensure better access to major public procurement markets for EU companies.

Separately, China will be the subject of special attention presenting, as it does, “the single greatest challenge for EU Trade policy in the years to come”. The European Commission will set out a comprehensive new strategy on China at the end of October 2006.

Lip-service is, of course, paid to the EU's commitment to the WTO multilateral trading system and, in particular, the Doha Development Agreement. But the European Commission's “Plan B”, in case these discussions fail, is clearly taking shape and the emphasis will be a bilateral one. Confirming this orientation, EU Trade Commissioner Peter Mandelson openly proposed the possibility of an EU-India Bilateral Free Trade Agreement immediately following the publication of the new general strategy.

For more information, please contact Robert MacLean or Margareta Djordjevic, in our Brussels office at or; or or


EURID, the European authority for .eu domain names, has announced that it has released 74,000 domain names that it had previously decided to withhold on the grounds that the names were not rightfully registered. The announcement of the domain name release followed an injunction issued by a Belgian court which decided that the organisation did not have authority to withhold these names. It is expected that in the future, EURID will be facing many more domain name litigations before the Belgian courts.

The .eu top level domain was created in 2004 at the request of the European Commission and the European Parliament. These European institutions felt that there was a need for a unique top level domain name by which European legal entities and private persons could easily identify themselves.

In the same year, the European Commission and the European Parliament also issued two Regulations that provide for a number of public policy rules and registration principles relating to .eu domain names. Under the Regulations, only European legal entities and private persons are entitled to register .eu domain names. Furthermore, the domain name registration is organized according to the “first come, first served” principle. In order to prevent abuses however, the Regulations provide that during a first transition period (the so-called “Sunrise Period”), holders of intellectual property rights (such as a trademark or copyright) must enjoy priority in registering .eu domain names. The Regulations also order that the administration of the .eu top level domain name must be ensured by a private domain name authority.

Further to a public tender procedure, the administration of the .eu top level domain name was finally entrusted to EURID, a non-profit organization based in Brussels. However, so far, the administration of the .eu top level domain name process by EURID has given rise to serious criticism.

First, observers have indicated that the registration of .eu domain names under the Sunrise Period was arbitrary and open to abuse. Various multinational companies have not succeeded in securing domain names based on their intellectual property rights – either because their applications were refused on very formal grounds or because bad faith domain name squatters succeeded in registering domain names earlier, invoking bogus or manifestly invalid trademarks. A number of domain name applicants who have been rejected by EURID and disappointed by the outcome of the arbitration proceeding, have already sued EURID before the Belgian courts.

Second, there is increased protest regarding the manner in which EURID invokes grounds of public policy to take measures that exceed the duties and rights of a mere registry. For instance, in July 2006, EURID decided to suspend the registration of 74,000 domain names and accused the owners of those domain name registrations of abusive behavior. In particular, EURID accused the domain name owners of participating in a so-called “warehousing” scheme aimed at registering potentially valuable domain names with the sole purpose of reselling them at a profit, instead of using the domain names themselves. The decision to suspend was taken without any prior court authorization. In the beginning of October 2006, the owners of the suspended domain names obtained an injunction from the Belgian courts, ordering EURID to release the suspended domain names. Proceedings on the merits are currently still pending.

It is expected that an increasing number of court cases will be brought before the Belgian courts against EURID. As a matter of fact, since EURID's registered offices are located in Brussels, Belgium, it could very well be that the Belgian courts will evolve to become a true pan-European litigation forum for .eu domain names

For more information on this issue, please contact Christoph De Preter in our Brussels office at or

The United States, the European Union and Japan express serious concerns over China's IPR protection activities prior to upcoming WTO review. China's implementation of its WTO Trade-Related Aspects of Intellectual Property (“TRIPS”) obligations to provide adequate and effective protection of IPR will be reviewed during an upcoming meeting of the WTO TRIPS Council on October 25. Prior to that meeting, the United States, EU and Japan have all expressed serious concerns about China's legislative and enforcement efforts to protect IPR. Specific concerns were raised in written questions and comments on the areas of trademarks, patents, Internet infringement and judicial enforcement.

One overarching, long-standing complaint by U.S., EU and Japanese companies is the current numerical thresholds - in terms of losses or illegal income due to infringement - that are necessary for criminal prosecution. Western and Japanese companies believe that the current thresholds for criminal prosecution are too high and prevent Chinese authorities from taking actions against the majority of IPR infringement activity. The U.S. and Japan in particular have urged China to lower these thresholds so that Chinese authorities can take actions directly against more IPR infringement activities.

Another primary area of concern for Western and Japanese companies is the lack of effective protection for foreign-held trademarks, evidenced by the high-level of counterfeits and trademark infringement in China. Both the U.S. and EU raised concerns that the overall level of fines imposed on counterfeiters has actually dropped in the last few years, despite the fact that China's Trademark Law tripled the amount of damages that could be awarded, and urged China to ensure that penalties need to be high enough to serve as a deterrent against future infringement. The EU will also raise concerns over the increasing delay in registrations of trademarks and the adjudication of disputes over trademark registrations caused by the backlogs at China's Trademark Office and Trademark Review and Adjudication Board. Japan will raise concerns over the apparent discrepancy in enforcement between domestically-held and foreign-held trademarks, citing evidence that only a very small number of the total amount of infringement cases in 2005 were related to trademarks held by foreign entities.

With regard to Internet-based infringement, the U.S. has questioned the availability of legal remedies for right-holders to challenge the advertising of counterfeit and pirated goods over Internet sites regulated by Chinese authorities (in the .cn domain). The U.S. has also asked China to demonstrate its enforcement against sites that offer infringing content, an increasing source of piracy losses for U.S. copyright holders.

On patents, the EU will express concerns about current rules governing the transfer of patents or technology to non-Chinese entities which the EU believes make it very difficult for foreign entities to facilitate the transfer of patents and technology. China's Patent Law requires government approval for such transfers, and the EU has charged that the approval and registration formalities required for cross-border technology transfer and assignment of patents are complex and cumbersome. In addition, the EU claims that these formalities are inconsistently applied from city to city within China.

Under China's WTO accession agreement, China is expected to respond to these questions and concerns as part of the WTO review process of China's implementation of its TRIPS obligations during the upcoming TRIPS Council meeting on October 25, with the final step of the 2006 review process taking place in December during a meeting of the WTO's ruling General Council.

In the meantime, there have been increasing calls by U.S. industry and Congress to bring a WTO dispute settlement case against China on its failure to provide effective enforcement of intellectual property rights. The U.S. took a first step in that process late last year when it invoked Article 63.3 of the TRIPS Agreement and requested China to provide information on specific judicial decisions and administrative rulings of IPR enforcement. Switzerland and Japan have also made similar requests. However, to date, China has rebuffed these requests for information. How China responds to the questions and concerns raised for the upcoming review may become a factor in whether the United States and other countries decide to move forward with a challenge in the WTO.

For more information please contact Brian Peck in our California Office at 949.798.1361 or

The upcoming elections may spell trouble for the Bush administration's free trade agenda. While the U.S.-Oman Free Trade Agreement made it in under the wire (it was signed into law by President Bush in September) the future of other pending agreements remains uncertain. A partisan shakeup in the House and Senate could drastically change priorities, and free trade agreements could be a victim of the political fallout.

Those who hope to push legislation in the lame duck session of Congress may be overly ambitious. Most of the government is currently operating on a continuing resolution passed September 29, expiring November 17, and political efforts will be focused on passing the 11 remaining appropriations bills before Congress adjourns. This, together with a climate of political divisiveness that seems inevitable after the upcoming elections, could present challenges to the following outstanding trade initiatives:

  • Presidential “Fast-Track” Authority: The President's trade promotion authority (TPA), which provides for the passage of multilateral trade agreements with no amendments and under expedited timeframes, expires in July 2007. If it is not renewed, trade agreement negotiations will become more difficult for the administration, as trading partners are likely to be wary of the possibility of post-negotiation amendments by Congress.

  • Vietnam PNTR (HR 5602, S 3495): The Senate Finance Committee voted 18-0 to extend permanent normal trade relations to Vietnam. Two Republican senators, Elizabeth Dole of North Carolina and Lindsey Graham of South Carolina, opposed the bill due to its potential adverse effect on the textile industries of their respective states. To address their concerns, the administration has vowed to self-initiate dumping complaints on textile and apparel imports. Montana Democrat Max Baucus, the Ranking Member of the Senate Finance Committee, cosponsored an amendment that would require Peru to accept all U.S. beef exports as a precondition of adoption. Despite this resistance, the bill appears to have strong bipartisan support and, if passed, will facilitate Vietnam's accession to the World Trade Organization (WTO). WTO consultations on its membership deal began on October 6, and the chairperson of Vietnam's membership working party is calling for a final meeting to agree on the package at the end of this month. Upon WTO accession, a bilateral agreement with the U.S. will go into effect, reducing tariffs to 15 percent or less on nearly 94 percent of industrial and consumer goods. The agreement also will feature a reduction of tariffs to 5 percent in several key sectors, including construction equipment and pharmaceuticals.

  • Peru Trade Promotion Agreement (PTPA): Peru is anxious to get the FTA enacted; with the impending expiration of the Andean Trade Promotion and Drug Eradication Act (ATPDEA) on December 31 of this year, Peru, along with neighbors Bolivia, Colombia and Ecuador, is scheduled to lose the special duty-free trade preferences extended by the program. Democrats' insistence on including internationally recognized basic labor standards from the International Labor Organization and more stringent environmental standards in the agreement could become more of an issue in the event of a Democratic takeover of Congress.

  • General System of Preferences (GSP) Program: This program gives developing countries duty-free access to the U.S. market for a wide range of products; 4650 products from 133 designated beneficiary countries and territories currently enter duty-free. With its expiration scheduled for December 31, 2006, the GSP Subcommittee recently solicited comments on whether to limit, suspend, or withdraw eligibility status for certain GSP beneficiary countries, including Argentina, Brazil, Croatia, India, Indonesia, Kazakhstan, Philippines, Romania, Russia, South Africa, Thailand, Turkey, and Venezuela. Finance Committee Chairman Charles Grassley has voiced opposition to a straightforward extension of the program; he opposes the participation of Brazil and India – two of the wealthier developing countries – because they are perceived to have impeded progress in the Doha Development Round global trade talks. Democrats Charles Rangel of New York and Ben Cardin of Maryland have called for a straightforward, two-year extension of the GSP program. Their “Emergency Trade Program Extension Act (HR 6076, S 3904) would also extend the African Growth and Opportunity Act (AGOA) set to expire in October of 2007 (which gives special textile and apparel benefits to African countries) and the ATPDEA.

Other free trade agreements in various stages of development include the Columbia, Malaysia, Korea, and Thailand FTAs. These are not likely to be on the congressional agenda until the next Congress in 2007, and their future thus is even more uncertain than those detailed above.

For more information please contact Addie Cliffe Taylor or Alex Schaefer in our Washington, DC Office at 202.624.2683 or; or 202.624.2773 or; or Mike Gill at Capitolink at 202.508.8843 or

United States sets up Cuba Sanctions Enforcement Task Force to crack down on Cuba sanctions infringements and violations. U.S. sanctions against Cuba are longstanding and broad, reaching U.S. subsidiaries incorporated outside the U.S. as well as U.S.-based companies and individual U.S. citizens.  Last week the U.S. Government established an Interagency Task Force to pursue those who violate the Cuba sanctions.

The Task Force will investigate all types of violations of the sanctions, including travel by individuals, imports and exports, currency transfers and money laundering.  Violations of the Cuba sanctions can lead to civil or criminal penalties. Private individuals convicted of violating the sanctions' provisions can be sentenced to up to 10 years imprisonment and fined up to $250,000. Corporations can be fined up to U.S.$ 1 million.  Civil fines of up to $55,000 per violation may also be imposed. 

Task force members include representatives from the Federal Bureau of Investigation, Coast Guard, Immigration and Customs Enforcement, the Internal Revenue Service, Department of Commerce, U.S. Attorneys Office, and the Office of Foreign Assets Control (which has primary responsibility for enforcing the sanctions). 

In announcing the interagency "Cuba Sanctions Enforcement Task Force," the U.S. Attorney for the Southern District of Florida cited in particular illegal travel to Cuba and said that prosecutions would be "much more than a mere slap on the wrist." The task force's criminal investigations will include those involved in organizing and facilitating unlicensed travel transactions with Cuba. 

The sanctions, which have been in effect for 40 years, were intended to isolate Cuba and drive Cuban President Fidel Castro from power. This crack down on violators is intended to "speed the transition to democracy" in Cuba. Whether cracking down on those who arrange travel and individuals who visit Cuba will accomplish that remains to be seen.

For further information, contact Lorry Halloway or Jeff Snyder in the Washington, DC office at 202.624.2538 or; or 202.624.2683 or

U.S. extends its long jurisdictional arm to enforce the Foreign Corrupt Practices Act abroad. Friday the 13th is considered unlucky in the United States, something Norway's state-controlled oil company, Statoil ASA, will not soon forget after settling charges under the Foreign Corrupt Practices Act for U.S.$ 21 million. This is the second recent settlement in actions brought by U.S. authorities in cases involving only limited contacts with the United States.

Last July, the Securities & Exchange Commission (SEC) obtained consent judgments (including fines and disgorgement of profits) from three UK citizens who were former employees of various UK and Nigerian subsidiaries of ABB Ltd., a Swiss corporation whose American Depository Receipts (ADRs) are traded on the NY Stock Exchange. In that case, the UK citizens were allegedly involved in a bribery scheme in connection with seeking a contract to provide equipment for an oil drilling project in Nigeria with some of the cash involved in the scheme – including a kickback to one of the UK citizens – going through U.S. banks.

According to the SEC's Administrative Order, the Statoil case involved payments – disguised as fees to an offshore company for vaguely described consulting services – to an Iranian Government official in connection with Statoil's efforts to participate in the South Pars oil and gas fields in Iran. Despite being aware of publicly reported accusations of corruption against this official's family, Statoil failed to perform any due diligence to investigate the accusations. Ultimately, through the Iranian Official, Statoil obtained non-public information concerning Iranian projects as well as copies of bid documents submitted by competing companies. Exacerbating the situation, Statoil's internal audit department questioned the consultant agreement, and Statoil's security group subsequently discovered through investigation that the Iranian Official was in fact the consultant although nowhere named in the agreement. Upon being presented with these findings, Statoil's Chairman of the Board failed to act and referred the issue to the then-CEO who agreed to suspend further payments but refused to terminate the agreement or further address the security group's concerns.

Statoil's settlement provides for $10.5 million to go to the SEC and another $10.5 million to the U.S. Department of Justice under a deferred prosecution agreement. As has become typical in such settlements, the agreements require Statoil to appoint an independent compliance monitor to review and periodically report on the company's FCPA compliance program over the next three years. This may be the first time, however, that U.S. authorities have imposed such a requirement on an entity whose employees (because of Norway's continued 70.9% ownership interest) could themselves be considered foreign government officials for FCPA purposes.

Another interesting aspect of the deferred prosecution agreement is that Norway had already investigated and in 2004 had fined Statoil the equivalent of $3 million under Norway's trading-in-influence statute. Thus, this case represents what could be an emerging trend under the OECD Convention on Combating Bribery of Foreign Government Officials where multiple countries which are able to assert jurisdiction over a transaction will seek fines or penalties. Here, the SEC's jurisdiction over the books and records and lack of internal controls violations is premised on Statoil's registration of its ADRs under the 1934 Exchange Act, but jurisdiction over the bribery violations appears premised only on the fact that one of the payments to the consulting company was routed through a New York bank. DOJ has apparently agreed to credit the $3 million already paid to Norway against its fine, thereby reducing the actual amount to $7.5 million. In three years, provided Statoil fulfills its obligations under the deferred prosecution agreement, DOJ will dismiss the criminal information filed in the U.S. District Court for the Southern District of NY.

For more information or advice on the Foreign Corrupt Practices Act, contact Alan Gourley at 202.624.2561 or

After Doha: Practical Approaches for Cutting the Costs of Trade. Over the last few editions of the ITB, the discussion has been about the steps that companies can take to scrub their supply chains, enhance export sales, and cut import duties. To date, the discussion has focused on ensuring proper tariff classification and valuation of merchandise. Those items are important; in fact, they're so important that a lot of importers end their analysis there. That's a mistake, because even more savings can be made by using “special duty programs” – there are a lot of them, but we provide some general information about what they are, what they do, and why they're worth pursuing.

Economic Development Programs

For U.S. Customs purposes, all countries are most emphatically not created equal. On the contrary, the U.S. (like many of its trading partners) has a number of special duty programs designed to stimulate activity in economically developing regions. The mechanics of these programs differ from one to the next, but in general the key principles are the same – qualifying goods that originate in the covered countries can be imported into the U.S. free of duty. This provides U.S. importers with an incentive to source in those countries, thereby stimulating their economies. Beneficiary regions include the Caribbean Basin nations (under the Caribbean Basin Economic Recovery Act and the U.S.-Caribbean Trade Partnership Act), Africa (under the African Growth and Opportunity Act), and the Andean nations (under the Andean Trade Preference Act). In addition, a variety of goods are exempted from duties under the “Generalized System of Preferences” which covers thousands of different products from dozens of developing countries. In practice, taking advantage of these programs adds an extra step (other than just identifying the lowest cost producer) to the usual supply chain evaluation, but the savings can be tremendous.

Free Trade Agreements

The U.S. has negotiated a number of “FTAs” with key allies and trading partners, and more are in the works all of the time. As with the economic development programs, the details vary somewhat from one to the next, but the over-arching purpose remains to eliminate import duties on goods made in and traded between the signatories. Current FTA partners include Canada/Mexico (under NAFTA), Australia, Israel, Jordan, Singapore, Morocco, and Chile. Meanwhile, similar agreements with Peru, Columbia, Malaysia, Korea, and Thailand are on the horizon. (In the next issue, we'll be discussing how to make the most of these programs before, during, and after country-to-country negotiations.)

Duty Deferral and Avoidance Programs

Under U.S. law, there are several mechanisms available to help U.S. importers pare down their import burden. Duty drawback is a well-known (but underused) example – under that program, manufacturers who export merchandise that includes imported components or ingredients can apply for a refund of the import duties paid on those items. For instance, if a bicycle manufacturer imports bearings that go into bikes that get exported, the manufacture can claim a refund of the import duties on those bearings. Duty drawback claims every year are in the tens of millions, but many millions more are left on the table (and in the general treasury).

“Temporary Importation Under Bond,” or “TIB” is a similar program, with the added benefit of cutting out initial duty payments altogether. Under a TIB, importers who certify that they will export (or destroy) imported goods within a certain period need not pay the import duty at all. The administrative requirements of this program can be tricky, but the prospect of not having capital tied up in duty deposits on high-value goods makes the program worthwhile for many importers.

Importers also can defer duties by undertaking manufacturing or processing in Foreign Trade Zones (“FTZs”) or Bonded Warehouses. Under both of these programs, imported goods are brought into the zone/warehouse free of duty. Once they are manufactured or further processed, they can either be exported (thus avoiding duty altogether) or entered into the U.S., at which point they are dutiable at the rate associated with the finished product rather than the imported good. So, if importers are using high-duty rate goods in the manufacture of lower duty-rate goods, performing the manufacturing operation in a zone or a warehouse can again create tremendous savings.

Duty Suspension

For U.S. importers who are bringing in goods that they cannot source domestically, Congress frequently includes “duty suspension” provisions in miscellaneous trade and tariff legislation packages. Under these provisions, import duties are reduced or suspended on a product-specific basis for products that aren't available from domestic producers. The chemical and pharmaceutical industries save millions of dollars each year through this type of legislation, but other importers frequently get left behind because they're not aware that it exists, or that their imports might qualify.

* * *

There's more savings out there, and Crowell & Moring's Customs lawyers are experienced in all aspects of special duty program mechanics and management. For more information on these or other U.S. Customs issues, please contact Barry Cohen or Alex Schaefer in Crowell & Moring's Washington, DC office at 202.624.2997 or; or 202.624.2773 or

India's outsourcing industry has come under fire for a number of security breaches involving bank and other confidential information which highlights some of the dangers of outsourcing. While many such breaches may be the result of criminal activity, the absence of comprehensive data protection legislation in India renders processors of personal information particularly susceptible to security breaches in that country.  In addition to the privacy-related problems that are causing companies to reconsider what and how they outsource to India, India's record also highlights a potential export control issue that could expose companies to both civil and criminal penalties under U.S. law.

For the last several years, U.S. companies have increasingly taken advantage of India's high-skilled, low-wage, English speaking workers by outsourcing in a number of areas including IT services, semiconductor design, and legal work such as document review and patent drafting. However, by sharing technical knowledge with their Indian counterparts or by granting Indian administrators with access to U.S. servers and databases containing technical data, these U.S. companies may be running afoul of complex U.S. export control regulations.

The export control challenge facing U.S. companies seeking to outsource is threefold: (1) determine what information is being shared with these foreign companies; (2) determine what in that information might be export controlled and what rules apply; and (3) if an export license is required, perform due diligence to ensure that the foreign company doing the work has sufficient safeguards in place to prevent breaches in information security or unauthorized re-exports of controlled information.

With the recent bad press in India, the third part of the challenge may now have become even more challenging. U.S.—India cooperation agreements involving sensitive technologies will likely have increasingly stringent conditions, as will export licenses themselves. Pre-license checks—U.S. Government investigative visits to Indian consignees—will probably become more frequent and more thorough. This, in turn, may slow the process of obtaining a license or preclude licenses for exports that might have been granted in the past.

Given the potentially large financial incentives for outsourcing highly skilled services to India, the trend toward greater delegation, sharing, and partnership in that country will likely continue in spite of the recent security problems. However, outsourcing companies will have to proceed with greater caution as their transactions with their Indian partners face increased scrutiny from the U.S.

For more information, please contact Lorry Halloway or Chris Gagne in our Washington, DC office at 202.624.2538 or; or 202.624.2817 or

EU and U.S. authorities finally reach an interim agreement bringing closure (at least for now) to the stand-off on EU-U.S. Passenger Name Record (PNR) data transfers. The agreement ends uncertainty for European airlines that arose after the May 2006 European Court of Justice judgment annulled the 2004 U.S.-EU data sharing agreement.

The U.S. had threatened to impose fines and revoke landing rights on airlines refusing to provide the data. The interim agreement will enter into force upon approval of the Council and will remain in force until July 31, 2007. During the interim period, the parties will work on a long term agreement.

According to EU Commissioner for Justice and Home Affairs, Franco Frattini, the interim agreement is generally based on the 2004 agreement struck down in May and will allow the electronic transfer of the same 34 data elements (including passenger names, credit card numbers and other personal information) to the U.S. as before. However, the interim agreement sets forth the following safeguards requested by the Europeans:

  • It no longer provides for an “information pull-system” but for an “information push-system” requiring air carriers to transfer PNR data upon the U.S. authorities' request (instead of the U.S. authorities accessing carriers' databases in the EU and pulling data to the U.S.). The introduction of a “push-system” was one of the main requirements of the pan-European Privacy watch-dog, the Article 29 Data Protection Working Party, in its September 27, 2006 Opinion;

  • The U.S. Department of Homeland Security may pass on PNR data to the CIA and other U.S. intelligence agencies for purposes of terrorism-fighting if such agencies provide a level of data protection comparable to the European level, but such agencies will not have direct electronic access to PNR data. Those other agencies may retain the data for no more than three and half years, the same limit applicable to the border protection agency.

  • Special meal requests and other data that could be used to identify racial origin, religious and ethnic background, or political opinions, will not be provided.

Some MEPs have already raised criticisms against the new agreement and take the view that the EU has again succumbed to U.S. pressure at the expense of EU citizens' privacy rights. However, no reports of renewed court action have appeared publicly so far.

For further information on this issue, please contact Jan Dhont in our Brussels office at or

European Commission, DG-Trade, adopts Crowell & Moring Report on the EU's Market Access Database. Earlier this year, Crowell & Moring was selected by the European Commission to carry out an Evaluation Study of one of the key internet-based tools made available to EU industries and enterprises to improve their export performance.

This Evaluation Study has now been published on the internet site of DG-Trade of the European Commission. It can be assessed through the following link:

October 25, 2006 – Are You Ready for E-Discovery Under The New Federal Rules? Global companies face e-discovery issues in a variety of situations, which can include not only litigation but regulatory proceedings, such as HSR second requests.

On Wednesday, October 25, 2006, Crowell & Moring will host a roundtable discussion on "Meeting the Challenges of E-Discovery and Digital Information Management," during which our expert panel will discuss best practices in litigation readiness under the new amendments to the federal rules, preservation obligations, and how to use the latest technologies to reduce costs and gain tactical advantages.  The event will be held at the Washington, DC offices of Crowell & Moring LLP located at 1001 Pennsylvania Avenue, NW. A cocktail reception will follow the roundtable.  For more information and to register, please visit

October 26, 2006 – Globalization's New Road Map: Best Practices and Policies for Growing and Protecting Your International Business

  • General Electric Company's former Chief Privacy Leader and Senior Counsel for E-Commerce & Information Technology, James M. Jordan III, will speak on corporate compliance with U.S. and EU privacy and personal data protection laws, including implementation of global privacy programs and cross-border transfers of personal data pertaining to employees, customers and suppliers.
  • How to take a dvantage of Free Trade Agreements and Bilateral Investment Treaties to protect your investments and assets in overseas markets.
  • The benefits and opportunities provided by NAFTA, presented by Mexican Counsul General Robert Beltran, Canadian Deputy Consul General Jim Feir, and California Undersecretary for International Trade Garrett Ashley.

Reminder: Please reserve by Monday, Oct. 23 to attend this conference if you have not had a chance to do so already

For more information on topic panels and our speakers or to register to attend this seminar, please visit the web site for this event at



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