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May 30, 2006 |



The EU implementation of the WTO sugar ruling falls short of expectations of all sides. The EU's sugar regime was last year declared illegal under WTO rules in a case brought by the large sugar producing countries, Brazil, Thailand and Australia. The EU was granted until 22 May 2006 to implement the ruling.

Under the disputed EU regime, sugar produced in the EU is allocated under a quota system into A, B and C sugar. Sugar in the A and B quotas must be sold in the domestic market at prices significantly higher than the world market price, while C sugar, produced in excess of the domestic A and B quotas, must be exported under export licenses at international market prices. Import of sugar to the EU is restricted by way of high tariffs and the use of import licenses. Preferential tariffs are however applied to fixed quantities of sugar imports from India and the ACP countries. The regime effectively makes the EU a net exporter of sugar.

The WTO ruled that the higher EU prices for A and B sugar are being used to cross-subsidize exports of the cheaper C sugar above the maximum level allowed under WTO rules, i.e., in the case of the EU, 1.273 million tons and 499 million Euros per year. The WTO also concluded that sugar originating in India and the ACP countries must be included when calculating the amount of authorised subsidized EU exports under these rules.

Last week, the EU adopted legislation suspending the issuing of export licenses for C sugar. Licenses already issued, but not yet used, are however still valid for a period of three months. The EU claims that these measures will limit EU exports of sugar and bring the EU into compliance with the WTO ruling. These measures are also part of a broader EU sugar reform that is set to reduce the EU production quotas and decrease the guaranteed minimum EU sugar price.

The reform will ultimately make the EU a net importer of sugar. EU farmers are therefore offered compensation and incentives for uncompetitive sugar producers to leave the industry. At the WTO ministerial conference in Hong Kong last year, the EU also promised ACP countries compensation for their loss of revenues resulting from the EU sugar reform.

It is still to be seen how Brazil, Thailand and Australia will react to these latest developments. However, the three month extension of the C sugar quotas is likely not to be looked upon favorably by these countries. Australia is already claiming that subsidized EU sugar exports will reach record levels of between 7 and 8 million tons this year, compared to the average annual exports of around 5.5 million tons. At the same time, ACP countries are disappointed with the level of compensation proposed by the EU of on average 184 million Euros annually from 2007 to 2013.

For more information, please contact Margareta Djordjevic in our Brussels office at



Toyota has been hit with a lawsuit seeking $190 million in damages arising out of a claim of sex harassment filed against the company and its former top U.S. executive.

The lawsuit, filed in New York by a woman who was the personal assistant to the executive, alleges the executive made a series of sexual advances against the plaintiff and then retaliated against her after she complained about his conduct. The executive resigned his position as president and CEO of Toyota's North American operations shortly before the lawsuit was filed.

Lawsuits like this underscore the importance of developing and maintaining appropriate programs to insure compliance with U.S. employment and labor law. The U.S. system is highly regulated and includes numerous obligations that may be unfamiliar to companies not based in the U.S. U.S. laws outlawing harassment and retaliation for "whistleblowers" are two leading examples. We see a significant number of these types of claims brought against foreign companies whose senior managers may not fully appreciate the consequences of U.S. law. Harassment claims are particularly difficult to defend, particularly if the company does not enforce policies meeting the standards set by regulations promulgated by the Equal Employment Opportunity Commission. In addition to training managers on the legal issues, and adopting a policy in which harassment is not tolerated, companies should be careful to avoid creating a situation in which individuals claim they have been retaliated against in response for complaining about inappropriate conduct in the workplace.

For more information, please contact Tom Gies in our Washington, DC office at or at 202-624-2690.


Companies Engaging in Mergers and Acquisitions in Europe Must Pay Close Attention to Employees' Rights. As companies seek new markets and European integration continues, Council Directive 2001/23/EC of 12 March 2001 ("Directive") becomes increasingly important. The Directive aims to protect employees in the event of a change of employer resulting from the transfer of all or part of an undertaking or business situated within the EU.

To this end, the Directive provides that the transferor's rights and obligations arising from any employment relationship existing on the date of the transfer are automatically transferred to the transferee. In the event of any cross-border transfer of undertakings within the European Union, the question of whether the planned operation falls within the scope of the directive will be crucial since the answer will directly determine the obligation for the transferee to take responsibility for the employees of the transferor who are affected by the transaction.

For any transaction, including not only mergers or acquisitions but also contracts, to be considered as a transfer under the Directive, the following conditions must be fulfilled: (i) a change in the legal entity which is considered as the employer (therefore mere share deals are normally excluded from the scope of the Directive), (ii) the transfer of an economic entity (as opposed to the transfer of a mere activity) and (iii) the retention by the transferred undertaking or business of its identity.

The European Court of Justice ("ECJ"), as well as most national courts, tends to broadly define these conditions, given the intent of the Directive. For example, the ECJ considers that the Directive is applicable whenever, in the context of contractual relations, there is a change in the natural or legal person responsible for carrying on the business and entering into the obligations of an employer towards employees of the undertaking irrespective of the direct or indirect contractual relationship between the transferor and the transferee.

When considering any cross-border transactions in the European Union which could possibly involve a transfer of employees, one should therefore carefully assess whether or not the planned operation falls within the scope of Directive 2001/23/EC to avoid possible confrontation with an undesired increase of employees as result of the transfer of an undertaking or business.

For more information, please contact Emmanuel Plasschaert in our Brussels office at

The Court of International Trade (CIT) confirms U.S. antidumping application of the revised reseller rule. U.S. importers of merchandise subject to antidumping duty orders are allowed by U.S. Customs and the Commerce Department to pay the antidumping duty deposit rate (at the time of entry of the goods) associated with the manufacturer, even where the merchandise was actually purchased by the importer from a third party.

In the past, if the manufacturer at issue was the subject of an administrative review for the pertinent period, the entry eventually would be liquidated at the final rate applicable to that manufacturer; if not, then the entry would be liquidated at the rate as entered. In May of 2003, however, the U.S. Commerce Department published a notice in the Federal Register clarifying its so-called "reseller rule" to be applied in antidumping administrative reviews. Under the revised rule, where a U.S. importer purchases merchandise subject to an antidumping duty order from a party other than the manufacturer, if that manufacturer is the subject of an administrative review but does not include the sale transaction in its U.S. sales database, the entry will be liquidated at the (usually much higher) "all others" rate.

The recent CIT case of Parkdale International v. United States has highlighted the significance of this seemingly minor and arcane issue. Parkdale, a U.S. importer, purchased corrosion-resistant steel from a Canadian steel reseller called Russel Metals who in turn had purchased the steel from a Canadian manufacturer that had its own antidumping duty deposit rate of 4.24%. However, because the manufacturer had sold the steel to Russel, a domestic (Canadian) company, rather than directly to the U.S., the sales from Russel to Parkdale were not a part of the review of the manufacturer. As a result, they became subject to Commerce's revised reseller rule and were liquidated at the "all others" rate of more than 18%.

Parkdale sued in the U.S. Court of International Trade, contending that Commerce's policy "clarification" is impermissibly retroactive in that it results in changes to the scheme of antidumping duty assessments for entries made in the past. In the recently issued Parkdale decision, however, the CIT disagreed, holding instead that the "retrospective" application of the rule was permissible.

Many U.S. importers enter merchandise subject to antidumping duty orders. Frequently, they purchase those goods from their own foreign parents or affiliates, who first purchased them from a manufacturer who is participating in administrative reviews of its own rate. Under the "clarified" rule, those foreign parents or affiliates become "resellers," and their sales to the U.S. companies can be liquidated at the "all others" rate unless the resellers themselves participate in an administrative review. As the CIT's Parkdale decision confirms, those resellers now are in the unenviable position of having their exports to the U.S. eventually be subject to the high “all others” rate or themselves having to secure their own rates by participating in an administrative review.

Even if resellers decide to participate in administrative reviews to secure their own antidumping duty rates rather than face continued application of the "all others" rate, it is unclear how Commerce intends to treat them, and how many of them can reasonably be reviewed. As a result, the administrative reviews conducted over the next year or so will be critical in setting precedent for resellers and the treatment of their exports to the U.S.

For more information, please contact Alexander H. Schaefer in our Washington, DC office at

Exporters Criticize Draft China Export Limits. U.S. industries have expressed several concerns over a draft proposal for a new export control rule which is aimed to curb U.S. exports to China that could help strengthen China's military.

Exporters are awaiting the publication of the proposed rule in the Federal Register, when it will be available for comment (it is now only available in a draft form that was initially released only to an industry advisory group, but rapidly found its way to the internet). The early release may actually work in favor of exporters, however, because BIS has received substantial feedback on even the draft.

Exporters have expressed an overarching concern that the proposed rule is too broad and lacks clarity, and would therefore cover too many products and create uncertainty. In addition, exporters have expressed these additional concerns:

  • The proposed rule would put an unfair burden on U.S. firms to establish the destination of goods after they have been exported. Industry groups claim that the current draft language is unclear and could be read to mean that U.S. firms would have to require Chinese buyers not to transfer goods to China for military uses without a license, and in the case of any other entity outside of China, to ensure that any sensitive technology is not re-exported to China.

  • The proposed rule's requirement that a U.S. company must obtain a new end-use certificate from the Chinese Government before the export of any item that requires a license and exceeds $5000 in value WILL BE DIFFICULT TO COMPLY WITH . The Chinese Government must certify that the goods in question would not be used for military purposes. U.S. industries are concerned that the broad categories subject to the new rule will result in a large increase in the number of requests to China's Ministry of Commerce for end-user certificates and that the Ministry of Commerce will either be unable or unwilling to certify non-military use.

  • The proposed rule does not clarify the extent to which U.S. companies must exercise due diligence when examining potential Chinese trading partners or what will be required to establish that a company used appropriate due diligence. The industry groups are concerned that such ambiguity would make it difficult for a company to ensure that its export control regime is compliant with the new rule.

Whether BIS will make changes in response to these concerns before it publishes the proposed rule for comment—expected in mid-June—will be an important indicator of the dialogue that will take place. Commerce will allow four months for public comment on the rule.

For more information, please contact Brian Peck in our California office at

United States and Vietnam Reach Bilateral Agreement on WTO Accession Opening Up Vietnam 's Market to U.S. Goods and Services. The United States and Vietnam reached a bilateral market access agreement “in principle“ on May 13 that will allow Vietnam to move forward on its WTO accession process while lowering Vietnamese tariffs on U.S. industrial goods and agricultural products and opening up Vietnam's services markets in such areas as financial services, telecommunications and retailing.

Under the bilateral agreement, 94 percent of U.S. manufactured goods exported to Vietnam will be subject to duties of 15 percent or less. For other types of goods such as pharmaceuticals, construction equipment and aircraft, tariffs will be between zero and 5 percent. Vietnam has also agreed under the accord to join the Information Technology Agreement, which will eliminate tariffs on high-tech goods. With regard to agricultural goods, approximately 75 percent of U.S. agricultural exports to Vietnam will be subject to duties of 15 percent or less. In addition, Vietnam has agreed to remove several non-tariff barriers to agricultural products by agreeing to make improvements to Vietnam 's sanitary and phytosanitary regime regulating the importation of such products.

In the area of services, Vietnam has agreed to open up key service sectors to foreign participation such as telecom (including satellite services), distribution, financial services, and energy services. For example, Vietnam has agreed to allow non-insurance companies and securities firms to open branches. In addition, Vietnam has agreed to extend the right to import to foreign-invested companies.

The agreement has strong bi-partisan support in Congress and is also strongly supported by most manufacturing, agricultural and service industries, who view the agreement as a milestone for opening up Vietnam 's market and creating commercially significant trade and investment opportunities. U.S. textile groups, however, strongly oppose the agreement, claiming that the agreement will continue to allow Vietnam to export unfairly low-priced goods to the United States while failing to provide any measures such as quotas or safeguard mechanisms to restrict unfairly subsidized exports from Vietnam. The textile groups are expected to urge Congress to either amend the agreement to provide for stronger enforcement measures or oppose the agreement.

The legal details of the pact and the changes to tariff schedules are currently being worked out and finalized. Once this process is completed the agreement will be formally signed and the Bush administration will then urge Congress to approve permanent normal trade relations (PNTR) with Vietnam. The agreement could be signed as early as the first week of June, and the administration would like to see Congress grant Vietnam PNTR this summer.

Vietnam has now concluded bilateral agreements with all the WTO members that requested one. The next step for Vietnam's accession to the WTO is to complete multilateral negotiations at the WTO in Geneva on a working party report and accession protocol in order to join the WTO. Vietnam hopes to accede to the WTO before it hosts the APEC leaders' summit in November.

For more information, please contact Brian Peck in our California office at

New computer control parameter. The Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies (Wassenaar Arrangement) decided in December 2005 to implement a new computer performance formula and corresponding control levels for export control purposes. As one of the 40 countries participating in the Wassenaar Arrangement, the United States has amended its Export Administration Regulations (EAR) to apply the revised formula for calculating computer performance.

For export control purposes, computer performance had typically been measured (for the past decade, at least) by Composite Theoretical Performance (CTP). An assessment of CTP as a measure for such performance, however, has been found by an interagency group, including the Departments of Defense, Energy, State and Commerce to be unable to keep pace with advances in computer architecture technology and thus, ineffective in meeting national security objectives.

Under the revised formula, effective April 24, 2006, computer performance is calculated by Adjusted Peak Performance (APP), which is measured in Weighted TeraFLOPS (Trillion Floating point Operations per Second) (WT). This formula takes into consideration a significant distinction between vector systems, which have considerably greater value in national security applications due to their superior performance capabilities, and non-vector systems—a distinction not clearly drawn under the previous CTP formula. The new APP formula thus allows for more targeted control of the high-end special order high performance computers (HPCs).

Under the controls outlined in the EAR (more particularly, section 742.12), an export license is only required for computers capable of performing at 0.75 WT, as calculated using the APP formula. This increased threshold attempts to respond to the rapid advances in technology as well as to concerns about burdening individual users of personal computers. Now, the HPC controls are at such a level that only high performance computers of the greatest national security concern require a license for export. How long this threshold remains current in light of daily technological advancements remains to be seen.

For more information, please contact Sobia Haque in our Washington, DC office at

Oil Concerns Prompt Effort To Relax Cuban Embargo . A recently introduced bill entitled the Western Hemisphere Energy Security Act of 2006, which proposes to open Cuba to oil exploration by U.S. companies, has been met with enthusiastic support as well as outraged dissent, highlighting current congressional debate over Cuba .

A recently introduced Senate bill would allow U.S. persons to engage in oil exploration in waters contiguous to U.S. waters. It would also permit the export without license authority of all related equipment and travel for individuals engaging in these activities. Proponents of the bill suggest that it would allow U.S. companies to compete effectively with other countries, including China and Brazil , who are already drilling in Cuban waters, address concerns about U.S. reliance on Middle Eastern oil resources, and lessen the risk of environmental harm to the region.

The seemingly benign text, proposed as a measure to handle the energy crisis, has been greeted by much debate and countermeasure. The proposed bill would amend the Cuban Assets Control Regulations, a highly controversial set of regulations that extends U.S. sanctions to non-U.S. companies owned or controlled by U.S. persons, by expanding the category of U.S. persons permitted to travel to Cuba and allowing for the transfer of equipment, information, and funding to Cuba that has been otherwise prohibited.

Opponents of the bill have suggested alternative means for dealing with competition from foreign oil investors, focusing mainly on deterrence. They propose measures to require the president, under certain circumstances, to impose sanctions on companies or individuals who contribute to the development of Cuba 's petroleum resources and to prohibit entry visas into the United States for those individuals who have invested in developing Cuba 's petroleum resources.

While the future of all of these bills remains uncertain, one thing that is certain is that the outcome will be far-reaching. With the end of the Castro regime looming in the not-to-distant future, U.S. companies, as well as non-U.S. companies currently prohibited from investing in Cuba on account of U.S. sanctions regulations, are already chomping at the bit to exploit business opportunities in Cuba. Under current legal authority, agricultural companies have already increased sales of products to Cuba and have resolved to continue pressing to open the Cuban market and to eliminate obstacles that make trade with Cuba difficult. These current bills should be monitored closely by oil companies, as the outcome of the legislative debate is more than academic. If the tide turns in favor of relaxing the Cuban embargo, new business opportunities will be plentiful. If not, U.S. companies will remain constrained, and non-U.S. companies may face a greater risk of investigation for their activities in the Caribbean.

For more information, please contact Erin Mikita in our Washington, DC office at

BIS and OFAC Penalties Increase. Enforcement officials have long complained that at the $10,000 or $11,000 per violation level, the penalties for export and sanctions violations were too low, and in fact were at times considered just a "cost of doing business."

The per violation amount has hovered around this area for some time and has led to the agencies expanding the number of violations found per event. Sometimes called "parsing" the practice involves splitting an event into parts, and charging each as a separate violation. In recent cases BIS has even begun to add "knowledge" as another violation to charge.

Much of this dynamic is a function of the charging and settlement process at Commerce. Because most contested cases actually settle, BIS has the incentive to charge as many violations as possible at the outset, as a way of obtaining the maximum amount in settlement from the exporter.

Both agencies are revisiting the charging and settlement process as a result of recent increases in the amount they can seek per violation.

BIS. The increase at BIS, effective March 9, is up to $50,000 for both EAR and IEEPA violations. This increase comes as a result of the legislation renewing parts of the PATRIOT Act. While significant, this increase is not as severe as pending legislation, which would increase the maximum penalty for EAR and IEEPA violations to $500,000.

OFAC. The legislation increasing the penalty amount for IEEPA violations also boosts the penalty amount for violations of OFAC programs that are authorized by IEEPA, such as the sanctions on Iran, Sudan, and others.

The increase in penalty amounts will change the calculus for many exporters. As internal reviews reveal possible violations and voluntary self-disclosure is evaluated, exporters will watch BIS and OFAC for signs that increased penalty authority will be tempered where mitigating factors are present.

For more information, please contact Jeff Snyder in our Washington, DC office at or (202) 624-2790.

Deemed Export Policy Review. A tried and true approach to intractable issues in Washington is to conduct a study, appoint a panel, or in some way avoid or defer final action. This approach was rolled out again recently when BIS created the Deemed Export Advisory Committee, or DEAC.

The DEAC's job will be to provide BIS with recommendations to "ensure that the deemed export licensing policy most effectively protects national security while ensuring that the U.S. continues to be at the leading edge of technological innovation."

This balance—between security and competitiveness—has been tipping in favor of competitiveness ever since the arrival of Under Secretary of Commerce David McCormick, who is credited with derailing the proposed rule issued last year that would have revised the deemed export rule to require consideration not only of citizenship of foreign nationals, but also country of birth. The proposed rule also addressed "use" technology and the guidelines on fundamental research. Acknowledging the "extended public discussion" of these issues, BIS now confirms "current BIS deemed export policy regarding country of birth, the existing definition of 'use' in the Export Administration Regulations (EAR), and the relationship of fundamental research to deemed exports."

And it couldn't be clearer: "BIS has decided not to make any changes at this time to current regulations and policy on these three issues."

The DEAC will undertake a comprehensive review of current policy and make recommendations for any changes. BIS is recruiting DEAC members.

For more information, please contact Jeff Snyder in our Washington, DC office at or (202) 624-2790.

Operating Through the Borderless Internet Still Requires Compliance with Domestic Laws: Online Advertising—Guidance on Disclosures. Although many of the traditional principles of advertising law apply to online advertising, new issues arise almost as quickly as online technology development. Companies should consider the following guidelines as they develop online advertisements, to ensure that they comply with applicable U.S. laws.

Consumer Protection Laws: Consumer protection laws that apply to commercial activities in other media also apply to online advertising. The U.S. Federal Trade Commission (FTC) Act's prohibition on "unfair or deceptive acts or practices" encompasses online advertising, marketing and sales. In addition, many Commission rules and guides are not limited to any particular medium used to disseminate claims or advertising, and therefore, apply to online activities.

The "Clear and Conspicuous" Requirement: Disclosures that are required to prevent an advertisement from being misleading, to ensure that consumers receive material information about the terms of a transaction or to further public policy goals, must be clear and conspicuous. In practice, companies should consider:

  • placing the disclosure in an advertisement close to the relevant claim;

  • making the disclosure prominent and consider if other features distract attention from the specific disclosure;

  • whether the advertisement is so lengthy that the disclosure should be repeated; and

  • clarity and duration—whether disclosures in audio messages are presented in an adequate volume and cadence; whether visual disclosures appear for a sufficient duration; and, whether the language of the disclosure is understandable to the intended audience.

The standard for reviewing online advertisement is that of the perspective of a reasonable consumer. Companies should assume that consumers do not read the every web page of a particular site, in the same way that they do not read every word on a printed page. In addition, it is important to draw attention to the disclosure. By merely making the disclosure available in a location of the advertisement where consumers may find such information is insufficient to meet the clear and conspicuous standard.

For more information, please contact Kim Nobles in our California office at

June 1, 2006
Globalization Accelerates: Trade and Business Strategies for the Pacific Rim, Irvine, CA
The California office will be presenting this seminar designed to help companies and individuals understand how globalization affects companies doing business in California and the Pacific Rim. Panel 1 will discuss leveraging trade policy for business success in the Pacific Rim. Panel 2 will examine how off-shore firms can expand in the U.S. market, and the smart way to acquire IP assets. Panel 3 will review the challenges that companies face in complying with U.S. laws, export controls and California labor law. The seminar is offered in affiliation with the California Council for International Trade (CCIT) and features speakers from the California office, Washington, DC office, C&M International and CCIT. For more information please see:

June 1, 2006
Crowell & Moring, Brussels office, to hold a series of simultaneous Roundtable discussions European law issues, including EU and US Market Access Solutions and Strategies, EU Anti-Trust compliance and EU privacy law. More …

June 20, 2006
Jeff Snyder, chair of Crowell & Moring's International Practice Group will be speaking on customs regulation for the import and export of ITAR related items at the National Forum on ITAR Compliance in Washington, DC.

June 28 - July 1, 2006
Kim Nobles will be chairing and moderating a panel on "China Issues" at the United States Federal Circuit Bar Association Annual conference. Panelists include:
Stephen Koplan – The Chairman of the International Trade Commission; Judge Jose Linares, USDC, NJ; Judge James Otero, USDC, Cal; Chief Judge Jane Restani, US Court of International Trade.


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