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Vol. I: Issue 13 | September 6, 2006  |


The EU – U.S. controversy over the spread of unauthorized genetically modified rice fuels the already infected cross-Atlantic GMO debate.

The European Union recently imposed restrictions on U.S. rice entering the EU, making it necessary to certify that such rice is free of genetically modified (“GM”) strain. The EU emergency measures were imposed after the U.S. notified the EU that unauthorized spread of a certain type of genetically modified rice, LL Rice 601, had been detected in the U.S. EU authorities, however, are not able to guarantee that GM rice has not entered the EU before the safety procedures were introduced.

Certificates must be issued by accredited laboratories using validated testing methods. Consignments lacking the necessary certificates will be sent back to the U.S. or destroyed at the border. The measures will be in place for at least six months, when the EU will reassess the need for continued restrictions.

As a consequence of the EU measures, U.S. rice imports and U.S. rice prices have dropped dramatically in the EU, and Bayer CropScience, the producer of LL Rice 601, has been sued by U.S. rice producers, claiming that the company failed to prevent its GM rice from contaminating their crops.

The EU reaction underlines the long-standing EU-U.S. disagreement over the potential risks involved in GM food. Both U.S. authorities and Bayer CropScience have found that the rice in question represents no risk to humans or the environment. However, strict EU safety requirements reflect the fact that EU consumers remain largely skeptical to GM food.

The EU position is currently under review in the WTO dispute settlement. The WTO Panel has been asked to consider whether there is a suspension of approvals of biotech products in the EU contrary to WTO rules and whether restrictions maintained by certain EU Member States on the importation and marketing of biotech products that have already been approved by the EU are WTO illegal. A confidential interim decision of the WTO Panel that was leaked in February this year established that the EU previously did have a moratorium in place and that this lead to "undue delay" in 24 out of 27 contested GM food approval processes. This finding does, however, only relate to historical facts since the EU changed its GMO approval system in 2004. Nevertheless, according to the leaked information, the Panel also came to the conclusion that the national bans by EU Member States contravene WTO rules. The official decision is due shortly.

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


European Commission publicly acknowledges that it has started a comprehensive review of the way that the EU will apply anti-dumping measures in the future. Confirming widespread speculation that EU Commissioner Peter Mandelson is unhappy with the inflexibility built into the way that the EU applies its anti-dumping laws, the European Commission has discreetly confirmed that a wholesale review of this trade remedy law is underway.

The acknowledgement comes from the European Commission as part of its public defense of its handling of the controversial anti-dumping case involving leather shoes from China and Vietnam. Faced with criticism from all sides, the Commission has used this problematic case as a catalyst for triggering discussions on how these pressures can be better handled in the future. Although the public statement seems to point towards the review of the future application of the EU's “Community interest” test, it seems that the review is far more comprehensive.

Explaining the rationale for the review, the European Commission stated that:

“A periodic review [of the EU Basic Anti-Dumping Regulation] allows us to ensuring [ sic ] public confidence in this instrument, and to make sure they are able to change if necessary to reflect a changing world. Many European companies now have global supply chains and invest and produce outside of the EU market. The EU's economic interests are global and highly complex. To be able to respond to these changing circumstances, we need to be sure that our trade defense instruments and our use of them take account of the new realities of globalization. However, there is no question of removing Europe's right of recourse to anti-dumping measures.”

Some of the ideas being explored clearly indicate that the Commission's thinking goes well beyond these parameters. Specifically, ideas being considered are:

  • Strengthening the Community interest test to require European complainants to establish that their interests in protection prevail over other European interested parties – including the supply chain – rather than the current situation where this is presumed.
  • Requiring business plans from complaining companies to see how they plan to restructure their activities to meet global competition.
  • Increasing the de minimis rules to allow non-EU exporters to avoid anti-dumping measures where small dumping margins are found or their share of the Community market for the product in question is small.
  • Retroactive repayments of anti-dumping duties where interim reviews are carried out and lower dumping margins are found to exist.
  • Exclusion of the sales of exporters found not to have been dumping from the assessment of material injury which is required to be satisfied before anti-dumping measures are imposed.
  • The introduction of an explicit rule providing that sampling is also possible where there is a high number of claims for Market Economy Treatment (MET) which impacts largely on exporters from China.

Understandably, it will take some time before the European Commission decides which of these reforms should be incorporated formally – either through changes in the EU's Basic Anti-Dumping Regulation or via administrative practice – into EU anti-dumping policy. At the same time, however, the orientation of these proposals suggests a definitive move towards greater account being taken of interests other than simply those of EU industries which was previously the case.

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


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. Innovative e-discovery approaches are the subject of a special Crowell & Moring roundtable on October 25.

Crowell & Moring presents a roundtable discussion on "Meeting the Challenges of E-Discovery and Digital Information Management."  The proliferation of electronic information and recent amendments to the Federal Rules of Civil Procedure highlight the need for companies to have firm command of electronic records retention, management and litigation readiness policies and programs.  Our panel of experts will lead a roundtable discussion on issues relating to best practices in preservation, discovery and negotiation of electronic materials. For more information, or to sign up for the roundtable discussion, please contact Jena Talarico at

After Doha: Practical Approaches for Cutting the Costs of Trade

Part 2: Classification Review

This is the second installment in our continuing series on ways for companies to improve their bottom lines by scrubbing their supply chains, enhancing export sales, and cutting import duties in the post-Doha environment. Last week, we talked about the value of imported merchandise and ways to reconsider it. Now, here's the second half of the import duty calculation: the tariff classification of imported merchandise, and why it may be more complicated – and interesting – than you think.

Tariff Classification, or Is Your DOG a WITCH? 

Here's the scenario: you're an importer of holiday specialty items, and your shipment of Halloween merchandise is on the water. Glow-in-the-dark skulls, candy corn, pumpkin-carving kits, rubber spiders, and a skeleton for the closet – they'll all be here soon. Deep in the shipping container is the hottest new seller of all: PET COSTUMES! That's right – this year, even the family animals are getting in on the holiday fun with customized costumes to turn the domestic dogs and cats into spooky witches and devils.

Cute? Sure. Fun? Absolutely. But, from an importer's standpoint, every imported item has to be classified under the tariff schedule – what on earth is the classification for a pet costume? If you guessed “textiles and apparel” (they're made of polyester), you'd be wrong. “Holiday novelty items” is another obvious possibility; unfortunately, according to U.S. Customs and Border Protection, it's also another wrong answer.

So what's the RIGHT answer? As it turns out, Customs has consistently found that pet costumes are classified as “saddlery.” As in saddles, bridles, and stirrup leathers. We know it sounds crazy, but it's true – and what's more, the duty rate on “saddlery” is 2.8 percent – significantly lower than most of the textile/apparel and holiday novelty categories!

Even for you non-importers of pet costumes, the larger point is that tariff classification is complicated and unpredictable. As a result, classification questions and debates can arise in almost any industry. Is the colorant in an ink jet cartridge a “printing ink” or “synthetic organic coloring material?” Are digital camera accessories “computer peripherals” or “photography equipment?” Most importers see this type of sticky question sooner or later, and they know all too well the difficulties that it can create – what many don't focus on, though, are the opportunities for cost savings that tariff classification presents.

For new products, the classification may not be as obvious as it appears – just ask the pet costume importers. In addition, the classification of products that have been imported for years doesn't always stand still. The tariff schedule is changed, Customs issues new rulings (and ruling revocations) and the nature of goods and the way they're perceived evolves over time. As a result, a careful review of tariff classification at the outset – and periodic reviews of existing classifications over time – can pay for itself many times over.


C&M has helped many companies save on trade-related expense and recover funds unnecessarily paid to the government. In many cases these efforts are undertaken at no cost to the client because the firm is compensated solely from the savings and/or proceeds.

* * *

Crowell & Moring's Customs lawyers are experienced in all aspects of tariff classification – for more information on these or other Customs issues, please contact Barry Cohen or Alex Schaefer in Crowell & Moring's Washington, DC office at and

Next Issue: Classification in the Court of International Trade.

C-TPAT Develops New Minimum Security Criteria for Foreign Manufacturers effective August 29, 2006.

The U.S. Customs and Boarder Patrol (“CBP”) has developed new minimum security criteria for foreign manufacturers. The program is now only open directly to Mexican manufacturers.  Other foreign manufacturers can participate only after asking CBP for an invitation to do so. The new security criteria are effective as of August 29, 2006. Existing foreign manufacturers C-TPAT members have 90 calendar days from this date to implement the new security criteria.

The minimum security criteria enhance the foreign manufacturer's ability to secure its supply chain, diminishing the possibility of criminal activity that could lead to terrorism or terrorist activity. The CBP lists the following security measures that must be applied and maintained throughout the foreign manufacturers supply chain:

  • Business Partner Requirements: the development of a written and verifiable process in selecting business partners.

  • Container & Trailer Security: the development of procedures to prevent the contamination of containers and trailers.

  • Physical Access Controls: the development of procedures to prevent the unauthorized entry to facilities, maintain control of its employees and visitors, and protect company assets.

  • Personnel Security: the development of procedures to cull potential employees and check current employees.

  • Procedural Security: the development of security procedures to maintain the integrity and security of the transportation, handling, and storage of cargo.

  • Physical Security: fencing, gate and gate houses, parking security, building structure that prevents unlawful entry, looking devices and key controls, lighting, and alarm system and video surveillance.

  • Information Technology Security: development of password protection and a system that identifies any abuse of the technology.

  • Security Training and Threat Awareness: the development of a program that generates awareness to the threat of terrorists and contraband smugglers at each point in the supply chain.

To apply, the foreign manufacturer must submit an online application found at and a comprehensive security profile. Thereafter, the applicant must perform a self-assessment of its security supply chain procedures using the aforementioned criteria to determine its level of operational security. Upon completion of the application process, the foreign manufacturer will be assigned a CBP C-TPAT Supply Chain Security Specialist (SCSS) who will commence the validation process.

While many have questioned the existence of real benefits of C-TPAT membership, they have been reported to include:

  1. social responsibility;
  2. reduced inspections;
  3. reduced cargo loss;
  4. assignment of an account manager;
  5. cost savings (ISA, ACE, Account treatment);
  6. competitive advantage (customers expect it);
  7. brand protection (avoiding negative unsecure associations); and
  8. a 'stamp of approval' from CBP, similar to an ISO standard, with process documentation demonstrating quality.

Perhaps the most compelling motivation is business relationships. Big US importers have leverage, according to former Commissioner Bonner, and can encourage, if not enforce, supply chain security.

For companies seeking an objective measure of the benefits, a new study just released by Stanford University researchers have identified so-called “spillover” benefits of enhanced security. According to their research, which was co-sponsored by the National Association of Manufacturers (NAM) and IBM, polled supply chain participants and found that they experienced:

  • 38 percent reduction in theft/loss/pilferage
  • 37 percent reduction in tampering
  • 14 percent reduction in excess inventory
  • 12 percent increase in reported on-time delivery
  • 50 percent increase in access to supply chain data
  • 30 percent increase in timeliness of shipping information
  • 43 percent increase in automated handling of goods
  • 30 percent reduction in process deviations
  • 49 percent reduction in cargo delays
  • 48 percent reduction in cargo inspections/examinations
  • 29 percent reduction in transit time
  • 28 percent reduction in delivery time window
  • close to 30 percent reduction in problem identification time
  • better response time to problems and problem resolution time
  • 26 percent reduction in customer attrition
  • 20 percent increase in number of new customers.

This complete study can be found here.

For more information please contact Nicole Jenkins at or Matthew Jaffe at in our Washington, DC office.

Bureau of Industry and Security Holds Regional Meetings with the Public to Explain New Proposed Export Control Rules for China.

Officials from the Bureau of Industry and Security (“BIS”) held meetings during August in Boston, Chicago, Houston and La Jolla to explain and answer questions about a proposed rule currently open for public comment which would revise and clarify the United State's policy for exports and re-exports of dual-use items to China. BIS was fortunate to have over 50 attendees representing several different companies at the La Jolla session. Crowell & Moring's Irvine office lawyers Don Sovie and Brian Peck attended this session in late August, and have this update on the BIS initiative.

To recap, the new rule would place an additional 47 items on the Commerce Control List that BIS believes could make a material contribution to the military capability of China and would place controls on these items (which otherwise would not require an export license) when an exporter has knowledge that such items are for a military end-use. BIS clarified that these controls are not targeting end-users; use is the key regardless of who does it. “Military end-use” is defined in the rule as “incorporation into, or use for the production, design, development, maintenance, operation, installation, or deployment, repair, overhaul or refurbishing of items” described on the U.S. Munitions List, the International Munitions List, or items ending in “AO18” on the Commerce Control List. In La Jolla, BIS stated that it is still considering a refinement of the definition for “military use,” particularly with regard to further defining the terms, e.g. incorporation into, design, etc.

With respect to the proposed rule's goal of creating new authorization for validated end-users in certain destinations, including China , to whom certain, specified items could be exported or re-exported without the need of a license, BIS intends to publish a list of validated end-users to permit exports by any U.S. company. According to BIS officials, there will be no time limit for a validated end-user to remain on the published list, unless some reason arises for the end-user to be removed. In addition, BIS officials clarified that a license would not be required for deemed exports related to the validated end-user. This authorization for validated end-users under the proposed rule is not China-specific, and BIS officials stated in La Jolla that once the proposed rule becomes final, the authorization will begin with China and then India would be next.

With regard to how a U.S. company can obtain approval for its customer to be a validated end-user, BIS announced that it is developing a template for an application that it will make publicly available, and is planning to complete the approval process for a validated end-user within thirty days. BIS officials recommended companies to talk with BIS beforehand to make sure the submission is as complete as possible in order to ensure a timely approval.

Attempting to blunt some of the criticism heard thus far, BIS reported in La Jolla, that China has not indicated that it could not handle the additional volume of End-User Certificates. This issue was raised because the proposed rule would also require exporters to obtain an End-User Certificate issued by China's Ministry of Commerce for all items that require a license for export to China for any reason and exceed a total of $5,000. The current China End-Use Certificate applies only to items controlled for national security reasons. The proposed rule would also eliminate the current requirement that exporters submit China End-User Certificates to BIS with their license applications. However, exporters must retain the Certificates for five years.

Representatives from companies such as Ingersoll Rand, Teledyne, General Atomics and Cisco Systems attended the La Jolla session, as well representatives from a spectrum of California exporters. The primary concern of the companies represented was how the proposed rule would place new compliance requirements on their exports of commercial items to China, how to obtain a validated end-user classification for their customers in China, and how to seek further clarification of the proposed rule's effect on their specific items.

The public comment period for the proposed rule ends on November 3, 2006, and BIS officials specifically requested that interested parties submit comments on the foreign availability of the additional 47 items in China either: 1) from other countries; or 2) because of indigenous capability to produce within China. BIS would consider such comments in determining whether to maintain all 47 items in the final rule.

BIS officials stated that they expect the final rule to be published in early 2007, although they held out the slight possibility at the meeting in La Jolla that a second revised proposed rule would be published first with a shorter public comment period.

For more information about this proposed rule, the process for obtaining a validated end-user classification or about submitting a public comment , please contact either Don Sovie or Brian Peck in our Irvine, California office; or Jeff Snyder in our Washington, DC office at, or

With the collapse of the World Trade Organization's Doha Round and no clear timeline for its resurrection, member countries are expected to focus renewed attention on bilateral and regional free trade agreements (FTAs). The U.S. is currently in negotiations on FTAs with Korea, Malaysia, Thailand, Panama, Ecuador and the United Arab Emirates (UAE).

The U.S.-Korea FTA (KORUS) is the most economically significant FTA currently in the legislative pipeline, with the third round of negotiations scheduled to take place the week of September 4 in Seattle. The agreement offers huge potential benefits to businesses through the lowering of tariffs and the provision of more robust legal and regulatory polices on investment and intellectual property rights.

The pact is currently on track to be completed by the end of this year, despite friction over recent changes in Korea's pharmaceutical reimbursement policy, according to U.S. trade officials. While it was the pharmaceutical issue that brought a premature end to the second round of talks in July, additional hurdles remain, such as beef, automobiles, and the treatment of products from the Kaesong Industrial Complex, a shared venture between North and South Korea. Among the most contentious agricultural issues is rice, a long and highly protected market in Korea. In the past Korea has steadfastly refused to liberalize the rice industry, citing the importance of national food security. Success on this issue and the conclusion of the agreement overall will require the active participation of businesses on both sides of the agreement.

The third round of U.S.-Malaysia FTA negotiations is scheduled for the week of September 18 in Kuala Lumpur. U.S. trade officials say that the second round of talks, completed in Washington in mid-July, was productive and made solid progress. The biggest areas of concern for Malaysian negotiators are with moving beyond precedents set in prior agreements (such as the Malaysia-Japan FTA).

These talks have progressed more cautiously than Korea : according to U.S. officials, no "deal breaker'' issues have yet been raised by the Malaysian side. The clock is ticking, as the business sector is being given extra time to engage officials from both sides, and perhaps give the negotiations some added momentum going into this critical phase. U.S. trade officials are specifically asking the U.S. business community to highlight the benefits that Malaysia would gain from the FTA, hoping to bolster public opinion.

Prospects for the other U.S. FTAs under negotiation are mixed, due to an uncertain political climate in both the U.S. and its partner countries. The U.S.-Ecuador FTA has been put into a “deep freeze” after Ecuador seized the assets of a U.S. oil company. The U.S. government is seeking clarification on this issue; however prospects are dim as the negotiations have already stalled due to differences on agriculture and intellectual property. The U.S.-UAE FTA experienced a brief cooling off period following the Dubai ports controversy; however both sides appear confident that talks will continue. The U.S.-Thailand FTA talks remain on hold in the wake of the political crisis that has gripped the country since early this year. Thailand is scheduled to hold fresh parliamentary elections on October 15. In principle, FTA talks could resume soon after that, but negotiators will be under pressure to complete the agreement in time for Congress to ratify the pact before the President's Trade Promotion Authority (TPA) expires next June.

Indeed, overshadowing individual trade agreements and legislative initiatives, however, will be Congress' receptiveness to renewing the President's negotiating authority. Trade Promotion Authority (TPA) provides for the passage of trade agreements with an “up or down” vote (no amendments), and under timeframes that guarantee moving agreements through the legislative process. Renewed TPA is needed to conclude the Doha Round and any other pending negotiations on trade agreements that may not come to a close by the end of 2006. Moreover, TPA would be needed to enable the U.S. to enter into negotiations with new FTA partners, such as Taiwan, Indonesia, the Philippines or Japan. The EU is expected to pursue its own ambitious strategy of negotiating “Economic Partnership Agreements”, particularly in Asia. If the U.S. does not have TPA after June 2007, it will be harder to use new negotiations as tools for pursuing trade policy objectives. Trading partners are often reluctant to enter into negotiations with the U.S., and especially to bargain over politically sensitive issues, if these carefully-crafted outcomes can be undone through amendments once agreements go to Congress for consideration.

For more information, please contact Amy Jackson or Kate Clemans, C&M International, at or

The U.S. considers sanctions options on Iran. As the deadline for UN action approaches, the U.S. is considering "plan B" tactics to turn put pressure on Iran if the UN does not act. The U.S. has been turning up the heat on Iran through strict enforcement of its direct sanctions and increasing use of its indirect sanctions.

Direct action. U.S. exporters and non-U.S. exporters handling items subject to the EAR, in transactions involving Iran, have increasingly been the target of BIS/ICE enforcement focus. See BIS, Major Cases List, July 2006 ( for a summary of recent BIS enforcement actions involving Iran. Even though U.S. companies cannot operate in Iran, offshore subsidiaries have limited opportunities. Nonetheless, many have begun to pull out in response to U.S. pressure and the risk of noncompliance. Even non-U.S. companies with ties to the U.S. face exposure. In conjunction with other agencies, OFAC recently imposed an $80 million fine on ABN Amro for its activities related to Iran and Libya.

Indirect action. The recent sanctions imposed on Russian companies (See ITB Vol. I, Issue 12 and elsewhere in this issue) are just the latest example of formal and informal measures the U.S. has employed to thwart Iran's commercial activity. The U.S. forced a German company, ThyssenKrupp, to buy back shares owned by an Iranian government-owned investment company; reducing the holding from 7.79% to about 5%, a level acceptable to the U.S. Government.

Japan has agreed to freeze Iranian assets. In June, according to the Financial Times, “ Japan has told the U.S. it is ready to freeze bank accounts held by Iran and its leadership in support of an America-led coalition preparing sanctions in the event that Iran refuses to halt its nuclear fuel programme.” According to the Los Angeles Times last week, “The Bush administration has indicated it is prepared to form an independent coalition to freeze Iranian assets and restrict trade if the U.N. Security Council fails to penalize Tehran for its nuclear enrichment program.”

With Congress returning this week from recess, we expect to see increased debate over the renewal of ILSA, the Iran and Libya Sanctions Act, which was temporarily extended until September 29, 2006. This will no doubt provide an opportunity for Congressional exploration of U.S. policy toward Iran in the wake of Iran's failure to abide by the UN mandate.

The unpredictable nature of the U.S. response to an unpredictable set of events requires all global companies, whether doing business in Iran or not, to consider compliance with U.S. extraterritorial laws.

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

Commission Announces New Initiatives on EU-U.S. Passenger Data Transfer: More of the Same or Expanded Access to Such Data?

The European Commission recently announced two initiatives to comply with the Ruling of the European Court of Justice on the transfer of Passenger Name Record (“PNR”) data of air passengers to the United States. Resolution of these issues could come in the next 30 days.

The Ruling of the ECJ on 30 May 2006 in Joined cases C-317/04 and C-318/04 annulled both the Commission Decision on the adequacy finding and the Council Decision on the conclusion of the PNR Agreement with the U.S. It obliges the Community Institutions to terminate the Agreement on the transfer of passengers' personal data with the United States by 30 September 2006 at the latest.

The Commission has asked the Council for authorization to open negotiations for a new agreement with the U.S. on the use of PNR data to preserve current levels of protection from terrorism and transnational crime. The Commission is working closely with the other institutions, to ensure full compliance with the Court ruling but is also underscoring its commitment to continue the fight against terrorism.

Significantly, the Court ruling did not criticize the content of the current Agreement, merely the legal framework on which it is based. Therefore, much of the content of the current Agreement may be transposed to the new Agreement, which will be on the basis of Art. 38 of Title VI, Treaty on European Union - the correct legal basis for an International Agreement on matters dealing with public security and criminal law. In this way the new Agreement can continue to offer the same level of safeguards regarding the legal certainty for air carriers, whilst also respecting the human rights of passengers.

Meanwhile, security officials, particularly in the U.S., see the need to adopt a new agreement as a golden opportunity to expand the information available to them and to loosen some of the restrictions on access to that information. Such an expansion, however, is likely to raise grave objections from privacy advocates on both sides of the Atlantic and some European Institutions like the European Data Protection Supervisor and the European Parliament.

For more information, please contact Jan Dhont in our Brussels office at

Focus on Iran – Singapore Airlines Joint Venture Sanctioned by OFAC.

The U.S. government continues to focus its sanctions and export enforcement efforts on Iran, with recent actions by both the Treasury Department's Office of Foreign Assets Control (“OFAC”) and Commerce's Bureau of Industry & Security (“BIS”) sanctioning foreign companies for exports of missile-related items and pipe cutting equipment, respectively. These actions follow on the heels of the State Department's recent sanctions against seven Russian, Korean, Cuban and Indian companies, reported in our last issue (See ITB Vol. I, Issue 12).

On August 16, OFAC added Chinese air cargo carrier Great Wall Airlines (“GWA”) – a joint venture 49 percent owned by Singapore Airlines ("SA") and SA's state-owned, controlling shareholder Temasek Holdings – to the list of Specially Designated Nationals (the “SDN list”), as a purported proliferator of weapons of mass destruction. China Great Wall Industry Corporation (“CGWIC”), GWA's 51 % owner, and CGWIC's U.S. subsidiary, G.W. Aerospace, Inc., were added to the SDN list in June for supplying Iran with “missile-related and dual-use components.” GWIC has also been subject to State Department sanctions under the Iran Nonproliferation Act of 2000 since December 2004 for transferring controlled technology and equipment to Iran.

Under Executive Order 13382, assets of entities on the SDN list for WMD proliferation reasons are blocked assets in the U.S., and U.S. persons wherever located and foreign persons within the U.S. are prohibited from engaging in transactions or dealings with listed entities.

The broad reach of OFAC's sanctions have led GWA – which began operations in May – to suspend all flights, reportedly because the sanctions mean they can no longer receive technical and safety support from U.S. aircraft companies. According to press reports, Singapore Airlines, which announced its $31 million investment in GWA in May 2005, is seeking GWA's removal from the list and says the sanctions have “nothing to do with” GWA's operations.

In other Iran-related news – and once again demonstrating the extraterritorial reach of U.S. sanctions and export controls – the Swiss global transport and logistics company Gondrand AG, its U.S.-based subsidiary Go-Trans (North America), and their respective Senior VP and COO entered into consent agreements with BIS for various alleged violations of the Export Administration Regulations involving the unauthorized export of pipe cutting equipment to Iran. BIS imposed total, collective fines of $119,000 on the two companies and the two individuals personally.

In addition to reminding global companies of the broad reach of U.S. export laws, this new enforcement activity underscores the potential of personal liability for senior management and the need for exporters to have a robust compliance program with a method for monitoring developments affecting their international trade partners, customers and suppliers.

For further information, please contact Lorry Halloway at or Carrie Fletcher at in our Washington DC office.

Japanese Executives Arrested for Violation of Japan's Export Control Laws.

Japan recently arrested executives who allegedly used an elaborate system of overseas re-exports to sell sophisticated precision equipment that could be used to help enrich uranium for weapons and evade Japan's licensing requirement and export controls for such machines.

Under Japanese export control rules, the sophisticated precision instruments at issue – three dimensional measuring machines – are considered to be “dual-use” items which, although have a commercial application – such as use for the manufacturing of precision auto parts – can also be used for developing weapons of mass destruction. Japanese export control rules require manufacturers to obtain permission from the Ministry of Economy, Industry and Trade (METI) to export precision measuring devices; and classify Iran, Iraq, Libya and North Korea as "states of concern." A company needs METI's permission if it wants to sell precision measuring devices that could be used in the development of nuclear weapons to these four countries.

The company, Mitutoyo, is alleged to have evaded the licensing requirements for over a decade by selling the precision measuring equipment to its overseas subsidiary in Singapore before being re-exported to the actual end-user which included countries that required a license from METI. The company's executives were arrested for allegedly exporting the instruments from Japan to the Singapore subsidiary in 2001 and then illegally re-exporting them to a Malaysian company which thought that it was shipping the instruments to Dubai for oil and gas production. Instead, the instruments were then shipped from Dubai to Libya. An investigation is underway to determine whether similar instruments were also shipped to Iran.

According to press reports, the executives went to great lengths to circumvent the export law: “In addition to disguising the precision machines to make them appear to have lower capabilities, Mitutoyo filed export permit applications with customs in which it falsely said their overseas arms were the final destinations of the machines, in order to bypass curbs on exports to countries and firms suspected of developing WMD.” The circumvention scheme was apparently developed to reverse a slide in sales in the early 90s.

U.S. export control laws also extend beyond the original export from the United States. A U.S. exporter of dual-use items that fall under U.S. export control restrictions is subject to licensing requirements and/or a possible prohibition of any re-export to the final end-user even if the original transaction did not face any licensing requirements or restrictions.

For more information on export control rules, please contact Brian Peck in our Irvine, California office or Jeff Snyder in our Washington, DC office at or

Crowell & Moring's Brussels office to host a seminar on "Trade Association Activity - Antitrust Pitfalls and Compliance Strategies" on November 30, 2006. The seminar will begin at 5:30 pm with a cocktail reception from 7:00 to 8:00 pm. If you are interested in attending, please contact Noelia Fernandez at

Crowell & Moring International Trade Counsel, Brian Peck, authored an editorial piece titled, "Benefits of the ROK-U.S. FTA," which appeared in The Korea Times. You can read the article in it's entirety on The Korea Times' website. (

In group news, Erin Mikita, an associate in the trade group, has returned to Washington after several months in our Brussels office. The trade practice lawyers in Washington and Brussels work closely together on international trade law issues.


Crowell & Moring LLP is a full-service law firm with more than 300 attorneys practicing in litigation, antitrust, government contracts, corporate, intellectual property and more than 40 other practice areas. More than two-thirds of the firm's attorneys regularly litigate disputes on behalf of domestic and international corporations, start-up businesses, and individuals. Crowell & Moring's extensive client work ranges from advising on one of the world's largest telecommunications mergers to representing governments and corporations on international arbitration matters. Based in Washington, DC, the firm has offices in Brussels, California and London. Visit Crowell & Moring online at

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