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Global Management: Import/Export US and EU Perspectives on
Rules and Compliance
ALL HANDS MEETING
International
Santa Clara, CA
May 16, 2013
John Brew
Laurent Ruessmann
Crowell & Moring
John Brew
Partner, International Trade
Laurent Ruessmann
Partner, International Trade
1
2
US Prospective: Reducing Costs on Imports and Minimizing Risks on
Exports
John Brew
Reducing Costs on Imports and Minimizing
Risks on Exports
» Overview of Global Trade Rules
– Unique import Rules for Hi-Tech Products
– Recent Hi-Tech Import Issues
– Cost Reduction Strategies
» Minimizing Risks on Exports
– Export Controls
– Sanctions
3
Reducing Costs on Imports
Overview of Global Trade Rules
» World Trade Organization (WTO) – tariff rates based on
Harmonized System (HS) Classification
» WTO Valuation Agreement – value based on
international rules
» Origin – Free Trade Agreements, Unilateral Preference
Programs and Marking
» Informational Technology Agreement (ITA)
» Duty Amount = HS rate x value
4
Reducing Costs on Imports
Global Trade Rules – HS Classification
» World Custom Organization (WCO)
» Structure
– Numerical Coding System
– 97 Chapters / 21 Sections
– Progressive (raw materials to hi-tech)
– 5000 items – all products
– Special National Provisions
» General Rules of Interpretation
– GR1 – According to terms of headings/legal notes
– GR2 – Unfinished goods
– GR3 – Mixtures and specificity
» WCO Explanatory Notes, Opinions and Disputes 5
6
Global Trade Rules
HS Classification - Example
7
Harmonized Tariff Schedule of the United States (2012) - Supplement 1 (Rev. 1) Annotated for Statistical Reporting Purposes
X V I - 4
Heading/
Subheading
Stat
Suf-
fix Article Description
Unit
of
Quantity
R a t e s o f D u t y
2
General Special
8528 Monitors and projectors, not incorporating television
(con.) reception apparatus; reception apparatus for television, whether or not incorporating radio -
broadcast receivers or sound or video recording or reproducing apparatus (con.)
Other monitors:
8528.51.00 00 Of a kind solely or principally used in an automatic
data processing system of heading 8471 No. Free 35%
8528.59 Other:
Color:
Incomplete or unfinished (including assemblies consisting of the parts
specified in subdivisions (a), (b), (c) and (e) in additional U.S. note 9 to
this chapter plus a power supply), presented without a display device:
8528.59.05 00 Incorporating video recording or
reproducing apparatus No. Free 25%
8528.59.10 00 Other. No. Free 35%
With a flat panel screen:
Incorporating video recording or reproducing apparatus:
8528.59.15 00 With a video display diagonal not
exceeding 34.29 cm. No. Free 25%
Other:
Global Trade Rules
HS Classification - Example
8
Harmonized Tariff Schedule of the United States (2012) - Supplement 1 (Rev. 1) Annotated for Statistical Reporting Purposes
X V I 8 5 - 3
Additional U.S. Notes (con.)
6. For the purposes of additional U.S. note 5 above the term "complete television receivers" means television receivers, fully assembled in their cabinets, whether or not packaged or tested for distribution to the ultimate purchaser(s).
10. For the purposes of subheading 8540.91.15, the term "front panel assembly" refers to:
a. with respect to a color cathode-ray television picture tube, an assembly which consists of a glass panel and a shadow mask or aperture grille, attached for ultimate use, which is suitable for incorporation into a color cathode-ray television picture tube (including video monitor cathode-ray tube), and which has undergone the necessary chemical and physical processes for imprinting phosphors on the glass panel with sufficient precision to render a video image when excited by a stream of electrons; or
b. with respect to a monochrome cathode-ray picture tube, an assembly which consists of either a glass panel or a glass envelope, which is suitable for incorporation into a monochrome cathode-ray television picture tube (including video monitor or video projector cathode-rate tube), and which has undergone the necessary chemical and physical processes for imprinting phosphors on the glass panel or glass envelope with sufficient precision to render a video image when excited by a stream of electrons.
11. For the purposes of subheading 8538.90.10, the expression "articles described in additional U.S. note 11 to chapter 85" means any of the following goods: photocopying apparatus of subheading 8443.32.30, 8443.32.50, 8443.39.20 or 8443.39.40; word processing machines of hea ding 8469; articles of heading 8470 or heading 8471; automatic teller machines of subheading 8472.90.10; articles of subheadings 8486.10 through 848 6.40; articles of heading 8517; articles of subheading 8519.50; transmission apparatus of subheading 8525.50.10; articles of subheading 8525.60; digita l still image cameras of subheading 8525.80.40; articles of subheading 8543.70.92; plotters of subheading 9017.10.40 or 9017.20.70; instruments and ap paratus of heading 9026; instruments and apparatus of heading 9027 except of subheading 9027.10 or 9027.90.20; instruments and apparatus of subheading 9030.40; instruments and apparatus of subheading 9030.82; optical instruments and appliances of subheading 9031.41; optical instruments and applia nces of subheading 9031.49.70; articles of subheading 9031.80.40.
12. For the purposes of subheading 8517.69.00, the term "paging receivers" includes paging alert devices designed merely to emit a sound or visual signal (e.g., flashing light) upon the reception of a pre-set radio signal.
13. For the purposes of subheadings 8528.59.21 and 8528.59.31, the term "flat panel display devices designed for use with an automatic data processing machine" refers to monitors that have as a purpose operation with an automatic data processing (ADP) machine of heading 8471, such monitors being able to display signals or data from an ADP machine in a form that meets the requirements of the user.
Such monitors need not be shown to be solely or principally for use with an ADP machine and may also be capable of displaying signals or data from devices other than ADP machines.
Global Trade Rules
Valuation
» WTO Agreement – Hierarchical Methods Applied
– Transaction Value Preferred
• Price paid or payable
• Related party issues
• Additions and deductions
– TV of Similar or Identical Merchandise
– Computed Value
– Deduction Value
– Fallback Value
» WCO Disputes and Opinions
» National Implementation
9
10
Global Trade Rules
Origin
» Free Trade Agreement
– Rule of Origin
– HS Shift or Regional Value Content
» Unilateral Preference Programs
» Marking
» Government Contracts
11
Global Trade Rules
Information Technology Agreement
» WTO enforced, signed 1996, complete elimination of
tariffs effective 2000
» Covers broad range of IT products
– Computers and peripherals
– Electronic components, semi-conductors
– Computer software
– Telecommunications
– Semiconductor manufacturing equipment
– Computer instruments
» Coverage by HS and product description
12
Unique Hi-Tech Rules
» HS Classification
– ITA duty free breakouts
– Special tariff remission laws (e.g., MTB)
– ADP use issues
» Valuation
– Media content rules
– R&D, royalties and reconciliation
» Origin
– Substantial transformation and software content
13
Recent Hi-Tech Issues
» EU ITA dispute
» WCO Proceedings
– Tablet computers
– LEDs
– Monitors
» WCO and US HS Changes
» ITA II – International Trade Commission Reports
» National Enforcement and Interpretations of ITA
» US MTB Legislation
» IP – ITC 337 Investigations
14
Cost Reduction Strategies
» Find the duty spend
» HS classification
» ITA I and II
» Valuation
» Origin – sourcing and rule changes
15
US Perspective: Minimizing
Risks on Exports
US Export Overview
» Overview of export control regimes and regulations
» Strategies to manage and evaluate risk
» Why does it matter?
– Increasingly globalized marketplace + new regulatory
developments + stepped up enforcement = increased risk
17
Challenges & Risks
» Well-trained engineers, capital, and technology no longer
concentrated in one country or region;
» Export controls and regulations are complex and can
change with little notice or warning;
» Violations are punished by fines, temporary/permanent
export bans, imprisonment of senior executives, and can
lead to negative publicity;
» Companies need to evolve their own practices to fit their
unique organizational structure and business practices.
18
Primary Players
» Department of Commerce
– Commercial/dual-use goods, technology and software
» Department of State
– Military hardware, technology, software
– Defense services
» Mutually-exclusive jurisdiction
» Commodity jurisdiction requests to State
19
Commercial / Dual-Use Items
» Department of Commerce
– Bureau of Industry & Security (“BIS”)
– Export Administration Regulations (“EAR”)
– Commerce Control List (“CCL”)
20
Activities Controlled under the EAR
» Transfer/movement from the US to foreign destination
– By any method
– Even temporarily
» Transfers of technology or source code within the U.S.
» Release abroad of technology or software
» Reexports of U.S.-origin items
» Exports of certain foreign-made items
21
Basic Concepts under the EAR
» Most exports and re-exports will not require a license
» Nevertheless, exports to some destinations or end-users
will need a license (know “what,” “where,” “who,” and
“what use”)
» “Red flags” indicating abnormal circumstances
22
Encryption Controls
» Determining obligations under EAR controls for products
designed to use encryption
– Classification
– Review and Reporting Requirements
23
Military Items
» Department of State
– Directorate of Defense Trade Controls (“DDTC”)
– International Traffic in Arms Regulations (“ITAR”)
– U.S. Munitions List (“USML”)
24
Basic Concepts Under the ITAR
» Most exports and re-exports will require a license
» If an item is on the USML, its export will require a State
Department license or other authorization unless an
exemption applies
» Manufacturers and exporters must register and notify
DDTC of certain changes
25
What is Controlled Under the ITAR?
» Defense Articles:
– Hardware
– Technical data/software (not technical data in the public
domain)
• Even if technology was developed for a commercial use, if it
is modified for a military purpose it will become ITAR-
controlled
– Defense services
26
Technology and “Deemed Exports”
» Definition
– Release of technology or source code to a foreign
national, even if within the U.S.
– Deemed to be an export to the foreign national’s home
country
» Exceptions
– Permanent residents
– Protected individuals
27
Technology and Deemed Exports
» How do releases of technology occur?
– Visual inspection by foreign nationals of U.S.-origin
equipment and facilities
– Oral exchanges of information in the U.S. or abroad
– Information exchange through emails, mail, faxes, plant
visits and video conferences
– Accessing information from U.S. or abroad of U.S.-based
databases
– Application to situations abroad of personal knowledge or
technical experience acquired in the U.S.
28
Third Federal Player
» Treasury, Office of Foreign Assets Control (“OFAC”)
– Embargoes/sanctions against countries and entities
– Each program varies in scope and prohibitions
29
Current Sanctions Programs
» Countries of Concern:
– Cuba
– Iran
– Sudan
– Syria
– Myanmar (Burma)
» Other Entities:
– Narcotics Traffickers
– Terrorists/Terrorist Organizations
– Diamond Trading
30
Specially Designated Nationals (SDNs)
» Sanctioned entities and individuals with which the US
persons are prohibited from engaging in transactions
» All transactions must be screened
31
Sanctions Programs: Who Is Covered?
» Most sanctions programs apply to U.S. Persons
– U.S. citizens and permanent residents, wherever located
– Persons physically present in the U.S., regardless of their
nationality
– Corporations or entities organized under the laws of the
U..S, including foreign branches
» Cuba sanctions
– Same as above, but also foreign subsidiaries owned or
controlled by the U.S.
32
Sanctions: Types of Prohibited Activity
» Exports of U.S.-origin goods, technology, and services
» Re-exports of U.S.-origin goods from other countries
» Imports of goods or services from embargoed countries
» Participation by U..S persons in transactions involving
embargoed countries
» Facilitation by U.S. persons of other people’s
transactions involving embargoed countries
» Travel by U.S. persons to embargoed countries (Cuba)
33
Strategies for Risk Management
» Awareness and Compliance Focus
» Understanding and Effective use of Rules and
Exemptions
» Tools & Resources for Robust Compliance Program
34
General Export
» Do you maintain export compliance policies? How
regularly are these policies updated?
» Do you have designated personnel for export
compliance?
» Do you conduct training for export compliance? How
regularly?
» Do you have a recordkeeping system for export
compliance?
» Do you conduct internal audits/reviews of compliance?
How regularly?
35
Foreign Nationals
» Do you maintain a specific HR policy addressing export
control issues arising from the employment or
assignment of foreign persons to work at your facility?
» Do you have procedures in place to ensure authorization
exists for the transfer of any controlled technology?
» Do you maintain processes for accessing the company’s
computers or databases?
» Do you have a process for managing export control risks
from foreign travel?
» Do you have procedures for visits by foreign nationals to
your facilities?
36
Commodity Classification
» Do you have any products or technology classified on
the Commerce Control List?
» Have you obtained any formal Commerce Commodity
classifications?
» Do you have any products controlled under the U.S.
Munitions List?
» Have you submitted any Commodity Jurisdiction
requests?
37
Sanctions
» Do you screen existing customers for eligibility to receive
U.S.-origin goods, services, or technologies?
– If so, when?
» Do you screen for destinations subject to sanction or
embargo?
– Do you conduct business in Iran, North Korea, Sudan,
Syria or Cuba?
» Do you screen for red flags or diversion risk
assessment?
38
EU Prospective: Reducing Costs
on Imports and Mitigating Risks on
Exports
Laurent Ruessmann
Reducing Costs on Imports and Minimizing
Risks on Exports
» EU customs rules
» EU export control & sanctions rules
» Bilateral & multilateral trade agreements: negotiations &
strategies
40
EU customs rules based primarily on same
international rules as the U.S. rules
» Same basis in international rules :
– World Trade Organization (WTO) – tariff rates based on
Harmonized System (HS) classification
– Informational Technology Agreement (ITA)
– WTO Valuation Agreement – rules for valuation
» Origin rules : not harmonised yet at WTO
– EU Free Trade Agreements
– EU GSP and other unilateral preference arrangements
» Union Customs Code (UCC) : no change of basic rules
» EU – US mutual recognition of authorised operators
41
Regulation (EC) No 450/2008: MCC
» The MCC Regulation was adopted and entered into
force in 2008 but was not yet in application
» Latest legal date for MCC implementation is 24 June
2013 but :
– New customs IT systems cannot be introduced by then
– Need to align the MCC and the related implementing
provisions to the Lisbon Treaty
– Need to introduce adjust some provisions of the MCC
because of the evolution of the relevant EU legislation
(e.g. transport safety and security) or the actual functioning
of customs procedures (e.g. temporary storage)
42
MCC/UCC highlights
43
» “Single window”, centralised customs clearance, “one-stop shop”
» Rationalisation of the legal framework and definition of customs rules and
procedures
» Greater standardisation of customs rules and their implementation, in
particular as regards rights and obligations, decisions and guarantees
» No longer national restrictions on customs representation, but possible
conditions and common criteria to be fulfilled by those wanting to act as
representatives in other Member States
» There are common rules for all types of decisions by customs authorities,
including the right to be heard and appeal procedures
MCC/UCC highlights (cont.)
44
» Prohibition against customs fees, charges and costs not corresponding to a
service actually rendered
» Binding information can possibly be extended to areas other than tariff
classification and origin
» BOI and BTI : if cease to be valid before end of the 3-year period of validity,
they can be used in respect of binding contracts based on them and concluded
before they cease to be valid (UCC, Art. 32)
» Common principles for customs penalties
» Common rules on guarantees for potential or existing customs liabilities,
covering all procedures
Reducing Costs on Imports
EU Combined Nomenclature Classification
» Changes to implement WTO and European Court
judgments re IT, multi-functional products
» New EU court judgments
» New EC classification regulations
» New EC guidelines re classification as sets
45
Classification - Implementation of WTO, EU
court judgments
» Classification regulations
» CN Explanatory Notes
46
Classification - new EU court judgments
» Rohm & Haas Electronic Materials (C-336/11)
Polishing pads intended for semiconductor wafer-polishing
machines under CN code 5911 1000, at a duty rate of 5.3%, or
under CN code 3919 9010, at a 6.5% duty rate
French CCED issued opinion saying classification under heading
8466 as ‘parts and accessories suitable for use solely or
principally with the machines of headings 8456 to 8465’, exempt
from customs duties
ECJ classified under CN code 3919 9010 holding that polishing
pads at issue not ‘parts’ or ‘accessories’ because “the
mechanical and electrical functioning of those machines is not
dependent on there being polishing pads”
47
Classification - new EU court judgments
» Digitalnet (C-320/11 and others)
Set-top boxes with a communication function manufactured in
Korea, under CN code 8528 7113, duty free, or under CN code
8528 7119, at a 14% duty rate
National customs authority found that the set-top boxes were not
equipped with an integrated modem and had to be classified
under CN code 8528 7119
ECJ held that for the purposes of subheading 8528 7113, a
modem for gaining access to the internet is a device which,
alone and without the intervention of any other apparatus or
mechanism, is capable of accessing the internet and of ensuring
interactivity and an exchange of information in both directions.
It is solely the capacity to gain access to the internet, and not the
technique used to achieve this, that is relevant for the purposes
of classification under that subheading
48
Classification - new EU court judgments
» Hewlett Packard Europe (C-361/11)
Multi-functional printers were covered by CN code 8443 31 91
(not disputed), and imported at a 6% duty rate, in April 2009
Issue was whether, if imported before 2007, would have been
under CN code 8471 6020, and duty free : if so, EC exceeded
powers when new classification increased duty rate
Machines capable of performing printing, electronic scanning
and reproduction operations came under CN code 9009 1200
because none of the functions related to those operations gave
those machines their essential character
Printers at issue perform a number of functions, none of which
can be regarded as giving them their essential character : before
2007, would have been classified under CN code 9009 1200
EU Regulation implementing as of July 2011 WTO ITA Panel
Report (adopted in September 2010) not applied retroactively
49
Classification - New classification regulations
» Remote elevator monitor (Aug 2012)
» Multi-switch for TV reception (Nov 2012)
» CCD area image sensor (Nov 2012)
» USB cable (Dec 2012)
» Passive infrared detector (Dec 2012)
» Digital media receiver (Jan 2013)
» Auto LCD display module (March 2013)
» Electric wire insulator (March 2013)
» Media player LCD module (March 2013)
50
Classification - EC guidelines re classification
as sets
» Published in April 2013, applying GIR 3(b)
» See, e.g., classification regulation re TV receiver and
transmitter (Nov 2011)
51
Valuation
» Draft implementing rules of UCC
– Treatment of royalties in customs valuation
– « First sale » rule
» EP (IMCO) report (Dec 2012) : see Amendment 52
» April 2013 announcement of informal agreement http://www.europarl.europa.eu/news/en/pressroom/content/20130422IPR07531
/html/Parliament-strikes-informal-deal-to-update-EU-customs-code
http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-
%2F%2FEP%2F%2FNONSGML%2BCOMPARL%2BPE-
510.566%2B01%2BDOC%2BPDF%2BV0%2F%2FEN
52
Origin – New ECJ judgment
» Lagura Vermögensverwaltung (C-438/11)
In 2007 Lagura imported shoes into the EU at a preferential rate,
under invalidcertificates of origin
The customs authorities of the exporting country, that issued the
certificates of origin for the goods in question, were unable to
verify the accuracy of the content of thosecertificates because
exporter had ceased production
Under Article 220(2)(b) CCC (re post-clearance recovery in case
of error of customs), if, owing to fact that exporter has ceased
production, the competent authorities are unable to determine
whether the certificate of origin they issued is based on correct
account of the facts by the exporter, burden of proving that
certificate was based on a correct account of the facts by the
exporter rests with the person liable for payment
53
Cost Reduction Strategies Same in the EU
» Find the duty spend
» HS classification
» ITA I and II
» Valuation
» Origin – sourcing and rule changes
54
Minimizing Risks on Exports
Laurent Ruessmann
Export compliance is the law
56
Introduction
» Many of the principles applicable in the US apply in the
EU
– Negotiated in international fora
– But the EU has its own peculiarities that companies
operating in or with the EU need to be aware of
» Why does it matter? Cannot assume that if comply with
US rules, comply with EU rules
– Some items are different from US (even opposed)
– Some items go beyond US controls
57
International Laws and Regimes
58
» Conventional arms and arms related dual-use controls
– Wassenaar Agreement (WA)
» Weapons of mass destructions
– UN Security Council Resolution 1540 (2004) (WMD)
– Missile Technology Control Regime (MTCR)
– Nuclear Suppliers‘ Group (NSG)
– Australia Group (AG)
– Chemical Weapon Convention (CWC)
» International sanctions
– UN Security Council Resolutions
Challenges & Risks Shared in the EU and US
» Well-trained engineers, capital, and technology no longer
concentrated in one country or region
» Export controls and regulations are complex and can
change with little notice or warning, esp. sanctions
» Violations are punished by fines, temporary/permanent
export bans, imprisonment of senior executives, and can
lead to negative publicity as well as business disruption
» Companies need to adapt practices to fit their unique
and evolving group structure and business practices
59
EU Primary Players
Military items Dual-Use Items Sanctions
Government Agency:
Council
EU Member States
Government agency:
Council
EU Commission
EU Member States
Government agency:
Council
European External Action Service
(EEAS)
EU Member States
Legal basis:
CFSP
MS Law
Legal basis:
EU Dual-Use Regulation 428/2009
MS Law
Legal basis:
EU Decisions and Regulations;
MS Law
Control List:
EU Military List
MS Military Lists
Control List:
Annexes I and IV
MS Dual-Use Lists (if applicable)
Selected Programs:
Iran, Libya, Syria, Sudan, North
Korea
Website:
http://eur-
lex.europa.eu/LexUriServ/LexUriS
erv.do?uri=OJ:C:2011:086:0001:0
036:EN:PDF
Website (guidance):
http://ec.europa.eu/trade/creating-
opportunities/trade-topics/dual-use
Website (guidance):
http://eeas.europa.eu/cfsp/sanctio
ns/index_en.htm
60
Military Items vs. Dual-use Items
Military Dual-use
Definition Item on ML or
Item specifically designed for
ML item
Item for civil application that
can also have a military use
Competent authority MS EU
MS
Control lists EU ML
MS Law
EU Transfer Directive 2009/43
Annex I Reg 428/2009,
MS Law
License requirement Export,
Intra-EU transfer
Export
Intra EU transfer (only Annex
4 Reg 428/2009)
Number structure ML 1 – ML 22 1 A 003
Re-export controls No formal controls, but
licensing requirements, EUU,
embargo rules, etc., might
impose (de facto) re-export
restrictions
No formal controls, but
licensing requirements, EUU,
embargo rules, etc., might
impose (de facto) re-export
restrictions
61
Technology Transfers
» Principle: same rules as for goods – “Item” comprises goods, software and technology
» Military technology
– License required for export and intra-EU transfer
» Dual-use technology
– License required for export (and intra-EU transfer of Annex IV items)
62
What constitutes an export/intra-EU transfer of
technical data?
» Making available in an electronic form software and technology to legal and natural persons and partnerships outside the EU (Art. 2 of Regulation 428/2009)
» Includes
– Sending technical data recorded or stored in any physical form
– Travelling with laptop or smart phone
– Sending via fax or email
– Access via servers or websites
– Telephone calls
– Also company internal communication
» Be aware of export controls when training foreign nationals in
or outside the EU – technical assistance might trigger
licensing requirement
63
Compliance Challenges
» Server transfer
– How to consolidate military data from various MS on one IT server
– No Tech Assist Agreement, Mfg Agreement available as under ITAR
– Necessary to acquire licenses from each MS
– Some MS like UK offer general license
» Travelling with laptop
– French technician visits Belgian plant, brings his laptop with BOM for military
item
– Necessary to acquire a license or travel with clean laptop
» Company internal email correspondence
– Belgian technician sends email to US plant and cc Italy; attachment contains
military data/listed dual-use data
– Necessary to acquire a license for both email to U.S. and Italy for military
data and for U.S. for listed dual-use data (if dual-use data listed in Annex IV
also license for transfer to Italy required)
64
Transit, Brokering
» Military items – MS competence
» Dual-use items – EU Dual-Use Regulation
– Brokering: license for Annex I items if used for WMD
– Transit: MS authorities may prohibit transit of Annex I items if
used for WMD
– MS can impose additional brokering and transit controls for
• Non-listed dual-use items used for WMD
• Listed dual-use items for military use in military embargo
country
65
End-Use Controls » In EU no EAR 99 but end-use controls under Art 4 of Reg 428/2009 for dual-use items
not listed in Annex I to Regulation 428/2009
– WMD and missiles
• Any destination
• Item intended for use for NBC weapon or missiles
– Military end-use in arms embargo country
• Purchasing of destination country subject to military embargo (Armenia,
Azerbaijan, Belarus, China, Congo, Eritrea, Guinea , Iraq, Iran, Ivory Coast,
Lebanon, Liberia, Libya, Myanmar, North Korea, Somalia, Sudan, South
Sudan, Syria, Zimbabwe)
• Use with or incorporation with military item (in entirety or part)
– Use in relation to illegally exported military item
• Any destination
• Parts or components (in entirety or part)
• For goods on national military list previously exported w/o authorisation
» For rules to apply, exporter has to have knowledge or be informed by authorities of
controlled end-use
66
Licensing
» General license: established by law, open to everybody subject to
registration
– For military items (at MS level, required by EU Directive 2009/43)
– For dual-use items (UGEA, MS level e.g. UK, Germany)
» Global license: company specific, can cover various shipments of various
products to various customers for various destinations; granting of license
subject to compliance checks
» Individual license: company specific, can cover one shipment (or shipments
up to a certain quantity) of one product to one customer for one destination
67
Licensing – UGEA
» Annex IIa-f Regulation 428/2009
» UGEA 1 – Annex IIa
– All Annex I items other than Annex IIg
– Australia, Canada, Japan, NZ, Norway, Switzerland, US
» UGEA 2 – Annex IIb
– Certain items
– Argentina, Croatia, Iceland, South Africa, South Korea, Turkey
» UGEA 3 – Annex IIc: repair/replacement
» UGEA 4 – Annex IId: export for exhibition of fair
» UGEA 5 – Annex IIe: telecommunications
» UGEA 6 – Annex IIf: chemicals
» Annex IIg: items for which UGEAs 1, 3 and 4 may not be used
68
Licensing procedures
» Licensing procedures in general :
– MS authorities responsible
– Application processes according to national laws – differences
between MS
– For global and individual licenses applicant must submit additional
supporting documents, such as end-user certificate/undertakings,
product specifications, etc.
» Licensing of goods
– Technical exercise
– Is item controlled?
» Licensing under embargo rules
– Politically motivated, fast changing environment
– Risk of export prohibition
– Ensure license obtained in timely manner to avoid delays
69
EU Sanctions
70
Structure of EU sanctions system
71
UN Security Council Resolution
EU Council Decision (CFSP)
EU Council Implementing Decision
EU Council Regulation
EU Implementing Regulation EU Member State Law
Implementation measures
outside the competence of the EU
- military embargo
- prohibition of admission
Notice to Parties
EEAS
Current EU sanctions
72
Country or persons
Afghanistan – (Taliban) Ivory Coast
Al Qaeda – (Foreign Terrorist Organisations) Lebanon
Belarus Liberia
Bosnia & Herzegovina Libya
Burma Moldova
China North Korea
Congo Serbia & Montenegro
Egypt Somalia
Eritrea South Sudan
Republic of Guinea (Conakry) Syria
Guinea-Bissau Tunisia
Haiti USA – (Anti-boycott)
Iran Zimbabwe
Iraq
Who is covered by EU sanctions?
– Anyone within the territory of the EU
– On board of aircraft/vessel under MS jurisdiction
– EU nationals inside and outside the EU
– Legal person or body incorporated or constituted under the
laws of a MS
– To any legal person, entity or body in respect of business
done in whole or part within EU
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Components of EU sanctions
» Item related measures
– Prohibitions vs. authorisation
– Financing/financial assistance
– Technical assistance
– Brokering
» Person (natural or legal)
– Travel ban
– Freezing of funds
– Prohibition to provide funds
– Prohibition to provide economic resources
» Sector related measures
– E.g., oil, gas, refining, mining industry (Syria, Iran)
– Prohibition to export, purchase, transport (Syria, Iran)
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Components of EU sanctions (continued)
» Others
– Pre-arrival/departure notification
– Flight ban
» Finance/Investment
– Restrictions on investment/finance/insurance
– Transfer of “funds” notifications/authorisations
» Annexes
– Item lists
– Person lists (no one list, each embargo has its own list)
– Competent MS authorities
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Strategies for EU Risk Management are the
Same as in the U.S.
» Awareness and Compliance Focus
» Understanding and Effective use of Rules and
Exemptions
» Tools & Resources for Robust Compliance Program
» Screen (customers), Screen (destinations), Screen (red
flags, diversion risks)
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Minimizing Risks & Maximizing
Opportunities in Trade
Agreements
Laurent Ruessmann
Trade Agreements: What’s in it for IT Companies?
» Reduce import tariff burden – maximize supply chain efficiencies
» Enhance market access for IT and other services, including regulatory standards, mutual recognition & harmonisation
» Trade facilitation – more efficient customs procedures, clearer rules, greater transparency
» Strengthened protection of intellectual property
» Disciplines governing e-commerce – e.g., cross-border data flows
78
Emerging Trade Policy Initiatives
» What are the 21st century issues?
– Cloud computing : cross-border data restrictions, localization requirements
– Misappropriation of trade secrets
– Intellectual property rules : shifting political/policy landscape
– State-owned enterprises
– Nanotechnology & otheremerging technologies
– Environmental goods and services
» Limited « roadmaps » exist for addressingthese issues
» Bilateral and multilateraltradeagreements are being used to establish new frameworks
» Negotiators are looking to IT companies to help
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The Challenges of China
• Inbound Trade • Forced technology transfer
• Dealing with commercial information as State secrets
• Data location requirements
• Preferential treatment for State-Owned Enterprises
• Investment restrictions
• Competition policy
• Outbound Trade • Subsidisation of production in keysectors : dumped exports
• Any Trade • IP theft
• Trade secrets
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A Full Agenda
» Information Technology Agreement Expansion
» EU-US Free Trade Agreement
» EU-Japan Free Trade Agreement, EU-India Free Trade Agreement & others
» International Services Agreement (extendbilateral « best treatment » but BIC missing)
81
ITA Expansion
» Negotiations launched in 2012; finished by Bali Ministerial?
– Bring in all ITA members
– Finish productlist by end of July?
» Eliminate tariffs in new technology categories : issues related to expanded product coverage (e.g., home appliances with digital functions removed)
» Access new signatory country markets (Brazil, Russia)
» Remove and/or lower regulatory barriers for priority IT products
» Increase sales and predictability for IT companies
82
ITA by the Numbers
83
• ZERO – tariffs on IT products covered by ITA
• 97% - World trade in IT products covered by ITA
• 1996 - ITA adopted in the WTO
• >15 - years since ITA has been updated
• 49- current signatories
• 76 - states and regions represented
US-EU negotiations : working towards a TTIP
» Two decades in the making
» Expected formal launch mid-2013
» Brussels and Washington currently focused on internal
pre-negotiation procedures
» Political aspiration – conclude negotiations by end-2014
(nonsense!)
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A Transatlantic Free Trade Deal
Transatlantic Trade and
Investment Partnership (TTIP)
» Economic Significance
» Degrees of Difficulty
» Global Rule-Setting Implications
» The “NAFTA model” will have to be reinvented 85
A Big Deal … in Several Senses
A Transatlantic Free Trade Deal
0
50
100
150
200
250
300
350
400
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
$ 1
00
0 B
illi
on
Source: U.S. Census Bureau (all figures are in U.S. dollars on a nominal basis, not seasonally adjusted. Details may not equal totals due to rounding.
Total transatlantic trade (goods and services) is nearly one trillion dollars each year. Total US investment in the EU is three times higher than in all of Asia, at $3.7 trillion.
U.S. trade in goods with European Union U.S. Exports to EU
U.S. Imports from EU
» Market access
– Tariff reductions = tax savings
– Several customs angles : rules of origin can be most important
» Intellectual Property : don’t get stuck on GI’s
» Product Risk/Regulatory Affairs : regulatory standards, harmonisation
» Antitrust/Competition Policy/State Aids
» Government contracts/public procurement : mutual access, national
treatment, information flows
» Environment/Energy
» Insurance
» Labor, including visa issues
» Investment protection, including arbitration/dispute settlement
86
A Transatlantic Free Trade Deal
Points of Interest
C&M International
» Food and agriculture
» Automotives
» Aviation (carbon tax, investment restrictions)
» Services (audio-visual, maritime)
» Renewable energy
» Data privacy/cross-border flows
87
Sectoral Hot-Button Issues
A Transatlantic Free Trade Deal
» Integral element in EU economic recovery strategy
» Big push from German manufacturing sector
– But EU companies currently more “passive” compared to
U.S. counterparts
» For some … a chance to propagate the “European social
model?”
– The “precautionary principle” won’t be going away
» EU Trade Commissioner: pushing for “prospective”
regulatory solutions
88
The View from Brussels
A Transatlantic Free Trade Deal
Snapshot of EU FTAnegotiations
We can help you reach your FTA goals
» Unique combination of trade negotiation and legal
expertise
» The negotiators know and trust us – in both
Washington and Brussels
» Ability to design workable, commercially targeted
proposals for negotiators – and to present to
negotiators
» Tailoring solutions to clients with varying degrees of
policy experience and sophistication
90
