Export, Customs & Trade

ReedSmith Export, Customs & Trade

Fall 2005 Volume II, Number 4 Sentinenel

International Trade Remedies are Available to In This Issue: Enforce Intellectual Property Rights International Trade Remedies are Available to Enforce Intellectual Whereas many companies are aware of the traditional means of enforc- Property Rights—Page 1 ing company-owned intellectual property rights (patents, trademarks and copyrights) through litigation in federal district court, companies operat- UN Trade Sanctions After the ing in the international arena or facing infringement from international ac- Oil-for-Food Program—Page 2 tors have a number of additional international trade remedies available to Enforcement Highlights—Page 4 protect intellectual property assets. International trade remedies available OFAC Reissues Burma Sanctions through the U.S. International Trade Commission (“ITC”) and the U.S. Regulations—Page 5 Customs Service (“Customs”) may offer fast, broad, and effective relief from intellectual property right infringement. Reed Smith in Print and at the Podium—Page 7 International Trade Commission “337” Investigations Recent Reed Smith Publications— Under Section 337 of the Tariff Act of 1930, as amended, it is unlaw- Page 11 ful to import, sell for importation, or sell within the United States after importation, articles that infringe upon a valid U.S. patent, trademark, or copyright. The Tariff Act empowers the ITC to conduct “337” investigations into all allegations of unfair practices in import trade, including infringement of patents, trademarks, or copyrights. The ITC may institute a 337 investigation on its own initiative, but usually such investigations are initiated based upon the fi ling of a complaint. If a “Complainant” fi les a complaint before the ITC, certain pre-institution proceedings may be undertaken between the Complainant and the ITC staff to ensure the adequacy of the complaint. If the complaint is deemed to be suffi cient, the ITC will decide to institute a formal 337 investigation within 30 days NEW YORK of the fi ling of the complaint. LONDON LOS ANGELES After initiation of the investigation, the ITC then assigns an Administra- PARIS tive Law Judge (“ALJ”) to conduct the investigation. While analogous to SAN FRANCISCO judicial proceedings before federal district courts, a 337 investigation is WASHINGTON, D.C. PHILADELPHIA an administrative proceeding which consists of formal discovery leading PITTSBURGH to a full briefi ng and hearing on the merits in which the alleged infringer, OAKLAND the “Respondent,” is entitled to participate. A 337 investigation operates MUNICH under procedural rules similar to the Federal Rules of Civil Procedure as PRINCETON NORTHERN VA supplemented by additional “ground rules” set forth by the ALJ and strict WILMINGTON regulatory deadlines. Like judicial proceedings before federal district NEWARK courts, traditional intellectual property defenses, such as patent invalidity, MIDLANDS, U.K. can be raised by the Respondent during the course of a 337 investigation. CENTURY CITY RICHMOND (continued on page 10) r e e d s m i t h . c o m ReedSmith

UN Trade Sanctions After the Oil-for-Food Program

On October 27, 2005, the United comprehensive trade sanction regime Nations (“UN”) released its fi nal as well. UN Resolution 661 further report (the “Report”) on the investi- established a Committee consisting of gation of the Oil-for-Food Program all members of the Security Council (“OFFP”). In addition to highlighting to obtain information from Member certain structural defi ciencies, the Re- States regarding the implementation port identifi ed more than 2,200 com- of the UN sanctions and to otherwise panies that paid bribes or kickbacks coordinate the sanctions regime. to the Iraqi government in violation of The growing humanitarian crisis in the OFFP. Without issuing a fi nal ver- Iraq caused the UN Security Council dict, the Report essentially provided to re-assess the sanctions program in a roadmap for interested national law 1995. On April 14, 1995, acting un- enforcement authorities to follow by der Chapter VII of the United Nations naming those companies that appear Charter, the Security Council adopted to have violated anti-bribery laws. UN Resolution 986, establishing the In addition to its explosive revela- OFFP. This program provided Iraq The [OFFP] Report tions, the UN inquiry represents a with an opportunity to sell oil to new and potentially signifi cant fi nance the purchase of humanitarian undoubtedly will serve as development in the administration of goods and to support other mandated a starting point for law international trade sanctions. Under United Nations activities concerning enforcement authorities previous UN sanction regimes, indi- Iraq. The OFFP was funded exclu- vidual Member States were primarily sively with the proceeds from Iraqi in investigating possible responsible for implementing and oil exports that were deposited in a violations by domestic enforcing trade sanctions imposed by UN-sponsored escrow account. The companies of national the Security Counsel. In the after- OFFP was intended as a temporary math of the allegations associated with measure to provide for the humanitar- anti-bribery laws. the OFFP, however, the UN formed ian needs of the Iraqi people, until a special committee—the Indepen- the fulfi llment by Iraq of the relevant dent Inquiry Committee (“IIC”)—to Security Council resolutions. investigate the scandal. Although a The Security Council lifted civilian unique set of circumstances precipi- sanctions on Iraq on May 22, 2003 tated the IIC’s formation, its investi- with the adoption of UN Resolu- gative powers nevertheless warrant tion 1483. This resolution gave the special attention, since they may have Secretary-General the authority to ramifi cations for future UN sanction appoint a Special Representative to programs. work with the occupying forces in UN Sanctions and the OFFP rebuilding Iraq. Following public allegations involving corruption and Soon after Iraq’s invasion of Kuwait mis- management of the OFFP, the in early August 1990, the United UN Secretary General appointed the Nations imposed comprehensive IIC on April 21, 2004 to conduct an trade sanctions on Iraq through UN inquiry into the program. Shortly Security Council Resolution 661. thereafter, the UN Security Council The United States implemented UN unanimously adopted UN Resolution Resolution 661 through the issuance 1538, which called for full coopera- of Executive Order No. 12724 on Au- tion in the investigation by all United gust 9, 1990, and established its own Nations offi cials and personnel, the

2 Export, Customs & Trade Sentinel

Coalition Provisional Authority, Iraq, cooperate and make themselves avail- Conclusion and all other Member States, includ- able for interviews. As noted above, The IIC was granted special powers ing their national regulatory authori- the IIC’s mandate also included the to investigate corruption and other ties. investigation of individual contractors malfeasance in the OFFP. While that participated in the OFFP. As an The IIC was chaired by Paul Volcker, the IIC probe may turn out to be a administrative inquiry committee, the former Chairman of the United States one-off event, it raises the possibility IIC was not assigned legally enforce- Federal Reserve. Committee Members of increased interaction between the able subpoena powers, meaning that included Mark Pieth of Switzerland, UN and domestic judicial authori- individual contractors were under no an expert on money-laundering in the ties in investigating violations of UN legal obligation to provide informa- Organization for Economic Coopera- trade sanctions. Moreover, the IIC’s tion. Nevertheless, the IIC was able tion and Development (“OECD”); and issuance of the Report, highlighting to put indirect pressure on private Richard Goldstone of South Africa, individual violations, could lead to a contractors, most notably, through former Prosecutor of the International more active UN role in supervising the threat of providing information to Criminal Tribunals for the former trade sanction programs. The Report national legal authorities. The IIC’s Yugoslavia and Rwanda. itself most likely will lead to criminal Investigation Guidelines specifi cally investigations and indictments in nu- stated that “[c]onsideration will be The IIC’S Investigation merous countries, and its full impact given to referring investigative infor- has only begun to be felt. Future The IIC was given a broad mandate mation and fi ndings to the appropri- Security Council sanction resolutions to collect and examine information ate national governmental authority,” will have to be reviewed carefully to relating to the administration and although companies with pending determine to what extent the UN re- management of the OFFP, including adverse fi ndings were given an op- lies on the IIC precedent and pursues allegations of fraud and corruption portunity by the IIC to rebut such greater oversight authority over sanc- (bribery, illegal surcharges, illicit pay- charges prior to any fi nal determination programs. ments, etc.) on the part of United Na- tion of corruption. tions offi cials, personnel, and agents, Eric A. Dubelier as well as by private contractors. At several stages of the investigation, Leigh T. Hansson Pursuant to the IIC’s Terms of Refer- the IIC apparently recommended that William E. Pomeranz ence, as listed on its offi cial website the Secretary General grant a properly (www.iic-offp.org/reference.htwww.iic-offp.org/reference.htm), the supported request by the law enforce- IIC’s responsibility included: ment authorities that were pursu- ing active investigations of potential to determine whether any United OFFP violations within their respec- Nations offi cials, personnel, tive jurisdictions, with due consid- agents or contractors engaged in eration being given to the requesting any illicit or corrupt activities in authority’s commitment to reciprocal the carrying out of their respec- cooperation with the Committee’s tive roles in relation to the Pro- investigation. Whether the Secre- gramme, including, for example, tary General ultimately provided this bribery in relation to oil sales, information in these individual cases abuses in regard to surcharges on remains unclear. In any event, the oil sales and illicit payments in October 27, 2005 Report identifi ed regard to purchases of humanitar- thousands of companies that unlaw- ian goods. fully manipulated the OFFP. The The IIC was granted access to all Report undoubtedly will serve as a relevant UN records and information, starting point for law enforcement and the Secretary-General insisted authorities in investigating possible that all UN offi cials and personnel violations by domestic companies of national anti-bribery laws.

3 ReedSmith

Enforcement Highlights

The U.S. Department of Commerce, titution in connection with the export Bureau of Industry of Security (“BIS”), of night vision equipment for deliv- announced on July 28, 2005 that the ery to Iran without the required U.S. Chattanooga Group Inc. (“CGI”), a Government authorization. Kyria- division of Encore Medical Corpora- cou pleaded guilty to two counts of tion based in Hixson, Tennessee, will violating the International Emergency pay a $101,000 civil penalty to settle Economic Powers Act, one count of administrative charges that it com- interstate transportation of stolen mitted 13 violations of the Export property, and one count of making a Administration Regulations (“EAR”) in false statement in export documents. connection with unauthorized exports According to court documents, in of physical therapy equipment from January 2004, Kyriacou unlawfully the United States to Iran via Australia attempted to export four Astroscope without the required export licenses. camera lenses from the United States With certain limited exceptions, un- with knowledge that the lenses were der the International Emergency Eco- to be shipped to Iran, which is cur- nomic Powers Act, the EAR and the rently under a U.S. embargo. Kyria- The antiboycott provisions Department of the Treasury’s Iranian cou also attempted to sell the lenses prohibit U.S. persons Transaction Regulations, all exports on the Internet to undercover agents from complying with to Iran of U.S.-origin commodities posing as international arms brokers. require an export license from the The Astroscope is a third-generation certain requirements of Department of the Treasury’s Offi ce night vision device that allows a video unsanctioned foreign of Foreign Assets Control (“OFAC”). camera to capture images clearly in boycotts, including It is also unlawful to ship U.S.-origin the dark. products to a third country for ship- On August 8, 2005, BIS announced furnishing information ment to Iran without the necessary that H. D. Sheldon & Company about business relationships authorization from OFAC. Inc., of New York, N. Y., agreed to with or in Israel. Asher Karni, a South African national, pay a $13,500 civil penalty to settle was sentenced to 36 months in prison allegations that it violated the anti- on August 4, 2005 by a Washing- boycott provisions of the EAR. The ton, D.C. federal court after pleading antiboycott provisions prohibit U.S. guilty to illegally exporting restricted persons from complying with certain electronic items that can be used in requirements of unsanctioned for- nuclear weapons and missile systems. eign boycotts, including furnishing Karni admitted that in March 2003 information about business relation- he obtained a Tektronix oscilloscope ships with or in Israel. In addition, from an unnamed company in Pla- the EAR requires that U.S. persons inview, N.Y., and had the company report their receipt of certain boy- send it to South Africa. When the cott requests to the Department of shipment arrived at Top-Cape, Karni Commerce. BIS alleged that, on two forwarded it to Pakistan. Karni did occasions in connection with transac- not obtain the requisite export license tions involving the sale and transfer before shipping the item from the of goods from the United States to United States. Bahrain and Qatar, Sheldon furnished prohibited information about another BIS announced on August 8, 2005 company’s business relationships with that Erik Kyriacou, of New York, N.Y., Israel in violation of the anti-boycott was sentenced to fi ve years’ probation provisions. BIS also alleged that, on and was ordered to pay $8,000 in res- fi ve occasions, Sheldon failed to re-

4 Export, Customs & Trade Sentinel

port in a timely manner its receipts of terrorist organization. The sentence sire to purchase weapons for a client requests from Dubai to provide such follows Gamarra-Murillo’s February in Colombia. Throughout the next certifi cation. 11 guilty plea to charges of brokering year, he continued negotiations for the and exporting defense articles without purchase of the weapons and was told Carlos Gamarra-Murillo, 53, of a license and providing material sup- by the informant that $100,000 had Sorroco, Colombia, was sentenced port to a foreign terrorist organization. to be paid before the weapons would to 25 years in prison on August 8, According to the charges, Gamarra- be transported from the United States. 2005 by a Florida federal court for Murillo met with a confi dential U.S. Mr. Gamarra-Murillo was arrested attempting to illegally purchase and government informant on numerous export numerous fi rearms and other occasions, where he indicated his de- (continued on page 6) weapons destined for a Colombian

OFAC Reissues Burma Sanctions Regulations

The Offi ce of Foreign Assets Control from the Government of Burma or a U.S. fi nancial institutions can operate (“OFAC”) issued an interim fi nal rule non-governmental entity in Burma accounts for individuals in Burma, on August 16, 2005, revising the Bur- of shares of ownership, including provided that those persons are not mese Sanctions Regulations (the “Reg- an equity interest, in the economic included on the Specially Desig- ulations”). While Burma has been development of resources located in nated Nationals and Blocked Persons subject to sanctions since 1997, the Burma, also are banned. (“SDN”) list. Total remittances may passage of the Burmese Freedom and not exceed $300 per Burmese house- In addition to new investment, the Democracy Act of 2003 (the “Act”), hold in any consecutive three-month Regulations ban the import of prod- plus President Bush’s Executive Order period. However, any attempt by a ucts from Burma, subject to a few of July 28, 2003, led to extensive U.S. person to “facilitate” a foreign limited exceptions. The only direct revisions of the Burmese sanctions person’s transaction with Burma is controls on U.S. exports to Burma program. As a result of these amend- prohibited if that foreign person’s concern the exportation of “fi nan- ments, OFAC decided to reissue the transaction would be barred if en- cial services,” which are specifi cally Regulations in their entirety. gaged by a U.S. person. forbidden under the Regulations. The Regulations retain the prohibition The exportation or reexportation of The reissued Burmese sanctions prove on all “new investment” in Burma by fi nancial services to Burma is broadly the rule that no two U.S. sanctions U.S. persons, i.e., a contract for the defi ned to include: (1) the transfer programs are exactly alike. Most no- development of resources (includ- of funds, directly or indirectly, from tably, the Regulations differ from other ing natural, agricultural, commercial, the United States or by a U.S. person, U.S. sanctions regimes in that they fi nancial, industrial, and human wherever located, to Burma; and (2) generally allow for some economic resources). Unlike other sanctions the provision, directly or indirectly, to dealings with the targeted country, programs, however, the Regulations persons in Burma of insurance servic- with the noted exception for new further identify certain types of indi- es, investment or brokerage services, investments and the export of “fi nan- rect investments that are also barred. banking services, money remittance cial services” (a term unique to the For example, the purchase of shares services; loans, guarantees, letters of Burma sanctions). The Regulations in a third-country company that is credit or other extensions of credit; also include a much more detailed list engaged in the economic development or the service of selling or redeeming of prohibited indirect foreign invest- of resources located in Burma, is pro- traveler’s checks, money orders and ments than other sanctions programs. hibited where the company’s profi ts stored value. Leigh T. Hansson are predominately derived from the All other exports to Burma are per- William E. Pomeranz company’s economic development mitted, provided that they do not of resources in Burma. Similarly, implicate the ban on the provision the purchase, directly or indirectly, of fi nancial services. Furthermore,

5 ReedSmith

“Enforcement Highlights” – continued from page 5

soon after an April 2004 meeting to fi led or caused to be fi led submis- fi nalize the transaction. sions that falsely stated that the items qualifi ed for export from the United The U.S. Department of Commerce States without a license, when in fact announced on August 8, 2005 that a license was required. The investiga- National-Oilwell L.P. (“NOW”) of tion of the shipments at issue resulted Houston, agreed to pay a $3,000 civil from voluntary self-disclosures by BJ penalty to settle allegations that it Services, which cooperated with BIS violated the antiboycott provisions of during the investigation. Self-disclo- the EAR. BIS charged that, on one sure is a mitigating factor in determin- occasion in 2001 in connection with ing penalties for violations of the EAR. transactions involving the sale and ultimate transfer of goods from the On August 10, 2005, Harold J. De- United States to Syria, NOW fur- Gregory, Jr., president of H&G Import nished prohibited information about Export (“H&G”), Ft. Lauderdale, was its business relationships with Israel arrested and charged in an eight- in violation of the antiboycott require- count indictment with conspiracy to ments. BIS also charged that NOW transport and smuggle in air com- failed to report in a timely manner its merce property containing hazard- receipt of the request from an inter- ous materials (“HazMat”) specifi cally mediary in Croatia to provide such radioactive Iridium-192, from the certifi cation. The company voluntarily United States to the Bahamas. A Self-disclosure is a disclosed the transactions and cooper- Department of Homeland Security mitigating factor in ated fully with the investigation. (“DHS”) investigation disclosed that on multiple occasions, DeGregory, determining penalties for The U.S. Department of Commerce an FAA-certifi ed pilot, transported announced on August 9, 2005 that violations of the EAR. Iridium-192 in H&G aircraft between BJ Services Company USA, L.P. (“BJ Ft. Lauderdale and the Bahamas, and Services”) agreed to pay a $142,450 failed to identify the HazMat cargo on civil penalty to settle charges that it export and import documents, in vio- illegally exported chemicals without lation of federal statutes. Iridium-192, BIS authorization. BJ also must per- an isotope used in industrial radiog- form an audit of its internal compli- raphy, poses public health risks if not ance program that will be submitted properly handled. Neither DeGregory to BIS’ Offi ce of Export Enforcement. nor H&G are licensed, trained, or cer- The agreement settled charges that be- tifi ed to handle or transport radioac- tween October 1999 and June 2002, tive HazMat. BJ Services made 13 exports of items controlled for chemical-weapons rea- The U.S. Department of Commerce sons to various destinations without announced on August 18, 2005 that obtaining the required Department The McFarland Cascade Pole and of Commerce export licenses. The Lumber Company and The Oeser settlement also alleged that on 12 Company, manufacturers of lumber occasions between October 1999 and and wood products headquartered June 2002, BJ Services sold items in Washington State, agreed to pay subject to the EAR, with knowledge civil penalties to settle charges that that violations were about to occur. they violated the EAR by exporting In addition, the settlement stated unprocessed Western red cedar to that on 12 occasions between Octo- Canada for further processing at wood ber 1999 and June 2002, BJ Services treatment plants, without obtaining

6 Export, Customs & Trade Sentinel

licenses from BIS. Exports of unpro- in prison on August 30, 2005 follow- and Korean military offi cials, which cessed Western red cedar harvested ing his admission that he violated the were later determined to be fraudu- from state and federal lands in the Arms Export Control Act by attempt- lent. United States are controlled for short ing to ship Black Hawk helicopter Four company owner/operators of supply reasons and require a license engines to China without fi rst receiv- Manten Electronics, Inc. pleaded for export to any destination outside ing proper authorization from the guilty on September 13, 2005 to the United States. McFarland agreed State Department. Park admitted that charges that they used their busi- to settle charges relating to 1136 he tried to obtain engines for Sikorsky ness to illegally transfer sensitive unlicensed exports of unprocessed Aircraft’s Black Hawk helicopters as national-security controlled items to Western red cedar to Canada for well as other military items in order state-sponsored research institutes further processing from November to ship them to China. In addition to within the People’s Republic of China. 1999 to February 2004. McFarland not seeking State Department permis- The defendants specifi cally pleaded will pay a civil penalty in the amount sion, however, Park also provided guilty to illegally exporting items that of $454,000. Oeser agreed to settle misleading documents to the U.S. are used in a wide variety of defense charges relating to 208 unlicensed State Department representing that weapons systems, including radar, exports of unprocessed Western red the engines, which were worth more smart weapons, electronic warfare and cedar to Canada for further process- than $1 million each, were going to be communications. The illegal exports ing during the same time period, and used by either the Malaysian army or were destined for entities controlled has agreed to pay a civil penalty in the the Korean army. Park also submitted by the Chinese government. Among amount of $83,200. sworn “end user” certifi cates bearing the purported signatures of Malaysian The United States Attorney for the (continued on page 8) Southern District of Florida, the United States Immigration and Cus- toms Enforcement, and the Depart- ment of Commerce announced that Reed Smith in Print and at the Podium on August 18, 2005, Chin Kan Wang and Robin Chang were indicted by a  William E. Pomeranz’ article “Reining in the Russian Taxman: An Initial federal grand jury in Ft. Lauderdale, Status Report,” was published in the July 2005 edition of the Survey of on charges of conspiracy to export East European Law. controlled items and exportation  On October 7, Jason P. Matechak spoke on “Government Integrity and of controlled items in violation of Anti-Corruption: Public Procurement” at the International Law Institute, Title 18, United States Code, Sec- Center for Public Procurement Law and Policy in Washington, D.C., to tion 371, and Title 50, United States an audience of African government offi cials. Code, Section 1702. The indictment alleges that Chin Kan Wang and Rob-  Eric Dubelier co-chaired the American Conference Institute’s National in Chang conspired to export and did Forum on Export Enforcement and Investigations in Washington, D.C. export radio communication encryp- October 17–18. tion modules, from the United States  Leigh Hansson and Ben Lindorf conducted a workshop on Export Com- to Taiwan without having applied for pliance Audits on October 17–18 at the American Conference Institute’s and obtaining the required export National Forum on Export Enforcement and Investigations in Washing- license. The controlled encryption ton, D.C. modules were destined for and sent to a company known as Taiwan Sato  On October 24, Jason P. Matechak gave a presentation on “Anti-Corrup- Kensetsu Kogyo Co., Ltd., located in tion Standards for Doing Business Internationally: International Conven- Taipei, Taiwan, Republic of China, for tions and the FCPA” at TRACE International in Brussels, Belgium. use by the Taiwanese Coast Guard.  On October 25, Jason P. Matechak led a panel on “TransAtlantic Defense Kwonhwan Park, a South Korean Procurement” at the American Bar Association, Section of International national, was sentenced to 32 months Law and Practice Fall Meeting in Brussels, Belgium.

77 ReedSmith

“Enforcement Highlights” – continued from page 7

those entities was a Chinese Research of export privileges was also imposed Institute that the United States gov- upon Sunford. BIS charged that ernment has identifi ed as posing an between November 1998 and July unacceptable risk in the development 1999, Sunford acted in violation of, of weapons of mass destruction or and conspired with others to violate, missiles used to deliver weapons of the EAR by causing the export of an mass destruction. industrial vacuum furnace to China without the required Commerce De- On September 17, 2005, the U.S. partment license. Specifi cally, Sunford Justice Department announced that ordered the furnace knowing that a Offi ce Depot, Inc., based in Del- license was required, concealed the ray Beach, Florida, agreed to pay type of item being exported and the $4.75 million to end a False Claims item’s actual end-user, and caused the Act (“FCA”) suit accusing the com- export of the furnace despite the fact pany of violating federal law by that the required license had not been supplying a government agency with obtained. products made in countries that do not have reciprocal trade agreements The U.S. Department of Commerce with the United States. The settle- announced on September 26, 2005 Exports of unprocessed ment with Offi ce Depot follows a that Bell Lumber and Pole Com- Western red cedar similar agreement with Offi ce Max, pany, a manufacturer of lumber and Inc. in May 2005 for $9.8 million. wood products headquartered in harvested from state and (See Sentinel Summer 2005 Enforce- New Brighton, Minnesota, agreed federal lands in the United ment Highlights) to pay civil penalties in the amount of $10,400 to settle charges that it States are controlled for The United States Attorney’s Offi ce violated the EAR by exporting unpro- announced on September 21, 2005 short supply reasons and cessed Western red cedar to Canada that a jury in Federal Court in Mil- require a license for export for further processing in the form of waukee convicted Ning Wen of nine treatment with preservative without to any destination outside counts of conspiring to export more obtaining licenses from BIS. During than $500,000 in restricted electronic the United States. the time period in which Bell made components to the People’s Republic the exports in question, exports of of China. The charges also include Western red cedar harvested from money laundering and making false state and federal lands in the United statements to the Federal Bureau of States that had been cut into poles, Investigation. The case involved the posts, or pilings for use as such and export of restricted electronic compo- were intended for treatment with nents that had a wide variety of uses, preservative outside the United States, including military radar and commu- required export licenses to all destina- nications applications. tions. Such exports were controlled The U.S. Department of Commerce for short supply reasons. Bell agreed announced on September 26, 2005 to settle charges relating to 26 unli- that Sunford Trading, Ltd. of Hong censed exports of unprocessed West- Kong, Special Administrative Region, ern red cedar to Canada for further will pay a $33,000 civil penalty to processing from April 27, 2000 to settle charges that it violated the EAR November 18, 2003. in connection with an unlicensed The U.S. Department of Commerce export to the People’s Republic of announced on September 26, 2005 China. In addition, a three-year denial that Price Brothers (UK) Limited of

8 Export, Customs & Trade Sentinel

Surrey, United Kingdom, agreed to between June 2000 and June 2002, EAR. BIS charged that, on six oc- pay civil penalties totaling $101,500 Price Brothers (UK) reexported ma- casions, AESA failed to report in a to settle charges pertaining to unli- chinery spare parts from the United timely manner its receipt of a request censed reexports of U.S.-origin com- Kingdom to a company in Libya with- to refrain from supplying goods or modities from the United Kingdom out obtaining licenses from BIS. Price materials manufactured or processed to Libya. These reexports were made Brothers (UK) voluntarily self-dis- in Israel or using any Israeli organiza- in violation of the EAR and a trade closed the violations and cooperated tion to handle or transport the items. embargo against Libya, which was in fully in the investigation. The transactions involved the sale place from January 1986 until April and transfer of goods from the United The U.S. Department of Commerce 2004. BIS charged that, on six occa- States to Dubai, U.A.E. AESA volun- announced on October 24, 2005 that sions between January 2000 and April tarily disclosed the transactions that Alcoa Europe SA (“AESA”), a Swiss 2000, Price Brothers (UK) supplied led to the allegations and fully cooper- company and, indirectly, a wholly machinery spare parts to an entity in ated with the investigation. owned subsidiary of a U.S. company, the United Kingdom, which subse- agreed to pay a $6,000 civil penalty Leigh T. Hansson quently reexported them to Libya to settle allegations that it violated without obtaining licenses from BIS. the antiboycott provisions of the BIS also charged that, on 23 occasions

Would You Like to Receive Future (or Past) Issues Topics Covered in Recent Issues… of Export, Customs & Trade Sentinel by E-Mail?  ABCs of CBP: A Glossary of U.S. Customs Acronyms We would be happy to send it to you as an Adobe Acrobat® fi le. Please  BIS Proposes Revised Defi nition of provide your e-mail and any mailing address updates below, and send the “Knowledge” Under the EAR information to Ari Wolfe by mail, phone, fax or e-mail.  The Commerce Department’s Re- newed Focus on Deemed Exports: Ari Wolfe Do You Need an Export License for Reed Smith LLP Your Employee? 1301 K Street, N.W. · Suite 1100 – East Tower · Washington, D.C. 20005  Customs Considerations: Don’t Phone: 202.414.9328 · Fax: 202.414.9299 · [email protected] Lose Value in Your Supply Chain  Department of Commerce Revises Encryption Regulations ______ Do Due Diligence Before an Acqui- Name sition: Don’t Buy an Enforcement Action ______Company  FDA Issues Rules on the Admin- istrative Detention of Food Under ______the Bioterrorism Act Title  National Security Hurdles to Foreign ______Investment in the United States Address  New FDA Food Allergen Requirements ______ The Offi cial End of the Libyan and City State Zip/Postal Code Iraqi Sanctions ______ A Review of the U.S. Anti-boycot- Phone ting Regulations  Ups and Downs at the Bureau of ______E-mail Industry and Security

9 ReedSmith

“International Trade Remedies are Available to Enforce Intellectual Property Rights” – continued from page 1

However, unlike judicial proceed- strict ITC timetables, while a federal ings before federal district courts, district court case can last 3–4 years counterclaims will generally not be before any permanent injunctive relief heard. A further difference between is available. Second, ITC General 337 investigations and federal dis- Exclusion Orders cover all infring- trict court proceedings is the role of ing articles, including those imported ITC staff. Along with the ALJ, the from unknown sources, while in- ITC assigns an ITC staff investigating junctive remedies in federal district attorney who serves as a full party to court proceedings bind the oppos- the 337 investigation. The ITC staff ing parties only. Cease and Desist investigating attorney is responsible Orders, the second ITC remedy, direct for representing the “public interest” Respondents to stop selling infringing in the 337 investigation. It is also articles in the United States. Cease important to note that parallel federal and Desist Orders are available under district court actions may be stayed the same rigid ITC deadline schedule during a 337 investigation. and, as such, are likely to be imposed faster than any similar relief in federal At the close of 337 investigation pro- district court. The Tariff Act does not ceedings, the ALJ submits an initial provide for any money damages to determination that adjudicates all of the Complainant under ITC 337 ac- the issues involved in the investigations, but civil fi nes may be imposed tion, including the ultimate issue of International trade for violation of ITC-issued Cease and violation of section 337 to the full remedies are available to Desist Orders. The combination of ITC for review and action. The ITC ITC Exclusion and Cease and Desist enforce intellectual can adopt, modify or remand the ALJ Orders can be powerful tools to pro- initial determination. property rights. tect intellectual property rights. If the ITC fi nds a violation of the Tariff Act, the ITC formulates a rem- U.S. Customs Service Actions edy and submits it to the President Customs is empowered under the for approval. Two main remedies may Tariff Act to enforce Exclusion or be approved: (1) Exclusion Orders Cease and Desist Orders issued by and (2) Cease and Desist Orders. An the ITC as a result of a 337 Investiga- ITC Exclusion Order can be either a tion. Customs, however, has other General Exclusion Order or a Limited tools available to assist companies in Exclusion Order. A General Exclusion diligently defending their intellectual Order directs Customs to “exclude” property rights. Specifi cally, Customs from entry into the United States all has regulations that permit the recor- infringing articles regardless of the or- dation of registered trademarks, trade igin or manufacturer, while a Limited names and copyrights. Although Exclusion Order excludes only those recordation with Customs does not infringing articles from the Respon- provide the registered trademark, dent. ITC Exclusion Orders may have trade name, or copyright owner with two advantages over the injunctive any additional rights under intel- relief that is available in federal dis- lectual property law, this procedure trict court proceedings. First, Exclu- does provide additional avenues for sion Orders will generally be obtained protection. As such, the recordation quicker in an ITC proceeding since procedure makes it easier for Cus- permanent Exclusion Orders can be toms to intercept and seize counterfeit issued within 12–18 months under products, and even allows for a means

10 Export, Customs & Trade Sentinel

for Customs to provide samples As briefl y summarized above, the article or the Reed Smith attorney with of seized suspect merchandise to International Trade Commission whom your company regularly works. the rightful registered trademark, and the U.S. Customs Service pro- Reed Smith has considerable experience trade name, or copyright owner, for vide additional avenues of defense in advising companies about 337 investi- examination, inspection, and testing. and relief in the case of intellectual gations and other strategies regarding the Furthermore, the recordation proce- property infringement. In some cases, protection of intellectual property rights. dure may alert the rightful intellectual the international trade remedies af- In addition to the authors, companies property right holder, and Customs, forded by these agencies of the U.S. can contact the Reed Smith attorneys to a problem in the importation of government, may provide important with whom they regularly work, or the “counterfeit” or “gray market” goods information in the enforcement of following, for trade-related intellectual that might otherwise go undetected. intellectual property rights and may property questions: William J. McNich- Customs law and regulation allows for also provide expedient remedies to ol—Philadelphia; Stanley P. Fisher and the seizure, forfeiture, and destruction effectively stop infringement from Mark W. Wasserman—Falls Church, of infringing merchandise identifi ed overseas sources. Peter Blasier—Pittsburgh; and John M. through the recordation procedure If your company is interested in utilizing Iino—Los Angeles. and provides for the imposition of either ITC or Customs trade remedies to civil fi nes based on the value of the Stephen M. Chin protect intellectual property rights, or if infringing merchandise. Customs Jason P. Matechak your company has been pulled into an also has the authority to refer detected ITC investigation or had products seized intellectual property rights violations by Customs based on alleged infringe- to other federal agencies for criminal ment, please contact the authors of this prosecution, if warranted.

Recent Reed Smith Publications To obtain a copy of any of these resources, please contact Sue Kosmach at 412.288.7179 or [email protected].  Client Bulletin 2005-17—In Case of First Impression, New Jersey Appellate Division Holds Employers Can Be Held Liable for Negligent Misrepresentation for Inaccurate Job Reference (by Robert H. Bernstein, Gregory B. Reilly)  Client Bulletin 2005-18—Kelo: What Lies Ahead for Public Use Outside Blighted Areas (by Karen C. Fagelson, J. Phillip London, Jr.)  Client Bulletin 2005-19—Increased Perchlorate Regulation on the Horizon for California Businesses (by Todd O. Maiden, Jesse L. Miller)  Client Bulletin 2005-20—New Jersey Supreme Court Rules Employer’s Leave Policy That Does Not Provide Ex- tended Leave Entitlement for Pregnancy- Related Medical Complications is Not Discriminatory Against Women (by Robert H. Bernstein, Stephen D. Bird, David M. Katz)  Client Bulletin 2005-21—Recent Eleventh Circuit Decision Creates Federal Excise Tax Refund Opportunity (by Diane M. Frenier, Phillip Pillar)  Client Bulletin 2005-22—Lost Privileges: Recent Decisions Clarify the Scope of Waiver Resulting from the Advice of Counsel Defense in Patent Infringement Litigation and Application of the Crime-Fraud Exception (by James C. Martin, Matthew R. Sheldon, Alexander Y. “Sandy” Thomas)  Client Bulletin 2005-23—CFA Centre Shines Spotlight on Shadow Accounting, and Other Performance Presentation Issues, for Wrap Fee/Separately Managed Accounts (by George F. Magera, Rachel L. Smydo)  Client Bulletin 2005-24—Out-of-State Direct Wine Shippers Beware: You Now Face a New Constitutionally Inﬁ rm California Law (by James P. Kleier, Brian W. Toman)

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11 ReedSmith

“Recent Reed Smith Publications” – continued from page 11 CONTRIBUTORS TO THIS ISSUE Stephen M. Chin  Client Bulletin 2005-25—Proposed Regulations Issued on Nonqualiﬁ ed New York, NY Deferred Compensation Under IRC Section 409A (by Jeffrey G. Aromatorio) 212.521.5479  Client Bulletin 2005-26—UK Real Estate Investment Trusts (by Lesley A. [email protected] Webber) Eric A. Dubelier Washington, D.C.  The Critical Path (newsletter focusing on issues of interest to the construction 202.414.9291 industry): Fall 2005 (Edward B. Gentilcore, Editor) [email protected]

 Employment Law Review (newsletter focusing on legal developments in em- Leigh T. Hansson ployment law and beneﬁ ts): Fall 2005 Washington, D.C.  Government Contracts, Grants & Trade Federal Forecaster (newsletter focus- 202.414.9394 [email protected] ing on legal developments pertaining to recent trends and compliance issues related to government contracts and grants): Summer 2005 Jason P. Matechak Washington, D.C.  Legal Bytes (newsletter focusing on the technology industry): October 2005 202.414.9224 ( Joseph I. Rosenbaum, Editor-in-Chief) [email protected]  Material Matters (newsletter focusing on legal developments pertaining to the William E. Pomeranz ﬁ nancial services industry): Summer 2005 Washington, D.C.  Product Liability Update (newsletter focusing on legal developments in prod- 202.414.9349 uct liability law): November 2005 [email protected]

Export, Customs & Trade Sentinel is published by Reed Smith to keep clients and friends informed of legal developments pertaining to the international trade industry. It is not intended to provide legal advice to be used in a speciﬁ c fact situ- ation; the contents are for informational purposes only. The editor of Export, Customs & Trade Sentinel is Leigh Hansson, a partner in the Washington, D.C. ofﬁ ce.

“Reed Smith” refers to Reed Smith LLP, a limited liability partnership formed in the state of Delaware. ©Reed Smith LLP Quality Matters.SM 12