EURO-MACE, INC., Re Contingent Fees Proposed Rules. Mr. WILLIAM B. ROBINSON, Director, Office of Munitions Control, Wexford, Pa., September 16, 1975. DEAR MR. ROBINSON: Pursuant to your invitation to submit our comments on above Proposed Changes in Rules, we respectfully submit: (1) The U.S. Government has no right to try to enforce business morality on foreign nations and should avoid meddling in same or otherwise it will get its tits in the wringer as we did in Vietnam. We cannot police the morality of our own states, municipalities, let alone the world. (2) As domestic based exporters we deal with commissioned agents who sell their governments our USA-made products much as a USA domestic distributor pays its retail agents to get business. We feel that this information is proprietary information and should not be made a condition of your issuance of any export license. Just in passing, perhaps you may consider alleviating the present stringent requirements in the issuance of export licenses which are required for as little as one brass case or one barrel accompanied with an import permit or DSP 83. Do you not feel that a reasonable dollar limit could be set on countries which are not in sensitive areas of the world and possible waive export license requirements? In as much in today's high price world of arms, it would take about $100,000.00 of anything to be anywhere significant. Other countries issue "open import licenses" to their experienced importers. Most countries that we ship to have very tight import requirements on arms anyhow. Very truly yours, JOHN S. LEVENDOS, President. MACHINERY AND ALLIED PRODUCTS INSTITUTE, Mr. WILLIAM B. ROBINSON, Director, Office of Munitions Control, U.S. Department of State, Washington, D.C. DEAR MR. ROBINSON: This letter concerns the notice of proposed amendments dealing with "contingent fees" to the International Traffic in Arms Regulations which appeared in the August 25 Federal Register, p. 37043. I should make it clear at the outset that these comments do not represent a formal Institute policy statement approved by its Executive Committee. What we attempt to do in this communication is to place certain questions or issues before Department of State officials working in this policy area. Thus, this is an Institute staff document as distinguished from a formal policy statement. While we recognize the public and foreign policy implications of the proposed amendments to the regulations, the changes raise a number of very important and complex questions that require the most careful examination by the Department of State before possible adoption in final form. Among the questions which, in our view, deserve most careful attention are the following: The August 25 Federal Register notice states that "Undisclosed contingent fees can damage the foreign policy interests of the United States." Is there another side to this proposition; might not the proposed changes conceivably intrude upon the prerogatives of foreign governments involved? For example, if information is to be sought concerning activities of foreign nationals acting as agents (or in some similar capacity) for U.S. companies, should any inquiry as to the conduct and business activities of these foreign nationals emanate from the foreign government rather than from regulations imposed upon U.S. companies by the United States Government? In view of the issues implicit in this question, is it fair to ask if a government-to-government exchange of ideas on the types of transactions involved in the proposed regulations should precede any unilateral requirements by the United States which, although imposed directly on U.S. companies, cover transactions involving foreign governments and nationals subject to their jurisdiction and reporting by U.S. companies to foreign governments? It is our understanding that a significant number of U.S. companies operating abroad, including the Middle East, retain on an ongoing contractual basis qualified foreign nationals as agents or representatives. The arrangements with these sales representatives call, in the typical case, for the payment of fees (commissions) contingent upon sales being realized in the representative's assigned territory. (It should be noted that such agents may be involved in furthering commercial sales as well as military items.) Has sufficient consideration been given to the fact that U.S. companies consider agent fee structures as highly confidential or proprietary information which should not be divulged to customers (including foreign government customers) and/or competitors, U.S. or foreign? Further it is our understanding that the overseas sales representatives described above publicly hold themselves out to be, and in fact are, bona fide agents or representatives of a U.S. company and, therefore, their identity and their relationship with the U.S. company is already known to the foreign government. Indeed, typically negotiations with respect to particular sales take place between representatives and the foreign government. Under these circumstances, should not regulations—if they are to be issued in final form-include an exception to the requirement of a certification as to the amount of the commission or similar payment? Isn't this appropriate in view of the great sensitivity of company agent fee schedules and in the light of the fact that the foreign government can—and, if it is in its judgment necessary and appropriate, should— obtain any information it wishes direct from the agent or U.S. corporate representative who is a national of that country? In posing this question with respect to a particular (but general) arrangement, we do not mean to suggest that exceptions should not be considered for other arrangements where fee disclosure could have adverse effects-government or private-more than offsetting any advantages gained by such disclosure. In view of the history and purpose of U.S. controls on exports of arms, are the statutes under which these controls have been exercised the proper vehicle for dealing with the contingent fee question? More specifically, do the underlying statutes permit such regulation as is proposed? Although we understand that the Department of Defense is furnishing information on the identity and compensation of foreign agents or representatives involved in U.S. company sales of military goods to foreign countries, does this necessarily represent a precedent for the proposed requirements in Department of State regulations relating to sales which are handled strictly in commercial channels as distinguished from having actual DOD participation in the transactions? We want to make one final observation which is a procedural matter. Since these regulations were issued in proposed form in the Federal Register on August 25, they reached interested U.S. companies and other interested parties during the vacation period. Moreover, in order to respond constructively, some companies may have believed it necessary to engage in international communications which, of course, take time. Finally, the subject matter is, as we have noted, important and sensitive. Under the circumstances, we trust that comments which are received within a reasonable period after the announced deadline of September 24 will be considered filed in a timely manner and thus given full consideration. While we have been advised informally that this will be the case, the point is referred to here for purposes of emphasis and confirmation. Sincerely, CHARLES STEWART, 60-363 O 75 16 APPENDIX 9 PRESS RELEASE ISSUED BY DEPARTMENT OF STATE ON BRIBERY OF MAY 15, 1975. The Department believes it would be advisable at this time to amplify recent policy statements regarding illegal activities by United States enterprises abroad. As indicated in those statements, the United States Government does not condone illegal activities by American business and industrial firms abroad. The United States condemns such actions by U.S. corporations in the strongest terms. Moreover, any American firm or individual making unlawful payments to officials of foreign governments cannot look to the Department of State for protection from legitimate law enforcement actions by the responsible authorities of either the foreign country in question or the United States. At the same time, the U.S. Government believes it would be helpful if host governments would clarify the rules for foreign firms in their countries regarding political contributions and other payments. We assume that the investigation and prosecution of offenses by foreign authorities will be non-discriminatory; that the penalties will be proportionate to the offense; and that persons or firms found guilty of improper conduct will be treated fairly and in accordance with international law. (238) APPENDIX 10 "ANTITRUST AND WORLD TRADE; TEMPEST IN AN INTERNATIONAL TEAPOT?” FROM THE CORNELL INTERNATIONAL LAW JOURNAL BY DONALD I. BAKER* (Reprinted from Volume 8, Number 1, 1974 by Cornell University. All rights reserved.) For several years, we have heard a great deal of shouting—and quite a lot of lawyering-about the impact of American antitrust law on international trade and investment. Unfortunately, we have not seen much quiet thinking on the relevance of antitrust to our broader goals as a nation of both consumers and producers. Various American business groups have complained loudly that antitrust hampers their efforts to compete in an increasingly competitive world.1 Foreign businessmen have sometimes complained that American antitrust merger enforcement discriminates against them and hampers foreign investment in the United States. Both groups repeatedly stress that we in the United States apply legal rules which foreign governments do not apply to enterprises. American business asks for broad antitrust exemptions to make it "more competitive" with firms abroad (and foreign firms sometimes seem to be asking for "diplomatic immunity" for various U.S. activities). Both arguments rest on some doubtful factual assumptions. Both seem to assume a "least common denominator" approach to law enforcement. If the criticism that "the United States is tougher" amounts to no more than sayir g “the United States protects its consumers better than other governments," then most would say "so be it." I believe that the business criticism of the antitrust laws in the international field involves serious errors, both of fact and of law. * Deputy Assistant Attorney General, Antitrust Division, U.S. Department of Justice; and Visiting Professor of Law, Cornell Law School (Spring 1974). The views stated do not necessarily represent those of the Department of Justice. 1. See generally Hearings on S. 2754 Before the Subcomm. on Foreign Commerce and Tourism of the Senate Commerce Comm., 92d Cong., 2d Sess., ser. 92-83 (1972) [hereinafter cited as Export Expansion Hearings]. American businessmen, when pressed, have generally been unable to come up with hard factual instances where American antitrust law has prevented them from doing things that were constructive and worthwhile for our overall international interest. Moreover, the critics have failed to perceive the primary thrust of our antitrust law-to protect the interests of Americans as consumers-and they have failed to see the broad flexibility written into the antitrust statutes. Beyond this, they fail to perceive the broad interest of the United States, as an exporting nation, in having a vigorous and competitive domestic economy—a message which has not been lost on a number of important industrial nations abroad.2 I believe that we can compete abroad and also protect the consumer at home. But we must be willing to think hard about both our goals and our legal tools if we are to succeed. I TRADING IN A COMPETITIVE WORLD When the Sherman Act was passed in 1890, the United States was still a largely agrarian nation and most of its exports were primary products. Sixty years later, after World War II, we were the great industrial power of the western world-a leading exporter of capital, high technology products, and still a major exporter of many primary agricultural products. Most other leading industrial countries had been badly damaged in the war and the United States stood far ahead of the pack. In time, things had changed again. By 1970, other leading industrial countries-including; particularly Japan and West Germany-had fully recovered, and thus had applied themselves with great energy to developing new business methods and new products; as a result, the United States no longer enjoyed an overwhelmingly dominant economic advantage over the western world. Indeed, the United States was running large balance of payments deficits and was encountering increasing difficulty in competing in many world markets with its industrial products. This was due, in part, to unfavorable currency exchange rates; in part, to foreign barriers to various of our products; and in part, to the price and quality of our products. 2. See, e.g., W. FUGATE, FOREIgn Commerce AND THE ANTITRUST LAWS ch. 16 (2d ed. 1973); Holloran, Tokyo Aide Startles Business by Enforcing Antitrust Laws, N.Y. Times, June 13, 1974, at 69, col. 1. |