COLUMN ONE : S. Africa Skirts the Sanctions : When is a steel girder not steel? When it comes from South Africa. Some in Congress are working to close the loopholes.

To some, the case of the South African steel seems to defy logic.

At the Houston Ship Channel, a $91-million bridge--the largest ever financed by the state--is being built with steel girders produced in South Africa.

Never mind that there has been a ban on the importation of South African steel since the United States imposed economic sanctions to protest apartheid in 1986. The bridge project is perfectly legal--at least in the eyes of the Bush Administration.

As the law is being interpreted, South African steel is, indeed, banned. But girders are allowed in because they are a fabricated product one step removed from the steel mill. In the language of government, a “substantial transformation” had taken place.

“The plain and simple answer is that it is not covered by the (anti-apartheid) act,” explained one Treasury Department official who requested anonymity.

While the distinction may be clear to Administration officials, it is not to others. Critics accuse federal officials of splitting hairs in order to skirt the sanctions, which Congress passed over President Ronald Reagan’s veto.

The sanctions, which were not intended to be comprehensive, prohibit importation of several South African goods, including iron, steel and agricultural products and anything produced by companies in which the South African government has a stake. The law also placed restrictions on what may be exported to South Africa, as well as financial transactions.

Several members of Congress charge that the importing of South African steel products illustrates how the Reagan and now Bush Administrations are undermining the spirit, if not the letter, of the law.

Millions of dollars of banned South African goods, from lobsters to textiles, are coming into the United States despite the sanctions. And, according to trade experts, American goods banned for export to South Africa are getting there anyway.

A common theme of critics is that many goods are allowed to enter the United States because of the U.S. Treasury Department’s narrow interpretation of the law and the failure of the State Department to identify products made by so-called parastatals--companies the South African government either controls or partly owns.

At the same time, South African businessmen are said to use a number of methods, including “laundering” shipments through other countries, as a way of moving products into the United States and other countries that have imposed trade embargoes.

The House Trade and Commerce Committee’s oversight and investigations subcommittee has begun an inquiry into the steel imports. Rep. John D. Dingell (D-Mich.), the chairman, in a letter to then acting U.S. Customs Commissioner Michael Lane, complained that the government “appears still to be accepting the most outrageous legal arguments of steel importers rather than trying to assess the clear intent of Congress. . . .”

The legislation states that “no iron or steel produced, or iron ore extracted, in South Africa may be imported into the United States.”

The task of enforcing the law fell to the Office of Foreign Assets Control at the Treasury Department, which identifies only 15 items as iron or steel products.

A Treasury official argued that the list did indeed satisfy the intent of the law and, in fact, may have gone beyond it by including items such as wire products. Others, however, disagree with that interpretation.

“The law absolutely bans all iron and steel from South Africa after Dec. 31, 1986,” said Rep. John Bryant, (D-Tex.), who has become one of the major proponents of broadening the sanctions.

Taking the ‘Low Road’

Another who considers the interpretation to be too narrow is Gay McDougall, director of the South Africa Project of the Washington-based Lawyers’ Committee for Civil Rights Under Law.

“The (Reagan) Administration was on the record as being against these sanctions,” she said. “Clearly, they took the low road in terms of enforcement and implementation. They have taken the narrowest interpretation of the embargo possible, and they haven’t taken all the steps to fully implement it.”

Import figures show that the sanctions have had some effect, but by no means have closed off trade with South Africa. In 1986, the year before the embargo, the United States imported $301-million worth of iron and steel from South Africa and, overall, imported goods worth more than $2.3 billion from that country. In the following two years, more than $353.6-million worth of iron and steel have been imported from South Africa, according to the U.S. Department of Commerce.

Billions in Imports

The Bureau of the Census reported that since the beginning of 1987, more than 11,000 tons of goods categorized as “other steel products” have been imported from South Africa.

In 1988, iron and steel ranked as the fourth-largest category of imports from South Africa to the United States, according to Commerce Department statistics. During that year, the last for which the Commerce Department had figures, the United States imported more than $1.5-billion worth of goods from South Africa.

The figures are assumed to be conservative, since they do not count goods transshipped through other nations.

Last April, for instance, Timothy Zwane, principal secretary for commerce, industry and tourism in Swaziland, complained that South African firms were using false documents to export goods as Swazi products. He cited as an example a shipment of 50 tons of cut flowers, said to have originated in Swaziland, that were exported to Europe, where sanctions against South Africa are also in force. The only problem was that Swaziland produces nowhere near that amount of flowers. He also pointed out that Swaziland does not grow apples, pears or grapes.

“Yet we constantly find, when we travel around (that) people talk about Swaziland apples, pears and grapes,” he was quoted as saying. “Of course, we are surprised.”

In another case, a U.S. Customs official described how an ostrich egg laid in South Africa was transferred to another country, where it was hatched, and the chick eventually was shipped to the United States. It was considered a legal import because the chick was not hatched in South Africa. The same official described how South African rock lobsters are allowed into the United States because they are processed and shipped on vessels registered to another country.

Last March, a former South African bank manager told a House subcommittee that a number of European banks were using their New York offices to disguise South African transactions, including some prohibited by the sanctions. Terry Crawford-Browne, now an adviser to Archbishop Desmond Tutu, said he could not document his allegations, but that his past banking experience led him to believe this was occurring.

The United Nations Commission on Transnational Corporations said in a report in July that South Africa had responded to the sanctions by developing what is widely known as “unconventional trade.”

The report described a raft of methods used to get around the sanctions, from simple mislabeling to transshipment through several countries. One example: A chain of private trading companies passes formal title to the goods among themselves until the real owner and destination are impossible to detect.

“This is intended to confuse or deter monitoring through sheer complexity,” the report said. “Invariably, the actual movement of the goods is much more direct. In monitoring oil shipments to South Africa it has been observed that, whereas the tanker sails directly from the port of loading to South Africa, title to the cargo may change hands 10 to 15 times among traders and brokers in a number of different countries.”

‘Dutch Blend’ Coal

The report also explained how South Africa ships coal to places where it is not banned. It mentioned Rotterdam and Antwerp. The South African coal is then mixed with shipments from other locales to obscure the coal’s origin. In the parlance of trade, the Rotterdam product is known as “Dutch blend.”

Given the lax U.S. enforcement, many South African products need not take such circuitous routes to reach America, McDougall of the South Africa Project said. In the project’s 135-page report last year, for example, McDougall was highly critical of the Treasury Department’s definition of uranium products covered by the sanctions. While uranium and uranium oxide are banned, uranium hexafluoride is not. Thus, she said, only uranium in its beginning and finished forms are banned, while the products of interim processing may be imported and then easily transformed.

“The Treasury Department’s interpretation permits easy circumvention of the sanction,” the report said.

Last August, a report of the General Accounting Office--the investigative arm of the Congress--said that sanctions against South Africa had been enforced only partially because the State Department never gave Customs a detailed list of parastatal products. It had only identified the parastatal companies.

Sen. Edward M. Kennedy (D-Mass.) one of the most ardent foes of South Africa’s white minority government, described the GAO’s findings as showing a “shocking lapse by top Reagan Administration officials, who failed to apply elementary enforcement procedures in carrying out the anti-apartheid laws.”

The whole question of sanctions is a tricky and controversial one that is further complicated by the fact that the 1986 provisions were the first in modern times enacted by the Congress rather than the President.

The Reagan Administration deemed sanctions to be counterproductive in any effort to get the South African government to end its minority rule. But when Congress overrode Reagan’s veto, it did so in very selective fashion, with the announced intent of hurting just the South African government’s tax base, not the citizenry.

As a result, the imports section specified only textiles, agricultural products, iron and steel, coal and uranium and any article grown or produced, manufactured or exported by a parastatal. It was not until 1987 that gold, which accounts for about 45% of South Africa’s export revenues, came under the sanctions. At that time gold was defined as a parastatal product, the government entity being the South African Reserve Bank.

Recently, Herman Cohen, assistant secretary of state for African affairs, was quoted as saying that the sanctions have been “effective in bringing about new thinking in Pretoria.”

McDougall and others say that the sanctions would be far more effective if they were of the blanket variety imposed in the past against Libya, North Vietnam, North Korea and other nations.

Others, including South African officials and many white South Africans who oppose apartheid, follow the Reagan line of thinking. They say the U.S. sanctions are hitting labor-intensive industries such as farming and coal mining, and thus hurting the black South African labor force.

From that standpoint, “the sanctions have been a complete failure,” said Michael Johns, a South African specialist at the conservative, Washington-based Heritage Foundation.

The GAO, in a report released last month, addressed the question of whether further restrictions on gold might be feasible. The conclusions were mixed, but the report did point out that while gold is banned, much of it comes into the United States anyway, as Italian jewelry.

The reason is that South Africa markets most of its gold through Britain and Switzerland, and those countries then redistribute it. Almost all of the gold that goes to Italy, the world’s leading consumer, is made into jewelry, which is then marketed around the world. The GAO said that 91% of all gold entering Italy comes from South Africa.

Meanwhile, a member of the House oversight subcommittee said that hearings on the importation of South African steel and steel products should begin in the next several weeks, and that Treasury and Customs officials will be called to explain their rationale on the importation of girders for the Texas bridge.

Rep. Bryant has sent the Treasury Department a letter requesting details of all transactions in which iron and steel have been allowed into the United States since the embargoes were imposed in 1986.

An aide to Sen. Kennedy said that an effort to tighten the sanctions will be made during this session of Congress. (The House last year passed a bill to widen the sanctions, but it did not make it to the Senate floor before the end of that session.)

“There are a lot of loopholes we’ve got to close,” he said. “We didn’t cover a lot of things.”