Just days after the issuance of an executive order imposing a range of sanctions on North Korea, the Treasury Department’s Office of Foreign Assets Control (OFAC) has taken further action by placing eight North Korean banks and 26 individuals linked to North Korean financial networks on the Specially Designated Nationals List (SDN List). As a result of this action, any property or interests in property of the designated persons in the possession or control of U.S. persons or within the United States must be blocked. “We are targeting North Korean banks and financial facilitators acting as representatives for North Korean banks across the globe,” said Treasury Secretary Steven T. Mnuchin.

OFAC has designated the following eight North Korean banks: Agricultural Development Bank, Cheil Credit Bank, Hana Banking Corporation Ltd, International Industrial Development Bank, Jinmyong Joint Bank, Jinsong Joint Bank, Koryo Commercial Bank Ltd. and Ryugyong Commercial Bank. Also, two other banks already on the SDN List have been further designated as being part of the government of North Korea ­– the Foreign Trade Bank of the Democratic People’s Republic of Korea and the Central Bank of Democratic People’s Republic of Korea. Foreign Trade Bank is North Korea’s primary foreign exchange bank.

The individuals sanctioned by OFAC are North Korean nationals operating in China, Russia, Libya and the United Arab Emirates who act as representatives of North Korean banks.

The U.S. International Trade Commission (ITC) has determined that increased imports of crystalline silicon photovoltaic cells (whether or not partially or fully assembled into other products) are being imported into the United States in such increased quantities as to be a substantial cause of serious injury to the U.S. solar equipment industry. After its 4-0 vote, the ITC must now undertake the remedy phase of the investigation. The ITC will hold a public hearing on October 3, 2017 and submit a report containing its injury determination, remedy recommendations, certain additional findings and the basis for them to President Trump by November 13, 2017. The president is solely responsible for any final decision on whether to impose a remedy and, if so, the form, amount and duration of the remedy. In determining what action to take, if any, the president will also take into account the U.S. industry’s efforts to make a positive adjustment to import competition, factors related to the national economic interest of the United States and certain other statutory factors.

This investigation was initiated under Section 201 of the Trade Act of 1974. Section 201 investigations are often referred to as “global safeguard investigations” and are not country-specific, targeting instead imports of the product under investigation from all sources. When a petition or request is filed, the ITC must determine whether an article is being imported in such increased quantities as to be a substantial cause of serious injury or threat of serious injury to a U.S. industry.

The complaint was filed in April 2017 by two U.S. solar equipment manufacturers – Suniva, Inc. and SolarWorld Americas, Inc. – who argued that nearly 30 U.S. solar panel producers ceased manufacturing operations from 2012 to 2016, the period of investigation in the case, largely due to a five-fold increase of imports into the United States. This surge was led by China, whose shipments to the United States rose by more than 700 percent, according to ITC data gathered during the investigation. The Solar Energy Industries Association (SEIA), the national trade association of the U.S. solar energy industry that represents installers, project developers, manufacturers, contractors, financiers and nonprofits, opposed the investigation, arguing that any tariff imposed as a remedy could double U.S. solar panel prices and significantly reduce demand for solar energy. The SEIA argued that up to 88,000 solar jobs, a third of the industry’s employment, could ultimately be lost since only a fraction of solar jobs are in manufacturing.

President Trump has issued a new executive order implementing further sanctions in response to North Korea’s “provocative, destabilizing, and repressive actions,” particularly its recent intercontinental ballistic missile launches and its nuclear test of September 2, 2017. The new sanctions, to be implemented by the Department of the Treasury’s Office of Foreign Assets Control (OFAC), target individuals and entities that engage in trade with North Korea as well as the financial institutions that facilitate such trade. The executive order also authorizes the secretary of the treasury, in consultation with the secretary of state, to impose sanctions on certain persons:

  • Industries: those who operate in the construction, energy, financial services, fishing, information technology, manufacturing, medical, mining, textiles or transportation industries in North Korea;
  • Ports: those who own, control or operate any port in North Korea, including any seaport, airport, or land port of entry; and
  • Imports/Exports: those who have engaged in at least one significant importation from or exportation to North Korea of any goods, services or technology.

These sanctions also target and allow OFAC to block property and interests in property of persons determined to be a North Korean person, including a North Korean person that has engaged in commercial activity that generates revenue for the government of North Korea or the Workers’ Party of Korea.

Further, the new sanctions state that (1) no aircraft in which a foreign person has an interest that has landed at a place in North Korea may land at a place in the United States within 180 days of departure from North Korea, and (2) no vessel in which a foreign person has an interest that has called at a port in North Korea within the previous 180 days, and no vessel in which a foreign person has an interest that has engaged in a ship-to-ship transfer with such a vessel within the previous 180 days, may call at a port in the United States. See new General License 10 for limited exceptions to these shipping prohibitions.

The executive order also provides the authority for OFAC to impose sanctions on any foreign financial institution that knowingly conducts or facilitates any significant transaction on behalf of certain designated North Korean individuals and entities or any significant transaction in connection with trade with North Korea. Under this new authority, the sanctions measures can be either restrictions on correspondent or payable-through accounts or blocking sanctions. The secretary of the treasury will also have the authority to block any funds originating from, destined for or passing through accounts linked to North Korea that come into the United States or possession of a U.S. person. See updated General License 3-A for limited exceptions to these prohibitions.

The White House indicated that these sanctions are specifically targeted towards the shipping and financial industries, noting that North Korea is dependent on these networks to facilitate international trade. Separately, Treasury Secretary Mnuchin stated that “[f]oreign financial institutions are now on notice that, going forward, they can choose to do business with the United States or with North Korea, but not both.” These additional sanctions towards North Korea are effective as of September 21, 2017.

In his remarks at the opening session of the General Assembly of the United Nations, President Donald Trump spoke on a wide range of topics, including international trade. On that subject, Trump said, “In America, we seek stronger ties of business and trade with all nations of good will, but this trade must be fair and it must be reciprocal. For too long, the American people were told that mammoth multinational trade deals, unaccountable international tribunals, and powerful global bureaucracies were the best way to promote their success. But as those promises flowed, millions of jobs vanished and thousands of factories disappeared. Others gamed the system and broke the rules. And our great middle class, once the bedrock of American prosperity, was forgotten and left behind, but they are forgotten no more and they will never be forgotten again. While America will pursue cooperation and commerce with other nations, we are renewing our commitment to the first duty of every government: the duty of our citizens. This bond is the source of America’s strength and that of every responsible nation represented here today.”

Acting Secretary of the Department of Homeland Security (DHS) Elaine Duke has issued a Binding Operational Directive (BOD 17-01) directing federal executive branch departments and agencies to take actions related to the use or presence of information security products, solutions and services supplied directly or indirectly by AO Kaspersky Lab or related entities. The directive requires all federal departments and agencies to identify any use or presence of Kaspersky products on their information systems in the next 30 days; to develop detailed plans to remove and discontinue present and future use of the products in the next 60 days; and at 90 days from September 13, 2017, unless directed otherwise by DHS based on new information, to begin to implement the agency plans to discontinue use and remove the products from information systems.

This directive is the result of an interagency review and analysis pertaining to potential information security risks presented by using this Russian entity’s products due to connections between Kaspersky Lab officials and Russian intelligence agencies. Under Russian law, Russian intelligence agencies are allowed to request or compel assistance from Kaspersky and to intercept communications transiting Russian networks. DHS determined that “The risk that the Russian government, whether acting on its own or in collaboration with Kaspersky, could capitalize on access provided by Kaspersky products to compromise federal information and information systems directly implicates U.S. national security.” DHS has indicated that Kaspersky Lab will be provided the opportunity to submit a written response addressing the department’s concerns or to mitigate those concerns.

This directive comes just months after the General Services Administration removed the company from its list of approved vendors and after high-profile news reports concerning potential Russian interference in the 2016 U.S. presidential election. In addition to any national security implications, trade analysts also see this decision as another form of sanctioning Russia. The U.S. government’s banning of Kaspersky products from its departments and agencies has the potential to significantly undermine Kaspersky Lab’s market position in the United States and probably elsewhere.

The United Nations (UN) Security Council unanimously passed resolution 2375 (2017) on Monday, further sanctioning the Democratic People’s Republic of Korea for its most recent nuclear test, and reaffirmed that North Korea must immediately suspend all activities related to its ballistic missile and nuclear programs in a complete, verifiable and irreversible manner. This latest round of UN sanctions bans the supply, sale or transfer of all condensates and natural gas liquids to North Korea and bans North Korean exports of its textiles, such as fabrics and apparel products. The UN Security Council further limited the direct or indirect supply, sale or transfer to North Korea of all refined petroleum products beyond 500,000 barrels during an initial period of three months – beginning on October 1, 2017 and ending on December 31, 2017 – and exceeding two million barrels per year during a period of 12 months beginning on January 1, 2018 and annually thereafter. The resolution allows for all UN member states to inspect, with the consent of the flag state, vessels on the high seas if member states have information that provides reasonable grounds to believe that the cargo of such vessels contains items of which the supply, sale, transfer or export is prohibited by past UN Security Council resolutions pertaining to North Korea. In addition to further freezing assets and implementing travel bans on several persons, the UN Security Council also agreed to prohibit UN member states from providing work authorizations for North Korean nationals to work in their jurisdictions in an effort to prevent foreign earnings from being expropriated into North Korea in support of Kim Jong-un’s nuclear weapons program.

The UN Security Council urged the resumption of multilateral negotiations to diplomatically and peacefully resolve matters. In her comments, Ambassador Nikki Haley acknowledged that this new round of sanctions would “cut deep” but that the United States is not “looking for war.” She said, “The North Korean regime has not yet passed the point of no return. … If it proves that it can live in peace, the world will live in peace with it. … The choice is theirs.”

Less than a week after President Trump issued a presidential memorandum directing the U.S. Trade Representative (USTR) to determine whether to investigate China regarding certain intellectual property and technology transfer issues, USTR Robert Lighthizer formally initiated a Section 301 investigation into the matter on August 18, 2017. In announcing the investigation, he stated that, “[a]fter consulting with stakeholders and other government agencies, I have determined that these critical issues merit a thorough investigation.” Details of the four areas of investigation and information regarding public comments were provided in a Federal Register notice.

Specifically, the public is invited to submit written comments to USTR no later than September 28, 2017 on: (1) the acts, policies and practices of the Chinese government described in the Federal Register notice; (2) information on other acts, policies and practices of China relating to technology transfer, intellectual property and innovation as described in the president’s memorandum, which might be included in the investigation and/or addressed through other trade avenues; (3) the nature and level of burden or restriction on U.S. commerce caused by the applicable acts, policies and practices of the government of China and/or any economic assessment of that burden or restriction; and (4) whether actionable conduct exists under Section 301 of the Trade Act of 1974 and what action, if any, should be taken. A public hearing will be held on October 10, 2017; persons wishing to testify at the hearing must provide written notification of their desire to speak and provide a summary of their proposed testimony by September 28, 2017.

The Department of the Treasury’s Office of Foreign Assets Control (OFAC) has designated 16 Chinese and Russian entities and individuals for activities related to the support of North Korea’s Kim Jong-un. These sanctions intentionally target third-country companies and individuals that (1) assist already-designated persons who support North Korea’s nuclear and ballistic missile programs, (2) deal in the North Korean energy trade, (3) facilitate its exportation of workers and (4) enable sanctioned North Korean entities to access the U.S. and international financial systems. These sanctions complement United Nations Security Council Resolution 2371 enacted on August 5, 2017. Treasury Secretary Steven Mnuchin stated, “It is unacceptable for individuals and companies in China, Russia, and elsewhere to enable North Korea to generate income used to develop weapons of mass destruction and destabilize the region. We are taking actions consistent with UN sanctions to show that there are consequences for defying sanctions and providing support to North Korea, and to deter this activity in the future.” For details on the 16 entities and persons that have been placed on OFAC’s Specially Designated Nationals List, see OFAC’s Federal Register notice.

U.S. Trade Representative Robert Lighthizer, Canadian Foreign Affairs Minister Chrystia Freeland and Mexican Secretary of the Economy Ildefonso Guajardo Villarreal have started the first round of NAFTA renegotiation in Washington, D.C. with opening statements and an ambitious agenda that is scheduled to take the negotiations through August 20.

In his opening statement, Lighthizer indicated that all the parties acknowledge that the trade agreement needs to be updated and modernized to address economies that are different than when NAFTA was implemented in the 1990s. After addressing modernization, however, he stated, “the tough work begins.” While the agreement has benefited many Americans, Lighthizer added that “for countless Americans, the agreement has failed … We cannot ignore the huge trade deficits, the lost manufacturing jobs, the businesses that have closed or moved because of incentives – intended or not – in the current agreement.”  He also made clear that President Trump is “not interested in a mere tweaking of a few provisions and a couple of updated chapters. We feel that NAFTA has fundamentally failed many, many Americans and needs major improvement.”

Asserting in a presidential memorandum that “Violations of intellectual property rights and other unfair technology transfers potentially threaten United States firms by undermining their ability to compete fairly in the global market,” President Trump has directed U.S. Trade Representative Robert Lighthizer to investigate any of China’s laws, policies, practices or actions that may be unreasonable or discriminatory and may be harming American intellectual property rights.

In response, Lighthizer stated, “The United States has for many years been facing a very serious problem. China[’s] industrial policies and other practices reportedly have forced the transfer of vital U.S. technology to Chinese companies. We will engage in a thorough investigation and, if needed, take action to preserve the future of U.S. industry. Thousands of jobs are at stake for our workers and for future generations. This will be one of USTR’s highest priorities, and we will report back to the President as soon as possible.”

This trade action is reported to be one of several trade actions that the Trump administration may take against China in the coming months to address alleged intellectual property violations and the theft of American trade secrets. China’s actions in this area were highlighted most recently by USTR in its annual Special 301 Report to Congress released in April 2017. This report stated that the “USTR continues to place China on the Priority Watch List because longstanding and new IP concerns strongly merit attention. China is home to widespread infringing activity, including trade secret theft, rampant online piracy and counterfeiting, and high levels of physical pirated and counterfeit exports to markets around the globe.”

In brief remarks on the topic, Trump indicated that once the investigation is complete, the USTR may use “all available options” to address and enforce any actions against any threat of further Chinese IP violations. For a more detailed analysis, see our client alert, Trump Administration Moves Against Chinese IP Violations.