Today, President Trump signed into law the Countering America’s Adversaries Through Sanctions Act, which strengthens and expands statutory sanctions on Iran, Russia and North Korea. In a statement released by the White House, the president said, “I favor tough measures to punish and deter bad behavior by the rogue regimes in Tehran and Pyongyang. I also support making clear that America will not tolerate interference in our democratic process, and that we will side with our allies and friends against Russian subversion and destabilization.” The statement goes on to say that “the bill remains seriously flawed – particularly because it encroaches on the executive branch’s authority to negotiate.”

In a separate statement issued the same day, the president again asserted that the legislation “is significantly flawed,” stating that, “In its haste to pass this legislation, the Congress included a number of clearly unconstitutional provisions.”

See our July 26th update for additional background information.

House Speaker Paul Ryan (R-WI), Senate Majority Leader Mitch McConnell (R-KY), Treasury Secretary Steven Mnuchin, National Economic Council Director Gary Cohn, Senate Finance Committee Chairman Orrin Hatch (R-UT) and House Ways and Means Committee Chairman Kevin Brady (R-TX) issued a joint statement yesterday on tax reform in which they announced that the controversial proposal for a border adjustment tax (BAT) system is being dropped from consideration so that the effort to address comprehensive tax reform can move forward.

According to the statement, the group is “… now confident that, without transitioning to a new domestic consumption-based tax system, there is a viable approach for ensuring a level playing field between American and foreign companies and workers, while protecting American jobs and the U.S. tax base. While we have debated the pro-growth benefits of border adjustability, we appreciate that there are many unknowns associated with it and have decided to set this policy aside in order to advance tax reform.”

On July 25, the House of Representatives passed legislation that would impose additional sanctions on Iran, North Korea and Russia. The bill would increase sanctions on those involved in Iran’s human rights abuses, its support for terrorism, as well as its ballistic missile program. For Russia, the bill would ensure that existing economic sanctions remain as long as Russian aggression continues by empowering Congress to review and disapprove any sanctions relief that the president may seek. The bill also includes the text of H.R. 1644, The Korean Interdiction and Modernization of Sanctions Act, which was passed by the House in May by a vote of 419-1, and seeks to expand sanctions targeting North Korea’s nuclear weapons program.

As noted in a previous post, the Senate has also passed legislation (S. 722) to implement additional sanctions on Iran and Russia; the Senate bill does not contain provisions on North Korea sanctions. Because different bills were passed in each chamber and the House bill included additional sanctions against North Korea, it is expected that the Senate will take up consideration of H.R. 3364 for any final vote. Interestingly, given President Trump’s perceived ambivalence on the Ukraine-related Russia sanctions, the votes for passage by each chamber – 419 to 3 in the House and 98-2 in the Senate – likely make any passage of a final bill veto-proof.

The Office of the U.S. Trade Representative (USTR) has announced that the first round of renegotiation of the North America Free Trade Agreement (NAFTA) will occur August 16-20, 2017 in Washington, D.C. Reportedly, the plan is to hold seven rounds of talks at three-week intervals, at alternating sites among the three countries, with a goal of completing the negotiations by early 2018.

John Melle, the assistant U.S. trade representative for the Western Hemisphere, will serve as the U.S. chief negotiator for the NAFTA negotiations. Since joining USTR in 1988, Melle has held a number of positions covering Mexico, Canada, the Caribbean and Central America. As assistant USTR for the Western Hemisphere, he is responsible for developing, coordinating and implementing the United States’ trade policy for the region.

The Trump administration has again certified that Iran is in compliance with the terms of the Joint Comprehensive Plan of Action (JCPOA), an international agreement to curtail Iran’s development of nuclear weapons. This certification to Congress must occur every 90 days and followed confirmation by the international monitors and other signatories to the JCPOA that Iran is meeting the terms of the agreement. Reports are, however, that President Trump begrudgingly agreed to the certification after multiple meetings with his national security staff and is demanding that his staff develop a new strategy to confront Iran because he does not want to continue to indefinitely recertify Iran’s compliance.

In making the announcement, State Department officials noted that President Trump intends to impose new sanctions on Iran for ongoing “malign activities” in non-nuclear areas such as ballistic missile development and support for terrorism. “We do expect to be implementing new sanctions” related to missiles and Iran’s “fast boat program,” one State Department official indicated.

Almost immediately after the Trump administration’s announcement that Iran was in compliance with the terms of the Joint Comprehensive Plan of Action (JCPOA), the Department of the Treasury’s Office of Foreign Assets Control (OFAC) and the State Department designated an additional 18 Iranian entities and individuals for engaging in activities supporting Iran’s continued testing of ballistic missiles, as well as for engaging in activities supporting Iran’s military or Iran’s Islamic Revolutionary Guard Corps (IRGC).

OFAC has designated three networks supporting Iran’s military and/or the IRGC through the development of unmanned aerial vehicles and military equipment for the IRGC, the production and maintenance of fast attack boats for the IRGC-Navy, or the procurement of electronic components for entities that support Iran’s military. Additional persons and entities were added to OFAC’s Specially Designated Nationals List for Iran-based transnational criminal organization activities, including the theft of U.S. and western software programs which, at times, were sold to the Iranian government. A complete listing of OFAC designations is available on Treasury’s website.

The State Department designated two entities for engaging in activities that have materially contributed to, or pose a risk of materially contributing to, the proliferation of weapons of mass destruction or their means of delivery: the IRGC’s Aerospace Force Self Sufficiency Jihad Organization, which is involved in Iranian ballistic missile research and flight test launches, and the IRGC’s Research and Self Sufficiency Jehad Organization, which is responsible for the research and development of ballistic missiles.

The State Department stated that Iran continues to test and develop ballistic missiles in direct defiance of United Nations Security Council Resolution 2231, and referred to the JCPOA’s statement regarding the participants’ anticipation that “full implementation of this JCPOA will positively contribute to regional and international peace and security.” In announcing these new sanctions, however, State Department officials stated that “Iran’s other malign activities are serving to undercut whatever ‘positive contributions’ to regional and international peace and security were intended to emerge from the JCPOA.” In announcing these new sanctions, the Trump administration stated that it is continuing to conduct a full review of U.S. policy toward Iran and that the United States during this review will continue to aggressively counter Iran’s activities in the region.

U.S. Trade Representative Robert Lighthizer has released a detailed and comprehensive summary of the negotiating objectives for the renegotiation of the North American Free Trade Agreement (NAFTA). In a brief statement upon the release, Lighthizer stated that the Trump administration will seek an agreement “that reduces the U.S. trade deficit and is fair for all Americans by improving market access in Canada and Mexico for U.S. manufacturing, agriculture, and services.” The summary notes that the “new NAFTA must continue to break down barriers to American exports. This includes the elimination of unfair subsidies, market-distorting practices by state owned enterprises, and burdensome restrictions of intellectual property. The new NAFTA will be modernized to reflect 21st century standards and will reflect a fairer deal, addressing America’s persistent trade imbalances in North America. It will ensure that the United States obtains more open, equitable, secure, and reciprocal market access, and that our trade agreement with our two largest export markets is effectively implemented and enforced.”

The negotiating objectives include a new digital economy chapter and stronger labor and environmental obligations that are currently in NAFTA side agreements. These objectives reflect the negotiating standards established by Congress in the Bipartisan Congressional Trade Priorities and Accountability Act of 2015, which requires that the USTR release objectives at least 30 days before formal negotiations begin. Negotiations will now start no earlier than August 16, 2017.

As we previously reported, Executive Order 13796 of April 29, 2017, requires the United States Trade Representative (USTR) and the secretary of Commerce, in consultation with the secretary of State, secretary of the Treasury, attorney general and the director of the Office of Trade and Manufacturing Policy, to conduct comprehensive performance reviews of all bilateral, plurilateral and multilateral trade agreements and investment agreements to which the United States is a party and all trade relations with countries governed by the rules of the World Trade Organization (WTO) with which the United States does not have free trade agreements but with which the United States runs significant trade deficits in goods.

USTR and Commerce are seeking comments that they will consider as part of these performance reviews and in preparation of the subsequent report to the president. Specifically, commenters should submit information related to one or more of the following assessments:

  • The performance of individual free trade agreements (FTAs) and bilateral investment treaties (BITs) to which the United States is a party.
  • The performance of the WTO agreements with regard to our trade relations with those trading partners with which the United States does not have an FTA but with which the United States runs significant trade deficits in goods. The trading partners subject to these performance reviews are China, the European Union, India, Indonesia, Japan, Malaysia, Switzerland, Taiwan, Thailand and Vietnam.
  • The performance of U.S. trade preference programs.

Written comments are due by 11:59 p.m. EDT on July 31, 2017. USTR and Commerce prefer electronic submissions made through the Federal eRulemaking Portal. The docket number is USTR-2017-0010. For additional information, please see the Federal Register notice on this matter.

On June 20, 2017, pursuant to four executive orders (EOs), the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) and the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) subjected to U.S. economic sanctions more individuals and entities involved in the ongoing Crimean conflict between Russia and Ukraine. These actions were deemed necessary to counter attempts to circumvent current U.S. sanctions. Treasury Secretary Steven Mnuchin stated, “This administration is committed to a diplomatic process that guarantees Ukrainian sovereignty, and there should be no sanctions relief until Russia meets its obligations under the Minsk agreements.”

OFAC designated 38 individuals and entities under the Ukraine-related EOs, including:

  • Alexander Babakov, the Russian Federation’s Special Presidential Representative for Cooperation with Organizations Representing Russians Living Abroad;
  • Oboronlogistika, OOO, the Russian Defense Ministry’s sole executor for the procurement of goods, works, and services for maritime transport of military troops and freight on the territory of the so-called Republic of Crimea; and
  • The following seven banks for operating or assisting in financial transactions in Crimea: Tsmrbank, OOO; Taatta, AO; Joint Stock Company Black Sea Bank of Development and Reconstruction; Joint Stock Commercial Bank Rublev; Joint Stock Company Commercial Bank North Credit; IS Bank, AO; and VVB, PAO.

OFAC also identified a number of subsidiaries owned 50 percent or more by Transneft, which was made subject to the Sectoral Sanctions Identification (SSI) List on September 12, 2014 pursuant to EO 13662. Transneft and its 50 percent or more subsidiaries are subject to Directive 2, which prohibits U.S. persons from dealing in new debt of greater than 90 days’ maturity of sanctioned entities. The complete listing of individuals and entities is available on Treasury’s website.

BIS has added 10 entities to the Entity List on the basis of 15 C.F.R. § 744.11 (license requirements that apply to entities acting contrary to the national security or foreign policy interests of the United States) of the EAR. The 10 entities added to the Entity List consist of two entities in the Crimea region of Ukraine and eight entities in Russia. For a complete list of these entities, please see the Federal Register notice.

After several months of internal review, the Trump administration on June 16 announced revisions to U.S. policy toward Cuba. The internal review, led by the president’s National Security Council, engaged in an interagency review that included input from the Departments of State, Commerce, Agriculture, Homeland Security, Transportation and the Treasury. Additionally, President Trump met with members of Congress. In making the announcement, a senior administration official stated that the president’s “basic policy driver was his concern that the previous policy was enriching the Cuban military and the intelligence services that contribute so much to oppression on the island. And that’s the opposite of what he wanted to achieve, which is to have the benefits of any economic commerce with the United States go to the Cuban people.”

One White House senior official acknowledged that all the regulatory and policy changes initiated by President Obama from December 2014 through 2016 would be difficult to undo; however, the revised policy under the Trump administration will once again restrict certain travel and seek to limit providing any advantages to the Cuban military (particularly the Cuban military monopoly, Grupo de Administración Empresarial) while seeking to continue to allow “American individuals and entities to develop economic ties to the private, small business sector in Cuba.” The Office of Foreign Assets Control (OFAC), the Bureau of Industry and Security (BIS) and the State Department are expected to update their lists of denied parties within the next 30 days. OFAC and BIS will also issue new regulations within that time to implement these policy changes. The president’s new policy will not become effective until those regulations are issued. The U.S. embassy in Havana will remain open, and Cuba will be allowed to maintain its embassy in Washington.

The policy clarifies that any further improvements in the United States-Cuba relationship will “depend entirely on the Cuban government’s willingness to improve the lives of the Cuban people, including through promoting the rule of law, respecting human rights, and taking concrete steps to foster political and economic freedoms.”

View the “National Security Presidential Memorandum on Strengthening the Policy of the United States Toward Cuba.”