On February 3, 2023, U.S. Customs and Border Patrol (CBP) issued a determination in the Federal Register providing notice that it has determined that palm oil and various derivatives thereof “are no longer being mined, produced, or manufactured wholly or in part with the use of convict, forced, or indentured labor by the Sime Darby Plantation, its subsidiaries, and joint ventures.” 

CBP issued its original Notice of Finding against Sime Darby Plantation (Sime Darby) on January 28, 2022, which immediately subjected such covered merchandise imported into the United States to seizure by port directors and possible forfeiture. See Update of January 27, 2022. The January 2022 finding came after CBP had, in December 2020, issued a Withhold Release Order (WRO) against such palm oil products made by or traceable to Sime Darby.  In announcing that it was lifting the January 2022 Finding, CBP stated that, “Since that time, the Sime Darby Plantation has provided additional information to CBP, which CBP believes establishes by satisfactory evidence that the subject palm oil and derivative products are no longer mined, produced, or manufactured in any part with forced labor.”  

This determination takes effect on February 3, 2023, and allows shipments containing Sime Darby-produced palm oil and derivatives to enter U.S. commerce, provided the imports are otherwise in compliance with U.S. law.

On January 27, 2023, U.S. Secretary of State Antony Blinken and U.S. Trade Representative Katherine Tai hosted the initial ministerial for the Americas Partnership for Economic Prosperity (APEP), a regional framework for cooperation to promote inclusive economic growth and strengthen competitiveness. The APEP consists of the United States, Barbados, Canada, Chile, Colombia, Costa Rica, the Dominican Republic, Ecuador, Mexico, Panama, Peru, and Uruguay. The APEP is intended to be a flexible framework and will be open to additional countries that share the values of economic cooperation and a vision for a prosperous Western Hemisphere. 

Ambassador Tai in her opening remarks stated: “This will be a historic agreement with one of the most dynamic economic regions in the world. The Western Hemisphere accounts for almost 32% of global GDP, and the United States’ ties with the region are broad and deep.” She added, “We have some of our most longstanding trade agreements in the region, like our agreements with Chile, Colombia and Peru. We also have some of our newest, like the renegotiated USMCA and the Protocol on Trade Rules and Transparency with Ecuador. [The United States is] committed to working with our partners to fully implement these existing agreements. But at the same time, we recognize that we need new tools to address new problems that will shape the coming decades – to better integrate our economies, reinforce our regional ties, and ensure that the benefits of trade are shared by all our citizens.”

The APEP will seek high-standard agreements in the following areas:  

  • Regional competitiveness: Focusing on issues that drive competitiveness and build the proper foundation for sustainable, dynamic economic growth and greater investment, including customs procedures, trade facilitation, logistics, good regulatory practices, and non-tariff barriers.
  • Resilience: Leveraging the countries’ geographic proximity and deep trade ties, strengthening the sustainability and resilience of supply chains and growing small and medium businesses, while protecting the environment and workers.
  • Shared prosperity: Ensuring that all can benefit from a dynamic economy by focusing on ways to make the lives of people fairer and more secure, including investments in workforce development, labor standards, and quality jobs; expanding financial inclusion; and improving public services while addressing corruption and tax evasion.
  • Inclusive and sustainable investment: Unleashing the region’s full potential, seeking to unlock needed financing, reinvigorating regional economic institutions and working together to bring responsible private investment to the region.

The full text of the Joint Declaration on The Americas Partnership for Economic Prosperity is available here.

In multiple petitions filed on January 18, 2023, Cleveland-Cliffs Inc. and the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union (collectively, “the Petitioners”) requested the imposition of antidumping duties on U.S. imports of certain tin- and chromium-coated steel sheet products (“tin mill products”) from Canada, China, Germany, Netherlands, South Korea, Taiwan, Turkey, and the United Kingdom and the imposition of countervailing duties on the same subject merchandise imported from China.

The scope of the petitions covers certain tin mill products primarily used as welded can bodies for food, aerosol, paint, filtration and general line applications and as caps and closures for glass containers because of their corrosion-resistance qualities:  “tin mill flat-rolled products that are coated or plated with tin, chromium, or chromium oxides”; tinplate, which is a “[f]lat-rolled steel product[] coated with tin”; and tin-free steel (also known as electrolytic chromium-coated steel), which is a “[f]lat-rolled steel product[] coated with chromium or chromium oxides[.]”  The scope includes all these tin mill products “regardless of thickness, width, form (in coils or cut sheets), coating type (electrolytic or otherwise), edge (trimmed, untrimmed or further processed, such as scroll cut), coating thickness, surface finish, temper, coating metal (tin, chromium, chromium oxide), reduction (single- or double-reduced), and whether or not coated with a plastic material.”

In support of their dumping allegations, the Petitioners reference data showing the volume of imports from the subject countries between 2019 and November 2022, increasing 21.1% from 2019 to 2021 and increasing by another 21.1% from January–November 2021 to January–November 2022.  The Petitioners also bolster their subsidization allegations by detailing how “producers of tin mill products in China are benefitting from a variety of subsidy programs provided in their home market, including export subsidies.”  The petitions conclude by alleging “the future of the domestic industry is in grave peril” and warning “[i]f trade relief is not granted soon, the United States may lose its ability to make tin mill products.” 

The Department of Commerce’s International Trade Administration now has 20 days following the filing of the petitions to determine whether to grant the Petitioners’ request for an investigation based upon their claims.  Meanwhile, the International Trade Commission has 45 days to issue a preliminary determination on whether there is a reasonable indication that the subject imports are causing or threatening to cause material injury to the domestic industry.

On January 18, 2023, the Department of Commerce’s Bureau of Industry and Security (BIS) issued an Interim Final Rule extending export controls currently in place for China on advanced computing integrated circuits (ICs), computer commodities that contain such ICs, and certain semiconductor manufacturing items to the Macau Special Administrative Region of China (“Macau”). While China grants Macau limited autonomy in economic and commercial relations under the principle of “one country, two systems,” BIS nevertheless determined that as a Special Administrative Region of China there is the potential risk of diversion of such critical items from Macau to China.

This rule adds the destination of Macau to the scope of the Regional Stability (RS) export controls under the Export Administration Regulations (EAR) that were implemented specific to China in the detailed October 2022 advanced computing and semiconductor manufacturing equipment rule issued by BIS. See Thompson Hine Update of October 31, 2022 for details. The following seven Export Control Classification Numbers (ECCNs) are directly impacted: 3A090, 3B090, 3D001, 3E001, 4A090, 4D090, and 4E001. The availability of License Exceptions will also be restricted, and U.S. persons may not knowingly export, reexport, or transfer items controlled for Macau under the scope of this rulemaking if the intended end-use involves ICs, supercomputers or other development or production equipment at semiconductor facilities. 

In addition, this rule expands the scope of the EAR’s foreign-direct product rules to Macau. Thus, Macau has been added to the destination scope of the advanced computing FDP rule and the supercomputer FDP rule. Accordingly, any foreign-produced items that are the direct product of advanced computing or supercomputer-related software or technology that is of U.S. origin or otherwise subject to the EAR would also require a U.S. export license if intended for Macau.

BIS clarified in the Interim Final Rule that this expanded scope of the application of the China advanced computing and semiconductor rule to Macau “does not change the status of Macau; it will continue to be treated as a separate destination from China.” This rule only adds Macau as a destination to which an export license will be required in order to ensure that appropriate controls are in place for these critical ICs and semiconductor items.

This rule was effective as of January 17, 2023. However, as an Interim Final Rule, BIS is accepting public comments on the rule until January 31, 2023. Comments must be submitted via the federal rulemaking portal (www.regulations.gov) under docket no. BIS– 2022–0025. Any comments must also reference “RIN 0694– AI94.” BIS will publish a subsequent rule to respond to any comments received, including possibly making updates to the overall export control rules implemented in October 2022 regarding advanced computing and semiconductor manufacturing equipment.

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As a reminder to our readers, the annual encryption self-classification report and semi-annual sales report for certain encryption items are due to be filed by February 1, 2023. 

Annual Self-Classification Report

The self-classification report covers less sensitive items covered under the Department of Commerce’s Bureau of Industry and Security (BIS) License Exception ENC (b)(1) (i.e., 15 C.F.R. § 740.17(b)(1)). Depending on the level of encryption, this may include wireless local area network (WLAN) software and equipment, certain disk/drive encryption devices, and many mass market consumer and mobile app items. Exporters may export items described under this License Exception without a license, but are required to take either of two additional steps:

  1. They may self-classify their items as eligible and submit an annual self-classification report. This annual report must be submitted to BIS by February 1 of each year. It must provide details on encryption commodities, software and components exported or reexported during the prior calendar year (i.e., January 1, 2022 through December 31, 2022).
  2. They may choose to obtain a CCATS for their items and are then no longer required to submit the annual report.

Annual reports must include the information outlined in Supplement No. 8 to 15 C.F.R. Part 742. BIS requires that each identified product be reported as it is typically distinguished in inventory, catalogs, marketing brochures and other promotional materials. Volume and details of actual exports are not required to be included in the report. If no information has changed since the previous annual report, exporters must still send an email stating that nothing has changed since the previous report; or submit a copy of the previous report. No self-classification report is required if no exports or reexports of covered encryption items occurred during the prior calendar year. For more information and details on this annual report, see Thompson Hine Update of January 5, 2021.

Semi-Annual Sales Reports

BIS also requires semi-annual reports for exports to all destinations other than Canada, and for reexports from Canada, for items described under 15 C.F.R. § 740.17 paragraphs (b)(2) and (b)(3)(iii). For exports occurring between January 1 and June 30, a report is due no later than August 1 of each year. For exports occurring between July 1 and December 31, a report is due no later than February 1 the following year. 

For these semi-annual reports, BIS requires the reporting of the Commodity Classification Automated Tracking System (CCATS) number and the name of the item(s) exported (or reexported from Canada), and the following information: (i) for sales to distributors or resellers, the identity of the distributor or reseller, the item and the quantity exported or reexported and, if collected, the end user’s name and address; (ii) if a direct sale, the name and address of the recipient, the item, and the quantity exported; or (iii) for export to a foreign developer or manufacturer headquartered in specified countries, the names and addresses of the manufacturers using these encryption items and, if known, when the product is made available for commercial sale, a non-proprietary technical description of the foreign products for which these encryption items are being used.

How to Report

These reports are filed with both BIS and the ENC Encryption Request Coordinator. 

Submissions of the annual self-classification report via email should be sent to BIS at crypt-supp8@bis.doc.gov and to the ENC Encryption Request Coordinator at enc@nsa.gov, as an attachment to an email. Submissions of the semi-annual sales report via email should be sent to BIS at crypt@bis.doc.gov and to the ENC Encryption Request Coordinator at enc@nsa.gov.

Submissions by email are preferred, but submissions may be made by disk or CD and sent to the following addresses:

Attn: Encryption Reports
Department of Commerce, Bureau of Industry and Security
Office of National Security and Technology Transfer Controls
14th Street and Pennsylvania Ave. NW., Room 2099B
Washington, D.C. 20230

and

Attn: ENC Encryption Request Coordinator
9800 Savage Road, Suite 6940
Ft. Meade, MD 20755-6000

If you have questions as to whether you are subject to the self-classification reporting requirements or need assistance in preparing and filing your annual self-classification report, please contact a member of our team.

On January 7, 2023, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued General License (GL) 5J, “Authorizing Certain Transactions Related to the Petróleos de Venezuela, S.A. 2020 8.5 Percent Bond on or After April 20, 2023,” which continues to delay U.S. persons’ ability to enforce bondholder rights to the CITGO shares serving as collateral for the Petróleos de Venezuela, S.A. (PdVSA) 2020 8.5% bond until on or after April 20, 2023. The previous deadline had been January 20, 2023. Effective January 17, 2023, this GL replaces GL 5I.

With this revised General License, U.S. persons remain prohibited until April 20, 2023 from engaging in any transactions related to the sale or transfer of CITGO shares in connection with the PdVSA 2020 8.5% Bond, unless specifically authorized by OFAC. In the modified FAQ 595, OFAC notes a favorable licensing policy toward those seeking to apply for a specific license in an effort to reach an agreement on proposals to “restructure or refinance payments due to the holders of the PdVSA 2020 8.5% bond.” 

On January 17, 2023, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued three amended General Licenses (GLs) regarding the continued authorization of certain limited activities in Russia or involving Russian entities. 

  • Russia-related General License 6C, “Transactions Related to Agricultural Commodities, Medicine, Medical Devices, Replacement Parts and Components, or Software Updates, the Coronavirus Disease 2019 (COVID-19) Pandemic, or Clinical Trials.” Revised GL 6C has added the term “provision” to the described authorized transactions so that the text in the authorizing first paragraph now reads: “(1) the production, manufacturing, sale, transport, or provision of agricultural commodities, agricultural equipment, medicine, medical devices, replacement parts and components for medical devices, or software updates for medical devices.” The revision also removed text that previously authorized certain accounting, trust, corporate and management services and activities as the deadline under separate authorization for such activities has now passed.  For past information on this GL and OFAC’s Fact Sheet offering clarity on agricultural commodities, equipment, and medicine, see Update of July 15, 2022.
  • Russia-related General License 54A, “Authorizing Certain Transactions Involving VEON Ltd. or VEON Holdings B.V. Prohibited by Executive Order 14071.” This GL authorizes all transactions ordinarily incident and necessary to the purchase or receipt of any debt or equity securities of VEON Ltd. or VEON Holdings B.V. that would otherwise be prohibited under section 1(a)(i) of Executive Order 14071, provided that such debt or equity securities were issued prior to June 6, 2022. The revision adds VEON Holdings B.V., which is ultimate 100% owned by VEON Ltd. Several Russian individuals sanctioned by the U.S., United Kingdom and European Union are minority owners in VEON’s corporate structure.
  • Russia-related General License 28B, “Authorizing the Wind Down and Rejection of Certain Transactions Involving Public Joint Stock Company Transkapitalbank and Afghanistan.” Revised GL 28B extends until March 18, 2023, authorization to continue transactions ordinarily incident and necessary to wind down transactions involving PJSC Transkapitalbank (TKB), or any entity in which TKB owns, directly or indirectly, a 50% or greater interest, that are ultimately destined for or originating from Afghanistan and otherwise prohibited by E.O. 14024.

Certain transactions remain unauthorized under these general licenses and therefore require close analysis. 

A United States-Mexico-Canada Agreement (USMCA) Chapter 31 Dispute Resolution Panel concluded that automakers may continue to use the longstanding practice of “roll-up” when calculating the percentage of North American-originating materials used in the production of core automotive parts (e.g., engines) that is subsequently factored into the computation for determining the total amount of originating content (the “regional value content” or “RVC”) for passenger vehicles and light trucks.

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On December 30, 2022, the Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) published preliminary guidance on how the United States will implement a price cap policy on petroleum products of Russian origin. OFAC notes that with this preliminary guidance the agency will likely “take a similar approach for Russian petroleum products as it has done for crude oil of Russian Federation origin.” See Update of December 5, 2022. To implement the price cap policy for Russian petroleum products, the Secretary of the Treasury will soon issue a determination pursuant to Executive Order 14071, as it did to implement the price cap policy for Russian crude oil. It also intends to publish a final version of this guidance document before February 5, 2023, when the price cap policy on petroleum products is scheduled to take effect.

In this preliminary guidance, OFAC addresses key questions regarding what constitutes petroleum products of Russian origin. For instance, OFAC clarified that petroleum products incidentally combined with a de minimis amount of Russian petroleum products will not have to be reclassified as petroleum products “of Russian Federation origin.” OFAC also confirmed that U.S. persons may reasonably rely upon a certificate of origin when assessing whether petroleum products are of Russian origin, although OFAC continues to emphasize U.S. persons should “exercise caution” about such documents, especially if there is reason to believe a certificate has been falsified or is otherwise erroneous.

OFAC also provides ground rules for when the petroleum price cap applies. For example, the price cap applies from the embarkment of maritime transport of Russian petroleum products (e.g., when a Russian entity sells Russian petroleum products and initiates the maritime transport of such goods) through the first landed sale in a jurisdiction other than Russia. Given this parameter, therefore, the price cap policy does not apply to further onshore sales of the Russian petroleum products once they have cleared customs in a jurisdiction other than Russia. Still, if Russian petroleum products have cleared customs in a jurisdiction other than Russia but are then not substantially transformed and subsequently sent back out onto the water, the Russian petroleum products have, in essence, benefitted from the evasive practice of transshipment, which retriggers the application of the price cap. The guidance offers several examples of what operations would not be considered to be substantial transformation.

When the petroleum price cap is implemented, OFAC anticipates amending Russia General Licenses 56 and 57 to extend these limited authorizations to cover Russian petroleum products. Further, it is expected that Russian petroleum products loaded onto a vessel after February 5, 2023 and unloaded before April 1, 2023 will be exempt from the price cap policy (see OFAC FAQ 1109).

Key Notes:

  • Real estate projects may be subject to CFIUS national security review if close to sensitive locations.
  • Proactive planning can mitigate transaction delays.
  • Security concerns may be broader than CFIUS regulatory issues and merit multi-tiered government and public outreach.

The Committee on Foreign Investment in the United States (CFIUS) recently reviewed a proposed real estate transaction near Grand Forks, North Dakota and determined that CFIUS did not have jurisdiction to take any action concerning the transaction. Public comments indicate that some would like to see CFIUS jurisdiction expanded or see other national security review authorities developed to address potentially sensitive real estate transactions.

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