On June 1, 2022, the Office of the U.S. Trade Representative (USTR) announced the U.S.-Taiwan Initiative on 21st-Century Trade, which is “intended to develop concrete ways to deepen the economic and trade relationship, advance mutual trade priorities based on shared values, and promote innovation and inclusive economic growth for our workers and businesses.”  Under the initiative, the two parties will seek to reach agreements “with high-standard commitments and economically meaningful outcomes” in the following trade areas:

  • Trade facilitation – including accelerated implementation of the World Trade Organization’s Trade Facilitation Agreement, adopting provisions on digitalization of trade facilitation measures, and ensuring inclusivity in accessing customs procedures.
  • Regulatory practices – including timely online accessibility to information about regulations and processes, providing adequate time for public consultations and consideration of comments, and ensuring that regulatory decisions are based on high quality information, science and evidence.
  • Agriculture – including provisions to facilitate agricultural trade through science and risk-based decision-making and through the adoption of sound, transparent regulatory practices.
  • Anti-corruption – including provisions that preclude the tax deductibility of bribes and establish measures regarding the recovery of proceeds of corruption and the denial of a safe haven for foreign public officials who engage in corruption.
  • Supporting SMEs in trade –  including efforts to identify and overcome barriers to trade for small and medium-sized enterprises (SMEs), focusing on trade facilitation for SMEs, sharing and promoting best practices, and working together on activities to promote and support SMEs, including those owned by under-represented groups and women entrepreneurs and those in disadvantaged communities.
  • Harnessing the benefits of digital trade – including efforts to build consumer trust in the digital economy, promoting access to information, facilitating use of digital technologies, promoting resilient and secure digital infrastructure, and addressing discriminatory and trade-distortive practices in the digital economy.
  • Promoting worker-centric trade – including efforts to develop more durable and inclusive trade policies, protecting labor rights, and eliminating forced labor in global supply chains.
  • Supporting the environment and climate action – including promoting decarbonizing economies, exchanging information, and supporting businesses, green jobs and the growth of low-carbon economies.
  • Standards – including the adoption and application of standards, technical regulations, and conformity assessment procedures that are non-discriminatory, do not create unnecessary barriers to trade, and serve legitimate policy objectives.
  • State-owned enterprises – including developing provisions to create a level playing field for workers and businesses when competing against these entities in the international marketplace by ensuring that these entities act in a commercial manner, are regulated impartially, and do not provide or receive trade-distorting non-commercial assistance.
  • Non-market policies and practices – including collaboration on ways to address these harmful non-market policies and practices.

The first meeting of the U.S.-Taiwan Initiative on 21st-Century Trade is expected to occur later this month.

On June 1, 2022, the Department of Commerce’s Bureau of Industry and Security (BIS) issued a Final Rule amending the Export Administration Regulations (EAR) to adopt a congressional notification requirement for license applications of semiautomatic firearms meeting certain requirements.  This final rule is effective on July 18, 2022.

This Final Rule adds a new section 15 C.F.R. § 743.6 adopting a congressional notification requirement for export license applications involving semiautomatic firearms that are (i) classified under Export Control Classification Number (ECCN) 0A501.a and (ii) valued at $4 million or more.  The congressional notification requirement will not apply to license applications if the 0A501.a semiautomatic firearms are destined for countries in Country Group A:5 or A:6 (i.e., close U.S. allies – see supplement no.1 to part 740 of the EAR), with the exception of Mexico, South Africa, and Turkey.  Nor will this requirement apply to exports to personnel and agencies of the U.S. Government under License Exception GOV or when for the official use by an agency of the North Atlantic Treaty Organization (NATO).  The Final Rule cautions that license applicants should not break-up any sales contract values in order to come under the $4 million dollar threshold.

BIS stated that it determined that congressional notification of such exports is warranted due to the fact that such semiautomatic firearms were previously subject to control under the International Traffic in Arms Regulations (ITAR) and are often used by military and law enforcement personnel.  BIS has stated that this notification requirement does not change the interagency license process for impacted firearms or how license applicants need to structure or generally apply for a BIS export license.

The Office of the U.S. Trade Representative (USTR) has announced that it will again extend Section 301 product exclusions for imports from China of medical care products needed to address the COVID-19 pandemic. The USTR will extend product exclusions on 81 medical care products, as set forth in Annex B of USTR’s announcement, for an additional six months.  These product exclusions were set to expire on May 31, 2022, but will now be extended through November 30, 2022.  The exclusion extensions are available for any product that meets the description in the product exclusion.  Further, the scope of each exclusion and modification is governed by the scope of the 10-digit Harmonized Tariff Schedule of the United States (HTSUS) statistical reporting numbers and product descriptions in the relevant section of Chapter 99 of the HTSUS.

See past Update of November 12, 2021, for additional details on past extensions.

On May 27, 2022, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued Venezuela-related General License 8J, extending authorization until December 1 for certain activities previously authorized under General License 8I. General License 8J authorizes the continuation of transactions and activities “ordinarily incident and necessary to the limited maintenance of essential operations, contracts, or other agreements,” that:

  1. are for safety or the preservation of assets in Venezuela;
  2. involve Petróleos de Venezuela, S.A. (PdVSA) or any entity in which PdVSA owns, directly or indirectly, a 50% or greater interest; and
  3. were in effect prior to July 26, 2019, for the following entities and their subsidiaries:
    • Chevron Corporation
    • Halliburton
    • Schlumberger Limited
    • Baker Hughes, a GE Company
    • Weatherford International, Public Limited Company

The term “safety or the preservation of assets” covers transactions and activities necessary “to ensure the safety of personnel, or the integrity of operations and assets in Venezuela; participation in shareholder and board of directors meetings; making payments on third-party invoices for transactions and activities authorized” under this general license (or prior to April 21, 2020, if such activity was authorized at that time) as well as “payment of local taxes and purchase of utility services in Venezuela; and payment of salaries for employees and contractors in Venezuela.” The general license authorizes such activities involving PdVSA and the other listed entities through 12:01 a.m. EST, December 1, 2022.

As with past extensions, General License 8J does not authorize any activities related to Venezuelan-origin petroleum or petroleum products; the provision of insurance for such products; the design, construction or work on wells or other facilities or infrastructure in Venezuela; contracting any additional personnel or services (except as required for safety); or the payment of any dividends to PdVSA. Further, this General License does not authorize transactions related to the export or re-export of diluents to Venezuela; the issuance of any loans to, or accrual of additional debt by, or subsidization of PdVSA; or any transactions otherwise prohibited by OFAC’s Venezuela Sanctions Regulations (31 C.F.R. part 591) or with any blocked persons other than those identified in this General License.

General License 8J replaces and supersedes General License 8I. See also SmarTrade Update of December 2, 2021.

On May 23, 2022, the U.S. Departments of State, the Treasury, Commerce, and Labor issued a joint advisory for U.S. businesses operating in Sudan. The advisory highlights the risks associated with conducting business with Sudan’s state-owned enterprises (“SOEs”), which are effectively controlled by the Sudanese military since its seizure of power on October 25, 2021. Among other things, the business advisory highlights the following risks:

  • Gold Industry: The advisory warns U.S. businesses that the U.S. Department of Labor lists gold from Sudan as a good produced with child labor and urges businesses engaging in gold trade in Sudan or whose suppliers source gold from Sudan to adopt due diligence practices consistent with OECD Due Diligence Guidance, Gold Supplement.
  • Sanctioned Parties: The advisory also highlights that certain individuals and entities in Sudan have been designated under various sanctions authorities, including the recent designation of the Central Reserve Police under Executive Order 13818, and advises businesses to employ a tailored risk-based approach to sanctions compliance by developing and updating their sanctions compliance policies and procedures.
  • Arms, Military Equipment, and Related Activities: the Sudan business advisory highlights that there is a UN arms embargo on the supply of arms and related materiel and any related technical training or assistance in relation to actors operating in Darfur, and that the embargo was implemented by the U.S. Government in the International Traffic in Arms Regulations, which reflects a policy of denial for exports or imports of defense articles and services destined for or originating in Sudan, with certain exceptions.
  • Human Rights Due Diligence: Finally, the business advisory document recommends that U.S. businesses conduct human rights due diligence based on publicly available guidance documents, including UN Guiding Principles on Business and Human Rights, and U.S. Department of Labor’s platform – Comply Chain: Business Tools for Labor Compliance – providing information about due diligence measures specific to forced labor and child labor in supply chains.

On May 26, 2022, the Department of Commerce’s Bureau of Industry and Security (BIS) issued a Final Rule regarding  export controls on certain cybersecurity items for national security and anti-terrorism reasons.  Originally issued as an interim Final Rule in October 2021 (see Update of October 25, 2021), BIS implemented these export controls due to concern that certain cybersecurity items could be used for malicious cyber activities, such as surveillance, espionage, or other actions that disrupt, deny or degrade the network or devices on it.  While the controls went into effect on January 19, 2022, BIS did also request public comment.

As a result of limited public comment, in the Final Rule, BIS has made several changes and clarified the scope of this rule, including:

  • Under license exception Encryption Commodities, Software and Technology (ENC), the Final Rule adds a new end-use restriction so this license exception “is not authorized if the exporter, reexporter, or transferor ‘knows’ or has ‘reason to know’ at the time of export, reexport, or transfer (in-country), including deemed exports and reexports, that certain specified items will be used to affect the confidentiality, integrity or availability of information or information systems, without authorization by the owner, operator or administrator of the information system (including the information and processes within such systems)”;
  • Under the new license exception Authorized Cybersecurity Exports (ACE), the Final Rule revises the definition of the term “Government end user” by adding a detailed illustrative list of end users that meet this definition;
  • Amends the terms ‘‘Less sensitive government end users’’ and ‘‘More sensitive government end users’’ to indicate that the terms apply to cybersecurity items;
  • Corrects an error made to ECCN 5D001 in the 2021 interim Final Rule. That rule inadvertently removed 5D001.e and this Final Rule restores 5D001.e.

This Final Rule is effective on May 26, 2022.

On May 23, 2022, the United States and several allies in the Asia-Pacific-India region announced the launch of the Indo-Pacific Economic Framework for Prosperity (IPEF) to pursue regional economic engagement. Secretary of Commerce Gina Raimondo stated, “This framework will enable the United States to expand its economic leadership in the Indo-Pacific and work with our allies and partners in the region to secure our supply chains, increase clean energy production, and cooperate on the development and regulation of emerging technologies. Nearly one billion people in the Indo-Pacific will enter the middle class over the next decade. Deepening our ties to the region is good for American workers and businesses ​and that of our partners in the region, and it is crucial to our ability to stay competitive.”

According to the “Statement on Indo-Pacific Economic Framework for Prosperity,” entered into by the United States, Australia, Brunei Darussalam, India, Indonesia, Japan, Republic of Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand and Vietnam, the IPEF is intended “to advance resilience, sustainability, inclusiveness, economic growth, fairness, and competitiveness for our economies. Through this initiative, we aim to contribute to cooperation, stability, prosperity, development, and peace within the region.” The IPEF members will engage in discussions involving “four key pillars”: (1) encouraging free and fair trade; (2) improving transparency, security and sustainability of supply chains; (3) accelerating the development and deployment of clean energy technologies; and (4) promoting fair competition and enforcing tax, anti-money laundering and anti-bribery regulatory regimes. A White House Fact Sheet provides additional background on the economic engagement that will occur under the IPEF.

During brief remarks to the press, President Joseph Biden stated that the “future of the 21st century economy is going to be largely written in the Indo-Pacific — in our region.” He also indicated that the framework will be open to other countries that may wish to join in the future. In conducting the first ministerial meeting, U.S. Trade Representative Katherine Tai noted that the IPEF would “link major and emerging economies to tackle 21st century challenges,” including issues such as the digital economy and emerging technology, labor commitments, the environment, trade facilitation, transparency and good regulatory practices, and corporate accountability. The United States will also use this forum to pursue an accelerated implementation of the World Trade Organization’s Trade Facilitation Agreement in an effort to improve the movement of goods across borders.

The Indo-Pacific covers half the population of the world and more than 60% of the global GDP.  The IPEF involves countries that negotiated the Trans-Pacific Partnership (TTP) from which the United States removed itself before the agreement was ratified. (For additional background on the TPP, see the Update of January 23, 2018). In remarks to the press upon announcing the IPEF, Ambassador Tai stated that the United States would remain out of the TPP as the agreement did not have sufficient congressional support to pass.

On May 12, 2022, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued Syria General License (GL) 22, which authorizes certain transactions, including processing or transfer of funds on behalf of third-country entities, otherwise prohibited under the Syrian Sanctions Regulations (SSR) that are ordinarily incident and necessary to activities in the areas of northeast and northwest Syria (i.e., non-regime held areas, as defined in the Annex to the GL) in agriculture, information and communications, power grid infrastructure, construction, finance, clean energy, transportation and warehousing, water and waste management, health services, education, manufacturing, and trade. This GL provides authorization for certain activities otherwise prohibited by the SSR, including the prohibitions on U.S. persons in engaging in new investments in, or exportation, reexportation, sale, or supply of any services to Syria. GL 22 also authorizes the purchase of refined petroleum products of Syrian origin for use in Syria that is ordinarily incident to the activities described in the GL. GL 22 authorizations exclude any transaction involving any person, including the government of Syria, blocked pursuant to Syrian Sanctions Regulations and Caesar Syria Civilian Protection Act of 2019.

OFAC issued five frequently asked questions (FAQs), FAQs 1041 – 1045, and updated FAQ 884 to reflect the new GL 22. Notably, OFAC explained in the new FAQs that the purpose of GL 22 is to improve the economic conditions in non-regime held areas of Syria and to support ongoing stabilization efforts, and is not intended to remove sanctions on the Assad regime.

The Department of the Treasury’s Office of Foreign Assets Control (OFAC) recently issued several Russia-related general licenses under the Russian Harmful Foreign Activities Sanctions Regulations, 31 C.F.R. Part 587 (RuHSR). These licenses authorize certain activities which would otherwise be prohibited under OFAC sanctions toward Russia:

GL 26A extends until July 12, 2022 existing authorizations for transactions ordinarily incident and necessary to wind down transactions involving Joint Stock Company SB Sberbank Kazakhstan, Sberbank Europe AG, or Sberbank (Switzerland) AG, and supersedes and replaces GL 26. The general license also applies to transactions with entities owned 50% or greater by these Sberbank entities. This license does not authorize: (1) opening/maintaining Correspondent or Payable-Through Accounts (CAPTA) for entities subject to Directive 2 of Executive Order 14024; (2) transactions with the Central Bank of the Russian Federation (CBR), the National Wealth Fund of the Russian Federation (NWF), and the Ministry of Finance of the Russian Federation (MoF); and (3) transactions with other OFAC-blocked persons.

GL 30 authorizes  transactions involving Gazprom Germania GmbH (and any entities owned 50% or greater by this entity) that are prohibited by Directive 3 under Executive Order 14024 regarding the provision of new debt or new equity to certain Russian entities until September 30, 2022. This license does not authorize transactions with other OFAC-blocked persons. Directive 3 applies to certain Gazprom entities, but in early April 2022, Gazprom announced that it was relinquishing its business interests and assets in Gazprom Germania GmbH. German regulatory authorities subsequently took control of the company to ensure its continued operations.

GL 32 authorizes transactions ordinarily incident and necessary to wind down transactions involving OFAC-sanctioned Amsterdam Trade Bank NV (and any entities owned 50% or greater by this entity) until July 12, 2022. This license does not authorize: (1) opening/maintaining CAPTA for entities subject to Directive 2 of Executive Order 14024; (2) transactions with the CBR, NWF or MoF; and (3) transactions with other OFAC-blocked persons.

Key Notes:

  • Persons, including non-U.S. persons, providing accounting, trust and corporate formation, and management consulting services in Russia may be added to the SDN List.
  • U.S. persons are prohibited from providing these same services to Russian persons unless the recipient of the services is the subsidiary of a U.S. person.

The Department of the Treasury’s Office of Foreign Assets Control (OFAC) has issued a Determination under Section 1(a)(i) under Executive Order (EO) 14071 which states that persons operating in the accounting, trust and corporate formation services, and management consulting sectors of the Russian economy may be subject to sanctions, including blocking designations. See Thompson Hine SmarTrade Update of April 7, 2022 for more information on EO 14071. This action follows previous determinations which allowed sanctions against Russian entities operating in the aerospace, marine, electronics, financial services, technology, and defense and related materiel sectors of the Russian economy.

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