On February 2, 2022, the State Department’s Directorate of Defense Trade Controls (DDTC) issued a Federal Register notice proposing various amendments and clarification to the International Traffic in Arms Regulations (ITAR). Most significantly, DDTC is proposing to revise the definitions of “export” and “reexport” to clarify that any release of technical data to a foreign person described within these definitions “is a release only to any countries in which that foreign person currently holds citizenship or permanent residency.” Historically, DDTC has always considered and included in these definitions, the current and prior citizenship or permanent resident status of individuals in assessing a foreign person’s access to ITAR-regulated activities. With this proposed amendment, DDTC acknowledges that the former citizenship or permanent residency status in another country “should not be deemed to automatically result in an export or reexport to that country.” DDTC notes that such a change to these two definitions will “provide greater opportunities for foreign persons who are no longer citizens or permanent residents of certain countries to participate in ITAR-regulated activities.” While not noted in the notice, this proposed amendment will also bring DDTC more in alignment with the Department of Commerce’s position on considering only the current citizenship status of an individual under the Export Administration Regulations (EAR).

In addition, DDTC is proposing to replace the term “national” with “person” in the Canadian exemptions; revise the exemption for intra-company, intra-organization, and intra-governmental transfers to dual nationals or third-country nationals; and correct administrative errors in the section of the ITAR regarding voluntary disclosures.

Interested parties must submit comments on these proposed amendment no later than April 4, 2022. Comments may be filed via the U.S. government e-filing portal at www.regulations.gov, under Docket DOS–2021–0031, or via email to DDTCPublicComments@state.gov with the subject line: ‘‘Regulatory Change: ITAR Sections 120, 126 and 127.”

On February 1, 2022, a three-judge panel at the U.S. Court of International Trade (CIT) held oral argument in the China Section 301 tariff refund litigation to consider the government defendants’ motion to dismiss and the plaintiffs’ cross motion for judgment on the record. Arguments by both parties focused on three main issues: (1) justiciability; (2) the plain meaning of the relevant statute under Section 301 of the Trade Act of 1974; and (3) the applicability of the Administrative Procedures Act (APA).

Government’s Argument

In support of its motion to dismiss, the government defendants argued that the Section 301 trade action and the resulting tariffs were “issued at the direction of the president” — a political act that is not reviewable by the CIT and outside of the APA process. The judges questioned the role of former President Donald Trump in the implementation of additional tariffs under Lists 3 and 4 (which were applied after the U.S. Trade Representative (USTR) issued its determination of injury in the amount of $50 billion covered by Lists 1 and 2). Other than arguing that the various Federal Register notices served as the president’s directives, the government attorneys had to acknowledge that implementation was handled by the USTR.

The government defendants then argued that Sections 301 and 307 of the Trade Act of 1974 are “negotiating tools” and that plaintiffs’ arguments that the Lists 3 and 4 actions and tariffs went beyond the intent of the statute would undermine the plain reading of the statutory language. Finally, the government argued that this Section 301 trade action is “unreviewable” under the APA given the exemption for matters involving the foreign affairs function of the United States. If the judges consider this argument, the government attorney argued the USTR nevertheless met the required threshold for providing notice, allowing public comment, and providing sufficient reasoning for its decisions.

Plaintiffs’ Argument

In support of its motion for a judgment on the record, the plaintiffs argued that the actions taken by the president through the USTR are reviewable since it was the USTR that promulgated the lists and undertook formal agency actions to implement the Section 301 determination and tariffs against China. The plaintiffs’ attorney then made several detailed arguments pertaining to the scope and congressional intent of Section 307 as to the USTR’s authority to modify any Section 301 trade action, particularly since the promulgation of Lists 3 and 4 were not part of the original investigation. As to the applicability of the APA, the plaintiffs’ attorney argued that the CIT does not even need to address the APA to support plaintiffs’ position. Nevertheless, the attorney argued that with the thousands of comments filed, the USTR provided no meaningful discussion as to its reasoning and decision-making process. Noting that the term “reasonable consultation” may be vague, the attorney argued that it does not mean “you ask and ignore,” and that in this instance, the USTR failed to provide any meaningful justification.

Amicus Parties

Two amicus parties offered brief arguments, and questioning by the judges was limited. However, these parties did raise one novel issue — the standing of parties who are not U.S. importers of record and their right to recovery.

On January 24, 2022, the Department of Commerce issued a Federal Register notice requesting information that will assist the National Institute of Standards and Technology (NIST) to guide programs designed to support a strong domestic semiconductor industry. The notice seeks public comment that will “inform the planning and design of potential programs to incentivize investment in semiconductor manufacturing facilities and associated ecosystems; provide for shared infrastructure to accelerate semiconductor research, development, and prototyping; and support research related to advanced packaging and advanced metrology to ensure a robust domestic semiconductor industry.”

This request for information comes after the Department released Results from Semiconductor Supply Chain Request for Information, which is based on responses to the September 2021 Request for Public Comments on Risks in the Semiconductor Supply Chain. See Update of September 29, 2021. In prepared remarks, Secretary Gina Raimondo stated that “The United States faces both an immediate supply shortage that’s driving up prices and a long-term threat to America’s economic and national security if we don’t increase domestic supply of chips…. As demand for semiconductors will only increase, we need smart, strategic investments to shore up our domestic supply chain – and we need it now. Not only to address current shortage and supply chain issues but to help position America to lead globally by investing in our semiconductor manufacturing and R&D and enhance American competitiveness.”

The Department published the current notice requesting information to seek input on a potential set of programs in general and the following topics specifically:

  • A Semiconductor Financial Assistance Program that would provide funding, through a competitive process, to private entities, consortia of private entities, or public-private consortia to incentivize the establishment, expansion, or modernization of semiconductor manufacturing facilities and supporting infrastructure.
  • A National Semiconductor Technology Center to serve as a hub of talent, knowledge, investment, equipment and toolsets.
  • An Advanced Packaging Manufacturing Program that focuses on the challenge of embedding fragile computer chips into very small configurations that combine multiple systems resulting in benefits including lower costs, increased functionality and improved energy efficiency.
  • Comments on the current and future Workforce Development Needs of the Industry for a highly skilled workforce capable of meeting current and future needs of the public and private sectors.

Comments submitted to the Department will help to inform the planning and implementation of programs to (1) protect and extend the U.S. semiconductor industry; (2) secure the supply of chips for critical, commercial and non-commercial U.S. sectors; and (3) promote the economic viability of U.S. industry in research and development, manufacturing, and other critical areas of the semiconductor value chain. At a later date, public workshops to explore in more detail questions raised in this January 2022 notice may be scheduled. The public may monitor developments on www.nist.gov/semiconductors.

Interested parties must submit any comments no later than March 25, 2022. All comments must be submitted via www.regulations.gov on docket DOC-2021-0010.

U.S. Customs and Border Protection (CBP) has issued a “Notice of Finding” in which it has determined that certain palm oil and derivative products made wholly or in part with palm oil produced by Sime Darby Plantation Berhad, its subsidiaries, and joint ventures with the use of convict, forced or indentured labor, are being, or are likely to be, imported into the United States. This finding will become effective on January 28, 2022, at which time any such merchandise imported into the United States may be seized by port directors and forfeiture proceedings commenced.

This finding comes after CBP on December 16, 2020, issued a Withhold Release Order (WRO) on “palm oil,” including all crude palm oil and palm kernel oil and derivative products, made wholly or in part with palm oil traceable to Sime Darby Plantation Berhad. At that time, CBP established that reasonable evidence demonstrated that this entity harvested the fruit and produced the palm oil using forced labor.

Through its full investigation, CBP determined that there is sufficient information to support a finding “that Sime Darby Plantation and its subsidiaries are using forced labor … to harvest fresh fruit bunches, which are used to extract palm oil and produce derivative products, and that such palm oil and derivative products produced by the company are likely being imported into the United States.”

This finding covers palm oil and derivative products made wholly or in part with palm oil classified under the following Harmonized Tariff Schedule of the United States (HTSUS) subheadings: 12.07.10.0000, 1511.10.0000, 1511.90.0000, 1513.21.0000, 1513.29.0000, 1517, 3401.11, 3401.20.0000, 3401.19.0000, 3823.12.0000, 3823.19.2000, 3823.70.6000, 3823.70.4000, 3824.99.41 and any other relevant subheadings under Chapters 12, 15, 23, 29 and 38, which are produced or manufactured wholly or in part by Sime Darby Plantation, its subsidiaries and joint ventures.  Based upon this CBP determination, port directors may seize the covered merchandise and commence forfeiture proceedings, unless the importer establishes “by satisfactory evidence that
the merchandise was not produced in any part with the use of prohibited labor” specified in this finding.

The Department of the Treasury’s Office of Foreign Assets Control (OFAC) has announced its extension of two general licenses related to GAZ Group, Ukraine-related General License No. 13Q, “Authorizing Certain Transactions Necessary to Divest or Transfer Debt, Equity, or Other Holdings in GAZ Group” and Ukraine-related General License No. 15K, “Authorizing Certain Activities Involving GAZ Group” until April 27, 2022. OFAC’s 90-day extension of both licenses is shorter than the previous extensions for one-year periods.

Effective January 24, 2022, General License 13Q supersedes and replaces General License 13P, dated December 23, 2020. General License 13Q authorizes all transactions and activities otherwise prohibited by Ukraine Related Sanctions Regulations, 31 C.F.R. Part 589 (“URSR”), that are ordinarily incident and necessary to:

  • divest or transfer debt, equity, or other holdings in GAZ Group or in entities in which GAZ Group owns, directly or indirectly, a 50% or greater interests to a non-U.S. person, or
  • facilitate the transfer of debt, equity, or other holdings in GAZ Group or in entities in which GAZ Group owns, directly or indirectly, a 50% or greater interests by a non-U.S. person to another non-U.S. person.

Similarly, effective January 24, 2022, General License 15K supersedes and replaces General License 15J, dated December 23, 2022. General License 15K authorizes, through April 27, 2022, all transactions and activities otherwise prohibited by the URSR that are ordinarily incident and necessary to:

  • the manufacture and sale of existing and new models of vehicles, components, and spare parts, including automobiles, light commercial vehicles, trucks, buses, engines/powertrains produced by GAZ Group or any entity in which GAZ Group owns, directly or indirectly, a 50% or greater interest, and
  • the maintenance or wind down of operations, contracts, or other agreements, including the importation of goods, services, or technology into the United States, involving GAZ Group, or any other entity in which GAZ Group owns, directly or indirectly, a 50% or greater interest, and that were in effect prior to April 6, 2018.

Both General Licenses 13Q and 15K require that on or before 10 business days after the expiration of the license, all U.S. persons participating in transactions authorized by this general license file a comprehensive, detailed report with OFAC.

General Licenses 13Q and 15K expire on April 27, 2022 at 12:01 a.m. EST.  In addition, OFAC has amended several Ukraine-related Frequently Asked Questions.

On January 24, 2022, the Department of Homeland Security, on behalf of the Forced Labor Enforcement Task Force (Task Force), issued a request for public comments on “how best to ensure that goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part with forced labor in the People’s Republic of China are not imported into the United States.” Pursuant to the recently enacted Uyghur Forced Labor Prevention Act (see Update of January 12, 2022), the Task Force is developing due diligence guidance of methods to determine how best to ensure that goods produced in whole or in part using forced labor in China are not imported into the United States. This is part of an ongoing and concerted U.S. government effort to address the use of state-sponsored forced labor in China’s Xinjiang Uyghur Autonomous Region (“Xinjiang”).

Specifically, the Task Force is seeking comment and date that provide “sufficient information to understand and assess concerns related to the risk of importing goods, wares, articles and merchandise mined, produced, or manufactured from specific regions, sectors, facilities, and entities in the People’s Republic of China”, noting that proposed “approaches and measures to implement the UFLPA should be as detailed as practicable.” The full request for public comments provides a list of 18 detailed questions that the public is invited submit comments. These questions, however, are not intended to restrict any issues that commenters may wish to address.

Comments must be received no later than March 10, 2022, and must be filed electronically on Docket No. DHS–2022–0001, through the Federal eRulemaking Portal at https://www.regulations.gov.

After receiving comments, the Task Force will conduct a public hearing and develop a strategy for supporting enforcement of section 307 of the Tariff Act of 1930.

On January 12, 2022, the Department of Commerce’s Bureau of Industry and Security (BIS) announced it was delaying implementation of rules establishing new controls on certain cybersecurity items for National Security (NS) and Anti-terrorism (AT) reasons, along with a new License Exception, Authorized Cybersecurity Exports (ACE).  In October 2021, BIS released this Interim Final Rule to implement these export controls on certain cybersecurity items that can be used for malicious cyber activities, noting that it would become effective on January 19, 2022 (see Update of October 25, 2021).  Since then, BIS received industry feedback which, among other issues, raised concerns about the necessary compliance measures and allowing industry sufficient time to update compliance procedures and requesting that BIS provide additional public guidance.  As a result of these comments, BIS is delaying the effective date of implementing these cybersecurity controls until March 7, 2022.

Key Notes:

  • President Biden signed the Uyghur Forced Labor Prevention Act into law on December 23, 2021 to continue efforts to prevent the importation into the United States of goods produced in whole or in part with forced labor in China.
  • The Act creates a rebuttable presumption that all goods produced in whole or in part in the Xinjiang region of China or imported from certain designated entities are produced from forced labor and must be denied entry into the United States.
  • The law will go into effect on June 21, 2022.

On December 23, 2021, President Biden signed into law the Uyghur Forced Labor Prevention Act, which is part of a concerted U.S. government effort to address the use of state-sponsored forced labor in China’s Xinjiang Uyghur Autonomous Region.

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On January 5, 2022, the multi-agency Committee on Foreign Investment in the United States (CFIUS) announced its determination that two countries – Australia and Canada – “have made significant progress toward establishing and effectively utilizing a robust process to analyze foreign investments for national security risks and to facilitate coordination with the United States on matters relating to investment security.”  As such, both countries will remain excepted foreign states and excepted real estate foreign states for the purpose of CFIUS’ jurisdiction over non-controlling “covered investments” and certain real estate transactions by certain foreign persons.  In addition, New Zealand has been identified as an eligible excepted foreign state under the CFIUS regulations.

Pursuant to the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA), CFIUS established the concept of “excepted foreign state[s],” defined as those states with compliance laws, orders and regulations similar to those of the United States concerning foreign investments assessed for national security purposes. See Update of January 22, 2020.  Under such a designation, an excepted foreign state qualifies, in certain circumstances, for an exemption from the two mandatory CFIUS filings established under the FIRRMA (i.e., non-controlling covered investments and certain real estate transactions).  In early 2020, CFIUS initially identified Australia, Canada, and the United Kingdom (including Northern Ireland) as excepted foreign states due to their “robust intelligence sharing and defense industrial base integration mechanisms with the United States.”  Such a designation, however, also required that within a two-year period, CFIUS make a determination that these foreign states had satisfied the criteria reflecting they had established and were effectively utilizing a robust process to analyze foreign investments for national security risks.  CFIUS’s determinations for Australia and Canada formally establish that these countries “are and will remain” excepted foreign states under applicable regulations absent further CFIUS action.

In addition, the period for the United Kingdom and now also New Zealand to fulfill the necessary criteria in order to remain excepted foreign states has been extended until February 13, 2023.  They remain excepted foreign states during the interim.

See also, CFIUS’ Excepted Foreign States web page.

 

On December 29, 2021, U.S. Customs and Border Protection (CBP) issued several guidance documents through its Cargo Systems Messaging Service concerning recent Presidential Proclamations that established the tariff rate quota (TRQ) process for imports of aluminum and steel articles from the member countries of the European Union (EU). See Update of December 29, 2021 for details and links to President Biden’s proclamations. A summary of CBP’s guidance is below, and CBP also has provided general guidance on the overall TRQ process under CMS#0536327 – GUIDANCE: European Union (EU) Section 232 Tariff Rate Quota on Aluminum and Steel Articles and Exempting EU from Derivative Duties.

Aluminum

Effective as of 12:01 a.m. EST on January 1, 2022, imports of aluminum articles from member countries of the EU are subject to a TRQ under the Harmonized Tariff Schedule of the United States (HTSUS) subheadings 9903.85.27 through 9903.85.44. Section 232 aluminum products from the EU that are in-quota will enter free of any Section 232 duty. Filers must use an appropriate 9903.85.27 through 9903.85.44 TRQ ID HTSUS number for the first HTSUS number, followed by the Chapter 76 classification HTSUS number of their goods. TRQ entries will be processed on a “first-come, first-served” basis according to presentation date/time until the country limit for that TRQ ID HTSUS group is reached. EU member country aluminum limit tables organized by Chapter 99 HTSUS TRQ ID group are displayed in the document linked here. The status of TRQs may be tracked via the weekly Commodity Status Report at https://www.cbp.gov/trade/quota/tariff-rate-quotas. The aluminum TRQ will be administered on a semi-annual basis. The first period (through June 30, 2022) is limited to 60% of the annual aluminum country limit.

All aluminum article imports from the EU in excess of the TRQ quantities shall remain subject to the 10% ad valorem duty rate imposed by HTSUS subheading 9903.85.01, provided they are not subject to an exclusion. All imports of aluminum articles from the EU must be accompanied by a certificate of analysis in order to be eligible for the TRQ. The aluminum TRQ will be processed daily, Monday through Friday (excluding holidays). For shipments to be processed for the EU TRQ on the same day, the entry summary must be filed, the entry summary payment date must be on file or scheduled for a future statement, and the conveyance must arrive by 4:30 pm in the port’s local time zone.

For more details on the TRQ and proper reporting instructions and entry methods, consult CBP’s Bulletin on 1st and 2nd Period 2022 TRQ for EU Aluminum Articles.

Steel

Effective as of 12:01 a.m. EST on January 1, 2022, imports of steel articles from member countries of the EU are covered under a TRQ under HTSUS subheadings 9903.80.65 through 9903.81.19. Section 232 steel products from the EU that are in-quota will enter free of any Section 232 duty. Filers must use an appropriate 9903.80.65 through 9903.81.19 TRQ ID HTSUS number for the first HTSUS number, followed by the appropriate Chapter 72/73 classification HTSUS number of their goods. TRQ entries will be processed on a “first-come, first-served” basis according to presentation date/time until the country limit for that TRQ ID HTSUS group is reached. EU member country steel limit tables organized by Chapter 99 HTSUS TRQ ID group are displayed in the document linked here. The status of TRQs may be tracked via the weekly Commodity Status Report at https://www.cbp.gov/trade/quota/tariff-rate-quotas. The steel TRQ will be administered quarterly, with each quarter assigned 25% of the annual TRQ amount. Third quarter and fourth quarter TRQ limits will be evaluated to include carry forward amounts up to 6% of the annual country limit for each steel HTSUS group. Unused first quarter steel quantity, up to 6% of the annual country limit for each HTSUS group, will be combined into the third quarter limit for that HTSUS group. Unused second quarter steel quantity, up to 6% of the annual country limit for each HTSUS group, will be combined into the fourth quarter limit for that HTSUS group.

All steel article imports from the EU in excess of the TRQ quantities will remain subject to the 25 percent ad valorem duty rate imposed by HTSUS subheading 9903.80.01, provided they are not subject to an exclusion. Steel imports from the EU must be melted and poured in a member country of the EU in order to be eligible for the TRQ. Additional details on the melt and pour requirement will be provided by CBP when they are available. The steel TRQ will be processed daily, Monday through Friday (excluding holidays). For shipments to be processed for the EU TRQ on the same day, the entry summary must be filed, the entry summary payment date must be on file or scheduled for a future statement, and the conveyance must arrive by 4:30 pm in the port’s local time zone.

For more details on the TRQ and proper reporting and entry methods, consult CBP’s Bulletin on 1st and 2nd Quarter 2022 TRQ for EU Steel Articles.

Derivatives

Effective January 1, 2022, imports of aluminum and steel derivatives from the EU, as referenced in Proclamation 9980, will no longer be subject to additional duties under HTSUS subheading 9903.80.03 or HTSUS subheading 9903.85.03 per the Steel Proclamation.

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The EU member countries covered by these guidelines are:  Austria, Belgium, Bulgaria, Croatia, Cyprus, Czechia (Czech Republic), Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and Sweden.

For aluminum and steel entries under the TRQ procedures, CBP stated: “All entries submitted prior to 8:30 am ET and on January 3, 2022 will be counted in the first opening at 8:30 am ET.  If the accepted entry totals for any HTS group submitted prior to the first opening exceed the country limit of that HTS group, they will be prorated.”