The Office of the U.S. Trade Representative (USTR) is seeking public comments on whether to continue exclusions from Section 301 duties for certain medical care imports from China needed to address the COVID-19 pandemic.  These exclusions are set to expire on September 30, 2021 (see Update of March 8, 2021).  The USTR notice and request for public comment states:  “In light of developments in the production capacity of the United States in the subject products and continuing efforts in the battle against COVID–19, USTR is requesting public comments on whether to extend particular exclusions past September 30, 2021.”

The 99 COVID-19 exclusions cover a variety of Chinese medical care products, including but not limited to: face shields; certain sterile drapes and covers; gloves; face masks; hot and cold packs; otoscopes; certain woven gauze sponges; certain non-woven fabrics; certain microscopes; certain dispensers and hand pumps for liquids; certain plastic aprons for personal protection; certain molded acrylonitrile-butadiene-styrene (ABS) tubes; certain adhesive polyethylene films, sheets and strips; and certain parts and components for X-ray and MRI equipment. These exclusions are available for any product meeting a description in the annexes accompanying USTR’s December 29, 2020 Federal Register notice. The scope of each exclusion is determined by the 10-digit Harmonized Tariff Schedule subheadings and the product descriptions in Annexes A, B, C and D of the December 29 notice.

Written comments in support of or opposition to extending an exclusion beyond September 30, 2021 will be accepted through September 27, 2021, and must be submitted via the online portal at:  https://comments.USTR.gov under the heading “Comments:  Modifications to COVID-19 Exclusions.”

On August 23, 2021, the plaintiff group led by Transpacific Steel LLC filed a petition with the U.S. Court of Appeals for the Federal Circuit (Federal Circuit) requesting a rehearing by all the Federal Circuit judges of the July 2021 three-judge panel decision reversing the ruling of the U.S. Court of International Trade (CIT) that former President Donald J. Trump violated the provisions of Section 232 of the Trade Expansion Act of 1962 (Section 232) by increasing tariffs on steel imports from Turkey beyond those previously implemented under an earlier presidential proclamation. In the July 2021 ruling, the Federal Circuit panel ruled 2-1 that former President Trump did not depart from the finding of the Secretary of Commerce of a national security threat and did not violate the process and timing standards applicable to the Secretary’s finding of a national security threat. See July 13, 2021 Update.

The plaintiff group seeks a rehearing before the full membership of the court “because the Majority [in the panel hearing] disregarded important statutory provisions in Section 232, reducing them to irrelevance,” and, if the decision stands, “Presidents will be able to usurp congressional authority to set tariffs by simply receiving an affirmative ‘threat to impair’ report from the Secretary of Commerce, who serves at the President’s pleasure.” The plaintiff group specifically argues that the panel majority overlooked or misapplied three points of law and fact:

  • Misread Section 232 as providing the President unfettered discretion to increase tariffs on, or otherwise adjust, imports at any time following an affirmative report by the Secretary of Commerce.
  • Transformed Section 232 into “an unlimited delegation of legislative power to the President to regulate international commerce.”
  • Misconstrued the equal protection guarantees of the Fifth Amendment to the U.S. Constitution.

In seeking a full rehearing, the plaintiff group asks that the Federal Circuit uphold the CIT’s July 14, 2020 decision that former President Trump’s tariff increase on steel imports from Turkey was unlawful. See July 14, 2020 Update.

On August 20, 2021, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) implemented additional sanctions on Russia in response to the state-sponsored poisoning of Russian opposition leader Aleksey Navalny in August 2020. Specifically, OFAC has designating nine Russian individuals and two Russian entities found to be involved in Navalny’s poisoning or Russia’s chemical weapons program. Additionally, the U.S. Department of State has designated two Russian Ministry of Defense scientific laboratories that have engaged in activities to develop Russia’s chemical weapons capabilities.

OFAC has placed the following Russian entities and persons on the Specially Designated Nationals (SDN) List:

  • FSB Criminalistics Institute – a sub-unit of the Federal Security Service of the Russian government (FSB).
  • State Institute for Experimental Military Medicine (GNII VM) – a scientific research organization specializing in security and defense that operates under the ultimate authority of the Russian Ministry of Defense.
  • Vladimir Bogdanov – Chief of the FSB’s Special Technology Center.
  • Stanislav Makshakov – reportedly an FSB official and toxicologist.
  • Konstantin Kudryavtsev – an FSB Criminalistics Institute operative.
  • Alexey Alexandrov  – an FSB Criminalistics Institute operative.
  • Ivan Osipov – an FSB Criminalistics Institute operative.
  • Vladimir Panyaev – an FSB operative.
  • Aleksei Sedov – Chief of the FSB’s Service for the Protection of the Constitutional System and the Fight against Terrorism (also referred to as the FSB’s 2nd Service).
  • Artur Zhirov – the former director of the 27th Scientific Center and a chemical weapons expert.
  • Kirill Vasiliev – the Director of the FSB Criminalistics Institute.

Effective immediately, all property and interests in property of these individuals and entities that are in the United States or in the possession or control of U.S. persons are blocked and must be reported to OFAC. In addition, U.S. persons are generally prohibited from engaging in transactions with these sanctioned individuals and entities. In addition, any entities that are owned, directly or indirectly, 50 percent or more by the designated persons and entities are also blocked.

The State Department has designated Russia’s 27th Scientific Center and the 33rd Scientific Research and Testing Institute for operating in the defense and related materiel sector of the Russian Federation. These two entities were previously placed on OFAC’s SDN List. As a result of these designations, the following sanctions will be applied under the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991 (CBW Act): (1) new and pending permit applications for the permanent importation of firearms and ammunition manufactured or located in Russia will be subject to a policy of denial; and, (2) additional Department of Commerce export restrictions on nuclear and missile-related goods and technology pursuant to the Export Control Reform Act of 2018.

For related past actions by the U.S. government towards Russia for its poisoning of Aleksey Navalny, see SmarTrade Update of March 8, 2021.

On August 16, 2021, the U.S. Court of International Trade (CIT) once again issued an order revising certain deadlines originally established in its July 6 decision and order granting the plaintiff group’s motion for a preliminary injunction in the ongoing Section 301 tariff refund litigation involving imports of certain Chinese products. The preliminary injunction suspended liquidation of unliquidated entries subject to Section 301 List 3 and List 4A duties that, the plaintiff group alleges, are not authorized under the original investigation of the U.S. Trade Representative (USTR) into China’s actions adversely affecting U.S. intellectual property rights, innovation, or technology development. Despite further progress in negotiations between the plaintiff group and the U.S. government defendants in establishing the process for reporting and suspending liquidation of unliquidated entries, the parties’ August 9, 2021 status report revealed lingering disputes between the parties. The CIT has adjusted the following deadlines:

  1. A September 3, 2021 deadline for the government defendants to establish the repository for entering unliquidated entry information; and
  2. A September 3, 2021 deadline for additional proposed modifications by the parties to the CIT’s preliminary injunction order.

Most significantly, the CIT has extended from September 2, 2021 until October 4, 2021 the temporary restraint period prohibiting U.S. Customs and Border Protection (CBP) from liquidating any unliquidated entries involving List 3 and List 4A duties.

On August 11, 2021, the Department of Commerce’s Bureau of Industry and Security (BIS) and the Department of Treasury’s Office of Foreign Assets Control (OFAC) issued a fact sheet noting existing exemptions and authorizations available for companies, individuals and exporters to provide telecommunications-related goods and services to Cuba. The fact sheet lists OFAC general licenses (authorizations) and BIS license exceptions for exports, reexports and in-country transfers for telecommunications equipment, technology and services in Cuba pursuant to the Cuba Assets Control Regulations, 31 CFR Part 515 (CACR) and the Export Administration Regulations, 15 CFR Part 740.

While the fact sheet reiterates that most transactions between the United States and Cuba are prohibited, the U.S. government does authorize certain activities aimed at supporting the Cuban people’s access to information and the internet. Specifically, OFAC has authorized the following activities, including but not limited to:

  • The provision of services incident to the exchange of communications over the internet and services related to the exportation and reexportation of certain communications-related items (CACR §§ 515.578, 515.533);
  • The provision of telecommunications services and establishment of telecommunications facilities linking the United States or third countries to Cuba (CACR § 515.542); and
  • Transactions necessary to establish and maintain certain telecommunications or internet-based services in Cuba (CACR § 151.573).

The BIS also highlights that the following license exceptions are available under the EAR for exports and reexports to Cuba of certain telecommunications and internet-based commodities, software and technologies related to:

  • Consumer communication devices (e.g., mobile phones, TV and radio receives, modems, etc.) (EAR § 740.19); and
  • Items in support of the Cuban people intended to improve the free flow of information and the creation and upgrade of telecommunications infrastructure that enables internet access (EAR § 740.21).

For transactions and items falling outside the scope of these authorizations, the BIS and the OFAC have favorable licensing policies that will prioritize requests related to internet freedom in Cuba. The OFAC has favorable licensing policies toward specific license requests involving transactions that are necessary to ensure that the Cuban people have a safe and secure access to the internet. The BIS has a general license of approval for telecommunications items and internet-related items intended to improve communications to and from the Cuban people.

In February 2021, President Joseph Biden’s administration sought a pause in ongoing litigation involving Chinese mobile applications TikTok and WeChat in order to evaluate the record and determine whether there was an actual national security threat as previously determined by former President Donald Trump. On June 9, 2021, President Biden issued a new executive order separately addressing the threat posed to the U.S. information and communications technology and services (ICTS) supply chain, and which revoked the prior executive orders. Given these actions, on July 14, 2021 and August 10, 2021, the cases challenging the TikTok and WeChat bans were voluntarily dismissed as moot.

These cases were the result of two August 6, 2020, executive orders issued by former President Donald Trump which sought to ban certain transactions with China-based mobile applications TikTok and WeChat. Both executive orders stated that the “mobile applications developed and owned by companies in the People’s Republic of China (China) … threaten[ed] the national security, foreign policy, and economy of the United States.” These orders and the Department of Commerce’s effort to implement the scope of prohibited transactions under the executive orders were challenged in court with preliminary injunctions granted by the courts against implementation of the executive orders. For previous information on the litigation, see Updates of February 12, 2021 and October 5, 2020. For more details on the Executive Orders involving TikTok, WeChat and the ICTS supply chain, see Updates of August 7, 2020 and June 10, 2021.

On August 9, 2021, the White House issued a new Executive Order (EO), “Blocking Property of Additional Persons Contributing to the Situation in Belarus,” which expands existing U.S. sanctions against Belarus to target various sectors. The Treasury Department’s Office of Foreign Assets Control (OFAC) also issued a host of new designations to the Specially Designated Nationals and Blocked Entities (SDN) List pursuant to the EO targeting individuals and entities involved in the “violent crackdown” on protestors following the August 2020 Belarusian elections. OFAC also issued General License 4, authorizing wind-down activities related to Belaruskali OAO, as well as frequently asked questions (FAQs) 916, 917 and 918 providing some detail on the GL and the scope of the new EO.

Previously, the Belarus Sanctions Regulations, 31 C.F.R. Part 548 (BSR), were based on Executive Order 13405 (June 19, 2016), which targeted persons and entities owned or controlled by, or materially assisting, such persons involved in undermining democratic processes, participating in human rights abuses and senior-level officials engaged in public corruption in Belarus. The new EO expands the scope of prior sanctions to also target persons involved, directly or indirectly, in:

  • actions or policies that threaten the peace, security, stability, or territorial integrity of Belarus;
  • actions or policies that prohibit, limit, or penalize the exercise of human rights and fundamental freedoms;
  • electoral fraud or other actions or policies that undermined the electoral process;
  • deceptive or structured transactions or dealings to circumvent any United States sanctions by or for or on behalf of, or for the benefit of, directly or indirectly, the government of Belarus or entities on the SDN List; or
  • public corruption related to Belarus.

Importantly, the EO targets any persons determined to be:

  • a leader, official, senior executive officer, or member of the board of directors of an entity engaged in those activities or blocked pursuant to Executive Order 13405;
  • a political subdivision, agency, or instrumentality of the Belarus government;
  • a leader or official of the Belarus government; or
  • to operate or have operated in the defense and related materiel sector, security sector, energy sector, potassium chloride (potash) sector, tobacco products sector, construction sector, or transportation sector of the economy of Belarus.

The new designations to the SDN List target Alexander Lukashenko’s regime supporters, various Belarusian government departments as well as large government owned-entities, Belaruskali OAO, global producer of potassium chloride, and Grodno Tobacco Factory Neman. GL 4 authorizes certain activities related to Belaruskali OAO to provide U.S. persons 120 days to wind down transactions with Belaruskali, or any entity it owns by 50% or more.

U.S. Customs and Border Protection (CBP) has issued five Frequently Asked Questions (FAQs) relating to its June 23, 2021 Withhold Release Order (WRO) requiring U.S. ports to detain shipments of silica-based products and materials as well as goods derived from those products manufactured by Hoshine Silicon Industry Co., Ltd. and its subsidiaries (“Hoshine”). Hoshine operates in Xinjiang, China and is considered to be engaged in forced labor. Section 307 of the Tariff Act of 1930, 19 U.S.C. § 1307, prohibits the import of merchandise produced in whole or in part with forced labor. While the language of the WRO was broad, the White House Fact Sheet and the CBP Press Release issued in relation to the WRO indicated the U.S. government was targeting the polysilicon industry.

The WRO defined “silica” as a “raw material that is used to make components for solar panels, electronics, and other goods.” The first FAQ provides a non-exhaustive list of examples of the types of component materials, intermediate goods and finished goods CBP considers to be “silica-based products” and materials and goods derived from those products covered by the WRO:

  1. Component Materials – silicon, including metallurgic grade silicon, silicon oxide and certain silicones in primary forms;
  2. Intermediate Goods – semiconductor devices, integrated circuits, additives for aluminum alloys and concrete; and
  3. Finished Goods – photovoltaic cells, solar generators, solar panels, electronics, adhesives, and lubricants.

The component materials cover silicon, silicon oxide and silicones found in various intermediate and finished products not only in the polysilicon industry but also other major industries like construction and electronics. This FAQ also expands on the recently updated Xinjiang Supply Chain Business Advisory (“Advisory”) at Annex II, which listed both the metallurgical grade silicon and polysilicon industries as separate industries using forced labor in Xinjiang. For more information on the Advisory, see our Update of July 27, 2021.

The second FAQ provides that CBP might consider certain products to contain de minimis input from forced labor and therefore be outside the scope of the WRO. Specifically, “if the contribution of prohibited labor to the whole product is insignificant (both from a quantitative and a qualitative perspective), CBP may consider the product outside the scope of the statute.” As an example, “if prohibited labor is used to manufacture a single part in the engine of a car, the contribution of prohibited labor to the final product (the car) may be considered ‘de minimis’ for purposes of Section 1307. But, if the part is an essential part of the engine or the manufacture of the part comprises a substantial portion of the total labor, CBP may deem the car to be within the scope of Section 1307.”

The third and fourth FAQs confirm that, respectively: silica-based products not derived from Hoshine are not subject to the WRO; and that the WRO is based on CBP’s findings of two International Labour Organisation’s forced labor indicators, threats and restriction of movement, with respect to Hoshine.

Finally, the fifth FAQ provides the types of evidence that CBP will find acceptable in order to release any merchandise seized pursuant to the WRO. The list of documentation needed to respond to a detention notice is extensive:

  • A Certificate of Origin in the format described in 19 C.F.R. § 12.43(a). The statement required by 19 C.F.R. § 12.43(b) should be submitted by the importer, not the seller. The importer’s statement should be sufficiently detailed and include proof that the goods were not produced, wholly or in part, with forced labor.
  • Additional Information:
    • Affidavit from the provider of the silica and its initially processed forms (i.e., silicon metal, metallurgical grade silicon, chemical-grade silicon, silicon, etc.) and identification of the source of the silica and its initially processed forms that identifies where the silica and its initially processed forms were sourced.
    • Purchase Orders, Invoices, and Proof of Payment for the silica and its initially processed forms and/or silica containing components.
    • List of production steps and production records from the imported merchandise back through the supply chain to the unprocessed silica and its initially processed forms.
    • Transportation documents from raw silica source (quarry or other) through silica’s initially processed forms to the imported merchandise.
    • Daily process reports that relate to the unprocessed silica and its initially processed forms sold to the downstream producer(s) and the list of entities that supplied inputs for the silica containing products being imported.

On August 2, 2021, the plaintiff group in the ongoing Section 301 tariff refund litigation at the U.S. Court of International Trade (CIT) filed a Cross-Motion for Judgment on the Agency Record and a Response to the Government’s Motion to Dismiss. In seeking judgment and asking that the government defendants’ motion be denied, the plaintiff group seeks a ruling that the government defendants unlawfully took retaliatory action against China in promulgating modifications to the Section 301 action of the U.S. Trade Representative (USTR) against China under the Trade Act of 1974 (Trade Act). The plaintiff group further seeks a ruling vacating USTR’s List 3 and List 4A and requiring a refund, with interest, of any duties paid by the plaintiff group on entries of products appearing on these two lists. The U.S. Department of Justice (DOJ), representing the U.S. government defendants, filed its motion to dismiss and, in the alternative, a motion for judgment on the agency record on June 1, 2021. For additional details and links to that motion, see Update of June 4, 2021.

In its motion, the plaintiff group claims that the government defendants exceeded their authority under the Trade Act with the implementation of these lists and argue that the ensuing tariff actions violated the Administrative Procedure Act (APA). The argument begins by stating that this case “presents a critical question: whether there are enforceable limits on the Executive Branch’s ability to expand a tariff action under Section 301 et seq. of the Trade Act of 1974 (Trade Act) for however long, by whatever amount, and by whatever means it chooses.” The plaintiff group notes that after imposing tariffs on $50 billion of imports from China following the Section 301 investigation – an amount it deemed “commensurate” to the harm caused by China’s unfair trade actions and not under challenge in this litigation – the USTR then announced “supplemental” tariffs as “modifications” to cover “another roughly $500 billion of imports from China, i.e., virtually the entirety of U.S. annual imports from China.” In doing so, the motion argues, this was a “radical escalation of tariffs” that “transgressed the statutory limits carefully delineated by Congress when delegating the exercise of its constitutional foreign-trade powers to the Executive Branch” and “trampled on the Trade Act’s clear limits.”

The plaintiff group’s cross-motion for judgment and response to the government’s motion effectively sets forth the following arguments:

  • The implementation of List 3 and List 4A is ultra vires and contrary to law since the Trade Act, absent a new investigation, does not allow the USTR to increase penalties imposed following a targeted Section 301 investigation. While Section 307 of the Trade Act allows the USTR to “modify or terminate” an action under two circumstances, neither, the motion argues, is present here. The defendants’ “open-ended reading of the Executive Branch’s Section 307 modification authority” amounts to “an unconstitutional delegation of Congress’s authority to levy duties and regulate foreign commerce.”
  • The government defendants’ “justiciability” arguments (i.e., these were presidential actions and not agency actions) are meritless. The plaintiff group argues that this case “challenges a final agency action taken by USTR, not by the President” and the government defendants has referenced no support for its argument that “an agency acting pursuant to Presidential direction is permanently shielded from judicial review.”
  • The government defendants violated the APA’s prohibition on “agency action in excess of statutory authority or otherwise contrary to law” and by failing to provide adequate public notice and opportunity to comment on proposed rules, to meaningfully consider the comments they received, and to avoid acting in an arbitrary and capricious manner.

The motion concludes with a request that the CIT grant the plaintiff group’s cross-motion for judgment on the agency record and deny the government’s motion to dismiss. Next on the briefing schedule is an August 9, 2021 deadline for the filing of any amicus curiae briefs in support of either the plaintiff group’s or the government defendants’ motions. The government defendants will then file a combined reply supporting their dispositive motion and response to the plaintiff group’s cross-motion by October 1, 2021, with the plaintiff group filing its reply supporting its cross-motion by November 15, 2021.

Two years after former President Donald Trump announced that he would decline to take any further action on uranium imports despite a finding that uranium was being imported into the United States in such quantities and under such circumstances as to threaten to impair the national security of the United States (see Update of July 15, 2019), the Department of Commerce has finally released its full public report.

Despite then-President Trump’s decision to forego any Section 232 import restrictions or tariffs on uranium and to, instead, establish a Nuclear Fuel Working Group, the report’s findings are nevertheless worthy to note. The report determined that:

  • Domestic uranium is required to satisfy the U.S. Department of Defense (DoD) requirements “for maintaining effective military capabilities, including nuclear fuel for the U.S. Navy’s fleet of 11 nuclear powered aircraft carriers and 70 nuclear powered submarines, source material for nuclear weapons, depleted uranium for  ammunition, and other functions.” The report notes that uranium used for military purposes is generally required to be domestically produced.
  • Uranium is essential to maintaining U.S. critical infrastructure sectors, “specifically the nation’s 98 reactors for nuclear power generation to support the Nation’s commercial power grid.”
  • Domestic uranium production and processing “depends on an economically viable, competitive U.S. commercial uranium industry.”
  • Since 1946, U.S. legislation governing the uranium production and nuclear power generation industries “has consistently made explicit written reference to these industries’ national security functions.”

The report provides details as to the level of imports of uranium which may adversely impact the U.S. uranium industry, including a determination that nearly 94 percent of uranium used for civilian nuclear energy generation is imported, as well as concluding that high imports have caused “all elements of the U.S. uranium sector to shut down production capacity, struggle to maintain financial viability, reduce workforce, cut R&D, and slash capital expenditures. Excessive imports have dropped U.S. uranium mining production to some of the lowest levels seen since uranium mining began in the late 1940s.”

While President Trump declined to restrict imports, the report supported such action by noting that, “[b]ased on the current and projected state of the U.S. uranium industry, the Department [of Commerce] has concluded that the U.S. uranium industry is unable to satisfy existing or future national security needs or respond to a national security emergency requiring a large increase in domestic uranium production.”  The report recommended a “modest reduction” of uranium imports via a targeted or global quota over a five-year period at a level sufficient to enable U.S. producers to supply 25 percent of U.S. utilities’ uranium needs.