On July 20, 2021, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced that it has issued General License (GL) 5G, “Authorizing Certain Transactions Related to the Petróleos de Venezuela, S.A. 2020 8.5 Percent Bond on or After October 21, 2021,” 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 October 21, 2021 – the previous deadline had been July 21, 2021. Effective July 20, 2021, this GL 5G replaces GL 5F. Additionally, OFAC modified frequently asked question #595 to address the scope of GL 5G.

With this new General License, U.S. persons remain prohibited until October 21, 2021 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.” See Update of December 23, 2020 for prior OFAC activity on this issue.

On July 14, 2021, the Federal Trade Commission (FTC) published in the Federal Register (86 Fed. Reg. 37022-35) its final rule for “Made in USA” and other “unqualified U.S.-origin claims” on product labels. The final rule is effective on August 13, 2021.

The final rule codifies a longstanding FTC policy and practice that a product or service with an unqualified U.S.-origin claim, whether express or implied, on its label cannot contain more than a de minimis amount of foreign origin. The final rule also addresses mail order catalogs or mail order promotional material that include a seal, mark, tag, or stamp that identifies a product with an unqualified U.S.-origin claim.

View this full client update in HTML or PDF format.

On July 19, 2021, the U.S. Department of the Treasury (Treasury) and the State Bank of Vietnam (SBV) reached an agreement to address concerns raised by the United States about Vietnam’s currency practices that were found actionable in an investigation under Section 301 of the Trade Act of 1974 by the Office of the U.S. Trade Representative (USTR). See Update of January 15, 2021. Under the agreement, the USTR stated that the SBV has agreed to allow Vietnam’s currency “to move in line with the development of Vietnam’s financial and foreign exchange market and with Vietnam’s economic fundamentals.” In the joint statement released by the Treasury and the SBV, the SBV underscored that “the focus of its monetary policy framework is to promote macroeconomic stability and to control inflation” and that the country is “bound under the Articles of Agreement of the IMF [International Monetary Fund] to avoid manipulating its exchange rate in order to prevent effective balance of payments adjustment or to gain an unfair competitive advantage and will refrain from any competitive devaluation of the Vietnamese dong.” In its ongoing efforts to modernize its financial system, the SBV will “continue to improve exchange rate flexibility over time, allowing the Vietnamese dong to move in line with the stage of development of the financial and foreign exchange markets and with economic fundamentals, while maintaining macroeconomic and financial market stability.” Under the agreement, the SBV will provide necessary information for the Treasury to conduct analysis and reporting on the SBV’s activities in the foreign exchange market.

Ambassador Katherine Tai, the USTR, stated that “[c]ountries should not be able to manipulate their exchange rates to gain an unfair competitive advantage in international trade, and I commend Vietnam for its commitment to addressing our concerns.” As a result of this agreement, the “USTR, in coordination with the Treasury, will monitor Vietnam’s implementation of its commitments and work with Vietnam to ensure that it addresses the acts, policies and practices related to the valuation of its currency that were found actionable in the Section 301 investigation.” No further action by the USTR is expected in the Section 301 investigation.

On July 16, 2021, the U.S. Departments of State, Commerce, Homeland Security and the Treasury issued a Hong Kong Business Advisory highlighting growing risks for U.S. companies operating in the Hong Kong Special Administrative Region (SAR) due to ongoing actions taken by the Government of the People’s Republic of China (China). The advisory states that these risks fall into four categories: (1) risks for businesses following the imposition of the Law of the People’s Republic of China on Safeguarding National Security in the Hong Kong Special Administrative Region (NSL); (2) data privacy risks; (3) risks regarding transparency and access to critical business information; and (4) risks for businesses with exposure to sanctioned Hong Kong or China entities or individuals.

Regarding risks under the NSL, which was implemented in June 2020 and under which China significantly reduced Hong Kong’s autonomy and undermined protected rights and freedom, the advisory notes that potential offenses include secession, subversion, terrorist activities, and collusion with a foreign country or external elements to endanger national security. The NSL states that “an incorporated or unincorporated body, such as a company or organization which commits an offense” may be subject to a criminal fine and to having its operations suspended or its license or business application revoked. Certain provisions may also apply to offenses committed from outside the SAR and apply to these same “incorporated or unincorporated” companies or organizations. The advisory notes that Hong Kong authorities have arrested foreign nationals under the NSL, including one U.S. citizen.

Concerning data privacy, the business advisory notes that China and Hong Kong authorities are using expanded legal authorities to collect data from businesses and individuals in Hong Kong for actions that may violate “national security.” To date, this has included collecting data on participating in primary elections, calling for political steps specifically protected by the Basic Law, posting opinions on social media, and meeting with members of the diplomatic community. Further, the NSL grants Hong Kong law enforcement broad authorities to conduct wiretaps or electronic surveillance. Similarly, with respect to transparency and access to information, the NSL has allowed Hong Kong authorities to increase pressure on freedom of expression and freedom of the press by, ostensibly, allowing authorities to “stamp out fake news” as a matter of “national security.” Since passage of the NSL, journalists have been harassed and arrested for allegedly making false statements, “colluding with a foreign country” or conspiring with foreign institutions.

For U.S. businesses with exposure to sanctioned Hong Kong or China entities or individuals, the business advisory reminds these companies that the United States has implemented several export control and sanctions regulations and orders targeting specific China and Hong Kong persons or entities without a license from the appropriate U.S. government agency. The advisory notes that Hong Kong has been removed as a separate destination and that “all items subject to the EAR that are destined for export, reexport or transfer (in-country) to or from Hong Kong will be treated as exports, reexports or transfers (in-country) to or from [China].” Failure to comply with these U.S. sanctions and current export restrictions can result in civil and criminal penalties under U.S. law. Importantly, the business advisory notes China’s response to these sanctions and export restrictions with its recent passage of a law to “counter foreign sanctions.” The business advisory provided a detailed background of China’s new law on this matter and the countermeasures China may take against such foreign sanctions. As a result, U.S. businesses operating in Hong Kong may face heightened risk and uncertainty in connection with U.S. sanctions and export compliance efforts.

The business advisory “strongly encourages organizations subject to U.S. jurisdiction, as well as foreign entities, including foreign financial institutions, that conduct business in or with the United States or U.S. persons, or deal in U.S.-origin goods or services, to employ a risk-based approach to sanctions compliance by developing, implementing, and routinely updating a sanctions compliance programs” as they relate to Hong Kong and continuing efforts by China reduce Hong Kong’s autonomy and restrict rights and freedoms.

For past important SmarTrade Updates on Hong Kong, see:

On July 19, 2021, the Department of Commerce’s Bureau of Industry and Security (BIS) published a final rule adding six Russian entities to the Entity List after having been determined to be “acting contrary to the foreign policy interests of the United States.” The entities are:

  • Aktsionernoe Obshchestvo AST;
  • Aktsionernoe Obshchestvo Pasit;
  • Aktsionernoe Obshchestvo Pozitiv Teknolodzhiz;
  • Federal State Autonomous Institution Military Innovative Technopolis Era;
  • Federal State Autonomous Scientific Establishment Scientific Research Institute Specialized Security Computing Devices and Automation; and
  • Obshchestvo S Ogranichennoi Otvetstvennostyu NEOBIT.

These designations are related to President Biden’s April 15, 2021, Executive Order 14024 (“E.O.”) on “Blocking Property with Respect to Specified Harmful Foreign Activities of the Government of the Russian Federation.” This E.O. established a new national emergency under which sanctions may be imposed against individuals and entities furthering specified harmful foreign activities of Russia against the United States and others, including: undermining free and fair elections; malicious cyber-enabled activities; transnational corruption; extraterritorial activities targeting dissidents or journalists; undermining security, international law and the territorial integrity of states. Shortly after the issuance of this E.O., the Department of the Treasury’s Office of Foreign Assets Control (OFAC) placed these six entities on its Specially Designated Nationals (SDN) List. See Update of April 19, 2021. In also placing them on the Entity List, BIS stated that it is seeking to “ensure the efficacy of existing sanctions on Russia that target aggressive and harmful activities by the Russian government.”

Placement on the Entity List ensures that U.S. sanctions on these entities will apply to all items subject to the Export Administration Regulations (EAR) regardless of whether a U.S. person is involved in the transaction or whether the transaction involves the U.S. financial system. BIS has imposed a license review policy of a “presumption of denial” for these six entities. In addition, no license exceptions are available for exports, reexports, or transfers (in-country) to these six Russian entities. This final rule is effective as of July 19, 2021. However, shipments that were en route aboard a carrier to a port of export, reexport, or transfer (in-country) on July 19, 2021, pursuant to actual orders for export or reexport to a foreign destination, may proceed to that destination under the previous eligibility for a License Exception or export, reexport, or transfer (in-country) without a license (NLR).

On July 12, 2021, the Department of Commerce’s Bureau of Industry and Security (BIS) published a final rule adding thirty-four (34) entities to the Entity List for the following destinations:  Canada; People’s Republic of China (China); Iran; Lebanon; Netherlands; Pakistan; Russia; Singapore; South Korea; Taiwan; Turkey; the United Arab Emirates (UAE); and the United Kingdom.  In addition, this final rule adds one entity to the Military End-User (MEU) List for Russia.  Each of these entities has been deemed as “acting contrary to the foreign policy interests of the United States.”

The factual basis for these listing vary based upon each entity.  Overall, these entities were either determined to have: (i) facilitated the export of U.S. items to Iran; (ii) been implicated in human rights violations and abuses in the implementation of China’s campaign of repression, mass detention, and high-technology surveillance against Uyghurs, Kazakhs, and other members of Muslim minority groups in the Xinjiang Uyghur Autonomous Region (XUAR); (iii) to have acquired and are attempting to acquire U.S.-origin items in support of military modernization for the People’s Liberation Army (China); (iv) been involved in the procurement of U.S.-origin items for unauthorized military end-use; (v) exported and attempted to export items subject to the EAR to an entity on the U.S. Department of the Treasury’s Office of Foreign Asset Control (OFAC) Specially-Designated Nationals (SDN) List without the necessary licenses; (v) been involved in the procurement of U.S.-origin electronic components likely in furtherance of Russian military program; or, (vi) been involved in proliferation to unsafeguarded nuclear activities.

The entities are:

Canada

  • Karim Daadaa
  • Modern Agropharmaceuticals & Trade Establishment.

China

  • Armyfly
  • Beijing E-science Co., Ltd.
  • Beijing Geling Shentong Information Technology Co., Ltd.
  • Beijing Hileed Solutions Co., Ltd.
  • Beijing Sinonet Science & Technology Co., Ltd.
  • Chengdu Xiwu Security System Alliance Co., Ltd.
  • China Academy of Electronics and Information Technology
  • Hangzhou Hualan Microelectronics Co., Ltd.
  • Info Rank Technologies
  • Kindroid
  • Kyland Technology Co., Ltd.
  • Leon Technology Co., Ltd.
  • Shenzhen Cobber Information Technology Co., Ltd.
  • Shenzhen Hua’antai Intelligent Technology Co., Ltd.
  • Suzhou Keda Technology Co., Ltd.
  • Tongfang R.I.A. Co., Ltd.
  • Urumqi Tianyao Weiye Information Technology Service Co., Ltd.
  • Wingel Zhang
  • Wuhan Raycus Fiber Laser Technologies Co., Ltd.
  • Xinjiang Beidou Tongchuang Information Technology Co., Ltd.
  • Xinjiang Lianhai Chuangzhi Information Technology Co., Ltd.
  • Xinjiang Sailing Information Technology Co., Ltd.
  • Xinjiang Tangli Technology Co., Ltd.

Iran

  • Payam Nabavi
  • Sina Biomedical Chemistry Company

Lebanon

  • Karim Daadaa
  • Modern Agropharmaceuticals & Trade Establishment

Netherlands

  • Suzhou Keda Technology Co., Ltd.

Pakistan

  • Suzhou Keda Technology Co., Ltd.

Russia

  • Andrey Leonidovich Kuznetsov
  • Dmitry Alexandrovich Kravchenko
  • Margarita Vasilyevna Kuznetsova
  • OOO Teson
  • OOO Trade-Component
  • Radiant Group of Companies
  • JSC Kazan Helicopter Plant Repair (added to BIS’ MEU List)

Singapore

  • Suzhou Keda Technology Co., Ltd.

South Korea

  • Suzhou Keda Technology Co., Ltd.

Taiwan

  • Hangzhou Hualan Microelectronics Co., Ltd.

Turkey

  • Suzhou Keda Technology Co., Ltd.

United Arab Emirates

  • TEM International FZC

United Kingdom

  • China Academy of Electronics and Information Technology

For most of the China-related entity, BIS has imposed a license review policy of case-by-case review depending upon the applicable Export Control Classification Numbers (ECCNs).  In most other instances, BIS has imposed a license requirement for all items subject to the EAR and a license review policy of “presumption of denial”. For all thirty-four entities, the license requirements apply to any transaction in which items are to be exported, reexported, or transferred (in country) to any of the entities or in which such entities act as purchaser, intermediate consignee, ultimate consignee, or end user. In addition, no license exceptions are available for exports, reexports, or transfers (in-country) to the entities being added to the Entity List.

This final rule was effective as of July 12, 2021.  However, shipments that were en route aboard a carrier to a port of export, reexport, or transfer (in-country) on July 12, 2021, pursuant to actual orders for export or reexport to a foreign destination, may proceed to that destination under the previous eligibility for a License Exception or export, reexport, or transfer (in-country) without a license (NLR).

On July 13, 2021, the U.S. Court of Appeals for the Federal Circuit (Federal Circuit) issued a majority 2-1 opinion 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. See Update of July 14, 2020 for more details on the CIT ruling. The Federal Circuit ruling remands the case to the CIT for an entry of judgment against the plaintiff group led by Transpacific Steel LLC.

The plaintiffs had argued that the Trump administration’s actions violated both the statutorily-mandated procedures for a Section 232 national security investigation and the U.S. Constitution’s guarantee of equal protection under law. In its opinion, the CIT agreed, determining that the subsequent presidential proclamation implementing additional tariffs solely affecting Turkish steel (i.e., raising the duty rate from 25% to 50%) was issued well after the statutory time period allowed under Section 232. The CIT also found that former President Trump acted “without a proper report and recommendation by the [Secretary of Commerce] on the national security threat posed by imports of steel products from Turkey.”

The Federal Circuit, however, ruled that former President Trump did not depart from the finding of the Secretary of Commerce (Secretary) 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. According to the decision, the statute “empowers and directs the President to act to alleviate threats to national security from imports” and “[t]he key issue is whether [the statute] permits the President to announce a continuing course of action within the statutory time period and then modify the initial implementing steps in line with the announced plan of action by adding impositions on imports to achieve the stated implementation objective. We conclude that the President does have such authority in the circumstances presented here.”

Overall, the Federal Circuit found that the president “specifically adhered to the Secretary’s underlying finding of the target capacity-utilization level that was the rationale for the predicate threat finding,” and that the “initial presidential action (in March 2018) itself announced a continuing course of action that could include adjustments as time passed.” In a detailed review of the legislative history and congressional intent for the Trade Expansion Act of 1962 and its subsequent amendments, the Federal Circuit found that this history undermined the CIT’s ruling, concluding “that the increase in the tariff on steel from Turkey by Proclamation 9772 did not violate [the provisions of Section 232].” The Federal Circuit also concluded that Proclamation 9772 did not violate the equal protection guarantees of the Fifth Amendment’s due process clause.

The Federal Circuit decision made clear that the judges were not addressing “other circumstances that would present other issues about presidential authority to adjust initially taken actions without securing a new report with a new threat finding from the Secretary.” As a result, the Federal Circuit indicated, the immediate impact of this ruling should be limited to the facts and issues surrounding the implementation of additional duties on imports of Turkish steel.

In his dissenting opinion, Judge Jimmie Reyna started by quoting President John Adams, stating that “Power must never be trusted without a Check” and adding that the “essential question posed by this appeal is whether Congress enacted [Section] 232 to grant the President un-checked authority over the Tariff.” He based his dissent on three grounds: (1) The “majority overlooks the context of Section 232 as a trade statute” and Congress delegated only narrow authority to the President over trade; (2) Section 232 is “written in plain words that evoke common meaning and application” and the majority offers no clear reason “to diverge from that plain language,” and (3) Section 232’s “legislative history shows that Congress intended, for good reason, to end the Executive Branch’s historical practice of perpetually modifying earlier actions without obtaining a new report from the Secretary of Commerce and without reporting to Congress.”

The next steps in this litigation remain unclear. After remand to the CIT, the plaintiffs have the option of challenging the decision by either seeking a review by the full Federal Circuit or appealing to the U.S. Supreme Court.

On July 12, 2021, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued Venezuela-related General License 40, “Authorizing Certain Transactions Involving the Exportation or Reexportation of Liquefied Petroleum Gas to Venezuela.”  This general license authorizes all transactions and activities related to the exportation or reexportation, directly or indirectly, of liquefied petroleum (LP) gas to Venezuela, involving: (i) the Government of Venezuela, (ii) Petróleos de Venezuela, S.A. (PdVSA), or (iii) any entity in which PdVSA owns, directly or indirectly, a 50 percent or greater interest, that are prohibited by E.O. 13850, as amended by E.O. 13857, or E.O. 13884.  The general license is effective through  July 8, 2022.

OFAC has made clear that for its purposes, the term LP gas means – “a group of hydrocarbon gases, primarily propane, normal butane, and isobutane, derived from crude oil refining or natural gas processing. These gases may be marketed individually or mixed. They can be liquefied through pressurization (without requiring cryogenic refrigeration) for convenience of transportation or storage. The definition excludes ethane and olefins.”

General License 40 does not authorize any payment-in-kind of petroleum or petroleum products, and continues to prohibit any other activities otherwise prohibited by OFAC’s Venezuela Sanctions Regulations.

On July 6, 2021, the U.S. Court of International Trade (CIT) issued an opinion granting the Plaintiffs’ motion for a preliminary injunction in the ongoing China Section 301 tariff litigation. The preliminary injunction suspends liquidation of unliquidated entries subject to List 3 and List 4A Section 301 duties, which, the Plaintiffs allege, 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.

The two-judge majority opinion states that the Plaintiffs “demonstrated they will likely suffer irreparable harm because their entries of subject merchandise will liquidate absent an injunction.” In addition to the potential unavailability of reliquidation or receiving any refund, the majority opinion notes that the group of U.S. government defendants failed “to meaningfully dispute that liquidation will cause harm that cannot be undone and instead argues that any unlawfully collected duties would be forever unrecoverable.” While stating that the CIT is granted broad authority to order appropriate relief, the opinion notes that several U.S. Court of Appeals decisions have “cast sufficient doubt as to the scope of that authority” and, until the higher court makes the scope of that authority clear, the CIT “must conclude that liquidation will result in irreparable economic harm.” As a result, the “Plaintiffs’ interpretation of the statute raises serious and substantial questions about the scope of the USTR’s statutory authority to act, which should be resolved via full litigation of the merits of these claims.”

In ordering the suspension of liquidation, the CIT found that such an action “maintains the status quo: the Government will still collect the duties pending the merits determination, but as liquidation is the final computation of duties, their finality is delayed.” Thus, if “Plaintiffs are unsuccessful in their challenge, the Government will not lose any revenue.” The CIT’s order requires the Plaintiffs to take the following steps in order to obtain suspension of liquidation of their unliquidated entries:

  • the government must meet with the Plaintiffs’ steering committee within seven days of the order to discuss the establishment of the repository for any unliquidated entries,
  • the government must establish such a repository within 14 days of the order,
  • any plaintiff requesting suspension of liquidation must provide (i) its full Importer of Record (IOR) number(s), including any suffix(es); (ii) the case/court number and filing date of the Section 301 complaint as well as the CBP Center and team assignment (if known); and (iii) the entry number and date of entry for any entries where suspension of liquidation is to be requested,
  • the government is enjoined during the remainder of this litigation from liquidating any entries for which they received a request for suspension of liquidation, unless within 14 days of receiving such a request, and at their option, the government stipulates to refund any duties found to have been illegally collected and notifies the Plaintiffs of such stipulation,
  • the government is temporarily restrained for 28 days from July 6, 2021 from liquidating any entries, and that should any subject entry be inadvertently liquidated during this 28-day period, such entry must be returned to unliquidated status,
  • any entry for which liquidation is suspended under the July 6, 2021 order will be liquidated in accordance with any final court decision, and
  • any entry inadvertently liquidated by CBP in contravention of the order must be returned to unliquidated status.

The parties will next appear before the CIT for a status conference on July 15, 2021.

Chief Judge Mark Barnett dissented from the opinion, arguing that, while he agreed with much of the analysis, the Plaintiffs failed to establish a likelihood of irreparable harm because the CIT has the authority to order refunds. Much of Chief Judge Barnett’s dissent is based on precedent that there is “no more than a remote chance that the appellate court would find that the [CIT] is not empowered to provide relief with respect to any liquidated entries.”

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) has issued a final rule to remove the International Criminal Court-Related Sanctions Regulations, 31 C.F.R. part 520, from the Code of Federal Regulations. OFAC is taking this action after the national emergency upon which these sanctions were based was terminated by President  Biden on April 1, 2021. The final rule will become effective once published in the Federal Register on July 6, 2021.

On June 11, 2020, former President Trump issued Executive Order 13928, “Blocking Property of Certain Persons Associated with the International Criminal Court” and determined that any attempt by the ICC to proceed in various juridic activity against states that are not parties to the Rome Statute without consent constituted a national security threat. In September 2020, several ICC prosecutors were placed on the Specially Designated National and Blocked Entities (SDN) List pursuant to the executive order and the next month OFAC issued the ICC-Related Sanctions Regulations. For more information, see Update of October 5, 2020. On April 1, 2021, President Biden issued an executive order terminating the previously declared national emergency and reversing sanctions imposed by Executive Order 13928. For more information, see Update of April 5, 2021. This final rule implements the president’s April 1, 2021 executive order.