The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced that it has issued General License (GL) 5E (Authorizing Certain Transactions Related to the Petróleos de Venezuela, S.A. 2020 8.5 Percent Bond on or After January 19, 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 January 19, 2021. Effective October 6, 2020, this GL 5E replaces GL 5D. Additionally, OFAC modified frequently asked question #595 to address the scope of GL 5E.

On May 21, 2018, President Donald Trump issued Executive Order (EO) 13835 which, among other things, prohibits U.S. persons from engaging in transactions related to the sale, transfer, assignment or pledging as collateral by the Venezuelan government of any equity interest in an entity owned 50% or more by the Venezuelan government. Thereafter, on July 19, 2018, OFAC issued GL 5, which removed E.O. 13835 as an obstacle to holders of the PdVSA 2020 8.5% bond from gaining access to their collateral.

Starting in January 2019, however, Trump continued expanding the sanctions targeting PdVSA (see Update of January 19, 2019). Eventually, on October 29, 2019, GL 5 was replaced and superseded by GL 5A (and eventually 5B, 5C, and most recently, 5D), which delayed the effective date of GL 5’s authorizations relating until October 20, 2020 (see Update of July 16, 2020). The most recent version, GL 5E, again delays the effective date of the GL 5 authorizations to January 19, 2021.

Between October 24, 2019 and January 19, 2021, U.S. persons are prohibited from engaging in any transactions related to the sale or transfer of CITGO shares in connection with the PdVSA 2020 8.5%, 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 percent bond.”

On October 2, 2020, the Office of the U.S. Trade Representative (USTR) announced that it was initiating two Section 301 investigations regarding certain trade practices by the Socialist Republic of Vietnam (Vietnam) related to its import and use of timber illegally harvested or traded and the country’s policies that may contribute to the undervaluation of its currency (Vietnamese dong). Section 301 of the 1974 Trade Act authorizes the USTR to initiate an investigation to determine whether an act, policy, or practice of a foreign country is unreasonable or discriminatory and burdens or restricts U.S. commerce. USTR Robert Lighthizer stated in a brief press release: “Using illegal timber in wood products exported to the U.S. market harms the environment and is unfair to U.S. workers and businesses who follow the rules by using legally harvested timber. In addition, unfair currency practices can harm U.S. workers and businesses that compete with Vietnamese products that may be artificially lower-priced because of currency undervaluation. We will carefully review the results of the investigation and determine what, if any, actions it may be appropriate to take.”

Investigation into Import and Use of Illegal Timber

In a forthcoming Federal Register notice, the USTR  alleges that Vietnam relies on imports of timber harvested in other countries and that the “evidence suggests that a significant portion of that imported timber was illegally harvested or traded (illegal timber). Some of that timber may be from species listed under the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES).”  USTR further states that timber imported from Cambodia, Cameroon and the Democratic Republic of the Congo may have been harvested against those countries’ laws and traded illegally. This Section 301 investigation will focus on:

  • Whether Vietnamese imports of illegal timber are inconsistent with Vietnam’s domestic laws, the laws of exporting countries, or international rules. The import of illegal timber may indicate that Vietnam is not enforcing its own laws concerning the import and processing of timber, such as laws requiring that wood processors ensure the lawful origins of the timber they use.
  • Whether evidence indicates that Vietnam tacitly supports the import and use of illegal timber and allows Vietnamese exporters to disclaim knowledge of illegal timber inputs when exporting wood products to third countries.
  • Any other acts, policies, and practices of Vietnam relating to the import and use of illegal timber.

The USTR is requesting that interested parties submit written comments no later than November 12, 2020, regarding:

  1. The extent to which illegal timber is imported into Vietnam.
  2. The extent to which Vietnamese producers, including producers of wooden furniture, use illegal timber.
  3. The extent to which products of Vietnam made from illegal timber, including wooden furniture, are imported into the United States.
  4. Vietnam’s acts, policies, or practices relating to the import and use of illegal timber.
  5. The nature and level of the burden or restriction on U.S. commerce caused by Vietnam’s import and use of illegal timber.
  6. Any determinations that should be issued by USTR, including what action, if any, should be taken.

All written comments must be submitted via the Federal eRulemaking portal at http://www.regulations.gov on docket number USTR-2020-0036.

Investigation into Currency Valuation

In a forthcoming Federal Register notice, the USTR  alleges that Vietnam, through the State Bank of Vietnam (SBV), “tightly manages the value of its currency” and that analysis indicates that the Vietnamese dong has been undervalued over the past several years. Specifically, USTR alleges that “the dong was undervalued on a real effective basis by approximately 7 percent in 2017 and by approximately 8.4 percent in 2018…. [and] was undervalued in 2019 as well.”  The USTR further states that the SBV intervened in the exchange market with net purchases of foreign exchange that resulted in undervaluing the dong’s exchange rate with the U.S. dollar.

This Section 301 investigation will focus on whether Vietnam’s interventions, through the SBV, in exchange markets and other related actions that contribute to the undervaluation of Vietnam’s currency are unreasonable or discriminatory and burden or restrict U.S. commerce.  The USTR states that it will consult with the Department of the Treasury in the investigation as to matters of currency valuation and Vietnam’s exchange rate policy.

The USTR is requesting that interested parties submit written comments no later than November 12, 2020, regarding:

  1. Whether Vietnam’s currency is undervalued, and the level of the undervaluation.
  2. Vietnam’s acts, policies, or practices that contribute to undervaluation of its currency.
  3. The extent to which Vietnam’s acts, policies, or practices contribute to the undervaluation.
  4. Whether Vietnam’s acts, policies and practices are unreasonable or discriminatory.
  5. The nature and level of burden or restriction on U.S. commerce caused by the undervaluation of Vietnam’s currency.
  6. Any determinations that should be issued by USTR, including what action, if any, should be taken.

All written comments must be submitted via the Federal eRulemaking portal at http://www.regulations.gov on docket number USTR-2020-0037.

The USTR notes that for both investigations it will not be accepting hand-delivered submissions. Also, interested parties may file comments containing business confidential information (BCI) as long as such information is clearly marked and bracketed and that a public version of the comments is also submitted. At this time, due to COVID-19 restrictions, the USTR is not scheduling a public hearing for either investigation.

On October 5, 2020, the Department of the Commerce’s Bureau of Industry and Security (BIS) issued a Federal Register notice in which it finalized export controls on six recently developed or developing technologies that are essential to the national security of the United States. The changes were made in accordance with the United States and other countries participation in the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies; an agreement under which the parties seek to control items that may contribute to the development or enhancement of military capabilities. For U.S. export control purposes, these six technologies fall under the Export Administration Regulations (EAR) and this final rule is effective on October 5, 2020.

The final rule adds controls to the following six recently developed or developing technologies:

  1. Hybrid additive manufacturing (AM)/computer numerically controlled (CNC) tools;
  2. Computational lithography software designed for the fabrication of extreme ultraviolet (EUV) masks;
  3. Technology for finishing wafers for 5nm production;
  4. Digital forensics tools that circumvent authentication or authorization controls on a computer (or communications device) and extract raw data;
  5. Software for monitoring and analysis of communications and metadata acquired from a telecommunications service provider via a handover interface; and
  6. Sub-orbital craft.

Shipments of items subject to the final rule that were already en route to a foreign destination as of October 5, 2020, pursuant to actual orders for export, may proceed to that destination under the previous license exception eligibility or without a license so long as they have been exported, reexported or transferred (in-country) before December 4, 2020.

On September 29, 2020, the Office of the U.S. Trade Representative (USTR) requested that the U.S. International Trade Commission (ITC) initiate a Section 201 global safeguard investigation into “the extent to which increased imports of blueberries have caused serious injury or threat thereof to domestic blueberry growers.” This is one of numerous proposed actions announced in the Report on Seasonal and Perishable Products in U.S. Commerce jointly released by USTR, the Department of Agriculture, and the Department of Commerce in early September.

USTR’s request includes all imports with these product descriptions under the following statistical reporting categories in the Harmonized Tariff Schedule of the United States (HTSUS):

  • 0810400029 (cultivated blueberries, including highbush, fresh or chilled);
  • 0810400026 (certified organic blueberries, fresh or chilled);
  • 0810400024 (wild blueberries, fresh or chilled);
  • 0811902024 (wild blueberry, uncooked or cooked by steaming or boiling in water, frozen);
  • 0811902030 (blueberries, certified organic, cultivated (including highbush), uncooked or cooked by steaming or boiling in water, frozen); and
  • 0811902040 (blueberries, cultivated (including highbush), uncooked or cooked by steaming or boiling in water, NESOI, frozen).

It is expected that the ITC will soon publish notice of the commencement of this investigation in the Federal Register and will hold public hearings to allow interested parties and consumers an opportunity to present evidence or otherwise be heard. Thompson Hine’s International Trade attorneys and professionals are monitoring this investigation and will provide further updates as warranted.

On October 2, 2020, the U.S. Department of Commerce published a notice in the Federal Register informing the public that on September 27, 2020, the U.S. District Court of the District of Columbia granted a nationwide preliminary injunction against implementation of President Donald Trump’s August 6, 2020 Executive Order against TikTok declaring it a national security threat and directing Commerce to define the scope of prohibited “transactions” with TikTok. Chinese social media app WeChat was separately granted a similar injunction by a federal judge on September 18, 2020, in the U.S. District Court for the Northern District of California against implementation of a similar August 6, 2020 Executive Order against WeChat.  On September 24, 2020, pursuant to the executive order against TikTok, Commerce identified six categories of prohibited transactions with ByteDance Ltd. and its subsidiaries including TikTok, Inc. This included one category of prohibited transactions scheduled to take effect on September 27, 2020.  Pursuant to the injunction order, however, the prohibitions are no longer effective until further notice from the D.C. Court.

Specifically, the following transactions with ByteDance Ltd. and its subsidiaries including TikTok, Inc. previously identified by Commerce are not yet prohibited:

Any provision of services to distribute or maintain the TikTok mobile application, constituent code, or application updates through an online mobile application store, or any online marketplace where mobile users within the land or maritime borders of the United States and its territories may download or update applications for use on their mobile devices.

As of September 27, 2020, the preliminary injunctions enjoin Commerce and the Trump administration from implementing these category of restrictions.

Importantly, the other five categories of prohibited transactions identified by Commerce on September 24, 2020, are not covered by the preliminary injunction and will become effective on November 12, 2020. In its Memorandum Opinion, the D.C. Court made clear that the injunction was limited to this one category of transactions identified by Commerce and scheduled to be prohibited on September 27, 2020. For more information on recent legal activity involving Commerce, TikTok and WeChat, see SmarTrade updates dated September 22, 2020 and September 24, 2020.

On October 1, 2020, the Department of the Treasury issued two related advisories to assist U.S. companies in efforts to combat ransomware scams and attacks. In addition to offering guidance, the advisories note that anti-money laundering and economic sanctions regulations implemented and enforced by Treasury’s Office of Terrorism and Financial Intelligence may be triggered by persons or companies involved in facilitating ransomware payments.

Treasury’s Office of Foreign Assets Control (OFAC) issued an Advisory on Potential Sanctions Risks for Facilitating Ransomware Payments. The advisory highlights OFAC’s sanctioning and designations of numerous malicious cyber actors and those who facilitate ransomware transactions under its cyber-related sanctions program. It notes that companies “that facilitate ransomware payments to cyber actors on behalf of victims, including financial institutions, cyber insurance firms, and companies involved in digital forensics and incident response, not only encourage future ransomware payment demands but also may risk violating OFAC regulations.” The advisory encourages cooperation with law enforcement and offers guidance and U.S. government resources for reporting ransomware attack. It also provides information on the factors OFAC generally considers when determining an appropriate enforcement response to any sanctions violation, such as facilitating certain ransomware payments.

Treasury’s Financial Crimes Enforcement Network (FinCEN) issued an Advisory on Ransomware and the Use of the Financial System to Facilitate Ransom Payments. The advisory serves to “alert financial institutions to predominant trends, typologies, and potential indicators of ransomware and associated money laundering activities.” It provides information on “the role of financial intermediaries in payments, ransomware trends and typologies, and related financial red flags.” It also reminds U.S. financial institutions of their regulatory obligations to report suspicious activity involving ransomware and information sharing requirements under the USA PATRIOT ACT.

In a series of actions this week, the Department of the Treasury moved to implement regulations to enforce sanctions related to actions of the International Criminal Court (ICC). Almost immediately, however, President Trump’s executive order and the regulations were challenged in court.

ICC-Related Executive Order and Regulations

On June 11, 2020, President Trump issued Executive Order 13928 stating that the ICC’s “illegitimate assertions of jurisdiction over personnel of the United States and certain of its allies, including the ICC Prosecutor’s investigation into actions allegedly committed by United States military, intelligence, and other personnel in or relating to Afghanistan” threaten to infringe the sovereignty of the United States and impede the critical national security and foreign policy work of United States and allied officials. The ICC operates under the auspices of the Rome Statute, prosecuting cases of international concern, including war crimes and crimes against humanity. The United States, however, is not a party to the Rome Statute, and has never accepted ICC jurisdiction over its personnel.

In response to the ICC’s investigation of U.S. personnel conduct in Afghanistan, Executive Order 13928 blocked all property and interests in property that are in the United States or within the possession or control of any United States person, of any foreign person determined by the Secretary of State, Secretary of the Treasury and the Attorney General to have:

  • directly engaged in any effort by the ICC to investigate, arrest, detain, or prosecute any United States personnel without the consent of the United States;
  • directly engaged in any effort by the ICC to investigate, arrest, detain, or prosecute any personnel of a country that is an ally of the United States without the consent of that country’s government;
  • materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, any ICC investigations, arrests, detainments or prosecutions.

On October 1, 2020, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued regulations to implement Executive Order 13928. The regulations adds part 520 to Title 31 of the Code of Federal Regulations (C.F.R.) at Chapter V. OFAC noted that it intends to supplement these regulations with a more comprehensive set of regulations, which may include additional interpretive and definitional guidance, general licenses, and statements of licensing policy.

The immediate effect of these regulations is to more clearly authorize the U.S. government’s freezing of the assets of two individuals designated and placed on OFAC’s Specially Designated Nationals (SDN) List on September 2, 2020. Fatou Bensouda, an ICC prosecutor investigating potential war crimes in Afghanistan, and Phakiso Mochokhoko, head of the ICC’s Jurisdiction, Complementarity, and Cooperation Division, were placed on the SDN List. As a result of these persons being placed on the SDN List, all property and interests in property of these persons or entities that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC. In addition, persons that engage in certain transactions or provide material assistance or support to any persons or entities designated under these new ICC-related sanctions also risk designation.

Lawsuit

On October 1, 2020, four law professors and a nonprofit organization that have previously worked with the ICC filed suit in the U.S. District Court for the Southern District of New York seeking to stop implementation of the executive order and regulations. The suit claims that Executive Order 13928 and the regulations violate the first amendment right of the plaintiffs to freedom of speech because the regulations are too vague and appear to possibly cover such actions. The suit also claims that the plaintiffs’ fifth amendment rights have been violated by lacking required clarity as to what acts subject a person to enforcement. They further claim that Executive Order 13928 and the regulations are ultra vires under International Emergency Economic Powers Act (IEEPA) by purporting to regulate the plaintiffs’ provision of information and informational materials, which is exempted by IEEPA. The plaintiffs seek both a declaration that the executive order and regulations are unconstitutional and ultra vires as well as an injunction against enforcement of the executive order and regulations against the plaintiffs.

The Office of the U.S. Trade Representative (USTR) has issued two Federal Register notices announcing the extension of a limited number of product exclusions from the Section 301 tariffs for imports from China appearing on List 1 (products from China with an annual trade value of $34 billion) and List 2 (products from China with an annual trade value of $16 billion) that were set to expire on October 2, 2020.

USTR is extending nine product exclusions from List/Tranche 1: all of HTSUS subheading 9030.90.4600; certain chemically etched dies of steel; certain operator riding self-propelled aerial work platforms; certain cement retainer assemblies; certain extrusion machines for processing rubber; certain brass or bronze safety valves; certain DC motors with varying wattage output; and certain combined positron emission tomography/computed tomography scanners. Other product exclusions listed in USTR’s August 3, 2020 notice (see Update of August 3, 2020) will expire on October 2, 2020.

USTR is extending 28 product exclusions from List/Tranche 2, including: elastomeric petroleum resins; certain stabilizing machine tool stands; certain electric motors (including DC electric motors) with varying volts and wattage outputs; certain direct current permanent magnet motors; certain bottom shelf coupler assemblies designed for use with certain vehicles; certain buffering/cushioning plates, protection members, rear structural units and retention caps for use with certain vehicles; certain draft pack rear alignment and overtravel protection members for use with certain hybrid railcar cushioning systems; certain digital thermometers; and certain portable, wireless enabled, electrical gas monitors. Other product exclusions listed in USTR’s June 22, 2020 notice (see Update of June 24, 2020) will expire on October 2, 2020.

These product exclusion extensions will apply until December 31, 2020. These exclusions continue to apply to any product that satisfies the description in the annexes of these Federal Register notices, regardless of whether the company using the exclusion filed the request. Each exclusion is governed by the scope of the HTS subheading and the product description appearing in the annexes; they are not governed by the description set out in any particular exclusion request.

On September 30, 2020, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned three Syrian individuals and 13 entities, placing them on the Specially Designated Nationals and Blocked Persons (SDN) List. These persons and entities are associated with the Fourth Division of the Syrian Arab Army, the Syrian General Intelligence Directorate and the Central Bank of Syria.

Specifically, OFAC added the following individuals, among others, to the SDN List: (1) Khodr Taher Bin Ali (Taher), a Syrian businessman who serves as an intermediary and contractor for the Fourth Division of the Syrian Arab Army, and his business network; (2) Husam Muhammad Louka, the current head of the Syrian General Intelligence Directorate (GID); and (3) Hazem Younes Karfoul, governor of the Central Bank of Syria. Further details on these individuals and Taher’s business entities are available here.

OFAC has also issued Syria General License 20, “Authorizing Transactions and Activities Necessary for Wind Down of Transactions with Emma Tel LLC,” one of the entities that was also added to the SDN List. All transactions and activities that are ordinarily incident and necessary to the wind-down of transactions involving, directly or indirectly, Emma Tel LLC, or any entity in which Emma Tel LLC owns, directly or indirectly, a 50 percent or greater interest, are authorized through December 30, 2020 only.

As a result of these persons and entities being placed on the SDN List, all property and interests in property of these persons or entities that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC. In addition, non-U.S. persons that engage in certain transactions with the persons and entities designated on the SDN List also risk designation.

On September 30, President Donald Trump issued an executive order (EO) declaring a national emergency to address “the threat posed by our Nation’s undue reliance on critical minerals, in processed or unprocessed form, from foreign adversaries.” In a message to Congress, the president stated that a “strong America cannot be dependent on imports from foreign adversaries for the critical minerals that are increasingly necessary to maintain our economic and military strength in the 21st century” and that the EO was issued to “reduce our vulnerability to adverse foreign government action, natural disaster, or other supply disruptions. Our national security, foreign policy, and economy require a consistent supply of each of these minerals.” The EO also declares that it is the policy of the United States to protect and expand domestic mining and processing capacity for critical minerals.

The secretary of the interior has identified 35 minerals that: (1) are “essential to the economic and national security of the United States,” (2) have supply chains that are “vulnerable to disruption,” and (3) serve “an essential function in the manufacturing of a product, the absence of which would have significant consequences for our economy or our national security.” The EO indicates that for 31 of the 35 critical minerals, the United States imports more than half of its annual consumption and that the United States has no domestic production for 14 of the critical minerals. The EO states that U.S. dependence on the People’s Republic of China “for multiple critical minerals is particularly concerning,” noting that the United States currently imports 80 percent of its rare earth elements directly from China.

The EO states that undue reliance on critical minerals, in processed or unprocessed form, from foreign adversaries “constitutes an unusual and extraordinary threat” to the United States. The EO directs:

  • The secretary of the interior to investigate and report to the president within the next 60 days any undue reliance on critical minerals, in processed or unprocessed form, from foreign adversaries. The report is to recommend executive action, which may include the imposition of tariffs or quotas, other import restrictions against China and other non-market foreign adversaries whose economic practices threaten to undermine the health, growth and resiliency of the United States.
  • By January 1, 2021, and every 180 days thereafter, the secretary of the interior must inform the president of the state of the threat posed by reliance on critical minerals, in processed or unprocessed form, from foreign adversaries and recommend any additional actions necessary to address that threat.
  • That relevant U.S. agencies should prioritize the expansion and protection of the domestic supply chain for minerals and the establishment of secure critical minerals supply chains, including developing secure critical minerals supply chains; expanding and strengthening commercially viable critical minerals mining and minerals processing capabilities; and developing globally competitive, substantial, and resilient domestic commercial supply chain capabilities for critical minerals mining and processing.
  • The secretary of the interior and the secretary of defense will consider whether the authority delegated at section 306 of Executive Order 13603 of March 16, 2012 (National Defense Resources Preparedness) can be used to establish a program to provide grants to procure or install production equipment for the production and processing of critical minerals in the United States.
  • The secretary of energy will develop guidance (and, as appropriate, shall revoke, revise or replace prior guidance, including loan solicitations) clarifying the extent to which projects that support domestic supply chains for minerals are eligible for certain loan guarantees and for funding awards.
  • The secretary of the interior, the secretary of agriculture, the secretary of commerce, the administrator of the Environmental Protection Agency and the secretary of the Army are authorized to use all available authorities to accelerate the issuance of permits and the completion of projects in connection with expanding and protecting the domestic supply chain for minerals.
  • The secretary of the interior, the secretary of energy and the administrator of the Environmental Protection Agency will examine all available authorities of their respective agencies and identify any such authorities that could be used to accelerate and encourage the development and reuse of historic coal waste areas, material on historic mining sites, and abandoned mining sites for the recovery of critical minerals.