The Department of Commerce’s Bureau of Industry and Security (BIS) and the Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against several persons and entities determined to be supporting Iran’s Mahan Air in violation of U.S. sanctions toward Iran. According to both agencies, the involved companies have provided key parts and logistics services for Mahan Air, which was first sanctioned in March 2008 for providing support to Iran’s Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF) and has subsequently been found to provide transportation for other illicit purposes.

OFAC Designations

On August 19, 2020, OFAC designated UAE-based Parthia Cargo and Delta Parts Supply FZC for their “material support” of Mahan Air, while also designating Iranian national Amin Mahdavi for owning or controlling Parthia Cargo. According to an OFAC press release, “[t]he services provided by Parthia Cargo and Delta Parts Supply FZC help Mahan Air sustain its fleet of western-manufactured aircraft and allow it to support the Iranian regime’s destabilizing agenda through activities that include the transportation of terrorists and lethal cargo to Syria to prop up the murderous Assad regime, as well as the more recent transportation of Iranian technicians and technical equipment to Venezuela to support the illegitimate Maduro regime’s efforts to revive energy production ruined by corruption and mismanagement.”

As a result of this action, these entities and have been placed on OFAC’s Specially Designated Nationals (SDN) List and all property and interests in property of these entities/person that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC. Further, any foreign financial institution that knowingly facilitates a significant financial transaction or provides significant financial services for these persons could be subject to U.S. correspondent account sanctions or payable-through account sanctions.

BIS Temporary Denial Order

On August 21, 2020, BIS issued a Temporary Denial Order (TDO) against six parties in Indonesia for operating an international procurement network of aircraft parts suppliers and repair facilities to acquire and repair U.S.-origin goods for Mahan Air. Named in the TDO are: (1) Sunarko Kuntjoro, (2) Satrio Wihargo Sasmito, (3) Triadi Senna Kuntjoro, (4) PT MS Aero Support, (5) PT Antasena Kreasi, and (6) PT Kandiyasa Energi Utama. BIS has determined that each has been involved “in operating an international procurement scheme to illegally obtain and repair U.S.-origin aircraft parts on behalf of Mahan Air and Mustafa Oveici (Oveici), an Iranian executive for Mahan Air.”

Under the TDO, each person and entity has been denied export privileges to prevent an imminent or ongoing export control violation. The TDOs are issued for a renewable 180-day period and prohibit persons from exporting or reexporting any item subject to the Export Administration Regulations (EAR) to or on behalf of the denied person. It also prohibits the denied person from themselves dealing in items subject to the EAR, and prohibits the denied persons from negotiating, storing, forwarding, or engaging in other dealings related to items subject to the EAR.

The U.S. International Trade Commission (ITC) announced on August 21, 2020 that it has initiated a Section 332 general factfinding investigation on COVID-19 related industry sectors and particular products. The investigation, COVID-19 Related Goods: The U.S. Industry, Market, Trade, and Supply Chain Challenges, was requested by the U.S. House of Representatives’ Committee on Ways and Means and the U.S. Senate Committee on Finance in an August 13, 2020 letter. In a final report due by December 15, 2020, the ITC will provide to Congress:

  • a brief overview of key U.S. industry sectors producing COVID-19 related goods, including, but not limited to, medical devices; personal protective equipment; and medicines (pharmaceuticals). The overview will include, to the extent practicable, information on U.S. production, employment and trade.
  • case studies on key products within each relevant industry sector, including N95 respirators, ventilators, vaccines and COVID-19 test kits. The case studies will focus on products for which there were reported shortages in the first half of 2020, including those affected by supply chain fragility, blockages or barriers, and will include information on:
  • the U.S. industry, market and trade, including, to the extent available:
    • the product, including key components and the production process;
    • the size and characteristics of the U.S. market;
    • the U.S. manufacturing industry, including key producers of finished goods and intermediate inputs, the extent of U.S. production and employment; and
    • U.S. imports of finished goods and inputs, including leading source countries and supplying firms; and
  • supply chain challenges and constraints, including, but not limited to:
    • factors affecting domestic production, including, to the extent practicable, regulatory requirements that may impact entry into the market; and
    • foreign trade barriers and restrictions and other factors that may affect U.S. imports of finished goods or inputs needed for domestic production.

In preparing the report, the ITC is seeking public comment from all interested parties and will hold a public hearing in connection with the investigation.  The hearing will be held on September 23, 2020 by videoconference. Key dates involving the hearing are:

  • September 11, 2020: Deadline for filing requests to appear at the public hearing.
  • September 14, 2020: Deadline for filing pre-hearing briefs and statements.
  • September 23, 2020: Public hearing.
  • September 30, 2020: Deadline for filing post-hearing briefs and statements only on issues raised at the hearing.

All filings, including requests to appear at the hearing, must be made through the ITC’s Electronic Document Information System (EDIS, https://edis.usitc.gov) on ITC Docket no. 332-580. No in-person paper-based filings or paper copies of any electronic filings are currently being accepted by the ITC. In lieu of or in addition to participating in the hearing, interested parties may file written submissions concerning this investigation until October 2, 2020. All submissions made in this investigation, except for confidential business information, will be available for public inspection.

Our firm’s International Trade group participates regularly in ITC proceedings; please contact us if your company is interested in providing comments in this investigation.

On August 20, 2020, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) and the Department of State sanctioned six Syrian individuals in President Basher al-Assad’s office and the Syrian Ba’ath Party who have contributed to the oppression of the Assad regime. The sanctioned individuals are: (1) President al-Assad’s media adviser, Luna al Shibl; (2) senior Ba’ath party official Mohamad Amar Saati; (3) Yasser Ibrahim, National Defense Forces commander; (4) Fadi Saqr, 42nd Brigade commander; (5) Brigadier General Ghaith Dalah; and (6) Samer Ismail, Tiger Forces Haider Regiment commander. In a lengthy press release providing background details on each individual, Secretary of State Mike Pompeo stated, “While these Assad regime supporters prolong the brutal Syrian conflict, the United States and its international partners are standing by the Syrian people calling for peace. We support efforts to convene the UN-facilitated, Syrian-led Constitutional Committee and hope all participating recommit themselves to building a peaceful future for Syria.”

As a result of this action, these persons and entities have been placed on the Specially Designated Nationals (SDN) List and all property and interests in property of these persons that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC. OFAC has indicated in its press release that any non-U.S. persons that engage in certain transactions with these designated persons may also be exposed to sanctions including designation on the SDN List.

For additional recent sanctions activity, see Updates of July 30, 2020, June 26, 2020, and June 5, 2020.

On August 21, 2020, the United States and the European Union (EU) agreed to tariff reductions on several products unrelated to ongoing trade disputes involving Section 232 national security tariffs on aluminum and steel products and retaliatory tariffs under the WTO dispute involving large commercial aircraft. In a Joint Statement issued by the Office of the U.S. Trade Representative (USTR), the EU will eliminate tariffs on imports of U.S. live and frozen lobster products, valued at over $111 million in 2017. The EU tariffs will be eliminated for five years, and the European Commission will initiate procedures to make the reduced tariff rate permanent. The United States will reduce by 50% its tariff rates on a range of products exported by the EU, worth an average annual trade value of $160 million, including certain prepared meals, certain crystal glassware, surface preparations, propellant powders, cigarette lighters and lighter parts. Both the United States and the EU have agreed to make the tariff reductions retroactive to August 1, 2020.

“As part of improving EU-US relations, this mutually beneficial agreement will bring positive results to the economies of both the United States and the European Union. We intend for this package of tariff reductions to mark just the beginning of a process that will lead to additional agreements that create more free, fair, and reciprocal transatlantic trade,” said Ambassador Lighthizer and Commissioner Hogan. Details on the specific products and tariff reductions are expected soon.

On August 21, the Office of the U.S. Trade Representative (USTR) issued a Federal Register notice exempting Section 301 import tariffs for two additional List/Tranche 3 products from China (import from China with an annual trade value of $200 billion):

  • Wallets, whether or not with wrist straps, of reinforced plastics, each measuring at least 17.5 cm long by 2 cm wide by 11 cm high and not more than 19 cm long by 2 cm wide by 11 cm high (described in statistical reporting number 4202.32.1000); and
  • Mixtures containing N,N-dimethyldodecan-1-amine (CAS No. 112-18-5) and N,N-dimethyltetradecan-1-amine (CAS No. 112-75-4) (described in statistical reporting number 3824.99.9297).

The USTR also made eight technical amendments to prior product exclusion descriptions previously published in the annexes of Federal Register notices published on October 28, 2019, February 5, 2020, and May 8, 2020.

The exclusions will apply from September 24, 2018, through August 7, 2020. The exclusions are governed by the scope of the HTS headings and the product descriptions appearing in the annex of the Federal Register notice; they are not governed by the product descriptions set out in any particular exclusion request. U.S. Customs and Border Protection will soon issue instructions on entry guidance and implementation. The USTR will continue to issue determinations on pending requests on a periodic basis. Please contact us to discuss whether we can assist in determining if your product might fit within one of these exclusions.

Since April 2020, we have collaborated with our foreign law firm partners to provide a chart of economic, labor and employment, health and safety, and export and import measures taken by governments around the world in response to the COVID-19 pandemic.

We will not provide regular updates to this chart (until further notice) but please feel free to contact us or the firms listed on the chart directly with any questions.

View/Download the Country Guide: Government Measures Taken in Response to COVID-19

This update includes new information through the first week of August 2020 for Australia, Belgium, Brazil, Canada, Chile, Costa Rica, El Salvador, Guatemala, Honduras, India, Indonesia, Israel, Italy, Japan, Mexico, Netherlands, Philippines, Poland, Russia, South Korea, Turkey, United Kingdom and United States. The updates are in bold on the chart for ease of reference.

In the Americas and Europe, July’s changes involve the easing of stricter health and safety measures including curfews, stay-at-home orders and domestic travel restrictions. In Europe, it appears that restrictions on public gatherings are being lifted. However, mandates to wear face masks in public indoor spaces and on public transportation have continued. In the United States, states and counties continue to differ on business closures and reopenings as well as face mask requirements. In Asia, governments continue to lift lockdown measures and to implement technology-based health measures such as temperature checks and contact tracing applications.

Most governments have used a phased approach to reopening businesses previously closed due to the pandemic and continue to maintain new export controls and import facilitation measures involving COVID-19-related health and medical goods. In recent months, the EU and United States have narrowed their export control measures to more accurately reflect domestic need.

Please see our Trump and Trade Update of April 7 for a discussion of this initiative.

On August 17, 2020, the Department of Commerce’s Bureau of Industry and Security (BIS) issued a Federal Register notice and Final Rule taking several actions directly impacting Huawei Technologies Co., Ltd. (Huawei) and its non-U.S. affiliates. Importantly, after issuing and extending a temporary general license since May 2019, BIS removed that license and replaced it with a more limited permanent authorization. BIS also added thirty-eight (38) non-U.S. affiliates of Huawei to the Entity List and revised identifying information on several other previously listed affiliates. Finally, the notice announces amendments to the special variation on the foreign-produced direct product rule applicable to transfers to Huawei or its affiliates.

Expiration of Temporary General License

In this Final Rule, BIS announced that the Temporary General License (TGL) has expired as of August 13, 2020. In its place, BIS has issued a limited permanent authorization for the Huawei entities on the Entity List. This limited authorization is for the sole purpose of providing ongoing security research critical to maintaining the integrity and reliability of existing and currently “fully operational networks” and equipment. BIS has allowed to expire the prior authorizations allowing: (i) continued operation of existing networks and equipment; and, (ii) support to existing “personal consumer electronic devices” and “Customer Premises Equipment (CPE).” BIS has made permanent an export authorization for necessary cybersecurity research and vulnerability disclosures; specifically by ensuring that exports, reexports, or transfers (in-country) involving cybersecurity research and vulnerability disclosure are allowable for national security purposes and are not hindered by the Entity List license requirements for Huawei and its non-U.S. affiliates on the Entity List. For prior information on Huawei’s TGL and its prior status, see Updates of May 21, 2019 and May 15, 2020.

Additions to the Entity List

In addition to the 68 Huawei affiliates placed on the Entity List in May 2019 and the 46 added in August 2019, BIS has now added another 38 Huawei non-U.S. affiliates to the Entity List effective immediately, bringing the total number of listed and restricted affiliates to 152. Being placed on the Entity List imposes a license requirement for all items subject to the EAR and implements a BIS license review policy of a “presumption of denial.” BIS also modified four existing Huawei affiliate Entity List entries, and added to export restrictions by imposing license requirements on “any transaction involving items subject to Commerce export control jurisdiction where a party on the Entity List is involved, such as when Huawei (or other Entity List entities) acts as a purchaser, intermediate, or end user.”  BIS stated that this action was necessary to prevent Huawei’s continued attempts to circumvent U.S. export controls to obtain electronic components developed or produced using U.S. technology. For prior information on Huawei BIS Entity Listings, see Updates of May 17, 2019, and August 19, 2019.

Foreign-Produced Direct Product Rule Amendments

The Final Rule simplifies the special variation on the foreign-produced direct product rule applicable to transfers to Huawei and its affiliates. The prior Interim Rule made the following subject to the Export Administration Regulations (and hence prohibited for transfer to Huawei without a license): (i) items, such as semiconductor designs, when produced by Huawei and its affiliates on the Entity List (e.g., HiSilicon), that are the direct product of certain U.S. Commerce Control List (CCL) software and technology; and, (ii) items, such as chipsets, when produced from the design specifications of Huawei or an affiliate on the Entity List, that are the direct product of certain CCL semiconductor manufacturing equipment located outside the United States.

The Final Rule removes the requirement that covered semiconductor items be designed by Huawei, to be subject to the EAR. Now, the final rule makes the following subject to the EAR necessitating a license to transfer to Huawei:

  • Items that are the direct product of certain controlled electronic devices, computer and telecommunications software or technology involving certain electronic circuits; processors; integrated circuits; electronic and digital computers; and certain telecommunications test, inspection and production equipment;
  • Items that are manufactured at plants located outside of the United States that are the direct product of such controlled U.S.-origin software or technology; and,

when there is “knowledge” that the foreign-produced item: (1) will be incorporated into, or will be used in the “production” or “development” of any “part,” “component,” or “equipment” produced, purchased, or ordered by any listed Huawei entity or affiliate; or (2) any listed Huawei entity or affiliate is a party to any transaction involving the foreign-produced item, e.g., as a “purchaser,” “intermediate consignee,” “ultimate consignee,” or “end-user.”

According to BIS, “This amendment is intended to further restrict Huawei from obtaining foreign made chips developed or produced from U.S. software or technology to the same degree as comparable to U.S. chips.” Notably, the rule states that license applications for the transfer of such items only capable of supporting communication below the 5G level will be reviewed on a case-by-case basis (as opposed to a policy of denial). For prior information on this issue, see Update of May 15, 2020.

On August 14, 2020, after an extensive review and unanimous recommendation by the Committee on Foreign Investment in the United States (CFIUS), President Donald Trump issued an Executive Order directing that the already completed transaction that resulted in the acquisition of Musical.ly, now known as TikTok, by the Chinese company ByteDance Ltd. be unwound. The 2017 acquisition of Musical.ly appears not to have been reviewed by CFIUS prior to completion. The order directs ByteDance to divest all interests and rights in any assets or property used to enable or support the operation of TikTok in the United States, and any data obtained or derived from TikTok or Musical.ly users in the United States. Specifically, the order directs that within 90 days, ByteDance, its subsidiaries, affiliates and Chinese shareholders, must divest all interests and rights in:

  • any tangible or intangible assets or property, wherever located, used to enable or support ByteDance’s operation of the TikTok application in the United States; and
  • any data obtained or derived from TikTok application or Musical.ly application users in the United States.

Upon its acquisition of Musical.ly in November 2017, ByteDance merged its TikTok application with Musical.ly’s social media application and created a single integrated social media application. In the Executive Order, President Trump stated that there was credible evidence that, through the acquisition, ByteDance “might take action that threatens to impair the national security of the United States.”

In completing a sale or transfer of its holdings, ByteDance must notify CFIUS of the intended recipient or buyer and allow CFIUS to review the proposed sale to determine: (i) if the recipient or buyer is a U.S. citizen or is owned by U.S. citizens; (ii) has or has had a direct or indirect contractual, financial, familial, employment, or other close and continuous relationship with ByteDance, or its officers, employees, or shareholders; and, (iii) can demonstrate a willingness and ability to support compliance with this divestment order. The Executive Order also allows CFIUS to take other measures it deems “necessary and appropriate to verify compliance with this order and to ensure that the operations of the TikTok application are carried out in such a manner as to ensure protection of the national security interests of the United States.” This includes authorization to audit TikTok’s accounting records and books; to inspect any information systems, networks, hardware, software and data; and to interview officers, employees or agents of ByteDance or TikTok Inc., or any subsidiaries, concerning any matter relating to this divestment order.

This action comes shortly after President Trump issued another Executive Order on August 6, 2020, effective September 20, prohibiting, to the extent permitted under applicable law, any transaction by any person, or with respect to any property, subject to the jurisdiction of the United States, related to TikTok with ByteDance and any of its subsidiaries. As described in our prior Update of August 7, 2020, the earlier Executive Order appears to have broad applicability on the functioning of TikTok in the United States.

On August 12, 2020, the Office of the U.S. Trade Representative (USTR) released an updated list of goods from the European Union (EU) that will continue to be subject to retaliatory tariffs as part of the dispute settlement at the World Trade Organization (WTO) over Airbus subsidies. In June 2020, USTR sought public comment on a proposal to possibly modify the list of EU products subject to the tariffs and whether such products should be subject to additional duties. See Update of June 25, 2020. The announced changes yesterday were minimal. The USTR determined that the amount of products subject to WTO retaliatory tariffs will remain unchanged at $7.5 billion and the tariff rates will remain unchanged at 15% for aircraft and 25% for all other products.

The USTR is removing from the list certain cheeses from Greece and sweet biscuits from the United Kingdom and adding an equivalent amount of trade from France and Germany with tariffs on various fruit jams, pastes and purees. The changes will take effect on September 1, 2020. In a press statement, Ambassador Robert Lighthizer commented: “The EU and member states have not taken the actions necessary to come into compliance with WTO decisions … The United States, however, is committed to obtaining a long-term resolution to this dispute. Accordingly, the United States will begin a new process with the EU in an effort to reach an agreement that will remedy the conduct that harmed the U.S. aviation industry and workers and will ensure a level playing field for U.S. companies.”

For additional background on this longstanding dispute between the United States and the EU over alleged subsidies provided to Airbus and Boeing and the implementation of these tariffs, see our Updates of October 4, 2019 and December 9, 2019.

The Federal Trade Commission (FTC) has issued a Notice of Proposed Rulemaking (NPRM) seeking public comment on the “Made in USA” claim and other unqualified U.S.-origin claims on product labels. The FTC’s statutory authority allows it to pursue enforcement actions to prevent unfair and deceptive “Made in USA” and other U.S.-origin claims. According to the notice, the FTC held a public workshop and collected public comments in support of a review of unqualified labeling claims. The FTC noted that many participants at the workshop stated that a federal rule “could have a strong deterrent effect against unlawful [“Made in USA”] claims without imposing new burdens on law-abiding companies.”

This NPRM is intended to cover labels on products that make unqualified U.S.-origin claims. If implemented, it would prohibit marketers and advertisers from including unqualified claims on labels unless:

  1. Final assembly or processing of the product occurs in the United States,
  2. all significant processing that goes into the product occurs in the United States, and
  3. all or virtually all ingredients or components of the product are made and sourced in the United States.

The proposed draft definition of “Made in USA” would mean “any unqualified representation, express or implied, that a product or service, or a specified component thereof, is of U.S. origin, including, but not limited to, a representation that such product or service is ‘made,’ ‘manufactured,’ ‘built,’ ‘produced,’ ‘created,’ or ‘crafted’ in the United States or in America, or any other unqualified U.S.-origin claim.”

The NPRM also covers labels making unqualified “Made in USA” claims appearing in mail order catalogs or mail order advertising. In order to avoid confusion or perceived conflict with other country-of-origin labeling laws and regulations, the NPRM specifies that it does not supersede, alter, or affect any other federal or state statute or regulation relating to country-of-origin labels, except to the extent that a state country-of-origin statute, regulation, order, or interpretation is inconsistent with the NPRM.

Interested parties may file comments until September 14, 2020, by filing online via the Federal ePortal at www.regulations.gov and searching for Docket No. FTC-2020-0056-0001, or via hard copy to the Federal Trade Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite CC-5610 (Annex C), Washington, DC 20580, and noting “MUSA Rulemaking, Matter No. P074204” on the envelope and in the comments.