On June 17, 2020, U.S. Trade Representative (USTR) Robert Lighthizer testified before both the House Ways and Means Committee and the Senate Finance Committee concerning President Donald Trump’s 2020 Trade Policy Agenda. His written statement highlights the “benefits of the President’s trade and economic policies” for U.S. households, the Trump administration’s fundamental changes to U.S. trade policy, and the status of trade agreements and negotiations from the past year. For 2020, USTR Lighthizer stated that “President Trump will continue to pursue new trade agreements that benefit all Americans, aggressively enforce our trade laws, respond to unfair trade practices by other nations, and work toward reform at the World Trade Organization.”

In discussing the 2020 trade policy agenda, Ambassador Lighthizer noted ongoing efforts to negotiate trade agreements with the United Kingdom (UK) and Kenya, as well as efforts to rebalance the trade relationship with the European Union. The United States, he emphasized, would continue to “aggressively enforce” U.S. trade laws, ensure compliance with the terms of existing trade agreements, and continue to pursue reforms at the World Trade Organization (WTO). Interestingly, in discussing avenues to strengthen existing trade policies, USTR Lighthizer noted that one option is to “tighten de minimis thresholds for American imports, including those subject to Section 301 tariffs. At $800, the U.S. de minimis threshold far exceeds that of our major trade partners. For example, the EU threshold is only $150, while China’s stands at a mere $7. This results in massive numbers of shipments to the U.S. receiving duty-free treatment and virtually no screening.” He indicated that such a “disproportionately high volume of these shipments indicates China and others are likely exploiting the high U.S. de minimis threshold to avoid paying duties.”

In exchanges with Committee members in both chambers, Ambassador Lighthizer noted that COVID-19 has slowed progress on the UK and Kenya trade agreement negotiations, adding that there would be no final agreement with the UK before the November elections. He indicated that the pandemic had also stalled efforts to begin “phase two” negotiations with both China and Japan. When asked about renewal of the Generalized System of Preferences (GSP) program, the USTR seemed noncommittal in his response, noting that the program “has benefits, but needs changes”; he indicated, however, that the Trump administration is willing to restore GSP benefits it took away from India if some trade disputes are resolved. Regarding continuing Section 301 tariffs on imports of certain products from China, USTR Lighthizer stated that any future product exclusion renewals will only last until the end of 2020, and at that time they “will decide what happens after that.”

Click here view the House testimony.

Click here to view the full Senate testimony.

On June 22, 2020, the U.S. Supreme Court denied certiorari of an appeal by the American Institute for International Steel (AIIS) regarding the constitutionality of President Donald Trump’s authority to impose tariffs on steel imports under Section 232 of the Trade Expansion Act of 1962. The Court issued no formal statement; in declining to hear the case, the Section 232 tariffs will remain in place.

AIIS had initially challenged the constitutionality of the President’s power to implement steel tariffs under Section 232 before the U.S. Court of International Trade (CIT); on March 25, 2019, the CIT rejected claims that Section 232 “constitutes an improper delegation of legislative authority in violation of Article I, Section 1 of the U.S. Constitution and the doctrine of separation of powers.”  See Trump and Trade Update of March 25, 2019.  In a February 2020 ruling by the U.S. Court of Appeals for the Federal Circuit (Federal Circuit),  a three-judge panel upheld the CIT’s ruling that Congress’s delegation of authority over trade does not violate the Constitution.  See Trump and Trade Update of February 28, 2020.

 

The Office of the U.S. Trade Representative (USTR) has issued a Federal Register notice exempting Section 301 import tariffs for one additional List 3 product from China (imports from China with an annual trade value of $200 billion):

  • Motorboats with displacement hulls of reinforced fiberglass and wood, each motorboat measuring not less than 14.47 m and not more than 36.57 m in length and weighing not less than 28 t and not more than 363 t, powered by inboard engines, other than inboard/outdrive (described in statistical reporting number 8903.92.0065).

The exclusion will apply from September 24, 2018, through August 7, 2020.  The exclusion is governed by the scope of the HTS heading and the product description appearing in the annex of the exclusion notice; it is not governed by the product description 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.

The U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) announced that it has issued General License (“GL”) 37  (Authorizing the Wind Down of Transactions Involving Delos Voyager Shipping Ltd, Romina Maritime Co Inc, and Certain Vessels), which expires on July 21, 2020.   Additionally, OFAC issued frequently asked question (“FAQ”) 834 addressing the scope of GL 37, and designated 18 individuals, entities and vessels to the Specially Designated Nationals and Blocked Entity (“SDN”) List pursuant to Executive Order (“EO”) 13850.

On November 1, 2018, President Trump issued EO 13850, which authorized the Secretary of the Treasury in consultation with the Secretary of State to block all property and interests in property of, among other things, any person:

  1. operating in the gold sector of Venezuela or the Venezuelan economy;
  2. involved in or with corruption or deceptive practices and the Venezuelan government or its projects; or
  3. materially assisting, sponsoring, or providing financial, material or technological support to persons falling into categories (1)-(2).

The EO authorized the blocking of any person owned or controlled by, or to have acted or purported to act for or on behalf of, directly or indirectly, any person blocked under this EO.

On June 18, 2020, OFAC blocked 3 individuals, 8 entities and 2 vessels, for materially assisting entities that fell under parts 1 and 2 of the EO.   Among them were Delos Voyager Shipping Ltd, the Delos Voyager vessel (collectively, “Delos”), Romina Maritime Co. Inc., and the Euroforce vessel (collectively, “Romina”).  Pursuant to OFAC’s 50% rule, entities in which Delos or Romina owns a 50% or greater interest are also blocked.

Until July 21, 2020, GL 37 authorizes all transactions and activities otherwise prohibited by the Venezuela Sanctions Regulations, 31 C.F.R. Part 591 (“VSR”) “that are ordinarily incident and necessary to the wind down of transactions involving” Delos or Romina, and entities in which Delos or Romina owns a 50% or greater interest.  FAQ 834 provides that the following activities and transactions are authorized by GL 37:

  • completion of ongoing voyages, including discharge of cargo aboard such vessels as of June 18, 2020;
  • docking or anchoring of the vessels at third-country, non-sanctioned ports;
  • transactions related to the safety and maintenance of the vessels, such as entering into contracts and paying for insurance coverage, flagging, and safety and compliance inspections; and
  • transactions related to the health and safety of any crew, including the provision and processing of wages or other employee benefits, or other provision of crewing services.

However, GL 37 does not authorize any new contracts with Delos or Romina or any debit to a Delos or Romina on the books of a U.S. account.  Non-U.S. persons are encouraged to seek guidance from OFAC if they are unable to meet the July 21, 2020 deadline for winding down their transactions with these entities.

OFAC also delisted two companies and two vessels from its SDN List after they committed to “enhanced risk-based sanctions compliance programs” and stopped their activities in Venezuela’s oil sector.

In collaboration with our foreign law firm partners, we continue to update our chart of COVID-19 measures taken by governments around the world. The government measures in the chart include economic, labor and employment, health and safety, and export and import measures. Below is a list of the updated countries and a summary of the changes we are seeing.

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

Today’s update includes new information as of the second week of June, 2020 for Australia, Belgium, Canada, Chile, Costa Rica, El Salvador, Germany, Guatemala, Honduras, India, Indonesia, Israel, Japan, Mexico, Netherlands, Panama, Poland, South Africa, Spain, Thailand, Turkey, United Kingdom, United States and Vietnam. The updates are bolded in the chart for ease of reference.

In the Americas and Europe, recent changes involve the easing of stricter health and safety measures including of curfews, stay-at-home orders, and domestic travel restrictions.  In Asia, governments have lifted most lock-down measures relating to domestic travel and have begun to allow international travel.  Most governments have used a phased approach to re-opening  businesses previously closed in response to the pandemic.  Finally, most governments continue to maintain new export controls and import facilitation measures involving COVID-19-related health and medical goods.

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

 

The U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) announced on June 15, 2020 that it is issuing a new rule to allow persons to share certain U.S. technology with Huawei Technologies Co., Ltd. (“Huawei”) in connection with standards development in a standards setting body, despite Huawei’s designation to the Entity List.   Commerce stated that this action is aimed at “ensuring U.S. industry’s ability to more fully contribute to standards-development activities in the telecommunications sector.”  This comes after other restrictions targeting Huawei were implemented in May 2020, as discussed in a previous Trump and Trade bulletin and post. The new rule has not yet been published in the Federal Register, so the effective date is not known at this time.

Previously, the temporary general license (“TGL”) issued at the time of Huawei’s designation to the Entity List in May 2019, included paragraph (c)(4) allowing engagement as necessary for the development of 5G standards by a duly recognized standards body.  However, this authorization was removed in the August 2019 extension of the TGL, according to BIS guidance, based on the determination that existing provisions of the Export Administration Regulations (“EAR”) sufficed for activities in connection with standards development bodies, including 5G standards bodies.  A related general advisory opinion was also issued in August 2019, Concerning Prohibited Activities in the Standards.  With the June 15 announced rule, BIS is changing course.  The announcement states that the August 2019 advisory opinion is no longer in effect.

The June 15 announcement provides that under the new rule, companies may disclose technology to Huawei without an export license if it: (1) would not have required a license to be disclosed to Huawei before its placement on the Entity List; and (2) will be disclosed for the purpose of standards development in a standards-development body, not for commercial purposes.  Specifically, the announcement states that the new rule will authorize the release of U.S. technology designated as EAR99 or controlled only for Anti-Terrorism reasons on the Commerce Control List without a license, in the context of “voluntary consensus standards bodies” of which Huawei is a participant, for the purpose of contributing to the revision or development of a “standard,” as defined in Office of Management and Budget Circular A-119 (Rev. 2016).  However, disclosure of technology to Huawei for commercial purposes will remain subject to all applicable EAR requirements.

According to Commerce Secretary Wilbur Ross, “This action recognizes the importance of harnessing American ingenuity to advance and protect our economic and national security.  The Department is committed to protecting U.S. national security and foreign policy interests by encouraging U.S. industry to fully engage and advocate for U.S. technologies to become international standards.”

Shortly after taking office, President Donald Trump announced a foreign policy shift toward Cuba with the issuance of National Security Presidential Memorandum on Strengthening the Policy of the United States Toward Cuba (NSPM).  In announcing President Trump’s revised policy in June 2017 (see Trump and Trade Update of June 20, 2017), the United States once again restricted certain travel and sought to limit providing any advantages to the Cuban military.  As a result, the Department of Commerce’s Bureau of Industry and Security (BIS), the Department of the Treasury’s Office of Foreign Assets Control (OFAC), and the State Department re-instituted certain export restrictions and prohibitions that had been waived during the presidency of Barack Obama.  Details of this new Cuba policy were detailed in a Thompson Hine International Trade Update bulletin of November 20, 2017.  Generally, BIS re-instituted a policy of denial for license applications to export or re-export goods to, or for use by, certain entities or subentities the State Department identified on its Cuba Restricted List.  In addition, OFAC implemented changes to the authorizations allowing for travel to Cuba and related transactions and amended its regulations to restrict certain financial transactions for entities on the Cuba Restricted List.

Importantly for this policy shift, the State Department compiled the list of entities under the control of, or acting for or on behalf of, the Cuban military, intelligence, or security services or personnel with which direct financial transactions were prohibited “as it would disproportionately benefit such services or personnel at the expense of the Cuban people or private enterprise in Cuba.”  This Cuba Restricted List includes various Cuban government ministries, state-owned holding companies, numerous hotels, tourist agencies and marinas, as well as multiple entities directly serving the defense and security sectors of the Cuban economy. The list will be updated as necessary, and State has clarified that entities or subentities owned or controlled by another entity or subentity on the Cuba Restricted List are not treated as restricted unless specifically named on the list.  The State Department has updated this list on six occasions including most recently on June 12, 2020.  This recent update added six new Cuban entities:

  • Hotel Marqués de Cardenas de Montehermoso
  • Hotel Regis
  • Pestana Cayo Coco (also Hotel Playa Paraiso)
  • Centro de Buceo Varadero
  • Centro Internacional de Buceo Gaviota Las Molas
  • Delfinario Cayo Naranjo

The State Department has republished the Cuba Restriction List in its entirety in the Federal Register.  Companies considering doing business in Cuba are reminded of the significant re-implementation of U.S. export control and financial restrictions toward Cuba by President Trump and that due diligence during any transaction and consideration of the need for any BIS or OFAC licenses is critical.

On June 8, 2020, the State Department announced sanctions against the Islamic Republic of Iran Shipping Lines (IRISL) and its Shanghai-based subsidiary, E-Sail Shipping Company Ltd (E-Sail) pursuant to Executive Order 13382, which targets weapons of mass destruction (WMD) proliferators and supporters.  In a press statement, Secretary of State Mike Pompeo noted that, “IRISL has repeatedly transported items related to Iran’s ballistic missile and military programs and is also a longstanding carrier of other proliferation-sensitive items. . . . Despite Iran’s claims that it will never develop nuclear weapons and associated delivery systems, the Iranian regime has continued to pursue and procure proliferation-sensitive items in violation of UN Security Council Resolution 2231.”

Upon this announcement, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) has placed IRISL, E-Sail, and numerous other Iranian-flagged, as well as other foreign-flagged ships known to carry Iranian goods, on the Specially Designated Nationals and Blocked Persons (SDN) List.  As a result of this action, all property and interests in property of these entities that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC. Because U.S. persons are generally prohibited from dealing with entities on the SDN List, persons who engage in certain transactions with these designated persons may themselves be exposed to designation on the SDN List. OFAC has indicated that 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.  A full listing of the designated vessels and entities is available here.

Secretary Pompeo urged “government authorities worldwide to investigate all IRISL and E-Sail activity in your ports and territorial seas and take appropriate action to put a halt to it.”  In addition, he reminded the maritime industry to review the U.S.  Guidance to Address Illicit Shipping and Sanctions Evasion Practices, which addresses how Iran abuses the international shipping system to advance illicit activities.  For more on this guidance, see Trump and Trade Update of May 14, 2020.

The Department of Commerce’s Bureau of Industry and Security (BIS) has released a statement indicating that is it extending the deadline for filing public comments until July 3, 2020 for the Section 232 investigation into imports of certain electrical steel components for incorporation into transformers, electrical transformers and transformer regulators. The initial comment period was set to expire on June 9, 2020 (see Trump and Trade Update of May 19, 2020). The period for submitting rebuttal comments has been extended to July 24, 2020.

 

The Office of the U.S. Trade Representative (USTR) has issued a Federal Register notice excluding certain List/Tranche 4 products (imports from China with an annual trade value of $300 billion) from Section 301 tariffs of 10 percent. The exemptions cover two 10-digit Harmonized Tariff Schedule (HTS) subheadings and 32 specially-prepared product descriptions, which cover 55 separately submitted exclusion requests.

The excluded HTS subheadings are both within Chapter 52 (Cotton) of the HTS:

  • 5210.11.4040 – Woven fabrics of cotton, containing less than 85 percent by weight of cotton, mixed mainly or solely with man-made fibers, weighing not more than 200 g/m²: Unbleached: Plain weave: Of number 42 or lower number: Sheeting.
  • 5210.11.6020 – Woven fabrics of cotton, containing less than 85 percent by weight of cotton, mixed mainly or solely with man-made fibers, weighing not more than 200 g/m²: Unbleached: Plain weave: Of numbers 43 to 68: Poplin or broadcloth.

The exclusions with specially-prepared product descriptions include but are not limited to:  certain down of ducks or geese; cyanuric chloride; kneeling pads of plastics; certain printed books in Chinese language; certain types of knitted or textile fiber gloves; certain shells for pillows and comforters; certain round wire of nonalloy steel; certain three-way hand-operated valve part of brass, suitable for use as an input part on irrigation-grade valves; certain lithium-ion batteries; optical channel splitters; certain television liquid crystal display (“LCD”) main board assemblies; certain spectacle frames of plastics; certain LCD modules, not capable of receiving or processing a broadcast television signal; certain stainless steel or titanium wristwatch cases; certain watch dials of brass or copper; parts of child safety seats; certain fish hooks; certain mop heads of polyester and rayon; certain tufts of swine hair for incorporation into brushes; and electrical spark lighters.

These exclusions will apply from September 1, 2019, through September 1, 2020.  Each exclusion is governed by the scope of the HTS heading and the product description appearing in the annex of the exclusion notice; it is not governed by the product description 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.

An exclusion can apply to any product that fits within a description provided in the annex of the Federal Register notice, regardless of which company submitted the original request. Please contact us to discuss whether we can assist in determining if your product might fit within one of these exclusions.