On April 6, 2020, House Ways and Means Chairman Richard E. Neal (D-MA) and Senate Finance Committee Chairman Chuck Grassley (R-IA) submitted a request to the U.S. International Trade Commission (ITC) for an expedited Section 332 investigation to identify imported products that may be needed to respond to the COVID-19 pandemic. In a letter to ITC Chairman David Johanson, the chairmen requested a report by April 30, 2020 that provides details on the tariff classifications and applicable rates of duty associated with identified products in order to assist their committees in working to address the coronavirus emergency.

The chairmen specifically requested that for each identified product, the ITC provide:

  1. the 10-digit HTS subheading;
  2. its legal description;
  3. general duty rate;
  4. any special or additional rates of duty imposed on the article, the dates on which the rates were imposed, and the authorities under which they were imposed;
  5. whether any such duties have been suspended and, if so, the date of suspension as well as how long the suspension is scheduled to last;
  6. the total rate of duty imposed on such article, including any special or additional rate of duty; and
  7. the major countries of origin for each such article, and the import value of each
    such article from each country for the years 2017-2019.

Neal and Grassley noted that they “are keenly aware that our challenges are being severely exacerbated by disruptions and deficiencies in our supply of equipment, inputs, and substances needed for treating and otherwise responding to the COVID-19 pandemic,” and that the requested report would assist their committees and the U.S. Trade Representative “in proposing or taking appropriate and responsive actions.”

As countries around the globe respond to the COVID-19 pandemic, business operations must adapt to changing rules and new restrictions. Many countries have limited business activity and travel, and many have taken actions that impact employee wages and benefits. In addition, several nations have issued economic stimulus measures that may provide companies with opportunities for loans or other support. Many other countries continue to enact export restrictions on medical supplies while providing favorable import treatment.

We are teaming with a group of international law firms to provide a chart compiling key measures implemented by countries around the world. It is not intended as legal advice but as a practical resource for companies adapting to the global pandemic. We intend to continue to periodically update this resource.

This week’s version of the chart includes updates on the following countries: Australia, Brazil, Canada, Costa Rica, Guatemala, Panama, Chile, China, France, Germany, India, Israel, Japan, Mexico, Philippines, Russia, Spain, Thailand, United States, Vietnam and Turkey.

The Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced the extension of a general license involving Nynas AB, General License 13E, through 12:01 a.m., May 14, 2020. The announcement explained that OFAC was extending the expiration date of this general license to provide additional time for Nynas AB to complete its proposed corporate restructuring, which would result in “significant changes to Nynas AB’s ownership and control.”

General License 13E authorizes all transactions and activities otherwise prohibited by the Venezuela Sanctions Regulations, 31 C.F.R. part 591 (VSR), where the only Venezuelan government entities involved are Nynas AB or any of its subsidiaries. General License 13E does not authorize transactions or dealings with blocked persons other than Nynas AB and its subsidiaries, or that are related to the export of diluents and the purchase of Venezuelan-origin petroleum and petroleum products.

The Office of the U.S. Trade Representative (USTR) has released its annual National Trade Estimate Report on Foreign Trade Barriers that addresses the status of foreign trade and investment barriers to U.S. exports around the world. This report is the U.S. government’s major annual report on the barriers to trade, investment and services that U.S. exporters and other businesses encounter around the world. It discusses the largest export markets for the United States, covering 59 countries, including each of the United States’ 20 free trade agreement (FTA) partners and the 50 largest markets for exports of U.S. goods. Together, these countries account for over 95% of the United States’ $5.5 trillion in two-way trade in goods and services.

The report notes that “trade barriers elude fixed definitions, but may be broadly defined as government laws, regulations, policies, or practices that either protect domestic goods and services from foreign competition, artificially stimulate exports of particular domestic goods and services, or fail to provide adequate and effective protection of intellectual property rights.” The report classifies foreign trade barriers in 11 categories:

  • Import policies (e.g., tariffs and other import charges, quantitative restrictions, import licensing, customs barriers and shortcomings in trade facilitation, and other market access barriers);
  • Technical barriers to trade (e.g., unnecessarily trade restrictive standards, conformity assessment procedures, or technical regulations, including unnecessary or discriminatory technical regulations or standards for telecommunications products);
  • Sanitary and phytosanitary measures (e.g., trade restrictions implemented through unwarranted measures not based on scientific evidence);
  • Subsidies, including export subsidies (e.g., export financing on preferential terms and agricultural export subsidies that displace U.S. exports in third country markets) and local content subsidies (e.g., subsidies contingent on the purchase or use of domestic rather than imported goods);
  • Government procurement (e.g., “buy national” policies and closed bidding);
  • Intellectual property protection (e.g., inadequate patent, copyright, and trademark regimes and inadequate enforcement of intellectual property rights);
  • Services barriers (e.g., prohibitions or restrictions on foreign participation in the market, discriminatory licensing requirements or regulatory standards, local-presence requirements, and unreasonable restrictions on what services may be offered);
  • Barriers to digital trade (e.g., barriers to cross-border data flows, including data localization requirements, discriminatory practices affecting trade in digital products, restrictions on the provision of internet-enabled services, and other restrictive technology requirements);
  • Investment barriers (e.g., limitations on foreign equity participation and access to foreign government-funded research and development programs, local content requirements, technology transfer requirements and export performance requirements, and restrictions on repatriation of earnings, capital, fees and royalties);
  • Competition (e.g., government-tolerated anticompetitive conduct of state-owned or private firms that restricts the sale or purchase of U.S. goods or services in the foreign country’s markets or abuse of competition laws to inhibit trade); and
  • Other barriers (barriers that encompass more than one category, e.g., bribery and corruption, or that affect a single sector).

USTR Fact Sheets:

“Removing Barriers to U.S. Exports Worldwide” (major developments in the 2020 NTE)
“Fighting to Open Foreign Markets to American Agriculture”
“Strong, Binding Rules to Advance Digital Trade”

Effective on March 25, 2020, the U.S. Department of State’s Directorate of Defense Trade Controls (DDTC) interim final rule amended the “Encryption Rule” under the International Traffic in Arms Regulations (ITAR) (22 C.F.R. § 120.54) with definitions more clearly explaining activities that are not considered to be exports, reexports, retransfers or temporary imports of secured and unclassified technical data. A summary of the proposal was provided in a previous Trump and Trade post on January 3, 2020 and the DDTC issued a summary of the changes on February 3, 2020.

On March 27, 2020, the DDTC issued a new entry in its frequently asked questions (FAQ) on the subject of providing access information to a foreign person under the Encryption Rule. Specifically, the FAQ address how users should reconcile technical data encrypted in accordance with section 120.54(a)(5) and not deemed an export, reexport or retransfer, with section 120.50(b) prohibiting regulated persons from providing access information to unauthorized foreign persons. The FAQ clarifies there would be a violation under section 120.54(b) if a “regulated person” provides access information to a foreign person who is able to “access, view, or possess” the encrypted technical data in an “unencrypted form” and is “not authorized to have the technical data.”

PrimeSource Building Products, Inc., a U.S. importer of various steel derivative products, filed an amended complaint in the U.S. Court of International Trade (CIT) on February 4, 2020, arguing that President Donald Trump’s Proclamation No. 9980 is unlawful and unconstitutional. This proclamation expanded the implementation of steel and aluminum tariffs under Section 232 of the Trade Expansion Act of 1962 and directed the Secretary of Commerce to adjust these tariffs to also apply to certain steel and aluminum derivatives beginning on February 8, 2020 (see Trump and Trade Update of January 28, 2020). The PrimeSource case is one of many challenges to the Section 232 tariffs on steel derivatives, at least two of which, New Supplies and Trinity Steel, have filed motions with the consent of DOJ, to stay their cases pending the outcome of the PrimeSource case.

The PrimeSource complaint argues that the new tariffs violate the Section 232 procedural requirements and its right to due process under the Constitution because: (1) no opportunity for comment was provided in response to the Commerce secretary’s determination the duties should be imposed; and (2) duties were implemented by the president beyond the prescribed Section 232 time frames. A summary of the complaint and related initial proceedings was provided in an earlier Trump and Trade update on February 14, 2020.

On March 20, 2020, the U.S. Department of Justice (DOJ) filed a motion to dismiss the complaint, arguing that the new tariffs did not violate the Section 232 procedural requirements or PrimeSource’s right to due process because: (1) the secretary of Commerce’s provision of facts and recommendations to the president are not subject to judicial review; and (2) the prescribed time frame to “implement” action within 15 days “does not foreclose the President’s authority to modify the action selected, as the President determines is necessary to protect national security.”

These various court challenges to the Section 232 tariffs on steel derivatives have already resulted in a court order blocking collection of the tariffs while the cases proceed. On March 20, the DOJ filed a motion to dismiss in the now-consolidated Oman Fasteners, LLC and Huttig Building Products, Inc. case, similarly arguing that the president can modify Section 232 tariffs at any time to protect national security.

The cases previously referenced are PrimeSource Building Products Inc. v. United States et al., case number 1:20-cv-00032; Oman Fasteners, LLC v. United States, case number 1:20-cv-00037; Huttig Building Products, Inc. et al. v. United States et al., case number 1:20-cv-00045; Trinity Steel Private Ltd. v. United States et al., case number 1:20-cv-00047; and New Supplies Co., Inc et al. v. United States, case number 1:20-cv-00048, all before the U.S. Court of International Trade.

The U.S. Trade Representative (USTR) has issued another Federal Register notice exempting Section 301 tariffs for certain List 4A (imports from China with an annual trade value of $300 billion) products. The exemptions cover five entire 10-digit Harmonized Tariff System (HTS) subheadings and seven specially-prepared product descriptions – covering a total of 36 separate exclusion requests.

The five excluded HTS subheadings include non-medical items:

  • 0505.10.0050 – Skins and other parts of birds, with their feathers or down, feathers and parts of feathers (whether or not with trimmed edges) and down, not further worked than cleaned, disinfected or treated for preservation; powder and waste of feathers or parts of feathers: Feathers of a kind used for stuffing; down: Feathers.
  • 3926.90.9925 – Other articles of plastics and articles of other materials of headings 3901 to 3914: Other: Other: Reflective triangular warning signs for road use.
  • 6506.10.3045 – Other headgear, whether or not lined or trimmed: Safety headgear: Of reinforced or laminated plastic: Other: Athletic; recreational and sporting headgear.
  • 8512.10.2000 – Electrical lighting or signaling equipment (excluding articles of heading 8539), windshield wipers, defrosters and demisters, of a kind used for cycles or motor vehicles; parts thereof: Lighting or visual signaling equipment of a kind used on bicycles: Lighting equipment.
  • 8528.72.6420 – Monitors and projectors, not incorporating television reception apparatus; reception apparatus for television, whether or not incorporating radio-broadcast receivers or sound or video recording or reproducing apparatus: Other, color: Incomplete or unfinished (including assemblies for television receivers consisting of all the parts specified in additional U.S. note 9 to this chapter plus a power supply), presented without a display device: Other: With a video display diagonal: Not exceeding 75 cm.

The seven specially-prepared product description exemptions all cover medical supplies: certain plastic coverings designed to fit over wounds and forming a protective seal; plastic pouches used with manually operated pill or tablet crushers; plastic refillable dispensers to store and contain bags in a medical setting; sterile urology drain bags; ice bags for treating injuries or soreness; certain identification wristband; and certain apparatus suitable for wearing on wrists having time-display functions and capable of transmitting data.

These exclusions will apply from September 1, 2019, through September 1, 2020. These exclusions apply to any product that satisfies the description in the annex of the Federal Register notice, regardless of whether the company using the exclusion filed the request. 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 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.

As countries around the globe respond to the COVID-19 pandemic, business operations must adapt to changing rules and new restrictions. Many countries have limited business activity and travel, and many have taken actions that impact employee wages and benefits. In addition, several nations have issued economic stimulus measures that may provide companies with opportunities for loans or other support.

Many countries, according to a recent report, have enacted export restrictions on medical supplies and other items needed to treat patients with COVID-19. These restrictions may change quickly. According to a G20 press release, members will “work to ensure the flow of vital medical supplies, critical agricultural products, and other goods and services, and work to resolve disruptions to the global supply chain.”

We have prepared a chart that provides a compilation of reports of economic, employment, safety and export-related emergency measures implemented by countries in response to this crisis. It is not intended as legal advice but as a practical resource for companies adapting to the global pandemic.

The Department of the Treasury’s Office of Foreign Assets Control (OFAC) has designated 20 Iran- and Iraq-based front companies, senior officials, and business associates for providing support to, or acting on behalf of, the Islamic Revolutionary Guards Corps-Qods Force (IRGC-QF) and for transferring lethal aid to Iranian-backed terrorist militias in Iraq such as Kata’ib Hizballah (KH) and Asa’ib Ahl al-Haq (AAH). According to Treasury Secretary Steven Mnuchin, “Iran employs a web of front companies to fund terrorist groups across the region, siphoning resources away from the Iranian people and prioritizing terrorist proxies over the basic needs of its people.” OFAC has sanctioned these entities and persons for a multitude of “malign activities”, including: smuggling; money laundering; selling Iranian oil to the Syrian regime; promoting propaganda efforts in Iraq on behalf of the IRGC-QF; intimidating Iraqi politicians; and illicit use of funds and public donations.

Accordingly, 15 individuals and 5 companies have been placed on OFAC’s Specially Designated Nationals (SDN) List. The five companies are:

  • Reconstruction Organization of the Holy Shrines in Iraq (ROHSI) – an IRGC-QF-controlled organization based in Iran and Iraq. OFAC states that ROHSI, although ostensibly a religious institution, has transferred millions of dollars to the Iraq-based Bahjat al Kawthar Company for Construction and Trading Ltd.
  • Bahjat al Kawthar Company for Construction and Trading Ltd. – also known as Kosar Company, and another Iraq-based entity under the IRGC-QF’s control. OFAC states that the Kosar Company has served as a base for Iranian intelligence activities in Iraq, including the shipment of weapons and ammunition to Iranian-backed terrorist militia groups. Additionally, Kosar Company has received millions of dollars in transfers from the Central Bank of Iran.
  • Al Khamael Maritime Services (AKMS) – an Iraq-based company operating out of Umm Qasr port in which the IRGC-QF has a financial interest. OFAC states, inter alia, that AKMS was involved in the sale of Iranian-origin petroleum products in contravention of U.S. sanctions against the Iranian regime.
  • Mada’in Novin Traders (MNT) – an Iran- and Iraq-based company associated with multiple IRGC-QF officials, including Vali Gholizadeh. OFAC states that Gholizadeh has worked with Saburinezhad for the benefit of both AKMS and MNT.
  • Middle East Saman Chemical Company – an Iran-based company. OFAC states that it maintained an account at Rashed Exchange, an Iran-based exchange house used to convert currency for the IRGC-QF.

As a result of this action, 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. 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. 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.

On March 25, 2020, the Department of Commerce’s Bureau of Industry and Security (BIS) extended the deadline to April 22, 2020, for public comment on possibly granting future Huawei Temporary General License (TGL) extensions. As noted in its March 12, 2020 Federal Register notice, BIS is seeking input on the continuing need for, and scope of, possible future extensions of the TGL for Huawei Technologies Co. Ltd. and its non-U.S. affiliates on the Entity List. BIS stated that it has received requests from industry to allow for additional time for comments as the original deadline to file comments was March 25, 2020.

The comment period has now been reopened until April 22, and interested parties may file comments in Docket number BIS 2020-0001 or RIN 0694-ZA02 via the Federal eRulemaking portal at www.regulations.gov.