American Trade & Manufacturing Blog

USTR Launches New Trade Probe of France National Tax on Digital Services

Posted in Digital Trade, World Trade Organization

Yesterday, the U.S. Trade Representative announced a new investigation under Section 301 of the proposed new French digital services tax. The French bill would impose a 3% tax on the French revenues of hi tech companies providing digital services in France if their worldwide revenues exceed 750 million euros ($840 million) or French revenues exceed 25 million euros ($28 million).

The new 301 investigation was greeted with bipartisan support on Capitol Hill and from leading industry groups.

Here are some important things to keep in mind:

  • This is not the start of a trade war with France. Section 301 is the same statute used to challenge China’s trade-distortive practices on technology transfer, IP, and state-owned enterprises. But the use of Section 301 does not necessarily signal tariffs as with China. Section 301 gives great discretion to the President and to USTR as to remedies under Section 301. For example, USTR can suspend or withdraw trade agreement benefits, enter into negotiations with the offending country, and restrict or deny service sector authorizations.
  • The use of Section 301 is particularly warranted here, because there are no clear WTO rules on digital services taxes. Normally, the United States would be required to bring a dispute to the WTO rather than use Section 301, but clearly the 25-year-old rules of the WTO fail to govern digital services taxes.
  • This investigation allows the Trump Administration to help defend some of the largest and most successful U.S. tech companies (such as Amazon, Google, Facebook, and others), who have been under attack abroad in the EU, China, and elsewhere.
  • Finally, the probe targets a single country’s unilateral action, which sends an important warning for other countries trying to limit global trade in digital services.

The investigation will move quickly, but there are important opportunities for companies and industries to weigh in early on the scope of this trade barrier and the most appropriate remedies.

Administration Takes Significant Step Toward Congressional Approval of USMCA

Posted in Trade Policy

On May 30, 2019, the Office of the U.S. Trade Representative (USTR) submitted to Congress the draft Statement of Administrative Action (SAA) for the U.S.-Mexico-Canada Agreement (USMCA).  The SAA describes what administrative steps are necessary for the U.S. government to implement the agreement.   This is an important step for Congress to consider the legislation needed to enact the USMCA under the Trade Promotion Authority (TPA) statute.  If the requirements of TPA are met, such as sending Congress the draft SAA, then the implementing legislation is eligible under TPA for expedited consideration by Congress without amendment.

Under TPA, the Administration must now wait at least 30 days before sending a draft of the implementing legislation.  This would formally kick-off Congress’ consideration of the legislation.  TPA, however, further requires that this must be done on a day when both Chambers of Congress are in session.  As a result, the earliest that the draft legislation could be sent to Congress is July 9, which is the first day that both Chambers are currently scheduled to be in session after the 30-day clock expires.

Nonetheless, it is likely that the draft implementing legislation will be sent after July 9 as the Administration continues to work with Congress to address Members’ concerns.  The SAA for past trade agreements has often been used to set out how Congressional concerns will be addressed, so the USMCA’s draft SAA will likely be a focus of the negotiations between the Administration and Congress.  In addition, though not required by TPA, the House Ways & Means Committee and Senate Finance Committee will likely also want to hold “mock mark-ups” to consider the draft USMCA implementing legislation and offer amendments before the draft legislation is formally submitted.  This has traditionally been done for past agreements so that the Congressional Committees with primary jurisdiction over trade maintain their prerogative to review and amend trade legislation.

 

Commerce Proposes New Rules for Investigating Currency Undervaluation as a Subsidy

Posted in Dumping and Subsidies

For decades, U.S. companies and industries – and lawmakers – have complained about the harmful effects of currency manipulation and undervaluation on American manufacturing and exports.  Now, for the first time, the Commerce Department seems ready to do something about it.

In a notice to be published in the May 28 Federal Register, https://s3.amazonaws.com/public-inspection.federalregister.gov/2019-11197.pdf, Commerce sets forth proposed rules for treating currency undervaluation as a subsidy in countervailing duty cases.   Commerce is seeking comments, which are due 30 days from publication.

The most unique aspect about the proposal is that Commerce plans to seek and defer to the Treasury Department’s evaluation of whether a governmental action on exchange rates has resulted in currency undervaluation.   This could a creative breakthrough, or it could limit these new provisions.   Treasury, in its semiannual reports, has never named China as a currency manipulator, despite ample evidence that China does exactly that.  Notably, Commerce has said that if it has good reason to believe otherwise, it could act even without a Treasury finding of undervaluation.

Commerce has also stated that for purposes of finding a subsidy, enterprises that primarily buy or sell goods internationally can constitute a group of enterprises that is “specific.”   This is important, because in the past, Commerce has expressed concerns that currency undervaluation benefits a specific group of industries or companies, which is required in order to find a subsidy.

Although China is no doubt a primary target, these proposed rules — once finalized — should strengthen countervailing duty cases involving several other countries that tend to undervalue currencies over time, potentially including Korea, Turkey, Japan, and others.

Administration to Impose Additional Tariffs on “Essentially All” Chinese Goods

Posted in Announcements, Trade Policy, Trade Remedies

After the markets closed on Friday, May 10, 2019, the Office of the U.S. Trade Representative (USTR) posted a press release to its website confirming that President Trump has ordered the agency to begin the process to place additional tariffs, under Section 301 of the Trade Act of 1974, on Chinese products not already subject to such duties.

In its press release, USTR indicated that “essentially all” imports from China not yet subject to Section 301 duties would be affected. USTR’s use of the phrase “essentially all” suggests that some products may remain outside of this new process, potentially goods that were already proposed for inclusion in prior lists of dutiable products but that were ultimately not subjected to 301 duties. However, the details of the proposal are not yet clear.

Last year, the Administration imposed Section 301 tariffs on three successive rounds of Chinese imports. These tariffs were in addition to any import duties or fees already affecting such goods. Products covered by the “Tranche 1” tariffs (which cover approximately $34 billion in annual imports) and the “Tranche 2” tariffs (which cover approximately $16 billion in annual imports) have been subject to 25% additional duties since July 6 and August 23, 2018, respectively. Products covered by the “Tranche 3” tariffs, which were made effective on September 24, 2018, were subject to 10% additional import duties through May 10, 2019; those additional duties rose to 25% for goods entering the United States on or after May 10, 2019 or which, having been exported to the United States before that date, do not arrive in the United States by June 1, 2019.

USTR’s press release indicated that there will be a notice and comment period for the new “Tranche 4” proposal. It accordingly appears that the process of finalizing the “Tranche 4” list will be similar to those that were undertaken with prior rounds of proposed/finalized tariffs: (1) a proposal published in the Federal Register, (2) an opportunity for interested parties to comment, (3) potentially a hearing, and (4) finalization of the list of affected products and the duty rate.

Much remains unknown at this time, including the tariff rate that the Administration intends to propose for the goods subject to “Tranche 4.” It is expected that USTR will publish additional information on its website today, potentially including the draft Federal Register notice with the initial proposed list of affected products.

In the meantime, the Administration has also announced that it will implement an exclusion process for goods subject to the recent increase in Section 301 duties affecting “Tranche 3” products. The Administration created processes by which individual companies could petition for the exclusion of products from the additional 25% “Tranche 1” and “Tranche 2” tariffs last year, but resisted implementing an exclusion process for “Tranche 3” products while duties on those goods remained at 10%, despite Congressional pressure to do so. USTR has not yet released the specifics of the “Tranche 3” exclusion process but there is speculation within Washington that it may differ from the exclusion process adopted for the earlier tranches, which has proven difficult to administer.

OFAC Sanctions Petroleos de Venezuela, S.A. (PdVSA)

Posted in Economic Sanctions

In light of the political crisis in Venezuela and the U.S. government’s support for the self-declared Interim President, Juan Guadió, on January 28, 2019, the Office of Foreign Assets Control (OFAC) added Petróleos de Venezuela, S.A. (PdVSA), Venezuela’s state-owned oil and gas company, to its list of Specially Designated Nationals and Blocked Persons. As a result, U.S. persons are now generally prohibited, subject to the limited exceptions below, from engaging in any transactions, directly or indirectly, with PdVSA or any entities owned 50 percent or more by PdVSA. As one of the most important sources of revenue for the embattled regime of Nicolás Maduro, this new designation is intended to further pressure Mr. Maduro to relinquish power.

As U.S. Treasury Secretary Steven Mnuchin stated, this designation “will help prevent further diverting of Venezuela’s assets by Maduro and preserve these assets for the people of Venezuela. The path to sanctions relief for PdVSA is through the expeditious transfer of control to the Interim President or a subsequent, democratically elected government.”

Along with this designation, OFAC concurrently amended previously issued General License (GL) 3 and issued several new GLs authorizing certain maintenance, wind down, and other activities, including, but not limited to, the following:

  • General License 3A, which supersedes GL 3 in its entirety, authorizes all transactions related to and the provision of financing for, and other dealings in specified bonds as well as bonds issued both prior to August 25, 2017 and by U.S. entities owned or controlled, directly or indirectly, by the Venezuelan government, other than Nynas AB, PDV Holding, Inc. (PDVH), CITGO Holding, Inc. (CITGO), and any of their subsidiaries.
  • General License 7 authorizes:
    • through July 27, 2019, U.S. persons to engage in transactions and activities with respect to PDVH, CITGO, and any of their subsidiaries, where the only PdVSA entities involved are PDVH, CITGO, or any of their subsidiaries;
    • through April 28, 2019, PDVH, CITGO, and any of their subsidiaries to engage in transactions and activities ordinarily incident and necessary to the purchase and importation of petroleum and petroleum products from PdVSA and its subsidiaries.
  • General License 8 authorizes, through July 27, 2019, Chevron Corporation, Halliburton, Schlumberger Limited, Baker Hughes, and Weatherford International to continue operations in Venezuela involving PdVSA or its subsidiaries.
  • General License 9 authorizes all transactions and activities ordinarily incident and necessary to dealings in any debt (including specified bonds, promissory notes, and other receivables) of PdVSA or its subsidiaries, issued prior to August 25, 2017, provided that any divestment or transfer of, or facilitation of divestment or transfer of, any holdings in such debt must be to a non-U.S. person. GL 9 also authorizes all transactions and activities ordinarily incident and necessary to dealings in any bonds issued prior to August 25, 2017 by PDVH, CITGO, Nynas AB, or any of their subsidiaries.
  • General License 10 authorizes U.S. persons in Venezuela to purchase refined petroleum products for personal, commercial, or humanitarian uses from PdVSA or its subsidiaries. Notably, this GL does not authorize any commercial resale, transfer, exportation, or reexportation of refined petroleum products.
  • General License 11 authorizes, through March 29, 2019, U.S. person employees and contractors of non-U.S. entities located outside the United States and Venezuela to engage in all transactions and activities ordinarily incident and necessary to the maintenance or wind down of operations, contracts, or other agreements involving PdVSA or its subsidiaries.
  • General License 12 authorizes, through April 28, 2019, all transactions and activities ordinarily incident and necessary to the purchase and importation into the United States of petroleum and petroleum products from PdVSA or its subsidiaries. This GL also authorizes, through February 27, 2019, all transactions and activities ordinarily incident and necessary to the wind down of operations, contracts, or other agreements, including the importation into the United States of goods, services, or technology involving PdVSA or its subsidiaries.
  • General License 13 authorizes, through July 27, 2019, all transactions and activities where the only PdVSA entities involved are Nynas AB or any of its subsidiaries;
  • General License 14 authorizes all transactions that are for the conduct of the official business of the U.S. government by U.S. government employees, grantees, or contractors.

In general, revenues owed to PdVSA or its subsidiaries from the activities authorized in these GLs are to be deposited in blocked accounts, which will be released upon a peaceful transition of power. In addition, on January 25, 2019, President Trump signed an Executive Order that broadens the previous definition of “Government of Venezuela” to now include persons that have acted, or have purported to act, on behalf of the Government of Venezuela, including members of the Maduro regime.

These measures mark a significant expansion of U.S. economic sanctions on Venezuela, and additional measures are not off the table. “The United States is holding accountable those responsible for Venezuela’s tragic decline, and will continue to use the full suite of its diplomatic and economic tools to support Interim President Juan Guaidó, the National Assembly, and the Venezuelan people’s efforts to restore their democracy,” said Secretary Mnuchin.

The Crisis in Venezuela – New Sanctions Forthcoming?

Posted in Economic Sanctions, Export Controls

On January 23, 2019, the leader of Venezuela’s National Assembly, Juan Guaidó, declared himself the acting President of Venezuela and announced he would assume the powers of the Venezuelan executive branch until new national elections are held. The move was a direct challenge to Venezuela’s sitting president, Nicolás Maduro, who was reelected to a second term in a widely denounced, allegedly rigged election last year. Several countries across the Americas, including, most notably, the United States, have recognized Mr. Guaidó as the legitimate Venezuelan President. As Vice President Mike Pence explained in an op-ed, “[t]his is a humanitarian crisis and also a matter of regional security.” He added, “[f]or the sake of [U.S.] vital interests, and for the sake of the Venezuelan people, the U.S. will not stand by as Venezuela crumbles.”

U.S. companies doing business in Venezuela should exercise caution, as reports indicate that new U.S. economic sanctions against Venezuela could be forthcoming. Current U.S. sanctions do not prohibit doing business in Venezuela or with the Venezuelan government, but instead focus on certain financial transactions involving the Venezuelan government and certain sanctioned individuals and companies, including those operating in the gold sector as well as Venezuelan government officials. With certain exceptions, current financial restrictions prohibit U.S. persons from engaging in transactions related to, the provision of financing for, or other dealings in certain new debt involving the Venezuelan government, including government-owned or -controlled entities such as Petróleos de Venezuela, S.A. (PdVSA); bonds issued by or dividend payments or other distributions of profits to the Venezuelan government; purchases of securities from or any debt owed to the Venezuelan government; any digital currency/coin/token issued by, for, or on behalf of the Venezuelan government; any debt owed to the Venezuelan government that is pledged as collateral on or after May 21, 2018; and any sale, transfer, assignment, or pledging as collateral by the Venezuelan government of any equity interest in any entity 50% or more owned by the Venezuelan government. In addition, U.S. persons are prohibited from engaging in transactions with any designated individuals/entities, and must ensure that any dealings with the Venezuelan government do not involve, directly or indirectly, any designated Venezuelan government officials.

While it appears that the U.S. government has been considering increasing sanctions against Venezuela for some time now, the current crisis in the country increases the likelihood that new sanctions will be imposed relatively soon. Reports indicate that the U.S. government is considering increased sanctions on the Venezuelan oil and gold sectors, as well as other sanctions, if Mr. Maduro resorts to force against his opponents. Any new sanctions targeting the oil sector, including PdVSA, could potentially include restrictions on Venezuelan oil import volumes or even a full ban on U.S. imports of Venezuelan oil. Other options could include sanctions against the Venezuelan military (assuming they remain under Mr. Maduro’s control) and the designation of additional Venezuelan government officials/entities. As one government official told the Wall Street Journal, all options are on the table.

Given the fluid situation in Venezuela, we expect that any new sanctions would go into effect quickly, as the Trump Administration seeks to facilitate a rapid end to the current crisis. U.S. companies operating in Venezuela, particularly in the oil sector, would thus be well advised to proceed with caution on any new transactions involving the Venezuelan government.

Jonathan Babcock, a Law Clerk in Wiley Rein’s International Trade practice, contributed to this post.

Global Law Firm Enters into Settlement Agreement with DOJ for Failure to Register as a Foreign Agent

Posted in Announcements

Yesterday, January 17, 2019, the U.S. Department of Justice (DOJ) announced that it has entered into a settlement agreement (Agreement) with Skadden, Arps, Slate, Meagher & Flom LLP (Skadden) to resolve the law firm’s failure to register as an agent of the Government of Ukraine under the Foreign Agents Registration Act (FARA).

According to the Agreement, since 2012, Skadden was involved in a public relations campaign for the Government of Ukraine that was directed towards the U.S. media. As such, Skadden was acting as an “agent of a foreign principal” under the statute. Although the FARA Registration Unit reached out to Skadden on several occasions regarding the law firm’s involvement in this public relations campaign, DOJ noted in a press release that a “partner then at Skadden made false and misleading statements to the FARA Unit, which led it to conclude in 2013 that the firm was not obligated to register under FARA.” DOJ later discovered that Skadden was actually required to register in 2012, but failed to do so. In addition to agreeing to retroactively register under FARA as part of the Agreement, Skadden has agreed to pay the U.S. Department of Treasury the fees and expenses that it received from Ukraine during the representation – i.e., more than $4.6 million.

Under FARA, individuals and/or entities that engage in one or more covered activities– e.g., public relations activities, political activities, etc. – within the United States and on behalf of a foreign principal must register under FARA unless an exemption to registration applies. This case reinforces the importance of understanding the registration triggers and reporting requirements under the statute. It also highlights the significant penalties (civil, criminal, and reputational) that can result from failure to comply with these obligations.

A copy of the settlement agreement is available here.


Wiley Rein’s FARA Handbook, which reviews the laws and regulations that govern whether an entity should register with the FARA Registration Unit of the DOJ, the registration process, the obligations of registered agents, and the penalties that may be imposed for FARA violations, can be read here. For more information about FARA, please contact one of the authors of this alert.

Impact of the United States-Mexico-Canada Agreement on Data Privacy Rules

Posted in Trade Agreement Compliance

On September 30, the United States, Mexico and Canada reached agreement on the United States-Mexico-Canada Agreement (USMCA) to replace the North American Free Trade Agreement (NAFTA). The agreement also significantly updates NAFTA with new rules, including rules regarding data privacy. The Administration intends to use the USMCA as a template for future potential trade agreements with Japan, the United Kingdom, the European Union (EU), and others. Therefore, the new rules in the USMCA potentially will impact not just doing business in Canada and Mexico, but potentially also in other significant markets.

The USMCA data privacy rules are included in the digital trade chapter. This is an important update to NAFTA, which does not contain any rules on data privacy or digital trade in general. This also means that the data privacy rules should be viewed along with the overall objectives of the USMCA’s digital trade chapter to reduce cross-border data flow barriers and limit domestic data storage requirements. Thus, while the USMCA’s data privacy rules are not a trade-off per se for liberalizing cross-border data flows, they certainly help address concerns about the impact on individuals of allowing such data flows.

The USMCA requires the United States, Canada, and Mexico to maintain a legal framework to protect personal data but leaves the content and enforceability of such laws up to each country. Specifically, the agreement creates only two hard commitments: 1) to adopt or maintain a legal framework that protects the personal information of the users of digital trade; and 2) to publish information on the personal information protections the country provides to users of digital trade, including how individuals can pursue remedies and businesses can comply with any legal requirements.

While the remaining data privacy rules are not obligatory importantly, they encourage the United States, Canada, and Mexico to have their respective privacy regimes reflect a common set of principles and be compatible. These principles include limitation on collection and use of data; security safeguards; transparency; individual participation; and accountability. Moreover, each country is urged to consider principles and guidelines of relevant international bodies, such as the Asia-Pacific Economic Cooperation (APEC) Privacy Framework and the Organisation for Economic Co-operation and Development (OECD). Recommendation of the Council concerning Guidelines governing the Protection of Privacy and Transborder Flows of Personal Data. Finally, the United States, Canada, and Mexico jointly recognize in the agreement that compliance with data privacy protections and any restrictions on cross-border flows of personal information should be necessary and proportionate to the risks presented and should not discriminate against parties from the other USMCA countries.

Regardless of the above, the USMCA specifically recognizes that there are different legal approaches to protecting personal information, including comprehensive privacy, personal information, or personal data protection laws; sector-specific laws covering privacy; or laws that provide for the enforcement of voluntary private sector undertakings. However, the United States, Canada, and Mexico agreed to promote compatibility and exchange information on their respective mechanisms. The USMCA specifically identifies the APEC Cross-Border Privacy Rules system as a valid mechanism to facilitate cross-border information transfers while protecting personal information.

The USMCA’s data privacy rules appear to be supported by most stakeholders and commenters. While some may wish that the rules were stricter, they recognize that the USMCA’s rules go farther than those in the Trans-Pacific Partnership agreement in requiring data protection and promoting compatibility. There is particular support for the USMCA allowing different approaches to data privacy while also promoting the APEC Cross-Border Privacy Rules.

The next steps are for the three countries to sign the USMCA, likely by the end of November, and then for Congress to pass legislation to approve and implement the agreement. Congressional consideration of the USMCA probably will not occur until next year. The combination of Congress’ full schedule after the midterm elections and various procedural and reporting requirements that apply to USMCA legislation prevent it from being voted on this year.

Webinar: What You Need to Know About the USMCA Agreement

Posted in Announcements, Antidumping

What You Need to Know About the USMCA Agreement: What’s In It, How It Will Affect Your Business, How It Is Different from NAFTA, and What’s Next

The US-Mexico-Canada Agreement (USMCA) is a modernization of the North American Free Trade Agreement (NAFTA), the 24-year old trilateral trade deal. Dan Pickard, Steve Claeys, and Nova Daly will discuss the details of the agreement, how it will affect U.S. industries, antidumping orders and enforcement concerns, the approval process, and how parties affected by the agreement may comment and seek clarifications as it goes on to Congressional review.

| DATE: Wednesday, November 7, 2018

| TIME: 12:00 p.m. – 1:00 p.m. (EDT)

Please join us for our in-depth discussion on the new trade agreement

RSVP Here

About the Speakers:

Dan Pickard, partner, counsels U.S. and international clients on the laws and regulations governing international trade, with particular emphasis on import remedy, anti-bribery, national security, and export control issues. He represents and advises clients in matters related to trade remedy investigations (including antidumping, countervailing duty, and safeguard cases), U.S. economic sanctions, export controls, anti-boycott measures, and the Foreign Corrupt Practices Act (FCPA). View full bio

Steve Claeys, partner, assists clients on a variety of international trade law and policy matters, including bilateral and multilateral trade agreements, trade remedies and safeguards, foreign market access barriers, e-commerce and digital trade, agriculture trade, and customs enforcement. He has 25 years of experience advising members of Congress, senior White House and U.S. Department of Commerce officials. View full bio

Nova Daly, a senior public policy advisor and experienced international investment and trade policy professional, has held senior leadership positions at the U.S. Departments of the Treasury and Commerce, the White House, and the U.S. Senate. Drawing on his experience, including as a member of the Trump Transition Team for trade, he provides both high-level insight and deep operational experience to help clients navigate the policy and regulatory environment surrounding cross-border business activities. View full bio

More Info

  • This event is complementary but advance registration is required.
  • Webinar instructions will be distributed prior to the webinar. Materials may be provided following the webinar. CLE credit is not being offered for this program.
  • For more information, please email Lynne Stabler at lstabler@wileyrein.com.

Webinar: The New Immediate & MANDATORY CFIUS Filing Regulations – What You Need to Know and Do Before the Regulations Take Effect on November 10

Posted in Announcements

The New Immediate & MANDATORY CFIUS Filing Regulations – What You Need to Know and Do Before the Regulations Take Effect on November 10

Wednesday, October 24, 2018 | 12:00 p.m. – 1:00 p.m. (EDT)

New CFIUS regulations were announced on October 10, 2018, and will go into effect on November 10, 2018. Rick, Nova, and Lori will discuss these new rules – which require mandatory reporting of deals to CFIUS – including possible civil penalties, and will explain how these regulations will affect your business. They will also provide insight on the fast comment process on these new regulations that will close on November 10, 2018.

RSVP Here

More Info:

  • This event is complementary but advance registration is required.
  • Webinar instructions will be distributed prior to the webinar. Materials may be provided following the webinar. CLE credit is not being offered for this program.
  • For more information, please email Lynne Stabler at lstabler@wileyrein.com.
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