American Trade & Manufacturing Blog

Agencies Amend Cuba Sanctions to Implement President Trump’s June National Security Presidential Memorandum

Posted in BIS, Economic Sanctions, Trade Policy

Last week, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC), the U.S. Department of Commerce’s Bureau of Industry and Security (BIS), and the U.S. Department of State took steps to implement restrictions on tourism and trade with Cuba, which were announced by President Trump in June. Consistent with the National Security Presidential Memorandum on Strengthening the Policy of the United States Toward Cuba, the State Department published a list of restricted entities in Cuba’s military, intelligence, and security services sectors (Cuba Restricted List). At the same time, OFAC amended its Cuban Assets Control Regulations (CACR) and BIS amended its Export Administration Regulations (EAR) to strictly enforce the statutory ban on tourism in Cuba and to restrict the flow of money and U.S. goods to entities on the Cuba Restricted List.

Increased Restrictions on Certain Financial Transactions and Travel

The Cuba Restricted List includes entities or subentities that the State Department has identified as being under the control of, or acting for or on behalf of, the Cuban military, intelligence, or security services or personnel. The list includes, but is not limited to, the Ministry of the Interior, Ministry of the Revolutionary Armed Forces, holding companies such as GAESA, Gaviota, and CIMEX (and specified subentities of each), numerous hotels in Cuba, and entities determined to be directly serving the Cuban Defense and Security Sectors. Pursuant to OFAC’s amendments to the CACR, U.S. persons are now prohibited from engaging in certain direct financial transactions with the entities and subentities identified on the Cuba Restricted List. This could prove particularly troublesome for U.S. companies seeking to do business in the Cuban hospitality sector, as many flagship hotels in Cuba are now off-limits unless specifically authorized. Notably, commercial engagements in place with such entities prior to November 9, 2017 remain authorized.

In addition, the CACR now prohibit individual people-to-people nonacademic educational travel to Cuba. Instead, such travel can now be engaged in only under the auspices of an organization subject to U.S. jurisdiction that sponsors such exchanges to promote people-to-people contact, and such travelers must be accompanied by a representative of the sponsoring organization. The remaining categories of travel previously authorized under general licenses remain authorized, provided that the travel does not involve direct financial transactions with entities and subentities identified on the Cuba Restricted List.

OFAC is also amending the definition of “Officials of the Government of Cuba” to include certain additional individuals. While previously limited to members of the Council of Ministers and flag officers of the Revolutionary Armed Forces, the new definition now also includes, but is not limited to, Ministers and Vice Ministers, members of the Council of State, members and employees of the National Assembly of People’s Power, members of any provincial assembly, Director Generals and sub-Director Generals and higher of all Cuban ministries and state agencies, and certain editors of Cuban state-run media organizations and programs. U.S. persons are prohibited from engaging in specified transactions with such prohibited officials.

Expanded Restrictions on Trade in Goods with the Cuban Government

Although most trade with Cuba is prohibited by the statutory embargo, BIS considers certain types of export license applications on a case-by-case basis or under a general policy of approval. One such type of transaction subject to case-by-case review involves exports of items to state agencies or government-owned companies to meet the needs of the Cuban people, such as products for infrastructure benefitting the Cuban people. Even before BIS’s amendments, the agency typically denied these applications if the items were for use by government entities that primarily generate revenue for the state. BIS’s changes clarify that it also generally will deny applications of goods for use by entities on the State Department’s Cuba Restricted List, with certain limited exceptions (e.g., the export furthers U.S. national security or foreign policy interests).

Consistent with OFAC’s amendment to the definition of prohibited government officials, BIS also made corresponding expansions to its list of Cuban government officials, thereby rendering these individuals ineligible for three license exceptions in the EAR—License Exceptions Gift Parcels and Humanitarian Donations (GFT), Consumer Communications Devices (CCD), and Support for the Cuban People (SCP).

While the administration clamped down on certain transactions with the Cuban government, BIS also simplified and expanded License Exception SCP to further support Cuba’s fledgling private sector. Previously, this exception permitted exports of certain items, such as tools, for certain private sector end-uses in Cuba, such as private building construction and agricultural activities. The new rule removes these limitations and instead generally authorizes exports of EAR99 items and other items subject to low level export controls for use by the Cuban private sector for private sector economic activities. Nevertheless, U.S. exporters relying on this exception must ensure that the items are not going to be used primarily to generate revenue for the state or to contribute to the operation of the state (e.g., construction of Cuban government-owned buildings).

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Both OFAC and BIS emphasized that the changes to the Cuba rules of engagement do not impact commercial engagements or approved licenses that were in place prior to the issuance of the revised regulations. Going forward, however, many of the limitations introduced by the agencies may well have a chilling impact on travel and trade with Cuba.

FARA Webinar: Overview of the Act and Recent Developments in a New Enforcement Environment on December 12 at 12 PM EST

Posted in Announcements

The Foreign Agents Registration Act (FARA), once a little-known law, has been thrown into the national spotlight in recent months. The law, which has been on the books since 1938, is a disclosure statute that requires persons who are acting as agents of a foreign principal, and providing services in a political or public relations capacity in the United States, to make periodic public disclosures to the U.S. government regarding their activities for or on behalf of that foreign principal.

During this webinar, guided by Dan Pickard and Tessa Capeloto from Wiley Rein’s International Trade Practice, you will learn how to provide political or public relations services to your foreign clients without risking FARA violations and the potential fines, imprisonment, and reputational damage that could result. This presentation will explore a variety of FARA-related topics, including:

  • The types of representations that require registration under FARA;
  • Available exceptions;
  • Registrant requirements under FARA; and
  • Recent enforcement actions by the U.S. Department of Justice.

Register Here.

Updated Foreign Agents Registration Act (FARA) Handbook

Posted in Announcements

Wiley Rein has updated our Foreign Agents Registration Act (FARA) Handbook, which reviews the rules that govern whether an entity should register with the FARA Registration Unit of the U.S. Department of Justice, the registration process, the obligations of registered agents, and the penalties that may be imposed for FARA violations. Any person who engages in political activities on behalf of a foreign principal will likely be required to register under FARA.

Wiley Rein’s International Trade Practice, recognized by Chambers USA as one of the country’s elite international trade practices, regularly advises sophisticated industry clients on FARA matters. In addition to providing high-level legal analysis of potential FARA issues, our attorneys provide step-by-step assistance with the registration process. Ongoing counseling from our attorneys ensures that our clients remain in compliance with FARA regulations in a dynamic, international marketplace.

The FARA Handbook can be read here.

For more information about FARA, please contact Daniel B. Pickard (202.719.7285 or dpickard@wileyrein.com).

Commerce Department Finds that China Remains a Non-Market Economy Under U.S. Law

Posted in Trade Agreement Compliance, Trade Policy, Trade Remedies, World Trade Organization

On October 27, 2017, the U.S. Commerce Department issued its preliminary determination in the antidumping investigation of Aluminum Foil from China.  A key aspect of this determination was an analysis of whether China should continue to be treated as a non-market economy in U.S. antidumping investigations.  In this regard, Commerce concluded that China remains a non-market economy because:

At its core, the framework of China’s economy is set by the Chinese government and the Chinese Communist Party (CCP), which exercise control directly and indirectly over the allocation of resources through instruments such as government ownership and control of key economic actors and government directives. The stated fundamental objective of the government and the CCP is to uphold the “socialist market economy” in which the Chinese government and the CCP direct and channel economic actors to meet the targets of state planning. The Chinese government does not seek economic outcomes that reflect predominantly market forces outside of a larger institutional framework of government and CCP control.

The right of WTO Members to continue treating China as a non-market economy in antidumping proceedings after December 11, 2016 is currently subject to challenge before the World Trade Organization (“WTO”).  Commerce’s 200-page analysis of the Chinese economy is the first time since 2006 that the agency has considered China’s market-economy status under U.S. law.  It confirms the United States’ position that WTO rules, even after December 11, 2016, continue to allow Members to treat China as a non-market economy, unless and until China demonstrates otherwise under the law of the individual Member.

A copy of Commerce’s memorandum is available here.

International Trade Commission Provides Overview of Major Digital Trade Issues

Posted in Trade Policy

In recent years, a growing number of restrictions on digital trade around the world has caught the attention of U.S. policy makers.  On January 13, 2017, for example, the United States Trade Representative requested the International Trade Commission (“ITC”) to prepare a series of three reports on “the value of new digital technologies for U.S. firms and the impact of barriers to digital trade on U.S. firms’ competitiveness in international markets.”  The first of these reports, Global Digital Trade 1: Market Opportunities and Key Foreign Trade Restrictions, is a thorough introduction to the primary digital trade barriers that have emerged with the expansion of the digital economy, and to the industries affected most.

The ITC’s report identifies six general categories of regulatory and policy measures that create restrictions on digital trade in major markets:

  • Data protection and privacy, including data localization;
  • Cybersecurity;
  • Intellectual property rights;
  • Censorship;
  • Market access restrictions (g., low de minimis duty thresholds and unique technical standards for hardware and software); and
  • Investment measures (g., ownership restrictions, licensing and taxation policies, and local content requirements).

Specific sectors covered by the report include:

  • Internet infrastructure and network communication services;
  • Cloud computing services;
  • Digital content, search, and news;
  • E-commerce, digital payments, and records; and
  • Consumer communications services and devices.

The ITC’s second report, which will provide analysis of specific restrictions on “business to business” (“B2B”) products and services in key foreign markets, is due by the end of October 2018.  The final report is due by the end of March 2019 will provide similar analysis regarding “business to business” (“B2B”) products and services.

Wiley Rein Submits Comments on Chinese Intellectual Property and Innovation Policies

Posted in Trade Policy

On September 28, 2017, Wiley Rein submitted comments to the U.S. Trade Representative on China’s unreasonable and discriminatory intellectual property and innovation policies and their negative impact on U.S. companies, workers, and the overall economy.  The comments were submitted in response to USTR’s investigation under Section 301 of the Trade Act of 1974 regarding “China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation.”  The investigation will determine whether these practices are actionable under Section 301 of that statute, which authorizes USTR to retaliate unilaterally against certain unreasonable or unjustifiable foreign trade practices.

Wiley Rein’s comments describe how the Chinese government uses a number of tools to unfairly acquire U.S. companies’ intellectual property and innovation, and create competitive advantages for Chinese companies.  These include, among others:

  • either shutting U.S. companies out of China’s domestic market, or requiring them as a condition of entry to hand over their valuable intellectual property to the Chinese government or Chinese companies;
  • directing Chinese companies and providing them financial support to acquire U.S. companies for the purposes of obtaining their innovative technology;
  • engaging or sponsoring the theft of intellectual property and trade secrets; and
  • abusing anticompetition laws to extract concessions from U.S. companies.

These Chinese government activities directly harm U.S. companies and their workers by stealing their technology, decreasing their revenue, and preventing them from further investment and innovation.  Moreover, these actions threaten to undermine the United States’ technological base and put the competitiveness of the entire U.S. economy at risk.  As a result, Wiley Rein strongly urged USTR to fully use all authorities granted by Section 301 to obtain the elimination of China’s activities.

The next steps of the investigation will be a public hearing on October 10, 2017, and rebuttal comments may be submitted on October 20, 2017.

CBP Announces Critical Interim Measures in New Investigations Against Evasion of the Antidumping Order on Chinese Diamond Sawblades

Posted in Antidumping, Customs Law, Trade Remedies

On Friday, September 22, U.S. Customs and Border Protection (CBP) announced interim measures in a consolidated investigation under the Enforce and Protect Act of 2015 (EAPA), against U.S. importers of Chinese sawblades Power Tek Tool, Inc. (Power Tek) and Lyke Industrial Tool, LLC (Lyke). CBP has a “reasonable suspicion” that Power Tek and Lyke are evading the antidumping duty order on Diamond Sawblades from China by falsely classifying imports of Chinese sawblades to the United States as millstone products, which are not subject to any antidumping duty order. Wiley Rein represents the Diamond Sawblades Manufacturers’ Coalition (DSMC), an ad hoc coalition of U.S. manufacturers that submitted the allegations that led to this consolidated investigation.

On July 18, 2017, CBP initiated the two investigations that have now been consolidated, based on evidence submitted by DSMC that Lyke, a successor to Power Tek, had strangely stopped importing diamond sawblades and began importing “millstone diamond saw segments” when the dumping margin on sawblades increased from 2.34% to 29.76%. Among other evidence, CBP also considered that Lyke’s U.S. customer of the new “millstone segments” was a reseller of only fully assembled sawblades and had no ability to manufacture diamond sawblades from these supposed segments.

In addition, following initiation of the investigations, CBP conducted a cargo exam of an entry by Power Tek and discovered diamond sawblades that had been misclassified in the entry documentation as millstone product. In light of this and DSMC’s allegations, CBP has now imposed interim measures that include, but are not limited to:

  • Requiring that misclassified entries be rated-adjusted to reflect that they are indeed subject to the antidumping order;
  • Requiring that entries be made as “live entries,” meaning that entry documents and duties are required before the merchandise is released into the U.S. market; and
  • Suspending liquidation on entries dated on or after the July 18, 2017 initiation.

Like the recent investigation against Diamond Tools Technology (DTT), this consolidated investigation and its corresponding interim measures are a significant development for the U.S. diamond sawblades industry.

Treasury Imposes New Sanctions on Venezuela

Posted in Economic Sanctions

On August 24, 2017, President Trump signed Executive Order 13808 imposing new sanctions against Venezuela largely in response to the political situation in the country, including the “establishment of an illegitimate Constituent Assembly, which has usurped the power of the democratically elected National Assembly and other branches of the Government of Venezuela.”   The new sanctions prohibit U.S. persons and those within the United States from engaging in transactions involving the following:

  • New debt with a maturity of greater than 90 days of Petroleos de Venezuela, S.A. (“PdVSA”), Venezuela’s state-owned oil company;
  • New debt with a maturity of greater than 30 days, or new equity, of the Government of Venezuela, other than debt of PdVSA as defined above;
  • Bonds issued by the Government of Venezuela prior to August 24, 2017;
  • Dividend payments or other distributions of profits to the Venezuelan Government from any entity owned or controlled, directly or indirectly, by the Venezuelan Government; and
  • The purchase, directly or indirectly, of securities from the Government of Venezuela, other than security qualifying as new debt with a maturity of less than or equal to 90 days (for PdVSA) or 30 days (for the Government of Venezuela).

The prohibitions above apply to the Government of Venezuela, its property and interests in property, including entities owned 50 percent or more by the Government of Venezuela.

The U.S. Department of the Treasury (“Treasury”), which administers U.S. financial sanctions, simultaneously issued four general licenses, authorizing the wind down of certain transactions now prohibited, as indicated below:

  • General License 1 authorizes U.S. persons to wind down contracts or other agreements now prohibited under EO 13808 that were in effect prior to August 25, 2017. Such winding down transactions are authorizing through September 24, 2017.
  • General License 2 authorizes transactions in which the only Venezuelan Government entity involved is CITGO Holding, Inc., or any of its subsidiaries.
  • General License 3 authorizes transactions related to, the provision of financing for, and other dealings in specified bonds included on the List of Authorized Venezuelan-Related Bonds.
  • General License 4 authorizes all transactions related to, the provision of financing for, and other dealings in new debt related to the exportation or reexportation, from the United States or by a U.S. person, wherever located, of agricultural commodities, medicine, medical devices, or replacement parts and components for medical devices to Venezuela or to persons in third countries purchasing specifically for resale to Venezuela, provided that all such exports or reexports are authorized by the Department of Commerce.

Notably, the Venezuelan Government has not been added to Treasury’s list of Specially Designated Nationals and Blocked Persons.  Thus, while U.S. companies and financial institutions can continue to do business with Government of Venezuela entities, they should exercise heighted due diligence when doing so.

CBP Initiates Investigation and Takes Critical Interim Measures Against Evasion of Antidumping Order on Chinese Diamond Sawblades

Posted in Antidumping, Customs Law, Trade Remedies

U.S. Customs and Border Protection (CBP) under the Enforce and Protect Act of 2015 (EAPA) recently notified on the initiation of an investigation and adoption of interim measures against Diamond Tools Technology (DTT), finding that there is a “reasonable suspicion” that DTT is evading the antidumping duty order on Diamond Sawblades from China by transshipping Chinese sawblades to the United States through Thailand. Wiley Rein represents the Diamond Sawblades Manufacturers’ Coalition (DSMC), an ad hoc coalition of U.S. manufacturers, that submitted the allegation that led to this investigation.

As part of its investigation, CBP officials earlier this summer traveled to DTT’s facility in Thailand, where the agency encountered refusals by company officials to inspect certain areas of the facility, denials on the existence of certain areas, sawblades that did not appear to be packaged in the facility, and contradictions on how much the facility can produce. This visit, coupled with DSMC’s earlier allegations, led CBP to find a “reasonable suspicion” of evasion of the antidumping order against Chinese sawblades, and impose interim measures against DTT’s imports. Specifically, DTT’s entries from Thailand have been affected as follows:

  • Entries are rated-adjusted to reflect that they are indeed subject to the antidumping order;
  • Cash deposits are owed on these entries;
  • Entries are now made as “live entries,” meaning that entry documents and duties are required before CBP can release the merchandise into the U.S. market;
  • Entries whose documents do not comport with requirements under the interim measures must be refiled;
  • Liquidation is suspended on entries dated March 22, 2017 and on;
  • To the extent possible, liquidated entries will be reliquidated at the adjusted rate; and
  • The continuous bond applying to DTT’s entries is being evaluated for sufficiency.

This investigation covers entries made from March 1, 2016 through the pendency of the investigation. The development of this case, as CBP’s recently issued first affirmative determination of evasion on steel wire garment hangers, signals a critical step towards the effective enforcement of antidumping and countervailing duty orders, protecting American industries and American jobs from unfair trade.

CBP is expected to deliver its final determination in early 2018.

U.S. Customs and Border Protection Issues First Final Affirmative Determination of Evasion Pursuant to the Enforce and Protect Act

Posted in Antidumping

On August 14, 2017, U.S. Customs and Border Protection (CBP) issued its first final affirmative determination of evasion pursuant to the Enforce and Protect Act (EAPA).  The EAPA was passed as part of the Trade Facilitation and Trade Enforcement Act of 2015 and established a formal process for CBP to investigate allegations of evasion of antidumping and countervailing duty orders.  CBP determined that substantial evidence demonstrates that certain imports of steel wire garment hangers from the People’s Republic of China (China), which are covered by an antidumping duty (AD) order, entered the United States through evasion.

In response to an allegation filed by M&B Metal Products Company, Inc., CBP initiated an investigation on October 11, 2017 into Eastern Trading NY, Inc.’s (Eastern Trading) imports of steel wire garment hangers from China, noting that the allegation reasonably suggested that Eastern Trading imported hangers from China that had been transshipped through Thailand and failed to pay the AD cash deposits in place for the merchandise.  On December 13, 2016, CBP issued a notice of initiation and notified interested parties of CBP’s decision to take interim measures based on reasonable suspicion that Eastern Trading did enter covered merchandise into the United States through evasion.

CBP determined that there is substantial evidence that Eastern Trading entered covered merchandise into the United States that had been transshipped through Thailand.  For instance, CBP found that:

  • The on-site visit of the facility of Eastern Trading’s reported supplier, Everbright Clothes Hanger (Thailand) Co., Ltd. (“Everbright”) in Thailand as well as Everbright’s financial statements, indicates that Everbright did not have the capability to actually manufacture the quantity of hangers it exported to Eastern Trading in terms of machinery, personnel, and supply.
  • Over 80 percent of Eastern Trading’s imports of hangers can be linked to shipments from China through Thailand.
  • Information from the administrative record of the new shipper review under the AD order obtained from the Department of Commerce, in particular with regard to Everbright’s ownership, further supports a conclusion that Everbright was used to transship hangers from China.
  • During the period of investigation, Eastern Trading also received shipments of hangers directly from China marked with Everbright’s name.

Eastern Trading argued that it would be inequitable for CBP to assess antidumping duties and penalties on the company because it had no knowledge of the scheme and did not profit from it.  CBP dismissed Eastern Trading’s argument, noting that the statute’s definition of evasion only focuses on whether insufficient cash deposits or bonds were made, not the culpability of the parties.

In accordance with CBP’s final determination, CBP will continue to suspend liquidation for any entries on or after the date of initiation of this investigation, October 11, 2016.  Further, CBP will continue to extend the period for liquidation for all unliquidated entries that entered prior to that date.  CBP will continue to request that Eastern Trading post cash deposits on its entries and will require live entry for any future imports of covered merchandise, meaning Eastern Trading will be required to post cash deposits prior to release of the merchandise.  Lastly, Eastern Trading’s continuous bond will remain at the increased level and will be reviewed in accordance with CBP’s policies.  CBP noted that it will pursue any additional enforcement action under the EAPA as appropriate, such as penalty proceedings and referral to U.S. Immigration and Customs Enforcement for civil and/or criminal investigation.

CBP’s final determination is significant.  The critical relief provided to the domestic industry from unfairly traded imports pursuant to antidumping and countervailing duty orders may be limited if such orders are not effectively enforced.  CBP’s first affirmative final determination of evasion pursuant to the EAPA indicates that the EAPA will be an effective tool in ensuring that the requisite antidumping and countervailing duties are properly being paid on covered merchandise and domestic manufacturers and their workers are being provided the full extent of the relief they deserve.

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