American Trade & Manufacturing Blog

US Trading Partners Defy The Rules They Claim To Support

Posted in Trade Policy

On March 8, 2018, President Donald Trump imposed tariffs of 25 percent on steel imports[1] and 10 percent on aluminum imports[2] pursuant to Section 232 of the Trade Expansion Act of 1962, which authorizes him to adjust imports in the interests of national security.[3] Over the next two months, the president granted temporary exemptions to various trading partners, including the European Union, Canada and Mexico, as possible alternative forms of relief were negotiated.[4]

Even as these negotiations were in progress, the EU took a confrontational approach asserting that it could unilaterally declare Trump’s actions to be a safeguard, entitling them to immediate retaliation.[5] On May 31, 2018, the president signed two additional proclamations.[6] In both, he announced that the tariffs would apply to Canada, Mexico and the EU, and that Australia was exempt. With respect to steel, he announced that quotas would be provided to Argentina, Brazil and Korea. With respect to aluminum, he announced that the imports from Argentina would be subject to a quota.

Following the imposition of tariffs, the EU was quick to claim the U.S. measures were disguised “safeguards.”[7] Ultimately, the Chinese agreed, and were first to challenge the Section 232 relief on that basis.[8] The EU and others claimed that the U.S. action to impose Section 232 relief on aluminum and steel imports for national security reasons would undermine the rules-based global trading order. Given their own previous statements, however, it is clear that the EU’s and others’ unilateral acts of retaliation are outside the rules, and represent the true threats to the global trading order.

Only by unilaterally reinterpreting the U.S. government’s Section 232 investigation and the subsequent relief can the EU and others attempt to justify their retaliation under the existing World Trade Organization rules.[10] This rationale is unsupported by the facts, and anathema to the very WTO rules they claim to champion.

In fact, in its third-party submission in the Russia-Ukraine dispute regarding “Traffic in Transit (DS 512)” before the WTO, in response to Russia’s defense that the national security provision of Article XXI prevents any review by a dispute settlement panel, the EU states expressly that Article 23 of the Dispute Settlement Understanding, or DSU,

Prohibits Members from making a determination to the effect that a violation has occurred, except through recourse to the dispute settlement in accordance with the DSU. … In other words, a WTO Member, rather than the WTO dispute settlement bodies, would be deciding unilaterally the outcome of a dispute. This would run against the objectives of the DSU enshrined in Article 23 of the DSU.[11]

Notwithstanding the EU’s statement that WTO members do not have the authority to unilaterally determine whether a particular member’s measures are in violation of its WTO obligations, that is precisely what the EU, Canada and others have done in justifying their unilateral retaliation against the United States’ Section 232 aluminum and steel relief. Apparently, the rules-based trading system that the EU and others champion is only supposed to apply to other countries and not them.

The EU knows it is not supposed to unilaterally determine whether the U.S. 232 relief is a violation of its obligations without review by a dispute settlement panel, yet that is precisely what the EU and others have done by moving straight to the retaliation. By immediately retaliating, they offer the U.S. government very little incentive for cooperating in the proceedings or attempting to comply with a panel determination.

When the U.S. enforced its rights against the EU in the aircraft dispute, it did not unilaterally find the EU subsidies to be a violation, and move straight to the retaliation, before there was even a determination by a dispute settlement panel.[12] Yet the EU’s actions in this dispute suggest that that is precisely what the United States should have done to preserve its rights under the agreement rather than waiting for the dispute settlement process to take its course.

The Section 232 investigation was initiated by President Trump, the investigation was conducted, findings were made, relief recommendations were proposed and ultimately imports were adjusted under the statutory authority granted by the president to protect the national security of the United States. Article XXI of the General Agreement on Tariffs and Trade, or GATT, expressly allows members to suspend concessions for national security reasons.

The EU and others may not like the result, but there is a system in place — one they claim to champion — for them to challenge that result. Instead, the EU and others have chosen to move straight to retaliation without any findings by a dispute settlement body. This action undermines the continued existence of the dispute settlement system that the EU and others claim is “a central element in providing security and predictability to the multilateral trading system.”[13]

Only by unilaterally declaring Trump’s action to have been a safeguard in disguise can the EU even attempt to justify that it is entitled to compensation (i.e., retaliation) under the WTO Safeguards Agreement. The EU has claimed that it can use the Safeguards Agreement to “retaliate” within 90 days against the United States.[14] But the steel and aluminum tariffs are not safeguards.

The U.S. ambassador to the WTO, Dennis Shea, has rejected this assertion.[15] The United States has taken these measures pursuant to the national security provision under the Trade Expansion Act of 1962. This is a wholly separate statute from that setting out the safeguards procedure. And, as the EU itself admitted in the Russian-Ukraine dispute, only a WTO dispute settlement panel has the authority to determine whether the Section 232 relief is a safeguard in disguise.

Nothing in the WTO agreement permits the EU to take any such action without a dispute settlement panel finding. Indeed, Article 11(1)(c) of the Safeguards Agreement itself states that it does not apply to actions taken under any other provision of the suite of WTO agreements. There is an express national security exemption under the WTO agreement. Therefore, according to the plain text of the Safeguards Agreement, the EU cannot take action thereunder.

The Safeguard Agreement itself precludes the EU from undertaking this course of action. Article 11.1(c) specifically states that the Safeguard Agreement does not apply to measures sought, taken or maintained pursuant to other GATT or WTO provisions. As noted above, the United States has made it clear that this action is not being taken pursuant to the Safeguard Agreement. The action is being taken pursuant to national security, which is covered by GATT Article XXI.

Furthermore, the U.S. and others have taken the position that actions taken for national security reasons under Article XXI of the GATT are nonreviewable by the WTO. While the EU may disagree with this interpretation of Article XXI of the GATT, the EU recognizes that Article 23(2)(a) of the DSU prohibits members from unilaterally declaring that another member has breached its obligations. Only the WTO can do that, pursuant to dispute settlement procedures.

Nevertheless, even if the steel and aluminum 232 tariffs were considered “safeguards,” the EU’s assertion that it could retaliate within 90 days was wrong for two reasons. First, assuming the Safeguards Agreement can be invoked, Article 8. 3 of the agreement states that retaliation is available after three years when the increase in imports in question is absolute, rather than relative.

For both steel and aluminum, the United States experienced absolute increases in imports. In an apparent recognition of this requirement, the EU has separated its retaliation list into two groups of products: one group for which they claim there is no absolute increase (mostly steel products), and where retaliation is therefore permitted immediately, and another group for which retaliation must be delayed three years. For that second group of products, where the EU attempts to justify immediate retaliation, it can only do so by selectively interpreting the period examined and the group of imports it considers.

While the agreement does not define what period is to be used when considering the increase for retaliation purposes, it is reasonable to use the same period the administering authority uses. The U.S. normally uses a five-year period in its safeguards cases. For both steel and aluminum, in its 232 investigation, the U.S. Department of Commerce used the five-year period from 2013 to 2017. Over that period there is an absolute increase of steel and aluminum imports.

The only way the EU could justify retaliation was to cherry-pick the import data, relying only on imports from European countries using self-selected smaller periods. If the measure is a “safeguard” in disguise, as the EU claims, then the imports must be examined globally. A member does not get to selectively examine the relative import surge of only a few members when retaliating. The Section 232 relief is either a “safeguard” in disguise, or it is not.

Second, the EU has argued that it is not subject to the three-year waiting period because Article 8.3 only provides that grace period if the underlying safeguard measure is consistent with Safeguard Agreement rules.[16] Having declared that the U.S. action is not consistent with Safeguard Agreement rules, the EU thus considers itself entitled to proceed directly to retaliation. This of course assumes that the Section 232 relief is a safeguard, which it is not.

The EU’s reckless course of action is now leading multiple WTO members to follow suit and breach their obligations. Nothing confines the EU’s tactics to this one dispute. Nothing stops any other WTO member from declaring that another member’s policy is a safeguard and retaliating accordingly. The United States, for example, could consider the EU’s retaliation to be a safeguard and develop its own retaliation strategy, perhaps targeting sensitive EU products, such as those covered by geographical indications.

If the EU considers the United States to have breached its WTO obligations, the appropriate course of action is to challenge the action before the Dispute Settlement Body, not to violate the plain language of the Safeguard Agreement and the DSU. This ill-conceived approach is the real threat to the WTO. The EU holds no moral high ground in this dispute. Rather than upholding the rules-based system, the EU, by its actions, may ultimately undo the system.


[1] Proclamation 9705.

[2] Proclamation 9704.

[3] 19 U.S.C. 1862.

[4] https://www.whitehouse.gov/presidential-actions/presidential-proclamation-adjusting-imports-aluminum-united-states-3/https://www.whitehouse.gov/presidential-actions/presidential-proclamation-adjusting-imports-steel-united-states-3/.

[5] https://www.reuters.com/article/us-usa-trade-eu-explainer/europes-response-to-u-s-import-tariffs-idUSKCN1GS2CH.

[6] https://www.whitehouse.gov/presidential-actions/presidential-proclamation-adjusting-imports-steel-united-states-4/https://www.whitehouse.gov/presidential-actions/presidential-proclamation-adjusting-imports-aluminum-united-states-4/.

[7] https://www.platts.com/latest-news/metals/london/eu-requests-wto-consultations-with-us-over-section-26940993.

[8] https://insidetrade.com/trade/china-claims-us-232-tariffs-are-safeguards-requests-wto-consultations.

[9] “The Charlevoix G7 Summit Communique,” (June 9, 2018), https://www.reuters.com/article/us-g7-summit-communique-text/the-charlevoix-g7-summit-communique-idUSKCN1J5107.

[10] The following does not address whether the proposed retaliation is consistent under the NAFTA rules.

[11] European Union Third Party Written Submission, Russia — Measures Concerning Traffic in Transit (DS 512), at 5 (Nov. 8, 2017).

[12] European Union — Measures Affecting Trade in Large Civil Aircraft, DS 316 (May 28, 2018), Appellate Body Article 21.5 Report, https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds316_e.htm.

[13] European Union Third Party Written Submission, Russia — Measures Concerning Traffic in Transit (DS 512), at 5 (Nov. 8, 2017) (quoting Art. 3(2) of the DSU).

[14] https://www.reuters.com/article/us-usa-trade-eu-explainer/europes-response-to-u-s-import-tariffs-idUSKCN1GS2CH.

[15] “China files trade case at WTO over Trump’s steel and aluminum tariffs,” The Hill, by Vicki Needham (April 10, 2018) (quoting letter from Ambassador Shea: “These actions are not safeguard measures and, therefore, there is no basis to conduct consultations under the Agreement on Safeguards with respect to these measures”).

[16] https://www.reuters.com/article/usa-trade-eu/update-2-eu-to-respond-to-u-s-tariffs-within-90-days-if-not-exempt-idUSL5N1QR1OQ.

USTR Announces Chinese Goods Subject to 25 Percent Tariffs

Posted in Trade Remedies

U.S. Will Review Additional Goods, Chinese Investment Restrictions

Today, June 15, 2018, the Office of the United States Trade Representative (USTR) announced Chinese products that will and may be subject to special duties stemming from the Section 301 investigation into China’s IP practices. USTR has released two lists. List 1 covers 818 tariff lines that will be subjected to 25% duties starting on July 6, 2018. List 2 includes 284 tariff lines that will not yet be subject to the tariffs, but will undergo further review before a decision on duties is made.

USTR originally announced a proposed list of products to be subject to the 25% duties in April. See Wiley Rein Alert. That list included 1,333 tariff lines, covering products as diverse as retail-packaged medications and airplane seats. After receiving comments and holding a hearing, USTR issued List 1 today, which includes products from that original proposal.

USTR’s List 2 covers products that were not included in the original proposal. For example, List 2 covers certain lubricating oils, numerous plastics, and machinery for hi-tech manufacturing operations, including semiconductors and semiconductor manufacturing machinery.

Notably, multiple tariff lines covered by the original proposal have been removed completely. In particular, USTR appears to have dropped its original proposal to apply tariffs to a number of pharmaceutical and medical goods, as well as certain steel/aluminum goods.

In conjunction with the issuance of the new lists, U.S. Trade Representative Robert Lighthizer indicated that the Administration plans to announce new restrictions on Chinese investment in technology goods. Ambassador Lighthizer indicated that the restrictions will be announced within the next two weeks and will be focused on investment restrictions directed at Chinese industries involved in fields related to the Section 301 tariff lists, which are largely intellectual property-intensive. The restrictions will be based on national security considerations that extend beyond those assessed under reviews conducted by the Committee on Foreign Investment in the United States.

Wiley Rein is well placed to provide counsel and direction should your company choose to prepare comments for submission, as well as to engage the Administration and assist companies affected by the U.S. actions and any potential Chinese retaliation.

Pakistani National Pleads Guilty to FARA Violations

Posted in CFIUS, Economic Sanctions, National Security

Far from the spotlight of Special Counsel Robert Mueller, a Maryland man has pled guilty and is awaiting sentencing for violating the Foreign Agents Registration Act (FARA), highlighting the U.S. Department of Justice’s (DOJ) renewed attention on enforcement of the once little-known FARA.

Nisar Ahmed Chaudhry, a U.S. permanent resident and Pakistani national pled guilty to charges that he failed to register as a foreign agent in connection with lobbying work he did from 2012 through 2018 for the Pakistani government in an effort to shape U.S. foreign policy, the DOJ reported last month. Prosecutors say Chaudhry, 71, who represented himself as the president of the Pakistan American League, organized discussions in the Washington area aimed at influencing U.S. policy and travelled to Pakistan to brief government officials there on information that he had learned from American contacts.

In a sentencing hearing scheduled for July 30, Mr. Chaudhry faces up to five years in prison, a $10,000 fine and three years of supervised release upon completion of the prison term.   This case serves as a cautionary tale for individuals and companies representing foreign interests in the U.S. who are looking to avoid a similar fate.

Enforced by the Counterespionage Section of the National Security Division of the DOJ, FARA is a disclosure statute that seeks to ensure that all persons acting politically or quasi-politically on behalf of foreign entities in the U.S. properly disclose their activities to the U.S. government.

FARA has been on the books since 1938, but prior to the headlines about the investigation into Russian interference and possible collusion in the 2016 election, yielded few criminal convictions.  A 2016 departmental audit by the Justice Department’s inspector general found that the department lacked a comprehensive enforcement strategy, underscored by a pattern of chronic underenforcement. The report uncovered that between 1966 and 2015, the department only brought seven prosecutions for FARA violations. In response, the DOJ has since dialed up its enforcement strategy.

Wiley Rein’s International Trade Practice has published our Foreign Agents Registration Act (FARA) Handbook, which reviews the rules that govern whether an entity should register.  The FARA Handbook can be read here.

Wiley Rein summer associate Tawanna Lee contributed to this blog post. 

Three Ways to Origin – What the New Circumvention Findings on Chinese Flat-Rolled Steel Products Illustrate

Posted in Antidumping, Customs Law

On May 17, 2018, the Department of Commerce (Commerce) handed a big win to U.S. producers of flat-rolled steel products, finding that products cold-rolled or coated in Vietnam using Chinese substrate are subject to existing antidumping and countervailing duty orders on Chinese hot-rolled and cold-rolled steel flat products.

Some initial commentary in the trade press has suggested that Commerce’s ruling implicates country-of-origin determinations for steel goods, and may change the way U.S. Customs & Border Protection (CBP) assesses the origin of steel products for general import purposes. Commerce’s decision, however cannot effect a change in CBP’s treatment of origin. So, why the confusion? It all goes back to the fact that while Commerce and CBP both consider the effect of third-country processing on how importers should declare their merchandise, the two agencies analyze third-country processing differently, and for different reasons.

In assessing whether third-country processing operations constitute circumvention of existing trade remedy orders, Commerce considers a number of factors, placing significant emphasis on the relative value of the third-country processing. Separately, Commerce may also make country-of-origin determinations for the purpose of establishing what products may be subject to particular antidumping or countervailing duty investigation, again placing a significant emphasis on value. Commerce often refers to the test employed in such initial investigations as the “substantial transformation test.”

Confusingly, this is the same name that CBP and the courts use for the test that they apply in assessing origin for customs entry purposes. CBP’s test, however, is not the same as Commerce’s. Unlike Commerce, CBP traditionally de-emphasizes the value added by processing operations, instead focusing on questions such as whether pre-processed inputs have any commercial use beyond being processed into the final end product, and whether the processing results in changes to the chemical or mechanical properties of the inputs.

The two agencies apply different tests because their separate determinations are animated by different statutes and different policies. While Commerce is chiefly concerned with offsetting the effects of unfair competitive practices, CBP is primarily concerned with the revenue-raising functions of standard import tariffs. For added complexity, CBP may analyze the origin of products exported from countries with which the United States maintains free trade agreements pursuant to separate origin/marking tests laid out in those agreements. The results of these agreement-specific analyses are not always identical to the results of CBP’s traditional version of the substantial transformation test.

We can see all of these issues at play with respect to flat-rolled steel products. Applying their traditional version of the substantial transformation test, CBP and the courts have long held that the galvanization of flat-rolled steel products changes the origin of the product. Thus, if cold-rolled steel is manufactured in Germany, but then galvanized in Norway, the resulting product is a good of Norway for customs entry declaration purposes. However, under NAFTA, the same operation performed on German cold-rolled steel in Canada would not result in a product eligible for duty-free entry; further, the product would not be eligible to be marked as a good of Canada. Finally, applying the logic of Commerce’s new finding, if the United States had an antidumping duty order on German cold-rolled steel, galvanizing the product in Norway prior to importation would not necessarily absolve importers of antidumping duty liability.

So, what does this mean for importers of steel that was further processed in Vietnam using Chinese inputs? While the products may remain Vietnamese from a CBP origin-declaration perspective, Commerce’s draft Federal Register notice establishes that the goods are nonetheless subject to AD/CVD duties, just as if they were being exported directly from China. Importers must therefore declare entries of such goods as “Type 03” entries, i.e., subject to trade remedy duties. For exports of corrosion-resistant steel flat products, the duties required at entry will be equal to 238.48%. For exports of cold-rolled steel flat products, the duties required at entry will be equal to 456.20%. The duties will apply not only to incoming entries, but to as-yet-unliquidated entries made on or after November 16, 2016. This may require importers to file post-summary corrections or to make other appropriate arrangements with CBP to deposit duties.

According to Commerce, importers of goods processed in Vietnam using non-Chinese substrates will not have to declare or pay trade remedy duties. However, they must support any declaration of their goods as not subject to such duties through certifications prepared and signed by both the exporter and the importer. Like the duty requirements, the certification requirements apply not only to prospective entries, but affect past, unliquidated entries made on or after November 16, 2016.

After publication of Commerce’s results in the Federal Register, it is possible that we will see additional technical guidance from CBP, in the form of instructions issued through the agency’s Cargo Systems Messaging Service. In the meantime, however, importers of flat-rolled products processed in Vietnam from Chinese substrates should prepare to declare their goods and deposit duties pursuant to Commerce’s announced instructions.

 

Back to the Future: What Your Company Needs to Know and Do About the Reinstated Iran Sanctions

Posted in Economic Sanctions

Webinar: Wednesday, June 6, 2018 | 12:00 p.m. – 1:00 p.m. EDT

RSVP Here

On May 8, President Trump announced the United States’ withdrawal from participation in the Joint Comprehensive Plan of Action (JCPOA), the landmark 2015 agreement that eased sanctions on Iran in exchange for curbs on Iran’s nuclear program. The U.S. government’s withdrawal likely will have major ripple effects outside the United States, particularly in Europe, where many companies that re-engaged with Iran in accordance with the terms of the JCPOA will once again potentially be subject to steep U.S. penalties if they continue to do business in Iran.

Please join Wiley Rein International Trade Practice partners Dan Pickard and Jack Shane, of counsel Lori Scheetz, and senior public policy advisor Nova Daly for a discussion on the key risk areas as the Iran sanctions “snap back” into effect.

Topics Will Include:

  • The primary and secondary sanctions that are being re-imposed by the U.S. government
  • The potential implications of turning back the clock on foreign subsidiaries of U.S. companies
  • What the reinstated Iran sanctions mean for non-U.S. companies in key sectors, such as the financial services, energy and petrochemical, insurance and reinsurance, automotive, and shipping industries
  • The scope of the “wind-down” authorizations

More Info:

  • This event is complimentary but advance registration is required.
  • Webinar instructions and materials will be distributed prior to the webinar. For more information, please email Lynne Stabler at lstabler@wileyrein.com.

Proposed Shift for Small Arms Export Controls from State Department to Commerce Department Authority

Posted in Export Controls

Yesterday, the Trump Administration announced a plan to transfer control over the export of small arms from the U.S. Department of State’s International Traffic in Arms Regulations (ITAR) to the typically less-stringent U.S. Department of Commerce’s Export Administration Regulations (EAR). The shift will affect U.S. small arms exports, including non-automatic and semi-automatic firearms up to .50 caliber, non-automatic and non-semi-automatic rifles and other weapons up to .72 caliber, and some ammunition, as well as certain gun parts and components.

The departments of Commerce and State detailed the plan to members of Congress during a confidential briefing on May 15. Agency officials explained that the regulatory burden associated with small arms exports would decrease as a result of the export controls shift, which is intended to promote American exports. For example, manufacturers and exporters of items shifted to EAR control will no longer be required to register annually with the State Department or pay an annual registration fee.

The State Department will retain control under the ITAR over military-grade weapons and other weapons systems that typically are not commercially available to the public, such as in sporting goods stores, as well as gun silencers and large component parts for fully automatic weapons.

The proposed rule from the Commerce Department regarding the transfer of authority is available here and the State Department’s proposed rule is available here. Once the proposed rule is published in the Federal Register, interested parties will have 45 days to submit comments to the agencies. The export controls changes will not be effective unless and until a final rule is published.

President Trump Withdraws from Iran Nuclear Deal; U.S. Sanctions to be Re-Imposed

Posted in Economic Sanctions

President Trump today announced the United States’ withdrawal from participation in the Joint Comprehensive Plan of Action (JCPOA), the landmark 2015 agreement that eased sanctions on Iran in exchange for curbs on Iran’s nuclear program. Pursuant to the withdrawal, President Trump has directed his Administration to immediately begin the process of re-imposing sanctions against Iran, targeting the Iranian energy, petrochemical, and financial sectors. While the U.S. government will provide wind-down periods for activities involving Iran that were previously consistent with U.S. law, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) expects that all U.S. nuclear-related sanctions that were previously lifted will be re-imposed and in full effect by November 4, 2018. Many of these “secondary” sanctions act as an ultimatum to non-U.S. companies—if such companies engage in certain business with Iran, they effectively can be cut off from doing business in the United States. As such, President Trump’s actions likely will have ripple effects outside the United States, particularly in Europe, where many companies re-engaged with Iran in accordance with the terms of the JCPOA.

OFAC guidance indicates that the U.S. government will provide two wind-down periods for entities engaged in business involving Iran. The first is a 90-day wind-down period, ending August 6, 2018, after which the United States will re-impose sanctions on:

  • The purchase or acquisition of U.S. dollar banknotes by the Government of Iran;
  • Iran’s trade in gold or precious metals;
  • The direct or indirect sale, supply, or transfer to or from Iran of graphite, raw, or semi-finished metals such as aluminum and steel, coal, and software for integrating industrial processes;
  • Significant transactions related to the purchase or sale of Iranian rials, or the maintenance of significant funds or accounts outside the territory of Iran denominated in the Iranian rial;
  • The purchase, subscription to, or facilitation of the issuance of Iranian sovereign debt; and
  • Iran’s automotive sector.

After August 6, 2018, the U.S. government will also revoke previously-issued authorizations permitting the importation of Iranian-origin carpets and foodstuffs, as well as its favorable licensing policy for activities related to commercial passenger aircraft, a key linchpin of the JCPOA. Additionally, OFAC plans to revoke any specific licenses issued pursuant to the favorable licensing policy for commercial passenger aircraft.

The second 180-day wind-down period will end on November 4, 2018, after which the United States will re-impose sanctions on:

  • Iran’s port operators, and shipping and shipbuilding sectors, including on the Islamic Republic of Iran Shipping Lines (IRISL), South Shipping Line Iran, or their affiliates;
  • Petroleum-related transactions with, among others, the National Iranian Oil Company (NIOC), Naftiran Intertrade Company (NICO), and National Iranian Tanker Company (NITC), including the purchase of petroleum, petroleum products, or petrochemical products from Iran;
  • Transactions by foreign financial institutions with the Central Bank of Iran and designated Iranian financial institutions under Section 1245 of the National Defense Authorization Act for Fiscal Year 2012 (NDAA);
  • The provision of specialized financial messaging services to the Central Bank of Iran and Iranian financial institutions described in Section 104(c)(2)(E)(ii) of the Comprehensive Iran Sanctions and Divestment Act of 2010 (CISADA);
  • The provision of underwriting services, insurance, or reinsurance; and
  • Iran’s energy sector.

In addition, OFAC plans to revoke General License H, the broad authorization that previously allowed U.S.-owned or -controlled foreign entities to engage in certain activities involving Iran. OFAC has indicated that it intends to issue wind-down authorization for activities conducted pursuant to General License H, and that all such wind-down activities must be completed by November 4, 2018.

OFAC’s guidance states that the agency generally will permit non-U.S., non-Iranian persons owed payment at the conclusion of the applicable wind-down period for goods or services fully delivered prior to the deadline pursuant to a pre-May 8 written agreement to receive payment for such goods or services, provided the underlying activities were consistent with U.S. sanctions at the time of delivery/performance. Further, note that typically, wind-down activities do not cover “new” transactions. Although OFAC did not directly address this issue in its initial guidance, the agency warned that

[w]hen considering a potential enforcement or sanctions action with respect to activities engaged in after August 6, 2018, or November 4, 2018, as applicable, OFAC will evaluate efforts and steps taken to wind down activities and will assess whether any new business was entered into involving Iran during the applicable wind-down period.

Stay tuned for additional guidance from OFAC and the Department of State as the agencies begin the process of implementing the President’s decision.

The New Section 301 Tariffs: Everything You Need to Know

Posted in Uncategorized

Please join us on Friday, May 4th for a webinar on the new Section 301 Tariffs. Wiley Rein International Trade Practice partners Steve Claeys and Maureen Thorson, and senior public policy advisor Nova Daly will discuss the goods and industries that will be affected, the implementation process, and how these tariffs may affect other sectors not identified in the initial round.

Friday, May 4, 2018 | 12:00 p.m. – 1:00 p.m. EDT

Register Here

Wiley Rein’s Daniel B. Pickard, Counsel to the Coalition of American Flange Producers, Issues Open Letter to Producers, Importers, and Purchasers of Stainless Steel Flanges

Posted in Antidumping

Today, Wiley Rein LLP partner Daniel B. Pickard, counsel to the Coalition of American Flange Producers, issued an open letter to producers, importers, and purchasers of stainless steel flanges, regarding affirmative preliminary determinations that the U.S. Department of Commerce and the U.S. International Trade Commission have reached in the antidumping and countervailing duty investigations into stainless steel flanges from China and India.

Pursuant to these preliminary determinations, U.S. Customs and Border Protection (CBP) began collecting duties on Indian flanges effective January 23, 2018, and will begin collecting antidumping and countervailing duties on imports of stainless steel flanges from China within the week.

“It should be stressed, however, that the preliminary duties do not reflect the final duties that importers will owe on incoming shipments,” Mr. Pickard wrote on behalf of the Coalition. “The Department of Commerce is continuing to assess the duties applicable to Chinese and Indian stainless steel flanges, and has the power to raise the duties applicable to these goods in its final determinations.”

“However, even if the preliminary duties are not increased in the final determinations in the ongoing investigations, importers nonetheless may remain retroactively liable for higher duties than were paid at entry,” Mr. Pickard added.

The full text of Mr. Pickard’s letter on behalf of the Coalition can be found here.

 

Trump Administration Sanctions Russian Oligarchs and Government Officials

Posted in Economic Sanctions

Today, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated several Russian individuals and entities, including seven Russian oligarchs and 17 top Russian government officials, pursuant to the Countering America’s Adversaries Through Sanctions Act of 2017 (CAATSA) and Executive Orders related to Ukraine and Syria. The full list of individuals and entities sanctioned is available here. The seven oligarchs include Oleg Deripaska, the billionaire founder and majority shareholder of EN+ Group, a leading international vertically integrated aluminum and power producer; Valdimir Bogdanov, the Director General and Vice Chairman of the Board of Directors of Surgutneftegaz, a Russian oil and gas company; Kirill Shamalov, the son-in-law of Vladimir Putin and a large shareholder in Sibur, another Russian oil and gas company; and Alexey Miller, the CEO of Gazprom PJSC. OFAC also designated several Oligarch-owned companies, including Basic Element, EN+ Group, GAZ Group, United Company RUSAL PLC, Renova Group, and Agroholding Kuban.

Among others, the newly designated top Russian government officials include Andrey Akimov, the CEO of Gazprom Bank; Andrey Kostin, the head of state-owned VTB Bank; Nikolai Patrushev, the secretary of Russia’s Security Council; Valdimir Kolokoltsev, the Minister of Internal Affairs and General Police of the Russian Federation; and Alexander Zharov, the head of Roskomnadzor, Russia’s media and telecommunications regulator.

As Specially Designated Nationals (SDNs), the assets of these individuals/entities are now blocked, and U.S. persons are prohibited from engaging in any transactions with them, as well as with entities owned 50% or more by these SDNs. In addition, non-U.S. persons could also be subject to sanctions for knowingly facilitating “significant transactions” for or on behalf of these SDNs.

Concurrent with the designations, OFAC issued two General Licenses (GL) authorizing certain limited, wind down transactions involving some of the new SDNs for a specified period. General License 12authorizes, until June 5, 2018, all transactions ordinarily incident and necessary to wind down contracts or agreements with certain of the newly-designated entities/individuals, including but not limited to Basic Element, GAZ Group, EN+ Group PLC, and Renova Group. For example, U.S. companies that had previously ordered goods from the newly-designated entities may still accept/import those goods, and U.S. persons employed by a sanctioned entity may wind down their dealings with their employer, provided they otherwise comply with the restrictions in GL 12. General License 13 authorizes, until May 7, 2018, transactions ordinarily incident and necessary to divest or transfer debt, equity, or other holdings in EN+ Group PLC, GAZ Group, or United Company RUSAL PLC. U.S. persons making use of these GLs are required to file detailed reports of each transaction within 10 days of their expiration.

Given the prominence of the new SDNs, U.S. companies as well as U.S. person employees, shareholders, and Board members should engage in thorough due diligence to ensure that they are not dealing with such individuals/entities or companies 50% or more owned by the SDNs.

.