On July 15, 2019, President Donald Trump signed an executive order, Maximizing Use of American-Made Goods, Products, and Materials, to further promote the principles underlying the Buy American Act of 1933. In remarks to the press, the president stated that “Early in my presidency, I ordered the federal government to live by two very simple but very crucial rules: Buy American and hire American. You know, it’s called ‘America First,’ folks.” He added, “The philosophy of my administration is simple: If we can build it, grow it, or make it in the United States, we will.”

This executive order continues the Trump administration’s effort to strengthen the standards used and applied under the Buy American Act. In this executive order, Trump directs the Federal Acquisition Regulatory Council (FARC) to consider tightening the preference requirements for federal acquisitions and when foreign products can be used, highlighting that his administration “shall enforce the Buy American Act to the greatest extent permitted by law.” While the order does not impact current government procurement activity, it directs FARC to undertake a review and “consider proposing for notice and public comment” amendments to the Federal Acquisition Regulations that materials would be considered to be foreign in origin if:

  • for iron and steel end products, the cost of foreign iron and steel used in such iron and steel end products constitutes 5 percent or more of the cost of all the products used in such iron and steel end products; or
  • for all other end products, the cost of the foreign products used in such end products constitutes 45 percent or more of the cost of all the products used in such end products.

Currently, a product can be of 50 percent foreign origin and still be considered U.S.-made if it is not a commercial-off-the-shelf (COTS) product. If a proposed rule is prepared for public comment, the FARC review could significantly raise these U.S.-origin content requirements. The executive order instructs FARC to undertake this review and consider proposing a rulemaking notice within 180 days (on or about January 12, 2020).

This is the third executive order signed by President Trump to enhance and revise certain requirements under the Buy American Act. On April 18, 2017, he signed an executive order seeking stricter enforcement of federal procurement policies and revamping the H-1B guest-worker visa program (see Trump and Trade Update dated April 17, 2017) and on January 31, 2019, the president signed an order directing federal agencies administering certain infrastructure programs to “encourage recipients of new Federal financial assistance awards pursuant to a covered program to use, to the greatest extent possible, iron and aluminum” as well as other manufactured products made in the United States (see Thompson Hine International Trade Update dated February 19, 2019).

President Donald Trump has issued a presidential memorandum concluding the Section 232 Investigation into the effect of uranium imports on U.S. national security and declining at this time to take any further action on uranium imports. Instead, the president is establishing a United States Nuclear Fuel Working Group (Working Group) to develop recommendations for reviving and expanding domestic nuclear fuel production.

In January 2018, Energy Fuels Inc. and Ur-Energy Inc. jointly submitted a petition to the U.S. Department of Commerce (Commerce) for relief under Section 232 of the Trade Expansion Act of 1962 from imports of uranium products from state-owned and state-subsidized enterprises in Russia, Kazakhstan and Uzbekistan (see Trump and Trade Update of January 17, 2018). In July 2018, Commerce initiated the investigation and informed the Department of Defense of the matter (see Trump and Trade Update of July 18, 2018). Any action would have likely had a disproportionate impact on Canada, the most significant source of imported uranium for the United States.

In the presidential memorandum, Trump acknowledged Commerce’s findings that (1) uranium “is being imported into the United States in such quantities and under such circumstances as to threaten to impair the national security of the United States as defined under section 232 of the Act,” (2) the United States imports approximately 93 percent of its commercial uranium, compared to 85.8 percent in 2009, and (3) increased production by foreign state-owned enterprises “have distorted global prices and made it more difficult for domestic mines to compete.” Despite these concerns, Trump stated that he does not agree with the determination of a national security risk and is seeking a “fuller analysis of national security considerations with respect to the entire nuclear fuel supply chain” through the establishment of the Working Group. The Working Group will examine “the current state of domestic nuclear fuel production to reinvigorate the entire nuclear fuel supply chain, consistent with United States national security and nonproliferation goals.” A report to the president from the Working Group must be submitted by October 10, 2019, setting forth its findings and making recommendations to further enable domestic nuclear fuel production if needed.

In May 2019, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) published the Framework for OFAC Compliance Commitments (“Framework”), which is intended to help organizations subject to U.S. jurisdiction, as well as foreign entities doing business in or with the United States, U.S. persons, or using U.S.-origin goods or services, to develop and implement an export control and economic sanctions compliance program (SCP). While acknowledging that each company’s SCP will vary depending upon a variety of company-specific and risk‑based factors, OFAC has indicated that any program should include, at a minimum, the following compliance components: (1) management commitment; (2) risk assessment; (3) internal controls; (4) testing and auditing; and (5) training.

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The Office of the U.S. Trade Representative (USTR) has issued a press release announcing the initiation of an investigation under Section 301 of the Trade Act of 1974 into the French government’s planned Digital Services Tax (DST). On March 6, 2019, France released a proposal for a 3 percent levy on revenues that certain companies generate by providing certain digital services to, or aimed at, French users. On June 26, 2019, a joint committee of the two houses of the French Parliament agreed to a joint committee DST bill. On July 4, the French National Assembly passed the DST bill. The French Senate is expected to take up, and pass, the bill on July 11, 2019. According to the USTR, the French DST, if passed, would apply only to companies with total annual revenues from the covered digital services of at least €750 million globally and €25 million in France.

“The United States is very concerned that the digital services tax which is expected to pass the French Senate tomorrow unfairly targets American companies,” USTR Robert Lighthizer said. In response, President Donald Trump directed the USTR to determine whether the tax would be “discriminatory or unreasonable and burdens or restricts United States commerce” under the provisions of Section 301.

The USTR has issued a Federal Register notice providing background information on the DST and the implementation of the Section 301 investigation.

The USTR will hold a public hearing on the matter on August 19, 2019. Interested parties wishing to testify at the hearing must submit a request to appear, along with a written version of the oral testimony, no later than August 12, 2019. All other written comments must be submitted to USTR by August 19, 2019, with any post-hearing comments filed by August 26, 2019. The USTR has established a formal docket for this investigation: USTR-2019-0009. Written comments and requests to appear must be filed on this docket via the Federal eRulemaking Portal, http://www.regulations.gov.

In particular, the USTR is seeking comments as to:

  • Concerns with the DST, as set out in the joint committee bill or as subsequently modified or adopted by the French government;
  • Whether the DST is unreasonable or discriminatory;
  • The extent to which the DST burdens or restricts U.S. commerce;
  • Whether the DST is inconsistent with France’s obligations under the WTO Agreement or any other international agreement; and
  • The determinations required, including what action, if any, should be taken.

The Senate Finance Committee’s Chairman and Ranking Minority Member, Chuck Grassley and Ron Wyden, respectively, issued a joint statement “applauding” the USTR for initiating the investigation and stating that “the digital services tax that France and other European countries are pursuing is clearly protectionist and unfairly targets American companies in a way that will cost U.S. jobs and harm American workers.”

The Office of the U.S. Trade Representative (USTR) has published in the Federal Register its latest round of product exclusions applicable to List 1 of the China Section 301 tariffs. List 1 imposed additional duties as of July 6, 2018, on goods imported from China and valued at $34 billion. This latest round of exclusions covers 110 specially prepared product descriptions, which cover 362 separate exclusion requests. The following is a partial, general description of the products covered under the Harmonized Tariff Schedule of the United States subheadings approved by USTR: heat exchangers; water tanks for certain boilers; certain compression-ignition engines; aircraft gas turbine compressor cases of steel and Inconel alloy; numerous types of power and water pumps and related parts and assemblies; certain compressors; propane powered forklift trucks; certain shovel loaders; parts of passenger or freight elevators; certain counterweights for industrial equipment; certain parts and assemblies for seeders or spreaders; certain check or pressure-reducing valves; certain electric AC/DC motors; furnace casings and structural components for industrial furnaces; certain capacitors; and certain contactors and rotary switches.

As noted by the USTR in past approval notices, these exclusions are available for any product that meets the description in the annex to this July 9 notice, regardless of whether the importer filed an exclusion request. Further, the scope of each exclusion is governed by the scope of the product descriptions in the annex, and not by the product descriptions set out in any particular request for an exclusion.

These product exclusions will apply as of July 6, 2018, the effective date of the $34 billion Section 301 trade action, which assessed a 25 percent tariff on these items, and will extend for one year after the July 9, 2019, publication of this notice in the Federal Register. U.S. Customs and Border Protection will shortly issue instructions on entry guidance, implementation of these exclusions and refund procedures.

Following a week of escalating tensions, allegations that Iran attacked two oil tankers in the Gulf of Oman, Iran’s threat to increase its stockpile of enriched uranium, and its acknowledged downing of an unmanned U.S. drone, President Donald Trump responded on June 24, 2019 by issuing an executive order sanctioning the Supreme Leader of Iran, Sayyid Ali Hosseini Khamenei, and numerous other appointed Iranian state officials. Under the order, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) has been authorized to block the property and funds within the United States or within the control of any U.S. persons of (i) the Supreme Leader of the Islamic Republic of Iran and the Iranian Supreme Leader’s Office (SLO) or (ii) any person determined by the Secretary of the Treasury, in consultation with the Secretary of State, to be a person appointed by the Supreme Leader of Iran or the SLO to a position as a state official of Iran.

In a statement regarding the sanctions, the White House announced that the sanctions “will deny Iran’s leadership access to financial resources, blocking them from using the United States financial system or accessing any assets in the United States.” The sanctions extend to persons and entities that have materially assisted, sponsored or provided financial, material or technological support for, or goods or services to or in support of, any person whose property and interests in property are blocked under these sanctions, as well as any entities known to be to be owned or controlled by, or to have acted or purported to act for or on behalf of, directly or indirectly, any person whose property has been blocked. In remarks to the press, Trump stated that the “Supreme Leader of Iran is one who ultimately is responsible for the hostile conduct of the regime. He’s respected within his country. His office oversees the regime’s most brutal instruments, including the Islamic Revolutionary Guard Corps.” The president indicated that he felt these measures were a strong and proportionate response to Iran’s increasingly provocative actions, and that “the assets of Ayatollah Khamenei and his office will not be spared from the sanctions.”

OFAC has updated its Specially Designated Nationals (SDN) List to reflect the addition of Ayatollah Khamenei and eight senior commanders of the Navy, Aerospace and Ground Forces of the Islamic Revolutionary Guards Corps (IRGC). OFAC separately released a press statement providing additional background information on the eight Iranian officials subject to sanctions along with the Ayatollah.

As a result of this action, all property and interests in property of these persons that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC. Because U.S. persons are generally prohibited from dealing with entities on the SDN List, persons who engage in certain transactions with these designated persons may themselves be exposed to designation. OFAC has indicated that any foreign financial institution that knowingly facilitates a significant financial transaction or provides significant financial services for these persons could be subject to U.S. correspondent account sanctions or payable-through account sanctions.

The Department of Commerce’s Bureau of Industry and Security (BIS) has determined that five Chinese companies are acting contrary to the national security or foreign policy interests of the United States and thus pose a significant risk. In a Federal Register notice, BIS announced that it has placed the following companies on the Entity List:

  • Chengdu Haiguang Integrated Circuit, including two aliases (Hygon and Chengdu Haiguang Jincheng Dianlu Sheji);
  • Chengdu Haiguang Microelectronics Technology, including two aliases (HMC and Chengdu Haiguang Wei Dianzi Jishu);
  • Higon, including five aliases (Higon Information Technology, Haiguang Xinxi Jishu Youxian Gongsi, THATIC, Tianjing Haiguang Advanced Technology Investment and Tianjing Haiguang Xianjin Jishu Touzi Youxian Gongsi);
  • Sugon, including nine aliases (Dawning, Dawning Information Industry, Sugon Information Industry, Shuguang, Shuguang Information Industry, Zhongke Dawn, Zhongke Shuguang, Dawning Company and Tianjin Shuguang Computer Industry); and
  • Wuxi Jiangnan Institute of Computing Technology, including two aliases (Jiangnan Institute of Computing Technology and JICT).

The BIS determination was based, in part, on these entities’ involvement in China’s development of “exascale high performance computing.” Sugon has publicly acknowledged a variety of military end uses and end users of its high performance computers. Sugon is also the majority owner of Higon, which has ownership interests in Chengdu Haiguang Integrated Circuit and Chengdu Haiguang Microelectronics Technology. Wuxi Jiangnan Institute of Computing Technology is owned by the 56th Research Institute of the General Staff of China’s People’s Liberation Army, and its mission is to support China’s military modernization.

With these entities’ placement on the Entity List, BIS has now imposed a license requirement on them for all exports, reexports and transfers (in-country) subject to the Export Administration Regulations (EAR), with a license review policy of presumption of denial. In addition, no license exceptions are available for exports, reexports or transfers (in-country) to these Chinese entities. While this rule is effective as of June 24, 2019, shipments on board a carrier to a port of export on June 24 may be exported under any previous eligibility under the EAR.

The Office of the U.S. Trade Representative (USTR) has created a website to assist persons in navigating the China Section 301 investigation and tariff process. Recognizing that every product subject to a proposed or ongoing Section 301 tariff action is identified by an 8-digit or 10-digit Harmonized Tariff Schedule (HTS) subheading, the website provides a search engine allowing users to search by an 8-digit HTS subheading to obtain information about a proposed or ongoing Section 301 tariff action and whether a product under a subheading is subject to any additional Section 301 tariff. The website also provides other useful links offering more details on the Section 301 exclusion process and the ongoing record of the Section 301 investigation.

The Office of the U.S. Trade Representative (USTR) has announced in a Federal Register notice that it will open an electronic portal for submission of China Section 301 product exclusion requests on June 30, 2019. This portal will allow interested U.S. parties to request exclusions for products captured under USTR’s Tranches/List 3 of Harmonized Tariff Schedule of the United States (HTS) subheadings for imports from China valued at $200 billion.

Product exclusion requests will be due through the portal at https://exclusions.ustr.gov (the website is not yet live) by September 30, 2019; parties supporting or objecting to such exclusion requests must file responses no later than 14 days after the request is posted on the portal. Any replies to these responses will be due the later of seven days after the close of the 14-day response period, or seven days after the posting of a response on the portal.

While both the process and the exclusion request form for submission to USTR are similar to those implemented for USTR’s Tranches/Lists 1 and 2 of HTS subheadings, this exclusion request process requires additional information. In addition to providing the applicable 10-digit HTS subheading, product name and specific description and function, and providing supporting data and the rationale for the requested exclusion, USTR will also require:

  • specific data on the annual quantity and value of the Chinese-origin product, domestic product and third-country product the requester purchased, in 2017, 2018 and the first quarter of 2019. Note: the requirement to identify and report domestic and third-country product data is new.
  • the requester’s gross revenues for 2018, the first quarter of 2018 and the first quarter of 2019.
  • for imports sold as final products, requesters must provide the percentage of their total gross sales in 2018 that sales of the Chinese-origin product accounted for.
  • for imports used in the production of final products, requesters must provide the percentage of the total cost of producing the final product(s) the Chinese-origin input accounts for and the percentage of their total gross sales in 2018 that sales of the final product(s) accounted for.

As with past exclusion requests, USTR will require that all requests clearly address whether the particular product is available only from China or can be sourced from the United States or third countries; whether the requester has sought to source the product from the United States; whether the additional duties have caused or will cause severe economic harm to the requester; and whether the particular product is strategically important or related to the “Made in China 2025” initiative or other Chinese industrial programs.

Exclusions will be retroactive to September 24, 2018, when the tariffs on this tranche of HTS subheadings were implemented with a 10 percent tariff (these tariffs have since been raised to 25 percent). Granted exclusions will be valid for one year from the date that the exclusion determination is published in the Federal Register.