Please join us Thursday, June 27 at 1 p.m. for a complimentary one-hour webinar on how your company can survive the U.S.-China trade war by navigating the U.S. government’s complex Section 301 tariff process, utilizing the Chinese government’s product exclusion request process and adjusting supply chain activities. During the program, we will:

  • Report from the front lines in Washington, D.C. on the U.S.-China trade war
  • Provide a status update on the Section 301 tariff process
  • Discuss strategies for the Section 301 product exclusion request process
  • Explain the Chinese government’s exclusion request process for products subject to retaliatory tariffs
  • Address supply chain options and issues
  • Answer questions

Presenters:

Register online by June 25. After you register, you will receive a confirmation email containing the webinar log-in information.

Questions? Contact Stacy via email or at 202.263.4184.

On June 7, 2019, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned Iran’s largest petrochemical holding group, Persian Gulf Petrochemical Industries Company (PGPIC). In addition to PGPIC, OFAC placed 39 PGPIC subsidiaries and foreign-based sales agents on its Specially Designated Nationals (SDN) List. According to OFAC, PGPIC was sanctioned for having provided, or attempted to provide, financial, material, technological or other support for, or goods or services to or in support of, Khatam al-Anbiya, another Iranian entity on the SDN List.

PGPIC and its subsidiary companies hold 40 percent of Iran’s total petrochemical production capacity and are responsible for 50 percent of Iran’s total petrochemical exports. OFAC stated that PGPIC has awarded major engineering, procurement and construction contracts to Khatam al-Anbiya, generating hundreds of millions of dollars for the Islamic Revolutionary Guard Corps (IRGC). In a press release, OFAC highlighted that in 2018 Iran’s Ministry of Petroleum “awarded the IRGC’s Khatam al-Anbiya ten projects in oil and petrochemical industries worth the equivalent of 22 billion dollars, a value four times the official budget of the IRGC. In late 2016, Iran’s Minister of Petroleum asked the IRGC’s Khatam al-Anbiya to increase its investment and presence across Iran’s oil and petrochemical industries.” Treasury Secretary Steven Mnuchin stated, “By targeting this network we intend to deny funding to key elements of Iran’s petrochemical sector that provide support to the IRGC.”

As a result of this action, all property and interests in property of these entities 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 the designated PGPIC entities 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 entities 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 published an Interim Final Rule in the Federal Register announcing that it has developed a specific portal (i.e., the ‘‘232 Exclusions Portal’’) for persons submitting exclusion requests, objections to exclusion requests, rebuttals and surrebuttals to replace the use of the federal rulemaking portal (http://www.regulations.gov) and “streamline the exclusions process while enhancing data integrity and quality controls.” This interim final rule is effective June 13, 2019.

While BIS stated that regulations.gov was readily available to quickly implement the steel and aluminum product exclusions process, “the site was not easily adaptable to the 232 submissions process, particularly as it evolved into a multi-step system and required a significant amount of human data entry.” The 232 Exclusions Portal will allow 232 submitters to view all exclusion request, objection, rebuttal and surrebuttal documents in one web-based system. To use the new portal, submitters must complete a web-based registration before submitting any documents. In addition, external parties will now be able to track submission deadlines in the same portal.

BIS will begin accepting new exclusion requests on the 232 Exclusions Portal on June 13, 2019 and will no longer accept new exclusion requests on regulations.gov. However, objections, rebuttals and surrebuttals must always be filed on the system where the exclusion request was submitted, whether in regulations.gov or in the 232 Exclusions Portal. BIS has published a detailed User Guide for the 232 Exclusions Portal so that parties can familiarize themselves with the operation of the portal before June 13, 2019.

BIS will accept public comment on this interim final rule until August 9, 2019. The comments should address whether BIS’s efforts have addressed earlier concerns with the use of regulations.gov for the 232 exclusions process, as well as comments on the 232 Exclusions Portal and the transition-related provisions. Specifically, BIS encourages comments on which 232 Exclusions Portal features are an improvement, as well as any areas of concern or suggestions for improvement. These comments should be filed via regulations.gov on docket number BIS-2019-0005.

After a week of uncertainty, the United States and Mexico reached an agreement in which Mexico will work to stem the tide of migration across its southern border and into the United States, while the Trump administration agreed to forgo the implementation of a 5 percent tariff on the import of goods from Mexico. In releasing the Joint U.S.-Mexico Declaration, Secretary of State Mike Pompeo stated that “The United States looks forward to working alongside Mexico to fulfill these commitments so that we can stem the tide of illegal migration across our southern border and to make our border strong and secure.” The negotiations resulted in the following commitments:

Mexican Enforcement Surge: Mexico will increase enforcement to curb irregular migration, which will include the deployment of its National Guard throughout Mexico, giving priority to its southern border. Mexico will take “action to dismantle human smuggling and trafficking organizations as well as their illicit financial and transportation networks.” Both the United States and Mexico have committed to strengthen bilateral cooperation, including information sharing and coordinated actions to better protect and secure their common border.

Migrant Protection Protocols: The United States will expand the implementation of the existing Migrant Protection Protocols across its entire southern border, meaning that persons crossing the U.S. southern border and seeking asylum “will be rapidly returned to Mexico where they may await the adjudication of their asylum claims.” Mexico will authorize the entrance of all such individuals for humanitarian reasons, in compliance with its international obligations, while they await the adjudication of their asylum claims. The United States has committed to work to accelerate the adjudication of asylum claims and to conclude removal proceedings as expeditiously as possible.

Both countries also agreed that should these measures not have the expected results, the parties will take further actions: “[T]he United States and Mexico will continue their discussions on the terms of additional understandings to address irregular migrant flows and asylum issues, to be completed and announced within 90 days, if necessary.”

On June 5, 2019, the Department of Commerce’s Bureau of Industry and Security (BIS) and the Department of the Treasury’s Office of Foreign Assets Control (OFAC) undertook coordinated actions to further restrict travel to Cuba “in order to hold the Cuban regime accountable for its repression of the Cuban people and its support of the Maduro regime in Venezuela.” Stating that “Cuba remains communist, and the United States, under the previous administration, made too many concessions to one of our historically most aggressive adversaries,” Commerce Secretary Wilbur Ross said the Trump administration “recognizes the threat Cuba’s government poses in the region, and … is acting to limit commercial activity that provides revenue for the Cuban regime.” These actions include:

Ending Group People-to-People Travel

  • OFAC amended its Cuba regulations to remove the authorization for group people-to-people educational travel. OFAC’s regulatory changes include a “grandfathering” provision, which provides that certain group people-to-people educational travel that previously was authorized will continue to be authorized where the traveler had already completed at least one travel-related transaction (such as purchasing a flight or reserving accommodation) prior to June 4, 2019.
  • OFAC updated its FAQs pertaining to Cuba.

Ending Exports of Passenger Vessels, Recreational Vessels and Private Aircraft

  • BIS amended certain Cuba-related provisions under the Export Administration Regulations (EAR) to make passenger and recreational vessels and private and corporate aircraft ineligible for license exception and to establish a general policy of denial for license applications involving those vessels and aircraft. License exception Aircraft, Vessels, and Spacecraft (AVS) has been amended to remove the authorization for the export or reexport to Cuba of most non-commercial aircraft and all passenger and recreational vessels on temporary sojourn. As of June 5, 2019, private and corporate aircraft, cruise ships, sailboats, fishing boats and other similar aircraft and vessels generally will be prohibited from going to Cuba.
  • BIS updated its FAQs pertaining to Cuba.

The State Department also issued a statement that “These actions are directly linked to the tourism industry, which has strong economic ties to the Cuban security, military, and intelligence sectors in Cuba. Veiled tourism has served to line the pockets of the Cuban military, the very same people supporting Nicolas Maduro in Venezuela and repressing the Cuban people on the island. In Cuba, the regime continues to harass, intimidate, and jail Cubans who dare to voice an opinion different from the one the regime wants them to have. The United States calls on the regime to abandon its repression of Cubans, cease its interference in Venezuela, and work toward building a stable, prosperous, and free country for the Cuban people.”

The Office of the U.S. Trade Representative (USTR) has released notice of its fifth batch of China Section 301 product exclusion approvals that will relieve impacted U.S. importers from the 25 percent tariff implemented on certain imports from China July 6, 2018. These approved exclusions cover 464 exclusion requests and are established in two different formats:

  1. as a full exclusion for one existing 10-digit Harmonized Tariff Schedule of the United States (HTSUS) subheading, 8537.10.8000 (touch-sensitive data input devices (so-called “touch screens”) without display capabilities, for incorporation into apparatus having a display, which function by detecting the presence and location of a touch within the display area (such sensing may be obtained by means of resistance, electrostatic capacity, acoustic pulse recognition, infra-red lights or other touch-sensitive technology)); and
  2. as a partial exclusion under an HTSUS subheading and further defined in 88 specially prepared product descriptions. These partial HTS exclusions include but are not limited to: parts of non-aircraft gas turbines; oil well and oil field crank-balanced, long-stroke and beam pumps; certain radial piston hydraulic fluid pumps; numerous types of centrifugal and submersible pumps; stand-alone ice-making machines; assemblies of thermo-electric modules, whether or not presented with attached heat exchangers, fans, shrouds, temperature sensors or controllers; solar water heaters; certain self-propelled fork-lift and platform trucks; garage door opener/closers; new, track-mounted hydraulic backhoes or hydraulic shovels; pile drivers; certain AC multi-phase motors; certain speed drive controllers for electric motors; certain printed circuit assemblies of the goods of subheading 8504.40 or 8504.50; certain push-button switches, rated at over 5 A; and machines for testing the hardness of metals. The list of these 88 partial exclusions and the scope of their product description is provided in the annex of USTR’s notice. 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 individual request for exclusion.

These product exclusions will apply as of the July 6, 2018, 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 publication of this notice. U.S. Customs and Border Protection will shortly issue instructions on entry guidance, implementation of these exclusions and refund procedures.

On May 30, 2019, President Donald Trump issued a Statement Regarding Emergency Measures to Address the Border Crisis in which he announced that his administration would be imposing a 5 percent tariff on all goods entering the United States from Mexico beginning on June 10, 2019. Stating that “the United States has suffered the severe and dangerous consequences of illegal immigration” for decades while “Mexico has allowed [illegal immigration] to go on for many years, growing only worse with the passage of time,” the president determined that from “a safety, national security, military, economic, and humanitarian standpoint, we cannot allow this grave disaster to continue.”

Claiming authority under the International Emergency Economic Powers Act, Trump will place a 5 percent tariff on all goods imported from Mexico beginning on June 10, 2019. Furthermore, the tariff will increase to 10 percent on July 1, 2019, if the problem persists. Then, according to the statement, “if Mexico still has not taken action to dramatically reduce or eliminate the number of illegal aliens crossing its territory into the United States,” the tariff will be increased to 15 percent on August 1, 2019, to 20 percent on September 1, 2019, and to 25 percent on October 1, 2019. The tariffs “will permanently remain at the 25 percent level unless and until Mexico substantially stops the illegal inflow of aliens coming through its territory.”

When asked on June 2, 2019, what Mexico will have to do to have the tariffs removed, Trump replied, “They have to stop the illegal flow — the flow of drugs; of immigrants, illegal immigrants — people that have not gone through the process. We have people — we want people to come into our country, but they have to come in legally.” On Monday, June 3, 2019, Secretary of Commerce Wilbur Ross met with Mexican Secretary of Economy Graciela Márquez Colín to discuss various matters and indicated that they discussed the pending tariff and reiterated “the President’s message that Mexico needs to do more to help the U.S. address immigration across our shared border.”

To date, no details have been released regarding the tariffs, the process for implementing them, or any potential exclusions. Additional meetings are scheduled for the week of June 3 and Trump and Trade will be monitoring this matter closely.

On November 24, 1975, the United States designated India as a beneficiary developing country (BDC) for the Generalized System of Preferences (GSP), which enabled India over the years to export roughly 2,000 products to the United States duty-free. On March 4, 2019, President Donald Trump announced his intention to terminate India’s BDC designation and its resulting GSP benefits, removing India’s duty-free access to the U.S. market. In a May 31, 2019, presidential proclamation, the president determined that India “has not assured the United States that India will provide equitable and reasonable access to its markets. Accordingly, it is appropriate to terminate India’s designation as a beneficiary developing country effective June 5, 2019.” The proclamation also indicates that the United States is removing India from the list of developing country World Trade Organization members exempt from safeguard measures on crystalline silicon photovoltaic (CSPV) cells and products, and large residential washers. As a result, imports of these products from India will now be subject to the U.S. government’s Section 201 global safeguard measures.

The Office of the U.S. Trade Representative (USTR) has announced that it is extending the amount of time certain goods exported from China will have to enter the United States before an additional Section 301 tariff increase from 10 percent to 25 percent is imposed. As we reported on May 9, President Donald Trump moved to increase Section 301 import tariffs to 25 percent on the third tranche of Chinese products valued at approximately $200 billion as of May 10, 2019. On May 10, USTR clarified that shipments from China that were “on the water” (i.e., already in transit) would be excluded from this tariff rate increase so long as such products entered the United States before June 1. On May 31, USTR further revised this extension, noting that covered products exported from China to the United States before May 10, 2019, will remain subject to only the additional 10 percent tariff if they enter into the United States before June 15, 2019. This limited extension is intended to account “for customs enforcement factors and the transit time between China and the United States by sea.”

During the month of May while President Donald Trump’s escalating trade war with China was garnering most of the headlines, the Trump administration also continued to apply economic pressure on Venezuela. In May, the Departments of Commerce, State and the Treasury further tightened sanctions and export restrictions on Venezuela.

On May 10, 2019, the Department of State announced that, pursuant to Executive Order 13850, the United States determined persons operating in the defense and security sector of the Venezuelan economy may be subject to economic sanctions. On the same date, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned two companies that operate in the oil sector of the Venezuelan economy, and also sanctioned two vessels, which transported oil from Venezuela to Cuba:

  • Monsoon Navigation Corporation is based in Majuro, Marshall Islands, and is the registered owner of the vessel, Ocean Elegance.
    • Ocean Elegance is a crude oil tanker (IMO: 9038749) that delivered crude oil from Venezuela to Cuba from late 2018 through March 2019.
  • Serenity Maritime Limited is based in Monrovia, Liberia, and is the registered owner of the vessel, Leon Dias.
    • Leon Dias is a chemical and oil tanker (IMO: 9396385) that delivered crude oil from Venezuela to Cuba from late 2018 through March 2019.

Continue Reading Trump Administration Further Tightens Economic Sanctions and Trade Restrictions on Venezuela