On September 11, 2019, the Customs Tariff Commission of China’s State Council (CTCSC) announced its first batch of tariff exclusions for imports of U.S. products, covering shrimp, fish meal, lubricants and more, according to an unofficial translation of a Ministry of Finance press release. These exclusions will be executed under two different lists:

  • List 1 Exclusions: No additional duties will be imposed from September 17, 2019 until September 16, 2020. Importers should apply to China Customs for the refund of duties previously paid within six months of the publication date of these exclusions.
  • List 2 Exclusions: No additional duties will be imposed from September 17, 2019 until September 16, 2020. Refunds of previously paid duties, however, are not available for these exclusions.

The CTCSC indicated that it will continue to issue additional batches of tariff exclusions for imports of U.S. products in due course.

The Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced that, effective October 9, 2019, the Cuban Assets Control Regulations (CACR) will be amended to further restrict certain financial transactions involving Cuba and to deny Cuba access to hard currency. In a press release, OFAC announced that these changes will amend certain authorizations related to the provision of remittances to Cuba and eliminate the authorization for specific financial transactions known as “U-turn” transactions. These amendments to the CACR will:

  • Revise the U-turn general license to eliminate the authorization for banking institutions subject to U.S. jurisdiction to process U-turn transactions (e., funds transfers that originate and terminate outside the United States where neither the originator nor beneficiary is a person subject to U.S. jurisdiction). The amended U-turn general license will authorize banking institutions subject to U.S. jurisdiction to reject and not require them to block such transactions.
  • Amend the general license authorizing family remittances to (1) place a cap of $1,000 as the maximum amount that one remitter can send to one Cuban national as a family remittance per quarter, and (2) exclude close relatives of prohibited officials of the government of Cuba or close relatives of prohibited members of the Cuban Communist Party as authorized recipients of family remittances.
  • Revise the general license authorizing remittances to certain individuals and independent non-governmental organizations in Cuba to now authorize remittances to certain additional “self-employed individuals” in order to encourage the development and operation of private businesses. A “self-employed individual” means a Cuban national who satisfies one or more of the following conditions: (a) is an owner or employee of a small private business or a sole proprietorship, including restaurants (paladares), taxis and bed-and-breakfasts (casas particulares); (b) is an independent contractor or consultant; (c) is a small farmer who owns his or her own land; or (d) is a small usufruct farmer who cultivates state-owned land to sell products on the open market.
  • Eliminate the general license for donative remittances.

Secretary of the Treasury Stephen Mnuchin stated that the United States was taking additional steps “to financially isolate the Cuban regime. The United States holds the Cuban regime accountable for its oppression of the Cuban people and support of other dictatorships throughout the region, such as the illegitimate Maduro regime” in Venezuela. The complete text of these amendments to the CACR (31 C.F.R. Part 515) is available in the Federal Register.

President Donald Trump announced via Twitter that his administration will delay until October 15, 2019, its increase in Section 301 tariffs from 25 percent to 30 percent on products from China appearing on Tranches/Lists 1-3. The president and the Office of the U.S. Trade Representative (USTR) had previously indicated that the 5 percent increase would take effect October 1, 2019. (See Trump and Trade Updates of August 26, 2019 and September 3, 2019.)

According to the president, this postponement was made in response to both a request from Vice Premier Liu He and to the scheduling of the original tariff increase start date on October 1, which is a national holiday in China celebrating the founding of the People’s Republic of China. It is expected that the USTR will formally announce this delay with a Federal Register notice soon. Trade negotiations between the United States and China are scheduled to resume in the next several weeks.

In the past week, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) has continued to increase pressure on Iran and North Korea by further identifying certain individuals and entities in the shipping sector as engaging in illicit activities and tightening related economic sanctions.

On August 30, 2019, OFAC designated two individuals, three shipping-related entities and one vessel and placed them on the Specially Designated Nationals (SDN) List. In doing so, OFAC stated that North Korea continues the use of “illicit ship-to-ship transfers to circumvent United Nations (UN) sanctions that restrict the import of petroleum products, as well as the U.S. Government’s commitment to implement existing UN Security Council Resolutions (UNSCR).” North Korea’s continued use of ship-to-ship transfers to import refined petroleum is in violation of UNSCR 2375 and UNSCR 2397. OFAC cited evidence that the involved vessel, the Shang Yuan Boa, conducted at least two transfers with North Korean-flagged vessels, which both later offloaded their cargo in North Korea’s Nampo port. All individuals and entities designated are either related to these incidents or have ownership interests in the vessel.

On September 3, 2019, OFAC designated certain Iranian space agencies for placement on the SDN List. The next day, on September 4, 2019, OFAC designated nine individuals, 16 Iranian entities and six vessels (and updated SDN information on another seven vessels) for placement on the SDN List. In making this announcement, OFAC stated in a press release that it took action against a “large shipping network that is directed by and financially supports the Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF) and its terrorist proxy Hizballah. Over the past year, the IRGC-QF has moved oil worth hundreds of millions of dollars or more through this network for the benefit of the brutal Assad regime, Hizballah, and other illicit actors.” OFAC indicated that Iranian officials are increasingly seeking to deceive potential customers into buying Iranian oil. The sanctioned shipping network, run by IRGC-QF official Rostam Qasemi, attempted on multiple occasions to pass off Iranian cargo as Iraqi in origin. In response, OFAC has issued a new advisory to the maritime community warning of the risks associated with these illicit schemes, such as the IRGC-QF’s oil-for-terror shipping network.

As a result of these actions, 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 these designated persons and 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.

Following up on President Donald Trump’s tweets and an earlier press statement (see Trump and Trade Update of August 26, 2019), the Office of the U.S. Trade Representative (USTR) has formally published a Federal Register notice requesting public comment on its intent to increase the Section 301 tariff from 25 percent to 30 percent on products from China appearing on Tranches/Lists 1-3. The proposed 5 percent increase would take effect October 1, 2019.

Written comments are due by September 20, 2019. The USTR is requesting that commenters focus on the proposed increase in the tariff from 25 percent to 30 percent and specifically invites comments on (1) whether increasing the rate of additional duties on one or more subheadings listed in the Tranches/Lists 1-3 Annexes would be practicable or effective in obtaining the elimination of China’s unfair trade actions, policies and practices, and (2) whether increasing the rate of additional duties on a particular product listed in the annexes would cause disproportionate economic harm to U.S. interests, including small or medium-sized businesses and consumers. All submissions must be submitted electronically via www.regulations.gov on Docket No. USTR-2019-0015.

The Office of the U.S. Trade Representative (USTR) formally announced today that an additional duty rate of 15 percent – not 10 percent as originally announced – will begin Sept. 1, 2019, on products imported from China and covered under Annex A of the August 20, 2019 Federal Register notice concerning tariffs on imported Chinese products valued at approximately $300 billion (see also Trump and Trade Update of August 13, 2019). Products identified under Annex C will also be subject to an additional duty rate of 15 percent beginning Dec. 15, 2019.

The USTR has yet to formally announce the tariff increase by 5 percent on the approximately $550 billion worth of Chinese imports covered under Tranches/Lists 1-3 of the China Section 301 investigation – which increases the tariff from 25 to 30 percent – but reportedly will allow for a public comment period before implementing such additional duties on or about Oct. 1, 2019.

On August 23, 2019, the ongoing trade dispute between the United States and China escalated quickly when China announced that it would impose tariffs on an additional $75 billion worth of imports from the United States and President Trump tweeted in response that China should not have done so and that the United States would be raising already existing tariffs on Chinese products another 5 percent.

The Customs Tariff Commission of China’s State Council began this latest round of the dispute by announcing that it would impose $75 billion in additional tariffs on certain U.S. products imported into China. According to news reports, the State Council will apply additional tariffs of either 5 or 10 percent on approximately 5,000 U.S. products. Mirroring the implementation of additional U.S. tariffs on Chinese products (see Trump and Trade Update of August 13, 2019), these Chinese tariffs will be applied in two steps – September 1, 2019 and December 15, 2019 – covering such products as soybeans, corn, beef, pork, chicken, cotton and crude oil. Further, China announced that it will reimpose on December 15, 2019, a tariff of 25 percent on imports of U.S. automobiles and automobile parts.

In response, the Office of the U.S. Trade Representative (USTR) released a statement that the United States would increase some of its existing import tariffs on Chinese products by 5 percent beginning on October 1, 2019. For the 25 percent tariff on approximately $250 billion worth of imports from China (China Section 301 Lists/Tranches 1 through 3), the USTR will begin the process of increasing the tariff rate to 30 percent. For the 10 percent tariff on approximately $300 billion worth of imports from China that Trump announced in early August (List/Tranche 4), the tariff will be increased to 15 percent, effective on the already scheduled dates of September 1 and December 15, 2019 for tariffs on these imports. The USTR indicated that a Federal Register notice will be issued shortly on this latest tariff increase that will allow for public comment.

The Office of the U.S. Trade Representative (USTR) is holding a public hearing today regarding its ongoing Section 301 Investigation of France’s Digital Services Tax (DST) (see Trump and Trade Update of July 11, 2019). The French DST law imposes a 3% tax on annual revenues generated by companies that provide certain digital services to, or aimed at, French users. The tax applies only to companies with annual revenues from the covered services of at least €750 million globally and €25 million in France. As President Donald Trump has noted, the services covered are ones where U.S. firms are global leaders. The list of the witnesses appearing to testify is available on USTR’s website.

In a Federal Register notice published on August 21, the Department of Commerce’s Bureau of Industry and Security (BIS) announced that it has added 46 non-U.S. affiliates of Huawei Technologies Co., Ltd. (Huawei) to the Entity List because they “pose a significant risk of involvement in activities contrary to the national security or foreign policy interests of the United States.” This is in addition to the 68 Huawei entities listed in May 2019 (see Trump and Trade Update of May 17, 2019); similarly, BIS has imposed a license requirement for all items subject to the Export Administration Regulations (EAR) for exports to these Huawei entities. Any export/reexport from the United States or shipments involving U.S.-origin items or technology to Huawei or any of these listed affiliates will require an export license from BIS; while these license applications will be reviewed by the agency on a case-by-case basis, the review will be conducted under a “presumption of denial.”

The additions (and certain modifications/clarifications made to the original list of 68 entities) affect affiliates of Huawei in 25 different countries: Argentina, Australia, Bahrain, Belarus, Belgium, Brazil, People’s Republic of China, Costa Rica, Cuba, Denmark, France, India, Indonesia, Italy, Kazakhstan, Mexico, New Zealand, Panama, Portugal, Romania, Russia, South Africa, Sweden, Thailand and the United Kingdom. BIS stated that “without the imposition of a license requirement to these affiliated entities, there is reasonable cause to believe that Huawei would seek to use them to evade the restrictions imposed by its addition to the Entity List.”

In addition to these Entity List additions, BIS announced via Federal Register notice that it has extended the temporary general license it issued in May 2019 (see Trump and Trade Update of May 21, 2019) that partially continued the availability of exports under the Export Administration Regulations (EAR) for exports, reexports and transfers (in-country) to Huawei Technologies Co., Ltd. and its affiliates. The temporary general license has been extended through November 18, 2019, and does not relieve parties of other obligations under the EAR as to other licensing requirements for exports to the People’s Republic of China. For U.S. persons currently exporting to Huawei entities under the temporary general license, a review of this extension is highly recommended. In addition to the extension of another 90 days, BIS has made several clarifications as to authorized transactions under the license to improve “public understanding of the intended scope of the temporary general license.” BIS also highlights that the Entity List does not create a license requirement for imports, including imports from entities on the Entity List. The agency notes that Entity List-based license requirements do not apply to services, “provided the service in question does not involve the export, reexport, or transfer (in-country) of items that are subject to the EAR.” When providing a service, however, a U.S. person must determine if there will be an export of any physical items, software or technology requiring license authorization.

The Department of Commerce’s International Trade Administration (Commerce or ITA) has announced the self-initiation of inquiries into possible circumvention involving exports of certain corrosion-resistant steel products (CORE) made with substrate from China or Taiwan, completed in Costa Rica, Guatemala, Malaysia, South Africa and the United Arab Emirates (UAE), and then exported to the United States. In undertaking these inquiries, ITA will determine whether imports of CORE completed in each of these countries using Chinese-origin substrate, or imports of CORE completed in Malaysia using Taiwanese-origin substrate, are circumventing the antidumping duty (AD) and countervailing duty (CVD) orders on CORE from China or the AD order on CORE from Taiwan.

AD/CVD circumvention inquiries are typically initiated in response to allegations made by the U.S. industry. However, Commerce’s regulations allow for a self-initiated inquiry when ITA determines from available information that an inquiry is warranted. In its announcement, Commerce noted that this is the first time it has self-initiated circumvention inquiries “based on its own monitoring of trade patterns, and the first self-initiation of multi-country circumvention inquiries.” ITA data indicate that imports of CORE from these countries into the United States increased in value by 29,210 percent (Costa Rica), 35,944 percent (Guatemala), 151,216 percent (Malaysia), 629 percent (South Africa) and 5,571 percent (UAE) over a 45-month period before and after the initiations of the original AD/CVD investigations on Chinese and Taiwanese CORE in 2016.

If ITA preliminarily determines that circumvention is occurring, Customs and Border Protection (CBP) will be instructed to begin collecting cash deposits on imports of CORE completed in these countries using Chinese-origin or Taiwanese-origin substrate. These duties would be imposed on future imports, and on any unliquidated entries since the date Commerce initiated these circumvention inquiries.