Merely nine days after implementing sanctions on Turkey for its military action in northeast Syria (see Trump and Trade Update of October 15, 2019), President Donald Trump announced that he was lifting those sanctions due to the continuing ceasefire along the border. The president stated that Turkey would be halting its offensive and make the ceasefire permanent. He added that since one would “define the word ‘permanent’ in that part of the world as somewhat questionable,” the sanctions would be lifted “unless something happens that we’re not happy with.”

As a result, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) removed sanctions imposed on Turkey’s Ministry of National Defence and Ministry of Energy and Natural Resources, as well as on its ministers of National Defence, Energy and Natural Resources and the Interior. With their removal from the Specially Designated Nationals (SDN) List, all of their property and interests in property, which had been blocked as a result of the OFAC sanctions, are unblocked and all otherwise lawful transactions involving U.S. persons and these entities and individuals are no longer prohibited.

In his remarks, Trump warned, “Should Turkey fail to honor its obligations, including the protection of religious and ethnic minorities … we reserve the right to re-impose crippling sanctions, including substantially increased tariffs on steel and all other products coming out of Turkey.”

The Office of the U.S. Trade Representative (USTR) has announced that it will begin accepting tariff exclusion requests on October 31, 2019, for imports of Chinese goods subject to a 15 percent tariff (Tranche/List 4 tariffs), which went into effect on September 1, 2019. This list encompasses products on List 4A of approximately $300 billion worth of Chinese products that President Donald Trump previously announced would occur in two phases – September 1 and December 15, 2019. See Trump and Trade Updates of August 1, 2019, August 13, 2019 and August 30, 2019.

As with the List 3 product exclusion request process, exclusion requests are to be submitted via USTR’s online exclusion request processing portal at www.exclusions.ustr.gov. This portal will open at noon on October 31, 2019, and all persons interested in submitting exclusion requests must do so no later than January 31, 2020, when the portal will close. As with all previous exclusion request processes, USTR has stated that each request must identify a particular product and provide supporting data and the rationale for the requested exclusion. Exclusion requests will be evaluated on a case-by-case basis, “taking into account the asserted rationale for the exclusion, whether the exclusion would undermine the objective of the Section 301 investigation, and whether the request defines the product with sufficient precision.” Requesting parties must provide their relationship to the product (Importer, U.S. Producer, Purchaser, Industry Association, Other) and provide specific data on the annual quantity and value of the Chinese-origin product, domestic product and third-country product involved in 2017, 2018 and the first half of 2019. Requesting parties must also provide information regarding their gross revenues for 2018 and the first half of 2019. Any exclusion will be effective for one year, starting from September 1, 2019.

The Department of Commerce’s Bureau of Industry and Security (BIS) further tightened U.S. sanctions on Cuba “for its repression of the Cuban people and its support of the Maduro regime in Venezuela.” Overall, the United States maintains a comprehensive embargo on trade with Cuba, and the export and reexport to Cuba of items subject to the Export Administration Regulations (EAR) require a BIS license unless authorized by a license exception. With the tightening of these sanctions, BIS issued an amendment to the Cuba provisions of the EAR that implements the following changes:

  • Licensing Policy for Aircraft – BIS will now apply a general policy of denial for leases of aircraft to Cuban state-owned airlines and has clarified that aircraft and vessels are no longer eligible for the License Exception Aircraft and Vessels (AVS) if they are leased to or chartered by a national of Cuba. Further, BIS has indicated that existing licenses will be revoked within the next seven days.
  • Change in De Minimis Amount Allowed in Foreign Goods – BIS has established a general 10 percent U.S.-origin de minimis content level for foreign items that contain U.S. content. The prior level had been 25 percent. This amendment drastically lowers the U.S. content level and will thus increase the amount of foreign-made items located abroad that are subject to the EAR under specified circumstances, including when they incorporate, or are bundled or commingled with, specified levels of controlled U.S.-origin commodities, software or technology. BIS has announced that license applications for the export or reexport of foreign-made items including 10 percent of more of U.S.-origin content will be subject to a policy of denial.
  • Revisions to License Exception Support for the Cuban People (SCP) – BIS has amended this license exception to: (1) make the Cuban government and Communist Party ineligible for certain donations, requiring a license application by any exporter wanting to donate items to organizations administered or controlled by the Cuban government or Communist Party so that the proposed donation can be reviewed by the U.S. government to determine whether donations to those entities would benefit the Cuban people; (2) eliminate an authorization for items to be given away for free for promotional purposes (BIS states that this provision has been primarily beneficial to the Cuban government since it has a virtual monopoly on importing items into the country); and (3) clarify that the SCP exemption for certain items for telecommunications is limited to eligible items for the creation and upgrade of telecommunications infrastructure to improve the free flow of information to, from, and among the Cuban people. Specifically, BIS notes that a license is required for the export or reexport to Cuba of items for telecommunications infrastructure that would be used to connect other specific end users (e.g., Cuban government ministries and state-owned hotels).

These amendments to the EAR are effective as of October 21, 2019. Secretary of Commerce Wilbur Ross stated, “This action … sends another clear message to the Cuban regime – that they must immediately cease their destructive behavior at home and abroad.”

On October 14, 2019, President Donald Trump announced U.S. economic sanctions directed at the government of Turkey in response to Turkey’s military action in northeast Syria, “including but not limited to indiscriminate targeting of civilians, targeting of civilian infrastructure, targeting of ethnic or religious minorities, or targeting or other actions that undermine the continued counterterrorism activities of the Syrian Democratic Forces.” In issuing an executive order to implement the sanctions, Trump added in a formal statement that the United States will again increase Section 232 tariffs on steel imports from Turkey from 25 percent to 50 percent, its level in May 2019. He also announced that ongoing negotiations on a $100 billion trade deal with Turkey will be halted. The president stated that he has been “perfectly clear” with Turkish President Recep Erdogan that Turkey’s actions are precipitating a humanitarian crisis and setting conditions for possible war crimes. He added, “I am fully prepared to swiftly destroy Turkey’s economy if Turkish leaders continue down this dangerous and destructive path.”

As a result, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated and blocked two ministries and three senior Turkish government officials and placed them on the Specially Designated Nationals (SDN) List. OFAC has designated Turkey’s Ministry of National Defence and the Ministry of Energy and Natural Resources, as well as the Minister of National Defence, Hulusi Akar, Minister of Energy and Natural Resources, Fatih Donmez, and the Minister of the Interior, Suleyman Soylu.

Additionally, OFAC issued three General Licenses authorizing certain activities and/or allowing for the winding down of other activities involving these Turkish ministries. General License 1 authorizes the conduct of the official business of the U.S. government by employees, grantees or contractors that would otherwise be prohibited by the sanctions. General License 2 authorizes a 30-day wind-down period (until November 13, 2019) for all transactions and activities that are ordinarily incident and necessary to conclude operations, contracts or other agreements involving the Ministries of National Defence or Energy and Natural Resources of the Turkish government. General License 3 authorizes official activities of the United Nations and certain related agencies and organizations involving these two Turkish ministries.

In announcing the sanctions, Treasury Secretary Steven Mnuchin said, “The United States is holding the Turkish Government accountable for escalating violence by Turkish forces, endangering innocent civilians, and destabilizing the region,” and is prepared to impose additional sanctions, as necessary.

Because of these actions, all property and interests in property of these ministries and the individual Turkish ministers – and of any entities that are owned, directly or indirectly, 50 percent or more by the designated 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 for or provides significant financial services to these entities could be subject to U.S. correspondent account sanctions or payable-through account sanctions.

On October 11, 2019, in remarks to the press, President Donald Trump announced that the United States and China’s trade negotiators had “agreed in principle” to address issues involving intellectual property, financial services and agricultural sales between the two countries. In this “phase one” agreement, China agreed to purchase between $40 billion to $50 billion in U.S. agricultural products, and the United States agreed to cancel a 5 percent increase in Section 301 tariffs on imports of Chinese products set to be implemented on October 15, 2019.

In addition to China’s purchase of agricultural goods, U.S. Trade Representative (USTR) Robert Lighthizer indicated that the agreement addresses sanitary-phytosanitary and other biotechnology issues that should make it easier for China’s importation of U.S. farm products. Secretary of the Treasury Stephen Mnuchin noted that there have been extensive discussions on the opening of China’s market to U.S. financial services firms as well as discussions with Governor Yi Gang, chairman of the People’s Bank of China, regarding currency issues and transparency on the foreign exchange markets. Regarding technology transfer, Trump stated that it will be addressed both in phase one and phase two of any overall trade agreement.

In reaching this partial trade agreement, the president agreed to suspend plans to raise tariffs beginning October 15, 2019, on $250 billion worth of Chinese goods from 25 percent to 30 percent see Trump and Trade Update of August 26, 2019). Lighthizer also confirmed that the increase in List/Tranche 4 tariffs on approximately $300 billion worth of imports from China set for December 15, 2019, remains subject to Trump’s final decision later in the year. He further added that this phase of the agreement does not address issues and U.S. concerns regarding Huawei Technologies Co., Ltd. and its placement on the U.S. Entity List, which has severely restricted U.S. dealings with the company (see Trump and Trade Updates dated May 17, 2019 and August 19, 2019).

The USTR has indicated that it could take up to five weeks to draft the final language for phase one of this agreement. Trump stated that he will meet with Chinese President Xi Jinping at the Asia Pacific Economic Cooperation Summit in November 2019 to sign it, which will be followed by negotiations on phase two. No text of these negotiations or the draft agreement have been made available yet. Many members of Congress publicly supported this development but reserved further comment until details of phase one were made available by the USTR. Several Chinese officials also commented that the phase one agreement has not been finalized, and continued negotiations on its terms remain pending.

On October 11, 2019, the U.S. International Trade Commission (ITC) opened its electronic portal for petitions seeking temporary import duty suspensions and reductions in accordance with the American Manufacturing Competitiveness Act of 2016. The ITC will accept these petitions until December 10, 2019 (see Trump and Trade Update of October 1, 2019).

This process allows companies that can show they are likely beneficiaries of a suspension or reduction of import duties to submit petitions directly to the ITC. These petitions will be evaluated by the ITC to determine whether they meet certain statutory requirements. At the conclusion of the evaluation, the ITC will submit preliminary and final reports to the House Committee on Ways and Means and the Senate Committee on Finance for their use in developing a miscellaneous tariff bill (MTB) for congressional consideration in early 2020.

The ITC’s MTB portal may be accessed here: https://www.usitc.gov/mtbps. According to the ITC, the key considerations are:

  • Petitioners must file their petitions using the portal; no other method of filing will be accepted.
  • Petitioners must file such requests no later than 5:15 p.m. on December 10, 2019; no late filings will be accepted.
  • Petitioners should visit the ITC website before attempting to file a petition and review the ITC’s Process for Consideration of Petitions for Duty Suspensions and Reductions, Handbook on MTB Filing Procedures and the Before You File
  • Petitioners should have all required information and documentation readily available before beginning the filing process; the portal system does not allow users to save their work and return to it at a later time.

Questions about the MTB process can be directed to mtbinfo@usitc.gov, and members of the Thompson Hine LLP International Trade group are also available to offer guidance and assistance with any petitions.

On October 7, 2019, U.S. Trade Representative Robert Lighthizer and the Ambassador of Japan to the United States Shinsuke J. Sugiyama signed the U.S.-Japan Trade Agreement and the U.S.-Japan Digital Trade Agreement. The U.S.-Japan Trade Agreement will eliminate or reduce tariffs on certain agricultural and industrial products to enhance bilateral trade and includes numerous side letters on specific items, such as alcoholic beverages, beef, rice, skimmed milk powder and whey. The Digital Trade Agreement establishes high-standard rules in digital trade and includes a side letter on interactive computer services.

As previously reported (see Trump and Trade Update of September 26, 2019), under this first stage of a broader trade agreement, Japan will provide increased market access for certain U.S. agricultural goods, the United States will reduce or eliminate tariffs on the import of certain Japanese industrial goods, and both countries will expand e-commerce and allow the free flow of data across borders. In brief remarks, President Donald Trump stated, “These two deals represent a tremendous victory for both of our nations.” He added that the agricultural agreement will eliminate Japanese tariffs on many U.S. products and that the digital agreement will “ensure that Americans have a level playing field in trading cutting-edge products and services.”

In addition to releasing the text of the two trade agreements and side letters, the Office of the U.S. Trade Representative published fact sheets with additional details on aspects of the agreements:

A World Trade Organization (WTO) arbitrator has ruled that the United States may take countermeasures/implement retaliatory tariffs against the European Union (EU) concerning “adverse effects” arising from EU subsidies provided to Airbus. The arbitrator determined that the United States may request authorization from the WTO’s Dispute Settlement Body (DSB) to take countermeasures at a level not to exceed $7,496,623 million annually. This ruling relates to a long-running dispute between the United States and the EU concerning allegations over subsidies to their largest civil aircraft manufacturers, Boeing and Airbus. The arbitrator determined that five sales campaigns involving the companies during the 2011-2013 period that resulted in winning bids by Airbus were affected by certain EU subsidies in violation of the WTO’s Agreement on Subsidies and Countervailing Measures. A previous WTO ruling determined that Boeing would have won the bids but for the EU subsidies.

The WTO arbitrator calculated the amount allowed for these retaliatory tariffs based on WTO findings that EU launch aid for Airbus has caused Boeing significant lost sales of large civil aircraft and impeded Boeing’s aircraft exports to the EU, Australia, China, Korea, Singapore and United Arab Emirates. In response to the ruling, U.S. Trade Representative (USTR) Robert Lighthizer stated, “For years, Europe has been providing massive subsidies to Airbus that have seriously injured the U.S. aerospace industry and our workers. Finally, after 15 years of litigation, the WTO has confirmed that the United States is entitled to impose countermeasures in response to the EU’s illegal subsidies.” After Lighthizer announced that the United States would begin applying tariffs on certain EU goods on October 18, 2019, the Office of the USTR released a final product list containing the affected items. [Update: see USTR’s notice published in the Federal Register on October 18,2019.] In total, the United States will impose a 10 percent tariff on the imports of new airplanes and other civil aircraft and a 25 percent duty on imports of agricultural and industrial products from various EU member countries. The bulk of the tariffs will affect imports from France, Germany, Spain and the United Kingdom.

According to the USTR, the arbitrator’s decision under the WTO rules is final and not subject to appeal. While this is correct, the ruling still must be approved before the WTO’s DSB. Accordingly, the USTR has requested that the DSB schedule a meeting for October 14, 2019. In addition, a separate WTO panel is considering whether EU subsidies for Airbus have been removed in compliance with WTO rules. If this separate ruling determines that the subsidies have been removed and the EU is in compliance with past WTO rulings on these aircraft subsidies, the United States would have to discontinue these retaliatory tariffs.

In a series of notices, the Office of the U.S. Trade Representative (USTR) granted exclusions from Section 301 tariffs for certain imported Chinese products on List 1 (valued at $34 billion), List 2 (valued at $16 billion and List 3 (valued at $200 billion). Products on these lists currently face a 25 percent Section 301 tariff, which is scheduled to increase to 30 percent on October 15, 2019.

List 1 – Tariffs on Products Valued at $34 Billion

On September 20, 2019, USTR announced exclusions for 310 specially prepared product descriptions covering 724 separate exclusion requests. Most fall within Chapter 84 (Nuclear reactors, boilers, machinery and mechanical appliances; parts thereof) and Chapter 85 (Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television image and sound recorders and reproducers, and parts and accessories of such articles) of the Harmonized Tariff Schedule (HTS). Additional product exclusions were granted for products under Chapter 87 (Vehicles other than railway or tramway rolling stock, and parts and accessories thereof), Chapter 88 (Aircraft, spacecraft and parts thereof) and Chapter 90 (Optical, photographic, cinematographic, measuring, checking, precision, medical or surgical instruments and apparatus; parts and accessories thereof). The list of products covers certain heat exchangers, certain centrifugal pumps, pet water drinking fountains, certain compressors, certain chilling units and freezers, certain filtration devices, certain swimming pool filter cartridges, certain electric operator-riding pallet trucks and forklift trucks, certain milling machines, certain woodworking equipment, certain types of valves and bearings, numerous types of AC/DC motors, certain GPS apparatus, numerous types of switches and circuit connectors, certain transistors and certain thermostats.

On September 27, 2019, USTR announced exclusions for 92 specially prepared product descriptions covering 129 separate exclusion requests. Most fall within Chapter 84 (Nuclear reactors, boilers, machinery and mechanical appliances; parts thereof) and Chapter 85 (Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television image and sound recorders and reproducers, and parts and accessories of such articles) of the HTS. Several product exclusions were granted for products under Chapter 88 (Aircraft, spacecraft and parts thereof) and Chapter 90 (Optical, photographic, cinematographic, measuring, checking, precision, medical or surgical instruments and apparatus; parts and accessories thereof). The list of products covers many electrical switches, capacitors, AC/DC motors, bearings, certain industrial equipment, certain process modules, valves and digital optic fiber cables.

For these List 1 products, the exclusions will be retroactive to July 6, 2018, and extend until October 2, 2020, which is one year from the date of USTR’s Federal Register notice.

List 2 – Tariffs on Products Valued at $16 Billion

On September 20, 2019, USTR announced exclusions for 89 specially prepared product descriptions covering 400 separate exclusion requests. Most fall within Chapter 39 (Plastics and articles thereof), Chapter 73 (Articles of iron or steel), Chapter 84 (Nuclear reactors, boilers, machinery and mechanical appliances; parts thereof) and Chapter 85 (Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television image and sound recorders and reproducers, and parts and accessories of such articles) of the HTS. Several product exclusions were granted for products falling under Chapter 76 (Aluminum and articles thereof), Chapter 86 (Railway or tramway locomotives, rolling-stock and parts thereof; railway or tramway track fixtures and fittings and parts thereof; mechanical (including electro-mechanical) traffic signaling equipment of all kinds), Chapter 87 (Vehicles other than railway or tramway rolling stock, and parts and accessories thereof) and one product under Chapter 90 (Optical, photographic, cinematographic, measuring, checking, precision, medical or surgical instruments and apparatus; parts and accessories thereof). The list of products covers certain acid-acrylic chemicals, certain polyvinyl chloride hoses, certain acrylonitrile-butadiene-styrene (ABS) tubes, certain polyacetal brackets, filters and hose fittings, certain types of film rolls, certain sheets of polyvinyl chloride or polyethylene, certain steel pipes and tubes, chain link fence panels, gazebos, pergolas and trellises made of iron or steel, certain spark-ignition engines, certain industrial cutting equipment, certain DC motors, electric skateboards and motorcycles, and certain thermometers.

On September 27, 2019, USTR announced exclusions for 111 specially prepared product descriptions covering 382 separate exclusion requests. Most fall within Chapter 85 (Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television image and sound recorders and reproducers, and parts and accessories of such articles), Chapter 86 (Railway or tramway locomotives, rolling-stock and parts thereof; railway or tramway track fixtures and fittings and parts thereof; mechanical (including electro-mechanical) traffic signaling equipment of all kinds) and Chapter 90 (Optical, photographic, cinematographic, measuring, checking, precision, medical or surgical instruments and apparatus; parts and accessories thereof) of the HTS. Several product exclusions were granted for products under Chapter 39 (Plastics and articles thereof), Chapter 70 (Glass and glassware), Chapter 73 (Articles of iron or steel) and Chapter 84 (Nuclear reactors, boilers, machinery and mechanical appliances; parts thereof). The list of products covers numerous DC electric motors, certain solar panel kits, certain pressure and sensor switches, buffering/cushioning members and parts for vehicles, certain thermometers, different types of multimeters and pet urine collection and disposal kits.

For these List 2 products, the exclusions will be retroactive to August 23, 2018, and extend until October 2, 2020, which is one year from the date of USTR’s Federal Register notice.

List 3 – Tariffs on Products Valued at $200 Billion

On September 20, 2019, USTR announced exclusions for 38 specially prepared product descriptions covering 46 separate exclusion requests. Most fall within 17 different chapters of the HTS. The list of products covers plastic pods for brewing coffee, dog harnesses and retractable leashes, certain cooking grills, certain wood flooring, certain woven or polyester fabrics, certain piston engines, parts for automatic data processing (ADP) machines, certain single-speed bicycles, certain decorative lighting sets and lamp shades.

For these List 3 products, the exclusions will apply retroactively to September 24, 2018, and extend until August 7, 2020.

Overall, these exclusions apply to any product that satisfies the description in the annexes of the Federal Register notices, regardless of whether the company using the exclusion filed the request. Each exclusion is governed by the scope of the 10-digit HTS heading and the product description appearing in the annex of the exclusion notice; it is not governed by the product description set out in any particular exclusion request. U.S. Customs and Border Protection will soon issue instructions on entry guidance and implementation. USTR will continue to issue determinations on pending requests on a periodic basis.

In September, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) continued to tighten its sanctions on Iran and Venezuela, and addressed a sanctions-evading scheme for Syria involving several Russian entities.

  • Iran: On September 20, 2019, OFAC announced that it was designating the Central Bank of Iran (CBI), the National Development Fund of Iran (NDF) and Etemad Tejarate Pars Co. for their ongoing support of the Islamic Revolutionary Guards Corps (IRGC), its Qods Force (IRGC-QF) and Hizballah. According to OFAC, the NDF, Iran’s sovereign wealth fund (whose board of trustees includes Iran’s president, oil minister and the governor of the CBI) has been a major source of foreign currency and funding for the IRGC-QF and Iran’s Ministry of Defense and Armed Forces Logistics (MODAFL). Etemad Tejarate Pars, an Iran-based company, has been designated by OFAC for concealing financial transfers for MODAFL’s military purchases, including funds originating from the NDF. The CBI has long been an entity of concern and has been designated for its continuing facilitation and transfer of, according to OFAC, “several billion of U.S. dollars and euros to the IRGC-QF and hundreds of millions to MODAFL from the NDF,” as well as for coordinating with the IRGC-QF to transfer funds to Hizballah. In announcing these designations, Sigal Mandelker, Treasury’s Under Secretary for Terrorism and Financial Intelligence, stated that “We are putting governments on notice that they are risking the integrity of their financial systems by continuing to work with the Iranian regime’s arm of terror finance, its Central Bank.”
  • Venezuela: On September 24, 2019, OFAC announced that it was designating four entities that operate in the oil sector of the Venezuelan economy and four vessels that were determined to be engaged in the transport of oil and other petroleum products from Venezuela to Cuba. According to OFAC, Caroil Transport Marine Ltd., Trocana World, Inc., Tovase Development Corp. and Bluelane Overseas SA had worked to circumvent sanctions by receiving oil shipments from Venezuela, specifically Venezuela’s state-owned oil company Petroleos de Venezuela, S.A., and then transporting the oil to Cuba on their vessels.
  • Russia: On September 26, 2019, OFAC announced that it was designating Maritime Assistance LLC, determined to be a front company supporting the already OFAC-designated Russian-company OJSC Sovfracht, for having materially assisted and provided support for, or goods or services in support of, the Syrian Company for Oil Transport. Maritime Assistance LLC participated in a sanctions evasion scheme by OJSC Sovfracht to facilitate the delivery of jet fuel to Russian forces operating in Syria, specifically by making payments on Sovfracht’s behalf to enable Sovfracht to continue fulfilling contracts after its designation. These transactions facilitated the sale and delivery of jet fuel in 2016 and 2017 to Banias, Syria, which was used by Russian military aircraft. In addition, OFAC designated three senior Sovfracht officials and identified five vessels as blocked property of Transpetrochart Co. Ltd., a Russian company designated by OFAC in December 2016 for providing material support to Sovfracht.

As a result of these actions, all property and interests in property of these entities and individuals – and of any entities that are owned, directly or indirectly, 50 percent or more by the designated 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 for or provides significant financial services to these entities could be subject to U.S. correspondent account sanctions or payable-through account sanctions.