The U.S. Department of Justice unsealed an indictment charging 28 North Korean and 5 Chinese individuals (“Defendants”) with facilitating more than $2.5 billion in illegal payments for Pyongyang’s nuclear weapons and missile program through North Korea’s state-owned Foreign Trade Bank (“FTB”).  DOJ alleges that the scheme involved “covert branches” of FTB in China, Russia, Libya, Austria, Kuwait and Thailand that provided services and engaged in prohibited U.S. dollar transactions for FTB in violation of U.S. sanctions.

The Office of Foreign Assets Control (“OFAC”) had added FTB to the Specially Designated Nationals and Blocked Persons (“SDN”) list on March 11, 2013 as part of its efforts to impede North Korea’s ballistic missile and weapons of mass destruction programs.   In the indictment, FTB is alleged to have directed Defendants and others to open and operate FTB branches in violation of U.S. sanctions and banking regulations.  Specifically, the Defendants are alleged to have conspired through an elaborate global scheme involving over 250 front companies to: transact in U.S. dollars with SDNs barred from the U.S. financial system; facilitate the purchase of products and services for North Korean users; and evade U.S. licensing requirements and regulations prohibiting the export of financial services to FTB.  The indictment charges the Defendants with counts of conspiracy, violations of the International Emergency Economic Powers Act (IEEPA), bank fraud, money laundering, and continuing a financial crimes enterprise.

According to comments from the acting U.S. attorney for D.C., “Through this indictment, the United States has signified its commitment to hampering North Korea’s ability to illegally access the U.S. financial system, and to limiting its ability to use proceeds from these illicit actions to enhance its illegal weapons of mass destruction program.”

 

 

 

 

On May 27, 2020, Secretary of State Mike Pompeo announced that the United States was ending the sanctions waiver pertaining to the remaining nuclear projects in Iran covered by the Joint Comprehensive Plan of Action (JCPOA) – the Arak reactor modernization conversion, the provision of enriched uranium for the Tehran Research Reactor, and the export of Iran’s spent and scrap research reactor fuel. The sanctions waiver covering these activities will end on July 27, 2020, following a final, 60-day wind-down period allowing companies and entities involved in these activities to cease their operations. However, for ongoing international support of the Bushehr Nuclear Power Plant Unit 1, the State Department indicated that this waiver would continue 90 days to ensure the safety of operations.

The Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced that as a result of the State Department’s action, “persons engaged in such activities should take the steps necessary to wind down those activities … to avoid potential exposure to sanctions under U.S. law.” In addition, OFAC added two Iranian individuals to the Specially Designated Nationals (SDN) List:

  • Majid Agha’I – a manager of an Atomic Energy Organization of Iran subsidiary responsible for research and development of advanced centrifuges
  • Amjad Sazgar – managing director of the Atomic Energy Organization of Iran responsible for the industrial-scale production of uranium enrichment gas centrifuge machines

In making this announcement, Pompeo stated, “The Iranian regime has continued its nuclear brinkmanship by expanding proliferation sensitive activities. These escalatory actions are unacceptable and I cannot justify renewing the waiver for these JCPOA-related activities as a result.”

In a May 28, 2020 Federal Register notice, the Office of the U.S. Trade Representative (USTR), without explanation or precedent, revoked two granted Section 301 product exclusions.  In early May 2020, the USTR approved a batch of product exclusions for certain List/Tranche 4 products (imports from China with an annual trade value of $300 billion) from Section 301 tariffs.  See Trump and Trade Update of May 11, 2020.  Barely three weeks later, the USTR has announced that exclusions for two products have been removed and that Section 301 tariffs will again apply to imports of these products from China.

The two products that have had their Section 301 tariffs reinstated are:

  • Tumblers or disposable graduated liners for pitchers, of plastics, of a kind used in healthcare facilities (described in statistical reporting number 3924.10.4000)
  • Manually operated pill or tablet crushers of plastics, presented with attachable pouches of plastics for capturing and storing the resulting powders (described in statistical reporting number 8479.82.0080)

The Office of the U.S. Trade Representative (USTR) has released its summary of specific negotiating objectives for the initiation of U.S.-Kenya trade negotiations.  As part of the process of formulating these objectives, the USTR on March 23, 2020, solicited public comments (see Trump and Trade Update of April 13, 2020) and received over 5,000 submissions.  Overall, the negotiating objectives will “seek a mutually beneficial trade agreement that can serve as a model for additional agreements across Africa” and “build on the objectives of the African Growth and Opportunity Act, promote good governance and the rule of law.”

The objectives for trade in goods are to ensure “fair, balanced, and reciprocal trade with Kenya” while increasing transparency in import and export licensing procedures and adding discipline to import and export monopolies to prevent trade distortions.  This includes addressing issues such as: sanitary and phytosanitary measures in agricultural trade; enhancing procedures and increasing transparency for customs and trade facilitation measures; developing clear rules of origin; addressing technical barriers to trade; promoting greater compatibility between U.S. and Kenya regulations; securing commitments from Kenya to provide fair and open conditions for trade in services (particularly in telecommunications and financial services); securing commitments not to impose customs duties on digital products and non-discriminatory treatment of electronically transmitted digital products; promoting adequate and effective protection of intellectual property rights; securing for U.S. investors in Kenya important rights consistent with U.S. legal principles; addressing state-owned and controlled enterprises (SOEs) by building on the definition of an SOE in the United States-Mexico-Canada Agreement; requiring Kenya to adopt and maintain in its laws and practices the internationally recognized core labor standards; establishing strong and enforceable environment obligations; securing provisions committing Kenya to criminalize government corruption; preserving the ability of the United States to enforce rigorously its trade laws, including the antidumping (AD), countervailing duty (CVD) and safeguard laws; establishing a dispute settlement mechanism that is effective and timely; and ensuring that Kenya avoids manipulating currency/exchange rates.

As required by law, the USTR will continue to work with Congress as negotiations with Kenya begin and, as necessary, update these negotiating objectives in the future.

ITC Initiates Investigation to Provide Advice on Probable Economic Effect of Duty-free Treatment for Current U.S. Imports from Kenya

In a related development, the U.S. International Trade Commission (ITC) has initiated at the request of the USTR an investigation into the probable economic effect of providing duty-free treatment for imports of currently dutiable products from Kenya on both U.S. industries producing like or directly competitive products and U.S. consumers.  In preparing its advice, the ITC will consider each article in chapters 1 through 97 of the Harmonized Tariff Schedule of the United States (HTSUS) for which U.S. tariffs will remain, taking into account implementation of U.S. World Trade Organization commitments. The advice will be based on the HTSUS in effect during 2020 and trade data for the year 2019. The ITC will submit its confidential report to the USTR by September 16, 2020.

The ITC will accept written comments regarding this investigation until July 14, 2020.  Written submissions should be addressed to the Secretary of the ITC and must be made through the Electronic Document Information System (EDIS, https://edis.usitc.gov) on the docket for Investigation Nos. TA-131-046 and TPA-105-007 (U.S.-Kenya Trade Agreement: Advice on the Probable Economic Effect of Providing Duty-free Treatment for Currently Dutiable Imports).  Further information regarding the investigation, submitting written comments, or requesting to appear at the on-line public hearing to be held on July 7, 2020 is available from the ITC’s May 26, 2020 Notice of Investigation.

 

On May 21, 2020, the Department of the Treasury published in the Federal Register a proposed rule to modify certain regulations of the Committee on Foreign Investment in the United States (CFIUS) pursuant to the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA). While the CFIUS notification process remains largely a voluntary process with respect to most transactions, CFIUS currently mandates the filing of a declaration where there is a covered transaction in a U.S. business that develops, manufactures or produces “critical technology” and where a foreign government has a “substantial interest” in a foreign person that will invest in certain types of U.S. businesses. The proposed rule will amend the mandatory filing requirements in these two areas. The public may file comments on this rulemaking no later than June 22, 2020.

Certain Transactions Involving U.S. Businesses with Critical Technologies

In October 2018, CFIUS published interim regulations that mandated the filing of a declaration for certain foreign investment transactions involving U.S. businesses engaged in critical technology industries. At the time, filings were mandated where the U.S. business produced, developed, or manufactured “critical technology” that was utilized in 27 specific industries identified by reference to the North American Industry Classification System (NAICS). See Trump and Trade Update of October 15, 2018. This interim rule was continued in large part in the final rules that went into effect February 13, 2020. See Trump and Trade Update of January 22, 2020.

This proposed rule will narrow the mandatory declaration requirement and align it more closely with U.S. export controls instead of NAICS codes. Specifically, a declaration would only be mandated if certain U.S. government authorizations would be required to export, re-export, transfer (in country), or retransfer the critical technology or technologies produced, designed, tested, manufactured, fabricated, or developed by the U.S. business to certain foreign parties to the transaction.  The foreign parties could trigger a declaration mandate if the foreign person would control the U.S. business, have a covered investment in the U.S. business, and or in simplified terms, a direct or indirect voting interest of more than 25% in a person that would have a controlling or covered investment interest in the U.S. business.

The proposed rule intends to leverage “the national security foundations of the established export control regimes, which require licensing or authorization in certain cases based on an analysis of the particular item and end user, and the particular foreign country for export, re-export, transfer (in country), or retransfer.” Note that this proposed rule does not seek to modify the definition of “critical technologies.”

Amendment to Definition of “Substantial Interest”

The proposed rule also seeks to clarify the definition of “substantial interest” for purposes of determining whether a foreign government has a substantial interest in a foreign person that will acquire certain types of U.S. businesses. In particular, the proposed rule clarifies that the definition of substantial interest applies, for example, ”where a general partner, managing member, or equivalent primarily directs, controls, or coordinates the activities of the entity.” Other edits intended to clarify calculations of indirect interests are also proposed.

FIRRMA also requires notifications for certain covered transactions in which a foreign government has a “substantial interest” in a foreign person that will acquire a substantial interest in certain types of U.S. businesses. The proposed rule clarifies the definition of “Substantial Interest” at 31 C.F.R. 800.244(b) and (c). This provision explains how to determine the percentage of interest an entity indirectly holds in another entity. The proposed rule clarifies that paragraph 800.244(b) “applies only where a general partner, managing member, or equivalent primarily directs, controls, or coordinates the activities of the entity.”

Public Comment Period

Written comments by interested parties on this proposed rule must be filed no later than June 22, 2020. Comments may be submitted electronically or by mail. Comments may be submitted electronically through the federal eRulemaking portal at https://www.regulations.gov on Docket no. TREAS-DO-2020-0012. Comments submitted via mail should be addressed to U.S. Department of the Treasury, Attention: Meena R. Sharma, Deputy Director of Investment Security Policy and International Relations, 1500 Pennsylvania Avenue NW, Washington, D.C. 20220, citing “Provisions Pertaining to Certain Investments in the United States by Foreign Persons.”

The Department of Commerce has issued a Federal Register notice seeking public comment on (1) the appropriateness of the information its Bureau of Industry and Security (BIS) requested and considered in applying the Section 232 exclusion criteria to product exclusion requests, and (2) the efficiency and transparency of the product exclusion process itself. This request for comment is related to the national security investigation President Donald Trump implemented pursuant to Section 232 of the Trade Expansion Act of 1962, as amended. In March 2018, the president issued two Presidential Proclamations implementing tariffs on certain steel and aluminum imports into the United States. See Trump and Trade Update of March 8, 2018.  Shortly thereafter, BIS released the requirements and procedures for requesting product-based exclusions from these tariffs. See Trump and Trade Update of March 16, 2020.

As of March 2020, BIS had received 179,128 exclusion requests (157,983 for steel and 21,145 for aluminum). Of these requests, 34,970 have been rejected and 33,297 received objections. BIS has posted 114,009 decisions, with 78,569 exclusions granted and 25,440 exclusion requests denied. Over the course of the exclusion review process, Commerce has received numerous complaints from Congress and the public about the manner in which reviews have been considered and the lack of any meaningful transparency. In October 2019, in fact, Commerce’s Inspector General issued a “management alert” over concerns about the “lack of transparency that contributes to the appearance of improper influence in decision-making” for the Section 232 steel and aluminum tariff exclusion process. See Trump and Trade Update of October 31, 2019.

With this Federal Register notice, BIS is seeking public input on the process and is interested in comments on: (1) the information sought on the exclusion request, objection, rebuttal and surrebuttal forms; (2) expanding or restricting eligibility requirements for requestors and objectors; (3) the Section 232 Exclusions Portal; (4) the requirements set forth in Federal Register notices, 83 FR 12106, 83 FR 46026, and 84 FR 26751; 5) the factors considered in rendering decisions on exclusion requests; 6) the information published with the decisions; 7) the BIS website guidance and training videos; 8) the definition of “product” determining when separate exclusion requests must be submitted; and 9) the incorporation of steel and aluminum derivative products into the product exclusion process. BIS will also accept comments on potential revisions to the exclusion process and any specific details about commenters’ experiences with the exclusion/objection process.

Public comments will be accepted until July 10, 2020. Any comments should be submitted via the eRulemaking portal at www.regulations.gov on Docket no. BIS-2020-0012.

On May 26, 2020, the Department of Commerce’s Bureau of Industry and Security (BIS) published a Federal Register notice seeking public comment, data analyses, and other relevant information concerning the Department of Commerce’s May 6 initiation of a national security investigation into the impact of imports of mobile cranes pursuant to Section 232 of the Trade Expansion Act of 1962. (See Trump and Trade Updated of May 8, 2020). Public comments must be filed no later than July 10, 2020, and rebuttal comments will be due by August 10, 2020.

BIS is particularly interested in comments and information on the following issues:

(i) Quantity of, or other circumstances related to, the importation of mobile cranes;

(ii) Domestic production and productive capacity needed for mobile cranes to meet projected national defense requirements;

(iii) Existing and anticipated availability of human resources, products, raw materials, production equipment, and facilities to produce mobile cranes;

(iv) Growth requirements of the mobile crane industry to meet national defense requirements and/or requirements for supplies and services necessary to assure such growth including investment, exploration, and development;

(v) The impact of foreign competition on the economic welfare of the mobile crane industry;

(vi) The displacement of any domestic mobile crane production causing substantial unemployment, decrease in the revenues of government, loss of investment or specialized skills and productive capacity, or other serious effects;

(vii) Relevant factors that are causing or will cause a weakening of our national economy; and

(viii) Any other relevant factors, including the use and importance of mobile cranes in critical infrastructure sectors identified in Presidential Policy Directive 21 (Feb. 12, 2013) (for a listing of those sectors see https://www.dhs.gov/cisa/critical-infrastructure-sectors).

Written Submissions and Public Hearing

All comments must be addressed as “Section 232 Mobile Crane Investigation” and filed via the eRulemaking portal at http://www.regulations.gov on Docket No. BIS–2020–0009. While the docket will allow users to provide comments by filling in the “Comment” field, submitters are encouraged to provide comments in an attached document, including any exhibits, annexes, or other attachments, which can be uploaded and filed as part of the submission.

Submitted comments will be made available for public inspection, except information determined to be confidential. Anyone submitting business confidential information should clearly identify the business confidential portion at the time of submission, file a statement justifying nondisclosure, and file a public version.

As noted, comments must be filed by July 10, 2020, with rebuttal comments due no later than August 10, 2020. Rebuttal comments can only address issues raised in comments filed on or before the original July 10 deadline.

Commerce has not yet announced whether a public hearing will be held for this investigation. If such a hearing is held, a separate Federal Register notice will be issued.

The Office of the U.S. Trade Representative (USTR) has issued a Federal Register notice exempting Section 301 import tariffs for certain List 3 products from China (imports from China with an annual trade value of $200 billion). The exemptions cover 17 ten-digit Harmonized Tariff System (HTS) subheadings and 61 specially prepared product descriptions, which cover 103 separately submitted exclusion requests.

The excluded HTS subheadings are:

0713.33.1040

0713.50.1000

1207.70.0020

1207.70.0040

1209.30.0090

1209.91.6010

1209.91.8010

1209.91.8020

1209.91.8040

 

1209.91.8050

1209.91.8060

1209.91.8070

2916.19.1000

 

5603.14.9090

5603.92.0090

5603.93.0090

9403.70.4002

 

The exclusions with specially-prepared product descriptions include but are not limited to: freeze-dried frozen bloodworms, tubifex worms and brine shrimp; certain dried seaweed; certain children’s paint sets; certain organic surface-active liquid for washing the skin; certain toilet seal rings; certain forms of artificial graphite; a variant of refrigerant gas R-421B; various chemical compounds (CAS numbers are provided); certain handbags, coin purses, and garment travel bags; certain flooring planks and other wood products; polypropylene roofing underlayment; certain diaries and albums for collecting; certain rugs of hand-knotted pile, of nylon and polypropylene; certain equipment for scaffolding; certain drums, barrels and containers of stainless steel; certain portable grills of iron or steel designed for use with both charcoal and propane as fuels; certain stainless steel cover assemblies and parts for stoves and ranges; certain types of tailor welded blanks of hot-formed steel sheets; certain types of pet identification tags; certain gun safes with digital keypads; wind turbine hubs; certain fuel filters for internal combustion engines; certain portal cranes, each with a jib or operating arm; certain self-regulating valves to control fuel pressure for automotive and marine applications; certain headlamp assemblies for passenger cars and trucks; certain countertop ovens of stainless steel and plastic; certain unassembled non-upholstered chairs with metal frames; and certain floor-standing jewelry armoires.

These exclusions will apply from September 24, 2018, through August 7, 2020. Each exclusion is governed by the scope of the 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. The USTR will continue to issue determinations on pending requests on a periodic basis.

An exclusion can apply to any product that fits within the description in the annex of the Federal Register notice, regardless of which company submitted the original request. Please contact us to discuss whether we can assist in determining if your product might fit within one of these exclusions.

In collaboration with our foreign law firm partners, we continue to update our chart of COVID-19 measures taken by governments around the world. The government measures in the chart include economic measures, labor and employment measures, health and safety measures, and export and import measures.

View/download the Country Guide: Government Measures in Response to COVID-19

Today’s update includes new information for Brazil, Canada, Chile, Costa Rica, El Salvador, France, Germany, Guatemala, Honduras, India, Indonesia, Israel, Italy, Japan, Panama, Poland, Russia, Thailand, Turkey, United Kingdom and Vietnam.

The pace at which countries are imposing new measures has slowed. Most of the changes this week are extensions of certain deadlines relating to economic and labor and employment measures. Additionally, depending on the continent, governments’ emergency declarations and related health and safety measures have been extended or have expired. Some countries in Europe and many in Asia have lifted or eased quarantine and lockdown measures. Generally, export controls and import facilitation measures involving COVID-19-related health and medical goods remain the same with a few exceptions. The updates are bolded in the chart for ease of reference.

Please see our Trump and Trade Update of April 7 for discussion of this initiative.

The Department of Commerce’s Bureau of Industry and Security (BIS) has issued an Interim Final Rule amending General Prohibition Three, also known as the foreign-produced direct product reexport rule, so that this General Prohibition applies to certain additional foreign-made items destined for certain persons designated with a new footnote on BIS’ Entity List. Specifically, this new rule targets Huawei Technologies Co., Ltd. and its non-U.S. affiliates listed on the Entity List and is intended to impose controls on their access to foreign-produced semiconductor chips produced outside the United States using U.S.-origin software or technology.

Key Notes:

  • Commerce amends provisions of the Export Administration Regulations to tighten “foreign-produced direct product” reexport rule.
  • Transactions involving Huawei Technologies Co., Ltd. and numerous non-U.S. affiliates will be significantly impacted as these entities’ ability to acquire semiconductors with ties to U.S. technology and software will be substantially reduced.
  • Interim Final Rule was effective as of May 15, but public comment is allowed until July 14, 2020.
  • Continued shipment of certain items already in production may continue until September 14, 2020.

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