The United States has announced additional financial sanctions on three individuals and nine entities supporting Russia’s attempt to integrate the Crimea region of Ukraine through private investment and privatization projects or engaging in serious human rights abuses in furtherance of Russia’s occupation or control over parts of Ukraine. Under Secretary of the Treasury for Terrorism and Financial Intelligence Sigal Mandelker stated, “The United States is leveraging new authorities to target Russian actors for serious human rights abuses in parts of Ukraine that the United States government has determined are forcibly occupied or otherwise controlled by the Russian government, and other reprehensible acts in furtherance of the Kremlin’s malign agenda.”

The sanctioned individuals are Andriy Volodymyrovych Sushko, Aleksandr Basov and Vladimir Nikolaevich Zaritsky. The sanctioned entities are the Ministry of State Security of the so-called Luhansk People’s Republic, Mriya Resort and Spa, Limited Liability Company Garant-SV, Limited Liability Company Infrastructure Projects Management Company, Joint Stock Company Sanatorium AY-Petri, Joint Stock Company Dyulber, Joint Stock Company Sanatorium Miskhor, KRIMTETS, AO, and Limited Liability Company Southern Project.

As a result of these sanctions, as of November 8, 2018, all of these individuals and entities have been placed on the Office of Foreign Assets Control’s Specially Designated Nationals (SDN) List, their property and interests in property that are subject to U.S. jurisdiction have been blocked, and U.S. individuals and entities are generally prohibited from engaging in transactions with them.

On November 7, 2018, the Department of Commerce’s International Trade Administration (ITA) issued an affirmative final determination in the antidumping duty (AD) and countervailing duty (CVD) investigations of imports of common alloy aluminum sheet from the People’s Republic of China (China). These investigations were self-initiated by the Trump administration last year (see Trump and Trade Updates dated April 18, 2018 and November 29, 2017), and were the first self-initiated investigations by the ITA in nearly 30 years.

In the AD investigation, ITA assigned a dumping rate of 49.85 percent for certain mandatory and otherwise eligible Chinese companies, while assigning a China-wide rate of 59.72 percent on other companies. In the CVD investigation, the ITA calculated a subsidy rate of between 46.48 percent and 55.02 percent for certain mandatory Chinese companies, while determining a rate of 116.49 percent for other Chinese companies that were specifically subject to the investigation. The China-wide subsidy rate is 50.75 percent. (See the AD case decision memorandum and CVD case decision memorandum.)

The ITA Fact Sheet notes that merchandise covered by these investigations is common alloy aluminum sheet, which is a flat-rolled aluminum product having a thickness of 6.3 mm or less, but greater than 0.2 mm, in coils or cut to length, regardless of width. Common alloy aluminum sheet within the scope of this investigation includes both not clad aluminum sheet, as well as multi-alloy, clad aluminum sheet. With respect to not clad aluminum sheet, common alloy sheet is manufactured from a 1XXX-, 3XXX-, or 5XXX-series alloy as designated by the Aluminum Association. With respect to multi-alloy, clad aluminum sheet, common alloy sheet is produced from a 3XXX-series core, to which cladding layers are applied to either one or both sides of the core. Subject merchandise includes common alloy sheet that has been further processed in a third country, including but not limited to annealing, tempering, painting, varnishing, trimming, cutting, punching, and/or slitting, or any other processing that would not otherwise remove the merchandise from the scope of the investigations if performed in the country of manufacture of the common alloy sheet. Common alloy sheet is currently classifiable under HTSUS subheadings 7606.11.3060, 7606.11.6000, 7606.12.3090, 7606.12.6000, 7606.91.3090, 7606.91.6080, 7606.92.3090, and 7606.92.6080. Further, merchandise that falls within the scope of these investigations may also be entered into the United States under HTSUS subheadings 7606.11.3030, 7606.12.3030, 7606.91.3060, 7606.91.6040, 7606.92.3060, 7606.92.6040, 7607.11.9090. Excluded from the scope of these investigations is aluminum can stock, which is suitable for use in the manufacture of aluminum beverage cans, lids of such cans, or tabs used to open such cans.

The U.S. International Trade Commission (ITC) is scheduled to make its final determinations regarding injury on December 20, 2018. If the ITC makes affirmative final determinations that imports of common alloy aluminum sheet from China materially injure, or threaten material injury to, the domestic industry, the ITA will issue AD and CVD orders. If, however, the ITC makes negative final injury determinations, the investigations will be terminated and no orders will be issued.

The U.S. International Trade Commission (ITC) is seeking public comment concerning the probable economic impact of duty-free treatment for currently dutiable imports from Japan. The investigation, U.S.-Japan Trade Agreement: Advice on the Probable Economic Effect of Providing Duty-free Treatment for Currently Dutiable Imports, was requested by the U.S. Trade Representative (USTR) Robert Lighthizer in a letter received October 26, 2018. For additional background on this trade agreement and USTR’s separate request for public comments, see Trump and Trade Updates of October 17, 2018 and October 26, 2018.

The ITC will provide a report advising the USTR on the probable economic effect of providing duty-free treatment for imports of currently dutiable products from Japan on U.S. industries producing like or directly competitive products and on consumers. The USTR asked that the ITC’s analysis consider each article in chapters 1 through 97 of the Harmonized Tariff Schedule of the United States (HTS) for which U.S. tariffs will remain, taking into account implementation of U.S. commitments in the World Trade Organization. The advice will be based on the HTS in effect during 2018 and trade data for the year 2017. In addition, the ITC report will assess the probable economic effects of eliminating tariffs on imports from Japan of certain agricultural products on U.S. industries producing the products concerned and on the U.S. economy as a whole. The ITC expects to submit its report, which will be confidential, to the USTR by January 24, 2019.

The ITC is seeking input for the investigation from all interested parties under Investigation Nos. TA-131-043 and TPA-105-004. The key deadlines for the investigation are:

  • November 26, 2018: Deadline for filing requests to appear at the public hearing
  • November 30, 2018: Deadline for filing prehearing briefs and statements
  • December 6, 2018: Public hearing – Main ITC Hearing Room, 500 E Street S.W., Washington, D.C. 20436
  • December 13, 2018: Deadline for filing post-hearing briefs and submissions
  • December 13, 2018: Deadline for filing all other written statements
  • January 24, 2019: Transmittal of report to the USTR

Further information on the scope of the investigation and appropriate submissions is available in the ITC’s notice of investigation, dated November 7, 2018.

On November 5, 2018, the U.S. government fully re-imposed sanctions on Iran as a result of the cessation of the United States’ participation in the Joint Comprehensive Plan of Action (JCPOA) (see Trump and Trade Update dated May 8, 2018). November 5 marked the end of the 180-day wind-down period for activities that had previously been allowed with Iran under the JCPOA. This deadline, along with the August 6, 2018 re-imposition of other sanctions toward Iran (see Trump and Trade Update dated August 6, 2018), now means that all U.S. sanctions lifted or waived in connection with the JCPOA have been re-imposed and are in full effect. On Friday November 2, 2018, Secretary of State Michael Pompeo and Secretary of the Treasury Steven Mnuchin held a special briefing to address the “snapback” of these sanctions on Iran’s energy, shipping, banking and shipbuilding industries that were lifted as part of the Iran nuclear deal.

Pompeo stated that “these sanctions hit at the core areas of Iran’s economy. They are necessary to spur changes we seek on the part of the regime.” Mnuchin announced: “The Treasury Department will add more than 700 names to our list of blocked entities. This includes hundreds of targets previously granted sanctions relief under the JCPOA, as well as more than 300 new designations.” The United States has temporarily granted eight countries (China, India, Italy, Greece, Japan, South Korea, Taiwan and Turkey) an “exemption” for specific circumstances dealing with the limited procurement of Iranian crude oil. Pompeo indicated, however, that “we will continue negotiations to get all the nations to zero.”

In a press release issued by the Office of Foreign Assets Control (OFAC), Mnuchin further stressed that “Treasury’s imposition of unprecedented financial pressure on Iran should make clear to the Iranian regime that they will face mounting financial isolation and economic stagnation until they fundamentally change their destabilizing behavior. Iran’s leaders must cease support for terrorism, stop proliferating ballistic missiles, end destructive regional activities, and abandon their nuclear ambitions immediately if they seek a path to sanctions relief.”

Sanctions previously lifted under the JCPOA have been re-imposed on the following industries, companies and organizations that have now been placed on the OFAC Specially Designated Nationals and Blocked Persons (SDN) List:

  • More than 70 Iran-linked financial institutions, including their foreign and domestic subsidiaries.
  • Iran’s Islamic Republic of Iran Shipping Lines (IRISL) and National Iranian Tanker Company (NITC), including 65 IRISL subsidiaries and associated individuals.
  • The Atomic Energy Organization of Iran (AEOI) as well as 23 AEOI subsidiaries and associated individuals.
  • Iran Air (the national airline of Iran) and 67 aircraft operated by Iran Air.

In a fact sheet issued by the White House, the Trump administration stated that sales of food, agricultural commodities, medicine and medical devices will continue to remain exempt from the sanctions.

For further information, the OFAC has published the full list of entities added to the SDN List and updated its frequently asked questions concerning the re-imposition of these sanctions.

On November 1, 2018, U.S. Attorney General Jeff Sessions announced the creation of a “China Initiative” aimed at identifying priority Chinese trade theft cases for investigation and enforcement. In prepared remarks, Sessions emphasized that “This theft is not just wrong; it poses a grave threat to our national security. And it is unlawful.” The new initiative comes after several high-profile investigations of Chinese enterprises and citizens concerning espionage and theft of key U.S. technologies and intellectual property. It would also appear that this new action directed at China is yet another approach President Trump and his administration are taking in an effort to address what it views as China’s unfair intellectual property and technology transfer policies and practices.

The new China Initiative will be led by Assistant Attorney General John Demers, who currently leads the Department of Justice’s (DOJ) National Security Division, and will include cross-functional support from various U.S. Attorneys and members of the Federal Bureau of Investigation. In a published fact sheet, Sessions established several goals for the initiative, including:

  • Identify priority trade secret theft cases, ensure that investigations are adequately resourced and work to bring them to fruition in a timely manner and according to the facts and applicable law;
  • Develop an enforcement strategy concerning non-traditional collectors (e.g., researchers in labs, universities and the defense industrial base) that are being coopted into transferring technology contrary to U.S. interests;
  • Apply the Foreign Agents Registration Act (FARA) to unregistered agents seeking to advance China’s political agenda, bringing enforcement actions when appropriate;
  • Equip U.S. Attorneys with intelligence and materials they can use to raise awareness of these threats within their districts;
  • Implement the Foreign Investment Risk Review Modernization Act (FIRRMA) for DOJ (related to national security reviews of certain foreign direct investment in U.S. companies holding critical technology);
  • Identify opportunities to better address supply chain threats, especially ones impacting the telecommunications sector, prior to the transition to 5G networks;
  • Identify Foreign Corrupt Practices Act (FCPA) cases involving Chinese companies that compete with U.S. businesses;
  • Increase efforts to improve Chinese responses to requests under the Mutual Legal Assistance Agreement (MLAA) with the United States; and
  • Evaluate whether additional legislative and administrative authorities are required to protect our national assets from foreign economic aggression.

In concluding his remarks, Sessions stated, “We will not allow our sovereignty to be disrespected, our intellectual property to be stolen, or our people to be robbed of their hard-earned prosperity. We want fair trade and good relationships based on honest dealing. We will enforce our laws—and we will protect America’s national interests.”

On October 16, 2018, the United States Trade Representative (USTR) notified Congress of the Trump administration’s intention to enter into negotiations with Japan for a U.S.-Japan Trade Agreement. (See Trump and Trade Update dated October 17, 2018.) USTR has stated that its aim in the negotiations is to address both tariff and non-tariff barriers and to achieve fairer, more balanced trade. As a result, and in order to develop negotiating objectives, USTR is seeking public comments on such a proposed agreement, including U.S. interests and priorities.

In particular, USTR is seeking comments on the following issues:

  • General and product-specific negotiating objectives for the proposed agreement.
  • Relevant barriers to trade in goods and services between the United States and Japan that should be addressed in the negotiations.
  • Economic costs and benefits to U.S. producers and consumers of removal or reduction of tariffs and removal or reduction of non-tariff barriers on articles traded with Japan.
  • Treatment of specific goods (described by HTSUS numbers) under the proposed agreement, including comments on: (i) product-specific import or export interests or barriers; (ii) experience with particular measures that should be addressed in the negotiations; and (iii) ways to address export priorities and import sensitivities in the context of the proposed agreement.
  • Customs and trade facilitation issues that should be addressed in the negotiations.
  • Sanitary and phytosanitary measures and technical barriers to trade that should be addressed in the negotiations.
  • Other measures or practices that undermine fair market opportunities for U.S. businesses, workers, farmers and ranchers that should be addressed in the negotiations.

Written comments addressing USTR’s negotiating objectives must be submitted no later than November 26, 2018. USTR’s Trade Policy Staff Committee will hold a public hearing on these negotiating objective on December 10, 2018; any request to appear and testify must also be submitted by November 26. Requests to testify and written comments must be filed through the Federal eRulemaking Portal at https://www.regulations.gov on Docket No. USTR-2018-0034.

On October 10, 2018, the U.S. Department of the Treasury issued several amendments and temporary regulations expanding the authority of the Committee on Foreign Investment in the United States (CFIUS). The Foreign Investment Risk Review Modernization Act, enacted as part of the John S. McCain National Defense Authorization Act for Fiscal Year 2019, laid the framework for CFIUS’ expanded scope as congressional leaders aimed to address national security concerns within the context of foreign investment activities in the United States that have historically fallen outside of CFIUS’ purview.

Key Notes:

  • New pilot program effective November 10, 2018, applies to all foreign persons engaging in investment with certain U.S. industries.
  • Mandatory declarations now required for certain transactions; risk of civil penalty if ignored.
  • Export control compliance is essential to understand if transaction involves any critical, emerging or foundational technology.

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The Office of the U.S. Trade Representative (USTR) announced that the United States is set to launch separate free trade agreement (FTA) negotiations with Japan, the European Union and the United Kingdom. In letters sent to Congress on October 16, 2018, Ambassador Robert Lighthizer wrote: “We are committed to concluding these negotiations with timely and substantive results for U.S. consumers, businesses, farmers, ranchers, and workers, consistent with U.S. priorities and the negotiating objectives established by Congress in statute.”

By issuing these formal letters to Congress, the USTR is following procedures required by the Congressional Trade Priorities and Accountability Act of 2015, commonly referred to as Trade Promotion Authority (TPA). The announcement allows negotiations to formally begin with Japan and the European Union after a 90-day period. The letter announcing the negotiations with the United Kingdom accounts for its upcoming exit from the European Union and signals that talks will begin after that is completed in late March 2019.

The congressional notification letters regarding Japan, the European Union and the United Kingdom are available on USTR’s website.

Following receipt of a request from the U.S. Trade Representative (USTR), the U.S. International Trade Commission (USITC) has initiated investigation No. TPA-105-003 for the purpose of preparing the report required by section 105(c) of the Bipartisan Congressional Trade Priorities and Accountability Act of 2015. The report will assess the likely impact of the United States-Mexico-Canada Agreement (USMCA) on the U.S. economy as a whole and on selected industry sectors. Transmittal of the final USITC report to the president and Congress must occur no later than 105 days after the president enters into the agreement.

The investigation, United States-Mexico-Canada Agreement: Likely Impact on the U.S. Economy and on Specific Industry Sectors, was requested by the USTR in a letter received on August 31, 2018. In assessing the likely impact of the USMCA on the U.S. economy, the report will include information and data on the impact the agreement will have on the gross domestic product, exports and imports, aggregate employment and employment opportunities, the production, employment and competitive position of industries likely to be significantly affected by the agreement, and the interests of U.S. consumers.

Key Dates:

  • October 29, 2018: Deadline for filing requests to appear at the public hearing
  • October 30, 2018: Deadline for filing prehearing briefs and statements
  • November 15-16, 2018: Public hearing at USITC
  • December 20, 2018: Deadline for written submissions from the public

Further information on the scope of the investigation and the procedures for written submissions are available in the USITC’s notice of investigation, dated October 12, 2018.

On October 10, 2018, the U.S. Department of the Treasury released temporary regulations expanding the authority of the Committee on Foreign Investment in the United States (CFIUS). This important first step comes after the passage of the Foreign Investment Risk Review Modernization Act (FIRRMA), enacted this past August, which laid the initial framework for the expansion of the committee’s authority. (See Trump and Trade Update dated August 16, 2018.)

FIRRMA, which passed as part of the broader John S. McCain National Defense Authorization Act for Fiscal Year 2019, received bi-partisan support as congressional leaders aim to address national security concerns within the context of foreign investment activities in the United States that have historically fallen outside of the committee’s purview.

CFIUS, an interagency body that is led by the Department of Treasury, historically reviewed investment deals that involved acquiring foreign control of a U.S. entity. FIRRMA expanded this authority to now include the mandate that the committee review certain investments in U.S. industries regardless of whether they result in a controlling stake. Treasury Secretary Steven Mnuchin announced in a press release: “These temporary regulations address specific risks to U.S. critical technology while informing the department of final regulations that will fully implement FIRRMA.”

Pilot Program Overview

In a fact sheet released by the Treasury Department, the pilot program implements certain authorities provided by FIRRMA to now “include review of certain non-controlling investments” by foreign persons in key U.S. industries and also “makes effective FIRRMA’s mandatory declarations provisions for transactions that fall within the specific scope of the pilot program.”

Other important aspects of the pilot program include:

  • The program is not country specific, but applies to all foreign persons engaging in investment with certain U.S. industries.
  • The program applies to any U.S. business that “produces, designs, tests, manufactures, fabricates, or develops a critical technology …” as defined by FIRRMA along with “emerging and foundational technologies” controlled pursuant to the Export Control Reform Act of 2018.
  • The program applies to 27 industries identified by specific North American Industry Classification System (NAICS) codes that the U.S. government has evaluated and “for which certain strategically motivated foreign investment could pose a threat to U.S. technological superiority and national security.” This full list can be found in Annex A to Part 801 of the Federal Register notice.
  • Mandatory declarations, or abbreviated notices not exceeding five pages in length, for transactions involving critical technologies must be filed within 45 days prior to a transaction’s closure date or risk a civil monetary fine up to the value of the transaction. A party may also choose to file under the standard procedures instead of through a declaration.

The full pilot program regulations can be found in the October 11, 2018 Federal Register.

The pilot program is due to begin on November 10, 2018, after a brief public comment period and will likely remain in effect until February 2020, when the final FIRRMA provisions are implemented.