Trade Remedy/Enforcement

In connection with President Donald Trump’s May 8, 2018 decision to cease U.S. participation in the Joint Comprehensive Plan of Action (JCPOA) and to re-impose all sanctions lifted or waived in connection with the JCPOA, the president has issued a new Iran-related Executive Order, “Reimposing Certain Sanctions With Respect to Iran.” This completes the first of two wind-down periods for the re-imposition of certain Iranian sanctions. The terms in the Executive Order are effective at 12:01 a.m. Eastern Daylight Time (EDT) on August 7, 2018. In addition, certain wind-down general licenses that allowed limited continued actions involving Iran will expire at 11:59 p.m. EDT on August 6, 2018.

The U.S. government will re-impose the following sanctions that were lifted pursuant to the JCPOA, including sanctions on associated services related to the activities below:

  • Sanctions on the purchase or acquisition of U.S. dollar banknotes by the government of Iran;
  • Sanctions on Iran’s trade in gold or precious metals;
  • Sanctions on the direct or indirect sale, supply, or transfer to or from Iran of graphite, raw or semi-finished metals such as aluminum and steel, coal, and software for integrating industrial processes;
  • Sanctions on significant transactions related to the purchase or sale of Iranian rials, or the maintenance of significant funds or accounts outside the territory of Iran denominated in the Iranian rial;
  • Sanctions on the purchase, subscription to, or facilitation of the issuance of Iranian sovereign debt; and
  • Sanctions on Iran’s automotive sector.

In addition, the U.S. government has revoked the following JCPOA-related authorizations under U.S. primary sanctions regarding Iran:

  • The importation into the United States of Iranian-origin carpets and foodstuffs and certain related financial transactions pursuant to general licenses under the Iranian Transactions and Sanctions Regulations, 31 C.F.R. part 560 (ITSR);
  • Activities undertaken pursuant to specific licenses issued in connection with the Statement of Licensing Policy for Activities Related to the Export or Re-export to Iran of Commercial Passenger Aircraft and Related Parts and Services (JCPOA SLP); and
  • Activities undertaken pursuant to General License I relating to contingent contracts for activities eligible for authorization under the JCPOA SLP.

For further assistance, the Department of the Treasury’s Office of Foreign Assets Control has published frequently asked questions relating to this Executive Order and the re-imposition of certain sanctions.

The second 180-day wind-down period will end on November 4, 2018, and the remaining sanctions that had been lifted or waived pursuant to the JCPOA will become effective again on November 5, 2018.

On July 13, 2018, the Department of Commerce’s Bureau of Industry and Security issued an order terminating the April 15, 2018 Denial Order against Zhongxing Telecommunications Equipment Corporation and ZTE Kangxun Telecommunications Ltd. (collectively, ZTE). The order confirms that ZTE paid the $1 billion penalty and complied with the requirement of depositing $400 million in a U.S. bank escrow account. This $1.4 billion amount was in addition to the $892 million in penalties ZTE paid under its earlier settlement agreement for U.S. export law violations that occurred when it supplied telecommunications equipment to North Korea and Iran.

In a brief statement, Commerce Secretary Wilbur Ross stated, “While we lifted the ban on ZTE, the Department will remain vigilant as we closely monitor ZTE’s actions to ensure compliance with all U.S. laws and regulations … Three interlocking elements – a suspended denial order, the $400 million in escrow, and a compliance team selected by and answerable to the Department – will allow the Department to protect U.S. national security.”

As reported in a Trump and Trade Update dated June 8, 2018, the Department of Commerce reached a superseding settlement agreement with Zhongxing Telecommunications Equipment Corporation of Shenzhen, China (ZTE Corporation) and ZTE Kangxun Telecommunications Ltd. of Hi-New Shenzhen, China (ZTE Kangxun) (collectively, ZTE) to remove the Department of Commerce’s Bureau of Industry and Security (BIS) denial order imposed as a result of ZTE’s violations of its March 2017 settlement agreement. BIS has now published the superseding settlement agreement.

Even with this superseding agreement, the denial order on ZTE currently remains in place until the company fulfills all the necessary obligations under the agreement (i.e., replace its entire board of directors and senior leadership team; allow BIS to select compliance officials for monitoring purposes; and pay a $1 billion fine and $400 million for an escrow account that the United States will use for any future violations). On July 2, 2018, however, BIS issued a general authorization for all persons to conduct limited business with ZTE from July 2, 2018 to August 1, 2018, including (1) activities with ZTE necessary to maintain and continue operation of existing networks and equipment, (2) activities to provide service and support to existing ZTE phones, (3) disclosure to ZTE of information regarding security vulnerabilities in items owned or controlled by ZTE and (4) authorization to make and receive payments to or from ZTE for these allowable authorizations. This limited general authorization does not relieve U.S. persons from obtaining any necessary export licenses from BIS but is intended to provide clarification and relief to continue these limited transactions with ZTE while the terms of the settlement agreement are fulfilled.

Regarding the establishment of an escrow account to hold the $400 million in suspended fines, BIS confirmed on July 11, 2018, that it has signed the escrow agreement with ZTE and that a notice will be issued lifting the denial order once the deposit has been made. In its announcement, Commerce reiterated that the denial order “remains in full force and effect” until further notice is provided.

President Donald Trump and Chairman Kim Jong Un issued a joint statement at the conclusion of their summit in Singapore in which both countries committed to further negotiations and future cooperation for the development of new relations between the United States and the Democratic People’s Republic of Korea. In the statement, Trump committed “to provide security guarantees” to North Korea, and Kim reaffirmed “his firm and unwavering commitment to complete denuclearization of the Korean Peninsula.”

In a post-summit press conference, Trump stated that his meeting with Kim “was honest, direct, and productive … Today is the beginning of an arduous process. Our eyes are wide open, but peace is always worth the effort, especially in this case.” He added that all U.S. sanctions toward North Korea will remain in effect until “the nukes are no longer a factor.”

On June 7, 2018, the U.S. Department of Commerce announced that Zhongxing Telecommunications Equipment Corporation of Shenzhen, China (ZTE Corporation) and ZTE Kangxun Telecommunications Ltd. of Hi-New Shenzhen, China (ZTE Kangxun) (collectively, ZTE) had agreed to additional penalties and compliance measures to replace Commerce’s Bureau of Industry and Security (BIS) denial order imposed as a result of ZTE’s violations of its March 2017 settlement agreement. On April 15, 2018, BIS activated the suspended denial order against ZTE after learning that ZTE had not disciplined numerous employees responsible for the violations that led to the settlement agreement. Instead, ZTE rewarded those employees with bonuses. With the imposition of the denial order by BIS, ZTE announced in early May 2018 that all major operating activities of the company had ceased as a result of the denial order. On May 13, 2018, President Trump, against the advice of U.S. law enforcement and intelligence officials, announced that “President Xi of China, and I, are working together to give massive Chinese phone company, ZTE, a way to get back into business, fast. Too many jobs in China lost. Commerce Department has been instructed to get it done!” Continue Reading Department of Commerce Announces Sanctions Deal with China’s ZTE, but Will Congress Block It?

The Department of Commerce’s Bureau of Industry and Security (BIS) has sanctioned 21 entities determined by the U.S. government to be acting contrary to the national security or foreign policy interests of the United States. BIS has taken this action to ensure the efficacy of existing sanctions on the Russian Federation (Russia) for violating international law and fueling the conflict in eastern Ukraine. These entities have been placed on the BIS Entity List, which identifies entities and other persons that are subject to specific license requirements for the export, reexport and/or transfer (in-country) of specified items. Engaging in transactions with any of these entities now entails additional export licensing requirements and approval from BIS. The license review policy for each listed entity is identified in the License Review Policy column on the Entity List.