On October 11, 2019, the U.S. International Trade Commission (ITC) will begin accepting Miscellaneous Tariff Bill (MTB) petitions for duty suspension or reduction. Before opening the process and electronic portal for filings, the ITC will be holding a “MTB Walk-Through” on October 8, 2019, from 11 a.m. to 12:30 p.m. ET. The walk-through will provide an overview of the MTB filing process, offer a preview of the MTB Petition System portal, and allow participants to ask ITC staff procedural and technical questions on the MTB process. Under the MTB process, U.S. importers petition for duty-free or reduced-duty treatment of certain imported products by submitting a petition to the ITC.

The American Manufacturing Competitiveness Act of 2016 permits MTB petitions to be filed by any member of the public who is a likely beneficiary of the duty suspension or reduction or by a legal representative. A successful MTB petition will cover a “noncontroversial” or “noncompetitive” product:

  • No domestic producer objects to the import duty elimination or reduction for the product;
  • The import duty elimination or reduction for the product is determined to be in the interest of U.S. “downstream” producers and consumers; and
  • The import duty elimination or reduction for the product must not result in a loss to the U.S. Department of the Treasury of more than $500,000 in annual revenue.

Once the ITC begins accepting petitions on October 11, parties will have 60 days to file their petitions (until December 10, 2019). A separate petition must be filed for each product during the petition process period. The ITC will then conduct a notice and comment period on whether individual requests threaten domestic producers. This period will be followed by the ITC’s report to Congress suggesting products for inclusion in a final MTB to amend Chapter 99 of the Harmonized Tariff Schedule of the United States.

On August 27, 2019, the ITC published its Final Rule for the submission and consideration of MTB petitions. Interested companies should begin gathering the materials needed for filing and familiarizing themselves with the MTB petition process. Please note that the ITC portal (https://mtbps.usitc.gov/external/) has not yet been updated for the 2019 petition process.

In what has been called a “mini-trade deal” or the “first stage” of a broader trade agreement, the United States and Japan have reached agreement in several areas of trade between the countries involving market access, reduced tariffs and digital trade. President Donald Trump announced that Japan will be liberalizing market access for certain U.S. agricultural goods and that the United States will be reducing or eliminating tariffs on the import of certain industrial goods from Japan. A separate agreement was concluded on digital trade, setting forth commitments to expand e-commerce and allow the free flow of data across borders.

Liberalizing Market Access

The agreement on market access will eliminate or lower Japanese tariffs or provide preferential country-specific quotas for a number of U.S. agricultural products, including:

  • Reduced tariffs on fresh and frozen beef and pork.
  • A country-specific quota for wheat and wheat products.
  • Reduced Japanese government markup on imported U.S. wheat and barley.
  • Elimination of tariffs for almonds, walnuts, blueberries, cranberries, sweet corn, grain sorghum, broccoli and more.
  • Staged tariff elimination for products such as cheese, processed pork, poultry, beef offal, ethanol, wine, frozen potatoes, oranges, fresh cherries, egg products and tomato paste.

In return, the United States will (1) eliminate or reduce 42 tariff lines for agricultural imports from Japan, including products such as certain perennial plants and cut flowers, persimmons, green tea, chewing gum and soy sauce and (2) eliminate or reduce tariffs on certain industrial goods from Japan such as certain machine tools, fasteners, steam turbines, bicycles, bicycle parts and musical instruments. U.S. Trade Representative Robert Lighthizer has indicated that these tariff reductions will take effect on January 1, 2020. A fact sheet regarding the agriculture-related provisions of the trade agreement is available on USTR’s website.

Regarding the separate digital trade agreement, the countries have finalized a set of provisions addressing priority areas such as:

  • Prohibitions on imposing customs duties on digital products transmitted electronically such as videos, music, e-books, software and games.
  • Non-discriminatory treatment of digital products, including coverage of tax measures.
  • Barrier-free cross-border data transfers in all sectors.
  • Prohibition of data localization requirements, including for financial service suppliers.
  • Prohibition of arbitrary access to computer source code and algorithms.
  • Protection of firms’ flexibility to use innovative encryption technology in their products.

While the texts of the two agreements are not yet publicly available, joint remarks by Trump and Japanese Prime Minister Shinzo Abe announcing the agreements have been published. Both countries have indicated that negotiations will continue for a more comprehensive trade agreement.

The U.S. Department of the Treasury (Treasury) has issued proposed regulations concerning the Committee on Foreign Investment in the United States (CFIUS) that will fully implement the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA). The proposed regulations were published in two parts in the Federal Register:

The new regulations must become effective no later than February 13, 2020.

While the CFIUS process continues to be largely voluntary, with most of the current regulations remaining intact (including the pilot project covering mandatory filings for certain critical technologies), there are key changes in these proposed rules.

FIRRMA Provisions on Non-Controlling Investments

The proposed regulations include expanding CFIUS’s jurisdiction to certain non-controlling investments that provide a foreign person access, rights or involvement in certain U.S. businesses (i.e., covered investments); critical technologies; critical infrastructure; and sensitive personal data. Declarations will be required when a foreign government has a “substantial interest” as defined in the regulations. The proposed regulations also create an exception from “covered investments” for certain foreign persons defined as “excepted investors” based on ties to countries identified as “excepted foreign states.” For the first time, Treasury has provided an appendix identifying covered investments in critical infrastructure and functions that would be sectors of concern in any national security review.

FIRRMA Provisions on Real Estate Transactions

The proposed regulations include new FIRRMA provisions that specifically allow the CFIUS to review certain real estate transactions, focusing on covered sites, such as specific airports, maritime ports, military installations and real estate within close proximity (defined as one mile) of the designated sites. The real estate provision also sets forth exceptions, including one for “excepted real estate investors,” which is again based on ties to certain excepted countries, and an exception for real estate transactions in an “urbanized area” or “urban cluster,” as defined by the Census Bureau. Again, for the first time, Treasury has proposed a list of identified military installations and sites that would be locations of concern in any national security review.

As a reminder, the CFIUS is an interagency committee chaired by the secretary of the Treasury that is authorized to review transactions involving foreign investment in the United States. FIRRMA was signed into law in August 2018 after receiving bipartisan support in Congress and modernizes the CFIUS review process to address national security concerns more effectively. FIRRMA expanded the president’s and CFIUS’s authorities to address foreign non-controlling investments and real estate transactions that previously fell outside CFIUS’s jurisdiction.

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.