In its continuing effort to tighten economic sanctions on Iran, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) has sanctioned five United Arab Emirates (UAE)-based companies that facilitate the Iranian regime’s petroleum and petrochemical sales. According to OFAC, these companies in 2019 “collectively purchased hundreds of thousands of metric tons of petroleum products from the National Iranian Oil Company (NIOC),” a major source of revenue to fund and support the Islamic Revolutionary Guard Corps-Qods Force’s (IRGC-QF). OFAC designated and placed on the Specially Designated Nationals (SDN) List (1) Petro Grand FZE, (2) Alphabet International DMCC, (3) Swissol Trade DMCC, (4) Alam Althrwa General Trading LLC, and (5) Alwaneo LLC Co. Treasury Secretary Steven Mnuchin stated, “The Trump Administration will continue to target and isolate those who support the Iranian regime and remains committed to facilitating humanitarian trade and assistance in support of the Iranian people.”

As a result of this action, all property and interests in property of these persons 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 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 persons could be subject to U.S. correspondent account sanctions or payable-through account sanctions.

Similarly, on March 16, 2020, the Department of Commerce’s Bureau of Industry and Security (BIS) added Iran Air and five Iranian nationals to the Entity List. Iran Air was added due to its transportation of military-related equipment on behalf of Iran’s Islamic Revolutionary Guard Corps (IRGC) and Ministry of Defense and Armed Forces Logistics (MODAFL). Aref Bali Lashak, Kamran Daneshjou, Mehdi Teranchi, Ali Mehdipour Omrani, and Sayyed Mohammad Mehdi Hadavi have been added due to their involvement in nuclear-related activities that are contrary to the national security and/or foreign policy interests of the United States. As a result, BIS has imposed a license requirement for all export transactions with these entities. For Iran Air, the licensing policy will be case-by-case review for licenses for the safety of civil aviation and the safe operation of aircraft; for the Iranian nationals, BIS has imposed a presumption of denial for any license applications.

On March 9, 2020 the Department of the Treasury (Treasury) published in the Federal Register proposed regulations to establish a fee for parties filing a voluntary notice of certain transactions for review by the Committee on Foreign Investment in the United States (CFIUS). The regulation would establish a fee for both “covered transactions” involving investments in or acquisitions of U.S. businesses and “covered real estate transactions.” Treasury is interested in comments from the public on the impact of the proposed tiered fixed-fee structure and whether additional tiers or additional features should be considered. Comments are due by April 8.

The proposed fees would be the same for voluntary notices filed with respect to both covered transactions and covered real estate transactions. Notably, persons filing both mandatory short-form declarations or voluntary short-form declarations to CFIUS would be exempt from the filing fees.

The proposed tiered fixed-fee structure is the following:

Value of the transaction Fee
Less than $500,000 No fee
Equal to or greater than $500,000
but less than $5,000,000
$750
Equal to or greater than $5,000,000
but less than $50,000,000
$7,500
Equal to or greater than $50,000,000
but less than $250,000,000
$75,000
Equal to or greater than $250,000,000
but less than $750,000,000
$150,000
Equal to or greater than $750,000,000 $300,000

Treasury commented that it believes the proposed fee structure “will not discourage filings and will allow parties to continue the practice of determining whether to file a voluntary written notice based on an evaluation of the facts and circumstances of the transaction.” Treasury “expects that the filing fee will represent a relatively small proportion of the total transaction costs associated with any given transaction.”

For transactions involving payment in securities, through non-cash assets, by services, or by other means, the proposed regulation sets forth the following guidelines for determining transaction value for purposes of the filing fee:

  • For securities traded on a national exchange, the transaction value would be determined by the last published closing price of the securities prior to the date of filing of the CFIUS notice;
  • For non-cash assets, interests, services, or other means, the transaction value would be the fair market value of those items as of the date of notice filing with CFIUS;
  • For a loan or financing agreement, the transaction value would be the cash value of the loan or financing agreement;
  • For conversions of a contingent equity interest previously acquired by a foreign person, the value of the transaction would include the initial purchase by or on behalf of the foreign person to obtain the equity interest in addition to any other payments made; and
  • With respect to covered real estate transactions, for leases and concessions, the value of the transaction would be the sum of the consideration, including lease inducements, fixed payments, certain variable lease payments, and other types of identifiable consideration applicable to real estate transactions.

Comments may be submitted via electronic submission using the Federal government electronic portal at www.regulations.gov on Docket No. TREAS-DO-2020-0008 or RIN 1505-AC65; or via mail to U.S. Department of the Treasury, Attention: Laura Black, Director of Investment Security Policy and International Relations, 1500 Pennsylvania Avenue N.W., Washington, D.C. 20220.

U.S Trade Representative (USTR) Robert Lighthizer has formally notified Congress that President Donald Trump will negotiate a trade agreement with the Republic of Kenya.  Ambassador Lighthizer stated that the Trump administration is seeking a “a comprehensive, high-standard agreement with Kenya that can serve as a model for additional trade agreements across Africa.  Kenya is an important regional leader, a strategic partner of the United States, and a commercial hub that can provide substantial opportunities for U.S. trade and investment.”   Pursuant to the provisions of the Bipartisan Congressional Trade Priorities and Accountability Act of 2015 (i.e., Trade Promotion Authority (TPA) or “fast track” authority), USTR must notify Congress in order to develop negotiating objectives that include Congressional and public input.  USTR will now publish a notice in the Federal Register seeking public comments on the focus and content of any trade negotiations and will publish 30 days before the commencement of formal negotiations the negotiating objectives.

The notification letter to Speaker Nancy Pelosi notes that USTR intends to initiate negotiations no earlier than June 15, 2020.  Negotiations will seek to address both tariff and non-tariff trade barriers and achieve “fairer, more balanced trade.”  The letter also indicates that the United States will seek provisions to “ensure effective implementation and enforcement.”  Two-way trade in goods between the United States and Kenya was approximately $1 billion in both 2018 and 2019.  Identical letters were also sent to Rep. Kevin McCarthy (House Minority Leader), Sen. Charles Schumer (Senate Minority Leader) and Sen. Chuck Grassley (Senate President Pro Tempore).  USTR first announced that it was initiating negotiations in February 2020 (see Trump and Trade Update of February 7, 2020).

 

The Office of the U.S. Trade Representative (USTR), after seeking comments on whether to extend for another year certain product exclusions it granted in March 2019 (see Trump and Trade Update of January 2, 2020), has granted 11 extensions covering these Harmonized Tariff Schedule (HTS) subheadings and product descriptions:

  • 8412.21.0045 – Other engines and motors, and parts thereof: Hydraulic power engines and motors: Linear acting (cylinders): Telescoping
  • 8607.21.1000 – Parts of railway or tramway locomotives or rolling stock: Truck assemblies, axles and wheels, and parts thereof: Brakes and parts thereof: Air brakes and parts thereof: For vehicles of heading 8605 or 8606
  • Breast pumps, whether or not with accessories or batteries (described in statistical reporting number 8413.81.0040)
  • Machinery for filtering water, submersible, powered by batteries, manually operated, such machinery designed for use in pools, basins, aquariums, spas or similar contained bodies of water (described in statistical reporting number 8421.21.0000)
  • Hand-held ultraviolet water purifiers, powered by batteries (described in statistical reporting number 8421.21.0000)
  • Filters designed to remove sulfites from wine (described in statistical reporting number 8421.22.0000)
  • Filter housings, covers, or couplings, the foregoing of steel and comprising parts of machinery or apparatus for filtering liquids (described in statistical reporting number 8421.99.0040)
  • Vulcanized rubber tracks, each incorporating cords and cleats of steel, designed for use on construction equipment (described in statistical reporting number 8431.49.9095)
  • Automated data processing storage units (other than magnetic disk drive units), not assembled in cabinets for placing on a table or similar place, not presented with any other unit of a system (described in statistical reporting number 8471.70.6000)
  • Electric motors, AC, permanent split capacitor type, each in a housing with outside diameter of 84 mm or less, with output of 6 W or more but not exceeding 16 W (described in statistical reporting number 8501.10.4020)
  • Inoculator sets of plastics, each consisting of a plate with multiple wells, a display tray, and a lid; when assembled, the set measuring 105 mm or more but not exceeding 108 mm in width, 138 mm or more but not exceeding 140 mm in depth, and 6.5 mm or less in thickness (described in statistical reporting number 9027.90.5650)

These HTS subheadings and products are currently subject to the Section 301 25 percent tariff covering Chinese products imported into the United States worth approximately $34 billion (List 1), and their exclusions to the tariff were set to expire on March 25, 2020. With this extension, such products entering the United States for consumption, or withdrawn from warehouse for consumption, on or after July 6, 2018 and before March 25, 2021, will continue to be excluded from the additional duty.   All other Section 301 exclusions granted in March 2019 will expire as of midnight, March 25, 2020 (see Trump and Trade Update of March 21, 2019).

UPDATED: March 26, 2020 – Major operational changes are expected at trade-related U.S. government agencies and courts in the coming weeks due to personnel and public safety concerns over the COVID-19 outbreak in the United States. Below is currently available information on their status. Overall, the Office of Personnel Management has announced that as of March 16, 2020, and until further notice, federal offices nationwide are open but “maximum telework flexibilities” are in place for all eligible employees “pursuant to direction from agency heads.”

U.S. Department of Commerce – While Commerce has published no formal notice of its operating status, it is known that meetings with visitors from outside of the agency have been canceled in the past week. The International Trade Administration (ITA) has temporarily modified its antidumping and countervailing duty (AD/CVD) cases to facilitate the serving of documents through electronic means.  Effective March 24, 2020 and until May 19, 2020, documents containing business proprietary information (BPI) may be served on opposing counsel via ITA’s online ACCESS data portal instead of the normal requirement for hard copy “in-person” service. Further, the Bureau of Industry and Security (BIS) has canceled its export control forum scheduled for April 2020.

U.S. Department of the Treasury – While Treasury has published no formal notice of its operating status, the “public engagement” schedule for the next several weeks is currently empty, suggesting that all outside meetings have been canceled. The Office of Foreign Assets Control (OFAC) has not indicated yet whether its operations have been affected.

U.S. Department of State – The Directorate of Defense Trade Controls (DDTC) has posted that its core activities across its Licensing, Compliance, Policy, and Management continue to functions. “However, staffing and other adjustments across the Department and interagency are being made” as the agency follows OPM guidance.

  • Licensing activities: All electronic application systems are currently in normal operational mode, and new licenses continue to be accepted for processing. However, a longer than normal processing time should be expected.
  • Registration, CJ Requests and General Correspondence: These filings via the DECCS system continue and are being processed as they are submitted; responses may be delayed by the current operational environment.

DDTC states that it has established a new option for industry to submit disclosures and related information (e.g., exhibits, extension requests, responses to DTCC inquires) by allowing submissions via email to DTCC-CaseStatus@state.gov. In the event that a disclosure cannot be submitted via email, DDTC indicates that the continued use of regular U.S. mail is acceptable.

U.S. Trade Representative (USTR) – The Office of the U.S. Trade Representative has offered no update on its operating status.

U.S. International Trade Commission (ITC)The ITC stated that it is open for business while it continues to monitor the situation. The secretary’s office will accept only electronic filings during this time. Filings must be made through the ITC’s Electronic Document Information System (EDIS) at https://edis.usitc.gov. No in-person, paper-based filings or paper copies of any electronic filings will be accepted until further notice. Limited access will be granted only to visitors who have a statutory matter, and all visitors are restricted to the first floor of the ITC building.

  • Section 337 Hearings – Administrative law judges (ALJs) have been ordered to postpone any hearings scheduled in the next 60 days. All discovery will continue and any essential outside participation by staff will be decided on a case-by-case basis.
  • Title VII Matters – All antidumping and countervailing duty preliminary phase staff conferences have been cancelled for the next 60 days. All ITC Title VII votes will be conducted by notation; there will be no in-person vote for the next 60 days. Regarding hearings for final phase Title VII investigations, five-year (sunset) reviews, and those held under Section 332 and Section 131, the ITC has decided not to hold in-person hearings and interested parties will be invited instead to answer written questions issued by the ITC with certified written responses.
  • Electronic service of documents has temporarily been implemented for most ITC issuances. Public documents will continue to be made available via the ITC’s electronic record, EDIS.  In addition, temporarily, confidential documents will be made available to authorized parties via Box (www.box.com). Service of confidential documents will be considered effected upon notification via email to other parties/counsel in ongoing investigations that the documents are available for download.
  • Agency Meetings, Seminars and Briefings – All scheduled in-person meetings with outside persons have been cancelled or postponed for the next 60 days.

U.S. Customs and Border Protection (CBP) – CBP refers users to DHS.gov/coronavirus for information related to the COVID-19 pandemic, where it states that “all air, land and sea Ports of Entry (POEs), CBP Officers (CBPOs) and Border Patrol Agents (BPAs) continue to identify and refer individuals with symptoms of COVID-19 or a travel history to China, Iran, or certain European countries in the past 14 days to CDC or local public health officials for enhanced health screening.” As has been occurring for several weeks, the rerouting of all flights with passengers who have recently been in China, Iran, and certain European countries continues through select airports with established resources, procedures and personnel. A February 3, 2020 bulletin explained that “[c]rew, and flights carrying only cargo (i.e., no passengers or non-crew), are excluded” from U.S. Department of Homeland Security’s arrival restrictions imposed on February 2, 2020. It has also been reported that “CBP continues to process cargo at its normal rate as there has been no identified threat as it relates to cargo shipments” and that “vessels or embarked crewmembers or passengers that have recently been in China will have their arrivals fully vetted to safeguard the American public yet facilitate trade. This safety protocol is not anticipated to slow down the movement of cargo.” CBP has cancelled several upcoming trade conferences.

U.S. Census Bureau – Many U.S. Census Bureau employees are operating remotely via telework. During this time, call centers and email inboxes will remain open to assist customers’ daily trade needs. However, the agency will have limited access to physical mail.  For those companies that are submitting a Voluntary Self-Disclosure (VSD) or data request, please make the submission electronically to the Trade Regulations Branch (TRB) in a password-protected file to emd.askregs@census.gov (for VSDs) or Data User & Trade Outreach Branch (DUTOB) to tmd.outreach@census.gov
(for data requests). Additionally, such submissions may be sent to Census’ secure fax at 301-763-8835.

U.S. Court of International Trade (CIT) – According to CIT’s statement of March 12, it appears that there have been no adjustments in CIT operations, except as listed below.

  • People who have traveled to China, Iran, Ireland, South Korea, the United Kingdom, or any of the 26 countries located in the Schengen Area of Europe within the last 14 days; reside or have had close contact with someone who has traveled to one of these areas within the last 14 days; have been asked to self-quarantine by any hospital or health agency; or have been diagnosed with, or have had contact with, anyone who has been diagnosed with COVID-19, must inform the court security officers upon entering the courthouse and will be denied permission to enter. Attorneys who are so affected who are scheduled to appear before the CIT in the near future must notify the court so that appropriate safeguard measures can be taken. Attorneys may appear via teleconference or videoconference with the approval of the presiding judge. These restrictions will remain in place until further notice.

U.S. Court of Appeals for the Federal Circuit – Per a public advisory notice and an administrative order, the Federal Circuit began restricting public access to the National Courts Building complex on March 16, 2020. On March 19, the Court issued an updated public advisory stating that all cases scheduled for argument during the April 2020 sitting will now be conducted by telephone conference and no in-person hearings will be held. Individuals, including pro se litigants and couriers wishing to deliver or to file case documents, must submit these items either by mail or by deposit in the court’s night box. Mail and third-party commercial deliveries will be limited to the lobby. Any other deliveries must be coordinated ahead of time with relevant court staff.

As the novel coronavirus pandemic alters our daily lives, how we interact with each other and how we conduct business, Thompson Hine’s Trump and Trade editors are providing these web links to helpful government and international organization resources. We will update this post as additional websites focused on the global COVID-19 response become available.

The U.S. government has established multiple websites to assist the public:

U.S. government international trade-related websites:

International resources:

Thompson Hine has also launched a multidisciplinary COVID-19 Task Force to monitor the latest developments and guidance from public health officials and assess the potential impacts on our clients and their businesses. The COVID-19 Task Force page on our website provides a centralized location for recent publications, webinars, articles and resources that you may find helpful.

The U.S. Trade Representative (USTR) issued Friday Federal Register notices exempting Section 301 tariffs for certain List 3 (imports from China with an annual trade value of $200 billion) and List 4 (imports from China with an annual trade value of $300 billion) products.  While the Items on List 3 include several non-medical supply related exclusions, the exemptions for the medical supplies on Lists 3 and 4 are an attempt to address items that could be in short supply as the United States focuses on curbing the spread of the coronavirus. The exemptions cover five entire 10-digit Harmonized Tariff System (HTS) subheadings and 19 specially-prepared product descriptions – a total of 114 separate exclusion requests.

The 19 specially-prepared product description exemptions for List 4 all cover medical supplies:  certain bowls of molded plastics, with clips for retaining guide wires during surgical procedures; certain disposable graduated medicine dispensing cups; certain pads of foam plastics of a kind used for positioning patients during medical procedures; certain single-use sterile drapes and covers of plastics of a kind used to protect the sterile field in surgical operating rooms; certain sterile decanters of polystyrene plastics of a kind used to transfer aseptic fluids or medication to and from sterile bags, vials or glass containers; certain cold packs consisting of a single-use, instant, endothermic chemical reaction cold pack; certain disposable shoe and boot covers; certain eye compresses; certain face masks for single-use; certain gel pads; certain single-use hot packs; certain laparotomy sponges of cotton; certain patient restraint or safety straps; certain single-use blood pressure cuff sleeves; certain single-use medical masks; certain single-use stethoscope covers; certain woven gauze sponges of cotton; certain electromechanical shoe cover dispensers of steel; and certain protective articles.

These exclusions will apply from September 1, 2019, through September 1, 2020.

The five excluded HTS subheadings for List 3 include both medical and non-medical items:

Medical Supplies:

  • 3926.20.9050 – Articles of apparel and clothing accessories (including gloves, mittens and mitts): Gloves, mittens and mitts: Other: Other
  • 4015.19.1010 – Articles of apparel and clothing accessories (including gloves, mittens and mitts), for all purposes, of vulcanized rubber other than hard rubber: Gloves, mittens, mitts: Other: Seamless: Disposable

Non-Medical Items:

  • 3923.21.0030 – Sacks and bags (including cones): Of polymers of ethylene: Reclosable, with integral extruded closure: Other
  • 3923.21.0095 – Sacks and bags (including cones): Of polymers of ethylene: Reclosable, with integral extruded closure: Other: Other
  • 5603.12.0090 – Nonwovens, whether or not impregnated, coated, covered or laminated: Of man-made filaments: Weighing more than 25 g/m2 but not more than 70 g/m2: Other

These exclusions will apply from September 24, 2018, through August 7, 2020.

These exclusions apply to any product that satisfies the description in the annex of the Federal Register notice, regardless of whether the company using the exclusion filed the request. 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.

On March 13, 2020, the Canadian House of Commons and the Canadian Senate each approved Bill C-4, an “Act to implement the Agreement between Canada, the United States of America and the United Mexican States.” Shortly after that, Canadian Governor General Julie Payette gave her royal assent, ratifying the United States-Mexico-Canada Agreement (USMCA) on Canada’s behalf. Now, all three countries have ratified the agreement.

Before the USMCA can enter into force, however, all three must prepare uniform regulations for certain new provisions in the agreement (e.g., automotive rules of origin and labor reforms). President Donald Trump continues to push for the USMCA’s implementation by June 1, 2020.

On March 12, 2020, President Donald Trump signed into law H.R. 4998, the “Secure and Trusted Communications Networks  Act of 2019,” which prohibits the use of certain federal funds and subsidies to purchase communications equipment or services posing national security risks.  The Act, passed by both the House of Representatives and the Senate by voice vote and now Public Law No. 116-124, also creates a reimbursement program to assist with the removal and replacement of current equipment in use that was manufactured by entities posing unacceptable national security risks.  The Act establishes a $1 billion fund to reimburse carriers during this ongoing Federal Communications Commission (FCC) national security-focused effort.

While never referenced in the Act, the legislation as introduced and passed by Congress is intended to assist in the Trump administration’s efforts to remove the equipment and technology of Chinese companies Huawei Technologies Co. and ZTE Corp. from U.S. telecommunication networks.  The White House in a Fact Sheet noted that the “stakes could not be higher—America’s citizens and our foreign partners must be able to trust that our 5G networks are reliable, private, and secure” and that the Trump administration “will not risk subjecting America’s critical telecommunications infrastructure to companies that are controlled by authoritarian governments or foreign adversaries.”  In a November 22, 2019 Report and Order, the FCC designated Huawei and ZTE as companies that pose a threat to U.S. national security.

The Department of Commerce’s Bureau of Industry and Security (BIS) has issued a Federal Register notice again renewing the temporary general license for Huawei Technologies Co., Ltd. and 114 of its non-U.S. affiliates on the Entity List until May 15, 2020. The expiration date for the license had been April 1, 2020. As published on May 22, 2019, this temporary general license authorizes certain activities, including those necessary for the continued operations of existing networks and equipment, the support of existing mobile services, and cybersecurity research critical to maintaining the integrity and reliability of existing and fully operational networks and equipment (see Trump and Trade Update of May 21, 2019). This renewal is the fourth extension BIS has granted since Huawei was placed on the Entity List.

BIS continues to remind exporters, reexporters and transferors subject to the notice that they are required to maintain certifications and other records, to be made available when requested by BIS, regarding their use of the temporary general license. This temporary general license does not relieve parties of their Export Administration Regulations (EAR) obligations as to other licensing requirements for exports to the People’s Republic of China. When not covered by the scope of the temporary general license, exports to listed Huawei entities will require a license and “license applications will continue to be reviewed under a presumption of denial.”