The Department of the Treasury’s Office of Foreign Assets Control (OFAC) has sanctioned the Xinjiang Production and Construction Corps (XPCC), Sun Jinlong, a former Political Commissar of the XPCC, and Peng Jiarui, the Deputy Party Secretary and Commander of the XPCC, in connection with human rights abuses against ethnic minorities in the Xinjiang Uyghur Autonomous Region (XUAR).  According to OFAC, the XPCC is a paramilitary organization in the XUAR that is subordinate to the Chinese Communist Party (CCP) – “[t]he XPCC enhances internal control over the region by advancing China’s vision of economic development in XUAR that emphasizes subordination to central planning and resource extraction.”  These designations are the latest efforts by the United States to address human rights abuses in the Xinjiang region.  On July 1, 2020 a multi-agency advisory was issued that warned U.S. businesses of potential supply chain risks involving the Xinjiang region (see Update of July 2020).  The Department of Commerce has placed a number of Chinese companies on the Entity List (see Federal Register notices of July 22, 2020 and June 5, 2020).

As a result of this action, these persons and entity have been placed on the Specially Designated Nationals (SDN) List and all property and interests in property of the entity and individuals, and of any entities that are owned 50% or more by them, that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC.  In order to assist companies that may be doing business with XPCC, OFAC has issued a general license authorizing certain wind down and divestment activities involving any entity in which the XPCC owns, directly or indirectly, a 50 percent or greater interest.  Activity pursuant to this general license must be concluded no later than September 30, 2020; and, U.S. persons acting under this general license must file a comprehensive report of each transaction within 10 business days after the expiration of the general license.

The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) has published the final rule in the Federal Register amending the Export Administration Regulations (EAR) to suspend all License Exceptions for Hong Kong that provide preferential treatment as compared to those available for exports to China.  This amendment to the EAR implements the announcement BIS made on June 30, 2020, which provided that, as of June 30, these License Exceptions were no longer available for exports and reexports to Hong Kong or transfers within Hong Kong.  Additionally, the final rule is adding a new, Hong Kong-specific paragraph to EAR Section 740.2 (“Restrictions on all License Exceptions”), as well as making some other conforming changes to Section 740.2.

A License Exception is an authorization contained in Part 740 of the EAR that allows exports, reexports, or transfers (in-country) of items subject to the EAR that would otherwise require a license for export to the destination.  As a result of the suspensions, absent a license from BIS, no items subject to the EAR may be exported to Hong Kong, reexported to Hong Kong, or transferred within Hong Kong unless it would otherwise be eligible for export to China under the applicable reason for control or a License Exception available for exports to China.  The suspended License Exceptions for Hong Kong include:

  1. Shipments of Limited Value (LVS) (§ 740.3);
  2. Shipments to Group B Countries (GBS) (§ 740.4);
  3. Technology and Software under Restriction (TSR) (§ 740.6);
  4. Computers, Tier 1 only (APP) (§ 740.7(c));
  5. Temporary Imports, Exports, Reexports, and Transfers (in-country) (TMP) (§ 740.9(a)(11), (b)(2)(ii)(C, and (b)(5));
  6. Servicing and Replacement Parts and Equipment (RPL) (§ 740.10(a)(3)(viii), (a)(4), (b)(1) except as permitted to Country Group D:5, and (b)(3)(i)(F) and (ii)(C));
  7. Governments (GOV) (§ 740.11(c)(1)—Cooperating Governments only));
  8. Gift Parcels and Humanitarian Donations (GFT) (§ 740.12);
  9. Technology and Software Unrestricted (TSU) (§ 740.13);
  10. Baggage (BAG) (§ 740.14) (except as permitted by § 740.14(d));
  11. Aircraft, Vessels, and Spacecraft (AVS) (§ 740.15(b)(1), (b)(2), (c));
  12. Additional Permissive Reexports (APR) (§ 740.16(a) and (j)); and
  13. Strategic Trade Authorization (STA) (§ 740.20(c)(2)).

BIS has taken this action as part of a broader U.S. policy change toward Hong Kong in response to the newly imposed security measures on Hong Kong by China.   For more information on related developments concerning Hong Kong, please see Trump and Trade posts for June 1, 2020, June 30, 2020, and July 16, 2020.

On July 29, 2020, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) and the Department of State sanctioned four Syrian individuals and ten entities. The OFAC designations focus on a key supporter of Syrian President Basher al-Assad for “enriching the Syrian regime through construction of luxury real estate” and for actively supporting the reconstruction efforts of President al-Assad. In making the announcement, Secretary Steven Mnuchin stated, “While corrupt businessmen with ties to Assad invest in luxury real estate made possible by forced displacement of innocent civilians, they also worsen the oppression of the Syrian people.” Concurrent with OFAC’s actions, the State Department designated three persons and the First Division of the Syrian Arab Army for obstructing, disrupting or preventing a ceasefire in the ongoing Syrian conflict. In announcing these designations, Secretary Mike Pompeo stated, “The Assad regime’s military has become a symbol of brutality, repression, and corruption. They have killed hundreds of thousands of civilians, detained and tortured peaceful protesters, and destroyed schools, hospitals, and markets without regard to human life.”

OFAC designated Wassim Anwar Al-Qattan, a Syrian businessman who holds several contracts with the Government of Syria to develop government-owned shopping malls and hotel properties who, according to the Treasury Department, has been award the majority of recent major real estate projects in the area around Damascus. In addition, the following entities related to Al-Quattan have been sanctioned: (1) Adam Trading And Investment LLC; (2) Al-Jalaa Hotel; (3) Intersection LLC; (4) Larosa Furniture; (5) Massa Plaza Mall; (6) Muruj Cham Investment And Tourism Group; (7) Qasioun Mall; (8) Wassim Kattan LLC; (9) Yalbagha Complex. The State Department designated: (1) Major General Zuhair Tawfiq al-Assad, (2) Zuhair Tawfiq al Assad’s son, Karam al-Assad, (3) President al-Assad’s son, Hafez al-Assad, and (4) the First Division of the Syrian Arab Army.

As a result of this action, these persons and entities have been placed on the Specially Designated Nationals (SDN) List and 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. OFAC has indicated that any non-U.S. persons that engage in certain transactions with these designated persons may also be exposed to sanctions including designation on the SDN List. In a brief press statement, the White House stated that these designations “underscore the Administration’s simple but firm position that no individual or entity should enter into business with or otherwise enrich such a vile regime.”

On July 29, 2020, Novus International, Inc. (Novus) filed petitions with the U.S. Department of Commerce (Commerce) and the U.S. International Trade Commission (Commission) seeking antidumping duties (ADD) on imports of methionine from France, Japan and Spain.  The petition alleges that imports of methionine “more than doubled from 2017 to 2019, increasing by 110.2 percent.  In the first quarter of 2020, as the Coronavirus crisis began to unfold, subject imports increased by another 29.1 percent.”  Novus argues that “[e]xisting trends in import market share, underselling, and price suppression and/or depression would lead to further injury if they continue without relief.”

The scope of the petition is methionine and precursors to methionine, including dl-Hydroxy analogue of dl-methionine, also known as 2-Hydroxy 4-(Methylthio) Butanoic acid (HMTBa), regardless of purity, particle size, grade, or physical form. Methionine has the chemical formula C5H11NO2S, liquid HMTBa has the chemical formula C5H10O3S, and dry HMTBa has the chemical formula C6H9CaO5S.  Methionine is an amino acid and is one of the essential sulfur-containing amino acids that must be supplied in the diets of animals.  It is used in the synthesis of protein. Methionine is currently classified and entering the United States under Harmonized Tariff Schedule of the United States (HTSUS) subheadings 2930.40.00.00 and 2930.90.46.00 and has the Chemical Abstracts Service (CAS) registry numbers 583-91-5, 4857-44-7, 59-51-8 and 922-50-9.

The petition lists Adisseo France SAS, Adisseo España and Sumitomo Corporation as foreign producers that shipped methionine products to the United States at allegedly dumped prices from France Spain and Japan, and identifies numerous U.S. importers of those products.

Commerce will determine by August 18, 2020, whether to formally initiate the investigations and, if Commerce does, the Commission will decide within 25 days after that whether there is a reasonable indication of existing material injury or threat of material injury to the domestic methionine industry that will require continuation of the investigations.

Thompson Hine is monitoring this matter closely. For additional information or to obtain a copy of the petitions, please contact us

The Office of the U.S. Trade Representative (USTR) in a Federal Register notice granted a limited number of extensions for imported Chinese products appearing on List 2 (goods valued $16 million) previously excluded from the Section 301 tariff.  These extensions include certain medical supplies and products necessary to continue to combat the COVID-19 virus.  In July 2019, the USTR granted 69 specially-prepared exclusion requests with an expiration date of July 31, 2020. See Trump and Trade Update of July 29, 2019.  In April 2020, interested parties were invited to comment on whether to extend by up to 12 months any of these exclusions that had been granted.  See Trump and Trade Update of April 29, 2020.

For the July 2019 exclusions, USTR granted only 14 extensions. The product descriptions are: certain polytetrafluoroethylene; certain polyethylene film; certain rectangular polyethylene sheets; certain gasoline or liquid propane engines; certain dispensers of hand-cleaning or hand-sanitizing solutions; certain walk behind rotary tillers; certain AC motors; certain position or speed sensors for motor vehicle transmission and braking systems; certain apparatus using passive infrared detection for lighting systems; certain programmable robots; certain motorcycles and mopeds; and certain digital thermometers. All other product exclusions granted in July 2019 will expire as of July 31, 2020.

These product exclusion extensions will apply as of July 31, 2020, and extend through December 31, 2020.  Each exclusion continues to be governed by the scope of the Harmonized Tariff Schedule heading and the product description appearing in the annex of the exclusion extension 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.

 

 

Effective July 22, 2020, pursuant to a Federal Register notice, the Department of Commerce’s Bureau of Industry and Security (BIS) has placed 11 Chinese entities on the Entity List stating that all “have been implicated in human rights violations and abuses in the implementation of China’s campaign of repression, mass arbitrary detention, forced labor and high-technology surveillance against Uyghurs, Kazakhs, and other members of Muslim minority groups in the Xinjiang Uyghur Autonomous Region (XUAR).” This action comes shortly after Commerce and other federal agencies cautioned U.S. businesses about conducting sufficient supply chain due diligence regarding the Chinese government’s repression of ethnic minorities, see Thompson Hine International Trade Update of July 2020.

Specifically, BIS determined that Changji Esquel Textile Co. Ltd.; Hefei Bitland Information Technology Co. Ltd.; Hefei Meiling Co. Ltd.; Hetian Haolin Hair Accessories Co. Ltd.; Hetian Taida Apparel Co., Ltd.; KTK Group; Nanjing Synergy Textiles Co. Ltd.; Nanchang O-Film Tech; and Tanyuan Technology Co. Ltd. are engaging in activities contrary to the foreign policy interests of the United States through the practice of forced labor involving members of Muslim minority groups in the XUAR. BIS also determined that Xinjiang Silk Road BGI and Beijing Liuhe BGI are enabling activities contrary to the foreign policy interests of the United States through conducting genetic analyses used to further the repression of Muslim minority groups in the XUAR.

These actions establish entity-specific license requirements for the export, re-export and transfer of U.S goods and technology to these designated parties.  Specifically, BIS has imposed a license requirement for all items subject to the Export Administration Regulations (EAR) with case-by-case license review policy for certain items with specified Export Control Classification Numbers (ECCNs). Additionally, BIS states that “in light of the current global pandemic, BIS has adopted a policy of case-by-case review for items subject to the EAR that are necessary to detect, identify and treat infectious disease.” BIS has adopted a license review policy of presumption of denial for all other items subject to the EAR and removed these entities from being eligible for any license exceptions.

In this notice, BIS has also modified the Entity List as to 37 other Chinese entities previously determined to be engaged in or enabling human rights abuses in Xinjing. See Federal Register notice of June 5, 2020. Specifically, and again, in light of the current global pandemic, BIS has modified the license review policy for these 37 entities “to reflect a policy of case-by-case review for items subject to the EAR that are necessary to detect, identify and treat infectious disease.” The license review policy for these entities otherwise remains the same.

On July 20, 2020, the Office of the U.S. Trade Representative (USTR) issued a Federal Register notice exempting Section 301 tariffs for imports from China appearing on List4A (products from China with an annual trade value of $300 billion). The exemptions cover 11 ten-digit Harmonized Tariff Schedule (HTS) subheadings and 53 specially prepared product descriptions, which altogether cover 242 separately-filed exclusions requests. These exclusions will apply from September 1, 2019, through September 1, 2020; however, the USTR has recently issued a separate notice seeking public comment on potentially extending these product exclusions for up to one additional year (see Trump and Trade Update of July 17, 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 description set out in any particular exclusion request.

The 11 excluded HTS subheadings are:

  • 0505.10.0055 –  Skins and other parts of birds, with their feathers or down, feathers and parts of feathers (whether or not with trimmed edges) and down, not further worked than cleaned, disinfected or treated for preservation; powder and waste of feathers or parts of feathers: Feathers of a kind used for stuffing; down; Down.
  • 5504.10.0000 – Artificial staple fibers, not carded, combed or otherwise processed for spinning: of viscose rayon.
  • 8215.99.3500 – Spoons, forks, ladles, skimmers, cake-servers, fish-knives, butter-knives, sugar tongs and similar kitchen or tableware; and base metal parts thereof:  Other: Spoons and ladles with stainless steel handles: Other.
  • 9506.70.4000 – Articles and equipment for general physical exercise, gymnastics, athletics, other sports (including table-tennis) or outdoor games, not specified or included elsewhere in this chapter; swimming pools and wading pools; parts and accessories thereof: Ice skates and roller skates, including skating boots with skates attached; parts and accessories thereof: ice skates with footwear permanently attached.
  • 9701.10.0000 – Paintings, drawings and pastels, executed entirely by hand, other than drawings of heading 4906 and other than hand-painted or hand-decorated manufactured articles; collages and similar decorative plaques; all the foregoing framed or not framed: Paintings, drawings and pastels.
  • 9702.00.0000 – Original engravings, prints and lithographs, framed or not framed.
  • 9703.00.0000 – Original sculptures and statuary, in any material.
  • 9705.00.0085 – Collections and collectors’ pieces of zoological, botanical, mineralogical, anatomical, historical, archeological, paleontological, ethnographic or numismatic interest: Numismatic (collector’s) coins, other than archaeological pieces: Other.
  • 9706.00.0020 – Antiques of an age exceeding one hundred years: Silverware.
  • 9706.00.0040 – Antiques of an age exceeding one hundred years: Furniture.
  • 9706.00.0060 – Antiques of an age exceeding one hundred years: Other.

The 53 specially prepared product descriptions include such items as: sodium alginate resins; certain boot hangers of plastic or steel; certain exterior doors with foam insulation; certain clamps and clips; certain women’s knit robes; certain baby sleep sacks and blankets; certain men’s and women’s cotton terry bathrobes;  certain blankets; certain crib sheets; certain oven mitts of cotton; certain handrails covers for spas and pools; certain outdoor shelters with canopies and a folding frame; certain athletic headgear; certain electrical snowblowers; certain cylindrical steel drives designed for controlling or adjusting color on printing machinery; certain electrical automated embroidery machines; certain steel parts of hand-operated gate valves; certain lithium-ion batteries; certain electric coffee makers for domestic purposes; certain headlight brackets for motorcycles; certain electric guitar kits; certain pre-charged pneumatic air rifles; certain modular diving boards; swim masks, snorkeling masks, snorkels and water fins; certain exercise machines of steel designed to train gluteal muscles; certain brushes of natural goat hair; certain gold coins or coins of other metal of collector’s interest of more than 250 years in age.

U.S. Customs and Border Protection (CBP) will soon issue instructions on entry guidance and implementation. The USTR will continue to issue determinations on pending requests on a periodic basis.

On July 17, 2020, the Department of Commerce’s Bureau of Industry and Security (BIS) issued a Notice of Inquiry seeking public comment on the list of items on the Export Administration Regulations (EAR) Commerce Control List (CCL) that are controlled for crime control and detection (CC) reasons.  Comments must be received no later than September 15, 2020.

BIS controls CC items to promote human rights throughout the world.  The Notice states that “CC items of particular interest for new license requirements by BIS include facial recognition software and other biometric systems for surveillance, nonlethal visual disruption lasers, and long range acoustic devices and their components, software, and technologies.”  BIS is also seeking comments on the merits of removing or modifying the CC controls on several items currently on the CCL, and on potential controls for such items that are end-use/end-user based.  Items of interest are those below and related items:

  • Facial recognition devices for individual or for crowd scanning, other biometric systems, and related software;
  • Non-lethal visual disruption lasers (“dazzlers”);
  • Long-range acoustic devices (LRAD) related components, software, and technologies for the above items;
  • Police helmets (ECCN 0A979);
  • Fingerprint readers (ECCN 3A981), and components (3A981, 4A980), software (3D980, 4D980), and technology (3E980, 4A980);
  • Fingerprint powders, dyes, and inks (ECCN 1A985);
  • Voice print identification systems (ECCN 3A980) and components (3A980), software (3D980), and technology (3E980);
  • Polygraphs and psychological stress analysis equipment (ECCN 3A981) and components (3A981), software (3D980), and technology (3E980);
  • Nonmilitary mobile crime science laboratories (ECCN 9A980);
  • Miscellaneous CC controls in ECCNs and sub-paragraphs of ECCNs 4A003, 4A980, 4D001, 4D980, 4E001, 4E980 covering certain computers, software and technology; and, ECCNs 6A002, 6E001, and 6E002 covering certain optical sensors, equipment and technology.

With regard to facial recognition devices, BIS is particularly interested in public comment on high-resolution cameras currently classified as EAR99 on the CCL, specifically such cameras’ utility as inputs to crowd surveillance systems, and the implications of placing them under new export controls.  The Notice indicates that In addition to law enforcement and public safety-related uses, crowd scanning systems (i.e., cameras) can also be used to facilitate the abuse of human rights.  In an indication of potential concern and/or the possible application of export controls, BIS notes that “China, for example, has deployed facial recognition technology in the Xinjiang region, in which there has been repression, mass arbitrary detention and high technology surveillance against Uighurs, Kazakhs and other members of Muslim minority groups.”

BIS seeks input on: (1) Information (including performance criteria) that may distinguish purely or predominantly consumer or commercial applications from applications purely or predominantly for use by law enforcement or security services and/or used in mass surveillance, censorship, privacy violations or otherwise useful in committing human rights abuses; (2) the impact of adding to, modifying, or removing items from the CCL on U.S. support of human rights throughout the world; and (3) the impact that changes of controls would have upon the competitiveness of U.S. business and industry.  The Notice adds that BIS “welcomes comments on the update of controls on other items for surveillance and crowd control as well as on related issues of concern to the public.”

Comments should be submitted on-line via the Federal rulemaking portal at http://www.regulations.gov, and searching for Docket No. BIS- 2020-0021. All comments (including any personally identifying information) will be made available for public inspection and copying.  BIS will also accept comments by mail or delivery to the Regulatory Policy Division, Bureau of Industry and Security, U.S. Department of Commerce, Room 2099B, 14th Street and Pennsylvania Avenue NW, Washington, DC 20230. Refer to RIN 0694-XC056.

On July 17, 2020, the Office of the U.S. Trade Representative (USTR) released a Federal Register notice seeking public comment on whether extensions for up to 12 months should be granted for particular products that have received exclusions in the China Section 301 process from the 7.5 percent tariff on imports from China with an annual trade value of $300 billion (List/Tranche 4).   These product exclusions appear in two Federal Register notices:

  1. 85 Fed Reg 41658 (July 10, 2020) – see Trump and Trade Update of July 8, 2020.
  2. A “notice of product exclusions to be published in the Federal Register in the coming days.”

All of the exclusions in the listed Federal Register notices are set to expire on September 1, 2020.  The USTR will evaluate the possible extension of each exclusion on a case-by-case basis. The focus of the evaluation will be “whether, despite the first imposition of these additional duties in September 2019, the particular product remains available only from China.” These issues should be addressed in submitting any comments:

  • Whether the particular product and/or a comparable product is available from sources in the United States and/or in third countries.
  • Any changes in the global supply chain since August 2018 as to the particular product or any other relevant industry developments.
  • The efforts, if any, importers or U.S. purchasers have undertaken since September 2019 to source the product from the United States or third countries.

The USTR will continue to consider whether the imposition of additional duties on the products covered by the exclusion will result in severe economic harm to the commenter or other U.S. interests.

The USTR is seeking public comments from interested parties on whether to extend any particular exclusion for up to 12 months. The period for comment runs from July 15, 2020 until August 14, 2020.  Comments must be submitted on the public docket on USTR’s web portal at https://comments.USTR.gov under Docket No. USTR-2020-0029 – “Request for Comments Concerning the Extension of Particular Exclusions Granted Under the $300 Billion Action Pursuant to Section 301: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation.”  New users will first have to create an account in order to submit comments.  For parties wishing to include Business Confidential Information (BCI), the USTR notes that such information will not be publicly available when comments are posted on the docket.  Parties may also upload supporting documents that can also be marked as public or BCI.

We continue to collaborate with our foreign law firm partners to update our chart of COVID-19 measures taken by governments around the world. The government measures in the chart include economic, labor and employment, health and safety, and export and import measures. Below is a list of the updated countries and a summary of the changes we are seeing.

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

This update includes new information as of the second week of July 2020 for Canada, Chile, Costa Rica, El Salvador, Germany, Guatemala, Honduras, India, Indonesia, Israel, Japan, Mexico, Netherlands, Panama, Turkey, United Kingdom and United States. The updates are in bold on the chart for ease of reference.

In the Americas and Europe, July’s changes involve the easing of stricter health and safety measures including curfews, stay-at-home orders and domestic travel restrictions. However, mandates to wear face masks in public indoor spaces have continued. In the United States, states like Florida and Texas have pulled back on reopening certain businesses. In Asia, governments continue to lift lockdown measures and to implement technology-based health measures such as temperature checks and contact tracing applications. Most governments have used a phased approach to reopening businesses previously closed due to the pandemic and continue to maintain new export controls and import facilitation measures involving COVID-19-related health and medical goods.

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