General International Trade News and Developments

In recent weeks, the United Stated Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) expanded the scope of sanctions against current and former Venezuelan government officials who have supported controversial President Nicholas Maduro and his regime of corruption and human rights abuses.

The first sanctions implemented against Venezuelan individuals and entities were authorized by President Barrack Obama in March 2015 (Executive Order 13692).  Following President Maduro’s re-election to a second six-year term on May 20, 2018, President Donald Trump has expanded the scope of both the prohibited conduct and the designated individuals and entities subject to sanctions.

On November 1, 2018, President Trump issued Executive Order 13850 broadly prohibiting transactions with individuals directly or indirectly involved in the deceptive and corrupt practices of the Government of Venezuela.  President Trump has subsequently issued Executive Orders designating specific individuals and entities subject to the sanctions regime.  On January 28, 2019, Executive Order 13857 revised the definition of “Government of Venezuela” (which is subject to sanctions) to specifically include, among others, the Central Bank of Venezuela and state-run oil company Petroleos de Venezuela, S.A. (“PdVSA”)  Further, in press releases on February 15, 2019 and February 25, 2019, OFAC announced additional individuals and entities with whom transactions are prohibited. Among those named in the recent press releases are Venezuelan military and intelligence officers, the head of the Special Action Force of Venezuela’s police, the President of PdVSA, and, most recently, the Governors of four Venezuelan states that have aligned themselves with President Maduro.

The recent press releases note that sanctions “need not be permanent” and that removal of sanctions is possible for individuals who “take concrete and meaningful actions to restore democratic order, refuse to take part in human rights abuses, speak out against abuses committed by the former Maduro regime, and combat corruption in Venezuela.”

For US companies transacting across borders, it always essential to verify that their business partners are not subject to US sanctions.  With the rapidly changing scope of sanctions relating to Venezula, the need to consult with experienced counsel is even greater and must continue on an ongoing basis throughout the life of a transaction of business venture.

The government shutdown, which is now in its fourth week, is causing a backlog of cases that will need to be reviewed by the Committee on Foreign Investments (“CFIUS”) once the government reopens.

CFIUS is an interagency committee chaired by the Secretary of the Treasury, which reviews certain transactions involving foreign investment in the Unites States in order to determine the effect of such transactions on national security. The shutdown will ultimately cause a delay in the ability of foreign acquirers to finalize transactions involving investments in the United States.

 

Since the government shutdown that began on December 22, 2018, CFIUS activities have been suspended. CFIUS has only been able to perform “caretaker functions” related to cases filed before the enactment of the Foreign Investment Risk Review Modernization Act of 2018 (“FIRRMA”), which was signed into law in August 2018.

In addition, the deadlines for all other cases that were not initiated prior to the enactment of FIRRMA are “tolled” during the shutdown. Although CFIUS filings can continue to be made during the shutdown, the Committee will not officially accept the filings for review.

The clock will not start running on any cases that are “tolled,” meaning the review or investigation process will not start until after the shutdown ends and CFIUS is able to officially acknowledge receipt of the case. CFIUS members will not be able to examine these transactions in order to identify and address any national security concerns that may arise as a result of the proposed transactions.

A link to the Department of Treasury’s contingency plan can be found here.

This post is authored by Fox Rothschild associate Rocky Rogers:

As a result of the new Section 232 and Section 301 tariffs on steel, aluminum, and goods imported from China, United States importers and customs brokers relying upon continuous bonds should review their bond amount to ensure it is sufficient to account for these new tariffs.  The continuous bond should be in the amount of 10% of estimated duties, taxes, and fees to be paid on goods imported over a twelve month period.  The new tariffs directly increase the amount of duties owed for these types of shipments and accordingly require an increase in the bond amount.

On November 8th, the United States Customs and Border Protection issued Cargo Systems Messaging Service Update 18-000664 reminding those holding continuous bonds that sufficiency reviews are conducted on a monthly basis.  The agency recommended importers forecast their import activities for the next twelve months and determine if a bond increase is appropriate.  The bonding formula utilized to conduct sufficiency reviews may be found at https://www.cbp.gov/sites/default/files/documents/bond_form_7.pdf.

Importers are already reporting an increase in bond insufficiency determinations since the announcement of the tariffs.  Update 18-000664 is further evidence of the agency’s increased attention to this issue.

If the Revenue Division of CBP determines a continuous bond is insufficient, any imported goods covered by that bond will not be released upon entry to the United States.  This will result in accruing demurrage charges and disruption of the supply chain.  Additionally, the agency can inactivate the bond, thereby requiring importers to obtain Single Transaction Bonds for future imports, which are far more costly and burdensome than maintaining a continuous bond.  For any imports of goods subject to anti-dumping or countervailing duties, the bond requirements can be “stacked” because often determinations by the Department of Commerce on those types of goods take longer than twelve months, so multiple bond periods remain exposed.

The impact of the new tariffs continue to affect importers and custom brokers in a variety of different ways.  Those importing goods subject to the new tariffs should immediately contact their surety to determine whether an increase in the bond amount is required.

In a recent decision, the Court of International Trade (CIT) denied the government’s request for a stay of the preliminary injunction that the CIT had implemented in July, banning the importation of certain seafood from Mexico.

In July, the CIT upheld its preliminary order and granted the preliminary injunction sought by conservation groups to protect the critically endangered vaquita porpoise – of which just 15 remain.  In imposing the preliminary injunction, the Court found that the Marine Mammal Protection Act (MMPA) properly applied and mandated that the Secretary of the Treasury “shall ban the importation of commercial fish or products from fish which have been caught with commercial fishing technology which results in the incidental kill or incidental serious injury of ocean mammals in excess of United States standards.” 16 U.S.C. § 1371(a)(2). Accordingly, the CIT imposed the preliminary injunction, pending final adjudication on the merits, banning the importation of all fish and fish products caught using gill-nets within the range of the vaquita in the Northern Gulf of California.

In the government’s recent motion to stay the preliminary injunction, the government cited, among other things, the negative impact the ban could have on ongoing trade negotiations between the United States and Mexico.  The CIT was not convinced, citing the mandatory ban language of the MMPA and finding that “[i]t is implausible that Congress was unaware that embargoes or limitations on imports may impact foreign relations.” In addition, the CIT was unmoved by the government’s arguments regarding the conservation groups’ purported lack of standing, finding that the government had unlawfully withheld agency action under § 706(1) of the Administrative Procedure Act and, in doing so, created cognizable harm to the vaquita.  The CIT also defended the narrowly tailored scope of the injunction, which is limited only to importation of fish and fish products caught using gill-nets in a small portion of the Gulf of California.

Accordingly, the ban remains in place until a full adjudication on the merits is complete.

 

Australia will become the newest member of the World Trade Organization (WTO) plurilateral Government Procurement Agreement (GPA). On October 17, 2018, parties to the GPA unanimously approved a decision to welcome Australia as the 48th WTO member to be covered by the GPA.

The GPA is a plurilateral agreement that strives to ensure open, fair and transparent conditions of competition in the government procurement markets. It aims to provide legal guarantees of non-discrimination for the products, services or suppliers of GPA parties in procurement covered by the Agreement.

The Agreement is open to all WTO members, and it is currently binding on the 47 members to the Agreement (19 parties, including the United States, and the EU and its 28 member states). The GPA is composed of two main parts: the text of the Agreement and the coverage schedules. The Agreement applies only to those procurement activities that are carried out by covered entities that are purchasing services or goods of a value exceeding specified thresholds.

Australia will become a member after it submits its Instrument of Accession to the WTO’s Director General. With an estimated overall government procurement market worth USD $78 billion, Australia will add significantly to the current government procurement covered by the other 47 members to the Agreement, which is currently approximately USD $1.7 trillion.

Australia initiated negotiations to join the Agreement three years ago, in September of 2015. At the meeting, the GPA also reviewed the accession bids of China, the Kyrgyz Republic, the former Yugoslav Republic of Macedonia, the Russian Federation and Tajikistan. Other countries with currently pending accession negotiations include Albania, Georgia, Jordan and Oman. See a full list of the GPA members and observers here.

On September 17, 2018, the Trump Administration finalized tariffs on $200 billion of Chinese imports and announced the final list (List 3) of tariff line items.   The additional tariffs became effective on List 3 products on September 24, 2018 in the amount of a 10 percent ad valorem duty.  The level of additional tariffs is set to increase to 25 percent on January 1, 2019.  The final list includes 5,745 tariff line items of the 6,031 tariff line items initially proposed.  Products that were removed from the final list include certain consumer electronics products, such as smart watches, fitness trackers, and health and safety products like bicycle helmets and child safety furniture.  In a statement announcing the imposition of tariffs on List 3, President Trump stated that “{i}f China takes retaliatory action against our farmers or other industries, we will immediately pursue phase three, which is tariffs on approximately $267 billion of additional imports.”

The Office of the United States Trade Representative (“USTR”) also announced a new product-specific exclusion process for List 2 items, upon which a 25 percent ad valorem duty has been imposed since August 23, 2018.  The deadline to apply for an exclusion for products on List 2 is December 18, 2018.  Products on List 1 have been subject to a 25 percent ad valorem duty since July 6, 2018. The deadline to apply for an exclusion for products on List 1 is October 9, 2018.  The USTR has not announced an exclusion process for List 3 and has indicated there are no immediate plans to implement such a process.  Fox Rothschild continues to monitor these developments.  Should you have any questions about filing a product-specific exclusion request, please contact Brittney Powell or Lizbeth Levinson.

 

On Monday, July 30, 2018, the World Trade Organization (WTO) released new resources regarding trends in global trade. The resources issued by the WTO are the latest editions of the annual publications of World Trade Statistical Review, Trade Profiles and World Tariff Profiles.

World Trade Statistical Review provides an in-depth analysis of trends in global trade, including the types of goods and services being traded.

Trade Profiles provides a concise overview of global trade by providing key indicators on trade for 197 economies and highlighting the breakdown of exports and imports for each economy.

World Tariff Profiles is a joint publication of the WTO, the United Nations Conference on Trade and Development (UNCTAD) and the International Trade Centre (ITC). The publication provides comprehensive information on the tariffs and non-tariff measures imposed by over 170 countries and customs territories.

Additional information about the publications and additional data can be found on the WTO’s website with links to download the publications.

On July 10, 2018, the Trump Administration announced a list of proposed tariffs on $200 billion of Chinese goods pursuant to Section 301 of The U.S.  Trade Act of 1974.  The proposed products are potentially subject to a 10 percent ad valorem duty. The United States Trade Representative (USTR) has targeted products from the “Made in China 2025” sectors in response to China’s unfair practices and policies with respect to foreign, including U.S., technologies and intellectual property.  Made in China 2025 is a strategic plan to make China a leader in a wide range of key global industries, such as advanced technologies, aerospace, and telecommunications, among others.

The list of proposed tariffs and the process for public notice and comment are provided in the Federal Register.  USTR is providing an opportunity to submit comments on the proposed list, which should include a discussion of the potential harm to U.S. interests, the potential effectiveness of tariffs on the proposed products, and other relevant information.  The important deadlines are as follows:

  • July 27, 2018 – Due date for filing requests to appear and for filing pre-hearing submissions
  • August 17, 2018 – Due date for the submission of written comments
  • August 20-23, 2018 – Public Hearing
  • August 30, 2018 – Due date for the submission of post-hearing rebuttal comments

At the conclusion of the public comment period and the public hearing, USTR will consult with federal agencies, such as the Department of Labor, Department of Commerce, and Department of Homeland Security, to determine the final list of products subject to the 10 percent ad valorem duty.  There are no statutory timeframes for the publication of the final list, though USTR is expected to move as quickly as possible.

Fox Rothschild’s International Trade team is actively involved and prepared to assist companies that wish to participate in this process. Please contact Brittney Powell or Lizbeth Levinson for more information.

 

 

On Tuesday, May 29, 2018, the U.S. Court of International Trade (CIT) ruled that the anti-dumping and countervailing duties for steel nails from Vietnam do not apply to zinc wall anchors.

In August 2016, OMG Inc. asked the Department of Commerce to determine whether wall anchors were within the scope of the anti-dumping and countervailing duties imposed on steel nails imported from Vietnam. The Department of Commerce determined that zinc wall anchors from Vietnam that were imported by OMG Inc. fit unambiguously within the scope of the anti-dumping and countervailing duty orders.

The CIT considered the common meaning of the term “nail” by consulting dictionary meanings and trade usage, and it reversed the previous scope ruling from the Department of Commerce. The CIT determined that because OMG’s zinc anchor is a unitary article of commerce, the entire product must be considered as a whole, and the entire item did not fit within the definition of a nail. Based on trade usage, the pin (a component) is considered a nail, but the unitary article of commerce is considered an anchor, not a nail.

The CIT remanded the case to the Department of Commerce for further consideration consistent with the CIT’s opinion.

The case is OMG Inc. v. United States, case number 1:17-cv-00036-GSK, in the U.S. Court of International Trade. You can read the full opinion here.

In a May 22, 2018 Opinion and Order, the U.S. Court of International Trade (“CIT) upheld the U.S. Department of Commerce’s (“Commerce”) use of a Thai nail producer, rather than a Dubai producer, as a surrogate for the calculation of anti-dumping duties to be assessed on two nail producers from the United Arab Eremites (“UAE”).  As a result, the nails will be assessed an 0.87% duty rate, not the 7.8% rate that the nails had been preliminary assigned.

In determining the appropriate anti-dumping duty to be assessed, Commerce had considered using, among others, the financial statements of Overseas International Steel Industry LLC (“OISI”), a Dubai-based subsidiary of one of the UAE nail producers at issue.  Commerce determined, however, that the subsidiary acted as “toll processor,” meaning that it was a service provider that used subcontractors to convert raw materials to finished products, but did not actually produce nails itself.  Accordingly, because OISI was not a producer, Commerce found that its financial records lacked some significant line items, including for material costs and inventory.  Therefore, Commerce determined that the financial records of a Thai nail producer, L.S. Industry Co. Ltd. (“LSI”), were a more fitting basis for its calculation of a constructed value profit on which the anti-dumping duties were based. As a result of using LSI’s financial statements, the anti-dumping duty calculation fell from the 7.8% rate contained in Commerce’s preliminary determination to 0.87%.

Before the CIT, a domestic nail producer argued that Commerce had erred in its determination that OISI was not the proper analog because OISI uses the same raw materials and production process as the UAE producer and that the financial statements sufficiently reflect all necessary information, such as material costs and inventory.

The CIT determined that, even if the domestic producer’s arguments were true, there was still not a sufficient basis to overcome “the presumption of administrative regularity” that insulates Commerce’s decision making.  The CIT found that Commerce had concluded that OISI was a toll producer and, therefore, did not consider its financial statements.  Instead, Commerce determined that LSI’s was the best surrogate and based its well-supported analysis on LSI’s financials.  Ultimately, the CIT found that there was no clear error demonstrated in the record which would warrant the Court’s substitution of its judgment for that of Commerce.