U.S. Department of Commerce

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.

 

Co-Author, Santos Ramos

On June 16, 2017, President Trump announced changes to United States’ Cuban sanctions regime which will stem the tide of liberalization that Obama Administration set in motion 2014. While the regulatory changes have not yet taken effect, the Department of Treasury’s Office of Foreign Assets Control (OFAC) released updated its online resources to reflect the Trump Administration’s forthcoming changes.  Most notably, under the announced changes, individual “people-to-people” travel will no longer be permitted and any trade or business ventures involving Cuba’s military, intelligence and security services is strictly prohibited.

Travel

Trump Administration’s new Cuban travel policies crack down on the potential for individual ‘vacation’ travel to Cuba. Under the Obama Administration’s reforms to the Cuban sanctions, individuals could travel to Cuba as long as they affirmed that they were engaged in permitted activities, such as educational and artistic study, news reporting, or other endeavors designed to promote and aid the Cuban people.  Under the newly announced changes, individuals will no longer be able to travel to Cuba on their own for “people-to-people travel” (i.e., educational travel that does not involve any academic study towards the pursuit of a degree and is not under the auspices of an organization). Group people-to-people travel will still be permitted as long as the group is led by a U.S.-based organization and maintains a full-time schedule of educational or other permitted activities. Unfortunately for those who may have already booked their tickets to Havana, the new regulation will not be prospective, meaning that any travel that does not conform with the new regulations (even if previously planned) will be prohibited.

Trade and Business

Companies seeking to do business in Cuba will also have to navigate stricter regulations. While trade and business ventures with the Cuban government remained restricted under the Obama Administration’s revised sanctions, the new rules will more clearly delineate entities which are associated with Cuban military conglomerate Grupo de Administración Empresarial SA (GAESA). GAESA, which is comprised of Cuban military, intelligence, and security services, has an extensive web of subsidiaries and ownership interests which some estimate touch as much as 60 percent of the Cuban economy. OFAC and Department of Commerce, Bureau of Industry and Security (BIS) will publish an extensive list of prohibited entities when the new regulations are completed. The new trade policy will be prospective, however, meaning that any contracts and licenses executed and issued prior to effective date of the new regulations will not be terminated.

What Should U.S. Companies Do?

U.S. companies which have already entered into contracts with a GAESA-related companies will be able to continue operating without any change. Any U.S. company seeking to begin or expand business in Cuba after the new policy takes effect, however, must heed the warning that any transaction with GAESA-related entities is prohibited. Moreover, while OFAC and BIS will strive to produce a comprehensive list of GAESA-related entities, it may prove to be a difficult and ever-evolving challenge.  Accordingly, despite any published list of entities, it will almost certainly remain the responsibility – and potential liability – of U.S. companies to know with whom they are conducting business. In addition, U.S. companies must be vigilant about any renewals of contracts or licenses with GAESA-related entities, as there has been little guidance as to whether renewing an existing contract will be considered continued operation or a new, prohibited engagement.

On June 20, 2016, U.S. President Barack Obama will deliver the keynote address at the meeting of the international trade and investment delegation. This event is being organized by the United States – India Imports Council (USIIC).

The USIIC will be taking a trade and investment delegation composed of 18 members from Gujarat, India, to the U.S.  The delegation will attend SelectUSA, a project of the U.S. Department of Commerce, where the U.S. will present its trade benefits to over 50 other countries. The goal is to promote foreign direct investment and trade in the U.S.  The delegates from Gujarat represent several business sectors, including infrastructure, mining, logistics, pharmaceuticals, automotive, and financial services.

For more information about the USIIC and the trade relationship between the U.S. and India, visit the USIIC website.

Jesse Harris writes:

As a penalty for selling their products in the American market below fair value, the U.S. Department of Commerce (the “Department”) has imposed increased anti-dumping duty rates on cold-rolled steel imported from China and Japan. The duty rates imposed on China’s and Japan’s largest cold-rolled steel exporters are now 256.44% and 71.35% respectively.

Steel manufacturing
Copyright: photollurg / 123RF Stock Photo

The Department’s determination came in response to allegations made by some of the U.S.’s largest steel producers, including U.S. Steel and AK Steel, that an influx of subsidized imports of cold-rolled steel from these foreign producers has captured a large share of the U.S. steel market. This increased market share has harmed production, shipments, and most importantly, selling prices and margins of U.S. steel makers. Indeed, the price of Chinese steel tends to be 20% to 50% lower than the prices in any other country.

This begs the questions: Will the anti-dumping duties work? And what are the implications of these duties?

Cold-rolled steel is used to produce, among other things, auto parts, appliances, shipping containers, and construction materials. Analysts believe that the U.S. imposed duties will prop up steel prices, and for companies that are in the business of purchasing foreign cold-rolled steel, this will increase costs. Steel manufacturers, however, will benefit from a decrease in foreign competition because of the restoration of fair trade conditions in the U.S. They will more easily compete with foreign prices because the anti-dumping duties inherently make foreign steel more expensive than U.S. steel.

However, the market demand will likely not improve, especially in the oil and gas segment; and without an increase in market demand, the duties may not result in any sustained, long-term benefits. This is especially true given the likelihood that Chinese manufacturers will not cut steel production despite the increased duties because of potential political fall outs from resulting job losses.

The U.S. already has anti-dumping duties in place on 19 categories of Chinese steel, yet these duties have done little to help the now sluggish U.S. steel industry. In 2015, the benchmark hot-rolled coil index fell 35% to under $400 per ton, contributing to a $1.5 billion loss at U.S. Steel, and over a $7 billion loss at ArcelorMittal, the world’s largest steelmaker. These companies have been forced to lay off U.S. workers as a result of the losses.

The anti-dumping duties not only affect the U.S., but will significantly impact other countries such as Brazil, India, Korea, Russia, and the U.K. These countries rely heavily on Chinese and Japanese steel. The estimated U.S. demand of steel is 110 million tons per year, which is far higher than the U.S.’s annual production of about 80 million tons. Given the U.S’s reliance on foreign steel, the increased duties are an attempt to strike a balance between fair competition and necessity.

Similar duties are being proposed for certain Chinese carbon and alloy steel products as well. It is possible that other countries will soon follow suit and implement similar anti-dumping duties.


Jesse Harris is a summer associate based in the firm’s Philadelphia office.

Effective today, January 27, 2016, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) and the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) have further reduced sanctions affecting U.S. relations with Cuba.  The amendments to the Cuban Assets Control Regulations (CACR) and Export Administration Regulations (EAR) represent significant steps toward the liberalization of commerce and travel which were first announced by the Obama administration in December 2014.

Cuba's flag
Copyright: mishchenko / 123RF Stock Photo

Among the reductions in current regulations are new allowances for financing, exportation, and travel.

  • Financing  – Restrictions on payment and financing terms for authorized non-agricultural exports and reexports have been removed and U.S. banking institutions are now permitted to provide financing for such transactions.  The U.S. Department of Commerce has indicated that payments of cash in advance; sales on an open account; and financing by third-country financial institutions or U.S. financial institutions will all permissible under the newly revised regulations.
  • Exports – OFAC and BIS have expanded general licenses for goods and services which aid the Cuban people.  General licenses related to the export and reexport of telecommunications items, agricultural items, civil aviation safety items, and news gathering software and technology items have all be expanded.  OFAC and BIS have also announced a case-by-case licensing policy which will facilitate the exportation of goods (including artistic and cultural endeavors as well as education, infrastructure, public health, and sanitation items) which will benefit the Cuban people even if their exportation necessarily involves the Cuban government or other state-owned enterprises with whom commercial interaction is generally prohibited under current U.S. regulations.
  • Travel – OFAC authorized travel for additional business-related reasons as well as authorizing additional transactions which are incident to authorized travel.  Among the newly authorized reasons for travel are the production of media and artistic programs (including, television programs, films, music recordings, the creation of artworks by Cuban artists), and the organization of professional conferences, sports competitions, artistic exhibitions, and public performances, as well as additional types of humanitarian projects such as disaster preparedness projects. It is now also permissible to travel to Cuba and engage in market research, marketing, sales and contract negotiation, delivery, installation, and leasing of items which are incident to otherwise authorized activities in Cuba.

Although relations between the U.S. and Cuban continue to take strides toward liberalization, numerous sanctions regulations remain in full effect and can carry significant penalties if violated.  Accordingly, companies looking for opportunities in Cuba must, with the the help knowledgeable counsel, remain vigilant in their adherence to existing regulations despite the progress of the past year and the promising trend of rapid deregulation.

Cuba's flag
Copyright: mishchenko / 123RF Stock Photo

On September 21, 2015, both the Department of Treasury’s Office of Foreign Assets Control (OFAC) and the Department of Commerce’s Bureau of Industry and Security (BIS) announced significant reductions in the regulation of transactions between US individuals and entities and Cuban nationals.

OFAC Regulatory Changes

The revised regulations and interpretive guidance are effective immediately and demonstrate substantial progress in the normalization of relations between the United States and Cuba which were historically first announced earlier this year.  Among the most significant changes to OFAC’s Cuban Assets Control Regulations include new permissions that:

  • US entities may establish a physical presence, as well as Cuban bank accounts, to further authorized businesses related to mail, parcel and cargo services, news bureaus, telecommunications and internet-based services, educational services, religious organizations, and travel and carriers services.
  • US entities may operate carrier services via vessels to and from Cuba, though travel to Cuba for tourism remains prohibited.
  • US entities may provide goods and services to Cuban nationals who are located outside of Cuba.
  • US entities may engage in legal services, emergency medical services, humanitarian, and diplomatic activities for the benefit of Cubans and Cuban nationals.

BIS Regulatory Changes

Similarly, the BIS has revised and clarified the Export Administration Regulations to facilitate the movement of authorized goods and people to and from Cuba by:

  • Expanding the categories of vessels which are authorized to temporarily sojourn in Cuba to include cargo, transport and recreational vessels.
  • Expanding the time aircraft can sojourn in Cuba.
  • Permitting export and reexport of: software to improve the “free flow of information” to, from and around Cuba; items incidental to establishment of authorized businesses; and, on a temporary basis, certain proprietary “tools of the trade” necessary to establish and support authorized business ventures.

Although these substantial revisions to OFAC and BIS regulations indicate that the Obama administration is committed to rapid liberalization, many significant regulations remain.

With limited guidance on how these new regulations will be interpreted and implemented, any U.S. individual or entity considering entry into the Cuban market should seek specific advice as to whether their proposed venture complies with all current regulations before they agree to any transactions with Cuban nationals.