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This Month in International Trade - April 2016

Client Alert | 23 min read | 05.05.16

In this issue:


This news bulletin is provided by the International Trade Group of Crowell & Moring. If you have questions or need assistance on trade law matters, please contact John B. Brew or any member of the International Trade Group.

CUSTOMS / IMPORTS / TRADE REMEDIES

Miscellaneous Tariff Bill Clears House, Moves to Senate

On April 13, the U.S. House of Representatives, Ways and Means Subcommittee on Trade and 15 other members of Congress introduced the American Manufacturing Competitiveness Act of 2016 (AMCA). This bill is intended to reform the stalled Miscellaneous Tariff Bill (MTB) process and would reduce tariffs on the importation of products not manufactured in the U.S. On April 27, the bill was considered, passed the House, and received in the Senate the following day.

In the past, members of Congress introduced a bill to suspend or eliminate duties on certain imported commodities on behalf of their constituents. The House Ways and Means and Senate Finance committees would then consolidate these bills into a Miscellaneous Tariff Bill (MTB), which would often be incorporated into larger legislation for passage. MTBs historically lasted up to three years before being reconsidered by Congress. The last MTB expired in December 2012 and has not been renewed despite multiple attempts primarily due to the perception that MTBs were “earmarks,” federal funding only benefiting a state or local interest that circumvented the normal legislative process.

Under AMCA, interested parties would file a petition with the U.S. International Trade Commission (ITC), who would be tasked with vetting the proposals. After the ITC reviewed and either approved or dismissed tariff reduction petitions, a report would be generated for Congress recommending products that meet the MTB criteria. The public could also comment on the petitions through a notice and comment period. Congress would then draft a MTB proposal wherein it could strike certain ITC recommendations, but could not add new ones. The MTB would then proceed through Congress under the normal legislative process. The MTB would continue to provide temporary relief for a three year period, after which the process would be repeated.

Once AMCA is enacted, the measure would direct the ITC to begin a new MTB no later than October 15, 2016. AMCA also provides certain timelines by which the ITC must complete its processes. Assuming Congress’ prompt consideration of the ITC report and conversion into a MTB bill, importers could receive benefits as early as the fourth quarter of 2017.

Companies should begin to review their import and purchasing data to identify potential MTB opportunities as the petition period will only be open with the ITC for sixty days and then would not be open again until 2019.

For more information, contact: John Brew, Frances Hadfield, Jini Koh, Mike Gill

U.S. Steel Seeks Total Import Ban of Chinese Carbon and Alloy Steel Products

Consumers and Importers Comments Due May 11

On April 26, on top of the dozens of antidumping and countervailing duty investigations of steel imports underway, U.S. Steel filed a petition under Section 337 of the Tariff Act of 1930, typically used for intellectual property violations committed overseas, requesting a total import ban of all carbon and alloy steel products from China by alleging that Chinese steelmakers have:

  • Conspired to fix prices and shared production schedules through their trade group, the China Iron and Steel Association.
  • Misappropriated, via cyber-hacking in January 2011, U.S. Steel’s trade secrets related to the production of advanced high-strength steel used by the automotive industry.
  • Falsifying the origin of Chinese steel to circumvent Antidumping and Countervailing Duty (AD/CVD) orders and duties.

Unlike AD/CVD proceedings which take place at both the U.S. Department of Commerce and the U.S. International Trade Commission (ITC), 337 proceedings are presided over by an ITC Administrative Law Judge (ALJ) who conducts a trial and renders an opinion regarding any violations and proposed remedies. This includes exclusion orders, cease and desist orders, and the imposition of a bond during the presidential review period. The ALJ’s opinion and remedy is then reviewed by the ITC’s commissioners and must ultimately be approved by the president.

The first hurdle for U.S. Steel’s 337 petition, however, is for the ITC to determine by the end of May whether to initiate the investigation.

The ITC is soliciting comments on potential exclusions from the 337 matters, as well as input from consumers. Comments are due on May 11.

In particular, the Commission is interested in comments that:

  1. Explain how the articles potentially subject to the requested remedial orders are used in the U.S.
  2. Identify any public health, safety, or welfare concerns in the U.S. relating to the requested remedial orders.
  3. Identify like or directly competitive articles that complainant, its licensees, or third parties make in the U.S. which could replace the subject articles if they were to be excluded.
  4. Indicate whether complainant, complainant’s licensees, and/or third party suppliers have the capacity to replace the volume of articles potentially subject to the requested exclusion order and/or a cease and desist order within a commercially reasonable time.
  5. Explain how the requested remedial orders would impact U.S. consumers.

For more information, contact: Dan Cannistra, Anne Li, Benjamin Blase Caryl

EU Increases Pressure on China to Curb Steel Overcapacity

In a speech at the Organization for Economic Co-operation and Development’s (OECD) High-Level Symposium on Steel, held in Brussels on April 18, EU Trade Commissioner Cecilia Malmström focused on China’s role in exacerbating the problem of overcapacity in the steel industry. Her intervention followed the rather vague aspirational commitments to which China agreed with the European Union following the ninth meeting of their bilateral Steel Contact Group in March.

Noting that state involvement in China has incentivized excess investment and overproduction, Malmström highlighted that China’s steel production is now twice the combined production of Japan, India, the U.S., and Russia. She also noted that the 350 to 400 million tons of excess steel produced by China annually is more than double the annual production of the European Union, the world’s second largest producer.

Although acknowledging that trade defense measures are not a long-term solution to the problem of overcapacity, Malmström clearly stated that the Commission would act quickly in the months ahead to counter unfair trading practices. She maintained that much of what is entering the EU market under the massive import surge currently facing EU producers “is being sold under conditions which can only be classified as dumping.”

As a consensus could not be reached upon conclusion of the OECD symposium, the European Union is also increasing pressure on China within the bilateral framework. Ahead of an upcoming EU-China summit, EU officials raised the issue of steel overcapacity with their Chinese counterparts in the context of their Economic and Trade Working Group on April 19. The struggles of the steel industry will thus remain at the top of the agenda.

For more information, contact: Dan Cannistra, Charles De Jager, Ben Caryl

CBP Detains Material Due to Alleged Use of Forced Labor

On March 30, U.S. Customs and Border Protection (CBP) detained materials produced by Chinese chemical supplier Tangshan Sanyou Group Co. Ltd. (Tangshan Sanyou) because of accusations it uses forced prison labor.

The seizure was driven by a withhold release order from CBP Commissioner R. Gil Kerlikowske the day prior on textile manufacturing materials containing soda ash—otherwise known as sodium carbonate, a chemical used for cleaning and dying fabric—and viscose rayon—a fabric made from purified cellulose, manufactured or mined by Tangshan Sanyou in China.

Moreover, on April 13, CBP issued a second withhold release order against imported potassium, potassium hydroxide, and potassium nitrate manufactured or mined by Tangshan Sunfar Silicon Company, a.k.a. Tangshan SunFar Silicon Industries Co. Ltd. in the People’s Republic of China, which will require detention at all U.S. ports of entry of merchandise manufactured by this company. This order was similarly based on information obtained by CBP indicating that the Tangshan Sunfar Silicon Company utilizes convict labor.

For detailed information on the seizure and its implications, please see Crowell’s Client Alert.

For more information, contact: Frances Hadfield, Anne Li

New Antidumping (AD) and Countervailing Duty (CVD) Petitions for April

  • Carbon and Alloy Steel Cut-to-Length Plate: On April 8, ArcelorMittal USA LLC, Nucor Corporation, and SSAB Enterprises, LLC, filed AD and CVD petitions on low-priced imports of carbon and alloy steel cut-to-length plate from twelve countries (see below). The U.S. International Trade Commission will vote on continuing the investigations on May 20.
Country Dumping Margins Alleged Countervailing Subsidies Alleged
Austria 158.27 percent No
Belgium 75.27 percent No
Brazil 93.32 percent Yes (26 programs)
China 76.58 percent Yes (44 programs)
France 28.84 – 121.62 percent No
Germany 43.09 - 194.50 percent No
Italy 127.04 percent No
Japan 187.70 percent No
South Korea 42.59 – 244.19 percent Yes (46 programs)
South Africa 109.09 percent No
Taiwan 6.53 – 74.24 percent No
Turkey 36.09 – 52.09 percent No

 

For more information, contact: Benjamin Blase Caryl

SANCTIONS / FINANCIAL CRIME / ANTI-CORRUPTION / EXPORT CONTROL

Cuba Update: U.S. Authorizes New Imports; Cuba Allows Citizens to Travel by Sea

The U.S. and Cuba continued efforts to advance commercial relations between their two countries in April. Although the U.S. generally continues to prohibit the importation of Cuban-origin goods, since January 2015 the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) has authorized the importation of certain goods and services produced by independent Cuban entrepreneurs.

OFAC’s general license authorized U.S. Persons to engage in all transactions ordinarily incident to the importation of items identified by the U.S. Department of State as being produced by Cuban entrepreneurs (the 515.582 List).

On April 22, the State Department updated and expanded the 515.582 List to authorize the import of additional goods and services produced by independent entrepreneurs in Cuba.

Persons subject to U.S. jurisdiction can now import coffee (Harmonized Tariff Schedule (HTS) Heading 0901) and additional wool, cotton, and other textile articles (HTS Chapters 51-52) produced by Cuban entrepreneurs, in addition to the items previously authorized. Importantly, the imports of these items no longer need to be made directly from Cuba. By expanding this list, the U.S. intends to further empower the emerging Cuban private sector by increasing the flow of information and resources between it and the U.S. market.

On the Cuban side, and as a result of the controversy regarding the prohibition of Cuban passengers on Carnival Cruises traveling to Cuba, the Cuban government announced on April 22 that Cuban nationals - regardless of their immigrant status - can travel to the island on board cruise and merchant ships, both as passengers and as crew members. For Cuban nationals and Cuban-Americans lawfully resident in the U.S., this change will enable them to potentially travel to Cuba by ship; however, for Cubans living in Cuba, the change will have a limited practical effect. Cuban nationals can only be enrolled as crew members through Cuban national employment agencies which are unlikely to authorize direct employment by non-Cuban cruise or merchant lines. Moreover, with an average monthly salary of $20, most Cubans will be unable to afford traveling by cruise ship.

Cuba also held the seventh Congress of the Communist Party of Cuba from April 17 to 19, celebrating 55 years of Revolution. Despite hopes that the Party Congress might announce further economic reforms, there were no significant declarations. President Raul Castro concluded the conference by noting that the economic changes that the country needs will not be made overnight; instead, the changes will be “slow but steady.”

For more information, contact: Cari Stinebower, Mariana Pendas, Dj Wolff

Iran Update: Election Returns, EU Sanctions’ Extension, Threats of Lawsuits Against the U.S., and More

On April 29, Iran held a run-off election for 69 parliament seats where no candidate won 25 percent of the vote in the February balloting. Between both elections, supporters of President Hassan Rouhani won 42 percent of the 290 seats in parliament, a working plurality. Although legislation passed in Iran’s Parliament must be approved by the Guardian Council, a 12-member body of theologians and jurists, with the hardliners now in the minority, Rouhani is expected to have a somewhat easier time passing certain economic and political changes.

Other notable events involving Iran this month

The EU extended its sanctions on Iran for human rights violations for an additional year. The new expiration date is 13 April 2017. The measures, first introduced in 2011, impose an asset freeze and travel ban on listed persons and entities, and ban exports to Iran of equipment that may be used for internal repression or telecommunications monitoring. More than 80 Iranian officials are listed for involvement in the violent suppression of protestors or other human rights violations. The action is parallel to and not affected by the Joint Comprehensive Plan of Action (JCPOA) which only lifted nuclear-related sanctions. The EU and the U.S. have both retained their sanctions on Iran for human rights violations, as well as for terrorism and ballistic missile reasons.

Even though the JCPOA was implemented three months ago, trade between Europe and Iran has yet to meet expectations because Europe’s major financial institutions remain reluctant to deal with Iran. Dozens of energy, aviation, and construction deals have stalled for fear of remaining U.S. sanctions, despite public clarifications from U.S. Secretary of State John Kerry earlier this month that the U.S. would not object to non-U.S. financial institutions processing transactions permissible under the JCPOA. European oil companies in particular are awaiting clear guidance on the use of dollars for transactions involving Iranian oil. EU foreign policy chief Federica Mogherini, on a recent visit to Tehran said the EU is working to “reassure” banks transacting with Iran is safe.

On April 25, Iran announced it intended to sue the U.S. at the International Court of Justice (ICJ) at The Hague to block the distribution of $2 billion in impounded assets to American victims of overseas attacks allowed by last month’s landmark U.S. Supreme Court decision.

Eager to compete with its rival Airbus which has already announced deals to sell 118 airliners valued at $27 billion to Iran, a team from Boeing began preliminary discussions last month in Tehran with several Iranian airlines about possible sales of aircraft and aircraft services. While the U.S. enacted a statement of licensing policy to support specific license applications for civil, commercial, and passenger aircraft pursuant to the JCPOA, Boeing still faces a range of practical challenges to executing such a deal, including Republican opposition, the requirement to allow Iran to transact in U.S. dollars, and the inability to use the U.S. Export-Import Bank because of Iran’s designation as a state sponsor of terror. Iran is reportedly interested in Boeing 737 single-aisle jets, as well as wide-body 777s.

For more information, contact: Carlton Greene, Cari Stinebower, Chris Monahan, Charles De Jager, Dj Wolff

UK Office of Financial Sanctions Implementation Issues Guidance Document

In keeping with its stated mission to provide a high-quality service to the private sector and ensure financial sanctions are properly understood, the newly established UK Office of Financial Sanctions Implementation (OFSI) published a guidance document on financial sanctions in April.

The 39-page document provides both a general high-level summary of the financial sanctions framework and a series of practical compliance examples for designated persons, members of the public, and businesses.

The first section of the guidance document summarizing the financial sanctions framework addresses the question of determining who is subject to financial sanctions, including how to use the consolidated list of designated persons. It also refers to the European Commission’s guidance on the concept of ownership and control. In addition, this section mentions the various prohibitions under financial sanctions and the bases for exemptions, as well as the grounds and processes for obtaining and complying with licenses.

The second section provides practical examples covering the three categories of parties. With respect to designated persons, it distinguishes between individuals and entities/organizations, with multiple examples for both based on practical and succinct questions. The twenty examples for members of the public are similarly detailed. Finally, with respect to businesses, the guidance document offers separate examples for financial institutions, insurers, lawyers, exporters, NGOs and charities.

This guidance represents a first step in meeting the first of the OFSI’s stated goals, to provide additional guidance to the regulated community about the scope and implementation of UK sanctions. The UK has indicated it intends to keep supplementing this guidance with additional outreach and educational tools to promote compliance. Lest anyone be lulled into a false sense of security however, the OFSI’s second focus is on enhanced enforcement. To that end, the UK has recently expanded the severity of its enforcement powers, including a range of new administrative penalties for sanctions breaches, including monetary penalties and an increase in the maximum prison sentence.

For more information, contact: Charles De Jager, Carlton Greene, Cari Stinebower, Dj Wolff

And Now the Carrots: DOJ Announces FCPA Self-Reporting Pilot Program

On April 5, the Fraud Section of the Department of Justice’s Criminal Division launched a one-year pilot program under which companies can receive tangible credit for self-reporting violations of the Foreign Corrupt Practices Act (FCPA). The rewards for self-reporting, cooperation, and remediation can include avoidance of a corporate monitor, a substantial fine reduction, or declination of prosecution entirely.

For detailed information on the FCPA Self-Reporting Pilot Program, please see Crowell’s Client Alert.

For more information, contact: Stephen Byers, Kelly Currie, Janet Levine, Tom Hanusik, Alan Gourley

Courts Can Bark But Can’t Bite: D.C. Circuit Holds DPAs are in the Sole Province of Prosecutors

On April 5, the D.C. Circuit Court of Appeals held that district court judges have no authority to deny a motion for exclusion of time under the Speedy Trial Act following a Deferred Prosecution Agreement (DPA) “based on concerns that the government should bring different charges or should charge different defendants.” United States v. Fokker Servs. B.V., No. 15-3016, 2016 WL 1319266 (D.C. Cir. Apr. 5, 2016). In granting the government’s mandamus petition, the Court held that a district court’s review is limited to ensuring that a DPA enables the defendant to demonstrate compliance with the law and is not “a pretext to evade the Speedy Trial Act’s time constraints.”

For detailed information on this first of its kind decision, please see Crowell’s Client Alert.

For more information, contact: Janet Levine, Tom Hanusik, Glen McGorty, Kelly Currie

TRADE AGREEMENT AND INVESTMENT UPDATES

TTIP Negotiations Complete Thirteenth Round with Fourteenth Planned for July

Following a productive thirteenth round of formal negotiations in New York the last week of April, EU and U.S. officials remain in close contact to ensure all negotiating texts can be consolidated or at least tabled by the next formal round initially planned for early July. This is in keeping with President Obama’s remarks at the Hannover Messe, in which he emphasized the necessity to conclude a deal before the end of his term.

Particular progress was achieved in this latest round on labor and environmental issues, trade facilitation, competition, regulatory cooperation, and mutual recognition of inspection methods relating to auto safety, pharmaceuticals, medical devices, and cosmetics. A concerted effort will also be needed to eliminate the few remaining tariff lines still outstanding.

However, much remains to be discussed with respect to services, as the EU’s top negotiator has suggested both sides could improve their offers of market access for services. Similarly, public procurement remains sensitive for both sides, with U.S. officials suggesting they might not be able to make a revised offer before the July round.

During this latest round, the European Union also issued a report on the state of play of the TTIP negotiations. EU Trade Commissioner Cecilia Malmström emphasized that the report “aims to be a broad, yet straightforward and concise document, a result of our continued promise to keep these negotiations the most transparent trade talks ever conducted by the EU.” Nevertheless, Greenpeace Netherlands subsequently released allegedly secret TTIP negotiation documents, the accuracy of which EU and U.S. officials have questioned.

For more information, contact: Ian Laird, Paul Davies, Charles De Jager

China Terminates Export Subsidies Challenged by the U.S.

China and the U.S. have signed a memorandum of understanding under which China agrees to terminate the export subsidies it provided to a variety of industrial sectors in recent years under its “Demonstration Bases and Common Service Platforms” program.

This ends the dispute settlement proceeding initiated by the U.S. at the World Trade Organization (WTO) one year ago challenging this WTO-inconsistent program.

Seven industrial sectors located in over 179 industrial clusters in China benefited from export subsidies under the program, including: textiles; apparel and footwear; advanced materials and metals, including specialty steel, titanium and aluminum products; light industry; specialty chemicals; medical products; hardware and building materials; and agriculture. China has agreed to address all the contested elements of the program.

China’s willingness to settle this WTO dispute is significant, as a lack of transparency and the program’s extent and complexity made it difficult for the U.S. to assess the scope of these subsidies contingent on export performance. However, the U.S. Trade Representative estimates that at least $1 billion was provided over three years. The U.S. was joined by the European Union and eleven other countries in the WTO case.

For more information, contact: Ian Laird, Charles De Jager

AGENCY ENFORCEMENT ACTIONS

Bureau of Industry and Security (BIS)

  • On April 11, BIS announced the denial of export privileges for 10 years to:
    • Alexandre Astakhov – convicted of violating the Arms Export Control Act for aiding and abetting the attempted export of two CNVD-T thermal clip-on night vision devices without a license.
    • Paweena Pechner – convicted of violating the Arms Export Control Act for knowingly and willfully causing the export to Thailand of firearms designated on the U.S. Munitions List without a license.

Financial Crimes Enforcement Network (FinCEN)

  • On April 5, FinCEN announced a $1 million civil money penalty (CMP) against Sparks Nugget, Inc. d/b/a John Ascuaga’s Nugget of Sparks, Nevada. Sparks Nugget admitted it willfully violated federal anti-money laundering (AML) laws. The company egregiously violated AML program requirements, reporting obligations, and recordkeeping requirements. FinCEN Director Jennifer Shaskey Calvery said, “Sparks Nugget had a systemic breakdown in its compliance program. Despite the fact that it hosted convicted embezzlers and had been repeatedly alerted to suspicious transactions by its own Bank Secrecy Act (BSA) compliance manager, Sparks saw no need to re-think its AML defenses.” .

Securities and Exchange Commission (SEC)

  • On April 7, the SEC announced Las Vegas Sands Corporation agreed to pay $9 million to settle charges that it violated the Foreign Corrupt Practices Act (FCPA) by failing to properly authorize or document millions of dollars in payments to a consultant facilitating business activities in China and Macao.

For more information, contact: Edward Goetz

OTHER AGENCY ACTIONS

Bureau of Industry and Security (BIS)

  • On April 2, BIS issued a final rule revising the Export Administration Regulations (EAR) to reflect changes to the Missile Technology Control Regime (MTCR) that were agreed to by MTCR member countries at the October 2015 Plenary in the Netherlands and the April 2015 Technical Experts Meeting in Switzerland.

Directorate of Defense Trade Controls (DDTC)

  • The Directorate of Defense Trade Controls (DDTC) posted an Industry Notice regarding updated DTrade Forms.
    • Beginning Friday, April 16, 2016, DTrade users must use version 9.2 for forms DSP-5, -6, -61, -62, -73 and -74; and version 7.5 for the Common Schema.
    • Additionally, DDTC has upgraded the IBM forms viewer to v8.2.
    • Earlier versions of these forms will be rejected beginning April 16, 2016.
    • To access the new forms, click here.

Executive Office of the President

  • On April 19, the president issued a new Executive Order (E.O.) “Blocking Property and Suspending Entry into the United States of Persons Contributing to the Situation in Libya,” which imposes sanctions against individuals or entities that, among other things, threaten the peace, security, or stability of Libya or obstruct or undermine the Libyan Government of National Accord (GNA).

Office of Foreign Assets Control (OFAC)

  • On April 6, OFAC issued regulations to implement Executive Order 13712 of November 22, 2015 (“Blocking the Property of Certain Persons Contributing to the Situation in Burundi”).
  • On April 15, OFAC issued regulations to implement the Hizballah International Financing Prevention Act of 2015.
  • On April 21, OFAC updated its Frequently Asked Questions (FAQ) regarding Cuba by issuing new FAQs 62, 63, 67, 68, 80, 81, 93, and 97. The questions address U-turn financial transactions and insurance, among other things.
  • On April 27, OFAC updated its Iran FAQ 417 (Payments or the Facilitation of Payments to Iranian Civil Aviation Authorities for Overflights of Iran or Landing in Iran) to reflect the lifting of nuclear-related secondary sanctions under the Joint Comprehensive Plan of Action (JCPOA).
  • On April 29, OFAC extended the authorization by general license of transactions involving certain Belarusian entities blocked pursuant to Executive Order 13405. This license does not generally authorize the release of property blocked pursuant to E.O. 13405. This authorization expires on October 31, 2016, unless extended or revoked.

For more information, contact: Edward Goetz

CROWELL & MORING INVITES YOU TO A RECEPTION AT ICPA ROME

Please join Crowell & Moring for a Reception at the International Compliance Professionals Association’s (ICPA) EU/UK Conference in Rome on June 5, 2016, from 8-10pm. For more information and to RSVP, please email Jenn Rivers at jrivers@crowell.com.

CROWELL & MORING SPEAKS

Jeff Snyder spoke on issues related to dispute resolution under the Trans Pacific Partnership (TPP) at the 26thAnnual Meeting and Conference of the Inter-Pacific Bar Association in Kuala Lumpur on April 15.

Jim Smith, C&M International President, spoke at the National Association for Surface Finishing’s (NASF) Washington Forum on April 20 at the Ritz-Carlton Pentagon City in Arlington, VA. He discussed “Trade: A Look at Pending Trade Agreements with Asia and Europe.”

Charles De Jager will be presenting at the International Compliance Association’s (ICPA) EU/UK Conference in Rome on June 7. He will be on a panel discussing the latest updates on U.S. and EU economic sanctions.

Addie Cliffe and Carlton Greene will be presenting on the International Panel at Crowell & Moring’s Ounce of Prevention Seminar (OOPS) scheduled for May 25-26 at the Renaissance Washington DC.

Contacts

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