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The Month in International Trade – July 2021

Client Alert | 35 min read | 08.06.21

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 Jeff Snyder or any member of the International Trade Group.

Top Trade Developments

Latest U.S. Trade Actions/Tariffs and Other Countries Retaliatory Measures

Please click here anytime for the latest actions, covered products rate increases, and effective dates.

For more information, contact: Dan Cannistra, Robert Holleyman, Bob LaFrankie, Ru Xiao-Graham, Sam Boone, Clayton Kaier

Latest on Section 301 Product Exclusions

Please click here anytime for the latest actions regarding Section 301 Product Exclusions.

For more information, contact: Dan Cannistra, Robert Holleyman, Bob LaFrankie, Ru Xiao-Graham, Sam Boone, Clayton Kaier

Customs and Border Protection (CBP) Modifies Withhold Release Order on Carpet and Hand-Knotted Wool Products from Nepal

On July 26, 2021, U.S. Customs and Border Protection (CBP) modified its July 1998 Withhold Release Order (WRO) that originally prevented the importation of carpet and hand-knotted wool products from seven Nepalese companies. Specifically, CBP modified the WRO so that carpet and hand-knotted wool products from Annapurna Carpet Industries Pvt. Ltd. (Annapurna Carpet) would be admissible at all U.S. ports of entry. This decision came after a thorough investigation by CBP into Annapurna Carpet indicated that the company had addressed all eleven indicators of forced labor and “remediated concerns about the use of forced labor in its production process.”

The modification marks the second time CBP has modified this WRO. The first time CBP modified the WRO was in October 1998 when it allowed for the importation of carpet and hand-knotted wool products from the following three of the seven companies originally included in the WRO:

  • Norsang Carpet Industries Pvt., Ltd.,
  • Everest Carpet
  • K.K. Carpet Industries.

At that time CBP found that the three companies had fully addressed concerns regarding the use of forced labor in their supply chains. Notably, the following three companies are still impacted by the WRO:

  • Kumar Carpet Pvt.
  • Singhe Carpet Pvt.
  • Valley Carpet

WROs are issued by the U.S. government when information reasonably but not conclusively indicates goods were made in whole or in part using Forced Labor. Merchandise detained under a WRO order must be exported immediately or a substantial submission made that provides specific information showing that the goods were not made with forced labor. To obtain a release of any shipment that has been subjected to a WRO, a certificate of origin along with this detailed statement regarding the merchandise’s production and supply chain origin must be submitted to CBP. CBP makes a determination on a case-by-case basis.

The Press Release is available here.

For more information on actions addressing human rights and forced labor abuses, contact our team and see previous posts below.

CBP Issues Withhold Release Order (WRO) on Certain Silica-Based Products from Xinjiang, PRC | International Trade Law (cmtradelaw.com)

Customs and Border Patrol (CBP) Issues Withhold Release Order (WRO) Against Chinese Fishing Vessels | International Trade Law (cmtradelaw.com)

 For more information: John Brew, Jeff Snyder, Frances Hadfield, Martín Yerovi

Government Releases Updated Version of Xinjiang Supply Chain Business Advisory

On July 13, 2021, the U.S. government released an updated version of the Xinjiang Supply Chain Business Advisory. The notice, which was originally released last summer, states that the PRC government is perpetrating genocide and crimes against humanity in Xinjiang, highlights the legal risks posed to companies and supply chains, updates the list of U.S. governments authorities and enforcement actions, and provides a list of other countries’ relevant regulatory provisions and information on forced labor in supply chains. Notably, the new advisory adds the Department of Labor (DOL) and the Office of the U.S. Trade Representative (USTR) as co-signatories.

The risks and types of exposure companies and supply chains face, as outlined by the Xinjiang Supply Chain Business Advisory and State Department Press Release, are provided below.

Risks related to investment in PRC companies linked to surveillance and forced labor in Xinjiang:

  • Violation of statutes criminalizing forced labor including knowingly benefitting from participation in a venture, while knowing or in reckless disregard of the fact that the venture has engaged in forced labor
  • Sanctions violations if dealing with designated persons
  • Export control violations
  • Violation of the prohibition of importations of goods produced in whole or in part with forced labor or convict labor.

Primary types of potential supply chain exposure to entities engaged in human rights abuses:

  • Assisting or investing in the development of surveillance tools for the PRC government in Xinjiang, including tools related to genetic collection and analysis
  • Sourcing labor or goods from Xinjiang, or from entities elsewhere in China connected to the use of forced labor of individuals from Xinjiang, or from entities outside of China that source inputs from Xinjiang
  • Supplying U.S.-origin commodities, software, and technology to entities engaged in such surveillance and forced labor practices
  • Aiding in the construction and operation of internment facilities used to detain Uyghurs and members of other Muslim minority groups, and/or in the construction and operation of manufacturing facilities that are in close proximity to camps and reportedly operated by businesses accepting subsidies from the PRC government to subject minority groups to forced labor.

The full version of the Advisory is available here.

For more information on actions addressing human rights and forced labor abuses contact our team and see previous posts below.

Forced Labor/U.K. Modern Slavery Act Archives | International Trade Law (cmtradelaw.com)

Xinjiang Archives | International Trade Law (cmtradelaw.com)

For more information: Frances Hadfield, Clayton Kaier

First Meeting of USMCA Labor Council Targets Forced Labor in Advance Of Final Rules

On June 29, 2021, U.S. Trade Representative for Labor, Joshua Kagan, and U.S. Department of Labor’s Deputy Undersecretary for International Affairs, Thea Lee, met with their counterparts from Mexico and Canada for the first USMCA Labor Council meeting.

Key areas of discussion as outlined by USTR included:

  • USMCA’s requirement that each party prohibit the importation of goods into its territory from other sources produced in whole, or in part by forced or compulsory labor.
  • Ongoing implementation of Mexico’s recent historic labor law reform.
  • Labor policies for migrant workers.
  • Areas for ongoing and future cooperation and technical capacity building.

Notably, the USMCA is the first U.S. trade agreement that has entered into force that prohibits the import of goods produced using forced labor. Following the inaugural meeting, USTR Katherine Tai stated that “A good next step in this increased cooperation can be on the issue of forced labor.” “Working together to address this critical economic and moral issue would send a powerful message to the world.”

Key labor changes in the USMCA as outlined by CRS include:

  • Prevention of panel blocking in dispute settlement. Ensures the formation of a panel in dispute cases where a party refuses to participate in the selection of panelists.
  • “In a Manner Affecting Trade and Investment.” Shifts the burden of proof by stating that an alleged violation affects trade and investment, unless otherwise demonstrated.
  • Rapid Response Mechanism. Adds a new rapid response mechanism to provide for an independent panel investigation of denial of certain labor rights at “covered facilities,” as opposed to a government inspection.
  • Mexico’s Labor Reform Monitoring. USMCA implementing legislation creates a new interagency committee, labor attachés, and reporting requirements to Congress on Mexico’s implementation of labor reforms.
  • New or amended provisions on Rules of Procedure for DS, forced labor, and violence against workers

Next Steps and Additional Information

The Office of the U.S. Trade Representative and the Labor Department are expected to publish final guidelines for USMCA labor provisions soon.

The Interim Final Rule is available here.

The Labor Councils’ full joint statement is available here.

For more information on the USMCA and actions addressing human rights and forced labor abuses, contact our team and see previous posts below.

https://www.cmtradelaw.com/category/u-s-mexico-canada-agreement-usmca/

https://www.cmtradelaw.com/category/forced-labor-uk-modern-slavery-act/

https://www.cmtradelaw.com/category/xinjiang/

For more information: John Brew, Frances Hadfield, Clayton Kaier

USTR Releases Determination in Vietnam Currency Investigation

On July 23, 2021, the U.S. Trade Representative issued a formal determination deciding not to take action against Vietnam in response to their currency practices under Section 301. The investigation, which was initiated in October of 2020 to examine Vietnam’s acts, policies, and practices related to the valuation of their currency, effectively concluded following the announcement of a currency agreement between the U.S. and Vietnam on July 19, 2021. While the investigation found evidence that Vietnam engaged in activities that warranted action under Section 301, “the determination finds that the Treasury-State Bank of Vietnam (SBV) agreement provides a satisfactory resolution of the matter subject to investigation and accordingly that no trade action is warranted at this time. USTR, in coordination with Treasury, will monitor Vietnam’s implementation going forward.”

Investigation findings, as outlined by USTR:

  1. Vietnam’s acts, policies, and practices with respect to currency valuation, including excessive foreign exchange market interventions and other related actions, taken in their totality and as discussed in further detail in the Report, are unreasonable in light of U.S. and international norms that exchange rate policy should not be undertaken to gain an unfair competitive advantage in international trade, should not artificially enhance a country’s exports and restrict its imports in ways that do not reflect the underlying competitiveness, should not prevent exchange rates from reflecting underlying economic and financial conditions, and should not prevent balance of payments adjustment.
  2. Vietnam’s acts, policies, and practices that contribute to undervaluation of its currency through excessive foreign exchange market interventions and other related actions burden or restrict U.S. commerce; and, accordingly,
  3. The acts, policies, and practices under investigation are actionable under Section 301(b) of the Trade Act

The report is available here.

The Federal Register Notice is available here

Action, as outlined by the formal determination:

  • Citing the July 19, 2021, Treasury-SVB currency agreement, the determination notes that, where an agreement or measures provide a satisfactory resolution of the matter subject to investigation, USTR may determine under Section 304 that no action is appropriate.

Next Steps, as outlined by the formal determination:

  • Acknowledging that Section 304 allows USTR to defer 301 actions in favor of an alternative agreement or measures, the determination notes that, Section 306 of the Trade Act, requires USTR to monitor the agreement or measures, and may take action at a future time upon a finding that the implementation has not been satisfactory.

The full determination can be found here.

USTR’s press release can be found here.

For more information on the Vietnam and currency issues please reach out to our team and see previous posts below.

Vietnam Archives | International Trade Law (cmtradelaw.com)

 For more information: John Brew, Frances Hadfield, Clayton Kaier

CIT Issues Preliminary Injunction Temporarily Restraining Liquidation of Section 301 Import Entries

On August 24,2017, the Office of the U.S. Trade Representative (USTR) began a Section 301 investigation to determine whether acts, policies, and practices of the Government of China related to technology transfer, intellectual property, and innovation were actionable under the Trade Act of 1974. On March 22, 2018, USTR announced its affirmative findings and imposed tariff measures on technology related products to address China’s its affirmative finding. Thereafter, China retaliated with import tariffs against US products and President Trump ordered the USTR to impose additional tariffs on a variety of non-technology products at varying additional duty rates (from 7.5% to 25%). And in September 2018 and August 2019, USTR issued those further tariffs on non-technology related products (called List 3 and List 4A products), which imposed an additional $300 billion in tariffs on imported products from China.

In September 2020, companies and importers filed over 3,000 Complaints involving more than 6,500 plaintiffs alleging that Lists 3 and 4A exceed USTR’s authority under the Trade Act of 1974 and violated the Administrative Procedure Act (APA). The initial case, HMTX Industries, Ct. No. 20-177, was assigned to a three-judge panel of Chief Judge Barnett, Judge Kelly and Judge Choe-Groves. Thereafter, the court stayed all cases under a new lead case In re Section 301, Ct. No. 21-00052, and ordered a steering committee to assist the court. The government filed a Master Answer responding to all of the Complaints and then the U.S. government alleged that the CIT lacked authority to order refunds for List 3 or List 4A duties paid after liquidation even if plaintiffs prevail on the merits. Liquidation is defined as “the final computation or ascertainment of duties.” 19 C.F.R. § 159.1. Accordingly, on April 23, 2021, Plaintiffs filed a motion for a PI to protect the entries at issue in this case and require CBP to suspend liquidation of 301 entries. The Government responded and, Plaintiffs’ moved to and filed a Reply brief on their PI Motion. On June 17, 2021, the court held a remote oral argument on the Motion.

On July 6, 2021, the three-judge panel issued a decision with a two-judge majority (Judge Kelly and Judge Choe-Groves) granting a preliminary injunction that suspends the liquidation of unliquidated entries subject to List 3 and List 4A duties. Chief Judge Barnett dissented. The CIT’s majority decision held that liquidation of Plaintiffs’ entries constituted irreparable harm because it may foreclose Plaintiffs’ ability to challenge the Government’s imposition of duties paid or have those duties returned. The majority indicated that the potential unavailability of reliquidation or refund in this case sufficiently demonstrated irreparable harm. The court used a sliding scale approach where the greater the potential harm to the plaintiff, the lesser the burden on Plaintiffs to make the required showing of likelihood of success on the merits. To obtain a preliminary injunction, a party must demonstrate that there is a: (1) likelihood of success on the merits; (2) irreparable harm absent immediate relief; (3) the balance of interests weighs in favor of relief, and (4) that the injunction serves the public interest. The majority decision found that there was a sufficient likelihood of success on the merits and relief was warranted because the harm to Plaintiffs was great if they were unable to recover Section 301 duties that were unlawfully paid. Chief Judge Barnett dissented, stating that the court has the authority to order reliquidation on finally liquidated entries as a remedy in this case, and thus Plaintiffs’ did not show irreparable harm. The majority opinion also pointed to the court’s authority to issue refunds on finally liquidated entries, but still found irreparable harm given the Government’s refusal to conceded this point. He agreed with the position that the court has the authority to issue refunds on all past entries, but seeking suspension of liquidation of entries is a precautionary step in case the CIT’s view is overturned on appeal.

The CIT’s order regarding the PI temporarily restrained liquidation of any entries for the next 28 days and ordered the U.S. government to establish a repository through which plaintiffs who have filed a lawsuit may identify any unliquidated entries affected by the List 3 and List 4A duties. Within 7 days of the order, the government must meet with the Plaintiffs’ steering committee to discuss the establishment of the repository for any unliquidated entries. And within 14 days of the order, the government must establish such a repository.

The order requires the Plaintiffs to take the following steps in order to obtain suspension of liquidation of their unliquidated entries:

  • Any plaintiff requesting suspension of liquidation must provide:

(i) Its full Importer of Record (IOR) number(s), including any suffix(es);

(ii) The case/court number and filing date of the Section 301 complaint as well as the CBP Center and team assignment (if known); and

(iii) The entry number and date of entry for any entries where suspension of liquidation is to be requested,

  • The government is enjoined during the remainder of this litigation from liquidating any entries for which they received a request for suspension of liquidation, unless within 14 days of receiving such a request, and at their option, the government stipulates to refund any duties found to have been illegally collected and notifies the Plaintiffs of such stipulation.
  • Any entry for which liquidation is suspended under the July 6, 2021 Order will be liquidated in accordance with any final court decision, and
  • Any entry inadvertently liquidated by CBP in contravention of the order must be returned to unliquidated status.

The parties will next appear before the CIT for a status conference on July 15, 2021. If you have any questions regarding this case please do not hesitate to contact us.

 For more information: John Brew, Frances Hadfield

Department of Commerce Releases the Four Remaining Trump-Era Section 232 Import Reports

On July 29, 2021, the U.S. Department of Commerce (DOC) released the results of four Section 232 trade investigations that took place during the Trump administration on the imports of vanadium, transformers and their components, titanium sponge, and uranium. Though the DOC found all four materials as essential to U.S. national security, it only determined that imports of transformers and their inputs, titanium sponge, and uranium posed threats. The DOC concluded that vanadium imports did not pose a threat – which eliminates the rationale for the Biden administration to impose any tariffs or import restrictions – while also providing non-trade actions to ensure a reliable domestic source of the mineral. These recommendations included expanding the National Defense Stockpile to include vanadium and further government promotion of recycling efforts.

Transformers and their components were the only products of the four reports that received a recommendation for tariffs or quotas from the DOC. Specifically, the DOC determined that large power transformers, laminations for incorporation into transformers, and stacked and wound cores for incorporation into transformers were being imported at a level that posed a threat to U.S. national security. The DOC provided alternative options to tariffs and quotas as well – which included negotiating bilateral or trilateral deals with trading partners to reduce imports, imposing domestic content requirements for transformers, and changing the Harmonized Tariff classification for laminations and cores to the steel Harmonized Tariff Schedule (HTS) category.

Both titanium sponge and uranium imports were also classified as a threat to national security – though the DOC did not recommend imposing tariffs on either of the two products. For titanium sponge the DOC suggested expanding the National Defense Stockpile to include titanium sponge and temporary compensation to U.S. producers to cover the difference between their current production costs and global purchase prices. The DOC also recommended that the U.S. Government take a multilateral approach to combat global market distortion by non-market actors. Alternatively, the DOC determined that the U.S. Government should enact an import waiver in order to “achieve a phased-in reduction of uranium imports” over a 5-year period. The import waiver could be achieved through a target zero quota towards countries with state-owned enterprises (SOEs) that distort the uranium market or through a global zero quota on all imports of uranium.

Under Section 232, the DOC has 270 days to deliver its recommendations to the President, and the President has 90 days to enact the recommendations or not. Notably, this window to enact the recommendations has expired for each of the four reports. For more information on Section 232 rules, contact our team and see previous posts below.

U.S. - EU Aim to Resolve Excess Capacity Issues and Section 232 Tariffs by the End of the Year | International Trade Law (cmtradelaw.com)

World Trade Organization (WTO) Dispute Panel Delays Final Ruling on Section 232 Tariffs | International Trade Law (cmtradelaw.com)

For more information: Jeff Snyder, Martín Yerovi

  1. We have one add to Crowell & Moring Speaks.

Evan Chuck will be speaking at a U.S.-China Business Council webinar titled “Navigating Conflicting US-China Sanctions Regimes and Countermeasures” on Tuesday, July 27, at 10:30 am (US EDT). In addition to sanctions, the webinar will be examining export controls and CFIUS.

Bureau of Industry and Security (Bis) Adds Six Russian Entities to The Entity List

On July 19, 2021, the Department of Commerce’s Bureau of Industry and Security (BIS) added six Russian entities to the Entity List for their relation to the Russian government’s “harmful foreign activities” that present a threat to the United States’ national security, foreign policy, and economy. Specifically, the entities were added to the Entity List for being a part of the Russian government’s efforts to undermine the U.S. elections, engage in malicious cyber activities against the U.S. and other foreign governments, foster transnational corruption to influence foreign governments, and pursue extraterritorial activities targeting dissidents or journalists. The six entities include:

  • Aktsionernoe Obshchestvo AST;
  • Aktsionernoe Obshchestvo Pasit;
  • Aktsionernoe Obshchestvo Pozitiv Teknolodzhiz;
  • Federal State Autonomous Institution Military Innovative Technopolis Era;
  • Federal State Autonomous Scientific Establishment Scientific Research Institute Specialized Security Computing Devices and Automation; and
  • Obshchestvo S Ogranichennoi Otvetstvennostyu NEOBIT.

Notably, these six entities were also sanctioned by the Department of the Treasury’s Office of Foreign Assets Control (OFAC) in April 2021. As such, the BIS’s action to add the six entities to the Entity List will “complement the actions already taken by OFAC by ensuring that U.S. sanctions on these entities will apply to all items subject to the EAR regardless of whether a U.S. person is involved in the transaction or whether the transaction involves the U.S. financial system.”

The Entity List is a tool used by the BIS to restrict the export, reexport, and transfer (in-country) of items subject to the EAR to entities believed to be participating in actions that go against the interests of the United States’ national security or foreign policy. Additional licenses are required for the exportation, re-exportation, and transfer of commodities, software, and technology to any listed entities. No license exceptions apply and license applications are subject to a presumption of denial.

The announcement by the BIS is available here.

For more information on Russia, EAR, and OFAC, contact our team and see previous posts below.

OFAC Revokes Belarus General License (General License 2G or GL 2G) | International Trade Law (cmtradelaw.com)

Five Charged in Scheme to Export Thermal Imaging Scopes and Night Vision Goggles to Russia, in Violation of the Arms Export Control Act | International Trade Law (cmtradelaw.com)

For more information: Jeff Snyder, Frances Hadfield, Martín Yerovi

Commerce Adds 23 Companies to Entity List Citing Forced-Labor, Military Technology, and Sanctions Concerns

On July 9, 2021, The Department of Commerce (DOC) determined that 23 Chinese companies took actions contrary to the foreign policy interests of the United States and were added to the Entities List. The Bureau of Industry and Security (BIS) noted that it “publishes the names of certain foreign persons – including businesses, research institutions, government and private organizations, individuals, and other types of legal persons – that are subject to specific license requirements for the export, re-export and/or transfer (in-country) of specified items.” The BIS also notes that “These persons comprise the Entity List, which is found at Supplement No. 4 to Part 744 of the Export Administration Regulations (EAR).”

Of the 23 companies added to the list, 14 were accused of direct involvement in human rights abuses in Xinjiang, 4 of supporting the Chinese military’s modernization programs, 4 of violating U.S. sanctions, and 1 of procurement of U.S.-origin items for unauthorized military end-use. The list below, as outlined by the July 12, 2021, BIS rule highlights the additions:

The End-User Review Committee (ERC) added the following 14 entities to the Entity List for being implicated in human rights violations and abuses in the implementation of China’s campaign of repression, mass detention, and high-technology surveillance against Uyghurs, Kazakhs, and other members of Muslim minority groups in the Xinjiang Uyghur Autonomous Region (XUAR).

  1. China Academy of Electronics and Information Technology
  2. Xinjiang Lianhai Chuangzhi Information Technology Co., Ltd.
  3. Leon Technology Co., Ltd.
  4. Xinjiang Tangli Technology Co., Ltd.
  5. Shenzhen Cobber Information Technology Co., Ltd.
  6. Xinjiang Sailing Information Technology Co., Ltd.
  7. Beijing Geling Shentong Information Technology Co., Ltd.
  8. Tongfang R.I.A. Co., Ltd.
  9. Shenzhen Hua’antai Intelligent Technology Co., Ltd.
  10. Chengdu Xiwu Security System Alliance Co., Ltd.
  11. Beijing Sinonet Science & Technology Co., Ltd.
  12. Urumqi Tianyao Weiye Information Technology Service Co., Ltd.
  13. Suzhou Keda Technology Co., Ltd.
  14. Xinjiang Beidou Tongchuang Information Technology Co., Ltd.

The ERC added the following 4 companies to the Entity List for activities related to acquiring or attempting to acquire U.S.-origin items in support of military modernization for the People’s Liberation Army.

  1. Hangzhou Hualan Microelectronics Co., Ltd.
  2. Kyland Technology Co., Ltd.
  3. Kyland subsidiary Armyfly
  4. Kyland subsidiary Kindroid

The ERC added the following 4 companies to the Entity List for exporting or attempting to export items subject to the EAR to an entity on the U.S. Department of the Treasury’s Office of Foreign Asset Control Specially-Designated Nationals List without the necessary licenses.

  1. Beijing Hileed Solutions Co., Ltd.;
  2. Beijing E-Science Co., Ltd.;
  3. Info Rank Technologies; and
  4. Wingel Zhang

The ERC added the following company to the Entity List for exporting or attempting to export items subject to the EAR related to the procurement of U.S.-origin items for unauthorized military end-use.

  1. Wuhan Raycus Fiber Laser Technologies Co., Ltd.

A full copy of the federal register notice is available here.

For more information on actions addressing human rights, forced labor abuses, and export controls, contact our team and see previous posts below.

Forced Labor/U.K. Modern Slavery Act Archives | International Trade Law (cmtradelaw.com)

Xinjiang Archives | International Trade Law (cmtradelaw.com)

Bureau of Industry and Security (BIS) Archives | International Trade Law (cmtradelaw.com)

Export Administration Regulations (EAR) Archives | International Trade Law (cmtradelaw.com)

Export Controls Archives | International Trade Law (cmtradelaw.com)

For more information: Jeff Snyder, Frances Hadfield, Chandler Leonard, Edward Goetz, Clayton Kaier

BIS Adds More Burmese Entities to Entity List

On July 2, 2021, the Bureau of Industry and Security (BIS) added four more Burmese entities to the Entity List for their relation to the Burmese military and its February coup. In doing so, BIS limits the four entities’ ability to access commodities, software, and technology subject to the Export Administration Regulations (EAR).

One of the entities is King Royal Technologies Co., Ltd., which is a telecommunication company that provides satellite communication services in support of the Burmese military. The other three entities are Wanbao Mining and its two subsidiaries – Myanmar Wanbao Mining Copper, Ltd. and Myanmar Yang Tse Copper, Ltd. The latter three entities were added to the Entity List due to their revenue-sharing agreement with Myanmar Economic Holdings Limited (MEHL). MEHL provides revenue to Burma’s Ministry of Defence – which is linked to the coup – and was also added to the Entity List in March 2021. This decision by BIS builds on previous actions to increase restrictions on the Burmese military, which include:

  • Expanding the Military-End User (MEU) Rule to include Burma. This decision made Burma subject to the enhanced end-uses and end-user controls under the MEU rule in § 744.21 of the EAR. Previously, this rule was limited to only end-users and end-uses in China, Russia, and Venezuela.
  • Adding the Burmese Ministries of Defence and Home Affairs, the Myanmar Economic Corporation, and MEHL to the Entity List.
  • Downgrading Burma’s country group status from Country Group B to Country Group D:1. This move drastically limits the use of license exceptions, including Shipments of Limited Value (LVS), Shipments to Group B Countries (GBS), and Technology and Software under Restriction (TSR).
  • Reclassifying Burma from Computer Tier 1 to Computer Tier 3 under the License Exception Computers (APP).

The Entity List is a tool used by the BIS to restrict the export, reexport, and transfer (in-country) of items subject to the EAR to entities believed to be participating in actions that go against the interests of the United States’ national security or foreign policy. Additional licenses are required for the exportation, re-exportation, and transfer of commodities, software, and technology to any listed entities. No license exceptions apply and license applications are subject to a presumption of denial.

The Press Release is available here.

For more information on Burma (Myanmar) and the EAR, contact our team and see previous posts below.

UPDATE: President Biden Imposes Sanctions & Export Controls on Myanmar In Response to Military Coup | International Trade Law (cmtradelaw.com)

President Biden Imposes Sanctions & Export Controls on Myanmar In Response to Military Coup | International Trade Alerts | Crowell & Moring LLP

For more information: Jeff Snyder, Martín Yerovi

U.S. Government Issues Business Advisory – Warns Companies About Risks of Doing Business in Hong Kong

On July 16, 2021, several U.S. government agencies issued a business advisory highlighting for U.S. companies the risks of doing business in Hong Kong. The advisory, which was issued by the Departments of Commerce, Homeland Security, State, and the Treasury, stated that companies operating in Hong Kong face potential regulatory, financial, legal, and reputational risks due China’s recently enacted National Security Law (NSL) in Hong Kong. The NSL states that “an incorporated or unincorporated body, such as a company or organization” that breaches the law may be subject to a criminal fine and suspension of operations. Notably, the NSL also states that provisions may apply to companies set up in the region even if an offense takes place outside the region. As a result, the advisory notes that the NSL could adversely affect businesses and individuals operating in Hong Kong.

The U.S. government advisory outlines for individuals, business, research providers, and investors the following potential risks:

  • Heightened risk for businesses and individuals operating in Hong Kong: Under the NSL, businesses operating in Hong Kong and individuals conducting business in Hong Kong on their behalf are subject to the NSL. According to the advisory, foreigners, including one U.S. citizen, have been arrested under the NSL. The advisory explains that under the NSL, protected rights and freedoms in Hong Kong have been substantially curtailed, and individuals have been arrested under the NSL for publishing news articles and attending public gatherings. Punishments under the NSL can include criminal fines and imprisonment, including life imprisonment in certain situations. Under the NSL, business can be subject to criminal fines and can have their operations or license suspended. Individuals who are arrested may have their travel documents confiscated and may be prevented from leaving Hong Kong.
  • Heightened risk regarding data privacy, including warrantless electronic surveillance, and surrender of data. The NSL also expanded the Hong Kong and People’s Republic of China (PRC) authorities’ ability to collect business and individual data for actions that may violate “national security.” Hong Kong authorities have interpreted “national security” to include participating in elections, political advocacy, and posting on social media. Hong Kong law enforcement are permitted under the NSL to conduct searches of electronic devices and to require Internet services providers to either provide or delete data for national security cases.
  • Access to business information and open press. Since the NSL’s introduction to Hong Kong, authorities have increased pressure on freedom of expression – primarily freedom of the press. Recently, Hong Kong authorities have exercised powers under the NSL to pursue journalists and a print media company.
  • Exposure to U.S. sanctioned persons and entities. Businesses operating in Hong Kong should be aware of potential consequences of engaging with individuals and/or entities subject to U.S. sanctions. U.S. individuals and entities are prohibited from engaging in certain transactions with blocked persons without a general or specific license from the Treasury Department’s Office of Foreign Assets Control (OFAC), or other exemption. Violations of U.S. sanctions may result in civil or criminal penalties. Companies should also be aware that Hong Kong has been removed as a separate destination under the Export Administration Regulations (EAR) and items subject to the EAR destined for Hong Kong, including reexport or transfer, will be treated as exports, reexports, or transfers to or from the PRC. Similarly, companies operating in Hong Kong could face retaliation from the Chinese government for complying with U.S. sanction laws.

The PRC Anti-foreign Sanctions Law (enacted June 10, 2021) (the “ASL”) provides China with the legal basis for retaliating against foreign actions deemed to be “restrictive discriminatory” – a vague and nebulous term that provides China with an incredibly broad tool to counter a wide range of actions that it views as counter to its sovereign interests (ranging from foreign sanctions programs to politically sensitive positions such as geopolitical flash points involving Taiwan, South China Sea or Senkaku Islands to the US Withhold Release Order aimed at addressing allegations of forced labor in Xinjiang). Not only does the ASL give the Chinese government the ability to penalize foreign subsidiaries operating in China, but it also gives aggrieved Chinese parties and entities a private cause of action in Chinese courts to recover losses incurred. Further, the ASL contains a “catch-all” that allows China to determine what practices are “restrictive discriminatory.” Since many Hong Kong businesses are historically linked with mainland China operations, it is very important that companies review carefully the potential impact of the ASL when entering into new business as well as deciding to terminate businesses as to avoid actions that could be perceived as “restrictive discriminatory” from a PRC perspective and be subject to retaliation by China or private parties.

The recent advisory comes days after the U.S. government agencies released an updated version of its Xinjiang Supply Chain Business Advisory and following a separate announcement to add 14 Chinese companies to the Department of Commerce’s Entity List for their direct involvement in human rights abuses in Xinjiang.

A link to the advisory is available here.

For more information on actions regarding China as well as actions addressing U.S. sanctions, human rights, and export controls, contact our team and see previous posts below.

Government Releases Updated Version of Xinjiang Supply Chain Business Advisory | International Trade Law (cmtradelaw.com)

Commerce Adds 23 Companies to Entity List Citing Forced-Labor, Military Technology, and Sanctions Concerns | International Trade Law (cmtradelaw.com)

Navigating Conflicting US-China Sanctions Regimes and Countermeasures

For more information: Caroline Brown, Evan Chuck, Dj Wolff, Anand Sithian, Frances Hadfield, Martín Yerovi

Treasury Deputy Secretary Wally Adeyemo Holds Roundtable Discussion with Bipartisan Group of Former Sanctions Senior Leaders

On July 20, 2021, Deputy Secretary of the Treasury Wally Adeyemo held a virtual roundtable discussion with six former U.S. government sanctions leaders from the last three presidential Administrations to discuss the application of U.S. economic and financial sanctions. The roundtable comes as part of a series of discussions Deputy Secretary Adeyemo is leading to review, identify challenges, and improve the use of U.S. sanctions. The goal of this bipartisan meeting is part of the Treasury Department’s commitment that sanctions continue to effectively advance U.S. national security, foreign policy, and economic aims.

A notable takeaway from the group of former sanctions leaders was that U.S. sanctions work most effectively “when employed in the context of a broader U.S. government strategy to address foreign policy or national security threat.” The Deputy Secretary and the group also discussed the importance of calibrating both economic and financial sanctions to limit their unintended impact on U.S. business, foreign partners, and other third parties, including those engaging in legitimate humanitarian activities.

A readout from the meeting is available here.

For more information regarding sanctions and the Treasury’s Office of Foreign Assets Control (OFAC), contact our team and see previous posts below.

U.S. Government Issues Business Advisory – Warns Companies About Risks of Doing Business in Hong Kong | International Trade Law (cmtradelaw.com)

President Biden Imposes Additional Sanctions on Russia | International Trade Law (cmtradelaw.com)

For more information: Jeff Snyder, Anand Sithian, Frances Hadfield, Martín Yerovi

FINCEN Issues Major Anti-Money Laundering Act Announcements and Appoints New Chief Digital Currency Advisor

Agency Issues First National Priorities for Anti-Money Laundering and Counter-Terrorist Financing, Completes Assessment on Potential No-Action Letter Process, Provides 180-Day Update on AML Act Implementation, and Appoints First-Ever Chief Digital Currency Advisor

On June 30, 2021, the Financial Crimes Enforcement Network (“FinCEN”) issued its first-ever Anti-Money Laundering and Countering the Financing of Terrorism National Priorities (the “Priorities”). FinCEN was required to do this by the Anti-Money Laundering Act of 2020 (“AMLA”), enacted on January 1, 2021, as part of the National Defense Authorization Act of 2021. FinCEN identified the following as anti-money laundering (“AML”) and countering the financing of terrorism (“CFT”) priorities, in no particular order: 

  • Corruption;
  • Cybercrime, including cybersecurity and virtual currency considerations;
  • Foreign and domestic terrorist financing;
  • Fraud;
  • Transnational criminal organization activity;
  • Drug trafficking organization activity;
  • Human trafficking and human smuggling; and
  • Proliferation financing.

For the complete alert, please click here.

For more information: Caroline Brown, Kelly Currie, Michelle Gitlitz, Carlton Greene, Rebecca Ricigliano, Anand Sithian, Nicole Succar

Customs Rulings of The Week

For more information, contact: Frances Hadfield, Rebecca Toro Condori, Martín Yerovi

Crowell & Moring Speaks

Caroline Brown was featured in a July 22ndLaw360 article titled, “Firms Vie For CFIUS Attys As 'Black Box' Panel Extends Reach.”

Robert Holleyman was featured in a July 7thInside U.S. Trade article titled, “Former USTR Officials: U.S. Needs ‘Bite-Sized’ Approach To Trade With India.”

David Stepp was featured in a July 7thWomen’s Wear Daily article titled, “U.S. Steps Up Enforcement On Apparel Imports Over Forced Labor in Xinjiang.”

Contacts

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Client Alert | 3 min read | 04.23.24

DOJ Promises NPAs to Certain Individuals Through New Voluntary Self-Disclosure Pilot Program

On April 15, 2024, the Acting Assistant Attorney General for the Criminal Division of the Department of Justice (“DOJ”) Nicole Argentieri announced a new Pilot Program on Voluntary Self-Disclosure for Individuals (“Pilot Program” or “Program”). The Pilot Program offers a clear path for voluntary self-disclosure by certain corporate executives and other individuals who are themselves involved in misconduct by corporations, in exchange for a Non-Prosecution Agreement (“NPA”). The Pilot Program specifically targets individuals who disclose to the Criminal Division at DOJ in Washington, D.C. information about certain corporate criminal conduct. By carving out a clear path to non-prosecution for those who qualify, DOJ has created another tool to uncover complex crimes that might not otherwise be reported to the Department. ...

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