In this issue:

• Top Trade Developments
  • USTR Posts Section 301 Exclusion Procedures on Products from China Subject to 25% Duties
  • Latest U.S. Trade Actions/Tariffs and Other Countries Retaliatory Measures
  • OFAC Revokes Several Iran-Related Licenses to Begin the Process of Re-Imposing Certain Iran-Related Sanctions Post-JCPOA
  • Other OFAC Actions in June
  • Duty Drawback Users Lose Case Challenging use of CBP’s Interim Guidance Document
  • Supreme Court Limits Foreign Law Defenses for Non-U.S. Companies Sued for Antitrust Cartel Violations
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• Crowell & Moring Speaks

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.

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TOP TRADE DEVELOPMENTS

USTR POSTS SECTION 301 EXCLUSION PROCEDURES ON PRODUCTS FROM CHINA SUBJECT TO 25% DUTIES

Formal Notice will be Published in the Federal Register on July 11

In a notice published on June 20, 2018, the U.S. Trade Representative (USTR) announced the imposition of an additional ad valorem duty of 25 percent on products from China classified in the 818 subheadings of the Harmonized Tariff Schedule of the United States (HTSUS) set out in Annex A of the notice in response to China’s alleged acts, policies, and practices related to technology transfer, intellectual property, and innovation included. Note that Annex B to the notice contains the same list of tariff subheadings, with unofficial descriptions of the types of products covered in each subheading.

The additional duties on these products took effect on July 6, 2018.

The June 20 notice also announced that the USTR would establish a process by which U.S. stakeholders may request that particular products classified within a covered tariff subheading be excluded from the additional duties.

On July 6, 2018, USTR issued a press release with a link to the Federal Register Notice to be published on July 11. It explains the procedures and criteria related to requests for product exclusions. Per the notice, a docket will be opened on regulations.gov for the receipt of exclusion requests. The docket number is USTR-2018-0025.

A key piece of information for importers is that “[a]ny exclusion will be effective starting from the July 6, 2018 effective date of the additional duties, and extending for one year after the publication of the exclusion determination in the Federal Register. In other words, an exclusion, if granted, will apply retroactively to the July 6 date of the imposition of the additional duties. USTR will periodically announce decisions on pending requests.”

Key Dates

• Interested parties will have 90 days to file a request for a product exclusion.
• The request period will end on October 9, 2018.

Rationale for Requested Product Exclusion

Each request should explain the following factors:

• Whether the particular product is available only from China. In addressing this factor, requesters should address specifically whether the particular product and/or a comparable product is available from sources in the United States and/or in third countries.
• Whether the imposition of additional duties on the particular product would cause severe economic harm to the requester or other U.S. interests.
• Whether the particular product is strategically important or related to “Made in China 2025” or other Chinese industrial programs.

Process Timeline

• Following public posting of a request on Regulations.gov, the public will have 14 days to comment on a certain product exclusion request.
• After the close of the 14 day response period, interested persons will have an additional 7 days to reply to any responses received in support of or opposition to the request.

Highlights

The notice includes information on:

• How to identify products in the exclusion request.
• Submission Instructions – to include the submission of business confidential information.
• Document Format Instructions. 

Check back here for the latest developments on all the on-going trade actions.

For more information, contact: John Brew, Spencer Toubia, Cherie Walterman, Edward Goetz

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LATEST U.S. TRADE ACTIONS/TARIFFS AND OTHER COUNTRIES RETALIATORY MEASURES

Finding it hard to stay on top of the latest in tariff increases?

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, Spencer Toubia, Ru Xiao-Graham, Cherie Walterman

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OFAC REVOKES SEVERAL IRAN-RELATED LICENSES TO BEGIN THE PROCESS OF RE-IMPOSING CERTAIN IRAN-RELATED SANCTIONS POST-JCPOA

On June 27, in accordance with President Trump’s May 8, 2018 decision to withdraw from the Joint Comprehensive Plan of Action (JCPOA), the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) revoked two Iran-related General Licenses and amended the Iranian Transactions and Sanctions Regulations (ITSR), 31 C.F.R. part 560, to reflect the re-imposition of sanctions. OFAC also updated previously issued Frequently Asked Questions on the President’s announcement. These actions represent the first tangible steps taken by the U.S. government to implement the May 8 announcement to end some limited primary sanctions exceptions and re-impose secondary sanctions on Iran.

Revocation of General Licenses H and I

Fulfilling one of the promises made on May 8, OFAC revoked both General License H and General License I authorizing certain transactions with Iran.

• General License H authorized U.S.-owned foreign entities to engage in transactions with the Government of Iran or any person subject to the jurisdiction of the Government of Iran. OFAC revoked General License H and replaced it with an amendment to the ITSR authorizing the wind-down, until November 4, 2018, of previously permitted activity, as described in the Final Rule published on June 28, 2018 (see 31 C.F.R. § 560.537).
• General License I authorized U.S. persons to engage in certain transactions related to the export or re-export to Iran of commercial passenger aircraft. OFAC has now revoked General License I and amended the ITSR to authorize the wind down of such transactions through August 6, 2018 (see 31 C.F.R. § 560.536).

Additional ITSR Amendments

OFAC amended the ITSR to authorize the wind-down of two previously authorized types of activity for U.S. persons.

• Import of Carpets and Foodstuffs: OFAC amended 31 C.F.R. § 560.534 to authorize the wind down of transactions regarding U.S. imports of, and dealings in, certain Iranian-origin foodstuffs and carpets through August 6, 2018.
• Credit and Brokering Services for Related Activity: OFAC amended 31 C.F.R. § 560.535 to authorize the wind down of transactions regarding letters of credit and brokering services relating to certain Iranian-origin foodstuffs and carpets through August 6, 2018.

OFAC also updated JCPOA Withdrawal-Related Frequently Asked Questions (FAQs) 4.3, 4.4, and 4.5 to address these changes.

Additional Announcements Expected in the Coming Weeks

These changes give effect to some, but not all, of the changes announced by President Trump on May 8. Specifically, in the coming weeks, we expect the issuance of at least one new Executive Order to re-authorize previously terminated sanctions authorities as well as the issuance by OFAC and the U.S. Department of State of additional guidance regarding the re-implementation of primary and “secondary” sanctions that had been in effect prior to the JCPOA as well as potentially to announce additional restrictions beyond those that existed prior to the JCPOA (e.g., targeting ballistic missile proliferation or potentially even expanding secondary sanctions).

We will continue to update this guidance as and when these changes are announced.

For more information, contact: Michelle Linderman, Jeff Snyder, Dj Wolff, Ade Johnson

Associate Alex Rosen also contributed to this article.

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OTHER OFAC ACTIONS IN JUNE

Publication of Global Magnitsky Sanctions Regulations

On June 28, 2018, OFAC announced the issuance of the Global Magnitsky Sanctions Regulations, 31 CFR part 583. These regulations implemented the Global Magnitsky Human Rights Accountability Act and Executive Order 13818 of December 20, 2017 (Blocking the Property of Persons Involved in Serious Human Rights Abuse or Corruption). 

The regulations took effect upon publication in the Federal Register on Friday, June 29, 2018.

Removal of Sudanese Sanctions Regulations and Amendment of Terrorism List Government Sanctions Regulations

On June 29, 2018, OFAC removed from the Code of Federal Regulations the Sudanese Sanctions Regulations as a result of the revocation of certain provisions of one Executive Order and the entirety of another Executive Order on which the regulations were based.

OFAC also amended the Terrorism List Government Sanctions Regulations to incorporate a general license authorizing certain transactions related to exports of agricultural commodities, medicines, and medical devices, which has, until now, appeared only on OFAC's website.

For more information, contact: Dj Wolff, Edward Goetz

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DUTY DRAWBACK USERS LOSE CASE CHALLENGING USE OF CBP’S INTERIM GUIDANCE DOCUMENT

On June 29, 2018, the Court of International Trade (CIT) ruled against certain duty drawback users seeking to enjoin U.S. Customs and Border Protection (CBP) from enforcing its Guidance Document regulating drawback claims during the interim period while new regulations implementing the Trade Facilitation and Trade Enforcement Act of 2015 (TFTEA) are being reviewed.

The claims stemmed from TFTEA provisions passed by Congress on February 24, 2016, which directed the Secretary of the Treasury to publish regulations for calculating TFTEA drawback claims by February 24, 2018. Drawbacks are generally refunds of a customs duty, fee, or tax paid on imported merchandise when that imported merchandise is used in exports.

To this day, the Department of Treasury (Treasury) has not published the required regulations.  However, on April 6, 2018, Treasury drafted a regulatory package in the form of a Notice of Proposed Rulemaking (NPRM). The package will be set for a period of public notice and comment following a 90-day interagency review. 

CBP also released the first version of its Guidance Document which provided interim procedures for filing TFTEA drawback claims during the transition year (February 24, 2018 to February 23, 2019), i.e., the year before TFTEA takes full effect. The Guidance Document also promulgated “First Filed” and “Mixed Use” rules, which declared some duty-paid imports ineligible for TFTEA drawback if merchandise from the same import entry line item had previously been designated as the basis for a drawback claim.

On March 26, 2018, CBP published the third version of the Guidance Document which stated that CBP will not process or liquidate drawback claims made under TFTEA during the transition year until new regulations are published by Treasury and that until regulations are published, parties may still make drawback claims under the old drawback mechanism.

Plaintiffs filed a lawsuit with the CIT, seeking to (1) require CBP to make “accelerated payments” of drawback on TFTEA claims; (2) prohibit CBP from enforcing its “First Filed” and “Mixed Use” restrictions on TFTEA claims, pending the publication of properly issued final regulations because these rules have not followed the proper notice and comment rulemaking procedures; (3) enjoin application of the new restrictions in the Guidance Document and have them declared unlawful; and (4) ask the CIT to enjoin the Treasury Department to issue the Congressionally-prescribed refund calculation regulation within a “reasonable time.”

The CIT dismissed each of the first three claims because (1) the Plaintiff's failed to state a claim against CBP for not including an accelerated payment provision in the Guidance Document because the “Guidance Document does not curtail Plaintiffs’ license to seek accelerated payments under [the old] version of the statute;” (2) the CIT found that the Plaintiff’s claim against the Guidance Document’s “First Filed” and “Mixed Use” restrictions was moot because the “latest version of the Guidance Document unequivocally indicates CBP will not process TFTEA drawback claims until TFTEA regulations have passed the necessary rulemaking procedures.” As to the final claim, although the CIT found that Treasury was taking all the prescribed actions through the “notice-and-comment process as expeditiously as possible,” it allowed for Plaintiffs to ask the court in the future to consider imposing its own deadline if “the government fails to promulgate the regulation within a reasonable timeframe” and stated that an example of this would be if the government did not produce a regulation “on or about July 5, 2018, approximately 90 days after April 6, 2018.” The Court advised Plaintiffs that on July 27, 2018, they may ask the court if further action is needed in this regard. To date, CBP has not published TFTEA implementing regulations.

For more information, contact: Spencer Toubia

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Supreme Court Limits Foreign Law Defenses for Non-U.S. Companies Sued for Antitrust Cartel Violations

In Animal Science Products, Inc. v. Hebei Welcome Pharmaceutical Co. Ltd., the U.S. Supreme Court unanimously rejected the argument that two Chinese companies could not be found liable under the Sherman Act for conspiring to fix the price and quantity of vitamin C exported to the United States from China simply because the Chinese government submitted court filings stating that Chinese law required the companies to engage in such conduct.

In doing so, the Supreme Court expressly held that U.S. courts need not accept as conclusive and binding submissions by a foreign government that characterize or interpret its own law. Instead, U.S. courts must undertake a case-by-case analysis where they give “respectful consideration” to a foreign government’s submission but also conduct their “own research and consider any relevant material.”

Such a thorough and independent analysis, the Supreme Court determined, helps ensure that U.S. courts properly decide foreign law questions when adjudicating claims brought under U.S. laws.

The Supreme Court’s decision resolves a circuit split on the question of whether U.S. courts must defer to the submissions of foreign governments describing their own laws when presented with questions of foreign law. Prior to the Supreme Court’s Animal Science decision, the U.S. Court of Appeals for the Second and Ninth Circuits had held that U.S. courts were “bound to defer” to a foreign government’s interpretation of its own law whenever that interpretation was “reasonable” while other federal appellate courts had held that the weight given to a foreign government’s statements about its laws depended on the facts and circumstances presented by a case.

For more on the Supreme Court’s decision and its potential implications for U.S. and non-U.S. companies, please see Crowell & Moring’s Client Alert.

For more information, contact: Juan A. Arteaga, Olivier N. Antoine

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CROWELL & MORING SPEAKS

Dj Wolff led a seminar on June 20 at the South Korean National assembly for parliament staff and Non-Government Organization (NGO) personnel to discuss the scope of U.S. and UN sanctions on North Korea, including recent changes to these programs, with a focus on how NGO’s can continue to undertake humanitarian work in North Korea in compliance with these restrictions. He spoke on behalf of the Eugene Bell Foundation (EBF), an NGO and C&M pro bono client, which provides multi-drug resistant tuberculosis (MDR-TB) treatment in North Korea.