This Month in International Trade - November 2015
In this issue:
Trade Agreement Updates
Customs, Imports, and Trade Remedies
Agency Enforcement Actions
Other Agency Actions
Crowell & Moring Speaks
Trade Agreement Updates
TPP Leaders Meet in Manila; Path to U.S. Ratification Remains Unclear
Following a meeting in Manila on November 18, the leaders of the 12 Trans-Pacific Partnership (TPP) countries, including President Obama, issued a statement affirming that they would seek "expeditious consideration and approval" of TPP in their home countries. The leaders reportedly discussed a proposal to formally sign the agreement on February 4, 2016, in New Zealand, though no signing date was endorsed in the joint statement. The earliest that the Administration can sign the agreement is February 3, 2016, following a 90-day Congressional review period mandated by the 2015 Trade Promotion Authority (TPA) legislation.
The timing for a Congressional vote on TPP remains unclear. President Obama has called on Congress to act "promptly" to approve the agreement following the termination of the review period in February. For Congress to do so, President Obama will have to submit draft implementing legislation to Congress after he signs TPP.
In addition, the International Trade Commission (ITC) must prepare an economic assessment of the TPP agreement (see next article), which is usually submitted as a package to Congress along with the draft implementing legislation (though the only legal requirement under TPA is that the ITC assessment be completed within 105 days after signature of the agreement). The ITC, which is holding a public hearing on TPP in January 2016, has forecasted that its assessment will not be ready until May 18, 2016, although that date simply accords with the timeline under TPA. In reality the ITC report could be available substantially earlier to enable prompt Congressional action.
Key Congressional leaders have held off on providing a definitive timeline for a TPP vote during the 2016 election year. Senate Finance Committee Chairman Orrin Hatch (R-Utah), expressing concern regarding the TPP provisions on intellectual property protections for biologic drugs, suggested on November 6 that Congressional passage of TPP would be "difficult" in 2016, and that TPP may have to be renegotiated under a new President. On November 18, Speaker of the House Paul Ryan (R-Wisconsin) said that a Congressional vote on TPP in 2016 was possible but not guaranteed. Rep. Gerry Connolly (D-Virginia), a key pro-trade Democrat, suggested on November 20 that a vote would not happen until the lame-duck Congressional session in late 2016.
For more information, contact: Paul Davies, Dj Wolff, Evan Yu
ITC to Investigate Likely Impacts of TPP on U.S. Economy
Following receipt on November 5 of a request from the U.S. Trade Representative (USTR), the U.S. International Trade Commission (ITC) has:
- Instituted Investigation No. TPA-105-001, Trans-Pacific Partnership Agreement: Likely Impact on the U.S. Economy and on Specific Industry Sectors, for the purpose of assessing the likely impact of the Agreement on the U.S. economy as a whole and on specific industry sectors and the interests of U.S. consumers.
- Key Dates:
- December 22, 2015: Deadline for filing requests to appear at the public hearing.
- December 29, 2015: Deadline for filing pre-hearing briefs and statements.
- January 13, 2016: Public hearing.
- January 22, 2016: Deadline for filing post-hearing briefs and statements.
- February 15, 2016: Deadline for filing all other written submissions.
- May 18, 2016: Anticipated date for transmitting Commission report to the President and Congress.
For more information, contact: Edward Goetz
WTO Director General Breaks Procedural Deadlock Ahead of WTO Ministerial Conference in Nairobi
In the face of disagreement between developing- and developed-country members of the World Trade Organization (WTO) ahead of the Tenth WTO Ministerial Conference, which is being held December 15 to 18 in Nairobi, Kenya, WTO Director General (DG) Roberto Azevêdo agreed to include language endorsed by the developing countries in a final Nairobi ministerial declaration. While the substance of any future WTO negotiations remains unresolved, the procedural agreement allows members to continue debating topics for a possible Doha agenda after the Nairobi meeting.
In recent weeks, certain members remained entrenched in their positions and on the central question of how explicitly to continue with the Doha Development Agenda (DDA). However, following DG Azevêdo's intervention, the continuation of the DDA negotiations will be reaffirmed in the declaration in accordance with the position of a majority of members.
Developing and least-developed countries have held firm on the centrality of development goals in the negotiations and thus wished to reaffirm continuation of the Doha negotiations. They insist that principles of special and differential treatment, as well as less than full reciprocity, must remain integral parts of the WTO's future work. They have also emphasized the importance of agriculture to many WTO Members, including least-developed countries, such that agriculture reform must remain a priority.
A minority of WTO members, principally developed economies, have opposed the continuation of the DDA and sought agreement to end the negotiations and find constructive ways to move the multilateral trade agenda forward. The U.S., EU, Japan, and other countries had apparently expressed a willingness to consider language on the continuation of negotiations provided major emerging economies such as India, China, and South Africa consider foregoing special and differential treatment. However, these three emerging economies reportedly rejected this approach whereby they would "graduate" to a level at which they would no longer qualify for such treatment.
For more information, contact: Melissa Morris, Charles De Jager
Iran Nuclear Agreement: Implementation Day Tied to IAEA Investigation; EU Concerns If Sanctions Are Re-Imposed
On November 18, the International Atomic Energy Agency (IAEA) released a report on Iran's progress toward meeting its initial obligations pursuant to the Joint Comprehensive Plan of Action (JCPOA). Under the JCPOA, sanctions relaxations will only begin to take effect on 'Implementation Day', the date on which the IAEA verifies to the United Nations Security Council that Iran has met certain initial nuclear-related commitments. According to the IAEA's report, Iran made significant initial progress in reducing its total number of centrifuges, decommissioning roughly 4,500 of its nearly 20,000 existing centrifuges.
However, progress stopped on November 9 after Iranian lawmakers protested, arguing Iran's President, Hassan Rouhani, was ignoring an order from Supreme Leader Ayatollah Ali Khamenei that Implementation Day activities should begin only after the question of past Possible Military Dimensions (PMD) of Iran's nuclear program are settled by the IAEA in mid-December.
Closing the decade-long IAEA look into PMD was negotiated alongside the JCPOA between the IAEA and Iran. The IAEA's Board of Governors plans to discuss the agency's evaluation of the PMD issue on December 15.
To fulfill its pre-Implementation Day commitments pursuant to the JCPOA, Iran will need to continue decommissioning roughly 10,000 additional centrifuges, reduce its stock of 8,300 kg of enriched uranium to 300 kg, and alter the design of the under construction Arak nuclear plant.
Even after sanctions are lifted post-Implementation Day, EU companies are concerned about the possibility of being penalized by U.S. authorities if sanctions were to be re-imposed against Iran. As a result, at least two missions of French, British, and German representatives have visited the U.S. seeking solid assurances that EU firms would not be subject to U.S. sanctions in the event sanctions are re-imposed.
French firms appear particularly concerned, having been once very active in Iran and having faced heavy fines in recent years for dealing with Iran in violation of U.S. sanctions law. French Foreign Minister Laurent Fabius is reported to have sought concrete assurances from the U.S. "so that the same thing does not happen again."
Fabius argues that, in the absence of such assurances, potential investors in Iran might wait until a clear picture of a post-sanctions Iran emerges
For more information, contact: Alan Gourley, Cari Stinebower, Salomé Cisnal de Ugarte, Chris Monahan, Dj Wolff, Charles De Jager, Lorenzo Di Masi
U.S.-EU Negotiations on Track Towards a New Data Privacy Framework
Following the invalidation of the Safe Harbor framework by the European Court of Justice in October, negotiations between the U.S. and EU have intensified in recent weeks to develop a new framework enabling data transfers from the EU to the U.S. EU Justice Commissioner Vĕra Jourová spent time in Washington, D.C. in November addressing various outstanding issues in the negotiations that may require further discussion among the EU Member States.
EU officials seek greater clarification of the national security exemptions the U.S. insists on keeping in the new framework, which will require the U.S. and EU to agree on precise definitions of "national security" and "public interest." Concerns could be addressed in part by the U.S. Judicial Redress Act (H.R. 1428), which was approved by the House on October 20 and is waiting to be taken up by the Senate.
This bill, if signed into law, will provide EU citizens the right to bring civil actions against US agencies for 1) intentionally or willfully disclosing personal data without appropriate consent and 2) refusing a valid request by an individual to review or amend his or her records. The Department of Justice (DOJ) will designate the foreign countries or regional economic integration organizations whose natural citizens may bring such civil actions under the Privacy Act of 1974 based on whether the country or organization has appropriate privacy protections for sharing information with the United States.
In addition, EU officials are proposing a greater role for EU Member States' national privacy regulators, possibly creating an official process for EU citizens to complain directly to their national authorities who would then likely act in coordination with the U.S. Federal Trade Commission. Nevertheless, officials are reportedly optimistic an agreement can still be reached by the end of January 2016.
The next meeting on U.S.-EU data privacy is scheduled for December 17.
For more information, contact: Robin, Campbell, Frederik Van Remoortel, Charles De Jager, Christopher Hoff
New EU Trade Policy and the 'Right to Regulate'
In recent weeks, the European Commission has presented its proposed new trade and investment strategy for the EU. The main aims of the new strategy are to render EU trade policy more transparent and effective in addressing current economic realities, to reinforce the link between trade policy and the fundamental values of the EU, and to try to shape globalization through the EU's program of trade negotiations.
A prominent feature of the new strategy is the "right to regulate, whereby public authorities' regulatory power is safeguarded and their right to pursue specific public policy objectives is reserved, in part by limiting the interpretive power of arbitral tribunals.
The Commission is emphasizing both the need to ensure a high level of regulatory protection and the need to reform investment policy globally. If implemented in the future, the "right to regulate" component of the new strategy could potentially have a significant impact on multinational companies' trade and investment decisions in the EU and beyond.
Another important part of the new strategy is its support for sustainable development, fair and equitable trade, human rights and high labor standards, as well as anti-corruption. The Commission also reiterates its intention to complete ongoing negotiations with the U.S. and Japan, to launch new negotiations primarily in the Asia Pacific region, and to modernize existing agreements with Turkey, Mexico, and Chile.
The new strategy will now be reviewed by the EU Member States in the Council, the European Parliament, and the European Economic and Social Committee. There may be opportunities for stakeholder involvement and comment throughout the negotiation process so interested companies should closely monitor ongoing developments.
For more information, contact: Dj Wolff, Charles De Jager
UK Amends Russia Sanctions to Add High-Energy Propellant Compounds
The UK amended its Export Control (Russia, Crimea and Sevastopol Sanctions) Order 2014 (the Russia Sanctions Order) on November 25 to restrict the supply of hydrazine and related high-energy propellant compounds to Russia. The new amendment will come into force on December 16, 2015.
More specifically, the new restriction imposes an authorization requirement for the provision of technical assistance, financing, or financial assistance for: (i) the sale, supply, transfer, or export or the import, purchase, or transport of hydrazine; (ii) the import, purchase, or transport of unsymmetrical dimethyl hydrazine; and (iii) the sale, supply, transfer, or export or the import, purchase, or transport of monomethyl hydrazine.
The amendment follows changes to the EU sanctions regime against Russia brought about by Council Decision 2015/1764 (Oct. 1, 2015) and Council Regulation 2015/1797 (Oct. 7, 2015). These EU measures permitted certain operations concerning pyrotechnics, including hydrazine and related compounds, necessary for: (i) the use of launchers operated by launch service providers of EU Member States or established in a Member State; (ii) the use of launches by EU, Member State and European Space Agency space programs; or (iii) the fueling of satellites by satellite manufacturers established in an EU Member State.
For more information, contact: Alan Gourley, Cari Stinebower, Charles De Jager, Dj Wolff, Sarah Moens
Cuba Releases Its New Portfolio of Opportunities for Foreign Investors
Cuba officially presented its new portfolio of opportunities for foreign investors at the Havana International Fair on November 3. According to the Cuban government, more than twenty five U.S. companies were represented, showing the increasing interest that the island has received from U.S. business since the thawing of U.S.-Cuba relations.
The new portfolio of opportunities, totaling more than $8 billion for potential foreign investment, lists more than three hundred projects in industries such as tourism, mining, agriculture, oil and renewable energies, transportation, biotechnology, pharmaceuticals, health, construction, commerce, and audiovisual. The majority of the projects identified a specific Cuban entity that will be partnering with the foreign investor. These projects build on the 246 projects identified in last year's portfolio, according to Cuban officials. However, it should be noted that only 40 of these 246 projects are in advanced negotiations.
Meanwhile, the U.S. and Cuba continue to strengthen their diplomatic relations and to work towards their normalization. On November 19, the U.S. de-designated several Cuban persons, including the chairman, deputy chairman, and several executive and managing directors of Havana International Bank (now Havin Bank Ltd.), a London-based financial institution that provides wholesale banking services for the Cuban market.
On November 24, the U.S. and Cuba also signed a Joint Statement on Cooperation on Environmental Protection, recognizing the importance of protecting the environment and the coastal and marine environment of both countries.
For more information, contact: Cari Stinebower, Dj Wolff, and Mariana Pendas
Venezuela Adopts Stricter Price Control Law
On November 10, Venezuela published an amended "Law of Fair Prices" granting the Venezuelan Government greater control over the sale of products and services in the country. The new law sets profit margins and imposes a wide range of penalties, including fines, temporary shutdowns, and prison terms.
The amended law sets two mechanisms for establishing price controls: (i) "Fair Price" for regulated products and services, such as certain basic goods; and (ii) "Maximum Selling Price" for non-regulated products and services. The latter was not contemplated in the original law and may potentially cover any product or service. Additionally, the new law provides that profit margins shall not exceed 30 percent of the cost structure of the good or service. The National Superintendency for Defense of Socioeconomic Rights (SUNDDE in Spanish) will be responsible for the implementation of these mechanisms.
Notably, the amended law allows for administrative inspections and searches without warrant and imposes higher fines and business shutdowns from 48 hours to up to 30 days. It establishes personal liability on officers, directors, and potentially any employee involved in the commercial activity being sanctioned. It also sets out new criminal offences with individuals potentially facing prison terms for speculation, boycott, hoarding, and fraudulent price alteration.
While commentators suggest that the Law of Fair Prices has been one of the main causes of the current shortage of basic goods and household products in Venezuela, the revised law appears to even further expand the scope of affected products and services. This high level of control given to SUNDDE under the new law may result in additional barriers causing a significant impact on companies.
For more details, please see Crowell's 2014 Client Alert Investors Facing More Challenges with New Price Control Law in Venezuela.
For more information, contact: Ian Laird, Eduardo Mathison, J.J. Saulino
Customs, Imports, and Trade Remedies
ITC Determines Imports of Welded Line Pipe and Supercalendered Paper Injure Domestic Industry
On November 6, the U.S. International Trade Commission (ITC) determined that U.S. welded line pipe manufacturers were materially injured by imports from Korea and Turkey that the U.S. Department of Commerce (DOC) determined were sold in the United States at less than fair value and subsidized by the government of Turkey.
As a result of the ITC's unanimous decision, DOC will issue antidumping duty orders on imports of welded line pipe from Korea and Turkey and a countervailing duty order on imports from Turkey. Imports from Korea will be subject to antidumping duties ranging from 2.53 percent to 6.19 percent, while imports from Turkey will be subject to antidumping duties ranging from 6.66 percent to 22.95 percent and countervailing duties ranging from 1.31 to 152.2 percent.
On November 18, the ITC also determined that U.S. supercalendered paper manufacturers were materially injured by imports from Canada that DOC determined were subsidized by the government of Canada. Supercalendered paper is smoother and thinner than normal paper and is commonly used in magazines, catalogs, and directories.
As a result of the ITC's decision, DOC will issue a countervailing duty order on imports of supercalendered paper from Canada. Canadian imports will be subject to countervailing duties ranging from 17.87 to 20.18 percent.
The Canadian government has already filed a challenge to both the ITC and DOC's final decisions before a North American Free Trade Agreement (NAFTA) panel.
For more information, contact: Benjamin Blase Caryl, Edward Goetz
Century Aluminum Creates China Trade Task Force to Fight Chinese Aluminum Subsidies
In early November, U.S. aluminum producer Century Aluminum created a "China Trade Task Force" that filed a petition on www.change.org for the Office of the U.S. Trade Representative (USTR) to investigate subsidies provided to Chinese aluminum smelters that have caused global aluminum prices to collapse and U.S. aluminum smelters to shut down and lay-off employees.
The China Trade Task Force alleges the Chinese government provides its aluminum producers numerous subsidies such as direct grants, interest free loans, transfers of low cost state-owned land, and preferential regulatory treatment.
In late November, China Trade Task Force called on President Obama to initiate dispute settlement proceedings at the World Trade Organization (WTO) with China over the aluminum subsidies. Century Aluminum has also stated that it is considering filing antidumping (AD) and countervailing (CVD) duty petitions against Chinese aluminum imports, potentially with the support of the United Steelworkers union.
No other U.S. aluminum producers other than Century Aluminum are publicly associated with China Trade Task Force, and the Aluminum Association, which includes U.S. aluminum producers other than Century, has publicly distanced itself from China Trade Task Force.
In order to have legal standing to file AD/CVD petitions, the petitioner must represent at least 25 percent of domestic aluminum production.
Companies and workers representing at least 50 percent of domestic aluminum production must also support the petition for AD/CVD investigations to be initiated.
For more information, contact: Alexander Schaefer, Benjamin Blase Caryl, and Edward Goetz
Federal Circuit Upholds ITC Split Vote in Wind Towers Investigation
On November 25, in Siemens Energy, Inc. v. United States, the U.S. Court of Appeals for the Federal Circuit upheld the final determination of the U.S. International Trade Commission (ITC) on imports of utility scale wind towers from China and Vietnam.
In the underlying 2013 vote, two commissioners made affirmative determinations based on present injury, one commissioner made an affirmative determination based on threat of injury, and three commissioners made negative determinations.
Siemens Energy, an importer of utility scale wind towers, challenged the ITC's determination by arguing, among other things, that the ITC's vote should be deemed a negative determination because the total vote tally was four negative present injury votes, two negative threat votes, and two affirmative present injury votes (i.e., the two commissioners that made affirmative determinations based on present injury did not make a threat determination, negative or affirmative).
The Federal Circuit, however, agreed with the U.S. Court of International Trade that the ITC's final wind tower vote was covered by the statute that provides that evenly divided votes are deemed affirmative determinations (i.e., the courts interpreted the vote as three affirmative votes to three negative votes).
For more information, contact: Benjamin Blase Caryl, Edward Goetz
AGENCY ENFORCEMENT ACTIONS
Office of Foreign Assets Control (OFAC)
- On November 4, Banco do Brasil, S.A., New York Branch (BBNY) agreed to remit $139,500 to settle its potential civil liability for seven apparent violations of the Iranian Transactions and Sanctions Regulations.
- On November 24, Barracuda Networks, Inc. (Barracuda U.S.), of Campbell, California, agreed to pay $38,930 on behalf of itself and its United Kingdom subsidiary, Barracuda Networks Ltd. (Barracuda U.K.), (collectively Barracuda) to settle potential civil liability for alleged violations of the Iranian Transactions and Sanctions Regulations, the Sudanese Sanctions Regulations, and the Syrian Sanctions Regulations.
- From August 2009 to April 2012, Barracuda U.K. sold Web filtering products including products that could be used to block or censor internet activity; internet security products; and related software subscriptions to individuals and entities in Iran and Sudan, and to Specially Designated Nationals and Blocked Persons (SDNs) under the Syrian Regulations. In addition, from August 2009 to May 2012, Barracuda U.S. provided the firmware and software updates for these and other software subscriptions.
Bureau of Industry and Security (BIS)
- On November 12, BIS amended the Export Administration Regulations (EAR) by adding seven (7) persons and ten (10) entities to the Unverified List (UVL). These persons will be listed on the Entity List under the destinations of China and Hong Kong.
- This final rule also removes two persons from the Entity List. One entity requested removal from the Entity List in accordance with the procedure for requesting removal or modification of an Entity List entity. The End-User Review Committee (ERC) decided to remove this entity following a review of information provided in the removal request. The ERC decided to remove a second person from the Entity List following a proposal submitted by an ERC member agency, in accordance with the procedure for requesting removal or modification of an Entity List entity.
- Finally, this final rule modifies ten existing entries on the Entity List consisting of one entry under China and nine entries under Hong Kong to provide additional or modified addresses and/or aliases for these persons.
- On November 23, BIS entered into a Settlement Agreement with EGYPTAIR Airlines Company, of Cairo Egypt (EGYPTAIR) for the re-export of aircraft to Sudan without a license. EGYPTAIR re-exported two Boeing aircraft from Egypt to Sudan as part of a lease agreement with Sudan Airways. EGYPTAIR was assessed a civil penalty in the amount of $140,000.
- In addition to the enforcement action taken by OFAC on Barrucuda Networks, Inc. on November 24, BIS entered into a Settlement Agreement with the company on November 23 for selling, servicing, or providing updates and subscriptions to encryption-controlled devices or software to Syria, Iran, and Sudan. Barracuda agreed to pay a $1.5 million civil penalty.
For more information, contact: Edward Goetz
OTHER AGENCY ACTIONS
Office of Foreign Assets Control (OFAC)
U.S. Customs and Border Protection (CBP)
- On November 17, due to the transfer of CBP from the Department of the Treasury to the Department of Homeland Security (DHS), most of CBP's Freedom of Information Act (FOIA) regulations were superseded.
- With the exception of a regulation pertaining to the treatment of confidential commercial information, CBP will apply the DHS FOIA and Privacy Act regulations for purposes of administering the FOIA.
- This final rule removes outdated regulations, aligns CBP's regulatory procedures for processing FOIA requests with those of DHS, thereby creating a consistent standard among the DHS components, and brings CBP within compliance of the FOIA guidelines developed by OMB.
Directorate of Defense Trade Controls (DDTC)
- On November 10, DDTC issued the following Industry Notice requiring the use of updated forms beginning on November 26:
- Updated Forms – the DS-2032, DSP -5, -6, -61, -62, -73, -74, -83, -85, -94, and -119 have been updated;
- DTrade users must use version 9.1 for forms DSP-5, -6, -61, -62, -73 and -74; and
- Additionally, DDTC users must use version 4.4 of the DS-2032, version 3.1 of the DSP-85, and version 2.0 of the DSP-83, -94, -119.
- Earlier versions of these forms will be rejected beginning November 26, 2015. To access the new Forms, click here.
For more information, contact: Edward Goetz
CROWELL & MORING SPEAKS
On November 13, Benjamin Blase Caryl moderated a panel entitled "Virginia International Trade Alliance" at the Virginia Manufacturers Association (VMA) annual leadership forum in Charlottesville, Virginia. Panelists included officials from the Virginia Economic Development Partnership (VEDP), the Port of Virginia, and Embassy of Canada. The panel discussed programs, incentives, and tools to expand export sales and reduce international trade costs.
Cari Stinebower, Frances Hadfield, and Jini Koh will be discussing "Recent Trade Developments affecting eCommerce and Software Companies" at Pitney Bowes in Stamford, CT on December 7. Trade topics to be discussed are Anti-money Laundering and Foreign Corrupt Practices Act, Export Controls, Customs and Free Trade Agreements, and Economic Sanctions.
On December 9, from 12:30 pm to 2 pm at Crowell's DC offices, Benjamin Blase Caryl will moderate a panel on the Trade in Services Agreement (TiSA) negotiations, featuring the lead U.S. negotiator on TiSA and two other experts. TiSA is an international agreement currently being negotiated by countries representing 75 percent of global trade in services to liberalize trade in services, including finance, investment, insurance, legal services, and other emerging issues such as restrictions on cross-border data flows that can disrupt financial and e-commerce services. You can register at http://www.dcbar.org/marketplace/event-details.cfm?productcd=121605IIFC.
On January 21, John Brew, will be a panelist at the 10th Advanced Forum on Import Compliance and Enforcement in Washington, D.C. His panel's topic is "Statistical Sampling in Prior Disclosures: Understanding the Methods and Benefits while Avoiding Common Errors."
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For more information, please contact the professional(s) listed below, or your regular Crowell & Moring contact.