The Month in International Trade – August 2023

Top Trade Developments

• Catch Up Fast: The “Data Days” of Summer in China
• Commerce Concludes Controversial Investigation Into Solar Panels From China
• Executive Order and Rulemaking on U.S. Outbound Investment
• GAO Report on Section 232 Exclusions Signals Increased Enforcement for Steel and Aluminum Importers

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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 Jana del-Cerro, Anand Sithian, or Simeon Yerokun or any member of the International Trade Group.

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Top Trade Developments

Catch Up Fast: The “Data Days” of Summer in China

The summer has been anything but slow in the People’s Republic of China. China is leaning into its regulation of emerging technologies, while attempting to strike a balance with its domestic economic priorities. In just the past few weeks, state authorities have issued a slew of draft measures and announced new initiatives – all with significant ramifications for businesses processing data within the PRC.

 

Click here to continue reading the full version of this alert.

For more information, contact: Kate Growley, Evan Chuck, Zhiwei Chen

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Commerce Concludes Controversial Investigation Into Solar Panels From China

On August 18, the U.S. Department of Commerce concluded an investigation it launched early last year on solar cells and modules from the People’s Republic of China (PRC). Commerce provided its conclusions in a Federal Register notice, highlighting that five specific Chinese companies are shipping Chinese-origin solar products to certain Southeast Asian countries for minor processing in an attempt to circumvent U.S. Antidumping/Countervailing (AD/CVD) duties on such products. However, duties on these imports will not be collected or assessed until June 2024, when a waiver enacted by the Biden administration is set to expire.

Commerce’s investigation began in March 2022 in response to a complaint filed by Auxin Solar, a U.S. manufacturer which alleged that Chinese manufacturers were evading U.S. tariffs on such products from China by routing manufacturing through Thailand, Cambodia, Vietnam and Malaysia. Nearly three-quarters of solar modules imported into the U.S. originate from these countries. Commerce found that five out of the eight Chinese companies it investigated are engaged in evasion of U.S. AD/CVD duties by producing such products in the five countries from Chinese-origin components.  The Chinese companies are – BYD Hong Kong, New East Solar, Canadian Solar, Trina Solar, and Vina Solar. The other three entities investigated (Boviet Solar, Hanwha Q CELLS, and Jinko Solar) were determined to not be circumventing. The final results reflect those of Commerce’s preliminary report released in December of last year, with the exception of New East Solar, having previously been found not to be circumventing duties, but being added to the list after not cooperating with auditors during the investigation.

The investigation has generated significant controversy among policymakers due to its potential impacts on the Biden Administration’s climate and energy policy agenda – U.S. Energy Secretary Jennifer Granholm stated under congressional testimony that “at stake is the complete smothering of the investment and the jobs and the independence that we would be seeking as a nation to get our fuel from our own generation sources.” Solar industry groups have also voiced their disapproval with the investigation, highlighting that it puts the entire industry at risk. According to the Solar Energy Industries Association, 318 solar projects across the U.S. have been canceled or delayed as a result of Commerce’s investigation, which threatens the Biden Administration’s plan to cut the cost of solar electricity in half by 2030.

In response to these concerns, President Biden issued Proclamation 10414 on June 6, 2022, which temporarily suspends any antidumping or countervailing duties on imports of silicon photovoltaic cells and modules from Thailand, Cambodia, Vietnam and Malaysia and using parts and components manufactured in the PRC for two years up until the “Date of Termination” – June 6, 2024. In its final affirmative ruling issued last Friday, Commerce stated that it will not collect duties pursuant to Biden’s decision “as long as the imports are consumed in the U.S. market within six months of the termination of the President’s Proclamation”, meaning up until December 6, 2024. The ruling also highlights that, in order to be exempt from U.S. duties following the expiration of the waiver, all solar providers in Vietnam, Malaysia, Thailand, and Cambodia (including companies not specifically investigated by Commerce) must self-certify that they are not circumventing the AD/CVD orders and otherwise complying with all findings in this case, with those claims being subject to potential audit.

Both sides are likely to appeal this decision to the Courts.

For more information, contact: Bob LaFrankie, Dmitry Bergoltsev

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Executive Order and Rulemaking on U.S. Outbound Investment

What You Need to Know

• Key takeaway #1 Issuance of Executive Order and Rulemaking: On August 9, 2023, President Biden issueda long-anticipated “Executive Order on Addressing United States Investments in Certain National Security Technologies and Products in Countries of Concern” (the “Executive Order”). The Executive Order, which the President issued pursuant to the International Emergency Economic Powers Act (“IEEPA”), authorizes the U.S. Department of the Treasury (“Treasury”), in consultation with the U.S. Department of Commerce and other relevant agencies, to establish a new and targeted national security program aimed at certain outbound investments.
• Key takeaway #2 Opportunity to Influence Regulations: The Executive Order instructs Treasury to promulgate outbound investment regulations, and Treasury simultaneously issued an Advance Notice of Proposed Rulemaking (“ANPRM”) seeking comments, until September 28, 2023, on such key issues as what transactions and technologies should be covered. Treasury will then publish a proposed rule soliciting additional comments before publishing a final rule. Each step provides industry a meaningful opportunity to shape the final set of regulations.
• Key takeaway #3 No Currently Effective Restrictions:The Executive Order itself does not impose any restrictions; rather, the applicable restrictions will take effect only after Treasury publishes final regulations. Moreover, Treasury’s ANPRM notes that the final regulations will not apply to any historic “covered transactions” (though Treasury has said that it may inquire about transactions completed or agreed to after issuance of the Executive Order for purposes of developing the program).
• Key takeaway #4 Not a “Reverse CFIUS”, but Prohibitions and Notifications: Some transactions will be outright prohibited, while others will only require a notification to Treasury, both based on the specific technologies involved. Unlike CFIUS, which applies to inbound investments in the U.S., there will not be a case-by-case review process. However, similar to CFIUS, Treasury will have the authority to nullify, void, or otherwise compel the divestment of any prohibited transaction.
• Key takeaway #5 Third Technology-Focused Legal Regime for China: Currently, the People’s Republic of China (including Hong Kong and Macau) (hereinafter “China”) is the only “country of concern” targeted by the Executive Order. Treasury proposes to control a broad scope of activity related to the following technologies: (1) semiconductors and microelectronics, (2) quantum information technologies, and (3) artificial intelligence (AI) systems. The identified categories of technologies do not mirror those already controlled for China under existing U.S. export controls, or the clawback provisions of the CHIPS Act. Investors and other actors would need to review at least three separate technology-focused legal regimes to ensure compliance.
• Key takeaway #6 S. Person Jurisdictional Hook: The prohibitions and notification requirements will apply to U.S. persons, and employ a similar definition to that used in U.S. economic sanctions. In addition, based on Treasury’s ANPRM, U.S. persons will have certain obligations with respect to non-U.S. entities that they control and in certain scenarios where U.S. persons knowingly direct transactions by non-U.S. persons.
• Key takeaway #7 Potential Exceptions and an Exemption: Treasury has proposed various carveouts or exceptions for specific types of transactions, such as investments into publicly-traded securities or into exchange-traded funds, as well as a case-by-case “national interest exemption” for otherwise prohibited transactions.

 

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For more information, contact: Jason Prince, Addie Cliffe, Caroline Brown, Jana del-Cerro, Robert Holleyman, Evan Chuck, Jeremy Iloulian, Kelsey Clinton

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GAO Report on Section 232 Exclusions Signals Increased Enforcement for Steel and Aluminum Importers

On July 20, 2023, the U.S. Government Accountability Office (“GAO”) released a report titled, Steel and Aluminum Tariffs: Agencies Should Ensure Section 232 Exclusion Requests are Needed and Duties are Paid. Following an investigation analyzing import entry data from March 2018 through September 2021, GAO published a 66-page report about the usage and administration of the Section 232 steel and aluminum exclusion programs. 

The report detailed the shortcomings of the Department of Commerce’s Bureau of Industry and Security (“BIS”) and the United States Customs and Border Protection (“CBP”) in administering the Section 232 exclusion programs. In light of the GAO report, importers of steel and aluminum should expect BIS to conduct additional quantity certification reviews and more closely scrutinize the data points included in exclusion requests. Importers may also face increased scrutiny from CBP, who will more closely examine and deny 232 exclusion claims that are not properly filed. Because of the likely increased scrutiny by BIS and CBP, importers should be extra vigilant of the information submitted in exclusion requests, carefully monitor their quota usage and ensure proper claims are filed with CBP. 

Click here to continue reading the full version of this article.

For more information, contact: John Brew, Sam Boone

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Crowell Webinars

How U.S. Companies Should Think About China’s Counterespionage Law and Other Actions Taken in Response to U.S. Restrictions

09.26.23, 3:00 PM EDT – 4:00 PM EDT

Register Here

• While the Biden’s administration’s recent corporate enforcement actions and initiatives have garnered significant press attention, China has engaged in recent months in a series of less-publicized corporate enforcement actions and initiatives against non-Chinese companies (mostly, but not exclusively, U.S.-based) operating in the country, including through new investigations, raids of China-based offices, and even detention of employees. China has taken many of these actions based on alleged violations of laws established or updated in the last five years, some of which were issued in response to actions taken by the United States in the ongoing U.S.-China Strategic Competition.
• This program will provide an understanding of some of the national security and trade restrictions aimed at China that the United States has taken, and China’s responses, including China’s updated Counterespionage Law, which went into effect on July 1, 2023, with a particular focus on how you and your company should approach risk mitigation.

Participants: Michael K. Atkinson, Caroline E. Brown, Evan Y. Chuck

Contact: Ana Lopez at ALopez@crowell.com.

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Crowell Speaks

Fireside Chat and Q&A: Compliance, Enforcement and Career Paths in Government - 1^stAnnual Women in AML & Sanctions Forum (September 28, 2023). Moderator: Caroline Brown.

Navigating Ongoing Challenges: Russia and China Sanctions, Increased Export Control Regulation and Global AML Oversight - 1^stAnnual Women in AML & Sanctions Forum (September 28, 2023). Speaker: Nicole Succar.

Case Studies in Sanctions Evasion Techniques – Association of Certified Sanctions Specialists New York Chapter (September 14, 2023). Speaker: Nicole Succar.

Deep Dive into ADD/CVD Scope Rulings – ICPA Fall Conference (September 11, 2023). Speaker: Pierce Lee

Tornado Cash Charges Set Stage for Clash Over ‘Control’ (subscription required)
August 28, 2023 — Law360
Related Professional: Caroline Brown

Treasury already seeking comments on the outbound investment regime
August 13, 2023 — Foreign Investment Watch
Related Professionals: Caroline Brown and Evan Chuck

Biden Restricts US Investments in China’s Tech
August 9, 2023 — Law360
Related Professionals: Caroline Brown

Latest DOJ, Treasury, Commerce guidance implies more than it updates
July 28, 2023 — Global Investigations Review
Related Professional: Caroline Brown