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The Month in International Trade – February 2022

Client Alert | 15 min read | 03.15.22

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 Russia Sanctions/Export Highlights

Russia Sanctions:  The U.S., EU, and UK continue to apply pressure on Russia through new sanctions on oligarchs and politicians and restrictions on exports.  A number of other countries have implemented similar measures and continue to widen the scope of such prohibitions as the invasion continues.  On a more limited scale, Belarus has also been subject to new EU restrictions targeting certain financial institutions.  As the invasion continues, we expect additional sanctions and export controls in the near future.

Financial Sector Restrictions: The most recent actions have focused on the Belarusian financial sector.  The EU expanded its prohibition on SWIFT access to three Belarusian banks: Belagroprombank, Bank Dabrabyt, and Development Bank of the Republic of Belarus, which means these banks will be removed from SWIFT effective March 20, 2022.  This action follows the EU’s previous announcement that seven major Russian banks and majority-owned subsidiaries will be disconnected from SWIFT.  The EU also announced that transactions related to the management of reserves or assets of the Central Bank of Belarus are prohibited.

Oligarch Sanctions:  A number of additional oligarchs and prominent businesspeople were sanctioned by the UK and EU this week.   These individuals are involved in key economic sectors that provide a substantial source of revenue to Russia, including the oil, metallurgical, agriculture, pharmaceutical, telecom, and industrial industries.  As the list of sanctioned oligarchs continues to expand, identifying the companies and entities that may also be sanctioned by operation of law, as a result of oligarch ownership or control, will continue to pose a challenge to businesses globally.  We expect the U.S., UK, and EU will continue to target oligarchs as the invasion continues.

Export Controls & Energy Sanctions:  As anticipated, the U.S. announced a ban on the import of Russia origin oil, petroleum, and natural gas.  The Executive Order also prohibits “new investment in the energy sector.”  The definition of “investment” is broad and includes any transaction involving a “contribution of funds or other assets for” new “energy sector activities” that are “located or occurring” in Russia after March 8, 2022.  As a result, this may effectively prohibit the export of any goods for use in the Russian energy sector after March 8, 2022.  The UK announced that it would “phase out” the import of Russian oil over the course of 2022, but offered no specific guidance.

The EU imposed a prohibition on the export of maritime navigation goods and technology to Russia.  This restriction applies to navigation equipment and radio-communication equipment and the provision of technical or financing related to such goods.

For more information, contact: Jeff Snyder, Carlton Greene, Dj Wolff, Michelle Linderman, Nicole Succar, Anand Sithian, Brian McGrath, Laurel Saito, Rachel Schumacher

Expanded U.S. Ban on Russian Imports and Russia’s Removal from Permanent Normal Trade Relations Status

 

On March 11, 2022, United States President Joseph Biden formally announced via Executive Order that the following Russian-origin goods will no longer be permitted importation into the U.S. customs territory:

  • Fish, seafood, and preparations thereof;
  • Alcoholic beverages;
  • Non-industrial diamonds; and
  • Any other products of Russian Federation-origin as may be determined by the Secretary of the Treasury, in consultation with the Secretary of State and the Secretary of Commerce.

The prohibition takes immediate effect, except that the Office of Foreign Assets Control (OFAC) has issued a General License providing that all such prohibited transactions ordinarily incident and necessary for the importation of these goods into the United States pursuant to written contracts or agreements entered into prior to March 11, 2022 are authorized through 12:01 am (EDT), March 25, 2022.

Today’s announcement is an expansion of the import ban announced earlier this week by the Biden Administration and implemented by Executive Order 14066 (Mar. 8, 2022) in which the United States prohibited the importation of certain Russian-origin energy products, including crude oil, petroleum, petroleum fuels, oils and products of their distillation, liquidized natural gas, coal and coal products.  This move by the U.S. Government is among a number of actions taken to escalate efforts to apply pressure on the administration of Russian President Vladimir Putin in response to its recent military aggression in the sovereign state of Ukraine.  The trade community awaits formal publication of today’s executive order and further instruction from the U.S. Government regarding the implementation of this import ban.  Today’s Executive Order authorizes the promulgation of rules and regulations to carry out the purposes of the Order.  Crowell and Moring LLP (Crowell) is monitoring this space closely to provide specific guidance to clients with exposure to this type of government action.

In another move to leverage trade power over the Putin regime, today the  Group of Seven (G7) also announced its intent to strip Russia of its Permanent Normal Trade Relations status for key products.  WTO members generally commit to treating other members equally in connection with trade barriers, e.g., tariffs, for goods and services.  This treatment is known as “Most-Favored Nation” (MFN) treatment.  To strip Russia of its normal trade relations status would be to revoke MFN treatment, which opens the door to tariffs on Russian goods imported into individual countries.  The G7 forecasted a statement by a broad coalition of WTO members, including the G7, to collectively revoke Russia’s MFN status.  The Biden Administration also expressed its intent to work closely with Congress to deny Russia MFN treatment.  Crowell is tracking any develops in the revocation of Russian MFN status and any subsequent tariff actions by individual countries.

Takeaways for Importers:

  • Assess the exposure of your company’s U.S. import profile to the Russian-origin goods covered by the import ban, including not only energy products, but also now numerous consumer goods.
  • Assess your Company’s trade exposure more broadly to Russian-origin goods shipped globally, in the event that individual countries revoke Russia’s MFN status and elect to apply tariffs.

For more information, contact: John Brew, Dj Wolff, Maria Vanikiotis, Anand Sithian, Frances Hadfield, Chandler Leonard

House Trade Title Includes Changes to Trade Remedies Law

To complement legislation introduced by Ohio Sens. Rob Portman (R) and Sherrod Brown (D), the House included changes to trade remedies law in the COMPETES Act. In addition to the updates outlined in our May 2021 update, the COMPETES Act also grants U.S. Customs and Border Protection (CBP) a statutory basis to investigate claims of evasion of a safeguard action. Currently, statutory provisions only exist for claims of evasion of antidumping and countervailing duty laws.

Please click here for an overview of the Trade Remedies Title including the newly added Subtitle E as provided by Ways and Means.

For more information, contact: John Brew, Frances Hadfield, Michael Bowen, Clayton Kaier

USTR Releases 2022 Trade Policy Agenda And 2021 Annual Report

On March 1, 2022, the United States Trade Representative (USTR) released the President’s 2022 Trade Policy Agenda and USTR’s 2021 Annual Report. These documents are issued yearly to Congress pursuant to Section 163 of the Trade Act of 1974. The agenda, which has historically been used as a messaging document, highlights the unique approach each Administration takes with regard to trade policy development, while the report is a formal overview of the work accomplished by the USTR in bilateral, region, plurilateral, and multilateral contexts. This is the second Trade Policy Agenda and Annual Report issued by the Biden Administration and the 33rd report issued in its current form.

Please click here for more information.

For more information, contact: Robert Holleyman, John Brew, Evan Yu, Frances Hadfield, Clayton Kaier

USTR Releases Annual Report on China’s WTO Compliance

On February 16, 2022, the United States Trade Representative (USTR) released its 2021 Report on China’s World Trade Organization (WTO) Compliance. The report, issued yearly to Congress pursuant to section 421 of the U.S.-China Relations Act of 2000, outlines the current Administration’s assessment of China’s membership in the WTO. Notably, this year marks the 20th edition of the report and is the first assessment issued since the January 2020 “Phase One Agreement” entered into force.

Please click here for a report overview.

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

U.S. and Japan Reach Tariff-Rate Quota (TRQ) Agreement to Replace Section 232 Tariffs

 

 

On February 7, 2022, the United States and Japan issued a joint statement announcing a 232 tariff agreement allowing historically-based sustainable volumes of Japanese steel products to enter the U.S. market without tariffs.

Please click here for an overview of the actions.

For more information, contact: John Brew, Jeff Snyder, Frances Hadfield, Clayton Kaier

Customs Rulings of The Week

 

 

For more information, contact: Frances Hadfield, Martín Yerovi

Crowell & Moring Speaks

March 21, 2022 - CMI President and CEO and Crowell Partner Ambassador Robert Holleyman will participate in a conversation with Agathe Demarais, Global Forecasting Director at the Economist Intelligence Unit, as part of the Economist’s Asia Trade Week. They will discuss how countries in the regions can best navigate increasing trade tensions between China and the U.S. in the Asia-Pacific, if remaining neutral in an era of superpower competition is feasible, and what impact this rivalry is having on trade flows in the region among other topics.

Webinar – Official Event Website

Starts: 9:30 PM (EST)

Ends: 10:00 PM (EST)

March 5, 2022 – Partner Caroline Brown was quoted in The Block’s article, “Crypto Exchange Executives Respond to Sanction ‘Misinformation.’”

March 3, 2022 – Partner Caroline Brown, was quoted in a Law360* titled, “Law Firms Dash to Handle Flood of Russia Sanctions Q’s.” *subscription required

March 3, 2022 – Export Compliance Daily* highlights the firm’s March 2 webinar—Russia-Related Sanctions Developments—which discusses the current state of a rapidly changing Russia-related sanctions landscape, including new measures both implemented and expected from the United States, United Kingdom, and European Union. *subscription required

"Russia-Related Sanctions Developments," Crowell & Moring Webinar (March 2, 2022). Speakers: Caroline E. Brown, Carlton Greene, Michelle J. Linderman, David (Dj) Wolff,Lorenzo Di Masi, Anand Sithian, and Nicole Sayegh Succar.

March 2, 2022 – Associate Chandler Leonard spoke at the ICPA’s Annual Conference in San Diego on “Creating an Effective Export Compliance Program.”

March 2, 2022 – American Banker* speaks with partner Caroline Brown about Russia and other entities looking for ways that they can access the U.S. dollar as sanctions begin to have their effects. Brown says the likelihood of Russian entities getting caught using cryptocurrency to skirt sanctions will depend on the jurisdiction where the cryptocurrency companies they use are operating (“Could Russian Banks and Oligarchs Use Crypto to Evade Sanctions?”). *subscription required

March 1, 2022 – Partners Dj Wolff and Michelle Linderman spoke on sanctions at a BIMCO webinar titled “War in Ukraine – Implications to Shipping.”

March 1, 2022 – Inc. quotes New York counsel Nicole Succar regarding the need for companies that want to stay in Russia to invest in compliance (“Businesses Pull Russian Products in Response to the Invasion of Ukraine. Should You Do the Same?”).

February 28, 2022 – The Hill quotes international trade partner Dj Wolff regarding the unprecedented speed at which the sanctions have been imposed and the level of coordination with so many other nations (“Unprecedented Western Sanctions Strangling Russian Economy”).

February 26, 2022 – The Telegraph* quotes London partner Michelle Linderman on the business impact of Boris Johnson designating a freeze on all major Russian banks (“How Sanctions Could Break the Web of Russian Influence in the City”). *subscription required

February 25, 2022 – Partner Caroline Brown, was quoted in a Reuters article, “European, U.S. Bank Shares Recoup Some Losses Ahead of New EU Sanctions.”

February 25, 2022 – NBC News speaks with senior counsel Clif Burns about the likelihood that Russia may try to switch to cryptocurrencies to sidestep international sanctions. Burns explains how cryptocurrency is not completely anonymous and cites several reasons why Russians with cryptocurrencies may have trouble unloading it (“Could Bitcoin Be Putin's Economic Savior? That's Unlikely, Experts Say”).

February 25, 2022 – Bloomberg*quotes London partner Michelle Linderman regarding the impact of the new sanctions on Russia in terms of oligarchs, as the City of London is historically a prime destination for Russian money (“In Private, Bankers Debate Nuclear War, Russian Trading Risk”). *subscription required

February 25, 2022 – Partner Caroline Brown, spoke at Duke Law School’s 27thAnnual National Security Law Conference on “Cybersecurity: Can the Intelligence Community and the Private Sector Collaborate?

February 23, 2022 – Partner Caroline Brown, was quoted in an article in The New York Post titled “NYC Delivery Guys at Russia-Backed App Buyk Worried About Sanctions.”

February 22, 2022 – Partner Caroline Brown, was quoted in an article in The Quint titled “Can Russia’s ‘De-Dollarisation’ Protect its Economy from US Sanctions?”

February 14, 2022 – Partner Caroline Brown, a former national security attorney at the U.S. Departments of Justice and the Treasury, is featured in a video interview discussing the scale of the financial sanctions being contemplated. To watch, click here: Law Firms Gear Up for Potentially Unprecedented Sanctions if Russia Invades Ukraine. Brown also speaks with S&P Global Market Intelligence* about how Russian banks’ access to the global finance system could be restricted if the country invades Ukraine (“What is In Store for Banks if West Hits Moscow With New Sanctions”). *subscription required

February 3, 2022 – A video interview with partners John Brew, co-chair of the International Trade Group and Tom Lorenzen, co-chair of the Environment & Natural Resources Group, is featured on SupplyBrainDrain. Brew and Lorenzen discuss how well companies are doing in adhering to their ESG promises, based on the results of the firm’s recent ESG Survey. To watch, click here: Are Businesses Living Up to ESG Requirements?

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