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The Month in International Trade – July 2020

Client Alert | 23 min read | 08.13.20

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

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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, Spencer Toubia, Ru Xiao-Graham, Cherie Walterman

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, Spencer Toubia, Ru Xiao-Graham, Cherie Walterman

Creation of a New Hong-Kong-Related Sanctions Program

On July 14th, President Trump signed into law the Hong Kong Autonomy Act (the “Act”) that Congress unanimously passed earlier this month, and simultaneously issued Executive Order 13936 (the “HK EO”) that implements many of its provisions. These actions follow the June 30th imposition by the government of the People’s Republic of China (“China”) of a far-reaching national security law on Hong Kong (“National Security Law”).

Taken together, the Act and the HK EO create a new Hong Kong / China-related sanctions program that targets non-U.S. persons making “material contributions” to the failure of the Government of China to uphold its obligations under the Joint Declaration and Basic Law, the law that codified China and Hong Kong’s ‘one country, two systems’ paradigm (the “Basic Law”). They also, along with the recent Uighur Human Rights Policy Act and designations against Chinese companies under existing authorities, such as the Magnitsky Human Rights Accountability Act, can be understood as part of the emergence of a broader sanctions policy targeting China.

For more on the Act and the HK EO, please click here.

UPDATE: On August 7, 2020, the Office of Foreign Assets Control used the HK EO authority for the first time and imposed sanctions on 11 current and former government officials, including Hong Kong’s Chief Executive, for allegedly undermining Hong Kong’s autonomy and restricting the freedom of expression or assembly of the citizens of Hong Kong.

For more information, contact: Caroline Brown, Carlton Greene, Dj Wolff, Nicole Succar, Erik Woodhouse

Canada Proposes Retaliatory Tariff List in Response to Latest U.S. Tariffs on Canadian Aluminum Products: Comments Due September 6, 2020

The Government of Canada has announced retaliatory tariffs of 10 percent on certain steel and aluminum imports from the United States, effective September 16, 2020. These countermeasures will only apply to goods originating from the U.S. and will remain in place until the U.S. eliminates its aluminum tariffs. The U.S. had previously announced on August 6, 2020 the imposition of tariffs of 10 percent on all aluminum products from Canada effective August 16, 2020. The Canadian Department of Finance will accept comments on its proposed retaliatory tariff list until September 6, 2020.

All comment submissions to the government should include, at a minimum, the following information:

  1. Canadian company/industry association name and contact person.
  2. Relevant eight-digit tariff item(s) and description of the goods of particular interest.
  3. Reasons for the expressed support for, or concern with, the proposed countermeasures, including detailed information substantiating any expected beneficial or adverse impact.
  4. Please identify if information provided in the submissions is commercially sensitive.

Comments should be sent to the email address fin.tariff-tarif.fin@canada.ca and include the term “Aluminum countermeasures” in the subject line.

In May 2019, the United States announced a deal with Canada and Mexico to remove U.S. Section 232 tariffs for steel and aluminum imports in exchange for the removal of Mexican and Canadian retaliatory tariffs. The agreement provided a monitoring mechanism to prevent surges in steel and aluminum imports into the U.S. If the U.S. government determined a surge in steel or aluminum imports has occurred, then the U.S. could reimpose Section 232 tariffs. However, any retaliation by Canada or Mexico would then be limited to steel and aluminum products, as to not drag other industries into the trade dispute.

In accordance with that agreement, the table of retaliatory tariffs provided by the Canadian government includes 68 products of steel or aluminum composition. Notable products include bicycles, golf clubs, refrigerators, and washing machines.

For the full list of products and HTS codes, please click here.

For more information, contact: John Brew, Sam Boone

USITC Delivers Final MTB Report to Congress

On August 10, 2020, the United States International Trade Commission (USITC) delivered its final report on miscellaneous tariff bill (MTB) petitions it received in December 2019 under the 2016 American Manufacturing Competitiveness Act (AMCA). Petitions that have been recommended by the USITC will receive a temporary reduction or suspension on import duties once the President signs the bill. As required by AMCA, the final report was sent to the House Committee on Ways and Means and the Senate Committee on Finance. The preliminary report was sent to Congress on June 9, 2020, and the USITC subsequently accepted comments on Category VI petitions not recommended for inclusion in the tariff bill.

In its final report, the USITC categorized all 3,442 petitions filed based on whether the petition meets the requirements of the act. For a petition to be recommended by the USITC, it must be shown that there is no domestic production of the article, the duty suspension or reduction is available to any person importing the article, the petition is administrable by U.S. Customs and Border Protection (CBP), and the estimated revenue loss to the United States is under $500,000 each calendar year. Based on these requirements the petitions have been sorted into six categories.

Category I: “Petitions that the Commission finds meet the requirements of the Act without modification.”

Category II: “Petitions for which the Commission recommends technical corrections in order to meet the requirements of the Act.”

Category III: “Petitions for which the Commission recommends a modification to the amount of the requested duty suspension or reduction in order to comply with the requirements of the Act.”

Category IV: “Petitions for which the Commission recommends a modification to the scope of the articles covered by the petitions to address objections from domestic producers.”

Category V(aa): “Petitions that the Commission finds do not contain the information required under the Act.”

Category V(bb): “Petitions for which the Commission has determined that the petitioner is not a likely beneficiary.”

Category VI: “Petitions that the Commission does not otherwise recommend for inclusion in a miscellaneous tariff bill (MTB)”.

The following chart examines the number of petitions in each category and compares the breakdown of categories in the preliminary report against the final report.

 

Preliminary Report

Final Report

Category I

874

878

Category II

1,229

1,278

Category III

526

534

Category IV

3

5

Category V (aa)

16

17

Category V (bb)

26

25

Category VI

805

705

Withdrawn Petitions

607

644

Total

4,086

4,086


Upon the delivery of this report to Congress, the USITC has now completed the second and final miscellaneous tariff bill petition cycles as mandated by the AMCA. There is no set timeline for when Congress will send the bill to the President for his final signature.

For more information, contact: John Brew, Sam Boone

Labor Provisions of the USMCA: What Multinational Employers Should Know

The new United States Mexico Canada Agreement (USMCA), which replaced the 1994 North American Free Trade Agreement (NAFTA), became effective on July 1, 2020. Historically, free trade agreements like the NAFTA have been criticized for their lack of strong labor provisions to address low wages and inadequate labor standards that advocates argue support worker rights and improve economic growth in developing countries.

The USMCA seeks to address those concerns. In fact, as a precondition to the passage of the USMCA, the U.S. Congress reopened the negotiations at the end of 2019 and amended the agreement to bolster Mexican workers’ rights and to include stronger enforcement provisions like the Rapid Response Mechanism to hold companies in Mexico accountable for violating the rights of free association and collective bargaining. 

For more on this complex topic, please click here.

For more information, contact: Kris Meade, Nicole Simonian, Christine Hawes, Jackson Pai

New Executive Orders Start Clock Ticking for TikTok and WeChat

On August 6, 2020, the President issued two Executive Orders (the EOs) pursuant to the International Emergency Economic Powers Act (IEEPA) and the National Emergencies Act (NEA) prohibiting U.S. persons from engaging in transactions with the Chinese-owned parent companies of the mobile applications (apps) TikTok and WeChat. The prohibitions begin 45 days after the orders (September 20, 2020) and the EOs direct the Secretary of Commerce to identify the transactions subject to the EOs within that time. The EOs do not confer any authority on the Secretary to take immediate or earlier action.

For more on these new Executive Orders, please click here.

For more information, contact: Caroline Brown, Robert Holleyman

Recent FinCEN Advisories on Medical and Consumer Fraud Scams Related to the COVID-19 Pandemic

The Financial Crimes Enforcement Network (FinCEN) has issued two advisories to alert financial institutions to scams related to the COVID-19 pandemic and has stated that it intends to continue to issue similar alerts.  The advisories, based on FinCEN’s analysis of COVID-19-related information obtained through Bank Secrecy Act (BSA) data, public reports, and law enforcement partners are intended to aid financial institutions in detecting, preventing, and reporting potential COVID-19-related criminal activity and provide “red flags” that may assist financial institutions in identifying suspicious activity.

Most recently, FinCEN issued an alert on July 7, 2020, describing indicators of imposter scams and money mule schemes, which FinCEN said illicit actors are using to take advantage of the COVID-19 pandemic.  On May 18, 2020, FinCEN issued an advisory alerting financial institutions to the rise in medical scams related to the pandemic.  These alerts follow earlier COVID-19-related guidance from FinCEN that, in part, identified certain trends of potential suspicious activity, and advised financial institutions to be alert for the kind of malicious or fraudulent transactions that it suggested are common during natural disasters.  FinCEN requested that financial institutions reference the consumer fraud advisory by including the term “COVID19 MM FIN-2020-A003” in SAR field 2 and reference the medical scam advisory by including “COVID19 FIN-2020-A002”.

For more on imposter scams, money mule schemes, and medical scams, please click here.

For more information, contact: Caroline Brown, Carlton Greene, Nicole Succar, Alexander Rosen

FinCEN Issues Alert to Financial Institutions Regarding Scam Involving Twitter

On July 16, 2020, the Financial Crimes Enforcement Network (FinCEN) issued an alert to financial institutions emphasizing a recent scam exploiting Twitter accounts to fraudulently solicit virtual currency payments.  The cyber threat actors involved in the scam compromised accounts of various public figures, organizations, and financial institutions in an attempt to solicit virtual currency payments by claiming these payments would be doubled and returned to the senders. 

FinCEN asked financial institutions not to send money or provide identifying or confidential information if they receive such a solicitation before verifying its authenticity, and reminded virtual currency exchanges and other financial institutions to identify and report suspicious transactions determined to be associated with the scam. Included in those Suspicious Activity Reports (SARs) should be any “relevant technical cyber indicators related to cyber events and associated transactions.”  

Examples of possible cyber indicators include chat logs, suspicious IP addresses, suspicious email addresses, suspicious filenames, malware hashes, CVC addresses, command and control (C2) IP addresses, C2 domains, targeted systems, MAC address or port numbers.  This appears to be a reference to the types of “cyber-related information” that FinCEN previously has instructed financial institutions to include in SARs where it is available.

FinCEN included in the alert a list of “red flags” to help financial institutions identify and report suspicious activity potentially related to the scam:

  • Promises of high or guaranteed investment or donation returns for payments made to accounts with which a financial institution had no prior business relationship.
  • Communications, including social media posts, soliciting payments that have misspellings or messages out-of-profile for the counterparty, soliciting payments from individuals or organizations with whom a financial institution had no prior existing business relationship, including celebrities or public figures.
  • Solicitations requesting donations via social media where the solicitor is not affiliated with a reputable organization.
  • Social media posts that solicit donations or advertise give-aways that appear from accounts that are not “verified” through the social media platform account verification processes or that misspell the celebrity or financial institution’s name.
  • Multiple social media accounts communicating the same message soliciting funds for an unknown purpose or to an unknown account.
  • Communications, including social media posts, that provide the same CVC address across multiple celebrity or prominent financial institution social media accounts.

FinCEN directed financial institutions to include the term “FIN-2020-Alert001” in SARs reporting this activity.  Financial institutions may also reference FinCEN’s May 2019 Advisory on Illicit Activity Involving Convertible Virtual Currency for additional red flags of illicit CVC activity, and its Cyber Event FAQs for additional information on reporting cyber events.

For more information, contact: Carlton Greene, Caroline Brown, Erik Woodhouse, Michelle Ann Gitlitz, Justin Porter

FinCEN Provides Additional Guidance for Financial Institutions on Hemp-Related Businesses

On June 29, 2020, the Financial Crimes Enforcement Network (FinCEN) issued helpful guidance on due diligence requirements for hemp-related businesses under the Bank Secrecy Act (BSA). The four-page guidance builds upon a December 3, 2019, joint statement on this topic issued by FinCEN, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency, in consultation with the Conference of State Bank Supervisors, and provides additional detail on due diligence and suspicious activity reporting for such businesses. FinCEN's goal for the guidance is to “enhance the availability of financial services for, and the financial transparency of, hemp-related businesses in accordance with federal law.”

For more on this, please click here.

For more information, contact: Caroline Brown, Carlton Greene, John Fuson, Amanda Lineberry, Nicole Succar, Erik Woodhouse

NYDFS and OCC Announce Major Overhauls Important for Virtual Currency Businesses

The Office of the Comptroller of the Currency (OCC) and the New York Department of Financial Services (NYDFS) each recently took significant steps to address the key impediments for virtual currency (VC) companies in the U.S. First, on June 24, NYDFS announced significant updates to its approach on Bitlicenses, New York’s business license for VC activities, which has traditionally been considered difficult to obtain.

Second, on June 25, 2020, Brian Brooks, the former Chief Legal Officer of Coinbase, Inc., and current Chief Operating Officer and First Deputy Comptroller at the OCC, announced that the OCC is planning to unveil a “payments charter” later this year which is intended to serve as a “national version of a state money transmission license.”

For more on these important changes to the virtual currency business, please click here.

For more information, contact: Michelle Ann Gitlitz, Carlton Greene, Jorge Pesok, Nicole Succar

DOE Seeks Information on Securing Bulk Power System

Pursuant to Executive Order 13920, “Securing the United States Bulk-Power System” (the EO) issued May 1, 2020, which declared that threats by foreign adversaries to the bulk-power system (BPS) constitute a national emergency, on July 8, 2020, the Department of Energy (DOE) issued a Request for Information (RFI) seeking information regarding the energy industry’s current practices for identifying and mitigating vulnerabilities in the supply chain for BPS components. 

For more on the RFI, please click here.

For more information, contact: Larry Eisenstat, Alan W.H. Gourley, Caroline Brown, Deborah Carpentier

Customs Rulings of the Week

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

Upcoming Crowell & Moring Webinars

Handling Violations and Voluntary Disclosures

Date: Tuesday, August 18, 2020
Time: 12:00 PM Eastern Daylight Time
Duration: 1 hour

Companies that handle export-controlled technology, software, or commodities are bound to run afoul of the export control regulations at some point – the question is, what do you do next?  Our international trade attorneys, including Clif Burns, a seasoned export control practitioner, and Chandler Leonard, a former Compliance official with DDTC and OFAC, will explore how and why companies make the decision to disclose potential violations of U.S. export controls to the government and will detail best practices for initiating internal reviews and making disclosures.  We will also explain the different disclosure and enforcement regimes at the Departments of State, Commerce, Treasury, and Justice, and will distinguish between civil and criminal disclosures for each.

Contact: Crowell & Moring Events (events@crowellevents.com)

Speakers:

To register for this webinar, please click here.

Valuing Your Imports for U.S. Customs Entry

Date: Wednesday, September 16, 2020
Time: 1:00 PM Eastern Daylight Time
Duration: 1.5 hours

As a result of the trade wars there has been a significant increase in tariffs on imports. Because tariffs are applied based on the value of imports it is critical that companies understand how to properly value their imports under U.S. customs laws. Using improper values may lead to draconian audits, enforcement actions, and penalties imposed by U.S. Customs and Border Protection. However, smart importers structure their transactions to reduce U.S. customs values, creating significant cost savings from reduced tariffs. This topic will explore the basic rules of proper U.S. customs valuation, common errors, how to avoid risks, and how to minimize U.S. customs value to maximize your company’s profits.

Learning Objectives

  • You will be able to review basic U.S. custom value rules and methods.
  • You will be able to identify possible deductions from U.S. customs value.
  • You will be able to recognize common valuation errors and penalties.
  • You will be able to describe strategies to reduce U.S. customs requests, audits, and enforcement actions.

  Speaker: John Brew

To register for this webinar, please click here.

Crowell & Moring Speaks

Caroline Brown authored an article for Law360 on July 8 titled “Security Fears Over HK Cable Reveal ‘Team Telecom’ Priorities.”

Clark Jennings was featured in a July 10 South China Morning Post article on “China’s Interest in Trans-Pacific Trade Deal Met with Scepticism By Those Who Helped Negotiate It,” as well as a podcast the same day on “Hong Kong Security Law Stokes U.S.-China Trade War; Analysing Joe Biden’s China Policy.”

Jana del-Cerro was featured in a Law360 article on July 16 titled “U.S. May Restrict Facial Scanning, Surveillance Gear Exports.”

Caroline Brown was featured in Law360’s July 21st article on the “The Biggest Telecom Developments of 2020: Midyear Report.”

Maria Vanikiotis was featured in a July 22 article in Forbes titled “Trump’s Tariff War is Crippling the Spirits Industry. Distillers want action.”

Dan Cannistra was featured in a July 27 article in Inside U.S.Trade (subscription required) titled “China Finds Non-Market Conditions in U.S. Energy Market, Drives up AD Duties.”

Caroline Brown and Chandler Leonard authored a July 28 WorldECR article titled “Circling the wagons: reactions to Covid-19 bolster regulatory exclusions.”

Caroline Brown and Dj Wolff were featured in a July 28 WorldECR article titled “Back to the Rink.”

Dj Wolff was featured in a July 28 WorldECR article titled “Lawyering and the New Normal.”

Nicole Simonian was featured in a July 29 SHRM Online article titled “U.S.-Mexico-Canada Agreement Introduces Labor Changes.”

Clif Burns was featured in a July 31 article in Inside Defense (subscription required) titled, “Defense Industry Not Sold On Trump’s Drone Export Deregulation Efforts.”

Clif Burns was also featured in an August 7th Financial Times article and an August 9th Financial Review article discussing the impact of banning WeChat on Chinese and U.S. businesses.

Caroline Brown was featured in an August 10th Law360 article titled "Confusion Prevails Over Extent Of Trump's TikTok 'Ban.'"

John Brew will be a speaker at the Petroleum Equipment and Services Association’s free webinar on USMCA: Advantages and Challenges for OFS. The event will be held on August 19 from 2:00 PM – 2:00 PM Central Time. Please click here to register.

Jeff Snyder will be a moderator for the Inter-Pacific Bar Association’s “International Trade in a Time of Crisis” webinar on September 7 at 8:00 PM U.S. Central Time. Please click here to register.

Contacts

Insights

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The Federal Trade Commission (“FTC”)  recently announced that it approved final amendments to its Telemarketing Sales Rule (“TSR”), broadening the rule’s coverage to inbound calls for technical support (“Tech Support”) services. For example, if a Tech Support company presents a pop-up alert (such as one that claims consumers’ computers or other devices are infected with malware or other problems) or uses a direct mail solicitation to induce consumers to call about Tech Support services, that conduct would violate the amended TSR. ...

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