The Month in International Trade – May 2023

Top Trade Developments

• Pressure Mounting: United States and United Kingdom Impose New Sanctions and Export Controls on Russia
• Legislation on Higher Tariffs on China Seeks to Reduce U.S. Trade Deficit
• Online Sellers Be Ware: Senate Reintroduces Digital Country-of-Origin Label Legislation
• China’s Revised Counterespionage Law and Recent Actions Highlight Challenges for U.S. Companies Operating in China

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

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Top Trade Developments

Pressure Mounting: United States and United Kingdom Impose New Sanctions and Export Controls on Russia

Following a meeting of the G7 Summit Leaders, on May 19, 2023, the United States and the United Kingdom announced a new round of sanctions and export controls against the Government of the Russian Federation (“Russia”) to continue their efforts against key sectors of Russia’s military-industrial base.

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For more information, contact: Caroline Brown, Jana del-Cerro, Carlton Greene, Nicola Phillips, Jason Prince, Dj Wolff, Anand Sithian, Jeremy Iloulian, Chandler Leonard

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Legislation on Higher Tariffs on China Seeks to Reduce U.S. Trade Deficit

The Raising Tariffs on Imports from China Act was introduced by Senator Josh Hawley (R-Mo.) and aims to increase tariffs on imports from China until the United State’s bilateral trade deficit returns to balance. In tandem with this legislation, Senator Hawley is pushing for debt limit talks to focus on the reduction of the trade deficit.

Following the normalization of trade relations between the United States and China, the trade deficit grew to 382,917 million in 2022. Senator Hawley points to the ongoing trade deficit between the United States and China, which has averaged $350 billion annually since President Clinton granted China permanent Normal Trade Relations, as the catalyst for the loss of 3.82 million jobs, particularly 2.89 million manufacturing jobs.

As of 2020, China is the United States’ largest supplier of goods imports and the top two import categories include electrical machinery, machinery, toys and sports equipment, furniture and bedding, and miscellaneous textile articles. Additionally, China is the 7th largest supplier of agricultural imports to the United States and has steadily increased imports of services to the United States since 2010.

Senator Hawley’s legislation Raising Tariffs on Imports from China would:

• Require the President to calculate and subsequently publish the total value of imports into the United States from China and total value of exports from the United States to China annually,
• Mandates the President to impose an additional duty of 25% on all goods imported from China if, a bilateral deficit is published in the previous calendar year, and
• Authorizes the President to remove duties if, during the previous calendar year, the United States publishes a bilateral surplus with China.

For more information, contact: John Brew, Emily Devereaux

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Online Sellers Be Ware: Senate Reintroduces Digital Country-Of-Origin Label Legislation

On May 3, 2023, Senators Tammy Baldwin, D-Wis., Sherrod Brown, D-Ohio, and J.D. Vance, R-Ohio, introduced the ‘‘Country of Origin Labeling Online Act’’ or the ‘‘COOL Online Act’’ in an attempt to require origin and location disclosure for new products of foreign origin offered for sale on the internet. Following previous unsuccessful attempts to pass similar legislation in 2020, this group of bipartisan senators has reintroduced legislation in an effort to promote goods made in America.

Currently only products sold in-person are required to disclose country-of-origin, however the Country of Origin Labeling Online Act seeks to amend labeling laws to force e-commerce sites to provide similar information. According to Senator Baldwin, “whether we buy things online or in-store, Americans have a right to know if the product they are purchasing was made in America, by American workers.” Senator Vance claimed that the legislation would, “close a legal loophole by extending current, commonsense labeling requirements to e-commerce.” Senator Brown asserted that, “companies shouldn’t be able to hide their ‘made in China’ label just because they’re selling online.” The percentage of total retail sales from e-commerce relative to in-store has been steadily increasing each year, causing groups such as the Coalition for a Prosperous America to become more vocal about the need for legislation. Proponents of this legislation argue that American consumers will prefer to buy American products should they have the full knowledge online of where retailed goods are manufactured which would be a boon for U.S. producers.

Big retailers, including electronics, furniture, and toy industries, have argued that this legislation would add onerous regulations for online sellers which could be complex both legally and technically to comply with. The National Retail Federation (“NRF”), the retail industry’s largest trade group, said back in 2021 that it “opposes the measure because it would create complications for retailers who might source any number of items – T-shirts, say, or strawberries – from multiple countries.”

The bill requires sellers to conspicuously disclose the country of origin of products sold over the internet. This includes compliance with the labeling of the country of origin of the product and the country of origin in which the seller has its principal place of business. There are several exclusions to this requirement – such as certain agricultural products, certain food and drug products, used or previously-owned articles, and small sellers with annual sales of less than $20,000 and fewer than 200 discrete sales. If passed and approved, the law would take effect 12 months after the date of the publication of the Memorandum of Understanding between the Federal Trade Commission, the U.S. Customs and Border Protection, and the Department of Agriculture, which must be signed within 6 months after the date of enactment.

For more information, contact: John Brew, Sam Boone

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China’s Revised Counterespionage Law and Recent Actions Highlight Challenges for U.S. Companies Operating in China

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.

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For more information, contact: Michael Atkinson, Caroline Brown, Evan Chuck, Kelsey Clinton, Jeremy Iloulian

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Crowell Speaks

"Sanctions Lawyers Describe Difficult OFAC Delisting Process," May 25, 2023 — Global Investigations, Related Professionals: Jason Prince.

“A Conversation with Matthew S. Axelrod, Assistant Secretary for Export Enforcement, Bureau of Industry and Security, U.S. Department of Commerce” – OOPS 2023: Government Contracting Amidst a Global Shake-Up (May 9, 2023). Moderator: Jana del-Cerro.

“Overview of Counter-party risk/evaluation and decision-making” and “UK/US: Compare and Contrast” – WorldECR Sanctions Practitioners Forum (May 15, 2023). Speaker: Dj Wolff.

“Status Report on Iran – and a Look Forward to What’s Next” - ACI Global Economic Sanctions, Berlin (June 2, 2023). Speaker: Dj Wolff. 

“Conversation with Women at OFAC” - ACI’s Women in  Sanctions Network (WSN)Webinar (June 7, 2023). Speaker: Nicole Succar.