The Month in International Trade – September 2023

Top Trade Developments

• U.S. Department of Commerce Joins with Allied and Partner Countries to Recommend Best Practices, Including Specific End User Assurances, To Prevent Diversion of 45 High Priority Items to Russia
• Focusing the Spotlight: DOJ Focuses on National Security in Corporate Criminal Enforcement
• New EU/UK Restrictions on Russian-origin Iron and Steel Products
• Final Rule from Commerce on National Security Guardrails for CHIPS Act Funding: Restrictions on China and Other Countries of Concern
• USTR Further Extends Section 301 Tariff Exclusions to Allow More Time for Four-Year Review
• New Section 232 Exclusion Proposed Rules Will Force Additional Burden of Proof on Importers and Domestic Producers
• U.S. Department of Commerce Releases Text from IPEF Agreement on Supply Chains
• How to Meet the New Notification Obligations Under the EU Foreign Subsidies Regulation

Crowell Congratulates

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

U.S. Department of Commerce Joins with Allied and Partner Countries to Recommend Best Practices, Including Specific End User Assurances, To Prevent Diversion of 45 High Priority Items to Russia

On September 28, 2023, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS), alongside the UK, Australia, Canada, New Zealand (termed the “Export Enforcement Five” or “E5,”), as well as the EU, issued new guidance with recommended best practices to help prevent a list of “high-priority items” from being diverted to Russia.

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

For more information, contact: Jana del-Cerro, Jeremy Iloulian, Dilan Wickrema

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Focusing the Spotlight: DOJ Focuses on National Security in Corporate Criminal Enforcement

On September 11, 2023, the U.S. Department of Justice (“DOJ”)’s National Security Division (“NSD”) announced the appointment of its first-ever Chief Counsel and Deputy Chief Counsel for Corporate Enforcement, fulfilling a commitment made by DOJ in March 2023. Both appointees are prosecutors with significant experience prosecuting large-scale, international corporate crimes, commensurate with DOJ’s recent emphasis on holding accountable corporate actors that violate national security laws, including sanctions and export controls.

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For more information, contact: Michael Atkinson, Caroline Brown, Jeff Severson

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New EU/UK Restrictions on Russian-origin Iron and Steel Products

From September 30, 2023, new EU and UK sanctions will come into effect targeting the imports of specified iron and steel products which are processed in third countries and incorporate Russian-origin iron and steel inputs. Importers will need to declare upon import whether the imported goods are compliant (and be prepared to provide evidence demonstrating compliance if checked by customs).

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For more information, contact: Vassilis Akritidis, Jeff Snyder, Sophie Davis

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Final Rule from Commerce on National Security Guardrails for CHIPS Act Funding: Restrictions on China and Other Countries of Concern

What You Need to Know

• Key takeaway #1 Specific Guardrails Subject to Negotiation: The Final Rule indicates that more of the national security guardrails will be negotiated with the recipient, creating the opportunity for project specific agreements.
• Key takeaway #2 Broader than the EAR: The CHIPS Act national security guardrails have some overlap with U.S. export controls, but are still distinct and meant to be broader and more expansive. Compliance with both will be required.
• Key takeaway #3 Final Rule Narrows Application to Fewer Affiliates Under Common Control: Commerce removed a prior requirement that these controls apply to all affiliates under common control with the funding recipient. The new Expansion Clawback standard is narrower, but still wide-ranging, while the Technology Clawback standard is amorphous. Parent entities should take stock to determine if any of their subsidiaries or branches are accepting funding and how it might impact sister companies.

After publishing a proposed rule in March 2023 on how it will implement the national security guardrails for the CHIPS and Science Act of 2022 (“CHIPS Act”) (the “Proposed Rule”), which all funding recipients are required to follow, the U.S. Department of Commerce (“Commerce”) published the corresponding final rule, (the “Final Rule”). The Final Rule will come into effect on November 24, 2023.

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For more information, contact: Jana del-Cerro, Jeremy Iloulian

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USTR Further Extends Section 301 Tariff Exclusions to Allow More Time for Four-Year Review

The Office of the United States Trade Representative (“USTR”) announced on September 6, 2023 the further extension of 352 reinstated exclusions and 77 COVID-related exclusions from the Section 301 tariffs on imports from China. These exclusions, which cover a variety of products ranging from machinery components to medical equipment, constitute the only remaining active exclusions following the lapse of all other exclusions back in December 2020. The remaining active exclusions were originally set to expire on September 30, 2023; however, the new deadline of December 31, 2023 will allow additional time for USTR to complete its statutorily mandated four-year review process.

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For more information, contact: John Brew, Sam Boone, Tori Auerhan

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New Section 232 Exclusion Proposed Rules Will Force Additional Burden of Proof on Importers and Domestic Producers

On August 28, 2023, the U.S. Commerce Department’s Bureau of Industry and Security (“BIS”) proposed new rules to streamline and strengthen the Section 232 Exclusions Process for Steel and Aluminum imports.

The proposed rules will build on the five existing interim final rules and respond to public comments received by BIS since February 2022. BIS is proposing these revisions almost a month after the U.S. Government Accountability Office (“GAO”) released a report calling for increased enforcement on Section 232 Exclusions.

The rules seek to make four primary changes:

1. Modifies the existing certification language and introducing new certification requirements for exclusion requests relating to finding alternate suppliers from certain U.S. allies;
2. Requires similar certification language on the objection form to further ensure objectors can supply comparable quality and quantity steel or aluminum;
3. Proposes a more efficient General Approved Exclusions (“GAE”) process by changing the criteria; and
4. Introduces a “General Denied Exclusions” (“GDE”) process to limit further exclusions on products which have consistently been found to be manufactured in the United States. The public can submit comments on these regulations until October 12, 2023.

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For more information, contact: John Brew, Sam Boone

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U.S. Department of Commerce Releases Text from IPEF Agreement on Supply Chains

On September 7, 2023, the U.S. Department of Commerce released the text of the Indo-Pacific Economic Framework for Prosperity (IPEF) Supply Chain Agreement three days before a U.S. delegation is set to travel to Bangkok, Thailand for the fifth negotiating round. In this round, IPEF partners will focus on Pillars I (Trade), III (Clean Economy), and IV (Fair Economy). The fifth negotiating round comes after previous negotiating rounds in Australia, Indonesia, Singapore, and South Korea, a special negotiating round in India, and a ministerial meeting in Michigan to announce the conclusion of negotiations on Pillar II (Supply Chains).

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For more information, contact: John Brew, Jackson Pai, Patricia Wu, Kate Beale, Neda Shaheen

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How to Meet the New Notification Obligations Under the EU Foreign Subsidies Regulation

What You Need to Know

• Key takeaway #1 As of October 12, 2023, companies active in the EU have to notify foreign financial contributions (FFCs) received from third countries to the Commission, when they engage in large M&A transactions or participate in high-value public procurements. Pending the Commission’s review of such notifications, a standstill obligation applies.
• Key takeaway #2 While the focus of the Commission’s substantive review will be on those subsidies deemed most likely to distort the internal market, companies need to consider all of the (broadly defined) FFCs they have received to calculate whether they meet the notification thresholds.
• Key takeaway #3 Companies active in the EU need to assess their notification risks and update their internal reporting and data management systems to continuously identify, track and categorize any FFCs received from third countries.

As from October 2023, companies receiving financial contributions from third countries will have to report these to the European Commission when engaging in M&A transactions or bidding for public contracts above certain thresholds. This alert guides you through the new notification obligations under the EU Foreign Subsidies Regulation (FSR): first, we situate these obligations within the overall set-up of the FSR; then we go into the detail of the notification obligations themselves; before concluding with practical advice on how to meet these new obligations.

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For more information, contact: Karel Bourgeois, Karl Stas, Benjamin Geisel

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Crowell Congratulates

Crowell & Moring’s Caroline Brown Elected as Member of the Council on Foreign Relations

• Crowell & Moring partner Caroline E. Brownhas been elected as a member of the Council on Foreign Relations. Brown joins the ranks of leaders in the foreign policy arena who are CFR members, including top government officials, scholars, business executives, journalists, prominent lawyers, and nonprofit leaders.

Latinvex Names Nicole Janigian Simionian and Lisa Henneberry to Latin America’s Top 100 Female Lawyers 2023

• Latinvexnamed Nicole Janigian Simonian and Lisa G. Henneberry to its list of Latin America's Top 100 Female Lawyers for 2023. Henneberry was honored in the Energy category and Simonian was honored in the Trade & Sanctions category. This is the fourth consecutive year that Simonian has received this honor.

Crowell & Moring congratulates associate Jeremy Iloulian on the birth of his son, Levi Louis Iloulian.

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Crowell Speaks

Emerging Trends in Sanctions and Export Enforcement: Takeaways for Responding to Enforcement Actions, and Informal Regulator Outreach – ACI/C5 New York Forum on Economic Sanctions (Dec 14, 2023). Moderator: Jason Prince.

Special Guest Speaker for the inaugural meeting of the American Bankers Association’s Sanctions Working Group (Oct 18, 2023). Speaker: Jason Prince.

Global Sourcing and National Security: Special Considerations for Government Contractors – Government Contracts 101 Back to Basics (Oct 10, 2023). Participants: Addie Cliffe and Jana del-Cerro.

Export Controls and Sanctions - 2023 WITA Academy Virtual Intensive Trade Seminar (Oct 2, 2023). Participant: Jason Prince.

Examine Contracts for Chinese Anti-Foreign Sanctions Law Liability, Lawyer Says
October 4, 2023 – Export Compliance Daily
Related Professionals: Michael K. Atkinson, Evan Y. Chuck

Fireside Chat and Q&A: Compliance, Enforcement and Career Paths in Government - 1^stAnnual Women in AML & Sanctions Forum (Sep 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 (Sep 28, 2023). Speaker: Nicole Succar.

How U.S. Companies Should Think About China’s Counterespionage Law and Other Actions Taken in Response to U.S. Restrictions – Webinar (Sep 26, 2023). Participants: Michael K. Atkinson, Caroline E. Brown, Evan Y. Chuck.

OFAC Risk Management and Enforcement - Association of Certified Sanctions Specialists New York Chapter (Sep 14, 2023). Speaker: Nicole Succar.

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

Russian Criminal Enterprises: Protecting Your Network from Unwelcome Guests – Executive Decisions with a Legal Lens & ACC NYC Annual Meeting (Sep 12, 2023. Participant: Neda Shaheen.

US authorities seize Iranian oil traded in violation of sanctions
September 12, 2023 – Global Investigations Review
Related Professionals: Jason Prince

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

The Buck Stops Here: Further Roadblocks to U.S. Investment in China Ahead?
September 8, 2023 – OC Lawyer
Related Professionals: Caroline E. Brown, Evan Y. Chuck