Customs and Border Protection (CBP) released new guidance following the announcement of new 200% tariffs on Russian aluminum.  CBP’s guidance outlines new reporting requirements for all imports of aluminum and aluminum derivative products, regardless of the country of origin.

The new reporting requirements follow the issuance of Presidential Proclamation 10522.  Under Proclamation 10522, any imports of aluminum articles or aluminum derivative articles that are produced in Russia, or produced in any other country using any amount of primary aluminum that is smelted or cast in Russia are subject to a 200 percent ad valorem duty, effective as of March 10, 2023 and April 10, 2023, respectively.

CBP specifies in its guidance that the following aluminum articles and derivative aluminum articles are subject to Proclamation 10522, and subject to the new smelt and cast reporting requirements:

  • Aluminum articles:
    • Unwrought aluminum provided for in heading 7601:
    • Bars, rods and profiles provided for in heading 7604; wire provided for in heading 7605;
    • Plates, sheets and strip provided for in heading 7606; foil provided for in heading 7607;
    • Tubes, pipes and tube or pipe fittings provided for in heading 7608 and 7609;
    • Castings and forgings of aluminum provided for in subheading 7616.99.51.
  • Aluminum derivative articles:
    • Stranded wire, cables, plaited bands and the like, including slings and similar articles, of aluminum and with steel core, not electrically insulated; the foregoing fitted with fittings or made up into articles (described in subheading 7614.10.50);
    • Stranded wire, cables, plaited bands and the like, including slings and similar articles, of aluminum and not with steel core, not electrically insulated; the foregoing comprising electrical conductors, not fitted with fittings or made up into articles (described in subheading 7614.90.20);
    • Stranded wire, cables, plaited bands and the like, including slings and similar articles, of aluminum and not with steel core, not electrically insulated; the foregoing not comprising electrical conductors, not fitted with fittings or made up into articles (described in subheading 7614.90.40);
    • Stranded wire, cables, plaited bands and the like, including slings and similar articles, of aluminum and not with steel core, not electrically insulated; the foregoing fitted with fittings or made up into articles (described in subheading 7614.90.50);
    • Bumper stampings of aluminum, the foregoing comprising parts and accessories of the motor vehicles of heading 8701 to 8705 (described in subheading 8708.10.30); and
    • Body stampings of aluminum, for tractors suitable for agricultural use (described in subheading 8708.29.21).

Reporting smelt and cast countries will take effect regarding goods entered for consumption, or withdrawn from warehousing for consumption, on or subsequent to 12:01 a.m., eastern daylight time on April 10, 2023.  Smelt and cast reporting requirements may also apply to goods withdrawn from a Foreign Trade Zone (FTZ) for consumption, on or after 12:01 a.m. eastern daylight time on April 10, 2023.  Regardless of Section 232 duties, quotas, exclusions, or general approved exclusion applicability, all importers of aluminum and aluminum derivative articles of all countries of origin must report the following information upon entry of summary:

  • Primary Country of Smelt: This field requires the reporting of the country where the largest volume of new aluminum metal is produced from alumina (or aluminum oxide) by the electrolytic Hall-Héroult Process.
  • Secondary Country of Smelt: If Russia is not the country reported as the primary country of smelt, and if any primary aluminum used in the manufacture of the product was smelted in Russia, this field requires the reporting of the ISO code for Russia as the secondary country of smelt.  Note that products of the United States are not covered by the countries of smelt and cast reporting requirements and until further notice, for products of the United States, filers may report “N/A” for the countries of smelt, and United States for country of cast.
  • Country of Cast: This field requires the reporting of the country where the aluminum, with or without alloying elements, was last liquified by heat and cast into a solid state. The final solid state can take the form of either a semi-finished product, such as slap, billets or ingots, or a finished aluminum product.  Note that products of the United States are not covered by the countries of smelt and cast reporting requirements and until further notice, the products of the United States, filers may report “N/A” for the countries of smelt, and United States for country of cast.

On February 24, 2023, the United States and other G7 nations announced a number of new sanctions and export control measures coinciding with the one-year mark of Russia’s military invasion of Ukraine. Shortly after these expansive sanctions and export controls were announced, the Departments of Justice (“DOJ”), the Treasury (“Treasury”), and Commerce (“Commerce”) issued their first-ever joint guidance regarding a planned crack-down by these agencies on sanctions and export controls evasion related to Russia in concert with DOJ’s sweeping announcements of a renewed focus on corporate compliance with sanctions and export controls.

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This client alert summarizes the Administration’s ongoing trade priorities and summarize trade activities in the past year based on the Biden Administration’s 2023 Trade Policy Agenda and 2022 Annual Report, which was issued on March 1, 2023.

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New proclamations published to the U.S. Federal Register will bring additional tariffs on Russian metals (including a 200% tariff on aluminum), minerals, and chemicals imported into the United States.

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Global Trade Talks is a podcast that shares brief perspectives on key global issues on international trade, current events, business, law, and public policy as they impact our lives. In this podcast, hosts Nicole Simonian and Ambassador Robert Holleyman talk to Jason Prince, a Crowell & Moring Partner and immediate-past Chief Counsel to OFAC , about what it was like to be at the eye of the sanctions hurricane following Russia’s full-scale invasion of Ukraine, what to expect in the Russia-related sanctions arena in 2023, and steps that companies should be taking now to mitigate the risks of potential future China-related sanctions.

Listen: Crowell.com | PodBean | SoundCloud | Apple Podcasts

On February 28, 2023, the Commerce Department released the first Notice of Funding Opportunity (“First NOFO”) under the recently enacted CHIPS and Science Act (CHIPS Act), P.L. 117-167.  The First NOFO seeks applications for assistance—including direct funding, loans, and loan guarantees—for projects to construct, expand, or modernize commercial semiconductor facilities.  

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In Island Industries Inc. v. Sigma Corp., the Ninth Circuit is set to address whether federal district courts have subject matter jurisdiction over customs fraud cases in actions initiated under the qui tam provisions of the False Claims Act (“FCA”). The FCA allows private parties (“relators”) to file suits on behalf of the government so that the Department of Justice (“DOJ”) can investigate the claims and decide whether to intervene in the action. 

FCA cases have historically involved actions brought against procurement and healthcare companies, but in recent years, there has been a significant rise in the number of cases brought against U.S. importers.  For example, in January, the U.S. Attorney’s Office for the Southern District of New York announced that an importer of vitamins and nutritional supplements paid $22.8 million to settle allegations that the company misclassified its products under the Harmonized Tariff Schedule in order to avoid paying customs duties.  The relator in that case, a former employee of the importer, received a relator’s share of $4.5 million for whistleblowing.

While importers have long faced the risk of an enforcement action to collect duties, importers must now contend with the possibility of getting sued under the FCA by internal whistleblowers or competitors. In Island Industries, the relator was a domestic manufacturer of pipe fittings and alleged that its competitor, Sigma Corp., was making false statements to avoid paying duties owed in connection with a 182.9% anti-dumping duty order for piping imported from China.  The trial court held Sigma Co. had violated the FCA and was liable for more than $24 million in damages and penalties.  Sigma subsequently appealed and asked the Ninth Circuit to reverse the judgment.

Although the question of subject matter jurisdiction was not raised on appeal, a judge on the panel raised the issue during oral arguments and inquired whether the district court had subject matter jurisdiction over the suit.  The uncertainty around this issue stems from the Ninth Circuit’s earlier decision in U.S. v. Universal Fruits and Vegetables Corp., where the Ninth Circuit held that an FCA action brought by the government based on an importer’s use of fraud to evade antidumping duties fell within the exclusive jurisdiction of the CIT because the action was “commenced by the United States[] … to recover customs duties.”  U.S. v. Universal Fruits and Vegetables Corp. 370 F.3d 829 (9th Cir. 2004); 28 U.S.C. § 1582(3).  However, after the case was transferred, the CIT concluded that it did not have jurisdiction over the suit because an FCA suit does not seek to recover customs duties, but rather imposes liability in the form of damages and penalties for a defendant’s fraud on the government.  See U.S. v. Universal Fruits & Vegetables Corp., 433 F. Supp. 2d 1351 (Ct. Int’l Trade 2006).  The issue of FCA jurisdiction has not come before the CIT since the 2006 Universal Fruits decision.  

In the nearly twenty years since the Ninth Circuit’s decision in Universal Fruits, relators and the DOJ have largely side-stepped this precedent by drawing a distinction between cases brought directly by the government and those cases initiated by qui tam relators.  To date, district courts have agreed with relators and the DOJ that a case brought under the qui tam provision is not “commenced by the United States” and courts have consistently held that such actions do not fall within the CIT’s exclusive jurisdiction under § 1582.  See, e.g., U.S. ex rel. Huangyan Imp. & Exp. Corp. v. Nature’s Farm Prods., Inc., 370 F. Supp. 2d 993, 997-98 (N.D. Cal. 2005).  This reasoning has allowed qui tam relators to continue to file suit in courts within the Ninth Circuit.

This distinction between government-initiated cases and qui tam actions is now the subject of scrutiny in Island Industries.  Following oral arguments, the court invited the parties to submit supplemental briefing on the question of whether the district court had subject matter jurisdiction over the qui tam suit.  As of February 21, the parties have submitted supplemental briefing with the DOJ noting that the court would “effectively create a customs-related exception to the FCA within this circuit” if the court were to extend Universal Fruits to actions initiated by qui tam relators.  Such a ruling could have a ripple effect in other jurisdictions across the country making the Ninth Circuit’s forthcoming opinion a case worth watching for importers in the Ninth Circuit and beyond.   

On Friday, the U.S. Department of Commerce Bureau of Industry and Security (BIS) issued its latest set of export controls in response to Russia’s invasion of Ukraine. The broadest expansion of U.S. export controls on Russia since last fall, Friday’s actions are separate and distinct from the new sanctions regulations imposed by the U.S. Department of the Treasury Office of Foreign Assets Controls (OFAC). Both sets of controls are in coordination with the United States’ allies, resulting in the United Kingdom and Australia imposing their own controls, and the European Union’s control expected soon.

For companies still directly or indirectly dealing with Russia, robust rescreening compliance programs are essential to confirm that third parties with whom the company deals, and items proposed for export to Russia, are not caught by the new rules. This includes analyzing third parties in China that are likely to resell to Russia. The rule does include one notable benefit for U.S. companies, BIS has implemented measures to expedite the process of exiting from Russia.

A summary follows of major components of the new export controls:  

  • Entity List Designations: BIS designated 79 Russian entities, five Chinese entities, two Canadian entities, one French entity, one Luxembourg entity, and one Netherlands entity on the Entity List. All exports, reexports, and transfers to these persons of items subject to the EAR now require a license.
  • Russia/Belarus Military End User FDP Rule: BIS also confirmed that the Russia/Belarus military end user foreign direct product rule applies to 66 (of the 79) Russian entities.
  • Iran Foreign Direct Product Rule & Drone Restrictions: BIS created a new list of items identified by HTS listed in a new Supplement No. 7 to 15 C.F.R. § 746, comprised of items that are parts and components related to unmanned aerial vehicles (UAVs) that Iran has used in the drones it sells to Russia. Additionally, BIS created the Iran Foreign Direct Product Rule which applies to items listed in Supp. No. 7 or are in Categories 3, 4, 5, or 7 of the Commerce Control List, and that are the direct product of certain U.S. origin technology or software. BIS also modified the Russia/Belarus foreign direct product rules to include items listed in Supp. No. 7.
  • Expansion of Russian/Belarussian Unconventional Oil and Gas Export Controls: BIS updated the list of parts controlled for export, reexport, or transfer to unconventional Russian/Belarussian oil and gas exploration and production to identify the items controlled using the HTS Code (as opposed to the Schedule B) and to note that items not listed by HTS code, but that are parts, components, accessories, or attachments (that are not minor, e.g., screws and bolts) for an item listed via HTS code, are also controlled.
  • Expansion of Listed Items Controlled for Export to Russia and Belarus: BIS identified over 500 new items to include in Supplement Nos. 4, 5, and 6 to 15 C.F.R. § 746 that are now prohibited for export, reexport, or transfer to Russia. The items identified in Supplement No. 6 are also subject to the Russia/Belarus foreign direct product rules
  • Taiwan Exemption: BIS added Taiwan to the list of the countries exempt from the Russia/Belarus regular and military end user foreign direct product rules, as well as certain of the de minimis requirements.
  • Exiting Russia: Significantly, BIS changed its licensing posture for companies exiting Russia and will review license requests to dispose of items on a case-by-case basis (as opposed to the previous policy of denial), thereby potentially easing the licensing process for companies’ exiting from Russia. However, OFAC clarified in FAQ 1118 that any “exit tax” that Russia may impose on U.S. persons could require a license from OFAC if it is paid to Russian sanctioned persons.

Last week the U.S. Department of Justice (“DOJ”) and U.S. Department of Commerce announced a new Disruptive Technology Strike Force (the “DIS-TECH Strike Force”). The Strike Force will bring together experts throughout government – including the Federal Bureau of Investigation (“FBI”), Homeland Security Investigations (“HSI”), and 14 U.S. Attorneys’ Offices in 12 metropolitan regions across the country – to target illicit actors, strengthen supply chains, and protect critical technological assets from being acquired or used by nation-state adversaries. The Strike Force will be co-led by DOJ’s National Security Division (“NSD”) and the Commerce Department’s Bureau of Industry and Security (“BIS”).

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Register Now

This March please join Crowell’s International Trade team for two webinar events. These 1-hour, CLE virtual events will cover the Russian invasion of Ukraine and what that means for companies, one year later, and discuss the current state of human rights and forced labor regulations in the U.S. and EU. More information about these two webinars can be found below. 

We hope you can join!

March 7th – 1:00 PM ET
Russia One Year Later: Lessons Learned, Lingering Risks, and 2023 Predictions

One year after the Russian invasion of Ukraine led to an unprecedented ramp up in coordinated economic sanctions from the United States, United Kingdom, EU, and their allies, our panel of sanctions practitioners from both sides of the Atlantic will examine their impact on how companies are planning for 2023.  What are the risks for companies continuing to do business, or wind-down, in Russia?  How might the crisis escalate and what could that mean for companies both inside and outside of Russia?  Where will the regulators’ place their enforcement priorities, including perspectives from OFAC’s most recent Chief Counsel.  And, what lessons can we draw from the last 12 months that inform companies’ broader compliance and risk management approaches as they look to 2023 and thereafter.

Presenters: Carlton Greene, Michelle Linderman, Jason Prince, Anand Sithian & Nicole Succar

March 21st – 1:00 PM ET
Compliant on Forced Labor? Prove It! | A Practical Guide on Preventing Forced Labor in Your Supply Chain and Responding to U.S. Customs Actions

Crowell & Moring International Trade attorneys will discuss the current state of human rights and forced labor regulations in the U.S. and EU. We will examine the myriad of challenges in this evolving regulatory environment and provide practical advice on: 

  • Identifying high-risk sectors
  • Navigating China’s Antiforeign Sanctions Law
  • Applying the requirements to a real-world case study
  • Interacting with U.S. Customs and Border Protection

Presenters: John Brew, Evan Chuck, Carolyn Krampitz, Laurel Saito, David Stepp & Simeon Yerokun