Following the United States House Select Committee on Strategic Competition between the United States and the Chinese Communist Party (“Chinese Select Committee”) request in January calling for a strengthened enforcement of the UFLPA, DHS adds 26 new entities to the UFLPA entity list.

The United States Department of Homeland Security (“DHS”) announced today the addition of 26 Chinese firms to the Uyghur Forced Labor Prevention Act (“UFLPA”) Entity List for allegedly sourcing cotton from the Xinjiang Uyghur Autonomous Region (“XUAR”). Among the parties added to the Entity List are several warehousing and logistics providers.

While public pressure coupled with demands from Congress calls for stricter enforcement and expansion of scope for the UFLPA, the addition of new entities demonstrates that cotton remains an area of high priority despite recent enforcement actions targeting other industries.

These new Entity List additions are notable inasmuch as they largely comprise firms involved in the storage and trade of cotton products from the XUAR, sending a clear signal that DHS is taking more serious enforcement against firms attempting to circumvent U.S. forced labor regulations and those parties facilitating the evasion of forced labor laws.

Crowell & Moring, LLP continues to monitor developments in the forced labor prevention space and their potential impact on customers and businesses going forward.

This week, President Biden has directed the United States Trade Representative (“USTR”) to take further action against Chinese unfair trading practices following the release of the statutory four-year review of Section 301 tariffs against the People’s Republic of China (“PRC”). Per Biden’s direction, Ambassador Katherine Tai announced that she will be proposing modifications to existing China tariffs under Section 301, while also maintaining existing tariffs on certain goods. Among the proposed modifications to Section 301 tariffs are the addition of tariffs for certain chemicals and machinery, as well as increases to certain products as seen in the chart below. The proposed tariff additions and modifications would cover an additional $18 billion worth of goods, bringing the total amount of China-origin goods covered by Section 301 to around $370 billion.

ProductActionGoes into effect:
Battery parts (non-lithium-ion batteries)      Increase rate to 25%2024
Electric vehicles        Increase rate to 100%2024
Facemasks      Increase rate to 25%2024
Lithium-ion electrical vehicle batteries         Increase rate to 25%2024
Lithium-ion non-electrical vehicle batteriesIncrease rate to 25%2026
Medical gloves           Increase rate to 25%2026
Natural graphiteIncrease rate to 25%2026
Other critical mineralsIncrease rate to 25%2024
Permanent magnetsIncrease rate to 25%2026
Semiconductors         Increase rate to 50%2025
Ship to shore cranes   Increase rate to 25%2024
Solar cells (whether or not assembled into modules)Increase rate to 50%2024
Steel and aluminum productsIncrease rate to 25%2024
Syringes and needles             Increase rate to 50%2024

In addition to these new tariffs, the USTR report recommends the establishment of an exclusion process for certain products, such as manufacturing equipment—particularly solar manufacturing equipment—though it fails to address exclusions currently in place for certain medical and non-medical products, which are set to expire at the end of May.

The USTR will issue a Federal Register notice next week to announce procedures for interested parties to comment on the proposed modifications, as well as to request information concerning the new exclusion process for machinery used in domestic manufacturing.

Finally, the report advocates for more funding to U.S. Customs and Border Patrol (“CBP”) to enhance the agency’s enforcement capacity with regard to Section 301 actions.

Crowell & Moring, LLP continues to monitor developments in the customs and trade remedies space and their potential impact on customers and businesses going forward.

On Tuesday, the U.S. Department of Commerce Bureau of Industry and Security’s Office of Antiboycott Compliance (OAC) issued an advisory regarding the Turkish government’s announcement that it will “suspend all exports and imports to and from Israel until the Israeli government allows an uninterrupted and sufficient flow of humanitarian aid into Gaza.”

The OAC advisory highlights that U.S. anti-boycott laws and regulations prohibit “U.S. persons” from “taking certain actions in furtherance or support of an unsanctioned foreign boycott maintained by a country against a country friendly to the United States and require reporting of receipt of a boycott-related request to BIS,” and that companies operating in in Türkiye or doing business with companies there should be aware of “any requests to refrain from importing or exporting goods to or from Israel or to provide certification that the goods are not of Israeli origin or do not contain Israeli-origin components or materials.”

In this context, U.S. persons can include U.S. entities and their non-U.S. subsidiaries, partnerships, affiliates, branches, offices, or other permanent foreign establishments. Therefore, U.S. entities and those with a U.S. parent should be mindful of this OAC update when considering transactions in Turkey, particularly of any new requests they receive from Turkish customers or counterparties related to Turkey’s announcement.

On Thursday, May 9, 2024, the U.S. Department of Commerce Bureau of Industry and Security (BIS) added 37 Chinese entities to the Entity List. Among them were technology companies (predominately those tied to quantum computing), manufacturing firms, and research institutions. No person may export, reexport, or transfer any items subject to the Export Administrative Regulation (EAR) to these persons without a license.   BIS will review any license requests from these entities with a presumption of denial.

BIS designated these parties because they: (i) shipped U.S. controlled items to Russia, (ii) attempted to acquire controlled items to aid China’s military or quantum technologies capabilities, or (iii) had ties to, or were involved with, China’s “High Altitude Balloon” that overflew the United States in February 2023. These additions are part of the U.S.’s broad strategy to impede both China’s access to critical and emerging technologies (CET) and deter support for Russia’s invasion of Ukraine. Last week the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued new sanctions on Chinese (and other) entities supporting Russia’s invasion of Ukraine.

If you have any questions about the recent additions to the BIS Entity List, contact Crowell’s International Trade Team.

In this session, hosts and International Trade Practice Leaders Nicole Simonian and Dj Wolff talk with Crowell lawyers Jeremy Iloulian and Laurel Saito about the significant new sanctions and export control authorities included in the recently enacted National Security Supplemental fiscal package. While this legislation is best known for providing U.S. foreign aid commitments for Ukraine, Israel, and Taiwan, it also contains critical trade related provisions that (i) expand the statute of limitations for U.S. sanctions violations; (ii) give the President new authorities to coordinate sanction efforts with the US and UK; (iii) expand sanctions and export controls on Iran (with some targeting Chinese financial institutions); and (iv) provide for new sanctions authorities targeting terror groups. | PodBean | SoundCloud | Apple Podcasts 

On Wednesday, May 1, 2024, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced that it issued new sanctions on nearly 200 entities and individuals for supporting Russia’s invasion of Ukraine, intensifying U.S. efforts to thwart Russia’s attempts to circumvent Western sanctions. The list includes more than a dozen of companies located in China and Hong Kong, as well as entities located in Russia, Azerbaijan, Belgium, Slovakia, Tukey and the United Arab Emirates (UAE).  In addition to OFAC’s sanctions, the Department of State is imposing sanctions on over 80 entities and individuals that are engaged in sanctions evasion or are related to Russia’s chemical and biological weapons programs and military industrial base. 

These designations are reflective of OFAC’s efforts to impose secondary sanctions to deter non-U.S. parties from supporting Russia and its invasion of Ukraine.

OFAC also announced the issuance of three new General Licenses. These include General License 95, “Authorizing Civil Aviation Safety and Wind Down Transactions Involving Limited Liability Company Aviakompaniya Pobeda,” a Russian state-owned airline; General License 96, “Authorizing Limited Safety and Environmental Transactions Involving Certain Blocked Persons or Vessels,”; and General License 97, “Authorizing the Wind Down of Transactions Involving Certain Entities Blocked on May 1, 2024.”

The latest U.S. foreign aid bill supporting Ukraine, Israel, and Taiwan enacted on April 24, 2024 enhances U.S. sanctions and export controls including expanding (1) the statute of limitations for sanctions violations; (2) the President’s authority to coordinate sanctions efforts with the European Union and the United Kingdom; (3) sanctions and export controls on Iran (including some targeted at Chinese financial institutions); and (4) new sanctions authorities targeting terror groups. 

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On May 1, 2024, the Department of State’s Directorate of Defense Trade Controls (DDTC) published a proposed rule that, if implemented, would streamline defense trade between and among Australia, the United Kingdom (UK), and the United States in furtherance of the trilateral security partnership (the “AUKUS” partnership).

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On May 1, 2024, the UK’s financial sanctions regulator – the Office of Financial Sanctions Implementation (“OFSI”) – launched a new Frequently Asked Quesstion service, setting out consolidated responses to frequently asked questions about UK financial sanctions. 

Russia is the key focus, with FAQs dedicated to the UK’s asset freezing sanctions, other financial prohibitions, and the Russian Oil Services Ban (which OFSI is responsible for).  There is also a short section on Libya, information on general licenses, a summary of key definitions (e.g., what would constitute “dealing” with the funds or economic resources of a sanctioned person), and details about how UK sanctions apply in British Crown Dependencies and Overseas Territories. 

The FAQs do not cover trade sanctions, which are currently overseen by the Export Control Joint Unit until the launch of the Office of Trade Sanctions Implementation (“OTSI”) expected sometime this year. 

The FAQs are intended to be supplementary to, and not a replacement for, OFSI’s primary guidance. Indeed, much of the substance of the FAQs is located in other forms of OFSI guidance. 

Nonetheless, by grouping information together in an easily accessible format, OFSI is offering another avenue to assist industry and the public on how to navigate and interpret its often complex sanctions regimes. Crucially, the launch of the FAQs brings the UK in line with the United States and the European Union, which both maintain detailed FAQs about the operation of their Russia sanctions regimes.

OFSI has stated that it will release new FAQs on an as-needed basis. OFSI notes that it will not generally accept individual requests for new FAQs; however, it would look to publish FAQs if they benefit a significant portion of industry or the public. OFSI’s engagement team will work closely with industry and the public to identify specific issues where additional guidance may be of benefit.  

This approach underscores the importance of filtering any questions that companies may have about unclear elements of the UK’s sanctions regime to OFSI through industry groups and other representative bodies, with OFSI now having a clearer means through which to respond to the public in a practical manner. 

Read the press release on OFSI’s website here and the link to the FAQs is here.

The European Parliament today voted overwhelmingly in favor of adopting a regulation banning all products made with forced labor from the European Union, with 555 votes in favor, 6 votes against, and 45 abstentions. The approval comes a little over a month after the Parliament and the European Council reached a deal on a draft text of the proposed regulation, which grants the European Commission the authority to investigate “suspicious goods, supply chains, and manufacturers” originating outside of the EU for the possible use of forced labor. All cases internal to the EU will be handled by the competent authority of the respective Member State or States. In all cases, products determined to have been made using forced labor will be banned from the Single Market, and all incoming shipments will be intercepted at the EU’s borders. Additionally, the Commission is tasked with issuing guidance to Member States on the implementation of “effective, proportionate, and dissuasive” penalties in the form of fines and possible criminal charges for non-compliant firms. The proposed regulation also directs the Commission to establish a publicly-available database to catalogue forced labor risks by sector.

Following its approval by the Parliament, the regulation now moves to the Council for formal approval. Once the Council approves the text, the Regulation will enter into force, after which EU Member States will have three years to implement the law. You can find the Parliament’s announcement here. As stated by the Executive Vice President Dombrovskis, “The main change brought by the agreed text compared with the initial Commission proposal concerns the governance mechanism, which will result in the Commission taking on the large majority of cases.” Although many argue that the diluted legislation has lost significant enforcement effectiveness, the Forced labor ban should be considered in collaboration with the EU Corporate Sustainable Due Diligence Directive (CSDDD/CS3D) which includes reporting requirements specific to supply chain transparency. The European parliament’s plenary vote on April 24th saw the CS3D successfully being approved into law.

While the push to regulate goods entering and exiting the EU market will give EU member states three years to implement the law, companies should start thinking about proactively adopting global due diligence measures. Setting up an EU program approach to combatting forced labor will most likely see US based companies build on top of existing programs. Additional internal controls should be incorporated to address both upstream and downstream due diligence, but most importantly, assessing risk should include comprehensive human rights risk beyond forced labor. Crowell will be issuing a follow up update on the CSDDD later this month and is currently working on proactive guidance for importers and exporters operating in the US, UK and EU markets.

Crowell continues to monitor developments in anti-forced labor space and their potential impact on businesses and consumers moving forward.