Brexit was once the topic of every conversation in the United Kingdom (U.K.), but, overshadowed by the COVID-19 pandemic, it’s not something we hear as much about these days.

The U.K. left the European Union (EU) on January 31, 2020 (bringing to an end 47 years of British membership of the EU and the institutions that preceded it) under the terms of the Withdrawal Agreement, an agreement struck by London and Brussels in October 2019. However, during the standstill post-Brexit transition period, most of the arrangements that were valid during the U.K.’s EU membership have been kept in place. As a result, and until the transition period expires on December 31, 2020, the U.K. must continue to comply with all EU rules and laws which include the rules on freedom of movement, cross border travel and personal rights. This means that up until now virtually nothing has changed for businesses or for the public.

However, the end of the transition period is in sight, and it will bring significant changes regardless of whether or not an agreement is reached on future trading and other relations. The U.K. and EU have both now ruled out any extension to the Brexit transition period so – barring the unlikeliest of U-turns over the next couple of weeks – we now know that a new post-Brexit landscape will take effect on January 1, 2021.

For more on planning for global mobility in a Post-Brexit world, please click here.

In ruling NY N313570 (Aug 21, 2020), Customs and Border Protection (CBP) discussed the classification of a cleaning pad from China. It is described as the inShield Wiper®, a dusting pad consisting of a 1.75 centimeter thick sponge covered with an 80% polyester and 20 % polyamide microfiber fabric.  It incorporates two woven elastic straps that loop around the assembled duster for the user to place their hand under when in use. A layer of neoprene is glued under the woven elastic straps that provides a cushion for the palm of the users hand when in use.

The assembled duster measures approximately 12 x 17 centimeters and is designed to be used to wipe away haze, fingerprints, smudges, smears and dust off of interior windshields, electronic touchscreens, stainless steel appliances, glass and mirrors.

As stated in the ruling, the item is considered by CBP as composite goods made of textile and plastic. GRI 3 provides for classification of composite goods.  GRI 3(b) provides that composite goods made up of different components shall be classified as if they consisted of the component which gives them their essential character.  CBP believes the microfiber fabric provides the essential character of the article since it provides the wiper’s cleaning surface.

CBP determined that the applicable subheading for the inShield Wiper is 6307.10.2030, HTSUS, which provides for “Other made up articles, including dress patterns:  Floorcloths, dishcloths, dusters and similar cleaning cloths:  Other:  Other.”  The rate of duty will be 5.3 percent ad valorem.

Pursuant to U.S. Note 20 to Subchapter III, Chapter 99, HTSUS, products of China classified under subheading 6307.10.2030, HTSUS, unless specifically excluded, are subject to an additional 7.5 % ad valorem rate of duty.  At the time of importation, the Chapter 99 subheading, 9903.88.15, in addition to subheading 6307.10.2030, HTSUS, must be reported.

In a press release issued August 20, 2020, the Bureau of Industry and Security (BIS) announced a final order imposing a fine of over $31 million against Singapore based Nordic Maritime Pte. Ltd. (“Nordic”) and its Chairman, Morten Innhaug (“Innhaug”).

Nordic was found to have violated the Export Administration Regulations (EAR) by using U.S. origin subsea survey equipment, installed on a vessel chartered by Nordic, in Iranian territorial waters. A previous vessel operator had installed the equipment on the vessel pursuant to a BIS reexport license. After Nordic chartered the vessel, the previous operator sent Nordic a cease and desist letter informing them of the terms of the BIS reexport license and warned against use of the equipment in Iranian waters.

BIS determined that Nordic and Innhaug ignored the letter and instead used the controlled equipment to perform a 3D offshore seismic survey for an Iranian power plant management company in Iranian territorial waters without previous authorization from either BIS or Treasury’s Office of Foreign Assets Control (OFAC). Nordic was found to have committed three violations when it illegally reexported the equipment to Iran, including acting with knowledge of the violations, and making false and misleading statements to BIS during the investigation.  Innhaug was found to have aided and abetted Nordic in violating the regulations. BIS previously issued a 15-year denial order against both Nordic and Innhaug.

In ruling NY N313534 (August 18, 2020), Customs and Border Protection (CBP) discussed the classification of the LifeSmart-TrueWash, described as an Ozone and ultraviolet (UV) sterilizer.  The device measures approximately 14 inches wide, 14 inches high and 16 inches deep and is meant to be placed on a user’s kitchen counter or table.  The device includes a digital control panel, water reservoir, UV light source, and internal basket.  The sterilizer is meant to clean and sanitize a wide variety of items including fruits and vegetables, baby bottles, plastic containers, and small personal electronics, by killing 99.9% of germs and bacteria.

The ruing states that in use, the user will place the desired item to be sterilized or sanitized within the basket in the machine. From the control panel, the necessary cleaning cycle is then selected that corresponds with the item. For some items, such as food and everyday plastic items, the unit will first spray the items with activated Ozone that is generated from the water contained within the reservoir.  These cleaning cycles require the user to pour 4 cups of water into the reservoir. The UV lamp is then turned on to further sanitize and sterilize the items.  Some preset cleaning functions, such as those designated for personal electronics, do not spray with Ozone, but only sterilize with UV light. The basket within the sanitizer spins to dry the sterilized goods.

CBP determined that the applicable subheading for the LifeSmary-TrueWash sterilizer will be 8543.70.9960, HTSUS, which provides for “Electrical machines and apparatus, having individual functions, not specified or included elsewhere in this chapter; Other machines and apparatus; …Other.”  The general rate of duty will be 2.6 percent ad valorem.

Pursuant to U.S. Note 20 to Subchapter III, Chapter 99, HTSUS, CBP states that products of China classified under subheading 8543.70.9960, HTSUS, unless specifically excluded, are subject to an additional 25 percent ad valorem rate of duty.  At the time of importation, the Chapter 99 subheading, 9903.88.02, in addition to subheading 8543.70.9960, HTSUS, must be reported.

In ruling NY N313554 (August 4, 2020), Customs and Border Protection (CBP) discussed the classification of a Bluetooth-enabled speaker. The item is the Drips Wireless Speaker, which incorporates a single 3 watt speaker and microphone.  It is compatible with any Bluetooth-enabled device, such as a smartphone.  It can answer/reject incoming telephone calls, redial the last number dialed and incorporates a talking caller ID.  It also incorporates a 3.5 mm auxiliary input jack used to connect the speaker to an audio source using an audio cable. This speaker is powered by a 500 mAh USB rechargeable lithium-ion battery.

CBP determined that the applicable subheading for the speaker is 8518.21.0000, HTSUS, which provides for “Microphones and stands therefor; loudspeakers, whether or not mounted in their enclosures…: Loudspeakers, whether or not mounted in their enclosures: Single loudspeakers, mounted in their enclosures.”  The rate of duty will be Free.

Pursuant to U.S. Note 20 to Subchapter III, Chapter 99, HTSUS, CBP stated that products of China classified under subheading 8518.21.0000, HTSUS, unless specifically excluded, are subject to an additional 7.5 percent ad valorem rate of duty.  At the time of importation, the Chapter 99 subheading, 9903.88.15, in addition to subheading 8518.21.0000, HTSUS, must be reported.

In ruling NY N313219 (July 29, 2020), Customs and Border Protection (CBP) discussed the classification of the SNAPXT Thermal Scanner. It consists of an infrared thermometer connected to a programmable 8-inch touch screen. The device also encompasses a RGB dual-lens color camera and infrared camera for facial recognition, LED lights for increased visibility of the user and capable of reading NFC, RFID, BLE & QR codes for scanning the user’s identification badge. In regards to temperature measurement, it can measure temperature from a distance of approximately 50 to 70 cm, with an accuracy of ±0.3°C(±0.54°F), and a range of 15-45°C (59-113°F). The infrared thermometer temperature reading is displayed on the LCD screen near the picture of the user. If specifically programmed, the SNAPXT Thermal Scanner can also provide entry into a building if the user has an acceptable temperature as well as the ability to send alerts via email for tracking and security purposes.

Goods that are facially classifiable under two or more headings, are classifiable in accordance with GRI 3. GRI 3(a) states that the heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings refers to only part of the machine then those headings are to be regarded as equally specific in relation to the function of the machine. As per Note 3 to Section XVI, composite machines consisting of two or more machines fitted together or machines designed for the purpose of performing two or more complementary or alternative functions are to be classified as if consisting only of that component which performs the principal function. In this instance, CBP stated that the principal function cannot be determined. According to General Explanatory Note (VI) to Section XVI, when it is not possible to determine the principal function of the machine as provided for in Note 3 to Section XVI, and when the context does not otherwise require, it is necessary to apply GRI 3(c). Thus, CBP classified the SNAPXT Thermal Scanner under the subheading occurring last in numerical order among those which equally merit consideration. In this instance, the temperature reading component falls within heading 9025.

 

CBP determined that the applicable subheading for the SNAPXT Thermal Scanner is 9025.19.8010, HTSUS, which provides for “Hydrometers and similar floating instruments, thermometers, pyrometers, barometers, hygrometers and psychrometers, recording or not, and any combination of these instruments; parts and accessories thereof: Thermometers and pyrometers, not combined with other instruments: Other: Other: Clinical: Infrared thermometers of a kind described in statistical note 2 of this chapter.” The rate of duty is free.

 

Pursuant to U.S. Note 20 to Subchapter III, Chapter 99, HTSUS, products of China are classified under subheading 9025.19.8010, HTSUS, unless specifically excluded, and are subject to an additional 25 percent ad valorem rate of duty. At the time of importation, the Chapter 99 subheading, 9903.88.02, in addition to subheading 9025.19.8010, HTSUS, must be reported.

 

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 see below:

Tariff Item Description (note 1)
2606.00.00 Aluminum ores and concentrates
2620.40.00 Slag, ash and residues, containing mainly aluminum
2818.20.00 Aluminum oxide
2818.30.00 Aluminum hydroxide
2826.12.00 Fluorides of aluminum
2827.32.00 Other chlorides of aluminum
2833.22.00 Other sulphates of aluminum
3212.90.00 Pigments used in manufactures of paints and dyes
3815.19.00 Reaction initiators, reaction accelerators and catalytic preparations, other
7601.10.00 Unwrought aluminum, not alloyed
7601.20.00 Unwrought aluminum, aluminum alloys
7602.00.00 Aluminum waste and scrap
7603.10.00 Aluminum powders of non-lamellar structure
7603.20.00 Aluminum powders of lamellar structure; aluminum flakes
7604.10.00 Aluminum bars, rods and profiles, not alloyed
7604.21.00 Hollow profiles, of aluminum alloys
7604.29.00 Aluminum bars, rods and profiles, of aluminum alloys, other
7605.11.00 Aluminum wire, not alloyed, of which the maximum cross-sectional dimension exceeds 7 mm
7605.19.00 Aluminum wire, not alloyed, other
7605.21.00 Aluminum wire, of aluminum alloys, of which the maximum cross-sectional dimension exceeds 7 mm
7605.29.00 Aluminum wire, of aluminum alloys, other
7606.11.00 Aluminum plates, sheets and strip, of a thickness exceeding 0.2 mm, rectangular (square), not alloyed
7606.12.00 Aluminum plates, sheets and strip, of a thickness exceeding 0.2 mm, rectangular (square), of aluminum alloys
7606.91.00 Aluminum plates, sheets and strip, of a thickness exceeding 0.2 mm, other, not alloyed
7606.92.00 Aluminum plates, sheets and strip, of a thickness exceeding 0.2 mm, other, of aluminum alloys
7607.11.00 Aluminum foil, not backed, rolled but not further worked
7607.19.00 Aluminum foil, not backed, other
7607.20.00 Aluminum foil, backed
7608.10.00 Aluminum tubes and pipes, not alloyed
7608.20.00 Aluminum tubes and pipes, of aluminum alloys
7609.00.00 Aluminum tube or pipe fittings
7610.10.00 Aluminum doors, windows and their frames and thresholds for doors
7610.90.10 Aluminum structures and parts of structures; aluminum plates, rods, profiles, tubes and the like, prepared for use in structures, other than doors, windows and their frames and thresholds for doors, for use in Canadian manufactures
7610.90.90 Aluminum structures and parts of structures; aluminum plates, rods, profiles, tubes and the like, prepared for use in structures, other than doors, windows and their frames and thresholds for doors, other
7611.00.00 Aluminum reservoirs, tanks, vats and similar containers, for any material (other than compressed or liquefied gas), of a capacity exceeding 300 litres, whether or not lined or heat-insulated, but not fitted with mechanical or thermal equipment
7612.10.00 Aluminum collapsible tubular containers
7612.90.10 Aluminum aerosol containers, excluding three-piece cans without inserts having a base diameter of 50 mm or more but not exceeding 80 mm
7612.90.91 Embossed aluminum cans for use in the packaging of beverages
7612.90.99 Aluminum casks, drums, cans, boxes and similar containers, for any material (other than compressed or liquefied gas), of a capacity not exceeding 300 litres, whether or not lined or heat-insulated, but not fitted with mechanical or thermal equipment, other
7613.00.00 Aluminum containers for compressed or liquefied gas
7614.10.00 Stranded wire, cables, plaited bands and the like, of aluminum, not electrically insulated, with steel core
7614.90.00 Stranded wire, cables, plaited bands and the like, of aluminum, not electrically insulated, other
7615.10.00 Aluminum table, kitchen or other household articles and parts thereof; aluminum pot scourers and scouring or polishing pads, gloves and the like
7615.20.00 Aluminum sanitary ware and parts thereof
7616.10.00 Aluminum nails, tacks, staples (other than those of heading 83.05), screws, bolts, nuts, screw hooks, rivets, cotters, cotter-pins, washers and similar articles
7616.91.00 Cloth, grill, netting and fencing, of aluminum wire
7616.99.10 Articles of aluminum: Cups for use in the manufacture of candles; Ferrules for use in the manufacture of pencils; Fish egg incubators and parts thereof; For climbing or mountaineering; Identification bands for migratory birds; Pigeon countermark leg bands; To be employed in the manufacture of sera, antisera, toxoids, viruses, toxins or antitoxins, virus or bacterial vaccines, bacteriophage or bacterial lysates, allergenics, liver extracts, pituitary extracts, epinephrine or its solutions, insulin (with or without zinc, globin or protamine), and blood plasma or serum of human origin, or fractions thereof, or extenders or substitutes thereof
7616.99.90 Other articles of aluminum, other
8418.21.00 Refrigerators, household type, compression type
8418.29.00 Refrigerators, household type, other
8450.11.10 Household washing machines, not including machines which both wash and dry, of a dry linen capacity not exceeding 10 kg, fully-automatic
8450.11.90 Household or laundry-type washing machines, including machines which both wash and dry, of a dry linen capacity not exceeding 10 kg, fully-automatic, other
8450.12.00 Household or laundry-type washing machines, including machines which both wash and dry, of a dry linen capacity not exceeding 10 kg, with built-in centrifugal dryer
8450.19.00 Household or laundry-type washing machines, including machines which both wash and dry, of a dry linen capacity not exceeding 10 kg, other
8450.20.00 Household or laundry-type washing machines, including machines which both wash and dry, of a dry linen capacity exceeding 10 kg
8532.22.00 Other fixed capacitators, aluminum electrolytic
8712.00.00 Bicycles and other cycles
8714.91.10 Frame lugs, bottom bracket shells, forks, fork tubing sets, fork bearing assemblies, hydraulic shock absorbing cylinders, spring shock absorbers, rear pivots, cable stops, cable guides and back, chain and seat stays
8714.91.90 Other frames and forks, and parts thereof
8714.92.00 Wheel rims and spokes of vehicles of headings 87.11 to 87.13, other than bicycle wheels
8714.99.10 Bicycle wheels
8716.39.10 Aluminum construction drop-centre livestock trailers having a g.v.w. of 11.778 tonnes or more and a length exceeding 12 m
9403.10.00 Metal furniture of a kind used in offices
9403.20.00 Other metal furniture
9406.90.90 Prefabricated buildings, other than of wood
9506.31.00 Golf clubs, complete
9506.99.00 Articles for sports and general physical exercise (e.g., bats, hockey sticks, playground equipment)
9620.00.93 Monopods, bipods, tripods of aluminum
Note 1: Descriptions are included for illustrative purposes and do not necessarily reflect Customs Tariff nomenclature.

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.

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.

The EOs, which mirror one another in several instances, do not declare a new national emergency but rather base the prohibitions on the same national emergency declared with respect to the information and communications technology and services supply chain as pronounced in Executive Order 13873 (Securing the Information and Communications Technology and Services Supply Chain).  The EOs note “the spread in the United States of mobile applications developed and owned by companies in the People’s Republic of China (China) continues to threaten the national security, foreign policy, and economy of the United States” and single out TikTok and WeChat as being of particular concern.

Specifically, the EO addressing the mobile video app TikTok states that it “automatically captures vast swaths of information from its users, including Internet and other network activity information such as location data and browsing and search histories.”  Such collection, according to the EO, could contribute to China’s ability to access Americans’ personal and proprietary information, potentially track locations of Federal employees and contractors, build dossiers for blackmail and enable corporate espionage on U.S. companies.  Another concern cited by the EO is reported censorship by TikTok of “content that the Chinese Communist Party deems politically sensitive, such as content concerning protests in Hong Kong and China’s treatment of Uyghurs and other Muslim minorities” and its potential use in disinformation campaigns.

The EO targeting the messaging, social media and electronic payment app WeChat includes in the description of risks its ability, like that of TikTok, to capture information from its users that “threatens to allow the Chinese Communist Party access to Americans’ personal and proprietary information”, to censor content deemed politically sensitive, and its potential use for disinformation campaigns.  The EO adds that WeChat captures information on Chinese nationals visiting the United States.  It does not identify potential risks to Federal employees and contractors, presumably because WeChat has less current adoption in the United States than TikTok.

Most notably, the TikTok EO prohibits transactions by any U.S. person with TikTok’s parent company, ByteDance Ltd. (ByteDance) or its subsidiaries, and not TikTok itself.  By contrast, the WeChat EO specifically prohibits transactions “related to WeChat” with Tencent Holdings, Ltd. (Tencent), the parent company.  That the TikTok EO does not use the same language in the prohibition to bar transactions “related to TikTok” seems to suggest a path forward for TikTok if it’s no longer affiliated with ByteDance.  The scope of the WeChat order leaves some ambiguity, so its remains for the Commerce Secretary to define whether the EO extends to other transactions with Tencent or its subsidiaries.  Tencent has ownership stakes in several U.S. companies other than WeChat, especially in the video gaming industry.  Accordingly, using the WeChat EO as grounds for prohibiting transactions with other companies or apps backed by Tencent could have far-reaching effects.  While there has been a suggestion made by White House officials that the EO is only targeted at transactions specifically involving WeChat and the language may be interpreted as such, the order itself doesn’t explicitly limit its coverage to that.

Neither EO defines the “transactions” subject to the EOs nor do they immediately prohibit any transactions with ByteDance or Tencent.  Instead, the EOs direct the Secretary of Commerce to “identify the transactions” subject to the prohibition by September 20, 2020.  This should include a delineation of the scope of the WeChat order.  A provision in the EOs explicitly provides that any transaction designed to evade or avoid the prohibition is also prohibited.

Commentary

For months, the fate of TikTok has hinged on review of ByteDance’s acquisition of Musical.ly by the Committee on Foreign Investment in the United States (CFIUS).  Although ByteDance acquired Musical.ly in 2017, and rebranded it to TikTok, it failed to file a notice with CFIUS.  Following Congressional pressure, CFIUS began review of the “non-notified” transaction in November 2019.  Although Musical.ly, like its parent ByteDance, was a Chinese company, CFIUS is authorized to review those transactions where foreign acquisition of “U.S. entities” – interpreted to include those with a substantial U.S. presence – may pose a threat to U.S. national security.  Recent public reporting suggests that TikTok is in discussions with a potential U.S. acquirer following CFIUS review.  If ByteDance divests its ownership interests in TikTok before September 20 – the date that the EOs go into effect – the EO will not affect TikTok’s operations.  While the EO is plainly targeted at TikTok, it prohibits transactions only with ByteDance and not TikTok itself, so ByteDance’s divestiture of TikTok would position TikTok beyond the scope of the order.  The EO would still apply to other transactions with ByteDance or its subsidiaries.

Conversely, WeChat does not seem to have a similar exit to avoid becoming subject to the EO.  While a smaller number of U.S. persons use WeChat, the app services a large swath of payments and e-commerce for U.S. businesses in China and could substantially affect their operations there should they be cut off from the app.  Similarly, many U.S. businesses operating within the United States and other U.S. persons rely on the messaging app to communicate with counterparts in China.  Depending on how the EO is implemented, that line of communication could no longer be an open pathway after September 20, 2020.

Protecting the Information and Communications Technology and Services Supply Chain

These EOs are the latest in a series of actions designed to protect the information and communications technology and services supply chain, including the expanded use of export controls to limit Huawei Technologies Co., Ltd.’s ability to produce or develop products using certain U.S. software and technology, and Section 889 of the 2019 National Defense Authorization Act, which prohibits the federal government from entering into a contract with any entity that uses “covered telecommunications equipment or services.”

Both EOs are predicated on Executive Order 13873 issued last May, “Securing the Information and Communications Technology and Services (ICTS) Supply Chain.”  That order directed the Secretary of Commerce to promulgate regulations to prohibit transactions involving components produced by “foreign adversaries” that pose risks to U.S. national security.  Pursuant to the ICTS Executive Order, the Commerce Department proposed regulations on November 27, 2019, that adopt a case-by-case framework through which Commerce can review information and communications technology and services that have connections to a “foreign adversary” and determine whether certain transactions are prohibited or must be mitigated due to national security concerns.

Separately, CFIUS has long since been focused on the extent that information can be collected in vast quantities and the corresponding ability for foreign intelligence to manipulate that information.  Recent legislation modernizing CFIUS, the Foreign Investment Risk Review Modernization Act (FIRRMA), explicitly extends to foreign investors’ access to personally identifying information (PII) of U.S. citizens, making it clear that CFIUS will continue to scrutinize foreign acquisition of U.S. businesses that collect or maintain sensitive PII of U.S. citizens.  Indeed, CFIUS has forced divestiture of U.S. businesses where the collection of sensitive information was at issue, as was the case with GrindR.

Similar in some ways to CFIUS, Team Telecom, the interagency national security review body that reviews certain licensing applications referred to it by the Federal Communications Commission (FCC) for national security and law enforcement concerns, recently recommended in June that the FCC deny an application by Pacific Light Cable Network (PLCN) and backed by Facebook and Google for a submarine cable system that would have directly connected mainland U.S. and Hong Kong. Team Telecom raised concerns about PLCN’s Chinese owners and their relationship with China’s intelligence and security services.  Team Telecom has previously recommended that the FCC take action with respect to other Chinese-owned telecoms.

The Executive Orders also come on the heels of two other developments last week: the U.S. Senate’s unanimous vote to approve a bill prohibiting Federal workers from using TikTok on government-issued devices and the Secretary of State’s announcement to expand the Clean Network Program in an effort to protect the nation’s critical telecommunications and technology infrastructure.  Taken together, these developments signal an all tools approach to curb the perceived threat to national security presented by vulnerabilities in ICTS infrastructure and supply chain.

Conclusion

Should ByteDance divest its ownership interest of TikTok, the effect of the Executive Order on TikTok’s operations is ultimately nullified.  It should be noted, however, that CFIUS retains its authority to review any acquisition of TikTok, and any such acquisition would necessarily need to ameliorate any national security concerns of the committee.  This argues in favor of acquisition of TikTok’s U.S. assets by a U.S. entity.

The date by which a deal is rumored to be struck, September 15, should be on the radar for those with interests in TikTok.  Should any acquisition fall through, TikTok would be subject to the EO when it goes into effect five days later on September 20, 2020.  Because the TikTok EO targets transactions with ByteDance, other transactions involving ByteDance could remain subject to the order notwithstanding whether TikTok is still owned by ByteDance.

The EO regarding WeChat is potentially further reaching as the scope of the order could extend to investment relationships and business dealings with companies in China.  At stake could also be the payments and e-commerce platform that many U.S. companies use to access the Chinese market.  Depending on how it’s implemented, many could find their communication connections severed and ability to do business hindered.  Finally, a separate question left open is whether the Administration will use these EOs as templates for similar action against other Chinese-owned companies and apps in an effort to further protect the ICTS supply chain.

In ruling NY N313010 (July 22, 2020), Customs and Border Protection (CBP) discussed the classification of the AquaFusion Water Filter.

General Rule of Interpretation (GRI) 1, HTSUS, states in part that for legal purposes, classification shall be determined according to the terms of the headings, any relative section or chapter notes and, unless otherwise required, according to the remaining GRI’s taken in order. Goods that are, prima facie, classifiable under two or more headings, are classifiable in accordance with GRI 3, HTSUS. CBP stated that the articles are put up in a manner suitable for sale directly to users without repacking. Therefore, the item in question is within the term “goods put up in sets for retail sale.” GRI 3(b) states in part that goods put up in sets for retail sale, which cannot be classified by reference to GRI 3(a), are to be classified as if they consisted of the component that gives them their essential character. In this case, CBP found that the essential character of the AquaFusion is filtering component. The item’s primary function is to filter water with an auxiliary or secondary feature of mixing the flavor in the end. Without the filter function, the machine will not work but not vice versa. Water filters are more specifically provided for elsewhere.

CBP determined that the applicable subheading for the AquaFusion will be 8421.21.0000, HTSUS, which provides for “Centrifuges, including centrifugal dryers; filtering or purifying machinery and apparatus, for liquids or gases; parts thereof: Filtering or purifying machinery and apparatus for liquids: For filtering or purifying water.”  The general rate of duty is Free.

Pursuant to U.S. Note 20 to Subchapter III, Chapter 99, HTSUS, products of China classified under subheading 8421.21.0000, HTSUS, unless specifically excluded, are subject to an additional 25 percent ad valorem rate of duty.  At the time of importation, the Chapter 99 subheading, 9903.88.01, in addition to subheading 8421.21.0000, HTSUS, must be reported.