On July 19, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued Venezuela General License 5.

General License 5 authorizes U.S. persons to engage in all transactions related to, the provision of financing for, and other dealings in the Petróleos de Venezuela SA 2020 8.5 Percent Bond that would be prohibited by Subsection 1(a)(iii) of  Executive Order 13835 of May 21, 2018 (“Prohibiting Certain Additional Transactions With Respect to Venezuela”) (E.O. 13835). In practice, General License 5 expands the previously issued General License No.3. by adding a new bond to the list of previously authorized bonds.

OFAC also published two new Frequently Asked Questions (FAQs).One explains why OFAC is issuing General License 5. The other answers the question of whether E.O. 13835 prohibits a U.S. person with a legal judgment against the Government of Venezuela from attaching and executing against Venezuelan government assets.

 

 

 

On July 16, 2018, the Court of Federal Claims released a far-reaching decision in Acetris Health, LLC v. United States, concluding that a drug could qualify as a “U.S.-made end product” under the Trade Agreements clause, FAR 52.225-5, despite a Customs and Border Protection (CBP) ruling under the Trade Agreements Act (TAA), that the drug had not been “substantially transformed” in the United States, the usual test for whether a product from a designated country is eligible for sale to the United States under the TAA. The court concluded that a drug which met the definition of a “domestic end product” would also qualify as a “U.S.-made end product” and enjoined the Department of Veterans Affairs from relying on the CPB ruling in declaring the product ineligible. In doing so, the court has given effect to often overlooked language in the FAR 25.003 definition of “U.S.-made end product” that allows either an item manufactured in the United States or an item substantially transformed in the United States to be eligible for sale to the federal government. The decision opens the door for manufactured COTS items to be eligible under the TAA as long as final assembly occurs in the United States, without regard to the source of a COTS product’s components. It might even have broader implications because the FAR has never included an express definition of “manufacture,” and the definition of “U.S. made end product” does not expressly reference the definition of “domestic end product,” under which, in the Buy American context, “manufacture” is just one of two elements for determining eligibility.

On July 10, 2018, U.S. Trade Representative (USTR) Robert Lighthizer announced that at President Trump’s request, USTR has initiated the process of imposing an additional 10 percent ad valorem duty on approximately $200 billion worth of imports from China.

The USTR statement included a link to an advance copy of the Federal Register Notice with the list of proposed tariffs and the process for the public notice and comment period.

This is the formal publication in the Federal Register of this notice.

For more information on the proposed tariffs and the process for the public notice and comment period, please see our previous article.

 

 

In a July 13, 2018 press release, the Commerce Department announced it had lifted the denial order on Zhongxing Telecommunications Equipment Corporation, of Shenzhen, China (ZTE Corporation) and ZTE Kangxun Telecommunications Ltd. of Hi-New Shenzhen, China (ZTE Kangxun) (collectively, ZTE). Commerce took this action shortly after ZTE deposited $400 million in escrow at a U.S. bank to provide a form of security that ZTE will comply with its continuing obligations under the June 2018 superseding settlement agreement. The funds in escrow are in addition to the $1 billion paid to the U.S. Treasury last month.

According to the press release, the $1.4 billion paid under the 2018 settlement agreement is in addition to the $892 million in penalties ZTE paid to the U.S government under the original March 2017 settlement agreement. That agreement included a suspended denial order against the company, which the Bureau of Industry and Security (BIS) had activated on April 15, 2018.

The 2018 settlement agreement requires ZTE to retain a team of special compliance coordinators selected by and answerable to BIS for a period of 10 years. The June 2018 agreement again imposed a denial order that is suspended, this time for 10 years, and BIS can activate it in the event of additional violations during the ten-year probationary period. Pursuant to the 2018 agreement, ZTE has also replaced the entire board of directors and senior leadership for both entities.

 

On Monday, July 16, 2018, the Commerce Department will post a notice in the Federal Register cancelling one of the days of the two-day public hearing associated with the investigation the Department is conducting to determine whether imports of automobiles, including cars, SUVs, vans and light trucks, and automotive parts threaten to impair the national security and to recommend remedies if such a threat is found to exist.

The hearing was originally scheduled for July 19 and 20. The Department received 45 requests to testify, which can all be accommodated on a single day. Therefore, the second day of the hearing originally scheduled for July 20 is cancelled.

The hearing will be held on July 19 only and will begin at 8:30 am and will end at 5:30 pm. The location of the hearing remains unchanged.

 

 

 

 

On July 11, 2018, the United States Trade Representative (USTR) opened the docket for China 301 Product Exclusion Requests on regulations.gov. The Docket ID is USTR-2018-0025.

The docket includes USTR’s ‘China 301 Product Exclusion Form’.

In its July 11 Federal Register Notice describing the procedures to use for product exclusion requests, USTR states, “To assist in review of requests for exclusion, USTR has prepared a request form that will be posted on the USTR website under ‘‘Enforcement/Section 301 investigations’’ and on the www.regulations.gov docket in the ‘‘supporting documents’’ section. USTR strongly encourages interested persons to use the form to submit requests.”

The Section 301 exclusion form is more simplified than the earlier Section 232 exclusion form. Interested parties can still submit supporting documents in addition to the form, and there is no page limit to the submission

As a reminder, this product exclusion request process only applies to those goods subject to the ad valorem duty of 25 percent on products from China classified in the 818 subheadings of the Harmonized Tariff Schedule of the United States (HTSUS) set out in Annex A of the June 20, 2018, Federal Register Notice. Note that Annex B to the notice contains the same list of tariff subheadings, with unofficial descriptions of the types of products covered in each subheading.

For more information on key dates and submission guidelines for China Section 301 Product Exclusion Requests, please click here for Crowell’s post discussing the specifics of the notice

 

 

On July 10, 2018, U.S. Trade Representative (USTR) Robert Lighthizer announced that at President Trump’s request, USTR has initiated the process of imposing an additional 10 percent ad valorem duty on approximately $200 billion worth of imports from China including apparel, textiles, chemicals, and agricultural & aquacultural goods.

The USTR statement includes a link to an advance copy of the Federal Register Notice with the list of proposed tariffs and the process for the public notice and comment period. The notice will be published in the Federal Register later this week.

This is the third round of additional tariffs proposed by the Trump administration as a result of its Section 301 investigation into China’s alleged unfair trade practices related to “the forced transfer of American technology and intellectual property.”

The notice indicated the USTR will maintain the first round of tariffs on $34 billion worth of goods implemented on July 6, and will continue with a second round of proposed tariffs on $16 billion worth of goods. This second list is currently under review in a public notice and comment process, with a public hearing scheduled for July 24, 2018.

The Harmonized Tariff Schedule of the United States (HTSUS) subheadings of the products subject to the proposed tariffs is listed in the Annex (pages 11-205) to the notice.

The notice also included a list of key dates for a public notice, comment, and hearing process:

  • July 27, 2018: Due date for filing requests to appear and a summary of expected testimony at the public hearing, and for filing pre-hearing submissions.
  • August 17, 2018: Due date for submission of written comments.
  • August 20-23, 2018: The Section 301 Committee will convene a public hearing in the main hearing room of the U.S. International Trade Commission, 500 E Street SW, Washington, DC 20436 beginning at 9:30 am.
  • August 30, 2018: Due date for submission of post-hearing rebuttal comments.

 

 

Section 301 For covered products in List 1, please click here. 25% 7/6/2018
For covered products in List 2, please click here. TBD TBD
For covered products in List 3, please click here and see Annex 10% TBD
Status: List 1 totaling $34 billion worth of imports is composed of 818 tariff lines, and went into effect on 7/6/2018.

 

List 2 totaling $16 billion worth of imports is composed of 284 proposed tariff lines identified by the interagency Section 301 Committee. These are in a public review process.

 

List 3 includes a list of tariff lines of products from China with an annual trade value totaling approximately $200 billion. These are also subject to a public review process.

On July 11, 2018, the United States Trade Representative (USTR) published a notice in the Federal Register explaining the procedures and criteria related to requests for product exclusions from the additional tariffs placed on goods from China on July 6.

USTR must receive requests to exclude a particular product by October 9, 2018. Per the notice, a docket will be opened on regulations.gov for the receipt of exclusion requests in docket number USTR–2018–0025.

Responses to a request for exclusion of a particular product are due 14 days after the request is posted.

Any replies to responses to an exclusion request are due 7 days after the close of the 14 day response period.

On July 6, 2018, USTR issued an intial press release with a link to an advance copy of this Federal Register Notice.

For more details regarding this important announcement, please click here for Crowell’s July 8 post discussing the specifics of the notice.

 

 

 

 

 

 

In a notice published on June 20, 2018, the U.S. Trade Representative (USTR) announced the imposition of an additional ad valorem duty of 25 percent on products from China classified in the 818 subheadings of the Harmonized Tariff Schedule of the United States (HTSUS) set out in Annex A of the notice in response to China’s alleged acts, policies, and practices related to technology transfer, intellectual property, and innovation included. Note that Annex B to the notice contains the same list of tariff subheadings, with unofficial descriptions of the types of products covered in each subheading.

The additional duties on these products took effect on July 6, 2018.

The June 20 notice also announced that the USTR would establish a process by which U.S. stakeholders may request that particular products classified within a covered tariff subheading be excluded from the additional duties.

On July 6, 2018, USTR issued a press release with a link to the soon-to-be published Federal Register Notice which explains the procedures and criteria related to requests for product exclusions. A docket for the receipt of exclusion requests will be established on regulations.gov.

The notice will be published in the Federal Register sometime during the week of July 9, 2018.

A key piece of information for importers is that “[a]ny exclusion will be effective starting from the July 6, 2018 effective date of the additional duties, and extending for one year after the publication of the exclusion determination in the Federal Register. In other words, an exclusion, if granted, will apply retroactively to the July 6 date of the imposition of the additional duties. USTR will periodically announce decisions on pending requests.”

Key Dates

  • Interested parties will have 90 days to file a request for a product exclusion; and
  • The request period will end on October 9, 2018.

Rationale for Requested Product Exclusion

Each request should explain the following factors:

  • Whether the particular product is available only from China. In addressing this factor, requesters should address specifically whether the particular product and/or a comparable product is available from sources in the United States and/or in third countries;
  • Whether the imposition of additional duties on the particular product would cause severe economic harm to the requester or other U.S. interests; and
  • Whether the particular product is strategically important or related to “Made in China 2025” or other Chinese industrial programs.

Process Timeline

  • Following public posting of a request on Regulations.gov, the public will have 14 days to comment on a certain product exclusion request; and
  • After the close of the 14 day response period, interested persons will have an additional 7 days to reply to any responses received in support of or opposition to the request.

Highlights

The notice includes information on:

  • How to identify products in the exclusion request;
  • Submission Instructions – to include the submission of business confidential information; and
  • Document Format Instructions.

 

 

Check back here for the latest developments on all the on-going trade actions.

On July 5, 2018, U.S. Customs and Border Protection (CBP) hosted a teleconference to review Section 301 filings requirements, allow members of the trade community to seek clarifications and raise questions, and outline resources CBP has in place.

The first set of Section 301 tariff increases is effective on July 6, 2018.

This is the second round of tariff increases following the recent Section 232 tariffs on steel and aluminum. CBP is highly interested in hearing from the trade community to ensure effective implementation of the new 301 tariffs. If a business or importer has specific questions or concerns, CBP encourages them to contact the agency at traderemedy@cbp.dhs.gov.

CBP recommends monitoring the Federal Register and USTR website for the forthcoming exclusion process. This will be provided in a separate Federal Register Notice (FRN).

There is also a second list of 284 tariff lines covering approximately $16 billion of imports from China under consideration for implementation. These were identified by the interagency Section 301 group and are currently undergoing a public notice and comment process, including a public hearing.

On the call, CBP clarified that the 25% tariff is limited to goods with a country of origin (CoO) and NOT a country of export, of the People’s Republic of China (excluding Hong Kong and Macao).

Other highlights are included below:

  • Free Trade Zones (FTZ): Goods entering as privileged foreign (PF) before 12:01 AM on July 6 will not be subject to, or assessed, the new duties. The FRN specifies applicability to products admitted to FTZs on or after the effective date. The notice does not discuss PF status prior to the effective date. It was confirmed that the ACE system has been updated to reflect this.
  • Harmonized Tariff Schedule of the U.S. (HTSUS) Subheading 9903.88.10 should be active in system.
  • There are no quotas related to Section 301. The ACE quota module is not being used and is not tied to Section 301 products. Members of the trade community should not receive any quota messages unless the product is subject to an applicable quota, however, CBP does not believe that the over 800 HS codes subject to the 25% tariff are also subject to an applicable quota.
  • If Chapter 98 provisions are applied correctly from a compliance perspective, then the rates of duty imposed under Section 301 will not apply. Importers must follow the instructions and properly file claims for HTSUS Chapter 98 entries.
  • Importers must report if a product meets the requirements of Section 301 by using the correct HTSUS Subheading (i.e., 9903.88.10).
  • De Minimis: It was noted that if a product meets Section 301 requirements and is under the $800 threshold, the shipment should follow existing procedures.
  • CBP has indicated that they will, under a case-by-case review approach, grant leeway to members of the trade community experiencing some of the more complicated questions and/or complex technical matters raised on the call. CBP has asked parties to document questions, so that they can be responded to. For example, there are open FTZ questions, questions related to sets and kits where an import specialist may be able to assist and/or a ruling needs to be requested.

The CBP web page for Section 301 trade remedies against China may be found here.

CBP announced it is developing a Section 301 Frequently Asked Questions (FAQs) web page.