In ruling NY N319331 (June 3, 2021), Customs and Border Protection (CBP) discussed the classification of the electrically powered self-balancing hoverboard “Ninebot S-Max” and “Ninebot Gokart Pro” from China. The Gokart Pro is powered by 2 x 500 electric motors, can travel up to 15.5 miles on a single charge, and has various modes for speed—ranging from its “ECO mode” with a max speed of 5 mph to its “CORSA mode” with a max speed of 23 mph. The S-Max is a two-wheeled hoverboard, which serves as the go-cart’s rear drive motor.

The hoverboard may be detached and used independently from the go-cart body as a self-balancing hoverboard. The hoverboard can reach a maximum speed of 12.4 mph with an estimated range of 23.6 mph on a single charge. As noted in the ruling, “the Ninebot is powered by a lithium rechargeable battery. These two (2) items, designed to be connected and used together, form a composite good,” with the hoverboard establishing the essential character of the whole good.

CBP determined that the applicable subheading for both the Ninebot Gokart Pro and the Ninebot S-Max is 8711.60.0090, HTSUS, which provides for “Motorcycles (including mopeds) and cycles fitted with an auxiliary motor, with or without side-cars; side-cars: With electric motor for propulsion: Other.” The rate of duty is free.

Lastly, CBP also determined that “as the subject merchandise is equipped with side-by-side rather than inline wheels,” the Ninebot S-Max does not qualify for exclusion from additional Section 301 duties imposed by subheading 9903.88.02 per Note 20 (v) to Subchapter III, Chapter 99, HTSUS. The additional duty rate is 25% ad valorem. As such, the chapter subheading 9903.88.02 must be reported in addition to subheading 8711.60.0090.

On June 4, 2021, the European Commission (EC) issued its long-awaited updated standard contractual clauses (SCCs).  The publication of the SCCs is an important moment for the global business community because they allow companies to meet the requirements of the European General Data Protection Regulation (GDPR) when transferring personal data from the European Union (EU) to non-EU countries.

Introduction

As a reminder, the strict GDPR only allows personal data, i.e., all information related to an identified or identifiable living individual, such as employees or customers contact persons, to be transferred outside of the EU if the EC has decided that the receiving non-EU country, a territory or one or more specified sectors within that non-EU country, or an international organization ensures an “adequate” level of protection..

The EC has issued 12 such adequacy decisions so far. Japan is the subject of the most recent adequacy decision (January 2019), and a final decision on South Korea is expected soon. A decision is also expected soon for The United Kingdom, a former EU Member State, which at the end of this month will no longer be able to benefit from the grace period provided by the EU-UK Withdrawal Agreement for international transfers of personal data from the EU.

There have been two tailored adequacy mechanisms for the United States over the years: Safe Harbor and Privacy Shield, but both have been invalidated by respectively the Schrems I and Schrems II decisions of the Court of Justice of the European Union (CJEU).

In the absence of an adequacy decision, parties can implement so-called “appropriate safeguards,” which essentially means that a pre-approved data transfer mechanism is used to protect the personal data. Or, as the EU data protection regulators phrase it, to make sure that the protection of the data travels with the data wherever it goes.

Standard Contractual Clauses

One of the most commonly used “appropriate safeguards” are the SCCs, which are preapproved by the EC and therefore cannot be amended. The GDPR refers to them as “standard data protection clauses adopted by the Commission.”

Up until now, there were three sets of SCCs, two for controller-to-controller transfers adopted in 2001 and 2004 respectively, and another set for controller-to-processor transfers adopted in 2010. Moreover, those SCCs allowed for no flexibility, as each of them had to be used in its entirety.

This one-size-should-but-does-not-fit-all approach has changed with the updated SCCs. While the EC issued its final working document on June 4, 2021, the final, and thus official, version will be published in the Official Journal of the EU shortly, and the final working documents should generally track the final version of the SCCs.

Modernized Approach

The first major change is that the updated SCCs finally refer to the GDPR, which recently celebrated its third anniversary, rather than the outdated former data protection directive.

Second, there is one single, comprehensive set of SCCs instead of separate sets for controller-to-controller or controller-to-processor transfers.

Third, the new approach allows for much more flexibility. As was the case with previous versions of the SCCs, the SCCs cannot be modified, apart from adding or updating information in the annexes of the appendix, but the new SCCs adopt a modular approach where general clauses can be combined with specific clauses to tailor the agreement to the scenario at hand.

Furthermore, while the previous SCCs were drafted to be used between two parties, the new SCCs take a multi-party approach, with the possibility to opt-in by acceding to the SCCs by completing the SCCs’ appendix and signing their annex I.A. This allows the entire data processing chain to be covered, as the SCCs can now be used for onward transfers as long as the third party is, or agrees to be, bound by the SCCs. In other words, using the SCCs, personal data can be transferred from the EU to the party in a non-EU country, and then transferred again to another non-EU third party.

Challenges

As mentioned in the article that we published at the end of last year, while these changes may feel like a breath of fresh air when compared to the current version, and should certainly be considered an important improvement, these are arguably not significantly innovative changes from a European contract law point of view.

Furthermore, some additional obligations will certainly be challenging from an operational standpoint. For example, individuals (so-called “data subjects”) should always be informed about the identity of the data importer, which goes a step further than the current transparency obligations stemming from the GDPR, which impose an obligation to inform data subjects about the “categories” of recipients and “the fact” of an (intended) international data transfer.

Additionally, onward transfers are more strictly regulated. Barring a limited number of exceptions such as the consent of the data subject, onward transfers are only allowed to a party that is or agrees to be bound by the SCCs.

Schrems II

One of the key reasons that a draft version of the new SCCs was not published until the end of last year is that the EC was awaiting the Schrems II judgment addressing the legal v validity of SCCs as data transfer mechanism. The SCCs were upheld, but the CJEU ruled that supplementary measures were needed.

The new SCCs take the Schrems II judgment and the subsequent guidance from the European supervisory authorities into account, ensuring that there is no escaping their consequences. Among other obligations, the data importer and/or the data exporter have the following obligations under Section III of the new SCCs:

  • Mutual obligation to consider the laws of the data importer’s country: Both the data importer and the data exporter warrant that they have considered the laws and practices of the third country of destination – including those requiring the disclosure of data to public authorities or authorizing access by such authorities – relevant in light of the specific circumstances of the transfer, and the applicable limitations and safeguards. In this context, the new SCCs provide that the parties may consider relevant and documented practical experience of the data importer and the data exporter with prior instances of requests for disclosure from public authorities, or the absence of such requests. Such documented experience should cover a sufficiently representative time-frame as evidenced by internal records or other documentation, drawn up on a continuous basis in accordance with due diligence and certified at senior management level. The parties to the SCCs must document this assessment.
  • Data importer notification obligation of non-compliance due to laws or practices: The data importer must promptly notify the data exporter if it has reason to believe that it is or has become subject to laws or practices that make it unable for the data importer to comply with the SCCs.
  • Supplementary safeguards: To the extent the circumstances in the data importer’s country warrant, the data importer and the data exporter must implement supplementary contractual, technical or organizational safeguards including measures applied during transmission and to the processing of the personal data in the country of destination for purposes of mitigating risks associated with the transfer.
  • Data importer obligation relating to legally binding requests for personal data: The data importer must (i) notify the data exporter about the requests, including information about the personal data requested, the requesting authority, the legal basis for the request and the response provided; (ii) review the legality of requests for personal data; (iii) pursue an appeal; (iv) seek interim measures with a view to suspending the effects of the request until the competent judicial authority has decided on its merits; (v) not disclose the personal data requested until required to do so under the applicable procedural rules; and (vi) document all of the aforementioned efforts.
  • Data importer notification about “direct” access to personal data: This obligation is intended to cover government access, for example in connection with intelligence operations where no “request” for personal data as such is received by the data importer.
  • “Best efforts” to fight so-called gag orders: If an obligation to not disclose a request attaches to a government request for personal data, the data importer must engage in documented best efforts to obtain a waiver from such an obligation.

Subject to applicable legal limitations, the data importer and, where applicable, the data exporter must make all of the documentation relating to their compliance efforts   available to the supervisory authorities and/or the data exporter upon request. In other words, the SCCs will be part of the “GDPR accountability package” that regulators tend to ask for in case of an inspection and that should allow organizations to demonstrate, and regulators to review, compliance with the GDPR.

Government access to personal data was already a focus point of the Schrems II case, and it remains important in the context of the SCCs too, as the SCCs require the data importer to notify the data exporter “and, where possible, the data subject” in case of a request for or direct access by a public authority, including judicial authorities.

What Should A Company Do Now?

Many organizations have already started (re-)mapping their data transfers. In addition to creating policies, procedures, and other documentation relating to addressing Section III of the new SCCs, those that rely on the previous version(s) of the SCCs will have to adopt the new version within the next 15 months. This is three months longer than the 12 months foreseen in the draft decision, as the previous SCCs will only be repealed in three months, which might be helpful for parties that are currently in the process of signing the old SSCs (which, of course, also require the implementation of supplementary measures imposed by Schrems II).

In summary, the new SCCs provide a more workable instrument for international data transfers than the previous ones, but there is likely more work to be done. It will be “all hands on deck” in the privacy and legal departments of organizations around the world.

   

On June 2, 2021, United States Trade Representative (USTR) Katherine Tai announced the conclusion of the Section 301 Digital Services Taxes (DSTs) investigations on Austria, India, Italy, Spain, Turkey, and the United Kingdom. The investigation determined to impose additional tariffs of 25 percent on certain products from the six countries, as noted in the Notices of Action below:

Notably, USTR also determined to suspend the application of the additional duties for up to 180 days in order to provide more time to complete ongoing multilateral negotiations pertaining to international taxation issues through the OECD and G20 processes.

This decision comes a year after USTR first initiated investigations into DSTs in the six jurisdictions as well as four others—which included Brazil, the Czech Republic, the European Union, and Indonesia. In January 2021, USTR determined that the DSTs adopted by Austria, India, Italy, Spain, Turkey, and the United Kingdom both discriminated and burdened U.S. companies and were not in line with international taxation principles. Two months later in March 2021, USTR announced proposed trade actions in the six countries as well as the termination of the remaining four investigations in Brazil, the Czech Republic, the European Union, and Indonesia, where they were found to have not implemented the DSTs under consideration.

The Press Release is available here.

For more information on Section 301 investigations, contact our team and see previous posts below.

USTR Launches Section 301 Investigation Targeting Imports from Vietnam | International Trade Law (cmtradelaw.com)

USTR Launches 301 Investigations into Digital Services Taxes | International Trade Law (cmtradelaw.com)

On May 28, 2020, U.S. Customs and Border Protection (CBP) issued a Withhold Release Order (WRO) against Chinese fishing fleet Dalian Ocean Fishing Co., Ltd. (Dalian) on the basis of forced labor in the entity’s operations. The WRO against Dalian comes amid earlier WROs against other vessels in the distant water fishing industry—such as the Lien Yi Hsing No.12, the Da Wang, and the Yu Long No.2.  Notably, while these previous mandates targeted specific vessels, this is the first WRO to be issued against an entire fishing fleet. The WRO instructs CBP personnel at all U.S. ports of entry to detain all tuna, swordfish, and other seafood harvested by vessels operated or owned by Dalian.

CBP has indicated that Dalian Ocean Fishing Co., Ltd. is a major supplier to a seafood distributor. During a press briefing with Mr. Troy A. Miller, the Senior Official Performing the Duties of the Commissioner (SOPDOC) for CBP today (May 28), he indicated that this WRO also obviously covered downstream products from the fleet such as canned tuna and pet food.  Although the United States appears to be a lower priority market for Dalian, CBP data indicate that more than $2.9 million of the company’s seafood entered the United States between January 1, 2019 and April 30, 2021. This figure is broken down by calendar year in the table below.

 

Calendar Year Import Value
2019 $1,819,369
2020 $320,808
2021 (thru April 30) $763,115

 

The Agency’s Press Release identified all 11 indicators of forced labor, which include:

  • Physical Violence
  • Restriction of movement
  • Isolation
  • Intimidation and threats
  • Withholding of wages
  • Abusive living and working conditions
  • Abuse of vulnerability
  • Deception
  • Physical and sexual violence
  • Intimidation and threats
  • Excessive overtime.

WROs are issued by the U.S. government when information reasonably but not conclusively indicates goods were made in whole or in part using Forced Labor. Merchandise detained under a WRO order must be exported immediately or a substantial submission made that provides specific information showing that the goods were not made with forced labor. To obtain a release of any shipment that has been subjected to a WRO, a certificate of origin along with this detailed statement regarding the merchandise’s production and supply chain origin must be submitted to CBP. CBP makes a determination on a case-by-case basis.

The Press Release is available here.

For more information on actions addressing human rights and forced labor abuses, contact our team and see previous posts below.

https://www.cmtradelaw.com/category/forced-labor-uk-modern-slavery-act/

https://www.cmtradelaw.com/category/xinjiang/

On May 26, 2021, the United States Trade Representative (USTR) proposed new measures to address forced labor on fishing vessels as part of the World Trade Organization’s (WTO) agreement on curbing harmful fisheries subsidies. The negotiations, which began last year were delayed due to COVID-19. Negotiations restarted in April of 2021 with WTO Director-General Ngozi Okonjo-Iweala calling on members to reach an agreement by July 2021. The proposed amendments are outlined below and update the May 2021 negotiating text which has been publicly released.

  • Article 3.1: No Member shall grant or maintain any subsidy to a vessel [or operator] engaged in illegal, unreported and unregulated (IUU) fishing or fishing related activities in support of such fishing.
  • The following text is proposed for inclusion in any preamble to the agreement: Recognizing that effective disciplines on and greater transparency of fisheries subsidies can contribute to Members’ efforts to prevent and halt the use of forced labor on fishing vessels;
  • The following text is proposed for inclusion as a chapeau to Article 3 concerning IUU fishing: Members recognize that the use of forced labor on fishing vessels is often associated with IUU fishing, and therefore that effective disciplines on subsidies to vessels and operators engaged in IUU fishing or fishing related activities in support of such fishing can contribute to Members’ efforts to eradicate forced labor on fishing vessels.
  • The following text is therefore proposed for inclusion as Article 8.2(b):

8.2. Each Member shall notify the [Committee] in writing on an annual basis of:

(a) any list of vessels and operators that it has determined as having been engaged in IUU fishing; and

(b) any vessels and operators for which the Member has information that reasonably indicates the use of forced labor, along with relevant information to the extent possible; and

(c) a list of any fisheries access agreements in force with another government or governmental authority, and such notification shall consist of the titles of the agreements and a list of their parties.

For more information on actions addressing human rights and forced labor abuses, contact our team and see previous posts below.

https://www.cmtradelaw.com/category/forced-labor-uk-modern-slavery-act/

https://www.cmtradelaw.com/category/xinjiang/

In ruling NY N319346 (May 27, 2021), Customs and Border Protection (CBP) discussed the classification of the “Nano Spray Machine (Model CD-06)”, a battery powered, mechanical handheld disinfectant spray machine. As stated in the ruling, the device has a rechargeable built-in lithium battery, 400-milliliter plastic reservoir, AC 12v pump, and a spray nozzle. While in use, the reservoir is filled with a desired liquid solution. The ruling states that the user selects the spray level (low, middle, or high) and when the on/off button is moved to the on position, this activates the pump that moves the liquid solution from the reservoir and out through the nozzle, forming a mist spray. Furthermore, “depending on the liquid solution used, it can be utilized for a variety of applications ranging from disinfecting, to humidification, to a mosquito deterrent”.

CBP determined that the applicable subheading for the Nano Spray Machine is 8424.89.9000, HTSUS, which provides for “Mechanical appliances (whether or not hand operated) for projecting, dispersing or spraying liquids or powders; fire extinguishers, whether or not charged; spray guns and similar appliances; steam or sand blasting machines and similar jet projecting machines; parts thereof: Other Appliances: Other.”

The general rate of duty is be 1.8% ad valorem.

On May 24, 2021, The Department of Commerce (Commerce) announced its affirmative final determinations in the antidumping duty (AD) investigation and countervailing duty (CVD) investigation of passenger vehicle and light truck tires (PVLT). Notably, in the CVD investigation, Commerce found that exporters from Vietnam received subsidies including through undervalued currency exchange rates. This is the first time that the Currency Rule was used in an affirmative final determination and only the second time the rule has been used in a CVD investigation.

The determination follows an August 2020 decision by Commerce to accepted evidence related to currency undervaluation under regulations from a valuation assessment conducted by the Treasury Department.

The final decision fact sheet is available here.

For more information on the Currency Rule please reach out to our team and see previous posts below.

https://www.cmtradelaw.com/2020/10/ustr-launches-section-301-investigation-targeting-imports-from-vietnam/

 

On May 20, 2021, Senate Finance Committee ranking member Mike Crapo (R-ID) introduced amendments to the Trade Act of 2021. The amendments include language renewing the Generalized System of Preferences (GSP) and Miscellaneous Tariff Bill (MTB) as well as provision to renew the Section 301 product exclusion process. Notably, the amendments seek renewal of the GSP and MTB in the same fashion as Senate Finance Committee Chairman Ron Wyden’s legislation, the Trade Preferences and American Manufacturing Competitiveness Act of 2021.

Key elements of the amendments include:

  • Bolster efforts to prohibit goods made with forced labor from reaching the United States by strengthening Customs and Border Protection (CBP) enforcement efforts and expanding the Seafood Import Monitoring Program (SIMP).
  • Modernize trade enforcement tools provided to U.S. Trade Representative (USTR) to address anti-competitive digital trade and censorship practices like China’s Great Firewall, including requiring USTR to identify trading partners that disrupt digital trade; allowing for the investigation of unreasonable digital trade measures detrimental to Americans; and expedited review of discriminatory digital trade proposals.
  • Review of trade in essential supplies, including the sources of imports and an analysis of any vulnerabilities, as well as additional tools for businesses in the United States seeking reliable suppliers.
  • Strengthen oversight over U.S. trade policy by providing an Inspector General to USTR and by ensuring the application of Section 301 tariffs related to China are calibrated to provide leverage, while ensuring U.S. competitiveness and manufacturing.
  • Reauthorization of the Miscellaneous Tariff Bill (MTB) and an improved Generalized System of Preferences (GSP) that will promote human rights, the environment, women’s economic empowerment, the rule of law and digital trade.

The full text of the legislation is available here.

A full analysis of American Innovation and Competition Act an Trade Act of 2021 is available here.

For more information on the Generalized System of Preferences or Miscellaneous Tariff Bill please contact our team and see previous posts below.

Generalized System of Preferences (GSP) Archives | International Trade Law (cmtradelaw.com)

Miscellaneous Tariff Bill Archives | International Trade Law (cmtradelaw.com)

 

Chambers and Partners has ranked 63 Crowell & Moring lawyers in 75 rankings across 41 categories in the Chambers USA 2021 guide, an increase of 10 lawyers, 13 rankings and 8 categories over last year’s results. In addition, 30 practice areas were also ranked in the guide, up from 21 practices last year. The regional and national rankings are driven by independent interviews of our clients and other lawyers.

We are pleased and grateful that our International Trade Group was once again nationally ranked.

International Trade

International Trade: Customs – Nationwide*
International Trade: Export Controls & Economic Sanctions – Nationwide
Partner John B. Brew – International Trade: Customs – Nationwide*
Counsel Frances Hadfield – International Trade: Customs (Up and Coming) – Nationwide
Partner Jeffrey L. Snyder – International Trade: Export Controls & Economic Sanctions – Nationwide*

Partner Joshua Pond – International Trade: Intellectual Property (Section 337) – Nationwide*

* Indicates first or second tier ranking

Chambers and Partners ranks lawyers and law firms around the world, covering 185 jurisdictions. Its researchers conduct in-depth interviews with lawyers and clients and makes selections based on satisfaction, professional ability, and reputation. The Chambers USA 2021 guide can be accessed online here and the firm’s profile is here.

About Crowell & Moring LLP

Crowell & Moring LLP is an international law firm with more than 575 lawyers representing clients in litigation and arbitration, regulatory and policy, and transactional matters. The firm is internationally recognized for its representation of Fortune 500 companies in high-stakes litigation, as well as its ongoing commitment to pro bono service and diversity, equity, and inclusion.

On May 12, 2021, the U.S. International Trade Commission (USITC) established a pilot program allowing its Administrative Law Judges (ALJs) to issue interim initial determinations (IDs).Under the program, presiding ALJs may hold an evidentiary hearing and receive briefings on one or more discrete issues prior to the main evidentiary hearing in order to fully develop the factual record to resolve discrete issues. The ALJ will then issue an interim ID on the discrete issues, which will be subject to petitions for review and response thereto as well as prompt Commission decisions on whether to review the interim ID and resolution of any review.

The pilot program as outlined by the USITC’s press release will operate under the following parameters:

  • Presiding ALJs will be able to put issues within the program as they deem appropriate. It will be within each ALJ’s discretion to allow parties to file motions to put particular issues within the program that they believe will resolve the investigation expeditiously or facilitate settlement.
  • The presiding ALJ will fully develop the factual record and arguments on the discrete issues within the program, including, as appropriate, through an evidentiary hearing and briefing on those issues.
  • Interim IDs will be based on a full evidentiary record and all applicable legal standards and burdens of proof, including the requirements of the Administrative Procedure Act (APA).
  • Interim IDs are to be issued no later than 45 days before the scheduled start of the main evidentiary hearing in the investigation.
  • The presiding ALJ may determine to stay discovery on other issues during the interim ID process, taking into account the Commission’s obligation to complete investigations expeditiously and with a view toward avoiding extension of the target date.
  • The presiding ALJ may also determine to place the remaining procedural schedule of an investigation on hold while an interim ID is before the Commission, again taking into account the need to complete investigations expeditiously and avoiding an extension of the target date.
  • Petitions for review of interim IDs will be due 8 calendar days after the interim ID issues; responses will be due 5 business days later.
  • The Commission will normally determine whether to review an interim ID within 45 days of issuance, and resolve any review within another 45 days, but can set a different time frame for good cause.

The Commission created the program in an effort to improve section 337 investigations—which relate to unfair practice in import trade, primarily patent infringement allegations as well as infringements of trademarks, copyrights, mask works, and other forms of intellectual property, misappropriation of trade secrets, and other unfair practices. The issuance of interim IDs is also expected to resolve significant issues in advance of the main evidentiary hearings and even resolve entire disputes between the parties.

Notably, the pilot program will apply to all investigations on or after May 21, 2021, as well as to prior investigations at the discretion of the presiding ALJ. After a two-year period, the USITC will review the program and will decide whether to permanently allow interim IDs.

The Press Release is available here.

For more information about 337 investigations please contact our team.