On August 24, the European Commission (“Commission”) made public its intent to implement the recommendation and ruling from the World Trade Organization (“WTO”), and bring the safeguard measure on certain steel products (“Steel Safeguards”) into conformity with the WTO Agreement on Safeguards and the GATT 1994.

The Commission also invited interested parties to submit comments by September 14, 2022.

The Commission’s notice follows the WTO’s ruling on DS595, whereby Turkey challenged the European Union’s Steel Safeguard measures before the WTO Dispute Settlement Body (“DSB”) in 2020.  The WTO’s final panel report was circulated on 29 April 2022. On 31 May 2022, the WTO DSB adopted the Panel report with a recommendation for the EU to bring its measures into conformity.

The two inconsistencies that the WTO found concern:

– Article XIX:1(a) of GATT: the original safeguard measure had not sufficiently explained how the increase in imports took place as a result of the unforeseen developments that had been identified. Also, the measure had not identified the GATT obligations whose effect resulted in the increase in imports; and

– Article 4.1(b) of the WTO Agreement on Safeguards: the panel found that two central elements of the determination of a threat of serious injury were not ‘based on facts’: first, the finding that the domestic industry was ‘in a fragile and vulnerable position’, despite its improved performance and, second, the finding that a further increase in import volumes in the future would bring about serious injury to the domestic industry.

This is a positive development for EU importers and third-country exporters who have been contesting the Steel Safeguards since they were originally imposed in 2019. Interested parties may now use the WTO’s Panel Report to support that the Steel Safeguard measures are WTO-incompatible ab initio, and there are no retroactive remedies that could apply to render them WTO-compatible or to remedy the injury that the measures caused. We therefore foresee a great influx of comments and hearings by interested parties and sovereign Governments before to Commission to argue that the Steel Safeguards should be terminated.

In order to effectively comply with the WTO ruling, the Commission may need to revise its safeguard duty adoption criteria and procedures, and potentially be forced to terminate the existing Steel Safeguards forthwith. 

UK Publishes General License for Energy for Mongolia: On August 16, 2022, the UK published General License INT/2022/2085212 for Mongolia energy payments.  The license permits payments to the Credit Bank of Moscow, Gazprombank, Sberbank, Rosbank PJSC, or any entity owned or controlled by these banks, for the purpose of making energy available for use in Mongolia.  The aforementioned banks or subsidiaries can carry out any activity necessary to effect such payments.

UK Amends Two General Licenses: On August 18, 2022, the UK amended two general licenses.  General License INT/2022/2009156 allows UK-designated persons to make certain permitted payments to UK insurers from a frozen bank account, and allows UK insurers to receive the payments.  The general license was amended to further include Terrorism Insurance, Property Owners’ Liability Insurance, and Claims Preparation Insurance, as defined in the license.  General License INT/2022/1710676 permits the continued business operations of Evraz’s North American subsidiaries.  It was set to expire on September 2, 2022, but was extended to March 31, 2023.

U.S., EU, and Others Call for Russian Diamonds to be Labeled “Conflict Diamonds”: According to media reports, the U.S., European Union, Canada, and other Western countries have submitted requests to discuss the invasion of Ukraine and whether Russia’s diamonds should be labeled conflict diamonds.  These requests were sent to the Kimberley Process, an international organization and multilateral trade regime.  Under the Kimberley Certification Scheme, states implement safeguards on shipments of rough diamonds, and certify them as “conflict free.”  The Kimberley Process defines conflict diamonds as “rough diamonds used to finance wars against governments.”  The press reports that, aside from energy, gems are among Russia’s top exports.

New U.S. Export Controls on Four Emerging and Foundational Technologies: The U.S. Bureau of Industry and Security (“BIS”) issued an interim final rule that establishes new export controls on four emerging and foundational technologies under Section 1758 of the Export Control Reform Act (“ECRA”) (“Section 1758 technologies”), which are essential to national security.  The technologies support the production of advanced semiconductors and gas turbine engines, and include:

  • Two substrates of ultra-wide bandgap semiconductors (Gallium Oxide (Ga2O3) and diamond);
  • Electronic Computer-Aided Design (“ECAD”) software specially designed for the development of integrated circuits with Gate-All-Around Field-Effect Transistor (“GAAFET”) structure; and
  • Pressure Gain Combustion (“PGC”) technology.

The interim final rule adds the four technologies to the Commerce Control List (“CCL”), supplement no. 1 to part 774, as Section 1758 technologies.  It revises the CCL as well as corresponding parts of the Export Administration Regulations (“EAR”) to implement controls on these four technologies by revising five Export Control Classification Numbers (“ECCNs”) and adding one new ECCN, as follows:

  • Revises ECCNs: 3C001.d–.f, 3C005.a and .b, 3C006, and 3E003 for the two substrates (Ga2O3 and diamond) of ultra-wide bandgap semiconductors; and 9E003.a.2.e for PGC technology.
  • New ECCN: 3D006 for Software for ECAD for the development of Integrated Circuits (“ICs”) with GAAFET.

The four technologies are among the items that participating states of the Wassenaar Arrangement agreed to control at the December 2021 Plenary.  BIS will publish the remaining Wassenaar Arrangement controls in a later ruling.

On August 8, 2022, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) sanctioned virtual currency mixing service Tornado Cash, which OFAC said has been used to launder billions of dollars in virtual currency, including $455 million stolen by the Lazarus Group, a Democratic People’s Republic of Korea (“DPRK”) state-sponsored hacking group that OFAC sanctioned in 2019.  Though OFAC’s action marks the second instance it has sanctioned a virtual currency mixer—OFAC sanctioned Blender.io in May 2022—this is the first time that OFAC has designated a non-entity software protocol. Tornado Cash is a “smart contract” that allows users to anonymize the origins, destinations, and counterparties for virtual currency transactions. 

Click here to continue reading the full version of this alert.

In ruling N326984 (August 2, 2022), Customs and Border Protection (CBP) discussed the tariff classification of torrefied wood pellets from Vietnam. The pellets under consideration consist of agglomerated, powdered wood by-products – which include sawdust, sawmill waste, wood manufacturing waste, and tree waste. The powdered wood is agglomerated under heat and pressure. The pelletized material is then subject to torrefaction, which means that the pellets are heated to 200 – 300 degrees Celsius in a limited oxygen environment. The pellets are cylindrical in shape and measure less than 10 mm in diameter and 40 mm or less in length. The pellets are used as a fuel source and can be burned alone or mixed with coal to reduce CO2 emissions.

For background, torrefaction is the thermochemical process of heating biomass at a relatively low temperature without oxygen in order to degrade the hemicellulose content of the wood. Torrefaction improves the water resistance, grindability, and combustibility of the wood pellets. Torrefied pellets are different from charcoal in that charcoal is carbonized. Carbonization is destructive distillation that takes place in higher temperatures than torrefaction (at about 400 – 600 degree Celsius), leaving porous carbon as residue.

CBP in its analysis notes that the Explanatory Notes to the Harmonized System for heading 4403, Wood charcoal, state that “Wood charcoal is obtained when wood is carbonised out of contact with air.” As noted above, torrefaction is different from carbonization, and as such the pellets cannot be under heading 4403. CBP next looked at subheading 4401.31. Customs notes in its ruling that Subheading Note 1 to Chapter 44 of the Harmonized Tariff Schedule of the United States (HTSUS) defines wood pellets as the following:

“For the purposes of subheading 4401.31, the expression ‘wood pellet’ means by-products such as cutter shavings, sawdust or chips, of the mechanical wood processing industry, furniture-making industry or other wood transformation activities, which have been agglomerated either directly by compression or by the addition of a binder in a proportion not exceeding 3 percent by weight. Such pellets are cylindrical, with a diameter not exceeding 25 mm and a length not exceeding 100 mm.”

CBP found that the pellets under consideration fit this definition. As such, the applicable subheading for the torrefied wood pellets would be 4401.31.0000, HTSUS, which provides for “Fuel wood, in logs, in billets, in twigs, in faggots or in similar forms; wood in chips or particles; sawdust and wood waste and scrap, whether or not agglomerated in logs, briquettes, pellets or similar forms: Sawdust and wood waste and scrap, agglomerated in logs, briquettes, pellets or similar forms: Wood pellets.” The rate of duty is free.

Russia Sanctions: This week the United Kingdom updated the listings for several sanctioned persons by making 17 amendments to designated individuals and 10 amendments to designated entities.  The amendments included revisions to dates of birth, addresses, and descriptions.

General Licenses: On August 5, 2022, the United Kingdom issued general license (“GL”) INT/2022/2055384.  The GL allows UK persons to use the retail banking services of credit institutions and financial institutions designated under Regulation 5 of the Russian Regulations to make or receive payments that are exclusively for the purpose of winding down business operations in Russia.  Authorized payments include the payment of “staff salaries, taxes, regulatory fees and other fees to official government bodies, and payment of bills or invoices.”  The GL includes a reporting requirement.  Any person making or receiving a payment pursuant to the GL must report to HM Treasury (i) the amount(s) and purpose of payments, (ii) the payment method used, and (iii) the date on which the payments were made.   

Enforcement: The U.S. Department of Justice (“DOJ”) obtained a seizure warrant (the “Seizure Warrant”) from the U.S. District Court for the Southern District of New York authorizing the seizure of an airplane (the “Airplane”) belonging to sanctioned Russian oligarch Andrew Skoch.  The Airplane is an Airbus A319-100, and is estimated to be worth more than $90 million.  OFAC designated Skoch as a Specially Designated National (“SDN”) in April of 2018.  The investigation was coordinated through DOJ’s Task Force KleptoCapture, which was established in March 2022 to enforce U.S. sanctions, export controls, and other economic countermeasures imposed by the United States in response to Russia’s invasion of Ukraine, including through criminal prosecutions and the seizure and forfeiture of assets.  In an affidavit in support of the Seizure Warrant, a Bureau of Industry and Security law enforcement agent claimed that the Airplane was subject to seizure and forfeiture as property involved in a money laundering transaction or attempted money laundering transaction.

In ruling N327063 (August 3, 2022), Customs and Border Protection (CBP) discussed the country of origin of mallets. The imported mallets are identified as 12-ounce and 24-ounce Hickory 2-sided Soft Face Mallets. The mallets consist of a forged, carbon steel head and an injection-molded handle. The mallets also come with replaceable plastic caps that are used to cover the striking face of the mallet heads, thus protecting parts and surfaces from damage when the mallets are being used.

Both types of mallets are manufactured in the same manner. The process begins in Vietnam where raw Chinese-origin carbon steel is cut, forged, and sandblasted into the final shape and size of the mallet heads. Holes are also machined into the heads so that the handles may be inserted. The mallet heads are then sent to China where they are heat-treated, polished, cleaned, and coated with anti-rust oil.  The mallet heads are also assembled with Chinese-origin handles as well as replaceable Chinese-origin plastic caps. Lastly, the completed mallets are affixed with labels and packed for exportation to the U.S.

In order to determine the country of origin of the mallets, CBP first established the meaning of country of origin. Per 19 CFR 134.1(b), the country of origin of an item is defined as “the country of manufacture, production, or growth of any article of foreign origin entering the United States.  Further work or material added to an article in another country must effect a substantial transformation in order to render such other country the ‘country of origin’ within the meaning of this part.” CBP also established that substantial transformation occurs when an article emerges from a process “with a new name, character, or use, different from that possessed by the article prior to processing.” In circumstances where components of various origins are assembled into a single completed product, CBP considers all factors in order to determine if a product with a new name, character, or use is produced.

With regards to the mallets, CBP found that the forging of the mallet heads – which takes place in Vietnam – is what imparts the essence of the finished good. The assembly and finishing operations that take place in China do not substantially change the forged mallet heads so as to transform them into a new article with a different name, character, or use. As such, CBP determined that the country of origin of the 12-ounce and 24-ounce Hickory 2-sided Soft Face Mallets would be Vietnam.

On August 4, 2022, the Department of Homeland Security (DHS) published notice adding entities to the Uyghur Forced Labor Prevention Act’s (UFLPA’s) Entity List.  Per Section 2(d)(2)(B) of the UFLPA – which was signed by President Biden on December 23, 2021 – the Department of Homeland Security on behalf of the Forced Labor Enforcement Task Force (FLETF) is required to develop and maintain the UFLPA Entity List. The UFLPA Entity List serves as a consolidated register of the following four lists, as required by the Act:

  1. A List of Entities in Xinjiang That Mine, Produce, or Manufacture Wholly or in Part any Goods, Wares, Articles, and Merchandise with Forced Labor;
  2. A List of Entities Working with the Government of Xinjiang To Recruit, Transport, Transfer, Harbor or Receive Forced Labor of Uyghurs, Kazakhs, Kyrgyz, or Members of Other Persecuted Groups Out of Xinjiang
  3. A List of Entities That Exported Products Described in Clause (iii) From the PRC Into the United States
  4. A List of Facilities and Entities, Including the Xinjiang Production and Construction Corps, That Source Material from Xinjiang or From Persons Working with the Government of Xinjiang or the Xinjiang Production and Construction Corps for Purposes of the ‘‘Poverty Alleviation’’ Program or the ‘‘Pairing-Assistance’’ Program or any Other Government Labor Scheme That Uses Forced Labor

In its notice DHS also provides the process for listed entities to submit requests for removal from the UFLPA Entity List.  The party seeking removal must submit supporting documentation evidencing that the entity no longer produces goods in whole or in part from forced labor.  Following the submission of documents and dissemination of the removal request among the FLETF member agencies, there may be additional questions for the entity by the FLETF member agencies before or during the review period, and before the voting process. If the FLETF denies a removal request, entities may submit a new removal request with new supporting documentation and information. In addition, DHS explained that any FLETF member agency may submit recommendations to add entities to the UFLPA Entity List. Both addition and removal processes rely on Section 2(d)(2)(B) of the UFLPA to determine whether entities will be added or removed from the list. Upon receipt and review of a removal request, or a request to add an entity, the FLETF member agencies will decide via a majority vote.

Due to the FLETF’s ability to add or remove entities to the UFLPA Entity List, the List will likely change over time and will serve as a dynamic tool for the U.S. government to combat the use of forced labor in the People’s Republic of China. In addition, the UFLPA also has the potential to set the stage for normalizing anti-forced labor practices on a global scale, as seen by similar efforts to pass anti-forced labor legislation in the UK, Germany, and the EU.

The UFLPA went into effect on June 21, 2022 and requires Customs and Border Protection to “apply a rebuttable presumption that goods mined, produced, or manufactured by entities on the UFLPA Entity List are made with forced labor, and therefore, prohibited from importation into the United States.” Below is the current state of the UFLPA Entity List in full:

A list of entities in Xinjiang that mine, produce, or manufacture wholly or in part any goods, wares, articles and merchandise with forced labor
Section 2(d)(2)(B)(i)
Baoding LYSZD Trade and Business Co., Ltd. 
Changji Esquel Textile Co. Ltd. (and one alias : Changji Yida Textile)
Hetian Haolin Hair Accessories Co. Ltd. (and two aliases: Hotan Haolin Hair Accessories; and Hollin Hair Accessories)
Hetian Taida Apparel Co., Ltd (and one alias: Hetian TEDA Garment)
Hoshine Silicon Industry (Shanshan) Co., Ltd (including one alias: Hesheng Silicon Industry (Shanshan) Co.) and subsidiaries
Xinjiang Daqo New Energy, Co. Ltd (including three aliases: Xinjiang Great New Energy Co., Ltd.; Xinjiang Daxin Energy Co., Ltd.; and Xinjiang Daqin Energy Co., Ltd.)
Xinjiang East Hope Nonferrous Metals Co. Ltd. (including one alias: Xinjiang Nonferrous)
Xinjiang GCL New Energy Material Technology, Co. Ltd (including one alias: Xinjiang GCL New Energy Materials Technology Co.)
Xinjiang Junggar Cotton and Linen Co., Ltd.
Xinjiang Production and Construction Corps (including three aliases: XPCC; Xinjiang Corps; and Bingtuan) and its subordinate and affiliated entities
A list of entities working with the government of Xinjiang to recruit, transport, transfer, harbor or receive forced labor or Uyghurs, Kazakhs, Kyrgyz, or members of other persecuted groups out of Xinjiang
Section 2(d)(2)(B)(ii)
Aksu Huafu Textiles Co. (including two aliases: Akesu Huafu and Aksu Huafu Dyed Melange Yarn)
Hefei Bitland Information Technology Co., Ltd. (including three aliases: Anhui Hefei Baolongda Information Technology; Hefei Baolongda Information Technology Co., Ltd.; and Hefei Bitland Optoelectronic Technology Co., Ltd.)
Hefei Meiling Co. Ltd. (including one alias: Hefei Meiling Group Holdings Limited)
KTK Group (including three aliases: Jiangsu Jinchuang Group; Jiangsu Jinchuang Holding Group; and KTK Holding)
Lop County Hair Product Industrial Park
Lop County Meixin Hair Products Co., Ltd.
Nanjing Synergy Textiles Co., Ltd. (including two aliases: Nanjing Xinyi Cotton Textile Printing and Dyeing; and Nanjing Xinyi Cotton Textile)
No. 4 Vocation Skills Education Training Center (VSETC)
Tanyuan Technology Co. Ltd. (including five aliases: Carbon Yuan Technology; Changzhou Carbon Yuan Technology Development; Carbon Element Technology; Jiangsu Carbon Element Technology; and Tanyuan Technology Development)
Xinjiang Production and Construction Corps (XPCC) and its subordinate and affiliated entities
A list of entities that exported products described in clause (iii) from the PRC into the United States
Section 2(d)(2)(B)(iv)
Entities identified in sections (i) and (ii) above may serve as both manufactures and exporters. We have not identified additional exporters at this time but will continue to investigate and gather information about additional relevant entities.
A list of facilities and entities, including the Xinjiang Production and Construction Corps, that source material from Xinjiang or from persons working with the government of Xinjiang or the Xinjiang Production and Construction Corps for purposes of the ‘‘poverty alleviation’’ program or the ‘‘pairing-assistance’’ program or any other government-labor scheme that uses forced labor
Section 2(d)(2)(B)(v)
Baoding LYSZD Trade and Business Co., Ltd. 
Hefei Bitland Information Technology Co. Ltd.
Hetian Haolin Hair Accessories Co. Ltd.
Hetian Taida Apparel Co., Ltd.
Hoshine Silicon Industry (Shanshan) Co., Ltd., and Subsidiaries
Xinjiang Junggar Cotton and Linen Co., Ltd.
Lop County Hair Product Industrial Park
Lop County Meixin Hair Products Co., Ltd.
No. 4 Vocation Skills Education Training Center (VSETC)
Xinjiang Production and Construction Corps (XPCC) and its subordinate and affiliated entities
Yili Zhuowan Garment Manufacturing Co., Ltd.

The Federal Register Notice can be found here.

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

Department of Homeland Security Releases the Uyghur Forced Labor Prevention Act (UFLPA) Strategy Report | International Trade Law (cmtradelaw.com)

CBP Issues its Uyghur Forced Labor Prevention Act (UFLPA) Operational Guidance for Importers | International Trade Law (cmtradelaw.com)

In a report from April 2022, Washington, DC based-firm Horizon Advisory investigated the Xinjiang aluminum sector and reported how – alongside the textile, apparel, agriculture, and solar energy sectors in the region – this sector is at high-risk of forced labor exposure. The report found that the eight major aluminum companies operating in Xinjiang – one of which, Xinjiang East Hope Nonferrous Metals, is already on the Forced Labor Enforcement Task Force’s (FLETF) UFLPA Entity List – are exposed to indicators associated with forced labor. In addition, the report emphasizes how forced labor at such an upstream node can have implications across a multitude of other sectors’ supply chains, including the automotive, aerospace, rail, information technology, electronics, and polysilicon industries.

The report states that 17% of China’s aluminum production, which already makes up 60% of the world’s primary aluminum production, comes from Xinjiang. This is a result from the Xinjiang Production and Construction Corp’s (XPCC’s) identification of the heavy industry as a sector of high importance. As noted in the report, the XPCC in its 14th Five Year Plan called “for ‘the extension of the industry chain for ferrous metals such as aluminum.’ ” In looking at the top eight aluminum producers in the region, the report identified how each of the eight companies had exposure to at least one forced labor indicator. These eight companies include:

  1. Xinjiang Sixth Division Aluminum Co., Ltd.
  2. Xinjiang East Hope Nonferrous Metals Co., Ltd. (currently on the UFLPA Entity List)
  3. The Eighth Division of the XPCC Tianshan Aluminum Co., Ltd.
  4. Xinjiang Qiya Aluminum & Power Co., Ltd.
  5. Xinjiang Jiarun Resources Holdings Co., Ltd.
  6. Xinjiang Shenhuo Coal and Electricity Co., Ltd.
  7. Xinjiang Tianlong Mining Co., Ltd.
  8. Xinjiang Zhonghe Co., Ltd.

Of these eight entities, the first seven were identified as being associated with government-led transfer of labor programs. Three of the eight – Xinjiang Sixth Division Aluminum Co., Ltd,  The Eighth Division of the XPCC Tianshan Aluminum Co., Ltd., and Xinjiang Zhonghe Co., Ltd. – were also identified as subordinates of the XPCC. Lastly, the report found that two of the eight – Xinjiang Jiarun Resources Holdings Co., Ltd. and Xinjiang Tianlong Mining Co., Ltd. – participate as “ethnic policy” leaders, while four of the eight – Xinjiang East Hope Nonferrous Metals Co., Ltd., The Eighth Division of the XPCC Tianshan Aluminum Co., Ltd., Xinjiang Qiya Aluminum & Power Co., Ltd., and Xinjiang Zhonghe Co., Ltd. – coordinate labor transfer subprograms.

In addition to these specific companies, the report notes that the entire aluminum industry in Xinjiang is under systemic risk of exposure to forced labor. A major indicator of risk identified in the report is the XPCC’s heavy emphasis on the aluminum industry over the past decade as well as the two largest Xinjiang aluminum companies’ affiliation to the XPCC. The second major indicator is the fact that many of the major aluminum companies in Xinjiang operate in industry parks that have been associated with forced labor risks. As an example, the report states that three of the eight identified companies are based in the Zhundong Economic and Technological Development Zone. The Zhundong Zone has been recognized by the Xinjiang government as a contributor to Beijing’s “ethnic policies” in the region.

The report concludes that while the findings are not intended to be conclusive, the indicators used “mirror those that have been monitored and applied in assessments of other Xinjiang-based supply chains found to be benefiting from forced labor (e.g., textiles, agriculture).” In addition, due to the fact that aluminum is one of the most commonly used metals around the world, and due to China’s aluminum sector’s deep integration in many industries’ supply chains, global industries “from aircraft fuselages to utensils” are at risk to exposure.

Horizon Advisory’s report can be found here.

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

Department of Homeland Security Releases the Uyghur Forced Labor Prevention Act (UFLPA) Strategy Report | International Trade Law (cmtradelaw.com)

CBP Issues its Uyghur Forced Labor Prevention Act (UFLPA) Operational Guidance for Importers | International Trade Law (cmtradelaw.com)

EU Designates Viktor Yanukovych and His Son: On August 2, 2022, the EU designated the former president of Ukraine, Viktor Yanukovych.  Viktor Yanukovych was pro-Russia when he was president, and a Ukrainian court later found him guilty of treason.  He currently resides in Russia, and the EU alleged him to be involved in a Russian special operation to re-install him as the president of Ukraine.  The EU also designated Viktor Yanukovych’s son, Oleksandr Yanukovych.  Oleksandr Yanukovych amassed wealth and business interests during his father’s presidency, and as a result of his close ties to the pro-Russian separatists in eastern Ukraine.

UK Designates Two Rosneft Board Members and Delisted One Individual: On August 2, 2022, the UK designated Didier Casimiro and Zeljko Runje, two members of the Management Board of Public Joint Stock Company Rosneft Oil Company (“Rosneft”).  The UK also published amendments for 18 previously-designated individuals, which describe the basis of their designations, and delisted Olga Ayziman.

UK Extends General License for Wind Down with Rosbank: On July 29, 2022, the UK extended license INT/2022/1968500 two months.  The general license was set to expire on July 30, 2022, but now expires on September 30, 2022 instead.  INT/2022/1968500 allows a person, other than Rosbank or a Rosbank subsidiary, to wind down “any transaction to which it is a party” that involve Rosbank or its subsidiaries.

U.S. Designates Numerous Individuals and Entities: On July 29, 2022, the Office of Foreign Assets Control (“OFAC”) designated two Russian individuals and four entities that support Russia’s influence operations and election interference activities.  These include English-language website STOP-Imperialism, Aleksandr Viktorovich Ionov, and two organizations Mr. Ionov founded that have targeted the U.S., Iran, Venezuela and Lebanon.  OFAC also added the Center for Support and Development of Public Initiative Creative Diplomacy and its founder to its List of Specially Designated Nationals And Blocked Persons (“SDN List”) for working on behalf of the Russian government.

OFAC published another round of SDN designations on August 2, 2022, targeting Russian elites, and companies that operate in sectors that generate substantial revenue for Russia.  The new designees included Andrey Grigoryevich Guryev, the founder of Russian chemical company PhosAgro, Viktor Filippovich Rashnikov, majority owner of a sanctioned steel company (described below), and the heads of a pro-Kremlin media group and technology company.  OFAC also sanctioned Publichnoe Aktsionernoe Obschestvo Magnitogorskiy Metallurgicheskiy Kombinat (“MMK”), one of the world’s largest steel producers, and two of its subsidiaries in Russia and Turkey.

The designations also included eight Russian companies and research organizations involved in the production or design of microchips or semiconductors, and twelve institutions involved in the research and manufacture of digital circuits, microelectronics, and other high-end technologies.  These organizations included the Moscow Institute of Physics and Technology, and Skolkovo Institute of Science and Technology.

U.S. Issues Five General Licenses and Three FAQs: On August 2 and 3, 2022, OFAC issued five new general licenses (“GLs”) and two new “Frequently Asked Questions” (“FAQs”), clarifying whether certain entities are blocked based on the designated of affiliated individuals.

  • GL 40B: permits the provision, exportation, or reexportation of goods, technology, or services to ensure the safety of civil aviation.  The revision added Joint Stock Company State Transportation Leasing Company to the list of entities that may receive certain goods, technologies, and services, as specified in the license.
  • GL 43A: permits the divestment or transfer of the debt or equity of Public Joint Stock Company Severstal and Nord Gas PLC.  The revision now also: (1) authorizes the “facilitation of the divestment or transfer” of debt or equity of these entities and of entities in which they hold 50 percent or more ownership interests; and (2) explicitly permits U.S. financial institutions to unblock covered debt or equity that was blocked on or after June 2, 2022, but before June 28, 2022, for transactions authorized by GL 43A.
  • GL 47A: permits the wind down of any transaction involving: (1) Skolkovo Foundation; (2) Skolkovo Institute of Technology; (3) Technopark Skolkovo Limited Liability Company; (4) Federal State Institution of Higher Vocational Education Moscow Institute of Physics and Technology; (5) Publichnoe Aktsionernoe Obschestvo Magnitogorskiy Metallurgicheskiy Kombinat; (6) Joint Stock Company State Transportation Leasing Company; or (7) any entity owned 50 percent or more by one or more of the foregoing, provided that any payment must to a blocked person must be made into a blocked account.  The transactions are authorized through 12:01 a.m. eastern time, September 1, 2022.
  • GL 48A: permits the divestment or transfer, or facilitation of the divestment or transfer, of debt or equity of: (1) Publichnoe Aktsionernoe Obschestvo Magnitogorskiy Metallurgicheskiy Kombinat; (2) Joint Stock Company State Transportation Leasing Company; or (3) any entity owned 50 percent or more by one or more of those parties, to a non-U.S. person, through 12:01 a.m. eastern time, October 3, 2022.
  • GL 49: permits the wind down of any transaction involving: (1) MMK Metalurji Sanayi Ticaret Ve Liman Isletmeciligi Anonim Sirketi; or (2) any entity it owns 50 percent or more of.  The transactions are authorized through 12:01 a.m. eastern time, January 31, 2023, provided that any payment is made into a blocked account.
  • OFAC issued FAQ 1073, explaining that Sheremetyevo International Airport is not blocked as a result of the designation of Alexander Anatolevich Ponomarenko.
  • OFAC issued FAQ 1074, explaining that EuroChem Group AG is not blocked as a result of the designation of Andrey Igorevich Melnichenko.
  • OFAC issued FAQ 1075, explaining that PhosAgro PJSC is not blocked as a result of the designation of Andrey Grigoryevich Guryev and Andrey Andreevich Guryev

U.S. Adds 25 Foreign-Produced Aircraft to Restricted List: On August 2, 2022, the Bureau of Industry and Security (“BIS”) updated the list of aircraft that have flown into Russia or Belarus in apparent violation of the Export Administration Regulations (“EAR”).  In adding the first 25 foreign-produced aircraft, there are now a total of 183 aircraft listed for apparent violations of U.S. export controls.  Any subsequent actions taken with regard to any of the listed aircraft, including, but not limited to, refueling, maintenance, repair, or the provision of spare parts or services, are subject to General Prohibition Ten of the EAR.  General Prohibition Ten prohibits various activities relating to an item subject to the EAR where there is knowledge that a violation has occurred or is about to occur in connection with that item.  “Today’s identification of 25 foreign-produced aircraft further degrades Russian airlines’ ability to operate their fleets of both U.S. and EU airplanes,” said Assistant Secretary of Commerce for Export Enforcement Matthew S. Axelrod.

General U.S. Export Update: On August 1, 2022, BIS announced its first non-monetary administrative resolution under new settlement policies announced last month.  In situations involving a lower threat to national security, BIS will seek to resolve administrative enforcement actions with non-monetary penalties such as suspended denials of export privileges.  To be eligible, respondents must accept responsibility, including by admitting to the underlying conduct, and also agree to other remediation-oriented measures such as participation in training programs and compliance audits.  While BIS is focused on aggressive enforcement of export controls as they relate to Russia, this resolution may provide another enforcement outcome for Russia-related violations where BIS views the conduct as less serious from a national security perspective.

On Monday, August 1st, the Office of the U.S. Trade Representative (USTR) filed remand results with the U.S. Court of International Trade (CIT), releasing updated explanations for retaliatory tariffs on roughly $300 billion worth of Chinese goods imposed in the midst of the U.S. – China Trade War. USTR filed the remand as ordered by the CIT, which found that the USTR had not satisfied its obligations under the Administrative Procedure Act (APA). The APA governs the process by which federal agencies develop and issue regulations.

Under the Trump Administration, the USTR levied two rounds of Section 301 tariffs on a combined $50 billion worth of Chinese goods in the response to the country’s forced intellectual property transfer and discriminatory trade policies. Section 301 authorizes USTR to take action to encourage foreign countries to abandon or mitigate unfair trade practices affecting U.S. commerce. After Beijing retaliated with its own tariffs on U.S. goods, the Trump Administration directed the USTR to expand its Section 301 tariffs to cover roughly $300 billion of imports, a development that was controversial from the start. The decision to impose a third and fourth round of Section 301 tariffs on China elicited more than 9,000 public comments on the proposed expansions.  Despite these comments, the USTR imposed the tariffs and thousands of importer plaintiffs have filed suit in the CIT challenging these actions.

The 90-page document addresses product-specific comments across eight categories, including new explanations on why the USTR included some products (parts) and excluded others (certain rare earths/critical minerals, seafood products, antiquities and art, consumer electronics, health and safety products, and chemicals and chemical inputs).   The USTR did not explain inconsistencies in its decision-making process, but relied heavily on its desire to maintain the level of coverage directed by of former President Trump.  The USTR stated in Monday’s remand that “most comments urging for additional inputs to be removed failed to demonstrate how imposing the additional duties on the input would not be practicable or effective to eliminate China’s acts, policies, and practices or failed to show how imposing the additional duties would cause disproportionate economic harm to U.S. interests.”

Prior to filing its remand results Monday, the USTR submitted a motion to correct the administrative record in the case, asking to add several Federal Register notices and press releases it said influenced decision-making around List 3 and List 4. USTR Associate General Counsel Megan Grimball stated on Monday that “upon drafting the remand results as ordered by the court, USTR determined that additional documents were directly or indirectly considered in the process of issuing List 3 and List 4.”  None of these documents were provided or cited in USTR’s original notices implementing the tariffs. 

Crowell & Moring, LLP continue to monitor this development and the potential impact to businesses and consumers moving forward.