On January 28, 2019, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated Petróleos de Venezuela, S.A. (PdVSA) pursuant to Executive Order (E.O.) 13850 – “Blocking Property of Additional Persons Contributing to the Situation in Venezuela”. Further, OFAC amended General License 3, issued eight (8) new General Licenses, and published a new Frequently Asked Question (FAQ) on the new E.O. – “Taking Additional Steps to Address the National Emergency with Respect to Venezuela.”  Additional FAQs are anticipated.

by Anyul Rivas

The sanctions designation and the corresponding general licenses appear modeled after sanctions programs designed to protect and preserve a jurisdiction’s assets from kleptocratic or corrupt regimes for the next duly elected Administration – in this case, Interim President Juan Guaidó.  Treasury Secretary Mnuchin’s statement illustrates this point:

“T[he] designation of PdVSA will help prevent further diverting of Venezuela’s assets by Maduro and preserve these assets for the people of Venezuela.  The path to sanctions relief for PdVSA is through the expeditious transfer of control to the Interim President or a subsequent, democratically elected government.”

Similar programs include the Kuwait sanctions program and the current remaining sanctions in Iraq and Libya.   As a result, the sanctions on PdVSA are accompanied by general licenses allowing U.S. Persons (individuals and entities) to wind down or maintain certain transactions—in some instances, by mandating that payments flow into interest bearing blocked (or “frozen”) accounts.

For more information, please see Crowell’s Client Alert.

Crowell & Moring’s Latin America Practice helps clients navigate laws, regulations, and issues by jurisdiction; resolve international disputes and litigation; and assist with both domestic and cross-border corporate and M&A transactions. Additionally, we bring cultural and political sophistication within Latin America to our work and represent clients in both English and Spanish, among other languages. The Crowell & Moring Latin America practice is available to counsel on a wide range of issues. Please click here for contacts and additional information.

 

 

Talks on World Trade Organization (WTO) reform continued this past Thursday, January 24, 2019, in Davos, Switzerland. The “Ottawa Group” of 13 members, chaired by Canada, met on the need to protect and increase the functionality of the organization, focusing particularly on the dispute settlement mechanism and transparency aspects.

The United States has objected that the WTO’s existing rules are not adequate to respond to practices of non-market economies (most notably, China). The U.S. points to practices such as failure by countries to comply with transparency obligations to notify government subsidies; the anticompetitive behavior of state-owned enterprises (leading to overcapacity in sectors such as steel and aluminum); and the ability of countries to “self-declare” developing status and maintain exclusions from WTO obligations long after their economic situations have changed for the better.

Many WTO members privately agree with these U.S. concerns about the functioning of the WTO. Where they diverge, however, is over the U.S. approach to the WTO’s dispute settlement mechanisms. Over several administrations Washington has expressed concerns about the operation of the Appellate Body, which reviews panels’ findings, prompting the U.S. to block new appointments to the body. Three judges are required to handle cases, and by December 2019 (or earlier, if conflicts of interest arise with any one judge), only two members will remain. As a result, the WTO will be unable after that date to issue binding rulings in trade disputes.

The EU, Canada, and others have submitted WTO reform proposals in an effort to respond to U.S. concerns over the Appellate Body’s “overreach” and operation. For example, others have proposed that the Appellate Body refrain from interpreting domestic laws and generally act within its 90 day deadline for reviewing a panel’s findings. They have proposed expanding the number of Appellate Body judges from seven to nine, and for limiting the ability of any judge to serve beyond his or her appointment term. Washington has rejected these proposals, saying that they merely perpetuate the faults of the Appellate Body, and do nothing to correct them. Meanwhile, Washington has not set out its own blueprint for how it wants the WTO dispute settlement system to operate.

Greater consensus exists among the Ottawa Group and other WTO members on the need to improve WTO procedures for monitoring and transparency, and the process of notifying members’ trade policies. Some members hope that making progress in such procedural areas will ultimately bring the United States around and ease the way toward reaching greater consensus on the more difficult dispute settlement reforms.

During this meeting, volunteers within the Ottawa Group offered to lead reviews of the functioning of certain WTO committees, with the aim of improving the WTO’s deliberative function, and strengthening its ability to address trade concerns as they arise, without resorting to litigation:

  • Brazil – Sanitary and Phytosanitary Measures Committee
  • Singapore – Technical Barriers to Trade Committee
  • Switzerland – Rules of Origin Committee
  • Australia – Council for Trade in Services
  • Norway will examine the development dimension of WTO reform

It is important to note that the members must reach a consensus in order to make any significant changes to WTO rules. The Group intends to continue talks in May 2019.

Last week, the FAA moved forward with rulemaking on expanded drone operations with the release of several key documents: (1) a Draft Notice of Proposed Rulemaking (NPRM) for Operation of Small Unmanned Aircraft Systems over People, (2) a Draft Advanced Notice of Proposed Rulemaking (ANPRM) for Safe and Secure Operations of Small Unmanned Aircraft Systems, and (3) the announcement of the Unmanned Traffic Management (UTM) Pilot Program. This alert, the second of two, addresses the Draft ANPRM for safety and security and the UTM Pilot Program. The first alert, which addressed the Draft NPRM, can be found here. Manufacturers of all small drones would be well-advised to review the questions and track industry comments regarding these proposed rules.

Draft ANPRM

The FAA is contemplating additional rulemaking to address safety and security concerns associated with small drone integration. Feedback from industry in response to the ANPRM will help the FAA determine the extent of future operational limitations under the Small UAS Rule. The Draft indicates that the ANPRM will seek comment on:

  • Requirements for stand-off distances (the space between a drone and the nearest person or object).
  • The utility of applying performance limitations to address safety and security concerns.
  • Categories of operations that should be subject to UTM requirements.
  • Additional restrictions on hazardous payloads.
  • System design requirements for complex operations outside the scope of the NPRM for operations over people.

The ANPRM is a precursor to a proposed rule. The FAA will not seek or solicit comments until the final ANPRM is published in the Federal Register. Like the Draft NPRM for operations over people, the Draft ANPRM does not address recreational operations of small drones. Accordingly, manufacturers of all small drones would be well-advised to review the questions and track industry comments as it may affect them. Many questions in the ANPRM address system design, so industry responses will likely influence future manufacturing rulemaking. Commercial pilots would also do well to review the Draft ANPRM carefully, as it addresses performance limitations that may affect commercial operations.

UTM Pilot Program

Despite receiving less media attention than the draft rules, the UTM Pilot Program (the Program) is an important piece of the FAA’s announcement.

The Program, which will run through September 2019, will develop and demonstrate an air traffic management system, similar to Air Traffic Control, for low-altitude unmanned operations. It will provide the FAA with crucial data for future UTM rulemaking. Through a competitive RFP process, the FAA selected three UAS test sites to assist the Agency in its effort to demonstrate a UTM system capable of safely integrating drones into the National Airspace System. The three selected sites are Nevada UAS Test Site Smart Silver State (Nevada), Northern Plains Unmanned Aircraft Systems Test Site (North Dakota), and Virginia Tech Mid-Atlantic Aviation Partnership (Virginia). Each site built a team of drone industry partners to participate in the demonstrations. Although the FAA has awarded agreements to three sites, the FAA Reauthorization Act of 2018 contemplates UTM testing at additional sites, indicating that drone industry stakeholders who are not on a selected team may still have the opportunity to participate in UTM development.

 

The full texts of the Draft NPRM and Draft ANPRM can be found here.

The European Commission voted to adopt definitive measures on imported steel products from all non-European Economic Area (EEA) countries following the safeguard proceeding launched in March 2018. However, certain countries in which the Commission has signed an Economic Partnership Agreement will be exempted from the scope of the measures. This list includes countries such as Botswana, Cameroon, Fiji, Ghana, Ivory Coast, Lesotho, Mozambique, Namibia, South Africa, and Swaziland.

The measures will consist of a country-specific quota based on average imports from 2015-2017 for 26 steel product categories to counter “trade diversion” due to the U.S. Section 232 tariffs on steel and aluminum products. Imports above the tariff-rate quota will be subject to a 25% ad valorem duty. The safeguard measures go into effect at the beginning of February 2019 and will remain in place until July 16, 2021.

The 26 steel categories consist of the following steel products:

  1. Non-Alloy and Other Alloy Hot-Rolled Sheets and Strips;
  2. Non-Alloy and Other Alloy Cold-Rolled Sheets;
  3. Electrical Sheets (other than Grain Oriented Electrical Steels, or GOES);
  4. Metallic Coated Sheets;
  5. Organic Coated Sheets;
  6. Tin Mill Products;
  7. Non-Alloy and Other Alloy Quarto Plates;
  8. Stainless Hot-Rolled Sheets and Strips;
  9. Stainless Cold-Rolled Sheets and Strips;
  10. Stainless Hot Rolled Quarto Plates
  11. Non-Alloy and Other Alloy Merchant Bars and Light Sections;
  12. Rebars;
  13. Stainless Bars and Light Sections;
  14. Stainless Wire Rod;
  15. Non-Alloy and Other Alloy Wire Rod;
  16. Angles, Shapes, and Sections of Iron or Non-Alloy Steel;
  17. Sheet Piling;
  18. Railway Material;
  19. Gas Pipes;
  20. Hollow Sections;
  21. Seamless Stainless Tubes and Pipes;
  22. Other Seamless Tubes;
  23. Large Welded Tubes;
  24. Other Welded Pipes;
  25. Non-Alloy and Other Alloy Cold Finished Bars; and
  26. Non-Alloy Wire.

A comprehensive list of the steel categories subject to the tariff-rate quota can be found in Annex II of the EU’s notification to the WTO to impose safeguard measures.

There is currently no company exclusion process for the EU safeguard measures.

The Commission circulated the notification to impose safeguard measures to all WTO members. According to the notification, countries with a “significant supply interest” will get a specific tariff-rate quota, while all other countries will import under a “residual quota”. Any remaining balance of the quota for each product category will become available to all exporters in the last quarter of the period.

 

Photo by Thomas A on Flickr

On January 16, 2019, the Trump administration signaled a possible major shift in its policy toward Cuba by announcing it was considering allowing the suspension of Title III of the Helms-Burton Act to lapse, thereby opening the floodgates to litigation over property confiscated by Fidel Castro and the Cuban government 60 years ago.

History of the Act

The Helms-Burton Act, formally titled the Cuban Liberty and Democratic Solidary Act (a/k/a the Libertad Act), was signed into law in 1996 with the goal of increasing pressure on Cuba for peaceful democratic change. The Act codified the United States embargo in place at the time on trade and financial transactions with Cuba and required the President to produce a plan for providing economic assistance to a transition government. Additionally, the Act aimed to punish non-U.S. companies doing business in Cuba. Title III created a private cause of action authorizing U.S. nationals to file suit in U.S. courts against persons or companies that may be trafficking in and profiting from properties confiscated by the Cuban government following the 1959 socialist revolution. U.S. claimants that had their claims certified by the Foreign Claims Settlement Claims Commission may also be able to seek treble damages for their claims.

The Helms-Burton Act was not well received in the international community, however. Both the European Union and Canada quickly announced their opposition, arguing that the provisions violated international trade treaties by punishing foreign companies for doing business outside of the U.S. The EU went so far as to bring a case at the World Trade Organization. At the time, the U.S. threatened to invoke the “national security exception” that is contained in the WTO treaty texts, but following negotiations between the U.S. and the EU, the suit was dropped in 1998.

Although Title III could have kept many lawyers busy throughout the U.S., Cuba, and beyond, the provision never actually took effect. The Act granted the President authority to suspend the lawsuit provision for consecutive six month periods if necessary to expedite a transition to democracy in Cuba and if doing so was in the national interest. Every president since President Clinton has relied on and exercised this suspension authority. In 2013, President Obama delegated the power to suspend the provision to his Secretary of State, who then continued to suspend the provision each time it came up.

Rumblings of Change

The Trump administration first had to weigh in on the provision in July 2017. Then Secretary of State Rex Tillerson delegated the decision to his Under Secretary who in turn suspended Title III. In recent months though, the administration has hinted that it may break from more than 20 years of tradition and allow lawsuits to be brought under Title III. In November 2018, White House National Security Adviser John Bolton remarked that the administration planned to give the provision “serious review.” In the most definitive move yet, earlier this month the administration suspended Title III for only 45 days until March 18, 2019 and urged any person doing business in Cuba to consider whether they were “abetting this dictatorship” by trafficking in confiscated property.

What To Expect

Although no official changes have been made, the Trump administration has vowed to be tougher on Cuba. Invoking Title III would permit Americans with claims to confiscated property in Cuba to attempt to sue companies whose business in and with Cuba today are connected to these properties, creating a potential risk for companies that do business in Cuba and which may also be subject to the jurisdiction of courts in the U.S.

So what does this mean for potential claimants and companies doing business in Cuba? It really depends on their situation. For the last 60+ years, people have believed that change in Cuba and/or change in U.S. policy towards Cuba was potentially imminent. And since Helms-Burton was enacted and came into (as of now still suspended) force, there have been some changes in Cuba and some changes in U.S. policy toward the island that is located only 90 miles away. Nevertheless, 60 years later, the embargo persists and claimants whose property was confiscated by the Cuban Government remain uncompensated.

Rumors that the suspension of Title III might end circulate every few years, but usually not so publicly and never from such highly placed sources. Could this time be different? – The answer is yes.

If you have or believe you may have claims to property confiscated by the Cuban Government on or after January 1, 1959, should you start dusting off old documents and trying to determine who, if anyone, may be trafficking in property in which you may have a claim?

If you are a company doing business in or with Cuba, or with Cuban products (such as nickel, timber, sugar, etc.), should you examine whether you are potentially subject to civil jurisdiction in the U.S. such that you could be sued as a defendant under Title III of Helms-Burton?

If you are the EU, should you start dusting off the old WTO complaint against the U.S.? And what might that mean if the Trump administration invokes the national security clause?

If you are Cuba and worried that such threats might stifle further foreign investment, should you “come to the table” to try to make a deal with the Trump administration?

The answer to all of these questions is of course – it depends. It depends on what you think the Trump Administration might do. It depends on whether you think the Trump Administration might be willing to break with decades of tradition. It depends on the magnitude of your potential claims and exposure. It also depends on whether there is anything that you might be able to do about it.

Are these answers satisfying and/or do they bring increased certainty to your everyday or business relations concerning Cuba? The answer is of course no. But for the last 60+ years, U.S. relations with Cuba have been impacted both because of and despite that uncertainty.

If you would like to discuss your particular situation with regard to potential claims as either a potential plaintiff or defendant under Title III, please reach out to your regular Crowell & Moring attorney or one of the POCs listed on this post.

 

 

 

 

 

 

 

 

Last week, the FAA moved forward with rulemaking on expanded drone operations with the release of several key documents: (1) a Draft Notice of Proposed Rulemaking (NPRM) for Operation of Small Unmanned Aircraft Systems over People, (2) a Draft Advanced Notice of Proposed Rulemaking (ANPRM) for Safe and Secure Operations of Small Unmanned Aircraft Systems, and (3) the announcement of the Unmanned Traffic Management (UTM) Pilot Program. This blog post, is the first of two.

The draft rule increases manufacturing and operational obligations based on the risk category, with higher-risk operations being subject to greater operational limitations and responsibilities. The lowest-risk category, light-weight drones, imposes no manufacturing requirements, and drone operations in this category can begin immediately after the final rule goes into effect. Higher-risk categories come with complex design requirements necessitating FAA acceptance, operating limitations, record-keeping requirements, and other obligations. Manufacturers should note that the proposed rule sets desired design outcomes without mandating a specific solution.

The manufacturing requirements for higher-risk operations over people will also apply retroactively to drones currently on the market. Thus, manufacturers of existing drones will need to comply with the proposed design requirements in order to market their drones for operations under the rule. Once the rule takes effect, compliance with and understanding of the design outcome requirements, and the process for FAA acceptance, will be crucial to manufacturers’ ability to market new and existing drones.

The Draft NPRM would allow routine nighttime operations and operations over people under the Small UAS Rule (14 C.F.R. §107) without a waiver or exemption. In a nod to advancing technology, the proposed rule seeks to balance the interests of safety-risk mitigation with rapid industrial innovation.

Current FAA regulations do not permit small drone operations at nighttime or over people. The existing waiver process for such operations can add substantial delays to important commercial operations. The proposed rule will provide significant relief from the cumbersome waiver process for both types of operations, subject to certain design and operational requirements.

Flying at Night and Over People

Under the proposed rule, operators may conduct nighttime operations without obtaining a waiver so long as they complete updated knowledge training and comply with anti-collision lighting requirements as specified in the Draft NPRM. Operators who do not meet these conditions may still request a waiver for nighttime operations using the traditional waiver process.

Operators would also be free to conduct operations over people, subject to important manufacturing and operational constraints. Recognizing that the risk associated with operations over people is higher than the risk of mere nighttime operations, the FAA proposes three categories of permissible operations over people, each keyed to the associated risk of injury.

The Small UAS Rule is Still in Effect

While the Draft NPRM signals an effort by FAA to relax operational restrictions for small, commercial drone operations, it does not change the overall regulatory structure for small drones. Remote pilots should note that the proposed rule does not:

  • Cancel operator requirements to comply with existing provisions of the Small UAS Rule.
  • Alter the enforcement regime currently in place.
  • Change the existing waiver process.

And, notably, the proposed rule applies only to operations conducted under the Small UAS Rule. Therefore, the following categories of operations would remain unaffected:

  • Operations of drones weighing greater than 55 pounds.
  •  Air carriers.
  • Operations under an exemption.
  • Recreational drone operators.

The FAA will not seek or solicit comments until the final NPRM is published in the Federal Register. However, interested parties should consider reviewing the draft now to identify concerns and cause for comment.

The FAA’s movement toward meeting its Congressional mandate to accelerate integration of drones into our national airspace system is encouraging for commercial drone operators. Robust industry participation in the rulemaking process is crucial to creating opportunities in the commercial drone space.

 

 

Watch our website for the second of two alerts, addressing the Draft Advanced Notice of Proposed Rulemaking and the announcement of the UTM Pilot Program, and for updates on deadlines for comments to the Notices.

 

Photo by Dunphasizer on Flickr

On 15 January 2019, Members of Parliament (MP) voted overwhelmingly against the UK Government’s proposed Brexit Withdrawal Agreement, resulting in a ‘historic loss’ for PM Theresa May. Opposition leader Jeremy Corbyn immediately called for a vote of no confidence in the Government which took place on 16 January 2019. The Government won the vote, meaning that at this stage there will be no early general election.

Options

Regarding the rejection of the Withdrawal Agreement, PM May has 3 days to present a plan on how the withdrawal should proceed. There are several options at the moment.

  • The first one is ‘hard Brexit’, which means the UK will leave the EU on 29 March 2019 with no deal in place with the EU.
  • Second, the UK government could propose to re-negotiate another agreement with the EU. At the moment, this scenario seems unlikely as EU27 persistently refuses to negotiate a new deal. If the EU nevertheless agrees, then Article 50 of the Treaty on European Union (TEU) could possibly be extended, resulting in an additional 2-year period to negotiate a new deal.
  • Third, the UK Government could hold a new referendum on the current Withdrawal Agreement; this scenario also seems unlikely, as the Government has said preparations for a new referendum could not be completed before the March 2019 exit date. Alternatively, PM May could call for an early general election in order to get a political mandate for her deal, but given the current lack of support for the deal and for her government in general this would be a risky strategy and therefore seems equally unlikely. If it were to occur, the UK could ask for an extension of the 2-year period according to Article 50 (3) TEU.
  • Finally, it is worth mentioning that according to the European Court of Justice, the UK could unilaterally revoke its intention to withdraw. However, in the current climate, this scenario seems unlikely as well.

With only 70 days until the mandated exit date arrives, it is clear the UK’s Parliament has much work to do. PM May’s new Brexit plan must be published on 21 January and a full debate and key vote on that plan will take place on 29 January.

No Consensus on Direction

She is looking to hold talks with MPs of all parties, but Mr Corbyn has refused to participate unless PM May rules out leaving the EU with no deal. In response PM May explained it is not within the Government’s power to do so and the UK will leave the EU on 29 March unless Parliament either agrees to a deal with the EU or the UK revokes Article 50 and chooses to stay in the EU permanently, which she believes would be wrong. Discussions with other parties have already taken place, but there is currently no consensus on the direction that any new plan will take.

 

Photo by Vincent Guth on Unsplash;

On October 18, 2018, U.S. Senator Tim Kaine (D-VA) and ten other Democratic senators sent a letter to the Office of the U.S. Trade Representative (USTR) asking why an exclusion process was not in place for the 10 percent tariff on List 3’s $200 billion of imported Chinese goods.

On January 11, 2019, USTR replied, telling Senator Kaine an exclusion process will not be initiated on List 3 unless negotiations fail with China and the President raises the tariff on the $200 billion worth of goods from 10 percent to 25 percent. Currently, President Trump has agreed to delay the implementation of the higher tariff until March 2, 2019.

USTR’s reply also addressed Chinese goods admitted into a Foreign Trade Zone (FTZ). The letter said, “Understandably, every importer, including importers who make use of FTZs, would prefer a special exemption from the additional tariffs. As of this time, we have not found a basis for exempting U.S. importers who use FTZs from the additional duties, when those duties apply to all other U.S. importers.”

 

 

 

 

Crowell & Moring has issued its seventh-annual “Litigation Forecast 2019: What Corporate Counsel Need to Know for the Coming Year.”

The story focusing on international trade, “Big Questions For The CIT,” provides a concise summary on how the Trump administration’s aggressive trade policy has dramatically increased the scope and scale of litigation at the Court of International Trade (CIT).

In addition, the Forecast also explores trends in #MeToo litigation, consumer protection, and more, and it provides forward looking insights to help legal departments anticipate and respond to challenges that might arise in the year ahead.

Be sure to follow the conversation on social media with #LitigationForecast.

 

Photo by Vidar Nordli-Mathisen on Unsplash;

Earlier this week, U.S. Customs and Border Protection posted a notice on Section 301 Product Exclusions announced on December 28, 2018.

The notice provided the following guidance regarding exclusions granted by USTR:

  • On December 28, 2018, the U.S. Trade Representative published Federal Register Notice 83 FR 67463 announcing the decision to grant certain exclusion requests from the 25% duty assessed on goods of China with an annual trade value of approximately $34 billion (Tranche 1), as part of the action in the Section 301 investigation of China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation. The product exclusions announced in this notice will apply as of the July 6, 2018 effective date of the $34 billion action (see Federal Register 83 FR 28710), and will extend for one year after the publication of this notice.
  • At the conclusion of the government funding hiatus, CBP will issue instructions on entry guidance and implementation.  Any updates to the Automated Customs Environment (ACE) will be implemented 10 business days after the shutdown has concluded. Until these updates are completed, entry and entry summaries must be submitted without the Chapter 99 product exclusion number referenced in 83 FR 67463.  Entry and entry summaries will be rejected by ACE if the Chapter 99 product exclusion number referenced in 83 FR 67463 is transmitted.
  • Once CBP issues guidance and implements ACE enhancements, a Post Summary Correction (PSC) or a Protest may be submitted for a refund.
  • All questions related to Section 301 entry filing requirements should be emailed to traderemedy@cbp.dhs.gov.  After the funding hiatus, questions from the importing community concerning ACE rejections should be referred to their ABI Client Representative.