BIS Alert! New Encryption Controls Guidance Posted

The Commerce Department’s Bureau of Industry and Security (BIS) has posted long-awaited updates to its guidance regarding changes to a number of encryption-related provisions in the Export Administration Regulations (“EAR”). The updates cover the changes to encryption controls adopted in September 2016 and include a quick reference guide and updated flow charts for classifying encryption items, as well as additional guidance on encryption items NOT subject to the EAR. The full updated policy guidance can be found here.

The encryption controls remain one of the more confusing parts of the dual use export controls. If you export software from the U.S., or hardware with encryption capabilities, it is important to get classifications right, and to understand and properly apply license exceptions. One classification error can lead to multiple export violations.

Up at Bat this Summer:  Renegotiating NAFTA

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NAFTA renegotiations are up at bat this summer.  In May, the Trump administration sent a letter to Congress that began a 90-day consultation period between Congress, the administration, and business stakeholders to discuss the United States’ priorities.  The 90-day period is set to expire on August 16th, at which point the United States may restart discussions with Canada and Mexico. Commerce Secretary Wilbur Ross has indicated that Congress will receive a detailed proposal in July that provides specifics on how to re-work the 1994 free trade agreement with Canada and Mexico.

Renegotiating NAFTA has been a major issue at the center of the administration’s trade policy.  USTR Lighthizer stated that the goal of renegotiation is to create an agreement that advances the interests of America’s workers, farmers, ranchers, and businesses.  Last week, USTR received over 1,300 comments from stakeholders following its request for input on how to “modernize” NAFTA.  Next week, USTR will hold a public hearing during which stakeholders can present their views for consideration by the administration.  Continue Reading

Congress Takes The Lead In Broad New Sanctions Against Russia

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On June 15, 2017, the Senate overwhelmingly – by a vote of 98-2 – approved broad new sanctions against Russia in response to that country’s interference in the 2016 U.S. election and its ongoing aggression in Syria and Ukraine.

The legislation would make several big changes.  First, the package would codify existing sanctions on Russia, which were imposed in the wake of the invasion of Crimea, into law.  Codifying the sanctions would prevent the White House from unilaterally easing or lifting the sanctions, which the administration could do under current law without obtaining approval from Congress. Continue Reading

India Challenges the United States’ Compliance on Cross-Cumulation

Earlier this month, India requested consultations with the United States at the WTO on the United States’ compliance with a WTO Appellate Body (AB) ruling from 2014.  That AB ruling held, in part, that the U.S. ITC had inappropriately “cross-cumulated” both dumped and subsidized subject imports in determining whether hot-rolled steel from several countries caused material injury to the domestic hot-rolled steel industry.

The United States had two years to comply with the AB ruling, pursuant to an agreement reached with India.  In March 2016, after briefing by interested parties, including Kelley Drye on behalf of domestic hot-rolled steel producer ArcelorMittal USA LLC, the ITC issued a “Section 129 Consistency Determination” (USITC PUB. 4599).  The ITC concluded that, under U.S. law, it was required to cumulate subject imports from India – whether subject to an antidumping or countervailing duty investigation – with imports from the other subject countries because the statutory requirements for cumulation had been met (and also continued to find that the domestic industry had been materially injured by cumulated subject imports).  In its April 2016 final determination in the investigation on PET Resin from four countries (USITC Pub. 4604), the ITC explained: Continue Reading

Appeals Court Says That Actual Arrival In Iran Is Not Necessary For OFAC To Find Violation

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On May 26, the U.S. Court of Appeals for the DC Circuit remanded for further consideration OFAC’s imposition of a $4 million penalty against Epsilon Electronics for 39 shipments found to violate the Iranian Transactions and Sanctions Regulations (“ITSR”).  According to the DC Circuit, OFAC failed to meet its burden to justify its finding of violation with respect to five of the 39 shipments in question.  The Court therefore directed OFAC to reconsider its findings with respect to the five violations and to recalculate the penalty.  Despite this being a rare circumstance in which a company (temporarily?) successfully challenged an OFAC determination in court, this ruling is not a broad rebuke of OFAC’s authority to interpret its regulations.

Even in remanding a portion of OFAC’s determination to the agency, the Court upheld OFAC’s broad interpretation of the ITSR.  OFAC’s final Penalty Notice imposed liability for 39 exports of car audio/visual equipment to the UAE that Epsilon knew, or should have known, were intended for reexport to Iran.  OFAC relied on evidence from the UAE company’s site advertising extensive relationships with Iran, among other factors, to draw its conclusion.  Epsilon argued that OFAC did not prove that any of the 39 shipments actually arrived in Iran.  The Court agreed with the government that actual arrival in Iran is not necessary to find a violation – that exporting with reason to know the items were intended for Iran is sufficient to sustain a finding of violation. Continue Reading

Commissioner Kieff Announces Departure from ITC

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Commissioner F. Scott Kieff has announced that he will leave the ITC at the end of this month to return to his positions at the George Washington University School of Law and Stanford University’s Hoover Institution.  Commissioner Kieff’s last day at the ITC will be June 30, 2017.  Kieff has served as an ITC Commissioner since 2013, and his term was set to expire on June 16, 2020.  As a result of Commissioner Kieff’s department from the ITC, two of the six Commissioner seats will be vacant.  The President has yet to announce any nominations for the vacant positions.

Prior to assuming his role as an ITC Commissioner, Kieff held positions as a professor at the George Washington University School of Law and the Ray & Louise Knowles Senior Fellow at the Stanford University Hoover Institution.  According to his bio, Commissioner Kieff’s research, teaching, practice, and consulting work focused on the law, economics, and politics of innovation, including entrepreneurship, corporate governance, finance, economic development, trade, intellectual property, antitrust, bankruptcy, medical ethics, technology policy, and health policy.

 

ITC Votes Unanimously to Continue Investigations on Cold-Drawn Mechanical Tubing from Six Countries

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On June 2nd, the International Trade Commission (“ITC”) voted to continue the antidumping and countervailing duty investigations on cold-drawn mechanical tubing from China, Germany, India, Italy, Korea, and Switzerland.  The ITC’s preliminary vote finding a reasonable indication that the domestic industry is material injured by reason of imports from the six countries was unanimous.  As a result of the affirmative preliminary injury finding, the Commerce Department will continue its respective investigations to determine whether cold-drawn mechanical tubing from each of the six countries is being unfairly subsidized and/or sold at less than fair value.  The petitions for trade relief, filed on April 19th, allege margins of dumping that range from the double digits to the triple digits for certain countries, including China, Germany, and Switzerland.  The countervailing duty petitions for China and India identify numerous subsidy programs including, for example, export loans, credit and insurance at preferential rates, preferential tax treatment, and government grants.  The ITC and Commerce Department are expected to issue their final determinations by or before early next year.  Continue Reading

Commerce Department Signals that Findings in Section 232 Investigations on Steel and Aluminum are Imminent

The Commerce Department has signaled that it will issue findings in its respective “Section 232” investigations covering imports of steel and aluminum before the end of June.  Section 232 of the Trade Expansion Act of 1962 (19 U.S.C. § 1862) grants the U.S. Department of Commerce the authority to conduct an investigation to determine whether imports of particular merchandise threaten the national security.  The Commerce Department then issues its findings, along with a recommendation for action, to the President.  A conclusion that imports of steel or aluminum threaten the national security allows the President to decide whether to adjust or modify the volumes or prices of imports of foreign-made steel or aluminum into the United States.  Continue Reading

Results of the OECD Ministerial and a New Ambassador for the United States

The Ministerial Council of the Organization of Economic Cooperation and Development (OECD) wrapped up a two-day meeting this week with a joint statement for the organization’s policy priorities.  The OECD was established in 1961 as a forum for democratic, market economies to exchange economic and social policy ideas, collect data, and identify best practices.  This most recent ministerial resulted in consensus on a number of topics, including competition and corporate governance, taxation, responsible business conduct, the digital economy, and corruption.

Notably missing from the consensus text, however, was a joint text on international trade, investment, and climate change, which was not agreed to by the United States.  The OECD Chairman issued a separate statement outlining full consensus on points such as the establishment of the Global Forum on Steel Excess Capacity, further analysis by the OECD on the benefits of trade, and the importance of reducing trade barriers and costs.  There was “near consensus” on the need to strengthen the WTO, to “resist protectionism,” and to recognize the importance of the Paris Climate Agreement, among other issues.  The United States issued its own statement, emphasizing the importance of combatting trade barriers, enforcing existing trade agreements, and addressing “trade imbalances.” Continue Reading

It’s Time To Comment on Miscellaneous Tariff Petitions

The American Manufacturing Competitiveness Act of 2016 (“AMCA”) established a new process for the submission and evaluation of requests for temporary duty suspensions and reductions.  Under the AMCA, petitions for duty suspensions and reductions are filed with the U.S. International Trade Commission (“Commission” or “USITC”), and the Commission, with input from other federal agencies, reviews each petition.  The Commission must submit preliminary and final reports to two Congressional committees (the House Committee on Ways and Means and the Senate Committee on Finance).  Following the final report’s submission, the Committees will draft a miscellaneous tariff bill (“MTB”).  Once the MTB passes, the temporary duty suspensions or reductions will be take effect for a period not to exceed three years. The process will repeat again in a second series, no later than October 15, 2019.

In the first series, over 3,100 petitions were submitted to the ITC through its online Miscellaneous Tariff Bill Petition System (“MTBPS”).  Due to petition withdrawals, 2,500 petitions still are under consideration.  On June 6, 2017, the Commission issued its preliminary report to the Committees, entitled:  American Manufacturing Competitiveness Act of 2016: Preliminary Report, USITC Pub. 4699 (USITC June 2017).   Continue Reading

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