Could Brexit Benefit Africa Through Science-based Decisions on GMOs?

Prime Minister Theresa May’s recent visit to Kenya, South Africa and Nigeria was the latest in the United Kingdom’s global diplomacy effort to secure strategic economic­ partnerships in preparation for the UK leaving the European Union (EU).  In the first visit of a UK Prime Minister to Africa since 2013, a 29 person delegation of government and private sector representatives pursued May’s goal of becoming Africa’s biggest foreign investor within four years.  As a result of the trip, trade and investment deals worth some 300 million GBP were announced, involving everything from automobile manufacturing and digital money transfer services to insurance and agricultural technology. Importantly, the UK also reached a deal with the Southern African Customs Union and Mozambique to facilitate trade and announced major investments in education and voluntary family planning for the future of African youth.

Trade between the UK and Africa already is worth 31 billion GBP annually.  By 2050, a quarter of the world’s consumers will be African. According to the Prime Minister, “With a shared passion for entrepreneurship, technology and innovation, now is the time for UK companies to strengthen their partnerships with Africa to boost jobs and prosperity both at home and overseas.”

According to the African Agricultural Technology Foundation, 233 million Africans are either suffering from hunger or are malnourished; 32 million of these are under the age of five.  While Africa’s economy is driven by agriculture, farming continues to be largely at a subsistence level:  80 percent of the 51 million farmers are small holder farmers.  Further, 95 percent of all farming in Africa is entirely dependent on rainfall.  The challenge under these conditions is to increase food production by 50 to 70 percent by 2050 without destroying the environment.  What will be required is a combination of increasingly sophisticated farming techniques (e.g. precision farming), precision breeding; improved stewardship; access to advancements achieved by modern biotechnology to increase drought tolerance, increase yield, and combat plant pests and diseases; and enabling regulatory policies and frameworks.  Critical is the fact that more efficient agriculture directly translates into freeing women and children to pursue other economic activities and/or education. Continue Reading

Preparing for the Worst:  Licenses Needed for UK Export of Dual Use Items

It has always been a possibility that the United Kingdom would crash out of the European Union on 30 March 2019 but “no deal” preparation is now highly recommended by both sides.  For organisations that export dual use items, the possibility of the UK becoming a “third country” vis-à-vis the EU without an exit agreement or transition period means an overnight need for export licenses where none are required today.

Seasoned international businesses understand that dual use items, which can be used for both civil and military purposes, include far more products than one might assume.  In addition to the more obvious goods that may be used to produce or develop military items, such as machine tools and equipment used for chemical manufacturing, computers, drawings, technology, software, raw materials, and components also may be subject to dual use controls.   Even seemingly mundane items such as protective clothing used in medical laboratories, certain commonly used chemicals, certain ball bearings, and a wide variety of other products are controlled for export and they need to be properly classified to determine if a license would be needed to ship to a UK that has left the EU.  Many entities that have been operating exclusively within the EU could soon be confronted with dual use licensing requirements for the first time and global businesses may be faced with a potentially significant increase in the number of items that need be licensed. Continue Reading

President Trump is Expected to Terminate NAFTA Following Agreement in Principle with Mexico

On Monday, August 27, President Trump announced that he intends to terminate NAFTA if discussions with Canada are not finalized by the end of the week.  This news follows the successful negotiation of an agreement in principle for trade between the U.S. and Mexico.  While, according to the USTR, the agreement provides the “most comprehensive set of enforceable environmental obligations of any previous United States agreement,” the deal also contains numerous provisions of note involving trade.

The agreement in principle is expected to contain a more robust intellectual property (“IP”) chapter than that of its NAFTA predecessor.  In fact, the USTR is calling the chapter the “most comprehensive” for enforcement of IP with any trade agreement to which the U.S. is a party.  In particular, among other provisions, enforcement authorities must be able to stop the entry or exit of goods that are suspected to be pirated or counterfeited, the countries must establish “meaningful” criminal penalties for the camcording of movies, the countries will require national treatment for copyright, and both countries will make available civil and criminal remedies for the theft of trade secrets.  Continue Reading

Bans on Imported Waste Continue in Southeast Asia

On August 16, 2018, Reuters reported that Thailand plans to ban imports of a variety of scrap electronics within the next six months and recycled plastic within the next two years.  The Thai Minister of Natural Resources and Environment, Kanchanarat, cites environmental and health concerns as the reason for the ban.

While some repairable appliances, such as telecommunication devices, will continue to be allowed to enter the country, 432 types of electronic waste, such as circuit boards, will not. The trade in so called “e-waste” is centered around the ability to mine the scrapped electronic items for copper, gold, platinum, silver, and the like.  In addition to valuable components, e-waste often contains potentially harmful elements including lead.

Thailand is not alone in its concerns about imported waste. Earlier this week, more than 100 plastic waste processing factories’ import permits were revoked in Malaysia due to environmental concerns.  Likewise, Vietnam announced last month that it will cease issuing new licenses for the import of waste products.  Vietnam also noted environmental and health concerns as the primary reasons for the new policy.  Waste processing serves as a supplemental source of materials for Vietnam’s paper, plastic, and steel industries, according to Reuters.  In regard to plastic, some Vietnamese companies reportedly use as much as eighty percent recycled materials in production.

The changing policies across the region are likely in response to recent and sizable increases in the volume of waste imports in the respective countries. Waste imports in Southeast Asian countries increased after China banned certain waste imports earlier this year.

BIS Proposed Expansion of Export Controls of Spraying and Fogging Systems Could Affect Agriculture Industry and Spray Equipment Used in Other Industries

Earlier this week, the Bureau of Industry and Security (“BIS”) published a request for public comment regarding a proposed expansion of export controls under the Export Administration Regulations (“EAR”) for certain spraying or fogging systems, which are controlled under Export Control Classification Number (“ECCN”) 2B352.i.  Currently, the ECCN controls only spraying or fogging equipment that is specially designed or modified for use on certain aircraft that also meet certain technical specifications related to droplet size and flow rate.[1]

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US Customs Releases Proposed Drawback Rules Comments Due September 16th

US Customs and Border Protection has finally released the much anticipated proposed changes to the drawback regulations. (See FRN August 2)

Drawback provides an opportunity for importers to apply for refunds of duty payments upon exportation of the same or similar product. It is also a terrific opportunity for importers of components to receive duty refunds once the finished product is exported. Importers and exporters need not be the same party to apply for drawback as long as there is cooperation between the two.

The 444 page proposed regulations attempt to simplify the program especially with regard to manufacturing in the US and record keeping requirements. Electronic filing will also be a new requirement. Comments may be submitted until September 16, 2018.

Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA)

After months of negotiation, Congress recently passed, and the president is expected to sign, the Foreign Investment Risk Review Modernization Act of 2018 (“FIRRMA”).[1]  FIRRMA updates the national security review of inbound investments undertaken by the Committee on Foreign Investments in the United States (“CFIUS” or “the Committee”), an interagency body located within the Treasury Department.   The bill is broad, expanding and clarifying the Committee’s jurisdiction, codifying CFIUS practices, amending the Committee’s administrative procedures, and granting judicial review of CFIUS decisions.  However, the final legislation did not adopt several proposals, including expanding the Committee’s authority over export control regulations and certain joint ventures.  Overall, we expect FIRRMA to create a more aggressive, transparent, and efficient CFIUS process.

Expansion and clarification of jurisdiction

FIRRMA both expands CFIUS jurisdiction and codifies certain existing practices.  CFIUS reviews certain “covered transactions” to determine whether proposed foreign investments in a U.S. business would impair U.S. national security, and has the authority, along with the president, to block or amend transactions.  Under current law, a “covered transaction” requires that a foreign person have effective control over a U.S. business.[2]  FIRRMA expands CFIUS jurisdiction to several non-controlling transactions, if the investment involves:

  • Critical technologies.  This includes items or technology that are subject to export controls under either the International Traffic in Arms Regulations (“ITAR”) or the Export Administration Regulations (“EAR”), as well as certain undefined “emerging and foundational technologies.”[3]
  • Critical infrastructure.  The Committee will “enumerate specific types and examples” of critical infrastructure, and will presumably include defense and military, energy, telecommunication, and financial infrastructure, among others.  However, because the regulations will likely enumerate a non-exhaustive list, the Committee may interpret this term broadly.
  • Sensitive personal data of U.S. citizens.  This will broadly include consumer data, as well as information regarding financial services, insurance, and health care.

However, CFIUS is authorized to exempt certain countries from these non-controlling transactions.

Other expansions of CFIUS jurisdiction include the Committee’s ability to review certain changes in a foreign investor’s existing rights in a U.S. entity, which could allow the Committee to review both the initial investment by a foreign person, as well as any future investment or change to an entity’s governance structure or authorities.  Further, CFIUS may review transactions in real estate located near military facilities, ports, or other sensitive national security facilities.  These expansions largely formalize our experience with current CFIUS practices. though it may signal the Committee’s intention to assert this jurisdiction more aggressively.

Administrative procedures and appeals

FIRRMA made significant changes to the CFIUS process, including changes regarding expedited reviews for less sensitive transactions, mandatory filings for certain transactions, timing of the review and investigation procedures, and transparency.

  • Expedited reviews.  CFIUS will permit parties to file a short “declaration,” rather than a full joint voluntary notice, describing less sensitive transactions.  CFIUS will then have 30 days to respond to the declaration by either clearing the transaction or demanding a full joint voluntary notice.
  • Mandatory filings.  Under current law, submitting a transaction to CFIUS for review and investigation is a voluntary process.  Although most transactions will remain subject to voluntary filing, CFIUS will require notification of transactions in which the U.S. business involves either critical infrastructure or critical technology, and a foreign government has a substantial interest in the foreign investor.  CFIUS will define “substantial interest” in subsequent rulemakings.
  • Review and investigation timelines.  When considering a transaction, CFIUS currently has a 30-day review period and an additional 45-day investigation period, if necessary.  FIRRMA extends both of these timeframes, automatically making the review period 45 days and allowing the Committee to extend the investigation phase to 60 days, if necessary.
  • Increased transparency.  CFIUS currently provides an annual report to Congress, but focuses almost exclusively on broad, aggregated statistics (such as the nationality of foreign investors and the economic sector of the U.S. business).  FIRRMA will require CFIUS to report at least basic details regarding all reviews that include a full notice, which will include the results of the case.  CFIUS will also be required to provide statistics on the length of time the CFIUS review process takes.  The increased transparency will offer parties significantly more information regarding how CFIUS has handled transactions in the past and may allow the development of some baseline precedents.
  • Judicial review.  Currently, only very limited substantive due process appeal rights exist in the CFIUS context.[4]  FIRRMA will allow appeals of CFIUS determinations to the DC Circuit Court of Appeals, though presidential determinations are not included in the right to judicial review.
  • Filing fees.  CFIUS will establish by regulation a filing fee for full notices, though the fee may not exceed either $300,000 or one percent of the value of the transaction.  These fees will allow CFIUS to increase its staff to handle CFIUS’ notoriously heavy workload.

FIRRMA reflects Congressional recognition that CFIUS requires broader direct authority to perform its national security reviews, especially over critical technologies and infrastructure, as those terms will be defined under the regulations.  The new statutory authority to review transactions implicating sensitive personal data will give the Committee the opportunity to greatly expand its jurisdiction beyond cases traditionally associated with national security and into other, rapidly increasing economic sectors and businesses that store significant amounts of personal data.  Even though certain FIRRMA provisions are arguably codifications of current CFIUS practices, the Committee now has direct authorization to continue to aggressively interpret transactions falling within its jurisdiction.

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[1] Although the majority of the statutory provisions will come into force 180 days after FIRRMA’s effective date, some provisions will be in force immediately after the president signs the bill, including the changes to the review and investigation period timeframes and the right to judicial review.

[2] In our experience, any transaction not meeting the regulatory 10 percent foreign ownership threshold has been potentially subject to CFIUS review.

[3] An interagency committee will be established to identify emerging and foundational technologies.

[4] See Ralls Corp. v. CFIUS.

Exports of National Security Controlled Items to Russia Could Be Banned Under New Sanctions

Yesterday the U.S. government announced that it would implement new sanctions against Russia mandated under the Chemical and Biological Weapons Act of 1991 (the CBW Act) following the apparent deployment of a chemical weapon on British soil by Russia.

The first round of sanctions, which are expected to come into force on or around August 22, will prohibit many exports and reexports of goods, software, or technology to Russia controlled for national security reasons under the dual use Export Administration Regulations.  Such items include gas turbine engines, encryption items, electronics components, optical equipment, lasers, sensors, electronic components, materials, and certain unmanned systems, among many others. National security controlled items currently require a license to be exported to Russia, but the new rules will require the Commerce Department to apply a ‘presumption of denial’ to future license requests in many instances.  In a briefing announcing the new sanctions, the State Department indicated that certain exceptions will be made, including those related to joint space activities, aviation safety, and the activities of U.S. and other foreign companies in Russia.  While the scope of the sanctions has yet to finalized, the State Department suggested that up to half of all licensed exports to Russia are controlled for national security reasons.  If the sanctions are fully enforced, the impact could be substantial – based on 2016 figures over $1 billion in trade could be impacted. Continue Reading

Exporting to India is Getting Easier

A set of changes to the U.S. dual use export control rules makes exporting sensitive goods, software, and technology to India less burdensome.

Over the last several years, India has joined three of the four major multilateral export control regimes – the Missile Technology Control Regime (MTCR), the Wassenaar Arrangement, and the Australia Group.  In response to India’s ascension to these agreements, the United States has amended the Export Administration Regulations (EAR) to ease export control license requirements for exports and reexports of qualifying items to India.

Earlier this year, the Bureau of Industry and Security (BIS) lifted license requirements for exports and reexports of “CB2” controlled items to India, including fluid handling equipment controlled under Export Control Classification Number 2B350 and chemicals controlled under ECCN 1C350, as a result of India’s ascension to the Australia Group.  This move eased restrictions on many fluid handling companies that produce controlled equipment, as they may more easily transfer products and share data between operations in India and the United States.

Last week, BIS lifted licensing requirements for transfers of items controlled for “NS2” reasons to India, including a broad array of optical equipment, lasers, sensors, electronic components, and materials, reflecting India’s status as a participant in the Wassenaar Arrangement.  The amendment also allows exporters to more broadly use License Exception Strategic Trade Authorization (STA) to export more sensitive items controlled for national security purposes to India without a license.  Although license exception STA involves a number of administrative steps, once an STA program is set up, it can be far more efficient to use than obtaining individual licenses from BIS for each export.

 

First Set of U.S. Secondary Sanctions on Iran Snap Back on August 7, EU Blocking Statute Comes Into Force

Tomorrow the United States will re-impose a set of secondary sanctions on Iran as the newly amended EU blocking statute comes into force.

Following the U.S. withdrawal from the multilateral Iran nuclear deal (the Joint Comprehensive Plan of Action or JCPOA), the United States is set to re-impose a raft of secondary sanctions targeting Iran.  The secondary sanctions are designed to penalize non-U.S. companies for conducting certain types of business involving Iran, even in cases where that activity occurs wholly outside of U.S. commerce.  Pursuant to prior announcements and a new Executive Order, tomorrow the United States will have the authority to sanction non-U.S. companies that engage in the following types of activity with Iran:

  • The purchase or acquisition of U.S. dollar bank notes by entities owned or controlled by the Government of Iran;
  • Trade in gold or precious metals;
  • The direct or indirect sale, supply, or transfer to or from Iran of certain materials, including graphite, raw and semi-finished metals (such as aluminum, steel, and coal), and certain software for integrating industrial processes;
  • Significant transactions related to the Iranian rial;
  • The purchase of, subscription to, or facilitation of the issuance of Iranian sovereign debt; and
  • The sale or supply of significant goods or services related to the Iranian automotive sector, including the manufacture and assembly of light and heavy vehicles, the manufacture of aftermarket parts, and the provision of auto kits or “knock-down kits.”

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