Today, the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC) imposed sanctions on Rosneft Trading S.A., a Switzerland-based subsidiary of Russian state-controlled global energy company Rosneft Oil, and its president and board executive Didier Casimiro.  Specifically, OFAC designated the company as a specially designated national (SDN) pursuant to Executive Order (E.O.) 13850 for supporting the Maduro regime by brokering the sale and transport of Venezuelan crude oil in circumvention of U.S. sanctions laws.  OFAC designated Casimiro as an SDN for acting on behalf of Rosneft Trading S.A. in collaborating with Petróleos de Venezuela (PdVSA), the designated Venezuelan state-owned oil company, on projects between Rosneft Trading S.A. and PdVSA.  Rosneft Trading S.A., as well as parent Rosneft Oil Company, were previously subject to restrictions under Ukraine/Russia related Directives 2 and 4 for operating in the energy sector of the Russia Federation.

Along with the designations, OFAC also issued General License (GL) 36 authorizing U.S. persons to engage in certain activities necessary to wind down transactions involving Rosneft Trading S.A., or any entity in which the company owns, directly or indirectly, a 50% or greater interest, through 12:01 a.m. eastern daylight time, May 20, 2020.

After the GL 36 expires, unless exempt or otherwise authorized by OFAC, U.S. persons will no longer be able to engage in transactions with Rosneft Trading S.A., or any entity in which Rosneft Trading S.A. owns, directly or indirectly, a 50 percent or greater interest, and must block property or interests in property of Rosneft Trading S.A. that are in the United States or the possession or control of a U.S. person.  Blocked transactions will also be subject to OFAC reporting requirements.

Please contact us with any questions on these developments.


Last Friday the United States Trade Representative (USTR) ramped up its tariffs on European aircraft, increasing the duty from 10% to 15%, effective March 18.

It also announced it would make minor modifications to 25% tariffs imposed on cheese, wine, Irish and Scotch whisky, and other non-aircraft products from the EU, namely adding a 25% tax on French and German butcher and kitchen knives and dropping prune juice from the list of taxed items. While the move is hard-hitting, particularly for European aircraft, EU officials had feared more drastic measures in an increasingly fraught trade relationship with the U.S.


The tariffs are part of a 15-year-old complaint over European aircraft subsidies to plane maker Airbus, putting Boeing, its U.S. competitor, at a disadvantage. Last October, the World Trade Organization authorized the U.S. to impose tariffs of up to 100% on 7.5 billion dollars’ worth of EU exports annually to recoup its losses. The imposed duties are lower than those permitted under WTO’s ruling, however, USTR decided against additional escalation after a mid-December public consultation recorded protestations from more than 26,000 U.S. consumers and industries. While USTR’s latest action on tariffs thus could have been significantly more painful, businesses hoping for a relief remain disappointed with the levies, which are expected to continue until the U.S. and EU come to a negotiated resolution. As the two sides cannot agree on terms for starting talks, this remains an uncertainty at least in the short-term.

Potential for Escalation

Further escalation by Washington also is anticipated if Brussels hits U.S. imports with tariffs over unfair subsidies to Boeing. The WTO is expected to rule this spring on damages caused by U.S. plane maker’s state tax breaks, which would authorize the EU to target U.S. goods with retaliatory tariffs. A preliminary list of U.S. goods proposed as targets for EU retaliatory tariffs was drawn up last year, focusing primarily on U.S. farm products. Although Brussels no doubt is mulling over a right response to the most recent U.S. tariff hikes on aircraft, the broader picture for the EU remains to reset its trade relations with the U.S.

Impact on EU-US Trade Agreement

At the beginning of the year, European Commission President Ursula von der Leyen announced that she is seeking a mini trade deal with the U.S. in the next few weeks covering trade, technology and energy. However, the U.S. insists any deal must include EU agricultural concessions – a sticky and politically explosive topic for the EU. EU officials have conceded agricultural concessions could come in the shape of separate commitments lowering EU non-tariff barriers for certain U.S. farm goods. It has been suggested this could include the approval of more genetically modified crops for sale in the bloc, which is of obvious interest to the U.S. Continue Reading U.S. increases tariffs on European aircraft: EU response a litmus test for transatlantic trade relations

On January 17, 2020, the U.S. Treasury Department published final rules in the Federal Register implementing the Foreign Risk Review Modernization Act (“FIRRMA”), one of which implements FIRRMA’s provisions regarding foreign investments in U.S. real estate.  In accordance with FIRRMA’s expansion of Committee on Foreign Investment in the United States (“CFIUS”) jurisdiction, these final rules give CFIUS jurisdiction over purchase or lease by, or concessions to, foreign persons of “covered real estate” even when there is not an investment in a U.S. business.[1]  These final rules are generally consistent with the rules proposed last September.

Covered real estate transactions

The final rules identify two types of covered real estate: 1) real estate within, or that will function within or as a part of, a “covered port;” and 2) real estate within “close proximity” of U.S. military installations or other government property.  The former group includes certain airport and maritime ports identified by reference to other regulatory authorities, incorporating both major airports and strategically significant seaports.  The latter group includes real estate within one mile from the outer boundary of a designated military installation or other government property (i.e., in “close proximity” to such a location) and property within 100 miles of the real estate (i.e., within an “extended range” of such a location), among other enumerated properties.  The relevant properties are enumerated within the rule and will be included in an appendix to Part 802.

To qualify as a “covered real estate transaction” transaction within Part 802, a transaction must confer certain property rights to covered real estate.  Specifically, a transaction is covered only if it allows a foreign person at least three from the following property rights: 1) access the real estate; 2) exclusion of others from the real estate; 3) improve and/or develop the real estate; 4) attach fixed or immovable structures and/or objects to the real estate.  Holding these rights concurrently with another party, including a U.S. party, does not remove such a transaction from CFIUS jurisdiction.


The final rules identify a series of exceptions to what would otherwise be covered real estate transactions:

  • Excepted real estate investors: certain individuals, governments, and entities meeting a series of factors, provided that they are from an “excepted real estate foreign state.”  Currently, the excepted real estate foreign states are Australia, Canada, and the UK, though this list has the potential to expand.
  • Urbanized areas and urban clusters: real estate transactions that are within urbanized areas or urban clusters, as defined by the U.S. census, are excepted unless they are in close proximity to a military site or within, or functioning as a part of, a covered port.
  • Other exceptions are available for certain commercial office space and individual housing units, among other enumerated exceptions.

CFIUS explicitly refused to adopt an exception for certain intra-company real estate transactions.

These final rules become effective February 13, 2020, and will be located at 31 C.F.R. Part 802.

[1] Transactions in real estate that qualify as controlling investments in a U.S. business continue to be subject to CFIUS jurisdiction pursuant to 31 C.F.R. Part 800 under the traditional “control” analysis.

The United Kingdom will need a new most favored nation tariff regime as early as January 2021 when the current Brexit transition could come to an end and is calling on businesses, consumers, and others to advise which tariffs should be eliminated or reduced.

The EU’s Common External Tariff, which currently applies to all imports into the UK from non-EU countries, will essentially be marked up to create the new UK Global Tariff (UKGT). Guiding principles for the UK’s forthcoming independent trade policy already are enshrined in UK law and focus on the interests of UK consumers and producers and the general promotion of free trade.

The UK proposes to simplify and tailor tariffs in the interest of UK businesses and households by:

  • Eliminating “nuisance tariffs”, i.e., tariffs of less than 2.5%, to reduce administrative burden on business;
  • Rounding other tariffs down to the nearest standardized 2.5%, 5% or 10% band to make the system easier for businesses to use; and
  • Removing tariffs on key inputs to production or where the UK has zero or limited domestic production to reduce costs for UK manufacturers and lower prices for consumers.

Conveniently, the UK has created interesting menus of goods for which there may be reduction or elimination of tariffs. These lists include:

  • Broad Economic Categories, such as valves; pulleys and flywheels; graphite electrodes; aluminum, copper, and various iron and steel products; and parts for metal-rolling mills;
  • Tariff Suspensions, such as mushrooms; valves; polyethylene terephthalate (PET); and iron, steel, and stainless steel products; and
  • Inward Processing, such as PET; valves; and iron, steel, aluminum, and titanium products.

The foregoing proposals are not exhaustive, however. Suggestions are invited for other goods that should be considered as candidates for reduced or removed tariffs. The UKGT will apply to all goods imported into the UK from 1 January 2021 (or a later date if the UK and EU agreed to extend the transition period) except for goods from developing countries under the WTO Generalised Systems of Preferences or those governed by the free trade agreements the UK expects to negotiate in the coming months.

Stakeholders have until 5 March 2020 to send in their wish lists.

The United States and India are working to complete a limited trade deal later this month. U.S. Trade Representative Robert Lighthizer will travel to India to finalize the agreement in the coming weeks. President Trump is expected to sign the agreement when he visits India around February 24-25, his first trip to India as president. The agreement should quell trade tensions between the two nations, which have been rising since they failed to reach a deal late last year.

The United States will restore India’s benefits under the Generalized System of Preferences (“GSP”) as part of the deal. The GSP program eliminates duties on a range of products for certain developing countries designated by the United States. President Trump removed India from the program in June 2019, citing various trade barriers and market access issues faced by U.S. companies in India. India’s benefits under the program are valued at $6.4 billion.

Also as part of the deal, India will (1) remove price controls on medical devices, including heart stents and knee implants, (2) improve market access for agriculture and dairy products, and (3) add intellectual property protections. The agricultural products benefiting from greater market access include almonds, cherries, pork, hay, and dried grains. The benefits accruing to the United States from these commitments will match the $6.4 billion benefit India would gain under the GSP program.

Both sides hope to incorporate tariff reductions, which could include reductions for duties on U.S. information and communication technology goods and Harley-Davidson motorcycles. It is unclear at this point if U.S. duties on Indian steel and aluminum under Section 232 will be affected.

Although this pact is relatively limited in scope, it represents the first step towards a more comprehensive trade agreement between the two nations.

Late last Friday evening, President Trump issued a proclamation imposing duties on imports of certain derivatives of steel and aluminum articles that have been found to threaten the national security.  The proclamation specifically identified products that were subject to the new duties (effective February 8, 2020), but it was unclear whether two yet-to-be-released Annexes would identify a more expansive list of products.

Yesterday, the proclamation and accompanying annexes were published in the Federal Register revealing that the list of products covered by the new duties was extremely limited.  It is unclear, however, whether the criteria laid out in the President’s proclamation will be used to apply duties to additional derivative steel and aluminum articles in the future.

For additional information regarding the President’s proclamation, please click here.

For a copy of the proclamation and accompanying annexes, please click here.

On January 17, the U.S. Treasury Department issued final rules implementing the Foreign Investment Risk Review Modernization Act (“FIRRMA”), which expanded and clarified the jurisdiction of the Committee on Foreign Investment in the United States (“CFIUS”) (an additional final rule regarding real estate transactions was published the same day and will be the subject of an additional alert).  These final rules, which are effective on February 13, 2020, generally reflect the rules that were proposed in September 2019.  However, the final rules include some marginal changes and provide significant additional context and examples.

The primary jurisdictional expansion in FIRRMA is CFIUS jurisdiction over certain non-controlling investments in technology, infrastructure, and data U.S. businesses (“TID U.S. businesses”), including U.S. businesses that: 1) produce, design, test, manufacture, fabricate, or developed a “critical technology”; 2) own, operate, manufacture, supply, or service “critical infrastructure”; or 3) maintain or collect “sensitive personal data” of U.S. citizens.

The final rules maintain the pilot program mandatory declaration concept for critical technology investments, with a few changes (including by moving the rules from 31 C.F.R. Part 801 to 31 C.F.R. Part 800).  For example, the final rules include the following exceptions from the mandatory filing requirements: 1) transactions involving excepted investors (excepted investors include a foreign national who is a national of one or more “excepted foreign states,” among other specified entities); 2) transactions involving encryption technologies that qualify for license exception ENC under 15 C.F.R. Part 740 of the Export Administration Regulations; 3) entities that are already subject to a foreign ownership, control, or influence mitigation agreement pursuant to the National Industrial Security Program regulations; and 4) transactions involving investment funds managed by a U.S. general partner, managing member, or equivalent that is either not a foreign person or is ultimately under U.S.-person control; among other exceptions.  “Critical technology” includes technology controlled for export under the International Traffic in Arms Regulations, Export Administration Regulations, or is designated as an emerging or foundational technology, among other related controls.  Further, the final rule anticipates a future rulemaking that changes the jurisdictional hook from industry designations determined by reference to NAICS codes to a focus on export control requirements.

The final rules also modified some of the proposed rules’ treatment of “sensitive personal data.” The treatment of genetic information as a subset of sensitive personal data has generally become more permissive in the final rule by stating that covered genetic information must be “identifiable data,” or traceable to a specific individual.

Finally, broad exceptions are available to “excepted foreign states” and “excepted investors.”  Beginning on the effective date, Australia, Canada, and the United Kingdom will qualify as excepted foreign states, and qualifying investors from those countries are free from FIRRMA’s broadened jurisdiction related to non-controlling investments.  This list may expand in the future.

These final rules expand and substantially complicate CFIUS jurisdictional analysis.  The regulations include significant detailed guidance regarding the rules’ interpretation and implementation, which often limits what appears to be very general applicability.  Further, certain aspects of FIRRMA implementation remain incomplete (including the ultimate scope of “critical technologies”), even after this final rule, and CFIUS acknowledges in the rulemaking that periodic review and amendment of these rules will be appropriate.  Accordingly, careful review and analysis of the new rules is vital when assessing potential transactions from a CFIUS perspective.

On Friday, January 24, 2020, President Trump issued a proclamation expanding duties imposed on steel and aluminum articles pursuant to Section 232 of the Trade Expansion Act, commonly referred to as “Section 232 duties,” to certain downstream steel and aluminum “derivatives.”

Application of 232 duties to “derivative articles” is authorized by statute.  Indeed, while the scope of a 232 investigation is limited to certain “articles,” a remedy may be imposed on the articles subject to the investigation as well as their derivatives.  19 U.S.C. § 1862(b)-(c); see also 15 C.F.R. §§ 705.2 – 705.3.

The Trade Expansion Act of 1958 added the “derivative articles” language to the statute in order to prevent imports of derivative articles from undermining remedies imposed on imports of articles found to threaten the national security.  The President’s proclamation indicates that the determination to expand Section 232 duties was taken for this very reason – to address foreign producers’ circumvention of Section 232 duties by increasing shipments of derivative articles to the United States and because “imports of these derivative articles threaten to undermine the actions taken to address the risk to the national security of the United States.”

Products covered by the President’s proclamation are those “derivatives” of steel and aluminum articles that meet the following three criteria:

  1. the aluminum article or steel article represents, on average, two-thirds or more of the total cost of materials of the derivative article;
  2. import volumes of such derivative article increased year-to-year since June 1, 2018, following the imposition of the Section 232 duties, in comparison to import volumes of such derivative article during the 2 preceding years; and
  3. import volumes of such derivative article following the imposition of the tariffs exceeded the 4 percent average increase in the total volume of goods imported into the United States during the same period since June 1, 2018.

The proclamation also specifically identifies “steel nails, tacks, drawing pins, corrugated nails, staples, and similar derivative articles,” “aluminum stranded wire, cables, plaited bands, and the like (including slings and similar derivative articles),” and “bumper and body stampings of aluminum and steel for motor vehicles and tractors” as being covered, though it is unclear if two yet-to-be-released Annexes will identify a more expansive list of products.

Effective February 8, 2020, derivative steel articles will be subject to a 25 percent tariff, but imports from Argentina, Australia, Brazil, Canada, Mexico, and South Korea are exempted.  Similarly, derivative aluminum articles will be subject to a 10 percent tariff, but imports from Argentina, Australia, Canada, and Mexico are exempted. In the event of a surge of imports of any identified derivative article from an exempted country, however, the Secretary of Commerce is authorized extend tariffs to imports from that country or apply an alternative remedy.

The proclamation also authorizes Secretary Ross to establish an exclusion process from the additional duties “for any derivative article determined not to be produced in the United States in a sufficient and reasonably available amount or of a satisfactory quality” as well as “upon specific national security considerations.”

We will continue to monitor this important issue in the coming days and weeks as more details become available concerning the Proclamation’s coverage as well as any exclusion process established.

On January 15, 2019, President Trump and Chinese Vice Premier Liu He signed the long-awaited “phase one” trade deal at the White House. The deal represents the first step towards a comprehensive agreement between the two nations and progress in the U.S.-China relationship. The deal will help ease trade tensions signaling a truce in the trade war, at least for a while.  The signing also marks the beginning of “phase two” negotiations, which will almost certainly be more contentious. “Phase two” will not be completed before the November election.

The Agreement

The agreement has eight chapters, including chapters on (1) intellectual property, (2) technology transfer, (3) agriculture, (4) financial services, (5) macroeconomic policies and exchange rate matters and transparency, (6) expanding trade, and (7) bilateral evaluation and dispute resolution.

As part of the agreement, the United States has already postponed a 15 percent tariff that was scheduled to be imposed December 15th on $160 billion of Chinese imports. The United States has also agreed to reduce tariffs on an additional $120 billion of Chinese imports from 15 percent to 7.5 percent. The reduction is set to take place February 14, 2020, according to a draft Federal Register notice from the United States Trade Representative. The agreement commits China to increase purchases of U.S. goods and services by $200 billion over 2017 levels. This includes $77 billion in manufactured goods, $32 billion in agricultural goods, $52 billion in energy, and $37 billion in services over the next two years. All purchases will be at market prices, and market conditions will dictate the timing of purchases.

The intellectual property chapter covers trade secrets, pharmaceuticals, patents, trademarks, geographical indications, and the enforcement of pirated and counterfeit goods. Specifically, it expands the scope of trade secret misappropriation liability, shifts the burden of proof requirements in civil cases, and adds criminal penalties for willful misappropriation. It also creates a mechanism to resolve pharmaceutical patent disputes early in the process and extends the effective patent term of patents experiencing delays in the Chinese approval process. The agreement requires that China increase its civil and criminal penalties to levels sufficient to deter intellectual property violations.

The technology transfer chapter covers various practices the United States determined to be unreasonable or discriminatory. China has agreed to end the practice of forcing foreign companies to transfer their technologies to Chinese firms as a condition for obtaining market access and administrative approvals. The chapter requires China to enforce its technology transfer laws in an impartial, fair, transparent, and non-discriminatory manner. China must publish the rules of procedure, provide parties adequate notice, allow parties to review evidence and respond, and allow parties to have legal counsel for the proceedings.

The agriculture chapter covers structural barriers to trade separate from China’s increased purchase obligations.  The provisions should increase U.S. food, agriculture, and seafood exports and market access. The provisions aim to increase American farm and fishery income and promote job growth nationwide. The deal removes barriers for U.S. beef, pork, poultry, processed meat, rice, seafood, and pet food, among others.

The financial services chapter allows U.S. financial service providers to compete fairly and expand in the Chinese market. The chapter covers a broad range of financial services including banking, insurance, securities, and credit rating services, easing restrictions U.S. firms currently face in China. The provisions of this chapter also require China to eliminate foreign equity limits for securities companies, fund management companies, and U.S. life, health, and pension insurance providers.

The macroeconomic policies and exchange rate matters and transparency (currency) chapter requires both parties to refrain from competitive devaluations and targeting exchange rates for competitive reasons. The chapter also reaffirms the parties’ commitments to disclose relevant data publicly and refers conflicts on these issues to the dispute resolution system. The United States removed China’s currency manipulator designation earlier this week.

The agreement also includes a chapter on dispute resolution. Enforcement has always been problematic in agreements between the United States and China.  The chapter creates a Trade Framework Group to discuss high-level implementation issues and a Bilateral Evaluation and Dispute Resolution Office in each country to deal with low-level implementation issues and settle disputes. The dispute resolution process begins with the complaining party launching an appeal.  Designated officials from the opposing party’s Bilateral Evaluation and Dispute Resolution Office then assess the appeal. If those officials cannot resolve the issue, the appeal escalates to the Deputy United States Trade Representative and the designated Vice Minister, and then to the United States Trade Representative and the designated Chinese Vice Premier. If they cannot resolve the dispute, the complaining party can suspend obligations under the agreement or adopt a proportionate remedial measure. If the suspension or remedial measure was made in good faith, retaliation is not allowed. The parties may withdraw from the agreement if they believe the action is taken in bad faith.

Next Steps

While the agreement is a step in the right direction, the trade war is far from over. According to President Trump, the “phase one” agreement only covers about half of the relevant issues both sides wish to see addressed.  Many of the “phase two” issues are more complex and controversial. These issues include Chinese government subsidies, intellectual property theft, state control of the Chinese market, and discrimination against foreign firms. In the meantime, U.S. tariffs will remain in place on approximately $370 billion of Chinese goods. Both sides will be extremely reluctant to give ground on many of these issues without gaining significant benefits.

“Phase two” negotiations are set to begin shortly now that “phase one” has concluded. The President noted, however, that the United States and China would not complete the agreement before the upcoming November election.

The success of “phase two” will depend in part on how the United States and China implement the “phase one” agreement. If both countries keep up their end of the bargain and the enforcement provisions effectively resolve any disputes, negotiations will likely continue in earnest. If the parties ignore their commitments and the dispute resolution process proves toothless, the chances of concluding a comprehensive “phase two” agreement will diminish significantly.

There are also concerns that some of China’s commitments are infeasible. The commitment to purchase an additional $32 billion in agricultural products, for example, represents a massive increase over the highest level of trade between the United States and China. China’s ability to purchase such a large amount of agricultural products is uncertain. To do so, China would likely have to divert imports from current sources, distorting trade worldwide. The language of the agreement seems to contemplate this. It notes that Chinese purchases are subject to market conditions and WTO rules. It also notes that the United States must ensure that it will make available enough goods and services to allow China to meet its purchase obligations. This suggests that parties may view these amounts as ambitious targets, not ironclad purchase commitments.

The other purchase requirements also raise questions about implementation including questions such as how much, to whom and when? Many details need to be addressed before progress on “phase two” can be expected.

With the “phase one” agreement complete, tensions should ease for now. This first step towards ending the trade war is an important one, but implementation will be the true judge of its success.

On October 18, 2019, the United States Trade Representative (USTR) announced an exclusion process for products included on China Section 301 List 4A, which covers approximately $120 billion of imports. Imported products on this list are presently subject to an additional 15 percent duty, which went into effect September 1, 2019 – that duty rate is scheduled to be reduced by half starting in mid-February.

Importers of products on List 4A must file exclusion requests with the agency by January 31, 2020. Once USTR posts a request, there is a 14-day comment period for interested stakeholders to oppose or support, followed by a 7-day rebuttal period for the requestor to respond. USTR will grant approvals and denials on a rolling basis.

If granted, any importer of a product may utilize an exclusion, which would apply retroactively to the September 1, 2019 effective date. Importers may use an exclusion going forward, and also may seek duty refunds through U.S. Customs and Border Protection. USTR has set a uniform expiration date of September 1, 2020 for List 4A exclusions, regardless of the date they are granted.

Pursuant to the U.S.-China Phase One trade deal signed January 15, tariffs on List 4A products will be reduced to 7.5 percent from 15 percent. According to a draft Federal Register Notice made available this week, the effective date of the roll back is February 14, 2020. The rate reduction is not retroactive from September 1, 2019.

The exclusion process does not cover products on List 4B, which were scheduled to be assessed an additional 15 percent duty effective December 15, 2019.  As a result of the Phase One negotiations and agreement, the President suspended indefinitely the application of additional 301 tariffs on List 4B products.