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Pursuant to President’s Trump’s March 8, 2018 proclamations issued under authority of Section 232 of the Trade Expansion Act of 1962, added customs tariffs on imports of a wide variety of steel and aluminum imports from all countries except Canada and Mexico will enter into effect on March 23. On March 16, 2018, the Department of Commerce’s (“DOC”) Bureau of Industry and Security (“BIS”) issued an interim rule that specifies the requirements and process for parties to submit product-exclusion requests from the Section 232 tariffs. Under the new rule, DOC is authorized to exclude from the tariffs aluminum and steel articles that are determined to lack sufficient U.S. production capacity of comparable products, or for which there are “specific national security-based considerations.”

BIS determined that it has good cause to waive the prior notice and opportunity for comment procedures due to impracticability and public interest considerations, and therefore the new rule is immediately effective, although subject to being amended. Comments on the interim rule are due by May 18. BIS specifically advised that commenters “may submit comments regarding how and whether or not the country of origin of a proposed product should be considered … as part of the process for reviewing product-based exclusion requests,” therefore implying that it is considering whether imports from certain countries will be given more favorable treatment than imports from others.

In short, the process provides for parties that use steel or aluminum in business activities in the United States to submit company-specific exclusion requests, and for domestic industry participants to object to such requests. Parties filing exclusion requests and objections must fill out the applicable forms provided on BIS’s website. The forms for steel are available here and forms for aluminum are available here. If an exclusion is granted, it will take effect five days after approval and will be valid for one year.

Below we outline the key aspects of the product-exclusion information collection procedure set forth in the interim rule.

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On March 8, 2018, President Trump signed proclamations authorizing the imposition of a 25 percent customs duty on certain steel products and a 10 percent customs duty on certain aluminum products. The duties were imposed pursuant to Section 232 (“Section 232”) of the Trade Expansion Act of 1962, a rarely-used national security provision that authorizes the Department of Commerce (DOC) to investigate the effect of imports on national security.  The new customs duties are scheduled to enter into effect on March 23, 2018.  Below we discuss the Presidential Proclamations and reactions from Capitol Hill and other countries.

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On December 5, 2017, the Securities and Exchange Commission (SEC) awarded more than $4.1 million to a whistleblower for alerting the SEC to a multi-year securities fraud engaged in by his employer. The award is significant in that the recipient, a company insider who alerted the SEC to the securities fraud, is a non-U.S. national working overseas. This is not the first time that the SEC has awarded a large sum to a foreign whistleblower. The distinction for the largest award ever awarded goes to an award of $30 million awarded in 2014 to a whistleblower living in a foreign country. In that case the whistleblower provided the SEC with information about an on-going fraud that the SEC claimed was hard to detect.

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On November 8, 2017, the Department of Treasury’s Office of Foreign Assets Control (“OFAC”) and the Department of Commerce’s Bureau of Industry and Security (“BIS”) announced amendments to the Cuban Assets Control Regulations (“CACR”) and Export Administration Regulations (“EAR”). In addition, the State Department published a list of entities and subentities deemed to be under the control or to act on behalf of the Cuban military, intelligence, or security services or personnel. These steps implement the changes to the Cuba sanctions program announced by the President in his June “National Security Presidential Memorandum on Strengthening the Policy of the United States Toward Cuba” (“NSPM”). The changes reflect adjustments to the broader Cuba reform initiated by former President Obama in January 2015. A majority of the general license and guidance issued since that time remain in effect.

The key changes to the Cuba sanctions program are as follows:

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On November 1, 2017, the Department of Commerce’s Bureau of Industry and Security (BIS) introduced clarifications to the Export Administrative Regulations (EAR) for the use of license exception “Governments, International Organizations, International Inspections under Chemical Weapons Convention, and the International Space Station” (GOV), and license exception “Strategic Trade Authorization” (STA). BIS explained that the agency is not changing the requirements for the use of these exceptions, instead it is only providing guidance to answer questions frequently received from the public.

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On June 16, 2017, President Trump issued a National Security Presidential Memorandum on Strengthening the Policy of the United States Toward Cuba, which began the process to alter some aspects of U.S. policy toward Cuba. [See prior blog post here].  On July 25, 2017, OFAC updated its Cuba FAQs to address upcoming changes to its Cuba sanctions rules as they relate to pre-existing contracts, licenses, and travel arrangements.

Some of the more important points in the new OFAC guidance include the following:

  • Treatment of existing contracts and companies engaged in the Cuban market

OFAC states that companies already engaged in the Cuban market with entities related to the Cuban military, intelligence, or security services that may be affected by the new Cuba sanctions regime will be allowed to continue after issuance of the new regulations.  In the updated FAQs, OFAC further clarifies that “businesses will be permitted to continue with transactions outlined in contingent or other types of contractual arrangements agreed to prior to the issuance of the new regulations, consistent with other [Cuban Assets Control Regulations] authorization.”

  • Addition of “subentities”

OFAC indicated that the State Department will be publishing a list not only of “entities with which direct transactions generally will not be permitted,” but also a list of “subentities.”  This suggests that the Administration plans to assemble its own list of entities that are considered to be owned or controlled by the Cuban military, intelligence, and security services, which may be useful to U.S. companies by lessening their burdens to investigate the ownership of some Cuban entities.

  • Travel

OFAC explains that for travel after issuance of the forthcoming regulations, as long as a traveler has already completed at least one travel-related transaction prior to June 16, 2017, such as purchasing a flight, the trip and any meetings with listed entities/subentities will be permitted.

  • People-to-People Travel. The latest FAQs reiterate that the general license allowing individual people-to-people travel will end once Treasury issues the upcoming regulations. Nevertheless, group people-to-people travel will remain available subject to the rules in 31 CFR § 515.565(b).
  • Persons Organizing or Sponsoring people-to-people or educational travel. OFAC clarifies in new FAQs that such parties are covered by the general licenses and do not need to apply for a specific license.
  • Remittances

The latest Cuba FAQs explain that remittances to Cuba will still be permitted under the new regulations. However, “changes will be made to the definition of prohibited members of Government of Cuba that may exclude certain persons from receipt of such remittances.”

The June 16, 2017 Cuba FAQs may be found here.

The July 25, 2017 Cuba FAQs may be found here.

 

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On April 19, 2017, the Department of Commerce (DOC), through its Bureau of Industry and Security, self-initiated an investigation into the effects that steel imports may be having on U.S. national security interests. The investigation was initiated under a rarely-used statutory authority, Section 232 of the Trade Expansion Act 1962 (19 U.S.C. § 1862).

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On 16 March 2017, the European Parliament approved a draft EU regulation intended to ensure that trade in certain minerals and metals from high-risk or warn-torn areas does not fund conflict and human rights abuses. The regulation would apply to trade in tin, tantalum, tungsten and gold which are used in a variety of industries ranging from electronics, automotive, jewelry, aerospace, packaging, construction, lighting, industrial machinery and tooling.

The regulation is expected to come into effect as of 1 January 2021, at which time it would apply to up to 95% of EU imports.  Although this presents a substantial delay in implementation, the scope of impact means that this regulation bears watching and merits advance compliance consideration. Continue reading →

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On January 27, 2017, the Commerce Department’s Bureau of Industry and Security (BIS) recently made two significant changes to the Export Administration Regulations (EAR) concerning India that will facilitate the export of controlled items to that country.

The regulations reflect a June 7, 2016 joint U.S.-India statement in which the United States recognized India as a Major Defense Partner, laying the ground work for facilitating technology sharing with India on a level commensurate with that of the United States’ closest allies and partners. The two countries reached an understanding under which India would receive license-free access to a wide range of dual-use technologies in conjunction with steps that India committed to take to advance its export control objectives.

Favorable Licensing Policy

BIS has amended section 742.4 and section 742.6 pertaining to controls for purposes of National Security and Regional Stability reasons to state that export, reexport, or transfer items, including “600 series” items, for civil or military end uses in India will be assessed under a general policy of approval. The items can also be for the ultimate end use by the Government of India, for reexport to countries in Country Group A:5, or for return to the United States, so long as such items are not for use in nuclear, missile, or chemical or biological weapons activities. The rule does not amend any licensing policies with respect to Missile Technology items.

Companies seeing to export controlled items to India can now expect that their license applications will be reviewed more favorably and will routinely receive approvals for transactions as opposed to the “case-by-case” approach previously followed by BIS in reviewing license applications for India, which involved more rigorous scrutiny and possible denials of license applications. Continue reading →

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Policy makers in Europe continue to explore responses to the Panama Papers revelations and recent terrorist attacks. On 28 February, European law makers approved important amendments to the EU’s Anti-Money Laundering (AML) Directive, 2015/849 (the “Directive”) that would implement new rules to combat money-laundering, terrorism financing and tax evasion.

The amendments would include:

  • Expansion of AML obligations to trusts and certain virtual currency platforms;
  • Public access to registers of beneficial ownership information; and
  • Lower value thresholds for regulation of pre-paid instruments.

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