The U.S. Office of Foreign Assets Control (OFAC) issued General License 20 for Myanmar (Burma) on December 7, 2015, which authorizes certain trade related transactions that were previously prohibited due to the role of sanctioned parties in the country’s ports and other trade infrastructure.
On October 29, 2015, the U.S. and the EU took separate actions to ease their respective Belarus-related sanctions programs for six months. These measures follow the October 11, 2015 reelection of Alexander Lukashenko as President of Belarus, the regime’s decision to release certain political prisoners and hopes for an improvement of the political and economic relationship between Western countries and Belarus. While currently temporary in nature, the sanctions relief provided affords Western companies opportunities to engage in certain transactions in Belarus.
Importers of wood products should take note of the Justice Department’s first wood-related criminal conviction under the Lacey Act, which prohibits trade in illegally harvested plants or wildlife, and requires import declarations for certain products. On October 7, 2015, Lumber Liquidators pleaded guilty to five criminal counts, including entry by means of false statements, transport of illegally imported timber, and import of illegally harvested timber. In a recent client alert, William Sullivan, Jr., and Benjamin Cote discuss the implications of the plea agreement’s onerous compliance requirements for interpreting the scope of the Lacey Act’s “due care” requirement, and the potential implications for companies wishing to avoid violations.
Client Alert: Lacey Act Lessons From The Lumber Liquidators $13 Million Settlement: Has The Definition Of “Due Care” Been Expanded? [client alert link]
On October 18, 2015, both the United States and the European Union took action to prepare for future changes to sanctions policy which will be effective upon IAEA verification of Iran’s commitments under the Joint Comprehensive Plan of Action (JCPOA). This was a required step under the JCPOA, termed “Adoption Day,” scheduled to occur ninety (90) days after the JCPOA was endorsed by the UN Security Council via resolution 2231.
Importantly, Adoption Day does not bring about any immediate sanctions relief. OFAC reminded companies again about potential violations related to arranging agreements and contingent contracts with Iranian parties prior to Implementation Day.
Pillsbury and Goltsblat BLP are pleased to announce that Evgeny Shumilov, Economic Attaché, Embassy of the Russian Federation, will be participating in the October 21 luncheon and roundtable discussion on doing business in Russia. Mr. Shumilov will open the event by discussing the state of U.S.-Russia trade and opportunities for U.S. companies in the Russian market.
Please join us for Mr. Shumilov’s remarks and for presentations from top legal minds from Pillsbury and Goltsblat BLP regarding the key developments under Russian, U.S. and EU laws and regulations for U.S. companies doing business in Russia today.
Topics include:
Speakers
Evgeny Shumilov, Economic Attaché, Embassy of the Russian Federation
Andrey Goltsblat, Managing Partner, Goltsblat BLP
Nancy Fischer, Partner, Pillsbury
The Honorable Gregory H. Laughlin, Senior Counsel, Pillsbury
Elina Teplinsky, Partner, Pillsbury
For questions or to register, please contact Julie Merkin at julie.merkin@pillsburylaw.com.
On October 5, the trade ministers of the 12 nations participating in the negotiations announced that they had successfully concluded the Trans-Pacific Partnership (TPP) free trade agreement. Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States, and Vietnam are the member countries. There is a long way to go before the TPP is ratified and implemented (and the prospects for ratification in certain countries are not certain), but the agreement represents a major accomplishment for negotiations that began in 2009.
On Monday, September 21, 2015, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) and the Department of Commerce’s Bureau of Industry and Security (BIS) took coordinated action to further ease U.S. restrictions on trade with Cuba and Cuban nationals.
Under the terms of the Iran Nuclear Agreement Review Act, Congress had until September 18 to reject President Obama’s promised sanctions relief for Iran agreed to under the Joint Comprehensive Plan of Action (JCPOA). Although the House of Representatives voted to reject the deal, Senate Democrats blocked debate on a similar resolution, thus preventing a vote in the Senate. Consequently, Congress took no action, which means that the JCPOA will continue to be implemented on a step-by-step basis (see our blog post here for full details). Looking ahead, there are several key issues for businesses contemplating entering the Iran market to consider.
On July 22, 2015, the Department of Commerce’s Bureau of Industry and Security (BIS) released amendments to the Export Administration Regulations (EAR) implementing the Secretary of State’s May 29, 2015 decision to rescind the designation of Cuba as a State Sponsor of Terrorism. The removal of Cuba from Country Group E:1 and “AT” controls under the EAR requires a number of highly-technical changes to U.S. regulations. The key practical impacts are:
It is important to emphasize that the change to Cuba’s status as a state sponsor of terrorism does not remove the U.S. embargo on Cuba. Cuba remains in Country Group E:2, and any export, re-export, or transfer of goods, software or technology that are subject to the EAR to Cuba must still be licensed or be eligible for export under a license exception. Also, there have been no further changes to the U.S. sanctions policy administered by the Office of Foreign Assets Control (OFAC).
Increase in De Minimis Amount of U.S. Content Allowed for Cuba
Under the de minimis exception of the EAR, foreign-made products incorporating “controlled” U.S. content – that is, items that would require a license if exported separately to the country of ultimate destination – below certain threshold amounts are not subject to the EAR.
Previously, foreign made products that incorporated more than 10% U.S.-origin content were subject to the EAR when exported to Cuba from third countries. The amendments increase the threshold de minimis level to 25%, consistent with the threshold applied to most other countries.
As a result of this change, non-U.S. companies may find it easier in some cases to export products to Cuba incorporating U.S.-origin content. Nonetheless, companies should be mindful of continuing U.S. sanctions rules when assessing de minimis eligibility. In particular, because all U.S. content is controlled for export to Cuba (even items classified under EAR99), products that satisfy the de minimis test for export to other countries may not qualify for export to Cuba under the de minimis exception. Also, several categories of items are not eligible for the de minimis exception, including items incorporating content classified as a “600 series” item.
Changes to License Exceptions
License Exception Aircraft, Vessels and Spacecraft (AVS)
License exception AVS (“Aircraft, Vessels and Spacecraft”) (EAR § 740.15) previously allowed non-Cuban airlines to operate flights into Cuba. The amended regulations remove some restrictions on the use of AVS for Cuba, but the modifications currently seem likely to have a limited impact until such time as export licensing requirements for sales of aircraft and aircraft parts to Cuba are relaxed.
License Exception Servicing and Replacement of Parts and Equipment (RPL)
Certain exports and re-exports to Cuba may now be eligible for License Exception “Servicing and Replacement of Parts and Equipment” (EAR § 740.10). This would allow one-for-one replacement of parts, components, accessories, and attachments to be exported or re-exported to Cuba for aircraft; as well as for commodities controlled for national security (NS) reasons. Note that this license exception may only be used for items previously lawfully exported or reexported to Cuba.
License Exception Baggage (BAG)
License Exception “Baggage” (BAG) (EAR § 740.14) was previously available for Cuba. The amendments have the effect of now authorizing travellers to carry in their baggage encryption items (e.g., laptops containing encryption software) for their own use.
Before using any of the above license exception, it is important to review all of the specific requirements under EAR Part 740 and § 746.2 (providing information of the permitted use of license exceptions for Cuba) as well as the FAQ’s that accompanied the release of the amendments.
On June 31, Congress, led by House Financial Services Committee Chairman Jeb Hensarling (R-TX), allowed the authorization of the U.S. Export-Import bank to expire without any vote. As previously reported, the future of the Ex-Im Bank has been at risk since Tea Party Republicans, especially members of the House Republican Study Committee, targeted the bank as a wasteful government program.
Following the expiration of its charter, the bank will remain open, but only for limited functions. It will not be able to issue any new loans, but will continue to service its current $110 billion portfolio of loans until they expire. The expiration for some of these loans is 18 years away. Bank operations (as opposed to its loan activities) are funded through the normal federal appropriation process, allowing it to service these loans for as long as it receives the necessary budget appropriations. The bank’s current operations, like the rest of the federal government, are funded through September 31, 2015. It is expected that the bank’s operating budget will be funded for fiscal year 2016 under the normal appropriations process, but given the politically charged environment around the bank, nothing is certain. Continue reading →
