On September 12, 2024, the Biden Administration announced a number of new trade-related measures related to imports of Chinese-manufactured goods. This announcement comes as the latest action in the Biden Administration’s efforts to reinforce American manufacturing and supply chains.
The EU’s new Joint Communication on a European Economic Security Strategy proposes a methodology for an EU economic security risk assessment and identifies measures to mitigate these risks. The Strategy is noteworthy because it offers a comprehensive view of the EU’s overarching strategy for multiple existing or proposed new EU legislative and policy tools including export controls, FDI screening and domestic investment in critical technology through the EU’s own proposed Chips Act, and how these tools would work together to reduce EU economic security risks. It also signals the EU’s intention to align more closely with the U.S. regarding China, including with respect to reducing supply chain dependencies and new tools like outbound investment controls.
(This is the second post of a three-part series on U.S., UK and EU alignment on economic security strategy.)
On June 8, 2023, the United States and the United Kingdom announced the Atlantic Declaration for a Twenty-First Century U.S.-UK Economic Partnership (“Declaration”). The Declaration reaffirms the need to adapt and reimagine the unique alliance between the two countries. From critical and emerging technologies to digital transformation, clean energy, and defense collaboration, businesses can leverage the partnership to exploit new trans-Atlantic opportunities.
(This is the first post of a three-part series on U.S., UK and EU alignment on economic security strategy.)
On December 2, 2020, U.S. Customs and Border Protection (CBP) issued an import detention or Withhold Release Order (WRO) against cotton produced by Xinjiang Production and Construction Corps (XPCC) based on information that reasonably indicated XPCC used forced labor within its cotton supply chains. This action comes after CBP issued five WROs in September 2020 on products found to be reliant on state-sponsored forced labor in Xinjiang. The U.S. government has expressed ongoing concern about human rights abuses of the Uyghur minority in this part of China.
On November 12, 2020, President Trump issued an Executive Order (E.O.) prohibiting U.S. persons from engaging in any transaction (defined as a “purchase for value”) of publicly traded securities, or transacting in financial products that are derivative of, or provide investment exposure to, securities of designated Communist Chinese military companies (“Chinese Military Companies”).
The prohibition will enter into effect on January 11, 2021 at 9:30 a.m. Eastern time and currently applies to 31 entities that have been identified on a list of Chinese Military Companies published by the U.S. Department of Defense (DoD). U.S. investors will have until November 11, 2021 at 11:59 p.m. Eastern time to fully divest from any shares or funds involving these 31 companies. Continue reading →
Over the course of the Obama and Trump administrations, U.S. officials have found new ways to incorporate human rights concerns into sanctions and export control policies. Recent announcements by the Commerce and State Departments address how, by the U.S. government in its licensing approvals, and private companies in their foreign-sales decisions, can take into account human rights impacts.
Export Licensing for Dual-Use and Commercial Products
On October 6, 2020, the Department of Commerce’s Bureau of Industry and Security (BIS) issued a final rule revising the Export Administration Regulations (EAR) to allow the agency to consider human rights concerns when granting export licenses. Specifically, BIS amended its licensing policy for items controlled for crime control (CC) reasons under 15 CFR §742.7.
The final rule also expands the existing EAR human rights licensing policy. The prior licensing policy provided for case by case review for CC-controlled items “unless there is evidence that the government of the importing country may have violated internationally recognized human rights.” The final rule now would allow BIS to consider the risk that items will be used in violation or abuse of human rights by individuals or entities in addition to the government or the importing country. Further, licensing officers will now review how an item may be used to engage in, or enable, violations or abuses of human rights (not just “internationally recognized” human rights), including through censorship, surveillance, detention, or excessive use of force. Importantly, the new provision also allows the agency to consider such risk for items controlled for reasons beyond CC, covering most items listed on the Commerce Control List (with the exception of items controlled for short supply). The final rule specifically notes the need to examine items controlled for reasons related to certain telecommunications and information security and sensors.
State Department Guidance for Surveillance Tools
Separately, on September 30, 2020, the Department of State released guidance designed to assist U.S. businesses in assessing the risk that surveillance tools exported to foreign government end-users could be used to commit human rights abuses.
The guidance entitled, “U.S. Department of State Guidance on Implementing the UN Guiding Principles for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities,” provides a roadmap for businesses to assess the risk of human rights abuse prior to engaging in a transaction with a foreign government end-user and provides recommended contractual and procedural safeguards should the business proceed with the transaction. The guidelines are non-binding and, according to a statement by a State Department official, they will not be used as a basis for sanctions against foreign governments.
The State Department encourages U.S. businesses to integrate human rights due diligence into compliance programs, including export compliance programs. The following eight recommendations are provided to assist companies seeking to conduct human rights due diligence, screening, and risk mitigation—
The guidance is designed for U.S. companies that engage in transactions involving sensors, biometric identification, data analytics, internet surveillance tools, non-cooperative location tracking, and recording devices, among other products and services. While the guidance is not designed to address export control licensing, the State Department has suggested that the guidance may be used as a resource during export license reviews in cases that raise a human rights concern.
These two announcements form part of a slow-but-steady growth among U.S. officials looking for ways to use existing trade regulatory tools to recognize human rights considerations. Other examples include recent U.S. Customs withhold release orders (WROs) for certain goods produced from forced or indentured labor in Xinjian, China here; Hong Kong trade treatment in the wake of human rights abuses in that territory here; and Global Magnitsky sanctions designations here.
On October 5, 2020, the Department of Commerce’s Bureau of Industry and Security (BIS) issued a final rule that imposes new multilateral controls on six “emerging technologies,” agreed during the December 2019 plenary meeting of the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies (Wassenaar Arrangement). These recently developed or developing technologies “essential for the national security of the United States” include forensic hacking tools, surveillance software, sub-orbital craft, and manufacturing tools and technology used to make integrated circuits and semiconductors.
On September 15, 2020, a World Trade Organization (“WTO”) panel found that the Trump Administration’s unilateral tariffs imposed on Chinese products violated WTO rules regarding nondiscrimination and import tariff rates agreed to by the United States. The dispute concerned China’s challenge to the Trump Administration’s tariffs imposed pursuant to the Trump Administration’s investigation under Section 301 of China’s intellectual property and technology transfer practices. Specifically, China challenged USTR List 1 (discussed here) and List 3 (discussed here).
On September 14, 2020, U.S. Customs and Border Protection (CBP) issued five Withhold Release Orders (WROs) for a range of goods produced in the Xinjiang region of China. Under 19 U.S.C. § 1307, CBP can initiate enforcement actions for products made wholly or “in part” by forced or indentured labor—defined as “work or service which is exacted from any person under the menace of any penalty for its nonperformance and for which the worker does not offer himself voluntarily,” as well as forced or indentured child labor. CBP issues WROs following an investigation if it finds that information “reasonably but not conclusively” indicates that the goods have been made in whole or in part by such forced labor. A WRO prevents the products from being released by CBP into the United States.
On May 15, 2020 the Commerce Department announced an amendment to the direct product rule that further restricts the ability of Huawei Technologies Co., Ltd. and its affiliates on the Entity List, such as HiSilicon (collectively “Huawei”), to receive certain foreign-made semiconductor products.
The Commerce Department also extended the temporary general license (TGL) that authorizes certain dealings with Huawei and its subsidiaries by U.S. persons through August 13, 2020. Statements from the Commerce Department indicate this may be a “final” extension.
Global Trade & Sanctions Law