President Trump issued an Executive Order on September 21, 2020 which, effective immediately, imposes secondary sanctions on the transfer and sale of certain conventional arms shipments and the supply of related services to Iran by non-U.S. persons.  This Executive Order follows the current administration’s failed effort to reinstate sanctions and a conventional arms embargo by the U.N. Security Council.  The Executive Order, titled “Blocking Property of Certain Persons with Respect to the Conventional Arms Activities of Iran”, attempts to enforce such sanctions unilaterally by authorizing the U.S. Secretary of State to impose blocking sanctions on any non-U.S. person who transfers conventional arms to Iran or otherwise performs activities to support such transfers.  Continue Reading U.S. Moves to Block Conventional Arms Sales to Iran

China-based smartphone apps, TikTok and WeChat, have each received a reprieve from the respective bans, which were originally ordered by President Trump on August 6, 2020 against both parties and were scheduled to take effect on September 21, 2020.  Please see our previous post covering the Executive Orders.  Pursuant to the Executive Orders banning the apps on national security grounds, the U.S. Department of Commerce (“Commerce”) published final rules for implementing the bans on September 19, 2020, which were subsequently withdrawn.  Commerce then delayed the order to withdraw TikTok from U.S. app stores until September 27, 2020 at 11:59pm. Meanwhile, Commerce’s order to withdraw WeChat has been suspended temporarily due to an injunction granted by the U.S. District Court for the Northern District of California.

In an effort to come into compliance with the Executive Order and avoid the ban, TikTok’s parent, ByteDance Ltd. (“ByteDance”), negotiated a deal with Oracle and Walmart to keep TikTok operating in the United States.  Under the terms of the agreement, based on media reports, TikTok will be spun off into a U.S.-based company majority-owned by its Chinese parent ByteDance, while Oracle and Walmart will take up to a twenty (20) percent stake of the new U.S. company.  ByteDance will maintain control over the app’s algorithm, while user data will be stored in the U.S.  It is possible that the ban on TikTok may be formally lifted once the deal is finalized, since President Trump has given his personal approval of the agreement, though that is unclear at this time.

A judge from the U.S. District Court for the Northern District of California granted a nationwide injunction on September 19, 2020, temporarily suspending Commerce’s order for Apple and Google to remove WeChat from their app stores.  Plaintiffs U.S. WeChat Users Alliance, et al. allege that the ban violates First Amendment rights, especially for Chinese Americans. Judge Beeler stated that the plaintiffs “have shown serious questions going to the merits of the First Amendment claim” and that “the balance of hardships tips in the plaintiffs’ favor”.

Husch Blackwell continues to monitor the TikTok and WeChat situations and will provide updates as more information becomes available.  Should you have any questions or concerns regarding these potential restrictions, please contact Cortney Morgan or Grant Leach of our Export Controls & Economic Sanctions team.

On September 14, 2020, the U.S. Department of Commerce announced its preliminary countervailing duty determination finding that imports of prestressed concrete steel wire strand from Turkey were unfairly subsidized by the Turkish government.  Commerce preliminarily found that exporters from Turkey were subject to duties as high as 135.06%. Commerce preliminarily determined that Turkish producer Celik Halat ve Tel San A.S. had been non-cooperative and assigned a rate of 135.06% based on adverse facts available.  “All Other” Turkish producers were assigned a preliminary rate of 14.44%.

Commerce will issue its final determination on or about November 30, 2020. After that, if the International Trade Commission (ITC) makes an affirmative final determination of injury, a countervailing duty order will be issued around January 21, 2020.

Please contact Husch Blackwell’s International Trade and Supply Chain team with any questions or concerns.

The U.S. Court of International Trade (CIT) will not stay its order (Ct. No. 19-00009) instructing  U.S. Customs and Border Protection (CBP) to refund importers’ Section 232 tariffs on steel from Turkey.  A three-judge panel denied the government’s motion to stay while also denying the Plaintiffs’ motion to enforce judgement.  The CIT found that the government’s appeal is unlikely to be successful, and ruled that the government had not provided a reasonable justification for why the Court of Appeals for the Federal Circuit (CAFC) might overturn the panel’s prior decision that the duties were unlawful.  As stated by the CIT panel, “the Court of Appeals would have to overrule both the statutory and the constitutional holdings that the President’s imposition of additional tariffs on certain steel articles from Turkey is unlawful.”

In a July order, the CIT panel had found that the President failed to follow congressionally-mandated guidelines when doubling the duties on Turkish steel to 50%.   Additionally, the CIT found the government’s arguments regarding the Plaintiffs’ ability to pay should the government win its appeal unconvincing, as the government acknowledged it has no specific knowledge of Plaintiffs’ finances.  USCIT Rule 62 subsections (d) and (e) do not provide the government with an automatic stay of enforcement of the judgment pending appeal.

The CIT panel denied Plaintiff’s motion to stay enforcement, which requested a timeline and status report for refunds.  The CIT found Plaintiffs’ request unnecessary because the government has not demonstrated that it will avoid complying with the court order.

The TransPacific decision is the first ruling that establishes limits on the President’s authority to impose national security tariffs, and could have implications on several similar lawsuits against the Section 232 tariffs that are currently underway.

Husch Blackwell continues to monitor the CIT challenges to Section 232 tariffs on steel and aluminum and will provide further updates if more information becomes available. If you have any questions or concerns regarding the Section 232 tariffs, please contact our International Trade and Supply Chain team.

U.S. Supply ChainThe Office of the U.S. Trade Representative (USTR) announced the rescission of Section 232 tariffs on Canadian aluminum, retroactive to September 1, 2020.  The 10% tariff on non-alloyed, unwrought aluminum under subheading 7601.10 from Canada was announced on August 6, 2020 and went into effect on August 16, 2020.  Following the USTR’s announcement of the tariffs last month, Canada responded with retaliatory tariffs that it intended to implement on September 16, 2020.

After negotiations with the Canadian government, USTR concluded that trade in non-alloyed, unwrought aluminum is “likely to normalize in the last four months of 2020” from the high levels experienced earlier this year.  However, the USTR could decide to resume the tariffs at a future date if imports from Canada exceed 105 percent of the expected volume in any month.

We encourage clients and companies to contact Husch Blackwell’s International Trade and Supply Chain team with any questions or concerns related to the Section 232 tariffs on aluminum and steel.

The World Trade Organization (WTO) dispute settlement body ruled that the tariffs imposed by the U.S. on imports from China are inconsistent with the General Agreement on Tariffs and Trade (GATT), and recommended that the U.S. “bring its measures into conformity” with its obligations under the GATT.  Beginning in 2018, at the direction of President Trump, the U.S. imposed tariffs on $400 billion worth of imports from China over 4 different lists or tranches.  The U.S. and China negotiated a “phase one” trade deal earlier this year, however, most of the tariffs were still left in place.

The WTO panel concluded that the U.S. failed to demonstrate that the tariff measures are justified under Article XX(a) of the GATT 1994.  As a result, the panel found the U.S. tariff measures to be inconsistent with Articles I:1, II:1(a) and II:1(b) of GATT 1994.  In other words, the WTO found that the U.S. tariffs on China were discriminatory and excessive, and the U.S. failed to present justification for an exemption that could have legally allowed for the tariffs. Continue Reading WTO Rules that U.S. Section 301 Tariffs on Chinese Imports Violate International Trade Rules

The U.S. Department of Commerce’s (Commerce) Steel Import Monitoring and Analysis System (SIMA) will be modified effective October 13, 2020 to require that the country where the steel was “melted and poured” to be identified in the license application.  Other changes in the final rule published on September 11, 2020, include adding coverage for eight additional HTS numbers in order to synchronize the system with the coverage of Section 232 for basic steel mill products; increasing the low value license to $5,000 and allowing multiple uses; and extending the SIMA program indefinitely.

The new rule defines “melted and poured” as “the original location where the raw steel is: (A) First produced in a steel-making furnace in a liquid state; and then (B) Poured into its first solid shape…The first solid state can take the form of either a semi-finished product (slab, billets or ingots) or a finished steel mill product.”  The reporting requirement does not apply to raw materials used in steel manufacturing.  The new required information on the country of “melt and pour” may also be useful in investigating circumvention of duties.

The SIMA website will shut down from October 9 until October 13, 2020 when the new website is updated and goes live.  Commerce has created a page with the latest updates regarding SIMA.  In the interim, Commerce stressed that there will be limited availability for manual license processing.

Husch Blackwell encourages clients with questions or concerns to contact our International Trade and Supply Chain team.

A federal judge for the U.S. District Court for the District of Columbia dismissed FedEx Corporation’s challenge to the U.S. Department of Commerce’s (Commerce) Export Administration Regulations (EAR). Specifically, FedEx challenged the EAR requirements for global couriers to either verify the contents of its packages or to cease business with certain foreign entities, such as Huawei Technologies Co. Ltd., which FedEx described as departmental overreach that infringed upon its Fifth Amendment right to due process.

U.S. District Judge John D. Bates disagreed with FedEx’s assessment of the EAR’s impact on liberty, declaring that “unlike potentially one-off consumers, common carriers are repeat players with the institutional knowledge and scale to navigate the EAR, thus it is reasonable that common carriers might be held to a higher standard.”  According to Judge Bates, Commerce adequately demonstrated that the EAR is “rationally related to a legitimate government interest,” which satisfied the Fifth Amendment due process clause.  Judge Bates recognized the merit of the fundamental question raised in the complaint—whether the EAR is stricter than necessary to protect national security—but concluded that the court did not need to decide that issue “because FedEx  abandons its initial framing of the ultra vires claim in its opposition brief…”  Judge Bates’ ruling further solidifies the expectation that large global companies which are more experienced in international trade regulations may be held to a higher standard of compliance under the EAR.

We encourage clients and companies with questions or concerns regarding the EAR to contact Cortney Morgan or Grant Leach of Husch Blackwell’s Export Controls & Economic Sanctions team.

On September 10, 2020, HMTX Industries LLC, along with Halstead New England Corporation, and Metroflor Corporation (importers of vinyl tile) filed a complaint (Ct. No. 20-00177) at the Court of International Trade (CIT) challenging both the substantive and procedural processes followed by the United States Trade Representative (USTR) when instituting Section 301 Tariffs on imports from China under List 3. The List 3 tariffs went into effect on September 24, 2018. This is the first challenge of its kind filed against the administration’s use of Section 301 Tariffs in the ongoing trade war between the United States and China.

The complaint alleges that USTR’s institution of List 3 tariffs violated the Trade Act of 1974 on the grounds that USTR failed to make a determination or finding that there was an unfair trade practice that required a remedy and moreover, that List 3 tariffs were instituted beyond the 12 month time limit provided for in the governing statute (19 U.S.C. § 2414). The complaint also argues that the manner in which in the List 3 tariff action was implemented violated the Administrative Procedures Act (APA). According to the complainants, USTR failed to provide adequate opportunity for comments, failed to consider relevant factors when making its decision (e.g. no analysis of increased burden on U.S. commerce from unfair trade practices), and failed to connect the record facts to the choices it made by not explaining how the comments received by USTR came to shape the final implementation of List 3.

Husch Blackwell continues to monitor this challenge against the Section 301 List 3 tariffs on Chinese imports and will provide future updates as more information becomes available. We encourage companies who are currently affected by Section 301 Tariffs under List 3 to contact Husch Blackwell’s International Trade and Supply Chain group for further information.

U.S. Customs and Border Protection (“CBP”) is preparing a regulatory change that would eliminate the $800 de minimis exemption for imports subject to Section 301 tariffs, according to a proposed rule submitted by CBP to the Office of Management and Budget (“OMB”) on September 2, 2020.  Reviews of the proposed rule by OMB and an interagency review are the final steps before the publication of a final rule in the Federal Register. Continue Reading CBP Proposes Rule to Eliminate Section 321 Exemption for Imports Subject to Section 301 Tariffs