This Week in International Trade– Border Adjustment Tax, Trans Pacific Partnership Agreement & the NAFTA in the News

This Week in International Trade– Border Adjustment Tax, Trans Pacific Partnership Agreement & the NAFTA in the News

By Melissa Proctor

Several key international trade issues made the headlines in various news media outlets this week, namely the proposed border adjustment tax and the status of both the TPP and the NAFTA. Here are the key take-aways:

  • It has been reported in the media this week that House Republicans may push ahead with tax reform legislation that will include a border adjustment tax even though it is not clear whether they have enough votes to pass the bill. However, a couple of days ago, in an interview with The Wall Street Journal, Trump stated that he is not a fan of the GOP’s border adjustment proposal that would tax imports and exempt exports as it was too complicated. In that interview, he stated that he didn’t believe that a border adjustment was needed in addition to lowering the corporate tax rate, and that it was too complicated because companies would receive credit on certain parts and not others and would have to contend with country of origin issues. Therefore, one can only continue to speculate on the likelihood of that a border adjustment tax will come to pass and what it will specifically entail. 
  • Sean Spicer, Spokesman for the Trump Transition Team, announced that executive orders on the Trans-Pacific Partnership Agreement (TPP) and the North American Free Trade Agreement (NAFTA) will be issued shortly upon President-Elect Trump’s taking office, and that Trump will not wait for trade-related administration nominees to be confirmed by the Senate. During the presidential campaign, President-Elect Trump stated that he intended to withdraw from the TPP and either renegotiate the NAFTA or withdraw from it as well. 
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With Less Than a Week Left in Office, President Obama Lifts U.S. Economic Sanctions on Sudan

With Less Than a Week Left in Office, President Obama Lifts U.S. Economic Sanctions on Sudan

By Melissa Proctor

Today, most of the comprehensive U.S. economic sanctions imposed on Sudan have been lifted, and virtually all trade between the U.S. and Sudan that was previously prohibited under the Sudanese Sanctions Regulations (SSR) in 31 C.F.R. Part 538 are now authorized. The lifting of these sanctions was made by Presidential Executive Order on January 13th, as well as the implementation of a new General License today by the Treasury Department’s Office of Foreign Assets Control (OFAC) in Section 538.540 of the SSR. Specifically, the following activities by U.S. persons are now authorized:

  • The processing of transactions involving persons in Sudan, including those relating to the petroleum or petrochemical industries in Sudan;
  • Exports and reexports of goods, services and technology to Sudan;
  • Imports of goods, services and technology into the United States from Sudan; 
  • Facilitation of transactions between Sudan and third countries; and,
  • Transactions involving property in which Sudan has an interest—such property has been unblocked.
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2017 Begins with Additional U.S. Sanctions on Russia for Malicious Cyber-Related Activities

2017 Begins with Additional U.S. Sanctions on Russia for Malicious Cyber-Related Activities

By Melissa Proctor

U.S. companies doing business in Russia are urged to review the new cyber-related sanctions that were imposed on Russia at the end of December as they may impact existing business relationships with certain Russian individuals and entities. The new sanctions, enacted under Executive Order 13964, impact certain Russian government agencies, companies and individuals as a result of Russia’s cyber activities that were intended to influence the U.S. presidential election. Note that Executive Order 13964 was originally issued backed in April 2015, and authorized the imposition of sanctions for cyber-enabled malicious activities that:

  • Harm or compromise the provision of services by entities in a critical infrastructure sector;
  • Disrupt the availability of a computer or network or computers; or
  • Cause a misappropriation of funds or economic resources, trade secrets, personal identifiers or financial information for commercial or competitive advantage or private financial gain.
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OFAC Appears to Anticipate the Snapback of Nuclear-Related Sanctions on Iran

OFAC Appears to Anticipate the Snapback of Nuclear-Related Sanctions on Iran

By Melissa Proctor

Either in response to questions posed by U.S. companies, or in anticipation of the potential snap-back of secondary, nuclear-related sanctions on Iran by President Trump after the inauguration or by virtue of Iran’s recent announcement that the United States has violated the Joint Comprehensive Plan of Action (JCPOA), the Treasury Department’s Office of Foreign Assets Control (OFAC) posted guidance on its Frequently Asked Questions webpage as to what the reimposition of sanctions on Iran would likely entail. 

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“Operation Surge Protector” Targets Illegal Imports and Distribution of Dangerous Electronics Into the United States

“Operation Surge Protector” Targets Illegal Imports and Distribution of Dangerous Electronics Into the United States

By Melissa Proctor

U.S. Immigration and Customs Enforcement (ICE) just issued a press release announcing the roll out of “Operation Surge Protector” that will target the illegal importation and distribution of counterfeit consumer electronics in the United States. These products, which include digital media devices, power adapters and consumer technology powered by lithium ion batteries, are highly susceptible to counterfeiting and pose health and safety hazards by overheating, igniting and causing severe injuries and property damage. Operation Surge Protector is being coordinated by the National Intellectual Property Rights Coordination Center or “IPR Center,” which uses the expertise of 23 partner government agencies, including the FBI and Homeland Security Investigations (HIS) to share information, coordinate enforcement actions and conduct investigations relating to IP theft. Operation Surge Protector will also provide additional resources to ICE agents, including the ability to more effectively track arrests, indictments and convictions. Assistant Attorney General Leslie Caldwell of the DOJ’s Criminal Division stated that the Justice Department will also continue to prosecute traffickers and manufacturers of counterfeit electronics “who choose profit over public health and safety.”

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U.S.-Mexico Unified Cargo Processing Pilot Is Yielding Significant Reductions in Commercial Port Crossing and Cargo Inspections

U.S.-Mexico Unified Cargo Processing Pilot Is Yielding Significant Reductions in Commercial Port Crossing and Cargo Inspections

By Melissa Proctor

Wait times and the number of cargo inspections performed at the border between the United States and Mexico for transportation security reasons are expected to drop significantly as U.S. Customs and Border Protection (CBP) and Mexico’s Servicio de Administration Tributaria (SAT) continue to expand the Unified Cargo Processing pilot at Arizona’s Port of Nogales. 

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U.S. Antiboycott Compliance: New Federal List Published

U.S. Antiboycott Compliance: New Federal List Published

By Melissa Proctor

The Treasury Department recently published its quarterly list of countries that currently require participation or cooperation with an international boycott, such as the Arab League’s boycott of Israel. Even though many of these countries are WTO members and were required to shut down their Arab League offices as a condition of membership, many boycott-related requests are still being issued by government agencies and companies in these countries. The countries that are designated on this list, which by the way are the very same countries that were listed in the Third Quarter list, are: Iraq, Kuwait, Lebanon, Libya, Qatar, Saudi Arabia, Syria, United Arab Emirates, and Yemen.

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Don’t Forget: The New Export Destination Control Requirements Are Now In Effect

Don’t Forget: The New Export Destination Control Requirements  Are Now In Effect

By Melissa Proctor

Yesterday, the new export Destination Control Statement requirements under the Export Administration Regulations (EAR) and the International Traffic in Arms Regulations (ITAR) went into effect which required U.S. exporters to make adjustments to their invoices, shipping documents, airway waybills, other documents, and their export compliance programs. Earlier this summer, the Commerce Department’s Bureau of Industry and Security (BIS) and the State Department’s Directorate of Defense Trade Controls (DDTC) harmonized the Destination Control Statement requirements under both the EAR and the ITAR. U.S. exporters are required to insert Destination Control Statements on commercial documentation to inform their foreign customers that they are receiving goods which are subject to U.S. law, and that any subsequent reexport or retransfer may require them to obtain prior authorization from the U.S. Government. 

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U.S. Continues Liberalizing Travel and Trade with Cuba

U.S. Continues Liberalizing Travel and Trade with Cuba

By Melissa Proctor

The Commerce Department’s Bureau of Industry and Security (BIS) and the Treasury Department’s Office of Foreign Assets Control (OFAC) recently amended the Export Administration Regulations (EAR) and Cuban Assets Control Regulations (CAFC), respectively, to further the Administration’s efforts toward normalizing bilateral relations with Cuba. The following provides a recap of the changes that were made:

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New Mechanism for Submitting Commodity Jurisdiction Requests to the State Department’s Directorate of Defense Trade Controls to Be Launched on November 21st

New Mechanism for Submitting Commodity Jurisdiction Requests to the State Department’s Directorate of Defense Trade Controls to Be Launched on November 21st

By Melissa Proctor

Beginning on November 21st, as part of the DDTC’s IT Modernization project, the State Department’s Directorate of Defense Trade Controls (DDTC) will require Commodity Jurisdiction (CJ) requests to be submitted online via the new Defense Export Control and Compliance System (DECCS) which will interface with the USXPORTS system. Companies engaged in aerospace and defense-related industries, whose activities are subject to the International Traffic in Arms Regulations (ITAR), have the option of submitting CJ requests to the DDTC for a formal and binding determination as to whether their goods, software or technical data are subject to the ITAR or to the Export Administration Regulations.

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U.S. Commerce Department Issues New Encryption Rules That Will Lighten Some Exporter Burdens

U.S. Commerce Department Issues New Encryption Rules That Will Lighten Some Exporter Burdens

By Melissa Proctor

The Commerce Department’s Bureau of Industry and Security (BIS) recently published its final rule that makes significant changes to the Export Administration Regulations’ (EAR’s) requirements for items that have cryptographic features (i.e., hardware, software, middleware, firmware, source code and technology). The final rule was published on September 20, 2016, and implements the changes that were agreed at the December 15th plenary meeting of the Wassenaar Arrangements to which the United States and forty (40) other countries belong. The final rule made a number of revisions to the EAR and the Commerce Control List; however, the modifications made to the treatment of encryption items were the most significant.  U.S. and foreign companies that develop, sell or distribute items that contain cryptographic features should take immediate steps to update their current product and software classifications in light of the final rule. The final rule took immediate effect on September 20, 2016.

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President Obama Announces Intent to Lift U.S. Sanctions on Burma and Restore Its Status as a Least Developed Beneficiary Country under the Generalized System of Preferences

President Obama Announces Intent to Lift U.S. Sanctions on Burma and Restore Its Status as a Least Developed Beneficiary Country under the Generalized System of Preferences

By Melissa Proctor

President Obama announced yesterday, after his meeting at the White House with Aung San Syuu Kyi, the newly elected President of Myanmar (formerly known, and hereinafter referred to, as Burma), that he intends to lift U.S. sanctions on Burma as a result of that country’s progress toward implementing democracy. The eventual lifting of the sanctions on Burma will take effect when the President: (1) submits certain notifications to Congress; and, (2) issues a new Executive Order that will terminate the national emergency with respect to Burma. When those events take place, the Burmese Sanctions Regulations (found in 31 C.F.R. Part 537) will no longer be in effect. Thereafter, the Treasury Department’s Office of Foreign Assets Control (OFAC) will remove the Burmese Sanctions Regulations from the Foreign Assets Control Regulations. It should be noted that the arms embargo prohibiting exports, reexports and imports of defense articles and services that are subject to the International Traffic in Arms Regulations (ITAR) will continue to be imposed despite the removal of the Burmese Sanctions Regulations in the future.

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U.S. Lift Economic Sanctions on Côte d’Ivoire (Ivory Coast)

U.S. Lift Economic Sanctions on Côte d’Ivoire (Ivory Coast)

By Melissa Proctor

Yesterday, President Obama issued an Executive order entitled “Termination of Emergency with Respect to the Situation in or in Relation to Côte d’Ivoire” which lifts all U.S. sanctions against Côte d’Ivoire (Ivory Coast). These sanctions have been terminated and are no longer in effectas of 8:00am ET on September 14, 2016. The Obama Administration’s decision to lift the sanctions on Côte d’Ivoire stems from the U.N. Security Council Resolution 2283, which terminated the arms embargo and travel and financial sanctions on Côte d’Ivoire in April 2016. OFAC has also removed the individuals who were targeted under the previous U.S. sanctions on the Côte d’Ivoire from the Specially Designated Nationals Lists (SDN Lists). OFAC will be removing the Côte d’Ivoire Sanctions Regulations (in 31 CFR Part 543) from the Foreign Assets Control Regulations in the near future. 

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U.S. Customs and Border Protection Pushes Back Its Deadline for the Transition of Certain Filing Activities to the “Single Window” System

U.S. Customs and Border Protection Pushes Back Its Deadline for the Transition of Certain Filing Activities to the “Single Window” System

By Melissa Proctor

As we noted previously in this blog, imports and exports of merchandise from the United States have been transitioning from a paper-driven clearance regime to a “single window” electronic system known as the Automated Commercial Environment (ACE). Using the “single window,” companies and their agents will be able to submit a single, harmonized set of data electronically into ACE which will be accessed and processed by U.S. Customs and Border Protection (CBP) and the various Partnering Government Agencies (PGAs). In order to meet the December 31st deadline for U.S. government agency migration to ACE, which was set by President Obama’s Executive Order 13659 (“Streamlining the Import and Export Processes for America’s Businesses”), CBP has been working to phase in ACE implementation over the course of the last year. 

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“Single Window” System for Import and Export Clearance - U.S. Government Nearing Completing of Migration to the Automated Commerce Environment by December 31st

“Single Window” System for Import and Export Clearance - U.S. Government Nearing Completing of Migration to the Automated Commerce Environment by December 31st

By Melissa Proctor

The ways in which in information and documentation is submitted by U.S. companies and processed by the various U.S. government agencies for the import and export clearance of merchandise has been undergoing a dramatic evolution since 2014 and is nearing completion. Imports and exports of merchandise from the United States have been transitioning from a paper-driven clearance regime to a “single window” electronic system. The Automated Commercial Environment (ACE) serves as this “single window” enabling importers and exporters to interface with U.S. Customs and Border Protection (CBP) and other federal government agencies (i.e., “Partnering Government Agencies” or “PGAs”) that have a hand in the admissibility of imported merchandise and authorization of exports from the United States. Instead of manually submitting often duplicative information and paper-driven data to multiple agencies as part of the cargo release processes, companies and their agents now electronically submit a single, harmonized set of data and upload required documentation into ACE which can then be accessed and processed by the various PGAs. In addition, the PGAs will be able to communicate with importers and exporters directly through ACE on any additional information requirements, scheduling and execution of examinations and inspections, cargo releases, protests and enforcement actions. 

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The Departments of Commerce and State Harmonize the Export Destination Control Statements under the Export Administration Regulations and the International Traffic in Arms Regulations

The Departments of Commerce and State Harmonize the Export Destination Control Statements under the Export Administration Regulations and the International Traffic in Arms Regulations

By Melissa Proctor

On August 17, 2016, the Commerce Department’s Bureau of Industry and Security (BIS) and the State Department’s Directorate of Defense Trade Controls (DDTC) published final rules in the Federal Register effectively harmonizing the export destination control statements mandated by the Export Administration Regulations (EAR) and the International Traffic in Arms Regulations (ITAR). Generally, under the current rules, destination control statements (“DCS”) are placed on commercial invoices, air waybills, bills of lading and other shipping documents that will accompany export shipments from the United States in order to put the foreign end-users on notice that the goods they are receiving are subject to U.S. laws and regulations and may require prior U.S. government authorization before they can be reexported or retransferred. The ITAR DCS is currently required for all exports, reexports and retransfers of defense articles designated on the U.S. Munitions List (USML) per 22 C.F.R. Section 123.9. Similarly, per 15 C.F.R. Section 758.6 of the EAR, the DCS is required for exports of goods that are subject to the EAR and that are classified in Export Control Classification Numbers (ECCNs)—the EAR DCS is not currently required for goods classified as EAR99; however, it is generally a recommended “best practice” for exporters to utilize the DCS for all export shipments that are subject to the EAR, regardless of an item’s classification.

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Bureau of Industry and Security Issues Proposed Rule to Amend License Exception TMP to Conform to the Time Limits of Mexico’s IMMEX Program

Bureau of Industry and Security Issues Proposed Rule to Amend License Exception TMP to Conform to the Time Limits of Mexico’s IMMEX Program

By Melissa Proctor
 
On August 23, 2016, the Commerce Department’s Bureau of Industry and Security (BIS) published a proposed rule to align the time limit of License Exception Temporary Imports, Exports, Reexports and Transfers (TMP) with the time limit of Mexico’s Decree for the Promotion of Manufacturing, Maquiladora and Export Services (IMMEX) program. 

Under the U.S. Export Administration Regulations (EAR), License Exception TMP authorizes the export, reexport or in-country transfer of certain controlled commodities, software and technology for temporary use abroad without a license from the BIS. See 15 C.F.R. Section 740.9 of the EAR. Currently, such items must be returned no later than one (1) year after the date of export, reexport, or transfer if they are not consumed or destroyed during the period of authorized use abroad. However, this one-year period does not align with the time limits of Mexico’s IMMEX program, which allows imports of items for manufacturing operations for periods of time that may exceed eighteen (18) months.

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What the Trans Pacific Partnership Agreement Could Mean for U.S. Manufacturers, Retailers and Distributors

What the Trans Pacific Partnership Agreement Could Mean for U.S. Manufacturers, Retailers and Distributors

By Melissa Proctor

The Trans Pacific Partnership agreement (“TPP”), the largest regional free trade and investment agreement that has ever been negotiated, was signed by the United States and eleven other countries in the Asia Pacific region (i.e., Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and, Vietnam.). The signatory countries will have a maximum period of two (2) years in which to implement the TPP into their respective local laws. What does this mean for U.S. retailers, distributors, and manufacturers? For starters, the TPP will eliminate import tariffs on more than 18,000 goods, many of which are currently subject to high duty rates. U.S. companies will enjoy significant duty-savings opportunities on imports of qualifying goods into the United States, and U.S. exporters will likely find their goods in greater demand by foreign buyers located in TPP countries. The Obama Administration has also touted the TPP as a means for supporting higher paying jobs in the United States, growing the U.S. economy, and countering China’s economic expansion. 

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Key Lessons from a Recent Export Enforcement Case against a U.S. Pharmaceutical and Medical Supply Company

Key Lessons from a Recent Export Enforcement Case against a U.S. Pharmaceutical and Medical Supply Company

By Melissa Proctor

Recently, a U.S. pharmaceutical and medical supply company was fined over $16 Million for illegal sales, exports and reexports to Iran, Sudan and Syria—countries that are currently subject to U.S. embargoes and economic sanctions programs. Alcon Laboratories, Inc., located in Fort Worth, Texas, as well as its Swiss affiliates (Alcon Pharmaceuticals, Ltd. and Alcon Management SA), recently settled with the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) and the U.S. Commerce Department’s Bureau of Industry and Security (“BIS”) for exporting surgical and pharmaceutical products from the United States to its affiliates in Switzerland, and then reexporting the items to distributors in Iran, Sudan, and Syria to fulfill orders in those countries.  

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U.S. Commerce Department Announces Creation of Trade Finance Advisory Council to Address Financing Challenges Faced by U.S. Exporters

U.S. Commerce Department Announces Creation of Trade Finance Advisory Council to Address Financing Challenges Faced by U.S. Exporters

By Melissa Proctor

On July 25th, the U.S. Department of Commerce announced the establishment of the new Trade Finance Advisory Council (“TFAC”), which will advise the Secretary of Commerce on strategies and the implementation of new programs that would provide greater access to trade finance for U.S. exporters. Expanding access to public and private sources of finance for U.S. exporters is one of the five primary objectives of the Obama Administration’s National Export Initiative. The Commerce Department reports that access to capital is an obstacle for many exporters—particularly small and medium-sized enterprises. Such companies currently represent 98% of all U.S. exporters, but only 35% of the total U.S. export revenue.

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