On December 4, 2020, the Department of Commerce’s Bureau of Industry and Security (BIS) announced that it was terminating its Section 232 national security investigation into imports of mobile cranes. The announcement notes that petitioner Manitowoc Company, Inc. requested on September 8, 2020, that its petition be withdrawn due to “a changing economic environment due to the effects of the COVID-19 pandemic.” See Update of May 8, 2020, for details on the initiation of the investigation.
On November 30, 2020, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned and placed on the Specially Designated Nationals (SDN) List China National Electronics Import and Export Corporation (CEIEC). The Treasury Department indicated in a press release that this designation was due to CEIEC’s support for “the illegitimate Maduro regime’s efforts to undermine democracy in Venezuela, including its efforts to restrict internet service and conduct digital surveillance and cyber operations against political opponents. Chinese technology companies, including CEIEC, continue to challenge democratic values of freedom and transparency by developing and exporting tools to monitor, censor, and surveil citizens’ activities on the internet.” A State Department press release added that “CEIEC has provided software, training, and technical expertise to the [Maduro] regime’s entities. It provides cyber support and technical experts to state-run telecommunications provider Venezuelan National Telephone Company (CANTV) which controls 70 percent of internet service in Venezuela and frequently blocks online independent newspapers and speeches by opposition members.”
According to OFAC, CEIEC has over 200 subsidiaries and offices around the world. Thus, CEIEC’s designation on the SDN List could have far reaching implications with the application of OFAC’s “50% Rule,” which states that property of entities directly or indirectly owned 50% or more by one or more blocked persons are also considered blocked, even if not listed on the SDN List. As a result of CEIEC’s placement on the SDN List, all property and interests in property of CEIEC, or any entity in which it owns, directly or indirectly, a 50% or greater interest, that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC. In announcing this action, OFAC issued General License No. 38 under the Venezuela Sanctions Regulations, which authorizes until January 14, 2021 all transactions and activities otherwise prohibited that are ordinarily incident and necessary to the wind-down of transactions involving CEIEC. The license does not authorize “any debit to an account” of CEIEC or any entity that CEIEC owns by more than 50%. Entering into new business with CEIEC “will not be considered wind-down activity” according to OFAC pursuant to a newly posted frequently asked questions.
On November 25, 2020, the State Department issued a Federal Register Notice announcing the imposition of nonproliferation measures against certain Chinese and Russian entities for the transfer of goods, services, or technology controlled under multilateral control lists (Missile Technology Control Regime, Australia Group, Chemical Weapons Convention, Nuclear Suppliers Group, Wassenaar Arrangement) or otherwise having the potential to make a material contribution to the development of weapons of mass destruction (WMD) or cruise or ballistic missile systems. Such actions permit the imposition of export restrictions and other measures under the Iran, North Korea, and Syria Nonproliferation Act. The State Department has identified the following entities:
- Chengdu Best New Materials Co Ltd. (China);
- Zibo Elim Trade Company, Ltd. (China);
- Aviazapchast (Russia);
- Joint Stock Company Elecon (Russia);
- Nilco Group (aka Nil Fam Khazar Company; aka Santers Holding) (Russia).
Accordingly, as of November 6, 2020, the following measures have been imposed on these entities and any successor, sub-unit, or subsidiary thereof:
- No department or agency of the U.S. government may procure or enter into any contract for the procurement of any goods, technology, or services from these Chinese and Russian companies;
- No department or agency of the U.S government may provide any assistance to these companies, and these Chinese and Russian companies are not be eligible to participate in any assistance program of the U. S. government;
- No U.S. government sales to these companies of any item on the United States Munitions List (USML) are permitted, and all sales to these persons of any defense articles, defense services, or design and construction services under the Arms Export Control Act are terminated; and
- No new export licenses will be granted for the transfer to these companies of products, technology or software controlled under the Export Administration Regulations (EAR), and any existing such licenses are suspended.
The announcement states that these measures will remain in place for two years, except to the extent that the Secretary of State may determine otherwise.
On November 25, 2020, the Office of the U.S. Trade Representative (USTR) issued a Federal Register notice announcing that it will hold a virtual public hearing on December 28, 2020, in its ongoing investigation into Vietnam’s acts, policies and practices related to its import and use of illegally harvested or traded timber. See Update of October 6, 2020. A written request to appear at the hearing must be submitted no later than December 10, 2020, and must include a summary of the testimony. The USTR is specifically interested in testimony regarding:
- The extent to which illegal timber is imported into Vietnam.
- The extent to which Vietnamese producers, including producers of wooden furniture, use illegal timber.
- The extent to which products of Vietnam made from illegal timber, including wooden furniture, are imported into the United States.
- Vietnam’s acts, policies or practices relating to the import and use of illegal timber.
- The nature and level of the burden or restriction on U.S. commerce caused by Vietnam’s import and use of illegal timber.
- The determinations required under section 304 of the Trade Act, including what action, if any, should be taken in the investigation.
The hearing “will not involve testimony regarding specific products or services that might be affected by an action in the investigation.” If necessary, the USTR will offer another opportunity for public comment should it later consider actions affecting specific products or services. After the hearing, the USTR will accept rebuttal comments until January 6, 2021, which will be limited to raising “errors of fact or analysis” in any written submissions or hearing testimony.
All written submission must be filed via the Federal eRulemaking portal at www.Regulations.gov on docket number USTR–2020–0036.
On November 25, 2020, the Office of the U.S. Trade Representative (USTR) issued a Federal Register notice announcing that it will hold a virtual public hearing on December 29, 2020, in its ongoing investigation into Vietnam’s currency valuation. See Update of October 6, 2020. A written request to appear at the hearing must be submitted no later than December 10, 2020, and must include a summary of the testimony. USTR is specifically interested in testimony regarding:
- Whether Vietnam’s currency is undervalued, and the level of the undervaluation.
- Vietnam’s acts, policies or practices that contribute to undervaluation of its currency.
- The extent to which Vietnam’s acts, policies or practices contribute to the undervaluation.
- Whether Vietnam’s acts, policies and practices are unreasonable or discriminatory.
- The nature and level of burden or restriction on U.S. commerce caused by the undervaluation of Vietnam’s currency.
- The determinations required under section 304 of the Trade Act, including what action, if any, should be taken.
The hearing “will not involve testimony regarding specific products or services that might be affected by an action in the investigation.” If necessary, the USTR will offer another opportunity for public comment should it later consider actions affecting specific products or services. After the hearing, the USTR will accept rebuttal comments until January 7, 2021, which will be limited to raising “errors of fact or analysis” in any written submissions or hearing testimony.
All written submission must be filed via the Federal eRulemaking portal at www.Regulations.gov on docket number USTR–2020–0037.
- Executive Order 13959 bans U.S. persons from transacting in publicly traded securities or derivatives or similar securities of any publicly traded Chinese companies designated by the U.S. Department of Defense as enabling Chinese military aims.
- It also authorizes the secretary of the treasury to identify subsidiaries of the named companies, which will be subject to the same restrictions.
- Ban takes effect on January 11, 2021.
On November 12, President Donald Trump signed Executive Order 13959, “Addressing the Threat from Securities Investments That Finance Communist Chinese Military Companies,” which prohibits U.S. persons (companies and individuals) from investing in certain Chinese firms found to be enabling the Chinese military. This is the latest effort to pressure China over what the Trump administration describes as abusive business practices in the United States.
In an early confidential draft of a proposed rule that BIS has shared with a technical advisory committee of industry representatives, trade press is reporting that the Department of Commerce’s Bureau of Industry and Security (BIS) may seek to restrict export transactions with 89 Chinese and 28 Russian companies that are owned or controlled by these countries’ military branches; or at the very least, have military connections. While the draft may change before being published for comment, several significant foreign companies are reportedly identified in the current draft, including: Commercial Aircraft Corp. of China Ltd. (COMAC), Aviation Industry Corporation of China (AVIC) and ten of its subsidiaries, and Irkut Corporation. Each of these aviation companies have existing and significant commercial relationships with U.S. companies for aircraft parts and components.
This draft rulemaking appears to be a follow-on to BIS’ April rule expanding military end use/user controls in China, Russia and Venezuela. That final rule became effective on June 29, 2020, and expanded licensing requirements for these countries where “military end users” or “military end uses” were involved or potentially involved. See Update of April 28, 2020. Importantly, the rule broadened the definition of military end use beyond any item for the ‘‘use,’’ ‘‘development,’’ or ‘‘production’’ to now include any item that supports or contributes to the operation, installation, maintenance, repair, overhaul, refurbishing, ‘‘development,’’ or ‘‘production,’’ of military items. Significantly, BIS noted at the time that these expansions “will require increased diligence with respect to the evaluation of end users in China, particularly in view of China’s widespread civil-military integration.” While the full impact of this early draft proposed rule is not known, the listing of these Chinese and Russian companies would likely require U.S. companies to apply for export licenses in order to transact with and export to any listed company. If treated in a manner similar to how those foreign companies placed on BIS’ Entity List are treated, the result could be an overall “policy of denial” when considering such licenses.
BIS has not commented on the confidential draft. Thompson Hine trade attorneys and practitioners are closely following this development and will report further on any formal notifications published by BIS.
Since April 2020, we have collaborated with our foreign law firm partners to provide a chart summarizing the economic, labor and employment, health and safety, and export and import measures taken by governments around the world in response to the COVID-19 pandemic. After a short break, we are back with version 2.0 of our chart with substantive changes to reflect the most pressing and interesting government measures concerning the COVID-19 pandemic. The new version of the chart includes a concise, corporate-focused and user-friendly list of government measures and includes areas of interest such as tax, insolvency/restructuring, business immigration, government contracts and international trade.
Please feel free to contact us or the firms listed on the chart directly with any questions.
This update includes new information through the first week of November 2020 for Australia, Belgium, Brazil, Canada, Chile, China, Costa Rica, Czech Republic, El Salvador, European Union, France, Germany, Guatemala, Honduras, Hungary, India, Indonesia, Israel, Japan, Mexico, Netherlands, Panama, Philippines, Poland, Republic of Korea, Russia, South Africa, Spain, Thailand, Turkey, United Kingdom, United States and Vietnam.
After a brief period of relaxing restrictions on public gatherings during the summer, many countries recently started re-introducing measures to restrict public gatherings or movement of persons to address the rising number of COVID-19 cases.
In Europe, some countries, including France, imposed country-wide lockdowns at least until the end of November 2020. Many other countries continue to keep social distancing requirements in place and introduced new regional lockdown requirements based on the infection numbers of local populations. In the United States, states and counties continue to differ in their approaches to business closures and reopenings as well as face mask requirements. In Asia and the Americas, the general trend indicates that countries adopted a risk-based system to identify high-risk populations and restrict their activities as such.
Many governments also continue to support workers affected by the economic instability caused by the pandemic with measures including short-time compensation procedures, social security benefits or otherwise introduced regulations to ensure that workers receive personal protection equipment or are not discriminated against.
In connection with economic/corporate measures, most governments have taken various tax measures, including tax exemptions, to address the difficulties endured by businesses affected by the pandemic-related economic instability. Similarly, some governments have introduced new measures to provide more liquidity to support small, medium-sized and large businesses.
As to government contracts, some governments issued measures to address COVID-19-related economic difficulties, including easing the termination of contracts for force majeure or introducing emergency procurement regimes to speed up the procurement process. In the area of international trade, some countries continue to restrict exports of certain personal protection equipment and introduced new measures to subject foreign investments to increased scrutiny, especially investments linked to public health emergencies.
Please see our update of April 7, 2020 for a discussion of this initiative tracking pandemic-related measures taken by governments around the world.
On November 17, 2020, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued Venezuela-related General License 8G, “Authorizing Transactions Involving Petróleos de Venezuela, S.A. (PdVSA) Necessary for the Limited Maintenance of Essential Operations in Venezuela or the Wind Down of Operations in Venezuela for Certain Entities.” This general license continues to authorize transactions and activities “ordinarily incident and necessary to the limited maintenance of essential operations, contracts, or other agreements,” that
i. are for safety or the preservation of assets in Venezuela;
ii. involve PdVSA or any entity in which PdVSA owns, directly or indirectly, a 50 percent or greater interest; and
iii. were in effect prior to July 26, 2019, for the following entities and their subsidiaries:
- Chevron Corporation
- Schlumberger Limited
- Baker Hughes, a GE Company
- Weatherford International, Public Limited Company
The term “safety or the preservation of assets” covers transactions and activities necessary “to ensure the safety of personnel, or the integrity of operations and assets in Venezuela; participation in shareholder and board of directors meetings; making payments on third-party invoices for transactions and activities authorized” under this general license (or prior to April 21, 2020, if such activity was authorized at that time) as well as “payment of local taxes and purchase of utility services in Venezuela; and payment of salaries for employees and contractors in Venezuela.” The general license authorizes such activities involving PdVSA and the other listed entities through 12:01 a.m. EST, June 3, 2021.
General License 8G does not authorize any activities related to Venezuelan-origin petroleum or petroleum products; the provision of insurance for such products; the design, construction or work on wells or other facilities or infrastructure in Venezuela; contracting any additional personnel or services (except as required for safety); or, the payment of any dividends to PdVSA. Further, this General License does not authorize transactions related to the export or re-export of diluents to Venezuela; the issuance of any loans to, or accrual of additional debt by, or subsidization of PdVSA; or, any transactions prohibited by OFAC’s Venezuela Sanctions Regulations (31 C.F.R. part 591) or with any blocked persons other than those identified in this General License.
General License 8G, replaces and supersedes General License 8F.
On November 9, 2020, the EU, pursuant to World Trade Organization (WTO) authorization, applied approximately $4 billion worth of retaliatory tariffs on U.S. goods in the latest chapter of the long-running dispute between the EU and the United States over government subsidies provided to both Boeing and Airbus. This retaliation follows an October 2020 WTO arbitrator ruling allowing the EU to take such countermeasures. See Update of October 15, 2020. The EU’s implementing regulation for the tariffs states: “At present, the amount is considered appropriate to effectively induce compliance and provide relief to EU economic operators because, in the current economic climate, it permits measures to be imposed on U.S. large civil aircraft and other products that are considered sufficiently similar to the countermeasures imposed by the United States.”
According to a European Commission press release, the tariffs “bring the EU equal footing with the U.S., with sizeable tariffs on each side based on two WTO decisions related to aircraft subsidies.” Valdis Dombrovskis, EU Commissioner for Trade, said, “We have made clear all along that we want to settle this long-running issue. Regrettably, due to lack of progress with the U.S., we had no other choice but to impose these countermeasures.” The countermeasures include additional 15% tariffs on U.S. aircraft and 25% tariffs on a range of U.S. agricultural and industrial products, including fresh and frozen fish, fresh and dried fruits and vegetables, cocoa powder and chocolate, nuts and seeds, cotton, orange juice and grapefruit juice, spirits and alcohol, certain polymers, suitcases and handbags, shovel loaders and tractors, and exercise equipment.
The United States has already imposed its own tariffs on approximately $7 billion worth of EU products authorized by the WTO in a related dispute. See Updates of August 13, 2020, February 17, 2020, and October 4, 2020. In response to the EU’s action, Ambassador Robert Lighthizer stated: “The United States is disappointed by the action taken by the EU today. The alleged subsidy [a Washington State tax provision] to Boeing was repealed seven months ago. The EU has long proclaimed its commitment to following WTO rules, but today’s announcement shows they do so only when convenient to them.”