On January 12, 2022, the Department of Commerce’s Bureau of Industry and Security (BIS) announced it was delaying implementation of rules establishing new controls on certain cybersecurity items for National Security (NS) and Anti-terrorism (AT) reasons, along with a new License Exception, Authorized Cybersecurity Exports (ACE). In October 2021, BIS released this Interim Final Rule to implement these export controls on certain cybersecurity items that can be used for malicious cyber activities, noting that it would become effective on January 19, 2022 (see Update of October 25, 2021). Since then, BIS received industry feedback which, among other issues, raised concerns about the necessary compliance measures and allowing industry sufficient time to update compliance procedures and requesting that BIS provide additional public guidance. As a result of these comments, BIS is delaying the effective date of implementing these cybersecurity controls until March 7, 2022.
- President Biden signed the Uyghur Forced Labor Prevention Act into law on December 23, 2021 to continue efforts to prevent the importation into the United States of goods produced in whole or in part with forced labor in China.
- The Act creates a rebuttable presumption that all goods produced in whole or in part in the Xinjiang region of China or imported from certain designated entities are produced from forced labor and must be denied entry into the United States.
- The law will go into effect on June 21, 2022.
On December 23, 2021, President Biden signed into law the Uyghur Forced Labor Prevention Act, which is part of a concerted U.S. government effort to address the use of state-sponsored forced labor in China’s Xinjiang Uyghur Autonomous Region.
On January 5, 2022, the multi-agency Committee on Foreign Investment in the United States (CFIUS) announced its determination that two countries – Australia and Canada – “have made significant progress toward establishing and effectively utilizing a robust process to analyze foreign investments for national security risks and to facilitate coordination with the United States on matters relating to investment security.” As such, both countries will remain excepted foreign states and excepted real estate foreign states for the purpose of CFIUS’ jurisdiction over non-controlling “covered investments” and certain real estate transactions by certain foreign persons. In addition, New Zealand has been identified as an eligible excepted foreign state under the CFIUS regulations.
Pursuant to the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA), CFIUS established the concept of “excepted foreign state[s],” defined as those states with compliance laws, orders and regulations similar to those of the United States concerning foreign investments assessed for national security purposes. See Update of January 22, 2020. Under such a designation, an excepted foreign state qualifies, in certain circumstances, for an exemption from the two mandatory CFIUS filings established under the FIRRMA (i.e., non-controlling covered investments and certain real estate transactions). In early 2020, CFIUS initially identified Australia, Canada, and the United Kingdom (including Northern Ireland) as excepted foreign states due to their “robust intelligence sharing and defense industrial base integration mechanisms with the United States.” Such a designation, however, also required that within a two-year period, CFIUS make a determination that these foreign states had satisfied the criteria reflecting they had established and were effectively utilizing a robust process to analyze foreign investments for national security risks. CFIUS’s determinations for Australia and Canada formally establish that these countries “are and will remain” excepted foreign states under applicable regulations absent further CFIUS action.
In addition, the period for the United Kingdom and now also New Zealand to fulfill the necessary criteria in order to remain excepted foreign states has been extended until February 13, 2023. They remain excepted foreign states during the interim.
See also, CFIUS’ Excepted Foreign States web page.
On December 29, 2021, U.S. Customs and Border Protection (CBP) issued several guidance documents through its Cargo Systems Messaging Service concerning recent Presidential Proclamations that established the tariff rate quota (TRQ) process for imports of aluminum and steel articles from the member countries of the European Union (EU). See Update of December 29, 2021 for details and links to President Biden’s proclamations. A summary of CBP’s guidance is below, and CBP also has provided general guidance on the overall TRQ process under CMS#0536327 – GUIDANCE: European Union (EU) Section 232 Tariff Rate Quota on Aluminum and Steel Articles and Exempting EU from Derivative Duties.
Effective as of 12:01 a.m. EST on January 1, 2022, imports of aluminum articles from member countries of the EU are subject to a TRQ under the Harmonized Tariff Schedule of the United States (HTSUS) subheadings 9903.85.27 through 9903.85.44. Section 232 aluminum products from the EU that are in-quota will enter free of any Section 232 duty. Filers must use an appropriate 9903.85.27 through 9903.85.44 TRQ ID HTSUS number for the first HTSUS number, followed by the Chapter 76 classification HTSUS number of their goods. TRQ entries will be processed on a “first-come, first-served” basis according to presentation date/time until the country limit for that TRQ ID HTSUS group is reached. EU member country aluminum limit tables organized by Chapter 99 HTSUS TRQ ID group are displayed in the document linked here. The status of TRQs may be tracked via the weekly Commodity Status Report at https://www.cbp.gov/trade/quota/tariff-rate-quotas. The aluminum TRQ will be administered on a semi-annual basis. The first period (through June 30, 2022) is limited to 60% of the annual aluminum country limit.
All aluminum article imports from the EU in excess of the TRQ quantities shall remain subject to the 10 percent ad valorem duty rate imposed by HTSUS subheading 9903.85.01, provided they are not subject to an exclusion. All imports of aluminum articles from the EU must be accompanied by a certificate of analysis in order to be eligible for the TRQ. The aluminum TRQ will be processed daily, Monday through Friday (excluding holidays). For shipments to be processed for the EU TRQ on the same day, the entry summary must be filed, the entry summary payment date must be on file or scheduled for a future statement, and the conveyance must arrive by 4:30 pm in the port’s local time zone.
For more details on the TRQ and proper reporting instructions and entry methods, consult CBP’s Bulletin on 1st and 2nd Period 2022 TRQ for EU Aluminum Articles.
Effective as of 12:01 a.m. EST on January 1, 2022, imports of steel articles from member countries of the EU are covered under a TRQ under HTSUS subheadings 9903.80.65 through 9903.81.19. Section 232 steel products from the EU that are in-quota will enter free of any Section 232 duty. Filers must use an appropriate 9903.80.65 through 9903.81.19 TRQ ID HTSUS number for the first HTSUS number, followed by the appropriate Chapter 72/73 classification HTSUS number of their goods. TRQ entries will be processed on a “first-come, first-served” basis according to presentation date/time until the country limit for that TRQ ID HTSUS group is reached. EU member country steel limit tables organized by Chapter 99 HTSUS TRQ ID group are displayed in the document linked here. The status of TRQs may be tracked via the weekly Commodity Status Report at https://www.cbp.gov/trade/quota/tariff-rate-quotas. The steel TRQ will be administered quarterly, with each quarter assigned 25% of the annual TRQ amount. Third quarter and fourth quarter TRQ limits will be evaluated to include carry forward amounts up to 6% of the annual country limit for each steel HTSUS group. Unused first quarter steel quantity, up to 6% of the annual country limit for each HTSUS group, will be combined into the third quarter limit for that HTSUS group. Unused second quarter steel quantity, up to 6% of the annual country limit for each HTSUS group, will be combined into the fourth quarter limit for that HTSUS group.
All steel article imports from the EU in excess of the TRQ quantities will remain subject to the 25 percent ad valorem duty rate imposed by HTSUS subheading 9903.80.01, provided they are not subject to an exclusion. Steel imports from the EU must be melted and poured in a member country of the EU in order to be eligible for the TRQ. Additional details on the melt and pour requirement will be provided by CBP when they are available. The steel TRQ will be processed daily, Monday through Friday (excluding holidays). For shipments to be processed for the EU TRQ on the same day, the entry summary must be filed, the entry summary payment date must be on file or scheduled for a future statement, and the conveyance must arrive by 4:30 pm in the port’s local time zone.
For more details on the TRQ and proper reporting and entry methods, consult CBP’s Bulletin on 1st and 2nd Quarter 2022 TRQ for EU Steel Articles.
Effective January 1, 2022, imports of aluminum and steel derivatives from the EU, as referenced in Proclamation 9980, will no longer be subject to additional duties under HTSUS subheading 9903.80.03 or HTSUS subheading 9903.85.03 per the Steel Proclamation.
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The EU member countries covered by these guidelines are: Austria, Belgium, Bulgaria, Croatia, Cyprus, Czechia (Czech Republic), Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and Sweden.
For aluminum and steel entries under the TRQ procedures, CBP stated: “All entries submitted prior to 8:30 am ET and on January 3, 2022 will be counted in the first opening at 8:30 am ET. If the accepted entry totals for any HTS group submitted prior to the first opening exceed the country limit of that HTS group, they will be prorated.”
On December 28, 2021, Presidential Proclamation 10326 directing the modification of the Harmonized Tariff Schedule of the United States (HTSUS) was published in the Federal Register, triggering the 30-day implementation process. As previously reported — see Update of November 23, 2021 — the recommended HTSUS modifications will primarily update the HTSUS to conform to amendments adopted by the World Customs Organization (WCO) in its recommendation of June 28, 2019. The modifications will affect approximately 350 products and product groups that are classified in various chapters and will also make conforming changes to the HTSUS nomenclature, including modifications of article descriptions and heading/subheading numbers. Some modifications will modify section notes, chapter notes, additional U.S. notes and the general notes to the HTSUS. Others will replace existing HTSUS headings and subheadings. With publication of the proclamation in the Federal Register, these modifications will become effective on January 27, 2022.
In coordination with publication of the proclamation, the U.S. International Trade Commission (USITC) also published its final report on these HTSUS modifications. The report, “Modifications to the Harmonized Tariff Schedule of the United States under Section 1206 of the Omnibus Trade and Competitiveness Act of 1988 and for Other Purposes”, Publication No.: 5240, provides details on all of the HTSUS modifications and should be carefully reviewed by importers.
The proclamation also directs HTSUS changes to allow for the: (i) continuation of duty-free access through December 31, 2022 for certain agricultural products of Israel; (ii) continuation of duty treatment as to actions taken pursuant to section 301 of the Trade Act of 1974; (iii) correction of certain technical errors to provide for the intended tariff treatment accorded to certain goods from Colombia and Singapore; and (iv) continuation of staged duty reductions for goods under free trade agreements with the Dominican Republic-Central America, Peru, South Korea, Columbia, Panama, Canada and Mexico.
Notably, but as expected, the proclamation removes, effective January 1, 2022, Ethiopia, Guinea, and Mali as beneficiary sub-Saharan African countries under the African Growth and Opportunity Act (AGOA). The Biden administration had previously notified Congress that it would be terminating these designations as these countries are no longer eligible for these reasons: (i) Ethiopia – for gross violations of internationally-recognized human rights; (ii) Guinea – for not having established, or not making continual progress toward establishing, the protection of the rule of law and of political pluralism; and (iii) Mali – for not having established, or not making continual progress toward establishing, the protection of the rule of law, political pluralism and internationally-recognized worker rights and for not addressing gross violations of internationally-recognized human rights. See Letter to Congress dated November 2, 2021.
On December 28, 2021, President Joseph Biden issued two proclamations – Adjusting Imports of Steel into the United States and Adjusting Imports of Aluminum into the United States. In each proclamation, the president acknowledged that:
“the United States has successfully concluded discussions with the EU [European Union] on behalf of its member countries on satisfactory alternative means to address the threatened impairment of the national security posed by [steel and aluminum] articles imports from the EU. The United States and the EU have agreed to expand coordination involving trade remedies and customs matters, monitor bilateral steel and aluminum trade, cooperate on addressing non-market excess capacity, and annually review their arrangement for alternative means and their ongoing cooperation.”
The proclamations also state that the United States and the EU will continue negotiations on global steel and aluminum arrangements “to restore market-oriented conditions and support the reduction of carbon intensity of steel and aluminum across modes of production.” These negotiations should conclude by October 31, 2023. For additional details on the U.S.-EU agreement on the removal of Section 232 duties on steel and aluminum imports, see Update of November 1, 2021.
Notably, the proclamations formalize the implementation of a tariff-rate quota (TRQ) that will restrict the quantity of steel and aluminum articles imported into the United States from the EU without the application of the Section 232 tariffs imposed previously by the Trump administration. The proclamations also clarify that steel articles melted and poured in the EU are eligible for in-quota treatment and that aluminum articles accompanied by a certificate of analysis are eligible for in-quota treatment.
The TRQs on steel and aluminum imports from the EU will remain in place through December 23, 2023, and the United States will monitor the implementation and effectiveness of the TRQs. The approved aggregate TRQ volume for steel articles is 3.3 million metric tons annually; the approved aggregate TRQ volume for aluminum articles is 18,000 metric tons of unwrought aluminum and 366,040 metric tons of semi-finished wrought aluminum. Imports of steel and aluminum articles from member countries of the EU in excess of the TRQ quantities will remain subject to the Section 232 duties. The TRQ process will also apply to imports of derivative steel and aluminum articles previously identified under Proclamation 9980.
The proclamations also state that the United States has agreed to renew for two calendar years all exclusions that were granted and utilized to import steel products tariff-free from the EU in FY2021 (October 1, 2020 through September 30, 2021). The renewed exclusions will be for “an annual volume equal to that volume imported from a member country of the EU pursuant to the exclusion in Fiscal Year 2021.” This allowable renewal does not preclude an importer from seeking additional exclusions under the Section 232 product exclusion process. Also, while steel articles from a member country of the EU imported under a product exclusion do not count against the TRQ under the agreement in place between the United States and the EU for steel articles, the aluminum proclamation clearly states that aluminum articles from a member country of the EU imported under a product exclusion will count against the in-quota volume of the aluminum TRQ.
The Cargo Systems Messaging Service (CSMS) of U.S. Customs and Border Protection (CBP), CSMS #50533999, currently states that only EU steel and aluminum products subject to TRQs on January 1, 2022 will enter the U.S. market without the application of Section 232 tariffs. CSMS #50533999 refers users to the two proclamations for further details. The proclamation pertaining to adjusting steel imports does note that “[o]n a regular basis, the Department of Commerce shall publish on its website the volume of steel articles imported” under exclusions and the TRQ. While the proclamation pertaining to aluminum imports is silent on tracking the volume of aluminum imports, it is hoped that the Department of Commerce will also publish this data.
The proclamations direct the Department of Commerce to issue a notice in the Federal Register no later than February 10, 2022, seeking comments from interested parties on the Section 232 steel and aluminum exclusion processes. Issues for comment include the responsiveness of the exclusion process to market demand and enhanced consultation with U.S. firms and labor organizations. Within 60 days after the close of the comment period of this notice, the Department of Commerce must issue a proposed regulation revising the exclusion process as deemed appropriate following consideration of such comments. A Thompson Hine SmarTrade post will be published upon the issuance of this Federal Register notice.
On January 1, 2022, the Food and Drug Administration (FDA) will open the Voluntary Qualified Importer Program (VQIP) for FY 2023. Participants in the fee-based program receive expedited review of animal and human foods entering the United States. Specifically, an import screening tool will be used to recognize and typically immediately release shipments that are part of the program. The FDA will expedite import entry into the United States of all foods included in an approved VQIP application and will limit in most situations examination and/or sampling of VQUIP food entries.
Importers interested in applying should start an application by setting up an account through the FDA Industry Systems website. Once an account has been created, selecting “VQIP” under the Food Safety Modernization Act (FSMA) programs options will bring users to the VQIP application page and an option to submit a Notice of Intent to Participate. Importers interested in applying should also review the VQIP Portal User Guide. A list of approved VQIP Importers for FY 2022 is posted to FDA’s website and is available here.
Food importers must meet certain eligibility requirements and pay a user fee to participate in the program.
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On December 21, 2021, the Office of the U.S. Trade Representative (USTR) released its annual report submitted to Congress assessing Russia’s implementation and enforcement of its World Trade Organization (WTO) commitments. In keeping with the tone of past annual USTR reports on this topic, Ambassador Katherine Tai, the USTR, stated that the 2021 report “provides an overview of Russia’s continued departure from the guiding principles of the World Trade Organization, such as non-discriminatory practices, more open trade, predictability, transparency, and fair competition.” The report notes that Russia “maintains restrictive at-the-border measures, institutes behind-the-border measures to inhibit trade, and implements an industrial policy seemingly driven by the guiding principles of import substitution and forced localization.”
The 2021 report notes that Russia in the past year had extended its control over the Russian economy and tightened restrictions on trade. The report highlights the following :
- Russia maintains tariffs ranging from 25 to 40 percent on various industrial products imported from the United States in retaliation against U.S. tariffs imposed on steel and aluminum articles from Russia under Section 232 of the Trade Expansion Act of 1962.
- Russia continues to maintain a near-complete ban on imports of agricultural goods from the United States and other WTO members.
- Russia maintains outmoded import licensing requirements and a mandatory labeling regime.
- Russia maintains non-science-based import restrictions and refuses to recognize other countries’ guarantees on exporting facilities.
- Russia continues to adopt and implement localization measures to provide preferential treatment to both domestically-produced goods and services.
- Russian continues to lack transparency in its trade regime and policies by, for example, refusing to notify the WTO of any state trading enterprises and refusing to answer questions about its import substitution policies.
- Russia’s enforcement of intellectual property rights remains weak and the pirating of websites and movies and other online pirating activities there continue to proliferate.
The report states that the WTO is “premised on the belief that an open and fair multilateral trading system is built and sustained on transparency, predictability and the rule of law” but that “Russia appears to be taking a divergent path, erecting barriers and stifling competition.”
On December 16, 2021, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced it was placing another eight Chinese technology firms on its Non-SDN Chinese Military-Industrial Complex Companies List (CMIC List). This action was taken pursuant to Executive Order 13959 (as amended by Executive Order 14032), which prohibits U.S. persons from conducting any transaction in publicly traded securities, or securities that are derivative of, or are designed to provide investment exposure to such securities of any companies placed on the CMIC List. According to OFAC, the eight companies being added to the list “actively support the biometric surveillance and tracking of ethnic and religious minorities in China, particularly the predominantly Muslim Uyghur minority in Xinjiang.” The Chinese companies are:
- Cloudwalk Technology Co., Ltd.
- Dawning Information Industry Co., Ltd.
- Leon Technology Company Limited
- Megvii Technology Limited
- Netposa Technologies Limited
- SZ DJI Technology Co., Ltd.
- Xiamen Meiya Pico Information Co., Ltd.
- Yitu Limited
Additional details on each of these companies are available here. As a result of these listings, U.S. persons will be prohibited from purchasing or selling certain publicly traded securities connected with these entities, and U.S. persons or companies holding securities in these companies must divest themselves from holdings in the CMIC listed companies no later than December 15, 2022. For additional information and details on the underlying Executive Order “Addressing the Threat from Securities Investments that Finance Certain Companies of the People’s Republic of China,” see Update dated June 9, 2021.
Note that these eight companies were already on the Department of Commerce’s Bureau of Industry and Security (BIS) Entity List. Placement on the Entity List means that all exports, re-exports, or transfers of items subject to U.S. Export Administration Regulations (EAR) require a license from BIS, regardless of whether a U.S. person is involved in the transaction or whether the transaction involves the U.S. financial system.