On October 5, 2021, the Office of the U.S. Trade Representative (USTR) announced that it is seeking public comments on whether to reinstate previously extended product exclusions for certain imports from China subject to Section 301 tariffs. Of the more than 2,200 product exclusions that were granted by USTR during the administration of President Donald Trump, only 549 were ultimately extended beyond their initial expiration date. With the exception of exclusions related to the COVID-19 pandemic, all of these product exclusions have now expired. A list of these product exclusions covered by this USTR notice is available here.

As these exclusions were previously found to warrant additional time for being exempt from the additional Section 301 tariffs placed on certain products imported from China, USTR will evaluate, on a case-by-case basis, the possible reinstatement of each exclusion. In doing so, comments in support of, or opposition to, any reinstatement of an extension should address: (i) whether product remains available only from China; (ii) whether the product or a comparable product is available from sources in the United States or from third countries; (iii) any changes in the global supply chains since September 2018 with respect to the product or any other relevant industry developments; (iv) the efforts of the importers or purchasers to source the product from the United States or third countries; and (v) any domestic capacity for producing the product in the United States. In addition, USTR will consider whether or not reinstating the exclusion will impact or result in severe economic harm to the commenter or other U.S. interests, including the impact on small businesses, employment, manufacturing output and critical supply chains in the United States, and the possible impact of reinstatement of the exclusion on the goal of obtaining the elimination of China’s acts, policies and practices related to technology transfer, intellectual property and innovation covered in the Section 301 investigation. USTR is also seeking comments on the appropriate length for any reinstated exclusions. Finally, USTR is requesting the submission of certain business confidential information which will not be released to the public, which includes the value and quantity of the Chinese-origin product covered by the specific exclusion request purchased over the last three years (2019, 2020, first six months of 2021) and a company’s gross revenue in U.S. dollars for 2019, 2020 and 2021.

USTR will accept public comments from October 12 through December 1, 2021. All comments must be submitted via USTR’s online portal at https://comments.ustr.gov. While comments must be submitted via this portal, USTR is offering a sample copy of the “Exclusion Reinstatement Comment Form” as a guide for commenters. Submitted comments will be reviewed by USTR, which will also consult with other agencies as necessary.

Any reinstated product exclusions will be retroactive to October 12, 2021, and apply only to entries that are not liquidated at that time.

The Commerce Department’s Bureau of Industry and Security (BIS) has released a final rule to implement a multilateral agreement to control certain biotechnology software that could be misused for biological weapons purposes. This final rule amends the Export Administration Regulations (EAR) to implement the decision finalized by the Australia Group (AG) on August 6, 2021. The AG is a multilateral forum consisting of 42 participating countries and the European Union.  Its main purpose is to coordinate and maintain export controls on a list of chemicals, biological agents, and related equipment, software and technology that could be used in chemical or biological weapon programs. This AG decision and BIS’ final rule add export controls on nucleic acid assembler and synthesizer software that is capable of designing and building functional genetic elements from digital sequence data.  While this software has substantial beneficial civilian applications, it can be misused for biological weapons purposes.  This new licensing requirement could be significant for U.S. life sciences companies and other medical-related entities as the new export controls on such software cover a multitude of countries.

The final rule adds a new Export Control Classification Number (ECCN) to control “software” designed for certain nucleic acid assemblers and synthesizers (i.e., ECCN 2D352).  Specifically, the new software controls apply to nucleic acid assemblers and synthesizers that are both: (i) partly or entirely automated; and (ii) designed to generate continuous nucleic acids greater than 1.5 kilobases in length with error rates less than 5% in a single run.  Exports of this software will now require a license from BIS for chemical and biological weapons reasons and anti-terrorism reasons.  Further, BIS has also amended a related ECCN to cover the “technology” for the development of such nucleic acid assemblers and synthesizers software.

By strengthening export controls on software that could be inappropriately used for biological weapons proliferation, BIS has stated that this final rule “represents another step forward in preventing the misuse of this emerging technology by foreign adversaries and strengthening export control regimes in coordination with allies and partners.”  This final rule and the encompassing export controls on such software and related technology are effective as of October 5, 2021.

In an October 4, 2021 speech, U.S. Trade Representative (USTR) Katherine Tai offered several broad insights into President Joseph Biden’s approach to the U.S.-China trade relationship. Noting that this relationship is complex, competitive and “one of profound consequence,” she stated that “[f]or too long, China’s lack of adherence to global trading norms has undercut the prosperity of Americans and others around the world.” Instead of addressing concerns and meaningful reforms, China has “doubled down on its state-centered economic system.”

In her prepared remarks, USTR Tai reiterated President Biden’s message that the “key to [U.S.] global competitiveness and creating shared prosperity begins at home” with investments (i) to increase competitiveness, (ii) in research and development, clean energy technology and the U.S. manufacturing base, and (iii) to incentivize companies to Buy American. Regarding the Biden administration’s comprehensive review of U.S.-China trade, she stated that China has not lived up to its commitments under the Phase One agreement negotiated by the Trump administration. She added that the Biden administration has “serious concerns with China’s state-centered and non-market trade practices that were not addressed in the Phase One deal.”

While acknowledging that the Phase One deal may have “stabilized the market”, USTR Tai explained that it “did not meaningfully address the fundamental concerns that we have with China’s trade practices and their harmful impacts on the U.S. economy.”  She provided several examples of China’s subsidies of targeted industries and measures that limit market access for U.S. producers.  As a result, China’s policies have “reinforced a zero-sum dynamic in the world economy where China’s growth and prosperity come at the expense of workers and economic opportunity here in the U.S. and other market-based, democratic economies.”  In addressing these challenges, USTR Tai stated that the Biden administration is investing in U.S. workers and rebuilding our infrastructure, and investing in education and worker training.

In upcoming meetings with Chinese officials, USTR Tai indicated that she will have “frank conversations” about China’s performance under the Phase One agreement and its industrial policies. Given the size of the economies of the United States and China, “[d]urable coexistence requires accountability and respect for the enormous consequences of our actions.” She added that the United States will also work with “our allies and like-minded partners towards building truly fair international trade that enables healthy competition.”

Notably, after months of inquiries and complaints about the expired Section 301 tariff exclusion process for imported Chinese products, USTR Tai indicated that the agency will restart a targeted tariff exclusion process. In doing so, she stated that the office of the USTR “will ensure that the existing enforcement structure optimally serves our economic interests. We will keep open the potential for additional exclusion processes, as warranted.” Further details on this renewed exclusion process have not yet been provided by the agency.

On October 1, 2021, the Office of the United States Trade Representative (USTR) announced that the United States and the Socialist Republic of Vietnam (Vietnam) reached an agreement resolving the Section 301 investigation into Vietnam’s alleged import and use of timber illegally harvested or traded. The investigation was initiated in October 2020 by former President Donald Trump. See Updates of October 6, 2020 and November 25, 2020. In the investigation, the Office of the USTR alleged that Vietnam relies on imports of timber harvested in other countries and that the “evidence suggests that a significant portion of that imported timber was illegally harvested or traded (illegal timber). Some of that timber may be from species listed under the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES).” According to a USTR press release, the agreement reached between the United States and Vietnam “secures commitments that will help keep illegally harvested or traded timber out of the supply chain and protect the environment and natural resources.” While Ambassador Katherine Tai, the USTR, indicated that no trade action will occur, the USTR will monitor Vietnam’s implementation of the agreement.

The Agreement between the Governments of the Socialist Republic of Vietnam and the United States of America on Illegal Logging and Timber Trade (the Agreement) contains multiple commitments on issues related to illegal timber, including:

  • Vietnam’s treatment of confiscated timber.
  • Financial incentives related to illegal timber.
  • Customs inspections and clearance.
  • Entities covered by Vietnam’s timber legality assurance system.
  • The criteria used to classify a third country as a “positive geographical area exporting timber to Vietnam.”
  • The verification of domestically harvested timber.
  • The implementation of certain licensing schemes.
  • Cooperation with the governments of third-country sources of imported timber.
  • Illegal timber activities in third countries or involving third-country nationals.
  • Verification and enforcement measures.
  • Cooperation between the parties’ respective law enforcement agencies to combat the harvest and trade of illegal timber.
  • Creation of a timber working group under the U.S.-Vietnam Trade and Investment Framework Agreement Council.
  • Public information and participation on matters related to the implementation of the Agreement.
  • Cooperation on technical assistance and initiatives to promote sustainable forest management and to combat illegal logging and associated trade.

According to the Office of the USTR, this was the first Section 301 investigation to address environmental concerns. The Agreement notes that both countries agree “on the importance of the conservation and sustainable management of forests for providing environmental, economic, and social benefits for present and future generations, and the critical role of forests in providing numerous ecosystem services and habitat for wild fauna and flora.” The Agreement establishes various deadlines for Vietnam to implement programs and processes to address the treatment of illegal timber and to keep it out of the supply chain. Further, both countries’ law enforcement agencies will cooperate to combat the harvest and trade of illegal timber.

On September 29, 2021, the Coalition of Freight Coupler Producers, consisting of Amsted Rail Company, Inc. and McConway & Torley LLC (“Petitioners”), filed petitions with the U.S. Department of Commerce (“Commerce”) and the U.S. International Trade Commission (ITC) seeking antidumping and countervailing duties on imports of freight rail coupler (FRC) systems and components from the People’s Republic of China (PRC). According to the petitions, freight rail coupler systems and components from the PRC are being sold at less than fair value in the United States and benefit from countervailable subsidies, causing material injury to the domestic FRC industry and threatening further material injury if trade remedy duties are not imposed. FRCs from the PRC are currently subject to a 25 percent Section 301 tariff.

FRC systems and components, including knuckles, coupler bodies, coupler yokes, and follower blocks, are mechanisms used to connect freight rail cars together and meet or exceed the Association of American Railroads (AAR) specifications of M211 “Foundry and Product Approval Requirements for the Manufacture of Couplers, Coupler Yokes, Knuckles, Follower Blocks, and Coupler Parts” and/or AAR M215 “Coupling Systems” or equivalent domestic or international standards. Please contact us for a copy of the proposed scope of the investigations.

In the petitions, the Petitioners allege that Chinese FRC producers are benefiting from more than 30 subsidy programs. The Petitioners also allege dumping margins ranging from 142.98 to 147.11 percent.

Commerce will determine by October 19, 2021, whether to formally initiate the investigations, and, if Commerce does, the ITC will decide 25 days after that whether there is a reasonable indication of existing material injury or threat of material injury to the domestic FRC industry and whether the investigations should be continued or terminated.

On September 29, 2021, the inaugural meeting of the United States–European Union Trade and Technology Council (TTC) met to discuss and establish “common principles to update the rules for the 21st century economy.” Attending were U.S. Co-Chairs, Secretary of State Antony Blinken, Secretary of Commerce Gina Raimondo and United States Trade Representative Katherine Tai, and EU Co-Chairs European Commission Executive Vice Presidents Margrethe Vestager and Valdis Dombrovskis. The TTC was established during the U.S.-EU summit in June 2021 under the new Biden administration as one commitment to renew their transatlantic partnership and initially discuss a Joint Transatlantic Agenda for “regular dialogue to take stock of progress.” See Update of June 17, 2021. Ambassador Tai emphasized during the meeting that the TTC is an important platform for assuring that the United States and the EU “remain global leaders in technology and innovation, projecting our shared democratic values internationally, and protecting fundamental labor rights.”

At the conclusion of the TTC meeting, the U.S. and EU issued a Joint Statement reaffirming TTC’s objectives: to coordinate approaches to key global technology, economic, and trade issues; and deepen transatlantic trade and economic relations, basing policies on shared democratic values. As a result of this first meeting, the U.S. and EU announced close coordination on a set of critical economic and technology issues, including:

  • Global trade challenges and addressing non-market, trade distortive practices: Seek to strengthen U.S.-EU competitiveness and technological leadership by developing common strategies to mitigate the impact of non-market practices at home and in third countries and by working to avoid new and unnecessary barriers to trade, especially in products and services derived from emerging technologies. The U.S. and EU also intend to use various tools to protect workers and labor rights, combat forced and child labor, and consult on relevant trade, climate, and environmental issues.
  • Semiconductor supply chains: Intend to enhance cooperation on measures to advance transparency and communication in the semiconductor supply chain and identify gaps, shared vulnerabilities, and opportunities to strengthen our domestic semiconductor R&D and manufacturing ecosystems with a view to improving resilience in the semiconductor supply chain.
  • Investment screening: Intend to exchange information on investment trends affecting security, including industry specific trends, origin of investments, and types of transactions, and on best practices with respect to analyzing and addressing risk, with a focus on sensitive technologies and related sensitive data.
  • Export Controls: Determine shared principles and areas for export control cooperation, including capacity building assistance to third countries to support multilateral export control regimes, prior consultations on current and upcoming legislative and regulatory developments, and developing convergent control approaches on sensitive dual-use technologies.
  • Artificial Intelligence (AI): Develop and implement AI systems that are innovative and trustworthy and that respect universal human rights and shared democratic values, explore cooperation on AI technologies designed to enhance privacy protections, and undertake an economic study examining the impact of AI on the future of our workforces.

In a post-meeting news conference, Secretary Blinken noted the United States and EU represent two of the world’s largest economies and, thus, “have a unique ability to help shape the norms, the standards, the rules that will govern the way technology is used, the technology that affects the lives of virtually all of our citizens. We have an ability to set the pace, to set the standard.” While the next meeting of the TTC has not been announced, the Joint Statement does provide details for the future focus and scope of work for each of the 10 TTC Working Groups.

On September 24, 2021, the Department of Commerce’s Bureau of Industry and Security (BIS) issued a notice seeking public comment and input from domestic and foreign semiconductor design firms, semiconductor manufacturers, materials and equipment suppliers, and semiconductor intermediate and end-users regarding ongoing risks in the semiconductor supply chain. The goal of this public comment request is to facilitate the flow of information across the various segments of the supply chain, to identify data gaps and bottlenecks in the supply chain, and to determine potential inconsistent demand signals.  The notice acknowledges that  “ongoing shortages in the semiconductor product supply chain are having an adverse impact on a wide range of industry sectors.”

This effort was mandated by President Joseph Biden’s Executive Order (E.O.) 14017, which included a 100-day supply chain review of the semiconductor industry. For additional background on this issue and the E.O., see past Updates of February 25, 2021, March 11, 2021, March 29, 2021, and June 11, 2021. In its notice, BIS stated that it is specifically seeking information and data from (i) front- and back-end manufacturers and microelectronics assemblers, and their suppliers and distributors, on semiconductor product design; and (ii) intermediate users and end users of semiconductor products or integrated circuits. Key issues to be addressed include any order backlogs; identifying any current delays, disruptions or bottlenecks in the supply chain; any deferred, delayed or suspended production; and identifying semiconductor products in short supply.

Comments must be submitted no later than November 8, 2021 via the U.S. government’s eRulemaking portal at www.regulations.gov. Submissions must be identified by docket number BIS 2021-0036 or RIN 0694-XC084. BIS requires commenters to download and submit a fillable form from the BIS website at https://bis.doc.gov/semiconductorFRN2021. Submissions containing business confidential information must be clearly marked, include a statement justifying nondisclosure and provide a non-confidential version of the submission. Material submitted that is marked as containing “business confidential information,” and accepted as such by BIS, will be exempted from public disclosure.

On September 21, 2021, the Department of Commerce (Commerce) initiated an investigation to determine the effects on U.S. national security of imports of neodymium-iron-boron (NdFeB) permanent magnets (sometimes referred to as neodymium magnets, neo magnets, or rare earth magnets). According to a Commerce press release, “critical national security systems rely on NdFeB permanent magnets, including fighter aircraft and missile guidance systems. In addition, NdFeB permanent magnets are essential components of critical infrastructure, including electric vehicles and wind turbines. The magnets are also used in computer hard drives, audio equipment, and MRI devices.”

This is the first Section 232 investigation initiated by President Joseph Biden’s administration and Secretary of Commerce Gina Raimondo and is consistent with the president’s directive to strengthen U.S. supply chains and encourage investments to support domestic production. (See Update of June 11, 2021, regarding 100-Day Supply Chain Review of Critical Industries).

Secretary Raimondo must present Commerce’s findings and recommendations to President Biden within 270 days, or no later than June 18, 2022. On September 27, 2021, Commerce’s Bureau of Industry and Security (BIS) issued a notice requesting public comments on the investigation. While the BIS is interested in any information related to this investigation, the notice also seeks the following details from any interested parties:

  • Quantity of or other circumstances related to the importation of NdFeB permanent magnets;
  • Domestic production and productive capacity needed for NdFeB permanent magnets to meet projected national defense requirements;
  • Existing and anticipated availability of human resources, products, raw materials, production equipment, and facilities to produce NdFeB permanent magnets;
  • Growth requirements of the NdFeB permanent magnet industry to meet national defense requirements and/or requirements for supplies and services necessary to assure such growth, including investment, exploration, and development;
  • The impact of foreign competition on the economic welfare of the domestic NdFeB permanent magnet industry;
  • The displacement of any domestic NdFeB permanent magnet production causing substantial unemployment, decrease in the revenues of government, loss of investment or specialized skills and productive capacity, or other serious effects;
  • Relevant factors that are causing or will cause a weakening of our national economy; and
  • Any other relevant factors, including the use and importance of NdFeB permanent magnets in critical infrastructure sectors identified in Presidential Policy Directive 21 (Feb. 12, 2013) (for a listing of those 16 sectors, see dhs.gov/cisa/critical-infrastructure-sectors).

Comments must be submitted no later than November 12, 2021 via the federal government’s eRulemaking portal at www.regulations.gov. Any submissions must be identified by docket number BIS 2021–0035 or RIN 0694–XC083. Material submitted that is marked as  containing “business confidential information”, and accepted as such by the BIS, will be exempted from public disclosure.

On September 27, 2021, the Office of the U.S. Trade Representative (USTR) announced that it was again continuing exclusions from Section 301 duties for certain medical care imports from China needed to address the COVID-19 pandemic. These exclusions were set to expire on September 30, 2021 (see Update of March 8, 2021), but have now been extended until November 14, 2021. This extension will allow USTR sufficient time to review the comments it received in response to its August 27, 2021 notice requesting public comments on whether any of the 99 product exclusions should be further extended for up to six months (see  Update of August 27, 2021).

On September 24, 2021, Office of Foreign Assets Control (OFAC) issued two general licenses (GL) intending to alleviate the impact of U.S. sanctions on civilians in Afghanistan. Specifically, OFAC issued GL 14 “Authorizing Humanitarian Activities in Afghanistan” and GL 15 “Transactions Related to the Exportation or Reexportation of Agricultural Commodities, Medicine, Medical Devices, Replacement Parts and Components, or Software Updates in Afghanistan.” Both GLs authorize certain transactions involving the Taliban or the Haqqani network, which are blocked pursuant to Executive Order 13224, and listed on the Specially Designated Nationals and Blocked Persons List.

GL 14 authorizes all transactions involving the Taliban or the Haqqani network, or any entity in which these hold 50% or greater interest, that are ordinarily incident and necessary for the provision of humanitarian assistance to Afghanistan by the U.S. government, nongovernmental organizations, the United Nations, certain development banks, and Red Cross and persons acting on behalf of these entities, including their employees and contractors. GL 14, however, does not authorize financial transactions with persons involved in the Taliban or the Haqqani network.

GL 15 authorizes all transactions involving the Taliban or the Haqqani network, or any entity in which these hold 50% or greater interest, that are ordinarily incident and necessary to the exportation or reexportation of agricultural commodities, medicine, medical devices, replacement parts and components for medical devices, or software updates for medical devices to Afghanistan, or to persons in third countries purchasing specifically for resale to Afghanistan. Covered items under GL 15 include agricultural commodities, medicine and medical devices. GL 15 does not authorize financial transactions with persons involved in the Taliban or the Haqqani network.

OFAC also released four related FAQs – 928, 929, 930 and 931. FAQs 928-929 explain that U.S. sanctions on the Taliban and the Haqqani network do not prohibit the provision of humanitarian assistance to Afghanistan, and that the “humanitarian assistance” means, among other things, provision of relief services and non-commercial development projects that primarily benefit poor or at-risk populations or otherwise relieve human suffering. FAQ 930 explains that the U.S. sanctions do not prohibit the exportation or reexportation of agricultural commodities, medicine, and medical devices to Afghanistan, as set forth in GL 15. FAQ 931 explains that non-U.S. persons do not risk exposure to U.S. sanctions for engaging in transactions that U.S. persons would be authorized under GLs 14 and 15.