In a February 5, 2021 order, after months of delay, the U.S. Court of International Trade (CIT) is proceeding in the China Section 301 tariff refund litigation with the appointment of a three-judge panel consisting of Judge Mark A. Barnett, Judge Claire R. Kelly and Judge Jennifer Choe-Groves. This is the CIT’s first action in the matter since U.S. importers began filing more than 3,600 complaints on September 10, 2020. See Update of September 14, 2020. The complaints challenge the legality of Section 301 tariffs imposed on U.S. imports of Chinese products covered under Lists/Tranches 3 and 4A. Several plaintiffs sought the appointment of a three-judge panel, while the Department of Justice (DOJ) asked for the appointment of a single judge. See Update of October 21, 2020.

The three judges appointed are the most senior active judges at the CIT with extensive experience and excellent reputations. The bios of the three judges are available here – Barnett, Kelly, and Choe-Groves.  While the order addresses only the establishment of the three-judge panel, it is expected that consideration of the complaints will begin soon, starting with the establishment of a briefing schedule.

Thompson Hine attorneys and trade professionals will continue to monitor and report on the litigation status as warranted.

On February 4, 2021, a three-judge panel at the U.S. Court of International Trade (CIT) denied a broad challenge by Universal Steel Products and several other importers (“plaintiffs”) to Section 232 tariffs that former President Donald Trump placed on steel imports. The plaintiffs had challenged both the report by the U.S. Department of Commerce (“Commerce”) supporting the Section 232 steel tariffs (“Steel Report”) and President Trump’s executive order, Proclamation 9705, and its subsequent modifications (collectively, “Proclamations”), claiming that they violated various Section 232 procedural requirements and the Administrative Procedure Act (APA).

In their complaint, plaintiffs alleged: (1) the Steel Report is a reviewable, final agency action, is procedurally deficient, and invalidates subsequent presidential action; (2) both the secretary of Commerce and President Trump fundamentally misinterpreted the statute by failing to base their determinations on an “impending threat”; (3) President Trump violated Section 232 by failing to set the duration of the action he chose; and (4) tariffs imposed on Canada, Mexico and EU member countries violated Section 232 timing provisions.

The CIT rejected each of the plaintiffs’ four claims. For the first two claims, the CIT found that Commerce and President Trump’s actions are unreviewable. The CIT rejected the plaintiffs’ claims against Commerce, finding that the Steel Report is not a reviewable “final agency action” under the APA because it was within President Trump’s discretion to accept or reject Commerce’s recommendation. According to the CIT, President Trump, instead of the agency, acted to impose the tariffs. The CIT also denied the plaintiffs’ second claim that President Trump failed to identify an “impending threat,” holding that his exercise of discretion is unreviewable.

The CIT rejected the plaintiffs’ third claim that President Trump failed to set a duration for the tariffs in violation of Section 232, finding his edict that the tariffs remain in effect as long as national security is threatened satisfied this Section 232 requirement. The CIT disagreed with the plaintiffs that Section 232 requires the president to set a “definite duration” for the measures, stating that “even if the duration may be unlimited, it is not undefined, but bounded by whether, in the president’s judgment, the threat to impair national security exists.” In response to the plaintiffs’ fourth claim, the CIT disagreed with their statutory interpretation of Section 232’s timing provision, finding that the president does not need to wait for the 180-day negotiation period to expire before taking any action under Section 232.

Considerations for Cross-Border M&A: Canada, the UK & the U.S. – Trends in Antitrust & National Security Merger Review

A SmarTrade webinar presented by Thompson Hine LLP

The past year saw significant developments in the cross-border M&A review processes in Canada, the United Kingdom and the United States. National security reviews in Canada and the United States have been enhanced to cover a broader array of transactions, and there will also soon be a new wide-ranging national security regime in the UK. In addition, economic and political shifts continue to impact antitrust reviews.

Please join us for a panel discussion on these developments and how investors should anticipate and plan for their impact on cross-border deals in 2021.

Wednesday, February 24, Noon – 1:00 p.m. ET

Presenters:

Please click here to register and receive instructions on how to join the webinar.

CLE credit will be requested.

Key Notes:

  • Many countries have taken various health and safety measures to address the rising number of COVID-19 cases and the new COVID-19 variants.
  • Governments continue to support workers and employers affected by the economic instability caused by the pandemic.
  • Rollout of COVID-19 vaccines and investments in critical infrastructure are the key issues in government contracts.
  • Some governments continue to restrict exports of personal protective equipment and to subject foreign investments to increased scrutiny.

Since April 2020, we have collaborated with foreign law firm partners to monitor and report on the most relevant government measures worldwide addressing the COVID-19 pandemic. The newest version of the guide includes a concise, corporate-focused and user-friendly list of government measures and covers areas like tax, restructuring, business immigration, government contracts and international trade:

View/Download (PDF): Country-by-Country Guide:
Government Measures Taken in Response to COVID-19.

This month’s update includes new information as of early January 2021 for Australia, Belgium, Canada, Chile, China, Costa Rica, Czech Republic, El Salvador, European Union, Germany, Guatemala, Honduras, Hungary, India, Indonesia, Israel, Italy, Japan, Mexico, Netherlands, Panama, Philippines, Poland, Republic of Korea, Russia, South Africa, Spain, Thailand, Turkey, United Kingdom, United States and Vietnam.

Many countries continue to reintroduce health and safety measures previously implemented in March 2020, and later relaxed, to restrict public gatherings or movement of persons to address the rising number of COVID-19 cases. In Europe, some country-wide lockdowns were put in place. Other countries continue to keep social distancing requirements in place and have introduced new regional curfews or lockdown requirements based on the numbers of infections within local populations. In the United States, states and counties continue to differ in their approaches to both business closures/reopenings and face mask requirements. In Asia and the Americas, the general trend indicates that countries have adopted a risk-based system to identify high-risk populations and to restrict their activities accordingly. In Asia, international travel restrictions have been eased in some countries, with a focus on workers. That said, following the discovery of new COVID-19 variants, some countries introduced travel bans from countries with the presence of the new variants.

Most governments continue to support workers and employers affected by the economic instability caused by the pandemic. Most have taken various measures, including tax deferrals or exemptions and loan facilities, to address the difficulties endured by businesses affected by the pandemic-related economic instability. Measures include short-term compensation procedures, social security benefits or other regulations to ensure that workers receive personal protective equipment or do not face discrimination. In the United States, Congress enacted the Consolidated Appropriations Act of 2021 to provide additional benefits for businesses and extend some provisions of the original CARES Act.

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. Further, some governments have introduced measures to facilitate the rollout of COVID-19 vaccines. Additionally, there is increased attention on investment and regulations involving critical infrastructure in the Americas and Europe to support COVID-19 efforts.

In the area of international trade, some countries continue to restrict exports of certain personal protective equipment and have introduced new measures to subject foreign investments to increased scrutiny, especially investments linked to public health emergencies. Foreign investment in health care and related infrastructure continues to be regulated around the world.

On January 27, 2021, the U.S. Court of International Trade (CIT) issued an opinion in which it dismissed all but one claim challenging on various grounds a proclamation by former President Donald Trump (Proclamation 9980) that imposed 25% tariffs on, inter alia, various imported products made of steel pursuant to Section 232 of the Trade Expansion Act of 1962. However, the CIT will continue to consider the claim that President Trump implemented additional and new duties on certain steel derivative products after the statutory time period for such action had lapsed.

PrimeSource Building Products, Inc., a U.S. importer of various steel derivative products, filed a complaint (subsequently amended) in the CIT on February 4, 2020, arguing that President Trump’s Proclamation 9980 was unlawful and unconstitutional. See Update of February 14, 2020. On March 20, 2020, the U.S. Department of Justice (DOJ) filed a motion to dismiss the complaint, arguing that the new tariffs did not violate the Section 232 procedural requirements or PrimeSource’s right to due process. See Update of March 31, 2020.

In its January 27, 2021 order, the CIT dismissed PrimeSource’s claims that: (i) the imposition of Section 232 duties on the derivative products was procedurally deficient; (ii) the secretary of commerce violated all of the Section 232 statutory provisions; (iii) PrimeSource was deprived of its Fifth Amendment due process constitutional rights; and (iv) Section 232 is unconstitutional as it unlawfully delegates legislative authority from Congress to the president.

The CIT did not dismiss PrimeSource’s claim that Proclamation 9980 was issued 638 days after the transmittal of the Section 232 steel investigation report to the president (well after the 105 days set forth in 19 U.S.C. § 1862(c)(1)) and is thus null and void. Despite DOJ arguing that the president has the authority to modify Section 232 tariffs at any time to protect national security (including adjusting imports of articles not addressed in Proclamation 9705 that the president designated as “derivatives” of identified steel articles), the CIT found that this claim rests upon a “plain meaning” interpretation of the statute. The opinion states that DOJ’s “’flexible’ reading of [19 U.S.C. § 1862(c)(1)] would require us to interpret the ‘action’ taken by Proclamation 9980 and that taken by Proclamation 9705 as parts of the same ‘action’,” which “presents several interpretive problems.” The opinion concludes that there “is no ‘flexible’ reading of [19 U.S.C. § 1862(c)(1)] Section 232(c)(1) that suffices to allow the President to adjust, through new tariffs, imports of derivatives of previously-affected articles outside of the time limits Congress imposed, and the appellate decisions on which defendants rely do not lend support to any such reading.”

The parties now have until February 26, 2021, to file a joint schedule that will govern the briefing and hearing schedule for the remaining “unresolved factual issues” of this claim.

Key Notes:

  • Tighter requirements for domestic content under consideration.
  • New Made in America Office to be established and Made in America director to be appointed.
  • Waivers to domestic preference laws subject to heightened scrutiny.

As part of his “Build Back Better” initiative, President Biden issued an executive order (EO) Tuesday that tightens Buy American requirements by enhancing enforcement efforts, increasing domestic content requirements for U.S. goods, and making it more difficult to obtain waivers. The EO, “Executive Order on Ensuring the Future is Made in All of America by All of America’s Workers,” also establishes a centralized Made in America office within the Office of Management and Budget (OMB) to track compliance with the policy.

View this full client update in HTML or PDF format.

On January 25, 2021, President Joe Biden issued an Executive Order (EO) stating that the “United States Government should, whenever possible, procure goods, products, materials, and services from sources that will help American businesses compete in strategic industries and help America’s workers thrive.”  The EO tightens Buy American requirements by enhancing enforcement efforts, increasing domestic content requirements for U.S. goods, and making it more difficult to obtain waivers. The EO, “Executive Order on Ensuring the Future is Made in All of America by All of America’s Workers,” also establishes a centralized Made in America office within the Office of Management and Budget (OMB) to track compliance with the policy. It refers to domestic preferences related to federal procurement, federal grants and other forms of federal assistance, and implements the following actions:

  • Requires the Federal Acquisition Regulatory Council (FAR Council) to consider proposing amendments to the Federal Acquisition Regulations (FAR) for tighter requirements for domestic content.
  • Appoints a new senior leader in the Executive Office of the President in charge of the government’s Made in America policy approach.
  • Increases oversight of potential waivers to domestic preference laws.
  • Connects new businesses to contracting opportunities by requiring active use of supplier scouting by agencies.
  • Reiterates the President’s support for the Jones Act.
  • Directs a cross-agency review of all domestic preferences.

For additional details on these points, see the related White House Fact Sheet. Perhaps, the most immediate impact of the Executive Order is the establishment of a Made in America Office in the Office of Management and Budget (OMB) that will centralize the review of federal agencies’ waivers of the Buy American requirements. Before an agency may grant a waiver, the agency must provide the Made in America Office with a description of its proposed waiver “and a detailed justification for the use of goods, products, or materials that have not been mined, produced, or manufactured in the United States.” Before proceeding further, the relevant agency must await notice from the OMB Director, through the Made in America Office, either that (i) issuing the proposed waiver would be consistent with the applicable law and policy, or (ii) issuing the proposed waiver would not be consistent with the applicable law or the policy and that the proposed waiver is being returned for further consideration. To the extent permitted by law, any disagreements or conflicts between the Made in America Office and the head of any agency regarding proposed waivers will undergo further review toward a resolution of the matter. Such information will also be published by the General Services Administration (GSA) in order that manufacturers and other interested parties can identify proposed waivers and whether those waivers have been granted.

Within the next six months, the head of each federal agency must submit to the Made in America Office a report detailing its implementation of, and compliance with, Made in America laws, and any ongoing use of longstanding or nationwide waivers of any Made in America laws, with a written description of the consistency of such waivers. Thereafter, on a bi‑annual basis, each federal agency must submit a report on the agency’s: (i) ongoing implementation of, and compliance with, Made in America laws; (ii) analysis of goods, products, materials and services not subject to Made in America laws or where requirements of the Made in America laws have been waived; and (iii) analysis of spending as a result of waivers issued pursuant to the Trade Agreements Act of 1979.

In brief remarks to the press, President Biden stated: “The federal government every year spends approximately $600 billion in government procurement to keep the country going safe and secure. And there’s a law that’s been on the books for almost a century now: to make sure that that money was spent … to support American jobs and American businesses. But the previous administration didn’t take it seriously enough. Federal agencies waived the Buy American requirement without much pushback at all.” He added, “That is going to change on our watch.”

This EO lays the groundwork for the eventual further tightening of restrictions regarding domestic preferences and “loopholes” that allow agencies to buy foreign-made end products. Practically, these proposed changes may be somewhat limited for contractors whose contracts are exempt from Buy American restrictions based on the Trade Agreement Act (TAA) and other international obligations as they are not specifically targeted in the EO. For government contractors and U.S. manufacturers that are subject to the BAA, these proposed changes could potentially have a significant impact on existing supply chains that were developed in reliance on long-standing Buy American rules.

The Department of State’s Directorate of Defense Trade Controls (DDTC) has announced that it will be adjusting the review policy to ensure U.S. partners receiving such items can employ them in a manner that will “minimize collateral damage and mitigate harm to civilians.”

The announcement notes that the “responsible and effective employment of PGMs requires advanced target development (ATD) capabilities including weaponeering, collateral damage estimation (CDE), and target coordinate mensuration (TCM, also referred to as Precision Point Mensuration or PPM) for coordinate-seeking weapons.” Going forward, any licenses for the export of such items will continue to be reviewed on a case-by-case basis. However, DDTC will now also confirm that the “foreign end-user government possesses or is in the process of procuring sufficient U.S., indigenous, or third-party ATD capabilities with respect to the PGMs considered for transfer.” The announcement provides a listing of covered PGMs and critical components, noting that such items likely fall under U.S. Munitions List Categories III, IV, V, and XI.

On January 20, 2021, Ronald Klain, President Joseph Biden’s Chief of Staff, issued a memorandum to the current heads of all executive branch departments and agencies placing a freeze on the implementation of any new federal regulations, a typical move at the start of a new president’s term. This hold on further action will allow a Biden-appointed/designated department or agency head to review and approve any new rules. Accordingly:

  • For rules that former President Donald Trump’s administration proposed but have not yet been published in the Federal Register, departments and agencies have been instructed to immediately withdraw them from the Office of the Federal Register (OFR) for review and approval, unless there is an emergency situation or other urgent circumstances requiring implementation.
  • For rules that have been published in the Federal Register or rules that have been issued in any manner but have not taken effect, the departments and agencies have been requested to postpone the rules’ effective dates for 60 days from January 20, 2021, to allow for the review of any questions of fact, law, and policy the rules may raise. For rules postponed in this manner, the memo suggests that, as appropriate, a 30-day comment period be opened to allow interested parties to provide comments and any petitions for reconsideration involving such rules.

This freeze will place a hold on many regulatory actions proposed in the final month of President Trump’s term. For example, the State Department’s Directorate of Defense Trade Controls (DDTC) has withdrawn its rulemaking to consider making permanent the temporary exception to allow for continued telework operations (see Update of December 10, 2020) and the Department of Commerce’s Bureau of Industry and Security (BIS) has paused implementation of its interim final rule expanding certain controls on the activities of U.S. persons (see Update of January 20, 2021). While not confirmed, it is believed that the Department of Commerce’s final rule adopting the Aluminum Import Monitoring and Analysis (AIM) system scheduled to be effective January 25, 2021, has been delayed also.

Thompson Hine international trade attorneys and professionals will continue to monitor and report on any other significant delays or withdrawals of pending regulatory actions.

On January 15, 2021, the Department of Commerce’s Bureau of Industry and Security (BIS) issued an interim final rule implementing further provisions of the Export Control Reform Act of 2018 by: (i) imposing additional export license requirements under the Export Administration Regulations (EAR) in connection with certain military-intelligence end uses and end users; (ii) clarifying that license requirements under the EAR apply even when the items at issue are not subject to the EAR; (iii) establishing restrictions on transactions intended to circumvent license requirements for listed entities; and, (iv) expanding the scope of activities subject to chemical and biological weapons and rocket systems and unmanned aerial vehicles end-use controls. Overall, these regulations implement new controls on any U.S. technologies and specific activities of U.S. persons who may be supporting foreign military-intelligence end uses and end users in China, Cuba, Russia, and Venezuela, as well as in terrorist-supporting countries. They also enhance controls to prevent U.S. persons from supporting unauthorized weapons of mass destruction (WMD) programs including weapons delivery systems and production facilities.

These controls are intended to prevent U.S. persons from supporting certain foreign military-intelligence services through activities such as brokering the sale of foreign-origin items or providing maintenance, repair, or overhaul services. BIS will also expand license requirements for military-intelligence end uses and end users in China, Russia, and Venezuela beyond specifically listed items subject to existing military end-use and end-user (MEU) controls to apply to all items subject to the EAR. BIS is adding a new restrictions for exports, reexports, and transfers (in-country) to certain military-intelligence end uses or end users, specifically targeting the following foreign military-intelligence organizations:

  • Cuba’s Directorate of Military Intelligence (DIM) and Directorate of Military Counterintelligence (CIM)
  • China’s Intelligence Bureau of the Joint Staff Department
  • Iran’s Islamic Revolutionary Guard Corps Intelligence Organization (IRGC-IO) and Artesh Directorate for Intelligence (J2)
  • North Korea’s Reconnaissance General Bureau (RGB)
  • Russia’s Main Intelligence Directorate (GRU)
  • Syria’s Military Intelligence Service
  • Venezuela’s General Directorate of Military Counterintelligence (DGCIM)

The interim final rule also establishes license requirements for specific activities of U.S. persons even when the items at issue are not subject to the EAR. For example, the new regulation has a general prohibition on U.S. persons offering, without a license, support for the design, development, production, operation, installation, maintenance, repair, overhaul, or refurbishing of nuclear explosive devices in or by any country subject to certain nuclear end-use restrictions. Similar restrictions on specific activities of U.S. persons have been added to cover “support” (a defined term in the regulations) for missiles, chemical or biological weapons, chemical weapons precursors and the aforementioned military-intelligence end use or a military-intelligence end user. No license exceptions will apply to these new prohibitions, and BIS will deny any export licenses if such support “would make a material contribution to the end uses and end users” identified as prohibited. License applications for a U.S. person to support a military-intelligence end use or end user will be reviewed with a presumption of denial.

Under the new regulations BIS may also inform persons that an export license is required because there is an “unacceptable risk that the export, reexport, or transfer (in-country) is intended to circumvent the license requirement imposed on an entity listed [on the Entity List], or because the transaction involves an “unacceptable risk that the party is acting as an agent, front, or shell company.” Finally, BIS is also revising end-use controls related to chemical and biological weapons, rocket systems, and unmanned aerial vehicles (UAVs) to ensure that any U.S. activity related to the operation, installation, maintenance, overhaul, repair, or refurbishing of such weapons, rocket systems, or UAVs triggers a catch-all export license requirement under the EAR.

This interim final rule will become effective on March 16, 2021. Public comments on the rule may be submitted via the Federal rulemaking portal (www.regulations.gov) on Docket No. BIS-2020-0044.