On June 28, 2022, the Department of Commerce’s Bureau of Industry and Security (BIS) issued a Final Rule placing 36 entities on the Entity List for engaging in activities contrary to the national security or foreign policy interests of the United States. These entities will be listed on the BIS Entity List under the destinations of: (i) the People’s Republic of China (China), (ii) Lithuania, (iii) Pakistan, (iv) the Russian Federation (Russia), (v) Singapore, (vi) the United Arab Emirates (UAE), (vii) the United Kingdom, (viii) Uzbekistan, and (ix) Vietnam. This Final Rule also revises 11 existing entries under the destinations of Belarus, China, Russia, and Slovakia and corrects one existing entry on the Entity List under the destination of Pakistan.

Six entities have been added to the Entity List due to providing support to Russia’s military and/or defense industrial base. Twelve Chinese entities have been added due to deceptive practices to supply Iran with U.S.-origin electronics that would ultimately provide support to Iran’s military. Eight entities have been added due to their efforts to acquire U.S.-origin items in support of military applications. Four additional Russian entities have been added for activities contrary to the national security or foreign policy interests of the United States. Four UAE entities have been placed on the Entity List for posing an unacceptable risk of using or diverting items to certain nuclear end-uses and certain rocket systems and unmanned aerial vehicles end-uses. Two additional UAE entities have been added for either providing false or misleading information and for circumventing BIS export licensing requirements.

Their addition to the Entity List means these entities are subject to a license requirement – currently under a policy or presumption of denial, or a case-by-case review – with no license exceptions available, for the export, reexport, export from abroad, or transfers (in-country) of all items subject to the EAR destined to these entities.

The rule is effective as of June 28, 2022. BIS has stated that shipments of items subject to the Final Rule that, pursuant to actual orders were en route aboard a carrier to a port of export, reexport, or transfer (in-country) on June 28, 2022, may proceed to that destination under the previous export eligibility without a license (NLR).

On June 28, 2022, the Department of the Treasury’s Office of Foreign Assets Control (OFAC), in consultation with the Departments of Commerce and State, issued a determination prohibiting gold imports from Russia, the country’s largest non-energy export, effective immediately. According to the determination, gold imports of Russian Federation origin are prohibited, except to the extent provided by law, or unless licensed or otherwise authorized by OFAC. The determination excludes gold of Russian Federation origin that was located outside of Russia before June 28, 2022. OFAC has defined the term “Russian Federation origin” to include goods produced, manufactured, extracted or processed in the Russian Federation, excluding any Russian Federation-origin good that has been incorporated or substantially transformed into a foreign-made product.

The United States has been joined in this effort by the United Kingdom, Canada and Japan. Even before this determination and prohibition, OFAC stated that it has cautioned U.S. persons “to be vigilant about attempts to circumvent OFAC regulations through gold-related transactions.” In a related FAQ, OFAC states that U.S. persons, including gold dealers, distributors, wholesalers, buyers, individual traders, refineries and financial institutions, are prohibited under Executive Order (EO) 14024 from engaging in or facilitating prohibited transactions, including gold-related transactions, in which blocked persons have an interest.

Further, U.S. persons are prohibited from engaging in any transaction — including gold-related transactions — involving the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, or the Ministry of Finance of the Russian Federation pursuant to Directive 4 under EO 14024 (Russia-related Sovereign Transactions Directive). U.S. financial institutions are also generally prohibited from processing transactions, including gold-related transactions, involving foreign financial institutions that are determined to be subject to the prohibitions of Directive 2 under Executive Order 14024 (Russia-related CAPTA Directive).

During meetings among the G7 leaders on June 28, 2022, President Joseph Biden and the other G7 leaders committed to a “unified approach to confront” China’s trade-distorting industrial directives.  According to a White House Fact Sheet, such actions will include:

  • sharing insights and best practices to identify, monitor and minimize vulnerabilities and logistic bottlenecks in advance of supply chain shocks;
  • cooperating on cyber and quantum technology to achieve accountability and increase stability and security in cyberspace;
  • demonstrating how “democratic and market-oriented approaches to trade, technology and innovation can improve the lives of our citizens and be a force for greater prosperity:”
  • accelerating efforts to address forced labor, with “the goal of removing all forms of forced labor from global supply chains, including state-sponsored forced labor;” and
  • reaffirming the importance of strengthening democratic resilience to authoritarian threats around the world.

Text from the full G7 Leaders’ Communique states that the G7 countries will “build a shared understanding of China’s non-transparent and market-distorting interventions and other forms of economic and industrial directives. We will then work together to develop coordinated action to ensure a level playing field for our businesses and workers, to foster diversification and resilience to economic coercion, and to reduce strategic dependencies.” Regarding the importance of democratic resilience, the G7 Leaders – along with the leaders of Argentina, India, Indonesia, Senegal and South Africa – released a statement affirming their commitment on working toward equitable, inclusive and sustainable solutions to global challenges, including climate change and the COVID-19 pandemic, and reaffirming a commitment to the rules-based international order.

On June 27, 2022, President Joseph Biden issued a Presidential Proclamation announcing that the United States was increasing the duty rate to 35% ad valorem on certain products from Russia effective July 28, 2022. The White House indicated that this higher tariff will affect “more than 570 groups of Russian products worth approximately $2.3 billion”; however, the specific Harmonized Tariff Schedule of the United States (HTSUS) list of such products has not yet been released. The list of products and categories covered reportedly includes steel and aluminum; minerals, ores and metals; chemicals; arms and ammunition; wood and paper products; aircraft and parts; and automotive parts. Pursuant to the proclamation, goods from Belarus will face a similar increase in import tariffs.

This trade action follows earlier passage of the Suspending Normal Trade Relations with Russia and Belarus Act, which effectively ended normal trade relations by suspending permanent normal trade relations (PNTR) between the United States and Russia and the United States and Belarus. The removal of PNTR status included the withdrawal of “most favored nation” tariffs, resulting in higher tariffs on goods imported from Russia and Belarus. The law also gave the president authorization to increase the duties applicable to products imported from these two countries. See Update of April 11, 2022.

In addition, during the G7 meetings in Germany, the United States and other G7 leaders committed to: (1) sanctioning additional Russian individuals and entities; (2) expanding targeted sanctions on Russia’s military production and supply chains; (3) further restricting Russia’s ability to participate in the global market, including prohibiting the gold imports from Russia; and (4) targeting efforts by those engaging in “evasion and backfill activities” by prohibiting identified companies from purchasing U.S.-origin goods and technology. A White House Fact Sheet broadly describing these forthcoming actions is available here.

Key Notes:

  • Effective June 21, 2022, the Uyghur Forced Labor Prevention Act (UFLPA) establishes a rebuttable presumption that all goods produced, mined or manufactured in the Xinjiang region of China or by certain entities designated to the UFLPA Entity List are produced with forced labor and prohibited from entry into the United States.
  • The prohibition on entry includes finished products that are manufactured in whole or in part using inputs sourced directly or indirectly from Xinjiang, even if imported from outside China.
  • CBP has provided guidance on the enforcement process for the UFLPA to aid the trade community to comply with the UFLPA’s requirements and rebut the presumption.
  • DHS has provided importer guidance on the UFLPA including due diligence and supply chain tracing and management.
  • DHS has also established the UFLPA Entity List with several listed companies. Products sourced from companies on the UFLPA Entity List are subject to the rebuttable presumption regardless of where they are produced.

The Uyghur Forced Labor Prevention Act was passed into law on December 21, 2021, to ensure enforcement of Section 307 of the Tariff Act of 1930, which prohibits the importation of all “ … goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part in any foreign country by convict labor or/and forced labor or/and indentured labor under penal sanctions.”  It creates a rebuttable presumption that all products produced in whole or in part in the Xinjiang Uyghur Autonomous Region (“XUAR” or “Xinjiang”) or by persons designated to the UFLPA Entity List were produced with forced labor and must be denied entry into the United States pursuant to Section 301 of the Tariff Act. The UFLPA’s provisions are effective as of June 21, 2022.

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On June 14, 2022, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued amended Russia-related General License No. 8C extending the authorization to conduct transactions involving the Central Bank of Russia and certain Russian banks that are related to energy until December 5, 2022.  The original General License No. 8, issued on February 24, 2022 had previously been amended to expand the scope of Russian entities, but was schedule to expire on June 24, 2022.

The term “related to energy” means the extraction, production, refinement, liquefaction, gasification, regasification, conversion, enrichment, fabrication, transport, or purchase of petroleum, including crude oil, lease condensates, unfinished oils, natural gas liquids, petroleum products, natural gas, or other products capable of producing energy, such as coal, wood, or agricultural products used to manufacture biofuels, or uranium in any form, as well as the development, production, generation, transmission, or exchange of power, through any means, including nuclear, thermal, and renewable energy sources. This definition remains unchanged from the original issuance of General License No. 8.

General License No. 8C authorizes energy-related transactions through 12:01 a.m. EST, December 5, 2022, unless renewed.  In the event that this general license is not renewed, OFAC has indicated that it intends to issue a general license authorizing the orderly wind down of activities covered by General License No. 8C.

In a June 9, 2022 opinion, the U.S. Court of Appeals for the Federal Circuit (Federal Circuit or CAFC) upheld the decision by the U.S. Court of International Trade (CIT) dismissing Universal Steel Products Holding’s challenge to Section 232 tariffs that the Trump administration placed on steel imports.  The plaintiffs had earlier challenged both the report by the U.S. Department of Commerce (Commerce) supporting the Section 232 steel tariffs (Steel Report) and former 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).  A CIT three-judge panel had earlier dismissed the challenge (see Update of February 5, 2021).

In its opinion, the CAFC affirmed the CIT’s decision.  While the plaintiffs argued that the Secretary of Commerce’s threat finding constituted a final agency action subject to review under the APA, the CIT ruled that the report “was not a final, reviewable action under the APA because the ‘imposition of tariffs, which is the action that gave rise to the legal consequences that Plaintiffs challenge, was an action taken by the President, and not by the Secretary,’ such that the report did not carry legal consequences itself.”  The CAFC found that the CIT was incorrect on this point and references relevant case law that a predicate affirmative agency finding of injury or threat is reviewable.

The remainder of the opinion focuses on the plaintiffs’ argument that the threat determination by both former President Trump and the Secretary of Commerce was contrary to the clear language of the relevant Section 232 statute.  The plaintiffs had argued at the CIT that the “threat” must be “imminent” or “near at hand” and “likely to happen soon.”  The CAFC held that the statute “imposes no imminence requirement.”  The CAFC found that the plaintiffs did not challenge former President Trump’s determination “for any reason other than [this] alleged statutory violation.”  As for the Secretary of Commerce’s threat determination, the judges held that such a determination “is not reviewable under the APA arbitrary and capricious standard. This is so because the standard governing the Secretary’s action is the same as for the President’s action (i.e., the existence of a “threat”), and the President’s action is only reviewable for compliance with the statute.”

The CAFC considered plaintiffs’ argument that “the President failed to satisfy the ‘nature and duration’ requirement of the statute with Proclamation 9705”  by failing to indicate a time period for the tariffs.  In their analysis, the judges found that this action “is committed to the President, and the Secretary plays no part.”  They held that this matter is left to “the President’s discretion, and the President’s exercise of his judgment to ‘determine the nature and duration’ of the action he believes necessary is beyond the scope of our review.”

The opinion concludes, “We have authority to review the determinations by both the President and the Secretary that steel imports threaten national security and the determination by the President to set a steel tariff for an indefinite duration. We find no violations of the statute.”

While concurring with the decision, Judge Raymond Chen offered brief additional views, expressing concern that the key precedent supporting the decision, Corus Grp. PLC v. Int’l Trade Comm’n, is inconsistent with U.S. Supreme Court precedents on “the non-finality of a Secretary’s or Commission’s tentative report and recommendation to the President.”  His comments reference, in particular, two other Supreme Court decisions that found “the Secretary’s or Commission’s report and recommendations to the President did not constitute final agency action, reviewable under the APA, because those recommendations were not themselves binding actions that directly affected the parties.”  However, Judge Chen concluded that the CAFC is bound by the Corus Group decision despite his concern that it was incorrectly decided in the wake of these Supreme Court precedents.

On June 6, 2022, President Joseph Biden announced that he was declaring an emergency “with respect to the threats to the availability of sufficient electricity generation capacity to meet expected customer demand” in the United States.  Announcing that a “robust and reliable electric power system” is critical to national security and national defense, the president took several actions to address ongoing requirements, including addressing growing needs in the solar energy industry.  In a Declaration of Emergency, President Biden announced that for 24 months he was authorizing the Secretary of Commerce to allow for the importation, free from any duties, of certain solar cells and modules exported from the Kingdom of Cambodia, Malaysia, the Kingdom of Thailand and the Socialist Republic of Vietnam.  This decision is related to and impacts the Department of Commerce’s ongoing investigation into whether imports of solar cells and/or modules from these countries are circumventing the antidumping duty (AD) and countervailing duty (CVD) orders on crystalline silicon photovoltaic cells, whether or not assembled into modules (solar cells and modules), from the People’s Republic of China (China).

As a result of the president’s declaration, imports of solar cells and modules from these countries will not be subject to additional antidumping or countervailing duties during this two-year period.  In a brief press statement, Assistant Secretary of Commerce for Enforcement and Compliance Lisa Wang noted President Biden’s emergency declaration, stating that the Department of Commerce will soon issue regulations to temporarily permit duty-free access to solar cells and modules from these four countries.  She added that the Department’s “anti-circumvention proceeding continues uninterrupted, and whatever conclusion Commerce reaches when the investigation concludes will apply once this short-term emergency period is over.  [However,] with the President’s declaration, no solar cells or modules imported from Cambodia, Malaysia, Thailand, and Vietnam will be subject to new antidumping or countervailing duties during the period of the emergency. Existing duties on Chinese and Taiwanese imports of solar cells and modules remain in effect.”

Invoking the Defense Production Act

In addition to this action, President Biden announced that he was authorizing the use of the Defense Production Act (DPA) to accelerate domestic production of clean energy technology.  On June 6, 2022, the president authorized the Department of Energy to use the DPA to expand U.S. manufacturing of five critical clean energy technologies:

The White House announced that the Department of Energy will “soon convene relevant industry, labor, environmental justice, and other key stakeholders” to maximize the impact of the DPA tools made available for this initiative.  A Department of Energy statement on the presidential determinations authorizing the DPA to accelerate domestic production of these five key energy technologies is available here.

On June 2, 2022, the Department of Commerce’s Bureau of Industry and Security (BIS) issued a Final Rule adding 71 entities located in Russia and Belarus to the Entity List in further response to Russia’s invasion of Ukraine. These entities have been determined by the U.S. government to be acting contrary to the national security interests or foreign policy of the United States. According to BIS, these additions bring the total number of parties added to the Entity List for support of Russia’s military to 322 entities.

Sixty-six entities are being added to the Entity List on the basis of §§ 744.11(b) and 744.21 and will receive a footnote 3 designation because BIS determined they are Russian or Belarusian “military end users” that have acquired or attempted to acquire U.S.-origin items in support of Russia’s military. A footnote 3 designation subjects these entities to the Russia/Belarus foreign “direct product” (FDP) rule (see Updates of February 25, 2022 and March 4, 2022) requiring a license for the export, reexport, export from abroad or transfers (in-country) of all items subject to the Export Administration Regulations (EAR). The other five entities are being added for acquiring and attempting to acquire U.S.-origin items in support of activities contrary to U.S. national security and foreign policy interest.

Their addition to the Entity List means these entities are subject to a license requirement – currently under a “policy of denial,” with no license exceptions available – for the export, reexport, export from abroad (as described under Russia/Belarus FDP rule), or transfers (in-country) of all items subject to the EAR destined to these entities.

The rule is effective as of June 2, 2022. BIS has stated that shipments of items subject to the Final Rule that, pursuant to actual orders were en route aboard a carrier to a port of export, reexport, or transfer (in-country) on June 2, 2022, may proceed to that destination under the previous export eligibility without a license (NLR).