On July 13, 2021, the U.S. Court of Appeals for the Federal Circuit (Federal Circuit) issued a majority 2-1 opinion reversing the ruling of the U.S. Court of International Trade (CIT) that former President Donald J. Trump violated the provisions of Section 232 of the Trade Expansion Act of 1962 (Section 232) by increasing tariffs on steel imports from Turkey beyond those previously implemented under an earlier Presidential proclamation. See Update of July 14, 2020 for more details on the CIT ruling. The Federal Circuit ruling remands the case to the CIT for an entry of judgment against the plaintiff group led by Transpacific Steel LLC.

The plaintiffs had argued that the Trump administration’s actions violated both the statutorily-mandated procedures for a Section 232 national security investigation and the U.S. Constitution’s guarantee of equal protection under law. In its opinion, the CIT agreed, determining that the subsequent presidential proclamation implementing additional tariffs solely affecting Turkish steel (i.e., raising the duty rate from 25% to 50%) was issued well after the statutory time period allowed under Section 232. The CIT also found that former President Trump acted “without a proper report and recommendation by the [Secretary of Commerce] on the national security threat posed by imports of steel products from Turkey.”

The Federal Circuit, however, ruled that former President Trump did not depart from the finding of the Secretary of Commerce (Secretary) of a national security threat and did not violate the process and timing standards applicable to the Secretary’s finding of a national security threat. According to the decision, the statute “empowers and directs the President to act to alleviate threats to national security from imports” and “[t]he key issue is whether [the statute] permits the President to announce a continuing course of action within the statutory time period and then modify the initial implementing steps in line with the announced plan of action by adding impositions on imports to achieve the stated implementation objective. We conclude that the President does have such authority in the circumstances presented here.”

Overall, the Federal Circuit found that the president “specifically adhered to the Secretary’s underlying finding of the target capacity-utilization level that was the rationale for the predicate threat finding,” and that the “initial presidential action (in March 2018) itself announced a continuing course of action that could include adjustments as time passed.” In a detailed review of the legislative history and congressional intent for the Trade Expansion Act of 1962 and its subsequent amendments, the Federal Circuit found that this history undermined the CIT’s ruling, concluding “that the increase in the tariff on steel from Turkey by Proclamation 9772 did not violate [the provisions of Section 232].” The Federal Circuit also concluded that Proclamation 9772 did not violate the equal protection guarantees of the Fifth Amendment’s due process clause.

The Federal Circuit decision made clear that the judges were not addressing “other circumstances that would present other issues about presidential authority to adjust initially taken actions without securing a new report with a new threat finding from the Secretary.” As a result, the Federal Circuit indicated, the immediate impact of this ruling should be limited to the facts and issues surrounding the implementation of additional duties on imports of Turkish steel.

In his dissenting opinion, Judge Jimmie Reyna started by quoting President John Adams, stating that “Power must never be trusted without a Check” and adding that the “essential question posed by this appeal is whether Congress enacted [Section] 232 to grant the President un-checked authority over the Tariff.” He based his dissent on three grounds: (1) The “majority overlooks the context of Section 232 as a trade statute” and Congress delegated only narrow authority to the President over trade; (2) Section 232 is “written in plain words that evoke common meaning and application” and the majority offers no clear reason “to diverge from that plain language,” and (3) Section 232’s “legislative history shows that Congress intended, for good reason, to end the Executive Branch’s historical practice of perpetually modifying earlier actions without obtaining a new report from the Secretary of Commerce and without reporting to Congress.”

The next steps in this litigation remain unclear. After remand to the CIT, the plaintiffs have the option of challenging the decision by either seeking a review by the full Federal Circuit or appealing to the U.S. Supreme Court.

On July 12, 2021, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued Venezuela-related General License 40, “Authorizing Certain Transactions Involving the Exportation or Reexportation of Liquefied Petroleum Gas to Venezuela.”  This general license authorizes all transactions and activities related to the exportation or reexportation, directly or indirectly, of liquefied petroleum (LP) gas to Venezuela, involving: (i) the Government of Venezuela, (ii) Petróleos de Venezuela, S.A. (PdVSA), or (iii) any entity in which PdVSA owns, directly or indirectly, a 50 percent or greater interest, that are prohibited by E.O. 13850, as amended by E.O. 13857, or E.O. 13884.  The general license is effective through  July 8, 2022.

OFAC has made clear that for its purposes, the term LP gas means – “a group of hydrocarbon gases, primarily propane, normal butane, and isobutane, derived from crude oil refining or natural gas processing. These gases may be marketed individually or mixed. They can be liquefied through pressurization (without requiring cryogenic refrigeration) for convenience of transportation or storage. The definition excludes ethane and olefins.”

General License 40 does not authorize any payment-in-kind of petroleum or petroleum products, and continues to prohibit any other activities otherwise prohibited by OFAC’s Venezuela Sanctions Regulations.

On July 6, 2021, the U.S. Court of International Trade (CIT) issued an opinion granting the Plaintiffs’ motion for a preliminary injunction in the ongoing China Section 301 tariff litigation. The preliminary injunction suspends liquidation of unliquidated entries subject to List 3 and List 4A Section 301 duties, which, the Plaintiffs allege, are not authorized under the original investigation of the U.S. Trade Representative (USTR) into China’s actions adversely affecting U.S. intellectual property rights, innovation, or technology development.

The two-judge majority opinion states that the Plaintiffs “demonstrated they will likely suffer irreparable harm because their entries of subject merchandise will liquidate absent an injunction.” In addition to the potential unavailability of reliquidation or receiving any refund, the majority opinion notes that the group of U.S. government defendants failed “to meaningfully dispute that liquidation will cause harm that cannot be undone and instead argues that any unlawfully collected duties would be forever unrecoverable.” While stating that the CIT is granted broad authority to order appropriate relief, the opinion notes that several U.S. Court of Appeals decisions have “cast sufficient doubt as to the scope of that authority” and, until the higher court makes the scope of that authority clear, the CIT “must conclude that liquidation will result in irreparable economic harm.” As a result, the “Plaintiffs’ interpretation of the statute raises serious and substantial questions about the scope of the USTR’s statutory authority to act, which should be resolved via full litigation of the merits of these claims.”

In ordering the suspension of liquidation, the CIT found that such an action “maintains the status quo: the Government will still collect the duties pending the merits determination, but as liquidation is the final computation of duties, their finality is delayed.” Thus, if “Plaintiffs are unsuccessful in their challenge, the Government will not lose any revenue.” The CIT’s order requires the Plaintiffs to take the following steps in order to obtain suspension of liquidation of their unliquidated entries:

  • the government must meet with the Plaintiffs’ steering committee within seven days of the order to discuss the establishment of the repository for any unliquidated entries,
  • the government must establish such a repository within 14 days of the order,
  • any plaintiff requesting suspension of liquidation must provide (i) its full Importer of Record (IOR) number(s), including any suffix(es); (ii) the case/court number and filing date of the Section 301 complaint as well as the CBP Center and team assignment (if known); and (iii) the entry number and date of entry for any entries where suspension of liquidation is to be requested,
  • the government is enjoined during the remainder of this litigation from liquidating any entries for which they received a request for suspension of liquidation, unless within 14 days of receiving such a request, and at their option, the government stipulates to refund any duties found to have been illegally collected and notifies the Plaintiffs of such stipulation,
  • the government is temporarily restrained for 28 days from July 6, 2021 from liquidating any entries, and that should any subject entry be inadvertently liquidated during this 28-day period, such entry must be returned to unliquidated status,
  • any entry for which liquidation is suspended under the July 6, 2021 order will be liquidated in accordance with any final court decision, and
  • any entry inadvertently liquidated by CBP in contravention of the order must be returned to unliquidated status.

The parties will next appear before the CIT for a status conference on July 15, 2021.

Chief Judge Mark Barnett dissented from the opinion, arguing that, while he agreed with much of the analysis, the Plaintiffs failed to establish a likelihood of irreparable harm because the CIT has the authority to order refunds. Much of Chief Judge Barnett’s dissent is based on precedent that there is “no more than a remote chance that the appellate court would find that the [CIT] is not empowered to provide relief with respect to any liquidated entries.”

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) has issued a final rule to remove the International Criminal Court-Related Sanctions Regulations, 31 C.F.R. part 520, from the Code of Federal Regulations. OFAC is taking this action after the national emergency upon which these sanctions were based was terminated by President  Biden on April 1, 2021. The final rule will become effective once published in the Federal Register on July 6, 2021.

On June 11, 2020, former President Trump issued Executive Order 13928, “Blocking Property of Certain Persons Associated with the International Criminal Court” and determined that any attempt by the ICC to proceed in various juridic activity against states that are not parties to the Rome Statute without consent constituted a national security threat. In September 2020, several ICC prosecutors were placed on the Specially Designated National and Blocked Entities (SDN) List pursuant to the executive order and the next month OFAC issued the ICC-Related Sanctions Regulations. For more information, see Update of October 5, 2020. On April 1, 2021, President Biden issued an executive order terminating the previously declared national emergency and reversing sanctions imposed by Executive Order 13928. For more information, see Update of April 5, 2021. This final rule implements the president’s April 1, 2021 executive order.

Effective June 24, 2021, the Bureau of Industry and Security (BIS) will place five Chinese companies on the Entity List for human rights violations and abuses in the implementation of China’s campaign of repression, mass arbitrary detention, forced labor and high-technology surveillance against Uyghurs, Kazakhs, and other members of Muslim minority groups in the Xinjiang Uyghur Autonomous Region. Specifically, BIS has listed (i) Xinjiang GCL New Energy Material Technology, Co. Ltd; (ii) Xinjiang Daqo New Energy, Co. Ltd; (iii) Xinjiang East Hope Nonferrous Metals Co. Ltd.; (iv) Hoshine Silicon Industry (Shanshan) Co., Ltd.; and (v) Xinjiang Production and Construction Corps “for engaging in activities contrary to the foreign policy interests of the United States through participating in the practice of, accepting, or utilizing forced labor.”

The Entity List is used by BIS to restrict the export, reexport and transfer (in-country) of items subject to the Export Administration Regulations (EAR) to persons (individuals, organizations, companies) reasonably believed to be involved, or to pose a significant risk of becoming involved, in activities contrary to the national security or foreign policy interests of the United States. For exports to these five companies, BIS will now impose a license requirement for all items subject to the Export Administration Regulations (EAR) and a license review policy of case-by-case review for Export Control Classification Numbers (ECCNs) 1A004.c, 1A004.d, 1A995, 1A999.a, 1D003, 2A983, 2D983, and 2E983. A policy of case-by-case review will also apply to items designated as EAR99 that are described in the Note to ECCN 1A995, specifically, items for protection against chemical or biological agents that are consumer goods, packaged for retail sale or personal use, or medical products. In light of the ongoing COVID-19 global pandemic, BIS has adopted a policy of case-by-case review for items subject to the EAR that are necessary to detect, identify and treat infectious disease. For all other items subject to the EAR and not referenced above, BIS has adopted a license review policy of presumption of denial. In addition, no license exceptions are available for exports, reexports, or transfers (in-country) to these newly listed Chinese companies.

Shipments of items to any of these listed entities that were en route aboard a carrier to a port of export or reexport as of June 24, 2021 pursuant to actual orders for export or reexport to a foreign destination may proceed to that destination without a BIS export license.

On June 21, 2021, the Office of Foreign Assets Control (OFAC) designated 16 individuals and five entities in response to the Lukashenko regime’s escalating violence and repression. The persons are all closely associated with Belarusian President Alexander Lukashenko and, according to an OFAC press statement, “have harmed the people of Belarus through their activities surrounding the fraudulent August 9, 2020, presidential election in Belarus and the ensuing brutal crackdown on protesters, journalists, members of the opposition, and civil society.” Similarly, the entities are Belarusian government agencies or committees that have relied upon violence against peaceful protesters and that have detained journalists attempting to cover such protests. “The United States and its partners will not tolerate continued attacks on democracy and the ceaseless repression of independent voices in Belarus,” said OFAC Director Andrea Gacki.

As a result of being placed on the Specially Designated Nationals (SDN) List, all property and interests in property of these persons and entities that are in the United States or in the possession or control of U.S. persons are blocked and must be reported to OFAC. Further, any entities that are owned 50% or more by them, that are in the United States or in the possession or control of U.S. persons must similarly be blocked and reported to OFAC. Unless authorized by a general or specific license issued by OFAC, or otherwise exempt, all transactions by U.S. persons or within (or transiting) the United States that involve any property or interests in property of these designated persons is generally prohibited. Similar sanctions actions were also taken by Canada, the European Union (EU), and the United Kingdom (UK).

OFAC Belarus General License No. 3

While implementing these sanctions, OFAC also issued General License No. 3 under the Belarus sanctions which authorizes certain transactions with the State Security Committee of the Republic of Belarus (the “Belarusian KGB”). This general license authorizes transactions and activities that ‘are necessary and ordinarily incident’ to:

  • Requesting, receiving, utilizing, paying for, or dealing in licenses, permits, certifications, or notifications issued or registered by the Belarusian KGB for the importation, distribution, or use of information technology products in Belarus, provided that (i) the exportation, reexportation, or provision of any goods or technology are licensed or authorized by the Department of Commerce’s Bureau of Industry and Security (BIS); and (ii) the payment of any fees for such licenses, permits, certifications, or notifications does not exceed $5,000 in any calendar year;
  • Complying with law enforcement or administrative actions or investigations involving the Belarusian KGB; and,
  • Complying with rules and regulations administered by the Belarusian KGB.

On June 17, 2021, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued three general licenses related to the sanctions programs of Iran (General License N), Syria (General License 21) and Venezuela (General License 39), “Authorizing Certain Activities to Respond to the Coronavirus Disease 2019 (COVID-19) Pandemic.” Along with the general licenses, OFAC also issued related frequently asked questions (FAQs) 906, 907, 908, 909, 910, and 911. The general licenses provide time-limited but broad authorizations for certain COVID-19 related transactions and activities beyond current humanitarian exemptions, exceptions and authorizations in place under these programs. The general licenses expire on June 17, 2022.

Iran General License N

General License (GL) N authorizes the following transactions otherwise prohibited by the Iranian Transactions and Sanctions Regulations (ITSR):

  1. transactions and activities related to the exportation and importation of goods, services and technology for use in connection with the prevention, diagnosis or treatment of COVID-19, including research or clinical studies, to Iran, the Iran government or third persons for resale to Iran or the Iran government;
  2. importation into the United States or other dealings related to goods exported or reexported to Iran or the Iran government pursuant to GL N that are broken, defective or non-operational or connected to recalls, adverse events or safety concerns for routing maintenance or return;
  3. transactions and activities involving the Central Bank of Iran (CBI) or the National Iranian Oil Company (NIOC) and any entity owned 50% or more by NIOC that may otherwise be prohibited by the ITSR, the Global Terrorism Sanctions Regulations, or Executive Order 13224; and
  4. processing of funds transfers or trade finance transactions ordinarily incident and necessary to give effect to the transactions and activities authorized in paragraphs (a) and (b) of the general license.

Transactions involving the export of technology must be designated EAR99 under the Export Administration Regulations or not otherwise subject to multilateral export control regimes. The exportation or reexportation of the following remain prohibited:

  • goods or technology to CBI, NIOC or any entity in which NIOC owns a 50% or greater interest;
  • goods, technology or services to military, intelligence or law enforcement purchasers or importers;
  • goods, technology or services to facilitate the development or production of chemical or biological weapon or weapon of mass destruction.

FAQ 907 lists the covered COVID-19-related goods or technology. The list includes various personal protective equipment (PPE); personal hygiene products and supplies; vaccines and vaccine ingredients or components;  products related to transporting, storing, and administering vaccines; software and technology related to COVID-19 testing kits, equipment and diagnostic imaging tests;  ventilators, oxygen tanks and supplies to deliver oxygen; and medical units. Notably, COVID-19 related medical devices designated as EAR99 on the List of Medical Devices Requiring Specific Authorization do not require a specific license for export to Iran pursuant to GL N.

 Syria General License 21

GL 21 authorizes all transactions and activities related to the exportation of services to Syria related to the prevention, diagnosis or treatment of COVID-19 (including research or clinical studies), including those involving the Syrian government, Polymedics, LLC, Letia Company or any entity in which Polymedics or Letia own, whether individually or in the aggregate, 50% or greater interest. Any exportation or reexportation of items to Syria must be licensed or otherwise authorized by the Department of Commerce. The GL does not authorize the exportation or reexportation of goods, technology or services to military, intelligence or law enforcement purchasers or importers.

Venezuela General License 39

GL 39 authorizes all transactions and activities related to the prevention, diagnosis or treatment of COVID-19 (including research or clinical studies) involving the following entities:

  • the Venezuelan government;
  • Banco Central de Venezuela (BCV);
  • Banco de Venezuela, S.A. Banco Universal (Banco de Venezuela);
  • Banco Bicentenario del Pueblo, de la Clase Obrera, Mujer y Comunas, Banco Universal C.A. (Banco Bicentenario del Pueblo); and
  • any entity owned individually or in the aggregate 50% or greater interest by these banks.

Like FAQ 907, FAQ 909 provides a list of authorized transactions and activities. This general license does not authorize any transactions or activities involving Petróleos de Venezuela, S.A. (PdVSA), Banco de Desarrollo Economico y Social de Venezuela (BANDES), or Banco Bandes Uruguay S.A. (Bandes Uruguay), or with any entity owned individually or in the aggregate 50% or greater interest by these entities.

Related FAQs

FAQ 906 explains that these general licenses are independent of the humanitarian authorizations under each sanctions regime such that any conditions or other requirements thereunder do no apply with the intended transaction or activity is authorized under these licenses. FAQ 908 lists the types of services authorized by Iran GL N and Syria GL 21, including, treatment, training, promotional materials, research, repairs, clinical studies and public education, among others.

FAQ 910 provides that financial institutions may process financial transactions incident to the transactions and activities authorized by the general licenses and barring knowledge of a violation, may rely on the originator of the funds transfer with regard to compliance with the general licenses. Finally, FAQ 911 provides that non-US persons will not be sanctioned for engaging in activities authorized by the general licenses.

On June 15, 2021, the United States and European Union (EU) issued a joint Summit Statement trumpeting a “renewed transatlantic partnership” at the conclusion of President Joseph Biden’s first trip abroad as president.  The statement establishes a Joint Transatlantic Agenda “for the post-pandemic era, and … regular dialogue to take stock of progress.”  The leaders committed to: (i) end the COVID-19 pandemic and “prepare for future global health challenges, and drive forward a sustainable global recovery”; (ii) protect the Earth and foster green growth; (iii) strengthen trade, investment and technological cooperation; and (iv) “build a more democratic, peaceful, and secure world.”  They also committed to uphold and advance “the rules-based international order with the United Nations at its core, reinvigorate and reform multilateral institutions where needed, and cooperate with all those who share these objectives”.

While broadly addressing trade, investment and technology cooperation, the U.S. and EU have committed to “drive digital transformation that spurs trade and investment, strengthens our technological and industrial leadership, boosts innovation, and protects and promotes critical and emerging technologies and infrastructure.”  In doing so, a U.S.-EU Trade and Technology Council will be established to focus on:

  • growing bilateral trade and investment relationships;
  • avoiding new unnecessary technical barriers to trade;
  • coordinating, seeking common ground, and strengthening global cooperation on technology, digital issues and supply chains;
  • supporting collaborative research and exchanges;
  • cooperating on compatible and international standards development;
  • facilitating regulatory policy and enforcement cooperation and, where possible, convergence;
  • promoting innovation and leadership by U.S. and EU firms; and
  • strengthening other areas of cooperation.

Regarding U.S. Section 232 tariffs on steel and aluminum imports implemented under former President Donald Trump and the resulting EU retaliatory tariffs, the statement notes that the United States and EU will engage in discussions to resolve existing differences “before the end of the year” and to “resolve tensions arising from the U.S. application of tariffs on imports from the EU”.  The parties are committed to ensuring the long-term viability of U.S. and EU steel and aluminum industries and to addressing excess global capacity.

On other trade issues, the statement mentions (i) the recent Cooperative Framework addressing the longstanding U.S.-EU World Trade Organization (WTO) dispute involving large civil aircraft (see Update of June 15, 2021); (ii) plans to work cooperatively toward meaningful WTO reform; (iii) efforts to foster a fair and modern international tax system (see Update of June 2, 2021); (iv) coordination on shared concerns regarding China and ongoing human rights violations and respecting international law; (v) a “principled approach” toward Russia and its “repeating pattern of negative behavior and harmful activities”; (vi) opposition to the proliferation of weapons of mass destruction; and (vii) the facilitation of the return of the United States to the Joint Comprehensive Plan of Action (JCPOA) as well as the full and effective implementation of the JCPOA by Iran.

On June 15, 2021, the United States and the European Union (EU) announced a “cooperative framework” to resolve their decades-long World Trade Organization (WTO) dispute involving alleged subsidies in the large civil aircraft industry supporting both Boeing and Airbus. U.S. Trade Representative Katherine Tai stated, “Our goal was clear – to forge a new, cooperative relationship in this sector so that our companies and our workers can compete on a more level playing field. The agreement includes a commitment for concrete, joint collaboration to confront the threat from China’s non-market practices, and it creates a model we can build on for other challenges.” The cooperative framework includes:

  • A Working Group on large civil aircraft led by each side’s respective “minister” responsible for trade. The Working Group will meet on request or at least every six months; the higher-level trade ministers will meet annually. The Working Group will address any disagreements that may arise and will collaborate on and continue discussing and developing the principles reached in the framework agreement.
  • Each side providing “financing to its LCA [large civil aircraft] producer for the production or development of large civil aircraft on market terms.”
  • Each side providing “funding for research and development (R&D) for large civil aircraft to its LCA producer through an open and transparent process and [intending] to make the results of fully government funded R&D widely available, to the extent permitted by law. Each side intends not to provide R&D funding or other support that is specific, to its LCA producer in a way that would cause negative effects to the other side.”
  • Each side intending “to collaborate on jointly analyzing and addressing non-market practices of third parties that may harm their respective large civil aircraft industries.” To that end, the framework agreement has an annex regarding cooperation on non-market economies so that the United States and EU can share information and more effectively address challenges posed by non-market economies (i.e., China).
  • Suspending current WTO-approved retaliatory tariffs for five years, with the expectation that the United States and EU “will contribute to establishing a level playing field and to addressing shared challenges from non-market economies.”
  • Continuing to confer on addressing outstanding support measures.

The full text of the framework is available here.

This latest announcement follows the March 2021 temporary suspension of retaliatory tariffs by each side in order to seek a “comprehensive and durable negotiated solution to the Aircraft disputes.” See Update of March 5, 2021. In this longstanding dispute, the WTO Dispute Settlement Body has authorized the EU to impose $4 billion in retaliatory tariffs annually on U.S. products and authorized the United States to impose $7.49 billion in retaliatory tariffs annually on EU products. For additional background on this dispute and the resulting retaliatory tariffs regarding EU subsidies to Airbus and U.S. subsidies to Boeing, see SmarTrade Updates of October 4, 2019December 9, 2019February 17, 2020August 13, 2020October 15, 2020 and November 11, 2020.

Key Notes:

  • Proposed rule would allow persons working under a long-term contract to be considered “regular employees” under the International Traffic in Arms Regulations (ITAR) even if they work remotely.
  • Remote work would be permitted so long as people were not working in Belarus, Burma, China, Cuba, Iran, North Korea, Russia, Syria or Venezuela, or any other country subject to a U.S. arms embargo.
  • Persons considered “regular employees” are exempt from various licensing requirements under the ITAR.
  • Public comments must be submitted on or before July 26, 2021.

At the onset of the COVID-19 pandemic, the State Department’s Directorate of Defense Trade Controls (DDTC) announced a temporary suspension of and exception to the ITAR’s requirement that regular employees or long-term contractual personnel must work on-site at a company’s facilities, allowing individuals to telework during the public health emergency. On May 27, DDTC proposed a rule that would amend the ITAR’s definition of “regular employee” to make this change permanent and include (1) persons working under long-term contracts and sufficiently subject to the employer’s control, and (2) contractors not working under long-term contracts but who have active security clearances and are sufficiently under the employer’s control.

View this full client update in HTML or PDF format.