On July 15, 2020, the U.S. Department of State updated its public guidance on Section 232 of the Countering America’s Adversaries Through Sanctions Act (“CAATSA”), which authorizes (but does not require) the president to impose sanctions on “a person” that “knowingly” invests in Russian energy export pipelines, or that sells Russia goods, technology or services for such pipelines where certain monetary thresholds are met.

The Department of State announced that the purpose of the updated guidance is “to expand the focus of implementation of Section 232 to address certain growing threats to U.S. national security and foreign policy interests related to Russian energy export pipelines, particularly with respect to Nord Stream 2 and the second line of TurkStream.” This is a significant change, as the prior public guidance stated “The focus of implementation of Section 232 sanctions would be on . . . [Russian] energy export pipeline projects initiated on or after August 2, 2017 . . . For the purposes of Section 232, a project is considered to have been initiated when a contract for the project is signed. Investments and loan agreements made prior to August 2, 2017 would not be subject to Section 232 sanctions.”  This prior guidance had suggested that the focus of implementation of Section 232 would not be on Nord Stream 2 or Turkstream (either line), because these projects were “initiated” before August 2, 2017.Continue Reading US Clarifies Secondary Sanctions on Nord Stream 2

U.S. Customs and Border Protection (“CBP”) recently issued a ruling on the classification under the Harmonized Tariff Schedule of the United States (“HTSUS”) of Apple Watch Bands. In the ruling, CBP concluded that the watch bands properly are classified under heading 9113, which specifically covers “watch bands” and “watch straps”.  CBP declined Apple’s request that the watch bands be classified under heading 8517, for parts of a radio transceiver – or, in other words, parts of an Apple Watch. These HTS classifications have commercial significance because the usual duty rate for products in heading 9113 ranges from 1.8 percent to 11.2 percent, but the duty rate for products in subheading 8517.70 (for parts of a radio transceiver) is zero.

This ruling underscores a key classification principle, from Rule 1 of the General Rules of Interpretation (“GRI 1”) of the Harmonized System. GRI 1 requires that the first place to look when determining an item’s classification is “the terms of the {four-digit} headings and any relative Section or Chapter Notes.”  In other words, to determine classification one must turn first to the four-digit tariff schedule headings, and any section or chapter notes for that heading.  Only then, as CBP reminds in the watch band ruling, “in the event that the goods cannot be classified solely on the basis of GRI 1, and if the headings and legal notes do not otherwise require, GRIs 2 through 6 may then be applied in order.”  In other words, if the language of a heading, at the four digit level, matches the product in its condition as imported, then the product is properly classified somewhere in that heading, without looking at other headings, other subheadings, or other GRIs.
Continue Reading How Your Smart Watch Illuminates Fundamental Customs Classification Principles

On March 31, 2017, President Donald J. Trump signed two Executive Orders on international trade and customs issues. The first of the two orders suggests that much tougher enforcement actions will be coming for import compliance especially, but not only, on merchandise (1) subject to antidumping (“AD”) or countervailing duty (“CVD”) orders, and (2) that may infringe on intellectual property rights (“IPR”).  The second order requires a thorough report on trade deficits to support potential, as yet undefined, changes in trade policy to reduce those deficits.  While relatively short on specifics, the orders strongly suggest that changes in US import requirements – and an increase in enforcement actions – may be implemented in the coming months.
Continue Reading Executive Orders Indicate Increased Enforcement and Costs on Import Declarations, Potential Action on Trade Deficits