US Section 301 Investigation: Update on US Tariffs and China’s Response

The Office of the US Trade Representative (USTR) issued an update on its Section 301 investigation into Chinese technology and intellectual property practices on June 15, 2018. This update contains a list of products that will be subject to additional 25% tariffs on July 6, 2018 as well as a second proposed list of products targeted for future 25% tariffs.  

The announcement that the United States would impose Section 301 tariffs marked a change of course in US-China trade relations. As the deadline for public comments on USTR’s April tariff list approached, US Treasury Secretary Steven Mnuchin stated that the United States would postpone tariffs while finalizing a bilateral agreement to reduce the US-China trade deficit and promote bilateral commerce and intellectual property protection. A week later, however, the White House stated that Section 301 tariffs would be announced by June 15 and would go into effect soon after. Following this announcement, US-China trade talks have deteriorated, China has retaliated for the Section 301 tariff plan, and both countries have made significant additional retaliation threats against one another.

For more information, please see our advisory.

EU Extends the Scope of EU Blocking Statute to Protect Against Extra Territorial Application of US Re-Imposed Sanctions on Iran

On June 6, and in furtherance of its May 16 announcement, the European Commission adopted a delegated act to amend the annex to the EU Blocking Statute by adding within its scope US Iran-related secondary sanctions that have extra-territorial application.  The delegated act will enter into force once it is published in the EU Official Journal – probably well before the August 16 deadline set out for the re-imposition of the US secondary sanctions – unless the European Parliament or the Council (the Member States) object within a two-month scrutiny period.

List of US Secondary Sanctions Newly Targeted

The revised annex sets out the third-country measures to which the statute applies should it enter into force. The revised annex includes the same references to US sanctions laws that have previously been included in the annex, namely those that target US sanctions on Cuba.  But it also lists the following new US sanctions laws and regulations specifically to address the reimposition of US sanctions pursuant to the US withdrawal of the JCPOA: Continue Reading

President Trump Issues Venezuela-Related Executive Order

On May 21, 2018, President Trump issued a new executive order prohibiting certain transactions benefitting the government of Venezuela.  The order prohibits all transactions related to, provision of financing for, and other dealings in:

(i) the purchase of any debt owed to the Government of Venezuela, including accounts receivable,

(ii) any debt owed to the Government of Venezuela that is pledged as collateral after the effective date of this order, including accounts receivable; and

(iii) the sale, transfer, assignment, or pledging as collateral by the Government of Venezuela of any equity interest in any entity in which the Government of Venezuela has a 50 percent or greater ownership interest.

As is typically the case with such executive orders, the new order also prohibits “any transaction that evades or avoids, has the purpose of evading or avoiding, causes a violation of, or attempts to violate any of the prohibitions set forth in this order” and “any conspiracy formed to violate any of the prohibitions set forth in this order.” Continue Reading

In-Depth Advisory on President’s Announcement of Withdrawal From JCPOA and Reimposition of Nuclear-Based Sanctions on Iran

In addition to our previous updates, Steptoe recently published an in-depth advisory on President Trump’s May 8, 2018 decision to withdraw the United States from the Joint Comprehensive Plan of Action (JCPOA). The JCPOA is an agreement reached in July 2015 between Iran, the United States, the United Kingdom, France, China, Russia, and Germany in which Iran agreed to curtail its nuclear program in exchange for phased economic sanctions relief. A White House Fact Sheet published at the time of the decision indicated that Iran entered the JCPOA in bad faith, citing Iran’s destabilizing role in conflicts throughout the Middle East, continued development of its ballistic missiles, support for terrorist organizations, and human rights abuses. The JCPOA and the United Nations Security Council Resolution that endorsed the deal included mechanisms for implementing a sanctions “snapback” in the event of a JCPOA violation, but the Trump Administration elected to withdraw unilaterally from the JCPOA without relying on these procedures.

For more information on this issue, please see the full advisory.

Russia Sanctions: General Licenses, Deadlines, Russian Counter-Measures– What’s the Latest?

As the world turns… There have been several key developments recently in the Russia sanctions context:

  • Issuance of General License 15.  This general license, issued May 22, authorizes maintenance and winding down of pre-April 6 business with GAZ Group and its subsidiaries through October 23.  The authorization is similar in scope to General License 14, issued on April 23 with respect to Rusal.
  • Issuance of General License 13B.  This general license, issued May 31, added EN+ Group PLC to the list of companies (previously consisting of GAZ Group and Rusal) for which divestment of holdings is permitted, and extended the deadline for divestment from June 6 to August 5.  The general license also permits divestment of holdings in the subsidiaries of the covered companies under certain circumstances.
  • Issuance of General License 16.  This general license, issued just yesterday, authorizes certain activities to maintain or wind down pre-April 6 business with EN+ Group PLC,  EuroSibEnergo, and their subsidiaries through October 23.
  • Lapse of General License 12C.  This general license previously had authorized certain activities to maintain or wind down pre-April 6 business with several Russian companies (see the list below).  That authorization lapsed yesterday, meaning that business with the companies covered by the general license no longer is permitted.
  • President Putin signs Russian “counter-sanctions” into law.  Yesterday, President Putin signed into law a bill that gives him the power to sever relations with “unfriendly” countries and prohibit trade with such countries.  Notably, the bill as initially proposed would have banned a range of U.S. goods and services, including certain U.S. food, alcohol, medicine, and consulting services, but it was watered down significantly before reaching the president’s desk.  Consideration of a related bill, which would criminalize compliance with U.S. sanctions on Russian soil, has been postponed for the time being.

So where do things stand?  Here’s a short summary: Continue Reading

Steptoe’s Rebecca Lipe, Dane Jaques, and Stephanie Roy to Appear at ABA’s Drone Law Conference 2018

On June 5, three Steptoe lawyers will participate in the ABA’s 2018 Drone Law Conference.  Steptoe associate Rebecca Lipe will moderate and partner Dane Jaques will participate on a panel titled “Safety Challenges & Accident Reporting.” The panel will focus on the NTSB process from investigation through litigation and potential pitfalls related to Unmanned aircraft systems (UAS) and automated vehicles (AV). Steptoe partner Stephanie Roy will also participate on a panel titled “Counter-Drone Solutions to Public Safety Concerns,” which will address the need to integrate counter-drone technology into the National Airspace System—and the legal challenges (including with current law and pending legislation) involved with doing so.

(For a take on trade compliance issues related to drones and unmanned technology, see “Unmanned Systems and Export Controls: What your Company Needs to Know” in the May 2018 edition of Unmanned Systems magazine.)

DoD Delivers a Mixed Report on the Health of the Defense Industrial Base

Steptoe’s Paul Hurst and Tom Barletta recently authored an advisory on the DoD’s release of its FY 2017 Annual Defense Industrial Capabilities Report (DoD Report). The DoD Report provides a comprehensive overview of DoD’s assessment of key issues and risks facing the defense industrial base (DIB), generally and in specific sectors. The DoD Report also discusses DoD’s plans and strategies for addressing the identified issues and risks.

For more information on the DoD Report, please see our advisory.

Commerce Initiates Section 232 Investigation of Imports of Automobiles and Automotive Parts

Commerce Secretary Wilbur Ross announced on the evening of May 23 that he would begin a Section 232 investigation into the national security implications of automobile imports. According to a Department of Commerce (DOC) statement, the investigation will “determine whether imports of automobiles, including SUVs, vans, light trucks, and automotive parts into the United States threaten to impair the national security.” This investigation was initiated by the DOC at President Trump’s direction; shortly before Secretary Ross’ announcement, President Trump stated he “met with Secretary of Commerce Wilbur Ross to discuss the current state of our automobile industry” and “instructed Secretary Ross to consider initiating a Section 232 investigation.” President Trump has reportedly asked for additional tariffs of as much as 25% on automobile imports, though this is not reflected in any official documents.

Under Section 232, the President has broad authority to impose trade remedies, including tariffs and quotas, on imports on a global basis. Therefore, the Section 232 autos investigation could potentially cause serious trade disruptions. Initial reactions from Republican lawmakers and US trading partners have been negative.

For more information, please see our advisory.

Russian State Duma Proposes to Criminalize Compliance with US and EU Sanctions and Adopts Retaliatory Measures

On May 14, a cross-party group of Russian lawmakers at the Russian State Duma, the lower house of the Federal Assembly of Russia, introduced an amendment to the Criminal Code of the Russian Federation to create a new offense that would criminalize compliance with US and EU sanctions on Russian soil.  On May 15, the State Duma unanimously approved the proposed amendment in the first reading. If enacted into law, these restrictions would create significant complications for companies seeking to comply with US and EU sanctions.

Part 1 of the amendment prohibits a person from taking any action (or omitting to take any action) for the purposes of implementing sanctions against Russia if such action or omission restricts or denies Russian citizens, corporate entities, or government institutions the performance of ordinary business operations and transactions.  The proposed amendment defines “ordinary business operations and transactions” in broad terms.  This includes performance of statutory and contractual obligations and pre-existing obligations, as well as entry into a “public contract”, and any other operations, which are not ordinarily refused due to the individual characteristics of the counterparty, including the opening of a bank account, making and accepting payments, performing transactions with securities, and accounting for such transactions.  A person guilty of the offense may be punished with, among others, imprisonment for up to four years in prison or a corrective labor colony, or a fine of up to 600,000 rubles (approximately $9,700 USD).   Continue Reading

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