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The Month in International Trade – June 2022

Client Alert | 12 min read | 07.11.22

In this issue:

Ukraine Crisis Resource Center

Crowell & Moring Speaks

This news bulletin is provided by the International Trade Group of Crowell & Moring. If you have questions or need assistance on trade law matters, please contact Jeff Snyder or any member of the International Trade Group.

Ukraine Crisis Resource Center

Crowell & Moring has a multidisciplinary working group helping clients navigate the rapidly evolving business, legal and operational issues associated with the crisis. Our group brings together lawyers and professionals with relevant senior government, industry, and private sector experience across a wide array of practices that intersect with the most critical issues in this unprecedented crisis. We are helping clients to mitigate risk, to implement practical approaches and sound business solutions, and anticipate and prepare for the opportunities and challenges that are on the horizon.

Insights

Webinars

Press Coverage

External Resources

Top Trade Developments

Latest Russia Sanctions/Export Highlights (as of June 2, 2022)

Russia Sanctions Updates: On May 31, 2022, European Commission President Ursula von der Leyen announced that EU leaders agreed in principle to the sixth round of sanctions. She previewed that the package would include a ban on “almost 0% of Russian oil imports by the end of the year,” remove Sberbank from SWIFT, ban insurance and reinsurance of Russian vessels by EU companies, prohibit a range of business services for Russian companies, and suspend broadcasting of Russian state outlets.

On June 2, 2022, the United States announced its latest round of sanctions, which included additional designations to the Specially Designated Nationals and Blocked Persons List (the SDN List), and additions to the Entity List.  The designations included a number of vessels and aircraft allegedly linked to Russian leaders, including President Vladimir Putin; a “Kremlin-aligned” yacht brokerage; Sergei Pavlovich Roldugin, who manages President Putin’s offshore wealth; Alexey Mordashov, the leader of Sevegroup; Public Joint Stock Company Severstal; and Nord Gold PLC.  The U.S. Department of Commerce (Commerce) also added 71 entities located in Russia and Belarus to the Entity List, 66 of which were determined to be military end users, subjecting them to additional licensing requirements.

General Licenses: The United States announced several new general licenses (GLs).  GL 25B supersedes GL 25A, and authorizes transactions ordinarily incident and necessary to the receipt or transmission of telecommunications involving the Russian Federation.  However, OFAC added Limited Liability Company Algorithm to the list of entities prohibited from benefiting from GL 25B.  GL 36 authorizes wind-down transactions with Public Joint Stock Company Severstal until August 31, 2022, and GL 37 authorizes wind-down transactions with Nord Gold PLC through July 1, 2022.  GL 38 authorizes transactions ordinarily incident and necessary to processing transactions involving pension payments to U.S. persons prohibited under Executive Order 14024.  Finally, the United States announced the expiration of GLs 13R and 15L, both of which had provided wind-down periods for divestiture from GAZ Group through May 25, 2022.

The UK announced a new license that permits business operations involving the provision of Civilian Telecommunication Services and News Media Services (as defined in the license) in relation to ZAO TransTeleCom Company.

Export Updates: Commerce announced a final rule that revises, corrects, and clarifies Export Administration Regulations (EAR) provisions pertaining to the export controls imposed on Russia and Belarus.  Notable revisions or clarifications made by the final rule include the following:

  • Revisions to the controls for Russian and Belarussian military end uses and military end users by extending license requirements to include food and medicine designated as EAR99; license applications for such items will be subject to a case-by-case review policy.
  • Corresponding modifications to the Russian and Belarusian military end users on the Entity List as a result of the new license requirement for EAR99 food and medicine.
  • Revisions to the EAR’s restrictions that apply to items that are destined for regions in Ukraine specified by EAR § 746.6 (currently Crimea, the so-called Donetsk People’s Republic, and the so-called Luhansk People’s Republic), including the addition of new categories of transactions that will be subject to case-by-case review.
  • Clarifications and corrections of provisions of the EAR pertaining to controls on exports of luxury goods destined for Russia and Belarus and items for use in Russia’s oil refinery sector.
  • Amendment to the EAR to make charging letters publicly available in future export enforcement cases prior to the final administrative disposition of such cases.  While precharging letters will retain their current nonpublic status, charging letters will now be public once filed with the Administrative Law Judge, making such information available to the public at an earlier stage of the proceedings.  According to Commerce, this will allow BIS to more timely inform interested parties of ongoing enforcement efforts and to educate the exporting community on its controls.

For more information, contact: Jeff Snyder, Carlton Greene, Dj Wolff, Michelle Linderman, Caroline Brown, Nicole Succar, Anand Sithian, Brian McGrath, Laurel Saito, Rachel Schumacher

Russian Goods Falling Under 576 Hts Codes Will Be Subject to 35% Duty Rate

The White House, continuing its efforts to escalate economic measures in response to the Russian Federation’s invasion of Ukraine, has published a list of 576 provisions of the Harmonized Tariff Schedule of the United States (“HTSUS”) under which Russian-origin products will be subject to a 35% rate of duty beginning July 27, 2022.

On April 8, the United States passed the Suspending Normal Trade Relations with Russia and Belarus Act (“Suspending NTR Act”), which stripped non-discriminatory tariff treatment for products of the Russian Federation and of the Republic of Belarus.  The Suspending NTR Act imposed “Column-2” duty rates on all Russian and Belarussian products and established that the President may increase the Column-2 rates of duty applicable to those products. 

On June 27, United States President Joseph Biden issued Presidential Proclamation 10420 announcing his decision to increase the Column-2 duty rate to 35% on certain Russian-origin products to be set forth in an Annex to the Proclamation.  The White House subsequently released the Annex, which covers a wide range of products across different HTSUS chapters, including those that cover minerals, chemicals, plastics, rubber, wood and paper, metals, vehicles and aircrafts, and numerous other articles.  Notably, certain Russian-origin products (including certain energy products, fish and seafood, alcoholic beverages, and non-industrial diamonds) have already been banned from importation into the U.S. customs territory per prior executive orders (EO 14066 (Mar. 8, 2022) and EO 14068 (Mar. 11, 2022)).

The Russian Federation and the Republic of Belarus also will now formally join the ranks of Cuba and North Korea as countries subject to Column-2 rates of duty under General Note 3(b), HTSUS.  This represents a further step to isolate Russia from the global trade community and additional measures to rebuke Russia’s actions and apply pressure may follow.  For example, US Trade Representative Katherine Tai expressed eagerness to work with Congress to enact legislation that will allow the tariff proceeds to be used to help Ukraine, which “will send an important message to Russia that it will have to pay for the costs of its war.”   US representatives Panetta (D-CA) and Rice (R-SC) also recently introduced the Expanding Trade Sanctions on Russia Act, a bill that would swiftly embargo additional products imported from Russia.

Importers should continue to assess their exposure to, and weigh the risks of, Russian manufacturing in their supply chains.  Where there are opportunities to shift sourcing from Russia to third countries or to transition key manufacturing processes to third countries, importers should consider the viability and impact of those alternatives from a customs perspective.

For more information, contact: John Brew, Maria Vanikiotis

Department of Homeland Security Releases the Uyghur Forced Labor Prevention Act (UFLPA) Strategy Report

On June 17, 2022, the Department of Homeland Security (DHS) – which serves as the chair of the Forced Labor Enforcement Task Force (FLETF) – released the Strategy to Prevent the Importation of Goods Mined, Produced, or Manufactured with Forced Labor in the People’s Republic of China (UFLPA Strategy) Report. The UFLPA Strategy Report was submitted to Congress, as required by to the UFLPA, and provides the trade community the strategy developed by the FLETF for preventing the importation into the United States of goods mined, produced, or manufactured wholly or in part with forced labor in the People’s Republic of China (PRC). Within the UFLPA Strategy Report, notable sections that importers should consider include:

  1. UFLPA required lists (including the UFLPA Entity List) and enforcement plans;
  2. Efforts, initiatives, tools, and technologies to identify and trace goods;
  3. CBP plans to enhance its use of legal authorities and tools to prevent entry of goods at U.S. ports in violation of 19 U.S.C. § 1307; and
  4. Guidance to importers;

For individual overviews of each of these sections, please click here.

For more information, contact: John Brew, Frances Hadfield

CBP Issues its Uyghur Forced Labor Prevention Act (UFLPA) Guidance for Importers

On June 17, 2022, the Department of Homeland Security (DHS) – which serves as the chair of the Forced Labor Enforcement Task Force (FLETF) – released the Strategy to Prevent the Importation of Goods Mined, Produced, or Manufactured with Forced Labor in the People’s Republic of China (UFLPA Strategy) Report. The UFLPA Strategy Report was submitted to Congress, as required by to the UFLPA, and provides the trade community the strategy developed by the FLETF for preventing the importation into the United States of goods mined, produced, or manufactured wholly or in part with forced labor in the People’s Republic of China (PRC). Within the UFLPA Strategy Report, notable sections that importers should consider include:

  1. UFLPA required lists (including the UFLPA Entity List) and enforcement plans;
  2. Efforts, initiatives, tools, and technologies to identify and trace goods;
  3. CBP plans to enhance its use of legal authorities and tools to prevent entry of goods at U.S. ports in violation of 19 U.S.C. § 1307; and
  4. Guidance to importers;

For individual overviews of each of these sections, please click here.

For more information, contact: John Brew, Frances Hadfield

Customs Rulings of the Week

For more information, contact: Frances Hadfield, Martín Yerovi

Crowell & Moring Speaks

Please Join Us for an Update on Foreign Direct Investments in the EU, Germany, the USA and UK

Please join us for an update on the current developments at the EU level, in Germany as well as in the USA and UK. We look forward to a thoughtful discussion from Stephan Müller of Oppenhoff and Caroline Brown and Peter Broadhurst of Crowell & Moring.

Foreign trade law, and in particular Foreign Investment Control has become an important instrument for protecting national security interests. This applies to Germany, but also internationally.

In Germany, the relevant provisions of the Foreign Trade and Payments Ordinance have been expanded and tightened with unprecedented dynamism. Similarly, the USA has reformed and tightened its CFIUS rules, while the UK enacted investment control regulations for the first time in early 2022.

As a result, investors must be clear about whether a so-called foreign investment clearance or approval has to be obtained in advance of an intended acquisition.

More Information

When: Thursday, July 14th, 2022 12:00 pm (EDT) / 6 pm (MESZ)

Where: WebEx

Click here to register

June 24, 2022 – Global Investigations Review* speaks with New York counsel Anand Sithian, a former DOJ prosecutor in the Criminal Division’s Money Laundering and Asset Recovery Section, about the DOJ’s confiscation of a superyacht in Spain. Sithian expects that the government is already looking at third parties who are not cooperating, or don’t yet know they are on the government’s radar (“Immunity Deal for Yacht Company Reveals US Strategy for Oligarch Probes”). *subscription required

June 8, 2022 – Bloomberg News speaks with London partner Michelle Linderman regarding a group of London firms that has identified hundreds of senior Russians with assets abroad who could be added to international sanctions lists. According to Linderman, some wealthy Russians shifted their ownership of companies to unsanctioned family members or associates and removing such shields would close a large loophole (“London Asset Hunters Uncover 'Hundreds of Low-Key Russians for Possible Sanctions”).

June 2, 2022 – The Washington Post* speaks with partner Dj Wolff regarding the impact economic sanctions are having on office workers and couriers far outside of Russia. Wolff explains how going after the biggest banks hurts everybody who has an account at those banks, including startups in the U.S. (with Russian founders and investors) that were forced to lay off workers (“How Russia Sanctions Helped Kill 15-Minute Delivery in New York”). *subscription required

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