The Month in International Trade – July 2024

Crowell & Moring Partner Jana del-Cerro Selected for Defense Trade Advisory Group (DTAG)

Top Trade Developments

• 2024 UFLPA Strategy Update: Forced Labor in the XUAR Remains Top Concern for U.S. Government
• Senate Finance Chairman Wyden Set to Unveil De Minimis Reform Legislation
• USTR Postpones Implementation of New Section 301 Tariffs
• OFAC Issues Notice for New Reporting Requirements for Financial Institutions Under the Rebuilding Economic Prosperity and Opportunity (REPO) for Ukrainians Act
• OFAC Publishes Guidance on Extended Statute of Limitations
• ITAR and EAR Proposed Rules Expand Controls on U.S. Person Services
• Transformations in Transferability: Challenges in the European Loan Market Amid Increasing Restrictions
• BIS Issues “Best Practices” Guidance for Mitigating Export Diversion Risk

Crowell 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 Jana del-Cerro, Anand Sithian, or Simeon Yerokun or any member of the International Trade Group.

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Crowell & Moring Partner Jana del-Cerro Selected for Defense Trade Advisory Group (DTAG)

Jana del-Cerro has been selected for membership on the DTAG for 2024-2026. DTAG provides the U.S. Department of State's Directorate of Defense Trade Controls (DDTC) with a formal channel for regular consultation and coordination with U.S. private sector defense exporters and defense trade organizations on issues involving U.S. laws, policies, and regulations for munitions exports.

Membership of the DTAG is appointed by the Assistant Secretary. The DTAG consists of up to 50 members, representing a broad range of industry, academia, and the legal/compliance fields.

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Top Trade Developments

2024 UFLPA Strategy Update: Forced Labor in the XUAR Remains Top Concern for U.S. Government

Congress enacted the UFLPA on December 23, 2021 in response to alleged forced labor violations occurring in the People’s Republic of China. The UFLPA supports U.S. Customs and Border Protection’s (CBP) enforcement of Section 307 of the Tariff Act of 1930. The act aims to prevent the importation of goods sourced and/or made in whole or in part with forced labor from China into the US by imposing a rebuttable presumption that holds that any goods “mined, produced, or manufactured wholly or in part” in the XUAR or “produced by an entity on the UFLPA Entity List” are prohibited from import into the US. The UFLPA’ s rebuttable presumption went into effect on June 21, 2022.  

The DHS-led Forced Labor Enforcement Task Force (FLETF) annually updates its UFLPA enforcement strategy. FLETF issued an update August 1, 2023 to aid CBP’s enforcement of the Act. Most recently, on July 9, 2024, FLETF released a 2024 update that refined and detailed several crucial aspects of the Act, which are critical for business compliance regarding human rights and forced labor screening.

On July 9, 2024, FLETF released a 2024 update that refined and detailed several crucial aspects of the Act, which are critical for business compliance regarding human rights and forced labor screening.

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For more information, contact: David Stepp, Simeon Yerokun, and Pierfilippo Natta

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Senate Finance Chairman Wyden Set to Unveil De Minimis Reform Legislation

Senate Finance Chairman Wyden (D-OR) is expected to soon introduce legislation that will target de minimis reform. The legislation, dubbed the Fighting Illicit Goods, Helping Trustworthy Importers, and Netting Gains (FIGHTING) for American Act, would prohibit goods impacted by Sections 232, 301, and 201, as well as those considered sensitive goods by GSP, from entering the U.S. via de minimis.

This legislation aims to curb the flood of goods currently eligible for de minimis entry. Specifically, it would ban de minimis treatment for any product that doesn’t qualify for duty-free status under the U.S. Generalized System of Preferences program, which benefits developing countries. This would notably impact “sensitive” items such as textiles and apparel, which are excluded from GSP. In addition, the legislation would make goods subject to anti-dumping duties, countervailing duties, Section 232 tariffs, Section 301 tariffs, or Section 201 tariffs ineligible for de minimis entry. It also proposes heftier penalties for shipments that flout de minimis rules and introduces a $2 fee per shipment.

The de minimis provision has been a staple of U.S. customs law based on the idea that the administrative effort to process low-value shipments isn’t worth the revenue they generate. It is named for a Latin phrase which refers to something so minor it can be disregarded. In fiscal 2023, U.S. Customs and Border Protection processed over 1 billion de minimis shipments valued at more than $50 billion, a drastic increase from only 134 million shipments in 2015. CBP estimates the average value of de minimis shipments entering the U.S. is about $54, well below the maximum threshold for duty-free purchases from abroad.

For more information, contact: John Brew and Dmitry Bergoltsev

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USTR Postpones Implementation of New Section 301 Tariffs

On July 30, 2024, the Office of the U.S. Trade Representative (USTR) announced the increased Section 301 tariffs proposed on May 28, 2024, would not go into effect as planned on August 1, 2024.

USTR is still reviewing the 1,100 public comments it received. It now expects its final determination will be issued sometime in August 2024. It would then take effect two weeks after publication.

For more on the proposed changes, please see our previous post from May 24, 2024.

For more information, contact: John Brew and Edward Goetz

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OFAC Issues Notice for New Reporting Requirements for Financial Institutions Under the Rebuilding Economic Prosperity and Opportunity (REPO) for Ukrainians Act

On July 23, 2024, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued a notice about new reporting requirements (the OFAC Reporting Notice) under the Rebuilding Economic Prosperity and Opportunity for Ukrainians Act (REPO for Ukrainians Act). As discussed in our previous client alert, the REPO for Ukrainians Act authorizes the President to seize Russian sovereign assets subject to U.S. jurisdiction and transfer them to a fund that can be used to support Ukraine.

OFAC now requires financial institutions that hold Russian sovereign assets to report them to OFAC by August 2, 2024, or within 10 days of the detection that a financial institution holds such Russian sovereign assets.

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For more information, contact: Anand Sithian, Carlton Greene, and Dmitry Bergoltsev

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OFAC Publishes Guidance on Extended Statute of Limitations

On July 22, 2024, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) released guidance (“Guidance”) on how it will implement the new authority it was granted in the April 24, 2024 National Security Supplemental (“the Act”). The Act extended the statute of limitations for civil, criminal, and forfeiture violations of sanctions programs promulgated pursuant to the International Emergency Economic Powers Act (“IEEPA”) or the Trading with the Enemy Act (“TWEA”) from five to 10 years.

In the Guidance, OFAC addressed two of the larger questions the new statute of limitations raised for businesses and compliance professionals surrounding scope and recordkeeping requirements.

First, OFAC clarified that the 10-year statute of limitations applies to any civil violation of IEEPA- or TWEA-based sanctions prohibitions that was not time-barred at the time of the Act’s enactment. In other words, OFAC may now commence enforcement actions for such violations within 10 years of the latest date of the violation, if such date was after April 24, 2019. By way of example, here is how OFAC’s Guidance would apply depending on the date of the violation:

• Violation occurred before April 24, 2019: Remains time-barred.
• Violation occurred after April 24, 2019: Previously would have been subject to a five-year statute of limitations; now that time period runs for 10 years.

OFAC considers the issuance of a pre-penalty notice or finding of violation to be the commencement of an action for statute of limitation purposes, and the 10-year statute of limitations starts at the time of the most recent violation. 

Second, while OFAC has yet to amend its recordkeeping requirements, which today generally only require records to be kept for five years, OFAC anticipates publishing an interim final rule, with an opportunity to provide comment, extending the recordkeeping requirement to 10 years under 31 C.F.R. § 501.601, in order to correspond with the new statute of limitations. OFAC anticipates the final rule will likely become effective six months after the publication.

For more information, contact: Caroline Brown, Dj Wolff, and Jackie Schaeffer

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ITAR and EAR Proposed Rules Expand Controls on U.S. Person Services

On July 25, 2024, the U.S. Departments of State and Commerce issued new proposed rules that, if implemented, would (1) increase the restrictions associated with U.S. persons providing services in support of non-U.S. military-related end users / uses; and (2) implement new controls associated with exports, reexports, and transfers of items subject to the EAR if they involve a broader swath of non-U.S. military-related parties.

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For more information, contact: Jana del-Cerro, Jeremy Iloulian, Aryn Gruneisen, Chandler Leonard, Rachel Schumacher, Dilan Wickrema, and Dmitry Bergoltsev

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Transformations in Transferability: Challenges in the European Loan Market Amid Increasing Restrictions

In the ever-evolving landscape of English law credit agreements in the European leveraged loan market, the dynamics of lending have undergone significant transformations in the last few years. One issue that has gained prominence is the increase in limits on the ability of lenders to transfer their loans and the associated restrictions imposed on potential new lenders. European syndicated loan agreements have historically included a standardised and expected set of transfer restrictions applicable to prospective lenders, reflective of the market guidance and templates issued by the Loan Market Association (“LMA”). Certainty of terms and the capability of an existing lender to sell out of a loan position have been the hallmark (and expectation) of the LMA loan market. However, trends in the drafting of credit agreements have contained a concerning increase in limitations on loan liquidity. As a result, many lenders are finding it difficult to sell their distressed loans. This article explores these trends, as well as their implications on the secondary loan trading market.

Click here to continue reading this client alert.

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For more information, contact: Andrew Martin, Matthew Hughes, Emilie Condie, Miriam Karam, Adam Colman, and Adam English

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BIS Issues “Best Practices” Guidance for Mitigating Export Diversion Risk

On July 10, 2024, the Department of Commerce’s Bureau of Industry and Security (BIS) released guidance to provide helpful “best practices” for companies and universities who have received a “supplier list” letters, Project Guardian requests, “red flag” letters, or “is informed” letters from BIS.

These notifications generally require the recipients of the letter to take additional steps when dealing with the identified foreign end users by recognizing and resolving red flags, and/or requesting an export license prior to exporting to these identified end users.

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For more information, contact: Jana del-Cerro, Aryn Gruneisen, and Edward Goetz

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Crowell Speaks

Sports & Fitness Industry Association (SFIA) Supply Chain Disruptions, Due Diligence and Crisis Management Webinar (August 1, 2024)
Speakers: John Brew and Pierfilippo Natta

Repeated Billion-Dollar Fines and Their Business Model Threatened: Why Apple and Meta Are Now Really Worried About European Sanctions
July 2, 2024 – Trends Magazine
Related Professionals: Karl Stas