Trade Matters – International Trade & Investment

1. The FCC prohibits the import and sale of certain Chinese telecommunications and video surveillance devices

Late last year, the Federal Communications Commission (FCC) adopted new rules to block the import and sale of telecommunications equipment deemed unacceptably dangerous to US national security. The report and order, issued on November 25th, prohibits any further importation, marketing and sale of radio frequency devices and equipment by entities included in its Inclusion List. The FCC previously adopted rules prohibiting the use of federal funds to purchase equipment or services from those on the Black List. The FCC also issued a supplemental notice of proposed rulemaking announcing possible additional measures, including revoking existing permits for devices and equipment owned by covered entities and expanding the new ban to include “components” manufactured by the entities , but others use in their devices and equipment. . Communications equipment manufacturers and companies should make sure they know the provenance of their equipment and prepare for possible future FCC regulation.

2. 2022 ends with an explosion of execution

• 7. Accused of delivering sensitive US equipment to Russia
  Two U.S. citizens and five Russian citizens were recently indicted on conspiracy, wire fraud and money laundering charges for conspiring to obtain U.S. military and dual-use technology for the Russian defense sector in violation of U.S. sanctions. The indictment alleges that the defendants were linked to Moscow-based companies Serniya Engineering and Sertal LLC, which operate under the direction of Russian intelligence services, to purchase advanced electronics and sophisticated testing equipment for Russia’s military-industrial complex and research and development sector.




• A former naval pilot has been accused of illegally training Chinese pilots
  In December, authorities dropped charges and an arrest warrant against former Marine pilot Daniel Edmund Duggan after he was arrested in Australia for illegally training Chinese military pilots. Dagan allegedly trained Chinese military pilots in aircraft carrier approaches and landings without obtaining an export license or other authorization from the US State Department’s Directorate of Defense Trade Controls. Military training is considered a “defense service” whose export requires a license under the International Traffic in Arms Regulations. Dagan and his co-conspirators also allegedly purchased the aircraft from a US-based dealer and falsified end-user information to obtain permission to export them to South Africa, where the training took place.




• Failure to comply with sanctions in $4.4 million settlement
  On December 30, Danfoss A/S, a multinational Danish company that makes refrigeration and other cooling products, agreed to pay $4.4 million to the Office of Foreign Assets Control (OFAC) to settle its liability for sanctions violations. The violations occurred when Danfoss’ wholly-owned subsidiary in the United Arab Emirates had customers in Iran, Syria and Sudan who made payments to its bank account at the UAE branch of a US financial institution and then made payments from the same account to companies in Iran and Syria. . The violations occurred due to deficiencies in Danfoss’ global sanctions compliance programs. Although a non-US sale of goods by a person other than a US government entity in an OFAC-sanctioned country might not otherwise violate OFAC regulations, it may still result in a violation (export of US financial services) when payments are sent through US financial services. institutions.

3. Supply chain tracking essential to the automotive industry

UK university researchers have tracked the customers of companies that source, process and manufacture products in China’s Xinjiang region (XUAR) and found that virtually all major manufacturers of traditional cars and electric vehicles source from the area. A recent report details the findings. In the United States, the Uyghur Forced Labor Prevention Act (UFLPA) is broad and establishes a rebuttable presumption that any goods mined, manufactured, or produced in whole or in part in the XUAR are supplied through the use of forced labor and prohibits such imports. . The requirements to rebut the presumption can be complex and burdensome, so importers need to increase their tracking capabilities, especially as the US government steps up enforcement.

4. USTR Expands Section 301 Exemptions; Time left for comments

On December 16, the Office of the United States Trade Representative (USTR) announced a nine-month extension of the exclusion of 352 products in China’s Section 301 investigation, making the exemptions effective until September 30. USTR’s willingness to extend the exemptions is a positive sign. they conduct a statutory quadrennial Section 301 rate review. US companies still have the opportunity to comment on the impact of the Section 301 tariffs and argue for their repeal. Comments can be submitted on the USTR comment portal, which closes on January 17.

5. Broad Humanitarian Exceptions to Sanctioned Jurisdictions

On December 20, OFAC announced amendments to add or revise general licenses to several OFAC humanitarian sanctions programs. OFAC issued or amended general licenses to provide authorizations in the following four categories: US Government official business; official activities of certain international organizations and entities, such as the United Nations; certain humanitarian aid transactions to support the activities of non-governmental organizations; and provision of agricultural commodities, pharmaceuticals and medical devices, including spare parts and components.

6. Conclusion of commercial and economic contracts

• The Indo-Pacific Economic System
  USTR and Commerce Department representatives presented a draft text at the Indo-Pacific Economic Framework (IPEF) talks on December 10-15. Fourteen countries launched IPEF in May 2022; many of the same countries also participated in the Trans-Pacific Partnership (TPP) negotiations. IPEF is not a traditional trade agreement like the TPP, but an economic agreement with four pillars: trade, supply chain, clean economy and fair economy.




• MoU to promote trade and investment between the US and Africa
  On December 14, the US government signed a Memorandum of Understanding (MoU) with the Secretariat of the African Continental Free Trade Area with the goal of accelerating sustainable growth across the African continent. Combined, the free trade area will have 54 member states representing 1.3 billion people, making it the fifth largest economy in the world. In addition to signing the MOU, President Biden announced more than $15 billion in two-way trade and investment commitments, deals and partnerships that advance priorities in areas such as sustainable energy, health systems, agribusiness, digital connectivity, infrastructure and finance.

TRADE TIP OF THE MONTH: CFIUS EO Defining Moment of 2022; Supply chain tracking required for 2023

President Biden’s September 15 Executive Order 14803 did not change the laws or regulations of the Committee on Foreign Investment in the United States (CFIUS), but it did put parties on notice that CFIUS will consider supply chains and third-party relationships when reviewing foreign investments. transactions. Also, when assessing the national security risk posed by a covered transaction, the parties will need to pay more attention to US industry trends and existing foreign ownership issues. Finally, by providing CFIUS with increased resources to conduct unannounced reviews, the order makes file/no-file determinations more difficult and increases the potential for CFIUS to intervene in a transaction.

Companies should also expect supply chain transparency requirements to increase in 2023. For example, when selling goods to the military, you may be required to certify that your supply chain does not include goods or components from certain Chinese companies or certain products of Chinese origin. The Customs Trade Partnership Against Terrorism (CTPAT) program includes supply chain resilience and national security considerations in its risk assessment analysis. With different regulatory regimes putting supply chains under the microscope, companies will need to know where every screw and bolt comes from, and most companies aren’t ready for that analysis.

The content of this article is intended to provide a general guide to the topic. Specialist advice should be sought for your particular circumstances.