Overview

Donald Trump emphasized international trade throughout his presidential campaign and has made it his signature issue since taking office. Our team is closely monitoring his administration's international trade activities, and we update this website frequently to provide current profiles of seven crucial areas identified by President Trump as well as timely information on key trade-related appointments and policy developments.

Please click on "UPDATES" for the latest news, including:

  • USTR Releases Annual Reports on China's and Russia's Compliance With WTO Obligations, States That Supporting China's Accession to WTO Was a Mistake
  • New Section 232 Petition Seeks Investigation Into Effects of Uranium Imports on U.S. National Security
  • President Trump Reluctantly Continues to Waive Nuclear Sanctions on Iran
  • OFAC Sanctions Additional Iranian Individuals and Entities for Human Rights Abuses and Support of Weapons Proliferation
  • United States and South Korea Hold Initial Meeting on Renegotiating Free Trade Agreement

Please click on "Publications" for our latest communications, including:

If you have questions about how the Trump administration may affect your international trade concerns, please contact your relationship attorney or any member of our International Trade team.

UPDATES
USTR Releases Annual Reports on China's and Russia's Compliance With WTO Obligations, States That Supporting China's Accession to WTO Was a Mistake

1/19/18 – Today, the U.S. Trade Representative (USTR) made available its statutorily required reports on how the People's Republic of China (China) and the Russian Federation (Russia) are complying with the commitments they made to the World Trade Organization (WTO) resulting from their accession to the organization. China became a member of the WTO in 2001, and Russia joined the WTO in 2012. According to the USTR, China and Russia have "failed to embrace the market-oriented economic policies championed by the WTO and are not living up to certain key commitments they made when they joined the WTO."

Regarding China, the report states that China largely remains a state-led economy while using "the imprimatur of WTO membership to become a dominant player in international trade." As a result, USTR stated that "it seems clear that the United States erred in supporting China's entry into the WTO on terms that have proven to be ineffective in securing China's embrace of an open, market-oriented trade regime." The report seems to cast doubt on whether the USTR believes the WTO's dispute settlement mechanism will be sufficient to address China's non-market economy policies. Nevertheless, USTR stated that it will continue to pursue WTO cases against China that were initiated by previous administrations and "take all other steps necessary to rein in harmful state-led, mercantilist policies and practices pursued by China, even when they do not fall squarely within WTO disciplines."

Below are additional highlights of the 2017 Report to Congress On China's WTO Compliance:

  • "Today, almost two decades after it pledged to support the multilateral trading system of the WTO, the Chinese government pursues a wide array of continually evolving interventionist policies and practices aimed at limiting market access for imported goods and services and foreign manufacturers and service suppliers."
  • "China's regulatory authorities do not allow U.S. companies to make their own decisions about technology transfer and the assignment or licensing of intellectual property rights. Instead, they continue to require or pressure foreign companies to transfer technology as a condition for securing investment or other approvals."
  • "China is determined to maintain the state's leading role in the economy and to continue to pursue industrial policies that promote, guide and support domestic industries while simultaneously and actively seeking to impede, disadvantage and harm their foreign counterparts, even though this approach is incompatible with the market-based approach expressly envisioned by WTO members and contrary to the fundamental principles running throughout the many WTO agreements."
  • "Many of the policy tools being used by the Chinese government … are largely unprecedented, as other WTO members do not use them, and include a wide array of state intervention and support designed to promote the development of Chinese industry in large part by restricting, taking advantage of, discriminating against or otherwise creating disadvantages for foreign enterprises and their technologies, products and services."

Below are selected highlights of the 2017 Report on the Implementation and Enforcement of Russia's WTO Commitments:

  • "So far, Russia's actions strongly indicate that it has no intention of complying with many of the promises it made to the United States and other WTO Members. This trend is very troubling."
  • "Russia has done little in 2017 to demonstrate a commitment to the principles of the WTO or to many of the specific commitments that it made" in the negotiations leading to Russia's membership in the WTO.
  • "The agricultural sector continues to be one of the most challenging sectors for U.S. exporters. In addition to the import ban on nearly all agricultural goods from the United States and other WTO Members, Russia continues to erect barriers to U.S. agricultural exports."
  • "In 2017, notwithstanding a few tariff reductions, Russia increasingly appeared to turn away from the principles of the WTO, instead turning inward through the adoption of local content policies and practices. Russia continued to rely on arbitrary behind-the-border measures and other discriminatory practices to exclude U.S. exports."
New Section 232 Petition Seeks Investigation Into Effects of Uranium Imports on U.S. National Security

1/17/18 Energy Fuels Inc. and Ur-Energy Inc. (the “Petitioners”) have jointly submitted a petition to the U.S. Department of Commerce for relief under Section 232 of the Trade Expansion Act of 1962 from imports of uranium products from state-owned and state-subsidized enterprises in Russia, Kazakhstan and Uzbekistan. According to the petition, such imports now supply nearly 40 percent of U.S. demand and threaten U.S. national security. Despite uranium’s critical role in the United States supporting clean electricity and the national defense, “imports of cheap, foreign state-subsidized uranium have swelled in recent years to the point that domestic suppliers currently provide less than 5% of our nation’s demand.” As recently as 1980, the Petitioners argue, “U.S. producers supplied nearly 100% of our domestic uranium needs, and in 1989 the DOC initiated a Section 232 investigation at the request of the U.S. Department of Energy (“DOE”) because of concerns that uranium imports exceeded 37.5% at that time. The problem is far worse now.” The petition also notes that China is significantly growing its state-owned nuclear enterprises and intends to penetrate the U.S. market with nuclear fuel that will directly compete with U.S. uranium miners. Under U.S. law, the Petitioners argue that the warheads in U.S. nuclear weapons must be manufactured from uranium sourced from U.S. mines; tritium (an essential component of nuclear weapons) must be produced in a U.S. reactor using domestic uranium; and highly-enriched and fabricated uranium fuel for the U.S. Navy must be U.S. in origin. If this import trend continues and the condition of the U.S. uranium mining industry continues to worsen, the Petitioners contend that the United States will lose the ability to supply these essential national security requirements with domestic sources. The petition seeks remedies that will set a quota to limit U.S. uranium imports, effectively reserving 25 percent of the U.S. nuclear market for U.S. uranium production. It also seeks implementation of a requirement for U.S. federal utilities and agencies to buy U.S. uranium in accordance with President Trump’s Buy American policy.

Once the Department of Commerce initiates the investigation, it will have 270 days to prepare a report for the president. Following receipt of that report, the president will have 90 days to act on any recommendations and take action if necessary to “adjust the imports of an article and its derivatives” and/or pursue other lawful non-trade related actions necessary to address the threat. A full copy of the petition is available on Energy Fuels’ website.

President Trump Reluctantly Continues to Waive Nuclear Sanctions on Iran

1/12/18 – President Trump has announced that he will continue to waive nuclear-related sanctions toward Iran despite his misgivings about the multi-party agreement with Iran known as the Joint Comprehensive Plan of Action (JCPOA, or commonly known as the Iran nuclear agreement) and Iran’s continued support for international terrorism, its human rights abuses and its continuing censorship at home. In a White House statement, the president indicated that “I have been very clear about my opinion of that deal. It gave Iran far too much in exchange for far too little.” He added, “Despite my strong inclination, I have not yet withdrawn the United States from the Iran nuclear deal.”* He then briefly identified his conditions for either fixing the agreement or ultimately withdrawing from the JCPOA.

While President Trump will continue to work with Congress on legislation regarding Iran, he indicated that it must have four “critical components”: (1) Iran must allow immediate inspections of potential nuclear sites; (2) Iran can never possess a nuclear weapon; (3) there must be no expiration date prohibiting Iran’s efforts to develop or acquire nuclear weapons under any deal; and (4) Iran’s long-range missile capabilities are inseparable from Iran’s nuclear weapons ambitions and will also be subject to severe sanctions. In closing, the president stated:

“Today, I am waiving the application of certain nuclear sanctions, but only in order to secure our European allies’ agreement to fix the terrible flaws of the Iran nuclear deal. This is a last chance. In the absence of such an agreement, the United States will not again waive sanctions in order to stay in the Iran nuclear deal. And if at any time I judge that such an agreement is not within reach, I will withdraw from the deal immediately. No one should doubt my word. I said I would not certify the nuclear deal—and I did not. I will also follow through on this pledge. I hereby call on key European countries to join with the United States in fixing significant flaws in the deal, countering Iranian aggression, and supporting the Iranian people. If other nations fail to act during this time, I will terminate our deal with Iran. Those who, for whatever reason, choose not to work with us will be siding with the Iranian regime’s nuclear ambitions, and against the people of Iran and the peaceful nations of the world.”

In a later press briefing, White House officials stated that the administration intends to work with European allies for a follow-on agreement that puts in place certain triggers that Iran could not exceed. They stressed that this “would not entail direct negotiations with the Iranians, [sic] this would be something the United States works out with our European partners only. It would be an agreement amongst the United States and our European partners to re-impose multilateral sanctions should the Iranians surpass the new triggers that we would lay out.”

* Under the Iran Nuclear Agreement Review Act, implemented in 2015 at the time of the JCPOA, the president must certify to Congress every 90 days that the suspension of sanctions under the nuclear agreement is warranted and that Iran remains in compliance with its obligations to terminate its illicit nuclear weapons program. In July 2017, Trump reluctantly certified that Iran was in compliance with the terms of the JCPOA (see Trump and Trade Alert of July 18, 2017); however, in October 2017, the president declined to certify that Iran was in compliance with the agreement (see Trump and Trade Alert of October 13, 2017).

OFAC Sanctions Additional Iranian Individuals and Entities for Human Rights Abuses and Support of Weapons Proliferation

1/12/18 – The Department of the Treasury’s Office of Foreign Assets Control (OFAC) has designated 14 individuals and entities for sanctions arising from serious human rights abuses and censorship in Iran and support of designated Iranian weapons proliferators. According to Treasury Secretary Steven T. Mnuchin, “The United States will not stand by while the Iranian regime continues to engage in human rights abuses and injustice. We are targeting the Iranian regime, including the head of Iran’s judiciary, for its appalling mistreatment of its citizens, including those imprisoned solely for exercising their right to freedom of peaceful assembly, and for censoring its own people as they stand up in protest against their government. We are also targeting Iran’s ballistic missile program and destabilizing activities, which it continues to prioritize over the economic well-being of the Iranian people.”

While the majority of these persons and entities are Iranian, several are located in Malaysia and China and have been sanctioned for their support of the Iranian regime. The full list is available on Treasury’s website. This decision is not formally related to an expected Trump administration announcement later today regarding an extension of the relaxation of sanctions on Iran under the Joint Comprehensive Plan of Action (i.e., JCPOA or Iran nuclear agreement) but indicates that the United States will continue to sanction Iran in non-nuclear areas outside the scope of the JCPOA.

United States and South Korea Hold Initial Meeting on Renegotiating Free Trade Agreement

1/8/18 – On January 5, the United States and South Korea held their first meeting to discuss potential renegotiation of the U.S.- South Korea (KORUS) free trade agreement. In addition to discussing procedural and timetable issues, the United States discussed proposals to move toward fair and reciprocal trade in key industrial goods sectors, such as autos and auto parts, and to resolve cross-cutting and sector-specific barriers affecting U.S. exports. South Korea noted its interest in resolving "sensitive issues," including the investor-state dispute settlement (ISDS) clause and trade remedies.

At the conclusion of the negotiating session, Ambassador Robert Lighthizer said, "We have much work to do to reach an agreement that serves the economic interests of the American people. Our goals are clear: we must achieve fair and reciprocal trade between our two nations. We will move forward as expeditiously as possible to achieve this goal."

The United States first announced its intent to seek modifications to KORUS in July 2017. During President Trump's visit to Seoul in November 2017, the two countries agreed to expedite the talks. The U.S. delegation is led by Michael Beeman, Assistant U.S. Trade Representative for Japan, Korea and APEC. South Korea's delegation is led by Myung-hee Yoo, Director General from the Ministry of Trade, Industry and Energy (MOTIE).

President Trump Releases National Security Strategy

12/18/17 – President Trump has released his first National Security Strategy (NSS), a statutorily mandated document that sets forth how the president intends to put his national security vision into practice on behalf of the United States. The strategy identifies four vital national interests, or “four pillars”: (1) Protect the American people, the homeland, and the American way of life; (2) Promote American prosperity; (3) Preserve peace through strength; and (4) Advance American influence.

To promote American prosperity, the NSS states that a strong economy is necessary to “restore our national power.” The NSS highlights that the United States for 70 years has embraced and advanced an international economic system “rooted in American principles of reciprocity, free markets, and free trade [that] served our economic and security interests.” Today, however, “American prosperity and security are challenged by an economic competition playing out in a broader strategic context” in which other countries do not share our belief in such a system and “espouse free trade rhetoric and exploit its benefits, but only adhere selectively to the rules and agreements.” In response, President Trump “will no longer turn a blind eye to violations, cheating, or economic aggression.”

The NSS sets forth a broad policy to promote free, fair and reciprocal economic relationships. The NSS reiterates the president’s commitment to address continuing trade imbalances, break down trade barriers, pursue enforcement actions and defend against economic aggression. To that end, the NSS sets forth these trade-related “priority actions” that the Trump administration will undertake:

  • Adopt new trade and investment agreements and modernize existing ones: The United States will pursue bilateral trade and investment agreements with countries that commit to fair and reciprocal trade and will modernize existing agreements to ensure that they are consistent with those principles. Agreements must adhere to high standards in intellectual property, digital trade, agriculture, labor and the environment.
  • Counter unfair trade practices: The United States will counter all unfair trade practices that distort markets using all appropriate means, from dialogue to enforcement tools.
  • Counter foreign corruption: Using our economic and diplomatic tools, the United States will continue to target corrupt foreign officials and work with countries to improve their ability to fight corruption so U.S. companies can compete fairly in transparent business climates.
  • Work with like-minded partners: The United States will work with like-minded partners to preserve and modernize the rules of a fair and reciprocal economic order. Together, we will emphasize fair trade enforcement actions when necessary, as well as multinational efforts, to ensure transparency and adherence to international standards within trade and investment projects.
  • Facilitate new market opportunities: The United States will partner with countries as they build their export markets, promote free market competition and incentivize private sector growth. We will expand U.S. trade and investment opportunities and increase the market base for U.S. goods and services.
USTR Lighthizer Criticizes WTO at Opening of its 11th Ministerial Conference

12/12/17 – At the introductory session for the 11th Ministerial Conference of the World Trade Organization (WTO), Ambassador Robert Lighthizer acknowledged that the WTO is an important institution but then proceeded in his opening statement to criticize the organization and its focus. He stated that the WTO is “losing its essential focus on negotiation and becoming a litigation-centered organization,” claiming that member countries “seem to believe they can gain concessions through lawsuits that they could never get at the negotiating table.”

Lighthizer argued that the WTO “cannot sustain a situation in which new rules can only apply to the few, and that others will be given a pass in the name of self-proclaimed development status. There is something wrong, in our view, when five of the six richest countries in the world presently claim developing country status.” He opined that “it is impossible to negotiate new rules when many of the current ones are not being followed” and that some members are “intentionally circumventing” their obligations. He indicated that addressing these concerns and the transparency of the WTO will be a top priority for the United States.

WTO Issues Annual Report on Trade-Related Developments

12/5/17 – The Trade Policy Review Body of the World Trade Organization (WTO) has released its annual report, Overview of Developments in the International Trading Environment, that covers the implementation of trade-related measures across the WTO membership in the last 12 months (from mid-October 2016 to mid-October 2017). WTO Director-General Roberto Azevêdo stated that "the Report aims to offer a horizontal, objective and fact-based view of developments across the trade landscape" and is not intended to be indicative of any WTO member state's compliance with WTO trade measures.

The report shows that 108 new trade-restrictive measures were established during the past year, while WTO member states implemented 128 new measures that facilitate trade. Import-facilitating measures implemented during the annual review period in the context of the expanded Information Technology Agreement amounted to roughly $385 billion. There was also a slight deceleration both in the initiation of trade remedy investigations and in the termination of measures compared to the previous annual overview. Anti-dumping measures continue to make up the bulk (83 percent) of all trade remedy matters. The main sectors affected by trade remedy investigations during the review period were electrical machinery and related parts, iron and steel, articles of iron and steel, and wood and articles of wood.

The report further indicates that international trade flows rebounded strongly during the 2016-2017 review period after a sharp slowdown in the previous reporting period. World merchandise trade volume growth in the first half of 2017 was 4.2 percent, well above the 1.3 percent increase recorded for the whole of 2016. World real gross domestic product growth at market exchange rates is projected to pick up to 2.8 percent in 2017 from 2.3 percent in 2016. The WTO's latest trade forecast has world merchandise trade volume increasing by 3.6 percent in 2017, with growth placed within an expected range from 3.2 percent to 3.9 percent, which reflects past forecast performance. The pace of expansion should moderate to 3.2 percent in 2018, set within a wider range from 1.4 percent to 4.4 percent, which reflects the greater uncertainty of longer-term forecasts.

Fifth Round of NAFTA Negotiations Concludes

11/22/17 – Upon the conclusion of the fifth round of renegotiations of the North American Free Trade Agreement (NAFTA), U.S. Trade Representative Robert Lighthizer issued the following statement:

“While we have made progress on some of our efforts to modernize NAFTA, I remain concerned about the lack of headway. Thus far, we have seen no evidence that Canada or Mexico are willing to seriously engage on provisions that will lead to a rebalanced agreement. Absent rebalancing, we will not reach a satisfactory result. A rebalanced, updated NAFTA will promote greater prosperity for American workers, farmers, ranchers and businesses and strengthen the North American region as a whole. Our teams will be meeting again next month in Washington. I hope our partners will come to the table in a serious way so we can see meaningful progress before the end of the year.”

The parties have agreed to hold the sixth round of negotiations January 23-28, 2018 in Montréal, Canada. In the meantime, negotiators will continue to work in intersessional meetings in Washington, D.C. throughout mid-December and will report back to the chief negotiators on the progress achieved.

U.S. Trade Representative Releases Updated NAFTA Negotiating Objectives

11/20/17 – The Office of the U.S. Trade Representative (USTR) has released an updated summary of U.S. objectives for the renegotiation of the North American Free Trade Agreement (NAFTA). The new objectives update the previous objectives published in July (see our 7/18/17 update), and come after four rounds of negotiations among the United States, Mexico and Canada. The updated objectives reflect the goals of text proposals the United States has tabled in the NAFTA negotiations so far. The objectives include increased market access for agriculture, new transparency and administrative measures, expanded investment and intellectual property objectives, and completed negotiations on the chapters of Competition and Small- and Medium-Sized Enterprises. According to the USTR, the objectives for Trade in Goods include the first-ever objective for trade deficit reduction and an improvement in the U.S. trade balance with NAFTA countries.

The updated objectives “represent a serious effort to renegotiate the Agreement to update its provisions to the best 21st century standards and rebalance the benefits of the deal so that each country succeeds. U.S. proposals reflecting these objectives are supported by a diverse group of American interests. If these objectives are achieved, the United States will obtain more open, equitable, secure, and reciprocal market access, and the entire NAFTA region will benefit.”

Remarks by President Trump on His Trip to Asia

11/16/17 – In brief remarks upon returning from his 12-day trip throughout Asia, President Trump defined the trip by three core goals: 
(1) uniting the world against "the nuclear menace" posed by North Korea;
(2) strengthening "America’s alliances and economic partnerships in a free and open Indo-Pacific" region; and
(3) insisting on "fair and reciprocal trade."

On this last goal, the president stated that "fairness and reciprocity – are an open invitation to every country that seeks to do business with the United States, and they are a firm warning to every country that cheats, breaks the rules, and engages in economic aggression." He announced that the United States "is ready to make bilateral trade deals with any nation in the region that wants to be our partner in fair and reciprocal trade." The United States, he added, "will never again turn a blind eye to trading abuses, to cheating, economic aggression, or anything else from countries that profess a belief in open trade, but do not follow the rules or live by its principles themselves. No international trading organization can function if members are allowed to exploit the openness of others for unfair economic gain."

As a result of this trip and meeting with other leaders, President Trump stated that "We have established a new framework for trade that will ensure reciprocity through enforcement actions, reform of international organizations, and new fair trade deals that benefit the United States and our partners." Shortly after these remarks, the White House released a fact sheet providing highlights and summaries of U.S. efforts and accomplishments during the Asia trip, including efforts "to end years of one-sided and unbalanced trade that has left too many Americans behind."

Commerce, State and Treasury Implement Changes to Cuba Sanctions Policy

11/14/17 – The Office of Foreign Assets Control (OFAC) at the Department of the Treasury and the Bureau of Industry and Security (BIS) at the Department of Commerce have announced amendments to the Cuban Assets Control Regulations and Export Administration Regulations, respectively, to implement changes to the Cuba sanctions program announced by President Trump in June 2017 with the issuance of the National Security Presidential Memorandum on Strengthening the Policy of the United States Toward Cuba (NSPM). See our June 20, 2017 update for background information. These changes, in effect as of November 9, 2017, roll back many of the initiatives and regulatory changes implemented by former President Obama in seeking to normalize relations with Cuba. In announcing these changes, Treasury Secretary Steven Mnuchin stated, “We have strengthened our Cuba policies to channel economic activity away from the Cuban military and to encourage the government to move toward greater political and economic freedom for the Cuban people.” The State Department has also released a list of entities under the control of, or acting for or on behalf of, the Cuban military, intelligence, or security services or personnel with which direct financial transactions are now prohibited “as it would disproportionately benefit such services or personnel at the expense of the Cuban people or private enterprise in Cuba.”

These revised regulations include:

  1. Persons subject to U.S. jurisdiction are prohibited from engaging in certain direct financial transactions with entities identified by the State Department on the Cuba Restricted List. Certain transactions will be excluded from this prohibition pursuant to exceptions detailed in the NSPM.
  2. BIS has established a general policy of denial for license applications to export items for use by entities on the Cuba Restricted List, unless the transaction is otherwise consistent with the NSPM.
  3. While announcing that the United States continues to maintain a comprehensive embargo on trade with Cuba, BIS has amended its licensing policy for Cuba and portions of three license exceptions available for exports and reexports to Cuba: License Exceptions Gift Parcels and Humanitarian Donations, Consumer Communications Devices and Support for the Cuban People (SCP).
  4. Under the SCP license exception, OFAC will require that each traveler engage in a full-time schedule of activities that result in meaningful interaction with individuals in Cuba. Such activities must enhance contact with the Cuban people, support civil society in Cuba or promote the Cuban people's independence from Cuban authorities.
  5. OFAC has revised and expanded the definition of the term “prohibited officials of the Government of Cuba.”

More detailed information regarding these regulatory changes is available:

Trans-Pacific Partnership Moves Forward Without the United States

11/13/17 – Despite the absence of the United States, the remaining members of the Trans-Pacific Partnership Agreement (TPP), which was originally signed in February 2016, announced that they had reached an agreement on “core elements” of the terms of an agreement, now termed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). While acknowledging that several key issues remain to be negotiated, the trade ministers from the remaining 11 countries issued a joint statement stating that the revised agreement “maintains the high standards, overall balance and integrity of the TPP while ensuring the commercial and other interests of all participants and preserving our inherent right to regulate, including the flexibility of the parties to set legislative and regulatory priorities. Ministers also affirm the right of each party to preserve, develop and implement its cultural policies. Ministers consider that the CPTPP reflects the desire of the parties to implement the TPP outcomes among themselves.”

While the text of the draft CPTPP was not released, an outline was released with the joint statement. Also, several provisions of the original TPP covering state-owned enterprises, services and investment non-confirming measures, dispute settlement and cultural exemptions have, for the moment, been suspended pending further discussions.

U.S. International Trade Commission Releases Remedy Recommendations in Section 201 Solar Cell Investigation

11/1/17 – As previously detailed in our September 26 Trump and Trade Update, the U.S. International Trade Commission (ITC) unanimously determined that crystalline silicon photovoltaic (CSPV) cells (or solar cells) were being imported into the United States in such quantities that they were causing substantial injury to the U.S. solar equipment industry. On October 31, 2017, the ITC issued its remedy recommendations to address the injury and to facilitate the efforts of the domestic industry to "make a positive adjustment to import competition."

The recommendations varied among the four ITC commissioners but included quantitative import restrictions and tariff rate quotas (TRQs). Three commissioners recommended TRQs, while the fourth suggested quantitative restrictions only. The commissioners further recommended international negotiations "to address the underlying cause of the increase in imports of CSPV products and alleviate the serious injury thereof." Commissioner Broadbent found that the main cause of the increase in imports was global oversupply of solar cells from China and specifically recommended negotiations with that country. Others acknowledged this global oversupply but also recommended that imports from certain countries (including Canada and other free trade agreement countries) be excluded because they were not the root cause of injury to the U.S. solar cell industry. Suniva, the primary petitioner in the case, which had requested a price floor, called the recommendations "disappointing" and urged the president to reject the ITC's recommendations and follow the recommendations of the domestic industry.

The ITC will now forward its report, which will contain the injury determination, remedy recommendations, certain additional findings, and the basis for them, to President Trump by November 13, 2017. The president will make the final decision on whether to provide relief to the U.S. solar cell industry and on the type and amount of any relief. The Office of the U.S. Trade Representative has issued a formal notice requesting comments on the ITC's injury determination and remedy recommendations. Any public comments are due by November 20, 2017; the USTR will also hold a public hearing on December 6, 2017. The president will have until January 12, 2018 to make a final decision on any remedy.

Department of Commerce Issues Memorandum on China's Continued Nonmarket Economy Status

10/31/17 – In support of its preliminary determination in the antidumping duty investigation of imports of aluminum foil from the People's Republic of China, the Department of Commerce has released a 205-page memorandum finding that China continues to be considered a nonmarket economy (NME) country in trade remedy cases because it "does not operate sufficiently on market principles to permit the use of Chinese prices and costs for purposes of the Department's antidumping analysis." At its core, the memo concludes, "the framework of China's economy is set by the Chinese government and the Chinese Communist Party (CCP), which exercise control directly and indirectly over the allocation of resources through instruments such as government ownership and control of key economic actors and government directives. The stated fundamental objective of the government and the CCP is to uphold the 'socialist market economy' in which the Chinese government and the CCP direct and channel economic actors to meet the targets of state planning. The Chinese government does not seek economic outcomes that reflect predominantly market forces outside of a larger institutional framework of government and CCP control."

The memo provides a detailed analysis of the six statutory criteria for determining whether a country is a market economy in trade remedy cases as set forth in the Tariff Act of 1930. Among the factors detailed in the memo are the Chinese government's continuing restrictions on foreign investment, the level of Chinese government ownership of various entities, the government's ability to set and control prices, and the continued functioning of  China's legal system as "an instrument by which the Chinese government and the CCP can secure discrete economic outcomes, channel broader economic policy, and pursue industrial policy goals."

Commerce Issues Preliminary Determination in China Aluminum Foil Dumping Investigation

10/30/17 – The Department of Commerce (Commerce) has announced its affirmative preliminary determination in the antidumping duty (AD) investigation of imports of aluminum foil from the People’s Republic of China (China). While the preliminary antidumping duty rates, ranging from 96 percent to more than 162 percent, will not be finalized by Commerce until late February 2018, Commerce will instruct U.S. Customs and Border Protection (CBP) to require cash deposits based on these preliminary rates.

The merchandise covered by these investigations is aluminum foil having a thickness of 0.2 mm or less, in reels exceeding 25 pounds, regardless of width. The implications of this trade remedy action, however, are potentially more far reaching and may affect U.S.-China trade relations. The preliminary determination comes just weeks before President Trump travels to China, and China was quick to state that it was “strongly dissatisfied” with the determination. A key issue in this investigation is the U.S. government’s continued treatment of China’s economy as a “nonmarket economy.” Commerce relied upon surrogate/third-country pricing analysis to conclude that China was dumping its aluminum foil in the U.S. market. Upon China’s accession to the World Trade Organization (WTO), other WTO members were allowed to use such a nonmarket economy methodology in antidumping duty matters involving China. Commerce continues to use this methodology, arguing that China still does not operate as a market economy due to continuing government price controls and other governmental involvement. China argues that this clause in its accession agreement has now expired and that its goods must be accorded market economy status.

State Department Publishes List of Russian Defense and Intelligence Sector Entities Under New Sanctions Law

10/30/17 – Section 231 of the Countering America’s Adversaries Through Sanctions Act (CAATSA), enacted on August 2, 2017, mandates that the president must impose certain sanctions on persons the president determines knowingly engage in a significant transaction with a person that is part of, or operates for or on behalf of, the defense or intelligence sectors of the government of the Russian Federation. The sanctions include, among others, prohibitions concerning property transactions, export license restrictions, Export-Import Bank assistance restrictions, debt and equity restrictions, visa ramifications for corporate officers, and U.S. government procurement prohibitions. The intent of Section 231 of the CAATSA is to respond to Russia’s behavior as to the crisis in eastern Ukraine, cyber intrusions and attacks, and human rights abuses.

On October 27, 2017, the State Department provided a list of those Russian defense and intelligence agencies that may face sanctions under CAATSA. At this time, however, this designation is not a determination regarding imposition of actual sanctions against these Russian entities; the CAATSA requires the imposition of sanctions beginning on or after January 29, 2018. In a short briefing, senior State Department staff indicated that over the next 180 days, the department will take a close look at transactions and dealings with these entities that it thinks may fall within the scope of the sanctions provision of CAATSA, and engage with partners and allies to determine whether any transactions undertaken with entities on the list are problematic. At that time, sanctions may be implemented.

Over the course of the next three months, U.S. companies should assess the amount and type of business transactions they may be conducting with Russian entities on the State Department list. Ultimately, persons who are determined to “knowingly engage in a significant transaction” with a person specified on the list may face sanctions. In determining whether a transaction is “significant” for purposes of CAATSA, the Department of State will consider the totality of the facts and circumstances surrounding the transaction and weigh various factors on a case-by-case basis. Clearly, issues of national security and U.S. foreign policy interests will be factors in such an analysis.

Fourth Round of NAFTA Negotiations Leaves All Parties Unsatisfied

10/19/17 – After four rounds of negotiations, the United States, Canada and Mexico are beginning to express frustration concerning the discussions and proposals to revise and update the North American Free Trade Agreement (NAFTA). In an October 17 joint statement, the parties indicated that they have put forward “substantially all initial text proposals” but that these proposals have “created challenges” and highlighted “significant conceptual gaps” among the three countries.

Acknowledging that one of President Trump’s clear objectives is the reduction of the U.S. trade deficit with its NAFTA partners, U.S. Trade Representative Robert Lighthizer stated that he was “surprised and disappointed by the resistance to change from our negotiating partners.” In his closing remarks, Ambassador Lighthizer said, “As difficult as this has been, we have seen no indication that our partners are willing to make any changes that will result in a rebalancing and a reduction in these huge trade deficits. Now I understand that after many years of one-sided benefits, their companies have become reliant on special preferences and not just comparative advantage. Countries are reluctant to give up unfair advantage. But the President has been clear that if we are going to have an agreement going forward, it must be fair to American workers and businesses that employ our people at home.”

In response, Canadian Foreign Affairs Minister Chrystia Freeland called the U.S. list of proposals “unconventional” and “troubling,” stating that some of them would “turn back the clock on 23 years of predictability, openness and collaboration under NAFTA.”

Mexican Secretary of the Economy Ildefonso Guajardo Villarreal said, “We must ensure that decisions we make today do not come back to haunt us tomorrow,” adding that, in order for the negotiations to be fruitful, “we must understand that we all have limits.”

Mexico will host the fifth round of negotiations November 17-21, 2017, and the parties have agreed that additional rounds will be necessary and scheduled during the first quarter of 2018.

President Trump Declines to Certify to Congress That Iran Is in Compliance With the JCPOA

10/13/17 – In brief remarks, President Trump announced that in addition to his administration’s new Iran strategy, he “cannot and will not” certify to Congress that the continued suspension of sanctions against Iran under the Joint Comprehensive Plan of Action (JCPOA) is appropriate. Reiterating his often stated claim that “the Iran Deal was one of the worst and most one-sided transactions the United States has ever entered into,” the president stated that he needed “negotiators who will much more strongly represent America’s interest.” The president added that, “Since the signing of the nuclear agreement, the regime’s dangerous aggression has only escalated. At the same time, it has received massive sanctions relief while continuing to develop its missiles program. Iran has also entered into lucrative business contracts with other parties to the agreement.”

Arguing that he will not “continue down a path whose predictable conclusion is more violence, more terror, and the very real threat of Iran’s nuclear breakout,” President Trump directed his administration to work with Congress and allies “to address the deal’s many serious flaws so that the Iranian regime can never threaten the world with nuclear weapons.” He added that should a solution not be reachable, “then the agreement will be terminated. It is under continuous review, and our participation can be cancelled by me, as President, at any time.”

President Trump’s “New Strategy on Iran” and Congressional Developments

10/13/17 – After a nine-month review, consultations with his national security staff and discussions with members of Congress, President Trump has announced a new U.S. strategy on relations with Iran. In a statement, the White House announced that the “new Iran strategy focuses on neutralizing the Government of Iran’s destabilizing influence and constraining its aggression, particularly its support for terrorism and militants.” While not providing specifics, the announcement indicated that the United States would work to deny Iran, and particularly the Islamic Revolutionary Guard Corps (IRGC), funding; counter Iran’s efforts to develop its ballistic missiles and other asymmetric weapons capabilities; and “deny the Iranian regime all paths to a nuclear weapon.”

Regarding the Joint Comprehensive Plan of Action (JCPOA), Trump stated that Iran’s “activities severely undercut whatever positive contributions to ‘regional and international peace and security’ [the JCPOA] sought to achieve,” adding that Iranian officials have sought to “exploit loopholes and test the international community’s resolve.” While not yet making a full statement on whether he will refuse to re-certify to Congress Iranian compliance under the JCPOA, which must be done by October 15, 2017, Trump clearly indicated that current Iranian behavior cannot be tolerated and that “the deal must be strictly enforced, and the IAEA must fully utilize its inspection authorities.”

Congressional Activity on Iran

On October 12, 2017, the House Foreign Affairs Committee, chaired by Rep. Ed Royce (R-CA), passed the Iran Ballistic Missiles and International Sanctions Enforcement Act (HR 1698). The legislation seeks to expand sanctions against Iran for its continuing efforts to develop intercontinental ballistic missile capabilities. In remarks prior to the committee markup of HR 1698, Chairman Royce stated, “As flawed as the [JCPOA] deal is, I believe we must now enforce the hell out of it. Let’s work with allies to make certain that international inspectors have better access to possible nuclear sites, and we should address the fundamental sunset shortcoming, as our allies have recognized.” Committee member statements, witness testimony and a webcast of the October 11, 2017 hearing on the legislation are available on the House Foreign Affairs Committee's website. The legislation currently has 320 cosponsors in the House of Representatives. HR 1698 will next be reported to the full House for further debate and consideration.

In the Senate, on October 13, 2017, Senators Bob Corker (R-TN) and Tom Cotton (R-AK) announced their intention to introduce legislation to amend the Iran Nuclear Agreement Review Act of 2015 (Public Law No. 114-17), to address certain provisions in the JCPOA, particularly an elimination of the deal’s sunset on limitations placed on Iran’s future development of any nuclear program. The legislation, which has not yet been formally introduced, would penalize Iran if it fails to abide by guidelines related to centrifuge research and development. Ultimately, under the proposed restrictions in the legislation, any violations by Iran could result in the reinstatement of U.S. sanctions, especially if it were to come within a year of gaining nuclear capability.

President Trump Reportedly to Refuse Certifying Iran's Compliance with JCPOA

10/6/17 – The White House has acknowledged that while no decision is final, President Trump is likely to decline to recertify that Iran is in compliance with the terms of the Joint Comprehensive Plan of Action (JCPOA), which is more commonly known as the Iran nuclear deal. Trump is expected to publicly announce his position on the JCPOA and an overall strategy toward Iran next week; any final determination must be issued by October 15, 2017. Until then, the TrumpandTrade.com team offers this summary of the 2015 law that would be triggered should Trump not recertify to Congress that Iran is in compliance with the JCPOA.

Under the Iran Nuclear Agreement Review Act of 2015 (Public Law No. 114-17), the president must submit to Congress every 90 days a compliance certification indicating that (1) Iran is fully implementing the terms of the JCPOA, (2) it has not committed a material breach, (3) it has taken no actions to advance its nuclear weapons program, and (4) the suspension of sanctions remains warranted. Under this law, there are clear and detailed provisions pertaining to congressional oversight of Iranian compliance under the JCPOA should the president not submit a certification of Iran's compliance. Subsection (e) of the law provides for expedited consideration of "qualifying legislation" introduced within 60 calendar days of the date when the president does not submit a certification stating Iran is in compliance with the JCPOA.

The term "qualifying legislation" is defined to mean only a bill that (1) is titled, "A bill reinstating statutory sanctions imposed with respect to Iran” and (2) states, after the enacting clause, "Any statutory sanctions imposed with respect to Iran pursuant to __________ that were waived, suspended, reduced, or otherwise relieved pursuant to an agreement submitted pursuant to section 135(a) of the Atomic Energy Act of 1954 are hereby reinstated and any action by the United States Government to facilitate the release of funds or assets to Iran pursuant to such agreement, or provide any further waiver, suspension, reduction, or other relief pursuant to such agreement is hereby prohibited," with the blank space filled with the law or laws under which sanctions are to be reinstated. Such qualifying legislation must be introduced in the House by either the majority leader or minority leader or in the Senate by the majority leader or minority leader (or one of their designees).

Any such legislation is to receive expedited consideration; if any committee to which the bill has been referred has not reported out the bill within 10 legislative days, that committee will no longer have oversight of the bill. Each chamber (House and Senate) has slightly different rules under the law in which to consider any bill. In the House, all points of order against any qualifying legislation are waived as are any motions against its consideration; two hours of debate are allowed; and no motions for reconsideration will be allowed. In the Senate, all points of order pertaining to any qualifying legislation are also waived; no motions to postpone or reconsider will be allowed, but certain (undefined) debatable motions and appeals can be considered; 10 hours of debate are allowed; and no motion to recommit will be allowed. If one chamber does not introduced qualifying legislation and the other chamber considers and passes such legislation, that bill once passed over to the other chamber must be considered under the expedited procedures (as previously discussed) under this law.

Stay tuned …

CFIUS 2015 Annual Report: National Security Filings Increase, as Does Focus on China

10/3/17 – The Committee on Foreign Investment in the United States (CFIUS), an inter-agency committee headed by the Department of the Treasury, is authorized to review transactions that could result in the control of U.S. businesses by foreign persons or companies in order to determine the effect of such transactions on the national security of the United States. Once a little-known committee, CFIUS has become more widely known in the past decade amid growing concern over foreign investment in the United States, and the potential security implications of certain foreign entities owning and controlling U.S. companies and/or technology. In fact, in September 2017, President Trump took the rare step of actually blocking a transaction: the proposed acquisition of Lattice Semiconductor Corporation by Canyon Bridge Capital Partners LLC, a subsidiary of Chinese state-owned China Venture Capital Fund Corporation Limited. Such a move indicates that the parties were unable to allay the national security concerns of CFIUS’s agency members. It further highlights Trump’s “America First” outlook and the likelihood that CFIUS reviews will become more common and stringent under the Trump administration.

The recently released CFIUS 2015 Annual Report indicates the following trends:

  • In 2015, 143 transactions were reviewed by CFIUS, continuing the general upward trend since 2009, when 65 notices were filed. Further, it is believed that filings increased again in 2016 and that 2017 will be a record year with more than 200 filings.
  • In 2015, 42 percent of reviews were conducted for industries in the Manufacturing sector; 32 percent in the Finance, Information and Services Sector; 18 percent in the Mining, Utilities and Construction industries; and 8 percent in the Wholesale Trade, Retail Trade, and Transportation sectors.
  • For the fourth consecutive year, China has led foreign countries in the number of CFIUS reviews, with 29 conducted in 2015. Over the three-year period from 2013 to 2015, Chinese foreign investment underwent 74 CFIUS reviews; the next closest country was Canada with 49 reviews, followed by the United Kingdom with 47 reviews.
  • While the majority of reviews conclude with approval by CFIUS, in 2015 the parties to 11 transactions had to agree to and adopt mitigation measures to ensure that the parties remained in compliance with various agency requirements to remove any national security risks.
  • The annual report must highlight any “perceived adverse effects” of transactions reviewed by CFIUS, and the 2015 report for the first time indicates there could be national security concerns regarding potential acquisitions of U.S. companies that hold “substantial pools of potentially sensitive data about U.S. persons and businesses that … could be in any number of sectors, including, for example, the insurance sectors, health services, and technology services.”

While not stated in the report, the statistics on the length of time a transaction is under review reveal that in 2015 there was a significant increase in the length of time transactions remained active before CFIUS. By law, CFIUS must complete a review within 90 days, with several triggers that may require a more thorough investigation during that time. Historically, most transactions have concluded within the more informal 30-day review period; however, 2015 data indicate that nearly half of the year’s 143 transactions went into the more formal 45-day investigation period.

Trump Nominates Two Individuals for U.S. International Trade Commission

10/2/17 – President Trump has made further nominations to the U.S. International Trade Commission (ITC), an independent, quasi-judicial federal agency with broad investigative responsibilities on matters of trade. The agency investigates the effects of dumped and subsidized imports on domestic industries and conducts global safeguard investigations. The ITC also adjudicates cases involving imports that allegedly infringe intellectual property rights.

The ITC is led by six commissioners who are nominated by the president and confirmed by the U.S. Senate. No more than three commissioners may be of any one political party. Currently, there are only four commissioners, with several serving beyond their original terms of nine years. To date, the president has nominated the following persons:

Dennis M. Devaney has been nominated for the remainder of a nine-year term expiring June 16, 2023. Devaney is currently practice team leader and counsel with the Varnum law firm. He earned his B.A. and M.A. from the University of Maryland in 1968 and 1970, respectively. He received his law degree from Georgetown University Law Center in 1975. From 1970 to 1972, he served on active duty with the U.S. Naval Security Group.

Randolph J. Stayin has been nominated for the remainder of a nine-year term expiring June 16, 2026. Stayin was born and raised in Cincinnati, Ohio. He graduated from Dartmouth College and received a law degree from the University of Cincinnati Law School. He served as chief of staff to Senator Robert Taft, Jr. and was the senator’s trade advisor in negotiating the passage of the Trade Act of 1974. Stayin’s 40+ years in the practice of law have focused on international trade policy and trade regulation. He has litigated antidumping and countervailing duty investigations, sunset reviews, trademark infringement, 301 unfair trade practices, 201 safeguards, 232 national security, Generalized System of Preferences, export regulation, trade sanctions, anti-boycott issues and U.S. Customs enforcement. He has practiced before the ITC, the U.S. Department of Commerce, the Office of the U.S. Trade Representative, the Court of International Trade, the Court of Appeals for the Federal Circuit, NAFTA dispute panels, and NAFTA and Uruguay Round/WTO negotiations.

These two nominations are in addition to the nomination of Jason Kearns in June 2017 for the remainder of a nine-year term expiring December 16, 2024. Kearns currently serves as chief international trade counsel (Democratic staff) to the Committee on Ways and Means in the House of Representatives. In that position, he advises members on legislation concerning trade and on oversight issues involving the Office of the U.S. Trade Representative and other agencies involved in international trade policy and regulation. Before that, he served for three years in the Office of the General Counsel of the U.S. Trade Representative. From 2000 through 2003, Kearns worked in the international trade group of the law firm, WilmerHale. Kearns holds a M.P.P. from the Kennedy School of Government at Harvard University, a J.D. from the University of Pennsylvania and a B.A. from the University of Denver.

Iran Sanctions: U.S. Agencies Continue to Implement Processes for Identifying Potentially Sanctionable Entities

9/29/17 – Under the Joint Comprehensive Plan of Action (JCPOA), the United States and several other countries agreed to ease certain sanctions on Iran in exchange for Iran’s commitment to limit its nuclear program. This relaxation, however, was limited in scope to any nuclear-related sanctions, and the United States and other parties to the JCPOA continue to have the authority to sanction Iran for any activity related to efforts to further develop its ballistic missile program. The United States may continue to sanction Iran for such activity under Executive Orders 12938 and 13382, and the Departments of State and Treasury continue their efforts to identify sanctionable entities.

The Government Accountability Office released a report September on 28, 2017 examining (1) the extent to which State and Treasury have continued since issuance of the JCPOA to identify entities that are potentially sanctionable and (2) entities that have actually been sanctioned since January 2016. According to the report, State and Treasury have placed 33 entities and 25 individuals on the Specially Designated Nationals List since January 2016.

OFAC Issues Further Sanctions on North Korea

9/27/17 – Just days after the issuance of an executive order imposing a range of sanctions on North Korea, the Treasury Department’s Office of Foreign Assets Control (OFAC) has taken further action by placing eight North Korean banks and 26 individuals linked to North Korean financial networks on the Specially Designated Nationals List (SDN List). As a result of this action, any property or interests in property of the designated persons in the possession or control of U.S. persons or within the United States must be blocked. “We are targeting North Korean banks and financial facilitators acting as representatives for North Korean banks across the globe,” said Treasury Secretary Steven T. Mnuchin.

OFAC has designated the following eight North Korean banks: Agricultural Development Bank, Cheil Credit Bank, Hana Banking Corporation Ltd, International Industrial Development Bank, Jinmyong Joint Bank, Jinsong Joint Bank, Koryo Commercial Bank Ltd. and Ryugyong Commercial Bank. Also, two other banks already on the SDN List have been further designated as being part of the government of North Korea ­– the Foreign Trade Bank of the Democratic People’s Republic of Korea and the Central Bank of Democratic People’s Republic of Korea. Foreign Trade Bank is North Korea’s primary foreign exchange bank.

The individuals sanctioned by OFAC are North Korean nationals operating in China, Russia, Libya and the United Arab Emirates who act as representatives of North Korean banks.

U.S. International Trade Commission Finds That Imports Injure U.S. Solar Equipment Manufacturers

9/26/17 – The U.S. International Trade Commission (ITC) has determined that increased imports of crystalline silicon photovoltaic cells (whether or not partially or fully assembled into other products) are being imported into the United States in such increased quantities as to be a substantial cause of serious injury to the U.S. solar equipment industry. After its 4-0 vote, the ITC must now undertake the remedy phase of the investigation. The ITC will hold a public hearing on October 3, 2017 and submit a report containing its injury determination, remedy recommendations, certain additional findings and the basis for them to President Trump by November 13, 2017. The president is solely responsible for any final decision on whether to impose a remedy and, if so, the form, amount and duration of the remedy. In determining what action to take, if any, the president will also take into account the U.S. industry’s efforts to make a positive adjustment to import competition, factors related to the national economic interest of the United States and certain other statutory factors.

This investigation was initiated under Section 201 of the Trade Act of 1974. Section 201 investigations are often referred to as “global safeguard investigations” and are not country-specific, targeting instead imports of the product under investigation from all sources. When a petition or request is filed, the ITC must determine whether an article is being imported in such increased quantities as to be a substantial cause of serious injury or threat of serious injury to a U.S. industry.

The complaint was filed in April 2017 by two U.S. solar equipment manufacturers – Suniva, Inc. and SolarWorld Americas, Inc. – who argued that nearly 30 U.S. solar panel producers ceased manufacturing operations from 2012 to 2016, the period of investigation in the case, largely due to a five-fold increase of imports into the United States. This surge was led by China, whose shipments to the United States rose by more than 700 percent, according to ITC data gathered during the investigation. The Solar Energy Industries Association (SEIA), the national trade association of the U.S. solar energy industry that represents installers, project developers, manufacturers, contractors, financiers and nonprofits, opposed the investigation, arguing that any tariff imposed as a remedy could double U.S. solar panel prices and significantly reduce demand for solar energy. The SEIA argued that up to 88,000 solar jobs, a third of the industry’s employment, could ultimately be lost since only a fraction of solar jobs are in manufacturing.

OFAC Implements Additional Sanctions on North Korea

9/22/17 – President Trump has issued a new executive order implementing further sanctions in response to North Korea’s “provocative, destabilizing, and repressive actions,” particularly its recent intercontinental ballistic missile launches and its nuclear test of September 2, 2017. The new sanctions, to be implemented by the Department of the Treasury’s Office of Foreign Assets Control (OFAC), target individuals and entities that engage in trade with North Korea as well as the financial institutions that facilitate such trade. The executive order also authorizes the secretary of the treasury, in consultation with the secretary of state, to impose sanctions on certain persons:

  • Industries: those who operate in the construction, energy, financial services, fishing, information technology, manufacturing, medical, mining, textiles or transportation industries in North Korea;
  • Ports: those who own, control or operate any port in North Korea, including any seaport, airport, or land port of entry; and
  • Imports/Exports: those who have engaged in at least one significant importation from or exportation to North Korea of any goods, services or technology.

These sanctions also target and allow OFAC to block property and interests in property of persons determined to be a North Korean person, including a North Korean person that has engaged in commercial activity that generates revenue for the government of North Korea or the Workers’ Party of Korea.

Further, the new sanctions state that (1) no aircraft in which a foreign person has an interest that has landed at a place in North Korea may land at a place in the United States within 180 days of departure from North Korea, and (2) no vessel in which a foreign person has an interest that has called at a port in North Korea within the previous 180 days, and no vessel in which a foreign person has an interest that has engaged in a ship-to-ship transfer with such a vessel within the previous 180 days, may call at a port in the United States. See new General License 10 for limited exceptions to these shipping prohibitions.

The executive order also provides the authority for OFAC to impose sanctions on any foreign financial institution that knowingly conducts or facilitates any significant transaction on behalf of certain designated North Korean individuals and entities or any significant transaction in connection with trade with North Korea. Under this new authority, the sanctions measures can be either restrictions on correspondent or payable-through accounts or blocking sanctions. The secretary of the treasury will also have the authority to block any funds originating from, destined for or passing through accounts linked to North Korea that come into the United States or possession of a U.S. person. See updated General License 3-A for limited exceptions to these prohibitions.

The White House indicated that these sanctions are specifically targeted towards the shipping and financial industries, noting that North Korea is dependent on these networks to facilitate international trade. Separately, Treasury Secretary Mnuchin stated that “[f]oreign financial institutions are now on notice that, going forward, they can choose to do business with the United States or with North Korea, but not both.” These additional sanctions towards North Korea are effective as of September 21, 2017.

President Trump Addresses International Trade in UN Speech

9/20/17 – In his remarks at the opening session of the General Assembly of the United Nations, President Donald Trump spoke on a wide range of topics, including international trade. On that subject, Trump said, “In America, we seek stronger ties of business and trade with all nations of good will, but this trade must be fair and it must be reciprocal. For too long, the American people were told that mammoth multinational trade deals, unaccountable international tribunals, and powerful global bureaucracies were the best way to promote their success. But as those promises flowed, millions of jobs vanished and thousands of factories disappeared. Others gamed the system and broke the rules. And our great middle class, once the bedrock of American prosperity, was forgotten and left behind, but they are forgotten no more and they will never be forgotten again. While America will pursue cooperation and commerce with other nations, we are renewing our commitment to the first duty of every government: the duty of our citizens. This bond is the source of America's strength and that of every responsible nation represented here today.”

Department of Homeland Security Bans Use of Russian Security Software

9/14/17 – Acting Secretary of the Department of Homeland Security (DHS) Elaine Duke has issued a Binding Operational Directive (BOD 17-01) directing federal executive branch departments and agencies to take actions related to the use or presence of information security products, solutions and services supplied directly or indirectly by AO Kaspersky Lab or related entities. The directive requires all federal departments and agencies to identify any use or presence of Kaspersky products on their information systems in the next 30 days; to develop detailed plans to remove and discontinue present and future use of the products in the next 60 days; and at 90 days from September 13, 2017, unless directed otherwise by DHS based on new information, to begin to implement the agency plans to discontinue use and remove the products from information systems.

This directive is the result of an interagency review and analysis pertaining to potential information security risks presented by using this Russian entity’s products due to connections between Kaspersky Lab officials and Russian intelligence agencies. Under Russian law, Russian intelligence agencies are allowed to request or compel assistance from Kaspersky and to intercept communications transiting Russian networks. DHS determined that “The risk that the Russian government, whether acting on its own or in collaboration with Kaspersky, could capitalize on access provided by Kaspersky products to compromise federal information and information systems directly implicates U.S. national security.” DHS has indicated that Kaspersky Lab will be provided the opportunity to submit a written response addressing the department’s concerns or to mitigate those concerns.

This directive comes just months after the General Services Administration removed the company from its list of approved vendors and after high-profile news reports concerning potential Russian interference in the 2016 U.S. presidential election. In addition to any national security implications, trade analysts also see this decision as another form of sanctioning Russia. The U.S. government’s banning of Kaspersky products from its departments and agencies has the potential to significantly undermine Kaspersky Lab’s market position in the United States and probably elsewhere.

United Nations Adds to Sanctions Against North Korea

9/13/17The United Nations (UN) Security Council unanimously passed resolution 2375 (2017) on Monday, further sanctioning the Democratic People’s Republic of Korea for its most recent nuclear test, and reaffirmed that North Korea must immediately suspend all activities related to its ballistic missile and nuclear programs in a complete, verifiable and irreversible manner. This latest round of UN sanctions bans the supply, sale or transfer of all condensates and natural gas liquids to North Korea and bans North Korean exports of its textiles, such as fabrics and apparel products. The UN Security Council further limited the direct or indirect supply, sale or transfer to North Korea of all refined petroleum products beyond 500,000 barrels during an initial period of three months – beginning on October 1, 2017 and ending on December 31, 2017 – and exceeding two million barrels per year during a period of 12 months beginning on January 1, 2018 and annually thereafter. The resolution allows for all UN member states to inspect, with the consent of the flag state, vessels on the high seas if member states have information that provides reasonable grounds to believe that the cargo of such vessels contains items of which the supply, sale, transfer or export is prohibited by past UN Security Council resolutions pertaining to North Korea. In addition to further freezing assets and implementing travel bans on several persons, the UN Security Council also agreed to prohibit UN member states from providing work authorizations for North Korean nationals to work in their jurisdictions in an effort to prevent foreign earnings from being expropriated into North Korea in support of Kim Jong-un’s nuclear weapons program.

The UN Security Council urged the resumption of multilateral negotiations to diplomatically and peacefully resolve matters. In her comments, Ambassador Nikki Haley acknowledged that this new round of sanctions would “cut deep” but that the United States is not “looking for war.” She said, “The North Korean regime has not yet passed the point of no return. … If it proves that it can live in peace, the world will live in peace with it. … The choice is theirs.”

OFAC Sanctions Chinese and Russian Entities and Individuals Supporting North Korea

8/25/17 – The Department of the Treasury’s Office of Foreign Assets Control (OFAC) has designated 16 Chinese and Russian entities and individuals for activities related to the support of North Korea’s Kim Jong-un. These sanctions intentionally target third-country companies and individuals that (1) assist already-designated persons who support North Korea’s nuclear and ballistic missile programs, (2) deal in the North Korean energy trade, (3) facilitate its exportation of workers and (4) enable sanctioned North Korean entities to access the U.S. and international financial systems. These sanctions complement United Nations Security Council Resolution 2371 enacted on August 5, 2017. Treasury Secretary Steven Mnuchin stated, “It is unacceptable for individuals and companies in China, Russia, and elsewhere to enable North Korea to generate income used to develop weapons of mass destruction and destabilize the region. We are taking actions consistent with UN sanctions to show that there are consequences for defying sanctions and providing support to North Korea, and to deter this activity in the future.” For details on the 16 entities and persons that have been placed on OFAC’s Specially Designated Nationals List, see OFAC’s Federal Register notice.

USTR Initiates Section 301 Investigation into China’s Acts, Policies and Practices Related to Technology Transfer, Intellectual Property and Innovation

8/25/17 – Less than a week after President Trump issued a presidential memorandum directing the U.S. Trade Representative (USTR) to determine whether to investigate China regarding certain intellectual property and technology transfer issues, USTR Robert Lighthizer formally initiated a Section 301 investigation into the matter on August 18, 2017. In announcing the investigation, he stated that, “[a]fter consulting with stakeholders and other government agencies, I have determined that these critical issues merit a thorough investigation.” Details of the four areas of investigation and information regarding public comments were provided in a Federal Register notice.

Specifically, the public is invited to submit written comments to USTR no later than September 28, 2017 on: (1) the acts, policies and practices of the Chinese government described in the Federal Register notice; (2) information on other acts, policies and practices of China relating to technology transfer, intellectual property and innovation as described in the president’s memorandum, which might be included in the investigation and/or addressed through other trade avenues; (3) the nature and level of burden or restriction on U.S. commerce caused by the applicable acts, policies and practices of the government of China and/or any economic assessment of that burden or restriction; and (4) whether actionable conduct exists under Section 301 of the Trade Act of 1974 and what action, if any, should be taken. A public hearing will be held on October 10, 2017; persons wishing to testify at the hearing must provide written notification of their desire to speak and provide a summary of their proposed testimony by September 28, 2017.

NAFTA Renegotiation Begins!

8/16/17 – U.S. Trade Representative Robert Lighthizer, Canadian Foreign Affairs Minister Chrystia Freeland and Mexican Secretary of the Economy Ildefonso Guajardo Villarreal have started the first round of NAFTA renegotiation in Washington, D.C. with opening statements and an ambitious agenda that is scheduled to take the negotiations through August 20.

In his opening statement, Lighthizer indicated that all the parties acknowledge that the trade agreement needs to be updated and modernized to address economies that are different than when NAFTA was implemented in the 1990s. After addressing modernization, however, he stated, “the tough work begins.” While the agreement has benefited many Americans, Lighthizer added that “for countless Americans, the agreement has failed … We cannot ignore the huge trade deficits, the lost manufacturing jobs, the businesses that have closed or moved because of incentives – intended or not – in the current agreement.”  He also made clear that President Trump is “not interested in a mere tweaking of a few provisions and a couple of updated chapters. We feel that NAFTA has fundamentally failed many, many Americans and needs major improvement.”

President Trump Directs USTR to Examine China's Intellectual Property & Forced Technology Transfer Policies

8/15/17 – Asserting in a presidential memorandum that "Violations of intellectual property rights and other unfair technology transfers potentially threaten United States firms by undermining their ability to compete fairly in the global market," President Trump has directed U.S. Trade Representative Robert Lighthizer to investigate any of China's laws, policies, practices or actions that may be unreasonable or discriminatory and may be harming American intellectual property rights.

In response, Lighthizer stated, "The United States has for many years been facing a very serious problem. China[’s] industrial policies and other practices reportedly have forced the transfer of vital U.S. technology to Chinese companies. We will engage in a thorough investigation and, if needed, take action to preserve the future of U.S. industry. Thousands of jobs are at stake for our workers and for future generations. This will be one of USTR's highest priorities, and we will report back to the President as soon as possible."

This trade action is reported to be one of several trade actions that the Trump administration may take against China in the coming months to address alleged intellectual property violations and the theft of American trade secrets. China's actions in this area were highlighted most recently by USTR in its annual Special 301 Report to Congress released in April 2017. This report stated that the "USTR continues to place China on the Priority Watch List because longstanding and new IP concerns strongly merit attention. China is home to widespread infringing activity, including trade secret theft, rampant online piracy and counterfeiting, and high levels of physical pirated and counterfeit exports to markets around the globe."

In brief remarks on the topic, Trump indicated that once the investigation is complete, the USTR may use "all available options" to address and enforce any actions against any threat of further Chinese IP violations. For a more detailed analysis see our client alert, Trump Administration Moves Against Chinese IP Violations.

President Trump Signs Into Law H.R. 3364 Regarding Sanctions Against Iran, Russia and North Korea

8/2/17 – Today, President Trump signed into law the Countering America’s Adversaries Through Sanctions Act, which strengthens and expands statutory sanctions on Iran, Russia and North Korea. In a statement released by the White House, the president said, “I favor tough measures to punish and deter bad behavior by the rogue regimes in Tehran and Pyongyang. I also support making clear that America will not tolerate interference in our democratic process, and that we will side with our allies and friends against Russian subversion and destabilization.” The statement goes on to say that “the bill remains seriously flawed – particularly because it encroaches on the executive branch’s authority to negotiate.”

In a separate statement issued the same day, the president again asserted that the legislation “is significantly flawed,” stating that, “In its haste to pass this legislation, the Congress included a number of clearly unconstitutional provisions.”

See our July 26th update for additional background information.

Trump Administration Update: Key Players in International Trade

7/28/17 – In an ongoing effort to provide readers with a current reference list of key trade policy officials and advisors in the Trump administration, the Trump and Trade team at Thompson Hine has prepared a presentation for our readers’ use. View or download the PDF.

Congressional and Administration Leaders Drop Border Adjustment Tax

7/28/17 – House Speaker Paul Ryan (R-WI), Senate Majority Leader Mitch McConnell (R-KY), Treasury Secretary Steven Mnuchin, National Economic Council Director Gary Cohn, Senate Finance Committee Chairman Orrin Hatch (R-UT) and House Ways and Means Committee Chairman Kevin Brady (R-TX) issued a joint statement yesterday on tax reform in which they announced that the controversial proposal for a border adjustment tax (BAT) system is being dropped from consideration so that the effort to address comprehensive tax reform can move forward.

According to the statement, the group is “… now confident that, without transitioning to a new domestic consumption-based tax system, there is a viable approach for ensuring a level playing field between American and foreign companies and workers, while protecting American jobs and the U.S. tax base. While we have debated the pro-growth benefits of border adjustability, we appreciate that there are many unknowns associated with it and have decided to set this policy aside in order to advance tax reform.”

House Passes Bill for Additional Sanctions Against Iran, Russia and North Korea

7/26/17 – On July 25, the House of Representatives passed legislation that would impose additional sanctions on Iran, North Korea and Russia. The bill would increase sanctions on those involved in Iran’s human rights abuses, its support for terrorism, as well as its ballistic missile program. For Russia, the bill would ensure that existing economic sanctions remain as long as Russian aggression continues by empowering Congress to review and disapprove any sanctions relief that the president may seek. The bill also includes the text of H.R. 1644, The Korean Interdiction and Modernization of Sanctions Act, which was passed by the House in May by a vote of 419-1, and seeks to expand sanctions targeting North Korea’s nuclear weapons program.

As noted in a previous post, the Senate has also passed legislation (S. 722) to implement additional sanctions on Iran and Russia; the Senate bill does not contain provisions on North Korea sanctions. Because different bills were passed in each chamber and the House bill included additional sanctions against North Korea, it is expected that the Senate will take up consideration of H.R. 3364 for any final vote. Interestingly, given President Trump’s perceived ambivalence on the Ukraine-related Russia sanctions, the votes for passage by each chamber – 419 to 3 in the House and 98-2 in the Senate – likely make any passage of a final bill veto-proof.

NAFTA Renegotiations to Begin on August 16

7/20/17 – The Office of the U.S. Trade Representative (USTR) has announced that the first round of renegotiation of the North America Free Trade Agreement (NAFTA) will occur August 16-20, 2017 in Washington, D.C. Reportedly, the plan is to hold seven rounds of talks at three-week intervals, at alternating sites among the three countries, with a goal of completing the negotiations by early 2018.

John Melle, the assistant U.S. Trade Representative for the Western Hemisphere, will serve as the U.S. chief negotiator for the NAFTA negotiations. Since joining USTR in 1988, Melle has held a number of positions covering Mexico, Canada, the Caribbean and Central America. As assistant USTR for the Western Hemisphere, he is responsible for developing, coordinating and implementing the United States’ trade policy for the region.

OFAC and State Department Sanction 18 Additional Iranian Entities/Persons

7/18/17 – Almost immediately after the Trump administration’s announcement that Iran was in compliance with the terms of the Joint Comprehensive Plan of Action (JCPOA), the Department of the Treasury’s Office of Foreign Assets Control (OFAC) and the State Department designated an additional 18 Iranian entities and individuals for engaging in activities supporting Iran’s continued testing of ballistic missiles, as well as for engaging in activities supporting Iran’s military or Iran’s Islamic Revolutionary Guard Corps (IRGC).

OFAC has designated three networks supporting Iran’s military and/or the IRGC through the development of unmanned aerial vehicles and military equipment for the IRGC, the production and maintenance of fast attack boats for the IRGC-Navy, or the procurement of electronic components for entities that support Iran’s military. Additional persons and entities were added to OFAC’s Specially Designated Nationals List for Iran-based transnational criminal organization activities, including the theft of U.S. and western software programs which, at times, were sold to the Iranian government. A complete listing of OFAC designations is available on Treasury’s website.

The State Department designated two entities for engaging in activities that have materially contributed to, or pose a risk of materially contributing to, the proliferation of weapons of mass destruction or their means of delivery: the IRGC’s Aerospace Force Self Sufficiency Jihad Organization, which is involved in Iranian ballistic missile research and flight test launches, and the IRGC’s Research and Self Sufficiency Jehad Organization, which is responsible for the research and development of ballistic missiles.

The State Department stated that Iran continues to test and develop ballistic missiles in direct defiance of United Nations Security Council Resolution 2231, and referred to the JCPOA’s statement regarding the participants’ anticipation that “full implementation of this JCPOA will positively contribute to regional and international peace and security.” In announcing these new sanctions, however, State Department officials stated that “Iran’s other malign activities are serving to undercut whatever ‘positive contributions’ to regional and international peace and security were intended to emerge from the JCPOA.” In announcing these new sanctions, the Trump administration stated that it is continuing to conduct a full review of U.S. policy toward Iran and that the United States during this review will continue to aggressively counter Iran’s activities in the region.

Trump Administration Again Certifies that Iran Is in Compliance With JCPOA Terms

7/18/17 – The Trump administration has again certified that Iran is in compliance with the terms of the Joint Comprehensive Plan of Action (JCPOA), an international agreement to curtail Iran’s development of nuclear weapons. This certification to Congress must occur every 90 days and followed confirmation by the international monitors and other signatories to the JCPOA that Iran is meeting the terms of the agreement. Reports are, however, that President Trump begrudgingly agreed to the certification after multiple meetings with his national security staff and is demanding that his staff develop a new strategy to confront Iran because he does not want to continue to indefinitely recertify Iran’s compliance.

In making the announcement, State Department officials noted that President Trump intends to impose new sanctions on Iran for ongoing “malign activities” in non-nuclear areas such as ballistic missile development and support for terrorism. “We do expect to be implementing new sanctions” related to missiles and Iran's “fast boat program,” one State Department official indicated.

USTR Releases Summary of Objectives for NAFTA Renegotiation

7/18/17 – U.S. Trade Representative Robert Lighthizer has released a detailed and comprehensive summary of the negotiating objectives for the renegotiation of the North American Free Trade Agreement (NAFTA). In a brief statement upon the release, Lighthizer stated that the Trump administration will seek an agreement “that reduces the U.S. trade deficit and is fair for all Americans by improving market access in Canada and Mexico for U.S. manufacturing, agriculture, and services.” The summary notes that the “new NAFTA must continue to break down barriers to American exports. This includes the elimination of unfair subsidies, market-distorting practices by state owned enterprises, and burdensome restrictions of intellectual property. The new NAFTA will be modernized to reflect 21st century standards and will reflect a fairer deal, addressing America’s persistent trade imbalances in North America. It will ensure that the United States obtains more open, equitable, secure, and reciprocal market access, and that our trade agreement with our two largest export markets is effectively implemented and enforced.”

The negotiating objectives include a new digital economy chapter and stronger labor and environmental obligations that are currently in NAFTA side agreements. These objectives reflect the negotiating standards established by Congress in the Bipartisan Congressional Trade Priorities and Accountability Act of 2015, which requires that the USTR release objectives at least 30 days before formal negotiations begin. Negotiations will now start no earlier than August 16, 2017.

USTR and Commerce Request Comments Regarding Administration’s Reviews of Trade Agreement Violations and Abuses

6/29/17As we previously reported, Executive Order 13796 of April 29, 2017 requires the United States Trade Representative (USTR) and the secretary of Commerce, in consultation with the secretary of State, secretary of the Treasury, attorney general and the director of the Office of Trade and Manufacturing Policy, to conduct comprehensive performance reviews of all bilateral, plurilateral and multilateral trade agreements and investment agreements to which the United States is a party and all trade relations with countries governed by the rules of the World Trade Organization (WTO) with which the United States does not have free trade agreements but with which the United States runs significant trade deficits in goods.

USTR and Commerce are seeking comments that they will consider as part of these performance reviews and in preparation of the subsequent report to the president. Specifically, commenters should submit information related to one or more of the following assessments:

  • The performance of individual free trade agreements (FTAs) and bilateral investment treaties (BITs) to which the United States is a party.
  • The performance of the WTO agreements with regard to our trade relations with those trading partners with which the United States does not have an FTA but with which the United States runs significant trade deficits in goods. The trading partners subject to these performance reviews are China, the European Union, India, Indonesia, Japan, Malaysia, Switzerland, Taiwan, Thailand and Vietnam.
  • The performance of U.S. trade preference programs.

Written comments are due by 11:59 p.m. EDT on July 31, 2017. USTR and Commerce prefer electronic submissions made through the Federal eRulemaking Portal. The docket number is USTR-2017-0010. For additional information, please see the Federal Register notice on this matter.

OFAC and BIS Designate Additional Individuals and Entities Under the Ukraine/Russian-Related Sanctions

6/23/17 – On June 20, 2017, pursuant to four executive orders (EOs), the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) and the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) subjected to U.S. economic sanctions more individuals and entities involved in the ongoing Crimean conflict between Russia and Ukraine. These actions were deemed necessary to counter attempts to circumvent current U.S. sanctions. Treasury Secretary Steven Mnuchin stated, “This administration is committed to a diplomatic process that guarantees Ukrainian sovereignty, and there should be no sanctions relief until Russia meets its obligations under the Minsk agreements.”

OFAC designated 38 individuals and entities under the Ukraine-related EOs, including:

  • Alexander Babakov, the Russian Federation’s Special Presidential Representative for Cooperation with Organizations Representing Russians Living Abroad;
  • Oboronlogistika, OOO, the Russian Defense Ministry’s sole executor for the procurement of goods, works, and services for maritime transport of military troops and freight on the territory of the so-called Republic of Crimea; and
  • The following seven banks for operating or assisting in financial transactions in Crimea: Tsmrbank, OOO; Taatta, AO; Joint Stock Company Black Sea Bank of Development and Reconstruction; Joint Stock Commercial Bank Rublev; Joint Stock Company Commercial Bank North Credit; IS Bank, AO; and VVB, PAO.

OFAC also identified a number of subsidiaries owned 50 percent or more by Transneft, which was made subject to the Sectoral Sanctions Identification (SSI) List on September 12, 2014 pursuant to EO 13662. Transneft and its 50 percent or more subsidiaries are subject to Directive 2, which prohibits U.S. persons from dealing in new debt of greater than 90 days’ maturity of sanctioned entities. The complete listing of individuals and entities is available on Treasury’s website.

BIS has added 10 entities to the Entity List on the basis of 15 C.F.R. § 744.11 (license requirements that apply to entities acting contrary to the national security or foreign policy interests of the United States) of the EAR. The 10 entities added to the Entity List consist of two entities in the Crimea region of Ukraine and eight entities in Russia. For a complete list of these entities, please see the Federal Register notice.

USTR Lighthizer Testifies Before Senate Finance Committee on the President’s Trade Policy Agenda

6/22/17 – U.S. Trade Representative Robert Lighthizer testified yesterday before the Senate Finance Committee, stating that “the President has instructed me to negotiate trade deals that put American workers, farmers and ranchers, families, and businesses first, and to complement those negotiations with a vigorous enforcement agenda.”

In his testimony, Lighthizer confirmed that the United States intends to begin NAFTA negotiations on August 17, 2017. In the meantime, he stated that USTR staff is talking to congressional offices and stakeholders to develop policy outcomes for the negotiations. USTR is reviewing the more than 12,400 comments received to date and will hold several days of public hearings beginning on June 27. He indicated that USTR staff will continue to work closely with Congress to develop and refine U.S. negotiating objectives, consistent with the Trade Promotion Authority, and publish a detailed summary of those objectives at least 30 days before the negotiations begin.

On trade enforcement, Lighthizer stated that he has instructed USTR’s Office of General Counsel, in accordance with the president’s directives in Executive Order 13796, to examine U.S. trade relationships and identify issues that can be addressed through enforcement of U.S. trade laws. The Trump administration believes that “too little has been done in this area in recent years, and we are actively assessing ways to get tough on countries who do not respect our economic system. We have also been active in identifying countries that have serious problems with protection of intellectual property, and we are reviewing and amending our action plans to ensure that we can identify violations and take appropriate enforcement actions.”

USTR has requested a 6 percent increase for its FY 2018 budget. Lighthizer indicated this additional funding would be used to implement the Interagency Center on Trade Implementation, Monitoring, and Enforcement, and would allow USTR to hire eight additional staff members to support the mission of that office.

View the full written testimony of USTR Lighthizer.

President Trump Announces New Cuba Policy

6/20/17 – After several months of internal review, the Trump administration on June 16 announced revisions to U.S. policy toward Cuba. The internal review, led by the president’s National Security Council, engaged in an interagency review that included input from the Treasury Department, State Department, Commerce Department, Department of Agriculture, Department of Homeland Security and the Department of Transportation. Additionally, President Trump met with members of Congress. In making the announcement, a senior administration official stated that the president’s “basic policy driver was his concern that the previous policy was enriching the Cuban military and the intelligence services that contribute so much to oppression on the island. And that's the opposite of what he wanted to achieve, which is to have the benefits of any economic commerce with the United States go to the Cuban people.”

One White House senior official acknowledged that all the regulatory and policy changes initiated by President Obama from December 2014 through 2016 would be difficult to undo; however, the revised policy under the Trump administration will once again restrict certain travel and seek to limit providing any advantages to the Cuban military (particularly the Cuban military monopoly, Grupo de Administración Empresarial) while seeking to continue to allow “American individuals and entities to develop economic ties to the private, small business sector in Cuba.” The Office of Foreign Assets Control (OFAC), the Bureau of Industry and Security (BIS) and the State Department are expected to update their lists of denied parties within the next 30 days. OFAC and BIS will also issue new regulations within that time to implement these policy changes. The president’s new policy will not become effective until those regulations are issued. The U.S. embassy in Havana will remain open, and Cuba will be allowed to maintain its embassy in Washington.

The policy clarifies that any further improvements in the United States-Cuba relationship will “depend entirely on the Cuban government’s willingness to improve the lives of the Cuban people, including through promoting the rule of law, respecting human rights, and taking concrete steps to foster political and economic freedoms.”

As further details on the regulatory changes that will be implemented to address these policies become available, Thompson Hine’s International Trade practice group will follow up with a detailed client bulletin. View the “National Security Presidential Memorandum on Strengthening the Policy of the United States Toward Cuba.”

Senate Passes Bill for Additional Sanctions Against Iran and Russia

6/19/17 – After several months of negotiations in the Committee on Foreign Relations, the full Senate on June 15, 2017 considered and passed a bipartisan bill by a vote of 98-2 seeking to hold both Iran and Russia accountable for their recent destabilizing activities in world affairs. S. 722 at Title I contains the Iran component of the legislation and was authored by Senators Corker (R-Tenn.), Menendez (D-N.J.), Rubio (R-Fla.), Cardin (D-Md.), Cotton (R-Ark.) and Casey (D-Pa.). It expands sanctions on Iran for ballistic missile development, support for terrorism, transfers of conventional weapons and human rights violations. The Countering Iran’s Destabilizing Activities Act of 2017 contains the following key provisions:

  • New mandatory ballistic missile sanctions: imposes mandatory sanctions on persons involved with Iran’s ballistic missile program and those that transact with them.
  • New terrorism sanctions: applies terrorism sanctions to the Islamic Revolutionary Guard Corps and codifies individuals who are currently sanctioned due to Iranian support for terrorism.
  • Enforcement of arms embargo: requires the president to block the property of any person or entity involved in specific activities related to the supply, sale, or transfer of prohibited arms and related material to or from Iran.

The text of Title II of S. 722 maintains and substantially expands sanctions against the government of Russia in response to the violation of the territorial integrity of the Ukraine and Crimea, its cyber-attacks and interference in elections, and its continuing aggression in Syria. This portion of the bill will:

  • Provide for a mandated congressional review if sanctions are relaxed, suspended or terminated.
  • Codify and strengthen existing sanctions contained in executive orders on Russia, including the sanctions’ impact on certain Russian energy projects and on debt financing in key economic sectors.
  • Impose new sanctions on: corrupt Russian actors; those seeking to evade sanctions; those involved in serious human rights abuses; those supplying weapons to the Assad regime; those conducting malicious cyber activity on behalf of the Russian government; those involved in corrupt privatization of state-owned assets; and those doing business with the Russian intelligence and defense sectors.
  • Allow broad new sanctions on key sectors of Russia’s economy, including mining, metals, shipping and railways.
  • Require a study on the flow of illicit finance involving Russia and a formal assessment of U.S. economic exposure to Russian state-owned entities.

S. 722 will shortly cross over to the House of Representatives, where it will be assigned to the appropriate committee(s) for consideration. As such, this legislation, while significant, is not yet a law.

USTR Lighthizer Announces Senior Staff

6/16/17 – U.S. Trade Representative Robert Lighthizer has announced the appointment of key senior staff in his office to help craft U.S. trade policy and oversee enforcement actions:

Jamieson Greer, Chief of Staff: Prior to joining USTR, Greer was of counsel in the International Trade and National Security practice group at Kirkland & Ellis, LLP. He earned his law degree from the University of Virginia School of Law, a joint master’s degree in international business law from l’Institut d’Etudes Politiques de Paris (Sciences Po) and l’Université Paris 1 Panthéon-Sorbonne, and a Bachelor of Arts in international studies from Brigham Young University.

Payne Griffin, Deputy Chief of Staff: Before coming to USTR, Griffin was an advisor to then-Senator Jeff Sessions on trade policy and other financial issues. During this time, he also served as the deputy lead on trade policy implementation for President Trump’s transition team, where he helped develop policy goals and priorities. Griffin received his bachelor’s degree from American University and studied the general course at the London School of Economics.

Pamela Marcus, Deputy Chief of Staff, Operations: Before joining USTR, Marcus was manager of the International Trade group at Skadden, Arps, Slate, Meagher & Flom LLP. Marcus also previously worked at McDonnell Douglas in various management positions and at Bell & Co. as a management consultant. She earned her Master of Business Administration from Pepperdine University and her bachelor’s degree from University of Maryland.

Stephen Vaughn, General Counsel: Prior to coming to USTR, Vaughn was a partner in the International Trade group at King & Spalding LLP. He has extensive experience litigating cases involving antidumping, countervailing duties and safeguards before numerous agencies and tribunals, including the U.S. International Trade Commission, the U.S. Court of International Trade and the World Trade Organization. He earned his law degree from Yale University and undergraduate degree from Vanderbilt University. 

Timothy Reif, Senior Advisor: Prior to his appointment as USTR general counsel in 2009, Reif served as chief international trade counsel for the House Committee on Ways and Means, special trade counsel in private law practice and associate general counsel at USTR. Reif received his J.D. from Columbia Law School and his Master of Public Affairs and bachelor’s degree from Princeton University.

Christopher Jackson, Assistant USTR for Congressional Affairs: Prior to coming to USTR, Jackson served as counsel to then-Senator Jeff Sessions, advising the senator on trade, budget and banking policy. Before that, he served as an assistant in the Office of Management and Budget under the leadership of Director Jim Nussle, where he worked on both the budget and management sides of OMB and served as a legislative assistant in the Office of Legislative Affairs. Jackson earned his law degree from The William and Mary School of Law and Bachelor of Arts from The George Washington University.

Cameron Bishop, Deputy Assistant USTR for Congressional Affairs: Prior to joining USTR, Bishop worked in the House of Representatives, most recently serving as legislative director for Rep. Austin Scott (GA-08) and before that as legislative director for Rep. Rick Allen (GA-12). He is a graduate of the University of Georgia.

Emily Davis, Deputy Assistant USTR for Public & Media Affairs: Davis previously worked as the communications director of the American Action Network/Congressional Leadership Fund. Her prior work also includes senior communications roles with the George Allen for U.S. Senate campaign, the National Republican Congressional Committee and Rep. Pete Sessions. Davis received her Bachelor of Arts in English from Dallas Baptist University.

Congressional Republicans Urge President Trump Not to Reverse Course on Cuba

6/12/17 – Groups of Senate and House Republicans have sent letters to President Trump urging him not to reverse Obama administration policies that began to relax longstanding economic sanctions and open up the country for limited trade. Seven House Republicans wrote President Trump stating, “Reversing course would incentivize Cuba to once again become dependent on countries like Russia and China. Allowing this to happen could have disastrous results for the security of the United States.” The letter also argued that reversing course would “threaten” efforts to combat human trafficking, illicit drug trade, cybercrime and fraud identification. Reps. Tom Emmer (MN), Rick Crawford (AR), Ted Poe (TX), Darin LaHood (IL), Roger Marshall (KS), James Comer (KY) and Jack Bergman (MI) signed that letter.

Similarly, Republican Senators John Boozman (AR), Mike Enzi (WY) and Jeff Flake (AZ) wrote to Secretary of State Rex Tillerson and National Security Adviser H.R. McMaster to “strongly urge you to weigh carefully any rollback of policies that would endanger” benefits such as the growth in Cuban entrepreneurs, expanded opportunity for U.S. businesses and the national security benefit of preventing the island nation from becoming “a client state of nations that view US interests as counter to their own.”

It is expected that during a trip to Miami, Florida later this week, President Trump will announce the results of his administration’s inter-agency review of existing Cuba policy. Many reports are indicating that he may tighten some restrictions on travel and business activities.

U.S.-Mexico Sugar Trade Agreement – NAFTA Renegotiation Precursor?

6/8/17 – On June 6, 2017, the United States and Mexico agreed to revise previously signed suspension agreements that will continue to suspend antidumping and countervailing duty investigations and prevent the imposition of additional duties on imports of sugar into the United States. The revised agreement is intended to prevent dumping of Mexican sugar and correct for subsidies the Mexican sugar industry receives. The agreement addresses many of the concerns the U.S. sugar industry had with the previous agreement, including the pricing of raw sugar sold to Mexico mills, the percentage of refined sugar that may be imported into the United States, the determining factors between refined and raw sugar, and increased enforcement measures. U.S. refiners argue that Mexican sugar producers have been circumventing the 2014 suspension agreements’ requirement that forced them to send nearly half of their exports to U.S. refineries by exporting sugar that was technically raw but could be sold at higher prices and used directly in beverage and food production with minimal processing. The fact sheet released with the announcement, “Draft Amendments to Mexican Sugar Suspension Agreements,” is available on Commerce’s website.

While the terms of the revised agreements were not supported by the Coalition for Sugar Reform or the American Sugar Alliance, Secretary of Commerce Wilbur Ross agreed to the terms of the deal in principle and stated that he was confident that it “defends American workers across many industries and is the best way to ensure stability and growth.” The U.S. Chamber of Commerce stated that the deal “demonstrates the willingness of both governments to work through difficult issues in a constructive manner.” Indeed, a number of trade analysts believe this agreement on sugar is a hopeful sign for North American Free Trade Agreement (NAFTA) renegotiation efforts; there had been concern that if these sugar trade talks failed, it would be unlikely that a renegotiated NAFTA would be plausible. These negotiations and the terms of the agreements may be an early indication that U.S. trade negotiators may be willing to negotiate deals where significant and broad progress is achieved but certain key industries remain unsatisfied.

Industry Comments on Section 232 Steel Import Investigation

6/2/17 – As comments in the ongoing Section 232 investigation into steel imports are being filed, we highlight two recent submissions that reflect the dichotomy of views on this trade issue. Both the American Iron and Steel Institute (AISI) and the National Foreign Trade Council (NFTC) filed comments with the Department of Commerce on May 31, 2017. AISI represents members of the steel industry that account for nearly 70 percent of U.S. steelmaking capacity. NFTC represents more than 200 U.S. companies with over $3 trillion in worldwide sales, including companies that rely on the steel industry.

AISI Comments: “[T]he U.S. steel industry has relied on our trade laws to seek to address the impact of unfairly traded steel imports in our market. While the antidumping and countervailing duty laws have provided some relief … they leave openings for steel products not subject to orders to continue to surge into our market. … The U.S. steel industry has been severely impacted by repeated surges in dumped and subsidized imports that have flooded the U.S. market in recent years. These surges are the result of foreign government interventionist policies in the steel sector that have fueled massive and growing global overcapacity in steel, particularly in China. If left unaddressed, this global steel crisis will threaten the very viability of the U.S. steel industry, and therefore will threaten the national security of the United States.” AISI urges the Department of Commerce to use the Section 232 investigation to implement a “more comprehensive and broad-based” solution to safeguard national security. See AISI’s full comments.

NFTC Comments: “We are … extremely concerned about the notion of seeking to remedy unfair trade or global overcapacity through an overly broad definition of ‘national security’ and the use of sweeping trade restrictions under Section 232. We do not believe that this is the proper role of a ‘national security’ related remedy, which should be more narrowly focused on two considerations: (a) what specific national security needs are not being met; and (b) whether a targeted remedy that is not unduly disruptive to the rest of our national economy can ensure essential supply to our defense sector. If the focus is something different, such as to remedy unfair trade practices, we believe the proper course of action is for the industry to seek relief under the laws established for those purposes, such as the antidumping and countervailing duty laws. These laws have well-established procedural requirements for determining injury and assessing the appropriate scope and level of remedies.” NFTC urges the Department of Commerce to balance the interests of steel consuming industries “against the advisability of restrictions for national security reasons,” the uncertainty that could be introduced if any “broad-based” or “sweeping” restrictions or trade barriers are created, and the potential for retaliation. See NFTC’s full comments.

Commerce Revises Comment Deadline for Section 232 Investigation of Aluminum Imports

6/1/17 – In an effort to expedite its investigation of the impact of aluminum imports on national security (see our previous update on this topic) and submit a report to President Trump by the end of June, the Department of Commerce has announced that the deadline for written comments is now June 23, 2017, one day after the scheduled public hearing. Comments were previously due by June 29. Written comments should be submitted to Brad Botwin, Director, Industrial Studies, Office of Technology Evaluation, Bureau of Industry and Security, U.S. Department of Commerce, 1401 Constitution Avenue NW, Room 1093, Washington, D.C. 20230 or by email to Aluminum232@bis.doc.gov.

CRS Issues Report on NAFTA as Renegotiation Approaches

5/30/17 – On May 24, 2017, the non-partisan Congressional Research Service (CRS) released a report on the North American Free Trade Agreement (NAFTA). In addition to providing a short history of the trade agreement and an overview of certain key provisions, this timely report provides insight into certain trade trends and the agreement’s economic effects on the three member countries. The report also sets forth potential topics for any NAFTA renegotiation, including Automotive Sector; Services; E-Commerce, Data Flows and Data Localization; Intellectual Property Rights; State-Owned Enterprises; Investment; Dispute Settlement; Labor; Environment; Energy; Customs and Trade Facilitation; and Sanitary and Phytosanitary Standards.

Commerce Holds Public Hearing in Section 232 Steel Investigation; Ross Suggests Final Report Could Be Submitted to President in June

5/25/17 – On May 24, 2017, the Department of Commerce held a public hearing as part of its investigation under Section 232 of the Trade Expansion Act of 1962 into the impact of steel imports on national security (see our previous update for more information). In opening remarks, Commerce Secretary Wilbur Ross stated that the purpose of the investigation is to “determine if the steel being imported into this country impairs our national economic and military security” and that the key question is, “Does the problem rise to the level of crisis sufficient to warrant action beyond existing countervailing duty and antidumping cases?” Ross said the investigation will further seek to recommend what action(s) the president should take in response if the investigation concludes that steel imports are threatening to impair U.S. national security: “Should it cover all steel from everywhere? What do we do in terms of the 20+ percent of steel imports from our NAFTA partners? Should all products be covered? Is some sort of tariff rate quota appropriate? Or a more broadly based tariff? Are there products or countries that should be excluded? Is there some more innovative solution? If we go the tariff route, should it be broadly applied or a tariff schedule for groups of products?”

Under the Section 232 law, if the Commerce secretary determines that imports threaten to impair U.S. national security, the president will then have 90 days to decide whether to support that determination and to take any necessary action to adjust imports or take other non-trade-related actions to protect national security. While this investigation was only initiated in April 2017 and the Department of Commerce has 270 days to complete the investigation (i.e., by mid-January 2018), Ross indicated that he hopes to submit a report to Trump by the end of June.

The panel hearing the testimony yesterday consisted of officials from the Department of Commerce’s Bureau of Industry and Security (BIS), the International Trade Administration, the U.S. Geological Survey, the Department of Defense and the Defense Logistics Agency. Approximately 37 individuals and company officials testified at the hearing, including Rep. Marcy Kaptur (D-Ohio), Chinese and Russian government officials, U.S. steel industry representatives, the president of the United Steelworkers union, and representatives from various U.S. companies that rely heavily on steel in the manufacturing of their products. While not yet available, the hearing transcript as well as submitted written hearing statements and other public comments will be posted on the BIS Electronic FOIA web page. Written comments will be accepted until May 31, 2017 and should be submitted to Brad Botwin, Director, Industrial Studies, Office of Technology Evaluation, Bureau of Industry and Security, U.S. Department of Commerce, 1401 Constitution Avenue NW, Room 1093, Washington, D.C. 20230 or by email to Steel232@bis.doc.gov. For those who wish to view the nearly four-hour hearing, it is available on YouTube.

U.S. Trade Representative Sets Public Hearing and Seeks Comment on NAFTA Renegotiation

5/23/17 – The Office of the U.S. Trade Representative (USTR) has published a notice in the Federal Register seeking public input on possible changes to the North American Free Trade Agreement (NAFTA) to inform the development of U.S. negotiating positions. A hearing to discuss those comments is scheduled for Tuesday, June 27, 2017. Written comments must be submitted by Monday, June 12, 2017 under docket number USTR-2017-0006 on www.regulations.gov and include the heading “NAFTA Negotiations.”

To assist the Office of the USTR as it develops its negotiating objectives and positions for the agreement, the Trade Policy Staff Committee has requested the submission of comments on general and product-specific negotiating objectives for Canada and Mexico in the context of a NAFTA modernization, as well as the following more specific trade issues:

  • Economic costs and benefits to U.S. producers and consumers of removal of any remaining tariffs and removal or reduction of non-tariff barriers on articles traded with Canada and Mexico.
  • Treatment of specific goods (describedbyHTSUS numbers), including comments on:
    • Product-specific import or export interests or barriers,
    • Experience with particular measures that should be addressed in negotiations, and
    • Addressing any remaining tariffs on articles traded with Canada, including ways to address export priorities and import sensitivities related to Canada and Mexico in the context of the NAFTA.
  • Customs and trade facilitation issues that should be addressed in the negotiations.
  • Appropriate modifications to rules of origin or origin procedures for NAFTA qualifying goods.
  • Any unwarranted sanitary and phytosanitary measures and technical barriers to trade imposed by Canada and Mexico that should be addressed in the negotiations.
  • Relevant barriers to trade in services between the United States and Canada and Mexico that should be addressed in the negotiations.
  • Relevant digital trade issues that should be addressed in the negotiations.
  • Relevant trade-related intellectual property rights issues that should be addressed in the negotiations.
  • Relevant investment issues that should be addressed in the negotiations.
  • Relevant competition-related matters that should be addressed in the negotiations.
  • Relevant government procurement issues that should be addressed in the negotiations.
  • Relevant environmental issues that should be addressed in the negotiations.
  • Relevant labor issues that should be addressed in the negotiations.
  • Issues of particular relevance to small and medium-sized businesses that should be addressed in the negotiations.
  • Relevant trade remedy issues that should be addressed in the negotiations.
  • Relevant state-owned enterprise issues that should be addressed in the negotiations

Public versions of comments, with business confidential information redacted, will be open to public inspection.

Branstad Approved by Senate as U.S. Ambassador to China

5/23/17 – Iowa Governor Terry Branstad was confirmed by the Senate to be the U.S. ambassador to China by a vote of 82-13. Despite his long friendship with Chinese President Xi Jinping, Ambassador Branstad will likely face many challenges as the Trump administration continues to criticize China’s trade and economic policies. His diplomatic efforts will be further complicated by factions competing in the White House to wrest control over the country's China policy.

Iran’s President Hassan Rouhani Wins Re-Election

5/22/17 – Press reports have confirmed that Iran’s president Hassan Rouhani, a moderate who negotiated the joint nuclear deal and who has sought more positive relationships with western powers, won re-election over the hard-right conservative challenger, cleric Ebrahim Raisi. Rouhani reportedly received 57 percent of the vote to Raisi’s 38.5 percent, with the remaining votes split among other minor candidates. While this result is being viewed by many as a positive outcome for Iran’s ongoing efforts to engage with the rest of the world, it remains to be seen if Iran’s Supreme Leader Ayatollah Ali Khamenei, who has final say over all state issues and limits the president's power, will limit any further efforts by Rouhani in this area. In response to the election results, U.S. Secretary of State Rex Tillerson stated, “What we hope – what I would hope – is that Rouhani now has a new term, and that he use that term to begin a process of dismantling Iran’s network of terrorism, dismantling its financing of the terrorist network, dismantling of the manning and the logistics and everything that they provide to these destabilizing forces that exist in this region. That’s what we hope he does. We also hope that he puts an end to [Iran’s] ballistic missile testing. We also hope that he restores the rights of Iranians to freedom of speech, to freedom of organization, so that Iranians can live the life that they deserve. That’s what we hope this election will bring. I’m not going to comment on my expectation. But we hope that if Rouhani wanted to change Iran’s relationship with the rest of the world, those are the things he could do.”

President Trump Declares Week of May 21, 2017 “World Trade Week”

5/22/17 – Stating that “trade is critical to the economic strength of our country,” President Trump has proclaimed this week to be World Trade Week. In issuing this proclamation, the president stated that the United States will:

  • promote economic growth by strengthening the manufacturing base and expanding exports in manufacturing, agriculture, and the service industries;
  • challenge unfair trade practices that leave American workers, farmers, and businesses competing in global markets at a disadvantage;
  • commit to breaking down trade barriers and opening new markets for American exports; and
  • negotiate future trade agreements that ensure that all Americans reap the benefits of global commerce.
USTR Formally Notifies Congress of Intent to Modernize NAFTA

5/18/17 - The Trump administration formally notified Congress of its intent to renegotiate the North American Free Trade Agreement (NAFTA) with Canada and Mexico, starting a 90-day clock for statutorily required consultations. This notification means that NAFTA negotiations with Canada and Mexico can begin no earlier than August 16, 2017. In the letter from U.S. Trade Representative Robert Lighthizer, the administration indicated it would consult closely with Congress to develop negotiating positions. The letter notes that while NAFTA was negotiated 25 years ago, the U.S. economy and businesses have changed, resulting in outdated provisions in the agreement. In particular, negotiations will include “new provisions to address intellectual property rights, regulatory practices, state-owned enterprises, services, customs procedures, sanitary and phytosanitary measures, labor, environment, and small and medium enterprises.”

In very brief comments, Lighthizer stated, “Today, President Trump fulfilled one of his key promises to the American people … USTR will now continue consultations with Congress and American stakeholders to create an agreement that advances the interests of America’s workers, farmers, ranchers, and businesses.” The Office of the U.S. Trade Representative in the near future will publish a notice in the Federal Register requesting public input on the direction, focus and content of the NAFTA negotiations.

Trump Administration Continues Waiver of Nuclear-Related Sanctions on Iran, Sanctions Iranian Officials for Ballistic Missile Program

5/18/17 – The Trump administration has renewed a necessary waiver regarding U.S. sanctions on Iran’s crude oil exports. This will allow Iran to continue to sell its oil in the international market despite existing U.S. sanctions that must be periodically waived under the terms of the 2015 nuclear deal with Iran.

The Treasury Department’s Office of Foreign Assets Control (OFAC), however, has placed two senior Iranian defense officials on OFAC’s Specially Designated Nationals (SDN) List for their involvement in Iran's solid-fueled ballistic missile program. Morteza Farasatpour, a senior defense official with Iran's Defense Industries Organization (DIO) and Rahim Ahmadi, a senior official serving as the Director of Iran's Shahid Bakeri Industries Group (SBIG), along with Iran-based company Matin Sanat Nik Andishan, have been placed on the SDN List for activities in support of Iran's ballistic missile program.

These actions were taken in conjunction with the State Department’s release of its semi-annual report to Congress detailing sanctions imposed on persons responsible for or complicit in human rights abuses committed against citizens of Iran or their family members.

As a reminder to our readers, on Friday, May 19, Iran will hold its presidential vote that could also have a major impact on the status of the nuclear deal. Current President Hassan Rouhani, considered a moderate who oversaw the negotiation and implementation of the nuclear deal, is running for re-election. While he faces competition from several other candidates, his principal challenger is hardline conservative cleric Ebrahim Raisi.

Trump Issues Executive Order Directing USTR and Secretary of Commerce to Review Trade Agreement Violations and Abuses

5/1/17 – On April 29, 2017, his 100th day in office, President Trump announced an executive order directing the U.S. trade representative (USTR) and secretary of the Department of Commerce to commence a review of “all bilateral, plurilateral, and multilateral trade agreements and investment agreements to which the United States is a party” and “all trade relations with countries governed by the rules of the World Trade Organization (WTO) with which the United States does not have free trade agreements but with which the United States runs significant trade deficits in goods.” In a press briefing, Secretary of Commerce Wilbur Ross clarified that this executive order differs from others previously signed by the president in that it will focus “more narrowly on the agreements themselves,” even those that do not result in deficits, and not on the behavior of individual countries.

The review of each agreement must be submitted to the president within 180 days (late October 2017) and identify violations or abuses of any U.S. trade agreement, including the WTO, as well as any trade preference programs and investment agreements. The review will identify trade agreements and programs that “have failed with regard to such factors as predicted new jobs created, favorable effects on the trade balance, expanded market access, lowered trade barriers, or increased United States exports.”

In signing the executive order, President Trump has authorized the secretary of Commerce, the USTR and other heads of executive departments and agencies to “take every appropriate and lawful action to address violations of trade law, abuses of trade law, or instances of unfair treatment.”

While Secretary Ross made clear that the review would cover all trade agreements, the United States has only 20 such agreements and much U.S. trade occurs with countries who are members of the WTO. He stated that the WTO has “a ‘most favored nation clause,’ meaning that of all the countries with whom we do not have a free-trade agreement, we must charge the same tariff on the same item to those – each of those countries as we charge to the others. So that’s a significant impediment toward getting to anything like a reciprocal agreement.” He also criticized the WTO agreement for not effectively dealing with non-tariff trade barriers and intellectual property rights, as well as claiming there were certain structural problems with the agreement, especially the dispute settlement provisions. When asked if the United States would consider withdrawing from the WTO, Ross replied that, while the review has not yet begun, “as [with] any multilateral organization, there's always the potential for modifying the rules of it.”

China
USTR Releases Annual Reports on China's and Russia's Compliance With WTO Obligations, States That Supporting China's Accession to WTO Was a Mistake

1/19/18 – Today, the U.S. Trade Representative (USTR) made available its statutorily required reports on how the People's Republic of China (China) and the Russian Federation (Russia) are complying with the commitments they made to the World Trade Organization (WTO) resulting from their accession to the organization. China became a member of the WTO in 2001, and Russia joined the WTO in 2012. According to the USTR, China and Russia have "failed to embrace the market-oriented economic policies championed by the WTO and are not living up to certain key commitments they made when they joined the WTO."

Regarding China, the report states that China largely remains a state-led economy while using "the imprimatur of WTO membership to become a dominant player in international trade." As a result, USTR stated that "it seems clear that the United States erred in supporting China's entry into the WTO on terms that have proven to be ineffective in securing China's embrace of an open, market-oriented trade regime." The report seems to cast doubt on whether the USTR believes the WTO's dispute settlement mechanism will be sufficient to address China's non-market economy policies. Nevertheless, USTR stated that it will continue to pursue WTO cases against China that were initiated by previous administrations and "take all other steps necessary to rein in harmful state-led, mercantilist policies and practices pursued by China, even when they do not fall squarely within WTO disciplines."

Below are additional highlights of the 2017 Report to Congress On China's WTO Compliance:

  • "Today, almost two decades after it pledged to support the multilateral trading system of the WTO, the Chinese government pursues a wide array of continually evolving interventionist policies and practices aimed at limiting market access for imported goods and services and foreign manufacturers and service suppliers."
  • "China's regulatory authorities do not allow U.S. companies to make their own decisions about technology transfer and the assignment or licensing of intellectual property rights. Instead, they continue to require or pressure foreign companies to transfer technology as a condition for securing investment or other approvals."
  • "China is determined to maintain the state's leading role in the economy and to continue to pursue industrial policies that promote, guide and support domestic industries while simultaneously and actively seeking to impede, disadvantage and harm their foreign counterparts, even though this approach is incompatible with the market-based approach expressly envisioned by WTO members and contrary to the fundamental principles running throughout the many WTO agreements."
  • "Many of the policy tools being used by the Chinese government … are largely unprecedented, as other WTO members do not use them, and include a wide array of state intervention and support designed to promote the development of Chinese industry in large part by restricting, taking advantage of, discriminating against or otherwise creating disadvantages for foreign enterprises and their technologies, products and services."

Below are selected highlights of the 2017 Report on the Implementation and Enforcement of Russia's WTO Commitments:

  • "So far, Russia's actions strongly indicate that it has no intention of complying with many of the promises it made to the United States and other WTO Members. This trend is very troubling."
  • "Russia has done little in 2017 to demonstrate a commitment to the principles of the WTO or to many of the specific commitments that it made" in the negotiations leading to Russia's membership in the WTO.
  • "The agricultural sector continues to be one of the most challenging sectors for U.S. exporters. In addition to the import ban on nearly all agricultural goods from the United States and other WTO Members, Russia continues to erect barriers to U.S. agricultural exports."
  • "In 2017, notwithstanding a few tariff reductions, Russia increasingly appeared to turn away from the principles of the WTO, instead turning inward through the adoption of local content policies and practices. Russia continued to rely on arbitrary behind-the-border measures and other discriminatory practices to exclude U.S. exports."
New Section 232 Petition Seeks Investigation Into Effects of Uranium Imports on U.S. National Security

1/17/18 Energy Fuels Inc. and Ur-Energy Inc. (the “Petitioners”) have jointly submitted a petition to the U.S. Department of Commerce for relief under Section 232 of the Trade Expansion Act of 1962 from imports of uranium products from state-owned and state-subsidized enterprises in Russia, Kazakhstan and Uzbekistan. According to the petition, such imports now supply nearly 40 percent of U.S. demand and threaten U.S. national security. Despite uranium’s critical role in the United States supporting clean electricity and the national defense, “imports of cheap, foreign state-subsidized uranium have swelled in recent years to the point that domestic suppliers currently provide less than 5% of our nation’s demand.” As recently as 1980, the Petitioners argue, “U.S. producers supplied nearly 100% of our domestic uranium needs, and in 1989 the DOC initiated a Section 232 investigation at the request of the U.S. Department of Energy (“DOE”) because of concerns that uranium imports exceeded 37.5% at that time. The problem is far worse now.” The petition also notes that China is significantly growing its state-owned nuclear enterprises and intends to penetrate the U.S. market with nuclear fuel that will directly compete with U.S. uranium miners. Under U.S. law, the Petitioners argue that the warheads in U.S. nuclear weapons must be manufactured from uranium sourced from U.S. mines; tritium (an essential component of nuclear weapons) must be produced in a U.S. reactor using domestic uranium; and highly-enriched and fabricated uranium fuel for the U.S. Navy must be U.S. in origin. If this import trend continues and the condition of the U.S. uranium mining industry continues to worsen, the Petitioners contend that the United States will lose the ability to supply these essential national security requirements with domestic sources. The petition seeks remedies that will set a quota to limit U.S. uranium imports, effectively reserving 25 percent of the U.S. nuclear market for U.S. uranium production. It also seeks implementation of a requirement for U.S. federal utilities and agencies to buy U.S. uranium in accordance with President Trump’s Buy American policy.

Once the Department of Commerce initiates the investigation, it will have 270 days to prepare a report for the president. Following receipt of that report, the president will have 90 days to act on any recommendations and take action if necessary to “adjust the imports of an article and its derivatives” and/or pursue other lawful non-trade related actions necessary to address the threat. A full copy of the petition is available on Energy Fuels’ website.

Department of Commerce Issues Memorandum on China's Continued Nonmarket Economy Status

10/31/17 – In support of its preliminary determination in the antidumping duty investigation of imports of aluminum foil from the People's Republic of China, the Department of Commerce has released a 205-page memorandum finding that China continues to be considered a nonmarket economy (NME) country in trade remedy cases because it "does not operate sufficiently on market principles to permit the use of Chinese prices and costs for purposes of the Department's antidumping analysis." At its core, the memo concludes, "the framework of China's economy is set by the Chinese government and the Chinese Communist Party (CCP), which exercise control directly and indirectly over the allocation of resources through instruments such as government ownership and control of key economic actors and government directives. The stated fundamental objective of the government and the CCP is to uphold the 'socialist market economy' in which the Chinese government and the CCP direct and channel economic actors to meet the targets of state planning. The Chinese government does not seek economic outcomes that reflect predominantly market forces outside of a larger institutional framework of government and CCP control."

The memo provides a detailed analysis of the six statutory criteria for determining whether a country is a market economy in trade remedy cases as set forth in the Tariff Act of 1930. Among the factors detailed in the memo are the Chinese government's continuing restrictions on foreign investment, the level of Chinese government ownership of various entities, the government's ability to set and control prices, and the continued functioning of  China's legal system as "an instrument by which the Chinese government and the CCP can secure discrete economic outcomes, channel broader economic policy, and pursue industrial policy goals."

Commerce Issues Preliminary Determination in China Aluminum Foil Dumping Investigation

10/30/17 – The Department of Commerce (Commerce) has announced its affirmative preliminary determination in the antidumping duty (AD) investigation of imports of aluminum foil from the People’s Republic of China (China). While the preliminary antidumping duty rates, ranging from 96 percent to more than 162 percent, will not be finalized by Commerce until late February 2018, Commerce will instruct U.S. Customs and Border Protection (CBP) to require cash deposits based on these preliminary rates.

The merchandise covered by these investigations is aluminum foil having a thickness of 0.2 mm or less, in reels exceeding 25 pounds, regardless of width. The implications of this trade remedy action, however, are potentially more far reaching and may affect U.S.-China trade relations. The preliminary determination comes just weeks before President Trump travels to China, and China was quick to state that it was “strongly dissatisfied” with the determination. A key issue in this investigation is the U.S. government’s continued treatment of China’s economy as a “nonmarket economy.” Commerce relied upon surrogate/third-country pricing analysis to conclude that China was dumping its aluminum foil in the U.S. market. Upon China’s accession to the World Trade Organization (WTO), other WTO members were allowed to use such a nonmarket economy methodology in antidumping duty matters involving China. Commerce continues to use this methodology, arguing that China still does not operate as a market economy due to continuing government price controls and other governmental involvement. China argues that this clause in its accession agreement has now expired and that its goods must be accorded market economy status.

CFIUS 2015 Annual Report: National Security Filings Increase, as Does Focus on China

10/3/17 – The Committee on Foreign Investment in the United States (CFIUS), an inter-agency committee headed by the Department of the Treasury, is authorized to review transactions that could result in the control of U.S. businesses by foreign persons or companies in order to determine the effect of such transactions on the national security of the United States. Once a little-known committee, CFIUS has become more widely known in the past decade amid growing concern over foreign investment in the United States, and the potential security implications of certain foreign entities owning and controlling U.S. companies and/or technology. In fact, in September 2017, President Trump took the rare step of actually blocking a transaction: the proposed acquisition of Lattice Semiconductor Corporation by Canyon Bridge Capital Partners LLC, a subsidiary of Chinese state-owned China Venture Capital Fund Corporation Limited. Such a move indicates that the parties were unable to allay the national security concerns of CFIUS's agency members. It further highlights Trump’s “America First” outlook and the likelihood that CFIUS reviews will become more common and stringent under the Trump administration.

The recently released CFIUS 2015 Annual Report indicates the following trends:

  • In 2015, 143 transactions were reviewed by CFIUS, continuing the general upward trend since 2009, when 65 notices were filed. Further, it is believed that filings increased again in 2016 and that 2017 will be a record year with more than 200 filings.
  • In 2015, 42 percent of reviews were conducted for industries in the Manufacturing sector; 32 percent in the Finance, Information and Services Sector; 18 percent in the Mining, Utilities and Construction industries; and 8 percent in the Wholesale Trade, Retail Trade, and Transportation sectors.
  • For the fourth consecutive year, China has led foreign countries in the number of CFIUS reviews, with 29 conducted in 2015. Over the three-year period from 2013 to 2015, Chinese foreign investment underwent 74 CFIUS reviews; the next closest country was Canada with 49 reviews, followed by the United Kingdom with 47 reviews.
  • While the majority of reviews conclude with approval by CFIUS, in 2015 the parties to 11 transactions had to agree to and adopt mitigation measures to ensure that the parties remained in compliance with various agency requirements to remove any national security risks.
  • The annual report must highlight any “perceived adverse effects” of transactions reviewed by CFIUS, and the 2015 report for the first time indicates there could be national security concerns regarding potential acquisitions of U.S. companies that hold “substantial pools of potentially sensitive data about U.S. persons and businesses that … could be in any number of sectors, including, for example, the insurance sectors, health services, and technology services.”

While not stated in the report, the statistics on the length of time a transaction is under review reveal that in 2015 there was a significant increase in the length of time transactions remained active before CFIUS. By law, CFIUS must complete a review within 90 days, with several triggers that may require a more thorough investigation during that time. Historically, most transactions have concluded within the more informal 30-day review period; however, 2015 data indicate that nearly half of the year’s 143 transactions went into the more formal 45-day investigation period.

OFAC Sanctions Chinese and Russian Entities and Individuals Supporting North Korea

8/25/17 – The Department of the Treasury’s Office of Foreign Assets Control (OFAC) has designated 16 Chinese and Russian entities and individuals for activities related to the support of North Korea’s Kim Jong-un. These sanctions intentionally target third-country companies and individuals that (1) assist already-designated persons who support North Korea’s nuclear and ballistic missile programs, (2) deal in the North Korean energy trade, (3) facilitate its exportation of workers and (4) enable sanctioned North Korean entities to access the U.S. and international financial systems. These sanctions complement United Nations Security Council Resolution 2371 enacted on August 5, 2017. Treasury Secretary Steven Mnuchin stated, “It is unacceptable for individuals and companies in China, Russia, and elsewhere to enable North Korea to generate income used to develop weapons of mass destruction and destabilize the region. We are taking actions consistent with UN sanctions to show that there are consequences for defying sanctions and providing support to North Korea, and to deter this activity in the future.” For details on the 16 entities and persons that have been placed on OFAC’s Specially Designated Nationals List, see OFAC’s Federal Register notice.

USTR Initiates Section 301 Investigation into China’s Acts, Policies and Practices Related to Technology Transfer, Intellectual Property and Innovation

8/25/17 – Less than a week after President Trump issued a presidential memorandum (please see update directly below) directing the U.S. Trade Representative (USTR) to determine whether to investigate China regarding certain intellectual property and technology transfer issues, USTR Robert Lighthizer formally initiated a Section 301 investigation into the matter on August 18, 2017. In announcing the investigation, he stated that, “[a]fter consulting with stakeholders and other government agencies, I have determined that these critical issues merit a thorough investigation.” Details of the four areas of investigation and information regarding public comments were provided in a Federal Register notice.

Specifically, the public is invited to submit written comments to USTR no later than September 28, 2017 on: (1) the acts, policies and practices of the Chinese government described in the Federal Register notice; (2) information on other acts, policies and practices of China relating to technology transfer, intellectual property and innovation as described in the president’s memorandum, which might be included in the investigation and/or addressed through other trade avenues; (3) the nature and level of burden or restriction on U.S. commerce caused by the applicable acts, policies and practices of the government of China and/or any economic assessment of that burden or restriction; and (4) whether actionable conduct exists under Section 301 of the Trade Act of 1974 and what action, if any, should be taken. A public hearing will be held on October 10, 2017; persons wishing to testify at the hearing must provide written notification of their desire to speak and provide a summary of their proposed testimony by September 28, 2017.

President Trump Directs USTR to Examine China's Intellectual Property & Forced Technology Transfer Policies

8/15/17 – Asserting in a presidential memorandum that "Violations of intellectual property rights and other unfair technology transfers potentially threaten United States firms by undermining their ability to compete fairly in the global market," President Trump has directed U.S. Trade Representative Robert Lighthizer to investigate any of China's laws, policies, practices or actions that may be unreasonable or discriminatory and may be harming American intellectual property rights.

In response, Lighthizer stated, "The United States has for many years been facing a very serious problem. China[’s] industrial policies and other practices reportedly have forced the transfer of vital U.S. technology to Chinese companies. We will engage in a thorough investigation and, if needed, take action to preserve the future of U.S. industry. Thousands of jobs are at stake for our workers and for future generations. This will be one of USTR's highest priorities, and we will report back to the President as soon as possible."

This trade action is reported to be one of several trade actions that the Trump administration may take against China in the coming months to address alleged intellectual property violations and the theft of American trade secrets. China's actions in this area were highlighted most recently by USTR in its annual Special 301 Report to Congress released in April 2017. This report stated that the "USTR continues to place China on the Priority Watch List because longstanding and new IP concerns strongly merit attention. China is home to widespread infringing activity, including trade secret theft, rampant online piracy and counterfeiting, and high levels of physical pirated and counterfeit exports to markets around the globe."

In brief remarks on the topic, Trump indicated that once the investigation is complete, the USTR may use "all available options" to address and enforce any actions against any threat of further Chinese IP violations. For a more detailed analysis, see our client alert, Trump Administration Moves Against Chinese IP Violations.

Branstad Approved by Senate as U.S. Ambassador to China

5/23/17 – Iowa Governor Terry Branstad was confirmed by the Senate to be the U.S. ambassador to China by a vote of 82-13. Despite his long friendship with Chinese President Xi Jinping, Ambassador Branstad will likely face many challenges as the Trump administration continues to criticize China’s trade and economic policies. His diplomatic efforts will be further complicated by factions competing in the White House to wrest control over the country’s China policy.

U.S.-China 100-Day Plan Starts to Come into Focus

5/12/17 – As we previously reported on April 10, during the U.S. visit last month of China’s President Xi Jinping, the two countries established a new cabinet-level framework for negotiations – the United States-China Comprehensive Dialogue – and agreed to a 100-day action plan under this framework. On May 11, 2017, Secretary of Commerce Wilbur Ross announced that the two countries had agreed to address issues involving agricultural trade, financial services, investment and energy. As concrete progress is made under the 100-day plan, the parties, Secretary Ross indicated, will begin discussions on a one-year plan to further solidify actions promoting U.S.-China economic engagement and cooperation.

These initial actions are set forth in a Department of Commerce press release covering 10 key issues that should be accomplished by July 16, the conclusion of the 100-day period since the leaders met. Actions to be taken include consultations on U.S. beef exports to China, Chinese exports of cooked poultry to the United States, biotechnology issues, U.S. liquid natural gas exports to China, the operation of U.S. financial service firms in China, as well as other banking and market access issues. Secretary Ross acknowledged that these actions address only 10 items and that “there are probably 500 items we could potentially discuss … So we’re going to do for the rest of the one-year plan another set of prioritization – what things can we reasonably accomplish within that period and then see if we can reach agreement.”

President Trump Will Not Label China a Currency Manipulator

4/13/17 – President Trump indicated in an interview with the Wall Street Journal on April 12, 2017 that his administration will not label China a currency manipulator. Despite repeated campaign statements that he would do so upon taking office, Trump said in the interview that, “They’re not manipulators,” and indicated that the Treasury Department will not list China as a currency manipulator in its semi-annual report due to be released on April 15. In the interview, he stated that he did not want this issue to hinder efforts to obtain China’s cooperation in addressing increasingly aggressive actions by North Korea.

Labeling a country a currency manipulator triggers an investigation by the Treasury Department and can lead to tariffs or other economically punitive measures. However, most economists agree that for the past several years China has not been devaluing its currency but, in fact, has raised the value of the yuan. Senate Minority Leader Chuck Schumer immediately criticized the president, stating that Trump’s “failure to name China a currency manipulator is symptomatic of a lack of real, tough action on trade against China.”

U.S. & China Establish “100-Day Plan” on Trade

4/10/17 – President Trump hosted Chinese President Xi Jinping late last week for a series of meetings regarding multiple issues, including the state of the bilateral relationship between the United States and China. On the trade front, the two presidents agreed to elevate existing bilateral talks to reflect the importance of making progress on issues. In doing so, they established a new cabinet-level framework for negotiations, the United States-China Comprehensive Dialogue, which will have four pillars: the Diplomatic and Security Dialogue; the Comprehensive Economic Dialogue; the Law Enforcement and Cybersecurity Dialogue; and the Social and Cultural Issues Dialogue.

In his meetings with President Xi, President Trump noted the challenges caused by the Chinese government’s intervention in its economy and raised serious concerns about the impact of China’s industrial, agricultural, technological and cybersecurity policies on U.S. jobs and exports. Trump reportedly underscored the need for China to take concrete steps to level the playing field for American workers, stressing repeatedly the need for reciprocal market access.

In his comments on the meetings, Secretary of State Rex Tillerson stated that “The chief goal of our trade policies is the prosperity of the American worker. To that end, we will pursue economic engagement with China that prioritizes the economic well-being of the American people.” In addition to the four pillars of dialogue listed above, Secretary of the Treasury Steven Mnuchin raised another “dialogue” that he and Secretary of Commerce Wilbur Ross will lead, which “will be focused on trade, investment, and other economic opportunities between both countries.” Mnuchin indicated that this dialogue will focus on a more balanced economic relationship, specifically on trade.

Commerce Moves to Review China’s “Nonmarket Economy” Status

4/3/17 – The Trump administration on April 3, 2017 issued a notice of initiation and request for public comment and information pertaining to whether the People’s Republic of China (PRC) should continue to be treated as a nonmarket economy (NME) country under the antidumping and countervailing duty laws. The notice in the Federal Register indicates that this inquiry is part of the Department of Commerce’s less-than-fair-value investigation of certain aluminum foil from the PRC.

The notice states that the Department of Commerce has treated the PRC as an NME country in all past antidumping duty investigations and administrative reviews. Yet, under the agreement with the PRC regarding its accession to the World Trade Organization (WTO), the PRC believes that WTO members were required to begin treating it as a market economy in December 2016. The department is conducting this inquiry in order to obtain the most recent data and information available from U.S. industry, and the notice states that U.S. law allows it to review the PRC's nonmarket economy status "at any time."

The timing of this notice is interesting, given that Chinese President Xi Jinping is traveling to the United States for talks later this week.

Congressional Research Service Releases U.S.-China Trade Report

2/23/17 – The Congressional Research Service, a public policy research congressional support agency, has released an in-depth analysis of U.S.-China trade and economic issues. Given the significant amount of political rhetoric that the Trump campaign generated towards China, and the stance of Peter Navarro, who is President Trump’s chairman of the newly formed National Trade Council, an outspoken China critic and author of “Death by China,” this timely report could be a valuable read by those in the international trade arena.

The 80-page report covers a wide variety of specific issues and highlights that U.S.-China economic ties have expanded substantially over the past three decades. Total U.S.-China merchandise trade rose from $2 billion in 1979 (when economic reforms began) to $579 billion in 2016. China is currently the United States’ second-largest merchandise trading partner, its third-largest export market, and its biggest source of imports. It also notes that many U.S. firms view participation in China’s market as critical to staying globally competitive.

Despite these growing commercial ties, the report notes that the U.S.-China bilateral economic relationship has become increasingly complex and often fraught with tension. From the U.S. perspective, many trade tensions stem from China’s incomplete transition to a free market economy. Major areas of concern expressed by U.S. policymakers and stakeholders include China’s alleged widespread cyber economic espionage against U.S. firms; relatively ineffective record of enforcing intellectual property rights; discriminatory innovation policies; mixed record on implementing its World Trade Organization (WTO) obligations; extensive use of industrial policies (such as financial support of state-owned firms and trade and investment barriers) in order to promote and protect industries favored by the government; and interventionist policies to influence the value of its currency.

There are different views on how the United States could better address commercial disputes with China. Trump administration officials contend that the United States should take a more aggressive stance against China’s trade policies, such as by increasing the number of U.S. WTO dispute settlement cases brought against China, expanding the use of U.S. trade remedy laws on certain imports from China, designating it as a “currency manipulator” and/or threatening to impose sanctions against China unless it addresses various policies that hurt U.S. economic interests.

The report, “China-U.S. Trade Issues,” provides background and analysis of U.S.-China commercial ties, including history, trends, issues and outlook.

Background

During the presidential campaign, Donald Trump frequently attacked China for its unfair trade policies, and stated that as president he would:

  1. instruct the Treasury Secretary to label China a currency manipulator;
  2. direct the U.S. Trade Representative to bring trade cases against China; and
  3. use his presidential power to remedy trade disputes, including the application of punitive import tariffs, if China refuses to stop its illegal activities.

In the run-up to inauguration, the president even challenged the longstanding “One China” approach that has served as the cornerstone of diplomatic relations among the United States, China and Taiwan since the 1970s. Will Trump’s provocative statements, if either implemented by the United States or addressed by China, result in a trade war with China, or will they provide leverage in future negotiations with China on these and possibly other trade issues?

Cuba
Commerce, State and Treasury Implement Changes to Cuba Sanctions Policy

11/14/17 – The Office of Foreign Assets Control (OFAC) at the Department of the Treasury and the Bureau of Industry and Security (BIS) at the Department of Commerce have announced amendments to the Cuban Assets Control Regulations and Export Administration Regulations, respectively, to implement changes to the Cuba sanctions program announced by President Trump in June 2017 with the issuance of the National Security Presidential Memorandum on Strengthening the Policy of the United States Toward Cuba (NSPM). See our June 20, 2017 update for background information. These changes, in effect as of November 9, 2017, roll back many of the initiatives and regulatory changes implemented by former President Obama in seeking to normalize relations with Cuba. In announcing these changes, Treasury Secretary Steven Mnuchin stated, “We have strengthened our Cuba policies to channel economic activity away from the Cuban military and to encourage the government to move toward greater political and economic freedom for the Cuban people.” The State Department has also released a list of entities under the control of, or acting for or on behalf of, the Cuban military, intelligence, or security services or personnel with which direct financial transactions are now prohibited “as it would disproportionately benefit such services or personnel at the expense of the Cuban people or private enterprise in Cuba.”

These revised regulations include:

  1. Persons subject to U.S. jurisdiction are prohibited from engaging in certain direct financial transactions with entities identified by the State Department on the Cuba Restricted List. Certain transactions will be excluded from this prohibition pursuant to exceptions detailed in the NSPM.
  2. BIS has established a general policy of denial for license applications to export items for use by entities on the Cuba Restricted List, unless the transaction is otherwise consistent with the NSPM.
  3. While announcing that the United States continues to maintain a comprehensive embargo on trade with Cuba, BIS has amended its licensing policy for Cuba and portions of three license exceptions available for exports and reexports to Cuba: License Exceptions Gift Parcels and Humanitarian Donations, Consumer Communications Devices and Support for the Cuban People (SCP).
  4. Under the SCP license exception, OFAC will require that each traveler engage in a full-time schedule of activities that result in meaningful interaction with individuals in Cuba. Such activities must enhance contact with the Cuban people, support civil society in Cuba or promote the Cuban people's independence from Cuban authorities.
  5. OFAC has revised and expanded the definition of the term “prohibited officials of the Government of Cuba.”

More detailed information regarding these regulatory changes is available:

President Trump Announces New Cuba Policy

6/20/17 – After several months of internal review, the Trump administration on June 16 announced revisions to U.S. policy toward Cuba. The internal review, led by the president’s National Security Council, engaged in an interagency review that included input from the Treasury Department, State Department, Commerce Department, Department of Agriculture, Department of Homeland Security and the Department of Transportation. Additionally, President Trump met with members of Congress. In making the announcement, a senior administration official stated that the president’s “basic policy driver was his concern that the previous policy was enriching the Cuban military and the intelligence services that contribute so much to oppression on the island. And that's the opposite of what he wanted to achieve, which is to have the benefits of any economic commerce with the United States go to the Cuban people.”

One White House senior official acknowledged that all the regulatory and policy changes initiated by President Obama from December 2014 through 2016 would be difficult to undo; however, the revised policy under the Trump administration will once again restrict certain travel and seek to limit providing any advantages to the Cuban military (particularly the Cuban military monopoly, Grupo de Administración Empresarial) while seeking to continue to allow “American individuals and entities to develop economic ties to the private, small business sector in Cuba.” The Office of Foreign Assets Control (OFAC), the Bureau of Industry and Security (BIS) and the State Department are expected to update their lists of denied parties within the next 30 days. OFAC and BIS will also issue new regulations within that time to implement these policy changes. The president’s new policy will not become effective until those regulations are issued. The U.S. embassy in Havana will remain open, and Cuba will be allowed to maintain its embassy in Washington.

The policy clarifies that any further improvements in the United States-Cuba relationship will “depend entirely on the Cuban government’s willingness to improve the lives of the Cuban people, including through promoting the rule of law, respecting human rights, and taking concrete steps to foster political and economic freedoms.”

As further details on the regulatory changes that will be implemented to address these policies become available, Thompson Hine’s International Trade practice group will follow up with a detailed client bulletin. View the “National Security Presidential Memorandum on Strengthening the Policy of the United States Toward Cuba.”

Congressional Republicans Urge President Trump Not to Reverse Course on Cuba

6/12/17 – Groups of Senate and House Republicans have sent letters to President Trump urging him not to reverse Obama administration policies that began to relax longstanding economic sanctions and open up the country for limited trade. Seven House Republicans wrote President Trump stating, “Reversing course would incentivize Cuba to once again become dependent on countries like Russia and China. Allowing this to happen could have disastrous results for the security of the United States.” The letter also argued that reversing course would “threaten” efforts to combat human trafficking, illicit drug trade, cybercrime and fraud identification. Reps. Tom Emmer (MN), Rick Crawford (AR), Ted Poe (TX), Darin LaHood (IL), Roger Marshall (KS), James Comer (KY) and Jack Bergman (MI) signed that letter.

Similarly, Republican Senators John Boozman (AR), Mike Enzi (WY) and Jeff Flake (AZ) wrote to Secretary of State Rex Tillerson and National Security Adviser H.R. McMaster to “strongly urge you to weigh carefully any rollback of policies that would endanger” benefits such as the growth in Cuban entrepreneurs, expanded opportunity for U.S. businesses and the national security benefit of preventing the island nation from becoming “a client state of nations that view US interests as counter to their own.”

It is expected that during a trip to Miami, Florida later this week, President Trump will announce the results of his administration’s inter-agency review of existing Cuba policy. Many reports are indicating that he may tighten some restrictions on travel and business activities.

Background

Donald Trump's position on Cuba changed drastically over the course of the presidential campaign, rendering it difficult to predict what his Cuban policy will be now that he is president. During the primaries, Trump broke ranks with other Republicans, stating that he supported President Obama's decision to re-engage diplomatically with Cuba. Then, in the final days of the campaign, and while stumping in Florida, Trump described President Obama's move to normalize relations with Cuba as a "very weak agreement" and, while Trump thought that an agreement was fine, he "would do whatever is necessary to get a good agreement." After Fidel Castro’s death, however, Trump repeated his threat to reverse Obama's decision to reopen diplomatic and commercial relations with Cuba if Cuba is unwilling to make a better deal. Those who support the recent changes in U.S. policy toward Cuba hope that these latest comments are merely nods to Cuban-American supporters in Florida. After all, Trump is a businessman who, at one time, controlled a company that considered a business opportunity in Cuba. Only time will tell if President Trump will actually roll back any of the recent changes adopted under the Obama administration.

For more information on the normalization of relations with Cuba under the Obama administration, please see our Cuba publications.

Enforcement
Trump Nominates Two Individuals for U.S. International Trade Commission

10/2/17 – President Trump has made further nominations to the U.S. International Trade Commission (ITC), an independent, quasi-judicial federal agency with broad investigative responsibilities on matters of trade. The agency investigates the effects of dumped and subsidized imports on domestic industries and conducts global safeguard investigations. The ITC also adjudicates cases involving imports that allegedly infringe intellectual property rights.

The ITC is led by six commissioners who are nominated by the president and confirmed by the U.S. Senate. No more than three commissioners may be of any one political party. Currently, there are only four commissioners, with several serving beyond their original terms of nine years. To date, the president has nominated the following persons:

Dennis M. Devaney has been nominated for the remainder of a nine-year term expiring June 16, 2023. Devaney is currently practice team leader and counsel with the Varnum law firm. He earned his B.A. and M.A. from the University of Maryland in 1968 and 1970, respectively. He received his law degree from Georgetown University Law Center in 1975. From 1970 to 1972, he served on active duty with the U.S. Naval Security Group.

Randolph J. Stayin has been nominated for the remainder of a nine-year term expiring June 16, 2026. Stayin was born and raised in Cincinnati, Ohio. He graduated from Dartmouth College and received a law degree from the University of Cincinnati Law School. He served as chief of staff to Senator Robert Taft, Jr. and was the senator’s trade advisor in negotiating the passage of the Trade Act of 1974. Stayin’s 40+ years in the practice of law have focused on international trade policy and trade regulation. He has litigated antidumping and countervailing duty investigations, sunset reviews, trademark infringement, 301 unfair trade practices, 201 safeguards, 232 national security, Generalized System of Preferences, export regulation, trade sanctions, anti-boycott issues and U.S. Customs enforcement. He has practiced before the ITC, the U.S. Department of Commerce, the Office of the U.S. Trade Representative, the Court of International Trade, the Court of Appeals for the Federal Circuit, NAFTA dispute panels, and NAFTA and Uruguay Round/WTO negotiations.

These two nominations are in addition to the nomination of Jason Kearns in June 2017 for the remainder of a nine-year term expiring December 16, 2024. Kearns currently serves as chief international trade counsel (Democratic staff) to the Committee on Ways and Means in the House of Representatives. In that position, he advises members on legislation concerning trade and on oversight issues involving the Office of the U.S. Trade Representative and other agencies involved in international trade policy and regulation. Before that, he served for three years in the Office of the General Counsel of the U.S. Trade Representative. From 2000 through 2003, Kearns worked in the international trade group of the law firm, WilmerHale. Kearns holds a M.P.P. from the Kennedy School of Government at Harvard University, a J.D. from the University of Pennsylvania and a B.A. from the University of Denver.

Executive Order Calls for Omnibus Report on Significant Trade Deficits

4/3/17 – President Trump signed an executive order on March 31 requiring that the secretary of Commerce prepare and submit a report that examines the causes of trade deficits within 90 days (i.e., by June 29, 2017). The analysis will focus on the major causes of trade deficits, including, as applicable, differential tariffs, non-tariff barriers, injurious dumping, injurious government subsidization, intellectual property theft, forced technology transfer, denial of worker rights and labor standards, and any other form of discrimination against the commerce of the United States or other factors contributing to the deficit. The report will also assess the effects of trade relationships on the production capacity and strength of the manufacturing and defense industrial bases of the United States and on employment and wage growth in the United States, and identify imports and trade practices that may be impairing the national security of the United States.

In signing the order, the president stated that he was “ordering the first-ever comprehensive review of America’s trade deficits and all violations of trade rules that harm the United States and the workers of the United States.” The executive order states that “For many years, the United States has not obtained the full scope of benefits anticipated under a number of international trade agreements or from participating in the World Trade Organization. The United States[’] annual trade deficit in goods exceeds $700 billion, and the overall trade deficit exceeded $500 billion in 2016.” In announcing the order, President Trump stated that, “We're going to investigate all trade abuses, and, based on those findings, we will take necessary and lawful action to end those many abuses.”

Secretary of Commerce Wilbur Ross has indicated that the study will focus on the countries primarily responsible for the U.S. trade deficit: China, Japan, Germany, Mexico, Ireland, Vietnam, Italy, South Korea, Malaysia, India, Thailand, France, Switzerland, Taiwan, Indonesia and Canada.

Executive Order Directs Homeland Security to Develop Plan to Collect Unpaid Tariffs

4/3/17 – Asserting that importers who evade antidumping and countervailing duties in place against them expose U.S. employers to unfair competition and deprive the U.S. government of lawful revenue, President Trump signed an executive order, “Establishing Enhanced Collection and Enforcement of Antidumping and Countervailing Duties and Violations of Trade and Customs Laws,” on March 31. The order directs the secretary of Homeland Security, in consultation with the secretary of the Treasury, the secretary of Commerce and the United States trade representative, to develop an implementation plan by June 29, 2017 that would (1) require covered importers (those who, based on a risk assessment conducted by Customs and Border Protection, pose a risk to the revenue of the United States) to provide security for antidumping and countervailing duty liability through bonds and other legal measures, and (2) identify other appropriate enforcement measures.

According to the order, $2.3 billion in antidumping and countervailing duties owed to the government remained uncollected as of May 2015. President Trump stated, “I'm signing [this] executive order to ensure that we fully collect all duties imposed on foreign importers that cheat. They're cheaters. From now on, those who break the rules will face the consequences – and they'll be very severe consequences.”

Background

Before his inauguration, President Trump stated that he intends to increase trade enforcement measures against countries and specific companies that he believes are harming U.S. interests at home and abroad. His recommendations targeting offending countries include:

  1. identifying violations of trade agreements and using applicable remedies to address such trade abuses;
  2. bringing trade cases against China – whether in the United States or at the World Trade Organization (WTO);
  3. applying tariffs under Section 201 and 301 of the Trade Act of 1974 and Section 232 of the Trade Expansion Act of 1962;
  4. placing a 45 percent tariff on all goods from China and a 35 percent tariff on goods from Mexico, which would upend the North American Free Trade Agreement (NAFTA); and
  5. increasing economic sanctions against certain countries like Cuba, Syria and Iran.

President Trump has also repeatedly stated that he would place import tariffs as high as 35 percent on U.S. companies that participate in offshore manufacturing and impose a 15 percent tax on U.S. companies that outsource jobs.

FTAs
United States and South Korea Hold Initial Meeting on Renegotiating Free Trade Agreement

1/8/18 – On January 5, the United States and South Korea held their first meeting to discuss potential renegotiation of the U.S.- South Korea (KORUS) free trade agreement. In addition to discussing procedural and timetable issues, the United States discussed proposals to move toward fair and reciprocal trade in key industrial goods sectors, such as autos and auto parts, and to resolve cross-cutting and sector-specific barriers affecting U.S. exports. South Korea noted its interest in resolving "sensitive issues," including the investor-state dispute settlement (ISDS) clause and trade remedies.

At the conclusion of the negotiating session, Ambassador Robert Lighthizer said, "We have much work to do to reach an agreement that serves the economic interests of the American people. Our goals are clear: we must achieve fair and reciprocal trade between our two nations. We will move forward as expeditiously as possible to achieve this goal."

The United States first announced its intent to seek modifications to KORUS in July 2017. During President Trump's visit to Seoul in November 2017, the two countries agreed to expedite the talks. The U.S. delegation is led by Michael Beeman, Assistant U.S. Trade Representative for Japan, Korea and APEC. South Korea's delegation is led by Myung-hee Yoo, Director General from the Ministry of Trade, Industry and Energy (MOTIE).

Trans-Pacific Partnership Moves Forward Without the United States

11/13/17 – Despite the absence of the United States, the remaining members of the Trans-Pacific Partnership Agreement (TPP), which was originally signed in February 2016, announced that they had reached an agreement on “core elements” of the terms of an agreement, now termed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). While acknowledging that several key issues remain to be negotiated, the trade ministers from the remaining 11 countries issued a joint statement stating that the revised agreement “maintains the high standards, overall balance and integrity of the TPP while ensuring the commercial and other interests of all participants and preserving our inherent right to regulate, including the flexibility of the parties to set legislative and regulatory priorities. Ministers also affirm the right of each party to preserve, develop and implement its cultural policies. Ministers consider that the CPTPP reflects the desire of the parties to implement the TPP outcomes among themselves.”

While the text of the draft CPTPP was not released, an outline was released with the joint statement. Also, several provisions of the original TPP covering state-owned enterprises, services and investment non-confirming measures, dispute settlement and cultural exemptions have, for the moment, been suspended pending further discussions.

President Trump Addresses International Trade in UN Speech

9/20/17 – In his remarks at the opening session of the General Assembly of the United Nations, President Donald Trump spoke on a wide range of topics, including international trade. On that subject, Trump said, “In America, we seek stronger ties of business and trade with all nations of good will, but this trade must be fair and it must be reciprocal. For too long, the American people were told that mammoth multinational trade deals, unaccountable international tribunals, and powerful global bureaucracies were the best way to promote their success. But as those promises flowed, millions of jobs vanished and thousands of factories disappeared. Others gamed the system and broke the rules. And our great middle class, once the bedrock of American prosperity, was forgotten and left behind, but they are forgotten no more and they will never be forgotten again. While America will pursue cooperation and commerce with other nations, we are renewing our commitment to the first duty of every government: the duty of our citizens. This bond is the source of America's strength and that of every responsible nation represented here today.”

Two-Step Process for Negotiating Trade Deals

2/1/17 – On January 31, 2017, the new Trump administration indicated there would be a “two-step process” for negotiating trade deals. White House Press Secretary Sean Spicer stated in a press briefing, “I think, number one, we're going to reexamine all of the current trade deals, figure out if we can re-improve them. But secondly, I think we're going to start talking to other countries around the globe, including some of those TPP partners. I think of the 11 other countries, five of them we have current trade deals with. So you would examine those to see if we can improve upon them and then look at the other countries in there and see if there's a willingness to engage with some of those other countries.” Asked about any potential changes to the roles of official U.S. trade negotiators, Spicer indicated that the “U.S. Trade Representative is clearly the leader of negotiating trade deals.”

Separately, when asked about trade with countries that are parties to the TPP, White House National Trade Council Director Peter Navarro stated that the Trump administration intends to “negotiate bilateral trade deals with every single country that comprised the TPP.”

President Trump Issues Memorandum Directing USTR to Withdraw the United States from Trans-Pacific Partnership

1/24/17 – As one of his first acts in office, on January 23, 2017, President Donald Trump issued a memorandum instructing the U.S. Trade Representative to take the necessary steps to withdraw the United States as a signatory to the Trans-Pacific Partnership (TPP) trade agreement, which was negotiated by President Obama but had yet to enter into force. As a candidate, Trump dubbed TPP “a potential disaster for our country,” and his position remains at odds with many Republican officials and TPP proponents who argue that abandoning the TPP will close off key trade markets in the Asia-Pacific region and “gut” U.S. leadership in this region of the world.

U.S. ratification of the TPP is essentially a precondition for it to come into force. The agreement requires ratification by at least six TPP parties representing 85 percent of the gross domestic product of the original signatories to the deal. With the action taken by the president, the 85 percent threshold cannot be met and TPP as a multilateral trade agreement is likely dead.

The TPP involved 12 nations that cover 40 percent of the global economy, but it was also viewed by many as a way in which the United States could counter-balance the rise of China as an economic influence in southeast Asia. Instead of TPP, President Trump has indicated that his administration will pursue bilateral trade agreements with TPP members with whom the United States does not already have agreements. At a press briefing, White House Press Secretary Sean Spicer stated, “The beautiful thing about a bilateral agreement is that if any one of the two parties in the agreement decides at any time they want to get out of the agreement or they’re not being treated fairly, they can renegotiate it much easier.”

While President Trump has made his position clear regarding the TPP agreement, it remains to be seen what his administration’s overall Asia-Pacific trade policy will be other than to pull the United States out of its TPP commitments.

Background

The Trans-Pacific Partnership (TPP) is a trade agreement signed in February 2016 among 12 Pacific Rim countries – Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam – to remove tariffs, promote trade and establish an investor-state mechanism for resolving disputes.

In both June and October 2016, Donald Trump stated that he would withdraw the United States from the TPP, as part of his “7 Point Plan To Rebuild the American Economy by Fighting for Free Trade” and as part of his plan for his first 100 days in the White House.

U.S. withdrawal from the TPP would destroy the pact because the TPP does not enter into effect until six signatories representing at least 85 percent of the original 12 signatories’ total gross domestic product (GDP) ratify the agreement, and the United States represents nearly 62 percent of the TPP’s GDP.

Iran
President Trump Reluctantly Continues to Waive Nuclear Sanctions on Iran

1/12/18 – President Trump has announced that he will continue to waive nuclear-related sanctions toward Iran despite his misgivings about the multi-party agreement with Iran known as the Joint Comprehensive Plan of Action (JCPOA, or commonly known as the Iran nuclear agreement) and Iran’s continued support for international terrorism, its human rights abuses and its continuing censorship at home. In a White House statement, the president indicated that “I have been very clear about my opinion of that deal. It gave Iran far too much in exchange for far too little.” He added, “Despite my strong inclination, I have not yet withdrawn the United States from the Iran nuclear deal.”* He then briefly identified his conditions for either fixing the agreement or ultimately withdrawing from the JCPOA.

While President Trump will continue to work with Congress on legislation regarding Iran, he indicated that it must have four “critical components”: (1) Iran must allow immediate inspections of potential nuclear sites; (2) Iran can never possess a nuclear weapon; (3) there must be no expiration date prohibiting Iran’s efforts to develop or acquire nuclear weapons under any deal; and (4) Iran’s long-range missile capabilities are inseparable from Iran’s nuclear weapons ambitions and will also be subject to severe sanctions. In closing, the president stated:

“Today, I am waiving the application of certain nuclear sanctions, but only in order to secure our European allies’ agreement to fix the terrible flaws of the Iran nuclear deal. This is a last chance. In the absence of such an agreement, the United States will not again waive sanctions in order to stay in the Iran nuclear deal. And if at any time I judge that such an agreement is not within reach, I will withdraw from the deal immediately. No one should doubt my word. I said I would not certify the nuclear deal—and I did not. I will also follow through on this pledge. I hereby call on key European countries to join with the United States in fixing significant flaws in the deal, countering Iranian aggression, and supporting the Iranian people. If other nations fail to act during this time, I will terminate our deal with Iran. Those who, for whatever reason, choose not to work with us will be siding with the Iranian regime’s nuclear ambitions, and against the people of Iran and the peaceful nations of the world.”

In a later press briefing, White House officials stated that the administration intends to work with European allies for a follow-on agreement that puts in place certain triggers that Iran could not exceed. They stressed that this “would not entail direct negotiations with the Iranians, [sic] this would be something the United States works out with our European partners only. It would be an agreement amongst the United States and our European partners to re-impose multilateral sanctions should the Iranians surpass the new triggers that we would lay out.”

* Under the Iran Nuclear Agreement Review Act, implemented in 2015 at the time of the JCPOA, the president must certify to Congress every 90 days that the suspension of sanctions under the nuclear agreement is warranted and that Iran remains in compliance with its obligations to terminate its illicit nuclear weapons program. In July 2017, Trump reluctantly certified that Iran was in compliance with the terms of the JCPOA (see Trump and Trade Alert of July 18, 2017); however, in October 2017, the president declined to certify that Iran was in compliance with the agreement (see Trump and Trade Alert of October 13, 2017).

OFAC Sanctions Additional Iranian Individuals and Entities for Human Rights Abuses and Support of Weapons Proliferation

1/12/18 – The Department of the Treasury’s Office of Foreign Assets Control (OFAC) has designated 14 individuals and entities for sanctions arising from serious human rights abuses and censorship in Iran and support of designated Iranian weapons proliferators. According to Treasury Secretary Steven T. Mnuchin, “The United States will not stand by while the Iranian regime continues to engage in human rights abuses and injustice. We are targeting the Iranian regime, including the head of Iran’s judiciary, for its appalling mistreatment of its citizens, including those imprisoned solely for exercising their right to freedom of peaceful assembly, and for censoring its own people as they stand up in protest against their government. We are also targeting Iran’s ballistic missile program and destabilizing activities, which it continues to prioritize over the economic well-being of the Iranian people.”

While the majority of these persons and entities are Iranian, several are located in Malaysia and China and have been sanctioned for their support of the Iranian regime. The full list is available on Treasury’s website. This decision is not formally related to an expected Trump administration announcement later today regarding an extension of the relaxation of sanctions on Iran under the Joint Comprehensive Plan of Action (i.e., JCPOA or Iran nuclear agreement) but indicates that the United States will continue to sanction Iran in non-nuclear areas outside the scope of the JCPOA.

President Trump Declines to Certify to Congress That Iran Is in Compliance With the JCPOA

10/13/17 – In brief remarks, President Trump announced that in addition to his administration’s new Iran strategy, he “cannot and will not” certify to Congress that the continued suspension of sanctions against Iran under the Joint Comprehensive Plan of Action (JCPOA) is appropriate. Reiterating his often stated claim that “the Iran Deal was one of the worst and most one-sided transactions the United States has ever entered into,” the president stated that he needed “negotiators who will much more strongly represent America’s interest.” The president added that, “Since the signing of the nuclear agreement, the regime’s dangerous aggression has only escalated. At the same time, it has received massive sanctions relief while continuing to develop its missiles program. Iran has also entered into lucrative business contracts with other parties to the agreement.”

Arguing that he will not “continue down a path whose predictable conclusion is more violence, more terror, and the very real threat of Iran’s nuclear breakout,” President Trump directed his administration to work with Congress and allies “to address the deal’s many serious flaws so that the Iranian regime can never threaten the world with nuclear weapons.” He added that should a solution not be reachable, “then the agreement will be terminated. It is under continuous review, and our participation can be cancelled by me, as President, at any time.”

President Trump’s “New Strategy on Iran” and Congressional Developments

10/13/17 – After a nine-month review, consultations with his national security staff and discussions with members of Congress, President Trump has announced a new U.S. strategy on relations with Iran. In a statement, the White House announced that the “new Iran strategy focuses on neutralizing the Government of Iran’s destabilizing influence and constraining its aggression, particularly its support for terrorism and militants.” While not providing specifics, the announcement indicated that the United States would work to deny Iran, and particularly the Islamic Revolutionary Guard Corps (IRGC), funding; counter Iran’s efforts to develop its ballistic missiles and other asymmetric weapons capabilities; and “deny the Iranian regime all paths to a nuclear weapon.”

Regarding the Joint Comprehensive Plan of Action (JCPOA), Trump stated that Iran’s “activities severely undercut whatever positive contributions to ‘regional and international peace and security’ [the JCPOA] sought to achieve,” adding that Iranian officials have sought to “exploit loopholes and test the international community’s resolve.” While not yet making a full statement on whether he will refuse to re-certify to Congress Iranian compliance under the JCPOA, which must be done by October 15, 2017, Trump clearly indicated that current Iranian behavior cannot be tolerated and that “the deal must be strictly enforced, and the IAEA must fully utilize its inspection authorities.”

Congressional Activity on Iran

On October 12, 2017, the House Foreign Affairs Committee, chaired by Rep. Ed Royce (R-CA), passed the Iran Ballistic Missiles and International Sanctions Enforcement Act (HR 1698). The legislation seeks to expand sanctions against Iran for its continuing efforts to develop intercontinental ballistic missile capabilities. In remarks prior to the committee markup of HR 1698, Chairman Royce stated, “As flawed as the [JCPOA] deal is, I believe we must now enforce the hell out of it. Let’s work with allies to make certain that international inspectors have better access to possible nuclear sites, and we should address the fundamental sunset shortcoming, as our allies have recognized.” Committee member statements, witness testimony and a webcast of the October 11, 2017 hearing on the legislation are available on the House Foreign Affairs Committee’s website. The legislation currently has 320 cosponsors in the House of Representatives. HR 1698 will next be reported to the full House for further debate and consideration.

In the Senate, on October 13, 2017, Senators Bob Corker (R-TN) and Tom Cotton (R-AK) announced their intention to introduce legislation to amend the Iran Nuclear Agreement Review Act of 2015 (Public Law No. 114-17), to address certain provisions in the JCPOA, particularly an elimination of the deal’s sunset on limitations placed on Iran’s future development of any nuclear program. The legislation, which has not yet been formally introduced, would penalize Iran if it fails to abide by guidelines related to centrifuge research and development. Ultimately, under the proposed restrictions in the legislation, any violations by Iran could result in the reinstatement of U.S. sanctions, especially if it were to come within a year of gaining nuclear capability.

President Trump Reportedly to Refuse Certifying Iran's Compliance with JCPOA

10/6/17 – The White House has acknowledged that while no decision is final, President Trump is likely to decline to recertify that Iran is in compliance with the terms of the Joint Comprehensive Plan of Action (JCPOA), which is more commonly known as the Iran nuclear deal. Trump is expected to publicly announce his position on the JCPOA and an overall strategy toward Iran next week; any final determination must be issued by October 15, 2017. Until then, the TrumpandTrade.com team offers this summary of the 2015 law that would be triggered should Trump not recertify to Congress that Iran is in compliance with the JCPOA.

Under the Iran Nuclear Agreement Review Act of 2015 (Public Law No. 114-17), the president must submit to Congress every 90 days a compliance certification indicating that (1) Iran is fully implementing the terms of the JCPOA, (2) it has not committed a material breach, (3) it has taken no actions to advance its nuclear weapons program, and (4) the suspension of sanctions remains warranted. Under this law, there are clear and detailed provisions pertaining to congressional oversight of Iranian compliance under the JCPOA should the president not submit a certification of Iran's compliance. Subsection (e) of the law provides for expedited consideration of "qualifying legislation" introduced within 60 calendar days of the date when the president does not submit a certification stating Iran is in compliance with the JCPOA.

The term "qualifying legislation" is defined to mean only a bill that (1) is titled, "A bill reinstating statutory sanctions imposed with respect to Iran” and (2) states, after the enacting clause, "Any statutory sanctions imposed with respect to Iran pursuant to __________ that were waived, suspended, reduced, or otherwise relieved pursuant to an agreement submitted pursuant to section 135(a) of the Atomic Energy Act of 1954 are hereby reinstated and any action by the United States Government to facilitate the release of funds or assets to Iran pursuant to such agreement, or provide any further waiver, suspension, reduction, or other relief pursuant to such agreement is hereby prohibited," with the blank space filled with the law or laws under which sanctions are to be reinstated. Such qualifying legislation must be introduced in the House by either the majority leader or minority leader or in the Senate by the majority leader or minority leader (or one of their designees).

Any such legislation is to receive expedited consideration; if any committee to which the bill has been referred has not reported out the bill within 10 legislative days, that committee will no longer have oversight of the bill. Each chamber (House and Senate) has slightly different rules under the law in which to consider any bill. In the House, all points of order against any qualifying legislation are waived as are any motions against its consideration; two hours of debate are allowed; and no motions for reconsideration will be allowed. In the Senate, all points of order pertaining to any qualifying legislation are also waived; no motions to postpone or reconsider will be allowed, but certain (undefined) debatable motions and appeals can be considered; 10 hours of debate are allowed; and no motion to recommit will be allowed. If one chamber does not introduced qualifying legislation and the other chamber considers and passes such legislation, that bill once passed over to the other chamber must be considered under the expedited procedures (as previously discussed) under this law.

Stay tuned …

Iran Sanctions: U.S. Agencies Continue to Implement Processes for Identifying Potentially Sanctionable Entities

9/29/17 – Under the Joint Comprehensive Plan of Action (JCPOA), the United States and several other countries agreed to ease certain sanctions on Iran in exchange for Iran’s commitment to limit its nuclear program. This relaxation, however, was limited in scope to any nuclear-related sanctions, and the United States and other parties to the JCPOA continue to have the authority to sanction Iran for any activity related to efforts to further develop its ballistic missile program. The United States may continue to sanction Iran for such activity under Executive Orders 12938 and 13382, and the Departments of State and Treasury continue their efforts to identify sanctionable entities.

The Government Accountability Office released a report September on 28, 2017 examining (1) the extent to which State and Treasury have continued since issuance of the JCPOA to identify entities that are potentially sanctionable and (2) entities that have actually been sanctioned since January 2016. According to the report, State and Treasury have placed 33 entities and 25 individuals on the Specially Designated Nationals List since January 2016.

President Trump Signs Into Law H.R. 3364 Regarding Sanctions Against Iran, Russia and North Korea

8/2/17 – Today, President Trump signed into law the Countering America’s Adversaries Through Sanctions Act, which strengthens and expands statutory sanctions on Iran, Russia and North Korea. In a statement released by the White House, the president said, “I favor tough measures to punish and deter bad behavior by the rogue regimes in Tehran and Pyongyang. I also support making clear that America will not tolerate interference in our democratic process, and that we will side with our allies and friends against Russian subversion and destabilization.” The statement goes on to say that “the bill remains seriously flawed – particularly because it encroaches on the executive branch’s authority to negotiate.”

In a separate statement issued the same day, the president again asserted that the legislation “is significantly flawed,” stating that, “In its haste to pass this legislation, the Congress included a number of clearly unconstitutional provisions.”

See our July 26th update below for additional background information.

House Passes Bill for Additional Sanctions Against Iran, Russia and North Korea

7/26/17 – On July 25, the House of Representatives passed legislation that would impose additional sanctions on Iran, North Korea and Russia. The bill would increase sanctions on those involved in Iran’s human rights abuses, its support for terrorism, as well as its ballistic missile program. For Russia, the bill would ensure that existing economic sanctions remain as long as Russian aggression continues by empowering Congress to review and disapprove any sanctions relief that the president may seek. The bill also includes the text of H.R. 1644, The Korean Interdiction and Modernization of Sanctions Act, which was passed by the House in May by a vote of 419-1, and seeks to expand sanctions targeting North Korea’s nuclear weapons program.

As noted in a previous post, the Senate has also passed legislation (S. 722) to implement additional sanctions on Iran and Russia; the Senate bill does not contain provisions on North Korea sanctions. Because different bills were passed in each chamber and the House bill included additional sanctions against North Korea, it is expected that the Senate will take up consideration of H.R. 3364 for any final vote. Interestingly, given President Trump’s perceived ambivalence on the Ukraine-related Russia sanctions, the votes for passage by each chamber – 419 to 3 in the House and 98-2 in the Senate – likely make any passage of a final bill veto-proof.

OFAC and State Department Sanction 18 Additional Iranian Entities/Persons

7/18/17 – Almost immediately after the Trump administration’s announcement that Iran was in compliance with the terms of the Joint Comprehensive Plan of Action (JCPOA), the Department of the Treasury’s Office of Foreign Assets Control (OFAC) and the State Department designated an additional 18 Iranian entities and individuals for engaging in activities supporting Iran’s continued testing of ballistic missiles, as well as for engaging in activities supporting Iran’s military or Iran’s Islamic Revolutionary Guard Corps (IRGC).

OFAC has designated three networks supporting Iran’s military and/or the IRGC through the development of unmanned aerial vehicles and military equipment for the IRGC, the production and maintenance of fast attack boats for the IRGC-Navy, or the procurement of electronic components for entities that support Iran’s military. Additional persons and entities were added to OFAC’s Specially Designated Nationals List for Iran-based transnational criminal organization activities, including the theft of U.S. and western software programs which, at times, were sold to the Iranian government. A complete listing of OFAC designations is available on Treasury’s website.

The State Department designated two entities for engaging in activities that have materially contributed to, or pose a risk of materially contributing to, the proliferation of weapons of mass destruction or their means of delivery: the IRGC’s Aerospace Force Self Sufficiency Jihad Organization, which is involved in Iranian ballistic missile research and flight test launches, and the IRGC’s Research and Self Sufficiency Jehad Organization, which is responsible for the research and development of ballistic missiles.

The State Department stated that Iran continues to test and develop ballistic missiles in direct defiance of United Nations Security Council Resolution 2231, and referred to the JCPOA’s statement regarding the participants’ anticipation that “full implementation of this JCPOA will positively contribute to regional and international peace and security.” In announcing these new sanctions, however, State Department officials stated that “Iran’s other malign activities are serving to undercut whatever ‘positive contributions’ to regional and international peace and security were intended to emerge from the JCPOA.” In announcing these new sanctions, the Trump administration stated that it is continuing to conduct a full review of U.S. policy toward Iran and that the United States during this review will continue to aggressively counter Iran’s activities in the region.

Trump Administration Again Certifies that Iran Is in Compliance With JCPOA Terms

7/18/17 – The Trump administration has again certified that Iran is in compliance with the terms of the Joint Comprehensive Plan of Action (JCPOA), an international agreement to curtail Iran’s development of nuclear weapons. This certification to Congress must occur every 90 days and followed confirmation by the international monitors and other signatories to the JCPOA that Iran is meeting the terms of the agreement. Reports are, however, that President Trump begrudgingly agreed to the certification after multiple meetings with his national security staff and is demanding that his staff develop a new strategy to confront Iran because he does not want to continue to indefinitely recertify Iran’s compliance.

In making the announcement, State Department officials noted that President Trump intends to impose new sanctions on Iran for ongoing “malign activities” in non-nuclear areas such as ballistic missile development and support for terrorism. “We do expect to be implementing new sanctions” related to missiles and Iran's “fast boat program,” one State Department official indicated.

Senate Passes Bill for Additional Sanctions Against Iran and Russia

6/19/17 – After several months of negotiations in the Committee on Foreign Relations, the full Senate on June 15, 2017 considered and passed a bipartisan bill by a vote of 98-2 seeking to hold both Iran and Russia accountable for their recent destabilizing activities in world affairs. S. 722 at Title I contains the Iran component of the legislation and was authored by Senators Corker (R-Tenn.), Menendez (D-N.J.), Rubio (R-Fla.), Cardin (D-Md.), Cotton (R-Ark.) and Casey (D-Pa.). It expands sanctions on Iran for ballistic missile development, support for terrorism, transfers of conventional weapons and human rights violations. The Countering Iran’s Destabilizing Activities Act of 2017 contains the following key provisions:

  • New mandatory ballistic missile sanctions: imposes mandatory sanctions on persons involved with Iran’s ballistic missile program and those that transact with them.
  • New terrorism sanctions: applies terrorism sanctions to the Islamic Revolutionary Guard Corps and codifies individuals who are currently sanctioned due to Iranian support for terrorism.
  • Enforcement of arms embargo: requires the president to block the property of any person or entity involved in specific activities related to the supply, sale, or transfer of prohibited arms and related material to or from Iran.

The text of Title II of S. 722 maintains and substantially expands sanctions against the government of Russia in response to the violation of the territorial integrity of the Ukraine and Crimea, its cyber-attacks and interference in elections, and its continuing aggression in Syria. This portion of the bill will:

  • Provide for a mandated congressional review if sanctions are relaxed, suspended or terminated.
  • Codify and strengthen existing sanctions contained in executive orders on Russia, including the sanctions’ impact on certain Russian energy projects and on debt financing in key economic sectors.
  • Impose new sanctions on: corrupt Russian actors; those seeking to evade sanctions; those involved in serious human rights abuses; those supplying weapons to the Assad regime; those conducting malicious cyber activity on behalf of the Russian government; those involved in corrupt privatization of state-owned assets; and those doing business with the Russian intelligence and defense sectors.
  • Allow broad new sanctions on key sectors of Russia’s economy, including mining, metals, shipping and railways.
  • Require a study on the flow of illicit finance involving Russia and a formal assessment of U.S. economic exposure to Russian state-owned entities.

S. 722 will shortly cross over to the House of Representatives, where it will be assigned to the appropriate committee(s) for consideration. As such, this legislation, while significant, is not yet a law.

Iran’s President Hassan Rouhani Wins Re-Election

5/22/17 – Press reports have confirmed that Iran’s president Hassan Rouhani, a moderate who negotiated the joint nuclear deal and who has sought more positive relationships with western powers, won re-election over the hard-right conservative challenger, cleric Ebrahim Raisi. Rouhani reportedly received 57 percent of the vote to Raisi’s 38.5 percent, with the remaining votes split among other minor candidates. While this result is being viewed by many as a positive outcome for Iran’s ongoing efforts to engage with the rest of the world, it remains to be seen if Iran’s Supreme Leader Ayatollah Ali Khamenei, who has final say over all state issues and limits the president's power, will limit any further efforts by Rouhani in this area. In response to the election results, U.S. Secretary of State Rex Tillerson stated:

“What we hope – what I would hope – is that Rouhani now has a new term, and that he use that term to begin a process of dismantling Iran’s network of terrorism, dismantling its financing of the terrorist network, dismantling of the manning and the logistics and everything that they provide to these destabilizing forces that exist in this region. That’s what we hope he does. We also hope that he puts an end to [Iran’s] ballistic missile testing. We also hope that he restores the rights of Iranians to freedom of speech, to freedom of organization, so that Iranians can live the life that they deserve. That’s what we hope this election will bring. I’m not going to comment on my expectation. But we hope that if Rouhani wanted to change Iran’s relationship with the rest of the world, those are the things he could do.”

Trump Administration Continues Waiver of Nuclear-Related Sanctions on Iran, Sanctions Iranian Officials for Ballistic Missile Program

5/18/17 – The Trump administration has renewed a necessary waiver regarding U.S. sanctions on Iran’s crude oil exports. This will allow Iran to continue to sell its oil in the international market despite existing U.S. sanctions that must be periodically waived under the terms of the 2015 nuclear deal with Iran.

The Treasury Department’s Office of Foreign Assets Control (OFAC), however, has placed two senior Iranian defense officials on OFAC’s Specially Designated Nationals (SDN) List for their involvement in Iran's solid-fueled ballistic missile program. Morteza Farasatpour, a senior defense official with Iran's Defense Industries Organization (DIO) and Rahim Ahmadi, a senior official serving as the Director of Iran's Shahid Bakeri Industries Group (SBIG), along with Iran-based company Matin Sanat Nik Andishan, have been placed on the SDN List for activities in support of Iran's ballistic missile program.

These actions were taken in conjunction with the State Department’s release of its semi-annual report to Congress detailing sanctions imposed on persons responsible for or complicit in human rights abuses committed against citizens of Iran or their family members.

As a reminder to our readers, on Friday, May 19, Iran will hold its presidential vote that could also have a major impact on the status of the nuclear deal. Current President Hassan Rouhani, considered a moderate who oversaw the negotiation and implementation of the nuclear deal, is running for re-election. While he faces competition from several other candidates, his principal challenger is hardline conservative cleric Ebrahim Raisi.

Trump Administration Undergoing Interagency Review of Iran Deal

4/20/17 – On April 18, 2017, the U.S. Department of State certified to House Speaker Paul Ryan that Iran is compliant through April 18th with its commitments under the Joint Comprehensive Plan of Action (JCPOA). However, Secretary Tillerson raised concerns about Iran's role as a state sponsor of terrorism and alerted Congress to an effort directed by the president to evaluate whether continuing to lift sanctions would be in U.S. national security interests.

"Iran remains a leading state sponsor of terror, through many platforms and methods. President Donald J. Trump has directed a National Security Council-led interagency review of the Joint Comprehensive Plan of Action that will evaluate whether suspension of sanctions related to Iran pursuant to the JCPOA is vital to the national security interests of the United States."

In further comments after releasing the letter, the secretary strongly rebuked the deal, stating that, "This deal represents the same failed approach of the past." He added that it ''fails to achieve the objective of a non-nuclear Iran'' and ''only delays their goal of becoming a nuclear state.''

The full text of the letter:

The Honorable Paul D. Ryan
Speaker of the House of Representatives
Washington, DC 20515

Dear Mr. Speaker:

This letter certifies that the conditions of Section 135(d)(6) of the Atomic Energy Act of 1954 (AEA), as amended, including as amended by the Iran Nuclear Agreement Review Act of 2015 (Public Law 114-17), enacted May 22, 2015, are met as of April 18, 2017.

Notwithstanding, Iran remains a leading state sponsor of terror through many platforms and methods. President Donald J. Trump has directed a National Security Council-led interagency review of the Joint Comprehensive Plan of Action (JCPOA) that will evaluate whether suspension of sanctions related to Iran pursuant to the JCPOA is vital to the national security interests of the United States. When the interagency review is completed, the administration looks forward to working with Congress on this issue.

Sincerely,

Rex W. Tillerson

Iran Retaliates for Ballistic Missile Sanctions Implemented in February by President Trump

3/27/17 – In retaliation for restrictions that the Trump administration imposed on companies and people connected with Iran’s ballistic missile program (see our previous update on this topic), Iran has imposed sanctions on 15 U.S. companies for alleged human rights violations and cooperation with Israel. Iran's foreign ministry stated that the companies had "flagrantly violated human rights" and cooperated with Israel in its "terrorism" against the Palestinians and the expansion of Jewish settlements. It is not immediately clear if any of these U.S. companies actually have any dealings with Iran or whether they would be affected in any way by this action, which includes seizure of their assets and a ban on contacts with them.

ZTE Pleads Guilty to Illegal Exports to Iran and North Korea

3/9/17 – On March 7, 2017, Zhongxing Telecommunications Equipment Corporation and ZTE Kangxun Telecommunications Ltd., known collectively as “ZTE,” agreed to combined civil and criminal penalties of $1.19 billion for the illegal shipment of telecommunications equipment to Iran and North Korea in violation of the Export Administration Regulations (EAR), the Iranian Transactions and Sanctions Regulations (ITSR) and the International Emergency Economic Powers Act (IEEPA). ZTE is one of the world’s largest manufacturers of telecommunications equipment, and relies heavily on U.S. companies and U.S.-origin goods for components. The civil penalty is the largest ever imposed by the Bureau of Industry and Security at the Department of Commerce (BIS) and the Office of Foreign Assets Control at the Department of the Treasury (OFAC), and the combined penalties are the largest fine and forfeiture ever levied by the U.S. government in an export control case.

This investigation and resulting penalties serve as important reminders to both U.S. and foreign companies that there is a steep price to pay for attempting to circumvent U.S. economic sanctions and export control laws and regulations. A robust compliance program with regular training and auditing is essential, as is a commitment from company officials in supporting compliance, in order to avoid this kind of outcome.

While this investigation was initiated prior to President Trump assuming office, the tone of administration officials in announcing this settlement echoes their campaign promise of more forceful trade enforcement. In announcing the settlement, Commerce Secretary Ross stated, “We are putting the world on notice: the games are over. Those who flout our economic sanctions and export control laws will not go unpunished – they will suffer the harshest of consequences. Under President Trump’s leadership, we will be aggressively enforcing strong trade policies with the dual purpose of protecting American national security and protecting American workers.”

Read our full client update on this topic.

Iranian Persons and Entities Designated by OFAC as a Result of Recent Ballistic Missile Tests

2/3/17 – On February 3, 2017, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated 13 individuals and 12 entities for placement on its Specially Designated Nationals (SDN) List. This move comes just days after National Security Advisor Michael Flynn placed Iran “on notice” in response to its recent ballistic missile tests. John Smith, acting director of OFAC, said, “Today’s action is part of Treasury’s ongoing efforts to counter Iranian malign activity abroad that is outside the scope of the JCPOA [Joint Comprehensive Plan of Action]. We will continue to actively apply all available tools, including financial sanctions, to address this behavior.”

Read our full client update on this topic.

Trump Administration Puts Iran “On Notice”

2/2/17 – In response to a recent ballistic missile test conducted by Iran, President Trump’s National Security Advisor Michael Flynn made a brief press statement February 1, 2017, condemning the testing and stating that it is in violation of United Nations Security Council Resolution 2231. Flynn stated that the Obama administration “failed to respond adequately” to Iranian transgressions under the nuclear deal with Iran implemented in January 2016 and noted that President Trump has criticized such agreements “as being weak and ineffective.” Without providing any further details, Flynn announced that the United States was “officially putting Iran on notice.”

Background

On July 14, 2015, the P5+1 (China, France, Germany, Russia, the United Kingdom and the United States), the European Union, and Iran reached a Joint Comprehensive Plan of Action (JCPOA) to ensure that Iran’s nuclear program will be used exclusively for non-military, peaceful means. On January 16, 2016, the JCPOA was formally implemented and certain trade and economic sanctions against Iran were relaxed. From its inception, the deal has had its share of proponents and critics, and was a hot-button issue during the presidential election.

President Trump has been inconsistent in his view of the deal. He originally promised to renegotiate it; eventually, however, he told the American Israel Public Affairs Committee (AIPAC), "My number one priority is to dismantle the disastrous deal with Iran." The deal is not a treaty (requiring Senate ratification) but reflects non-binding commitments by the parties, along with verification measures. If he wanted, Trump could issue executive orders to restore sanctions on Iran and announce that the United States will no longer participate in the JCPOA. Walking away from the deal and reintroducing sanctions will be problematic, however, because the other participants in the deal will likely want to maintain it for both strategic and political reasons.

For more information on the scope of the JCPOA, please see our Iran publications.

NAFTA
Fifth Round of NAFTA Negotiations Concludes

11/22/17 – Upon the conclusion of the fifth round of renegotiations of the North American Free Trade Agreement (NAFTA), U.S. Trade Representative Robert Lighthizer issued the following statement:

“While we have made progress on some of our efforts to modernize NAFTA, I remain concerned about the lack of headway. Thus far, we have seen no evidence that Canada or Mexico are willing to seriously engage on provisions that will lead to a rebalanced agreement. Absent rebalancing, we will not reach a satisfactory result. A rebalanced, updated NAFTA will promote greater prosperity for American workers, farmers, ranchers and businesses and strengthen the North American region as a whole. Our teams will be meeting again next month in Washington. I hope our partners will come to the table in a serious way so we can see meaningful progress before the end of the year.”

The parties have agreed to hold the sixth round of negotiations January 23-28, 2018 in Montréal, Canada. In the meantime, negotiators will continue to work in intersessional meetings in Washington, D.C. throughout mid-December and will report back to the chief negotiators on the progress achieved.

U.S. Trade Representative Releases Updated NAFTA Negotiating Objectives

11/20/17 – The Office of the U.S. Trade Representative (USTR) has released an updated summary of U.S. objectives for the renegotiation of the North American Free Trade Agreement (NAFTA). The new objectives update the previous objectives published in July (see our 7/18/17 update), and come after four rounds of negotiations among the United States, Mexico and Canada. The updated objectives reflect the goals of text proposals the United States has tabled in the NAFTA negotiations so far. The objectives include increased market access for agriculture, new transparency and administrative measures, expanded investment and intellectual property objectives, and completed negotiations on the chapters of Competition and Small- and Medium-Sized Enterprises. According to the USTR, the objectives for Trade in Goods include the first-ever objective for trade deficit reduction and an improvement in the U.S. trade balance with NAFTA countries.

The updated objectives “represent a serious effort to renegotiate the Agreement to update its provisions to the best 21st century standards and rebalance the benefits of the deal so that each country succeeds. U.S. proposals reflecting these objectives are supported by a diverse group of American interests. If these objectives are achieved, the United States will obtain more open, equitable, secure, and reciprocal market access, and the entire NAFTA region will benefit.”

Fourth Round of NAFTA Negotiations Leaves All Parties Unsatisfied

10/19/17 – After four rounds of negotiations, the United States, Canada and Mexico are beginning to express frustration concerning the discussions and proposals to revise and update the North American Free Trade Agreement (NAFTA). In an October 17 joint statement, the parties indicated that they have put forward “substantially all initial text proposals” but that these proposals have “created challenges” and highlighted “significant conceptual gaps” among the three countries.

Acknowledging that one of President Trump’s clear objectives is the reduction of the U.S. trade deficit with its NAFTA partners, U.S. Trade Representative Robert Lighthizer stated that he was “surprised and disappointed by the resistance to change from our negotiating partners.” In his closing remarks, Ambassador Lighthizer said, “As difficult as this has been, we have seen no indication that our partners are willing to make any changes that will result in a rebalancing and a reduction in these huge trade deficits. Now I understand that after many years of one-sided benefits, their companies have become reliant on special preferences and not just comparative advantage. Countries are reluctant to give up unfair advantage. But the President has been clear that if we are going to have an agreement going forward, it must be fair to American workers and businesses that employ our people at home.”

In response, Canadian Foreign Affairs Minister Chrystia Freeland called the U.S. list of proposals “unconventional” and “troubling,” stating that some of them would “turn back the clock on 23 years of predictability, openness and collaboration under NAFTA.”

Mexican Secretary of the Economy Ildefonso Guajardo Villarreal said, “We must ensure that decisions we make today do not come back to haunt us tomorrow,” adding that, in order for the negotiations to be fruitful, “we must understand that we all have limits.”

Mexico will host the fifth round of negotiations November 17-21, 2017, and the parties have agreed that additional rounds will be necessary and scheduled during the first quarter of 2018.

NAFTA Renegotiation Begins!

8/16/17 – U.S. Trade Representative Robert Lighthizer, Canadian Foreign Affairs Minister Chrystia Freeland and Mexican Secretary of the Economy Ildefonso Guajardo Villarreal have started the first round of NAFTA renegotiation in Washington, D.C. with opening statements and an ambitious agenda that is scheduled to take the negotiations through August 20.

In his opening statement, Lighthizer indicated that all the parties acknowledge that the trade agreement needs to be updated and modernized to address economies that are different than when NAFTA was implemented in the 1990s. After addressing modernization, however, he stated, “the tough work begins.” While the agreement has benefited many Americans, Lighthizer added that “for countless Americans, the agreement has failed … We cannot ignore the huge trade deficits, the lost manufacturing jobs, the businesses that have closed or moved because of incentives – intended or not – in the current agreement.”  He also made clear that President Trump is “not interested in a mere tweaking of a few provisions and a couple of updated chapters. We feel that NAFTA has fundamentally failed many, many Americans and needs major improvement.”

NAFTA Renegotiations to Begin on August 16

7/20/17 – The Office of the U.S. Trade Representative (USTR) has announced that the first round of renegotiation of the North America Free Trade Agreement (NAFTA) will occur August 16-20, 2017 in Washington, D.C. Reportedly, the plan is to hold seven rounds of talks at three-week intervals, at alternating sites among the three countries, with a goal of completing the negotiations by early 2018.

John Melle, the assistant U.S. Trade Representative for the Western Hemisphere, will serve as the U.S. chief negotiator for the NAFTA negotiations. Since joining USTR in 1988, Melle has held a number of positions covering Mexico, Canada, the Caribbean and Central America. As assistant USTR for the Western Hemisphere, he is responsible for developing, coordinating and implementing the United States’ trade policy for the region.

USTR Releases Summary of Objectives for NAFTA Renegotiation

7/18/17 – U.S. Trade Representative Robert Lighthizer has released a detailed and comprehensive summary of the negotiating objectives for the renegotiation of the North American Free Trade Agreement (NAFTA). In a brief statement upon the release, Lighthizer stated that the Trump administration will seek an agreement “that reduces the U.S. trade deficit and is fair for all Americans by improving market access in Canada and Mexico for U.S. manufacturing, agriculture, and services.” The summary notes that the “new NAFTA must continue to break down barriers to American exports. This includes the elimination of unfair subsidies, market-distorting practices by state owned enterprises, and burdensome restrictions of intellectual property. The new NAFTA will be modernized to reflect 21st century standards and will reflect a fairer deal, addressing America’s persistent trade imbalances in North America. It will ensure that the United States obtains more open, equitable, secure, and reciprocal market access, and that our trade agreement with our two largest export markets is effectively implemented and enforced.”

The negotiating objectives include a new digital economy chapter and stronger labor and environmental obligations that are currently in NAFTA side agreements. These objectives reflect the negotiating standards established by Congress in the Bipartisan Congressional Trade Priorities and Accountability Act of 2015, which requires that the USTR release objectives at least 30 days before formal negotiations begin. Negotiations will now start no earlier than August 16, 2017.

U.S.-Mexico Sugar Trade Agreement – NAFTA Renegotiation Precursor?

6/8/17 – On June 6, 2017, the United States and Mexico agreed to revise previously signed suspension agreements that will continue to suspend antidumping and countervailing duty investigations and prevent the imposition of additional duties on imports of sugar into the United States. The revised agreement is intended to prevent dumping of Mexican sugar and correct for subsidies the Mexican sugar industry receives. The agreement addresses many of the concerns the U.S. sugar industry had with the previous agreement, including the pricing of raw sugar sold to Mexico mills, the percentage of refined sugar that may be imported into the United States, the determining factors between refined and raw sugar, and increased enforcement measures. U.S. refiners argue that Mexican sugar producers have been circumventing the 2014 suspension agreements’ requirement that forced them to send nearly half of their exports to U.S. refineries by exporting sugar that was technically raw but could be sold at higher prices and used directly in beverage and food production with minimal processing. The fact sheet released with the announcement, “Draft Amendments to Mexican Sugar Suspension Agreements,” is available on Commerce’s website.

While the terms of the revised agreements were not supported by the Coalition for Sugar Reform or the American Sugar Alliance, Secretary of Commerce Wilbur Ross agreed to the terms of the deal in principle and stated that he was confident that it “defends American workers across many industries and is the best way to ensure stability and growth.” The U.S. Chamber of Commerce stated that the deal “demonstrates the willingness of both governments to work through difficult issues in a constructive manner.” Indeed, a number of trade analysts believe this agreement on sugar is a hopeful sign for North American Free Trade Agreement (NAFTA) renegotiation efforts; there had been concern that if these sugar trade talks failed, it would be unlikely that a renegotiated NAFTA would be plausible. These negotiations and the terms of the agreements may be an early indication that U.S. trade negotiators may be willing to negotiate deals where significant and broad progress is achieved but certain key industries remain unsatisfied.

CRS Issues Report on NAFTA as Renegotiation Approaches

5/30/17 – On May 24, 2017, the non-partisan Congressional Research Service (CRS) released a report on the North American Free Trade Agreement (NAFTA). In addition to providing a short history of the trade agreement and an overview of certain key provisions, this timely report provides insight into certain trade trends and the agreement’s economic effects on the three member countries. The report also sets forth potential topics for any NAFTA renegotiation, including Automotive Sector; Services; E-Commerce, Data Flows and Data Localization; Intellectual Property Rights; State-Owned Enterprises; Investment; Dispute Settlement; Labor; Environment; Energy; Customs and Trade Facilitation; and Sanitary and Phytosanitary Standards.

U.S. Trade Representative Sets Public Hearing and Seeks Comment on NAFTA Renegotiation

5/23/17 – The Office of the U.S. Trade Representative (USTR) has published a notice in the Federal Register seeking public input on possible changes to the North American Free Trade Agreement (NAFTA) to inform the development of U.S. negotiating positions. A hearing to discuss those comments is scheduled for Tuesday, June 27, 2017. Written comments must be submitted by Monday, June 12, 2017 under docket number USTR-2017-0006 on www.regulations.gov and include the heading “NAFTA Negotiations.”

To assist the Office of the USTR as it develops its negotiating objectives and positions for the agreement, the Trade Policy Staff Committee has requested the submission of comments on general and product-specific negotiating objectives for Canada and Mexico in the context of a NAFTA modernization, as well as the following more specific trade issues: 

  • Economic costs and benefits to U.S. producers and consumers of removal of any remaining tariffs and removal or reduction of non-tariff barriers on articles traded with Canada and Mexico.
  • Treatment of specific goods (describedbyHTSUS numbers), including comments on:
    • Product-specific import or export interests or barriers,
    • Experience with particular measures that should be addressed in negotiations, and
    • Addressing any remaining tariffs on articles traded with Canada, including ways to address export priorities and import sensitivities related to Canada and Mexico in the context of the NAFTA.
  • Customs and trade facilitation issues that should be addressed in the negotiations.
  • Appropriate modifications to rules of origin or origin procedures for NAFTA qualifying goods.
  • Any unwarranted sanitary and phytosanitary measures and technical barriers to trade imposed by Canada and Mexico that should be addressed in the negotiations.
  • Relevant barriers to trade in services between the United States and Canada and Mexico that should be addressed in the negotiations.
  • Relevant digital trade issues that should be addressed in the negotiations.
  • Relevant trade-related intellectual property rights issues that should be addressed in the negotiations.
  • Relevant investment issues that should be addressed in the negotiations.
  • Relevant competition-related matters that should be addressed in the negotiations.
  • Relevant government procurement issues that should be addressed in the negotiations.
  • Relevant environmental issues that should be addressed in the negotiations.
  • Relevant labor issues that should be addressed in the negotiations.
  • Issues of particular relevance to small and medium-sized businesses that should be addressed in the negotiations.
  • Relevant trade remedy issues that should be addressed in the negotiations.
  • Relevant state-owned enterprise issues that should be addressed in the negotiations

Public versions of comments, with business confidential information redacted, will be open to public inspection.

USTR Formally Notifies Congress of Intent to Modernize NAFTA

5/18/17 - The Trump administration formally notified Congress of its intent to renegotiate the North American Free Trade Agreement (NAFTA) with Canada and Mexico, starting a 90-day clock for statutorily required consultations. This notification means that NAFTA negotiations with Canada and Mexico can begin no earlier than August 16, 2017. In the letter from U.S. Trade Representative Robert Lighthizer, the administration indicated it would consult closely with Congress to develop negotiating positions. The letter notes that while NAFTA was negotiated 25 years ago, the U.S. economy and businesses have changed, resulting in outdated provisions in the agreement. In particular, negotiations will include “new provisions to address intellectual property rights, regulatory practices, state-owned enterprises, services, customs procedures, sanitary and phytosanitary measures, labor, environment, and small and medium enterprises.”

In very brief comments, Lighthizer stated, “Today, President Trump fulfilled one of his key promises to the American people … USTR will now continue consultations with Congress and American stakeholders to create an agreement that advances the interests of America’s workers, farmers, ranchers, and businesses.” The Office of the U.S. Trade Representative in the near future will publish a notice in the Federal Register requesting public input on the direction, focus and content of the NAFTA negotiations.

Canada and Mexico File Comments in Response to Executive Order Regarding Omnibus Report on Significant Trade Deficits

5/11/17 – In response to President Trump’s Executive Order 13786 requiring that the secretary of Commerce prepare and submit a report that examines the causes of trade deficits, the governments of Canada and Mexico have filed formal comments with the Department of Commerce ahead of the public hearing to be held on May 18, 2017.

While Mexico’s formal report is detailed, it notes:

The US trade deficit with Mexico is explained mainly by the way North American value chains are integrated. Mexico is the main supplier for many US industries, and this supplier relationship naturally creates trade deficits. Imports from Mexico enable US manufacturers to remain competitive in global markets, enhancing their ability to export to other countries and to provide American consumers with high quality goods at more competitive prices. The Mexican-US partnership strengthens both countries’ position in global markets and enhances our regional competitiveness to the benefit of workers, consumers and producers on both sides of the border.

The comments also note the strong ties and regional supply chains created under the North American Free Trade Agreement (NAFTA), and that “American manufacturing jobs depend on Mexican manufacturing jobs and vice-versa, since workers on both sides of the border work together in the production of goods to successfully compete in global markets.”

Canada’s formal report highlights the fact that the United States normally has a trade surplus with Canada and that “[o]ur trade is characterized by a high level of integrated production, with companies on both sides of the border using inputs from the other.” Further, the comments note that the U.S. relies on imports of Canadian raw materials and intermediate goods that ensure the competitiveness of U.S. manufactured products, and that the two countries have long cooperated to reduce impediments to trade.

To review other comments submitted for the record, visit www.regulations.gov and search for Docket ID: ITA-2017-0003; International Trade Administration.

NAFTA Status Report

5/10/17 – President Trump emphasized international trade throughout his campaign and has made it a major issue since taking office in January. Many of his executive orders and press statements have focused on broad trade issues, such as directing his administration to review trade agreement violations and abuses, to undertake an analysis on trade deficits, and to implement his “Buy American, Hire American” strategy. Trump has also taken specific trade actions, such as withdrawing the United States from the Trans-Pacific Partnership on the first day of his presidency and determining that China is not a currency manipulator. One major campaign trade issue/promise, however, remains unresolved at the 100-day mark of the Trump presidency: the status of the North American Free Trade Agreement (NAFTA).

Trump has been critical of NAFTA, but his intentions have varied from vowing outright withdrawal to identifying key provisions that must be renegotiated to stating that the 25-year-old agreement needs to be completely revised and updated. While discussions on NAFTA among the leaders of Canada, Mexico and the United States have occurred, no formal actions have been taken yet. Many questions remain, and Trump administration officials at times offer conflicting statements pertaining to the trade agreement. For our readers, we have prepared a status report (PDF) regarding NAFTA.

Draft Notice to Congress Indicates Intent to Begin Renegotiating NAFTA

4/3/17 – In a draft letter to the Senate and House of Representatives, the Trump administration appeared closer to formally announcing and notifying Congress of its intent to begin renegotiating the North American Free Trade Agreement (NAFTA). The draft notes that the “persistent U.S. deficit in goods trade with Canada and Mexico demands that this administration take swift action to revise the relationship to reflect and respond to new 21st century challenges. The NAFTA was negotiated 25 years ago and while our economy and businesses have changed considerably over that period, the NAFTA has not.”

The draft includes a list of 19 specific negotiating objectives, including issues surrounding trade in goods, rules of origin, customs matters and enforcement cooperation, trade in services, government procurement, transparency and regulatory reform, the operations of state-owned and state-controlled enterprises, and trade remedies.

Regarding trade remedies, the administration’s objectives include (1) seeking a safeguard mechanism to allow a temporary revocation of tariff preferences, if increased imports from NAFTA countries are a substantial cause of serious injury or threat of serious injury to the U.S. domestic industry, and (2) seeking to preserve the ability of the United States to vigorously enforce and promote its trade remedy laws. Another objective is eliminating NAFTA’s separate Chapter 19 dispute settlement procedures for antidumping and countervailing duty cases, arguing that panels have ignored the appropriate standard of review and applicable law, and aberrant panel decisions have not been effectively reviewed and corrected.

Sending the draft NAFTA notice to the congressional committees of jurisdiction is required under the provisions of the Trade Promotion Authority law. Further, it appears to be part of an ongoing effort by the Trump administration to negotiate with Congress on a final, official notice that will trigger a 90-day consultation process before NAFTA negotiations can begin. The Senate, however, has yet to confirm Robert Lighthizer as U.S. trade representative, and shortly after the draft notice was leaked, the White House quickly noted that it does not yet know the “final form” the official notice will take.

Congressional Research Service – Renegotiation of NAFTA: What Actions Do Not Require Congressional Approval?

2/1/17 – In a recent legal analysis, the Congressional Research Service (CRS) opined that while President Trump may have limited authority to renegotiate NAFTA, any significant modifications requiring changes to U.S. laws that originally implemented the agreement in 1993 could require Congressional consent. The analysis states that, “The Constitution gives Congress specific authority over international trade, including powers to impose and collect tariffs and duties and to regulate international commerce. U.S. free trade agreements, including NAFTA, have historically been approved and implemented as congressional-executive agreements by a majority vote of each house of Congress. In the NAFTA-implementing law, Congress approved NAFTA as it existed in 1993. Accordingly, major changes to the agreement would arguably require legislative approval. Furthermore, the President arguably lacks the authority to terminate the domestic effect of federal statutes implementing NAFTA without going through the full legislative process for repeal.”

Background

The North American Free Trade Agreement (NAFTA) is a trilateral agreement between Canada, Mexico and the United States that went into effect January 1, 1994. The agreement removed certain barriers to trade and investment between the countries, including eliminating almost all tariffs among the countries. During his campaign for president, Donald Trump repeatedly criticized NAFTA, calling it “the worst trade deal the U.S. has ever signed, [which] has [killed] and continues to kill American jobs.”

As part of his plan for his first 100 days in the White House, President Trump stated that he "will announce [his] intention to renegotiate NAFTA or withdraw from the deal," which would inevitably result in an increase in tariffs between the United States and Mexico. A NAFTA withdrawal or renegotiation would force companies with supply chain arrangements involving two or more of the NAFTA countries to re-evaluate their costs and benefits in the wake of possible changes.

Russia
USTR Releases Annual Reports on China's and Russia's Compliance With WTO Obligations, States That Supporting China's Accession to WTO Was a Mistake

1/19/18 – Today, the U.S. Trade Representative (USTR) made available its statutorily required reports on how the People's Republic of China (China) and the Russian Federation (Russia) are complying with the commitments they made to the World Trade Organization (WTO) resulting from their accession to the organization. China became a member of the WTO in 2001, and Russia joined the WTO in 2012. According to the USTR, China and Russia have "failed to embrace the market-oriented economic policies championed by the WTO and are not living up to certain key commitments they made when they joined the WTO."

Regarding China, the report states that China largely remains a state-led economy while using "the imprimatur of WTO membership to become a dominant player in international trade." As a result, USTR stated that "it seems clear that the United States erred in supporting China's entry into the WTO on terms that have proven to be ineffective in securing China's embrace of an open, market-oriented trade regime." The report seems to cast doubt on whether the USTR believes the WTO's dispute settlement mechanism will be sufficient to address China's non-market economy policies. Nevertheless, USTR stated that it will continue to pursue WTO cases against China that were initiated by previous administrations and "take all other steps necessary to rein in harmful state-led, mercantilist policies and practices pursued by China, even when they do not fall squarely within WTO disciplines."

Below are additional highlights of the 2017 Report to Congress On China's WTO Compliance:

  • "Today, almost two decades after it pledged to support the multilateral trading system of the WTO, the Chinese government pursues a wide array of continually evolving interventionist policies and practices aimed at limiting market access for imported goods and services and foreign manufacturers and service suppliers."
  • "China's regulatory authorities do not allow U.S. companies to make their own decisions about technology transfer and the assignment or licensing of intellectual property rights. Instead, they continue to require or pressure foreign companies to transfer technology as a condition for securing investment or other approvals."
  • "China is determined to maintain the state's leading role in the economy and to continue to pursue industrial policies that promote, guide and support domestic industries while simultaneously and actively seeking to impede, disadvantage and harm their foreign counterparts, even though this approach is incompatible with the market-based approach expressly envisioned by WTO members and contrary to the fundamental principles running throughout the many WTO agreements."
  • "Many of the policy tools being used by the Chinese government … are largely unprecedented, as other WTO members do not use them, and include a wide array of state intervention and support designed to promote the development of Chinese industry in large part by restricting, taking advantage of, discriminating against or otherwise creating disadvantages for foreign enterprises and their technologies, products and services."

Below are selected highlights of the 2017 Report on the Implementation and Enforcement of Russia's WTO Commitments:

  • "So far, Russia's actions strongly indicate that it has no intention of complying with many of the promises it made to the United States and other WTO Members. This trend is very troubling."
  • "Russia has done little in 2017 to demonstrate a commitment to the principles of the WTO or to many of the specific commitments that it made" in the negotiations leading to Russia's membership in the WTO.
  • "The agricultural sector continues to be one of the most challenging sectors for U.S. exporters. In addition to the import ban on nearly all agricultural goods from the United States and other WTO Members, Russia continues to erect barriers to U.S. agricultural exports."
  • "In 2017, notwithstanding a few tariff reductions, Russia increasingly appeared to turn away from the principles of the WTO, instead turning inward through the adoption of local content policies and practices. Russia continued to rely on arbitrary behind-the-border measures and other discriminatory practices to exclude U.S. exports."
New Section 232 Petition Seeks Investigation Into Effects of Uranium Imports on U.S. National Security

1/17/18 Energy Fuels Inc. and Ur-Energy Inc. (the “Petitioners”) have jointly submitted a petition to the U.S. Department of Commerce for relief under Section 232 of the Trade Expansion Act of 1962 from imports of uranium products from state-owned and state-subsidized enterprises in Russia, Kazakhstan and Uzbekistan. According to the petition, such imports now supply nearly 40 percent of U.S. demand and threaten U.S. national security. Despite uranium’s critical role in the United States supporting clean electricity and the national defense, “imports of cheap, foreign state-subsidized uranium have swelled in recent years to the point that domestic suppliers currently provide less than 5% of our nation’s demand.” As recently as 1980, the Petitioners argue, “U.S. producers supplied nearly 100% of our domestic uranium needs, and in 1989 the DOC initiated a Section 232 investigation at the request of the U.S. Department of Energy (“DOE”) because of concerns that uranium imports exceeded 37.5% at that time. The problem is far worse now.” The petition also notes that China is significantly growing its state-owned nuclear enterprises and intends to penetrate the U.S. market with nuclear fuel that will directly compete with U.S. uranium miners. Under U.S. law, the Petitioners argue that the warheads in U.S. nuclear weapons must be manufactured from uranium sourced from U.S. mines; tritium (an essential component of nuclear weapons) must be produced in a U.S. reactor using domestic uranium; and highly-enriched and fabricated uranium fuel for the U.S. Navy must be U.S. in origin. If this import trend continues and the condition of the U.S. uranium mining industry continues to worsen, the Petitioners contend that the United States will lose the ability to supply these essential national security requirements with domestic sources. The petition seeks remedies that will set a quota to limit U.S. uranium imports, effectively reserving 25 percent of the U.S. nuclear market for U.S. uranium production. It also seeks implementation of a requirement for U.S. federal utilities and agencies to buy U.S. uranium in accordance with President Trump’s Buy American policy.

Once the Department of Commerce initiates the investigation, it will have 270 days to prepare a report for the president. Following receipt of that report, the president will have 90 days to act on any recommendations and take action if necessary to “adjust the imports of an article and its derivatives” and/or pursue other lawful non-trade related actions necessary to address the threat. A full copy of the petition is available on Energy Fuels’ website.

State Department Publishes List of Russian Defense and Intelligence Sector Entities Under New Sanctions Law

10/30/17 – Section 231 of the Countering America’s Adversaries Through Sanctions Act (CAATSA), enacted on August 2, 2017, mandates that the president must impose certain sanctions on persons the president determines knowingly engage in a significant transaction with a person that is part of, or operates for or on behalf of, the defense or intelligence sectors of the government of the Russian Federation. The sanctions include, among others, prohibitions concerning property transactions, export license restrictions, Export-Import Bank assistance restrictions, debt and equity restrictions, visa ramifications for corporate officers, and U.S. government procurement prohibitions. The intent of Section 231 of the CAATSA is to respond to Russia’s behavior as to the crisis in eastern Ukraine, cyber intrusions and attacks, and human rights abuses.

On October 27, 2017, the State Department provided a list of those Russian defense and intelligence agencies that may face sanctions under CAATSA. At this time, however, this designation is not a determination regarding imposition of actual sanctions against these Russian entities; the CAATSA requires the imposition of sanctions beginning on or after January 29, 2018. In a short briefing, senior State Department staff indicated that over the next 180 days, the department will take a close look at transactions and dealings with these entities that it thinks may fall within the scope of the sanctions provision of CAATSA, and engage with partners and allies to determine whether any transactions undertaken with entities on the list are problematic. At that time, sanctions may be implemented.

Over the course of the next three months, U.S. companies should assess the amount and type of business transactions they may be conducting with Russian entities on the State Department list. Ultimately, persons who are determined to “knowingly engage in a significant transaction” with a person specified on the list may face sanctions. In determining whether a transaction is “significant” for purposes of CAATSA, the Department of State will consider the totality of the facts and circumstances surrounding the transaction and weigh various factors on a case-by-case basis. Clearly, issues of national security and U.S. foreign policy interests will be factors in such an analysis.

Department of Homeland Security Bans Use of Russian Security Software

9/14/17 – Acting Secretary of the Department of Homeland Security (DHS) Elaine Duke has issued a Binding Operational Directive (BOD 17-01) directing federal executive branch departments and agencies to take actions related to the use or presence of information security products, solutions and services supplied directly or indirectly by AO Kaspersky Lab or related entities. The directive requires all federal departments and agencies to identify any use or presence of Kaspersky products on their information systems in the next 30 days; to develop detailed plans to remove and discontinue present and future use of the products in the next 60 days; and at 90 days from September 13, 2017, unless directed otherwise by DHS based on new information, to begin to implement the agency plans to discontinue use and remove the products from information systems.

This directive is the result of an interagency review and analysis pertaining to potential information security risks presented by using this Russian entity’s products due to connections between Kaspersky Lab officials and Russian intelligence agencies. Under Russian law, Russian intelligence agencies are allowed to request or compel assistance from Kaspersky and to intercept communications transiting Russian networks. DHS determined that “The risk that the Russian government, whether acting on its own or in collaboration with Kaspersky, could capitalize on access provided by Kaspersky products to compromise federal information and information systems directly implicates U.S. national security.” DHS has indicated that Kaspersky Lab will be provided the opportunity to submit a written response addressing the department’s concerns or to mitigate those concerns.

This directive comes just months after the General Services Administration removed the company from its list of approved vendors and after high-profile news reports concerning potential Russian interference in the 2016 U.S. presidential election. In addition to any national security implications, trade analysts also see this decision as another form of sanctioning Russia. The U.S. government’s banning of Kaspersky products from its departments and agencies has the potential to significantly undermine Kaspersky Lab’s market position in the United States and probably elsewhere.

OFAC Sanctions Chinese and Russian Entities and Individuals Supporting North Korea

8/25/17 – The Department of the Treasury’s Office of Foreign Assets Control (OFAC) has designated 16 Chinese and Russian entities and individuals for activities related to the support of North Korea’s Kim Jong-un. These sanctions intentionally target third-country companies and individuals that (1) assist already-designated persons who support North Korea’s nuclear and ballistic missile programs, (2) deal in the North Korean energy trade, (3) facilitate its exportation of workers and (4) enable sanctioned North Korean entities to access the U.S. and international financial systems. These sanctions complement United Nations Security Council Resolution 2371 enacted on August 5, 2017. Treasury Secretary Steven Mnuchin stated, “It is unacceptable for individuals and companies in China, Russia, and elsewhere to enable North Korea to generate income used to develop weapons of mass destruction and destabilize the region. We are taking actions consistent with UN sanctions to show that there are consequences for defying sanctions and providing support to North Korea, and to deter this activity in the future.” For details on the 16 entities and persons that have been placed on OFAC’s Specially Designated Nationals List, see OFAC’s Federal Register notice.

President Trump Signs Into Law H.R. 3364 Regarding Sanctions Against Iran, Russia and North Korea

8/2/17 – Today, President Trump signed into law the Countering America’s Adversaries Through Sanctions Act, which strengthens and expands statutory sanctions on Iran, Russia and North Korea. In a statement released by the White House, the president said, “I favor tough measures to punish and deter bad behavior by the rogue regimes in Tehran and Pyongyang. I also support making clear that America will not tolerate interference in our democratic process, and that we will side with our allies and friends against Russian subversion and destabilization.” The statement goes on to say that “the bill remains seriously flawed – particularly because it encroaches on the executive branch’s authority to negotiate.”

In a separate statement issued the same day, the president again asserted that the legislation “is significantly flawed,” stating that, “In its haste to pass this legislation, the Congress included a number of clearly unconstitutional provisions.”

See our July 26th update below for additional background information.

House Passes Bill for Additional Sanctions Against Iran, Russia and North Korea

7/26/17 – On July 25, the House of Representatives passed legislation that would impose additional sanctions on Iran, North Korea and Russia. The bill would increase sanctions on those involved in Iran’s human rights abuses, its support for terrorism, as well as its ballistic missile program. For Russia, the bill would ensure that existing economic sanctions remain as long as Russian aggression continues by empowering Congress to review and disapprove any sanctions relief that the president may seek. The bill also includes the text of H.R. 1644, The Korean Interdiction and Modernization of Sanctions Act, which was passed by the House in May by a vote of 419-1, and seeks to expand sanctions targeting North Korea’s nuclear weapons program.

As noted in a previous post, the Senate has also passed legislation (S. 722) to implement additional sanctions on Iran and Russia; the Senate bill does not contain provisions on North Korea sanctions. Because different bills were passed in each chamber and the House bill included additional sanctions against North Korea, it is expected that the Senate will take up consideration of H.R. 3364 for any final vote. Interestingly, given President Trump’s perceived ambivalence on the Ukraine-related Russia sanctions, the votes for passage by each chamber – 419 to 3 in the House and 98-2 in the Senate – likely make any passage of a final bill veto-proof.

OFAC and BIS Designate Additional Individuals and Entities Under the Ukraine/Russian-Related Sanctions

6/23/17 – On June 20, 2017, pursuant to four executive orders (EOs), the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) and the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) subjected to U.S. economic sanctions more individuals and entities involved in the ongoing Crimean conflict between Russia and Ukraine. These actions were deemed necessary to counter attempts to circumvent current U.S. sanctions. Treasury Secretary Steven Mnuchin stated, “This administration is committed to a diplomatic process that guarantees Ukrainian sovereignty, and there should be no sanctions relief until Russia meets its obligations under the Minsk agreements.”

OFAC designated 38 individuals and entities under the Ukraine-related EOs, including:

  • Alexander Babakov, the Russian Federation’s Special Presidential Representative for Cooperation with Organizations Representing Russians Living Abroad;
  • Oboronlogistika, OOO, the Russian Defense Ministry’s sole executor for the procurement of goods, works, and services for maritime transport of military troops and freight on the territory of the so-called Republic of Crimea; and
  • The following seven banks for operating or assisting in financial transactions in Crimea: Tsmrbank, OOO; Taatta, AO; Joint Stock Company Black Sea Bank of Development and Reconstruction; Joint Stock Commercial Bank Rublev; Joint Stock Company Commercial Bank North Credit; IS Bank, AO; and VVB, PAO.

OFAC also identified a number of subsidiaries owned 50 percent or more by Transneft, which was made subject to the Sectoral Sanctions Identification (SSI) List on September 12, 2014 pursuant to EO 13662. Transneft and its 50 percent or more subsidiaries are subject to Directive 2, which prohibits U.S. persons from dealing in new debt of greater than 90 days’ maturity of sanctioned entities. The complete listing of individuals and entities is available on Treasury’s website.

BIS has added 10 entities to the Entity List on the basis of 15 C.F.R. § 744.11 (license requirements that apply to entities acting contrary to the national security or foreign policy interests of the United States) of the EAR. The 10 entities added to the Entity List consist of two entities in the Crimea region of Ukraine and eight entities in Russia. For a complete list of these entities, please see the Federal Register notice.

Senate Passes Bill for Additional Sanctions Against Iran and Russia

6/19/17 – After several months of negotiations in the Committee on Foreign Relations, the full Senate on June 15, 2017 considered and passed a bipartisan bill by a vote of 98-2 seeking to hold both Iran and Russia accountable for their recent destabilizing activities in world affairs. S. 722 at Title I contains the Iran component of the legislation and was authored by Senators Corker (R-Tenn.), Menendez (D-N.J.), Rubio (R-Fla.), Cardin (D-Md.), Cotton (R-Ark.) and Casey (D-Pa.). It expands sanctions on Iran for ballistic missile development, support for terrorism, transfers of conventional weapons and human rights violations. The Countering Iran’s Destabilizing Activities Act of 2017 contains the following key provisions:

  • New mandatory ballistic missile sanctions: imposes mandatory sanctions on persons involved with Iran’s ballistic missile program and those that transact with them.
  • New terrorism sanctions: applies terrorism sanctions to the Islamic Revolutionary Guard Corps and codifies individuals who are currently sanctioned due to Iranian support for terrorism.
  • Enforcement of arms embargo: requires the president to block the property of any person or entity involved in specific activities related to the supply, sale, or transfer of prohibited arms and related material to or from Iran.

The text of Title II of S. 722 maintains and substantially expands sanctions against the government of Russia in response to the violation of the territorial integrity of the Ukraine and Crimea, its cyber-attacks and interference in elections, and its continuing aggression in Syria. This portion of the bill will:

  • Provide for a mandated congressional review if sanctions are relaxed, suspended or terminated.
  • Codify and strengthen existing sanctions contained in executive orders on Russia, including the sanctions’ impact on certain Russian energy projects and on debt financing in key economic sectors.
  • Impose new sanctions on: corrupt Russian actors; those seeking to evade sanctions; those involved in serious human rights abuses; those supplying weapons to the Assad regime; those conducting malicious cyber activity on behalf of the Russian government; those involved in corrupt privatization of state-owned assets; and those doing business with the Russian intelligence and defense sectors.
  • Allow broad new sanctions on key sectors of Russia’s economy, including mining, metals, shipping and railways.
  • Require a study on the flow of illicit finance involving Russia and a formal assessment of U.S. economic exposure to Russian state-owned entities.

S. 722 will shortly cross over to the House of Representatives, where it will be assigned to the appropriate committee(s) for consideration. As such, this legislation, while significant, is not yet a law.

Background

The United States and Russia have a long history of strained relations, culminating in 2014 with the United States instituting economic sanctions against Russia for its occupation of the Crimean region of Ukraine. The occupation was widely criticized by allies of the United States, including the European Union, which instituted its own sanctions against Russia. Notably, the United States imposed sanctions on certain members of Russian President Vladimir Putin’s inner circle. During his presidential campaign, however, Donald Trump praised President Putin, calling him a stronger leader than President Obama. This has led to speculation that President Trump will attempt to roll back sanctions and normalize relations with Russia, which could complicate the United States' relationship with other allies in Europe and elsewhere, who will rely on U.S. support for NATO as a bulwark against possible Russian government action in the region.

Archive
Lighthizer Sworn in as USTR

5/16/17 – On Monday, May 15, 2017, Robert Lighthizer was sworn in as the U.S. Trade Representative (USTR). In presiding over the ceremony, Vice President Pence stated that Lighthizer was “uniquely qualified” for the office and that in choosing Lighthizer, “President Trump is keeping his promise to put America first.” In his brief remarks at the ceremony, Lighthizer commented that in the future, he believes that others will say “President Trump permanently reversed the dangerous trajectory of American trade, put America first, made our farmers, ranchers, and workers richer, and the country safer.” In comments posted to the USTR website, Lighthizer added, "I'm honored for the opportunity to serve President Trump and Vice President Pence by working for fair and free trade that benefits all Americans. By expanding export market access through negotiating good trade deals and enforcing U.S. trade laws, we can raise wages and help level the playing field for American workers, farmers, ranchers, and job-creators." USTR Lighthizer will have a busy first week in office with plans to meet with congressional leaders for a discussion on the North American Free Trade Agreement before leaving on his first official trip for an Asia-Pacific Economic Cooperation (APEC) trade ministers meeting.

Senate Confirms Robert Lighthizer as U.S. Trade Representative

5/11/17 – After months of delays and requiring a waiver allowing him to serve as the U.S. trade representative (USTR), Robert Lighthizer was finally confirmed by the Senate on a vote of 82-14. The delays in this vote were for a multitude of reasons. First and foremost, a section of the Trade Act of 1974 excludes anyone who has “directly represented, aided or advised a foreign entity … in any trade negotiation, or trade dispute” from serving as USTR. Lighthizer had represented Brazilian and Chinese entities in past trade disputes. Senate Democrats also delayed action on his confirmation by demanding concessions to address a shortfall in pension funding for miners. More recently, several Republican senators, including Sen. Jon McCain, questioned Lighthizer’s position on agricultural trade and his stance on the North American Free Trade Agreement. Lighthizer was a deputy USTR during the Reagan administration and has been representing U.S. corporations for the last three decades in international trade remedy litigation as a partner at the law firm Skadden, Arps, Slate, Meagher & Flom LLP.

Trump Issues Executive Order Directing USTR and Secretary of Commerce to Review Trade Agreement Violations and Abuses

5/1/17 – On April 29, 2017, his 100th day in office, President Trump announced an executive order directing the U.S. trade representative (USTR) and secretary of the Department of Commerce to commence a review of “all bilateral, plurilateral, and multilateral trade agreements and investment agreements to which the United States is a party” and “all trade relations with countries governed by the rules of the World Trade Organization (WTO) with which the United States does not have free trade agreements but with which the United States runs significant trade deficits in goods.” In a press briefing, Secretary of Commerce Wilbur Ross clarified that this executive order differs from others previously signed by the president in that it will focus “more narrowly on the agreements themselves,” even those that do not result in deficits, and not on the behavior of individual countries.

The review of each agreement must be submitted to the president within 180 days (late October 2017) and identify violations or abuses of any U.S. trade agreement, including the WTO, as well as any trade preference programs and investment agreements. The review will identify trade agreements and programs that “have failed with regard to such factors as predicted new jobs created, favorable effects on the trade balance, expanded market access, lowered trade barriers, or increased United States exports.”

In signing the executive order, President Trump has authorized the secretary of Commerce, the USTR and other heads of executive departments and agencies to “take every appropriate and lawful action to address violations of trade law, abuses of trade law, or instances of unfair treatment.”

While Secretary Ross made clear that the review would cover all trade agreements, the United States has only 20 such agreements and much U.S. trade occurs with countries who are members of the WTO. He stated that the WTO has “a ‘most favored nation clause,’ meaning that of all the countries with whom we do not have a free-trade agreement, we must charge the same tariff on the same item to those – each of those countries as we charge to the others. So that’s a significant impediment toward getting to anything like a reciprocal agreement.” He also criticized the WTO agreement for not effectively dealing with non-tariff trade barriers and intellectual property rights, as well as claiming there were certain structural problems with the agreement, especially the dispute settlement provisions. When asked if the United States would consider withdrawing from the WTO, Ross replied that, while the review has not yet begun, “as [with] any multilateral organization, there's always the potential for modifying the rules of it.”

Trump Announces Creation of Office of Trade and Manufacturing Policy

5/1/17 – On April 29, 2017, President Trump signed an executive order creating the Office of Trade and Manufacturing Policy (OTMP) within the White House. Peter Navarro, who was previously named to head the White House’s National Trade Council which was never formally established, will lead the office. OTMP’s stated mission is “to defend and serve American workers and domestic manufacturers while advising the President on policies to increase economic growth, decrease the trade deficit, and strengthen the United States manufacturing and defense industrial bases.” It will serve as a liaison between the White House and the Department of Commerce and undertake trade-related special projects as requested by the president.

CRS Issues Report on the Border Adjustment Tax

4/25/17 – With the Trump administration preparing to release its tax reform plan in the next several weeks, the Congressional Research Service (CRS) has just released a timely report on the border adjustment tax (BAT). The report offers an analysis of House Speaker Paul Ryan’s proposal of a destination-based cash flow tax (DBCFT), a type of national consumption tax, as part of the “A Better Way” tax reform blueprint. One component of the DBCFT proposal is the implementation of a BAT which has generated considerable interest since the November presidential election.

The report states that although there are many important issues surrounding a BAT that require careful consideration, the response of exchange rates is one that has received much attention. “Standard economic theory predicts that under certain conditions exchange rates would react to a BAT in a way that would leave exports and imports unchanged. That is, exchange rate movements would offset the effects of the tax, leaving the U.S. trade balance unaltered. Some observers, however, have speculated that such a response may not occur in a timely fashion or that exchange rate movements may not completely offset the tax. If either of these two situations were to occur, or if impact across industries was asymmetric, there could be implications for U.S. businesses and consumers, and as a result, the U.S. trade balance.” The CRS report provides a basic framework for understanding how and why exchange rates could respond to a BAT.

The report concludes that replacing the current corporate income tax system with a DBCFT with a BAT would be an “unprecedented shift in U.S. tax policy.” While such a change would bring uncertainty, CRS analysts stated that “economists tend to agree that any tax-induced advantage for U.S. exports or tax-induced costs on U.S. imports would be offset by adjustments to the exchange-rate value of the dollar. In other words, if the dollar appreciation occurs as economic theory predicts, there should be no changes in the trade balance resulting from tax.

President Trump Signs “Buy American and Hire American” Executive Order

4/18/17 – President Trump has signed an executive order seeking stricter enforcement of federal procurement policies and revamping the H-1B guest-worker visa program. In remarks on signing the order, Trump stated, “With this action, we are sending a powerful signal to the world: We’re going to defend our workers, protect our jobs, and finally put America first.”

For “Buy American,” the executive order:

  • Instructs every agency and department to conduct comprehensive assessments aimed at cracking down on weak monitoring, enforcement, and compliance efforts in order to strengthen Buy American policies.
  • Targets waivers and exceptions that have allowed foreign goods unfair advantages in U.S. government procurement.
  • Orders that America’s involvement in the World Trade Organization’s Agreement on Government Procurement and other trade deals be reviewed to ensure they meet the president’s standards.
  • For the first time, requires that the Buy American bidding process must take into account unfair trade practices.
  • Promotes American-made steel by affirming the “melted and poured” standard for steel production in the United States.

Commerce Secretary Wilbur Ross is tasked with reviewing all agency findings under this section of the executive order and providing a report to President Trump by November 23, 2017 recommending how to “close those loopholes” and identify flagrant use of unfair trade practices by foreign trading partners. An official stated that this report will serve as “a blueprint for additional executive and regulatory actions to further strengthen Buy American, as well as guide possible legislative proposals.”

For “Hire American,” the executive order:

  • Calls on the executive branch to fully enforce the laws governing the entry of foreign workers into the U.S. economy to promote rising wages and more employment.
  • Directs federal agencies to propose reforms to the H-1B program in order shift the program back to its original intent and prevent the displacement of American workers.

The president has particularly focused on alleged abuses of the H-1B program, asserting that, instead of allowing U.S. companies access to highly skilled foreign workers in fields where U.S. workers cannot fulfill demand, the program is being used to hire lower paid foreign workers to displace U.S. workers from entry-level jobs.

“This historic action declares that the policy of our government is to aggressively promote and use American-made goods and to ensure that American labor is hired to do the job,” stated President Trump.

Gilbert Kaplan Formally Nominated as Undersecretary of Commerce

4/12/17 - President Trump has now formally nominated Gilbert B. Kaplan to serve as undersecretary of Commerce for international trade. Kaplan is currently a partner at King & Spalding, where he works on antidumping (AD) and countervailing duty (CVD) cases as well as Section 337 cases. According to his bio, Kaplan “filed and prosecuted the first successful countervailing duty (anti-subsidy) case ever against China, in 2007.”

Kaplan served in several senior positions in the Reagan administration, including as deputy assistant secretary and first acting assistant secretary of Commerce for import administration, where he supervised over 500 trade remedy cases. Prior to that, he was the director of the Office of Investigations at the Department of Commerce, in charge of day-to-day trade remedy law administration. Kaplan’s bio also states that he was the principal spokesman for the administration on legislative and congressional issues related to AD, CVD and Section 232 national security import relief laws. From 2010 to 2012, he served as the first president of the Committee to Support U.S. Trade Laws, “an organization of companies, trade associations, unions and individuals dedicated to preserving and enhancing the U.S. trade remedy laws.”

Trump Administration Announces Nominations for Top CBP and BIS Positions

4/5/17 – President Trump has announced the nomination of Kevin McAleenan for commissioner of U.S. Customs and Border Protection (CBP). McAleenan became acting commissioner of CBP on January 20, 2017 and previously served as deputy commissioner from November 2014 until his appointment to acting commissioner. In this role, he served as CBP’s chief operating officer and senior career official. McAleenan has previously held several leadership positions at CBP and one of its legacy agencies, the U.S. Customs Service. From 2006 to 2008, he served as the area port director of Los Angeles International Airport (LAX), directing CBP’s border security operations at LAX and 17 other airport facilities in one of CBP’s largest field commands. In December 2011, McAleenan was named acting assistant commissioner of CBP’s Office of Field Operations. In this position, he led agency operations to secure the U.S. border while expediting lawful trade and travel at 329 ports of entry in the United States and 70 international locations in more than 40 countries. McAleenan has been a member of the U.S. government’s Senior Executive Service since 2006. Prior to government service, he practiced law in California. He received his Juris Doctor from the University of Chicago Law School and his Bachelor of Arts from Amherst College. 

The president also announced the nomination of Mira Ricardel to serve as undersecretary of Commerce for Export Administration and to oversee the Bureau of Industry and Security (BIS). Ricardel currently serves as a special assistant to the president and associate director for presidential personnel. She has had an extensive career in the national security arena in both the public and private sectors. Within the Department of Defense, Ricardel held the positions of acting assistant secretary of Defense and principal deputy assistant secretary of Defense for International Security Policy and deputy assistant secretary of Defense for Eurasia for the George W. Bush administration. She also served as legislative assistant for arms control and foreign policy to former Senator Bob Dole. From 2006 to 2015, Ricardel held senior leadership positions within Boeing Defense Space and Security, most recently as vice president, International Business Development, Network & Space Systems. She received a Bachelor of Science in Foreign Service from Georgetown University and completed doctoral course work at the Fletcher School of Law and Diplomacy.

Trump Administration’s Key Elements of a Model Trade Agreement

3/22/17 – In a recent meeting with members of Congress, White House National Trade Council Director Peter Navarro alluded to four trade goals and 13 different policy objectives that the Trump administration plans to pursue. For weeks, these goals and objectives remained vague and relatively unknown.

During the confirmation hearing of Robert Lighthizer, President Trump's nominee for U.S. Trade Representative, however, Senator Pat Roberts noted that the administration’s list of trade goals and policy objectives has grown substantially and placed a list of 24 items identified as “Key Elements of a Model Trade Agreement” into the record. While the list is very sparse on details, meaning and intent, it appears to be a list of items that the administration feels must be addressed in any trade negotiations.

Office of the U.S. Trade Representative Releases President Trump’s Trade Policy Agenda

3/3/17 – On March 1, 2017, the Office of the U.S. Trade Representative released the president’s trade policy agenda, stating that “[t]he overarching purpose of our trade policy – the guiding principle behind all of our actions in this key area – will be to expand trade in a way that is freer and fairer for all Americans.” The Trump administration’s trade policy agenda sets forth four major priorities: (1) defend U.S. national sovereignty over trade policy; (2) strictly enforce U.S. trade laws; (3) use all possible sources of leverage to encourage other countries to open their markets to U.S. exports of goods and services, and provide adequate and effective protection and enforcement of U.S. intellectual property rights; and (4) negotiate new and better trade deals with countries in key markets around the world.

1. Defending Our National Sovereignty Over Trade Policy – the agenda notes that a core provision under the World Trade Organization’s (WTO) dispute settlement mechanism is the express legal requirement that the WTO, through its dispute settlement findings and recommendations, could not “add to or diminish the rights or obligations” of the United States or other countries under the WTO agreements. Further, the implementing U.S. law (the Uruguay Round Agreements Act) also specifically provides that “No provision of any of the Uruguay Round Agreements, nor the application of any such provision to any person or circumstance, that is inconsistent with any law of the United States shall have effect.” Consistent with these protections, the Trump administration “will aggressively defend American sovereignty over matters of trade policy.”

2. Strictly Enforcing U.S. Trade Laws – the trade agenda cites numerous U.S. laws designed to prevent the U.S. market from being distorted by unfair practices such as injuriously dumped or subsidized imports, or by harmful surges of imports, and notes that even under multilateral trade mechanisms such as the General Agreement on Tariffs and Trade (GATT) and the WTO agreement, dumping “is to be condemned.” In referencing various provisions of the Trade Act of 1974, the Trump administration indicated it has the right to self-initiate trade remedy cases, take action under Section 301 of the Trade Act, and otherwise “act aggressively as needed to discourage this type of behavior – and encourage true market competition.”

3. Using Leverage to Open Foreign Markets – the agenda states that U.S. exports face significant barriers in many markets (e.g., high tariffs, non-tariff barriers, foreign subsidies, theft of trade secrets), and that for decades, the U.S. government has engaged in efforts to break down such barriers and open foreign markets to U.S. competition. While acknowledging the difficulty of the task of opening foreign markets, the Trump administration cites two “fundamental challenges”: (1) WTO rules and some bilateral/multilateral trade agreements that are often written with the implicit understanding that countries implementing those rules are pursuing free-market principles when, in fact, they are not, and (2) that these rules and agreements are written with the implicit understanding that countries implementing those rules have functional legal and regulatory systems that are transparent when, in practice, they are not. The Trump administration will use all possible leverage to encourage other countries to give U.S. producers fair, reciprocal access to their markets.

4. Negotiating New and Better Trade Deals – this portion of the trade agenda cites trade data showing trade deficits, manufacturing and job losses, and decreased industrial production since the 1980s when the United States entered into trade deals such as the North American Free Trade Agreement, the Uruguay Round Agreements that created the WTO and China’s 2001 Protocol of Accession to the WTO, and asserts that the outcomes have not been what the American people expected from these agreements. The Trump administration states that it will seek to develop deeper trading relationships with international partners, but “going forward, we will tend to focus on bilateral negotiations, we will hold our trading partners to higher standards of fairness, and we will not hesitate to use all possible legal measures in response to trading partners that continue to engage in unfair activities.”

The second portion of the full report contains the “2016 Annual Report of the President of the United States on the Trade Agreements Program.” This section provides more in-depth details on actions taken by the U.S. government in 2106 before the WTO, under various bilateral and regional negotiations and trade agreements, and other trade activities. It also discuss trade enforcement actions from the past year and trade policy development under the prior administration.

The report does note that the U.S. Trade Representative (USTR), by statute, acts as the “principle spokesman of the President on international trade,” and that the Trump administration intends to submit a more detailed report on its trade policy agenda once the Senate has confirmed a USTR and the new USTR has had the opportunity to participate in the development of such a report.

Read our full client update on this topic.

International Trade Remarks by President Trump in Address to Congress

3/1/17 – In his address to a joint session of Congress on February 28, 2017, President Trump touched upon trade matters, including what his administration has done in the first month in office, and a broad outline of next steps to address a trade deficit and “unfair” trade. Without commentary, the following are direct quotes from President Trump’s speech:

Trade accomplishments mentioned in President Trump’s speech:

  • “Since my election, Ford, Fiat-Chrysler, General Motors, Sprint, Softbank, Lockheed, Intel, Walmart and many others have announced that they will invest billions and billions of dollars in the United States, and will create tens of thousands of new American jobs.”
  • “We have withdrawn the United States from the job-killing Trans-Pacific Partnership.”
  • “I have also imposed new sanctions on entities and individuals who support Iran's ballistic missile program …”

Outline of “next steps” relating to trade:

  • “We've lost more than one-fourth of our manufacturing jobs since NAFTA was approved, and we've lost 60,000 factories since China joined the World Trade Organization in 2001. Our trade deficit in goods with the world last year was nearly $800 billion.”
  • “We must create a level playing field for American companies and our workers. We have to do it. Currently, when we ship products out of America, many other countries make us pay very high tariffs and taxes. But when foreign companies ship their products into America, we charge them nothing, or almost nothing.”
  • “I believe strongly in free trade but it also has to be fair trade. It's been a long time since we had fair trade. The first Republican president, Abraham Lincoln, warned that the 'abandonment of the protective policy by the American government … will produce want and ruin among our people.' Lincoln was right – and it's time we heeded his advice and his words. I am not going to let America and its great companies and workers be taken advantage of us any longer. They have taken advantage of our country. No longer.”

View the president’s remarks to Congress.

Trump Administration – Key Players in International Trade (Update)

2/28/17 – After much delay, the Senate on February 27, 2017 confirmed President Trump’s nomination of Wilbur Ross to be the next secretary of the Department of Commerce. The vote was 72 to 27.

The Trump administration has also announced the addition of two experienced international trade practitioners to the Office of the U.S. Trade Representative and the Commerce Department:

Stephen Vaughn, formerly a partner at King & Spalding, will be named general counsel of the Office of the U.S. Trade Representative (USTR) if USTR nominee Robert Lighthizer is confirmed by the Senate. Vaughn was part of Trump’s transition team and is, reportedly, already unofficially working at USTR. He will bring a domestic petitioner’s focus to the USTR, having previously represented U.S. producers in trade remedy actions, particularly in notable steel trade cases that resulted in defensive antidumping (AD) and antisubsidy tariffs on imports from China and other countries. According to his bio, Vaughn has litigated antidumping, countervailing duty (CVD) and safeguard cases before the U.S. International Trade Commission, the U.S. Court of International Trade, the U.S. Court of Appeals for the Federal Circuit, and NAFTA and WTO dispute settlement panels.

Gilbert Kaplan is expected to be nominated to be the Commerce Department’s undersecretary for international trade now that Wilbur Ross has been confirmed as secretary. Kaplan served in several senior positions in the Reagan administration, including as former deputy assistant and acting assistant secretary for import administration at the Commerce Department. During his previous tenure at Commerce, he supervised the President’s Steel Program, the U.S.-Japan Agreement on Trade in Semiconductors, the U.S.-Canada agreement on lumber and the machine tool program. His bio adds that he was also the principal spokesman for the administration on legislative and congressional issues related to AD, CVD and Section 232 national security import relief laws. Kaplan has been a notable proponent of efforts to treat currency manipulation as an illegal export subsidy.

For more information, please see our previous publication, “Trump Administration – Key Players in International Trade.”

President Trump: "Our country is being absolutely devastated with bad trade deals."

2/27/17 – In a speech to the Conservative Political Action Conference (CPAC) on February 24, 2017, President Trump reiterated his intent to negotiate only bilateral trade deals. In a broad ranging speech before CPAC, the president highlighted his campaign promise to withdraw from the TPP trade deal and again criticized NAFTA:

"I've also followed through on my campaign promise and withdrawn America from the Trans-Pacific Partnership – so that we can protect our economic freedom. And we are going to make trade deals, but we're going to do one-on-one, one-on-one. And if they misbehave, we terminate the deal. And then they'll come back, and we'll make a better deal. None of these big quagmire deals that are a disaster. Just take a look – by the way, take a look at NAFTA, one of the worst deals ever made by any country having to do with economic development. It's economic undevelopment as far as our country is concerned."

The president concluded his comments on trade by stating, "We will fix our broken and embarrassing trade deals that are no good – none of them." President Trump's intention to shift to bilateral trade negotiations and deals will be a significant change in U.S. trade policy after decades of multilateral or regional trade deals.

View the president’s CPAC remarks.

Mnuchin Confirmed as Secretary of the Treasury

2/14/17 – By a vote of 53 to 47, the Senate confirmed Steven Mnuchin as the Trump administration’s new Treasury secretary on February 13, 2017. The largely party-line vote followed a lengthy confirmation process that at times became contentious over certain aspects of Mnuchin’s career, specifically his Wall Street ties and the 2008 financial crisis. During his confirmation hearing, Mnuchin took a more moderate tone than President Trump on trade issues and dealing with China.

Please view/download our summary to view the confirmation status of President Trump’s cabinet nominees.

Trump Administration – Cabinet Confirmation Status

2/8/17 – All members of a president’s cabinet require the advice and consent of the Senate following appointment by the president and prior to their taking office. For an administration that has given every indication that trade will be a significant agenda item, the Trump administration’s cabinet-level nominees for Commerce, Treasury and U.S. trade representative (USTR) remain unconfirmed as of February 8, 2017.

While each of these nominees is ultimately expected to be confirmed, several reasons are behind the protracted confirmation process for these critical cabinet positions. First, the Trump transition team was slow in vetting its nominees. Second, Senate Democrats are slowing the confirmation process by demanding more scrutiny during hearings and debating the nominations on the floor of the Senate. Third, Wilbur Ross (Commerce), Steven Mnuchin (Treasury) and Robert Lighthizer (USTR) have not been without conflict due to their professional backgrounds; in fact, Lighthizer will likely require a waiver in order to become the USTR due to his past representation of a foreign government. Further, Rolf Lundberg, whom we previously reported was President Trump’s selection to be deputy director of the “Buy American, Hire American” effort of the newly formed White House National Trade Council, has announced that he will not serve in the administration, opting instead to become the head of public policy at Choice Hotels.

Please view/download our summary to view the status of President Trump’s cabinet nominees.

President Trump Highlights Trade in Inauguration Address

1/23/17 – In an inauguration address generally seen as broad on policy but lacking details, President Donald Trump highlighted several of his emerging trade themes and positions. Early in his address, the president stated that, “From this moment on, it's going to be America first. Every decision on trade, on taxes, on immigration, on foreign affairs, will be made to benefit American workers and American families.”

On increasing employment and rebuilding the nation’s infrastructure, Trump stated that his administration will “follow two simple rules: Buy American and hire American.” This follows the president’s December 2016 announcement of the creation of a White House National Trade Council, which will include Peter Navarro, Rolf Lundberg and Alexander Gray and will focus on trade issues promoting U.S. manufacturing and U.S. job growth. Our Key Players alert has additional information on Navarro, Lundberg and Gray.

Trade Deals Working for All Americans

1/23/17 – Shortly after President Trump took the oath of office, the White House website was updated and now includes a page titled “Trade Deals Working For All Americans,” which reads in its entirety:

For too long, Americans have been forced to accept trade deals that put the interests of insiders and the Washington elite over the hard-working men and women of this country. As a result, blue-collar towns and cities have watched their factories close and good-paying jobs move overseas, while Americans face a mounting trade deficit and a devastated manufacturing base.

With a lifetime of negotiating experience, the President understands how critical it is to put American workers and businesses first when it comes to trade. With tough and fair agreements, international trade can be used to grow our economy, return millions of jobs to America’s shores, and revitalize our nation’s suffering communities.

This strategy starts by withdrawing from the Trans-Pacific Partnership and making certain that any new trade deals are in the interests of American workers. President Trump is committed to renegotiating NAFTA. If our partners refuse a renegotiation that gives American workers a fair deal, then the President will give notice of the United States’ intent to withdraw from NAFTA.

In addition to rejecting and reworking failed trade deals, the United States will crack down on those nations that violate trade agreements and harm American workers in the process. The President will direct the Commerce Secretary to identify all trade violations and to use every tool at the federal government’s disposal to end these abuses.

To carry out his strategy, the President is appointing the toughest and smartest to his trade team, ensuring that Americans have the best negotiators possible. For too long, trade deals have been negotiated by, and for, members of the Washington establishment. President Trump will ensure that on his watch, trade policies will be implemented by and for the people, and will put America first.

By fighting for fair but tough trade deals, we can bring jobs back to America’s shores, increase wages, and support U.S. manufacturing.

Treasury Secretary Nominee Mnuchin Fields Questions on Trade Agreements, Retaliatory Trade Actions and Economic Sanctions

1/23/17 – Treasury Secretary nominee Steven Mnuchin appeared before the Senate Finance Committee on January 19 for his confirmation hearing and reiterated certain trade policies and positions of the incoming president, while backing off on providing a more nuanced position on other issues. “As the new administration comes in, I want to make sure first and foremost that our trade policies do no harm,” Mnuchin told the committee.

Mnuchin, as did Commerce Secretary nominee Wilbur Ross, confirmed that renegotiating the NAFTA will be one of the first priorities of the Trump administration. Mnuchin believes NAFTA can be revised so that it is a “win-win” trade agreement for the three parties. He commented that Trump wants to revive trade policies that “put the American worker first.” When asked about Trump’s plan to withdraw from the Trans-Pacific Partnership (TPP) agreement, Mnuchin responded that U.S. trade agreements have not done enough to safeguard companies’ patents, copyrights and trademarks overseas. He added that the Trump administration is interested in negotiating bilateral free trade agreements with the TPP countries that are not already trade agreement partners with the United States. Mnuchin noted that the outcome achieved in the TPP negotiations should be the “starting point” for a renegotiation of NAFTA since all three NAFTA signatories are TPP signatories and certain TPP provisions would effectively update related NAFTA provisions negotiated more than 20 years ago.

In response to questioning about Trump’s threats to impose a 35 percent tariff on imports, Mnuchin stated that Trump is “very much interested in free and fair trade” and less interested in limiting imports than in increasing exports. Mnuchin told the committee that he and Trump had never discussed the imposition of broad import tariffs and added that he doesn't think that policy “is going into action.” Mnuchin also indicated that Trump’s much-discussed tariff on imports of U.S. companies manufacturing abroad would need to be “carefully evaluated to ensure they do not hurt us at home.”

On issues involving China and Russia, Mnuchin indicated that the Trump administration could take advantage of legislation passed by the last Congress that makes it easier for the Treasury Department to label a country a currency manipulator, a charge often leveled at China. While he expressed support for current U.S. sanctions on Russia “for now,” Mnuchin highlighted that Trump has indicated the possibility of lifting those sanctions if Russia agrees to work with the United States on important issues, such as counter-terrorism.

The full hearing can be viewed on the Senate Finance Committee’s website.

Ross Discusses Trade Deals and Trade Enforcement

1/23/17 – At his January 18 Senate confirmation hearing, Commerce Secretary-designate Wilbur Ross stated that he is not “anti-trade” but instead is “pro-sensible trade, not pro-trade that is to the disadvantage of the American worker and the American manufacturing community.” He repeatedly stated that U.S. trading partners must “play by the rules” and those countries that cheat will be “punished – and severely.” On several occasions during his testimony, he singled out China as a country that refuses to play by the rules. Ross as secretary would be ready to self-initiate antidumping and countervailing duty cases against unfairly traded imports, stating that a more aggressive stance by the United States would have a “psychological effect on the cheater.”

Ross confirmed that the first issue on Trump’s trade agenda will be the renegotiation of NAFTA. He testified that all aspects of NAFTA will be open to negotiation. While Ross said there is nothing “inherently wrong” with multilateral trade pacts, he thought it was “easier and quicker to negotiate bilateral agreements.” His “fundamental concern” with multilateral deals is the United States’ negotiating strategy repeatedly applied that led to  concessions that may not have been necessary.

Ross acknowledged that he had originally supported TPP, but, as he read the details, “came across some things that I felt were not consistent with things that had been advertised.” Ross supports a trade agreement mechanism requiring an automatic review after certain intervals to address any problems. Based on his hearing testimony, he wants to overhaul how the United States negotiates free trade agreements.

When asked about Trump's threats to impose a 35 percent tariff on certain imports, Ross would not commit, saying “I think that it's a complicated issue whether we should have one flat tariff on everything or whether it should be more tailored to the individual situation.” He added, however, that the threat to impose tariffs is a good “negotiating tool.”

The full hearing can be viewed on the Senate Commerce Committee’s website.

Trade Enforcement To Be Key Priority for House Ways & Means Committee Trade Subcommittee in 115th Congress

1/23/17 – On January 11, 2017, House Ways & Means Committee Chairman Kevin Brady (R-TX) stated that “strong trade enforcement will be a major focus” of the Trade Subcommittee. In a statement to the press, Brady stated: “The freedom to trade lies at the heart of our nation’s economic prosperity and leadership. But, if trade is to benefit our businesses, workers, and communities, we must ensure that it is conducted fairly and according to strictly enforced rules. This is why strong trade enforcement will be a major focus for our Trade Subcommittee in 2017.” The chairman added that the committee will continue to promote free and fair trade, stating, “it’s not enough to simply buy American-made products – we also have to sell American-made products, and we have to do so throughout the world, given that 96 percent of the world’s consumers live outside our borders.”

President-Elect Trump Calls U.S. Trade Agreements a “Disaster”

1/23/17 – On January 11, 2017, President-elect Trump, in his first press conference since the election, called U.S. trade agreements “a disaster” and reiterated his threat to impose a “major border tax” on the products of U.S. companies that move operations overseas. Regarding past trade agreements, Trump generally reiterated his campaign position that “We don’t make good deals anymore.” He followed by stating, “Our trade deals are a disaster. We have hundreds of billions of dollars of losses on a yearly basis – hundreds of billions with China on trade and trade imbalance, with Japan, with Mexico, with just about everybody.”

The President-elect continued to stress that U.S. companies that move their operations outside of the United States will incur a border tax: “You're going to pay a very large border tax. So if you want to move to another country and if you want to fire all of our great American workers that got you there in the first place, you can move from Michigan to Tennessee and to North Carolina and South Carolina – you can move from South Carolina back to Michigan. You can do anyway. You have a lot of states at play. A lot of competition. So it’s not like oh, gee, I’m taking the competition away. You got a lot of places you can move. And I don't care. As long as it's within the United States, the borders of the United States. There will be a major border tax on these companies that are leaving and getting away with murder.”