Trade Matters – International Trade & Investment

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

Late last year, the Federal Communications Commission (FCC) adopted new rules to block the import and sale of telecommunications equipment deemed unacceptably dangerous to US national security. The report and order, issued Nov. 25, prohibits any future importation, marketing and sale of radio frequency devices and equipment by entities on its covered list. The FCC previously adopted rules prohibiting the use of federal funds to purchase equipment or services from those on the covered list. The FCC also issued a follow-up notice of proposed rulemaking announcing potential additional steps, including revoking existing licenses for devices and equipment held by covered entities and extending the new ban to “components” manufactured by covered entities , but are used by others in their devices and equipment. Manufacturers and companies of communications equipment must ensure that they know the provenance of their equipment and prepare for possible further regulation by the FCC.

2. The year 2022 ended with enforcement

• 7 Accused of concealing sensitive American technology from Russia
  Two American citizens and five Russian citizens were recently charged with conspiracy, wire fraud and money laundering for conspiring to acquire US military and dual-use technologies for the Russian defense sector in violation of US sanctions. According to the indictment, the defendants were linked to Serniya Engineering and Sertal LLC, Moscow-based companies operating under the direction of Russian intelligence services to procure advanced electronics and sophisticated test equipment for Russia’s military industrial complex and research and development sector.




• Former Marine pilot accused of illegally training Chinese pilots
  In December, authorities unsealed an indictment and warrant for the arrest of Daniel Edmund Duggan, a former Marine pilot, following his arrest in Australia for illegally training Chinese military pilots. Duggan allegedly trained Chinese military pilots in the aircraft carrier’s approaches and landings without obtaining an export license or other authorization from the US State Department’s Directorate of Defense Trade Controls. Military training is considered a “defence service”, the export of which requires a license under international arms trade regulations. Duggan and his co-conspirators also allegedly purchased the aircraft from a US-based dealer and falsified end-user information to obtain permission to export to South Africa, where training took place.




• Sanctions compliance gap results in $4.4 million settlement
  On December 30, Danfoss A/S, a multinational Danish company that makes refrigeration and other cooling products, agreed to pay $4.4 million to the Office of Foreign Assets Control (OFAC) to settle its liability for sanctions violations. The violations occurred when a Danfoss subsidiary in the United Arab Emirates had customers in Iran, Syria and Sudan make payments to its bank account at a branch of a financial institution in the United Arab Emirates and then made payments from that same account to entities in Iran and Syria. . The violations occurred due to deficiencies in Danfoss’ global sanctions compliance programs. Although the sale of non-U.S. goods by a non-U.S. person to an entity in an OFAC-sanctioned country may not otherwise violate OFAC regulations, it may nevertheless constitute a violation (export of financial services from the U.S.) when payments are made through a financial institution.

3. Supply chain tracking is critical to the automotive industry

Researchers at a UK university tracked down the customers of companies that mine, process and manufacture products in China’s Xinjiang region (XUAR) and found that virtually all major traditional car and electric vehicle manufacturers come from the area. A recent report details the findings. In the United States, the Uyghur Forced Labor Prevention Act (UFLPA) is broad and establishes a rebuttable presumption that any commodity mined in whole or in part in the XUAR is supplied by forced labor and imposes a ban on such imports. Presumption rebuttal requirements can be difficult and burdensome, and importers need to increase their tracking capacity, especially as the US government steps up enforcement.

4. USTR Expands Section 301 Exclusions; There is still time for comments

On December 16, the Office of the United States Trade Representative (USTR) announced a nine-month extension of the exclusions of 352 products in China’s Section 301 investigation, making the exclusions effective until September 30. USTR’s willingness to extend the exclusions is a positive sign as they complete the four-year Section 301 tariff review required by law. U.S. companies still have the opportunity to comment on the effects of Section 301 tariffs and advocate for their elimination. You can submit comments on the USTR Comments Portal, which closes on January 17.

5. Broader humanitarian exemptions for sanctioned jurisdictions

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

6. Negotiations on trade and economic agreements

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




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

TRADE TIP OF THE MONTH: CFIUS EO’s defining moment in 2022; Supply chain tracking is required for 2023

President Biden’s Executive Order 14803 of September 15 did not change the law or the regulations of the Committee on Foreign Investment in the United States (CFIUS), but it informed parties that CFIUS will consider supply chains and third-party relationships when reviewing foreign investments. transactions. Clients will need to pay more attention to U.S. industry trends and existing foreign ownership issues when considering the national security risk posed by a covered transaction. Finally, given that CFIUS has been given more resources to conduct no-notice reviews, the order makes the file/no-file decision more complex and increases the potential for CFIUS to intervene in the transaction.

Companies should also expect supply chain transparency requirements to increase in 2023. For example, when selling to the military, you may need to certify that your supply chain does not include items or components from certain Chinese companies or certain products of Chinese origin. And the Customs Trade Partnership Against Terrorism (CTPAT) program incorporates supply chain resilience and national security issues into its risk assessment analysis. With the variety of regulatory regimes putting supply chains under scrutiny, companies will need to know where every screw and bolt comes from, and most companies are not prepared for this analysis.

The content of this article is intended as a general guide to the topic. Professional advice should be sought regarding your particular circumstances.