Trade Matters – International Trade & Investment

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

Late last year, the Federal Communications Commission (FCC) adopted new rules to restrict the import and sale of telecommunications equipment deemed unacceptably dangerous to US national security. The report and order issued on November 25 prohibits any future importation, marketing and sale of radiofrequency devices and equipment by entities on its covered list. The FCC has previously adopted rules barring the use of federal funds to purchase equipment or services by those on the Covered List. The FCC issued a further notice of proposed rulemaking announcing potential additional steps, including revoking authorization of existing devices and equipment owned by covered entities and expanding the new ban to include “components” made by covered entities but used by others in their own devices and equipment. . Communications equipment manufacturers and companies should ensure they know the source of their equipment and prepare for increased regulation by the FCC.

2. 2022 enforcement ends with a bang

• 7 accused of leaking sensitive US tech to Russia
  Two US citizens and five Russian citizens were recently charged with conspiracy, wire fraud and money laundering for conspiring to get US military-grade and dual-use technologies to the Russian defense sector in violation of US sanctions. As alleged in the indictment, the defendants were affiliated with Moscow-based Sernia Engineering and Sertal LLC, 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.




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




• Sanctions compliance gap results in $4.4M settlement
  On December 30, Danfoss A/S, a multinational Danish company that makes refrigeration and other cooling products, agreed to pay $4.4 million to the Office of Foreign Assets Control (OFAC) to settle its liability for sanctions violations. The violations occurred when Danfoss’ wholly-owned United Arab Emirates subsidiary paid customers in Iran, Syria and Sudan into its bank account at the UAE branch of a US financial institution and made payments from the 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-US goods by a non-US person to an entity in an OFAC-approved country does not violate OFAC regulations, it may constitute a violation when the payments are routed through US financial (export of US financial services) institutions.

3. Supply chain tracking is critical for the automotive industry

UK university researchers have traced customers to companies that mine, process and manufacture products in China’s Xinjiang region (XUAR), and found that practically every major conventional vehicle and electric vehicle manufacturer sources from the region. A recent report details the findings. In the United States, the Uyghur Forced Labor Prevention Act (UFLPA) is broad and establishes a rebuttable presumption that any goods mined, produced or manufactured in whole or in part in the XUAR are supplied using forced labor and imposes a ban on such imports. . Presumption rebuttal requirements can be difficult and burdensome, so importers need to increase tracking capabilities, especially as the US government increases enforcement.

4. USTR expands Section 301 exemptions; Time remains for comments

On December 16, the Office of the United States Trade Representative (USTR) announced a nine-month extension of 352 product exclusions in the China Section 301 investigation, validating the exclusions until September 30. USTR’s willingness to extend the exclusion is a positive sign. They undertake the four-year Section 301 tariff review required by law. US companies still have the opportunity to comment on the effects of Section 301 tariffs and argue for their removal. Comments can be submitted on the USTR comments portal, which closes on January 17.

5. Broad Humanitarian Exceptions to Sanctioned Jurisdictions

On December 20, OFAC announced amendments to add or revise common authorizations across many OFAC sanctions programs for humanitarian-related assistance. OFAC has issued or amended general licenses to provide authorization 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 non-governmental organization activities; and provision of agricultural commodities, medicine and medical equipment including replacement parts and components.

6. Negotiation of trade and economic agreements

• Indo-Pacific Economic Framework
  From December 10 to 15, USTR and Commerce Department representatives presented the draft text during the Indo-Pacific Economic Framework (IPEF) negotiations. Fourteen countries launched IPEF in May 2022; The same countries also participated in the Trans-Pacific Partnership (TPP) negotiations. IPEF is not a traditional trade agreement like 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 entered into a Memorandum of Understanding (MOU) with the African Continental Free Trade Area Secretariat aimed at accelerating sustainable growth across the African continent. When unified, the free trade area will consist of 54 member countries representing 1.3 billion people, making it the world’s fifth largest economy. In addition to signing the MOU, 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.

Business Tip of the Month: CFIUS EO Defines Momentum for 2022; Supply chain traceability required by 2023

President Biden’s September 15 Executive Order 14803 did not change the Committee on Foreign Investment in the United States (CFIUS) law or regulations, but it notified parties that CFIUS considers supply chain and third-party relationships when reviewing foreign investment. transactions. The parties should pay close attention to trends in the US industry and existing foreign ownership issues when considering the national security risk posed by a closed transaction. Finally, given CFIUS more resources to conduct unannounced reviews, the order makes the file/don’t-file decision more complicated and increases the potential for CFIUS intervention in transactions.

Companies should 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 Chinese-origin products. And the Customs Trade Partnership Against Terrorism (CTPAT) program incorporates supply chain resilience and national security concerns into its risk assessment analysis. Considering the various regulatory regimes that put supply chains under the microscope, companies 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 to provide a general guide to the topic. Expert advice should be sought regarding your particular circumstances.