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On April 12, 2018 the United States Trade Representative (USTR) announced it was self-initiating a review to assess India’s eligibility to continue to be treated as a beneficiary country under the U.S. Generalized System of Preferences program (GSP).

The GSP is a trade preference program that allows duty free access to about 5,000 tariff categories from a range of developing and least developed countries, which are designated as beneficiary developing countries (BDCs) and least-developed beneficiary developing countries (LDBDCs). About 3,500 of these categories are available to all GSP countries, while about 1,500 are reserved for LDBDCs.

India is by far the largest beneficiary of the U.S. GSP program. It exported about $5.6 billion in GSP eligible articles in 2017, constituting about 26 percent of the value of total GSP imports for that year. The Indian sectors benefitting from the U.S. GSP program include organic chemicals, articles of iron and steel, plastics, vehicles and parts thereof and machinery and equipment for the electronics industry.

Under the Trade Act of 1974, a developing country is assessed against a host of factors which determine its eligibility to be a beneficiary country. These factors include respecting workers’ rights, eliminating the worst forms of child labor, respecting arbitral awards in favor of U.S. citizens or legal persons, not granting sanctuary to those involved in international terrorism, not engaging in nationalization or expropriation of assets of U.S. persons, providing reasonable and equitable market access, providing adequate and effective protection for intellectual property rights, and reducing barriers to investment and trade in services. Any person may file a request for USTR to review the GSP status of any eligible beneficiary developing country reviewed with respect to any of the designation criteria listed in the statue. In addition, USTR has implemented a new triennial process, under which it will assess each developing country’s compliance with the eligibility criteria every three years. The focus of the first year is on countries in Asia, and assessments of countries in other parts of the world will take place in the second and third years. If an assessment raises concerns about a country’s compliance with the eligibility criteria, USTR may self-initiate a full review.

In the review of India, USTR will examine whether India is in compliance with the market access criterion of the program which requires that a beneficiary country provide the United States with equitable and reasonable market access. The U.S. dairy industry has alleged that India denies market access for U.S. dairy exports on unjustified health and safety grounds. Likewise, the medical devices industry has alleged that India has failed to provide equitable and reasonable access to the Indian market because it maintains stringent price controls on coronary stents and knee replacement implants that are forcing U.S. companies to sell in India only after reducing prices by almost 85 percent

Stakeholders will want to take note of the public hearing and comment period for the India review, which USTR is expected to announce in the coming days.

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Recent reports suggest that the Administration may declare an emergency under the International Emergency Economic Powers Act (IEEPA) to grant the Committee on Foreign Investment in the United States (CFIUS) authority to review transactions involving the transfer of U.S. technology and intellectual property (IP) to foreign entities, even where there is no transfer of “control” as currently required under existing CFIUS regulations.  This executive action would follow a memorandum issued by President Trump directing the U.S. Government to propose possible restrictions on Chinese investment in U.S. companies due to concerns outlined by the Office of the United States Trade Representative (USTR) in connection with its Section 301 investigation.  The potential CFIUS review of U.S. technology transfers to foreign entities would mirror one aspect of the pending Foreign Investment Risk Review Modernization Act of 2017 (FIRRMA).

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  • The Treasury Department has placed several prominent Russian individuals and companies on the Specially Designated Nationals and Blocked Persons lists (SDN list). Several of these parties are Russian billionaires previously identified in the Treasury Department’s so-called “Oligarch List” reported to Congress on January 29, 2018. 
  • Under the general licenses issued with the new listings, U.S. persons have until June 5, 2018 to wind down operations with specified listed companies and their subsidiaries, and until May 7, 2018 to divest debt, equity, or holdings owned by EN+ Group PLC, GAZ Group and United Company RUSAL PLC. 
  • General License 12, which allows wind down operations with several newly designated SDN companies, instructs that payments to the SDNs must be made into blocked accounts with U.S. banks. This deviates from previous general licenses which did not place conditions on how SDNs must be paid. 

On April 6, 2018, the Treasury Department’s Office of Foreign Assets Control (OFAC), in consultation with the State Department, designated 7 Russian oligarchs, 12 companies that they own or control, 17 senior Russian government officials, and 1 state-owned Russian weapons trading company and its subsidiary, a Russian bank. (The list may be found here.)

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Yesterday, President Trump issued a memorandum (“Memorandum”) directing his Administration to take several actions related to the investigation by the Office of U.S. Trade Representative (“USTR”) into China’s acts, policies, and practices (“APPs”) related to technology transfer, intellectual property, and innovation under Section 301 of the Trade Act of 1974 (“Section 301”). The actions include restrictions on Chinese investment in the United States and the imposition of higher customs duties on imports from China. At the signing ceremony, President Trump called this action “the first of many” against Chinese practices. USTR Ambassador Lighthizer echoed the President at a hearing before the Senate Finance Committee today, noting that the Administration “expects to bring additional [actions] in other areas where the [United States does not] have reciprocal response.”

Below we describe these actions and USTR’s findings in the Section 301 investigation.

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Pursuant to President’s Trump’s March 8, 2018 proclamations issued under authority of Section 232 of the Trade Expansion Act of 1962, added customs tariffs on imports of a wide variety of steel and aluminum imports from all countries except Canada and Mexico will enter into effect on March 23. On March 16, 2018, the Department of Commerce’s (“DOC”) Bureau of Industry and Security (“BIS”) issued an interim rule that specifies the requirements and process for parties to submit product-exclusion requests from the Section 232 tariffs. Under the new rule, DOC is authorized to exclude from the tariffs aluminum and steel articles that are determined to lack sufficient U.S. production capacity of comparable products, or for which there are “specific national security-based considerations.”

BIS determined that it has good cause to waive the prior notice and opportunity for comment procedures due to impracticability and public interest considerations, and therefore the new rule is immediately effective, although subject to being amended. Comments on the interim rule are due by May 18. BIS specifically advised that commenters “may submit comments regarding how and whether or not the country of origin of a proposed product should be considered … as part of the process for reviewing product-based exclusion requests,” therefore implying that it is considering whether imports from certain countries will be given more favorable treatment than imports from others.

In short, the process provides for parties that use steel or aluminum in business activities in the United States to submit company-specific exclusion requests, and for domestic industry participants to object to such requests. Parties filing exclusion requests and objections must fill out the applicable forms provided on BIS’s website. The forms for steel are available here and forms for aluminum are available here. If an exclusion is granted, it will take effect five days after approval and will be valid for one year.

Below we outline the key aspects of the product-exclusion information collection procedure set forth in the interim rule.

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On March 8, 2018, President Trump signed proclamations authorizing the imposition of a 25 percent customs duty on certain steel products and a 10 percent customs duty on certain aluminum products. The duties were imposed pursuant to Section 232 (“Section 232”) of the Trade Expansion Act of 1962, a rarely-used national security provision that authorizes the Department of Commerce (DOC) to investigate the effect of imports on national security.  The new customs duties are scheduled to enter into effect on March 23, 2018.  Below we discuss the Presidential Proclamations and reactions from Capitol Hill and other countries.

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Today, President Trump issued a statement on the status of the Joint Comprehensive Plan of Action (“Iran nuclear deal”) and the Office of Foreign Assets Control designated 14 individuals and entities in connection with serious human rights abuses and censorship in Iran, and support to designated Iranian weapons proliferators.  Below, we provide notable highlights from the President’s statement.

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On December 20, 2017, President Trump issued Executive Order 13818 (the “E.O.”) implementing provisions of the Global Magnitsky Human Rights Accountability Act (“Global Magnitsky Act”) (enacted into law in December 2016), which provided for sanctions relating to gross human rights violations or government officials linked to corruption. The E.O. authorizes the imposition of sanctions on non-U.S. persons determined to be responsible for, complicit in, or have engaged in (directly or indirectly) “serious human rights abuse,” corruption, or “the transfer or the facilitation of the transfer of the proceeds of corruption,” or to have attempted to engage in or materially support such acts.

The E.O. applied sanctions designations to 13 persons and, separately, the Department of Treasury’s Office of Foreign Assets Control (“OFAC”) imposed sanctions on 39 additional individuals and entities around the world. This includes individuals and entities from 13 countries and territories spanning the continents of Asia, Africa, Europe, and North America.

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Further to our alert published on November 13, 2017 regarding whether acts, policies, and practices (APPs) of China related to transfer of technology, intellectual property, and innovation are actionable under Section 301(b)(1) of the Trade Act of 1974 (Section 301), it is anticipated that the U.S. Trade Representative (USTR) will make affirmative findings and remedy recommendations well ahead of the August 2018 statutory deadline, potentially as early as January 2018. USTR is authorized to take specified actions (noted below), “subject to the specific direction, if any, of the President regarding such action[s]” and is authorized to take “all other appropriate and feasible action within the power of the President that the President may direct USTR to take.”

According to USTR officials, if the United States makes an affirmative determination, the next steps will likely proceed in two tracks: (1) the United States may elect to initiate a World Trade Organization (WTO) dispute regarding the APPs, if they are considered to be in violation of WTO commitments, and/or (2) the United States may take unilateral retaliatory action.  Below, we comment briefly on both tracks.

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On December 5, 2017, the Securities and Exchange Commission (SEC) awarded more than $4.1 million to a whistleblower for alerting the SEC to a multi-year securities fraud engaged in by his employer. The award is significant in that the recipient, a company insider who alerted the SEC to the securities fraud, is a non-U.S. national working overseas. This is not the first time that the SEC has awarded a large sum to a foreign whistleblower. The distinction for the largest award ever awarded goes to an award of $30 million awarded in 2014 to a whistleblower living in a foreign country. In that case the whistleblower provided the SEC with information about an on-going fraud that the SEC claimed was hard to detect.

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