On February 4, 2019, U.S. Customs and Border Protection (CBP) issued a withhold release order (WRO) against tuna and tuna products from the Tunango No. 61, a Taiwanese vessel, based on information obtained by CBP that indicated that tuna is harvested with the use of forced labor. The order will detain the entry of tuna and any such merchandise manufactured wholly or in part by the Taiwanese vessel at all U.S. ports. In the accompanying statement, CBP stated that importers of detailed shipments will have the opportunity to “export their shipments or demonstrate that the merchandise was not produced with forced labor.” This WRO is the most recent action resulting from CBP’s renewed focus on enforcement of the U.S. ban on imports of forced labor under Section 307 of the Tariff Act of 1930, and the first issued against a fishing vessel.
On November 22, 2017, Apple, Inc. released a statement confirming reports that its major supplier in China, Foxconn Technology Group has used illegal student labor to assemble the latest version of the iPhone. Apple indicated that the company and Foxconn are taking corrective action in response. In the past, both Apple and Foxconn have been accused of employing forced labor practices. This time, the discoveries coincide with a time of renewed focus on enforcement of the decades-old U.S. ban on imports of forced labor, carrying consequences for importers in terms of penalties, and withholding and/or seizure of merchandise. As reviewed below, U.S. Customs and Border Protection (CBP) has recently taken measures to enforce the import ban and sanctions for forced North Korean labor (described below), and issued guidance to importers in this regard.
Following President Trump’s trip to Asia, sanctions policies for North Korea continue to evolve. The U.S. government has strengthened sanctions through legislation and Presidential Executive Orders. Further, it is enforcing its secondary sanctions against companies doing business with the North Korean regime, thus far targeting banks, businesses and individuals. The UN Security Council has approved resolutions imposing sanctions on North Korea in reaction to its nuclear and missile tests. Aggressive enforcement by the United States and actions by China and other Asian countries in light of the UN resolutions should be expected. Indeed, President Trump recently tweeted that China would be “upping” sanctions against North Korea.
Below is a summary of key pronouncements from the U.S. government, UN, and other countries.
Recent public reports indicate Sen. Chuck Schumer (D-NY), the Senate Democratic Leader, has authored a letter to President Trump requesting the President order the Committee on Foreign Investment in the United States (CFIUS) to suspend the approval of all covered transactions by Chinese entities. Sen. Schumer explains that such action would place severe economic pressure on China and force the country to take more stringent action against North Korea. While President Trump has publicly expressed “disappointment” with China over its perceived lack of response to recent North Korean missile tests, it is unclear what actions, if any, the President might take to spur action from China.
On June 29, 2017, the U.S. Treasury Department announced new steps applying pressure on North Korea in relation to its proliferation activities. Specifically, this involved (1) sanctions designations against Chinese shipping company Dalian Global Unity Shipping Co., Ltd. and two Chinese individuals; and (2) anti-money laundering special measures against China’s Bank of Dandong. All were involved in business with North Korea according to the Treasury Department’s announcement.
The Special Measures for Bank of Dandong under Section 311 of the USA PATRIOT Act prohibit U.S. financial institutions from maintaining correspondent accounts for, or on behalf of, that bank. This would prevent access to the U.S. banking system for dollar transactions or wiring services.
None of the sanctioned parties appear to be systemically important companies for China, but the sanctions may be intended, or viewed, as an effort by the Trump Administration to pressure China into doing more to restrain North Korea’s nuclear activities.
Donald Trump’s victory in the 2016 Presidential election put the Republican Party in charge of the White House and Congress for the first time in a decade. President-elect Trump ran as an anti-establishment candidate who departed from many traditional Republican positions and promised bold and in some respects controversial reforms. How his administration will govern and the extent to which its policies will be supported in Congress are key questions facing companies and investors.
This report comments on aspects of international trade, sanctions and export control policies that are currently at the forefront of discussion.
The United Nations and United States recently took significant new steps to expand sanctions on North Korea, with implications for international banking; shipping and port activities; air transport; energy and mining sectors; trade in labor and specified metals, minerals and commodities; aviation fuels; and software. The new rules will have a particular impact on companies conducting business in Asia, most importantly China, but also including South Korea, India, Russia and shipping hubs like Singapore and Hong Kong.