Trade Matters – International Trade & Investment

1. The FCC banned the importation and sale of certain Chinese telecom and video surveillance devices

Late last year, the Federal Communications Commission (FCC) adopted new rules to prevent the importation and sale of telecommunications equipment deemed unacceptably dangerous to US national security. The report and order, issued on November 25, prohibits the 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 people on the covered list. The FCC also issued a further notice of proposed rulemaking announcing possible additional measures, including revoking existing device and equipment authorizations held by covered entities and expanding the new ban to include “components” manufactured by covered entities. occurs but is used by others in their own devices and equipment. . Communication equipment manufacturers and companies should make sure they know the origins of their equipment and prepare for possible further regulation by the FCC.

2. 2022 implementation ends with a bang

• 7 accused of hiding 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 obtain US military-grade and dual-use technologies for Russia’s defense sector in violation of US sanctions. According to the indictment, the defendants were associated with Sernia Engineering and Sertal LLC, Moscow-based companies that operated under the direction of Russian intelligence services to obtain 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 the indictment and arrest warrant of former Marine pilot Daniel Edmund Duggan following his arrest in Australia for unauthorized training of Chinese military pilots. Duggan allegedly 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 Directorate of Defense Trade Controls. Military training is considered a “defense service”, the export of which requires a license under the International Traffic in Arms Regulations. Duggan and his co-conspirators also allegedly purchased the aircraft from a US-based dealer and provided false end-user information to obtain approval to export it 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 over sanctions violations. The breach occurred when a wholly-owned United Arab Emirates subsidiary of Danfoss made payments to customers in Iran, Syria and Sudan into its bank accounts at the UAE branch of a US financial institution and then made payments from the same accounts to entities in Iran and Syria. . The breach resulted from deficiencies in Danfoss’ global sanctions compliance programs. While the sale of non-US goods by a non-US person in an OFAC-sanctioned country does not otherwise violate OFAC regulations, it may constitute a violation (export of US financial services) when the payment is transited through US financial means. institutions

3. Supply chain tracking critical for automotive industry

Researchers at a UK university have traced the customers of companies that mine, process and produce products in China’s Xinjiang region (XUAR) and found that practically every major traditional automotive and electric vehicle manufacturer sources from that 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 goods produced, manufactured or produced in whole or in part in the XUAR are supplied using forced labor, and upon such importation imposes restrictions. . Presumption rebuttal requirements can be difficult and burdensome, so importers need to increase tracking capacity, especially as the US government increases enforcement.

4. USTR expands Section 301 exclusion; Time left for comments

On December 16, the Office of the United States Trade Representative (USTR) announced a nine-month extension of the 352 product exclusion in China’s Section 301 investigation, making the exclusion valid until September 30. USTR’s willingness to extend the exclusion is a positive sign. They conduct the four-year Section 301 tariff review required by law. US companies still have an 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 Approved Jurisdictions

On December 20, OFAC announced amendments to add or revise general licenses to multiple 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 some international organizations and institutions such as the United Nations; certain humanitarian transactions in support of non-governmental organization activities; and provision of agricultural commodities, medicine and medical devices 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 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 entered into a Memorandum of Understanding (MOU) with the African Continental Free Trade Area Secretariat with the goal of accelerating sustainable growth across the African continent. When consolidated, the free trade area will include 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, deals 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 2022’s Defining Moment; Supply chain tracing required for 2023

President Biden’s September 15 Executive Order 14803 did not change the Committee on Foreign Investment in the United States (CFIUS) laws or regulations, but it notified parties that CFIUS will consider supply chains and third-party relationships when reviewing foreign investments. Transactions When considering the national security risk posed by a covered transaction, the parties must pay close attention to trends in the US industry and current foreign ownership issues. Finally, given that CFIUS has been provided with additional resources to conduct non-notified reviews, the order complicates file/non-file determinations and increases the likelihood of CFIUS intervention in practice.

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