Source: https://www.crowell.com/NewsEvents/AlertsNewsletters/all/This-Month-in-International-Trade-July-2014
Timestamp: 2016-10-22 19:38:34
Document Index: 157706449

Matched Legal Cases: ['§ 544', 'art 598', 'art 536', 'art 501', 'art 536', 'art 547', 'art 541']

This Month in International Trade - July 2014 | All Alerts & Newsletters | Crowell & Moring LLP
THIS MONTH'S TOP TRADE DEVELOPMENTS 1) Ukraine: New U.S and EU Economic Sanctions and Export Restrictions The tragic shoot-down of Malaysia Airlines Flight MH17 and increased evidence of Russian support for the separatists in eastern Ukraine brought increased Western sanctions against Moscow in July, to include the first-ever use of sectoral sanctions imposed in a relatively coordinated fashion by the U.S., EU, and Canada.
Crowell's attorneys are available to answer any questions clients may have on this dynamic situation and how the new decisions and regulations may affect your business. For more information, contact: Cari Stinebower, Salomé Cisnal de Ugarte, Alan Gourley, Chris Monahan, Dj Wolff, Edward Goetz
In addition to the issues on the table (e.g., number of centrifuges, design of the Arak Heavy Water Reactor, length of agreement), the International Atomic Energy Association (IAEA) has voiced concern over Iran's lack of engagement in the IAEA's investigation of possible military dimensions to Iran's nuclear program. In a pact signed last year between the IAEA and Iran's Atomic Energy Agency, Iran agreed to implement five nuclear transparency measures by August 25th and there seems to be little movement on Iran's part to make this a reality. How this may impact the negotiations is unknown. Clients should not hesitate to contact Crowell with any questions regarding this complex negotiation. For more information, contact: Cari Stinebower, Dj Wolff, Edward Goetz
On January 24, 2014, the United States and 13 other WTO Members (Australia, Canada, China, Costa Rica, the European Union, Hong Kong, Japan, New Zealand, Norway, Singapore, South Korea, Switzerland, and Taiwan) announced their intention to negotiate a multilateral EGA under the auspices of the WTO. The first round of negotiations took place on July 8-11 in Geneva. The purpose of the EGA is to seek duty elimination on "environmental goods" to help promote trade in these items, thus promoting sustainability and greener growth. The economies participating in the negotiations have indicated that they will negotiate and build from a list of 54 products, on which member economies of the Asia-Pacific Economic Cooperation (APEC) forum agreed in September 2012 to lower duties. On April 2, 2014, the Obama Administration issued a substantially expanded list of products as to which it might seek the elimination of tariffs in the negotiations, suggesting that the U.S. will be setting a higher bar of ambition for the talks.
Given the open-ended nature of the process and the lack of a clear definition of "environmental good," companies across sectors have important opportunities through the EGA to seek the reduction or elimination of duties on the goods they use as inputs into their production processes or sell as finished products to consumers. For its part, the U.S. government has expressed interest in hearing from companies regarding (a) what products should be included (companies should be prepared to make the environmental case for the product's inclusion) and (b) how the companies' supply chains work, so that negotiators have a better understanding of the potential benefits of including certain products.
The Sixth Meeting of the U.S.-China Strategic and Economic Dialogue was held in Beijing on July 9th and 10th. One of the key outcomes of the two days of talks was a commitment from both sides to "intensify" U.S.-China Bilateral Treaty (BIT) negotiations, which started in 2008. There had been only limited progress until last summer when China took the significant step of agreeing to negotiate guarantees of market access for U.S. investors in potentially all sectors, on the basis of a "negative list" of narrowly tailored exceptions. Since 2013, the two sides have held increasingly successful negotiating sessions, reaching substantial agreement on many key provisions in the agreement. The hardest work remaining concerns the length and content of China's "negative list" (i.e., the list of specific parts of specific sectors it wishes to exclude from the BIT). Negotiations on the "negative list" are expected to begin in earnest in early 2015.
U.S. companies seeking to invest or that have already invested in China may face many of the kinds of market access and regulatory restrictions that could be addressed in this BIT negotiation. For example, companies may be subject to foreign equity caps or joint venture requirements in establishing their businesses, or be required to purchase or use domestically produced goods or technologies in producing final products. Furthermore, many companies face pressure to disclose proprietary business methods or other trade secrets as a condition for doing business in China. Whatever the challenges they face operating their businesses in China, companies in all economic sectors should carefully consider how a BIT could improve their business position and actively engage the U.S. government in ensuring the conclusion of a strong and effective treaty that achieves these objectives.
Clients with questions on how to best capitalize on this unique opportunity should not hesitate to contact Crowell. For more information, contact: Jonathan (Josh) Kallmer, Dj Wolff, Edward Goetz
Tofasco of America, Inc. (Tofasco), of La Verne, California, has remitted payment of $21,375 to settle potential civil liability for an alleged violation of the Weapons of Mass Destruction Proliferators Sanctions Regulations (the "WMDPSR"). On or about April 16, 2009, Tofasco appears to have violated §§ 544.201(a) and 544.205 of the WMDPSR when it dealt in blocked property by engaging a bank to process a blocked letter of credit transaction representing payment for a shipment of recreational chairs with a substitute bill of lading omitting reference to the Islamic Republic of Iran Shipping Lines (IRISL), an entity whose property and interests in property are blocked pursuant to the WMDPSR. Bank of America, N.A. (Bank of America) settled potential liability for apparent violations of the Foreign Narcotics Kingpin Sanctions Regulations, 31 C.F.R. part 598; the Narcotics Trafficking Sanctions Regulations, 31 C.F.R. part 536; and the Reporting, Procedures and Penalties Regulations, 31 C.F.R. part 501. The $16.5 million settlement resolves OFAC's investigation into transactions that OFAC alleges Bank of America processed and accounts Bank of America maintained on behalf of individuals with multiple or multi-part last names on the List of Specially Designated Nationals and Blocked Persons (SDN List). Procesadora Campofresco, Inc. of San Juan, Puerto Rico settled potential civil liability for apparent violations of the Narcotics Trafficking Sanctions Regulations. The company, known as Campo Gardens, Inc., agreed to pay $27,000 for six apparent violations of the Narcotics Trafficking Sanctions Regulations, 31 C.F.R. part 536. Epsilon Electronics Inc. (Epsilon) of Montbello, California was assessed a Penalty of $4 million for violating the Iranian Transactions and Sanctions Regulations. Epsilon, also doing business as Power Acoustik Electronics, Sound Stream, Kole Audio, and Precision Audio, shipped products to a company that re-exports most, if not all, of its products to Iran. Epsilon knew or had reason to know that such goods were intended specifically for supply, transshipment, or re-exportation, directly or indirectly to Iran. Securities and Exchange Commission (SEC)
The SEC charged Smith & Wesson Holding Corporation with violating the Foreign Corrupt Practices Act (FCPA) when employees and representatives of the U.S.-based parent company authorized and made improper payments to foreign officials while trying to win contracts to supply firearm products to military and law enforcement overseas. The company agreed to pay $107,852 in disgorgement, $21,040 in prejudgment interest, and a $1.906 million penalty. For more information, contact: Michael Appel, Edward Goetz
On July 22nd, the U.S. International Trade Commission (ITC) determined "there is a reasonable indication that a U.S. industry was materially injured or threatened with material injury by reason of imports of certain passenger vehicle and light truck tires from China that are allegedly subsidized and sold in the U.S. at less than fair value." With this affirmation, the U.S. Department of Commerce will continue its investigation on the tire imports and make a preliminary countervailing duty (CV) determination in late August and antidumping (AD) decision in November. The United Steelworkers Union (USW) had petitioned the ITC for relief this past June. Commerce initiated their investigation after a poll of domestic companies involved in the manufacture of passenger vehicle and light truck tire imports from China found that the USW had official legal standing to bring AD/CV charges against the Chinese importers.
FinCEN Designates FBME Bank as a Facilitator of Illicit Activity The Financial Crimes Enforcement Network (FinCEN), on July 17, 2014, identified the FBME Bank Ltd. (formerly known as the Federal Bank of the Middle East) as a foreign financial institution of primary money laundering concern pursuant to Section 311 of the USA PATRIOT Act. According to the finding, the bank is well-known for its willingness to evade Anti-Money Laundering (AML) regulations and is said to be favored by high-risk customers. Moreover, the finding states that FBME facilitated a substantial volume of money laundering through the Bank for many years. Specifically, FinCEN alleged that FBME is used by its customers to facilitate money laundering, terrorist financing, transnational organized crime, fraud, sanctions evasion, and other illicit activity through the U.S. financial system.
FinCEN's finding announced that FBME has changed its country of incorporation numerous times and is now nominally based in Tanzania; however, 90 percent of its transactions flow through branches in Cyprus, where the bank has taken active steps to evade Cypriot regulatory authorities. The financial institution was established in 1982 in Cyprus as the Federal Bank of the Middle East Ltd., a subsidiary of the private Lebanese bank, Federal Bank of Lebanon. According to FinCEN's finding, FBME's headquarters is widely regarded as the largest bank in Tanzania based on its $2 billion asset size, but maintains four branches. FinCEN has delivered this finding to the Federal Register, along with a notice of proposed rulemaking. FinCEN is proposing instituting the fifth special measure which would prohibit U.S. financial institutions from opening or maintaining correspondent accounts (including payable through accounts) for FBME. According to FinCEN's notice, only one U.S. financial institution currently maintain such an account for FBME. Clients should contact Crowell with any questions they might have on ensuring their compliance programs are properly structured to identify and avoid dealing with such high-risk entities.
During last week's round of discussions, the two sides covered the full range of "market access" issues, including trade in goods, trade in services, investment, and government procurement. On the issue of services, the U.S. pressed the Europeans to move more quickly and decisively to open up their services sectors, while both sides emphasized the importance of openings in each other's government procurement markets. Discussions towards greater regulatory cooperation, widely considered to be the greatest value of the TTIP talks, plodded forward last week. Negotiators made modest progress in talks regarding several product sectors, including textiles and apparel (where they focused on labeling and safety issues), chemicals (where they discuss broad opportunities for cooperation), and automobiles (where talks advanced in areas like equivalence of technical regulations). As the European Union welcomes a new Commission this fall and the U.S. prepares for the November Congressional elections, the TTIP negotiations find themselves at an important political juncture. The next six months will be critical for determining whether the two sides can maintain realistic hopes for an ambitious market-opening and regulatory cost-lowering agreement. As always, it is critical for companies and associations to make their voices heard with the negotiators, to ensure that their priorities for sector liberalization, regulatory cooperation, and increased transparency are taken into account. Crowell is actively working with many companies to ensure that their interests are fully advanced in the TTIP.
On July 18th, the Department of Commerce published its final dumping determination on South Korean oil country tubular goods (OCTG), reversing a prior ruling. The dumping margins determined by Commerce are 15% for Hyundai HYSCO, 9.89% for Nexteel Co. Ltd. and 12.82% for all other South Korean companies. OCTG consists of steel pipe and tube products used in oil and gas industry, such as drill pipe, pipe casting, and oil pipes. The investigation stemmed from a petition filed on July 2, 2013 by a group of U.S. steel manufacturers led by U.S. Steel Corp. The petition alleged dumping of OCTG by nine countries including South Korea, India, Saudi Arabia, Taiwan, Philippines, Thailand, Ukraine, Turkey, and Vietnam. At the preliminary phase of the dumping investigation, Commerce found sales at less than fair value for imports from all of the subject countries except for South Korea. Commerce has reversed the ruling with respect to South Korea at the final determination while upholding its prior rulings on the other eight countries.
The antidumping duties will be imposed once the U.S. International Trade Commission affirms its determination of material injury. The Korean government may file a complaint with the World Trade Organization over the ruling. It was also reported that the lawyers for some Korean steel companies had said before the final determination that they would consider appealing if the decision went against them. Clients should contact Crowell with any questions. Crowell will continue to keep tabs on any appeals and the impact they may have on industry. For more information, contact: Alex Schaefer, Jini Koh, Brian Gatta, Pierce Lee
The new EO adds the following to the list of predicate actions that could render a person subject to sanctions: that threaten the peace, security, or stability of the Congo; that would undermine democratic processes or institutions; acts of violence against men, women, children, or any civilians that would constitute a serious abuse or violation of human rights; obstruction of humanitarian assistance; attacks on United Nations personnel; and supporting any such activity through the illicit trade in Congolese natural resources. Although supporting activity through the illicit trade in Congolese natural resources is a new category of activity that could lead to designation, it is consistent with the policy goals behind the conflict mineral reporting requirements maintained by the Securities and Exchange Commission. The new EO does not affect the previous criteria for sanctions, codified in 31 CFR Part 547 (and identified by OFAC as "[DRCONGO]") including targeting foreign or Congolese armed groups impeding the disarmament, repatriation, resettlement, or reintegration of combatants; the use of children in combat or targeted for violence; and providing any assistance related to the activities listed or military activities.
For more information, contact: Cari Stinebower, Edward Goetz Other July OFAC Actions: Central African Republic
Zimbabwe On July 10th, 2014, the Department of the Treasury's Office of Foreign Assets Control (OFAC) issued updated Zimbabwe Sanctions Regulations, 31 CFR Part 541, which amended the Regulations to implement Executive Order (EO 13391) of November 22nd, 2005 (Blocking Property of Additional Persons Undermining Democratic Processes or Institutions in Zimbabwe) and EO 13469 of July 25, 2008 (Blocking Property of Additional Persons Undermining Democratic Processes or Institutions in Zimbabwe.)
Jonathan (Josh) Kallmer was a panelist for "U.S. BITs and FTA Investment Chapters: A Vital Tool or Outdated Relic?" at the Washington International Trade Association (June 18, 2014). * * *