The USA is an original member of the World Trade Organization (WTO). The USA is a party to both WTO plurilateral agreements – the Civil Aircraft Agreement and the Government Procurement Agreement – and a participant in the Information Technology Agreement.
The USA has free trade agreements in force with 20 countries, namely: Australia, Bahrain, Canada, Chile, Colombia, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Israel, Jordan, South Korea, Mexico, Morocco, Nicaragua, Oman, Panama, Peru and Singapore.
The USA and China entered into a “Phase One” trade deal on 15 January 2000, entitled “Economic and Trade Agreement Between the United States of America and the People’s Republic of China: Phase One”.
The USA and Vietnam entered into a bilateral trade agreement on 13 July 2000, normalising economic relations and imposing legally binding obligations on the USA with respect to non-discriminatory terms of trade.
The USA participates in several autonomous preferential arrangements, including the Generalized System of Preferences.
The Biden Administration appears to have placed a low priority on pursuing free trade negotiations that had been initiated by the Trump Administration with the EU, Kenya and the UK.
On 15 June 2021, the USA and EU established a high-level Trade and Technology Council. At the time of writing (December 2022), the USA continued to block consensus on the selection of new WTO Appellate Body members.
The Biden Administration has dedicated itself to a “worker-centred” trade policy, but it is too soon to tell how this shift in emphasis will affect the eventual direction of trade policy.
The primary legal and administrative authorities governing US customs matters are codified at Title 19 of the United States Code (US Code or USC) and Title 19 of the Code of Federal Regulations (CFR). These legal instruments implement the overarching multilateral, plurilateral and bilateral agreements covering customs law, such as the General Agreement on Tariffs and Trade and the Customs Valuation Agreement, among many others.
United States Customs and Border Protection (CBP), an agency within the US Department of Homeland Security (DHS), administers and enforces US customs laws and regulations, as well as the laws and regulations of approximately 40 other agencies as they apply at the border to restrict, limit or otherwise impose requirements on imported merchandise. US Immigration and Customs Enforcement/Homeland Security Investigations (ICE/HSI), also within the DHS, is responsible for enforcing criminal violations of US customs, trade and other laws.
There are three primary legal instruments through which the USA addresses negative impacts of trade practices in other jurisdictions: Section 201 of the Trade Act of 1974, Section 232 of the Trade Expansion Act of 1962 and Section 301 of the Trade Act of 1974.
Section 201 of the Trade Act of 1974 (19 USC Sections 2251–2255) authorises the President to provide temporary import relief to US domestic industry if the US International Trade Commission (ITC) determines that a surge in imports has caused or threatens to cause serious injury to that industry. Section 201 “safeguard” actions are intended to facilitate positive adjustment of the US domestic industry to import competition.
A Section 201 investigation may be triggered in one of four ways:
The ITC is generally required to make its injury finding within 120 days (or, in more complex cases, 150 days) of the event triggering the ITC’s investigation and to transmit its report, along with any recommendations, to the President within 180 days.
If the ITC makes an affirmative injury determination, it must recommend a remedy to the President. The President is ultimately responsible for determining what relief, if any, will be provided. Relief may take the form of imposition of additional duties, tariff rate quotas or quantitative restrictions on the imported article, or provision of trade adjustment assistance to the affected industry, inter alia.
Relief may be provided for an initial period of up to four years, and may be extended one or more times up to a maximum of eight years. The ITC is required to monitor and periodically report on industry developments during the period of relief and, at the conclusion of the relief period, to report on the effectiveness of the action in facilitating positive adjustment to import competition by US domestic industry.
At the time of writing (December 2022), there are two Section 201 measures in place related to (i) solar cells and panels, and (ii) washing machines and parts (washers). Notably, the United States and Canada signed a memorandum of understanding (MOU) on trade in solar products under the United States–Mexico–Canada Agreement, which suspended the application of the safeguard measure to solar products imports from Canada, effective February 2022.
South Korea and China have filed WTO disputes against the USA for its imposition of safeguard measures on washing machines (South Korea) and solar panels (South Korea and China). In September 2021, a WTO panel rejected all of China’s claims, and China notified its appeal to the Appellate Body, which currently has no members and is unable to review any appeals. As to the safeguard measures on washing machines, a WTO panel upheld most of South Korea’s challenges to the tariffs, rejecting several claims, and urged the US to bring the measures into conformity with WTO guidelines. The Dispute Settlement Body has not yet adopted the report as of the time of this writing.
Section 232 of the Trade Expansion Act of 1962 (19 USC Section 1862) authorises the President to take action to adjust imports of certain products (eg, through tariffs, quotas or other action) if the US Department of Commerce (the DOC or Commerce) determines that such products are imported in such quantities or under such circumstances as to threaten to impair the national security of the USA.
A Section 232 investigation may be triggered by a written request from any department, agency head or “interested party”, asking the DOC to ascertain the effect on US national security of particular imports, or on the DOC’s own initiative. Once an investigation is initiated, the DOC is required to consult with the Secretary of Defense and may consult with other “appropriate officers of the United States” as well as the public. The DOC’s Bureau of Industry and Security (BIS) conducts the investigation and, as part of the investigative process, may request public comments or hold hearings. Interested parties, which may include domestic companies as well as non-domestic companies and even foreign governments, may participate in this process.
The DOC is required to report its findings and recommendations to the President within 270 days after initiating a Section 232 investigation and to publish an executive summary of its final report, excluding any confidential or classified material, in the Federal Register.
If the DOC makes a negative finding, it simply informs the President and no further action is required. If the DOC makes an affirmative finding, the President has 90 days from receiving the DOC’s report to determine whether they concur with the findings and, if so, what action should be taken to adjust the imports in question, if any. Actions may include the imposition of tariffs or quotas, or other appropriate action. After making a determination, the President has 15 days to implement the action and 30 days to submit a written statement to Congress explaining any action or inaction. The President’s determination must be published in the Federal Register.
Since 2017, the DOC has initiated a number of Section 232 investigations. Significantly, following affirmative findings by the DOC, effective 23 March 2018, then President Trump imposed tariffs of 25% and 10% on certain imports of steel and aluminium, respectively, the scope of which was expanded in February 2020. A number of countries have received temporary or permanent exemptions from the tariffs. For example, on 31 October 2021, the USA and the EU reached an agreement, effective 1 January 2022, under which the USA will replace existing Section 232 tariffs on EU steel and aluminium with a tariff rate quota that will allow historically based volumes of EU steel and aluminium to enter the US market without application of the tariffs. In exchange, the EU will lift its retaliatory tariffs on US products. Similar agreements were reached with Japan as to certain Japanese-origin steel imports, on 7 February 2022, and with the UK with regard to both steel and aluminium imports, on 22 March 2022.
Further, the DOC has implemented a process by which manufacturers may request exclusions from these measures if the products in question cannot be produced in sufficient quantity or quality in the USA, or for national security reasons. This process also permits domestic steel and aluminium producers to object to any exclusion requests.
A number of the USA’s trading partners, including China and the EU, have challenged the USA’s Section 232 measures as inconsistent with its WTO commitments. These challenges remain pending at the time of writing. Notably, certain countries that have struck a deal with the US have terminated their WTO disputes, such as the EU.
Title III of the Trade Act of 1974 (Sections 301 through 310, 19 USC Sections 2411–2420) – collectively referred to as “Section 301” – authorises the United States Trade Representative (USTR) to investigate and take action (eg, suspend trade agreement concessions, impose import restrictions or enter into binding agreements) against any US trading partner that violates its trade agreement commitments or engages in acts that are unjustifiable, unreasonable or discriminatory, and burden or restrict US commerce.
A Section 301 investigation may be triggered in one of two primary ways: (i) any interested party may file a petition requesting USTR to take action under Section 301; or (ii) USTR may self-initiate an investigation. If USTR receives a petition from an interested party, USTR is required to determine whether to initiate an investigation within 45 days.
Once USTR decides to initiate an investigation, USTR typically solicits public comments, which may be made by any interested parties, including domestic and non-domestic companies, as well as foreign governments, and may hold a public hearing if requested. USTR is required to request consultations with the targeted foreign government concerning the issues raised in the investigation. Further, if the investigation involves a trade agreement and a resolution is not reached through consultations, USTR will generally request formal dispute settlement proceedings under the agreement in question.
If USTR makes an affirmative determination, it must then decide what action, if any, to take. Action is mandatory if USTR determines that US rights under a trade agreement are being denied or violated, or if USTR finds that an act, policy or practice of a foreign country is unjustifiable and burdens or restricts US commerce. Action is discretionary if USTR determines that an act, policy or practice of a foreign country is unreasonable or discriminatory and burdens or restricts US commerce. Retaliatory action may include:
Action should be equivalent in value to the burden or restriction on US commerce imposed by the foreign country.
USTR may modify or terminate any action taken if there is a change in the situation or if such action is no longer appropriate. Any action taken will automatically terminate after four years, unless the petitioner or a representative of the domestic industry that benefits from the action submits a written request for continuation.
Under the Trump Administration, USTR initiated a number of Section 301 investigations and imposed retaliatory tariffs as a result of two such investigations. President Biden has continued to impose these retaliatory measures with respect to China, but resolved investigations without applying tariffs with respect to Vietnam’s currency valuation and timber import practices, and with respect to digital services taxes in ten jurisdictions.
USTR announced continuation of the Section 301 tariffs on 2 September 2022, after receiving requests to continue the additional duties from domestic industry, and commenced the statutory four-year review process, including seeking public comments, in October 2022. Although the review is required by statute, the statute does not require USTR to take any action based thereon.
Implementation of the Uyghur Forced Labour Protection Act
Although the US has a long-standing prohibition on the import of goods made with forced labour under 19 USC Section 1307, the Uyghur Forced Labour Prevention Act (UFLPA), signed into law on 21 December 2021 by President Biden and effective 21 June 2022, represents the most powerful enforcement effort to date and is expected to have a meaningful impact on the global economy.
Specifically targeting the Xianjiang Uyghur Autonomous Region (XUAR) of China due to allegations of human rights abuses including forced labour, UFLPA strengthens the existing prohibition by establishing a rebuttable presumption that goods mined, produced, or manufactured wholly or in part in XUAR, or manufactured by an entity on the UFLPA Entity List, are produced with forced labour and, therefore, prohibited from importation in the United States. Although UFLPA designates certain priority products for enforcement, such as apparel, cotton and cotton products, silica-based products (including polysilicon), and tomatoes and downstream products, there is no de minimis exception. As a result, any amount of XUAR content – no matter how small or remote – will trigger the presumption.
If an entry is detained under UFLPA, the importer must comply with specified conditions and establish by “clear and convincing evidence” that the goods were not made using forced labour in order to rebut the presumption. To meet this high standard, importers must demonstrate due diligence and effective supply-chain tracing measures to prove that the product and all inputs are sourced outside the UFLPA and have no connection to any entity on the UFLPA Entity List. Notably, UFLPA supersedes Withhold Release Orders (WROs) on goods from XUAR. As a result, these products will be subject to UFLPA procedures, such as detention, exclusion and seizure.
Modernised Customs Broker Regulations
Changes to the regulations governing US customs brokers, found in Part 111 to Chapter 19 of the US Code of Federal Regulations (CFR), that modernise customs broker operations to align with contemporary business practices, take effect on 19 December 2022. Notable among the amendments are:
Limitations on the Use of Section 321
Pursuant to Section 321 of the Tariff Act of 1930, as amended, 19 USC Section 1321, certain goods valued at less than USD800 (the de minimis threshold) may enter the United States free of duty (including Section 301 tariffs) and without filing a formal customs entry. Although there are restrictions on the use of Section 321, the growth in e-commerce and direct-to-consumer sales has corresponded to an exceptionally high volume of low-value shipments entering the United States free of duty and without the scrutiny of formal entries. For example, CBP reported USD771.5 million Section 321 (also called de minimis) shipments in 2021, more than half of which were imported from China, which is a 21% increase from 2020.
Legislation has been proposed to limit the use of Section 321 so as to prevent exploitation of the de minimis threshold by bad actors that split shipments to avoid payment of duties or introduce illicit goods, and bolster competitiveness of American businesses. On 4 February 2022, the US House of Representatives passed the America COMPETES Act, which is the House’s version of the United States Innovation and Competition Act (USICA) that passed the Senate in June 2021. Importantly, the Import Security and Fairness Act was passed as part of the COMPETES Act, which would eliminate the de minimis exception for countries that are both (i) a non-market economy, and (ii) on the USTR’s Priority Watch List of countries that violate intellectual property standards, such as China. Additionally, the use of the de minimis exception would be prohibited for goods subject to enforcement actions, such as Section 301 and Section 232; importers that have been suspended or debarred; and goods covered by a single order or contract that are forwarded through offshore distribution or processing facilities.
Currently, the House of Representatives and Senate and are working to reconcile the differences between the COMPETES Act and USICA. Notably, the USICA does not address Section 321 reform and, therefore, it is possible that the de minimis restrictions proposed in the Import Security and Fairness Act will not be included in the final version of the bill.
Country of Origin Determinations for Goods from Canada or Mexico
The United States–Mexico–Canada Agreement (USMCA) entered into force on 1 July 2020, replacing the North American Free Trade Agreement (NAFTA), which had been in force since 1 January 1994. While many aspects of NAFTA are replicated in USMCA, absent from the text is a provision for the NAFTA Marking Rules that, under NAFTA, were used to determine the non-preferential country of origin for non-textile goods imported from Canada and Mexico. As a result of this absence, for non-textile imports from Canada and Mexico, two different tests are currently employed to determine the product’s country of origin for non-preferential purposes: (i) the substantial transformation analysis for non-preferential purposes except marking (a subjective test); and (ii) the NAFTA Marking Rules for country of origin marking (an objective, tariff-shift test).
CBP proposed through a Notice of Proposed Rulemaking published on 6 July 2021, to apply the NAFTA Marking Rules to all non-preferential country of origin determinations for non-textile products imported from Canada or Mexico. If the proposed rule is adopted, the use of two tests, which could yield (and have yielded) two different outcomes, would be eliminated. Therefore, a product could no longer have one origin for marking purposes (eg, Mexico) and another for non-preferential purposes (eg, China for Section 301 duty applicability). The proposal is intended to simplify and standardise non-preferential rules of origin for non-textile goods from Mexico and Canada in order to provide importers and CBP with certainty as to non-preferential country of origin decisions. However, if adopted, the rule would result in different country of origin tests being applied to different countries (eg, an objective tariff-shift test for non-textile goods imported from Mexico and Canada, and the traditional subjective substantial transformation test for non-textile goods imported for any other country).
The USA imposes economic and trade sanctions on individuals, entities and jurisdictions throughout the world based on US foreign policy and national security goals. US sanctions programmes include comprehensive, country-based sanctions, and more selective, list-based sanctions, using the blocking of assets and trade restrictions to accomplish foreign policy and national security goals.
The International Emergency Economic Powers Act (IEEPA) is the main source of statutory authority for most US sanctions programmes. IEEPA authorises the US President to broadly regulate international commerce after declaring a national emergency in response to any unusual and extraordinary threat to the USA which has a foreign source. Other statutory authorities include the Trading with the Enemy Act of 1917 (TWEA), which is the basis for the Cuba sanctions programme, the Foreign Narcotics Kingpin Designation Act, the Antiterrorism and Effective Death Penalty Act of 1996, and the Clean Diamond Trade Act.
The US Department of the Treasury’s Office of Foreign Assets Control (OFAC) and the US Department of State (DOS) are primarily responsible for administering US sanctions. The US Department of Commerce, Bureau of Industry and Security (BIS) has jurisdiction over certain exports and re-exports of commodities, software and technology, and in this capacity also plays a role in aspects of US sanctions enforcement.
US persons are required to comply with all US economic sanctions.
Companies organised under the laws of other countries are not required to comply with primary US sanctions, with two important exceptions, as follow.
First, non-US companies must comply with US sanctions against Iran or Cuba if such companies are owned or controlled by a US person (ie, a company or individual).
Second, non-US companies must generally comply with all US primary sanctions to the extent any of their activities involve the USA in some way. For example, non-US entities may be subject to OFAC regulations to the extent their transactions involve the US financial system (eg, transactions denominated in US dollars that clear through US banks), items subject to US jurisdiction (eg, US-origin goods or goods containing a certain amount of US content), or the shipment of goods via the USA.
The USA prohibits dealings with persons on the List of Specially Designated Nationals and Blocked Persons (SDN List). The USA also maintains several lists of persons with which certain transactions are restricted, including the Sectoral Sanctions Identification List (SSI List), the Non-SDN Chinese Military-Industrial Complex Companies List (NS-CMIC List), the Palestinian Legislative Council List (NS-PLC List), the Non-SDN Iran Sanctions Act List (NS-ISA List), the Foreign Sanctions Evaders List (FSE List), the Cuba Prohibited Accommodations List, and the Cuba Restricted List. The US Treasury and State Departments have significant discretion over the addition of persons to sanctioned party lists.
The countries and territories subject to comprehensive country-based US sanctions are currently Cuba, North Korea, Iran, Syria and the Crimea and so-called Donetsk People’s Republic and Luhansk People’s Republic regions of Ukraine.
The USA maintains some sanctions under which certain transactions, but not all transactions, are restricted. For example, sectoral sanctions apply to specific entities in Russia’s financial, energy and defence sectors that OFAC has identified for inclusion on the SSI List. These sectoral sanctions prohibit US individuals and entities from engaging in specific kinds of transactions related to lending, investment, and/or trade with entities on the SSI List, but permit other transactions with these same entities. The USA also imposes certain activity-based prohibitions which restrict certain types of dealings with even non-listed parties. For example, the USA prohibits new investment in Russia, and also the export of certain accounting, trust and corporate formation, management consulting services, and quantum computing services to persons in Russia.
The USA imposes certain sanctions on parties that have no connection to the USA (ie, secondary sanctions). Secondary sanctions target non-US entities doing business with certain listed persons or in identified sectors of certain sanctioned markets. The USA need not have jurisdiction over the entity for secondary sanctions to apply, as the USA can add the entity to the list of entities that are themselves being sanctioned (as opposed to being subjected to enforcement actions in the USA, as is the case for primary sanctions violations).
With respect to criminal penalties, a person who wilfully commits, wilfully attempts to commit, wilfully conspires to commit, or aids or abets in the commission of, a violation of any licence, order, regulation or prohibition may, upon conviction, be fined not more than USD1 million or, if a natural person, be imprisoned for not more than 20 years, or both. In past cases receiving criminal penalties, there has often been an aspect of wilful concealment present.
OFAC assesses civil penalties on a transaction-by-transaction basis, according to (i) whether it considers a case to be egregious or non-egregious, and (ii) whether the apparent violation is disclosed through a voluntary self-disclosure. Most comprehensive US sanctions programmes are issued under the International Emergency Economic Powers Act (IEEPA), for which the statutory maximum per transaction is the greater of USD330,947 or twice the amount of the underlying transaction.
There are two types of licences: general licences and specific licences. A general licence authorises a particular type of transaction for a class of persons, without the need to apply for a licence. A specific licence is a written document issued to a particular person or entity, authorising a particular transaction in response to a written licence application.
For example, US sanctions programmes often allow for legitimate humanitarian-related trade and activity and exports of medicines under existing laws and regulations, either through general licences or other exemptions from the relevant prohibitions. Where a general licence is not available, parties may apply directly to the relevant enforcement agency for a specific licence authorising otherwise prohibited activity.
There is “strict liability” under US primary sanctions regulations, meaning that there is no element of knowledge required under the law.
Persons subject to US jurisdiction holding property blocked pursuant to US sanctions laws and regulations must report the blocked property to OFAC within ten business days from the date that property becomes blocked, and thereafter on an annual basis. Persons subject to US jurisdiction must also report to OFAC rejected transactions that are not per se blocked pursuant to US sanctions laws and regulations, but where processing or engaging in the transactions would nonetheless violate such laws and regulations.
The USA maintains anti-boycott laws which prohibit US companies from furthering or supporting the boycott of Israel, including by complying with certain requests for information designed to verify compliance with the boycott.
Over the last year, the USA has continued to use its sanctions authority as a top foreign policy tool. Most notably, the past year saw the increased imposition of sanctions on Russia and Belarus, in response to actions taken by Russia in Ukraine and surrounding areas.
The wide-ranging types of sanctions imposed on Russia and Belarus in the past year demonstrate the breadth of US sanctions authorities. In particular, the recent sanctions imposed on Russia and Belarus include blocking sanctions on financial institutions, state-owned entities, companies that generate significant revenue for Russia, and Russian “elites” and their family members; restrictions on dealings with the Russian Central Bank and Ministry of Finance; prohibitions on the export of certain types of professional services to persons located in Russia; prohibitions on the import of certain types of goods, including oil, seafood, and alcoholic beverages; the imposition of territory-based sanctions on the so-called Donetsk People’s Republic and Luhansk People’s Republic regions of Ukraine; prohibitions on dealings in debt or equity of certain listed persons; prohibitions on dealings in sovereign debt; restrictions on access to US airspace to Russian flights; and a prohibition on new investment in Russia.
The sanctions imposed on Russia and Belarus were taken in co-ordination with US allies, including the European Union (EU) and the United Kingdom (UK), demonstrating a strong multilateral response to Russia’s recent actions. However, while the USA, EU and UK share a similar approach to the imposition of sanctions on Russia, there are a number of differences in the application of such measures.
If the tensions with Russia continue, the USA is expected to impose additional sanctions on Russia, which may include restrictions on the export of additional types of services to Russia, or comprehensive sanctions on regions of Ukraine held by Russian forces.
The USA may also in coming months increase sanctions on Iran, in response to both reports of human rights violations in Iran, and reports that Iran may be supplying Russia with drones and other military equipment, in furtherance of Russia’s military efforts in Ukraine.
In recent enforcement actions, OFAC has also demonstrated an increased focus on actors participating in the virtual currency industry, and warned that more needs to be done to protect against the threat posed by the rise of cryptocurrencies. We expect this approach to continue.
The USA imposes export controls to protect national security interests and promote foreign policy objectives. To do so, the USA controls the export of sensitive goods, software and technology to certain destinations without an export licence.
The primary authorities governing the enforcement of US export controls are the Export Control and Reform Act of 2018 (ECRA) and the Export Administration Regulations (EAR). The restrictions on the export of certain defence articles and services covered on the United States Munitions List (USML) are authorised by the Arms Export Control Act (AECA) and implemented through the International Traffic in Arms Regulations (ITAR).
The US Department of Commerce Bureau of Industry and Security (BIS) has jurisdiction over export controls, including exports and re-exports of commodities, software and technology that are subject to the EAR.
The US Department of State’s Directorate of Defense Trade Controls (DDTC) is responsible for enforcing the ITAR.
US export controls regulate:
Restricted party lists maintained by BIS include the Entity List, the Denied Persons List and the Unverified List. The DDTC also maintains the Debarred Parties List. BIS and DDTC have significant discretion to add persons to the restricted party lists. For example, any company that has been involved in, or poses a significant risk of becoming involved in, activities contrary to the national security or foreign policy interests of the USA may be added to the Entity List.
BIS maintains the Commerce Control List (CCL), a list of items controlled for export to certain destinations without an export licence due to the sensitive nature or potential use of the item.
DDTC maintains the USML, which covers and restricts the export of certain defence articles and services without DDTC authorisation.
Items not listed on the USML or the CCL may nevertheless be controlled for export based on the intended end use, the intended end user, or the destination. For example, BIS restricts the export of all items subject to the EAR to certain parties on the Entity List. BIS further restricts the export of all items on the CCL, and even certain items not on the CCL, to Russia or Belarus.
For violations of the EAR, the statutory maximum civil penalty amount is USD328,121 per violation or twice the value of the transaction, whichever is greater. With respect to criminal penalties, a person who wilfully commits, wilfully attempts to commit, wilfully conspires to commit, or aids or abets in the commission of, a violation of any licence, order, regulation or prohibition may, upon conviction, be fined not more than USD1 million, or, if a natural person, be imprisoned for not more than 20 years, or both.
Violations of the ITAR may result in civil penalties as high as USD1,272,251 per violation, and criminal penalties of up to USD1 million and ten years’ imprisonment per violation.
There are certain licence exceptions which authorise the export, under stated conditions, of items subject to EAR or ITAR that would otherwise require a licence. Where a licence is required and an exception is not available, parties may apply to BIS for a licence authorising the export of specific items by the party holding the licence to the end users and under the circumstances identified in the licence.
Violations of US export controls are generally “strict liability” in nature. However, in certain instances, BIS may consider a party’s reason or ability to know of the export violation.
Persons utilising certain licence exceptions or certain export licences may have reporting obligations to BIS, depending on the exception or licence used.
Persons registered under the ITAR have strict reporting requirements to the DDTC, including obligations to promptly notify the DDTC of any changes to the registration information initially reported.
The USA continues to rely on designations to the Entity List as a foreign policy tool.
The USA has also in the last year imposed a number of new export controls in response to Russia’s actions in Ukraine. In particular, BIS imposed controls restricting the export of all items on the CCL, and even certain items not on the CCL, to Russia or Belarus. BIS further imposed temporary denial orders on Russian aircraft, the effect of which is that persons subject to US jurisdiction cannot use or service such aircraft. Finally, a significant number of Russian and Belarusian entities were added to the Entity List. The USA imposed a more stringent foreign direct product rule with respect to these listed entities, such that the export restrictions apply more broadly to even certain foreign produced items.
Additionally, this year the USA has implemented new export controls on advanced computing and semiconductor manufacturing items to China. The new controls add a number of newly controlled items to the CCL, impose new end-use controls on the export to China of items not even on the CCL, and also impose novel restrictions on the activities of US persons in relation to certain advanced computing and semiconductor-related items not subject to the EAR. The new controls also expand US export controls jurisdiction over new categories of foreign-produced products, including with respect to certain persons on the Entity List, and items intended for certain advanced computing and semiconductor end uses. BIS established a temporary general licence for certain activities until 7 April 2023 to minimise the short-term impact on the semiconductor supply chain.
BIS also recently announced changes to the criteria for determining whether a party may be added to the Entity List. In particular, parties added to the Unverified List may be moved to the Entity List if they are unable to complete the required end-use checks with 60 days of being added to such list. This is the first time BIS has established a more formalised link between the two lists.
Given the breadth of the new controls on advanced computing and semiconductor manufacturing items, these rules and controls may continue to evolve over the next year as industry adapts to the new controls. BIS plans to seek multilateral enforcement of the new controls through the Wassenaar Arrangement process, and this process may in turn shape BIS’s own enforcement of the new controls.
If Russia’s war against Ukraine continues, the USA may impose more restrictive export controls on Russia, including by adding additional Russian or Belarusian entities to the Entity List, and adding new types of non-CCL goods to the lists of items controlled to Russian and Belarus absent a licence.
The Tariff Act of 1930 (the “Act”) provides the statutory authority to impose anti-dumping (AD) and countervailing duties (CVD). The implementing regulations of the relevant administering authorities are included under Title 19 of the Code of Federal Regulations.
US AD and CVD laws are administered by the US Department of Commerce (DOC) and the US International Trade Commission (ITC). The DOC determines whether a producer is dumping and/or receiving unfair subsidies and the extent of such dumping or subsidisation. The ITC determines whether the US domestic industry is injured by subject imports.
Domestic companies may petition the ITC and the DOC to initiate an investigation. In the event dumping and/or subsidisation is found, and an order is imposed, interested parties must request reviews of companies with entries that may be subject to the order. Administering authorities may self-initiate an investigation, but unilateral initiation is rare.
The DOC conducts administrative reviews of AD and CVD orders on a regular basis. However, interested parties, including domestic interested parties (domestic producers, importers, trade or business associations, etc) and foreign exporters and producers must request a review of specific entities. If a request is not submitted by deadlines established under the law, the DOC will not conduct a review.
The DOC and ITC also conduct “sunset reviews” or AD and CVD orders every five years to determine whether revoking the order would be likely to lead to continuation or recurrence of dumping or subsidies and material injury.
Non-domestic companies are the subject of investigations and reviews and, therefore, are afforded the opportunity to participate. They may request a review of themselves, and if selected by the DOC for individual review would be required to participate to the best of their abilities by responding to the DOC’s inquiries. Non-domestic companies subject to an investigation or review but not individually investigated or reviewed may also participate; however, in general, such companies will be assigned a rate equal to the average or weighted average rates calculated for the companies that DOC individually investigated or reviewed.
The investigation process is bifurcated between the DOC and the ITC. As noted above, the DOC investigates whether there is dumping or subsidisation, and the ITC investigates whether the domestic industry is injured because of subject imports.
The investigation begins with the ITC’s preliminary phase. During the preliminary phase, if the ITC finds there is a reasonable indication that an industry is materially injured or is threatened by material injury, or that the establishment of an industry is materially retarded, because of subject imports, then the DOC will continue the investigation.
The DOC will then review individual, foreign exporters and/or producers of subject merchandise. If it affirmatively finds dumping or subsidisation in its preliminary investigation, both the DOC and the ITC will continue the investigation into the final phase. During this process, the DOC will conduct a verification (typically on-site) of a respondent’s responses to the agency’s inquiries. The DOC will complete its final phase first and issue a final determination. If the DOC’s final determination is affirmative, thereafter the ITC will complete its final phase. If the ITC’s final determination is affirmative, then the DOC will issue an order and impose duties on subject imports.
With regard to safeguards, the ITC has the authority to impose temporary import relief under Section 201 of the Trade Act of 1974. For further discussion related to safeguards, see 2.3 Legal Instruments.
Both the ITC and the DOC issue preliminary and final determinations. The determinations are publicly reported in the Federal Register, and the accompanying reports and decision memoranda to the Federal Register notice are also made public on the ITC’s and the DOC’s websites. The DOC also issues preliminary and final results in reviews, which include publication of notice in the Federal Register and accompanying decision memoranda.
No jurisdictions are exempted from the potential imposition of AD or CVD duties.
Interested parties have the opportunity to request administrative reviews each year. Review requests must be made during the anniversary month of publication of the AD or CVD order. Requests for review are submitted to the DOC. Sunset reviews are conducted every five years.
In general, the administrative review process is similar to that of the DOC’s investigation process. There is a preliminary phase and a final phase. During the process, the DOC issues questionnaires to respondents it selects for individual review. In non-market economy proceedings, parties are invited to submit information. Similarly, the sunset review process is similar to that of the DOC’s and ITC’s investigation process.
Parties may appeal the DOC’s and the ITC’s findings before the US Court of International Trade (CIT) or, if the proceeding involves Mexico or Canada, before a five-member binational panel under Chapter 10 of the USMCA.
Parties may also seek appellate review of the CIT’s determinations before the US Court of Appeals for the Federal Circuit (CAFC). In most instances, parties may not seek review of panel determinations under the USMCA. Further appeal of decisions by the CAFC may be sought before the Supreme Court of the United States, but the Court has discretion to hear the appeal.
In addition, countries may seek review of the DOC’s and ITC’s determinations and practices before the WTO pursuant to the USA’s obligations under the General Agreement on Tariffs and Trade.
On 13 August 2020, the DOC published proposed modifications to its regulations regarding new shipper reviews, scope inquiries, circumvention proceedings, and required certifications, which are expected to add more hurdles for importers and exporters. The DOC invited the public to submit comments. The DOC has yet to issue final regulations and it is not certain when the DOC will do so.
In May 2021, the DOC calculated a final subsidy rate for undervalued currency. This was the first time the DOC has found currency undervaluation to be a countervailable subsidy, calculated a rate and has since found the same in other proceedings.
Based on the DOC’s findings, the US domestic industry is now expected to submit subsidy allegations related to undervalued currency in more proceedings. However, it is expected that parties will challenge this practice before US courts and the WTO.
Over the past few years, the DOC has also begun to conduct anti-circumvention inquiries on a country-wide basis, extending the application of full AD/CVD orders over products produced in third countries. The US domestic industry has begun to utilise this new tool to seek AD/CVD remedies instead of seeking the imposition of new AD/CVD orders.
The Committee on Foreign Investment in the United States (CFIUS) has jurisdiction to review certain foreign investment transactions in the USA that pose a threat to national security and recommend to the President actions to mitigate the threat.
Notifying a transaction to CFIUS carries the benefit that, if CFIUS reviews and clears the transaction, it is cleared forever (with some limited exceptions). In contrast, if the parties choose not to file, CFIUS has the option to self-initiate a review of the transaction at any time (including many years after the deal has closed), with uncertain and potentially significant results, including the possibility that the buyer would be required to divest the US business or US assets.
Parties to a transaction typically jointly prepare the submission to CFIUS.
The notice process includes the preparation of a 30–50-page notice, the submission of a draft to CFIUS for comments, preparation and acceptance of a formal notice, a 45-day formal review by CFIUS, and (if necessary) a 45-day investigation.
Alternatively, the parties could choose to notify the transaction to CFIUS through an expedited filing process in which parties would submit an approximately five-page “declaration”.
CFIUS operates pursuant to Section 721 of the Defense Production Act of 1950 (codified at 50 USC 4565). Section 721 was substantially revised by the Foreign Investment and National Security Act of 2007 (FINSA), which became effective 24 October 2007, and the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA), which became effective 13 August 2018.
CFIUS is an interagency committee, chaired by the United States Secretary of the Treasury. Additional members of CFIUS include the Secretaries of Homeland Security, Commerce, Defense, State, Energy, and Labor, the Attorney General, the Director of National Intelligence, the United States Trade Representative, and the Director of the Office of Science and Technology Policy. Representatives from other federal agencies also hold “observer” status.
CFIUS has jurisdiction over three types of “covered transactions”:
Certain covered transactions involving US businesses that produce, design, test, manufacture, fabricate or develop one or more critical technologies are subject to a mandatory filing requirement.
CFIUS also requires filings for certain covered transactions where a foreign government has a “substantial interest” in a foreign person that will acquire a substantial interest in US businesses involved in critical infrastructure, critical technology or storage/maintenance of sensitive personal information.
Certain investors from the UK, Australia, New Zealand and Canada are currently exempt from CFIUS’s review of non-controlling investments in certain US businesses. CFIUS may revise the list of exempt foreign states over time.
If CFIUS has concerns with a transaction, CFIUS could recommend that the President block the investment (or order divestment if the transaction has closed) or require other mitigation measures to address the national security concerns.
FIRRMA also authorises CFIUS to impose certain fees on parties who violate the CFIUS review process. Any person who submits a material misstatement or omission in a declaration or notice, or who makes certain other false statements, may be liable for a civil penalty of up to USD250,000 per violation.
Notices submitted to CFIUS are subject to a filing fee of up to USD300,000. The filing fee required in any given transaction is determined by the value of the transaction. There are no fees for filing declarations.
CFIUS continues to enhance its monitoring and enforcement measures over non-notified transactions, including by reviewing public and non-public databases and resources to determine whether certain transactions should have been presented to CFIUS. CFIUS is also stepping up efforts to train staff across CFIUS member agencies in order to increase co-ordination and identification of transactions to pursue.
CFIUS also published its first-ever guidelines on enforcement and penalties, detailing how it decides on violations, where CFIUS gets its information, steps it takes during the penalty process, and aggravating and mitigating factors it may consider during such process.
At this time, only four countries have been designated by CFIUS as foreign states exempt from CFIUS’s review of non-controlling investments in certain US businesses. CFIUS may in the future designate additional countries as excepted foreign states.
Further, the definition of exempt foreign states provides a two-part test for determining qualifying states: (i) CFIUS identifies it as an eligible foreign state; and (ii) CFIUS determines that the foreign state “has established and is effectively utilising a robust process to analyse foreign investments for national security risks and to facilitate coordination with the United States on matters relating to investment security”.
The second prong of this test does not currently take effect until 13 February 2023 (previously extended from 13 February 2022), giving the four foreign states currently eligible – Australia, New Zealand, Canada and the UK (and any other states which may become eligible) – time to ensure that their national security-based foreign investment review process meets the criterion.
There has also been a lot of discussion about the imposition of screening and controls on outbound investment. While a measure which would have imposed such controls was ultimately not included in the final version of the legislation in which it had been proposed, the development of workable restrictions on outbound investment activities will likely continue to receive significant attention from policymakers in the future.
As described by the WTO Secretariat, the USA has no overarching legal framework governing subsidies at federal and sub-federal levels. Traditionally, federal subsidies have been in the form of grants, tax concessions, loan guarantees and direct payments. The federal government maintains a search engine referred to as “Assistance Listings” at https://sam.gov. According to a database maintained by SelectUSA, some 108 federal programmes and incentives exist specifically to promote small businesses, provide support to existing or prospective exporters and assist enterprises with regulatory compliance.
As described by the WTO Secretariat, the development of standards in the USA is decentralised and demand-driven. The private sector addresses the needs or concerns expressed by industry, government and consumers, through the development of voluntary consensus standards (VCSs). The actual work to develop these VCSs is undertaken by standards-developing organisations (SDOs). A private, non-profit organisation, the American National Standards Institute (ANSI), co-ordinates and administers the VCS system. ANSI is the sole US member body to the International Organization for Standardization (ISO) and, through the US National Committee, to the International Electrotechnical Commission (IEC).
The basic legal framework for the preparation and adoption of standards and technical regulations includes the Trade Agreements Act of 1979, the Administrative Procedure Act (APA) of 1947, the National Technology Transfer and Advancement Act (NTTAA) of 1995 (PL 104–113), and the US Office of Management and Budget (OMB) Circular A-119. Federal law specifically prohibits any government agency from engaging in any standards-related activity that creates unnecessary obstacles to the foreign commerce of the USA.
See the WTO Secretariat’s Report in the 2019 Trade Policy Review – USA, paragraphs 3.171–3.174.
As described by the WTO Secretariat, the USA has numerous laws and regulations pertaining to food safety, animal health and plant health. The promulgation of the Food and Drug Administration (FDA) Food Safety Modernization Act (FSMA) in 2011 (PL 111–353) represented a major and long-awaited update in the oversight of food safety. The FSMA was accompanied by the issuance of seven key implementing regulations during 2015 and 2016, as well as four supplementary regulations, following a period of extensive public comment and review.
Other major long-standing pieces of sanitary and phytosanitary (SPS) legislation include the Federal Food, Drug and Cosmetic Act (including the FSMA amendments), the Federal Meat Inspection Act, the Poultry Products Inspection Act, the Egg Products Inspection Act, the Plant Protection Act, the Animal Health Protection Act, and the Federal Insecticide, Fungicide, and Rodenticide Act.
Responsibilities for SPS matters are allocated among several federal agencies depending on the nature of the product and the element of risk. Food is generally regulated by the FDA, except for meat, poultry, Siluriformes fish and fish products (catfish) and processed egg products, which fall under the responsibility of the US Department of Agriculture (USDA) Food and Safety Inspection Service (FSIS).
Other areas of FDA supervision and authority include food additives, dietary supplements, human and veterinary drugs, medical devices, human biologics, tobacco and cosmetics. Within the USDA, the FSIS ensures that commercial supplies, including imports, of meat, Siluriformes fish and fish products (catfish), poultry and egg products are wholesome, safe and properly labelled and packaged.
Imported goods are required to be produced under conditions equivalent to the level of protection applicable in the USA. The Animal and Plant Health Inspection Service (APHIS) at the USDA promotes and defends agricultural health, including protection against plant and animal diseases and pests. While both APHIS and FSIS responsibilities apply to imported goods, the APHIS safeguards against animal and plant health risks, whereas the FSIS ensures that food safety requirements are enforced.
The Environmental Protection Agency (EPA) is responsible, inter alia, for the registration of pesticides (including herbicides and fungicides) and the establishment of tolerances – ie, maximum residue limits – for pesticides in food. Other federal agencies involved in SPS issues include CBP, the Agricultural Marketing Service, the Agricultural Research Service, the National Institute of Food and Agriculture (USDA), the Centers for Disease Control and Prevention (Department of Health and Human Services), the National Marine Fisheries Service (Department of Commerce), and the Alcohol and Tobacco Tax and Trade Bureau (Department of Treasury).
See the WTO’s Committee on Sanitary and Phytosanitary Measures report, paragraph 3.14.
There are no competition policies or price controls at the federal level in the USA that appear to be aimed at reducing imports and/or encouraging domestic production. The competition policy framework has been well established in the USA for many years. The federal competition (antitrust) legislation consists of three core laws:
Government institutions, including those engaging in commercial activity, are exempted from federal antitrust legislation unless statute clearly provides otherwise. Limited immunity also applies, by way of example, to specific aspects of agriculture, fisheries, shipping and insurance.
In relation to international trade, the Webb-Pomerene Export Trade Act may allow associations of otherwise competing businesses to engage in the collective exports of goods, provided there are no anti-competitive effects or injury to competitors within the USA. The Export Trading Company Act (1982) also creates a procedure whereby persons engaged in export may obtain, under certain circumstances, an export trading certificate of review (ETCR) providing, inter alia, for limited antitrust immunity. The Shipping Act (1984) allows international ocean carriers to engage in pricing arrangements (liner conferences) that are filed with the Federal Maritime Commission, unless these are contested by that Commission.
See the WTO Secretariat’s Report in the 2019 Trade Policy Review – USA, paragraphs 3.190 and 3.192.
As noted by the WTO Secretariat, the incidence of US governmental authorities owning or controlling enterprises that engage in commercial activities is fairly limited. These entities – for example, the Tennessee Valley Authority – are not likely to conduct themselves in a manner that would reduce imports. At the federal level, a number of government corporations or government-sponsored enterprises generally fulfil public policy objectives or governmental functions and their intended purpose is not to compete with private enterprises.
While US states possess a general incorporation statute, the federal government does not have such powers, and each government corporation is chartered through an act of Congress to perform a public purpose with a clear and transparent mandate. Government corporations have a separate legal personality, and may receive federal allocations, but they may also have their own sources of revenue.
See the WTO Secretariat’s Report in the 2019 Trade Policy Review – USA, paragraph 3.219.
As summarised by the WTO Secretariat, the Buy American Act of 1933 (BAA) and the Trade Agreements Act of 1979 (TAA) remain the main laws regarding government procurement. The BAA requires the federal government to purchase domestic goods, while the TAA provides authority for the President to waive purchasing requirements, such as those contained in the BAA. These requirements are waived for WTO Government Procurement Agreement (GPA) participants, trading partners with which the USA has an FTA that covers procurement and beneficiaries of preferences. Federal agencies may waive domestic procurement requirements in US law under certain conditions.
Private construction activities are open to foreigners with few limitations, while public construction activities are subject to Buy American provisions and to the provisions of the GPA and FTAs.
Under the BAA, the purchase of supplies and construction materials by government agencies is limited to those defined as “domestic end-products”, in accordance with a two-part test that must establish that the article is manufactured in the USA, and that the cost of domestic components exceeds 50% of the cost of all the components. The BAA does not apply to services. As a way of monitoring enforcement of the BAA, the Independent Agencies Appropriations Act of 2006 (PL 109–115) requires the head of each federal agency to submit a report to Congress relating to acquisitions of articles, materials or supplies manufactured outside the USA. Federal domestic preference requirements are also sometimes included in annual appropriation and authorisation bills.
Under the TAA, the President may grant waivers from the BAA and other procurement restrictions; this authority has been delegated to the USTR. The Act waives the application of the BAA to the end-products of designated countries, which include the parties to the GPA, bilateral agreements that cover government procurement, CBERA beneficiaries and LDCs. CBERA and LDCs face GPA thresholds. For the other trading partners that are beneficiaries of a preferential agreement, there are thresholds. Eligible products are granted non-discriminatory treatment. There are few other situations in which procurement may be exempt from BAA requirements. Exceptions to the BAA can be granted if it is determined that the domestic preference is inconsistent with the public interest, in case of US non-availability of a supply or material, or for reasonableness of cost. Public interest determinations may be made on individual procurements or as a blanket for a set of procurements.
On 25 January 2021, Executive Order No 14005, Ensuring the Future Is Made in All of America by All of America’s Workers was issued in relation to the implementation of “buy American” laws. The Order instructs federal agencies to prioritise procurement of domestically produced goods and services.
As noted by the WTO Secretariat, the USA provides protection to foreign and domestic geographical indications (GIs) through its trade mark system for all classes of goods and services, usually as certification marks and collective marks with indications of regional origin. As such, the US system of GI protections would not appear to be aimed at reducing imports per se but, as is the case in any trade mark system, could be used to restrict infringing imports.
The Trademark Act differentiates certification marks with indications of regional origin from trade marks by two characteristics: (i) a certification mark is not used by its owner; and (ii) a certification mark does not indicate the commercial source nor distinguish the goods or services of one person from those of another person. Any entity, which meets the certifying standards, is entitled to use the certification mark. Certification marks identify the nature and quality of the goods, and affirm that these goods have met certain defined standards.
Geographic names or signs may also be registered as collective marks or as trade marks. However, the geographic term must not be deceptive, and the applicant must either show acquired distinctiveness in the geographic term, or disclaim exclusive right to use the geographic term. Although registration is preferable because of notice to the public and other benefits, GIs may also be protected through common law without being registered by the USPTO if they are a valid common law regional certification or collective mark (not a generic term). See the WTO Secretariat’s Report in the 2019 Trade Policy Review – USA, paragraphs 3.296–3.298.
There are no other significant issues or developments in US trade or investment law that have not already been addressed.