Global Trade Brief – October 2018

The United States achieved important steps to improve the large trade deficit in industrial goods and to address KORUS implementation concerns that have hindered U.S. export growth.

U.S. Truck Tariffs: Korea will extend the phase out of the 25% U.S. tariff on trucks until 2041, or a total of 30 years following the implementation of the KORUS FTA in 2012. (currently scheduled to phase out by 2021).

Growing U.S. Auto Exports: Exports of U.S. motor vehicles to Korea will be improved through the following steps:

Greater Access for U.S. Exports: Korea will double the number of U.S. automobile exports, to 50,000 cars per manufacturer per year that can meet U.S. safety standards (in lieu of Korean standards) and enter the Korean market without further modification.

Harmonization of Testing Requirements: U.S. gasoline engine vehicle exports will be able to show compliance with Korea’s emission standards using the same tests they conduct to show compliance with U.S. regulations, without additional or duplicative testing for the Korean market.

Recognition of U.S. Standards for Auto Parts: Korea will recognize U.S. standards for auto parts necessary to service U.S. vehicles, and reduce labeling burdens for parts.

Improvements to CAFE Standards: Korea will expand the amount of “eco-credits” available to help meet fuel economy and greenhouse gas requirements under the regulations currently in force, while also ensuring that fuel economy targets in future regulations will be set taking U.S. regulations into account and will continue to include more lenient targets for manufacturers that sell small volumes of cars in Korea.

Customs Improvement: Korea will address long-standing concerns with onerous and costly verification procedures through agreement on principles for conducting verification of origin of exports under KORUS and establish a working group to monitor and address future issues that arise.

Pharmaceutical Reimbursements: Within 2018, Korea will amend its Premium Pricing Policy for Global Innovative Drugs to make it consistent with Korea’s commitments under KORUS to ensure non-discriminatory and fair treatment for U.S. pharmaceutical exports.

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A complaint was filed with the U.S. International Trade Commission on August 30, 2018, under section 337 of the Tariff Act of 1930, as amended, on behalf of Autel Robotics USA LLC of Bothell, Washington. The complaint alleges violations of section 337 based upon the importation into the United States, the sale for importation, and the sale within the United States after importation of certain unmanned aerial vehicles and components thereof by reason of infringement of certain claims of U.S. Patents. The complaint further alleges that an industry in the United States exists as required by the applicable Federal Statute. The complainant requests that the Commission institute an investigation and, after the investigation, issue a limited exclusion order and cease and desist orders.

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The U.S. Commerce Department announced its findings of affirmative final determinations in antidumping duty (AD) investigations of imports of forged steel fittings from China and Italy and countervailing duty (CVD) investigation of imports of forged steel fittings from China. Exporters from China and Italy have sold forged steel fittings in the United States at significant percentages less than fair value. Commerce also determined that China is providing countervailable subsidies to its producers of forged steel fittings at the final rate of 13.41%. The U.S. International Trade Commission (ITC) is currently scheduled to make its final injury determinations on 15 November 2018

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Under the CBMA, reduced tax rates and/or tax credits are applicable to importations of certain limited quantities of distilled spirits, beer or wine imported from each foreign producer/assigning entity (as described in the CBMA).  Further, the assignments of the tax credits or reduced tax rates by the foreign producer/assigning entity to all importers may not exceed the quantities allowed by law.  Thus, for an importer to be eligible to receive a reduced tax rate or a tax credit, importers must substantiate that the foreign producer/assigning entity has assigned an allotment of its reduced tax rate or tax credits to the distilled spirits, beer, or wine imported by that importer.

Pursuant to the interim final rule on Refund of Alcohol Excise Tax, 83 Fed. Reg. 40,675 (August 16, 2018), CBP and the Department of Treasury amended 19 CFR 24.36, which authorized CBP to issue refunds owed on entries where the importer received a foreign producer assignment pursuant to the CBMA when appropriate.

Effective immediately, CBP advises importers claiming a reduced tax rate or tax rate incorporating applicable tax credits as permitted by the CBMA (hereinafter “CBMA rate”) to do so at the time of entry summary. In addition, going forward, importers will use the CBMA flag to identify entry lines for which the CBMA rate is claimed and declare the lower tax rate (as opposed to the excise tax rate required prior to the enactment of the CBMA).  Importers should ONLY use the CBMA flag when claiming the CBMA rate, whether at the time of entry summary filing or the filing of a PSC.

For entries filed since January 1, 2018 that have not liquidated and for which the importer wants to make a CBMA claim, effective immediately:

1. A) If not flagged, importers should file a PSC with the CBMA flag and the CBMA rate.
2. B) If flagged but the CBMA rate has not been claimed, importers should file another PSC with the CBMA rate and the CBMA flag.

For those importers that have liquidated entries for which they would like to claim the CBMA rate, the importer may file a protest.  Importers filing protests claiming the CBMA rate should identify “CBMA” in the protest issue dropdown.

For any entries filed since January 1, 2018, for which the low excise tax rate was claimed, importers must complete the CBMA claim by flagging the entry immediately via PSC, and submitting the substantiating documents, as defined below, prior to CBP review and liquidation.  PSC is the mechanism for submitting CBMA claims in this situation if within the PSC timeframe.

As will be discussed at length below, importers are required to file documentation to complete their CBMA claim, and the documentation should be filed at the time of entry summary, PSC filing or protest filing.  To complete a CBMA claim, importers will be required to submit two Excel spreadsheets (the CBMA Spreadsheet and the Controlled Group Spreadsheet) and an Assignment Certification to CBP.  Templates for these three documents are posted on CBP.gov at https://www.cbp.gov/trade/basic-import-export/craft-beverage-modernization-tax-reform-act-2017.  A claim will not be considered complete until the CBMA Spreadsheet, the Controlled Group Spreadsheet, and the Assignment Certification are provided to CBP.

CBP will process and liquidate claims for entries made in calendar year 2018, beginning January 31, 2019.  CBP will begin its review with the oldest entry on file with a CBMA claim and work forward chronologically.  Any 2018 CBMA claims that are not substantiated with the required documentation by January 31, 2019 are at risk of being liquidated without the benefit of the CBMA rate.  If the importer has a complete and valid claim and the assignment limit has not been reached at the time of CBP review, CBP will liquidate the entry and apply the CBMA rate.

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The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced a $5,263,171 settlement with JPMorgan Chase Bank, N.A., to settle potential civil liability for 87 apparent violations of the Cuban Assets Control Regulations, 31 C.F.R. Part 515 (CACR); the Iranian Transactions and Sanctions Regulations, 31 C.F.R. Part 560 (ITSR); and the Weapons of Mass Destruction Proliferators Sanctions Regulations, 31 C.F.R. Part 544 (WMDPSR).  Specifically, the transactions were net settlement payments, of which a very small portion appears to have been attributable to interests of airlines that were at various times on OFAC’s List of Specially Designated Nationals and Blocked Persons (the “SDN List”), blocked pursuant to OFAC sanctions, or located in countries subject to the sanction’s programs administered by OFAC.  These apparent violations do not include transactions that were exempt from the prohibitions of the International Emergency Economic Powers Act (IEEPA); for example, the apparent violations include transactions such as airline freight charges, which are not exempt.  OFAC has determined that JPMC voluntarily self-disclosed the apparent violations, and that the apparent violations constitute a non-egregious case.

Separately, OFAC has issued a Finding of Violation to JPMC regarding violations of the Foreign Narcotics Kingpin Sanctions Regulations, 31 C.F.R. part 598 (FNKSR), and the Syrian Sanctions Regulations, 31 C.F.R. part 542.  Specifically, OFAC determined that between August 4, 2011 and April 29, 2014, JPMC processed 85 transactions totaling $46,127.04 and maintained eight accounts on behalf of six customers who were contemporaneously identified on the SDN List.  OFAC determined that JPMC voluntarily disclosed the violations, and that the violations constitute a non-egregious case.

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[Tabacos de Wilson, Inc. v. United States, Slip Op. 18-138 (CIT 12 October 2018)]

In this action seeking to expedite promulgation of final regulations implementing Section 906 of the Trade Facilitation and Trade Enforcement Act of 2015 (“TFTEA”), Tabacos de Wilson, Inc., Tobacco Rag Processors, Inc., Brown-USA Inc., Nippon America, Inc., Skate One Corporation, Alliance International, CHB, Inc., C.J. Holt & Company, Inc., and Customs Advisory Services, Inc. (collectively, “Plaintiffs”) request that the court direct United States Customs and Border Protection (“CBP”) and the United States Department of the Treasury (“Treasury”) to issue, as an interim final rule (“IFR”), certain regulations recently published as part of a notice of proposed rulemaking (“NPRM”). The court concludes an interim final rule is not an appropriate remedy, but concludes that expedited promulgation of a final rule is warranted to prevent continued harm to plaintiffs as members of the importing public. Thus, the court orders that the final rule be published in the Federal Register by December 17, 2018, as set forth specifically in the accompanying order.

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The Bureau of Industry and Security (BIS) maintains, as part of its Export Administration Regulations (EAR), the Commerce Control List (CCL), which identifies certain items subject to Department of Commerce jurisdiction. This final rule revises the CCL, as well as corresponding parts of the EAR, to implement changes made to the Wassenaar Arrangement List of Dual-Use Goods and Technologies (WA List) maintained and agreed to by governments participating in the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies (Wassenaar Arrangement, or WA) at the December 2017 WA Plenary meeting. The Wassenaar Arrangement advocates implementation of effective export controls on strategic items with the objective of improving regional and international security and stability. This rule harmonizes the CCL with the agreements reached at the 2017 Plenary meeting by revising Export Control Classification Numbers (ECCNs) controlled for national security reasons in each category of the CCL. This rule also makes other associated changes to the EAR and makes a correction.

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