1. New Import Ban on All
Products From China’s Xinjiang Region
In late December 2021, President Biden signed the Uyghur Forced
Labor Prevention Act into law. The new legislation creates a
rebuttable presumption that any goods created in whole or in part
in the Xinjiang Uyghur Autonomous Region of China (Xinjiang) have
been made using forced labor and are therefore banned from entry
into the United States. Importantly, while the legislation
identifies polysilicon, cotton, and tomatoes as high-priority
sectors for enforcement, the ban, which will take effect on June
21, will apply to all goods with Xinjiang-origin inputs, regardless
of sector, country of export, or country of origin. The legislation
allows for exceptions to the broad ban if the importer can
demonstrate to U.S. Customs and Border Protection (CBP) that goods
excluded from entry pursuant to the rebuttable presumption were not
created using forced labor. However, the government has until June
21-the date the rebuttable presumption takes effect-to release
further guidance on how it will identify offending shipments and
what kind of documentary evidence will suffice to reverse the
forced labor presumption and allow goods to enter the United
States. In the meantime, the government will establish a time
period for accepting written public comments (at least 45 days),
which will be followed by a public hearing. In light of the new
law, to avoid entry issues at U.S. ports and to be ready to
demonstrate compliance if CBP asks, companies should consider
participating in the public comment process; trace, verify, and
document their entire supply chains; and identify and replace
inputs and suppliers linked to Xinjiang.
2. Economic Sanctions to
Increase; Enforcement Risks Related to China
U.S. and Allies Threaten Broad Sanctions and Export
Controls if Russia Invades Ukraine
In late December 2021, President Biden signed the Uyghur
Forced Labor Prevention Act into law. The new legislation creates a
rebuttable presumption that any goods created in whole or in part
in the Xinjiang Uyghur Autonomous Region of China (Xinjiang) have
been made using forced labor and are therefore banned from entry
into the United States. Importantly, while the legislation
identifies polysilicon, cotton, and tomatoes as high-priority
sectors for enforcement, the ban, which will take effect on June
21, will apply to all goods with Xinjiang-origin inputs, regardless
of sector, country of export, or country of origin. The legislation
allows for exceptions to the broad ban if the importer can
demonstrate to U.S. Customs and Border Protection (CBP) that goods
excluded from entry pursuant to the rebuttable presumption were not
created using forced labor. However, the government has until June
21-the date the rebuttable presumption takes effect-to release
further guidance on how it will identify offending shipments and
what kind of documentary evidence will suffice to reverse the
forced labor presumption and allow goods to enter the United
States. In the meantime, the government will establish a time
period for accepting written public comments (at least 45 days),
which will be followed by a public hearing. In light of the new
law, to avoid entry issues at U.S. ports and to be ready to
demonstrate compliance if CBP asks, companies should consider
participating in the public comment process; trace, verify, and
document their entire supply chains; and identify and replace
inputs and suppliers linked to Xinjiang.
Transacting With Belarusian Sovereign Debt
Prohibited
On December 2, the Treasury Department issued a
new Directive 1 under Executive Order 14038.
The new Directive 1 prohibits U.S. persons from transacting in,
financing, or otherwise dealing in new debt with a maturity of
greater than 90 days to or for the Belarusian government, effective
immediately, in both primary and secondary markets. Similar to the
restrictions on U.S. dealings with Russian sovereign debt,
Directive 1 restricts dealings in all denominations of debt.
Alongside the issuance of this new directive, OFAC designated 20
individuals, 12 entities, and three aircraft as blocked property in
response to the Belarusian regime’s continued disregard for
human rights and democracy. This is the fifth tranche of
Belarus-related sanctions since the allegedly fraudulent August 9,
2020 presidential election in Belarus.
Sanctions Part of U.S. Anti-Corruption Strategy
On December 6, the White House released its comprehensive
“United States Strategy on Countering
Corruption,” which comes on the heels of the White
House’s June 3, 2021 announcement that fighting international
corruption is a national security priority. Fighting international
corruption will be a whole-of-government approach, and we expect
increased cross-border diplomatic and law enforcement initiatives
to prosecute corruption. In line with this announced strategy, on
December 9, 2021, International Anti-Corruption Day, OFAC sanctioned seven people and eight
entities in Central America, Africa
and Europe for
corruption.
Airbnb Xinjiang Province Rentals Pose Sanctions
Risk
Ahead of the 2022 Winter Olympics in Beijing, Airbnb has
more than a dozen homes available for rent in China’s Xinjiang
region on land owned by a sanctioned Chinese entity. The entity,
paramilitary organization Xinjiang Production and Construction Corps, was
sanctioned in 2020 for human rights abuses, including for helping
to create a surveillance and detention program for Muslim minority
groups. The listings expose Airbnb to reputational and regulatory
risk under U.S. law.
3. White House Announces
New Export Control Initiative; AES Update
- On December 9, at the Summit for Democracy, President Biden
announced the establishment of the Presidential Initiative for Democratic
Renewal, a set of policies and initiatives, including an export
control initiative, which build and continue the U.S.
government’s work to bolster democracy and defend human rights
around the world. The Export Controls and Human Rights
Initiative’s goal is to create a coalition of governments that
will work together to best utilize export control tools to monitor
and as needed restrict the proliferation of dual-use
technologies. - Beginning January 13, the Commerce Department’s Automated
Export System (AES) will automatically warn filers if they are
exporting a controlled item without a license. If the exporter
selects “C33: No License Required (NLR)” but a prohibited
combination of information is provided for the ECCN and Country of
Destination, exporters will receive Response Code 66Q. If exporters receive this
error message, they will have six months to resolve the error
before the agency blocks them from moving forward with the
filing.
4. U.S. Dept. of Energy
Kicks Off Expansive Energy Sector Supply Chain Review
The Department of Energy is seeking input from energy industry
stakeholders involved directly or indirectly in the full supply
chain, from raw materials to end-of-life material recovery and
recycling. This request for information will help inform how the
DOE can approach building resilient supply chains for the energy
sector. The RFI asks questions and focuses on 14 topic areas
including solar photovoltaic technology; wind energy technology;
energy storage technology; electric grid-transformers and HVDC;
hydropower and pumped storage technology; nuclear energy
technology; fuel cells and electrolyzers; semiconductors; neodymium
magnets; platinum group metals and other materials used as
catalysts; carbon capture, storage, and transportation materials;
and cybersecurity and digital components. Responses are due no later than 5 p.m. on
January 15.
5. Contractors Encouraged
to Establish Effective Cybersecurity Programs Despite CMMC
Delay
On November 3, 2021, the Department of Defense (DOD) announced
significant changes to its Cybersecurity Maturity Model
Certification (CMMC) program via an Advance Notice of Proposed
Rulemaking (ANPR). Although the ANPR resulted in an immediate, but
temporary, suspension of the CMMC program, the DOD is encouraging
contractors to continue to establish and maintain effective
cybersecurity programs pending final rulemaking and implementation.
Among the changes, the DOD’s new CMMC framework reduces the
number of certification levels from five to three and eliminates
the requirements in the mid-tier certification level (CMMC Level 2)
that distinguished CMMC from the National Institute of Standards
and Technology (NIST) Special Publication (SP) 800-171 procedures.
Further, the new program authorizes the limited use of enforceable
Plans of Action and Milestones and permits contractors pursuing a
basic CMMC Level 1 certification to self-assess compliance with the
program. According to a recent CMMC-Accreditation Board Town Hall,
the DOD will announce the changes by issuing an interim rule with a
60-day public comment period and concurrent congressional review.
The DOD anticipates the final CMMC rulemaking period to take
anywhere between nine and 24 months. Although these changes affect
the implementation timeline for CMMC as a contractual obligation
for companies, the DOD encourages the Defense Industry Base to
continue improving cybersecurity and is exploring options to
provide incentives to companies that achieve CMMC compliance during
the provisional program.
6. United States Sets Arms
Embargo, Export Restrictions Against Cambodia
As expected following the November 10 joint business advisory on Cambodia
issued by the Departments of State, Treasury, and Commerce, the
Biden administration issued new restrictions on exports and
re-exports to Cambodia on December 9. BIS has designated Cambodia as part of
Country Group D:5, which makes it subject to U.S. arms embargo. In
addition, Cambodia was added to the list of countries subject to
both the military and military intelligence end use and end user
controls and restrictions. The State Department also changed the
International Trade in Arms Regulations (ITAR) to add Cambodia to
its list of proscribed countries, which means that there will be a
presumption of denial for all licenses and other approvals for
exports and imports of defense articles and defense services
destined for or originating from Cambodia.
Trade tip of the month: Changes to the
U.S. Harmonized Tariff Schedule that implement an update to the
World Customs Organization’s Harmonized System tariff
nomenclature are set to take effect January 27. The full list of
coming changes are described in a newly released report from the International Trade
Commission.
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