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Shara Aranoff

Shara Aranoff helps clients in technology, life sciences, and manufacturing use intellectual property and international trade enforcement tools to compete in U.S. and global markets.

Background

As we previously reported, President Biden and Congress took steps in March 2022 to revoke Russia’s most-favored-nation (or “MFN”) trade status, known as Permanent Normal Trade Relations (“PNTR”) status under U.S. law.  As a result of these actions, the Suspending Normal Trade Relations with Russia and Belarus Act (“Suspending NTR Act”) entered into force on April 8, 2022, formally revoking PNTR status for Russia and Belarus.  Under the terms of the Act, imports into the United States of products from Russia and Belarus became subject to tariff rates set out in column 2 of the U.S. tariff schedule, rather than the column 1 rates that had previously applied.  Column 2 tariff rates are often higher—sometimes much higher—than MFN tariff rates in column 1, and as a result of this change, tariffs on U.S. imports from Russia increased from an average of approximately three percent to 32 percent.  In addition to implementing this immediate change in applicable tariff rates, the Suspending NTR Act also temporarily authorized the President, through the end of 2023, to increase even further tariffs applicable to imports from Russia and Belarus.

On June 27, pursuant to the authority granted under the Suspending NTR Act, President Biden issued Presidential Proclamation 10420, announcing that the United States would further increase tariffs applicable to certain categories of imports from Russia, worth approximately $2.3 billion annually.  U.S. Customs and Border Protection (“CBP”) recently issued guidance on these tariff increases, which will apply effective July 27, 2022.  This alert provides additional information on the forthcoming tariff increases, and discusses potential implications for importers of Russian goods.

Overview of July 27 Tariff Rate Increase on Certain U.S. Imports from Russia

Since revocation of PNTR status in April, products imported into the United States from Russia and Belarus have been subject to tariff rates set forth in column 2 of the U.S. tariff schedule.  Under the terms of Presidential Proclamation 10420, however, duty rates of 35 percent ad valorem will apply to 570 categories of Russian products in lieu of column 2 rates, beginning July 27, 2022.  These product categories have an estimated value of approximately $2.3 billion annually.  The Proclamation does not impact imports from Belarus, which will remain subject to column 2 tariff rates.Continue Reading Increased Tariffs on Certain U.S. Imports from Russia Effective July 27, 2022: What Companies Need to Know

Importers of merchandise into the United States must use “reasonable care” in the importation process, which includes providing accurate and complete information necessary for U.S. Customs and Border Protection (“CBP”) to process and release the merchandise into the United States.[1]  Importers who fail to take this obligation seriously do so at their peril, because catching importer mistakes that result in duty underpayments is an enforcement priority for CBP.  If CBP determines that an importer has failed to exercise reasonable care, CBP may impose substantial civil penalties, even if an error was unintentional.[2]  However, where importers discover their own import compliance errors before CBP does, they may significantly reduce their exposure to penalties by proactively and voluntarily disclosing such errors to CBP with a “prior disclosure.”  This article summarizes the fundamentals of a prior disclosure, and reports on recent efforts by CBP to standardize prior disclosure practices across U.S. ports of entry.

Prior Disclosure Fundamentals

CBP encourages importers to file prior disclosures,[3] and it often makes sense for an importer to do so.  The statutes, regulations and procedures that govern the importation of merchandise into the United States are complex and constantly changing, such that even the most experienced and vigilant importers make mistakes.  A prior disclosure allows an importer to disclose its violations of Customs laws and regulations to CBP and pay any unpaid duties or fees owed.  In exchange, the importer limits exposure to otherwise applicable penalties, by limiting the penalty to the interest owed.  CBP benefits as well, receiving prompt payment of duties owed (plus interest) without using internal resources to conduct an investigation of the reported violations and enforce a penalty order. Continue Reading Voluntary Disclosures to CBP: What Importers Need to Know About the Changing Landscape

Presidential Action Triggered by Crisis in the U.S. Solar Industry

In recent months, the U.S. solar industry has been in the midst of an existential crisis, triggered by the threatened imposition of retroactive and future tariffs on a significant portion of U.S. imports. That crisis began on April 1, 2022, when the Department of Commerce (“Commerce”) initiated an inquiry to determine whether solar cells and modules from Cambodia, Malaysia, Thailand, and Vietnam are circumventing antidumping (“AD”) and countervailing duty (“CVD”) orders on solar cells from China. Solar cells from these countries generally accounted for approximately 80% of U.S. solar module imports in 2020.[1] If Commerce finds circumvention, solar cells and modules from the four target countries could not only be subject to combined AD/CVD tariffs approaching 250%, but Commerce’s regulations also allow for the agency to apply these tariffs retroactively to merchandise entering on or after April 1, 2022 (and potentially as far back as November 4, 2021). This threat of AD/CVD tariffs triggered a steep decrease in imports of solar cells and modules from Southeast Asia, and caused parts of the U.S. solar industry to come to a stand-still, furthering domestic reliance on coal.[2] Given this paralysis in the solar industry, lawmakers and others urged the President to provide relief from potential AD/CVD tariffs.[3]

The President’s Response

On June 6, 2022, President Biden issued a declaration of emergency (the “Declaration”)[4] pursuant to section 318(a) of the Tariff Act of 1930, as amended (19 U.S.C. § 1318), and issued a determination pursuant to section 303 of the Defense Production Act of 1950, as amended (50 U.S.C. § 4533) (“the DPA Determination”)[5]. The Declaration finds that an emergency exists “with respect to the threats to the availability of sufficient electricity generation capacity” and authorizes Commerce to issue a moratorium on tariffs on solar cells and modules from Cambodia, Malaysia, Thailand, and Vietnam for up to a 24-month period, while the DPA Determination aims to “expand the domestic production capability” for solar cells during this 24-month period. The Declaration itself does not prevent the imposition of tariffs on imported solar cells and modules from the Southeast Asian countries, rather it authorizes the Secretary of Commerce to “take appropriate action” to permit the duty-free importation of solar cells and modules for 24 months after the Declaration’s issue date.[6]Continue Reading President Acts to Prevent Import Tariffs on Solar Cells and Modules from Southeast Asia

On March 11, 2022, President Biden announced that the United States, acting in coordination with the European Union (“EU”) and leaders of major economies belonging to the Group of Seven (“G7”), would begin taking steps to revoke most-favored-nation (or “MFN”) trade status for Russia. MFN trade status—known as Permanent Normal Trade Relations (“PNTR”) status in the United States—is a term used to describe the nondiscriminatory treatment granted among most of the world’s trading partners. Days after the President’s address, on March 16, the House passed to formally revoke PNTR for Russia, and also stripping Belarus of MFN treatment. The bill now moves to the Senate, where timing for its consideration is uncertain.

MFN status is a fundamental principle in the international trading system established under the World Trade Organization (“WTO”), and as a general rule, WTO Members are required to accord MFN status to all other WTO Members. Having acceded to the WTO in 2012, Russia is generally entitled to MFN treatment by other WTO Members. In response to Russia’s invasion of Ukraine, however, several other WTO Members have joined the United States, the EU, and the G7 in stating an intent to revoke MFN treatment for Russia, invoking an “essential security” exception that permits WTO-inconsistent measures where a Member considers such measures to be “necessary for the protection of its essential security interests.” Statements issued by the White House and G7 Leaders emphasized the coordinated nature of the initiative across economies, and the intent to continue to pursue additional collective action to deny Russia the benefits of WTO membership.

While certain G7 countries, such as Canada, have already withdrawn Russia’s trade benefits by means of executive action, revocation of Russia’s PNTR status in the United States will require congressional action. While the House has passed a bill to do so, specific timing for consideration of that legislation in the Senate is still unknown. A revocation of Russia’s MFN status will increase tariff rates applicable to certain U.S. imports from Russia, and may also provoke Russia to take responsive, retaliatory actions against international firms. This alert provides background on Russia’s current trade status, analyzes congressional action to date on the issue, and describes the potential international trade implications for U.S. firms of a change in Russia’s trade status.

Background on Russia’s Trade Status

Under the principle of MFN treatment, WTO Members are required to treat imports of goods and services from any WTO Member as favorably as they treat the imports of like goods and services from any other WTO Member. In practice, this means that MFN treatment is the basic “non-discriminatory” treatment to which all WTO Members are generally entitled. Russia has been accorded MFN treatment by most major economies since it became a WTO Member in August 2012.
Continue Reading Revocation of Russia’s Most-Favored-Nation Trade Status: What Companies Need to Know

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