The STA license exception authorizes a broad array of export activity that would otherwise require an export license, if certain notice and recordkeeping procedures are followed. However, historically, exporters have frequently sought an export license rather than relying on the STA exception. To increase usage of STA and decrease export license requests when STA is available, the proposed rule seeks to:

• Clarify that STA is a transaction-based license exception and exporters do not need to review the Commerce Control List to determine if STA is available for a particular Export Control Classification Number (“ECCN”).
• Add text to make it more explicit that STA is eligible for deemed exports and deemed reexports.
• Exclude deemed exports and deemed reexports from the requirement to have been listed on an approved license or other approval for “600 series” technology.
• Adopt a simpler and consistent approach to identify ECCNs eligible for STA.
• Remove the limitation on the use of License Exception Additional Permissive Reexports for reexports between and among certain partner and ally countries to reflect their close coordination with the United States on export controls.

In addition to the proposed STA changes, BIS published two final rules also designed to ease certain categories of export licensing requirements and expand the availability of export license exceptions for key allied and partner countries.

The first rule changes licensing requirements for certain Australia Group (AG)-controlled pathogens and toxins (and their related technologies) so that no license is required to AG countries, unless the item is also subject to Chemical Weapons Convention controls. The rule also loosens licensing requirements on crime controls for certain countries.

The second rule expands license exception eligibility to additional countries for certain missile technology items excluding any countries of concern for missile technology reasons or that are subject to a U.S. arms embargo (i.e., countries specified in Country Groups D:4 or D:5). The rule also updates list-based controls to align with recent Missile Technology Control Regime control list changes.

Please contact our sanctions and export controls team if you require any assistance navigating these changes

Background

On February 24, 2022, BIS imposed a license requirement for the export, reexport, and transfer (in-country) of aircraft and parts subject to the EAR to Russia. On March 2, 2022, BIS modified license exception Aircraft, Vessels, and Spacecraft (AVS) to exclude aircraft registered in, owned, or controlled by, or under charter or lease by Russia or a national of Russia from the scope of the license exception. As a result of those actions, aircraft subject to the EAR operated by Russian airlines required a license from BIS to be transferred to Russia.

Despite the new license requirement, all three airlines continued to fly international routes to and from Russia using aircraft subject to the EAR without first obtaining a license from BIS. These flights were unlicensed exports to Russia, and violated the EAR. The airlines also violated General Prohibition Ten (GP10) of the EAR by continuing to operate, fly, and maintain aircraft after the initial export violations occurred. GP10 is a broad provision that prohibits U.S. and non-U.S. persons from selling, transferring, exporting, reexporting, financing, ordering, buying, removing, concealing, storing, using, loaning, disposing of, transporting, forwarding, or otherwise servicing any item subject to the EAR if that you know that a violation of the EAR has occurred, is about to occur, or is intended to occur in connection with the item. BIS issued a warning to the public on March 18, 2022 that servicing identified aircraft that had been flown to Russia in violation of the EAR would constitute a separate, new violation of its regulations.

The TDOs are harsh and far-reaching civil penalties that are designed to cut off the penalized companies from items subject to the EAR. Among other things, the TDOs broadly prohibit U.S. and non-U.S. persons from engaging in business dealings related to items subject to the EAR involving the penalized companies. The orders will remain in force for 180 days and may be renewed.

Companies in the aviation sector will need to carefully review any dealings with the penalized airlines to ensure compliance with these significant new restrictions. Copies of the TDOs are available here, here, and here.

By way of background, on October 27, 2021, President Biden announced that the United States would explore the development of an economic framework with partners in the Indo-Pacific region. In February, the administration released a more detailed strategy for the region, which identified several areas of focus for the planned economic framework, including promoting and facilitating trade, developing rules to govern the digital economy, improving supply-chain resilience and security, catalyzing investment in infrastructure, and building digital connectivity. The administration’s vision for such a framework is something short of a free trade agreement. Given that trade promotion authority lapsed in July 2021 and has not been renewed, this would presumably allow the administration to achieve their goals without formal approval of the Congress.

The Office of the USTR is responsible for negotiations related to “fair and resilient trade” and is specifically seeking comments on:

1. General negotiating objectives for the IPEF;
2. Labor-related matters;
3. Environment and climate-related matters;
4. Digital economy-related matters;
5. Agriculture-related matters;
6. Transparency and good regulatory practice issues;
7. Competition-related matters;
8. Customs and trade facilitation issues; and
9. Other measures or practices, including those of third-country entities, which undermine fair market opportunities for U.S. workers, farmers, ranchers, and businesses.

1. General negotiating objectives for the IPEF;
2. Digital and emerging technologies related issues;
3. Supply chain resilience-related issues;
4. Infrastructure-related issues;
5. Clean energy-related issues;
6. Decarbonization-related issues;
7. Tax-related issues; and
8. Anti-corruption-related issues.

Mr. Kaplan, a trade attorney, brings decades of experience to this role, including as a longtime partner at King & Spalding. Previously, Mr. Kaplan served as Deputy Assistant Secretary and the first Acting Assistant Secretary of Commerce for Import Administration during the Ronald Reagan administration, at which time he oversaw hundreds of trade remedy cases, acted as a key negotiator of the U.S.-Japan semiconductor and the U.S.-Canada lumber agreements, and supervised the administration’s steel and machine tool programs. During his time in the private sector, Mr. Kaplan successfully brought the first ever countervailing duty cases against China (on coated paper and standard pipe) in 2007. He is also co-founder of the Manufacturing Policy Initiative at the School of Public and Environmental Affairs at Indiana University, and the founder of the Conference on the Renaissance of American Manufacturing.

During his confirmation hearing, Senator Orrin Hatch (R-UT), Chairman of the Senate Finance Committee, praised Mr. Kaplan as “a knowledgeable and capable leader.” Ranking member Senator Ron Wyden (D-OR) noted that Mr. Kaplan “ takes the right approach to vigorous, tough trade enforcement, and that is needed now more than ever.” Mr. Kaplan will bring to Commerce additional leadership and expertise in support of Secretary Ross.

The Secretary’s press release presents the agency’s key findings and lists the agency’s various recommended remedies. With respect to steel imports, the Department of Commerce recommends three alternative options to the President:

1. A global tariff of at least 24% on all steel imports from all countries, or
2. A tariff of at least 53% on all steel imports from 12 countries (Brazil, China, Costa Rica, Egypt, India, Malaysia, Republic of Korea, Russia, South Africa, Thailand, Turkey and Vietnam) with a quota by product on steel imports from all other countries equal to 100% of their 2017 exports to the United States, or
3. A quota on all steel products from all countries equal to 63% of each country’s 2017 exports to the United States.

1. A tariff of at least 7.7% on all aluminum exports from all countries, or
2. A tariff of 23.6% on all products from China, Hong Kong, Russia, Venezuela and Vietnam. All the other countries would be subject to quotas equal to 100% of their 2017 exports to the United States, or
3. A quota on all imports from all countries equal to a maximum of 86.7% of their 2017 exports to the United States.

The Commerce Department’s reports also recommend that a process be set up to allow Secretary Ross to grant requests by U.S. companies to exclude certain products from whatever remedy President Trump ultimately imposes.

The Kelley Drye International Trade team is closely reviewing these reports and monitoring any further developments.

• Peter B. Davidson, Senior Vice President for Congressional Relations at Verizon Communications, was selected by President Trump to be general counsel of Commerce. Prior to Verizon, Mr. Davidson served as General Counsel to the United States Trade Representative (“USTR”). He has also served as Vice President for Congressional Relations at USWEST and Qwest, and General Counsel and Policy Director to the Majority Leader of the House of Representatives. Mr. Davidson earned his bachelor’s degree at Carleton College, and his law degree from the University of Virginia School of Law.

• Jason Kearns was selected to be a Commissioner of the USITC for the remainder of a 9 year term expiring December 16, 2024. Mr. Kearns currently serves as Chief International Trade Counsel (Democratic Staff) to the Committee on Ways and Means in the House of Representatives. In this position, Mr. Kearns advises Members of Congress on legislation concerning trade and oversight issues involving the USTR and other agencies involved in international trade policy and regulation. Before that, he served for three years in the Office of the General Counsel to the USTR. From 2000 through 2003, Mr. Kearns worked in the international trade group of the law firm, WilmerHale. Kearns has a master’s in public policy from Harvard University’s Kennedy School of Government, a law degree from the University of Pennsylvania and a bachelor’s degree from the University of Denver.

In addition, the Director-General of the World Trade Organization (“WTO”) announced a recent appointment of a senior Dentons senior counsel. More specifically, WTO Director-General Robert Azevedo announced on June 27^th that Alan Wolff had been named as deputy director-general at the WTO. Mr. Wolff will serve a four year term, replacing fellow American David Shark, a former U.S. trade official who has served in the secretariat since 2013. Director-General Roberto Azevedo lauded Wolff's qualifications, calling him "a strong supporter of trade as a key driver of growth and development and a strong supporter of the multilateral trading system." Mr. Wolff served in senior trade positions as deputy USTR and as USTR general counsel during the Carter and Ford administrations. He currently works as senior counsel at the law firm Dentons. Wolff earned his law degree from Colombia Law School and his bachelor’s degree at Harvard University.