Generally, the newly amended Part 120 seeks to prioritize a clearer regulatory framework and roadmap by taking a functional approach to grouping regulatory measures and statements. Namely, rather than situating general definitions and statements at disparate locations, Part 120 is now divided into three subparts based on the function of the underlying provisions. Subpart A consolidates general information useful for understanding the ITAR, such as the legislative authorities and regulatory intent underlying the ITAR’s provisions. Subpart B consolidates statements of policy and other information about processes under the ITAR. And Subpart C provides a consolidated set of defined terms that are applicable throughout the rules.

Section-specific changes to Part 120 focus on clarifying edits and deleting redundancies. These changes are described by DDTC as “non-editorial.” Edits include express reference to Blue Lantern—the program used by DDTC for end-use monitoring—the creation and grouping of international organizations and arrangements, and the removal, in its entirety, of the Missile Technology Control Regime Annex formally found at § 121.16. And section 120.12 has been revised in its entirety so that it now describes the process for obtaining a Commodity Jurisdiction determination. Note that, for certain revisions, DDTC specifically mentions that the change is non-substantive or otherwise not intended to reflect a substantive change, such as for certain changes relating to the introduction of and references to the U.S. Munitions List. Interim final rule is effective as of September 6, 2022. And, for clarity, the rule features a table that details the movement of all sections.

Please contact our export control and sanctions compliance team if you have any questions about this development.

Supply Chain Resilience. The EO directs the Committee to consider a covered transaction’s effect on supply chain resilience and security, both within and outside of the defense industrial base. The underlying message is that CFIUS should look broadly at supply chain effects of proposed acquisitions and not just focus on direct national security effects. The concept of the U.S. supply chain writ large as a CFIUS national security concern is relatively new and could lead to CFIUS reviews of more proposed transactions.

U.S. Technological Superiority. The EO identifies sectors crucial to the U.S.’s global technological advantage, including, but not limited to, microelectronics, artificial intelligence, biotechnology and biomanufacturing, quantum computing, advanced clean energy, climate adaptation technologies, and the agricultural industrial base. The EO directs the Committee to consider whether or not a transaction would compromise the manufacturing capabilities, services, critical mineral resources, or technologies of the listed sectors.

Industry Investment. The EO also directs the Committee to consider the risks arising from a covered transaction in the context of multiple acquisitions or investments in a single sector or in related sectors in order to safeguard any given sector from compromise / control by an adversarial foreign entity.

Cybersecurity. The EO directs the Committee to consider whether a covered transaction may provide a foreign person, or a third-party, with access to conduct malicious cyber activities, in addition to the cybersecurity posture, practices, capabilities, and access of all parties to the transaction that could afford a foreign person, or third-party, the ability to achieve such activities.

Sensitive Personal Data. The EO directs the Committee to consider whether a covered transaction involves a U.S. business with access to U.S. persons’ sensitive data, and whether the foreign investor has the ability to exploit such information to the detriment of national security, including through the use of commercial or other means.

This EO instructs CFIUS to pay attention to many areas that are already the focus of Committee activity – as reflected in the Committee’s regulations and in much of itsrecent activity. That said, the instruction on supply chains will encourage CFIUS to think more broadly in that area. The EO is also intended as a message to U.S. acquisition targets and to non-U.S. companies thinking about acquisitions, including Chinese companies that have been contemplating a stricter CFIUS landscape, that scrutiny of proposed transactions in the key areas listed will be enhanced even further. The EO is also a message that can be referenced in forthcoming mid-term election races that this administration is intent on protecting U.S. national security as defined very broadly by this EO.

The new Russia measures can be found here, and the Belarus measures are available here.

Bank Sanctions

Port & Transport Ban

Import Bans

Export Ban

Additional Designations

Amendments to Existing Sanctions

• A general ban on the participation of Russian companies in public procurement in member states;
• The exclusion of all financial support to Russian public bodies;
• An extended prohibition on deposits to cryptowallets; and
• An extension of the ban on the export of euro-denominated banknotes and on the sale of euro-denominated transferrable securities to Russia and Belarus, and persons in those countries, to all official currencies of the EU member states.

• Expand domestic preference procurement policies applicable to federal financial assistance programs for public works infrastructure;
• Increase the domestic component content requirements of products and construction materials sold to the Federal Government under the Buy American Act; and
• Provide transparency into governmental contracting decisions related to domestic sourcing.

BACKGROUND

The IIJA contains approximately $550 billion in new infrastructure spending over current spending levels and covers roads and bridges, public transit, rail, safety and research programs that are typically included in five-year surface transportation reauthorizations. Additionally, the five-year bill makes major investments in drinking and wastewater infrastructure; ports and airports; broadband; grid security; and clean energy programs (e.g., electric vehicle infrastructure and carbon capture). The bill also includes major domestic procurement ("Buy America") requirements for infrastructure materials.

“BUILD AMERICA, BUY AMERICA"

In summary, the BABA would bar the award of federal financial assistance for infrastructure unless all of the iron, steel and manufactured products and construction materials used in the project are produced in the United States.[1]

Waivers traditionally available under existing Buy America laws are authorized under the BABA where (1) applying the Buy America requirement would be inconsistent with the public interest; (2) where the iron, steel, manufactured products and construction material is not produced in the United States in sufficient and reasonably available quantities or of a satisfactory quality; and (3) where inclusion of the domestic products or construction materials will increase the cost of the overall project by more than 25 percent. In addition, Congress directs that the BABA be applied in a manner consistent with U.S. trade agreement obligations related to government procurement.

Robust Origin Standards

The BABA imposes robust origin standards for the products and construction materials acquired for federally-assisted infrastructure projects. The bill defines “produced in the United States” to mean, “in the case of iron or steel products, that all manufacturing processes, from the initial melting stage through the application of coatings, occurred in the United States.” Similar origin standards for iron and steel are currently imposed by regulation and agency guidance to federal-aid subject to existing Buy America laws, including those applicable to certain federal-aid transportation infrastructure programs as well as federal-aid clean and drinking water infrastructure programs.

The BABA will impose Buy America requirements on nonferrous construction materials – a break in precedent from existing Buy America laws applicable only to iron and steel. It identifies common construction materials as nonferrous metals, plastic and polymer-based products, glass (including optic fiber), lumber, and drywall. The BABA directs the imposition of similarly significant “all manufacturing processes” origin standards for non-ferrous construction materials. The OMB is required by the BABA to issue standards that define “all manufacturing processes” for construction materials.

Relative to the origin standard for manufactured products, the BABA is more explicit. Manufactured products will be deemed produced in the United States if: (1) the product was manufactured in the United States; and (2) the cost of the product’s components mined, produced or manufactured in the United States exceeds 55 percent of the total cost of the product’s components. This origin standard is consistent with the recently revised origin standard for domestic end products and construction materials under the federal BAA, but not reflective of changes to the BAA’s origin standard imposed by another section of the IIJA.

Rapid Timeline for Implementation

The BABA imposes a rapid timeline for implementation.

Upon enactment: The Office of Management and Budget (OMB) is directed to issue guidance to Federal agencies to assist in identifying programs that have “deficient” Buy America coverage and to issue guidance to assist Federal agencies in applying new domestic content preferences.

The BABA deems as deficient those programs that are not currently subject to Buy America requirements at all, are subject to limited Buy America requirements, the scope of which does not include iron, steel, manufactured products and construction materials, or are subject to Buy America requirements that have been waived by generally-applicable and longstanding waivers. For example the Buy America requirement imposed by 23 U.S.C. § 313 is limited in application by the Agency’s implementation policy to iron and steel only. The Federal Highway Administration has estimated that the ferrous inputs account for less than 5 percent of the cost of a federally-aided highway project.

Within 60 Days of Enactment: Federal agencies will be required to submit to the OMB and appropriate congressional committees a report that identifies each Federal financial assistance program for infrastructure administered by the agency, identify the Buy America-type requirements applied thereto, if any, and assess the applicability of any existing domestic content procurement preference, including its purpose, scope, applicability and any exceptions or waivers of the requirement. The agency report must identify the deficient programs not subject to domestic procurement preferences required by the BABA.

Within 180 Days of Enactment: Federal agencies must begin applying Buy America preferences meeting the scope of products required by the BABA. By this time, OMB must issue standards satisfying the “all manufacturing processes” origin standard required by the BABA for “construction materials.”

“MAKE IT IN AMERICA”

Specifically, the “Make it in America” section of the BABA provides statutory authority for the establishment of the new Made in America Office within the OMB. It also includes language aimed at reducing the use of waivers and strengthened application of the BAA, which as noted above, applies to direct procurement by Federal agencies.

The BABA directs the Made in America Office to promulgate guidance to Federal agencies aimed at standardizing and simplifying how agencies comply with the BAA. The guidance is to include the criteria agencies utilize to grant “public interest” and “non-availability” waivers of the BAA, providing some framework to what has traditionally been very murky process. In the context of non-availability waivers the BABA identifies appropriate considerations contracting officers should base waiver determinations upon, including anticipated project delays as well as lack of substitutable articles, materials and supplies.

Similarly, the BABA directs agencies to avoid issuing public interest waivers that would result in decreased employment in the United States both among the entities that produce the product or construction material or that would result in a contract award that would decrease domestic employment. It will also require for the first time that Federal agencies consider whether the cost advantage of a foreign product is the result of unfair trade practices such as dumping or subsidization.

Notably, the “Make it in America” section of the BABA includes a sense of Congress that BAA’s domestic component content standard should be amended by the Federal Acquisition Regulatory Council (FAR Council) upward from 55 percent currently to 75 percent. This sense of Congress is consistent with both the directives of EO 14005 and proposed changes to the Federal Acquisition Regulations (FAR) included in a notice of proposed rulemaking (NPRM) issued by the FAR Council in July of 2021. The July NPRM proposed graduated increases to the BAA’s component content standard from 55 percent currently to 75% over five years with a fallback mechanism at prior lower percentage standards in the event of no qualifying offers meeting the higher component content standards. The sense of Congress in the BABA also endorsed a fallback mechanism in the event of no qualifying offers. The BABA directs the FAR Council to amend the Part 25 of the FAR to provide a definition for an “end product manufactured in the United States,” which the FAR Council is poised to do with the current rulemaking.

TRADE AGREEMENT OBLIGATIONS PRESERVED; DIRECTED TO BE REVIEWED

Notably, the IIJA directs an assessment of the impacts of all United States free trade agreements, the World Trade Organization’s Government Procurement Agreement and federal permitting processes on the operation of Buy American laws. The required report is to be made public. While the assessment does not direct a change in policy, it could spur the Administration to reconsider how it interprets limitations on the scope of parties’ obligations embodied in these agreement texts as well as its construction and reliance on delineated reservations to its market access obligations under these agreements.

BUYAMERICA.GOV

Notably, the Director of the Made in America Office at OMB issued late last month a memorandum for senior federal procurement officials that provides specific guidance to Federal executive branch agencies on the use of a digital waiver portal to submit proposed waivers to the Made in America Office and posted on a new dedicated website MadeInAmerica.gov.

CONSIDERATIONS FOR MANUFACTURERS

Manufacturers of nonferrous products used in public works infrastructure projects are likely unfamiliar with the Buy America requirements applicable to certain federal-aid infrastructure programs. Federal agencies subject to existing Buy America laws applicable to iron and steel have, over the last nearly 40 years, adopted consistent standards construing “all manufacturing processes” that require the initial melting stage of steelmaking to occur in the United States. Manufacturers of nonferrous construction materials should take note of this precedent and consider what a comparably inclusive origin standard would look like for their industry sector.

Manufacturers should also assess how the BABA’s waiver transparency requirements and supplier scouting programs may be leveraged to identify gaps in domestic sourcing and inform capital investment planning.

[1] The BABA defines infrastructure as: roads, highways, and bridges; public transportation; dams, ports, harbors, and other maritime facilities; intercity passenger and freight railroads; freight and intermodal facilities; airports; water systems, including drinking water and wastewater systems; electrical transmission facilities and systems; utilities; broadband infrastructure; and buildings and real property.

Our team at Kelley Drye has prepared a high level summary of the bill, and will host a webinar on Friday, November 19th to review the details of the bill and discuss its implementation. We invite you to join us next Friday.

Commerce first published a proposed rule in August 2020, inviting public comment and allowing 30 days for initial comments and 14 days for rebuttal submissions. Regulations To Improve Administration and Enforcement of Antidumping and Countervailing Duty Laws, 85 Fed. Reg. 49,472 (Dep’t Commerce Aug. 13, 2020) (“Proposed Rule”). In response to the Proposed Rule, Commerce received 37 sets of comments and 17 rebuttal submissions from interested parties, including domestic producers, exporters, importers, surety companies, and foreign governments. Given the scope and significance of the Proposed Rule most submissions were submitted on behalf of formal trade associations or informal groups of companies, or law firms, including Kelley Drye, representing the general interests of their client base and providing input based on extensive practitioner experience.

The modifications proposed and ultimately adopted by Commerce were largely expected and codified agency practice as it has developed over many years, in a number of increasingly important areas. As Commerce explains:

Over the past 20 years of administering and enforcing the current iteration of the regulations, Commerce has discovered some inefficiencies and burdens that applied equally to our procedures for all interested parties—domestic producers, U.S. importers, and foreign exporters, alike. Over the years, we have heard complaints about those inefficiencies and burdens, but could do nothing about them without modifying our regulations. Furthermore, we have built a practice in some regards, like Commerce’s substantial transformation test, which should be codified in the regulations, but are not. In addition, we have discovered that our regulations do not adequately address some matters, such as the problem of circumvention of our orders. In short, none of these problems or concerns should be new to those who practice AD and CVD law before Commerce.

Final Rule at 52,369.

The purpose of the regulatory changes proposed in this rulemaking is to strengthen the administration and enforcement of AD/CVD laws, make such administration and enforcement more efficient, and create new enforcement tools for Commerce to address circumvention and evasion of trade remedies. If adopted, these changes would equip Commerce to better fulfill the Congressional intent behind the AD/CVD laws—namely, to protect U.S. companies, workers, farmers, and ranchers from the injurious effects of unfairly traded imports. In addition, if adopted, these changes would promote the Administration’s objective to enforce the AD/CVD laws rigorously, and to aggressively pursue parties that seek to skirt them. Moreover, the proposed regulations facilitate a stronger and more efficient administration of the AD and CVD laws in the context of Commerce’s proceedings.

The Final Rule strongly reinforced this objective. Final Rule at 52,303.

As a general matter, some of the rules changes give Commerce more flexibility to deal with emerging challenges as new shippers and related review proceedings, scope, circumvention, and coordination with Customs and Border Protection (CBP). At the same time, many revisions give more detailed requirements to initiate certain proceedings and clearer time frames for Commerce to deal with new allegations and new information, which can be viewed as an attempt by the agency to shift some administrative burden to parties.

To the extent new and stricter requirements may encumber petitioners or respondents under different circumstances, greater clarity with respect to both procedure and substance engenders procedural certainty and efficiency for all parties. Moreover, rules that support administrative efficacy tend to work in the domestic industry’s favor. Indeed, when Secretary of Commerce Gina Raimondo announced the issuance of the Final Rule, she specifically thanked “U.S. industries and interagency partners who contributed through their review and input to this important rulemaking,” reiterating that Commerce “is committed to safeguarding American workers, farmers, and other businesses from foreign actions that undermine free and fair trade.”

There are eight key aspects of Final Rule:

1. Initiation Comment Period for Industry Support (19 C.F.R. § 351.203(g)). The Final Rule imposes specific deadlines for interested parties to comment on industry support for a petition, and to respond to such comments, within the 20-day period for Commerce to determine whether to initiate on an AD or CVD petition. Effective October 20, 2021.
2. New Shipper Reviews (19 C.F.R. § 351.214). The Final Rule codifies Commerce’s long-standing practice of evaluating whether the sale(s) at issue in a new shipper review is a bona fide sale. The rule revisions also set forth information and certification requirements for Commerce to conduct a new shipper review, establish that new shippers must post cash deposits of duties, instead of bonds, during the new shipper review, and make other procedural changes and clarifications. Effective October 20, 2021.
3. Scope (19 C.F.R. § 351.225). Through the Final Rule, Commerce has a made a number of substantive and procedural modifications to the regulations governing scope inquiries. These changes include: establishing a standardized scope inquiry application form with detailed informational requirements necessary for initiation of a scope inquiry; eliminating the prior distinction between “informal” and “formal” scope inquiries; revising procedural elements such as service requirements and deadlines; and clarifying the hierarchy of sources and Commerce’s step-wise analysis Commerce utilizes in interpreting scope. The Final Rule also amends suspension of liquidation procedure, such that at the first scope ruling – preliminary or final – Commerce normally will direct CBP to begin the suspension of liquidation of any unliquidated entries not yet suspended and collect applicable cash deposits, including those entries pre-dating initiation of the scope inquiry. Effective November 4, 2021.
4. Circumvention (19 C.F.R. § 351.226). The Final Rule creates new regulations governing circumvention inquiries. Previously, Commerce relied on the scope inquiry provisions in analyzing and determining whether certain merchandise, although not covered by scope, could be found to be circumventing an existing trade order. The new circumvention inquiry provisions largely mirror the amendments made to the scope inquiry rules, with some exceptions, including different requirements for initiation and deadlines. A notable distinction between the scope and circumvention provisions is that upon a preliminary or final circumvention determination, Commerce will direct suspension of liquidation only for entries on or after the date of initiation of the circumvention inquiry. Commerce will adopt a case-by-case approach in determining whether “retroactive suspension” is appropriate. Effective November 4, 2021.
5. Covered Merchandise Referrals (19 C.F.R. § 351.227). If, during the course of CBP’s investigation of potential AD/CVD order evasion, pursuant to the Enforce and Protect Act of 2015, CBP is unable to determine whether the merchandise at issue is “covered merchandise” within the meaning of the statute, CBP shall refer the matter to Commerce to make a covered merchandise determination (covered merchandise referral). The Final Rule establishes entirely new provisions, non-existing in the current regulatory framework, to address the formal process for CBP to refer a scope coverage determination to Commerce. The new rules establish expedited deadlines for completion of the covered merchandise inquiry and allows Commerce to rely on the scope or circumvention analysis standards in making a determination. Effective November 4, 2021.
6. Certifications (19 C.F.R. § 351.228). The Final Rule codifies and enhances Commerce’s existing authority and practice to require certifications by importers, exporters, and other interested parties as to whether merchandise is subject to an AD/CVD order in the context of a circumvention inquiry and in other circumstances. Effective October 20, 2021.
7. Importer Reimbursement Certification (19 C.F.R. § 351.402(f)(2)). Under the current regulation, importers must certify whether they have or have not entered into an agreement for the payment or reimbursement of antidumping and countervailing duties by the exporter or producer. The Final Rule revises the regulation with respect to the format and procedure for filing such a certification. Effective October 20, 2021.
8. Other Procedural Amendments 19 C.F.R. § 351.103(d) Introductory Text and (d)(1)). In conjunction with other revisions imposed by the Final Rule, Commerce amends two of its procedural regulations related to entries of appearance and the information required for importers to be granted access to business proprietary information under administrative protective order in circumvention inquiries. Effective November 4, 2021.

The addition of Vassil Kroumov Bojk, Delyan Slavchev Peevski, Ilko Dimitrov Zhelyazkov and their companies to the List of Specially Designated Nationals (“SDN List”) effectively cuts the sanctioned parties off from the U.S. financial system and U.S. market. U.S. persons are broadly prohibited from conducting business with the sanctioned parties and with any entities owned 50 percent or more, directly or indirectly, by the SDNs. Further, any property or interests in property within the possession or control of U.S. persons must be formally “blocked” (or frozen) and reported to OFAC.

Companies that do business in Bulgaria should carefully review the new additions to the SDN List, as many of the sanctioned entities are prominent in the local media and entertainment sectors. Further developments are possible with upcoming elections in Bulgaria.

“Provided a full and complete accounting to any COVID-19 investigation led by the United States, its allies, or United Nations affiliates, such as the World Health Organization (WHO);

• Closed all wet markets that have the potential to expose humans to health risks; and
• Released all pro-democracy advocates in Hong Kong that were arrested in the post COVID-19 crackdowns.”

The legislation has additional requirements, most notably for exporters requires Buy America for procurements related to the Strategic National Stockpile with standard waiver authority for the Health and Human Services Secretary.

We are closely monitoring this draft legislation and related developments. We are happy to help answer any questions your company may have regarding this Act or other export and sanctions related matters, particularly in light of COVID-19.

Five Types of PPE Currently Covered:

• N95 Filtering Facepiece Respirators, including devices that are disposable half-face-piece non-powered air-purifying particulate respirators intended for use to cover the nose and mouth to reduce exposure to pathogenic biological airborne particulates;
• Other Filtering Facepiece Respirators (e.g., those designated as N99, N100, R95, R99, R100, or P95, P99, P100), including single-use, disposable half-mask respiratory protective devices that cover the user's airway and offer protection from particulate materials at an N95 filtration efficiency level;
• Elastomeric, air-purifying respirators and appropriate particulate filters/cartridges;
• PPE surgical masks, including masks that cover the user's nose and mouth and provide a physical barrier to fluids and particulate materials; and
• PPE gloves or surgical gloves, including exam and surgical gloves, as well as gloves intended for the same purposes.

FEMA Approval Process

In making its determination, FEMA may consult other agencies and will consider the totality of the circumstances, including the following factors: (1) ensuring that scarce or threatened items are appropriately allocated for domestic use; (2) minimizing supply chain disruption, both in the U.S. and abroad; (3) facts surrounding the distribution of the materials and potential for price-gouging or hoarding; (4) humanitarian concerns; (5) the quality and quantity of the materials; and (6) diplomatic considerations and international relations.

Exemptions Necessary or Appropriate to Promote National Defense

Customs and Border Protection (CBP) issued internal guidance for ports or entry. There will likely be additional public guidance forthcoming clarifying these exemptions. For example, CBP will be focusing its efforts on shipments involving “commercial quantities,” currently defined as shipments valued at $2,500 or more and containing more than 10,000 units. The guidance indicates that CBP will not be focusing on the following categories of shipments:

• Exports to Canada or Mexico;
• Exports to U.S. government entities such as U.S. military bases overseas;
• Exports by U.S. Government agencies;
• Exports by U.S. charities;
• Exports by critical infrastructure industries for the protection of their workers;
• Exports by the 3M Company;
• Express or Mail Parcels that do not meet the commercial quantity definition above;
• In-transit shipments.

Again, there will likely be more guidance on categories for exclusion, and FEMA encourages manufacturers to contact them with specific information regarding their status under this exemption. Additionally, the Administrator may announce other exemptions by notice in the Federal Register.

Enforcement

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We are continuing to monitor developments regarding these requirements for the five categories of PPE and potentially others to be subject to certain restrictions before leaving the United States, as well as any other exemptions and additional guidance. Please let us know if you have questions.

Kelley Drye has been closely monitoring the federal government response to the COVID-19 pandemic. Our goal is to help clients face current challenges and address questions that impact business operations as information becomes available to us. We have been providing up-to-date information including daily advisories, blog posts and frequent webinars about the legal and business implications related to the pandemic, all of which can be found on the firm’s COVID-19 Resource Center.

[1] The TFR is issued pursuant to the following authorities: The Defense Production Act of 1950, as amended (“DPA” or “the Act”), and specifically sections 101 and 704 of the Act, 50 U.S.C. 4511, 4554; Executive Order (E.O.) 13909, 85 FR 16227 (Mar. 23, 2020); E.O. 13910, 85 FR 17001 (Mar. 26, 2020); E.O. 13911, 85 FR 18403 (Apr. 1, 2020); DHS Delegation Number 09052 Rev. 00.1, “Delegation of Defense Production Act Authority to the Administrator of the Federal Emergency Management Agency” (Apr. 1, 2020); and The Presidential Memorandum on Allocating Certain Scarce or Threatened Health and Medical Resources to Domestic Use (April 3, 2020).

Jurisdiction over non-controlling investments

The draft regulations identify several company types that satisfy the first part of the test. The first type is a business that produces or otherwise deals in certain “critical technologies.” A separate statute[2] authorizes the Department of Commerce to identify these critical technologies. Although the Department of Commerce did identify examples of these technologies in a 2018 rulemaking, that process is not yet complete.

The second type is a business that maintains or otherwise deals in sensitive personal data of U.S. persons. The scope of sensitive personal data is likely to be very broad in practice, but must be able to be used to identify a person by a “personal identifier.” There are limited exceptions that include anonymized data. In practice, financial firms, insurance firms, firms collecting medical information, and firms in industries that collect similar types of personal identifier information, including certain internet and media firms, are very likely to fall within this type of company.

The final type is a business that owns, operates, manufactures, or otherwise performs a function specified in the regulations in critical infrastructure, which includes infrastructure that, if incapacitated, would have a “debilitating impact” on U.S. national security. Examples of such “covered investment critical infrastructure” includes certain internet protocol networks; certain internet exchange points; certain submarine cable systems and facilities; satellite systems that provide services directly to the U.S. Department of Defense or a related component; certain specialty metals and carbon, alloy, and armor steel plates; systems related to the storage of electric energy comprising the bulk-power system; and several others

The draft regulations specify that, to satisfy the second part of this test, the foreign investor must gain access to certain enumerated rights. These enumerated rights include access to material, non-public, technical information, which includes information that provides information regarding critical infrastructure, or provides information regarding critical technology; membership or observer rights on the U.S. company’s board of directors; and any involvement, outside of voting rights provided by shareholding, in substantive decision making processes.

Mandatory filing types

The expanded jurisdiction regarding critical technology was initially rolled out in the Pilot Program prior to these draft regulations, which identified 27 specific technologies subject to the rules. These draft regulations do not alter the Pilot Program, though we do expect that the final version of the regulations will include information about the Pilot Program.

Further, any transaction resulting in a foreign government obtaining a “substantial interest” in a critical technology, critical infrastructure, or personal data company is subject to a mandatory filing. In general, if the foreign government owns at least a 49 percent voting interest in the foreign person acquiring the U.S. business, and the foreign person is acquiring at least 25 percent of the U.S. business, that would qualify as a substantial interest.

Putting the mandatory filing provisions aside, in general, the proposed FIRRMA implementing regulations codify, rather than expand, the current jurisdiction already exercised by CFIUS in practice. The rulemaking is a clear indication, however, that CFIUS intends to continue to review non-U.S. investments in critical infrastructures and technologies. Moreover, other aspects of FIRRMA – including those related to the imposition of penalties – suggest a more proactive CFIUS going forward.

[1] Currently, the proposed regulations are in a notice and comment period, and there are likely to be some changes in the final rules. However, the basic outline of the changes are unlikely to change substantially.

[2] The Export Control Reform Act of 2018, which was also part of the broader National Defense Authorization Act package that included FIRRMA, is this authority.

On July 10, 2018, the United States Trade Representative (USTR) announced it was initiating the process of imposing a 10% tariff on Chinese imports as a supplemental action under Section 301 of the Trade Act of 1974. USTR’s proposed list covers more than 6,000 products, including seafood and agriculture, chemicals, textiles, metals, electronics, and a host of consumer goods from apparel to furniture to appliances. The list is valued at $200 billion annually and follows prior action on $50 billion worth of Chinese imports.

This latest round of tariffs will take effect at a later date following a public review process, including an opportunity for the submission of written comments and an opportunity to participate in a public hearing. USTR is seeking public input on:

• Whether any listed products should be retained or removed, and whether any products not listed should be added;
• The level of the duty rate; and
• The appropriate aggregate level of trade to be covered by additional duties.

• July 27, 2018: Due date for filing requests to appear and a summary of expected testimony at the public hearing, and for filing pre-hearing submissions.
• August 17, 2018: Due date for submission of written comments.
• August 20-23, 2018: Section 301 Committee public hearing.
• August 30, 2018: Due date for submission of post-hearing rebuttal comments.

• The first set of tariffs – which took effect July 6, 2018 – covers 818 products valued at $34 billion (at a tariff rate of 25%). The list was drawn from a draft list of 1,333 products published in April and finalized by USTR after a public comment process. On July 6, USTR announced a product exclusion process for domestic interests seeking product-specific exclusions from the tariffs.
• A second set of 284 products – valued at $16 billion – will see tariffs take effect at a later date following an ongoing public review process similar to that outlined above.
• The tariffs in these first two sets targeted Chinese imports containing “industrially significant technologies, including those related to China’s ‘Made in China 2025’ industrial policy.”
• The third set includes products from across all sectors of the Chinese economy, including some subheadings that commenters suggested for inclusion in the first round.

Date	Action	Product List	Tariff Rate	Value of Imports	Key Dates
6/15/2018	USTR finalized first set of 818 tariff lines of Chinese imports; products previously subject to public comment; product-exclusion process now open	1st set available here	25%	$34 billion	Effective date: 7/6/2018 Requests for product-exclusions due: 10/9/2018
	USTR released second set of 284 tariff lines of Chinese imports; public comment underway	2nd set available here	25%	$16 billion	Written comments due: 7/23/2018 Public hearing to be held: 7/24/2018 Rebuttal comments due: 7/31/2018 Effective date: TBD
6/16/2018	China released retaliation list to be implemented in two phases – 545 tariff lines and 114 tariff lines (covering U.S. imports into China)	1st set available here 2nd set available here	25% TBD	$34 billion $16 billion	Effective date: 7/6/2018 Effective date: TBD
7/10/2018	USTR released a third set of 6,000+ tariff lines of Chinese imports; will be subject to public comment	3rd set available here	10%	$200 billion	Request to appear at public hearing due: 7/27/2018 Written comments due: 8/17/2018 Public hearing to be held: 8/20-8/23/2018 Rebuttal comments due: 8/30/2018 Effective date: TBD
7/10/2018	China reportedly considering additional non-tariff retaliation measures

The proposed list covers the following sectors (See blog post from March 21):

• New advanced information technology
• Automated machine tools and robotics
• Aerospace and aeronautical equipment
• Maritime equipment and high tech shipping
• Modern rail transport equipment
• New energy vehicles and equipment
• Power equipment
• Agricultural equipment
• New materials
• Biopharma and advanced medical products

The U.S. Trade Representative announced that the imposition of these additional tariffs is due to the policies of the Government of China related to technology transfer, intellectual property, and innovation which are “unreasonable or discriminatory and burden or restrict U.S. commerce.”

The USTR also announced that there will be a public comment period including a hearing after which the USTR will issue a final determination on the merchandise subject to the additional tariffs. The timetable is short and we expect the new tariffs to be in place in June:

• April 23, 2018 due date for filing requests to appear at the public hearing
• May 11, 2018 due date for submission of written comments
• May 15, 2018 public hearing
• May 22, 2018 due date for submission of post-hearing rebuttal comments.

Despite fears among many in the Russian elite, the public version of list is relatively uncontroversial, listing known senior members of the Russian government and oligarchs worth $1 billion or more. (The list of Russian oligarchs appears to have been taken from a Forbes list of wealthy Russians and reordered alphabetically.) The more sensitive aspects of the report, including an accounting of oligarch’s assets outside of Russia and the index of corruption were excluded from the public version of the list.

There were also concerns before the release of the report that parties would confuse the list of government officials and oligarchs as a sanctions list, leading banks and U.S. parties to suspend or terminate business with listed individuals’ legitimate businesses in and outside of Russia. The public version of the report contained a clear reminder that the so-called Kremlin Report is not a sanctions list and does not block or otherwise impede U.S. persons from conducting transactions with the listed individuals or their businesses:

This report has been prepared and provided exclusively in response to Section 241 of CAATSA. It is not a sanctions list, and the inclusion of individuals or entities in this report, its appendices, or its annex does not and in no way should be interpreted to impose sanctions on those individuals or entities. Inclusion in this report also does not constitute the determination by any agency that any of those individuals or entities meet the criteria for designation under any sanctions program. Moreover, the inclusion of individuals or entities in this report, its appendices, or its classified annexes does not, in and of itself, imply, give rise to, or create any other restrictions, prohibitions, or limitations on dealings with such persons by either U.S. or foreign persons. Neither does inclusion on the unclassified list indicate that the U.S. Government has information about the individual's involvement in malign activities.