Trade Law

On June 8, 2017, Customs and Border Protection (CBP) published a final rule that removes the consumptive-demand exception from its regulations that implement the prohibition on the importation of merchandise that has been produced by convict, forced or indentured labor in Section 307 of the Tariff Act of 1930, as amended (19 U.S.C. 1307)(“Section 307”). Prior to the passage of the Trade Facilitation and Enforcement Act of 2015 (TFEA) in February 2016, Section 307 contained an exception that allowed for the importation of merchandise produced with forced labor if the goods were not produced in sufficient quantities in the United States to meet the consumptive demand of the United States. CBP’s final rule updates CBP’s regulations to reflect the TFEA’s amendment of Section 307 to eliminate the consumptive-demand exception.

On February 2, 2017, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued Cyber-related General License (GL) 1, a general license that authorizes certain transactions with Russia’s Federal Security Service (Federalnaya Sluzhba Bezopasnosti or FSB).  GL 1 authorizes U.S. persons (i.e., individuals and companies) to request, receive, use, pay for or deal in licenses, permits, certifications, or notifications issued or registered by the FSB for information technology (IT) products in Russia, provided that (i) the relevant IT goods or technology are subject to the U.S. Export Administration Regulations (EAR) and are licensed or otherwise authorized by the U.S. Department of Commerce’s Bureau of Industry and Security (BIS); and (ii) payment of fees to the FSB for such licenses and other authorization or notification does not exceed $5,000 in any calendar year. GL 1 also authorizes transactions or activities that are necessary and ordinary incident to complying with law enforcement or administrative actions or investigations involving the FSB or rules and regulations administered by the FSB.

Overview of Actions Taken by the United States

On December 29, 2016, President Obama announced that he was sanctioning nine individuals and entities: the Main Intelligence Directorate (aka Glavnoe Razvedyvatel’noe Upravlenie) (GRU) and the Federal Security Service (aka Federalnaya Sluzhba Bezopasnosti) (FSB), two Russian intelligence services; four individual officers of the GRU; and three companies that were stated to have provided material support to the GRU’s cyber operations. In addition, two Russian individuals were sanctioned for using cyber-enabled means to cause misappropriation of funds and personal identifying information. These actions mark the first expansion of the Specially Designated Nationals (SDN) List to include entities and individuals under the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC) cybersecurity program since it was established on April 1, 2015. The 2015 client alert can be found here.

President Obama issued an Executive Order on Friday, October 7, 2016, that effectively lifts all executive branch sanctions against Burma by terminating the long-standing national emergency relating to Burma and revoking the Executive Orders that authorized past sanctions. The President also provided notification to Congress as required to waive certain legislative sanctions against Burma. These actions fulfill the commitment President Obama made on September 14, 2016, following meetings with Burmese State Counsellor Aung San Suu Kyi, and they complete the President’s efforts over the past four years to bring reform to Burma.

The Forced Labor Statute and the Amendment

In February, the U.S. Congress passed, and President Obama enacted, the Trade Facilitation and Enforcement Act of 2015 (TFEA). Among its provisions is an amendment to the customs laws—The Tariff Act of 1930, Section 307 (the “Forced Labor Statute” or “Section 307”). This statute provides that “[a]ll goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part in any foreign country” by convict, forced or indentured labor “shall not be entitled to entry . . . and the importation thereof is hereby prohibited.” Prior to the amendment, this prohibition on entry and importation only applied if the merchandise was also available in the United States and in sufficient quantities to meet U.S. consumptive demand. CBP sometimes relied upon the theory that the goods were not available in the United States and not in sufficient quantities to meet U.S. consumptive demand. Now, CBP is precluded from relying on this exception as a basis not to enforce the statute.