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May saw the long-awaited release of the USTR’s Section 301 review. USTR confirmed that the Trump-era tariffs will remain in place, and raised those tariffs by another $18 billion on manufacturing, critical minerals, solar products, EVs, and other products. USTR also issued a month-long comment period beginning May 29. Other compliance matters of note include the release of a new OFAC sanction toolkit, expansion of the UFLPA entity list, and an anti-boycott advisory.
On the enforcement front, the DOJ issued its first declination following a company’s self-reporting of a money laundering scheme involving bribes to foreign officials. The declination decision stems from a new DOJ enforcement policy for business organizations that promotes self-reporting.
Compliance Updates
USTR Section 301 Review, Comment Period, and Exclusion Process
On May 14, the Office of the U.S. Trade Representative (USTR) announced the results of their 4-year review of the Section 301 Tariffs. On existing tariffs, USTR recommended keeping the existing Section 301 tariffs in place. USTR is also adding or increasing tariffs on certain products, including battery parts, electric vehicles, critical minerals, solar products, medical supplies, and other goods. Rates for these products will increase from between 25% to 100%, with varying effective dates from 2024-2026.
On May 22, USTR issued a Federal Register notice that provides additional information on the new or increased tariffs, and also proposes establishing a new Section 301 product exclusion process for manufacturing equipment classified in certain HTS subheadings. USTR is requesting comments on the proposed tariff increases, the temporary exclusions for certain solar manufacturing equipment, and the exclusions for machinery used in domestic manufacturing. The comment docket is open May 29 through June 28, 2024.
OFAC Modernizes its Sanctions Lists Toolkit
On May 6, the Treasury Department’s Office of Foreign Assets Control (OFAC) announced the launch of a Sanctions Service List (SLS) and data tool to help companies stay abreast of the latest changes to its sanctions lists. SLS provides users with easy access to the most up-to-date Sanctions Lists and sanctions list data ready for immediate download. Users can choose to download from either the Specially Designated Nationals (SDN) List or the Consolidated (non-SDNs) List. SLS is now the primary application OFAC will use to deliver sanctions list files and data to the public. The accompanying tool allows users to create custom datasets based upon their selection of certain sanctions lists and/or sanctions programs.
BIS Issues Antiboycott Advisory on Turkey
On May 15, the U.S. Commerce Department’s Bureau of Industry and Security (BIS) issued an antiboycott compliance advisory regarding the Turkish government’s announcement that it will suspend all imports and exports to and from Israel until the Israeli government allows for a sufficient and continuous stream of humanitarian aid into Gaza. The Export Administration Regulations prohibit taking certain actions in furtherance or support of an unsanctioned foreign boycott maintained by a country against a country friendly to the United States and require reporting of receipt of a boycott-related request to BIS. In light of this, U.S. companies operating in Turkey, in particular, are cautioned to be alert to their receipt of any requests to refrain from importing or exporting goods to or from Israel or to provide certification that the goods are not of Israeli origin or do not contain Israeli-origin components or materials.
DHS Expands UFLPA Entity List
On May 16, the U.S. Department of Homeland Security (DHS) announced 26 additional China-based textile companies to the UFLPA list. Effective May 17, 2024, goods produced by the named 26 entities will be restricted from entering the United States. DHS focused on cotton manufacturers based outside of the Xinjiang Uyghur Autonomous Region (XUAR) that source cotton from the XUAR. Since the UFLPA was signed into law in December 2021, the forced labor task force has added 65 entities to the UFLPA Entity List. These entities reach into the apparel, agriculture, polysilicon, plastics, chemicals, batteries, household appliances, electronics, and food additives sectors, among others.
Senate Report Ties Automakers to Forced Labor
On May 20, the U.S. Committee on Finance issued a report alleging that automakers shipped cars and parts made by Chinese companies on the forced labor banned list, and that those companies failed to police their supply chains for Chinese components made with forced labor. Particularly, the report alleges that BMW imported cars, Jaguar Land Rover imported parts, and VW AG manufactured cars all included components made by a supplier banned for using Uyghur forced labor.
Enforcement Actions
The DOJ declined the prosecution of MilliporeSigma after considering the factors set forth in the Department’s Principles of Federal Prosecution of Business Organizations and the National Security Division Enforcement Policy for Business Organizations (NSD Enforcement Policy). After the company found evidence that one of its employees was diverting millions of dollars’ worth of biochemical products to an unauthorized purchaser in China, it timely disclosed the matter and fully cooperated with the DOJ, leading to convictions of the responsible individuals.
This is the first time that NSD has declined the prosecution of a company under the NSD Enforcement Policy.
The NSD Enforcement Policy creates a presumption that companies that (1) voluntarily self-disclose to NSD potentially criminal violations arising out of or relating to the enforcement of export control or sanctions laws, (2) fully cooperate, and (3) timely and appropriately remediate will generally receive a non-prosecution agreement, unless aggravating factors are present.
The DOJ sentenced a former officer in the Venezuelan National Guard for participating in a money laundering scheme that involved bribes to foreign officials and defrauding foreign financial institutions.
Nepmar Jesus Escalona Enriquez, 47, of Fort Lauderdale, Florida, and formerly of Venezuela, participated in a scheme to finance purported food imports to Venezuela that was facilitated by bribery and false pretenses. Escalona and his co-conspirators submitted fraudulent applications to the Venezuelan currency regulation authority to deceive the Central Bank of Venezuela, and Venezuelan customs authorities into releasing U.S. dollars to Escalona and his co-conspirators outside of Venezuela. The scheme resulted in the transfer of nearly $1.7 million in U.S. dollars from the bank into an account controlled by the conspirators.