The BR International Trade Report: August 2024

Recent Developments

BIS, DDTC propose rules expanding EAR and ITAR export controls over military, intelligence, and law enforcement end-uses, and defense services.

In coordinated actions on July 29, the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) and the U.S. Department of State’s Directorate of Defense Trade Controls (“DDTC”) issued proposed rules that would broaden controls under the Export Administration Regulations (“EAR”) and the International Traffic in Arms Regulations (“ITAR”), respectively.  Specifically, the BIS proposal would expand the scope of EAR controls on exports and U.S. person support for military, intelligence, and law enforcement end-uses and end-users in certain countries, while the DDTC proposal would expand the scope of defense services regulated under the ITAR.

New tariffs on Chinese goods delayed.

The Office of the United States Trade Representative (“USTR”) announced that it delayed implementation of the additional tariffs set to impact over $18 billion USD in annual imports. These tariffs were supposed to go into force August 1 and would impact steel, aluminum, semiconductors, electric vehicles, batteries, critical minerals, solar cells, port cranes, and medical products. Due to the large number of public comments received—over 1,100—USTR now expects to issue its final determination sometime in August, with the tariffs coming into effect approximately two weeks after that.

New measures discussed to limit Chinese electric vehicles. 

On the heels of the European Union’s announcement that it will provisionally impose duties of up to 37.6 percent on Chinese electric vehicles (“EVs”) and the United States’ plan to increase its tariff from 25 to 100 percent, the Canadian government sought and collected input from the public about the potential actions Canada could take to protect its auto workers and growing EV industry from unfair Chinese trade practices, including preventing diversion due to the actions taken by the EU, United States, and others. Canada has not set a planned date to announce the results of its public consultation. Meanwhile, the U.S. Senate recently held a hearing to look into whether the U.S. response was adequate to the challenge.

U.S. Department of Commerce (“Commerce”) reportedly considering banning Chinese technology in autonomous vehicles.

Reports indicate that Commerce is moving towards issuing a proposed rule banning certain Chinese technology in autonomous and connected vehicles. The precise contours of the proposal are not clear as of this time, but reportedly it will target Chinese software in vehicles that feature “Level 3” automation (which would exclude most consumer vehicles), as well as Chinese advanced wireless communications technology in vehicles. This follows an earlier report that Commerce intends to issue the proposed rule in August.

CFIUS releases annual report to Congress.

On July 23, the Committee on Foreign Investment in the United States (“CFIUS” or the “Committee”) released its Annual Report to Congress for calendar year 2023. Notable points from the report include a 19 percent decrease in notices filed from 2022 to 2023 (from 286 to 233); significant increases in the clearance of transactions within the initial 30- or 45-day review period (58 to 66 percent) and the clearance of short-form declarations (from 58% to 76%); China reclaiming its position as the country accounting for the most filings, overtaking Singapore (which claimed the top spot in 2022); and assessment of four civil penalties for breaches of mitigation agreements.

ODNI issues bulletin warning emerging technology startups of investment from “foreign threat actors.”

The U.S. Office of the Director of National Intelligence’s (“ODNI”) National Counterintelligence and Security Center, in coordination with other U.S. agencies, released a joint bulletin informing emerging technology startups of the risks and potential indicators of investment efforts by foreign threat actors. The bulletin encourages U.S. technology startups to (i) identify and protect critical assets, (ii) scrutinize prospective investors, (iii) limit data sharing, and (iv) engage with federal agencies and industry partners.

United States weighs sanctions following Venezuelan election.

The United States is considering whether to impose additional sanctions on Venezuela in the aftermath of last month’s disputed presidential election, in which Nicolás Maduro claimed victory. U.S. Secretary of State Antony Blinken issued a statement denouncing the “rapid” claim of victory and recognizing opposition candidate Edmundo González Urrutia as the winner of the election. 

Largest prisoner exchange between Russia and the West since the end of the Cold War.

On August 1, Russia and the West exchanged 24 prisoners following complex negotiations with the United States, Germany, Poland, Slovenia, Norway, and Turkey. Among those released were former U.S. Marine Paul Whelan, The Wall Street Journal reporter Evan Gershkovich, Russian-American journalist Alsu Kurmasheva, and Russian-British journalist Vladimir Kara-Murza (a U.S. permanent resident).

EU transfers revenue from immobilized Russian assets to Ukraine.

On July 26, the EU transferred €1.5 billion (approximately $1.6 billion USD) to the European Peace Facility and the Ukraine Facility “to support Ukraine’s military capabilities as well as to support the country’s reconstruction.” The July payment comes after the May 2024 decision by the European Council to require central securities depositories holding Russian sovereign assets and reserves of more than €1 million to make bi-annual financial contributions from such assets’ net profits accumulating since February 15, 2024.

Quad foreign ministers aim to reinforce maritime security.

Leaders from the United States, Australia, India, and Japan (the “Quad”) gathered in Tokyo and announced measures to strengthen maritime security, counter cyberattacks, and respond to disinformation campaigns. Following the meeting, the Quad released a joint statement outlining their commitments and condemning violence abroad.

United States and Japan reaffirm alliance in “2+2” security talks.

On July 28, U.S. Secretary of State Anthony Blinken and Defense Secretary Lloyd Austin met with Japanese Minister of Foreign Affairs Yoko Kamikawa and Minister of Defense Minoru Kihara at the Japan-U.S. Security Consultative Committee in Tokyo. The two nations “emphasized [that] the United States and Japan will further enhance Alliance deterrence and response capabilities to meet the challenges posed by the evolving security environment” through nine action items meant to leverage their global partnership.

Italy and China sign three-year action plan.

Less than eight months after Italy withdrew from China’s Belt and Road initiative, Italian Prime Minister Giorgia Meloni vowed to “relaunch . . . bilateral cooperation” between the two nations by way of a three-year action plan. The action plan seeks to “implement past agreements and experiment with new forms of cooperation.”

U.S. government continues to treat Vietnam as a “non-market economy.”

Commerce announced that it will continue to treat Vietnam as a non-market economy for purposes of calculating antidumping duties on import from Vietnam. Commerce found that extensive government involvement in Vietnam’s economy distorts prices in Vietnam and makes them unusable in Commerce’s antidumping proceedings. The decision means that Commerce will continue to calculate duties on Vietnamese products as it has been, rather than potentially lowering the duties under the more favorable “market economy” approach.