McGinnis Lochridge International Trade and Transactions Newsletter

Regulatory Updates and Guidance

USMCA Finalized as Trump Administration and House Dems Reach Agreement to Replace NAFTA

On December 10, the Trump administration announced substantial updates to and completion of the U.S.-Mexico-Canada Agreement (USMCA), following months of meeting with House Democrats and working towards a finalized text to present to Congress. House Democrats have lauded the new USMCA, viewing it as the modern standard for U.S. trade agreements, with plans to vote on the deal before the end of the year; however, Republicans have been critical of the changes, with Senate Majority Leader Mitch McConnell (R-KY) admitting the USMCA was “not as good as [he]’d hoped for.” Mr. McConnell stated he would not bring the new agreement to the Senate floor until 2020, following the likely impeachment trial of President Trump. We note that the USTR released the latest version of the USMCA text on Friday, December 13; however, it is possible that there will be additional changes before the agreement is implemented.

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Partial China Trade Deal Announced; December 15 Tariffs Suspended

On December 13, President Trump announced that the Section 301 tariffs scheduled to go into effect on December 15 were suspended as a result of a new “Phase One” trade deal with China. The United States Trade Representative’s office released an accompanying Fact Sheet , stating that the new agreement would resolve a variety of longstanding trade issues between the two countries and cover topics such as intellectual property, technology transfer, agriculture, financial services, expanding trade, and dispute resolution. In addition, China has agreed to “make substantial additional purchases of U.S. goods and services.”

An official text of the new trade agreement has not yet been released. In regards to current duties in place against China, the existing 25% tariffs on items in List 1 , List 2 , and List 3 will remain in place, and the 15% duty on $120 billion goods (items in Annex A of List 4 ) will be reduced to 7.5% in the near future, although it is currently unclear as to the exact date this change will take effect.

Nord Stream 2 and TurkStream Pipeline Sanctions Bill Passes House and Senate, Heads to White House

On December 17, the U.S. Senate approved legislation placing sanctions on foreign individuals and entities involved in the construction of the Nord Stream 2 pipeline and the TurkStream pipeline, projects run by Russian-based Gazprom and intended to route natural gas from Russia to Europe. These sanctions have bipartisan support in Congress, with lawmakers fearing that completion of the pipelines will elevate Europe’s reliance on resources from Russia, monetarily benefit the Russian government, and increase Russian President Vladimir Putin’s sphere of influence over Europe. The sanctions provisions, which are contained within a defense spending bill , will now move to President Trump’s desk, which he is expected to sign into law later in the week. The Trump administration will then have 60 days to identify individuals and entities providing support for vessels engaging in certain pipe-laying activities. Following the 60-day period, the Trump administration must revoke visas from identified individuals and corporate officers and principal shareholders of identified entities. In addition, the Trump administration must block all property and interests in property related to identified individuals and entities. The legislation lists a number of exceptions, and also provides authority to not impose sanctions for any individual or entity that engages in good faith efforts to wind down operations that would otherwise subject that individual or entity to sanctions.

DOJ Clarifies FCPA Corporate Enforcement Policy

On November 20, 2019, the Department of Justice (DOJ) announced a number of changes to its FCPA Corporate Enforcement Policy , seeking to clarify what information companies are required to provide when submitting voluntary self-disclosures and offering additional guidance on how companies may qualify for “declination.”

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Notable Enforcement Actions

Denied Party Screening Software Lapse: Apple Settles with OFAC over Sanctions Violations

On November 25, Apple agreed to pay OFAC approximately $470,000 to settle its potential civil liability in relation to alleged violations of dealings with parties on the SDN List. Between 2015 and 2017, Apple dealt in the property and interests in property of SIS d.o.o. (SIS), a Slovenian software company, despite the fact that SIS and its owner were both placed on the SDN List in 2015. Specifically, Apple hosted, sold, and facilitated the transfer of SIS’s software applications and made 47 payments to SIS in connection with downloads of SIS’s apps from Apple App Store users. This is the second OFAC enforcement action in almost a year that occurred because of a breakdown in denied party screening procedures.

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Almost 200 Individuals and Entities Now Sanctioned Under Global Magnitsky Program

On December 10, the U.S. Treasury Department announced sanctions against 18 individuals and three entities under the Global Magnitsky Human Rights Accountability Act, which targets alleged perpetrators of serious human rights abuses and corruption. The newly listed individuals and entities are from Slovakia, Burma, Libya, Democratic Republic of Congo, Pakistan, and South Sudan. Almost two years after President Trump issued an executive order implementing the Global Magnitsky Human Rights Accountability Act, there are now 196 individuals and entities sanctioned under it.

The individuals and entities sanctioned under the Global Magnitsky program are from a wide variety of countries, some relatively predictable (like Iraq and Russia) and others much less so (like Canada and the Netherlands). Other countries whose residents have been sanctioned under the program include: the British Virgin Islands, Cambodia, China, Cyprus, the Dominican Republic, Gibraltar, Guatemala, Hong Kong, Israel, Latvia, Mexico, Nicaragua, Saudi Arabia, Serbia, South Africa, The Gambia, and Uzbekistan. The growth of the Global Magnitsky program means the likelihood of dealing with a Specially Designated National (SDN) continues to increase, and not just for obvious countries like Iran, Cuba, and North Korea. This further highlights the importance of having effective denied party screening procedures for counterparties.