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News from Reeves & Dola, LLP
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October 11, 2019
EXPORT AND COMPLIANCE NEWS
I. Executive Orders
On October 9, 2019, President Trump signed two executive orders that impact regulators' abilities to issue and enforce informal guidance to industry. Executive Order on Promoting the Rule of Law through Transparency and Fairness in Civil Administrative Enforcement and Adjudication instructs that "[g]uidance documents may not be used to impose new standards of conduct on persons outside the executive branch except as expressly authorized by law or as expressly incorporated into a contract. When an agency takes an administrative enforcement action, engages in adjudication, or otherwise makes a determination that has legal consequence for a person, it must establish a violation of law by applying statutes or regulations. The agency may not treat noncompliance with a standard of conduct announced solely in a guidance document as itself a violation of applicable statutes or regulations." This Executive Order also addresses fairness and notice in administrative enforcement actions, adjudications, and judicial determinations.
Executive Order on Promoting the Rule of Law through Improved Agency Guidance Documents requires "agencies treat guidance documents as non-binding both in law and in practice, except as incorporated into a contract, take public input into account when appropriate in formulating guidance documents, and make guidance documents readily available to the public. Agencies may impose legally binding requirements on the public only through regulations and on parties on a case-by-case basis through adjudications, and only after appropriate process, except as authorized by law or as incorporated into a contract."
II. Office of Foreign Assets Control (OFAC)
Don't forget to screen parties to a transaction! Recently, OFAC published regulations in the Federal Register (84 FR 46440) to implement Executive Order 13851 of November 27, 2018 ("Blocking Property of Certain Persons Contributing to the Situation in Nicaragua"). These regulations were effective upon publication in the Federal Register on September 4, 2019. OFAC intends to supplement this part 582 with a more comprehensive set of regulations, which may include additional interpretive and definitional guidance and additional general licenses and statements of licensing policy.
III. U.S. Trade Representative (USTR)
On August 20, 2019, the USTR published in the Federal Register (84 FR 43304) the fourth list (List 4) in the series of tariff actions taken pursuant to Section 301(b) of the Trade Act of 1974, as amended (Trade Act) (Section 301 investigations) related to acts, policies, and practices of China deemed unreasonable or discriminatory and burden or restrict U.S. commerce, and are thus actionable thereunder. On August 30, 2019, the USTR published a modification to this tariff action to increase the duty rate to be imposed (84 FR 45821). At the direction of the President, the additional Ad Valorem duty rate is now 15% as of September 1, 2019. Included in this tariff action are all HTS Codes for firearms and certain related parts and components, and sights. HTS Code 9903.88.15 will be applicable to these products, in addition to the standard HTS code that is applicable to the item. The USTR has announced it will publish a separate notice in the Federal Register describing the product exclusion process, including the procedures for submitting exclusion requests, and an opportunity for interested persons to submit oppositions to a request. The exclusion process has not been announced as of date of alert. Once exclusion process is open for List 4, presuming it follows the path of the previous list exclusion process, any exclusions granted will be made retroactive to the date of the increased duty (September 1, 2019) and will be good for one year after the publication of the exclusion determination in the Federal Register. USTR has dedicated webpage for Section 301 investigation for China, and each List that has been published: https://ustr.gov/issue-areas/enforcement/section-301-investigations/tariff-actions. It should be noted the list of impacted HTS Codes includes shotguns, muzzle-loading firearms, related parts and accessories, and ammunition. The list of impacted HTS Codes related to firearms identified in List 4 is as follows:
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9301.10.00
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Artillery weapons (for example, guns, howitzers, and mortars).
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9301.20.00
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Rocket launchers; flame-throwers; grenade launchers; torpedo tubes and similar projectors.
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9301.90.30
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Rifles, military.
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9301.90.60
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Shotguns, military.
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9301.90.90
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Military weapons, nesoi.
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9302.00.00
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Revolvers and pistols (o/than of heading 9303 or 9304).
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9303.10.00
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Muzzle-loading firearms.
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9303.20.00
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Shotguns (incl. comb. shotgun-rifles), for sport, hunting or target-shooting.
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9303.30.40
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Rifles (o/than muzzle-loading), for sport, hunting or target-shootings, valued o/$25 but n/or $50 each.
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9303.30.80
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Rifles (o/than muzzle-loading), for sport, hunting or target-shooting rifles, valued at $25 and under or o/$50 each.
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9303.90.40
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Revolvers and pistols, designed to fire only blank cartridges or blank ammunition.
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9303.90.80
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Firearms and similar devices that operate by the firing of an explosive charge, nesoi.
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9304.00.20
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Rifles that eject missiles by release of compressed air or gas, or by the release of a spring mechanism or rubber held under tension.
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9304.00.40
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Pistols & other guns (o/than rifles) that eject missiles by release of comp. air or gas, a spring mechanism or rubber held under tension.
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9304.00.60
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Arms (o/than those of heading 9307) nesoi.
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9305.10.20
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Parts and accessories nesoi, for revolvers or pistols of heading 9302.
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9305.10.40
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Parts and accessories nesoi, for revolvers or pistols designed to fire only blank cartridges or blank ammunition.
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9305.10.60
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Parts and accessories nesoi, for muzzle-loading revolvers and pistols.
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9305.10.80
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Parts and accessories nesoi, for revolvers or pistols nesoi.
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9305.20.05
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Stocks, for rifles of heading 9303.
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9305.20.80
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Other parts and accessories of shotguns or rifles of heading 9303.
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9305.91.10
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Parts and accessories for military rifles of heading 9301.
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9305.91.20
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Parts and accessories for military shotguns of heading 9301.
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9305.91.30
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Parts and accessories for military weapons (other than rifles and shotguns) of heading 9301.
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9305.99.40
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Parts and accessories for articles of heading 9303 other than shotguns or rifles.
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9305.99.50
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Parts and accessories for articles of subheading 9304.00.20 or 9304.00.40.
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9305.99.60
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Parts and accessories for articles of headings 9301 to 9304, nesoi.
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9306.21.00
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Cartridges, for shotguns.
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9306.29.00
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Parts of cartridges for shotguns; air gun pellets.
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9306.30.41
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Cartridges nesoi and empty cartridge shells.
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9306.30.80
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Parts of cartridges nesoi.
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9306.90.00
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Bombs, grenades, torpedoes, mines, missiles and similar munitions of war and pts thereof; other ammunition projectiles & pts. thereof.
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9307.00.00
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Swords, cutlasses, bayonets, lances and similar arms, parts thereof and scabbards and sheaths therefor.
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On August 23, 2019, President Trump instructed the USTR to increase by 5% the tariffs already imposed by previous Section 301 investigations on approximately $550 billion worth of Chinese imports.
On August 30, 2019, the USTR published a request for comment in the Federal Register on the proposal to increase the rate of additional duty from 10 percent to 15 percent on the products of China currently subject to the 10 percent tariff actions. For products covered by Annex A of List 4 (which includes the above listed firearm HTS Codes), the rate of additional duty will be 15 percent on the current effective date of September 1, 2019. For products covered by Annex C of the List 4 notice, the rate of additional duty will be 15 percent on the current effective date of December 15, 2019.
On September 3, 2019, the USTR published an additional request for comment in the Federal Register on the proposal to modify the action being taken in this investigation by increasing the rate of additional duty from 25 percent to 30 percent on the products of China currently subject to the 25 percent tariff actions. The original effective date was October 1, 2019, but President Trump delayed the implementation until October 15, 2019. However, as this alert was written, the Trump Administration announced it will hold off on raising tariffs against Chinese goods, delaying the implementation of the proposed increase. Stay tuned.
The above alert is for informational purposes only and is not intended to be construed or used as legal advice. Receipt of this alert does not establish an attorney-client relationship.
Questions about this alert may be directed to:
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About Reeves & Dola
Reeves & Dola is a Washington, DC law firm that specializes in helping clients navigate the highly regulated and complex world of manufacturing, sales and international trade of defense and commercial products. We have a deep understanding of the Federal regulatory process, and use our expertise in working with a variety of Federal agencies to assist our clients with their transactional and regulatory needs.
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