List 3 Exclusion Process?

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Last October, 10 10 senators sent a letter to the United States Trade Representative (USTR) inquiring why a List 3 exclusion process had not yet been established. As you are aware, an exclusion process allows importers or interested parties of goods subject to the Section 301 duties to petition to have their goods excluded from the tariffs of 10-25%.

Earlier this week, the USTR replied indicating an exclusion process will not start on List 3 unless negotiations fail with China and the tariffs are raised on the $200 billion worth of goods from 10 to 25%. Both China and the US have agreed to a “truce” until March 2, 2019.

Will update as soon as any updates are available. If you have any trade, import, export, trade or compliance attorneys, contact experienced trade attorney David Hsu at 832-896-6288 or by email at dhsu@givensjohnston.com.

General Tips for New Importers.

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Importing anything into the US is a trap for the unweary and U.S. Customs and Border Protection (CBP or “Customs”) does not accept “I didn’t know that” as a valid excuse. CBP requires all importers and exporters to be aware of the law before they import or export and as the old saying goes, “ignorance of the law is not an excuse”.

Here are a few tips –
1. You do not need an “import license” to import into the US.
2. You may need a license, certification or permit from other Federal agencies depending on what you want to import.
3. You need an Importer of Record number, typically your IRS business registration number.
4. If you don’t have an IRS business number, you can apply for a number from CBP through Form 5106 (after the shutdown).
5. Consult the Harmonized Tariff Schedule to see how your merchandise will be classified when entering the US.
6. You can get a ruling prior to an importation of merchandise through CBP to ensure proper classifcation and rate of duty.
7. Seek out the assistance of a Customs Broker licensed by CBP. You can find a list of Customs Brokers at your port through the CBP.gov website.

The seven tips above are just the tip of the iceberg of what CBP will require an importer to know. Feel free to give us a call before you begin importing – we’re here to help. Call David Hsu at 832-896-6288 or email at dhsu@givensjohnston.com.

Tesla applies for tariff exclusion.

According to Reuters, Tesla has applied for a tariff exemption for the Chinese made computer brain found in the Model 3.

While not mentioned in the Reuters article, the computer component is currently included under List 2 of the Section 301 duties that came into effect in August of last year.

All goods under List 2 have a duty of 25%.

Tesla’s filing did not specify the Chinese manufacturer and included language mentioning China as the only source of this product that could meet the required specifications and volume.

It will be interesting to see whether this exclusion request is approved as very few of the tens of thousands have been approved. I’ll definitely updated this if and when it is approved.

The time to apply for a tariff exclusion under List 2 has passed and there are currently no instructions for a tariff exclusion request for goods covered under List 3.

Feel free to contact me if you have any questions how these 301 tariffs will impact you and your interests. My cell is 832.896.6288 or email me at dhsu@givensjohnston.com.

Midlevel US-China trade talks end – higher-level talks next?

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According to the New York Times, the midlevel US trade negotiators and their Chinese counterparts concluded trade talks today (Wednesday, January 10th).

No new concerns were mentioned in the NYT article. The US is still concerned about China’s purchase of US agricultural, energy and manufacturing products; forced technology transfer; intellectual property protection and concerns regarding China’s 2025 initiative.

The next step is to report the results of their talks to President Trump. As you are aware, the imposition of List 3 tariff increases to 25% (from the current 10%) occurs on March 1st (a 90-day extension announced during the “truce” at the G-20 summit in December 2018).

If you have any questions on how the Section 232 or Section 301 duties on Chinese imports impact your business, contact experienced trade and customs attorney David Hsu at dhsu@givensjohnston.com or by phone/cell/text: 832-896-6288.

Is US Customs and Border Protection shut down during the government shutdown?

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Short answer – not really. 54,935 of the 60,109 total CBP employees are designated as exempt and will be working (although without pay). These 54,935 CBP workers along with an approximate 33,065 Department of Homeland Security employees comprise about 88,000 workers reporting for work without pay during the shutdown (but will get back pay after the shutdown ends).

Border patrol agents, border operations at the over 400+ ports of entry will continue to function. However, if you read this blog, you may notice I often get my information from the CBP media release page, and since the shutdown, nothing has been posted by CBP.

Check back for any other CBP shut down news that may impact you and your business.

Key 2019 Trade Deadlines.

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Happy new year everyone! Hope your new year is off to a great start.

2018 was a busy year for trade policy and 2019 will likely continue that trend. Here’s some important dates for trade in this new year:

1/1/2019 – the updated US trade agreement with South Korea signed in September 2018 will enter into force.

1/7/2019 – during this week, a US delegation will travel to Beijing for trade talks with Chinese officials. This will be the first face to face meeting since President Trump met with President Xi Jinping at the G20 summit on December 1st.

1/7/2019 – while a delegation goes to Beijing, the EU Trade Commissioner will meet with USTR Robert Lighthizer on other trade negotiations with the EU.

1/10/2019 – this is the deadline for submission of comments by US businesses regarding restrictions on high-tech American exports such as microprocessors and robotics

1/21/2019 – the US and Japan will likely enter into formal talks for a trade agreement.

2/17/2019 – deadline for the U.S. Department of Commerce to publish their report on the justification of tariffs on foreign cars. Once a report is submitted, President Trump has 3 months (May 18th) to make a decision on tariffs for foreign cars.

3/1/2019 – end of the 90-day truce started on December 1st. If no trade agreement is reached, $200 billion of Chinese goods will see increased tariffs from 10% to 25%.

4/2019 – deadline for the U.S. Department of Commerce to publish a national-secuirty report on the impact of uranium imports.

1st half of 2019 – congress will vote on the U.S.-Mexico-Canada Agreement to replace NAFTA.

Check back for more updates as they become available. If you have any questions how these upcoming events will impact your business, contact experienced trade attorney David Hsu at 832-896-6288 or by email at dhsu@givensjohnston.com.

DOJ’s ‘China Initiative’ to investigate and prosecute Chinese companies for FCPA violations.

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84th US Attorney General – Jeff Sessions. Source: justice.gov

As released on the justice.gov website on November 1st, then acting Attorney General Jeff Sessions announced the “China Initiative” fact sheet on the Department of Justice (DOJ) website.

The purpose of the China Initiative is in response to several Trump administration reports that showed concern regarding China’s trade practices and “various acts, polices and practices of Chinese industrial policy uses in seeking to acquire the intellectual property and technologies of the world and to capture the emerging high-technology industries that will drive future growth”.

The release also explains in detail the National Security Division (NSD): “The National Security Division (NSD) is responsible for countering nation state threats to the country’s critical infrastructure and private sector. In addition to identifying and prosecuting those engaged in trade secret theft, hacking and economic espionage, the initiative will increase efforts to protect our critical infrastructure against external threats including foreign direct investment, supply chain threats and the foreign agents seeking to influence the American public and policymakers without proper registration.”

According to the release, the goals of the China Initiative include:

  1. — Identify priority trade secret theft cases, ensure that investigations are adequately resourced; and work to bring them to fruition in a timely manner and according to the facts and applicable law;
  2. — Develop an enforcement strategy concerning non-traditional collectors (e.g., researchers in labs, universities, and the defense industrial base) that are being coopted into transferring technology contrary to U.S. interests;
  3. — Educate colleges and universities about potential threats to academic freedom and open discourse from influence efforts on campus;
  4. — Apply the Foreign Agents Registration Act to unregistered agents seeking to advance China’s political agenda, bringing enforcement actions when appropriate;
  5. —Equip the nation’s U.S. Attorneys with intelligence and materials they can use to raise awareness of these threats within their Districts and support their outreach efforts;
  6. — Implement the Foreign Investment Risk Review Modernization Act (FIRMA) for DOJ (including by working with Treasury to develop regulations under the statute and prepare for increased workflow);
  7. — Identify opportunities to better address supply chain threats, especially ones impacting the telecommunications sector, prior to the transition to 5G networks;
  8. — Identify Foreign Corrupt Practices Act (FCPA) cases involving Chinese companies that compete with American businesses;
  9. —Increase efforts to improve Chinese responses to requests under the Mutual Legal Assistance Agreement (MLAA) with the United States; and
  10. — Evaluate whether additional legislative and administrative authorities are required to protect our national assets from foreign economic aggression.

If you have any concerns about whether your Chinese company will have issues or be subject to scrutiny under the new DOJ “China Initiative”, call experienced FCPA attorney David Hsu at 832-896-6288 or email at dhsu@givensjohnston.com.

China drafts new technology transfer law – will this be enough to alleviate US concerns?

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According to a just published South China Morning Post article – new legislation has been introduced in China that banns forced technology transfers. The draft foreign investment law was revealed on Sunday and includes a clause on protection of intellectual property.

According to the SCMP article, the newest version of the law states that “forced technology transfer through administrative measures is prohibited, and technology cooperation should be “based on voluntarily agreed terms and business practices”.

A similar law was written in 2015 but was not enacted at that time. However, given the US/China trade war and one of the main concerns on forced technology transfer – 2019 may see an enactment of the new law. Will update this article as more news peoples available.

If you have any questions regarding, trade, import, export, compliance or FCPA issues and how they may impact your business, contact experienced compliance attorney David Hsu at 832-896-6288 or by email at dhsu@givensjohnston.com.

CHS Inc. SEC filing discloses FCPA violations.

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Tell me more about the CHS FCPA violation:
In an August 31, 2018 Form 10-K filing with the United States Securities and Exchange Commission (SEC), CHS Inc. disclosed FCPA violations related to:

“a small number of reimbursements the Company made to Mexican customs agents in the 2014-2015 time period for payments the customs agents made to Mexican customs officials in connection with inspections of grain crossing the U.S.-Mexican border by railcar. We are fully cooperating with the government, including with the assistance of legal counsel, which assistance includes investigating other areas of potential interest to the government. We are unable at this time to predict when our or the government agencies’ review of these matters will be completed or what regulatory or other outcomes may result.”

The full 10-K filing can be found here (link opens in a new window).

Who is CHS?
CHS is a Fortune 100 business based in Minnesota and operates food processing and wholesale, farm supply, Cenex brand fuel, financial services, and retail businesses. CHS employs 12,000 people and are also large operators in grain, soybean and sunflower production and transport.

What is the FCPA?
In short – the Foreign Corrupt Practices Act of 1977 was enacted for the purpose of making it unlawful for certain classes of persons and entities to make payments to foreign government officials to assist in obtaining or retaining business. Payments, promises to pay or even authorization for payment is a violation and the definition of a foreign official is also very broad.

What does the FCPA have to do with importers and exporters?
Everything! The FCPA applies to all U.S. persons and many of our clients have FCPA risks without even knowing they do. FCPA violations and penalties are severe and individuals have also been found to be personally liable for violations that were committed by the company. The CHS FCPA violations highlight just some of the risks US based exporters face when doing business (exporting) overseas.

FCPA consultation and audit at no obligation or cost to you.
If you don’t have a FCPA compliance program in place or have not updated your compliance program – call experienced trade and compliance attorney David Hsu at 832-896-6288 or by email at dhsu@givensjohnston.com.

The FCPA penalties and compliance risk to you and your company is high, call David Hsu today.