April was another month of robust trade actions aimed at foreign goods, export compliance, and heightened enforcement powers. DHS issued an enhanced strategy policy on the textile industry with a focus on de minimis shipments. Foreign investors could see enhanced compliance procedures through a proposed rule by CFIUS. Treasury is prohibiting the importation of Russian metals. China is facing yet another Section 301 investigation, this time over its maritime, logistics, and shipbuilding sector. Last but not least, buried in the $95 billion foreign aid bill was a doubling of the statute of limitations for sanctions violations.
The month also saw a $20 million settlement with OFAC over sanctions violations, and a $3 million settlement with DOJ and FTC over false “Made in America” claims.
Compliance Updates
DHS Tackles Loophole in Textile Industry
On April 6, 2024, DHS outlined an enhanced strategy to combat illicit trade and level the playing field for the American textile industry. The actions include “expanded targeting,” laboratory testing and focused enforcement operations for Section 321 de minimis shipments. Importers will see an increase in the use of customs audits and an expanded entity list under the Uyghur Forced Labor Prevention Act. The plan also includes the conducting of joint CBP-HSI (Homeland Security Investigations) trade special operations to ensure cargo compliance. This includes physical inspections; country-of-origin, isotopic, and composition testing; and in-depth reviews of documentation. CBP will issue civil penalties for violations of U.S. laws and coordinate with HSI to develop and conduct criminal investigations when warranted. In other words, supply chain audits continue to be paramount for importers, especially of Chinese goods.
Proposed Enhancement of CFIUS Procedures
On April 11, 2024, The Department of the Treasury, as Chair of the Committee on Foreign Investment in the United States (CFIUS), issued a Notice of Proposed Rulemaking (NPRM) to enhance certain CFIUS procedures and sharpen its penalty and enforcement authorities. The new rule would increase the types of information that CFIUS can request from companies, expand the board’s subpoena power to include third party companies connected to a transaction and widen the board’s ability to increase monetary fines to firms that omit information and mislead it, among other proposed changes. Written comments must be received by May 15, 2024.
OFAC Prohibits Russian Metals
On April 12, 2024, Treasury issued a new determination prohibiting the importation into the United States of aluminum, copper, and nickel of Russian Federation origin produced on or after April 13, 2024. Treasury also issued a parallel determination prohibiting the following categories of services: warranting services for aluminum, copper, or nickel of Russian Federation origin on a global metal exchange; and services to acquire aluminum, copper, or nickel of Russian Federation origin as part of physical settlement of a derivative contract. This prohibits the exportation, re-exportation, sale, or supply, directly or indirectly to any person located in the Russian Federation of any of these services.
USTR Announces New 301 Investigation
On April 17, USTR announced the initiation of a Section 301 investigation of acts, policies, and practices of the People’s Republic of China (PRC) targeting the maritime, logistics, and shipbuilding sectors for dominance. Interested parties can submit comments by May 22, 2024, on such items as to whether the acts, policies, and practices are unreasonable and discriminatory, whether they burden or restrict U.S. commerce, and on China's efforts to dominate the supply chain and shipping services.
Expanded Statute of Limitations
On April 24, 2024, President Biden signed a foreign aid bill into law authorizing $95 billion to Ukraine and Israel. The bill also includes a significant change to US sanctions and export control laws, doubling the amount of time from 5 to 10 years that regulators and prosecutors have to investigate sanctions violations.
Enforcement Actions
The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) settled with SCG Plastics Co., Ltd. (SCG Plastics), part of a multinational enterprise headquartered in Bangkok, Thailand. SCG Plastics agreed to pay $20 million to settle its potential civil liability for 467 apparent violations of OFAC sanctions on Iran. From 2017 to 2018, SCG Plastics allegedly caused U.S. financial institutions to process $291 million in wire transfers for sales of Iranian-origin polyethylene resin manufactured by a joint venture in Iran. The large settlement amount reflects OFAC's determination that SCG Plastics’ apparent violations were egregious and, with the exception of certain transactions, were not voluntarily self-disclosed.
The DOJ, with the Federal Trade Commission (FTC), settled with Williams-Sonoma Inc. (Williams-Sonoma) for more than $3 million in civil penalties over allegations of making false and misleading claims about the origins of its products. The government alleges that the company violated an FTC administrative order prohibiting it from advertising wholly imported products and products containing significant imported content as “Made in the USA” in violation of the FTC Act and the Made in USA Rule. Williams-Sonoma purportedly claimed its products were made in the U.S. even though they were made in China.
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