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As we stated last month, further restrictions are afoot on the use of Chinese technology in federal acquisitions. An Interim Rule issued by the Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA) (collectively, the “FAR Council”) implements the first phase of Section 889 of the FY2019 National Defense Authorization Act (NDAA). The Interim Rule, effective August 13, 2019, broadly prohibits federal agencies, federal contractors, and grant or loan recipients from procuring “covered telecommunications equipment or services” produced by Huawei Technologies Company and ZTE Corporation and, with respect to certain public safety or surveillance applications, Hytera Communications Corporation, Dahua Technology Company, and Hangzhou Hikvision Digital Technology Company. In particular, federal suppliers are prohibited from sourcing “substantial or essential component of any system, or as critical technology as part of any system” from the foregoing companies.

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Effective Date of Increase and Customs Reporting Guidance

On May 9, 2019, the Office of the U.S. Trade Representative (USTR) announced an increase in duties pursuant to Section 301(b) of the Trade Act of 1974, as amended (Section 301), from 10% to 25%, on over 5,700 Harmonized Tariff Schedule of the United States (HTSUS) products imported from China. The increase, covering $200 billion in products that were subject to 10% additional duties since September 24, 2018, was set to rise to 25% at the beginning of this year, only having to be postponed twice to allow U.S.–China trade negotiations to bear fruit. They did not.


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E-Verify, the online system used by enrolled employers to verify the identity and employment eligibility of newly hired employees against records available to the Social Security Administration (SSA) and the Department of Homeland Security (DHS), is temporarily suspended. It’s a barely noticed consequence of the government shutdown, unless, of course, you happen to be one of the more than 800,000 employers enrolled in the program and are in a position to hire new employees.

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Week three of the U.S. Government shutdown has begun, and agencies responsible for administering export controls, sanctions, and other trade-related functions have been affected by the lapse in federal appropriations.  This means that companies need to be prepared for extended licensing and processing wait times, along with increased wait times for any communications with the agencies, including advisory opinions. Accordingly, companies must operate — and continue to operate — in accordance with law and regulation. The shutdown requires increased vigilance on the part of those regulated by or working with the government (see here for advice for federal contractors). With that in mind, see below for the key international trade-related agencies impacted by the shutdown and suggestions on how industry should properly respond.

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In a highly unusual move, the federal Bureau of Industry and Security is asking U.S. industry to help identify emerging technologies that are essential to national security but currently escape the tangle of laws and regulations that govern — and in some cases restrict or prohibit — the sale or transfer of commodities, technology, and technical data to foreign businesses, research institutions, government and private organizations, and individuals who are neither U.S. citizens nor lawful permanent residents.


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On November 19, 2018, the Bureau of Industry and Security (BIS) published an Advanced Notice of Proposed Rulemaking (Notice) seeking comments from industry on how to define and identify “emerging technologies” that currently are not export controlled but which ought to be because they are “essential to the national security of the United States.” Yes, you read that correctly – BIS seeks industry input as to whether it should subject industry’s emerging technologies to export controls and, by extension, to likely review by the Committee on Foreign Investment in the United States (CFIUS) of any sales or control of such technology to foreign investors. For those who have something to say about this impending regulatory storm, comments on the Notice are due to BIS by December 19, 2018.

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In June 2018, the White House[1] outlined the threats posed by China’s investment in and acquisition of U.S. companies, noting that China is engaged in “state-sponsored IP theft through physical theft, cyber-enabled espionage and theft, evasion of U.S. export control laws, and counterfeiting and piracy.”[2] Apparently, someone recognized that those $1 million-to $5 million-dollar companies in Silicon Valley may be getting capital injections from folks who are not in it simply for the investment return. Worse still, until now, the United States has had no mechanism to review or prevent such foreign investment and resultant control.


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July 6th will mark the entry into force of Section 301 tariffs against China. Section 301 of the Trade Act of 1974 provides the president with the authority to respond to unfair, unreasonable, or discriminatory trade practices and gives the Office of the U.S. Trade Representative (USTR) the ability to take action to compel another country to eliminate the offending act, policy, or practice, with the president’s approval. Surprising no one, this president concluded that the United States is being taken advantage of in the global trade regime. What followed was a decision to impose tariffs on China and most of our other largest trading partners.

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In June, the White House released a report outlining the threats posed by China’s investment in and acquisition of U.S. companies. Spoiler alert: The report noted that China is engaged in “state-sponsored IP theft through physical theft, cyber-enabled espionage and theft, evasion of U.S. export control laws, and counterfeiting and piracy.” Apparently, someone recognized that those $1 million to $5 million-dollar companies in Silicon Valley may be getting capital injections from folks who are not in it simply for the investment return. Worse still, until now, the United States has had no mechanism to review or prevent such foreign investment and resultant control.

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Years ago I witnessed the owner of a Staten Island car dealership talking to his sales staff about their end-of-model-year sale. The dealership owner flogged and lashed about incentives, rebates and financing, but the message was singular: We’re here to deal! I was reminded of this on April 19, 2018, when our current President issued National Security Presidential Memorandum No. NSPM-10 (the Memorandum) outlining the new Conventional Arms Transfer (CAT) Policy. While it’s incongruous to equate the sale of the F-35 Joint Strike Fighter with a Nissan, the new CAT policy is clear: We’re here to deal!

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