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Department of Commerce Announced an Expansion of Sanctions Against Russian Industry Sectors Under the Export Administration Regulations.

Bureau of Industry and Security announced a final ruling in response to the Russian federation’s ongoing aggression against Ukraine. The Department of Commerce is expanding the existing sanctions against Russian industry sectors by imposing a license requirement for exports, reexports, or transfers (in country) to and within Russia for additional items subject to the Export Administration Regulations (EAR) identified under specific Schedule B numbers or Harmonized Tariff Schedule codes. The Bureau of Industry and Security (BIS) is taking these actions to further restrict Russia’s ability to withstand the economic impact of the multilateral sanctions, further limit sources of revenue that could support Russia’s military capabilities, and to better align with the European Union’s controls.

The article reads as follows:

I. Background

In response to Russia’s February 2022 invasion of Ukraine, BIS imposed extensive sanctions on Russia under the Export Administration Regulations (15 CFR parts 730 – 774) (EAR) as part of the final rule Implementation of Sanctions Against Russia Under the Export Administration Regulations (EAR) (the Russia Sanctions rule), effective on February 24, 2022, and published on March 3, 2022 (87 FR 12226). Since the publication of the Russia Sanctions rule, BIS has published a number of final rules imposing additional stringent export controls on Russia. These actions reflect the U.S. Government’s position that Russia’s invasion of Ukraine flagrantly violated international law, was contrary to U.S. national security and foreign policy interests, and undermined global order, peace, and security, all of which necessitated the imposition of stringent and expansive sanctions. The export control measures in this final rule build upon the policy objectives set forth in one of the subsequent rules, a final rule effective on March 3, 2022, and published on March 8, 2022 (87 FR 12856), Expansion of Sanctions Against the Russian Industry Sector Under the Export Administration Regulations (EAR) (Russian Industry Sector Sanctions rule). Among other things, the Russian Industry Sector Sanctions rule revised part 746 of the EAR (Embargoes and Other Special Controls) by adding a new paragraph (a)(1)(ii) which imposed an additional license requirement for exports, reexports, and transfers (in-country) to or within Russia of any items subject to the EAR if identified under certain Schedule B or Harmonized Tariff Schedule 6 (HTS) codes. The Russian Industry Sector Sanctions rule also added supplement no. 4 to part 746 – HTS Codes and Schedule B Numbers that Require a License for Export, Reexport, and Transfer (in-country) to or within Russia pursuant to § 746.5(a)(1)(ii) – which identifies HTS codes and Schedule B numbers that are subject to the license requirement set forth in paragraph (a)(1)(ii). The four columns added in supplement no. 4 to part 746 consisted of: the Harmonized Tariff Schedule (HTS)-6 Code, HTS Description, Schedule B and Schedule B Description to assist exporters, reexporters, and transferors in identifying the items subject to this license requirement. This final rule builds upon the policy objectives set forth in the Russian Sanctions rule and the Russian Industry Sector Sanctions rule by expanding upon the latter to further restrict Russia’s access to items that it needs to support its military capabilities. The expansion of these export controls under the EAR, implemented in parallel with similarly stringent measures by partner and ally countries, further limits sources of revenue that could support Russia’s military capabilities, as well as Russia’s ability to withstand the economic impact of the multilateral sanctions.

II. Revisions to the Export Administration Regulations (EAR)

1. Expansion of Russian Industry Sector Sanctions

This final rule amends part 746 of the EAR (Embargoes and Other Special Controls) to further expand the scope of the Russian industry sector sanctions by adding additional HTS codes and Schedule B numbers to supplement no. 4 to part 746 of the EAR, thereby imposing a license requirement for all exports, reexports, and transfers (in-country) to or within Russia for such items. In this final rule, BIS is adding 205 HTS codes at the 6-digit level and 478 corresponding 10-digit Schedule B numbers to better align with the European Union’s controls.

2. Clarifications to Supplement No. 4 to Part 746 Controls

This final rule revises supplement no. 4 to part 746 by re-organizing the list of items subject to a license requirement under § 746.5(a)(1)(ii) in order to make it easier for exporters to determine whether a particular item is described in this supplement. Specifically, the columns in supplement no. 4 were previously listed in the following order: Harmonized Tariff Schedule (HTS)-6 Code, HTS Description, Schedule B, Schedule B Description. This final rule reorganizes the columns to list them in the following order: Schedule B, Schedule B Description, HTS Code, and HTS Description. In addition, this final rule is individually listing the existing Schedule B numbers so each number corresponds with a single HTS Code; previously, some of these Schedule B numbers were listed with multiple HTS Codes. It also reorganizes the list of items by ordering them numerically by Schedule B number; previously they had been organized alphabetically by HTS Description.

This final rule revises the existing language in the introductory text in supplement no. 4 to part 746 to reflect the reorganization of the list. In addition, this final rule adds Schedule B number 8705200000 to the introductory text to indicate it is also listed in both supplements no. 2 and 4 and adds a sentence to indicate that Schedule B number 8412294000 is listed in both supplements no. 4 and 5 to this part.

This final rule also adds a second paragraph to the introductory text in supplement no. 4 to part 746 to clarify the relationship between the four columns included in supplement no. 4 to part 746 by further explaining the scope of the items controlled under § 746.5(a)(1)(ii). The first sentence being added clarifies that under the Foreign Trade Regulations (15 CFR 30.6(a)(12)), exporters can use either the referenced HTS Code or Schedule B number from supplement no. 4 to part 746 when filing Electronic Export Information (EEI) in the Automated Export System (AES). The Russian Industry Sector Sanctions Rule included the applicable HTS-6 Code and Schedule B number and descriptions of items listed in supplement no. 4 to part 746 to assist exporters, reexporters, and transferors who may be more familiar with one or the other of the HTS Code or Schedule B number identification systems. The second sentence being added clarifies that only the items identified in the HTS Description column are subject to the license requirement under § 746.5(a)(1)(ii), which is consistent with how the European Union (EU) applies its comparable controls. Lastly, the third sentence being added clarifies that the other three columns –HTS Code, Schedule B, and Schedule B Description – are only intended to assist exporters with their AES filing responsibilities and does not indicate that all items classified under those HTS Codes or Schedule B numbers are subject to § 746.5(a)(1)(ii)’s restrictions.

3. Conforming changes

This final rule revises the last sentence of the introductory text of supplement no. 2 to part 746 – Russian Industry Sector Sanction List – to provide guidance on certain Schedule B numbers that are identified in both supplement no. 2 and supplement no. 4 to part 746. It now clarifies that in addition to Schedule B number 8479899850, Schedule B number 8705200000 is also listed in both supplements no. 2 and 4, and that exporters, reexporters, and transferors must comply with the license requirements under both § 746.5(a)(1)(i) and (ii), as applicable, for these Schedule B numbers.

In addition, this final rule adds one sentence at the end of the introductory text of supplement no. 5 to part 746 – ‘Luxury Goods’ That Require a License For Export, Reexport, and Transfer (In-Country) to or Within Russia or Belarus Pursuant to § 746.10(a)(1) and (2) – to provide guidance on one Schedule B number that is identified in both supplements no. 4 and no. 5 to part 746. This sentence clarifies that exporters, reexporters, and transferors must comply with the license requirements under both §§ 746.5(a)(ii) and 746.10 as applicable, for Schedule B number 8412294000.

In § 746.5 (Russian industry sector sanctions), this final rule revises the license review policy in paragraph (b)(2) to specify that applications involving items that meet humanitarian needs will be reviewed under a case-by case license review policy. This case-by-case license review policy will allow for discretion in approving licenses for items that meet humanitarian needs while also providing discretion to deny licenses for items that could generate revenue to support Russia’s military capabilities.

Savings Clause

For the changes being made in this final rule, shipments of items removed from eligibility for a License Exception or export, reexport, or transfer (in-country) without a license (NLR) as a result of this regulatory action that were en route aboard a carrier to a port of export, reexport, or transfer (in-country), on [INSERT DATE OF FILING FOR PUBLIC INSPECTION], pursuant to actual orders for export, reexport, or transfer (in-country) to or within a foreign destination, may proceed to that destination under the previous eligibility for a License Exception or export, reexport, or transfer (in-country) without a license (NLR).

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References: https://public-inspection.federalregister.gov/2022-10099.pdf


CBP Issues Regionwide Withhold Order Xingang China Cotton and Tomato Products

Effective January 13, 2021, the CBP has issued a Withhold Release Order (WRO) that all U.S. ports of entry, U.S. Customs and Border Protection (CBP) will detain cotton products and tomato products produced in China’s Xinjian Uygur Autonomous Region. The WRO will detain the following products from China’s Xinjian Uygur: Apparel, textiles, tomato seeds, canned tomatoes, tomato sauce, and other goods made with cotton and tomatoes.

The CBP will begin detaining shipments that “exploit forced labor laws at any point in their supply chain, including the production or harvesting of the raw material”. The agency identified the following forced labor indicators through the course of its investigation: debt bondage, restriction of movement, isolation, intimidation and threats, withholding of wages, and abusive living and working conditions.

Notice of WRO 1/13/2021

https://www.cbp.gov/newsroom/national-media-release/cbp-issues-region-wide-withhold-release-orderproducts-made-slave

CBP Forced Labor Information

https://www.cbp.gov/trade/programs-administration/forcedlabor?_ga=2.198706028.2124264278.1610577086-1520727500.1541643165

If you have any questions, please do not hesitate to contact us at contact@expresstradecapital.com.


How Letters of Credit Can Benefit Your Business During COVID-19

By: Dina Davletshina, New Business Development

COVID-19 has disrupted nearly every part of our lives. Yes, the public health consequences are tragic. But along with this, small and large businesses alike are feeling significant economic pain. Companies in the consumer goods industry are encountering significant supply chain challenges and quickly shifting consumer spending habits. The retail and the apparel apparel industry in particular are facing their own share of supply chain challenges. The list goes on and on.

During times of such economic upheaval and uncertainty, normalcy disappears, once reliable customers start canceling orders and ask for extended payment terms. Stores suddenly close and it’s unclear whether they will ever open again. Shipping delays become more common and trading partners less flexible.

In this climate, all businesses need to reduce their risk to survive this economic storm. One way to do this is to leverage financial instruments like letters of credit (LCs), which can help achieve the highest risk-adjusted returns.

How Letters of Credit Can Benefit Your Business

Letters of credit offer businesses substantial advantages that are amplified by the uncertainty caused by COVID-19.

Supply chain risks and cancelled orders are a greater risk in this global pandemic, so letters of credit can give you more confidence that you’ll actually get paid.

Most prominently, letters of credit minimize risk for both buyers and sellers. Buyers are that their goods are shipped and documentation is in order before submitting payment. Sellers get the confidence they need to ship goods to their buyers.

Letters of credit are also helpful because they free up capital for both buyers and sellers. By using an LC, buyers do not need to leave deposits to start production. Instead, the LC is opened for the transaction’s full value, letting buyers more efficiently allocate their capital. Suppliers can then borrow against their letter of credit, which can provide them with more liquidity before the transaction closes. It is a win-win for both buyers and suppliers. 

Buyers and sellers may be transacting with new parties or others they may not fully trust, letters of credit can include provisions that must be satisfied before the transaction is completed. This can include everything from inspection of the delivered goods to specific delivery times. These provisions can ensure that your goods arrive in the precise manner that you expect – if they don’t, you have the option to reject the goods without payment or to seek a discount for the suppliers errors-

Helping Business Go Forward

It’s unclear when the COVID-19 crisis will end. In the meantime, business has become inherently riskier. There’s a greater chance that your suppliers and customers won’t pay for your goods and services. Because of this, letters of credit can help you continue business as usual while minimizing risk and preserving cash flow. For these reasons, we encourage you to leverage LCs when possible throughout this global pandemic.

At Express Trade Capital, we are happy to help you leverage all the the benefits of letters of credit. Banks require you to jump through several hoops (like collateral requirements or a prior credit relationship with the bank) to obtain a letter of credit. At Express Trade Capital, we have removed these restrictions by allowing clients to use our already existing LC facilities with out banks, thereby allowing you to quickly obtain LCs for your specific business needs without onboarding to a bank.

To learn more about how we can help you, don’t hesitate to click here.


CBP CONSIDERING DUTY PAYMENT EXTENSIONS

In response to the difficulties facing American businesses due to the COVID-19 pandemic and associated control measures, Customs and Border Protection is contemplating granting relief to importers.  In consideration of requests from the National Customs Brokers and Forwarders Association Customs Committee, chaired by GEODIS’ SVP of Trade Services and Government Relations Mary Jo Muoio, along with other industry group requests, CBP is looking at ways to provide flexibility to and extensions for a wide variety of deadlines importers face with customs obligations.

Specifically, CBP is considering granting a ninety-day extension of duty payments.  At this time CBP is working to understand authorities and mechanisms which may allow this and specifics are not available. In the meantime, CBP is reviewing extraordinary requests on a case-by-case basis.  As of today, lacking specific individual permissions, duty and related obligations remain in place.  We expect more information in the near future and will alert our clients as soon as known. If you would like to seek temporary duty-payment relief from CBP, please contact us immediately.  Initially, this relief would be for importers having duty payments due in the next week; if broader CBP issued extensions are not granted, we will pursue additional case-by-case requests.

 If you have questions about your duty payments, bond obligations or challenges meeting other CBP commitments, contact your account representative at Express Trade Capital, Inc. 

China Market Update

Overall Market Conditions:

China officials have extended the Spring Festival Holiday until after February 2. The length of the extensions may vary depending on the location. Shanghai has extended until February 10, while others until February 14 or longer. As factories re-open, labor continues to be minimal as public transportation in certain cities or provinces are still under restriction and quarantine. These can last up to an additional 14 days or longer. Trucking equipment and services as well are still impacted due to the lack of labor as well as road restrictions preventing normal pickup and delivery services.

Airlines:

Passenger Flights: Over 60 airlines have announced cancellation from flights to/from China.

Freighter Flights: Freighter flights are slowly returning as demand continues to increase. As of now, 60% of freighter flights are still not operating.

Airfreight Pricing: Due do the current supply & demand, transit is continued to be limited under a Force Majeure environment based on first come basis.

Infrastructure:

The major airports that are impacted are PVG & CGO with limited amount of staff. WUH is closed until further notice and those operating under normal conditions include, BJS, SZX, HKG, LAX, ORD, JFK, AMS, & FRA. 

All Seaports are operating under normal conditions, excluding Wuhan & Yichang a Hunan province. Ocean demand has dropped by more than half and is not expected to pick up again until after February 20.

Please contact our logistics office with any further questions contact@expresstradecapital.com.


If You Import from China – US and China have come to a decision regarding tariffs

Carli Valinoti, Express Trade Capital

Chinese President Xi Jinping with President Donald Trump in June in Japan. They are the primary actors in the longest-running, most serious trade war in history.
via Getty Images/WSJ

After months of negotiation, the US and China have announced that they have come to an agreement on trade. The US will cut the current taxes on $120 billion of Chinese goods from 15% down to 7.5% and has decided to not move forward with adding tariffs to the rest of the $160 billion Chinese goods. This will take effect on December 15, 2019. A 25% tariff rate will continue to stay in place on approximately $250 billion worth of US goods. In return, China has agreed to increase its purchases of US goods and services along with around $40-50 billion in agriculture products.

For questions on how this affects your imports from China, contact our logistics office for further assistance. Contact@expresstradecapital.com


Section 301 Tariffs Increase to 30 Percent on Chinese Goods Suspended

After meeting with Vice Premier Liu He of the People’s Republic of China, President Trump announced in a news release on October 11, 2019 that the duty increase from 25% to 30% on List 1, 2, and 3 products would be suspended. A final decision will be made later regarding the additional duties scheduled to go into effect December 15, 2019 for List 4B commodities.

Information regarding the phase one deal can be found in the White House news release here.


IF YOU IMPORT FROM THE E.U.

Following a World Trade Organization decision paving the way, the U.S. Trade Representative (“USTR”) has published a list of products form E.U. origin which will be subject to additional duty rates of 10% or 25% ad valorem, effective October 18, 2019.

We expect that a FEDERAL REGISTER notice will be published with the details including confirming the definition of the October 18 effective date; effective dates are commonly based on the date of entry. 

A link to the list of products, countries and additional tariff rates may be accessed at:  https://ustr.gov/sites/default/files/enforcement/301Investigations/EU_Large_Civil_Aircraft_Final_Product_List.pdf

As with other tariffs, close coordination with your carrier and EXPRESS representative is needed to avoid duties assessed to shipments arriving before the effective date.  EXPRESS Trade Capital, Inc. is available to answer your questions, help assess impact to your business and discuss mitigation strategies. Reach out to us at logistics@expresstradecapital.com


Changes to GSP Eligibility

Results of a GSP review have just been published as Presidential Proclamation 9813. This announcement lists changes to select products and countries. The GSP status of these identified articles is effective for goods entering on/after November 1, 2018.

If you would like more information or analysis as to how this impacts your company, please contact our logistics department at logistics@expresstradecapital.com.


AMS Plans Cotton Fee Increase

The Agricultural Marketing Service has released a statement announcing that it plans to raise the “cotton fee” applied to imported cotton goods from $0.011510 to $0.011905 per kilogram. Adjustments to the fee occur regularly to ensure that assessments collected on imported cotton match those paid on domestically produced cotton.

The announcement stipulates that the new rule will take effect October 16th, 2018, barring significant adverse feedback between now and September 17th.


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