In the June 20, 2019 pre-publication edition of the Federal Register, the U.S. Trade Representative announced the long awaited process for seeking exclusions for goods on List 3, the one which recently went from 10% to 25%.  While the exclusion process itself generally mirrors the process applied to those goods on Lists 1 and 2, there are a few differences, but let’s start at the beginning.

Any exclusion request for List 3 goods must be filed between June 30 and September 30, 2019. The request must be filed through the portal: https://exclusion/ One new wrinkle is parties must register in the portal before filing.

For the full article, please see

Putting all the hyperbole and posturing to one side, the recent agreement between Mexico and the U.S. which averted the tariffs can be found in the U.S.- Mexico Joint Statement released June 7, 2019. It consists of a few broad policy statements:

  • Mexico will deploy its National Guard throughout Mexico, giving priority to its southern border – meaning the border with Guatemala;
  • Mexico will take “decisive” action to dismantle human smuggling and trafficking organizations and their illicit financial and transportation networks;
  • The U.S. and Mexico will strengthen bilateral cooperation, including information sharing and coordinated actions to better “protect” and “secure” their common border;
  • The U.S. will immediately expand the existing Migrant Protection Protocols so that those crossing into the U.S. to seek asylum will be “rapidly” returned to Mexico where they “may” await adjudication of their asylum claims;
  • Mexico agrees to “authorize” the entrance of those individuals for humanitarian reasons, in compliance with its international obligations, while they await adjudication of their claims;
  • Mexico will offer jobs, healthcare and education to those individuals according to its principles; and
  • The U.S. commits to “work to accelerate” the adjudication of asylum claims and “conclude removal proceedings as expeditiously as possible.”

Upon announcing the agreement, President Trump stated Mexico agreed to the deal so as to “greatly reduce, or eliminate, illegal immigration come from Mexico into the United States.”  The Joint Declaration goes on to state:  “Both parties also agree that, in the event the measures adopted do not have the expected results, they will take further actions. Therefore, the United States and Mexico will continue their discussions on the terms of additional understandings to address irregular migrant flows and asylum issues, to be completed and announced within 90 days, if necessary.”  More recent general press stories talk in terms of a one page document Mr. Trump was carrying around that shows a 45 day period, but that document has not been publicly released. It could be nothing or it could be significant, we simply do not know at this point,

Against this backdrop, the threat of the tariffs being imposed remains. Companies would, therefore, be wise to consider what action they need to take to prepare for that possibility. As of late on Friday, June 7th, the last working day before the tariffs were due to take effect, clear instructions had not yet been given to Customs and Border Protection (CBP) as to how the tariffs would be applied. This leads one to question whether the computer programming needed to start collecting the tariffs could be implement so as to be fully operational by Monday morning. The point being, companies would be wise to anticipate this last minute timing could be repeated.

So, if you are an international trader who imports goods across the U.S.-Mexico border, it would be prudent for you to take a handful of steps now:

  • Ramp up your production, if possible, and get as many goods across the border into the U.S. before the 90 (or maybe 45) day window expires.
  • Coordinate with your customs broker the establishment of an ACH account through which whatever revenue due to CBP can be paid. Since these accounts take several weeks to establish, setting them up now allows goods movement to continue should the tariffs be imposed. The alternative is expect your broker to require that you wire money prior to the release of your shipments, and no one wants that cash flow or logistics headache.
  • Consider how many service providers (customs brokers, freight forwarders, truckers, etc.) you currently use, and whether it would be prudent to shorten the list to a handful of key supply chain partners who are highly proficient and know your company and goods well.
  • With your customs broker’s assistance, calculate the size of the bond you will need if the tariffs are imposed as originally announced, and figure out what documents the bonding company will require to increase your bond to that amount. Consider whether increasing your bond now in some degree as a proactive measure is advisable? Are your financial records in order and your financial statements current? If it becomes necessary to provide a personal guaranty to the surety, who will sign? Does that person have sufficient assets? If not, what is the maximum bond amount you will be able to obtain to continue your business?
  • If you ship goods without benefit of any NAFTA claims, or have no U.S. input (think here 9801 and 9802 – the circumstances where some or all of the returned goods are duty free), then whatever happens in the future, the impact on you takes the form of more duty across all your goods. The primary reason unambiguous instructions were needed in CBP’s hands well before late on the last business day prior to implementation is to settle the question of whether or not the threatened tariffs applied to goods which enjoyed the benefits of NAFTA, 9801 and/or 9802? Each has a myriad of complications, so the programming must be accurate and complete along with adequate testing performed, or goods and documents will back up at the border. If the tariff applies to NAFTA, 9801 and/or 9802 goods, that outcome also has a profound effect on importers of goods which have been fully or partially free of duty for many years. Can your line of credit handle that? Should you increase it now?
  • Finally, and equally importantly, start having conversations now with your business partners. Who is going to pay how much of the price changes that will result? While it is true that moving goods across the U.S.-Mexico border is quite distinct from importing goods from China, what steps companies have taken when impacted by the China 301 tariffs is worth considering regarding the possible Mexico tariffs.

Whether or not you agree with the use of tariffs to deal with an immigration issue, if tariffs are going to be imposed, that should at least be done in a way that allows the system to continue to function properly – but, given past history, be prepared for the chaos which is likely to ensue!

Agriculture Secretary Perdue recently stated the trade damages to be addressed in a new round of farm aid is $15 to $20 billion! The general press is replete with stories about how, as these tariffs continue, companies are making sourcing changes that will be hard to reverse. So, what is the latest news?

First, there is trade with China. It seems clear that unless there is a breakthrough at the G-20 meeting in Tokyo, or shortly thereafter, the anecdotal headaches we hear about will get far more costly. The American Chamber of Commerce in China and the American Chamber of Commerce in Shanghai conducted a survey before List 3 was announced. Even at that point, American companies operating in China acknowledged higher production costs, decreased demand for products, reduced staffing, reduced profits, increased inspections at importation, increased bureaucratic oversight and regulatory scrutiny, slower approval of licenses and permits, higher product rejections, and increasing plans to relocate (but not back to the U.S.).

On a point one can consider only marginally helpful, those with goods on List 3 now have until June 14th to file their entries. To be clear, the goods still must have left China before May 10, and the entry filed no later than June 14th for the 10% to apply. Otherwise, you pay the 25%.

On a somewhat more positive note, if you found the May 21, 2019 Federal Register notice, it published the submission by the U.S. Trade Representative (USTR) to the Office of Management and Budget of a request for expedited approval of a form to be used for List 3 exclusion requests. In that notice, USTR stated it expected the window to open for List 3 exclusion requests around June 30, 2019, which is 10 days after the Tokyo G-20 meeting. If they have not already done so, companies would be wise to start the data gathering process. Among the information to be submitted are product details, whether the product or one comparable can be purchased in the U.S. or other sources outside China, the value and quantity of the product imported in 2017, 2018 and Q1 2019 distinguished by sourcing from China, other third countries and domestically, the degree of severe economic harm caused by the tariffs, and whether or not the applicant submitted any exclusion requests regarding products on List 1 or 2. Those who have prepared exclusion requests for goods on Lists 1 and 2 will instantly recognize the data requirements.

Complicating U.S.-China relations further, on May 15, 2019, a Presidential Document was issued entitled Securing the Information and Communications Technology and Services Supply Chain. It forms the framework permitting the Administration to name companies barred from doing business with U.S. entities on national security grounds. On May 21, 2019, the Bureau of Industry and Security published a Federal Register notice adding Huawei Technologies Co., Ltd. and various affiliates (68 in total) to the Entity List on the ground there is reasonable cause to believe that Huawei “has been involved with activities contrary to the national security or foreign policy interests of the United States.” A May 22, 2019 Federal Register notice reversed that position and issued a Temporary General License effective between May 20, 2019 and August 19, 2019 for these same entities. See Supplement 7 to 15 CFR part 744.

Underscoring that tit-for-tat is very real, China announced on June 1, 2019 the creation of its own “unreliable” entities list. The initial rollout of this new policy took the form of a press briefing. That coverage made clear the criteria which China will rely upon is typically opaque: “foreign enterprises, organizations and individuals could land on this list because they do not obey market rules, violate contracts and block or cut off supply for non-commercial reasons, severely damage the legitimate interests of Chinese companies” or “pose a threat or potential threat to national security.” Almost immediately thereafter, it was announced that FedEx is under investigation in China for misdelivering some packages for Huawei (including returning them to sender or improperly routing them to the U.S.). China stated the purpose of the “unreliable entities list” was to “protect international economic and trade rules and the multilateral trading system, to oppose unilateralism and trade protectionism, and to safeguard China’s national security, social and publish interests,” according to a Ministry of Commerce spokesman.

Then there is the issue of China’s supply of rare earth minerals. China’s official press points out it is only a matter of time before China rolls out a plan to severely limit its exports of these metals which are used to make a variety of electronic products or accessories (including lithium batteries) along with items for U.S. military purposes such as to manufacture night vision goggles, precision-guided weapons and communications/GPS equipment. The latest numbers show that 52% of these metals are found in China and Russia (neither is exactly a friend to the U.S. right now), whereas 18% can be found in Brazil, but only about 1% in the U.S.

Add to this the announcement on May 30th, there will be tariffs imposed on “all goods imported from Mexico.” Even a few days later the most basic questions remain unanswered. Does this statement literally mean all goods from Mexico? What about American products returned which are duty free because unchanged? How about American products used to assemble the final product in Mexico but qualifying for duty free on the American components in the final product? [For you trade nerds – think 9801 and 9802.] What about goods which are of not of Mexican origin? Or are NAFTA qualifying?

Right now, all we have is the timeline – 5% on June 10%, 10% on July 1, 15% on August 1, 20% on September 1 and 25 % on October 1.  Every indication right now is these tariffs will be imposed. Then the question becomes are there grounds on which the tariffs would be removed. The only answer we have right now is if Mexico does “enough” to satisfy President Trump that all reasonable action was taken to stem the tide of migration, the tariffs would be removed. However, the determination as whether “enough” has been done is solely within the discretion of the President in the current proposal.

Having declared in February 2019 the migration situation at the U.S. southern border to be a matter of national security, President Trump has chosen now to invoke IEEPA to support the current action. IEEPA is the International Emergency Economic Powers Act, see 50 U.S.C. 1701 et seq. It authorizes the President to act in the national security interest of the country if dealing with “any unusual and extraordinary threat, which has its source in whole or substantial part outside the United States.”

Article 302 of NAFTA as currently enacted provides: “… no Party may increase any existing customs duty, or adopt any customs duty, on an originating good.” In other words, the imposition of this additional tariff on NAFTA-qualifying goods violates NAFTA and presents yet another reason why a precisely-worded policy is needed and a claim is possible. Can we also expect a World Trade Organization claim, assuming the bilateral discussions between the two countries do not diffuse the situation?

How does any of this help hardworking American business owners (of any size and in any industry) to keep their companies operating and profitable? This situation makes us all wonder how long it will take for the American public to wake up and realize China and Mexico are not paying these tariffs?

In our May 9, 2019 “Talking Trade” Periscope broadcast, we made the point that the wording in the China 301 tariff notice left confusion which needed to be cleared up, and now, it has been. As is common knowledge, the 10% tariff on the goods on List 3 or Traunch 3 went up to 25% at 12:01 a.m. on May 10, 2019. How this applies is, however, a bit more nuanced. The Federal Register Notice reads: “Effective with respect to goods (i) entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern daylight time on May 10, 2019, and (ii) exported to the United States on or after May 10, 2019…”

The first question on everyone’s mind was does the 25% apply to goods based strictly on import date or on the combination of import and export date, and the latter turns out to be correct. So, importers will have a small additional period of time in which to import goods and legitimately avoid the 25% rate.

CBP had already reprogrammed its computer and so goods with an arrival date of May 10, 2019 or later were going to be assessed the 25%, subject to later refund. However, CBP has updated its programming, and this morning in CSMS 19-000238  announced that if the goods were exported from China prior to May 10, 2019, only the 10% need be paid.

Stay tuned as the negotiations between China and the U.S. continue. We are also awaiting news about an exclusion process for the List 3 goods and the publication of a List 4 for comment.

Originally published by the Journal of Commerce in May 2019

Were crimes committed? Was the President saved by the inaction of his own staff?  Did he stay on the right side of the law? Was there obstruction of justice? These and other serious topics are the source for heated discussions around water coolers, at your favorite bar, and other gathering places, including on-line. However, for those of us in the international trade field, it was also a reminder that information technology related to supply chain security is critically important.

The Mueller Report was some 448 pages, the first 100 or so are relevant to this discussion. The remaining pages are the source of much conjecture and debate about what is or is not in them, how they are to be interpreted and the like.  The relevant outcome of the Mueller Report for us is two indictments related to hacking.

The first was filed in 2018 against Viktor Borisovich Netyksho and 11 other Russian military intelligence officers who are part of the Directive of the General Staff or GRU. It is 29 pages long and includes a lot of detail about the efforts they made to influence the outcome of the 2016 Presidential election.   As has been the case in the past when the U.S. wants to send the message – we know who you are and what you are doing – the indictment includes details about the ranks and roles of the individuals, along with the unit number to which they belong, screen names they used, and when and how they staged the release of stolen documents obtained by way of cyber theft or hacking.

In this case, the targets of the hacking were Clinton campaign volunteers and employees, the Democratic Congressional Campaign Committee, and the Democratic National Committee. The method used was the most common and easiest to carry out – spear phishing – when individuals clicked the links contained in emails they received, malware was installed into computer networks which gave Russian intelligence free rein to extract whatever it wanted. They stole emails and documents, and then the involved individuals sought to cover their tracks by deleting logs and other computer files.  They used false identifies and made false statements about their identities as vehicles for the leaks which followed.  There were also attempts to hack state election boards and state political parties.

The allegations made boil down to conspiracy to commit an offense against the U.S. (seeking to interfere with an election), aggravated identity theft (focused on the theft of user names and passwords) and conspiracy to lauder money (having to do with the use of bitcoins).

The second indictment was brought in 2019 and involves allegations against Internet Research Agency and 15 other entities and individuals. This is the indictment dealing with election meddling by way of false social media accounts and stories. This group created political advertisements and staged political rallies in the U.S. for various causes, often being on both sides of the issue! The people involved took on false identifies beyond just fake names, and once found out, sought to destroy evidence. They claimed to be advocates of specific viewpoints, created groups seeking to cater to specific limited special interests, and did so using fake social media accounts. Again, the indictments go into some detail to “name and shame”, and again deliver the we know who you are and what you doing message!

The allegations in this indictment summarize as conspiracy to defraud the United States (by seeking to meddle in an election), conspiracy to commit wire fraud and bank fraud (using false names and false accounts), and aggravated identity theft (including the theft of the identity of real people and the use of their Social Security numbers, and the creation/use of credit cards based on fraudulent accounts).

For those interested in reading more about these cases, there is the Mueller Report itself, which can be found at The indictments are U.S. v. Netyksho, et al, Case 1:18-cr-00215, and U.S. v. Internet Research Agency LLC, et al, Case No. 1:18-cr-00032; both were filed in the District Court in Washington, D.C.

These cases serve as a reminder that being smart with technology can minimize a lot of potential problems. The hacking that occurred of the Clinton campaign and the two Democratic Party institutions was possible in part because staff was not smart about what links to activate. It seems likely that security on the systems themselves needed improvement to meet basic needs, but even so, clicking on a link from a questionable source is relatively easy to sort out. Admittedly spoofing is a common occurrence, meaning the email is designed to look like it is coming from a legitimate source, but typically one can look carefully at the original sending address and realize it is not real. It is also true the “bad guys” are getting every more sophisticated, and so beside questioning the origin of the email, looking at the request and asking – does this seem a reasonable request from the sending individual? – is still the best tool to exposing spear phishing and other malicious attempts, and that does mean relying on the attention span of the recipient, and this is where supply chain security comes in.

The Customs-Trade Partnership was created post-9/11 and, to its credit, from the beginning Custom and Border Protection (CBP) knew to include an element of cybersecurity. It started with the most basic of standards – user names and passwords unique to their users, and need to know based access. The program was grounded in another basic element – accountability. It remains the case that compliance can most often be obtained by encouragement, so a proper C-TPAT program is expected to support the reporting of anything that seems questionable. Rewarding employees, even with something as basic as public acknowledgment, is a program stalwart. Now, however, CBP is recommending, and good cyber practices encourage, making sure there is accountability for abuse of the system, including improper access and tampering with or altering business data, and demands there be consequences, from discipline to termination.

Do you have a written cyber policy? Are user names and passwords individually assigned?  Including to IT and Admin staff? Must passwords be regularly changed? Are default passwords changed when a new machine is brought on line, or when a system or software program is installed? Does your system protect from unauthorized access? Does your system protect against manipulation? Do you use firewalls? Do you use virus detection? Is software regularly updated? Is there an adequate consequence in the face of abuse of the system? What is the log-out process? How long is the system left open before an employee must again log-in to gain access to his/her device? Does your personnel policy clearly state that anything on the company’s system (hardware and software) belongs to the company and is subject to search/review at the company’s discretion?  Does this extend to employee work spaces and telephone use? Does your system track usage, not just by employees and others with authorized access, but also external usage? Can you look at traffic volumes and identify anomalies? When fully functional and implemented, Blockchain will certainly help track document changes, but what are you able to determine now – anything?

In the meantime, we would all be well served to remind our co-workers, being smart about the technology you have and how you use it, including the social media accounts viewed, is the best way to stay protected from those who seek to do us harm, whether it is the Russians and election meddling, bad guys who want to steal our identifies and use them for their own nefarious purposes or those seeking to comprise shipments, whether by substituting cargo or stealing existing shipments.

Originally published in the Journal of Commerce in April 2019

Falling very much into the – you win some and you maybe lose some – a couple of noteworthy decisions have been published which may have long-term implications for the current Administration’s trade policies.

The first was in the decision in American Institute for International Steel, Inc. v. U.S., Slip Op. 19-137 (March 25, 2019). In that case, the President’s power to impose tariffs on steel (and aluminum) under Section 232 (19 U.S.C. 1862) was challenged on constitutional grounds. The thrust of the challenge was that too much power had been delegated to the President since he has unfettered discretion to decide whether or not to invoke national security and, having done so, then has unfettered discretion to determine the appropriate remedy. The three judge panel decided Congress delegated that authority and so, unless claimants are able to clearly show the President’s actions are beyond the granted statutory authority, the President is free to exercise his judgment in whatever way he chooses.

The second decision came out of the World Trade Organization’s Dispute Settlement Body, WT/DS512/R (April 5, 2019).  For the first time in the history of the WTO, a decision has been rendered in the context of a Member imposing trade restrictions based on national security considerations.  At the same time, India and Pakistan; and Qatar and the UAE, Saudi Arabia and Bahrain, along with the U.S. have WTO complaints pending which revolve around national security claims.

The recent decision concerned claims filed by the Ukraine that Russia had violated its WTO obligations by imposing severe limitations on the ability of Ukrainian people and cargo to freely transit the Ukraine-Russia border. The historical backdrop was the change in leadership which led to the decision by Ukraine in 2014 to join the European Union and the retaliatory steps taken by Russia in response. Russia took much the same attitude as President Trump’s team does – determinations about national security are beyond the scope of the WTO’s jurisdiction to consider.

The Russian actions under challenge were

a) the 2016 Belarus Transit Requirements, because they made distinctions based on the place of departure (Ukraine), destination (Kazakhstan and the Kyrgyz Republic) and entry (Belarus, where entry is exclusively permitted) of the traffic in transit;

b) the 2016 Transit Bans on Non-Zero Duty and Resolution No. 778 Goods, which made distinctions based on the place of departure (Ukraine), destination (Kazakhstan and the Kyrgyz Republic), origin (countries listed, as amended to include Ukraine) and entry (Belarus, where entry is exclusively permitted) of the traffic in transit; and

c) the 2014 Belarus-Russia Border Bans on Transit of Resolution No. 778 Goods, and the distinctions it made based on the place of entry (certain countries as listed from which entry is exclusively permitted) and origin (the countries listed, as amended to include Ukraine) of the traffic in transit.

In defending itself, Russia took the position there was an emergency in international relations that arose in 2014, evolved between 2014 and 2018, and continued to exist. As such, that emergency presented threats to Russia’s essential security interests and argued both the determination of a Member’s essential security interests and of whether any action is necessary for the protection of that Member’s essential security interests are at the sole discretion of that Member.

Ukraine argued these were disguised restrictions, meaning that Russia, by merely referring to an emergency in international relations that occurred in 2014, failed to discharge its burden to show the legal and factual elements of a defense, i.e., that there existed a serious disruption in international relations constituting an emergency akin to war which resulted in a genuine and sufficiently serious threat to its essential security interests, which, in turn, would justify each and every measure at issue as being necessary to protect those interests.

Third parties were given the opportunity for limited participation. The U.S. was one of those third parties and stated the Dispute Settlement Body Panel (Panel) lacked authority to make any decision regarding invocation of national security as the grounds for action by any Member. The U.S. subsequently clarified the issue is non-justiciable, meaning each Member makes its own decision which is not subject to challenge or review by the WTO.

The WTO article being interpreted/challenged was Article XXI which deals with “Security Exceptions” and states:

Nothing in this Agreement shall be construed

“(a)  to require any contracting party to furnish any information the disclosure of which it considers contrary to its essential security interests; or

(b)  to prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests
(i)   relating to fissionable materials or the materials from which they are derived;

(ii)  relating to the traffic in arms, ammunition and implements of war and to such traffic in other goods and materials as is carried on directly or indirectly for the purpose of supplying a military establishment;

(iii)   taken in time of war or other emergency in international relations; or

(c)  to prevent any contracting party from taking any action in pursuance of its obligations under the United Nations Charter for the maintenance of international peace and security.”

In interpreting this provision, the Panel found:

“An emergency in international relations would, therefore, appear to refer generally to a situation of armed conflict, or of latent armed conflict, or of heightened tension or crisis, or of general instability engulfing or surrounding a state. Such situations give rise to particular types of interests for the Member in question, i.e. defence or military interests, or maintenance of law and public order interests.

Therefore, as the existence of an emergency in international relations is an objective state of affairs, the determination of whether the action was “taken in time of” an “emergency in international relations” under subparagraph (iii) of Article XXI(b) is that of an objective fact, subject to objective determination.

…   for action to fall within the scope of Article XXI(b), it must objectively be found to meet the requirements in one of the enumerated subparagraphs of that provision. [footnotes omitted]”

The  Panel then held in Russia’s favor stating it had:

“…identified the situation that it considers to be an emergency in international relations by reference to the following factors: (a) the time-period in which it arose and continues to exist, (b) that the situation involves Ukraine, (c) that it affects the security of Russia’s border with Ukraine in various ways, (d) that it has resulted in other countries imposing sanctions against Russia, and (e) that the situation in question is publicly known. The Panel regards this as sufficient, in the particular circumstances of this dispute, to clearly identify the situation to which Russia is referring, and which it argues is an emergency in international relations.

It is therefore incumbent on the invoking Member to articulate the essential security interests said to arise from the emergency in international relations sufficiently enough to demonstrate their veracity.

What qualifies as a sufficient level of articulation will depend on the emergency in international relations at issue. In particular, the Panel considers that the less characteristic is the “emergency in international relations” invoked by the Member, i.e. the further it is removed from armed conflict, or a situation of breakdown of law and public order (whether in the invoking Member or in its immediate surroundings), the less obvious are the defence or military interests, or maintenance of law and public order interests, that can be generally expected to arise. In such cases, a Member would need to articulate its essential security interests with greater specificity than would be required when the emergency in international relations involved, for example, armed conflict.”

It seems obvious the steel and aluminum tariffs were not imposed in response to any actual or threatened armed conflict.  At the same time, it is worth keeping in mind the language in 19 U.S.C. 1862(d):

“… the Secretary [of Commerce] and the President shall further recognize the close relation of the economic welfare of the Nation to our national security, and shall take into consideration the impact of foreign competition on the economic welfare of individual domestic industries; and any substantial unemployment, decrease in revenues of government, loss of skills or investment, or other serious effects resulting from the displacement of any domestic products by excessive imports shall be considered, without excluding other factors, in determining whether such weakening of our internal economy may impair the national security.”

“So far, a lot of these cases do involve real conflicts — Ukraine and Russia; Qatar and these other countries; India and Pakistan,” Simon Lester, the associate director of Cato Institute’s Herbert A. Stiefel Center for Trade Policy Studies in Washington, said in an interview [with Bloomberg reporters Bryce Baschuk and Lyubox Pronina published March 28, 2019.]. “The U.S. metal tariffs “seem a little more far-fetched.”

It does seem likely the WTO challenges filed by other countries to the imposition by the U.S. of the 232 tariffs will not be resolved by consultations. Will the Trump Administration be able to convince a WTO Panel of the correctness of its position? Will any adverse decision be upheld on appeal?  Stay tuned for further episodes of “As the Trade World Turns!”

There are many ways employers may run afoul of the anti-discrimination provisions in U.S. immigration law.  As a very clear starting point, the general rule for a long time has been and remains an employer may not make hiring, firing, or recruitment / referral decisions based on a worker’s citizenship status. However, there are notable exceptions and the one relevant here relates to controlled goods.

For these purposes, the definition of controlled goods includes their documentation – typically referred to a technical data – and means those goods which are subject to either the International Traffic in Arms (ITAR) or Export Administration Regulations (EAR) laws and regulations. ITAR is the export license restrictions which regulate military and defense articles, whereas BIS controls other higher tech exports which are subject to export license restrictions. As part of their regulatory regimes, both agencies (and some others of more limited scope) regulate when and how non-U.S. persons may gain access to either the actual good, the technical data or both, and require some form of notice to and pre-approval by the agency.

Two recent settlements serve as a reminder why a proper plan is key not just to getting through the project successfully, but also staffing it properly.  To begin with, ITAR and EAR both require that access to the controlled goods and/or the related technical data must be denied to those who do not qualify as U.S. persons unless there is prior agency approval.  Most employers readily conclude that if someone is a U.S. citizen, they are permitted access. A similar conclusion is usually reached when it comes to green card holders, but that is not the end of the analysis and it is these other nuances that are the cause for the settlements in question.

The relevant definition of a U.S. person can be found at 8 U.S.C. 1324b and 28 CFR 44.101(k):

  • An individual who is —
    • a citizen or national of the United States,
    • an alien who is lawfully admitted for permanent residence,
    • granted the status of an alien lawfully admitted for temporary residence as seasonal agriculture worker or pre-1962 lawful resident,
    • admitted as a refugee, or
    • granted asylum; BUT
    • excludes an alien who fails to timely apply for lawful permanent residence or naturalization or is not timely granted such status.

One settlement was announced on February 1, 2019 and involved Honda Aircraft Company LLC (HAC) which manufactures and sells business jet aircraft.  According to the Dept. of Justice, HAC issued 25 job postings that limited applicants to the specific status of citizen or green card holder.  The settlement involved payment of a civil penalty of $44,626, the removal of all specific citizenship requirements from current and future job postings unless they are authorized by law, to go along with the additional training of certain staff so the law is administered correctly.

Equally notable, and certainly a reminder that even sometimes the lawyers cannot get it right, is the August 2018 settlement with Clifford Chance US LLP arising out of its staffing of a client document review project.  This situation involved 36 positions and the failure to hire both U.S. persons, but also dual U.S. citizens, to staff the project.  The settlement involved Clifford Chance “offering to pay” lost wages to three individuals who were removed from the project, paying a $132,000 civil penalty, training relevant employees, informing clients who request citizenship restrictions and being “subject to departmental monitoring and reporting requirements for two years.”

The fact there is a reference to “informing clients who request citizenship restrictions” would seem to suggest a client made a request and the law firm failed to properly counsel the client as well as staff the project. However, the settlement language is unclear and leaves one thinking that perhaps the law firm itself was having its own difficulty properly defining a U.S. person. You decide for yourself:

Within forty-five (45) days of the Effective Date and thereafter during the Term of this Agreement, Respondent shall keep a log of client requests to attorneys, paralegals, and office managers in Respondent’s D.C. location/office, whose practice includes or whose work supports Respondent’s Litigation and Dispute Resolution practice, to place restrictions on hiring or assignment based on citizenship status. The log shall reflect the following: (1) date of the client’s request, (2) identity of Respondent employee or official receiving the request, (3) number of positions restricted, (4) dates of the project or task, (5) basis for the restriction including a citation to the pertinent rule, law, or executive order or quoting the pertinent language of the government contract, (6) that Respondent, per its client notification procedure, provided the client with information about employer non-discrimination obligations under 8 U.S.C. § 1324b, and, if applicable, (7) identity of the staffing agency or e-discovery vendor to whom Respondent made the request to staff any project based on the client’s request.

There are two other contexts where an inquiry about citizenship may be proper. First, if a company is looking at two candidates of equal qualification and the position is not otherwise limited to being filled by U.S. persons, those making hiring decisions should keep in mind 28 CFR 44.200(b)(2) which states that “[n]otwithstanding any other provision of this part, it is not an unfair immigration-related employment practice for a person or entity to prefer to hire an individual, or to recruit or refer for a fee an individual, who is a citizen or national of the United States over another individual who is an alien if the two individuals are equally qualified.”  However, if the company is relying on this exception, keeping the supporting documentation in good order is, of course, key.

Second, if you are seeking an H-1 specialty (professional worker) or Trade NAFTA professional visa, there is the I-129 provision which requires disclosure of whether an export license is required. See Part 6 of the I-129 form.

More broadly, employers would be well-served to keep in mind the brochure the Dept. of Justice’s Immigration & Employee Rights Section of the Civil Rights Division published in July 2018. See Information for Employers About Citizenship Status Discrimination, which can be found at:, which discusses the basic questions:

  1. What is employment discrimination based on citizenship status?
  2. Who is protected from citizenship status discrimination in hiring, first and recruitment/referral for a fee?
  3. May I ask applicants for citizenship or immigration status information?
  4. If my company engages in activity regulated by the ITAR or EAR, does the ITAR or EAR require me to hire only U.S. citizens?
  5. What kind of language in job postings could result in citizenship status discrimination claims?

The answers to 3 and 4 in summary explain, as we have said above, that employers may ask whether a potential employee has the legal right to work in the U.S., but hiring staff to work on ITAR or EAR related issues is not limited to only U.S. citizens.

In March 2018, President Trump signed an executive order imposing Section 232 tariffs on steel products at the rate of 25% and 10% tariffs on aluminum products for reasons of national security.  At this time, Canada was exempted from the steel and aluminum tariffs.  On June 1, 2018, President Trump signed an executive order to remove the exemption for Canada. On July 1, 2018, Canada retaliated and imposed countermeasures against U.S.-origin steel, aluminum and a variety of other goods (e.e, recreational boats, bourbon, mayonnaise, bottled water, etc).  The Canadian steel countermeasures were at 25% and the other countermeasures were at 10%.

On May 17, 2019, President Trump and Canada entered into an agreement (the Joint Statement by Canada and the United States on Section 232 Duties on Steel and Aluminum) to end the steel and aluminum tariffs against Canada and end Canada’s countermeasures on U.S. steel, aluminum and other goods. The steel and aluminum trade dispute is ending (for now).

The Joint Statement states:

“After extensive discussions on trade in steel and aluminum covered by the action taken pursuant to Section 232 of the Trade Expansion Act of 1962 (19 U.S.C. §1862), the United States and Canada have reached an understanding as follows:

1. The United States and Canada agree to eliminate, no later than two days from the issuance of this statement:

a. All tariffs the United States imposed under Section 232 on imports of aluminum and steel products from Canada; and

b. All tariffs Canada imposed in retaliation for the Section 232 action taken by the United States (identified in Customs Notice 18-08 Surtaxes Imposed on Certain Products Originating in the United States, issued by the Canada Border Services Agency on June 29, 2018 and revised on July 11, 2018).

2. The United States and Canada agree to terminate all pending litigation between them in the World Trade Organization regarding the Section 232 action.

3. The United States and Canada will implement effective measures to:

a. Prevent the importation of aluminum and steel that is unfairly subsidized and/or sold at dumped prices; and

b. Prevent the transshipment of aluminum and steel made outside of Canada or the United States to the other country. Canada and the United States will consult together on these measures.

4. The United States and Canada will establish an agreed-upon process for monitoring aluminum and steel trade between them. In monitoring for surges, either country may treat products made with steel that is melted and poured in North America separately from products that are not.

5. In the event that imports of aluminum or steel products surge meaningfully beyond historic volumes of trade over a period of time, with consideration of market share, the importing country may request consultations with the exporting country. After such consultations, the importing party may impose duties of 25 percent for steel and 10 percent for aluminum in respect to the individual product(s) where the surge took place (on the basis of the individual product categories set forth in the attached chart). If the importing party takes such action, the exporting country agrees to retaliate only in the affected sector (i.e., aluminum and aluminum-containing products or steel).”

The affected steel and aluminum products are listed in the Joint Statement.

This is good news for the Canadian steel mills and Canadian steel workers.  It is also good news for suppliers to the Canadian steel sector, such as suppliers of iron ore, pellets and scrap.

What is interesting is point 5, which essentially takes off the table in the future targeted countermeasures against bourbon, bottled water, oranges and other goods.  Canada had selected goods for countermeasures based upon possible influence that affected politicians might have on the Trump Administration to remove the steel and aluminum tariffs against Canada.

It also appears that Canada and the United States will focus energy on antidumping and countervailing duty cases against steel and aluminum originating in or exported from other countries (e.g., China).  The United States and Canada agreed to implement effective measures to prevent the importation of aluminum and steel that is unfairly subsidized and/or sold at dumped prices.  This means more steel dumping and countervailing duty cases are likely.

For more information, please contact Cyndee Todgham Cherniak at 416-307-4168 or at

In response to U.S. tariffs applied to Canadian steel and aluminum, the Government of Canada introduced countermeasures on certain goods imported from the U.S.  On and after July 1, 2018 surtaxes of 25% and 10% apply respectively, to certain steel and aluminum products imported from the U.S. (United States Surtax Order (Steel and Aluminum).  Canada has also imposed a 10% surtax on a number of other products imported from the U.S., including certain coffee, prepared meals, jams, ketchup, mayonnaise, bottled beverages, whiskies, tableware, bedding and several other consumer goods (United States Surtax Order (Other Goods)).

There is no end date for these countermeasures/surtaxes.  They will remain in place until the U.S. eliminates its trade-restrictive measures against Canada (i.e. the U.S. tariffs applied to Canadian steel and aluminum).  This means that Canadian importers that bring any of the affected goods into Canada from the U.S. will face increased costs of between 10% and 25%, depending on the good.

That said, the Government of Canada has recognized that there are certain circumstances under which targeted relief will be granted.  Under certain exceptional circumstances, it will allow relief from paying the surtax or may refund the surtax already paid.  Importers who face certain challenges such as short supply of the imported U.S. good, or other severe adverse impacts arising as a result of the surtax imposed on its imports may submit a request for this targeted relief.

To-date, the Government of Canada has issued remission orders providing relief in respect of certain steel and aluminum products and in respect of certain of the other consumer goods to which the 10% surtax applies.

If your organization is facing increased costs arising as a result of the surtax, you may wish to consider whether or not your circumstances warrant the issuance of an order for such relief.

Should you have questions or require any assistance, please do not hesitate to contact Heather Innes at or 416-350-1234.