US – Government procurement: IRS publishes rules on tax on certain foreign procurement

On August 18, 2016, the Internal Revenue Service (IRS) published in the Federal Register final regulations [TD 9782] under section 5000C of the Internal Revenue Code (IRC) relating to the 2 percent tax on payments made by the U.S. government to foreign persons pursuant to certain contracts. The regulations affect U.S. government acquiring agencies and foreign persons providing certain goods or services to the U.S. government pursuant to a contract. The Federal Register document also contains final regulations under section 6114, with respect to foreign persons claiming an exemption from the 2 percent tax under an income tax treaty.

Section 5000C of the IRC was added by Public Law 111–347 (the Act), 124 Stat. 3623. Section 5000C(a) imposes on any foreign person that receives a specified Federal procurement payment a tax equal to 2 percent of the amount such payment. Section 5000C(b) defines the term specified Federal procurement payment as any payment made pursuant to a contract with the Government of the United States (U.S. government) for goods or services if the goods are manufactured or produced or the services are provided in any country that is not a party to an international procurement agreement with the United States. Section 301(a)(3) of the Act provides that section 5000C applies to payments received pursuant to contracts entered into on and after January 2, 2011. Additionally, section 301(b)(1)(c) of the Act states that this section must be applied in a manner consistent with U.S. obligations under international agreements. Section 5000C(d)(1) provides that the amount deducted and withheld under chapter 3 shall be increased by the amount of tax imposed under section 5000C.

The “international procurement agreements” that are referred to above are the WTO Agreement on Government Procurement and the various free trade agreements that include procurement provisions. “U.S. obligations under international agreements” include income tax treaties in effect that prevent the imposition of the tax. There are certain other exemptions from the tax set forth in the regulations. However, payments to foreign persons providing certain goods or services from an eligible least developed country to the U.S. government (listed in the Federal Acquisition Regulation) are not exempt, since they are not the result of an international procurement agreement or international obligation.

The regulations are effective on August 18, 2016.

US – BIS extends validity of Temporary General License

On August 19, 2016, the Bureau of Industry and Security (BIS) published in the Federal Register a final rule [Docket No. 160106014–6728–04] that extends the Temporary General License published on March 24, 2016 (81 Fed. Reg. 15633). The March 24 final rule created a temporary general license that restored, for a specified time period, the licensing requirements and policies under the Export Administration Regulations (EAR) for exports, reexports, and transfers (in-country) as of March 7, 2016, to two entities (ZTE Corporation and ZTE Kangxun) that were added to the Entity List on March 8, 2016. At this time, the U.S. Government has decided to extend the temporary general license until November 28, 2016. In order to implement this decision, this final rule revises the temporary general license to remove the expiration date of August 30, 2016, and to substitute the date of November 28, 2016.

US – BIS/State revise EAR and ITAR to harmonize destination control statements

On August 17, 2016, the Bureau of Industry and Security (BIS) published in the Federal Register a final rule [Docket No. 150107020-6464-02] that implements changes that were proposed on May 22, 2015, in a proposed rule entitled Revisions to the Export Administration Regulations (EAR): Harmonization of the Destination Control Statements. This final rule revises the destination control statement in § 758.6 of the Export Administration Regulations (EAR) to harmonize the statement required for the export of items subject to the EAR with the destination control statement in § 123.9(b)(1) of the International Traffic in Arms Regulations (ITAR).

Prior to the effective date of the BIS final rule, the EAR required exporters to include a destination control statement (DCS), specified in § 758.6 (Destination control statement and other information furnished to consignees) of the EAR, on certain export control documents that accompanied a shipment for most exports. The purpose of the DCS was to alert parties outside the United States that receive the item that the item was subject to the EAR, the item was exported in accordance with the EAR, and that diversion contrary to U.S. law was prohibited.

The BIS final rule is also part of Commerce’s retrospective regulatory review plan under Executive Order (E.O.) 13563.

The BIS final rule is published in conjunction with the publication in the August 17, Federal Register of a Department of State (Directorate of Defense Trade Controls) final rule revising § 123.9(b)(1) and other sections of the ITAR. Both final rules are part of the President’s Export Control Reform Initiative. In addition to revising the DCS in ITAR §123.9 to harmonize the language with the EAR, the State final rule also makes conforming changes to ITAR §§124.9 and 124.14, and makes several minor edits for clarity. ITAR §§124.7, 124.12, 125.2, and 125.7, among others are also revised.

Prior to the effective date of the State final rule, the ITAR, under § 123.9(b)(1), included the same type of DCS requirement as BIS, but with slightly different text than that which was required by the EAR. The purpose of the DCS requirements was the same under both sets of export control regulations. As a general principle of the Export Control Reform (ECR) effort, wherever the ITAR and EAR have provisions that are intended to achieve the same purpose, the U.S. Government will harmonize the corresponding provisions. The State rule removes the requirement that the DCS be placed on shipping documents and requires the DCS on the commercial invoice.

The State final rule also adds clarifying language to various provisions of the ITAR pertaining to the use of exemptions to the license requirements and the export of items subject to the EAR, when the EAR items are shipped with items subject to the ITAR. These revisions include guidance on the use of license exemptions for the export of such items, as well as clarification that items subject to the EAR are not defense articles, even when exported under a license or other approval, such as an exemption, issued by the Department of State. The rule also adds a paragraph (c) to ITAR §126.9, which permits any person to make a written request for an interpretation of the requirements in the form of an advisory opinion.

Both rules are effective November 15, 2016.

US – GAO issues report on CBP’s collection of AD/CVD

The Government Accountability Office (GAO) recently released a report entitled, Antidumping and Countervailing Duties – CBP Action Needed to Reduce Duty Processing Errors and Mitigate Nonpayment Risk (GAO-16-542) that reviews  efforts by U.S. Customs and Border Protection (CBP) to improve the collection of AD/CV duties. The report (1) examined the status and composition of uncollected AD/CV duties, (2) the extent to which CBP has taken steps to improve its collection of such duties, and (3) the extent to which CBP assesses and mitigates the risk to revenue from potentially uncollectible AD/CV duties. GAO analyzed CBP AD/CV duty entry data for fiscal years 2001 through 2014, AD/CV duty billing data as of mid-May 2015, and Department of Commerce data for fiscal years 2002–2015. GAO also reviewed agency documents, interviewed agency and private sector officials, and analyzed CBP data to assess the risk of duty nonpayment.

GAO estimates that about $2.3 billion in antidumping (AD) and countervailing (CV) duties owed to the U.S. government were uncollected as of mid-May 2015, based on its analysis of AD/CV duty bills for goods entering the United States in fiscal years 2001–2014. CBP reported that it does not expect to collect most of that debt. GAO found that most AD/CV duty bills were paid and that unpaid bills were concentrated among a small number of importers, with 20 accounting for about 50 percent of the $2.3 billion uncollected. CBP data show that most of those importers stopped importing before receiving their first AD/CV duty bill.

GAO said that CBP has undertaken efforts to improve its collection of AD/CV duties or to protect against the risk of unpaid final duty bills through bonding, but these efforts have yielded limited results. CBP’s limited analysis of the risk to revenue from potentially uncollectible AD/CV duties (nonpayment risk) misses opportunities to identify and mitigate nonpayment risk.

GAO recommended that CBP (1) issue guidance to collect and analyze data on a regular basis to find and address the causes of AD/CV duty liquidation errors and track progress; (2) regularly conduct a comprehensive risk analysis that considers likelihood as well as significance of risk factors related to duty nonpayment; and (3) take steps to use its data and risk assessment strategically to mitigate AD/CV duty nonpayment consistent with U.S. law and international trade obligations. CBP concurred with all three recommendations.

US – CPSC proposes exempting toys containing certain plastics from phthalate testing

On August 17, 2016, the Consumer Product Safety Commission (CPSC) published in the Federal Register a proposed rule [Docket No. CPSC–2016–0017] that would determine that certain plastics with specified additives would not contain the specified phthalates prohibited in children’s toys and child care articles. Based on these determinations, the specified plastics with specified additives would not require third party testing for compliance with the mandatory phthalates prohibitions on children’s toys and child care articles. Comments must be submitted by October 31, 2016.

US – CBP proposes amendments for vehicle imports subject to EPA

On August 17, 2016, U.S. Customs and Border Protection (CBP) published in the Federal Register a notice of proposed rulemaking [USCBP-2016-0011] to amend the CBP regulations relating to the importation into the United States of certain vehicles and engines subject to federal antipollution emission standards under the Clean Air Act (CAA). Compliance with these emission standards must be demonstrated to CBP by either filing, or retaining and producing upon request, the appropriate U.S. Environmental Protection Agency (EPA) declaration form or by establishing that the subject imports are exempt from this requirement. CBP is proposing to amend its regulations to harmonize the documentation requirements applicable to different classes of vehicles and engines that are subject to the CAA’s emission standards. CBP also proposes to permit the required EPA emission compliance forms to be filed with CBP electronically. CBP is proposing other non-substantive amendments to update regulatory citations and delete obsolete provisions. The proposed changes set forth in this document support consistency in the administration of CBP’s vehicle and engine imports program. In addition, electronic filing of EPA declaration forms will support key modernization initiatives, expedite the entry and clearance process, enhance targeting and enforcement objectives, and connect CBP with partner government agencies and the trade community through a single window access point. Comments on the proposed rule must be received on or before September 16, 2016.

US – OMB clearance sought for International Import Certificate

On August 17, 2016, the Department of Commerce published in the Federal Register a notice advising the public that it will seek Office of Management and Budget (OMB) clearance for the Bureau of Industry and Security (BIS) to collect information to issue an International Import Certificate (Form BIS-645P). The United States and several other countries have increased the effectiveness of their respective controls over international trade in strategic commodities by means of an Import Certificate procedure. For the U.S. importer, this procedure provides that, where required by the exporting country, the importer submits an international import certificate to the U.S. Government to certify that he/she will import commodities into the United States and will not reexport such commodities, except in accordance with the export control regulations of the United States. The U.S. Government, in turn, certifies that such representations have been made.

US – USTR requests comments on Russia’s WTO commitments

On August 17, 2016, the Office of the United States Trade Representative (USTR) published in the Federal Register a notice announcing that the interagency Trade Policy Staff Committee (TPSC) will convene a public hearing and seek public comment to assist USTR in the preparation of its annual report to the Congress on Russia’s compliance with the commitments made in connection with its accession to the WTO.Read more…

Annual International Trade, Brexit and Anti-Bribery Conference

27 – 29 September 2016 – London
3 & 4 November 2016 – Amsterdam
15 & 16 November 2016 – Santa Clara, CA

For in-house legal counsel and compliance professionals

These conferences in Amsterdam, London and Santa Clara will provide a practical overview of significant developments in the Anti-Bribery and International Trade arena, and the implications for your company’s compliance programme and procedures. As usual, you will hear from our experts from across the globe. Further details for each conference are provided below.Read more…

US – USTR requests comments on China’s WTO commitments

On August 16, 2016, the Office of the United States Trade Representative (USTR) published in the Federal Register a notice announcing that the interagency Trade Policy Staff Committee (TPSC) will convene a public hearing and seek public comment to assist USTR in the preparation of its annual report to the Congress on China’s compliance with the commitments made in connection with its accession to the WTO.Read more…