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Welcome to this month’s issue of The BR International Trade Report, Blank Rome’s monthly digital newsletter highlighting international trade, sanctions, cross-border investment, geopolitical risk issues, trends, and laws impacting businesses domestically and abroad. We invite you to share this resource with your colleagues and visit Blank Rome’s <a href="/services-and-industries/international-trade/" id="18498">International Trade</a> webpage for more information about our team.

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Commerce issues proposed rule that would ban certain connected vehicle imports.&nbsp;

On September 23, the U.S. Department of Commerce (“Commerce”) issued a <a href="https://www.federalregister.gov/public-inspection/2024-21903/securing-the-information-and-communications-technology-and-services-supply-chain-connected-vehicles">proposed rule</a> that would ban imports of connected vehicles and vehicle connectivity hardware with certain links to China or Russia, as well as require submission of certificates of conformity for non-prohibited vehicles and hardware. The prohibitions for targeted connected vehicles would not apply until model year 2027, while the prohibitions for targeted connectivity hardware would not apply until January 1, 2029, or model year 2030, depending on the circumstances. The comment period for the proposed rule is open through October 28. See our <a href="/news-and-events/bis-proposes-prohibitions-connected-vehicles-links-china-and-russia-nine-observations/" id="26173">alert</a>.

European Commission likely moving forward with China EV tariffs amid inconclusive vote.&nbsp;

On October 4, EU member states <a href="https://www.reuters.com/business/autos-transportation/eu-vote-chinese-ev-tariffs-inconclusive-leaving-eu-commission-decide-eu-sources-2024-10-04/">voted inconclusively</a> on whether to establish countervailing duties ranging from an additional 7.8 to 35.5 percent for Chinese-origin battery electric vehicles (“BEVs”), on top of the existing 10 percent tariff on all cars. Ten countries (including Italy, France, and Poland) voted in favor, while five (including Germany) voted against, and twelve abstained. Proponents of the tariffs see them as necessary to prevent Chinese domination of the European EV market, while opponents have <a href="https://www.cnbc.com/2024/10/04/european-union-votes-to-impose-tariffs-on-chinese-electric-vehicles.html">raised concerns</a> that the measure would risk a trade war with China while not improving EU competitiveness. China has already launched a challenge at the World Trade Organization (“WTO”), along with probes into EU exports of pork, dairy, and brandy. Although the <a href="https://www.reuters.com/business/autos-transportation/eu-governments-face-pivotal-vote-chinese-ev-tariffs-2024-10-04/">Commission has the intent and authority to move forward with the tariffs</a>, it is still working with Beijing to find a solution, such as setting a minimum sales price. The EU action follows recent actions by <a href="/news-and-events/br-international-trade-report-september-2024/" id="26187">Canada</a> and the <a href="/news-and-events/u-s-china-trade-developments-biden-administration-announces-new-tariffs/" id="26288">United States</a> to similarly limit the imports of Chinese electric vehicles.

Canadian surtax on Chinese steel and aluminum to begin.&nbsp;

Canada has&nbsp;<a href="https://www.canada.ca/en/department-finance/news/2024/10/final-list-of-steel-and-aluminum-products-from-china-that-will-be-subject-to-a-25-per-cent-surtax.html">finalized</a>&nbsp;its surtax on certain Chinese steel and aluminum, with a 25 percent surtax effective October 22, 2024. The tax will not apply to goods in transit on the effective date. These duties are&nbsp;<a href="https://www.canada.ca/en/department-finance/programs/consultations/2024/notice-of-intent-to-impose-surtaxes-on-chinese-steel-and-aluminum-in-response-to-unfair-chinese-trade-practices.html">designed</a>&nbsp;to protect Canadian workers and production, and prevent Canadian markets from being flooded by diverted products because other countries have imposed similar measures. China has already started a&nbsp;<a href="https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds627_e.htm">WTO dispute</a>&nbsp;over these tariffs and similar Canadian tariffs on electric vehicles.

Commerce issues rule allowing Middle East-based data centers to seek “Validated End User” status.&nbsp;

On September 30, Commerce <a href="/news-and-events/bis-proposes-prohibitions-connected-vehicles-links-china-and-russia-nine-observations/" id="26173">issued</a> a <a href="https://www.federalregister.gov/documents/2024/10/02/2024-22587/expansion-of-validated-end-user-authorization-data-center-validated-end-user-authorization">rule</a> paving the way for data centers in certain countries, mainly in the Middle East, to apply for “Validated End User” status that would authorize them to receive advanced artificial intelligence (“AI”) chips subject to U.S. export controls. The measure appears to be a nod to the complex geopolitics around intensive AI development efforts taking place in the region.

United States to postpone trilateral export control agreement with Japan and the Netherlands until after the 2024 presidential election.&nbsp;

<a href="https://subscriber.politicopro.com/article/2024/09/us-japan-netherlands-deal-to-curb-chips-to-china-faces-delay-00181758?source=email">Reports indicate</a>&nbsp;that the United States is likely to delay a&nbsp;<a href="https://www.csis.org/analysis/japan-and-netherlands-announce-plans-new-export-controls-semiconductor-equipment">long-awaited</a>&nbsp;agreement with Japan and the Netherlands to restrict certain technology exports to China. While the White House had hoped to unveil the agreement over the summer, Japanese and Dutch senior officials have raised concerns regarding potential Chinese retaliation and the impact on industry revenue.

Russia deploys new long-range attack drone incorporating Chinese engines and parts.&nbsp;

Russia reportedly has&nbsp;<a href="https://www.reuters.com/world/europe/russia-produces-new-kamikaze-drone-with-chinese-engine-say-european-intel-2024-09-13/#:~:text=KYIV%2C%20Sept%2013%20(Reuters),and%20documents%20seen%20by%20Reuters.">deployed</a>&nbsp;the drone, named the Garpiya, against both military and civilian targets in Ukraine. Sources&nbsp;<a href="https://foreignpolicy.com/2024/09/25/russia-drones-china-icbm-israel-ground-incursion-hezbollah-lebanon/">indicate</a>&nbsp;that the drone may mark the first instance of Chinese companies furnishing Russia with a whole weapons system, as compared to dual-use components, and that it could be the product of a secret weapons program. In response to these reports, the Chinese Foreign Ministry stated that it was not aware of the program and reiterated its neutral stance on the conflict in Ukraine. Meanwhile, the United States, while expressing deep concern,&nbsp;<a href="https://www.reuters.com/world/us-concerned-by-report-russia-secret-war-drones-project-china-white-house-says-2024-09-25/">stated</a>&nbsp;that it was not aware of any information to indicate that the Chinese government had knowledge of the project or was involved in it.&nbsp;

Commerce publishes guidance regarding export compliance best practices for banks.&nbsp;&nbsp;

On October 9, Commerce&nbsp;<a href="https://www.bis.gov/press-release/bis-issues-guidance-financial-institutions-best-practices-compliance-export">issued</a>&nbsp;new&nbsp;<a href="https://chrome-extension//efaidnbmnnnibpcajpcglclefindmkaj/https:/www.bis.gov/media/documents/guidance-financial-institutions-best-practices-compliance-export-administration">guidance</a>&nbsp;regarding how financial institutions can manage risk under the Export Administration Regulations (“EAR”).&nbsp; In particular, the guidance makes clear that banks can face liability under General Prohibition 10 under the EAR, which prohibits any person worldwide from engaging in a transaction with “knowledge” that a violation has occurred, is about to occur, or is intended to occur involving an item subject to the EAR.&nbsp; The guidance calls on banks to screen parties to a transaction against restricted party lists and against lists of entities that have exported sensitive items to Russia since 2023, which increasingly are becoming available.&nbsp;The guidance could mark a significant expansion of compliance expectations for banks.&nbsp; See more information&nbsp;<a href="https://www.linkedin.com/posts/anthony-rapa_bis-issues-guidance-to-financial-institutions-activity-7249893354442735617-Bv40?utm_source=share&amp;utm_medium=member_desktop">here</a>.

G7 publishes joint guidance for preventing evasion of export controls and sanctions against Russia.&nbsp;

On September 24, the Group of 7 (“G7”) countries (comprised of the United States, Canada, France, Germany, Italy, Japan, the United Kingdom, and the European Union) released a&nbsp;<a href="https://www.bis.gov/media/documents/g7-updated-guidance-industry-preventing-russian-export-control-and-sanctions">joint guidance document</a>&nbsp;“on preventing the diversion of controlled items to Russia, including through third parties.” The guidance document describes (i) items that pose a heightened risk of diversion, (ii) red flag indicators of potential evasion, (iii) industry best practices, and (iv) resources and tools to screen counterparties and facilitate due diligence efforts.

United States targets new industries under Uyghur Forced Labor Prevention Act.&nbsp;

The U.S. government has&nbsp;<a href="https://www.federalregister.gov/documents/2024/10/03/2024-22539/notice-regarding-the-uyghur-forced-labor-prevention-act-entity-list">announced</a>&nbsp;new additions to the Uyghur Forced Labor Prevention Act (“UFLPA”) Entity List, adding companies in the steel and sweetener industries. Goods produced by companies on the list are subject to a rebuttable presumption that they are made with forced labor and thus prohibited from entering the United States. The list now totals 75 companies.

President Biden hosts Quad summit.&nbsp;

On September 21, President Biden&nbsp;<a href="https://www.whitehouse.gov/briefing-room/statements-releases/2024/09/21/fact-sheet-2024-quad-leaders-summit/">welcomed</a>&nbsp;Australian Prime Minister Anthony Albanese, Japanese Prime Minister Fumio Kishida, and Indian Prime Minister Narendra Modi for the fourth leaders’ summit for the Quadrilateral Security Dialogue regarding Indo-Pacific security, known as the “<a href="https://www.cfr.org/in-brief/quad-indo-pacific-what-know">Quad</a>.” Following the summit, the Quad countries announced new initiatives to maintain a “<a href="https://www.whitehouse.gov/briefing-room/statements-releases/2024/09/21/the-wilmington-declaration-joint-statement-from-the-leaders-of-australia-india-japan-and-the-united-states/">free and open</a>&nbsp;Indo-Pacific” – including measures to (i) strengthen global health coordination and collaboration, (ii) deepen humanitarian assistance and disaster relief efforts, (iii) bolster maritime security, and (iv) reinforce regional infrastructure.

FBI stops large Chinese hacking operation.&nbsp;

Last month, U.S. Federal Bureau of Investigation (“FBI”) Director Christopher Wray&nbsp;<a href="https://www.cnn.com/2024/09/18/politics/fbi-chinese-hacking/index.html#:~:text=The%20FBI%20has%20used%20a,Director%20Christopher%20Wray%20said%20Wednesday.">revealed</a>&nbsp;the FBI had seized control of a network of over 260,000 hacked internet routers and other devices (known as a “botnet”) controlled by Chinese government-linked actors. A&nbsp;<a href="https://media.defense.gov/2024/Sep/18/2003547016/-1/-1/0/CSA-PRC-LINKED-ACTORS-BOTNET.PDF">Joint Cybersecurity Advisory</a>&nbsp;issued by members of the Five Eyes (an intelligence alliance between Australia, Canada, New Zealand, the United Kingdom, and the United States) warns of the threat posed by malicious actors and provides guidance to protect against Chinese-linked botnet activity.

Amendment to National Defense Authorization Act (“NDAA”) aims to increase transparency of U.S. investments in China.&nbsp;

On September 19, co-sponsors of the Outbound Investment Transparency Act, Senators Bob Casey (D-PA) and John Cornyn (R-TX),&nbsp;<a href="https://www.casey.senate.gov/news/releases/casey-legislation-to-crack-down-on-us-investment-in-china-included-in-annual-defense-bill">announced</a>&nbsp;that a scaled-back version of their&nbsp;<a href="https://www.congress.gov/bill/118th-congress/senate-bill/2678/text">2023 bill</a>&nbsp;would be added to the&nbsp;<a href="https://www.armed-services.senate.gov/imo/media/doc/samdt3290fy25ndaa1.pdf">NDAA</a>, making its passage by the U.S. Senate likely. The legislation would require U.S. investors to disclose to the U.S. Department of the Treasury certain outbound investments in sectors such as advanced semiconductors, artificial intelligence, and hypersonics in “covered countries” such as China. &nbsp;

Delay in implementation of European Union deforestation rules.&nbsp;

Responding to complaints from countries around the world, the European Commission has proposed&nbsp;<a href="https://ec.europa.eu/commission/presscorner/detail/en/ip_24_5009">delaying</a>&nbsp;the applicability of planned EU anti-deforestation rules by 12 months. The rules thus would not go into force for “large companies” until December 30, 2025 and “micro and small enterprises” until June 30, 2026. The EU rules will require agricultural products sold in the EU to have a supply chain that does not contribute to problems of deforestation and environmental degradation. The uncertainty about how such rules will be applied has led to objections from many of the European Union’s trading partners. The proposal must still be approved by the European Parliament and the European Council.&nbsp;

BIS Proposes Prohibitions on Connected Vehicles with Links to China and Russia: Nine Observations for Companies to Consider

The U.S. Department of Commerce’s Bureau of Industry and Security, on September 23, 2024, issued a notice of proposed rulemaking to curb national security and privacy risks associated with information and communications technology and services with a nexus to China or Russia in vehicles on public roads that communicate with external sources.

October 16, 2024: Blank Rome partner and International Trade practice group co-chair <a href="/people/anthony-rapa/" id="18891">Anthony Rapa</a> will host a webinar titled “Export Diversion Risks and Worldwide U.S. Government Enforcement,” at a time suitable for audience members in Asia and the Middle East, on October 16th at 1:00am EST / 9:00 AM GST / 1:00 PM SGT.

October 29, 2024: Blank Rome partner and International Trade practice group co-chair <a href="/people/anthony-rapa/" id="18891">Anthony Rapa</a> will be hosting a webinar titled “Navigating Federal and State Scrutiny of Foreign Ownership of U.S. Real Estate” on October 29th at 10:00 AM EST.

To learn more about other Recent Developments or Upcoming Events, click <a href="/services-and-industries/international-trade/" id="18498">here</a>. To read more about Blank Rome's International Trade practice, please visit our <a href="https://www.blankrome.com/services-and-industries/international-trade/#overview" id="https://www.blankrome.com/services-and-industries/international-trade/#overview">website</a>.

© 2024 Blank Rome LLP. All rights reserved. Please contact Blank Rome for permission to reprint. Notice: The purpose of this update is to identify select developments that may be of interest to readers. The information contained herein is abridged and summarized from various sources, the accuracy and completeness of which cannot be assured. This update should not be construed as legal advice or opinion, and is not a substitute for the advice of counsel.

The BR International Trade Report: October 2024

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The BR International Trade Report: October 2024

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