Welcome to this month's issue of The BR International Trade Report, Blank Rome’s monthly digital newsletter highlighting international trade, cross-border investment, geopolitical risk issues, trends, and laws impacting businesses domestically and abroad. 

Recent Developments

U.S. Department of the Treasury (“Treasury”) issues proposed rule regarding U.S. outbound investment in China and China-linked companies.

Treasury issued a Notice of Proposed Rulemaking (“NPRM”) that would regulate U.S. investment in China and China-linked companies based on concerns that U.S. capital and associated “intangible benefits”—such as managerial assistance, enhanced standing, and access to talent networks—could aid China in developing technologies that threaten U.S. national security. The period for public comment on the NPRM closes on August 4, 2024. Read our analysis of the NPRM here.

European Union imposes provisional duties on Chinese electric vehicles.

The European Union recently placed provisional duties of 17.4 to 37.6 percent on electric vehicles (“EVs”) made in China, effective July 5, 2024. These duties are in addition to a 10 percent import tariff applicable to all EV imports. This action follows a nine-month investigation into whether the presence of unfair government subsidies caused injury to EU carmakers. In the coming months, the European Union will continue its investigation, including calculating final duty rates and voting whether to make these duties definitive for five years. The EU action against Chinese EVs is one among many being considered by governments around the world. Chinese officials have previously warned that such duties may result in a “trade war,” although discussions appear to be ongoing between the European Union and China to “reach[ ] a [World Trade Organization] compatible solution.”

OFAC issues new round of Russia-related sanctions.

On June 12, 2024, Treasury’s Office of Foreign Assets Control (“OFAC”) and the U.S. Department of Commerce's Bureau of Industry and Security (“BIS”), in coordinated actions, issued a significant round of sanctions and export controls against Russia. The new measures impose restrictions relating to information technology consultancy and design services, enterprise management software, over 500 industrial items and chemicals, and a range of non-U.S. financial services with a nexus to Russia. Read our analysis of the new measures here.

BIS bans Kaspersky Lab (“Kaspersky”) software and adds Kaspersky entities to Entity List, and OFAC sanctions Kaspersky leadership.

BIS’s Office of Information and Communications Technology and Services (“OICTS”) issued a Final Determination banning Kaspersky from “directly or indirectly providing anti-virus software and cybersecurity products or services in the United States or to U.S. persons.” The measure marks OICTS’s first-ever use of its regulatory authority to ban technology presenting a national security threat. In related actions, BIS added AO Kaspersky Lab (Russia), OOO Kaspersky Group (Russia), and Kaspersky Labs Limited (United Kingdom) to the Entity List “for their cooperation with Russian military and intelligence authorities in support of the Russian Government’s cyber intelligence objectives,” while OFAC sanctioned 12 individuals in Kaspersky’s leadership.

Importers of Mexican Steel and Aluminum Must Prove North American Origin or Pay Duty

President Biden recently issued two proclamations requiring importers of Mexican steel and aluminum to certify the origin of the metals and potentially pay additional duties. If the Mexican steel was not originally “melted and poured” in the United States, Canada, or Mexico, an additional duty of 25 percent must be paid. If the Mexican aluminum was “smelted and cast” using primary aluminum from Russia, China, Belarus, or Iran, an additional 10 percent duty must be paid. A joint statement from Presidents Biden and López Obrador indicates that Mexico will be taking parallel actions to “protect the North American steel and aluminum markets from unfair trade.” Companies whose supply chains include steel or aluminum possibly imported from Mexico should take steps to determine whether they may be exposed to the risk of these additional duties and whether they can mitigate that risk. 

G7 pledges $50 billion loan to Ukraine.

At last month’s G7 Summit in Italy, G7 leaders unveiled a plan to provide Ukraine with $50 billion in new financing that would be collateralized by interest earned on frozen Russian sovereign assets held in the European Union and elsewhere. Following the announcement by the G7, Russian President Vladimir Putin responded that the move “would not go unpunished.”

Russia and North Korea enter into mutual defense pact.

On June 19, 2024, Russian President Vladimir Putin and North Korean leader Kim Jong Un signed a treaty cementing a “comprehensive strategic partnership” between the two countries. The treaty provides for mutual defense assurances and closer cooperation in weapons production. On June 23, 2024, the United States, South Korea, and Japan released a joint statement condemning the pact “in the strongest possible terms.”

Treasury issues NPRM regarding foreign land deals in U.S. real estate near military bases.

The NPRM would authorize review by the Committee on Foreign Investment in the United States (“CFIUS”) of transactions involving foreign persons gaining certain rights in U.S. real estate within one mile of 40 specified U.S. military bases and 99 miles of 19 other military bases. The NPRM, which follows a review by the U.S. Department of Defense, would add to a list of U.S. military bases already specified in the CFIUS regulations.

House Select Committee on the CCP urges Department of Commerce to regulate Chinese drones.

Last month, the House Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party called on BIS to expand the scope of its March 1, 2024, Advanced Notice of Proposed Rulemaking examining risks from China-linked technology in “connected vehicles” to include risks presented by Chinese drones.

U.S. lawmakers introduce legislation to prohibit CHIPS Act recipients from purchasing semiconductor manufacturing equipment from foreign countries of concern.

Senators Mark Kelly (D-AZ) and Marsha Blackburn (R-TN) introduced the Chip Equipment Quality, Usefulness, and Integrity Protection Act of 2024 (the “Chip EQUIP Act”), which seeks to amend the 2022 CHIPS and Science Act ("CHIPS Act") to prohibit CHIPS funding recipients from procuring, installing, or using certain semiconductor manufacturing equipment from foreign countries of concern (including China, Russia, North Korea, and Iran) or subsidiaries of foreign entities of concern. The Chip EQUIP Act is supported by House Science, Space, and Technology Committee Ranking Member Zoe Lofgren (D-CA) and Chairman Frank Lucas (R-OK).

Venezuela and United States restart talks.

United States and Venezuelan officials met virtually on July 3, 2024, to “discuss[ ] a wide range of issues,” including the upcoming July 28, 2024, Venezuelan presidential election. Communications between the two countries stalled in April after OFAC terminated temporary sanctions relief and re-imposed sanctions on oil and gas transactions, following a U.S. government determination that Venezuelan President Nicolas Maduro had not honored commitments under an electoral roadmap agreement signed with the Venezuelan opposition in October 2023.

Malaysia and Thailand express interest in joining BRICS.

One month after Thailand announced its intention to join BRICS (an economic group named after its initial members of Brazil, Russia, India, China, and South Africa), Malaysian Prime Minister Anwar Ibrahim signaled Malaysia’s intent to join the economic bloc. The announcement from Prime Minister Ibrahim comes as China and Malaysia entered into a number of trade and economic deals intended to bolster links in areas such as high-level manufacturing and the digital economy.