Despite the flurry or even blizzard of Biden Administration actions, executive orders, and policy shifts associated with the new government, it was a relatively quiet week on the international trade front. As more personnel are named and take office, things should pick up in the coming weeks. By the end of this week we will likely have Secretaries of State, Commerce, and the Treasury in place, and nominations for the next levels down will start coming fast and furious. Most notably, I would also expect in short order some kind of broad policy statement on how the Biden team will approach the China relationship.
Global Magnitsky/Congo Sanctions: Dan Gertler Receives OFAC License Authorizing Most Commercial Activities
Those who have dealt with either OFAC sanctions in Africa or the international mining industry are likely familiar with Israeli billionaire Dan Gertler, long alleged to be a bit too close to various governments in Africa and related corrupt activities. The New York Times reports that Gertler has received an OFAC license that effectively authorizes most of his activities going forward for at least a year. His designation as an SDN, along with the designation of many entities related to him, remains in place but the license is extremely broad. Thirty-two separate related entities are listed on the license as falling within its scope, along with all the further entities that are sanctioned because they’re 50% or more owned by those entities. Eight financial institutions are also authorized to unblock Gertler assets, and that sound you hear is probably the flood of assets leaving US jurisdiction in case the license goes away.
Gertler hired some heavy hitters to make this happen and one assumes he’s also pursuing a delisting petition. Arnold & Porter lawyers in DC represented him, along with former FBI Director Louis Freeh and somewhat notorious Trump lawyer Alan Dershowitz. Interestingly, Freeh and Dershowitz are listed on lobbying disclosures related to this work, suggesting their efforts were outside the usual lawyer-managed delisting process and crossed a line into straight lobbying. Furthermore, the license references its reliance on a December 2020 submission to OFAC, truly record time for an OFAC review of anything – let alone the issuance of a remarkably broad license for a notorious character like Gertler.
The NYT article reports that the Biden team is aware of the license but did not exactly give it a ringing endorsement, declining to comment when asked if Treasury would reconsider the decision. It would be prudent to await further developments on this front before jumping back into business with Gertler.
China Trade: Purchases of US Goods Lags Behind January 2020 Agreed Commitments
We are about halfway through a two year commitment China made to purchase $200 billion more in US goods than it did in 2017, and new data suggests China is well behind pace to meet its commitment. China’s purchases are at about 58% of expected purchase value, according to the Peterson Institute of International Economics. Naturally, at least some of the shortfall is due to the pandemic. For example, the collapse in oil prices during 2020 meant that China purchased about $10 billion of US energy products, against an implied target of $25 billion.
Observers greeted the original deal itself with restrained enthusiasm, because the commitments were fairly slim and the US didn’t take any actions on its side to deescalate the broader US-China trade dispute. This ‘phase one’ deal never did lead to a phase two. During the campaign, Joe Biden was also skeptical, saying that “China is the big winner of Trump’s ‘phase-one’ trade deal with Beijing.” Add this data to the reams of US-China trade data the Biden team will be reviewing as it formulates its China policy.
Russia Sanctions: New Restrictions on NordStream 2 Project
A last-minute addition to the Russia sanctions framework came from the State Department on Tuesday with new sanctions affecting the NordStream2 project. An entity named KVT-RUS and an associated vessel named FORTUNA (pictured below) became blocked “for knowingly selling, leasing, or providing to the Russian Federation goods, services, technology, information, or support for the construction of Russian energy export pipelines.” The announcement has disappeared from the State Department website but the entities still remain sanctioned in OFAC’s search function.
A Politico Europe report described disappointment in Germany and the EU more broadly, alongside a willingness to work with the Biden Administration going forward.
Sudan Sanctions: Rescission of Sudan’s Status as a State Sponsor of Terrorism
Following up on the Secretary of State’s rescission of Sudan’s status as a state sponsor of terrorism in December, the Commerce Department amended the EAR to remove AT-level controls on exports to Sudan and take other actions. Sudan is now eligible for the “usual” 25% de minimis threshold for controlled US-origin content, rather than being subject to the harsher 10% level for terrorism-supporting countries.
Sudan also now lives in Country Group B instead of the much more troublesome Country Group E:1, making it eligible for various license exceptions. Proceed with caution, however, because Sudan remains ineligible for License Exception Shipments to Country Group B (GBS) and License Exception Technology and Software Under Restriction (TSR). Sudan is also still subject to an arms embargo (Country Group D:5), so watch out for military-related exports under the EAR.
Along with a long list of EAR amendments, for those interested in a little export control history the Federal Register notice includes about a page and a half review of the history of Sudan sanctions including the complications involved in dual licensing requirements from OFAC and BIS.
Military Export Controls: DDTC Policy Statement on Precision-Guided Munitions and Partner Targeting Infrastructure
The State Department has adjusted its public policy on exports of certain precision guided munitions and associated items to more closely review whether the exports themselves match US policy on the use of conventional weapons. Specifically, DDTC will evaluate whether the foreign recipient has sufficient abilities with respect to “advanced target development” (ATD), such as precision targeting and the need to avoid civilian casualties where possible. The US Government will make this evaluation on its own; exporters need not provide evidence in this regard when applying for export authorizations.
The policy statement on DDTC’s web site enumerates the various items, technical data, and defense services subject to this policy, including items related to air-to-surface and guided indirect fire surface-to-surface munitions 105mm in diameter and larger: specifically, coordinate-seeking/feature-seeking, laser-guided, infrared/electro-optical, radar-seeking, and stand-off munitions.
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