The Biden Administration’s trade policies and positions signal a return to relations with U.S. allies and multilateral trade. With Janet Yellen confirmed as Treasury Secretary, we expect to see reviews of, and modifications to, U.S. sanctions. And the pending confirmation of Gov. Gina Raimondo as Commerce Secretary could bring changes to Section 232 tariffs on steel and aluminum products, as well as further actions on antidumping/countervailing duties.
COVID-19 and Humanitarian Aid
With COVID-19 continuing to wreak global havoc, the Biden Administration announced it will undertake a review of U.S. and multilateral sanctions to determine whether the sanctions are “unduly hindering responses to the COVID-19 pandemic.” Providing additional clarity on certain sanctions may allow for humanitarian aid supplies and other resources to be provided to countries like Iran, Syria, and Cuba, which are the subject of comprehensive U.S. embargo and sanction programs.
We will also be watching for the potential addition of exclusions from Section 301 duties on Chinese-origin COVID-19-related items, and extension of existing exclusions granted by the Office of U.S. Trade Representative (USTR). Currently, existing exclusions are set to expire on March 31, 2021.
Rejoining Multilateral Agreements and Potential New Trade Agreements
We also expect the Biden Administration will seek to re-join certain multilateral agreements, such as the Joint Comprehensive Plan of Action (JCPOA), the so-called “Iran Deal.” Re-joining the JCPOA or entering into another similar agreement with Iran and other countries, may re-open Iran for limited business opportunities for non-U.S. parties if, for instance, secondary sanctions are removed. However, most direct or indirect transactions with Iranian companies and involving U.S. parties will remain prohibited. There will be continued strict scrutiny by the Office of Foreign Assets Control (OFAC), the Bureau of Industry and Security (BIS), U.S. Customs and Border Protection (CBP) and other federal agencies of all authorized and unauthorized transactions. U.S. and non-U.S. companies will need to implement proper safeguards to ensure compliance.
Secretary Yellen has commented there will be no new trade agreements “before the US makes major investments in American workers and our infrastructure.” With Brexit over, however, we expect the Biden Administration will negotiate a trade deal with the UK. As the time approaches and negotiations get underway, companies can begin to prepare for a trade deal and perform necessary due diligence for both imports and exports to ensure proper compliance.
In the short term, we expect the Biden Administration to make few changes to U.S.-China relations. China reportedly warned the Biden Administration against following the “wrong policies” of the Trump Administration. Nevertheless, the current administration will not immediately seek to roll back the Section 301 duties assessed on Chinese-origin goods, and there are no reports of a “Phase 2” agreement. This means companies will still need to carefully determine country of origin and the question of “substantial transformation” when goods are produced in a third country but Chinese components or materials are used.
How the Biden Administration will approach the thousands of Section 301 lawsuits challenging the duties assessed under List 3 and List 4A remains to be seen.
With respect to forced labor, President Biden’s team will continue to prohibit the importation of goods suspected to be made from forced labor, including products made in Xijiang Province. The Biden Administration is also expected to take a tougher position on human rights issues, such as those in the Xijiang Province and the recent developments in Hong Kong. Those tougher positions are likely to result in additional sanctions and additional restricted entities in China and Hong Kong.
We expect more Chinese parties will be added to BIS’s Military End-User (MEU) List and Entity List, as well as OFAC’s Non-SDN Communist Chinese Military Companies (NS-CCMC) List, all of which require companies to perform significant due diligence to ensure compliance with these national security driven export control measures.
We anticipate the Biden Administration will implement additional sanctions against Russian actors. We expect the U.S. may follow the EU and UK in imposing sanctions against Russian actors who are suspected of playing a role in the poisoning of Russian anti-corruption activist, Alexei Navalny. Additional Russian conduct as reported in the media may also result in further sanctions and trade restrictions against Russian parties.
President Biden has voiced his support for re-engaging with Cuba and working to restore Obama-era relations. We expect, therefore, a return to Obama-era policies on Cuba, including rolling back of sanctions, creating license exceptions and general licenses, and re-evaluating the embargo.
We do expect the U.S. to continue its policies of sanctioning individuals involved in human rights abuses and corruption in countries such as Venezuela.
As the Biden Administration continues to review the prior administration’s trade policies, Flannery | Georgalis will continue to monitor and update our clients and contacts. We are available to assist in navigating the complexities of international business and trade.