On August 24, 2018, the US State Department gave notice of new sanctions on Russia under the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991 (the “CBW Act”) after determining that the Russian Government has used chemical weapons in violation of international law or chemical or biological weapons against its own nationals. The imposition of CBW Act sanctions follows reports of the use of a “Novichok” nerve agent in an attempt to assassinate UK citizen Sergei Skripal and his daughter Yulia Skripal. There is no indication in the notice regarding the potential for significant additional sanctions (e.g., an export ban, an import ban, an air transportation ban) to be imposed in three months time, as previously described here. Read more…
Following the recent developments, the Decision of the President of the Republic of Turkey regarding added fiscal burdens on import of certain products originating from the United States was published in the Official Gazette dated August 15, 2018 and No. 30510 (“Decision”).
The Decision calls for added fiscal burdens on 22 separate categories of items originating from the US. The additional tariffs range from 4% to 140%.
“Origin” is defined as the economic nationality of a product, and determination of a product’s origin which is imported into Turkey would be subject to Turkish customs legislation. For instance, in case a product is designed in a country and the parts of this product are put together in another country or the product is packaged in another country, added value of each of these processes on the product is generally taken into consideration for the origin determination. In this regard, it would be useful for companies which will import products to Turkey to pay attention to the origin of the product when they are evaluating the Decision.
According to the Decision, an exemption is defined for the goods that already have a bill of lading to be delivered to Turkey and have been loaded onto transportation vehicles before the publication date of the Decision. The applicable additional fiscal burdens before the Decision will be applied to these products if the customs declaration is approved regarding the import of these products or summary declaration within the scope of the customs regulation is submitted within 45 days commencing from the publication date of the Decision.
The Decision came into force as of August 15, 2018 and will be applicable for the relevant item categories that do not fall within the above exemption.
The additional fiscal burdens target the following item categories.
|Position No.||Item Description||Additional Fiscal Burden (%)|
|08.02||Other nuts, (fresh or dried), (whether or not shelled or peeled)||20|
|22.08||Undenatured ethyl alcohol of an alcoholic strength by volume of less than 80% by volume; spirits, liqueurs and other spirituous beverages||140|
|24.01||Unmanufactured tobacco; tobacco refuse||60|
|27.01||Coal; briquettes, ovoids and similar solid fuels manufactured from coal||13.7|
|2704.00||Coke and semi-coke of coal, of lignite or of peat, whether or not agglomerated; retort carbon||10|
|33.04||Beauty or make-up preparations and preparations for skincare (other than medicaments), including sunscreen or suntan preparations; manicure or pedicure preparations||60|
|3904.10||Poly (vinyl chloride), not mixed with any other substances (Polymers of vinyl chloride or of other halogenated olefins, in primary forms)||50|
|3908.10||Polyamides in primary forms -6, -11, -12, -6,6, -6,9, -6,10 or -6,12||10|
|39.26||Other articles of plastics and articles of other materials underheadings 39.01 to 39.14||60|
|44.01||Fuel wood, in logs, in billets, in twigs, in faggots or in similar forms; wood in chips or particles; sawdust and wood waste and scrap, whether or not agglomerated in logs, briquettes, pellets or similar forms||10|
|48.02||Uncoated paper and paperboard, of a kind used for writing, printing or other graphic purposes, and non-perforated punch cards and punch-tape paper, in rolls or rectangular (including square) sheets, of any size, other than paper of heading 48.01 or 48.03; handmade paper and paperboard||20|
|48.04||Uncoated kraft paper and paperboard, in rolls or sheets, other than those under heading 48.02 or 48.03||20|
|48.11||Paper, paperboard, cellulose wadding and webs of cellulose fibers, coated, impregnated, covered, surface-colored, surface-decorated or printed, in rolls or rectangular (including square) sheets, of any size, other than the goods described in heading 48.03, 48.09 or 48.10||50|
|5502.10||Made from cellulose acetate (Artificial filament tow)||60|
|8413.70||Other centrifugal pumps||20|
|87.03||Motor cars and other motor vehicles principally designed for the transport of persons (other than those of heading 87.02), including station wagons and racing cars||120|
|9022.19||Used for other purposes||10|
Further to our previous blog posts of 18 May 2018 and 7 June 2018, the updated Blocking Regulation (Regulation 2271/96) entered into force on 7 August 2018. The effect is to block the application in the EU of extraterritorial U.S. sanctions targeting Iran.
The update was triggered by the U.S.’ unilateral decision on 8 May 2018 to withdraw from the Joint Comprehensive Plan of Action, and the subsequent reimposition of extraterritorial sanctions. The full list of extraterritorial measures blocked by the EU can be found here.
What does the Blocking Regulation do?
In short, the Blocking Regulation:
- prohibits EU persons from complying with the blocked U.S. measures;
- requires EU persons to notify the European Commission of any effects on their economic or financial interests caused by a blocked measure;
- prevents the enforcement and/or recognition of any judgment or decision of a non-EU authority that gives effect to a blocked measure; and
- allows EU persons to recover damages arising from the application of the blocked measures.
The Blocking Regulation applies to EU entities, EU residents, EU nationals based outside the EU, and other persons located within the EU and acting in a professional capacity. Non-EU subsidiaries of EU entities are not required to comply; however, EU subsidiaries of non-EU companies (including U.S. parent companies) are required to comply with all provisions of the Blocking Regulation.
Enforcement of the Blocking Regulation falls within the remit of Member States. Some Member States (including the UK, Sweden and the Netherlands) impose criminal penalties for violations; some other Member States impose civil/administrative penalties (including Germany, Austria, Spain and Italy). Some Member States (such as France) have yet to introduce penalties for violations. To-date, enforcement of the Blocking Regulation has not been a priority for the EU Member States.
Nonetheless, companies with an EU nexus will need to consider carefully any decision to withdraw from business involving Iran in order to balance their obligations under the Blocking Regulation with potential risks under U.S. sanctions.
The EU has also issued a guidance note on the application of the Blocking Regulation, available here.
Is there scope for a waiver from the requirements of the Blocking Regulation?
Yes, the European Commission can authorise EU persons to comply with the U.S. measures in full or in part, where “non-compliance would seriously damage their interests or those of the Community”.
The 14 criteria for authorisation are set out in Regulation 2018/1101 (available here). These include the following criteria of particular interest:
- the existence of an ongoing administrative or judicial investigation against the applicant from, or a prior settlement agreement with, the third country which is at the origin of the listed extra-territorial legislation (in this context, the U.S.); and
- the existence of a substantial connecting link with the third country (again, the U.S. in this context) which is at the origin of the listed extraterritorial legislation or the subsequent actions; for example the applicant has parent companies or subsidiaries, or participation of natural or legal persons subject to the primary jurisdiction of the third country which is at the origin of the listed extra-territorial legislation or the subsequent actions.
In other words, it may be possible to obtain an authorisation where (for example) a U.S. authority such as OFAC has reached a settlement with an EU entity in relation to violations of U.S. sanctions, and that settlement requires the EU entity to comply with the blocked measures.
The Commission will consider applications on a case-by case basis, and there is no guarantee that it will grant any authorisation.
In July 2018, the Control of Economic Activity (Occupied Territories) Bill 2018 (the “Bill”, available here), a Private Member’s Bill proposed by the Irish independent senator Frances Black, was passed in the Seanad (the Upper House of the Irish Parliament). The Bill makes it an offence for a person to import or sell goods or services originating in an occupied territory or to extract resources from an occupied territory in certain circumstances.
Although the Bill does not expressly refer to Israel or Palestine, it has been widely interpreted as being directed at restricting trade with Israeli settlements. The Bill would apply to:
- a person who is an Irish citizen or ordinarily resident in the State,
- a company incorporated under the Companies Act 2014, and
- an unincorporated body whose centre of control is exercised in Ireland.
The vote was passed by 25 votes to 20 in the Seanad, despite opposition from the Irish Government. The Bill will next pass through the Dáil (the Lower House of the Irish Parliament) to be debated and voted on. If passed in the Dáil, the Bill will become law, subject to being approved and signed by the President of Ireland.
Assistance in preparing this post was provided by Cormac Little, Partner and head of William Fry’s Competition & Regulation Department (Cormac.Little@williamfry.com).