U.S., Mexican, and Canadian Officials Conclude First Round of NAFTA Modernization Talks

On August 20, trade officials from the United States, Mexico, and Canada concluded the first round of negotiations to modernize the North American Free Trade Agreement (NAFTA). In a joint statement released following five days of talks, trade officials reiterated their commitment to updating the deal, continuing domestic consultations, and working on draft text. They also pledged their commitment to a comprehensive and accelerated negotiation process to set 21st Century standards and to benefit the citizens of North America.

Their agenda covered a wide range of existing and new NAFTA chapters, including: updating the Rules of Origin, adding and amending trade remedies provisions, addressing transparency, combatting corruption, increasing intellectual property protections, and addressing issues facing financial services and investment. The U.S. reportedly tabled roughly 10 proposals updating existing chapters or proposing new ones. Officials expect the modernized NAFTA deal will include a total of 30 chapters (the current agreement is comprised of 22 chapters and seven annexes).

The NAFTA negotiating teams are being led by Assistant U.S. Trade Representative for the Western Hemisphere John Melle, veteran Canadian trade expert Steve Verheul, and Director of the Embassy of Mexico’s Trade and NAFTA Office Kenneth Smith Ramos. In addition to negotiators, a number of Canadian and Mexican stakeholders – including eight members of the Mexican Senate and 150 representatives of Mexico’s private sector – were present on the margins of the talks. However, U.S. negotiators have acknowledged that their accelerated schedule leaves little time for formal business stakeholders to be included in events like those organized during the Trans-Pacific Partnership talks.

Negotiators are expected to head to Mexico City for the second round of talks from September 1 to 5, and to Canada for their third round in late September (reportedly September 23-27). Negotiators will continue at this rapid pace, moving back to United States in October and planning additional rounds through the end of the year. The NAFTA parties hope to finish talks by the end of 2017 or early 2018, ahead of Mexico’s July 2018 presidential elections.

This post was written by Mayte Gutierrez and Ludmilla L. Savelieff of Squire Patton Boggs (US) LLP © Copyright 2017
For more legal analysis go to The National Law Review

President Trump Announces Withdrawal from Paris Agreement on Climate Change

President Trump announced on Thursday his intention to initiate a formal withdrawal of the United States from the Paris Agreement, a global agreement designed to address climate change by reducing greenhouse gas (“GHG”) emissions. The President indicated that the United States would move forward with the pull-out and possibly attempt to re-negotiate the agreement in order to get “terms that are fair to the United States.”  President Trump frequently discussed pulling out of the Paris Agreement while on the campaign trail, citing concerns regarding its potential impact on the American economy, particularly the energy sector.

While the President’s intentions are clear, the path forward is less obvious. The U.S. cannot immediately exit the Paris Agreement and several nations, including Germany, France, and Italy, announced in a joint statement that “that the Paris Agreement cannot be renegotiated.”  In addition to announcing withdrawal from the Paris Agreement, President Trump also indicated that the U.S. would immediately halt the remaining $2 billion of the $3 billion in aid to developing countries pledged by President Obama as a part of the Green Climate Fund, which also is a component of the UNFCCC.

The Paris Agreement’s formal processes does not allow for a notice of withdrawal to be submitted until November 4, 2019, after which it will take one year for such notice to become effective. Assuming adherence to this process, the earliest the U.S. can formally withdraw from the Paris Agreement is November 5, 2020, one day after the next presidential election.  Because the Agreement’s only binding obligations are certain reporting requirements, the withdrawal is viewed by some as a symbolic gesture, since any federal GHG reduction measures resulting from the Paris Agreement would still need to be pursued through domestic legislation or regulatory action.  As a practical matter, irrespective of the Paris Agreement the administration can—and likely will—take steps to alter federal climate change policy.

Paris Agreement Background

The Paris Agreement builds on the United Nations Framework Convention on Climate Change (UNFCCC), a treaty signed by President George H. W. Bush and ratified by the United States Senate in 1992. The Paris Agreement was adopted in December 2015 as part of the twenty-first session of the Conference of the Parties (COP21) to the UNFCCC.  Following its initial adoption, President Obama ratified the Paris Agreement as an “executive agreement” on September 3, 2016.  The Paris Agreement was ultimately signed by 195 parties, ratified by 146 nations and the European Union, and entered into force on November 4, 2016.

The Paris Agreement directs signatory nations to develop voluntary GHG reduction measures, known as “Intended Nationally Determined Contributions,” which convert to “Nationally Determined Contributions” (NDCs) after a nation ratifies the Paris Agreement.  The Paris Agreement further provides for periodic updates to NDCs in order to continually “enhance” emission reductions targets.  The Paris Agreement’s only binding provisions are reporting obligations largely governed by the UNFCCC and “global stocktakes” that occur every five years.  These reporting measures were designed to help track total carbon emissions and progress towards meeting each NDC.  However, actual attainment of an NDC is voluntary and the Paris Agreement has no legally binding enforcement mechanism. The Paris Agreement also directs wealthier nations to help developing nations reduce GHG emissions and adapt to the impacts of climate change, but again these actions would be taken on a voluntary basis.

What happens next?

The UNFCCC made a formal statement in response to President Trump’s announcement that it “regrets” the decision of the United States to withdraw from the Paris Agreement, and that it remains open to discussion of the rules and modalities currently being negotiated for implementation of the Paris Agreement.  At the same time, the UNFCCC stated that the Paris Agreement has been “signed by 195 Parties and ratified by 146 countries plus the European Union [and] cannot be renegotiated based on the request of a single Party.”  Based on this statement and similar statements from France, Germany, Italy, and other nations, it appears that any near-term renegotiation of the Paris Agreement is unlikely.

Regardless of whether the United States is a party to the Paris Agreement, multinational corporations will still be subject to GHG reduction programs in other nations as those nations attempt to fulfill their NDCs. In addition, France and other nations have indicated the possibility of imposing a carbon tax on American imports from certain industries if the United States does formally withdraw from the Paris Agreement.

Under the Paris Agreement, the United States established its NDC as a goal of reducing GHG emissions 26-28 percent below 2005 levels, by 2025, and to make “best efforts” to reduce emissions by 28 percent. It is important to note that the U.S. is in the first sustained period where greenhouse gas emissions have decreased while economic growth has increased, largely the result of increased reliance on natural gas, improved vehicle fuel economy, state and regional GHG programs, and growth in renewable energy.  These factors are likely to persist even if the U.S. leaves the Paris Agreement.  And even in the absence of U.S. commitments under the Paris Agreement or additional federal action, U.S. GHG emissions are expected to decline by about 15-18 percent below 2005 levels by 2025.

The federal Clean Power Plan was one measure that was expected to further reduce U.S. GHG emissions. However, that program is subject to ongoing legal challenges and has been stayed by the U.S. Supreme Court.  There also are various lawsuits underway seeking to compel the federal government to take action on climate change. See e.g., Juliana v. United States, No. 6:15-cv-01517-TC (D. Or. Nov. 10, 2016).   Apart from litigation, the Trump Administration has indicated a willingness to modify the Clean Power Plan (should it be upheld) and reconsider other federal regulations and programs directed at GHG emissions and climate change, such as motor vehicle emissions standards.  These processes will take time to play out and, in combination with ongoing state-level programs, will ultimately determine the course of climate change policy in the United States for the remainder of the Trump Administration.

This post was written by Brook J. Detterman, Leah A. Dundon and Kristin H. Gladd of Beveridge & Diamond PC.

Trump Administration Notifies Congress of Intent to Renegotiate NAFTA

The White House formally notified Congress on Thursday of the Trump administration’s intent to renegotiate the North American Free Trade Agreement (NAFTA). The notification letter from U.S. Trade Representative Robert Lighthizer marked the start of a 90-day window to consult with members of Congress on developing negotiation priorities before beginning formal negotiations with Canada and Mexico as early as August 16, 2017.NAFTA, USA, Mexico, Canada

Currently, there is no indication that renegotiations will impact NAFTA-related immigration programs. However, under the Bipartisan Congressional Trade Priorities and Accountability Act of 2015, the administration’s negotiation objectives are required to be made public 30 days before formal negotiations begin. While the letter to Congressional leadership did not discuss any specific changes to NAFTA, the administration indicated that it would aim to modernize outdated chapters of the agreement and address challenges faced by U.S. consumers, businesses, and workers.

NAFTA Immigration Programs

Among other economic and trade relationships established under NAFTA, the agreement created the TN nonimmigrant classification, which allows certain citizens of Canada and Mexico to work temporarily in the United States in a professional capacity. The agreement also provides an expanded range of permissible business activities for Canadian and Mexican citizens in B-1 visitor status and permits Canadian citizens to submit L-1 intracompany transferee petitions directly at U.S. ports of entry and pre-flight inspection stations for adjudication by U.S. Customs and Border Protection.

Whether the Trump administration intends to alter existing immigration programs under NAFTA is not yet known.

This post was written by Kara Kelly of Ogletree, Deakins, Nash, Smoak & Stewart, P.C.

Continued International and Domestic Coordinated Focus on Money Laundering

On February 1st, the U.S. Drug Enforcement Agency (DEA) announced an unspecified number of arrests of Hizballah money launderers, including Mohamad Noureddine. stack of moneyThese arrests followed the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) designation of Noureddine pursuant to its counterterrorism authority. The OFAC press release for this designation identifies Noureddine as a key Hizballah money launderer. According to OFAC,  Noureddine and his company Trade Point International S.A.R.L. established a money laundering network across Asia, Europe, and the Middle East that provides bulk cash shipping and black market currency exchange services for those seeking to hide their ill-gotten gains.

Hizballah International Financing Prevention Act of 2015

Irrespective of the detention of Noureddine, foreign financial intuitions that knowingly facilitate or conduct significant financial transactions for Trade Point International S.A.R.L. may have their U.S. correspondent or payable through accounts severed. OFAC has this authority under Section 102 of the Hizballah International Financing Prevention Act of 2015, which authorizes secondary sanctions on Hizballah.

Lebanese Canadian Bank

The arrests stem from  interagency  investigations of the Lebanese Canadian Bank (LCB). U.S.  law enforcement agencies have a long history with this now defunct Hizballah-linked bank.  In February 2011, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a Notice of Proposed Rulemaking to exclude  LCB from the U.S. financial system, finding that the bank is of “primary money laundering concern.”  In response to this action, the Banque du Liban revoked LCB’s banking license in September 2011. The bank’s remaining assets and liabilities were then sold to Societé General. Two years later, LCB entered into a $102 million settlement agreement to resolve a civil forfeiture and money laundering lawsuit filed by the U.S. Attorney for the Southern District of New York.  FinCEN withdrew  its Notice of Proposed Rulemaking in September 2015, on the basis that LCB no longer exists.

Coordinated Effort to Combat Money Laundering

The success of the ongoing money laundering investigation and recent arrests were possible because of the cooperation and coordination among the following international and domestic agencies:

  • DEA Philadelphia, DEA Miami, DEA Newark, DEA New York

  • DEA Special Operations Division and DEA Bilateral Investigative Unit

  • DEA country offices in Europe

  • DEA country offices in Bogota and Cartagena, Colombia

  • S. Customs and Border Protection National Targeting Center

  • S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN)

  • S. Department of the Treasury’s Office of Foreign Assets Control (OFAC)

  • Various French, German, Italian and Belgian law enforcement agencies

  • EUROPOL

  • EUROJUST

Like the LCB investigation before it, yesterday’s arrests will likely lead to additional U.S. and international actions against money launderers around the world.

ARTICLE BY Jeremy P. Paner of Holland & Hart LLP

Copyright Holland & Hart LLP 1995-2016.

Trans-Pacific Partnership Negotiations Face Tighter Timeline as Talks Continue

Trade ministers announced that they will continue negotiations over several unresolved provisions of the Trans-Pacific Partnership (TPP) during a four-day meeting in Maui, Hawaii that concluded July 31. Trade ministers representing the 12 Pacific Rim countries included in the free trade deal remain optimistic about negotiations and said in a joint statement that they are “more confident than ever that TPP is within reach.”

trade partnership, negotiations, trading deal, stakeholders, intellectual property

One of the major sticking points reportedly centers around intellectual property protections for biologics. The U.S. reportedly attempted to secure 12 years’ data protection for pharmaceutical companies, while Australia is insisting on five years. Observers suggest the agreement will fall somewhere between five and seven years’ data protection. U.S. stakeholders concerned with a deal that only includes five years of data protection could threaten to round up enough opposition in Congress to stymie the deal.

Other points of contention arose over agricultural issues and the auto industry. The U.S. is pushing for greater access to Canada’s dairy market, but Canada is concerned that could cause instability in its prices. Australia is seeking increased access to the U.S. sugar market, while the U.S. is trying to limit large increases in sugar imports. Meanwhile, the U.S., Canada, Mexico and Japan are hashing out “rule of origin” and other auto industry issues.

Once all 12 trade ministers agree to a deal, Congress will have 90 days to review and approve it. If talks continue beyond August, pushing the review period deep into the fall or winter, the deal is likely to become front and center in the U.S. presidential campaign. Democratic front-runner Hillary Clinton would face intense pressure from labor unions to disavow the deal, along with the 28 House Democrats who supported legislation to fast-track passage of the agreement. It could also become a problem for Canadian Prime Minister Stephen Harper, who is up for re-election in October.

The TPP will govern foreign exports, imports, and investment implicating several major sectors of the U.S. economy, including manufacturing, intellectual property, textiles and apparel, telecommunications, agriculture and others. It will also cover labor, employment, and environmental issues. The TPP will initially cover 12 countries: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam. Collectively these countries represent 40 percent of the global economy.

© 2015 Foley & Lardner LLP

BIS Removes Cuba as State Sponsor of Terrorism in Regulations

On July 22, 2015, the Bureau of Industry and Security (BIS), an agency of U.S. Department of Commerce, amended the Export Administration Regulations (EAR) to reflect Cuba’s removal from designation as a State Sponsor of Terrorism. The Secretary of State rescinded Cuba’s designation on May 29, 2015.

cuba_800_11429

As part of Cuba’s removal from designation as a State Sponsor of Terrorism, BIS amended the EAR to remove references in the text associating Cuba with terrorism. It also removes anti-terrorism (AT) license requirements from Cuba. Finally, BIS amended the EAR to remove Cuba from Country Group E:1, although Cuba remains on the Country Group E:2 list.

These amendments to the EAR affect certain license requirements and exceptions that apply to exports to Cuba. Specifically, the EAR apply to items that contain more than a de minimis amount of U.S.-origin content. For exports to most countries, that de minimis amount is 25 percent, but for exports to countries on the Country Group E:1 list, that de minimis amount is 10 percent. Exports of most items to Cuba are now also subject to the 25 percent de minimis rule. Yet, foreign-made items destined for Cuba that incorporate certain U.S.-origin 600 series content continue to be subject to the EAR regardless of level of U.S.-origin content.

Additionally, Cuba’s removal from the Country Group E:1 list makes exports to the country eligible for four new license exceptions including:

  • License Exception Servicing and Replacement of Parts and Equipment (RPL);
  • License Exception Governments, International Organizations, International Inspections Under the Chemical Weapons Convention and the International Space Station (GOV);
  • License Exception Baggage (BAG); and
  • License Exception Aircraft, Vessels and Spacecraft (AVS).

Despite these changes, it is important to remember that Cuba is still subject to a comprehensive embargo. Licenses are still required to export or reexport to Cuba any item subject to the EAR unless authorized by a license exception. Those who would like to export items authorized by license exceptions may only use license exceptions listed in 15 CFR 746.2(a).

©2015 Drinker Biddle & Reath LLP. All Rights Reserved

The European Court of Justice Overturns, Unfreezes EU Iran Sanctions

Sheppard Mullin 2012

In a series of recent rulings, the European Court of Justice overturned economic sanctions issued by the Council of the European Union (EU) on several Iranian banks and shipping lines.  On September 6 and 16, 2013, the Court halted sanctions on Persia International Bank plc, Bank Refah Kargaran, Export Development Bank of Iran, Post Bank Iran, Iranian Offshore Engineering & Construction Co., Iran Insurance Company, Islamic Republic of Iran Shipping Lines (IRISL), Khazar Shipping Lines, and Good Luck Shipping.  The EU had sanctioned these entities for their support of nuclear proliferation activities in Iran, but the Court determined that the EU lacked sufficient evidence to introduce such sanctions.  The cases are notable for their effect on global sanctions against Iran, although it seems unlikely that U.S. sanctions against Iran would be lifted on similar grounds.

While a full review of the developments in each case would be beyond the scope of this blog article, a few representative matters bear closer scrutiny.  In the case against IRISL, the Court noted that the imposition of sanctions was only permitted where a party had allegedly supported nuclear proliferation.  The Court indicated that sanctions could not be imposed simply based on a risk that  IRISL might provide support for nuclear proliferation in the future.  In particular, the Court determined that, while the EU established that IRISL had been involved in exports of arms from Iran, that activity was not alone sufficient to support the imposition of nuclear sanctions.  As a result, the Court struck down the sanctions against IRISL.

Similarly, in considering sanctions against Iran Insurance Company, the Court noted that the EU had sanctioned the company for insuring the purchase of helicopter spare parts, electronics, and computers with applications in aircraft and missile navigation, which the EU alleged could be used in violation of nuclear proliferation sanctions.  The Court ruled that the EU had relied on “mere unsubstantiated allegations” regarding the provision of insurance services, and annulled the sanctions.

We think these two matters are noteworthy for the types of evidence used to link the activities of the entities to nuclear proliferation.  When viewed in the light of a formal court proceeding, it seems somewhat remarkable that the EU sought to tie the insuring of items including helicopter spare parts to nuclear proliferation at all.  But, as we have discussed previously in this blog, [see May 2013 sanctions article]  economic sanctions against Iran have been broadly construed and applied by the United States and the EU to target industries integral to the functioning of the Iranian economy.  Insofar as a functioning Iranian economy also supports the nuclear development efforts of its government, it may make political sense for the EU and the United States to impose leverage through sanctions.  As a legal matter, however, the European Court of Justice rulings suggest that Court will be loathe to tie restrictions on general economic activity to a statute focused on the specific activity of nuclear proliferation.

In other words, the European Court of Justice seems unlikely to defer to the EU, even where European security is at stake.  This stands in relatively stark contrast to U.S. courts, which have generally shown deference to government activity on issues of national security.[1]

For the time being, U.S. sanctions on Iran and key entities within the Iranian banking and shipping sectors remain in place, with far reaching consequences that will continue to deter Western business from even considering business in Iran.  And ultimately, any warming in diplomatic relations between the United States and Iran will likely be more momentous than judicially vacated sanctions.  But at a minimum, the European Court of Justice has signaled that EU sanctions are subject to standards of proof that cannot be broadly construed to incorporate all types of economic activity.


[1] At least one U.S. court has overturned criminal sanctions charges on individuals by reading regulatory provisions in the accused’s favor due to issues of vagueness in the sanctions regulations. [see Clarity Required: US V. Banki]