Tag: Trade

Cuba: Further Easing of the U.S. Sanctions

Following up on the historic changes in 2014 and 2015 to the five-decade U.S. trade embargo on Cuba, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) and the Department of Commerce’s Bureau of Industry and Security (BIS) have announced new amendments to the Cuban Assets Control Regulations (CACR) and Export Administration Regulations (EAR), effective January 27, 2016.

What U.S. Companies Need to Know About the Easing of Restrictions

  1. Payment Terms for Authorized Exports to Cuba No Longer Restricted
    OFAC restrictions have been lifted on payment and financing terms for authorized exports and reexports to Cuba, except for agricultural commodities and items. U.S. banks will be authorized to provide financing by third-country or U.S. financial institutions (e.g., letters of credit, payment of cash in advance, sales on an open account). Payment for agricultural exports will still be limited to cash in advance or financing by third-country banks only. “Authorized exports and reexports” include those authorized under a BIS license exception (e.g., products and materials exported to private sector entrepreneurs under License Exception “SCP” – Support for the Cuban People), as well as export transactions permitted by BIS under a specific license.

  2. Most Cuban Embargo Restrictions Remain in Place
    Although the amendments to the CACR and EAR signify further relaxing of Cuba sanctions, the U.S. embargo on Cuba remains largely in place; most transactions between the U.S. and Cuba continue to be prohibited.

    In addition, a general policy of denial will still apply to exports and reexports of items for use by state-owned enterprises, agencies, or other organizations of the Cuban government that primarily generate revenue for the state. Additionally, applications to export or reexport items destined to the Cuban military, police, intelligence and security services remain subject to a general policy of denial.

  3. More Favorable Licensing Policies for Certain Exports and Reexports
    The following transactions still require a license application, but the chances of approval for such licenses have improved:

Exports to Cuban Government Agencies Meeting the Needs of the People: BIS is now considering, on a “case-by-case” basis, license applications for exports and reexports to Cuban state-owned enterprises and government agencies that provide services and goods to meet the needs of the Cuban people. Previously, such license applications were subject to a policy of denial. The new case-by-case policy applies to items for construction of facilities for public water treatment, electricity or other energy; sports and recreation; agricultural production; food processing; disaster preparedness, relief and response; public health and sanitation; residential construction and renovation; public transportation; wholesale and retail distribution for domestic consumption by the Cuban people; and artistic endeavors.

  • New Policy of Approval for Certain Exports and Reexports: License applications for the following exports and reexports are now subject to a “general policy of approval,” an upgrade from “case-by-case” consideration:

  • Environmental protection items: U.S. and international air quality, water, or coastline

  • Telecommunications items: To improve communications to, from, and among the Cuban people.

  • Civil aviation and commercial aircraft safety items: Those necessary to ensure the safety of civil aviation and safe operation of commercial aircraft engaged in international air transportation, including the export or reexport of civil aircraft leased to state-owned enterprises.

  • Agricultural items: Such as insecticides, pesticides, and herbicides, as well as other agricultural commodities (e.g., tractors and other farm equipment) not eligible for License Exception AGR

  • Commodities and software: To human rights organizations or to individuals and non-governmental organizations that promote independent activity intended to strengthen civil society in Cuba; also to U.S. news bureaus in Cuba whose primary purpose is the gathering and dissemination of news to the general public.

4. Travel Authorized for Additional Purposes Including Film Making 
U.S. persons are still prohibited from traveling to Cuba for tourism, but OFAC now permits travel to Cuba for additional purposes as highlighted below.

  • Travel related to information and informational materials now includes travel for the filming of movies and TV programs, music recordings, and artwork creation.

  • Organization of professional meetings, public performances, clinics, workshops, and athletic and other competitions and exhibitions in Cuba, in addition to the previously authorized attendance at such events.

5. Air Carrier Services Expanded to Permit Code-Sharing and Leasing
U.S. companies can now enter into blocked space, code-sharing, and leasing arrangements to facilitate the provision of carrier services by air, in connection with travel or transportation between the U.S. and Cuba, including such arrangements with a Cuban national.

Article By Global Services of Barnes & Thornburg LLP

© 2016 BARNES & THORNBURG LLP

White House Announces Long-Awaited Trans-Pacific Partnership Agreement

The Obama administration released the full text of the Trans-Pacific Partnership (TPP) agreement, on November 5, kicking off a 90-day window for congressional review.

The TPP would arguably be the largest free trade agreement in history when considering the economies of the 12 Pacific Rim member countries, covering approximately 40% of the global economy. The agreement must now be individually approved by each of the 12 countries: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam.

If ratified, the TPP will be one of President Obama’s crowning achievements. Obama has championed the landmark agreement as a vehicle for opening new markets to American products and establishing higher labor and environmental standards, while building an economic bloc in the Asia-Pacific region to compete with China. (See the White House Fact Sheet here.)

Obama now has an uphill climb as he launches a major public relations campaign to sell the agreement to the American public. The debate will be contentious, with a bitterly divided Congress voting on the final agreement in early 2016 – well into the election year as presidential primary elections are taking place.

Under pressure from labor unions to oppose the deal, Democrats have largely withheld support. In early October, former Secretary of State, and current presidential candidate, Hillary Clinton came out against the deal which she once called the “gold standard” of trade agreements. Last spring, Obama relied on Republicans in Congress to pass the underlying fast-track trade authority bill, with only 28 Democrats in the House voting in favor of passage. Under fast-track authority, Congress can approve or reject the agreement, but not amend it.

Note: The Office of the United States Trade Representative (USTR) posted the agreement in roughly two hundred separate PDF documents. The Washington Post promptly published a search function on their website for easier searching.

Article By Michelle A. Leeds of Foley & Lardner LLP

© 2015 Foley & Lardner LLP

Amazon Wins Ruling on Results for Searches on Brands It Doesn’t Sell

On October 21, 2015, the Ninth Circuit ruled that online retailer Amazon does not violate the Lanham Act when, in response to a search for a brand it doesn’t sell, it returns a results page that fails to disclose that fact and simply offers competing products sold under different brands. The decision in MultiTime Machine, Inc. v. Amazon.com, Inc. weakens the “initial interest confusion” doctrine in the Ninth Circuit and will likely be perceived as a significant victory for online retailers.

Plaintiff MultiTime Machine (MTM) sells an expensive military-style watch known as the “MTM Special Ops,” but doesn’t sell it through Amazon. When an Amazon customer types “mtm special ops” into the Amazon search box, the result is a list of other brands of military-style watches that Amazon sells. Meanwhile, “MTM Special Ops” remains visible within the search box and also in smaller type at the top of the page. Nothing on the page indicates that Amazon does not sell MTM products. MTM sued Amazon for trademark infringement, claiming that Amazon’s use of its trademark in this way created a likelihood of confusion.

The district court dismissed the case on summary judgment. MTM appealed. In a 2-1 decision issued July 6, 2015, the Ninth Circuit remanded the case, holding that there were issues of fact as to consumer confusion that precluded summary judgment. MTM then petitioned for a rehearing en banc.

On Wednesday, while that petition was pending, the same panel reversed itself and held in a 2-1 decision that “no rational trier of fact could find that a reasonably prudent consumer accustomed to shopping online would likely be confused by the Amazon search results.” Summary judgment in favor of Amazon was affirmed.

Judge Silverman (the dissenter in the July opinion, now writing for the majority) wrote that Amazon is doing no more that “responding to a customer’s inquiry about a brand it does not carry by … stating clearly (and showing pictures of) what brands it does carry.” In the majority’s view, this is “not unlike when someone walks into a diner, asks for a Coke, and is told ‘No Coke, Pepsi’.”

The Court held that the Ninth Circuit’s traditional eight-factor Sleekcraft test for assessing likelihood of confusion is not appropriate for this case. Sleekcraft is designed for cases analyzing similarity of the marks of competing brands. Here, said the Court, there is no issue as to the other marks involved; the only issue is Amazon’s use of MTM’s mark in displaying search results. In cases involving trademarks in the Internet search context, the more appropriate test is “(1) Who is the relevant reasonable consumer; and (2) What would he reasonably believe based on what he saw on the screen?”

Adopting the standard set forth in Toyota Motor Sales, U.S.A. Inc. v. Tabari, 610 F.3d 1171 (9th Cir. 2010), the Court held that the relevant consumer here is a “reasonably prudent consumer shopping online … Unreasonable, imprudent and inexperienced web-shoppers are not relevant.” The Court also noted that the watches at issue are relatively expensive and that consumers are therefore likely to be even more vigilant than usual.

As for what is seen on the screen, the Court focused on the “clear labeling” of all of the competing products returned in the search. MTM argued that “initial interest confusion” might occur because the phrase “mtm special ops” appears three times at the top of the search results page. It also argued that Amazon should change its results page to explain to consumers that it does not offer MTM watches. The Court brushed off both contentions. “The search results page makes clear to anyone who can read English that Amazon carries only the brands that are clearly and explicitly listed on the web page.”

As a result, in the Court’s view, no jury trial is necessary because there are no material issues of disputed fact. The contents of the web page showing “clear labeling,” and the expensive price of the watches, is undisputed. The Court needs no more to conclude that “no reasonably prudent consumer accustomed to shopping online” could be deceived, even initially.

Judge Bea, who had written the majority opinion in the July decision, wrote a sharp dissent. In his view, a jury is entitled to decide whether shoppers would believe that there is a relationship between MTM and the products listed in the Amazon search results. MTM had argued that this could arise from a belief that MTM had acquired those brands, or because they are other brands from the same parent company (much as Honda and Acura automobiles come from the same company). Determining whether or not MTM is correct, said Judge Bea, is a question for a jury, not appellate judges. This is especially true in a case involving brands whose relationships to each other may not be so obvious to consumers – unlike the relationship between Coke and Pepsi.

Judge Bea claims that, by “usurping the jury function,” the majority effectively overrules the “initial interest confusion” basis for infringement. In his view, the question of whether the defendant’s labeling is clear enough to prevent customers from initially believing that the products are connected with those of plaintiff is a fact-intensive inquiry, and prior Ninth Circuit cases have not applied the doctrine as a matter of law, as the Court does here.

Apart from the technical legal issues, the two opinions reflect differing views of how the public interacts with online commerce. The majority appears to believe that online buying is now so common that consumers are conditioned to understand that entering a trademark as a search term will not necessarily return results pointing only to that brand. Its apparent desire to create a bright-line rule on “clear labeling” may make it easier for e-retailers to move to dismiss, without a trial, infringement claims from brand owners concerned about use of their marks to search for competing products. The dissent is more skeptical about consumer sophistication; its approach would create a greater burden on online retailers to defend against infringement claims.

It is unclear whether the majority intends its holding to be applied only in cases where, as here, the goods are relatively expensive and the brands are not well known. Given this uncertainty, the fact that it was a split decision, the prior petition for rehearing en banc, and the participation by multiple amici curiae, it is possible that there will be an en banc rehearing in this case. If the decision stands, however, it may diminish the doctrine of “initial interest confusion” in the Ninth Circuit and allow a freer hand to online retailers in using trademarks to generate searches for broad classes of competitive products.

Article By Andrew Baum of Foley & Lardner LLP

© 2015 Foley & Lardner LLP

Illinois Department of Revenue Issues Proposed Amendments to Shipping and Handling Regulations

The Illinois Department of Revenue (Department) recently proposed amendments to its regulations governing the taxability of shipping and handling charges. The Proposed Amendments to 86 Ill. Admin Code §§ 130.415 and 130.410 (Proposed Amendments) are intended “to incorporate the holding of the Illinois Supreme Court in Kean v. Wal-Mart Stores, Inc., 235 Ill. 2d 351 (2009) … [and to] clarif[y] when transportation and delivery charges are considered part of ‘gross receipts’ subject to the Retailers’ Occupation Tax Act or the Use Tax Act.”  The Proposed Amendments state that they are retroactive to November 19, 2009, the date of the Kean decision.

Delivery charges taxable when they are “inseparably linked” to the taxable sale of property

In Kean, the Court held that delivery charges for products purchased over the internet and shipped to Illinois customers are taxable when “an ‘inseparable link’ exists between the sale and delivery of the merchandise plaintiffs purchased.”… 235 Ill. 2d at 376.  Citing Kean, the Proposed Amendments adopt that rule (Prop. 86 Ill. Admin. Code § 130.415(b)(1)(B)(i)) and provide two examples of an “inseparable link”:

  • When delivery charges are not separately identified to the customer in the contract or invoice; or

  • When delivery charges are separately identified to the customer, “but the seller does not offer the purchaser the option to receive the tangible personal property in any manner except by delivery from the seller (g., the seller does not offer the purchaser the option to pick up the tangible personal property).”

Prop. § 130.415(b)(1)(B)(ii)

The Proposed Amendments provide that if a product can be sold without rendering the delivery service, the service is not taxable.  Prop. §130.415(b)(1)(B)(ii).  Although this language is not limited to a circumstance in which a pickup option is offered, all of the examples provided by the Department focus on that fact pattern.  Notably, the pickup option need not be at an in-state location.  This is consistent with the Department’s recent private letter rulings concluding that when a pick up option is offered, even if it is out-of-state, the delivery charges are not taxable.  ST-15-0011-PLR (7/16/15); ST-15-0012-PLR (7/27/15).

In a change from the Department’s prior practice, the Proposed Amendments provide that separately stated shipping charges not found to be inseparably linked to the sale of goods are not taxable even if they include a profit component (i.e., exceed the actual cost of shipping).  Cf. the current regulation, at 86 Ill. Admin. Code §130.415(d), with Prop. §§ 130.415(b)(1)(C) and (b)(1)(D)(iv).

Practice Note:

Sub-part (b)(1)(B)(ii) of the Proposed Amendments supports the conclusion that offering customers free standard shipping evidences that any other shipping service for which a seller charges customers (i.e., expedited shipping) are separately contracted for and thus nontaxable.  Arco Industrial Gas Division, The BOC Group, Inc. v. Department of Revenue, 223 Ill. App. 3d 386, 392 (4th Dist. 1991), which is cited in the Proposed Amendments, also supports this conclusion.  Several defendants have successfully raised this defense in response to Illinois False Claims Act litigation alleging a failure to collect tax on shipping charges.

Taxability and rate depend on the underlying property

The Proposed Amendments go on to provide that in the event delivery charges are “inseparably linked” to the sale of property, their taxability and rate depends on the taxability of the property sold:

Property Sold & Delivered

Delivery Charges

All exempt

Not taxable

Part exempt; part taxable

Not taxable if selling price of nontaxable property > selling price of taxable property

All property subject to high or low tax rate

Follows tax rate of property

Some property subject to high tax rate and some subject to low rate

Low rate if selling price of low rate property  > selling  price of high rate property

Exempt, high and low rate property

Not taxable if selling price of exempt property  > selling price of taxable property; low rate if selling price of low rate property  > selling price of high rate property

Prop. § 130.415(b)(1)(E).

Incoming transportation generally remains a taxable cost of doing business

The Proposed Amendments maintain the longstanding rule that a seller’s incoming transportation or delivery costs or costs to move property to ready for customer delivery are taxable costs of doing business.  The rule applies even if the seller passes on these costs to a buyer by separately stating them on an invoice.  86 Ill. Admin. Code § 130.415(e); Prop. § 130.415(b)(2).

Taxability of handling charges follows shipping charges

The Department also proposes similar amendments to the regulation relating to the taxation of handling charges.  Prop. § 130.410(c).

Practice Note:

To the extent the Proposed Amendments were issued by the Department to assist companies who have been named in lawsuits filed under the Illinois False Claims Act alleging an intentional failure to collect and remit tax on shipping and handling charges, it may be too late.  The Proposed Amendments come almost six years after Kean, and after hundreds of companies have been forced to defend against these claims, regardless of their audit history with the Department, and regardless of their shipping policies.  It remains to be seen whether the Department’s effort to impose the Proposed Amendments retroactively will be adopted, or whether the retroactivity will be helpful to companies who are forced to defend against this litigation.  The Proposed Amendments also are inconsistent with position that many of the Department’s auditors have taken, both before and after Kean, that taxpayers need to collect tax on separately stated shipping and handling charges only to the extent that the charges are a source of profit for the company.

Article By Mary Kay McCalla Martire, Catherine A. Battin & Lauren A. Ferrante of McDermott Will & Emery

© 2015 McDermott Will & Emery

Days of Tax-Free Internet Sales May Soon Be Over With Introduction of Remote Transactions Parity Act

The imposition of sales tax on internet transactions is a continuing topic of conversation on Capitol Hill that has recently gained even more momentum. In June, Rep. Jason Chaffetz and Rep. Steve Womack introduced the Remote Transaction Parity Act (RTPA), a bill which would require online retailers to collect sales taxes from buyers in remote states even if the retailer does not have a physical location in such state. The passing of the RTPA would be a marked shift from current law, which requires internet retailers to pay sales tax only in those states where they have a physical location.

The RTPA is the most recent iteration of bills proposing to broaden the taxing authority of states by allowing them to capture additional sales tax revenue from internet retailers and closing what some have called a tax loophole that for years has allowed internet retailers a great pricing advantage over brick-and-mortar retailers who are forced to charge higher prices for identical merchandise to cover the sales taxes imposed on them. The Marketplace Fairness Act (MFA), which was passed by the Senate but not the House of Representatives in 2013 was also reintroduced earlier this year, showing the importance of this issue to some lawmakers.

While some claim the RTPA is intended to “level the playing field” among internet retailers and brick-and-mortar businesses, the lines of support are not so clear. In today’s marketplace many brick-and-mortar retailers also have some (if not a significant) internet sales presence, which means this Act will not just impact the Amazon’s of the world. Under the RTPA, retailers of all sizes that sell products online face potential new taxes and, at the very least, will be required to implement stringent sales tracking systems. Considering the expected costs of imposing these systems, the RTPA may actually create a competitive advantage for the larger online retailers as they would have the resources to implement these systems while continuing to provide products at a lower cost, while smaller retailers may have to increase prices to cover the additional costs of this system. As such, it is extremely important that retailers understand how the proposed destination-based taxation system will impact their bottom line and to become involved in the discussion prior to the final legislation.

The RTPA includes several notable differences from the MFA that may make this slightly more palatable than its predecessor. These differences include a larger initial small seller exception that phases back over three years and is eliminated in year four rather than the set smaller exception amount included in the MFA, increased protections for sellers using certified software providers, and additional audit protections. However, the basic premise remains the same. Under both Acts, states would be gaining greater authority to look inside a retailer’s business and impose tax based on the location of its customers, not just the location of the retailer itself. This shift in tax law would have a significant impact on the way retailers do business and is something that should be watched carefully in the coming months.

Article By Chris A. Jenny, William R. West & Megan L.W. Jerabek of von Briesen & Roper, S.C.

©2015 von Briesen & Roper, s.c

Coming to America: Foreign Manufacturers Looking to Produce in the U.S.

There’s been buzz about Keer Group lately, the Chinese textile company that opened a cotton mill this year in South Carolina.  China has long been seen as the global capital of textile manufacturing, due in part to their low production costs and seemingly endless supply of cheap labor.  But Keer Group found the rising costs in China made it difficult to grow in its hometown of Hangzhou.  Wages there have been steadily increasing, energy costs are rising, and shipping costs are growing higher.  Textile operations in China are actually starting to become unprofitable.  So production was moved to America.   And Keer Group is not alone.  JN Fibers Inc., also of China, is building a plant in South Carolina.  Indian textile manufacturer, ShriVallabh Pittie Group, is building a factory in Georgia.

Why would textile companies from traditionally low cost countries move production to the U.S.?  What’s the allure for these foreign companies?  Isn’t it expensive to operate here as opposed to low wage countries like China and India?  Well, despite the comparatively high wage rate in the U.S., several factors are at play to offset the cost of labor.  Years of low employment mean that Americans are willing to work longer hours and for suppressed wages.  The U.S. is also home to several right-to-work states where union representation is low and workers are not restricted to a single task but rather can set up, operate, and run multiple machines.   But even with a wage gap between the U.S. and low wage countries, the gap is more than compensated for by other savings.

“Except for human labor, all other production factors are cheaper in the U.S.”

“Except for human labor, all other production factors are cheaper in the U.S.”

The U.S. is a political, economic, and infrastructural oasis in an uncertain world.  America benefits from cheap, plentiful, and reliable energy ensuring production facilities can be kept running constantly.  While textile companies in the past have looked to countries such as Bangladesh and India to keep production costs low, economic volatility resulting in unreliable energy sources are disrupting production.  Many plants today are primarily automated, meaning companies rely on the constant energy supply.  What good are cheap utilities when they aren’t stable?

The U.S. has also created incentives to keep costs down for foreign companies looking to relocate.  Government at the local, state, and federal level have eagerly provided infrastructure grants, revenue bonds, and tax credits in order to bring back jobs to economically depressed areas.  Additionally, trade agreements between the U.S. and other low cost countries provide the extra incentive of keeping shipping and logistical costs low.  NAFTA has created duty free zones on imported textiles between the U.S. and several trade partners.  And should the Trans-Pacific Partnership reach an agreement, companies with production in America can take advantage of an expanded pool of countries with tariff reductions, including Vietnam.

Just how difficult is it for a foreign company to establish operations in America?  Not difficult at all.  The U.S. Small Business Administration has provided excellent guidance on the basic steps needed get started.

Businesses in the U.S. are incorporated at the state level, first by registering with the state and then establishing a registered agent with a valid state address to receive legal documents on behalf of the company.  Considerations for the foreign company include which state will be the most attractive in terms of readiness of labor force, land availability, and tax benefits.

International shipping of goods through the U.S. will be regulated at the federal level, requiring specific licenses and permits.  The Department of Commerce’s Trade Information Center and the U.S. Customs and Border Protection provide useful information on U.S. importation and exportation procedures.  Additional considerations include compliance with the Internal Revenue Service, starting by either obtaining an Employment Identification Number or an Individual Taxpayer Identification Number, depending upon the citizenship of the individual establishing the business.  Trade licensing requirements, IRS compliance, and tax credits, including incentives available to businesses through a foreign tax treaty, are all important issues to consider, and if left with any questions, it is always best to consult with a qualified attorney.

Symbol, the struggle for economic power between the United StateThere are numerous benefits for a foreign company to relocate manufacturing operations to the U.S., but there are also important considerations that should be taken into account.  However, navigating the channels of regulations and requirements shouldn’t deter manufacturers from taking advantage of all of that come from setting up shop in America.  Foreign companies are finding that operating in what were traditionally considered to be low cost countries are no longer profitable and are starting to look outside their borders.  And if companies like Keer Group are any indication, for the first time in a long time manufacturing in America is not only a consideration, it’s a serious contender.

ARTICLE BY Ayako Hobbs & Sarah K. Rathke of Squire Patton Boggs (US) LLP
© Copyright 2015 Squire Patton Boggs (US) LLP

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.

ARTICLE BY Richard J. Ferris, Jr., Jennifer F. Walsh & Michelle A. Leeds of Foley & Lardner LLP

© 2015 Foley & Lardner LLP

What Is The FTC Looking at When It Reviews Merger Agreements?

In our last post, we spoke about a proposed merger between office supply chains Office Depot and Staples. As we noted, Office Depot shareholders recently voted to go forward with the acquisition, but the Federal Trade Agreement still has to review the agreement and make a decision, which could make or break the process.

FTC_FederalTradeCommission-SealIn reviewing any merger agreement the Federal Trade Commission—or the Department of Justice, depending on which agency reviews the agreement—an important consideration is the impact the transaction will have on the market. Speaking generally, federal law prohibits mergers that would potentially harm market competition by creating a monopoly on goods or services.

According to the FTC, competitive harm often stems not from the agreement as a whole, but from how the deal will impact certain areas of business. Problems can arise when a proposed merger has too much of a limiting effect based on the type of products or services being sold and the geographic area in which the company is doing business.

With that having been said, most mergers—95 percent, according to the FTC—present no issues in terms of market competition. Those that do present issues are often resolved by tweaking the agreement so as to address any competitive threats. In cases where the reviewing agency and the businesses cannot agree on a solution, litigation may be necessary, but it often isn’t.

Any company that plans on going forward with a merger or acquisition needs to have a clear understanding of the law and the review process. This is especially the case if issues come up regarding competitive threats.

ARTICLE BY Business and Corporate Law Practice Group of McBrayer, McGinnis, Leslie and Kirkland, PLLC
© 2015 by McBrayer, McGinnis, Leslie & Kirkland, PLLC. All rights reserved.

Certain Goods and Services Now Eligible for Importation into the United States from Cuba

The U.S. Department of State published its Section 515.582 List that outlines which goods and services produced by independent Cuban entrepreneurs are eligible for importation into the United States.

In accordance with the Cuban policy changes announced by U.S. President Barack Obama on December 17, 2014, the Office of Foreign Assets Control (OFAC) issued implementing regulations on January 16, 2015. A new Section 515.582 of the Cuban Assets Control Regulations (31 C.F.R. Part 515—the CACR) authorized the importation into the United States of certain goods and services produced by independent Cuban entrepreneurs as determined by the U.S. Department of State. However, Section 515.582 as issued on January 16 did not state what those goods and services actually are. Section 515.582 states the following:

Persons subject to U.S. jurisdiction are authorized to engage in all transactions, including payments, necessary to import certain goods and services produced by independent Cuban entrepreneurs as determined by the State Department as set forth on the State Department’s Section 515.582 List, located here.

Note 1 to §515.582: As of the date of publication in theFederal Register of the final rule including this provision, January 16, 2015, the State Department’s Section 515.582 List has not yet been published on its Web site. The State Department’s Section 515.582 list also will be published in the Federal Register, as will any changes to the list.

Note 2 to §515.582: Imports authorized by this section are not subject to the limitations set forth in §515.560(c).

On February 13, 2015, the Department of State issued its Section 515.582 List, as follows below.

Goods

The goods whose import is authorized by Section 515.582 “are goods produced by independent Cuban entrepreneurs, as demonstrated by documentary evidence” that are “imported into the United States directly from Cuba,” except for goods specified in the following sections/chapters of the Harmonized Tariff Schedule of the United States (HTS):

  • Section I: Live Animals; Animal Products (all chapters)

  • Section II: Vegetable Products (all chapters)

  • Section III: Animal or Vegetable Fats and Oils and Their Cleavage Products; Prepared Edible Fats; Animal or Vegetable Waxes (all chapters)

  • Section IV: Prepared Foodstuffs; Beverages, Spirits, and Vinegar; Tobacco and Manufactured Tobacco Substitutes (all chapters)

  • Section V: Mineral Products (all chapters)

  • Section VI: Products of the Chemical or Allied Industries (chapters 28–32; 35–36, and 38)

  • Section XI: Textile and Textile Articles (chapters 51–52)

  • Section XV: Base Metals and Articles of Base Metal (chapters 72–81)

  • Section XVI: Machinery and Mechanical Appliances; Electrical Equipment; Parts Thereof; Sound Recorders and Reproducers, Television Image and Sound Recorders and Reproducers, and Parts and Accessories of Such Articles (all chapters)

  • Section XVII: Vehicles, Aircraft, Vessels, and Associated Transportation Equipment (all chapters)

  • Section XIX: Arms and Ammunition; Parts and Accessories Thereof (all chapters)

Accordingly, any goods produced by independent Cuban entrepreneurs that do not fall under one of the above-enumerated HTS categories are now eligible for importation. Persons subject to U.S. jurisdiction who engage in import transactions involving goods produced by an independent Cuban entrepreneur pursuant to Section 515.582 must obtain documentary evidence that demonstrates the entrepreneur’s independent status, such as a copy of a license to be self-employed that was issued by the Cuban government or, in the case of an entity, evidence that demonstrates that the entrepreneur is a private entity not owned or controlled by the Cuban government.

“Persons subject to U.S. jurisdiction” means the following for purposes of the CACR:

  • (a) Any individual, wherever located, who is a citizen or resident of the United States;

  • (b) Any person within the United States;

  • (c) Any corporation, partnership, association, or other organization organized under U.S. laws or the laws of any state, territory, possession, or district of the United States; and

  • (d) Any corporation, partnership, association, or other organization, wherever organized or doing business, that is owned or controlled by persons specified in items (a) or (c).

This Section 515.582 List does not supersede or excuse compliance with any additional requirements in U.S. law or regulation, including the relevant import duties as set forth on the HTS.

The Department of State stated that the $400 monetary limit set forth in Section 515.560(c)(3) of the CACR for travelers who bring back goods from Cuba as accompanied baggage would not apply for any goods now authorized for import under Section 515.582.

Services

The authorized services pursuant to 31 C.F.R. §515.582 are services supplied by an independent Cuban entrepreneur in Cuba, as demonstrated by documentary evidence. Persons subject to U.S. jurisdiction who engage in import transactions involving services supplied by an independent Cuban entrepreneur pursuant to Section 515.582 are required to obtain documentary evidence that demonstrates the entrepreneur’s independent status, such as a copy of a license to be self-employed that was issued by the Cuban government or, in the case of an entity, evidence that demonstrates that the entrepreneur is a private entity not owned or controlled by the Cuban government.

Payments

All payment transactions necessary to import goods and services authorized by Section 515.582 are also authorized. We recommend that payment documentation reference Section 515.582 to avoid payment rejection.

The Department of State, in consultation with other federal agencies, reserves the right to update the list periodically. Any subsequent updates will take effect when published on the Web page of the Bureau of Economic and Business Affairs’ Office of Economic Sanctions Policy and Implementation. Updates will also be published in the Federal Register.

BY
Louis Rothberg
Margaret M. Gatti

OF

Morgan, Lewis & Bockius LLP

Analysis of the European Commission’s 2015 Work Programme

Covington_NL

The European Commission’s Work Programme for 2015 falls in line with Juncker’s political guidelines for his Presidency. The overall focus lies on the creation of jobs and economic growth, and the vision is to achieve this through a greener, more digital and more unified European economy. At the same time the Commission has restated its ambition to make regulation leaner and relieve markets from unnecessary administrative burden without compromising the high standards in social, environmental and consumer protection.

The Work Programme stands out from prior ones by its emphasis on discarding a total of 80 proposals that have either not progressed or that are not aligned with the objectives of the new Commission. Amongst the most prominent proposals to be withdrawn are the directive for the taxation of energy products and electricity, and the directive on the reduction of national emissions of certain atmospheric pollutants.

Combined with Juncker’s €315 billion investment plan, however, the Commission’s Work Programme is potentially very good news for companies seeking to invest in cutting-edge infrastructure and technologies, but also for those that simply seek to benefit from the single market. There is a renewed focus on a strong European industrial base and the Commission’s introductory note promises measures to improve its competitiveness.

The Commission also intends to work on further pooling sovereignty in economic governance, for example through a Common Consolidated Corporate Tax Base and a Financial Transaction Tax. The focus here is on providing more transparency and a level playing field, mainly in response to the Luxleaks affair. This might imply a revision of state aid rules as well as of the implementation of Juncker’s investment program.

From a broader perspective, the Commission’s Work Programme emphasizes the importance of trade, with the Transatlantic Trade and Investment Partnership Agreement (TTIP) at the very top of the priority list of bilateral agreements. The Work Programme also mentions the intention to promote stability at Europe’s borders, although it is likely that internal security matters, e.g. on cross-border crime, cybercrime, terrorism and radicalization, will trump any focus on external policies.

The links below open analysis pieces on topics and initiatives linked to particular sectors, focused on by the Commission:

  • Energy and transport, read the overview here
  • Life sciences, read the overview here
  • ICT and telecoms, read the overview here

The European Commission’s full Work Programme for 2015 can be found here.

ARTICLE BY

Sebastian F.A. Vos
OF
Covington & Burling LLP
© 2014 Covington & Burling LLP