Analyst Insight: The last few years in trade have been turbulent to say the least. We’ve seen unprecedented and rapid-paced sanctions put into action. Many companies have been left scrambling to figure out how to comply with new regulations and whether they can export to, or provide services to, their customers. Following are some takeaways for planning for the next year.
Countries around the world have continued to add Russian and Belarusian companies and individuals to their restricted party lists. Shippers and any company with operations in Russia, Belarus and certain regions in Ukraine will continue to monitor activity in these regions in order to abide by current and evolving regulations. In addition, oil continues to be a focus for punitive action. In early December, 2022, the European Union and G7 adopted a price cap of $60 per barrel on Russian crude oil. The price cap is clearly a way to limit revenue to Russia. Ship-to-ship transfers of oil will happen as a way to evade this measure, but it’s yet to be seen how that will affect oil prices and transportation costs, as well as those of products requiring transport — going forward.
Companies should continue to be wary of diversion of their products to Russia. For instance, Azu International, a Turkish company, is keeping a steady supply of U.S. computer and IT equipment to Russia. While they’re not on a restricted party list, your company could be found in violation if unlicensed or unauthorized shipments are sold to this company and then shipped on to Russia.
Continued sanctions against China are having an impact on traders on multiple fronts. In December, the Office of the U.S. Trade Representative announced a nine-month extension of 352 product exclusions from duties under Section 301 of the Trade Act of 1974. There has been no update from the Biden Administration on the status of the Section 301 tariffs going forward. Companies, especially smaller ones, continue to pivot their operations based on duties for Chinese-manufactured products. It doesn’t appear that there will be any change to these tariff-based actions before the next election in 2024.
The area of supercomputer regulations has to be one of the most confusing and unprecedented for companies to digest. Published and effective on the same date, regional stability controls specific to China for certain items on the Commerce Control List were issued by the Bureau of Industry and Security (BIS). The following new export control classification numbers (ECCNs) have been added: 3A090, 3B090, 4A090 and 4D090. But all items (including those classified as EAR99, which are low-technology consumer goods that often don’t require a license) are impacted by these regulations that could have an “end use” in a semiconductor fabrication facility in China that develops or produces integrated circuits meeting or exceeding certain technology parameters. BIS also answers frequently asked questions about the definition of a semiconductor fabrication facility, along with other information.
Outlook: Exporters should have a company-wide trade compliance training program in place that provides an overview of high-risk areas. Training seminars and conferences such as the BIS Update and U.S. Customs Symposiums are great ways to stay updated, But companies should also invest in training that’s specific to their industries, products and markets. Trade compliance training is a company’s greatest ally.
Timely, incisive articles delivered directly to your inbox.