Tim Warren

Imported Apple products should be subject to a withhold release order (WRO) from Customs and Border Protection and be blocked at the ports from entering the U.S. due to possible involvement of Chinese forced labor in their production, said the Campaign for Accountability (CfA) in a Monday filing. The seizure of Apple imports "credibly tied to forced labor would be consistent with" other recent CBP enforcement actions, said the nonprofit. "There is now compelling evidence that Apple iPhones, computers, and other products should be added to the list." CfA believes "there is sufficient evidence to conclude that Apple, the world’s most valuable company, is in violation of the Tariff Act," said Executive Director Michelle Kuppersmith. By issuing a WRO and preventing the importation of Apple products linked to forced labor, CBP "has the power to compel Apple into action beyond its blanket, face-saving denials,” she said. Lawmakers asked Apple in June to work closely with CBP to be sure iPhones and other products are free of forced-labor entanglements. Apple didn't comment Monday but claimed previously its supply chains are free of forced labor. "Apple’s repeated claims to have 'thoroughly investigated' the forced labor issue are suspect, given the evidence that such factory inspections appear to be challenging, if not impossible, in China," CfA said. The group made the filing through CBP's e-Allegations portal to report suspected trade law violations. Recent Department of Homeland Security records said CBP typically accepts or rejects WRO petitions within 30 days.

New legislation and bigger fines were mentioned in a presidential memorandum Tuesday aimed at stopping imports of counterfeit goods through e-commerce platforms. Customs and Border Protection should seize counterfeit goods imported into the U.S. and impose the “maximum fines and civil penalties permitted by law on any e-commerce platform that directs, assists with, or is in any way concerned in the importation into the United States of counterfeit goods,” wrote President Donald Trump. He sought “legislation that would clarify and strengthen the executive branch’s authority and increase its resources to deter and address counterfeit trafficking on e-commerce platforms.” The Department of Homeland Security and attorney general are directed to “develop a legislative proposal to promote the policy objectives” within 120 days. EBay didn't comment Wednesday. Amazon didn't comment on the record.

The Office of Foreign Assets Control fined Comtech Telecommunications $894,111 for exporting warrantied satellite equipment and providing services and training to the Sudan Civil Aviation Authority, OFAC said. The settlement mandates bolstering its sanctions compliance program, including more frequent risk assessments, stricter internal controls and improved compliance training. From June 2014 to October 2015, Comtech indirectly exported the equipment and “facilitated ongoing telephone support” and training despite knowing the ultimate customer was under sanction by the U.S., OFAC said: Company affiliates signed a sales agreement with a Canadian satellite communications equipment manufacturer that was procuring the equipment for a Sudanese end user. The resolution will strengthen "Comtech’s compliance program," said CEO Fred Kornberg. "Trade compliance has been, and will continue to be, a top priority.” The company didn't comment further Friday.

More than a dozen classifications of tech goods from China eligible for "preferential" tariff treatment under the U.S.-Mexico-Canada Agreement on free trade remain subject to applicable Trade Act Section 301 tariffs, Customs and Border Protection ruled. It's dated last Friday and was released by CBP this week. "The country of origin of the subject goods for purposes of Section 301 is China and therefore, subject to the Section 301 duties," said CBP. The goods include hard drives, modems, switchers, routers and power supplies.

Some tech merchandise of Chinese origin sent to Mexico for minimal handling and then exported to the U.S. is eligible for tariff treatment under the U.S.-Mexico-Canada Agreement on free trade, said Customs and Border Protection in a ruling Friday. Jose Fierro, an El Paso customs broker, requested the ruling less than a week after USMCA took effect July 1. The broker said a client contracted with a Mexican maquiladora final assembly facility for logistical services, and inquired if USMCA treatment would apply. Workers at the maquiladora facility will provide sorting, picking and packing services on the goods, which will be exported to the U.S. "in the same condition as they were imported into Mexico," Fierro told CBP. The goods include computing products of various sorts and a broad variety of goods, including smart speakers, Bluetooth headphones, smartwatches and fitness trackers.

The Office of the U.S. Trade Representative is starting Trade Act Section 301 investigations into digital services taxes (DSTs) that were adopted or are under consideration, the agency said Tuesday. Investigations focus on Austria, Brazil, the Czech Republic, EU, India, Indonesia, Italy, Spain, Turkey and the U.K. Comments are due July 15. Evidence "suggests the DSTs are expected to target large, U.S.-based tech companies," USTR said. "The European Commission is considering a DST as part of the financing package for its proposed COVID-19 recovery plan." The EU's delegation to the U.S. didn't comment. The "investigation initially will focus on the following concerns with DSTs: discrimination against U.S. companies; retroactivity; and possibly unreasonable tax policy," the USTR said. While the Information Technology Industry Council "hoped to avoid further escalation of tensions, increasingly-expansive unilateral tax measures have necessitated a stronger response,” said CEO Jason Oxman. “ITI continues to support the U.S. government’s efforts to investigate these complex trade issues." Tariffs are a possible result of Section 301 investigations. The agency previously started a Section 301 investigation into France over such taxes and tariffs that were proposed but not implemented (see 1912030002). “An increasing number of countries have proposed or enacted discriminatory and unilateral digital taxes in recent months, despite ongoing [OECD] negotiation," noted Internet Association Director-Trade Policy Jordan Haas. "The U.S. must continue sending a strong message to trading partners that targeted discriminatory taxes against U.S. firms are not an appropriate solution." Instead of "unilateral DSTs, the world needs a multilateral solution," said U.S. Chamber of Commerce Head-International Affairs Myron Brilliant. "The Chamber supports efforts to address these challenges through multilateral negotiations under the aegis of the OECD. We urge all parties to double down on those negotiations.”

Duplicates of customs broker records may be stored on servers outside the U.S. as long as the originals are stored on U.S. servers, Customs and Border Protection said. The March 10 ruling was disclosed by a stakeholder last week and confirmed to us by the recipient. The ruling requested by Craig Seelig at WiseTech Global examined WiseTech's use of a foreign server in Australia as a secondary site. The primary site would be in the U.S. CBP requires that for broker records stored on a server, the server must be located in the customs territory of the U.S., the agency replied. “This is where CBP has jurisdiction to issue a summons and inspect records.” There’s “no rule applicable to duplicate records,” the agency said. “It seems logical then that once the recordkeeping regulations are met, including 19 C.F.R. § 111.23(a), requiring that records be retained at any location within the customs territory of the United States, that duplicates of these records may be maintained outside the territory of the United States." Grunfeld Desiderio lawyer Alan Klestadt, who told a webinar of the ruling, said that, with a coming update to customs broker regulations, more cloud-based recordkeeping could come to be OK’d.

Customs and Border Protection found “success and value” from its recent “proof of concept” using blockchain to track intellectual property license information, said Vincent Annunziato, director of CBP’s business transformation office, in the agency's report. This second test increased complexity over the previous POC, Wednesday's study said. “The Business Transformation and Innovation Division (BTID) recommends moving forward with maturing these tests as we take on the mission of re-engineering the supply chain,” Annunziato wrote. The simulation "demonstrated the value of emerging standards in Blockchain, Verifiable Credentials, Authorization Capabilities, Encrypted Data Vaults, Decentralized Identifiers and other emerging global open standards,” the agency said. Trade participants used the standards “to register a product’s physical features, e.g., trademark locations, stitching, logo placement, along with information related to organizations licensed to manufacture and import a product.” There are hurdles. “Although license holders may have restrictive contracts about the distribution of licensed goods, a violation of those contracts [is] not enforceable by CBP,” it said. “What CBP needs to verify at import is not whether or not there is a license to 'import' but rather whether or not the IP was legitimately licensed.” An issue emerged in evaluation of "a public-facing web page where a consumer, at the point of making a purchase, can scan in a product code and get information about whether or not that specific product is a legitimate, licensed good,” CBP said. "There was no mechanism to prevent bad actors from re-using valid serialized [global trade identification numbers] on invalid goods, leaving customers to believe they had a valid product when in fact it was a counterfeit.” The POCs "have been vital in not only shaping the global standards being pursued at the W3C" consortium and by the Internet Engineering Task Force "but have also led to a new area of standards related to increasing trust and verifiability on the Internet," CBP said. "This is demonstrated by W3C Membership's broad support for the creation of the Verifiable Credentials Working Group and the Decentralized Identifier Working Group citing" Department of Homeland Security, CBP and "industry involvement as a key motivator for the creation and investment in these global standards setting groups," said CBP: Plans are being "pursued for launching more global standards groups to take the remaining technologies identified in this PoC."

The Commerce Department proposed new procedures for reviewing transactions, including imports, that involve information and communications technology and services seen as a potential national security threat, it said Tuesday. The proposed rules are aimed at implementing President Donald Trump's May executive order, which directed Commerce to issue regulations to bar some foreign companies' technology from U.S. networks. The order was seen potentially targeting Chinese's Huawei and ZTE (see 1905150066). Commerce proposes "a case-by-case, fact-specific approach to determine those transactions that meet the requirements" in the EO. Parties subject to it will be expected to "maintain records related to such transaction in a manner consistent with the recordkeeping practices used in their ordinary course of business for such a transaction," Commerce says in Wednesday's Federal Register. Transactions are "any acquisition, importation, transfer, installation, dealing in, or use of any information and communications technology or service." Transactions subject to the reviews are any that involve people or property under U.S. jurisdiction, plus "any property in which any foreign country or a national thereof has an interest," it says. Transactions "initiated, pending, or completed" after May 15 would be subject to review. Comments are due Dec. 27 in docket DOC-2019-0005 via Regulations.gov. The Telecommunications Industry Association “has long maintained that supply chain risk management is best addressed by public-private partnerships and consensus-based, industry-driven standards, but there is a place for targeted and careful government intervention,” said CEO David Stehlin. “Today’s rules exemplify this approach and, through the invitation of comments from industry, represent a clear step forward towards a public-private effort." USTelecom is glad Commerce accepted “our recommendation to seek industry comment before establishing interim final rules, a process that should reduce the risk of unintended consequences,” said Senior Vice President-Cybersecurity Robert Mayer. “We are especially encouraged the Department has already adopted a process to determine whether a transaction meets the requirements.” The Information Technology Industry Council appreciates Commerce's “wise decision to issue proposed rather than final rules to maximize the ability of the Department to account for crucial industry feedback,” said CEO Jason Oxman. “The tech industry will continue to engage with the White House, Commerce, and other stakeholders to ensure this process furthers important national security imperatives while allowing U.S. innovation to thrive as it is finalized.”

DOJ is pursuing criminal charges against Aventura Technologies for selling Chinese-origin goods falsely labeled U.S.-origin, the U.S. Attorney’s Office Eastern District of New York announced. Seven current and former employees were named. "Aventura imported networked security products from [Chinese] manufacturers with known cybersecurity vulnerabilities, and resold them to U.S. military and other government installations while claiming that they were American-made," DOJ alleged Thursday. "The government intercepted and covertly marked numerous" such shipments, it alleged. Some apparently were "pre-marked with Aventura’s logo and the phrase 'Made in USA,' accompanied by an American flag." DOJ said the company "made upwards of $88 million, including over $20 million in federal government contracts" over a decade, "while claiming that it was manufacturing its products at its headquarters in Commack," New York. The company didn't comment.