International Trade Regulation: Tariffs, WTO, Export Controls & Sanctions

What are the two sets of rules every cross-border sale crosses?

The importing country's rules and the exporting country's rules.

What is a tariff?

A tax on goods when they enter a country, used to raise revenue and protect domestic industries.

Who pays the tariff in the United States?

The importer of record, usually the U.S. company bringing the goods in.

What determines the duty owed on imported goods?

Classification, Valuation, and Origin.

What is the Harmonized Tariff Schedule of the United States (HTSUS)?

A system that assigns a code to every product, which sets the duty rate.

What is an absolute quota?

A hard cap on the quantity of a product that may be imported during a period.

What is a tariff-rate quota (TRQ)?

A set quantity that may enter at a low tariff rate, with higher rates for quantities above that limit.

What is a safeguard in international trade?

Temporary relief measures like extra tariffs or quotas to protect domestic industries from surging imports.

What is dumping?

When a foreign company sells a product in another country at less than its normal value.

What is an antidumping duty?

A duty imposed to raise the import price back to a fair level when dumping injures a domestic industry.

What is a subsidy in the context of international trade?

Financial help from a foreign government to its producers, allowing them to sell abroad more cheaply.

What is a countervailing duty (CVD)?

A duty imposed to offset the value of a subsidy when it injures a domestic industry.

What two agencies share the responsibility for imposing antidumping and countervailing duties in the U.S.?

The Department of Commerce and the U.S. International Trade Commission (ITC).

What is the General Agreement on Tariffs and Trade (GATT)?

An agreement signed in 1947 by 23 countries to reduce tariffs and set common rules for trade in goods.

What are the two core principles of GATT?

Most-favored-nation (MFN) treatment and National treatment.

What was the purpose of the Kennedy Round (1964-1967)?

To produce an early antidumping code.

What was significant about the Uruguay Round (1986-1994)?

It was the most ambitious round in GATT's history, aiming to further reduce trade barriers.

What is the role of the U.S. Customs and Border Protection (CBP) in trade?

To collect tariffs and enforce trade laws when goods clear customs.

What can happen if a domestic industry is materially injured by imports?

The ITC may impose duties or safeguards to protect the industry.

What is the dumping margin?

The difference between the price a foreign company sells a product for in the U.S. and its normal value.

What is the Trade Expansion Act of 1962, Section 232?

A provision allowing the President to impose tariffs for national security reasons.

What is the Trade Act of 1974, Section 301?

A provision allowing the President to respond to unfair foreign trade practices with additional tariffs.

What are non-tariff barriers?

Trade restrictions that do not involve tariffs, such as quotas or regulations.

What is the purpose of trade negotiations in GATT?

To steadily cut tariffs and improve trade relations among member countries.

What happens when a quota is reached?

No more of that product may enter until the next period.

How can importers prepare for potential AD/CVD orders?

By accounting for existing and pending cases in their sourcing decisions.

What did the General Agreement on Trade in Services (GATS) extend trade rules to?

Services and intellectual property.

What major organization was created through the Marrakesh Agreement in 1994?

The World Trade Organization (WTO).

When did the WTO begin operating?

1995.

What is the primary function of the WTO?

To administer trade agreements, host negotiations, and resolve disputes between member governments.

What significant change occurred in dispute settlement between GATT and WTO?

WTO rulings are adopted automatically unless all members agree to reject them, unlike GATT where a losing country could block rulings.

What does the Bureau of Industry and Security (BIS) administer?

The Export Administration Regulations (EAR).

What is considered an 'export' under U.S. regulations?

Shipping items, transferring data, carrying controlled items abroad, or releasing technology to foreign persons in the U.S.

What are dual-use items?

Items that have both civilian and military applications.

What is a deemed export?

Releasing controlled technology to a foreign person in the U.S. is treated as an export to their home country.

What does ITAR stand for?

International Traffic in Arms Regulations.

What does ITAR control?

Items designed for military use, including defense articles, technical data, and defense services.

What is the U.S. Munitions List (USML)?

A list of items covered under ITAR, including firearms, military aircraft, and missiles.

What is required for almost every ITAR export?

State Department approval.

What is the difference in registration requirements between ITAR and EAR?

U.S. companies that manufacture or export defense articles must register with DDTC under ITAR.

What are the three kinds of items covered by ITAR?

Defense articles, technical data, and defense services.

What is the role of the Commerce Department's BIS?

To administer export controls under the EAR.

What happens if a U.S.-origin item is sent from one foreign country to another?

It is considered a reexport and may still require U.S. permission.

What are some examples of dual-use items?

Advanced semiconductors, encryption software, drones, and certain chemicals.

What is the significance of the Entity List maintained by BIS?

It includes prohibited or restricted parties for receiving exports.

What is the Export Control Classification Number (ECCN)?

A designation for controlled items on the Commerce Control List.

What are the four questions to determine if a license is needed for export?

What is the item? Where is it going? Who will receive it? What will it be used for?

What is the primary focus of export rules?

To protect national security and foreign policy.

What is the role of the State Department's Directorate of Defense Trade Controls (DDTC)?

To administer ITAR and control defense-related exports.

What is a key challenge for universities regarding export controls?

Managing access to controlled technology by international students and researchers.

What is the difference in membership commitments between GATT and WTO?

WTO members accept nearly all agreements as a 'single undertaking', while GATT allowed countries to pick and choose agreements.

What is a significant limitation of the WTO's Appellate Body?

It has been unable to hear cases since December 2019 due to issues with the United States.

What is the primary focus of export controls?

Export controls focus on what is being sent.

What do economic sanctions focus on?

Sanctions focus on who you are dealing with and where.

Which department administers U.S. economic sanctions?

The Treasury Department's Office of Foreign Assets Control (OFAC).

What are the two main forms of sanctions programs?

Comprehensive (country-based) sanctions and list-based (targeted) sanctions.

What do comprehensive sanctions prohibit?

Nearly all dealings with an entire country or region.

What is the purpose of list-based sanctions?

To block specific people and companies anywhere in the world.

Who must comply with U.S. sanctions?

All U.S. persons, including citizens, green card holders, and companies organized in the U.S.

What does the 50 Percent Rule state?

A company owned 50% or more by sanctioned parties is treated as sanctioned.

What is strict liability in the context of sanctions?

A company can face civil penalties even if it did not know it was dealing with a sanctioned party.

What does 'no facilitation' mean in export compliance?

A U.S. person may not help or approve a foreign person's deal that would be prohibited if done directly.

What is the role of OFAC in authorizing prohibited activities?

OFAC can authorize activities through general licenses or specific licenses.

What are the three export regimes?

BIS (EAR), DDTC (ITAR), OFAC (Sanctions).

What is the main question addressed by the BIS (EAR)?

What is the item, and where and to whom is it going?

What is the U.S. Munitions List?

A list of military items regulated under ITAR.

What is a typical violation under the EAR?

Shipping a controlled chip to a listed company.

What are antiboycott rules?

U.S. law prohibits participation in foreign boycotts not supported by the U.S.

What are the potential penalties for violations of export controls?

Civil penalties can reach hundreds of thousands of dollars, and criminal penalties can reach $1 million and up to 20 years in prison.

What is the first step a business should take to stay compliant before an international sale?

Classify the item.

What should exporters check regarding the destination of their items?

Whether the country or region is under comprehensive sanctions or heightened export controls.

What is a red flag in export compliance?

Examples include reluctance to disclose end-use, unusual payment terms, or cash payments for expensive equipment.

How long must records be kept under U.S. export rules?

Generally, records must be kept for five years.

What is the main difference between exporters and importers in compliance?

Exporters ask if they are allowed to send items, while importers ask about costs and fair trade.

What does the GATT and WTO provide in the context of trade?

An international framework for trade regulations.