Although it is impossible to tell whether the new Trump administration will follow through on its campaign promises to alter the landscape of U.S. trade with foreign countries, businesses should realize that the new administration’s power to do so is broad and should act accordingly in the coming weeks and months to take steps to limit the impact that these changes could have on their business and foreign trade. Of course, it remains possible that the new administration may soften or change its position with respect to the implementation of some of these promises.
1. Trade Agreements
At various times throughout the campaign, President-elect Trump promised to withdraw from the WTO, to terminate NAFTA, and to impose retaliatory tariffs on China and Mexico. Section 301 of the Trade Act of 1974, 19 U.S.C. § 2411, gives the President, acting through the United States Trade Representative, the unilateral power, among other things, to “suspend, withdraw, or prevent the application of [and] benefits of trade agreement concessions” and to “impose duties or other import restrictions” without further authorization from Congress.
Unapproved trade agreements, including the Trans-Pacific Partnership (“TPP”) and the Trans-Atlantic Trade and Investment Partnership (“T-TIP”), are likely now dead on arrival. At this point, the Obama administration has yet to submit the implementation bill required to start the clock on Congressional action on the TPP under fast track, so the fate of the TPP will be decided by the next Congress and the Trump administration. If the Trump administration does not submit to Congress a draft implementation bill, as required by fast track, the TPP will not go into effect.
2. Iran Sanctions
President-elect Trump repeatedly expressed his desire while campaigning to back out from the Joint Comprehensive Plan of Action (“JCPOA”), otherwise simply known as the Iran nuclear deal. Since the United States entered into the JCPOA by executive action, the Trump administration can withdraw from the deal unilaterally and immediately, and there is a good chance that it will.
If that happens, we can count on the regulatory changes adopted by the Office of Foreign Assets Control (“OFAC”) to implement the JCPOA to be reversed. These include General License H, which permits foreign subsidiaries of U.S. companies to engage in trade with Iran. They also include the relaxed policy on civil aviation sales to Iran.
The issue here will be both the time frame for such reversal and whether there will be any grandfathering in place. Historically, OFAC has been slow to act and has included limited grandfathering provisions which either allow certain agreements with the sanctioned country to proceed or provide a wind-down period to terminate those agreements. Even with these possibilities, U.S. businesses selling civil aircraft to Iran and permitting foreign subsidiaries to trade with Iran should, at a minimum, review their activities and ensure they have adequate protection for their business interests in the event of a change.
3. Cuba Sanctions
President-elect Trump also vowed to roll back the Obama administration’s actions that have relaxed many of the sanctions against Cuba. This would include the removal of Cuba from the list of state sponsors of terrorism.
The removal of Cuba from the list of state sponsors of terrorism was largely symbolic, so putting it back on the list will not have significant impact.
- Under section 40 of the Arms Export Control Act, 22 U.S.C. § 2780, any country put on the list of state sponsors of terrorism is automatically subject to an arms embargo. Of course, even after Cuba was removed from the list, there was no chance any arms shipments from the U.S. to Havana would be approved in the foreseeable future.
- Section 6(j) of the defunct Export Administration Act, 50 U.S.C. App § 2405, requires a license for exports to state sponsors if the export could make a “significant contribution to the military potential of such country” or if it could “enhance the ability of such country to support acts of international terrorism.” And, in those instances, Congress must be given notice of such exports thirty days in advance. None of the changes in the Cuba sanctions contemplated any such exports.
- Section 7205 of the Trade Sanctions Reform and Export Enhancement Act, imposes a license requirement for shipping those goods to a sanctioned country if that country is also on the state sponsors of terrorism list. However, that section specifically identifies Cuba as a state sponsor of terrorism and imposes the license requirement on exports of agricultural products, medicines and medical products to Cuba. So, removing Cuba from the terrorism list did not eliminate the need for exporters to Cuba to continue to file the export notifications required to utilize License Exception AGR for TSRA exports to Cuba.
Even if adding Cuba back to the list would not have much impact on trade relations with Cuba, the new Trump administration could undo other recent revisions, such as the general licenses for travel and favorable licensing policy for certain exports such as telecommunications equipment, civil aviation equipment, and certain items in support of Cuba’s private sector. All of these have a good chance of reversal. The regulations permitting entry into executory contracts subject to license approval could also be revoked.
Certainly those planning to use the general travel licenses should do so as soon as possible. The changes in licensing policy mean that businesses should also seek licenses for contemplated exports to Cuba as soon as possible, with the understanding that those licenses might be terminated at the same time the favorable licensing policy is reversed.
At the same time that the new Trump administration is likely to impose stricter controls on Cuba, it may well loosen sanctions on Russia, Cuba’s longtime ally and supporter. Vladimir Putin has strengthened Russian ties with Cuba and even called for lifting of the U.S. embargo on Cuba. Although President-elect Trump is not likely to heed this request from Putin, there is a stronger chance that Trump’s call for better relations with Russia will lead to the lifting or loosening of the sanctions on the Crimean territory as well as removals from, or elimination of, the Sectoral Sanctions Identifications List. Restrictions on oil-related exports to Russia could be lifted as well. Putin supporters that were placed on the List of Specially Designated Nationals and Blocked Persons could also be removed.
We will continue to monitor and provide updates regarding developments in the new administration affecting trade and foreign policy.