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USTR Releases Exclusive Request Process for Chinese Products Subject to Section 301 Tariffs - Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP
By Arthur W. Bodek   /  Joseph M. Spraragen

In a July 6th press release, the Office of the U.S. Trade Representative (USTR) announced an application process for product exclusions from the additional Section 301 tariffs imposed by the United States on certain products imported from China. These tariffs were imposed in response to allegations of unfair trade practices by China related to the forced transfer of U.S. technology and intellectual property.

By way of background, there are three Section 301 retaliatory duty lists that are each at various stages in the administrative pipeline:

  1. List 1 took effect on July 6th - The 818 tariff lines, which are subject to an additional 25% tariff, cover largely machinery, parts and components of Chapters 84 and 85 of the HTSUS, as well as a wide range of vehicles and vehicle parts and miscellaneous other industrial products. List 1 can be accessed at: https://ustr.gov/sites/default/files/enforcement/301Investigations/List%201.pdf.
     
  2. List 2 (not yet in effect) – The proposed List 2 (which would also be subject to an additional 25% tariff) includes certain chemicals, plastics, metal articles, as well as additional articles of machinery and transportation (and other miscellany). List 2 can be accessed . List two is currently under consideration in a notice and comment process (details).
     
  3. List 3 – The USTR announced that it is preparing a List 3 which, if implemented, would be subject to a 10% tariff.

In its July 6th press release, the USTR announced a process for interested persons to request the exclusion of a particular product from the 301 additional tariffs (i.e., List 1 at this point). The USTR will consider requests for the exclusion of a particular product within a subheading (but not a subheading as a whole).

A separate Federal Register notice outlines the criteria and process for product exclusion requests (which are very different from those that apply to requests for exclusion from the additional tariffs recently assessed under Section 232). Factors that will be considered include:

  • whether a product is available from a source outside of China;
  • whether the additional duties would cause severe economic harm to the requestor or other U.S. interests; and,
  • whether the particular product is strategically important or related to Chinese industrial programs including “Made in China 2025”.

The exclusion process is characterized by the following dates and features:

  • Requests may be filed until October 9, 2018.
  • The public will have 14 days from the posting of a request to file responses (in support or in opposition).
  • Interested persons will have 7 days to reply to any responses (after the close of the 14-day period).
  • Exclusions will be effective for one year from publication and will apply retroactively to July 6, 2018.
  • The exclusions will be made on a product-basis (and will apply to all importations of the product, not just those of the requestor).

Please do not hesitate to contact our office for additional details on the 301 exclusion process as well as to discuss strategies for navigating the current environment of additional tariffs assessed by the U.S. and retaliatory tariffs being assessed by U.S. trade partners.

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USTR Announces Third Proposed List for Section 301 Tariffs
In response to China’s imposition of retaliatory duties on goods from the United States, the Office of the United States Trade Representative (USTR) has released a third proposed list of tariff items to become subject to an additional 10% duty under Section 301 of the Trade Act of 1974.

The first list (“List 1”) covers 818 tariff lines. List 1 became effective on July 6, 2018. Goods covered on List 1 are now subject to an additional 25% duty. List 1 can be accessed at:

https://ustr.gov/sites/default/files/enforcement/301Investigations/List%201.pdf

The second proposed list (“List 2”) consists of 284 tariff items and is currently in the notice and comment phase. Upon becoming final, items covered by List 2 would become subject to an additional 25% duty. List 2 can be accessed at: https://ustr.gov/sites/default/files/enforcement/301Investigations/List%202.pdf

On July 10, 2018, USTR released a third proposed list (“List 3”) covering over 6,000 tariff lines that, if implemented, would subject these goods to an additional 10% duty. According to USTR, this list targets imports from China having approximately $200 billion in annual trade value. List 3 products include meat, fish and foods; tobacco; chemicals; rubber goods; leather (but not footwear); luggage and bags; certain apparel items; articles of wood (including paper); textiles; carpets; cutlery; metals; machinery; motor vehicle parts; and many other items. The full proposed List 3 is available at:

 

https://ustr.gov/sites/default/files/301/2018-0026%20China%20FRN%207-10-2018_0.pdf

Like Lists 1 and 2, proposed List 3 will be subject to comment process prior to being finalized. The critical dates of the comment process are as follows:

  • Requests to testify at the public hearing must be filed by July 27, 2018
  • Written comments must be filed by August 17, 2018
  • The public hearing will take place August 20-23, 2018
  • Rebuttal comments will be due on August 30, 2018

Importers and other interested parties should consider filing comments and appearing at the public hearing to make the case that particular tariff items should be excluded from List 3. Following the comment period for List 1, over 500 tariff lines were removed from the original proposed list. USTR requests that commenters address specifically whether imposing increased duties on a particular tariff item would be practicable or effective to obtain the elimination of China’s current (adverse) acts, policies, and practices that were identified in USTR’s initial Section 301 determination, and whether maintaining or imposing additional duties on a particular listed product would cause disproportionate economic harm to U.S. interests, including small or medium-sized businesses, and consumers.

In the event that List 3 is implemented, we anticipate that there will be a process for applying for product-specific exclusions, as there is currently for List 1 items. (For details, see
http://www.gdlsk.com/knowledge/519-ustr-releases-exclusion-request-process-for-chinese-products-subject-to-section-301-tariffs.html).

We are available to discuss options for responding to these developments such as classification reviews, comment submissions to USTR, exclusion requests, and valuation strategies. If you have specific questions, please contact our office.


Pennsylvania Man Indicted for Trafficking Turtles - Department of Justice

A federal grand jury sitting in Philadelphia indicted David Sommers, 62, of Levittown, Pennsylvania for trafficking in protected diamondback terrapins. The indictment charges Sommers with smuggling turtles and submitting false records for a package shipped to Canada and four violations of the Lacey Act for trafficking over 3,500 turtles in interstate commerce. 

The USFWS seized over 3,400 diamondback terrapin hatchlings from Sommers’ house in October while executing a search warrant. They were able to coordinate with biologists and return the hatchlings back into their New Jersey native habitat.

The indictment alleges that throughout 2017 Sommers poached diamondback terrapins and their eggs from coastal marshes in New Jersey. He would then illegally sell the turtles in violation of the Lacey Act. The Lacey Act is the nation’s oldest wildlife trafficking statute and prohibits the sale of wildlife that had been taken in violation of law. The indictment also charges that in 2014, Sommers smuggled turtles to Canada and falsely labeled the package by claiming it contained a book. 

Acting Assistant Attorney General Jeffrey H. Wood for the Justice Department’s Environment and Natural Resources Division, U.S. Attorney for the Eastern District of Pennsylvania William M. McSwain, and Acting Assistant Director Edward Grace of the Office of Law Enforcement for the U.S. Fish and Wildlife Service (USFWS) announced the indictment today.

“The distinctive coloration and pattern of the diamondback terrapin make it highly susceptible to illegal poaching and smuggling,” said Acting Assistant Attorney General Wood. “The Department of Justice will continue to work with its law enforcement partners to prosecute those who break our nation’s wildlife protection statutes for the sake of illegal profit.”  

“Wildlife trafficking decimates many species worldwide and undermines the rule of law,” said U.S. Attorney William M. McSwain. “Through the ongoing collaboration between ENRD, USFWS, and my Office, we have worked hard to stop wildlife trafficking dead in its tracks. Today’s indictment reaffirms our commitment to ending this destructive practice.” 

"It is one of the highest priorities for special agents of the U.S. Fish and Wildlife Service, Office of Law Enforcement to investigate transnational criminal organizations targeting our native wildlife species. 3,400 protected turtles, native to the United States were interdicted and returned to the wild with cooperation from other federal, state and local agencies to support imperiled wild populations,” said Acting Assistant Director Edward Grace of USFWS’s Office of Law Enforcement. 

Diamondback terrapins (Malaclemys terrapin) are a semi-aquatic species of turtle native to brackish waters in eastern and southern United States. They are not found in the wild in Pennsylvania, but have a dwindling habitat range in neighboring New Jersey. The terrapins are prized in the reptile pet trade for their unique, diamond-shaped shell markings. The turtles are protected under New Jersey law and by an international treaty, the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES).

The United States, Canada, and approximately 181 other countries are signatories to CITES, which provides a mechanism for regulating international trade in species whose continued survival is threatened by such trade. Due to declining populations, CITES listed the diamondback terrapin as threatened in 2013, and New Jersey banned collecting, possessing, and transporting them in 2016.   

If convicted, Sommers faces a maximum sentence of 10 years incarceration on the smuggling charge and five years for the Lacey Act violations. The indictment also seeks to forfeit from Sommers all the turtles involved in the investigation. 

An indictment is merely an allegation, and the defendant is presumed innocent until proven guilty beyond a reasonable doubt in a court of law. 

The USFWS conducted the investigation with assistance from the New Jersey Division of Fish and Wildlife. The government is represented by Trial Attorney Ryan Connors of the Environmental Crimes Section and Assistant U.S. Attorney Joan Burnes of the U.S. Attorney’s Office for the Eastern District of Pennsylvania.


National Health Care Fraud Takedown Results in Charges Against 601 Individuals Responsible for Over $2 Billion in Fraud Losses
- Department of Justice

Largest Health Care Fraud Enforcement Action in Department of Justice History Resulted in 76 Doctors Charged and 84 Opioid Cases Involving More Than 13 Million Illegal Dosages of Opioids

Attorney General Jeff Sessions and Department of Health and Human Services (HHS) Secretary Alex M. Azar III, announced today the largest ever health care fraud enforcement action involving 601 charged defendants across 58 federal districts, including 165 doctors, nurses and other licensed medical professionals, for their alleged participation in health care fraud schemes involving more than $2 billion in false billings. Of those charged, 162 defendants, including 76 doctors, were charged for their roles in prescribing and distributing opioids and other dangerous narcotics. Thirty state Medicaid Fraud Control Units also participated in today’s arrests. In addition, HHS announced today that from July 2017 to the present, it has excluded 2,700 individuals from participation in Medicare, Medicaid, and all other Federal health care programs, which includes 587 providers excluded for conduct related to opioid diversion and abuse.

Attorney General Sessions and Secretary Azar were joined in the announcement by Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division, Deputy Director David L. Bowdich of the FBI, Assistant Administrator John Martin of the Drug Enforcement Administration (DEA), Deputy Inspector General Gary Cantrell of the HHS Office of Inspector General (OIG), Deputy Chief Eric Hylton of IRS Criminal Investigation (CI), Centers for Medicare and Medicaid Services (CMS) Deputy Administrator and Director of the Center for Program Integrity Alec Alexander and Director Dermot F. O’Reilly of the Defense Criminal Investigative Service (DCIS).

Today’s enforcement actions were led and coordinated by the Criminal Division, Fraud Section’s Health Care Fraud Unit in conjunction with its Medicare Fraud Strike Force (MFSF) partners, a partnership between the Criminal Division, U.S. Attorney’s Offices, the FBI and HHS-OIG. In addition, the operation includes the participation of the DEA, DCIS, IRS-CI, Department of Labor, other various federal law enforcement agencies, and State Medicaid Fraud Control Units.

The charges announced today aggressively target schemes billing Medicare, Medicaid, TRICARE (a health insurance program for members and veterans of the armed forces and their families), and private insurance companies for medically unnecessary prescription drugs and compounded medications that often were never even purchased and/or distributed to beneficiaries. The charges also involve individuals contributing to the opioid epidemic, with a particular focus on medical professionals involved in the unlawful distribution of opioids and other prescription narcotics, a particular focus for the Department. According to the CDC, approximately 115 Americans die every day of an opioid-related overdose.

“Health care fraud is a betrayal of vulnerable patients, and often it is theft from the taxpayer,” said Attorney General Sessions. “In many cases, doctors, nurses, and pharmacists take advantage of people suffering from drug addiction in order to line their pockets. These are despicable crimes. That’s why this Department of Justice has taken historic new steps to go after fraudsters, including hiring more prosecutors and leveraging the power of data analytics. Today the Department of Justice is announcing the largest health care fraud enforcement action in American history. This is the most fraud, the most defendants, and the most doctors ever charged in a single operation—and we have evidence that our ongoing work has stopped or prevented billions of dollars’ worth of fraud. I want to thank our fabulous partners with the FBI, DEA, our Health Care Fraud task forces, HHS, the Defense Criminal Investigative Service, IRS Criminal Investigation, Medicare, and especially the more than 1,000 federal, state, local, and tribal law enforcement officers from across America who made this possible. By every measure we are more effective at finding and prosecuting medical fraud than ever.”

“Every dollar recovered in this year’s operation represents not just a taxpayer’s hard-earned money—it’s a dollar that can go toward providing healthcare for Americans in need,” said HHS Secretary Azar. “This year’s Takedown Day is a significant accomplishment for the American people, and every public servant involved should be proud of their work.”

According to court documents, the defendants allegedly participated in schemes to submit claims to Medicare, Medicaid, TRICARE, and private insurance companies for treatments that were medically unnecessary and often never provided. In many cases, patient recruiters, beneficiaries and other co-conspirators were allegedly paid cash kickbacks in return for supplying beneficiary information to providers, so that the providers could then submit fraudulent bills to Medicare. Collectively, the doctors, nurses, licensed medical professionals, health care company owners and others charged are accused of submitting a total of over $2 billion in fraudulent billings. The number of medical professionals charged is particularly significant, because virtually every health care fraud scheme requires a corrupt medical professional to be involved in order for Medicare or Medicaid to pay the fraudulent claims. Aggressively pursuing corrupt medical professionals not only has a deterrent effect on other medical professionals, but also ensures that their licenses can no longer be used to bilk the system.

“Healthcare fraud touches every corner of the United States and not only costs taxpayers money, but also can have deadly consequences,” said FBI Deputy Director Bowdich. “Through investigations across the country, we have seen medical professionals putting greed above their patients’ well-being and trusted doctors fanning the flames of the opioid crisis. I want to thank the agents, analysts and our law enforcement partners in every field office who work each and every day to stop these criminals and hold them accountable for their actions.”

“DEA is committed to ending the opioid crisis occurring in our communities and preventing prescription drug misuse,” said DEA Assistant Administrator Martin. “DEA will continue to work with our partners every day to protect our citizens while ensuring that patients have adequate access to these critical medications.”

“This year’s operations, focusing on opioid-related schemes, spotlight the far-reaching impact of health care fraud,” said HHS Deputy Inspector General Cantrell. “Such crimes threaten the vitally important Medicare and Medicaid programs and the beneficiaries they serve. Though we have made significant progress in our fight against health care fraud; our efforts are not complete. We will continue to work with our partners to protect the health and safety of millions of Americans.”

“It takes a special kind of person to prey on the sick and vulnerable as happened in many of these health care fraud schemes,” said Deputy Chief Hylton. “Medical professionals and others callously placed individuals and vital healthcare services in harm’s way simply because of greed. IRS-CI special agents continue to work side-by-side with other federal, state and local law enforcement officers to uncover these schemes and hold these criminals accountable for their actions.”

“CMS makes it a top priority to protect the health and safety of millions of beneficiaries who depend on vital federal healthcare programs,” said Alec Alexander, deputy administrator and director of the Center for Program Integrity. “CMS’ Center for Program Integrity collaborates closely with our law enforcement partners to safeguard precious taxpayer dollars. Under Administrator Seema Verma, we will continue to strengthen this partnership with law enforcement in order to ensure the integrity and sustainability of these essential programs that serve millions of Americans.”

“Heath care fraud wounds our service members and veterans alike, as they rely upon and rightfully expect uncompromised care through the Department of Defense’s TRICARE Program,” said DCIS Director O’Reilly. “Investigations that culminated in enforcement actions over the past several days underscore the steadfast commitment of the Defense Criminal Investigative Service and our investigative partners to vigorously investigate fraud impacting TRICARE. We remain vigilant in our efforts to ensure the high standards of care our service members, military retirees, and their dependents deserve while safeguarding American taxpayer dollars.”

The Medicare Fraud Strike Force operations are part of a joint initiative between the Department of Justice and HHS to focus their efforts to prevent and deter fraud and enforce current anti-fraud laws around the country. The Medicare Fraud Strike Force operates in 10 locations nationwide. Since its inception in March 2007, the Medicare Fraud Strike Force has charged over 3,700 defendants who collectively have falsely billed the Medicare program for over $14 billion.
 
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