China Expands Technology Export Controls: Fighting back on TikTok and Putting Your R&D at Risk

On August 28, 2020, China took its own swing in the fight over TikTok. The blow, however, may land right in the middle of U.S.-China technology research, collaboration, and innovation. New export regulations may require licenses from the Chinese government before researchers in China may share their technological advances with colleagues, counterparts, or customers in the United States. Continue Reading

Export Control HR Pitfalls To Avoid When Hiring

Hiring employees does not usually call to mind international trade compliance obligations. However, together U.S. export controls and anti-discrimination laws create a web that is overlooked or misunderstood by many types of employers of all sizes across many industries. Anti-discrimination laws prohibit unlawful citizenship status restrictions when hiring, and U.S. export controls prohibit disclosing controlled information to foreign nationals without authorization. Together, these law limit acceptable job descriptions and hiring practices. Continue Reading

UPDATE: National Security Meets Teenage Dance Battles: U.S. Increases Pressure on ByteDance Sale of TikTok

The Takeaway: Severe restrictions on ByteDance’s Sale of TikTok should be a warning to media and tech companies with foreign ownership, particularly Chinese investment, to know your risks and mitigate them before the government comes knocking. Continue Reading

The Professional Services Firm as Foreign Agent: Notable FARA Advisory Opinions

The U.S. Department of Justice has released a series notable advisory opinions outlining how some typical activities of law firms, consultants, and corporate legal departments may require registration under the Foreign Agents Registration Act (FARA). Some of the more interesting opinions are summarized here: Continue Reading

National Security Meets Teenage Dance Battles: Trump Issues Executive Orders Impacting TikTok and WeChat Business in the U.S.

On August 6, 2020, Trump issued two separate executive orders that will severely restrict TikTok and WeChat’s business in the United States.  For weeks, the media has reported on Trump’s desire to “ban” TikTok with speculation about the legal authority to do so.  We break down the impact of the Orders below. Continue Reading

Clearing the Air: FinCEN Guidance May Help Banks Find Their Way in the Field of Hemp Financing

On June 29, 2020, the Financial Crimes Enforcement Network (FinCEN) published updated guidance intended to “enhance the availability of financial services” for the hemp industry (the Guidance).  Even though the Agriculture Improvement Act of 2018 legalized hemp[1] at the federal level, some banks have hesitated to provide financing to the hemp industry because they are uncertain of their obligations under the Bank Secrecy Act or Anti-Money Laundering regulations (BSA/AML).  The Guidance was published to clarify those obligations, and follows closely on the new National Credit Union Administration guidance for federally-chartered credit unions issued on June 20, 2020.  Continue Reading

A Trade War on Two Fronts: U.S. Considers More Tariffs on European Goods

Opening Salvos: The Proposed Tariffs

On June 26, 2020, the U.S. Trade Representative (USTR) published a notice that it is considering new tariffs on exports such as olives, coffee, beer, gin, and trucks coming into the United States from France, Germany, Spain, and the United Kingdom.[1] The list of potential targets also includes various types of bread, pastries, cakes, and other baked products. That new list of goods may face duties of up to 100%, potentially doubling the price of certain goods [2] The announcement caused European stocks to fall, particularly for shares of beverage companies, luxury goods companies, and truck makers.

If the measure goes into effect, it may effect $3.1 billion dollars’ worth of imports[3] and threaten to exacerbate trade tensions that have been steadily on the rise following a series of tariffs that the administration imposed this year on EU goods. Those previous tariffs were imposed in retaliation for EU measures to increase digital taxation that could adversely impact major American tech companies.

A Devious Weapon: “Carousel Retaliation”

The U.S. may apply its new tariffs in a shifting spread across industries, moving the tariffs from one product group to another in order to cause disruption and uncertainty across business and supply chains,[4] a strategy known as “carousel retaliation.” That strategy is not unique to Europe, as the administration also has  discussed increased tariffs on China[5], Canada[6], India, South Korea, and at least 27 other countries.[7]

The War Map: Larger Trade Context

Your bread, wine, and gin may be pricier because of airplanes. For years the United States and EU countries have sparred before the World Trade Organization over prohibited subsidies to European and American airlines.

In December 2019, the WTO found that Germany, France, Spain and the U.K. continued to provide prohibited subsidies and authorized the United States to impose retaliatory tariffs.[8] At the same time, the WTO is considering whether EU member states may impose tariffs on $11.2 billion worth of U.S. goods in retaliation for illegal U.S. subsidies to Boeing.[9]

This dispute is not solely the work of Trump administration; it has been ongoing for the past 14 years, even in the midst of previous negotiations between the two parties for a trade and investment partnership.[10] What makes this situation unique is the contentious nature of the trade discussions, additional issues surrounding digital taxation and the global pandemic which threatens both economies.

According to EU Trade Commissioner Phil Hogan, the US has stepped back from settlement talks in recent weeks, which may prompt the EU to move forward with their own punitive measures.[11] Over the course of the year, the increased tit-for-tat by each party has only made the relationship more contentious, as evidenced by the fact that the U.S. pulled out of discussions on taxing the digital economy. That caused EU officials to threaten an even more aggressive stance on national and EU-wide digital levies, which experts warn would only draw further ire from the United States, leaving both parties in an escalating spiral of retaliation. [12]

Collateral Damage: The Effects on Your Business

Trade experts fear the escalation could lead to an all-out trade war which, with the damaging strategy of carousel retaliation, would injure all parties’ economies at a time when they have already been laid low by the effects of COVID-19. The USTR announcement also comes on the heels of the European Union announcing potential bans[13] on American citizens from travel to the European Union, due to the U.S. government’s failure to adequately contain the spread of COVID-19, and the U.S. announcement of increased restrictions on the issuance and entry of immigrant visas for workers entry into the United States, despite objections by major tech companies and other American businesses.[14] Despite this, the European Commission is still optimistic about the prospects of a global discussion involving the United States.[15]

A number of American companies have pushed back against the proposed tariffs. Following the announcement by USTR this week, the Distilled Spirits Council issued a statement condemning the actions, which they feel will have a negative impact on the distilled spirits sector, American companies, and hospitality jobs which have been particularly effected in the wake of COVID-19.[16]

Experts estimate that, so far, increased tariffs have cost U.S. companies at least $1.7 trillion in stock prices.[17] Although those studies were also conducted in the backdrop of a global pandemic, experts agree that increased volatility in the market serves little benefit in the current economic climate.

For now, it remains to be seen how the tariffs will be applied. From June 26, 2020-July 26, 2020, the USTR will be taking comments regarding the review of this action. If you would like additional guidance on submitting comments to this notice, contact the trade team at Sheppard Mullin.



















Another COVID-19 Enforcement Tool: Money Laundering Law

This article originally appeared on Law360 on June 9.

The novel coronavirus and resulting global health pandemic and economic crisis created a perfect storm for bad actors to engage in fraud and financial crimes. Law enforcement’s response to the criminal activity spurred by the pandemic and economic stimulus and relief efforts are still nascent and focusing on low hanging frauds by individuals and small groups. Continue Reading

CFIUS UPDATE ISSUE — Well I Do Declare: Mandatory Declarations Everywhere

On May 21, 2020, a proposed rule change brought the threat of a mandatory CFIUS filing to investments across all U.S. industries. The U.S. Department of Treasury proposed a rule[1] that removes a restriction formerly in the Foreign Risk Review Modernization Act’s (FIRRMA) that limited mandatory filings with the Committee on Foreign Investment in the United States (CFIUS) to only 27 industries.

The proposed rule is consistent with a series of changes by the Trump Administration aimed at decreasing Chinese access to U.S. technology (through export controls, FDI review, and other restrictions). However, the rule change may create complications for investments from a wide range of countries. Continue Reading


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