On August 20, 2019, the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) extended a revised version of the temporary general license authorizing business with Huawei Technologies Co., Ltd. and its Affiliates (collectively, “Huawei”) for 90 days until November 18, 2019. BIS also added a number of new Huawei affiliates to the Entity List.

As you know, Huawei was placed on BIS’s Entity List on May 15, 2019, prohibiting all unlicensed exports, re-exports, and transfers of U.S. origin goods and technology to Huawei. Later that week, BIS issued a temporary general license authorizing some business with Huawei for 90 days. The new temporary general license, which can be found in 84 Federal Register 43487, includes the following notable changes.

First, BIS narrowed the temporary authorization for the export of items subject to the Export Administration Regulations (“EAR”) for the purpose of supporting and maintaining fully operational networks. Specifically, the revised temporary general license only applies to activities such as patching networks and network infrastructure equipment that would be considered part of a fully operational, third-party network providing services to the third party’s customers. The revised authorization excludes activities related to general purpose computing devices or equipment not specifically related to supporting and maintaining a third-party network.

Second, BIS expanded the temporary authorization for activities to support handsets to include personal consumer electronic devices and “Customer Premises Equipment (CPE),” i.e., personally-owned equipment that enables consumers to access network communications services and distribute them within a home or small business. This applies to activities related to supporting existing Huaweiconsumer goods, such as patching software on Huawei phones, or updating software on CPEs. This authorization is intended to support existing consumer goods in the hands of consumers.

Third, BIS has determined that existing EAR rules, such as exempting published technology from the EAR, are sufficient for Huawei’s participation in the development of 5G standards. Accordingly, BIS has removed the authorization for exports related to Huawei’s participation in these activities.

Fourth, importantly, BIS now requires that exporters obtain a certification statement from the Huawei entity that is to receive an item subject to the EAR. The certification statement must specify how the export satisfies the provisions of the temporary general license, and whether it falls under paragraph (c)(1) (supporting fully operational networks), (c)(2) (supporting personal devices and CPEs), or (c)(3) (cybersecurity research and disclosures). It must also include documentation from Huawei to substantiate its compliance, as applicable. For activity authorized under (c)(1), this would include documentation showing an agreement between Huawei and a third party executed on or before May 16, 2019. In addition, the certification statement must include specific information on the items being exported and the end-use of the item. These certification statements do not need to be filed with BIS but are subject to the EAR’s record-keeping requirements.

The certification statement requirement creates a potential problem for forwarders, as BIS may take the position that forwarders have an obligation to ensure that Huawei-related shipments are supported by a certification statement. In the event that forwarders are provided with a certification statement by an exporter, it is also possible that BIS would expect the forwarder to review the certification statement to ensure that it is applicable. Accordingly, while this new requirement shifts some of the compliance burden from exporters to Huawei, it adds yet another export record for possible forwarder review.

While forwarders may be able to rely on the factual representations in the certification statements to some extent, it would be prudent for forwarders to review Huawei’s certification statements to confirm they contain the required information and apply to a given shipment.

We hope this is helpful information, but please contact Ed Greenberg (egreenberg@gkglaw.com) with any questions.

On August 16, 2019, the United States Court of Appeals for the District of Columbia Circuit (“D.C. Circuit Court”) affirmed a decision by the U.S. District Court for the District of Columbia to deny class certification In re Rail Freight Surcharge Antitrust Litig., No. 18-7010 (D.C. Cir. August 16, 2019).  The case involved a putative class of over 16,000 rail shippers and alleged a price-fixing conspiracy amongst the four largest freight railroads in the United States: BNSF Railway Company; CSX Transportation, Inc.; Norfolk Southern Railway Company; and Union Pacific Railroad Company. The class plaintiffs alleged that the railroads violated Section 1 of the Sherman Act, 15 U.S.C. 1, by engaging in a conspiracy between 2003 and 2008 to fix the levels of fuel surcharges that were calculated as a percentage of the base transportation rate.  While the District Court found that the requirements for a class action case had not been met, it also found on two occasions that the factual record demonstrated the complained-of collusion between the railroads very likely did occur, a finding that exposes the carriers to liability in individually filed cases.  The amount of overcharges during the relevant time period is estimated in the billions of dollars.

Next Steps

On that subject, the result of the D.C. Circuit’s ruling is that the statute of limitations for rail shippers to seek relief for railroad fuel surcharge overcharges they paid between July 1, 2003 and December 31, 2008, which has been tolled pending the class action process, began to run on August 16, 2019.  Pursuant to the applicable procedural rules, rail shippers now have until September 30, 2019 to preserve their own antitrust claims by filing a formal complaint, either individually or with a group of similarly situated companies.   The deadline could be affected by further procedural actions at in the D.C. Circuit or D.C. Federal District court, but such actions appear to be unlikely.   This firm has been involved in the percentage of the rate fuel surcharge controversy from its inception in 2002, advising our shipper clients on their options as part of a class or pursuing their claims in a separate action.

Case Background

The class action case arose out of eighteen antitrust actions filed in the 2007-08 timeframe that were consolidated by the Federal Multidistrict Litigation Panel.   After the cases were consolidated, the action was divided into two cases, one case involving direct purchasers (shippers who directly paid the fuel surcharges) and another involving indirect purchasers. All plaintiffs alleged that the railroads violated Section 1 of the Sherman Act.  The eight named plaintiffs in the direct purchasers’ case, moved for class certification. The proposed class consisted of all shippers who paid rate-based fuel surcharges for unregulated services purchased from the railroads between July 1, 2003 and December 31, 2008.

While the District Court found there was strong evidence that the complained-of collusion and conspiracy actually did occur, it ultimately concluded that the case could not be tried as a class action under the applicable federal rules and case precedent, and the D.C. Circuit affirmed that conclusion.

What Does This Mean to Your Company?

If your company tendered shipments to railroads during the 2003-2008 period, or if it arranged for rail shipments by contracting with steamship lines or other parties, it was likely subject to the same unlawful price fixing of fuel surcharges.  If so, you have the opportunity to now file a complaint seeking recovery of the unlawful charges, and those awards would be trebled.

Our office is representing forwarders and shippers that have decided to seek recovery of these illicit charges.  If you would like more information about the process, let us know.

Whom to Contact for More Information

If you have any questions about this issue or desire additional information, please do not hesitate to contact our Rail Transportation Group: Tom Wilcox (twilcox@gkglaw.com); Ed Greenberg (egreenberg@gkglaw.com); David Monroe (dmonroe@gkglaw.com); or Brendan Collins (bcollins@gkglaw.com).

Globalization, increased consolidation in many key industries, the rising dominance of technology giants like Amazon, Apple, Facebook and Google, and the rapid advance of new technologies have transformed our economy in the 21st century. During the past several months, members of Congress, the U.S. Department of Justice, the Federal Trade Commission, and a number of economists have all questioned whether current antitrust enforcement practices adequately protect consumers and effectively promote competition in today’s fast-changing economic environment.  The growing debate about the efficacy of current antitrust enforcement policies will likely lead to new enforcement initiatives and greater scrutiny of existing industry structures and practices.

Trade associations and professional societies as well as their members have experienced the effects of economic and technological change.  Industry consolidation has lowered the number of competitors in most major industries.  New technologies have rapidly changed the way professional services are provided to consumers by lawyers, doctors, engineers, research scientists and many other professionals.  The promulgation of and reliance on voluntary industry standards have become both more prevalent and more important in many industries.

Associations and professional societies should seriously consider whether their antitrust compliance programs – often created years ago based on industry structures or professional practices that may no longer exist or be relevant – need to be reexamined and updated in order to adequately address current industry practices and market conditions.  Associations and professional societies routinely reassess where their members fit in the current competitive climate, analyze how that competitive climate is evolving, and advise association members what they need to do to stay relevant.  These types of strategic analyses often involve the collection of information or data from members, roundtable discussions of member working groups, and other activities that are particularly antitrust sensitive.

Associations should proactively anticipate the effect new antitrust enforcement policies and governmental efforts to establish additional forms of economic controls will have on their target industries as well as on the work of associations themselves.  We recommend that the first step in such efforts should be a thorough review and updating of the association’s antitrust compliance policy.  Indeed, the Department of Justice has recently reiterated the importance and potential benefits of an effective antitrust compliance policy.

Contact Steve Fellman (sfellman@gkglaw.com) or David Monroe (dmonroe@gkglaw.com) to schedule a telephone discussion of your antitrust compliance policy.

On August 5, 2019, President Trump ratcheted up the sanctions on Venezuela.¹ On that occasion, he issued an Executive Order (“E.O.”) blocking all property and property interests of the Government of Venezuela and authorizing the Secretary of the Treasury to designate companies as SDNs if they provide material support or provide goods or services to any Venezuela-related SDN.  In addition, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) updated 12 Venezuela-related general licenses and issued 13 new general licenses, including a wind-down general license that expires on September 4, 2019 (GL 28).

As a result of these actions, U.S. companies are now prohibited from engaging in any unlicensed transactions with (1) the Government of Venezuela, including any of its political subdivisions, agencies, and instrumentalities; (2) any entities that are directly or indirectly owned or controlled by the Government of Venezuela; and (3) any individuals or entities acting on behalf of the Government of Venezuela, whether as agents, members of the Maduro regime, or otherwise.  Foreign companies may also be restricted from engaging in unlicensed transactions with these parties to the extent that the transaction has a U.S. nexus, such as the involvement of U.S. parties or U.S. dollar denominated payments.  In addition, foreign companies may be at risk of SDN designation by OFAC if the foreign companies continue to provide material support, assistance, goods, or services to the Government of Venezuela.

It is worth noting that the new E.O. does not impose a country-wide embargo on Venezuela.  Some statements by the U.S. government and media publications have portrayed this E.O. as implementing a territorial embargo on Venezuela.  This is simply not the case.  Under the new E.O., virtually all offices, officials, and state-owned companies controlled by the Maduro regime are treated as SDNs or blocked persons.  Nonetheless, U.S. and foreign companies are still permitted to engage in business with individuals and private companies in Venezuela that are not owned, controlled, or acting as agents for the government.

In addition, OFAC updated 12 general licenses and issued 13 new general licenses that authorize U.S. companies to engage in a range of activities, such as:

• (1) Winding down activities before September 4, 2019, that: (a) involve the Government of Venezuela; (b) were in effect and lawful prior to August 5, 2019; and (c) are not authorized by one of the other general licenses (GL 28);
• (2) Transactions related to Venezuela’s mission to the UN and other diplomatic or consular funds transfers (GLs 22 and 23);
• (3) Transactions related to certain non-governmental organizations’ activities in Venezuela, including humanitarian, democracy-building, educational, and environmental projects (GL 29);
• (4)Transactions incident and necessary to the operation or use of Venezuelan ports and airports (GL 30);
• (5) Transactions with the Venezuelan National Assembly, the Interim President of Venezuela, and any of their officials, representatives, agents, ambassadors, or staff, including any individuals appointed by Interim President Guaidó to the board of a state-owned entity (GL 31).
• (6) Transactions related to overflight payments, emergency landings, or air ambulance or related medical services (GL 33);
• (7) Transactions with CITGO, where the only Government of Venezuela entity involved is CITGO or PDV Holding, Inc. (GL 7C);
• (8) Transactions related to shipments of agricultural commodities (i.e., food, animal feed, etc.), medicine, or medical devices to Venezuela (GL 4C);
• (9) Transactions necessary for maintaining Chevron, Halliburton, Schlumberger Limited, Baker Hughes, or Weatherford International operations in Venezuela involving PdVSA (GL 8C);
• (10) Transactions related to the purchase of refined petroleum products from PdVSA by U.S. persons in Venezuela for personal, commercial, or humanitarian uses (GL 10A);
• (11) Transactions with Nynas AB, a PdVSA subsidiary, where no other Government of Venezuela entities are involved (GL 13C); and
• (12) Transactions incident to the official business of certain international organizations involving the Government of Venezuela (GL 20A).

Please note that these general licenses do not authorize the shipment of diluents to Venezuela and may contain restrictions on remitting payments directly to Venezuela.  Accordingly, before relying on a general license, we recommend that companies review the applicable terms and restrictions.  The full list of Venezuela-related general licenses is available here: https://www.treasury.gov/resource-center/sanctions/Programs/Pages/venezuela.aspx#gl2a.

Companies should also keep in mind that the wind down general license expires in less than 30 days.  Consequently, it would be appropriate to review these general licenses to determine if any ongoing projects will remain authorized past September 4, 2019, and, if not, to consider appropriate wind down arrangements.

We hope this is helpful information, and please do not hesitate to contact our office at 202.342.5277 or egreenberg@gkglaw.com if you have any questions.