Congress Votes to Impose Trade Sanctions on Russia and Belarus, Will Consider Fiscal and Procurement Measures | Bryan Cave Leighton Paisner

On April 8, 2022, President Biden signed two trade-related bills: one revoking normal tariff treatment for Russia and Belarus, and the other banning Russian energy imports. After the April recess, Congress could take further action on two other bills targeting companies operating in Russia: one to ban federal purchases from parties that continue to operate in Russia, and the another to ban federal tax credits for taxes paid to the Russian government. All are in response to the continued escalation in Ukraine by Russia, with material support from Belarus.

Suspension of normal trade relations and energy imports

Congress passed the pair of bills restricting imports in line with the President’s recent actions and statements, which we reported on last month. The first bill, the Russia and Belarus Normal Trade Relations Suspension Act, HR 7108, revokes the permanent normal trade relations (PNTR) status of Russia and Belarus and authorizes the President to increase yet duty rates on all goods of Russian or Belarusian origin. PNTR – known internationally as Most Favored Nation (MFN) – is a principle of the World Trade Organization (WTO) whereby a member is bound to accord its lowest tariff treatment equally to all other members, with certain exceptions. PNTR duty rates, which average just over 3% ad valoremare listed in Column 1 of the United States Harmonized Tariff Schedule (HTS) and, until now, applied to all of the United States’ trading partners except Cuba and North Korea.

HR 7108 revokes PNTR status for Russia and Belarus, instead applying column 2 statutory duty rates immediately to all products imported from these countries. On March 11, 2022, President Biden asked Congress, which alone has the power to set tariff rates, to take such action after coordinating with foreign allies. On average, column 2 rates are almost 30% higher than column 1 rates; however, the law delegates to the President until 2023 the authority to increase the duty rates for Russia and Belarus beyond the Column 2 rate, allowing even more flexibility to deter Russian and Belarusian imports .

The law further directs the US Trade Representative (USTR) to encourage other WTO members to suspend Russia from the WTO and block Belarus’ impending membership. Although Russia is currently a WTO member to which the United States is obligated to offer PNTR status, Article XXI of the General Agreement on Tariffs and Trade (GATT) allows members to the WTO to suspend such treatment for the protection of national security “in time of war”. or other emergency in international relations. HR 7108 also extends the Global Magnitsky Human Rights Accountability Act indefinitely to strengthen the President’s ability to punish perpetrators of human rights abuses.

The second bill, the Russian Oil Import Ending Act, HR 6968, explicitly codifies the outright ban on Russian energy imports imposed on March 8, 2022 by Executive Order (EO) 14066. EO 14066 specifically prohibits “the importation into the United States of the following products originating in the Russian Federation: crude oil; petroleum; petroleum fuels, oils and products of their distillation; liquefied natural gas; coal; and coal products” for any sales made on or after signing, with a grace period until April 22, 2022, for imports under pre-existing agreements HR 6968 clarifies and slightly expands the scope of products to include one of Chapter 27 of the HTS, which includes mineral fuels and oils, their distillation products, bituminous substances and mineral waxes.

Both bills grant the president the power, subject to congressional disapproval, to lift the ban and restore the status of the PNTR provided he certifies that Russia or Belarus “have entered into a withdrawal agreement. forces and cessation of military hostilities which is accepted by the free and independent government”. Government of Ukraine; poses no immediate military threat of aggression against any member of the North Atlantic Treaty Organization; and recognizes the right of the Ukrainian people to independently and freely choose their own government. They each passed the Senate unanimously and the House overwhelmingly.

Denial of Federal Procurement and Tax Benefits

Congress has crafted new legislation to pressure Russia and Belarus that it could act on as early as late April. First, House Oversight and Reform Committee Chair Carolyn Maloney (D-NY) is proposing legislation that would ban or terminate federal contracts for companies operating in Russia. The bill, the Federal Peace and Security Contracts Act, HR 7185, contains exceptions for activities that meet basic human needs, journalism, and operations in Russia for the benefit of Ukraine. Speaker Maloney pushed the bill through committee on April 7, 2022, and it will be available for consideration on the floor when the House returns from its current district sitting the week of April 25, 2022.

In the Senate, Finance Committee Chairman Ron Wyden (D-OR) and Member Rob Portman (R-OH) released a bipartisan bill that would deny corporations tax credits for taxes paid to Russia or to Belarus, alongside North Korea, Iran, Syria and Sudan. Their draft would also tax companies at the full rate of 21% on income from operations in these countries, and contains a safe haven exception for companies that terminate their activities there. In addition, certain other tax benefits would be denied to the Russian and Belarusian governments, and to persons or entities sanctioned by the United States in connection with the invasion of Ukraine or identified by the Secretary of the Treasury as (i) having participated in the invasion of Ukraine, (ii) be organized in Russia or Belarus, or (iii) be an executive or officer of such entity.

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