President Biden Signs Bills to Suspend Permanent Normal Trade Relations with Russia, Codify Import Ban on Russian Oil, and Reauthorize Magnitsky Sanctions Law

Co-authored by the Global Sanctions Team

On April 7, 2022, the US Congress approved two bills aimed at curtailing trade with Russia and Belarus in response to the situation in Ukraine:

• The Suspending Normal Trade Relations with Russia and Belarus Act (H.R. 7108), which denies "most-favored nation" tariff treatment to products of Russia and Belarus, and extends the President’s authority to impose sanctions under the Global Magnitsky Human Rights Accountability Act; and
• The Ending Importation of Russian Oil Act (H.R. 6968), which codifies into US law a prohibition on the importation of oil, gas, and coal from Russia.

President Biden signed both bills into law on April 8, 2022. These measures are intended to complement the sanctions and trade restrictions the Biden Administration has already imposed on Russia through executive action, which include prohibitions on the importation of Russian oil, gas, seafood, spirits, and non-industrial diamonds, among other measures.

This alert provides an overview of H.R. 7108 and H.R. 6968.

Suspending Normal Trade Relations with Russia and Belarus Act (HR 7108)

Suspension of MFN tariff treatment for products of Russia and Belarus

H.R. 7108 suspends normal trade relations with Russia and Belarus. Beginning on April 9, 2022, imports originating from Russia and Belarus will be ineligible for the "most-favored nation" (MFN) tariff rates the United States currently applies to imports from all WTO Member countries. Instead, imports originating from Russia and Belarus will be subject to the duty rates set forth in "Column 2" of the Harmonized Tariff Schedule of the United States, which average approximately 32.3% (versus an average MFN rate of 3.3%). H.R. 7108 also authorizes the President to increase the rates of duty on products of Russia and Belarus above the levels set forth in Column 2. The President’s authority to proclaim such duty increases expires on January 1, 2024.

Restoration of MFN tariff treatment

H.R. 7108 authorizes the President to restore MFN tariff treatment to products of Russia or Belarus, for one or more periods not to exceed one year each, after submitting to Congress a "certification" that one or both of these countries:

1. "has reached an agreement relating to the respective withdrawal of Russian or Belarusian forces (or both, if applicable) and cessation of military hostilities that is accepted by the free and independent government of Ukraine";
2. "poses no immediate military threat of aggression to any North Atlantic Treaty Organization member"; and
3. "recognizes the right of the people of Ukraine to independently and freely choose their own government."

The restoration of MFN tariff treatment would take effect 90 days after the President submits the certification, unless Congress enacts a joint resolution of disapproval during the 90-day period. Subject to the same certification and congressional disapproval provisions, the law also authorizes the President to restore Russia’s current, "permanent normal trade relations" (PNTR) status, which it has enjoyed since acceding to the WTO in 2012, and which would restore MFN tariff treatment to Russian goods in perpetuity. Belarus is not a WTO Member and does not currently enjoy PNTR with the United States, but has previously received MFN tariff treatment on a temporary basis through Presidential waivers issued in accordance with Title IV of the Trade Act of 1974.

The United States’ decision to deny MFN tariff treatment to another WTO Member is a major development without precedent in the WTO era. The impact of this change on the tariff rates applied to Russia-origin goods will depend on the product at issue, since the Column 2 tariff rates vary significantly from product to product. The impact of H.R. 7108 will also depend on whether the President exercises his new authority to increase tariffs on Russia-origin goods above the Column 2 rates, given that the Column 2 rates on several key Russian exports are relatively low and in some cases, zero.

Actions at the WTO

H.R. 7108 directs the United States Trade Representative (USTR) to use "the voice and influence" of the United States at the WTO to:

1. "condemn the recent aggression in Ukraine";
2. "encourage other WTO members to suspend trade concessions to the Russian Federation and the Republic of Belarus";
3. "consider further steps with the view to suspend the Russian Federation’s participation in the WTO"; and
4. "seek to halt the accession process of the Republic of Belarus at the WTO and cease accession-related work."

The United States already has taken some of these steps in recent weeks. On March 15, the United States and thirteen other WTO Members (counting the EU as one) issued a statement in the WTO that "condemn[s] in the strongest possible terms the Russian Federation’s military assault on Ukraine."¹ The signatories further state:

"We will take any actions, as WTO Members, that we each consider necessary to protect our essential security interests. These may include actions in support of Ukraine, or actions to suspend concessions or other obligations with respect to the Russian Federation, such as the suspension of most-favoured-nation treatment to products and services of the Russian Federation. Furthermore, in light of Belarus’ material support to the actions of the Russian Federation, we consider that its accession process is suspended and will not participate in any accession-related work."

The statement does not address the possible suspension of Russia’s participation in the WTO. No provision of the WTO Agreement expressly addresses the possible suspension of a WTO Member.

Reauthorization of Global Magnitsky Sanctions authority

H.R. 7108 extends indefinitely the President’s existing sanctions authority under the Global Magnitsky Human Rights Accountability Act ("Global Magnitsky Act," 22 U.S.C. 2656 note). The Global Magnitsky Act authorizes the President to impose sanctions on individuals responsible for human rights abuses. This authority was previously scheduled to expire on December 23, 2022. Unlike previous proposed versions of H.R. 7108, the final version approved by Congress only reauthorizes the Global Magnitsky Act in its current form and does not modify its scope.

Ending Importation of Russian Oil Act (H.R. 6968)

H.R. 6968 codifies into US law a ban on the importation of "[a]ll products of the Russian Federation classified under chapter 27 of the Harmonized Tariff Schedule of the United States[.]" Chapter 27 of the HTSUS covers crude oil, natural gas, and coal, among other products.

Pursuant to President Biden’s Executive Order 14066 of March 8, 2022, the United States already prohibits the importation of Russian-origin "crude oil; petroleum; petroleum fuels, oils, and products of their distillation; liquefied natural gas; coal; and coal products[.]" President Biden took this action pursuant to existing legal authorities, namely the International Emergency Economic Powers Act (50 U.S.C. 1701 et seq.) and the National Emergencies Act (50 U.S.C. 1601 et seq.) H.R. 6968 clarifies that the new statutory import prohibition will apply "in a manner consistent with any implementation actions issued under Executive Order 14066[.]"²

H.R. 6968 is intended to give Congress a role in any future decision to terminate the import prohibition on Russian energy products. Whereas the President may unilaterally terminate the import prohibition established by Executive Order 14066, he cannot terminate the statutory import prohibition established by H.R. 6968 if Congress formally objects by enacting a joint resolution of disapproval. Specifically, in order to terminate the statutory import prohibition under H.R. 6968, the President must submit a certification to Congress that Russia:

1. "has reached an agreement to withdraw Russian forces and for the cessation of military hostilities that is accepted by the free and independent government of Ukraine";
2. "poses no immediate military threat of aggression to any North Atlantic Treaty Organization member"; and
3. "recognizes the right of the people of Ukraine to independently and freely choose their own government."

Pursuant to Section 3 of H.R. 6968, the statutory import prohibition would terminate 90 days after Congress receives the certification, unless Congress enacts a joint resolution of disapproval during the 90-day period. This provision would prevent the President from terminating the import prohibition in circumstances where a majority in Congress considers it premature to do so.

_{1 WT/GC/244. The signatories are Albania; Australia; Canada; European Union; Iceland; Japan; Republic of Korea; Republic of Moldova; Montenegro; New Zealand; North Macedonia; Norway; the United Kingdom, and the United States.
2 On March 8, 2022, the US Treasury Department’s Office of Foreign Assets Control issued Russia-related General License 16, which authorizes through 12:01 eastern daylight time on April 22, 2022 transactions prohibited by E.O. 14066 that are ordinarily incident and necessary to the importation of crude oil; petroleum; petroleum fuels, oils, and products of their distillation; liquefied natural gas; coal; and coal products of Russian Federation origin pursuant to written contracts or written agreements entered prior to March 8, 2022.}

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