New York

On March 20, 2020, New York Governor Andrew Cuomo issued Executive Order 202.8 (“NY EO 202.8”), effective as of 8 pm on March 22, 2020, which requires all non-essential businesses to reduce their in-person workforce by 100% through April 19. NY EO 202.8 is an integral part of Governor Cuomo’s 10-point “New York State on PAUSE” policy, which aims to reduce the impact of the COVID-19 public health emergency through social distancing measures. Governor Cuomo has issued a series of Executive Orders that provide the guidelines for what businesses perform “essential services or functions.” Such services and functions are discussed in detail below. Although the New York restrictions look very similar to what other States are calling “shelter in place” orders, Governor Cuomo has not used this terminology to describe the “New York State on PAUSE” policy.

New Jersey

On March 21, 2020, Governor Murphy of New Jersey signed Executive Order No. 107 (the “NJ Order”), which contains new standards for businesses, effective at 9:00 pm on March 21, 2020. The primary effect of the NJ Order is to encourage residents to remain home by shutting down most retail operations in the state, and by curtailing attendance at non-retail workplaces as much as technology will permit. The NJ Order will remain in effect until revoked or modified by the Governor.

Connecticut

On March 20, 2020, Governor Ned Lamont of Connecticut issued Executive Order 7H mandating all non-essential businesses and nonprofit entities to reduce their in-person workforce at each business location by 100% by March 23, 2020. On March 22, 2020, Governor Lamont issued Executive Order 7J clarifying obligations of non-essential businesses (7H and 7J orders hereinafter referred as the “CT Executive Orders”). The Connecticut Department of Economic and Community Development further issued binding guidelines on essential businesses on March 22, 2020 (the “CT Guidelines”).

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Like their counterparts in other countries, the US antitrust agencies have begun considering and in some cases have already implemented changes to antitrust review processes in response to the COVID-19 pandemic. Both the US Federal Trade Commission (FTC) and the US Department of Justice (DOJ) have also announced measures geared to enabling the agencies to continue to function, with the head of the DOJ’s Antitrust Division stating that it “remains open for business,” and the FTC announcing that it was “reallocating resources across the [Competition] Bureau to maintain continuity of core operations.”

For an in-depth analysis of the antitrust risks emerging outside of the United States as a result of the pandemic, please find our most recent global update here: COVID-19 and Antitrust Law Global Update.

DOJ and FTC have adopted an expedited review procedure and issued guidance on collaborations in response to the pandemic.

On March 24th, the DOJ and FTC issued a joint statement1 announcing an expedited antitrust review procedure for collaborations, and also providing guidance on certain types of collaborations that may be especially important in responding to the current pandemic. Whereas the DOJ’s Business Review Process and FTC’s Advisory Opinion Process can take months to provide guidance on proposed business conduct, the agencies have announced that they “will aim to respond expeditiously to all COVID-19-related requests, and to resolve those addressing public health and safety within seven (7) calendar days of receiving all necessary information.”

The agencies’ statement also acknowledges the need for some individuals and businesses to act immediately to address the public health emergency (i.e., without time to seek formal guidance from the DOJ or FTC), and the statement provides guidance on several specific types of collaborative activities that “would be consistent with the antitrust laws,” such as collaborating on research and development, “sharing technical know-how, rather than company specific data about prices, wages, outputs, or costs,” as well as joint purchasing arrangements among healthcare providers.

FTC’s Bureau of Competition has announced a range of procedural and substantive measures in response to COVID-19 that will affect merger control.

The FTC’s Bureau of Competition recently announced a series of measures it had already taken or would be taking in response to the COVID-19 pandemic. The measures the Bureau announced range from procedural to more material changes that could potentially impact the timing of case resolutions. On the procedural side, most notably the Bureau announced that although the Premerger Notification Office will continue to accept HSR filings, those filings must be submitted electronically via a temporary e-filing system. Parties filing via the new system are advised to familiarize themselves with the rules and requirements of the new system well in advance of when they need to file, particularly in the coming days as the agencies fine tune the system. Although the agencies initially announced that they would not be granting early termination for any HSR filings under the temporary system, early terminations have since resumed effective March 30, though as the FTC highlighted in its announcement,2 “[e]arly termination will be granted but only as time and resources allow.” At this time, the agencies have also advised that “[p]arties and their counsel should not call the PNO or the litigation shops to advocate for early termination of the waiting period applicable to a notified transaction,” as doing so under current resource constraints will slow the agencies’ review—not expedite it. Details and instructions for using the system are available here. The Department of Justice will implement the same procedures.

Also on the procedural side, the Bureau announced changes that will impact the way parties will interact with the FTC. Virtually all FTC employees—like employees at many companies and in most government offices—are now working remotely, meaning that, unsurprisingly, almost all meetings, including meetings with the FTC Front Office, will be by telephone or videoconference. The Bureau has also imposed travel restrictions on employees and has been “reallocating resources across the Bureau”—all of which is likely to have a disruptive effect on its activities, the scope of which is still not entirely clear.

On the substantive side, the Bureau announced that it is “conducting a matter-by-matter review of [its] investigations and litigations to consider appropriate modifications of statutory or agreed-to timing.” According to the Bureau, companies should be prepared for requests for modifications and they are welcome to contact Bureau staff proactively to begin such discussions.

DOJ’s Antitrust Division announced changes that closely mirror those of the FTC.

The DOJ’s Antitrust Division similarly announced3 a range of changes to its civil merger investigation process that it stated “will remain in place during the pendency of the coronavirus (COVID-19) event.”

The Antitrust Division specifically announced on March 17th that for transactions currently under review or that may be submitted for review, the Division “is requesting from merging parties an additional 30 days to timing agreements to complete its review of transactions after the parties have complied with document requests.” The Division has published on its website a revised Model Timing Agreement4  with parties that would extend the post-compliance period from sixty to ninety days and recognizes “that it may become appropriate to revisit agreements, and to amend, shorten, extend, or cancel them, in light of developments in the unfolding COVID-19 situation.”

According to news reports of a DOJ proposal that has not been made public, the DOJ is also asking Congress, as part of its next COVID-19 response legislation, for permission to extend deadlines on merger reviews and certain antitrust prosecutions.5   On the merger front, the proposal would give the DOJ and FTC an additional 15 days (45 days instead of the current 30) to review transactions notified under the HSR Act. On the prosecution front, the proposal would extend the statute of limitations applicable to price-fixing and bid-rigging cases for at least six months in response to the current crisis. That would afford DOJ prosecutors additional time beyond the current five-year statute of limitations to conclude their investigations. In part, the request for additional time to move forward with prosecutions stems from the practical difficulty of convening a federal grand jury in a small room at a time when individuals are being instructed to maintain a distance of six feet from others.

Like the FTC, the DOJ is also accepting HSR filings via the temporary e-filing system described above and will be conducting all meetings by phone or videoconference unless there are “extenuating circumstances.” Notably for parties with depositions scheduled with the Antitrust Division, it announced that “[a]ll scheduled depositions temporarily will be postponed and will be rescheduled using secure videoconferencing capabilities.”

Officials at the federal and state level in the United States respond to threat of price-gouging.

Four congressional Democrat committee chairs wrote a letter  to FTC Chairman Joseph Simons on March 17th urging the FTC to take action to protect consumers from price-gouging. The letter noted that as a result of the COVID-19 crisis “a number of essential items have become scarce,” “[h]ealthcare workers are being asked to reuse personal protective equipment,” and “many Americans are unable to find essential household items such as hand sanitizer and cleaning supplies in their local stores or online marketplaces”—and at the same time, “profiteers … are hoarding the very same supplies or charging unconscionable prices.” The authors of the letter asked the FTC to “take immediate action” to address the dire situation during the current declared public health emergency, and noted that they would simultaneously be pursuing “other means, including legislation,” to assist the FTC’s efforts.

As we noted in our last newsletter, many states have the power to take action against sales above normal prices during declared periods of emergency, and states are expected to continue to play a key role in policing alleged price-gouging. For example, on March 15, the Governor of Michigan signed an executive order prohibiting anyone, beginning on March 16, from offering or selling any product at more than a 20% markup from the March 9, 2020 price. And in Oregon, the state’s Attorney General sent a letter to the state’s governor requesting an immediate declaration of an “abnormal disruption of the market” as defined under state law, which would allow the attorney general to take action against any business that “upsells the price of essential consumer goods by more than 15 percent.”

Other state governors and state attorney generals are taking similar steps. Most recently, on March 25, a group of 33 state attorneys general wrote letters to several of the largest U.S. online platforms requesting that those businesses more rigorously monitor and take action against price-gouging practices by online sellers.6 Specifically, the letters urged the platforms to (i) “[s]et policies and enforce restrictions on unconscionable price gouging during emergencies, (ii) “[t]rigger price gouging protections independent of, or prior to an emergency declaration,” and (iii) “[c]reate and maintain a ‘Fair Pricing’ Page/Portal where consumers can report price gouging incidents … directly.”

The DOJ previously warned businesses against violating antitrust laws in connection with the sale of public health products—for example, through price-fixing or bid-rigging. Although not directly related to antitrust enforcement, on March 22, 2020, the Justice Department filed its first COVID-19-related enforcement action in a case involving an alleged fraudulent website offering COVID-19 vaccine kits. The case suggests the DOJ is prioritizing action against abuses stemming from the current crisis, and that additional enforcement actions are likely to follow.


1 https://www.justice.gov/atr/joint-antitrust-statement-regarding-covid-19

2 https://www.ftc.gov/news-events/blogs/competition-matters/2020/03/resuming-early-termination-hsr-reviews?utm_source=govdelivery

3 https://www.justice.gov/opa/pr/justice-department-announces-antitrust-civil-process-changes-pendency-covid-19-event

4 https://www.justice.gov/atr/page/file/1258826

5 POLITICO, “DOJ wants more time on merger reviews, price-fixing cases because of pandemic,” available at https://www.politico.com/news/2020/03/21/doj-merger-reviews-coronavirus-140669# (March 21, 2010).

6 https://energycommerce.house.gov/sites/democrats.energycommerce.house.gov/files/documents/FTC.2020.3.17.%20Joint%20Letter%20re%20Price-Gouging.CPC__0.pdf

7 https://www.attorneygeneral.gov/wp-content/uploads/2020/03/03_25_2020_Multistate-letter.pdf

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We are pleased to enclose the March issue of Tax News and Developments, a publication of Baker McKenzie’s North America Tax Practice Group. This month’s edition features an update on the tax payment deadline, state and local tax effects of COVID-19, a discussion on the FDII regime, the final regulations under 721(c), and more.

In this Issue

  • Extension of April 15th Payment Date — It’s About Time
  • COVID-19: The Anticipated State and Local Tax Impacts of Coronavirus
  • Foreign-Derived Intangible Income (FDII) — The Great Tax Benefit Overlooked by Some and Maximized by Others
  • Finalization of the Section 721(c) Regulations
  • Claim of Right Didn’t Undo Trustee’s Unauthorized Sale
  • New Proposed Regs Under Section 382(h) Provide Some Transition Relief
  • OECD Releases Pillars One and Two Impact Assessment — Where is the Money Coming From?
  • You’re Invited!…To Give the State Money: Navigating Delaware’s Unclaimed Property Voluntary Disclosure Program
  • Never Give Up! States Continue to Move Digital Taxes
  • UK Budget 2020: What You Need to Know

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On Friday, March 20, 2020, the Internal Revenue Service (IRS), US Department of Labor (DOL), and US Department of the Treasury published a joint news release (Release) regarding tax credits available to employers who will be required to provide paid sick and family care leave for COVID-19-related purposes under the Families First Coronavirus Response Act (FFCRA). As explained in detail here, the FFCRA mandates employer-paid sick leave and partially-paid family care leave, offset by tax credits. The FFCRA also includes federal funding and waivers for free COVID-19 testing, food and nutrition assistance programs, and state unemployment insurance programs.

Published only two days after the FFCRA was signed into law, the Release further reflects the unprecedented steps being undertaken by the US government in response to the COVID-19 epidemic. At its core, the Release explains that employers covered by the leave provisions of the FFCRA will receive new, refundable payroll tax credits “designed to immediately and fully reimburse them, dollar-for-dollar, for the cost of providing Coronavirus-related leave to their employees.” It also provides additional details about the small employer exemption to the FFCRA leave requirements and the DOL’s enforcement plans.

To help you prepare, the below FAQ summarizes the key provisions of the Release.

1. What portion of the costs associated with an employer’s FFCRA leave obligations will be covered by the tax credits?

The Release provides that the entire amount of an employer’s paid leave obligations required by the FFCRA will be eligible for a refundable tax credit.

More specifically, tracking the employer’s leave obligations under the FFCRA, employers will receive a tax credit for:

  • paid sick leave at the employee’s regular rate of pay, up to $511 per day and $5,110 in the aggregate, when leave is provided for an employee’s own well-being;
  • paid sick leave at two-thirds of the employee’s regular rate of pay, up to $200 per day and $2,000 in the aggregate, when leave is provided for family or child care;
  • paid COVID-19 child care leave equal to two-thirds of the employee’s regular pay, capped at $200 per day or $10,000 in the aggregate; and
  • the costs to maintain health insurance coverage for the eligible employee during FFCRA-leave periods.

2. How Will the Tax Credits Work?

The tax credits can be taken by an eligible employer retaining federal employment taxes otherwise required to be deposited with the IRS. This includes payments the employer would otherwise make not only for its own share of Social Security and Medicare taxes, but also the amounts withheld from employees’ paychecks for federal income taxes and the employees’ shares of Social Security and Medicare taxes. In other words, employers will keep and be able to access amounts withheld from its employees’ paychecks that reflect the employees’ own tax obligations to offset the employer’s new leave costs, a step that Congress and the IRS have been loath to employ previously. Importantly, the employer can retain the payments from payroll tax amounts due the IRS for any of its employees, not just those associated with employees for whom the employer provided paid FFCRA leave.

Employers also will not face certain payroll tax obligations on the leave payments themselves.

3. What about self-employed individuals?

Equivalent FFCRA leave credit amounts are available to self-employed individuals under similar circumstances. These credits can be claimed on individual income tax returns and reflected in reduced estimated tax payments.

4. What If the payroll taxes owed are less than the employer’s FFCRA leave costs?

If there are not sufficient payroll taxes to cover the employer’s full cost of providing FFCRA leave, employers will be able file a request for an accelerated refund payment from the IRS. The IRS will be publishing additional details on this process during the week of March 23rd, but the Release states that the IRS expects to be able to process these requests in two weeks or less.

5. What about the costs of maintaining health insurance for employees during the FFCRA leave period?

The Release explicitly states that health insurance costs are included in the credit. Employers are entitled to an additional tax credit for the cost of maintaining health insurance coverage for eligible employees during their FFCRA leave periods.

6. I am a small business planning to seek an exemption pursuant to the FFCRA. What does the Release say about that?

The Release gives small businesses some insight into the exemption process for family leave, stating that employers with fewer than 50 employees will be eligible for an exemption from the leave requirements relating to school closings or child care unavailability where those requirements would jeopardize the ability of the business to continue. Exemption requests will be subject “simple and clear criteria that make it available in circumstances involving jeopardy to the viability of an employer’s business as a going concern.” The Department of Labor will be providing guidance and rulemaking to further articulate this standard.

The Release does not refer to whether and under what circumstances the DOL will allow exemptions to the paid sick leave requirements for employers with fewer than 50 employees. Nonetheless, we still expect regulations are forthcoming that will establish those standards, as permitted by the FFCRA.

7. When will the DOL begin enforcement actions related to the FFCRA?

The Release provides that the DOL will grant a 30-day grace period on enforcement to provide time for employers to come into compliance with the FFCRA. During this period, the DOL will not bring an enforcement action against any employer for violations of the FFCRA so long as the employer has acted reasonably and in good faith to comply with the FFCRA, and the DOL will instead focus on compliance assistance. The DOL will be issuing a temporary non-enforcement policy providing further detail.

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ICE Releases Guidance Relaxing I-9 Requirements For Certain Employers

The US Department of Homeland Security (DHS) has issued guidance that provides flexibility for certain employers to comply with Form I-9 requirements due to COVID-19.

Which employers does the new guidance apply to?

The relaxed requirements apply only to employers and workplaces operating remotely due to COVID-19. If there are employees physically present at a work locations, no exceptions will apply. However, if newly hired employees or existing employees are subject to COVID-19 quarantine or lockdown protocols, DHS will evaluate on a case-by-case basis.

What options does the new guidance offer?

This provision removes the requirement that employers review the employee’s identity and employment authorization documents in the employee’s physical presence. However, the employer must:

  • Inspect Section 2 documents remotely (e.g., over video link, fax or email, etc.) within three business days of work for pay;
  • Retain copies of the documents;
  • Add “COVID-19” as the reason for physical inspection delay in the Section 2 field once physical inspection takes place after normal operations resume and add “documents physically examined” with the date of inspection in the Section 2 additional information field on the Form I-9 (or section 3 if applicable);
  • Conduct in-person verification of identity and employment eligibility documentation within 3 business days of normal operation of business; and
  • Retain written documentation of their remote onboarding and telework policy with the Form I-9 for each employee.

Additionally, the Department of Homeland Security will allow employers to designate an authorized representative to act on their behalf to complete Section 2. An authorized representative can be any person the employer designates to complete and sign the Form I-9 on their behalf. The employer is liable for any violations in connection with the form or the verification process, including any violations in connection with the form or verification process, including any violations of the employer sanctions laws committed by the person to act on the employer’s behalf.

When, and for how long, is the new guidance effective?

This updated guidance may be implemented for a period of 60 days, starting today, or within 3 business days after the termination of the National Emergency, whatever comes first.

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The ever-evolving COVID-19 crisis continues to pose significant challenges for industrial enterprises across the United States. Until very recently, the engines of industry continued to hum while the broader world wrestled with this unprecedented public health crisis. However, with growing constituencies across the public and private sector calling for more aggressive action on social distancing and with states now beginning to issue strict shelter-in-place orders, more and more manufacturing facilities are closing their doors and idling their operations. To make things even more challenging, these decisions are being made with no real idea as to whether the ordered shutdowns will last for days, weeks or months. Amidst this uncertainty and with little notice, companies must confront and effectively address immediate environmental compliance and risk management issues and considerations arising from their rapidly changing business conditions.

COVID-19 orders and shutdown mandates raise immediate regulatory questions that must be addressed. Shutdown orders and the cessation of manufacturing operations – be they government mandated or voluntarily imposed – raise a number of important environmental regulatory questions, including:

  • How will ongoing remediation projects be affected by shutdown orders and the limited availability of third party contractors?
  • What steps need to be taken to manage environmental risks at idled plants including with respect to accumulated hazardous wastes, management of waste treatment ponds and lagoons, and maintenance of secondary containment and stormwater controls?
  • How are facilities going to continue to comply with air, water and waste permitting requirements as EHS staff and resources become increasingly scarce?

These questions must be promptly asked and answered as companies must presume that existing environmental regulatory requirements will continue to apply to temporarily shuttered operations subject to, as recommended more fully below, a detailed review of potential relief afforded under applicable permits or regulations or pursuant to clear pronouncements by government agencies in response to the extraordinary circumstances facing these enterprises today.

What can we expect from federal and state environmental agencies? As facilities consider these critical environmental compliance questions, the operating assumption must be that U.S. EPA and state environmental agencies will expect continued compliance regardless of any COVID-19-related operational disruptions or facility shutdowns. Importantly, all of the state shelter-in-place orders issued to date appear to contemplate the continuation of essential environmental compliance services at idled manufacturing facilities. These services either fall within defined “essential business operations” (which generally include building management and maintenance operations and waste management services) or otherwise constitute exempt “minimum basic operations” required to maintain the value of the business or ensure security of company facilities and assets.

The messaging from U.S. EPA and the states on environmental compliance expectations has not been consistent, but nonetheless reflects an expectation of continued adherence to regulatory obligations. Pennsylvania, for example, has issued written guidance making clear that “all permittees and operators are expected to meet all terms and conditions of their environmental permits, including conditions applicable to cessation of operations” during the crisis. California and Illinois, two states that have issued shelter-in-place orders in recent days, offer no express relief or accommodations as part of their messaging to state businesses and industrial locations. For its part, U.S. EPA is similarly silent on the availability of relief from regulatory compliance obligations in connection with federal COVID-19 mandates for affected businesses, focusing its messaging instead on FIFRA compliance related to surface disinfectants and transmission of COVID-19 in drinking water and wastewater. A few states, Texas and Oregon in particular, have acknowledged that some relief may be available through the exercise of enforcement discretion where noncompliance is unavoidable due to impacts from COVID-19. The Texas Commission on Environmental Quality (TCEQ) has even set up a special email address to field and timely respond to these requests.

Essential elements of an effective Environmental Action Plan.
 Successfully navigating the environmental challenges resulting from COVID-19 requires thorough consideration and planning, all in a time frame that keeps pace with the daily evolution of this crisis. To that end, we advise our industrial clients to pursue the following essential steps in implementing their COVID-19 environmental action plans:

1. Identify your COVID-19 Environmental Team. 
The first task must be to identify the Environmental Team charged with managing environmental compliance obligations and risks during extended operational disruptions or shutdowns. For most companies, the Environmental Team will include both corporate and plant EHS professionals. Consideration must also be given to necessary third-party consultants and their availability to the Team. Any questions regarding the effect of shelter-in-place orders or other company-mandated work restrictions for internal and external team members must be reviewed and addressed immediately – if necessary, through outreach to state officials – to ensure the availability of resources during the crisis.

2. Review your affected facilities and environmental compliance and risk considerations. The Environmental Team must carefully review and assess the compliance challenges and potential environmental risks implicated by a prolonged shutdown of operations. Some examples of environmental risks include: Will facility disruptions cause exceedances of hazardous waste generator storage limits? What actions will be necessary to operate, maintain and inspect product storage and waste management units and essential pollution control systems and equipment? What impact will operational disruptions have on ongoing remediation or long-term monitoring programs and potential risks to the public or the environment? What permit obligations are triggered by the idling of plants and what regulatory limits and monitoring and reporting requirements will continue to be imposed on these operations? Without question, companies will be obligated to ensure that no harm to public health or the environment occurs during these transitional periods or shutdowns. A careful review of operations will help prioritize the mobilization of constrained resources to the greatest potential risks and most challenging operational issues.

3. Understand your rights and obligations under applicable permits and government orders. Facility environmental permits and government cleanup orders impose obligations on operators, including during periods of shutdown or changes in operations. The terms of these permits often offer relief from certain compliance requirements in the face of unanticipated events or circumstances. For example, Superfund cleanup orders typically include force majeure provisions excusing compliance with certain order requirements. Likewise, Clean Air Act and Clean Water Act permits often include “emergency condition” or “upset” provisions and other force majeure-type terms that offer defenses to enforcement for failed compliance under appropriate circumstances. How these provisions might apply to circumstances and operational challenges triggered by COVID-19 mandates should be considered carefully in consultation with legal counsel given the unprecedented nature of this crisis. Regardless of these applicability questions, the ability to take advantage of any such regulatory relief will most certainly require adherence to the procedures laid out in the applicable permits and orders, including prompt notice to regulators of any unexpected impediments to compliance. Diligence in completing and documenting these pre-conditions to any requested relief must therefore be a priority.

4. Communicate with the regulatory authorities to the extent possible. 
Communication with the applicable environmental agencies will be critical to the success of any efforts to obtain relief, if necessary, from compliance obligations. The starting point is to ensure that all notice obligations in permits and orders are timely satisfied when requesting relief. Some states are also considering the extension of compliance deadlines for certain industry-wide required reporting. TCEQ, for example, has already announced a 30-day extension of its March 31st deadline for certain air emissions reports. We expect other states to issue similar extensions. Engaging with the regulators on these deadlines will ensure the maximum flexibility in addressing compliance issues. While communicating with the regulators is always good practice, we are already experiencing challenges contacting agency personnel, who themselves are on restricted schedules. In these cases, email and other correspondence to confirm outreach is important to document diligence in this agency engagement and compliance with notice and other requirements.

5. Act reasonably and document your environmental response and compliance actions. These are clearly uncertain times, and companies are facing challenges across their businesses and operations that they likely never fully contemplated in the best of contingency planning. How the consequences of COVID-19 will be resolved under environmental permits or “act of God” provisions of the environmental statutes are legal questions for another day. The priority for today must be on taking the necessary steps to (i) identify potential environmental risks and exposures, (ii) allocate the available resources to effectively managing these risks to public health and the environment, (iii) comply with permits conditions, including those offering relief under these extraordinary circumstances, and (iv) engage as responsibly as possible with the regulators. Companies will be judged on the reasonableness and diligence of their actions under the circumstances. Documenting these actions along the way is therefore necessary to provide the basis for defenses from any post-crisis enforcement that might arise.

Baker McKenzie’s Environmental Group is available to answer any questions you might have and provide legal support and counsel as you navigate the environmental issues that arise as the COVID-19 crisis continues to evolve. Please reach out to our COVID-19 contacts should you need further assistance.

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The Novel Coronavirus outbreak continues to have a substantial impact across the globe. As of the writing of this post, more than 87,000 cases of the Coronavirus disease (COVID-19) have been identified in 60 countries and territories around the world, claiming the lives of 2,977 people. Travel restrictions are becoming increasingly tighter at airports, with countries either imposing mandatory health screenings on travellers arriving from certain countries, or denying entry to passengers who have recently visited China, Italy, and other regions with reported cases of the Coronavirus.

The outbreak has also created uncertainty and fear about the health of the world economy. Just last week, the US stock market experienced its worst week since the financial crisis, with each of its major indexes (The Dow, SP 500, and Nasdaq) plunging between 10 and 12 percent. Other major indexes around the world also experienced significant declines. With many factories in China closed since the Lunar New Year, it is expected that global stock markets will continue to fall.

As the world considers how to best respond to these adverse health and economic events, global companies may want to consider the potential compliance risks the Coronavirus poses in their supply chains.

Shifts in Supply Chains Exacerbate Compliance Risks

Many multinational companies depend on Chinese manufacturing and exports, so with factories throughout China remaining closed in an attempt to stem the spread of the novel Coronavirus, companies around the world grew concerned about shortages of labor, goods, and raw materials. This concern has encouraged some companies to shift their manufacturing out of China to other countries and regions, or seek alternative suppliers outside of China. These shifts in the supply chain create new challenges and exacerbate risks, such as sourcing from regions where labor or other human rights abuses are common, and sourcing from new suppliers who have not been fully vetted and screened. This not only increases the risk of dealing with unreputable or even restricted parties, but also exposes companies to liability under sanctions regimes, the Foreign Corrupt Practices Act (FCPA), and corporate liability for supplier abuses, including forced labor and human rights violations. Diligence and screening is typically the primary way companies mitigate these legal risks in supply chains; however, the speed of changes wrought by the novel Coronavirus and the substantial potential impact on sales, revenue, and profit can demand prompt shifts in suppliers and result in transactions commencing with partners prior to the completion of formal vetting.

Global emergencies like the Novel Coronavirus outbreak frequently cannot be predicted, but companies can take proactive steps to help them adequately respond to such events when they arise. In a case like this, where companies experiencing supply shortages must look outside of their usual place of manufacturing or sourcing, companies may consider the following:

Use Other Existing Partners in Your Supply Chain – Consider if there are other manufacturers in your supply chain that can temporarily satisfy production or sourcing needs. By sticking with manufacturers and suppliers you are already familiar with, you are able to work with partners who have been previously vetted and who understand your business and ethics, which thereby reduces the risk of compliance breaches.

Properly Vet New Suppliers – Alternatively, if you must look to new suppliers for production, appropriate, risk-based due diligence checks should be conducted. In light of the urgencies, a risk-based approach to vetting is more important than ever – that is, dedicating resources to vetting suppliers based on locale, the type of services provided or product supplied, and other appropriate risk factors is paramount. This risk-based approach should consider, for example, the level of corruption in the country the supplier is located; whether the supplier has any personal relationships or business dealings with government entities or public officials; and whether the supplier has been the subject of any complaints or investigations related to labor abuses and other misconduct.

Conduct Restricted Party Screening – Screen new parties against applicable restricted parties lists, and incorporate them into your restricted party screening processes to minimize the risk of engaging in transactions that may be prohibited or restricted under export controls or trade sanctions laws. Keep in mind that anytime you engage a new supplier, they may bring other new parties into the equation, such as banks, freight forwarders, and other intermediaries, which can further increase the risk of dealing with restricted parties.
Supply Shortages Create Customs Risks at Borders

Multinational companies typically rely on customs agents and brokers to help them clear their merchandise across borders. While customs agents are able to assist companies in navigating the often complex local laws related to the customs clearance process, using such agents expose companies to certain compliance risks and liabilities, particularly under the FCPA. A significant number of FCPA enforcement actions brought by the US Department of Justice and the Securities and Exchange Commission have focused on improper payments made by third-party customs agents to secure customs clearance. With exports and imports in a lull due to the panic and uncertainty surrounding the Coronavirus, the risk of customs-related violations may be high, as companies face pressure to quickly clear goods and mitigate the economic consequences posed by the outbreak.

To control for such risks, companies may consider reminding their third party customs agents (as well as their own employees who liaise with these agents) about their zero-tolerance stance against customs violations, and require these agents to acknowledge their compliance with company policy and local laws and regulations. Companies may also consider reviewing their internal controls to help ensure the timely detection and response to customs violations.

Urgent circumstances such as these call for decisive company communication to relevant employees and third parties alike, underscoring the company’s commitment to following the law and appropriate procedures. By employing an appropriate risk-based approach to diligence and screening, companies can help ensure that the impact of the Novel Coronavirus is not exacerbated by additional legal and PR trials resulting from transactions with unreputable or restricted parties.

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In this issue of the Global Immigration and Mobility Quarterly Update:

  • Colombia: Immigration Trends – Changes on the Entry and Permanence Permits in Colombia
  • Italy: A Shortcut for Intra-Corporate Transferee Permits
  • Philippines: PEZA-ZONCR Now Requires Personal Appearances by New Visa Applicants
  • Russia: New Migrations Trends for Russia; Temporary Ban on the Entry of Chinese Citizens into Russia
  • Singapore: Address from Manpower Minister on Updates to the Fair Consideration Framework and a Logistics Firm First to be Charged with False Declaration on Fair Hiring of Singaporeans; Tech@SG: Boost for Tech Startups Looking to Expand in Singapore; Budget 2020: Reduction of the Foreign Worker Ratio in Construction, Marine Shipyard and Process Sectors
  • United Kingdom: UK Policy Statement Sets out Revised Points-Based Immigration System
  • United States: Start Preparing: USCIS Will Accept H-1B Cap Registrations on March 1, 2020; Registration Window to Close on March 20, 2020, under New Electronic Preregistration System

More news and events

2020 Edition Now Available — Global Employer: Focus on US Immigration & Mobility

We are pleased to bring you the 2020 version of the Global Employer: Focus on US Immigration & Mobility.

Whether you need information about a specific US visa type, or are looking for a high-level overview of employer obligations related to the movement of foreign nationals under US immigration and employment law, this handbook covers a wide range of topics and serves as a go-to desk-side guide for US employers.

Request copies by clicking the button below.

Order Now

The post The Global Employer: Global Immigration and Mobility Quarterly Update (March 2020) appeared first on Global Compliance News.

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The Trump Administration has imposed tariffs on nearly $5 billion of US imports of medical products from China, which accounts for roughly 26 percent of all medical products imported from all countries. Facing potential supply shortages, the Administration published an announcement in the Federal Register on March 16, 2020, that it would exclude several Harmonized Tariff Schedule categories from the Section 301 duties to aid in the treatment of COVID-19. These exclusions cover products like certain types of disposable gloves and biohazard bags, and the exclusions will apply from September 24, 2018 through August 7, 2020. This comes at the same time as a related announcement that temporarily reduces these tariffs on other medical products and equipment from China, such as facemasks, gauze, latex gloves, and sanitizing wipes. These tariff exclusions or reductions are important and valuable, and importers of medical goods should ensure that they review the available exclusions and properly claim them, where available. Where the exclusions apply retroactively, importers should review their entries since September 2018 and prepare documentation to claim back duties paid or otherwise owed.

Section 301 duties changed US purchases of medical products

The data confirm that there has been a reduction in the import of numerous medical devices or medical products from China. Recent analysis by Chad Bown from the Peterson Institute of International Economics presented the data as follows:

Source: Chad P. Bown, Trump’s trade policy is hampering the US fight against COVID-19, Peterson Institute for International Economics (March 13, 2020), https://www.piie.com/blogs/trade-and-investment-policy-watch/trumps-trade-policy-hampering-us-fight-against-covid-19 (last accessed on March 16, 2020).

These imports trends began after President Trump imposed Section 301 tariffs on Chinese products in early 2018. Duties were imposed on various medical products as part of the fourth round of tariffs in September 2019. Numerous healthcare industry group experts testified before the US Trade Representative about the impact of these duties. In February 2019, the tariff rate on some medical products was reduced from 15% to 7.5% as part of the Phase 1 U.S.-China trade agreement. On March 10, 2020 and March 16, 2020, the administration issued temporary tariff exclusions on additional medical products with other exclusion requests still pending.

Action Items

Importantly, if you have imports that fall within in the scope of these exclusions, you should ensure that you file Post Summary Corrections or protests with US Customs and Border Protection and claim back any duties that have been paid and/or rely on the exclusions going forward.

Further, be vigilant in monitoring developments from the US Trade Representative in reacting to additional exclusion requests that are pending. When exclusions are granted, they are generally product-specific – not importer or purchaser specific. That means that any US importer can claim the exclusion if its import meets the language provided in the tariff exclusion annex that is published by the US Trade Representative.

Where you have questions about the scope or availability of exclusions or how to claim the exclusion with US Customs, please contact the authors or the Baker McKenzie attorney with whom you work.

The post US Tariff Relief Medical Products appeared first on Global Compliance News.

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HITRUST recognizes the challenges that assessed entities may be facing in completing their HITRUST CSF Validated Assessments and the possible impact of not maintaining HITRUST CSF Certification.

The HITRUST CSF Bridge Assessment provides a solution to assist organizations in addressing these challenges, allowing assessed entities to demonstrate a continued level of control effectiveness and assert continued progress towards the next HITRUST CSF Validated Assessment.

HITRUST also recognizes that any solution addressing these challenges must maintain the integrity of the HITRUST CSF Assurance Program, introduce minimal additional costs and duplication of effort, and provide a reasonable level of assurance for anyone seeking to rely upon it.

Full details are listed in the new Assurance Advisory, HAA 2020-004: HITRUST CSF Bridge Assessments.

In addition, HITRUST has recently issued other advisories to address impacts of COVID-19 on performing CSF Assessments that can be found here.


Key Takeaways

  • 19 requirement statements will be randomly selected by the HITRUST MyCSF platform from the entity’s previous validated assessment to serve as a HITRUST CSF Bridge Assessment.
  • A HITRUST Authorized External Assessor will then test these requirement statements to confirm their maturity did not degrade since the previous assessment.
  • The testing performed in the HITRUST CSF Bridge Assessment does not need to be performed again in the delayed validated assessment. In other words, HITRUST will not require re-testing of these 19 requirement statements.
  • A HITRUST CSF Bridge Certificate is not a replacement for a HITRUST CSF Validated Report with Certification as it does not provide an equivalent level of assurance.
  • A HITRUST CSF Bridge Certificate is also not an extension to an existing HITRUST CSF Certification (which still expires on the two-year certification anniversary).

FAQs

Who qualifies? If my organization’s operations have been impacted by activating our business continuity plan, do I still qualify?

Any organization that (a) has a HITRUST CSF Validated Report with Certification, (b) will miss their validated assessment submission due-date, and (c) hasn’t missed that due date by more than 30 days.

Organizations that have implemented a business continuity plan still qualify as long as the scoped control environment hasn’t degraded while operating in emergency mode.

When can I create, complete, and submit a HITRUST CSF Bridge Assessment to HITRUST?

The HITRUST CSF Bridge Assessment object can be created no more than 60 days before and up to 30 days after the expiration date of the HITRUST CSF Certification then can be submitted to HITRUST no more than 30 days before and up to 30 days after the expiration date of the HITRUST CSF Certification.

Where can I find more information?

Please contact your HITRUST Customer Success Manager for more information, or refer to the following resources:

The post HITRUST Offers New Bridge Assessment and Certificate to Help Organizations Overcome Challenges Maintaining HITRUST CSF Certification Due to COVID-19 Disruption appeared first on HITRUST.

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