United States: Legislation Enacted Suspending Permanent and Normal Trade Relations with Russian Federation and Belarus

United States: Legislation Enacted Suspending Permanent and Normal Trade Relations with Russian Federation and Belarus

On April 8, 2022, President Joe Biden signed into law H.R. 7108, legislation that suspends normal trade relations with the Russian Federation and Belarus. This change in trade status is among the United States government’s latest actions in response to Russia’s invasion of Ukraine. Unlike previous sanctions, which were implemented by the executive branch, the suspension of normal trade relations required congressional approval to take effect.

Biden had announced on March 11, 2022, that he would work with the European Union and the national leaders comprising the Group of Seven, or G7, to implement the measure “to hold [Russian President Vladimir] Putin accountable for his continued assault on Ukraine and further isolate Russia from the global financial system.” On the same day, the G7 leaders issued a statement condemning Putin’s actions in Ukraine and promising to strip Russia of MFN trade status for particular products. Nations in the G7 include Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States. The House passed its version of the bill on March 17 by a vote of 424–8, with one member not voting. On April 7, the Senate passed an amended version of the bill by a vote of 100–0. The House agreed to the Senate’s amended bill later that day.

Beginning on February 21, 2022, the U.S. government and its foreign allies instituted financial and trade sanctions against Russian entities and individuals. These sanctions have escalated in severity as Russia’s invasion has persisted. Some of the sanctions include prohibiting multiple Russian banks from accessing U.S.-based assets; finalizing a Department of Commerce rule implementing export controls to prevent the sale or transfer of certain technologies to Russia and Belarus; targeting personal property in the U.S. owned by the Russian business elite (oligarchs); and banning Russian oil and gas imports.

Since the Russian Federation’s accession to the World Trade Organization (WTO) in 2012, it has enjoyed most-favored nation (MFN) status with other member nations, including the U.S. Generally, the MFN designation prevents WTO members from implementing discriminatory trade practices with other member countries. This principle can be found in multilateral trade agreements like the General Agreement on Tariffs and Trade (GATT), which requires members to give identical trade privileges, such as customs duties and charges, for like products to all member nations. The WTO has described MFN treatment to mean that “every time a country lowers a trade barrier or opens up a market, it has to do so for the same goods or services from all its trading partners[.]” Although Belarus is not a WTO member nation, until the passage of this law, it had normal trade relations with the U.S.

WTO member states and nations with normal trade relations with the U.S. are subject to uniform duty rates under “Column 1” of the United States Harmonized Tariff Schedule (HTS). H.R. 7108 applies higher tariffs, known as “Column 2” rates, to Russia and Belarus, and establishes a process for the president to apply duties and tariffs over and above these rates. The law also creates a mechanism for the resumption of Column 1 tariffs if Russia or Belarus meet certain conditions, including the withdrawal of troops from Ukraine, cessation of threats or aggression against North American Treaty Organization (NATO) countries, and recognition of Ukraine’s right to self-government.

This law also directs the U.S. Trade Representative to take a number of actions related to Russia and Belarus before the WTO. It provides that the Trade Representative is to condemn Russian aggression against Ukraine, encourage other WTO member nations to suspend trade concessions with Russia and Belarus, seek to halt Belarus’ accession to the WTO, and consider available methods for suspending Russia from the WTO.

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