Amendment to Virginia Law Prohibits Noncompetes Against Nonexempt Employees
Beginning July 1, 2025, Virginia will provide even more protection to workers against the enforcement of noncompete agreements. Since 2020, Virginia law has prohibited employers from entering into, enforcing, or threatening to enforce a covenant not to compete against a “low-wage employee” (currently any employee earning less than $76,081 per year). However, an amendment to the existing law expands the definition of “low-wage employee” to also include any worker who is classified as nonexempt under the Fair Labor Standards Act (FLSA).
Quick Hits
On March 24, 2025, Virginia Governor Glenn Youngkin signed SB128 into law, which significantly expands the existing scope of protection to low-wage employees against the enforcement of noncompete agreements.
Starting on July 1, 2025, covenants not to compete will be prohibited against any employee who qualifies as a “low-wage employee,” meaning any employee who (i) earns less than the average weekly wage in Virginia (currently $1,463.10 weekly or $76,081 annually) or (ii) is entitled to overtime compensation under the FLSA.
Employers that enter into, enforce, or threaten to enforce a covenant not to compete against a low-wage employee could be subject to injunctive relief, the payment of damages (including liquidated damages), attorneys’ fees, costs, and a civil penalty of $10,000 per violation.
Covenants not to compete that were entered into (or renewed) before July 1, 2025, are not affected by the changes in the law.
Summary of Virginia’s Amended Noncompete Law
Virginia’s decision to ban noncompete agreements against low-wage employees is not entirely new. As we previously reported, Virginia enacted a law in 2020 that prohibits covenants not to compete against “low-wage employees.” Until recently, the term “low-wage employee” had been defined as an employee whose average weekly earnings are less than the average weekly wage in Virginia. In 2020, the salary threshold for a “low-wage employee” was approximately $62,000 per year. By 2025, that amount had increased to $76,081 per year.
In an effort to expand the protection available to Virginia employees, the amended law still prohibits noncompetes against any employee who falls below the salary threshold, but also includes any employee “who, regardless of his average weekly earnings, is entitled to overtime compensation under the provisions of 29 U.S.C. § 207 for any hours worked in excess of 40 hours in any one workweek.” In other words, starting July 1, 2025, employers can no longer enter into or attempt to enforce noncompete agreements with employees classified as nonexempt under the FLSA.
Fortunately for employers, the amendment does not invalidate or otherwise affect covenants not to compete that were entered into (or renewed) prior to July 1, 2025. As such, employers have a narrow window of time to consider entering into noncompete agreements with nonexempt workers, provided those workers earn more than $1,463.10 weekly or $76,081 annually. Furthermore, the new law allows for the continued use of nondisclosure agreements if they are designed to “prohibit the taking, misappropriating, threatening to misappropriate, or sharing of certain information to which an employee has access, including trade secrets” and confidential or proprietary information.
Key Takeaways
Starting July 1, 2025, Virginia employers cannot enter into or attempt to enforce a covenant not to compete with any workers who are (or should be) classified as nonexempt under the FLSA. Thus, the amended law will offer protection to a significantly larger population of employees than in the past.
Employers may want to consider entering into noncompete agreements now, as the amended law does not apply to covenants not to compete entered into before July 1, 2025, provided that the employee earns more than the average weekly wage in Virginia.
Employers that neglect to carefully evaluate employees’ exempt versus nonexempt status under the FLSA for any agreements entered into after July 1, 2025, could face stiff penalties of $10,000 per violation and potential civil actions from employees.
Litigating Trade Secret Cases: A Strategic Guide for In-House Counsel
When faced with trade secret misappropriation, swift and strategic action is crucial.
For in-house counsel, understanding the litigation process and available remedies can mean the difference between protecting valuable intellectual property and watching it lose its protected status.
This guide focuses on key litigation strategies and the critical role of injunctive relief in trade secret cases.
The Race to the Courthouse
Trade secret cases often begin with a race to secure immediate court intervention.
Unlike other intellectual property disputes that might benefit from lengthy pre-litigation investigation, trade secret cases frequently require immediate action to prevent irreparable harm. The first 48 to 72 hours after discovering potential misappropriation are critical.
Immediate Action Items
Before or contemporaneous with filing suit, in-house counsel should immediately:
Implement a litigation hold and preserve all relevant evidence
Engage digital forensics experts (internal or external) to document unauthorized access or downloads
Review all relevant agreements (NDAs, employment contracts, etc.)
Document the specific trade secrets at issue and their value
Gather evidence of protection measures in place
Consider whether to engage criminal authorities
Identify key witnesses to provide affidavits supporting injunction filings
Draft preservation letters to all potential parties and witnesses
Remember, courts will scrutinize your company’s response time. Delays in seeking protection can undermine claims of irreparable harm and make obtaining injunctive relief more difficult.
Choosing Your Forum
Trade secret cases generally can be filed in either federal or state court, as the federal Defend Trade Secrets Act (DTSA) does not preempt state law claims. This choice requires careful strategic consideration.
Federal courts may offer advantages in cases involving interstate commerce or international parties, while state courts might provide faster injunctive relief or more favorable precedent.
For cases in North Carolina, the North Carolina Business Court has developed substantial trade secret jurisprudence and can be an attractive venue. It provides some of the features of a federal court, such as a single judge assigned to hear all aspects of the case, expedited discovery, dispute resolution, formal briefing for most substantive motions, along with an overall case management order.
Trade secret cases in state court with amounts in controversy over $5 million must be designated to the Business Court, while those under $5 million may be designated there by either party.
Securing Injunctive Relief
Temporary restraining orders (TROs) and preliminary injunctions are crucial tools in trade secret litigation. However, obtaining them requires careful preparation and specific evidence. Courts typically won’t grant injunctive relief based on mere suspicion or generalized allegations of misappropriation.
Elements of a Strong Injunction Motion
Your motion should clearly establish:
The specific trade secrets at issue
How the trade secret derives value from being secret
The reasonable measures taken to maintain secrecy
Clear evidence of misappropriation
Threat of immediate and irreparable harm
Why monetary damages are inadequate
Balance of hardships favoring an injunction
Public interest considerations
Most importantly, be specific about what relief you’re seeking.
Courts are increasingly rejecting vague injunction requests that simply reference “confidential information” or “trade secrets” without more detail.
Crafting Effective Injunctive Relief
Consider requesting specific provisions such as:
Orders to isolate and sequester devices containing trade secret information
Prohibition on accessing or deleting potentially misappropriated information
Required submission of devices for forensic examination
Certification of compliance with injunctions by counsel
Restrictions on specific work activities by former employees that could lead to disclosure
Prohibition on product distribution incorporating trade secrets
Requirements for return or destruction of trade secret information
Remember that courts generally do not prohibit a former employee from working for a competitor solely based on a non-disclosure agreement.
Instead, focus on preventing the use of specific trade secrets while allowing the employee to use their general skills and knowledge.
Discovery Strategies
Trade secret litigation demands a sophisticated approach to discovery, particularly given the complex electronic evidence often involved. A critical threshold issue is the pre-discovery identification of trade secrets.
Many courts require plaintiffs to identify their trade secrets with particularity before obtaining discovery of defendants’ confidential information. This requirement serves to balance the protection of legitimate trade secrets against the risk of plaintiffs using discovery as a fishing expedition to learn competitors’ secrets.
The identification process requires careful consideration of competing interests. You must be specific enough to support your claims and meet court requirements while avoiding public disclosures that could jeopardize trade secret status. Working with outside counsel to obtain entry of an appropriate protective order that allows you to file sensitive information under seal often provides the best solution to this challenge.
The time-sensitive nature of trade secret cases frequently necessitates expedited discovery, particularly in conjunction with temporary restraining orders or preliminary injunction proceedings.
To secure expedited discovery, you must demonstrate why standard discovery timelines would prove inadequate, specifically identify crucial early-stage discovery needs, and explain how the requested discovery relates to preventing irreparable harm. Courts will weigh these factors against the burden expedited discovery would impose on defendants.
When electronic evidence plays a central role, as it often does in trade secret cases, establishing a proper forensic examination protocol becomes essential.
An effective protocol should address the selection and compensation of neutral forensic experts, define the scope of examination, establish procedures for handling privileged and confidential information, and set clear timelines and reporting requirements.
The protocol should anticipate potential disputes and provide mechanisms for their resolution.
Criminal Implications and Parallel Proceedings
The criminal implications of trade secret misappropriation add another layer of complexity to civil litigation strategy.
While potential criminal liability under federal and state law can provide significant leverage, it requires thoughtful handling to avoid ethical pitfalls. Timing of criminal referrals can impact civil discovery and may lead to stays of civil proceedings. Individual defendants may invoke Fifth Amendment protections, complicating both discovery and settlement discussions.
In-house counsel must work closely with outside counsel to navigate these parallel proceedings effectively.
Protective Orders in Trade Secret Cases
Trade secret litigation requires particularly robust protective orders that go beyond standard confidentiality provisions.
Effective orders typically establish multiple tiers of confidentiality, including “attorney’s eyes only” designations for the most sensitive information. They should carefully define access restrictions for individual defendants and establish concrete requirements for information storage and transmission.
The order should anticipate the entire lifecycle of confidential information, from initial disclosure through post-litigation destruction or return.
The Role of Expert Witnesses
Expert testimony plays a pivotal role in trade secret litigation, with three types of experts proving particularly valuable.
Digital forensics experts provide analysis of electronic evidence and documentation of misappropriation patterns. Their work often proves decisive in preliminary injunction proceedings and shapes the overall trajectory of the case.
Damages experts help quantify losses and establish both trade secret value and the improper benefit gained by a defendant.
Industry experts provide essential context about technical aspects, the value of information, and help courts value and distinguish between protected trade secrets and general industry knowledge.
The timing of expert engagement can significantly impact case outcomes. Early involvement of experts, particularly forensic specialists, often proves crucial in preliminary injunction proceedings and shapes the development of the overall case strategy.
These experts can help identify key evidence, develop preservation protocols, and guide discovery requests.
Looking Ahead
The complexity of trade secret litigation demands a balanced approach that combines urgency with strategic planning. While immediate action remains critical, hasty or poorly planned litigation can prove counterproductive.
Success requires gathering key evidence and developing a coherent strategy while moving quickly enough to prevent irreparable harm and preserve available remedies.
Colorado Passes Bill Banning Most Physician Non-Compete Agreements
Ever since a reference to a “legislative ban on physician non-compete agreements” was made in the Colorado attorney general’s Stipulated Consent Agreement and Judgment with U.S. Anesthesia Partners of Colorado, Inc., filed Feb. 26, 2024, health law practitioners in Colorado have waited to see if the Colorado General Assembly would enact such a ban. On April 21, 2025, the General Assembly made good on the promised legislative ban when it enacted Senate Bill 25-083. If the governor signs it into law, SB 25-083 would broadly impact the use of most restrictive covenants in agreements with physicians, physician assistants, dentists, and advanced practice registered nurses entered or renewed after SB 25-083’s expected effective date of Aug. 6, 2025.
Prior to SB 25-083, subsection (5)(a) of the statute had rendered “void” a restrictive covenant that “restricts the right of a physician to practice medicine,” but permitted enforcement of “provisions that require the payment of damages in an amount that is reasonably related to the injury suffered by reason of termination of the agreement,” including “damages related to competition.” That is, under subsection (5)(a) of the statute prior to SB 25-083’s enactment, it was not possible to obtain an injunction preventing a physician from going to work for a competitor, but it was possible to enforce a damages provision.
SB 25-083 deletes altogether the prior language in subsection (5)(a) of the statute, thereby eliminating the prior exception for physician restrictive covenants. Instead, subsection (5)(a) now provides that “[a] provision of an employment agreement or any other agreement enforceable at law that does not include an unlawful restrictive covenant remains enforceable and subject to any damages or equitable remedy otherwise available at law.”
Additionally, prior to SB 25-083, the statute also had permitted restrictive covenants designed to protect trade secrets or to bar solicitation of customers in certain limited circumstances. In SB 25-083, the General Assembly exempted from the trade secret and non-solicitation provisions any “covenant not to compete that restricts the practice of medicine, the practice of advanced practice registered nursing, or the practice of dentistry.” A covenant is “deemed” to be as much if it “prohibits or materially restricts a health-care provider” from disclosing to existing patients prior to the provider’s departure the following information: “(a) the health-care provider’s continuing practice of medicine; (b) the health-care provider’s new professional contact information; or (c) the patient’s right to choose a health-care provider.” As a result, a covenant not to compete that is deemed to restrict the practice of medicine, the practice of advanced practice registered nursing, or the practice of dentistry in the manner SB 25-083 defines cannot instead be labeled and enforced as a provision to protect trade secrets or to bar the solicitation of customers.1
To which types of licensed professionals these provisions would relate is not entirely clear. Although SB 25-083 refers to “a covenant not to compete that restricts the practice of medicine, the practice of advanced practice registered nursing, or the practice of dentistry,” it also defines “health-care provider” to include an individual licensed as a certified midwife. It also defines the “practice of medicine” to include practice as a physician assistant.
Finally, the General Assembly revised and narrowed the portion of the statute permitting a restrictive covenant related to purchasing and selling a business, a direct or indirect ownership share in a business, or all or substantially all of the assets of a business. Specifically, the General Assembly narrowed the duration of years an individual who “owns a minority ownership share of the business and who received their ownership share in the business as equity compensation or otherwise in connection with services rendered” may be subject to a restrictive covenant, according to a specific formula set forth in SB 25-083. Notably, however, the General Assembly did not except from this provision any “covenant not to compete that restricts the practice of medicine, the practice of advanced practice registered nursing, or the practice of dentistry,” as it did with the trade secrets and non-solicitation provisions. Accordingly, a restrictive covenant entered in connection with the sale of a medical or dental practice, or the like, may still be permissible under the statute.
By the terms of SB 25-083, the changes to the statute would apply to only covenants not to compete entered or renewed on or after the bill’s effective date of Aug. 6, 2025. This means that SB 25-083 should not be interpreted to invalidate restrictive covenants in agreements that predate Aug. 6, 2025. However, going forward, Colorado employers using restrictive covenants in their agreements with “health-care providers” should evaluate whether contract templates comply with the new provisions of SB 25-083.
1 Nothing in SB 25-083 authorizes the misappropriation of trade secrets.
A New Playbook: What the CFTC’s Operating Divisions Will Consider When Making Enforcement Referrals
The three operating divisions of the CFTC (Division of Market Oversight, Market Participants Division, and the Division of Clearing and Risk, together the Operating Divisions) issued an advisory on April 17, explaining the materiality criteria they will use when determining whether to make a formal referral to the agency’s Division of Enforcement (DOE) for self-reported violations, supervision violations, or other non-compliance issues (the Referral Advisory).
The Referral Advisory comes off the heels of DOE’s February 25 advisory (the DOE advisory) regarding self-reporting, cooperation and remediation by a CFTC registered entity or registrant when recommending an investigation or enforcement action to the Commission, including the factors DOE will consider when evaluating whether to reduce the proposed civil monetary penalties in enforcement actions. Under the DOE Advisory, a registered entity or registrant may receive CMP credit for self-reporting a potential violation to the appropriate CFTC Operating Division. Under older DOE staff guidance (which has since been vacated), DOE would not provide such credit when a registered entity or registrant self-reported a potential violation to the appropriate Operating Division.
Read Katten’s summary of the DOE Advisory.
The Referral Advisory notes that the Operating Divisions may refer potential violations that are material to DOE, such as those that involve:
Harm to clients, counterparties or customers, or members or participants;
Harm to market integrity; or
Significant financial losses.
In circumstances where a material violation involves fraud, manipulation or abuse, the Referral Advisory recommends making a referral directly to DOE rather than to the Operating Divisions.
The Operating Divisions will address supervision or noncompliance issues that are not material. In other words, the Operating Divisions will no longer make referrals of these nonmaterial noncompliance issues. This guidance is consistent with the Acting Chairman Caroline Pham’s push to have the Commission treat technical, noncompliance violations in the same way that exam deficiencies are addressed. While a commissioner, she commented that “enforcement actions for one-off, non-material operational or technical issues is shooting fish in a barrel.” Acting Chairman Pham also suggested that, instead, the agency should “take an approach to operational and technical issues that is consistent with the requirements and intent of CFTC rules 3.3 and 23.602.”
In determining the materiality of a supervision or noncompliance issue, the Referral Advisory provides that the appropriate Operating Division will apply a reasonableness standard to the following criteria:
Especially egregious or prolonged systematic deficiencies or material weakness of the supervisory system or controls, or program;
Knowing and willful misconduct by management, such as conduct evidencing an intent to conceal a potential violation, or supervision or noncompliance issue; or
Lack of substantial progress towards completion of a remediation plan for an unreasonably lengthy period of time, such as several years, particularly after a sustained and continuous process with the appropriate Operating Division regarding the lack of substantial progress.
The Referral Advisory makes clear, however, that the failure to meet a deadline for corrective action or remediation plan on its own will not be sufficient for a referral to DOE.
AIPLA Conference on Trade Secret Litigation Recap: Part 1
At the recent AIPLA Trade Secret Summit, one of the nation’s premier conferences on trade secret law, critical issues surrounding the protection of confidential business information took center stage. The discussions reinforced the importance of safeguarding trade secrets and proprietary data against theft, liability, and employee mismanagement—particularly during key employment transitions such as hiring, active employment, and separation. These considerations are essential for companies striving to maintain their competitive edge while navigating complex legal and ethical challenges.
Hearing firsthand how companies handle these issues reinforced just how vital it is to stay proactive and ahead of the curve. Our team has put together a series of key take aways from the event that may help companies to guard against unfair competition and trade secret theft. Our first topic for consideration is joint representation.
Joint Representation
Representing an onboarding employee and the company concerning the hiring of the individual can be a tricky proposition. There are good reasons for engaging in a joint representation with proper warnings and there are definite pitfalls.
One of those pitfalls is the appearance that the new employee and the new employer are joined at the hip relating to the conduct of the employee exiting a former employer (especially if the former employer is a direct competitor). When this situation occurs, the first step is to review the representation from an ethical standpoint under existing Ethics and Professionalism rules.
It is considered ethical to simultaneously represent multiple clients whose interests may not ultimately be aligned if the law does not prohibit the representation and if no client asserts a claim against any other client involved in the proceeding.
First things first—obtain an acknowledgement from the new employee that there is no restrictive covenant impeding the employment, the employee has exited his former company without any trade secret/confidential/proprietary information, and the employee has not destroyed or spoliated any information that belongs to the former employer.
If these factors check out, proceed cautiously with the caveat that if it is learned that the acknowledgement is false, representation of the employee will end and representation of the company will continue. In this type of situation, informing each party of the risks of dual representation is key to continued representation of the company when bad facts present themselves. This is not to say that disqualification may still occur, particularly if privileged information obtained from the onboarding employee could assist the employer in defending any claims.
A key case to review before undertaking any dual representation is Upjohn v U.S, 449 U.S. 383 ( 1981).
New USTR Measures Target Chinese Maritime Sector: What You Need to Know
The Office of the United States Trade Representative (“USTR”) issued a detailed notice on April 17, 2025, regarding actions and proposed actions in response to China’s alleged targeting of the maritime, logistics, and shipbuilding sectors for dominance. The measures, USTR argues, will “disincentivize the use of Chinese shipping and Chinese-built ships, thereby providing leverage on China to change its acts, policies, and practices, and send a critically needed demand signal for U.S.-built ships.” Below, we break down the key elements of the notice and their potential impacts.
Background
The USTR launched an investigation under Section 301 of the Trade Act of 1974 (“Trade Act”) following a petition received by five national labor unions on March 12, 2024. The petition alleged that China’s policies unfairly harm U.S. commerce by targeting dominance in critical maritime-related sectors. Following a review, USTR determined that these practices displace foreign firms, reduce opportunities for U.S. businesses, and weaken supply chain resilience due to dependencies on China’s controlled sectors. As a result, in the closing days of the Biden administration, USTR issued a determination that these actions are unreasonable and actionable under the Trade Act.
The investigation revealed that China’s dominance strategy restricts U.S. competition, undermines supply chain security, and creates vulnerabilities in critical economic sectors. In response, on February 21, 2025, the USTR issued a Federal Register notice proposing certain responsive actions, including service fees and restrictions on certain maritime transport services, which resulted in the USTR convening a two-day public hearing and receiving nearly 600 public comments from industry stakeholders. USTR published its determination on responsive actions on April 17, 2025, Notice of Action and Proposed Action in Section 301 Investigation of China’s Targeting the Maritime, Logistics, and Shipbuilding Sectors for Dominance, Request for Comments.
Key Elements of the Notice of Action
Restrictions on Chinese Vessel Operators, Owners, and Chinese-Built Vessels. The plan includes a first phase with a 180-day grace period, after which fees will be implemented on Chinese vessel owners and operators calling in the United States based on net tonnage. Chinese operators and owners will face a port fee of $50 per net ton beginning on October 14, 2025, which will increase by $30 a year over the next three years.
Chinese-built vessels that are not Chinese-owned or controlled will face a lower phased fees of $18 per net ton or $120 per discharged container, whichever is higher. Those fees will also increase by $5 per net ton annually until 2028, with container fees increasing proportionally.
The fees will be applied per U.S. voyage, and not at each U.S. port call, as had been initially proposed, remedying objections raised by smaller U.S. ports. The fees will also only be levied up to five times per year on any given ship.
All Liquified Natural Gas (“LNG”) carrier vessels (whether Chinese-built or Chinese-owned or operated) are exempt from the new fees, but the carriage of LNG from U.S. ports is subject to separate cargo reservation requirements outlined below.
A number of exemptions were adopted to address objections raised in the March comment period by various U.S. shippers, ports, terminals, and regional carriers. These exemptions are only available Chinese-built vessels that are not Chinese-owned or operated. They include:
U.S.-owned vessels, where the U.S. entity owning the vessel is controlled by U.S. persons and is at least 75 percent beneficially owned by U.S. persons;
Vessels arriving at U.S. ports empty or in ballast (to avoid impacts to U.S. exports);
Smaller and medium-size vessels (with a capacity equal to or less than 4,000 Twenty-Foot Equivalent Units (“TEU”), 55,000 Deadweight Tonnage (“DWT”), or individual bulk capacity of 80,000 DWT);
Vessels engaged in shortsea shipping (entering a U.S. port in the continental United States from a voyage of less than 2,000 nautical miles from a foreign port or point);
Specialized chemical tanker vessels; and
Vessels enrolled in certain U.S. Maritime Administration sealift programs
Restrictions on Foreign-Built Vehicle Carriers and LNG Exports. Non-U.S.-built vehicle carriers will face fees based on Car Equivalent Unit (“CEU”) capacity, starting at $0 for the first 180 days and rising to $150 per CEU capacity thereafter. Beginning April 17, 2028, phased restrictions will require a growing percentage of U.S. LNG exports to be transported on U.S.-built, U.S.-flagged, and U.S.-operated vessels. This percentage will increase gradually over 22 years.
Proposed Tariffs on Ship-to-Shore Cranes and Cargo Handling Equipment. The notice proposes additional duties of up to 100 percent on cranes manufactured, assembled, or made with components of Chinese origin. Certain cargo handling equipment, including specific containers, chassis, and chassis parts from China, will also face tariffs ranging from 20 percent to 100 percent.
Significant Takeaways from the Proposed Actions
No Cumulative Fees. The Notice of Action clarified that the fees are not cumulative or stacked. A vessel will only be charged one fee per voyage/string of voyages and is limited to five charges per year.
Phased Tonnage-Based Fee on Chinese Vessel Operators and Owners. The February Proposed Action proposed a flat rate fee of up to U.S. $1,000,000 per vessel entrance to a U.S. port or up to U.S. $1,000 per net tonnage (“NT”) of the vessel’s capacity. The Notice of Action contains a fee of U.S. $50 per NT (after the first 180 days), which will increase incrementally. While the burden on smaller ships is reduced, under the new formula fees on large tankers and containerships could be more than double the flat fees proposed in February.
No Fees Based on Chinese Fleet Composition. The Notice of Action did away with one of the most controversial aspects of the February proposal, i.e., fees based on fleet composition for maritime transport operators with fleets comprised of Chinese-built vessels or maritime transport operators with prospective orders for Chinese vessels.
Expansive Definition of Chinese Owners and Operators, Including Minority Shareholding Test. The Notice of Action includes multiple alternative tests for determining if a vessel owner or operator is Chinese for the purpose of the fee schedule. Chinese owner or operator status can be triggered by country of citizenship or organization, ownership, control, headquarters location, principal place of business, and other factors. An entity will be deemed a Chinese owner or operator even if only 25 percent of the entity’s outstanding voting interest, board seats, or equity interest is held directly or indirectly by an entity that is a national or resident of China, Hong Kong, or Macau, or organized under the laws of those jurisdictions, or has its principal place of business there. The 25 percent threshold may pose new challenges for publicly traded and widely held companies and funds outside China that have some China-linked investor participation.
Lack of Clarity Regarding Other Key Definitions. “Owner” and “Operator” are defined in the notice by reference to Customs and Border Protection (“CBP”) Form 1300 (Vessel Entrance or Clearance Statement); however, those terms are not actually defined in that CBP form or any accompanying rules. Accordingly, uncertainty about these key terms remains—regarding, for example, the “owner” status of lease-finance title holders and owners pro hac vice (i.e., bareboat charterers); and the “operator” status of technical managers, commercial managers, document of compliance holders, and others that share responsibility for vessel activities and compliance.
Fees on Vessel Operators of All Foreign Vehicle Carriers (not just Chinese-Built Ships). These fees are imposed any non-U.S. built vehicle carrier and are not limited to those vehicle carriers built in China. Like the cargo reservation provisions for LNG, this action is likely to draw protests and challenges that it exceeds USTR’s authority, as new fees on European, Korean, and Japanese car carriers have no apparent nexus to alleged Chinese shipbuilding and maritime practices.
Cargo Reservation Requirements for LNG Exports. While USTR previously proposed a requirement that a mandatory percentage (increasing over time) of all U.S. exports be carried on U.S.-flagged, U.S.-built vessels, the current notice limits this cargo reservation requirement to LNG cargo only. Also, some exporters favor expanding the notice’s special treatment of LNG to other types of liquified gas and natural gas liquids exports.
Public Participation and Deadlines.
The comment period to the proposed tariff action opened on April 17, 2025. While USTR only solicited feedback on the tariff proposal, the docket is likely to attract commentary on the broader range of new remedies and issues introduced in the notice. USTR also will hold a public hearing on this proposed action on May 19, 2025, at the U.S. International Trade Commission in Washington, D.C. Requests to appear at the public hearing must be submitted by May 8, 2025, with written comments due by May 19, 2025. Rebuttal comments to the public hearing must be submitted within seven calendar days after the last day of the hearing.
Conclusion and Next Steps
The USTR’s notice introduces significant measures targeting China’s position in the maritime, logistics, and shipbuilding sectors. Key actions include the imposition of fees on Chinese maritime transport services, restrictions on U.S. LNG exports, fees on all non-U.S. car carriers, and proposed tariffs on vital shipping equipment. Stakeholders are encouraged to review the proposed measures and submit comments or requests to appear at the hearing by the specified deadlines. Companies involved in maritime transportation should begin preparing for the phased implementation of fees and restrictions.
For additional information, stakeholders can contact the USTR Section 301 support line at (202) 395-5725.
Comments on Minnesota’s Proposed Rule for Reporting Products Containing Intentionally Added PFAS Are Due May 21, 2025
With the January 1, 2026, reporting deadline fast approaching for reporting on products containing intentionally added per- and polyfluoroalkyl substances (PFAS), on April 21, 2025, the Minnesota Pollution Control Agency (MPCA) published a proposed rule intended to clarify the reporting requirements, specify how and what to report, and establish fees. Written comments on the proposed rule are due May 21, 2025, at 4:30 p.m. (CDT). On May 22, 2025, at 2:00 p.m. (CDT), MPCA will hold a public hearing during which it will accept oral comments on the proposed rule. The hearing will end at 5:00 p.m. (CDT), but additional days of hearings may be scheduled if necessary. The procedural rulemaking documents available include:
Proposed Permanent Rules Relating to PFAS in Products; Reporting and Fees (c-pfas-rule1-06) (proposed rule);
Statement of Need and Reasonableness for PFAS in products reporting and fees rulemaking (c-pfas-rule1-07) (SONAR); and
Notice of intent to adopt rules with a hearing (c-pfas-rule1-05).
Definitions
The proposed rule includes definitions not included in Minnesota’s statute, including:
Component: A distinct and identifiable element or constituent of a product. Component includes packaging only when the packaging is inseparable or integral to the final product’s containment, dispensing, or preservation.
Distribute for sale: To ship or otherwise transport a product with the intent or understanding that the product will be sold or offered for sale by a receiving party after the product is delivered.
Function: The explicit purpose or role served by PFAS when intentionally incorporated at any stage in the process of preparing a product or its constituent components for sale, offer for sale, or distribution for sale.
Homogenous material: One material of uniform composition throughout or a material, consisting of a combination of materials, that cannot be disjointed or separated into different materials by mechanical actions.
Packaging: The meaning given under Minnesota Statutes, Section 115A.03 — “‘Packaging’ means a container and any appurtenant material that provide a means of transporting, marketing, protecting, or handling a product. ‘Packaging’ includes pallets and packing such as blocking, bracing, cushioning, weatherproofing, strapping, coatings, closures, inks, dyes, pigments, and labels.”
Significant change: A change in the composition of a product that results in the addition of a specific PFAS not previously reported in a product or component or a measurable change in the amount of a specific PFAS from the initial amount reported that would move the product into a different concentration range.
Substantially equivalent information: Information that the MPCA commissioner can identify as conveying the same information required under Part 7026.0030 and Minnesota Statutes, Section 116.943, Subdivision 2. Substantially equivalent information includes an existing notification by a person who manufactures a product or component when the same product or component is offered for sale under multiple brands.
For some definitions, the proposed rule expands on definitions that are included in the statute. The statute defines manufacturer, but MPCA proposes additional language to clarify the definition (new language is italicized):
Manufacturer: The person that creates or produces a product, that has a product created or produced, or whose brand name is legally affixed to the product. In the case of a product that is imported into the United States when the person that created or produced the product or whose brand name is affixed to the product does not have a presence in the United States, manufacturer means either the importer or the first domestic distributor of the product, whichever is first to sell, offer for sale, or distribute for sale the product in the state.
According to the SONAR, MPCA inserted the phrase “has a product created or produced” to clarify the parties responsible for reporting. MPCA states that “[s]imilarly, the definition encompasses parties that either import or are the first domestic distributor of the product, whichever is first to sell, offer for sale, or distribute the product for sale in the state.” MPCA intends the revisions to clarify that companies that do not manufacture their own products are subject to the reporting and fee requirements.
Parties Responsible for Reporting
Under the proposed rule, a manufacturer or a group of manufacturers must submit a report for each product or component that contains intentionally added PFAS. Manufacturers in the same supply chain may enter into an agreement to establish their reporting responsibilities. The proposed rule allows a manufacturer to submit information on behalf of another manufacturer if the following requirements are met:
The reporting manufacturer must notify any other manufacturer that is a party to the agreement that the reporting manufacturer has fulfilled the reporting requirements;
All manufacturers must maintain documentation of a reporting responsibility agreement and must provide the documentation to MPCA upon request;
All manufacturers must verify that the data submitted on their behalf are accurate and complete; and
For the verification to be considered complete, all manufacturers must submit the required fee, as applicable.
MPCA states in the SONAR that “[i]t is reasonable to allow a manufacturer to submit the reporting requirements for another manufacturer because of the large overlap in common components used throughout the manufacturing of complex products.” According to MPCA, it will provide detailed guidance on how reporting entities can submit on behalf of multiple manufacturers in the reporting system instructions or in supplemental guidance.
Information Required
Under the statute, the following information must be reported:
(1) A brief description of the product, including a universal product code (UPC), stock keeping unit (SKU), or other numeric code assigned to the product;
(2) The purpose for which PFAS are used in the product, including in any product components;
(3) The amount of each PFAS, identified by its Chemical Abstracts Service Registry Number® (CAS RN®), in the product, reported as an exact quantity determined using commercially available analytical methods or as falling within a range approved for reporting purposes;
(4) The name and address of the manufacturer and the name, address, and phone number of a contact person for the manufacturer; and
(5) Any additional information requested by the commissioner as necessary to implement the requirements of this section.
Rather than requiring information regarding the purpose for which PFAS are used in the product, the proposed rule would require that manufacturers provide “the function that each PFAS chemical provides to the product or its components.” Under the proposed rule’s definition of function (“the explicit purpose or role served by PFAS when intentionally incorporated at any stage in the process of preparing a product or its constituent components for sale, offer for sale, or distribution for sale”), manufacturers would be required to report not only any PFAS intentionally added to the product, but PFAS used during the manufacturing process even if the PFAS are not present in the final product.
A manufacturer would be allowed to group similar products compromised of homogenous materials if the following criteria are met:
The PFAS chemical composition is the same;
The PFAS chemicals fall into the same reporting concentration ranges;
The PFAS chemicals provide the same function; and
The products have the same basic form and function and only differ in size, color, or other superficial qualities that do not impact the composition of the intentionally added PFAS.
If the product consists of multiple PFAS-containing components, the manufacturer would be required to report each component under the product name provided in the brief description of the product. Similar components listed within a product could be grouped together if the components meet the criteria listed above.
The proposed rule will allow manufacturers to report the concentration of PFAS using the following ranges:
Practical detection limit to less than (
Delaware Chancery Court Puts CFIUS Mitigation in Focus for M&A
What Happened
In a recent decision, the Delaware Court of Chancery (the Court) ordered Nano Dimension Ltd. (Nano) to enter into a national security agreement in the form proposed by the Committee on Foreign Investment in the United States (CFIUS), finding that Nano materially breached the CFIUS clearance provisions of a merger agreement (Merger Agreement) entered into with Desktop Metal, Inc. (Desktop) on July 2, 2024.
The Bottom Line
The Court’s decision to require Nano to execute a national security agreement proposed by CFIUS as a condition to clear the Nano-Desktop merger sets an important precedent for understanding the meaning of regulatory approval covenants generally, and CFIUS clearance covenants specifically.
The Full Story
According to the Court’s Post-Trial Memorandum Opinion, Desktop is a Massachusetts-based company that makes industrial-use 3D printers that create specialized parts for missile defense and nuclear capabilities. Nano is an Israeli firm, and sought to acquire Desktop in a $183 million all-cash transaction. Under the CFIUS rules, this is a “covered control transaction” and would therefore be subject to CFIUS review. To achieve the regulatory certainty that CFIUS would not later seek to force Nano to dispose of Desktop, the parties agreed to seek CFIUS approval on a voluntary basis as a condition to closing the merger. Given the national security implications of Desktop’s business, the parties anticipated that CFIUS approval would be complicated and would likely require that Nano enter into a national security agreement.
Desktop and Nano included in the Merger Agreement a relatively standard “reasonable best efforts” provision with respect to resolving government objections to the transaction generally. In addition, the parties specifically agreed to take “all action necessary” to receive CFIUS approval, including “entering into a mitigation agreement” in relation to Desktop’s business (a so-called “hell-or-high-water” provision). Nano included a narrow carveout that would allow it to refuse to agree to any condition imposed by CFIUS that would “effectively prohibit or limit [Nano] from exercising control” over any portion of Desktop’s business constituting 10 percent or more of its annual revenue, with clarifications that certain common mitigation requirements (e.g., US citizen-only requirements, information restrictions, continuity-of-supply assurances for US government customers, and notification/consent requirements in the event the US business exits a business line) would not impact the carve-out. In effect, the CFIUS approval condition in the Merger Agreement preserved wide latitude for conditions imposed by CFIUS in a mitigation agreement notwithstanding the control exception negotiated by Nano.
As anticipated by Desktop and Nano in the Merger Agreement, CFIUS informed the parties that it identified national security risks arising from the transaction and proposed a mitigation agreement to address those risks. Specifically, the mitigation agreement would have imposed information restrictions preventing the integration of Nano and Desktop IT infrastructure, restricted manufacturing locations for supply to US government customers, limited remote access software for products supplied to US government customers, required a US citizen board observer and appointed a third-party monitor. According to the Court’s recitation of facts, Nano’s cooperation with CFIUS in negotiating the terms of the mitigation agreement ceased following a proxy contest that resulted in a turnover on Nano’s board to a position opposed to the merger with Desktop. Desktop subsequently sued to enforce the terms of the Merger Agreement.
The Court held that Nano breached its obligations under the “reasonable best efforts” clause, noting that this language has been interpreted to require parties to take all reasonable steps and appropriate actions, which it found Nano failed to do. The Court also noted that good faith is relevant and that a “reasonable best efforts” clause does not allow parties to use regulatory approvals as a way out of a deal. Given the facts recited by the Court that Nano sought to use the CFIUS clearance condition as a way out of the deal, it is tempting to view the precedential weight of this part of the decision narrowly. However, “reasonable best efforts” provisions relating to regulatory clearances are commonplace and the Court’s discussion of this language merits attention. This is particularly true in the CFIUS context where remedies can be less predictable than those in other regulatory contexts due to the wide range of national security risks considered by CFIUS and the relative “black box” nature of CFIUS reviews.
The Court’s holding also provides important take-aways regarding the “hell-or-high-water” provision. These provisions are used to clarify “reasonable best efforts” in specific contexts and, as the Court noted, represent hard commitments in a merger agreement with respect to regulatory approval. Moreover, these firm commitments are relatively rare in CFIUS or other regulatory contexts. In this case, Desktop and Nano correctly anticipated that CFIUS would request a mitigation agreement and sought to identify a list of mitigation measures that would be acceptable. However, in the Court’s view, these mitigation measures were separate from the parties’ effort to define control with reference to the target’s financial performance. Rather, as CFIUS’s proposed mitigation concerned information restriction, supply assurances and monitoring requirements (which were specifically excluded from consideration of the loss of control exit provision), Nano’s ability to object to these requirements was quite constrained. The Court therefore rejected Nano’s argument that CFIUS’s conditions would impact Nano’s control over more than 10 percent of Desktop’s revenue-generating business lines.
The Court’s remedy of specific performance also merits consideration. The Merger Agreement stipulated to specific performance in the event of a breach. The Court’s recitation of facts explains that, in order to achieve greater deal certainty, Desktop proposed that CFUS clearance be subject to either a reverse termination fee or the “hell-or-high-water” provision backed by specific performance and that Nano opted for the latter. Transaction parties should note that generally, if a buyer needs greater flexibility to consider potential CFIUS mitigation given the unpredictability, a reverse termination fee can be used to purchase more discretion in deciding whether CFIUS’s proposed mitigation sufficiently erodes the value of the deal, provided that the parties carefully define the specific parameters of acceptable mitigation. Note, however, that the Court’s opinion with respect to the “reasonable best efforts” clause suggests that this does not simply allow a buyer to use mitigation as a pretext to refuse to go forward with the deal and transaction parties should carefully consider the degree of flexibility provided by regulatory approval conditions.
This case is a clear reminder that transaction parties should carefully consider the scope of regulatory approval conditions in negotiating merger agreements. No transaction party can predict exactly what mitigation measures CFIUS might require or even what national security risks it might identify, and parties will need to understand all possible mitigation remedies in order to successfully draft a CFIUS approval condition that effectively balances deal certainty with the flexibility necessary to turn down unacceptable mitigation requirements. To illustrate this uncertainty, the National Security Memorandum on America First Investment Policy issued by the President in February 2025 indicates some of the conditions required by CFIUS in its proposed mitigation agreement in this case (for example, indefinite monitoring conditions) may not have been required if the present administration negotiated the mitigation agreement continued. Transaction parties should consider emerging CFIUS trends and policy developments as relevant to the scope of a “reasonable best efforts” clause.
Taming the Tariffs: Employee Benefit Issues for Employers During Times of Economic Uncertainty – Group Employee Terminations
Many companies are scrambling to quickly assess how to reduce the business impact of the upheaval to U.S. manufacturing and trading with the recent onslaught of tariffs threatened or imposed by the United States and the related global response. Similar to the COVID-19 pandemic, employers may now be looking for ways to manage the impending financial impact of tariffs on their business, including trying to lower HR-related costs and obligations through larger-scale employee group terminations.
This article provides reminders of some of the employee benefits issues to consider if your company is considering group terminations as a way to tackle the business impact of tariffs. In our experience, employers often provide enhanced benefits for employees losing their employment as part of a group termination. While the enhanced benefits may add to the employer’s costs on a temporary basis, it is still less expensive in the long run than the ongoing costs of maintaining a larger active workforce.
Another cost-saving option an employer may consider is to reduce or suspend employer contributions to retirement plans, which is further discussed here.
This article does not address the employment aspects of a group termination, such as whether the group termination triggers federal or state WARN notice or other similar requirements and employers should consult their labor & employment counsel and advisors whenever considering a group termination of employees.
What Are the Impacts to Our 401(k) Plan for a Group Termination?
Vesting. When an employee terminates employment (whether in a single or group employee termination context), he or she will become eligible to receive a distribution of any vested benefit under the company’s 401(k) plan. While 401(k) plans rarely provide for full vesting when an employee experiences an employer-initiated termination of employment, if the group of terminated employees is large enough, then the 401(k) plan may experience a “partial plan termination,” which requires certain 401(k) plan accounts to become fully vested.
A 401(k) plan has a “partial plan termination” during a plan year if there is a significant change to the plan or a significant corporate event that affects the right of employees to vest in their plan benefits. While determining if a partial plan termination has occurred is a facts & circumstances test, current IRS guidance presumes that there is a partial plan termination when at least 20% of the 401(k) plan’s active participants experience an employer-initiated termination of employment (outside of a company’s “ordinary course” turnover) during a plan year or in connection with the same corporate event (e.g., a planned or coordinated reduction in force). When a partial plan termination occurs, the employer must fully vest any employee who left employment during the relevant plan year, including people who voluntarily left employment. There are several nuances to this analysis so we recommend that a company discuss any planned larger-scale reductions in force with its 401(k) plan recordkeeper and legal advisors to determine the application of the partial plan termination rules in that circumstance.
If a partial plan termination is not occurring, then you may also wish to consider whether to voluntarily vest 401(k) plan accounts for individuals affected by an employer-initiated group termination, provided the employee group is not disproportionately highly compensated (as defined under IRS rules). This will require a plan amendment and coordination with your 401(k) plan recordkeeper to administer the change.
Employer Annual Contributions. If your 401(k) plan provides employer contributions that require either a specific number of hours of service during the year and/or a last day of the year employment requirement as a condition for receipt of this contribution, you may wish to consider whether to waive those requirements for the employees affected by the group termination, provided the employee group is not disproportionately highly compensated. This will require a plan amendment; however, this plan provision need not be preserved in the plan going forward; for example, the amendment could be drafted to apply to employees experience a group termination only during a limited window of time (e.g., 2025) or so it applies only to terminations at a specific plant or location.
Eligible Plan Compensation. One other item to remember is that if severance benefits are provided to employees, severance pay may never be subject to 401(k) plan deferrals or, generally, be considered to determine employer contributions under a 401(k) plan. That contrasts with certain regular post-termination payments related to final pay or benefits for services provided (e.g., final paycheck or vacation cashout) that may be subject to 401(k) deferrals and related employer contributions, depending on how your 401(k) plan defines compensation. Coordinate with your 401(k) plan recordkeeper and payroll processers to make sure 401(k) plan deferrals and employer contributions are only applied to eligible compensation.
What About Severance?
Employers that either rarely offer severance benefits or that do so on an ad hoc basis will often adopt a more formal severance program in connection with group terminations. This can be especially helpful if there is an expectation that employees work through a specific date to receive severance; the promise of severance benefits can serve as a retention tool. Typical severance benefits include severance pay and sometimes outplacement benefits and subsidized COBRA premiums (see the next question for more about COBRA). Whether a severance program is considered a plan subject to ERISA rules depends on whether there is an “administrative scheme.” The rule of thumb is that if the severance benefits will be paid overtime under normal payroll practices, rather than in a lump sum, we recommend that the severance program be set up to be ERISA compliant. An ERISA compliant severance program needs to be in writing, include specific claims and appeals procedures, and provide a summary plan description (which can often also serve as the written plan document) to eligible employees. If the program covers over 100 employees, a Form 5500 would also need to be filed.
Unlike many ERISA benefits, there are no rules that require equal severance benefits, so highly compensated employees can receive richer severance benefits than lower-paid employees, or the benefits can vary by location or position. In addition, there is no legal requirement that the severance plan be continued indefinitely – it can remain in effect only for a finite period.
What Happens to Health Coverage for Employees Who Are Terminated?
In the normal course, terminated employees enrolled in an employer’s group health plan (whether that be medical, prescription drug, dental, vision, or health flexible spending accounts) can continue this coverage generally for up to 18 months under federal COBRA rules, or for smaller employers under state-specific “mini-COBRA” laws, by paying the full cost of such coverage.
Sometimes employers may choose (or be required under an employment contract or severance policy) to subsidize all or part of the terminated employee’s premium costs for COBRA continuation coverage. For example, you may let terminated employees continue to pay active employee rates for COBRA coverage. In that case, you need to be mindful of whether your health plan is a self-insured or fully-insured plan as there could be different tax reporting obligations on such subsidies based on how benefits are provided. If your health plan is fully insured, there are no tax consequences to the terminated employees because of the subsidized COBRA premiums. If your health plan is self-insured, however, and the subsidized COBRA premiums favor highly compensated employees, the amount of that subsidy may need to be treated and taxed as compensation. Note that if you choose to provide the subsidy as a cash payment regardless of whether the former employee spends it on COBRA coverage or otherwise, it is always considered taxable compensation even if they actually use it to buy COBRA coverage. Companies should take care to properly communicate, document, and tax report and withhold from any COBRA coverage subsidy benefits.
How Are Outstanding Stock Options or Other Equity Incentive Plan Awards Treated?
You will need to check the equity incentive plan documents and individual award agreements to properly determine any impact on outstanding awards in the event of an employee termination. In addition, you can’t stop there— you also need to make sure there are no other rules that may apply to an employee’s equity awards under an existing employment agreement, applicable severance policy, or any other individual contract. Unless the award provides for accelerated vesting on a termination of employment, any outstanding and unvested equity awards would typically be forfeited at termination of employment. In a group termination situation, employers often consider whether to provide for additional vesting if the plan or award agreement does not already require it. If additional vesting is desired, remember to check the equity plan or award agreement to determine the necessary process to approve the additional vesting, for example, whether approval of the board of directors or an officer is required to make that change.
Will the Company Need to Make Payments on Deferred Compensation Plans?
Possibly, depending on the terms of the deferred compensation plan. A termination from employment (called a “separation from service” under the Code Section 409A rules) is one of the permissible payment events under Code Section 409A for nonqualified deferred compensation plans. To the extent any terminated employees are participating in a deferred compensation plan, you will need to carefully review the plan and award agreements to determine any impact from the termination on vesting or payment obligations. If separation from service is a payment triggering event, the company will need to be ready to make those required payments, which will come from the company’s general assets unless the company has set up one of the limited ways that a company may set aside certain funds for deferred compensation obligations. The cash outlay for making these payments will need to be considered as part of the overall costs of a group termination.
Do the Same Considerations Apply for Employees Who Are Covered under a Collective Bargaining Agreement?
When considering employee terminations for any employees represented by a union, you should always first check the terms of the applicable collective bargaining agreements and consult with your labor advisors on the company’s obligations in connection with a group termination. While the summaries above do apply generally for employer-sponsored retirement and welfare benefits, there may be specific provisions in a collective bargaining agreement or under union-sponsored benefit plans that will require certain company actions or require the company to further bargain with the union in the event of a planned reduction in force.
Don’t Forget About Releases!
If you decide to provide enhanced benefits to employees in connection with a group termination, consider whether to condition those enhanced benefits on the impacted employees executing a general release of claims. It is difficult to condition enhanced 401(k) benefits on the provision of a release, but releases otherwise work well in connection with the other benefit enhancements discussed above. You should coordinate with your employment and benefits advisors for the appropriate form of any release of claims that employees will provide in connection with a group termination.
Modernizing Permitting and Securing Minerals: Key Takeaways from Recent Presidential Actions
On April 15, 2025, President Trump took two additional actions building on previous initiatives focused on streamlining and supporting domestic mining and mineral production, including the Immediate Measures to Increase American Mineral Production executive order issued on March 20, 2025 (the Mining Order) and the Unleashing American Energy executive order from January 20, 2025. These actions are:
Updating Permitting Technology for the 21st Century, which seeks to modernize and streamline the federal permitting process for infrastructure projects (the Permitting Directive); and
Ensuring National Security and Economic Resilience Through Section 232 Actions on Processed Critical Minerals and Derivative Products, which mandates an evaluation of how the importation of processed critical minerals and their derivative products could affect national security.
Together, these actions reflect an urgent commitment to facilitate domestic mineral production, enhance national security, and promote economic growth. In addition, on April 18, 2025, the Federal Permitting Improvement Steering Council (Permitting Council), released its initial list of ten transparency projects under the Priority Projects directive of the Mining Order. There will be more to come on this action in an upcoming post.
Permitting Directive
The Permitting Directive mandates that executive departments and agencies maximize the use of technology in environmental reviews and permitting processes. The directive is intended to apply to all types of infrastructure projects such as mines, roads, bridges, factories, and power plants. Key highlights include:
Digital Transition: The directive seeks to eliminate paper-based applications and reduce the duplication of data submissions. This is intended to facilitate better cooperation among agencies (including the ability for interagency use of the same analyses) and streamline the approval process to increase transparency and predictability of permit schedules.
Establishment of the Permitting Technology Action Plan: The chairman of the Council on Environmental Quality (CEQ) is tasked with developing a strategy to modernize the technology used in federal permitting and environmental reviews resulting in a Permitting Technology Action Plan.
Creation of the Permitting Innovation Center: The chairman of the CEQ is also tasked with establishing and leading an interagency Permitting Innovation Center. This new center will focus on designing and testing new prototypes to enhance the efficiency of the permitting process, ensuring that federal infrastructure projects can move forward on a timely basis.
Tariff Probe on Critical Minerals
In conjunction with the Permitting Directive, President Trump ordered an investigation under Section 232 of the Trade Expansion Act of 1962 to determine whether imports of processed critical minerals and their derivative products threaten to impair national security. This action aims to address risks to and vulnerabilities of the US manufacturing and defense industrial bases by reliance on global supply chains for critical minerals and derivative products. Key highlights of the executive order include:
National Security Concerns: The order identifies potential risks to national security and economic stability due to US reliance on global supply chains for critical minerals and derivative products that are crucial inputs for US manufacturing and the industrial base, including risks of potential disruption due to geopolitical events or natural disasters and potential for price and market manipulation.
Review Timeline: Commerce Secretary Howard Lutnick has been directed to begin a national security review under Section 232 of the Trade Expansion Act of 1962 and has been given 180 days to report findings, including recommendations on whether to impose tariffs. Section 232 of the Trade Expansion Act of 1962 allows the President to request that the Department of Commerce investigate to determine the effect of specific imports on US national security.
Focus on Domestic Production: The review is intended to assess vulnerabilities in the US critical minerals (including rare earths and uranium) supply chain, the economic impact of foreign market distortions, and potential trade remedies to ensure a secure and sustainable domestic supply of these essential materials. The Commerce Secretary is directed to report on the following:
Identification of current US imports of processed critical minerals and derivative products, the foreign sources of such critical minerals and derivative products, and the percent, volume, and dollar value of such imports by country;
Risks associated with source countries of critical minerals and derivative products and analysis of the distortive effects of any predatory economic, pricing, and market manipulation strategies and practices used by such countries
The demand for processed critical minerals by manufacturers of derivative products in the US and globally; and
A review and risk assessment of global supply chains for processed critical minerals and their derivative products and an analysis of the current and potential capabilities of the US to process critical minerals and their derivative products.
These recent actions reflect a dual strategy to bolster US mining, energy, and manufacturing and address vulnerabilities in the critical mineral supply chain. By integrating technology into the permitting process and identifying supply chain vulnerabilities, the administration aims to enhance domestic manufacturing, mineral production, and energy and secure long-term economic resilience and national security.
OFAC Issues Updated Guidance to Shipping and Maritime Sector Regarding Evasion of Iranian Oil Sanctions
On April 16, 2025, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued an update to its Sept. 2019 advisory, addressed to the global shipping and maritime sector, regarding sanctions evasion activities in connection with the shipment of Iranian-origin petroleum, petroleum products, and petrochemical products. The update was prompted by the Feb. 4, 2025 National Security Presidential Memorandum (NSPM-2), which directs the U.S. Department of the Treasury to implement a vigorous sanctions program to deny Iran and its terrorist proxies access to revenue.
Previously, on Oct. 11, 2024, Secretary of the Treasury Janet Yellen, in consultation with Secretary of State Anthony Blinken, had designated the petroleum and petrochemical sectors of the Iranian economy pursuant to Executive Order 13902, which authorizes the imposition of sanctions on any designated sector of the Iranian economy.
Iran relies on oil sales revenues to fund its malign activities, including its nuclear weapons and ballistic missile programs, and its support of terrorist groups. The oil shipments create significant sanctions risks for shipping companies, vessel owners, managers, operators, insurers, port operators, port service providers, financial institutions, and others in, or that work with, the maritime industry.
Iran’s Deceptive Practices
Iran-linked networks deploy an array of deceptive practices designed to circumvent sanctions, including:
Use of a “shadow fleet” of tankers. Iranian cargo is often transported on a shadow fleet of tankers, comprised of older, poorly maintained vessels that operate outside of standard maritime regulations. On Dec. 6, 2023, the International Maritime Organization (IMO) issued a resolution urging relevant stakeholders to avoid aiding illegal operations by the shadow fleet, but some stakeholders and jurisdictions continue to do so, by allowing substandard tankers to call at their ports; by overlooking adherence to international maritime regulations such as regular port state control inspections; and by providing bunkering, flagging, and crew management services to tankers sanctioned by OFAC or to other shadow fleet vessels. Iran also uses a separate shadow fleet of gas carriers to transport liquefied petroleum gas, primarily to China.
Use of ship-to-ship transfers to obscure origin and destination. While ship-to-ship (STS) transfers can be legitimate, Iran often uses multiple such transfers (typically three to five per shipment) to obfuscate the origin of the cargo and/or the involvement of sanctioned vessels. Multiple transfers are a strong risk factor for sanctions evasion. This is especially so when the transfers are conducted at night, in unsafe waters, near sanctioned jurisdictions, terminals, or refineries, or involve a vessel with missing or manipulated Automatic Identification System (AIS) data.
Use of falsified documents. To obscure the origin and destination of shipments, Iran-linked networks falsify cargo and vessel documents, including bills of lading, certificates of origin, invoices, packing lists, proof of insurance, and lists of last ports of call.
Disabling or tampering with AIS transponders. To mask their movements, including port calls and STS transfers, vessels transporting Iranian cargo often disable or tamper with their transponders. This is usually done together with other data manipulation, such as falsely reporting the Maritime Mobile Service Identity (MMSI) number or IMO number of the vessel. The updated guidance cautions not to rely solely on a single data point in verifying vessel activity for compliance.
Use of complex vessel ownership and management structures. Iran-linked networks use multiple shell companies and vessel-owning SPVs in high-risk, low-transparency, and low-regulation jurisdictions. Ship brokers in lax jurisdictions help facilitate transfers between and among shell companies.
Oil brokering networks. Oil brokers outside Iran help facilitate sales of Iranian petroleum and petroleum products, largely to China, often several steps removed from the initial sale. These oil brokers frequently create or distribute falsified documents, as noted above.
Identifying and Mitigating Sanctions Risks
To safeguard against these practices, and to avoid unwitting violations of sanctions laws, the updated guidance advises maritime sector stakeholders to review their sanctions compliance programs, and to enhance their due diligence and strengthen their internal controls as appropriate. The recommendations include:
Verify cargo origin. Recipients of cargo should conduct due diligence to corroborate the origin of goods. Red flags include vessels exhibiting deceptive behavior, or suspected links to sanctioned persons or locations. Testing samples of the cargo can reveal chemical signatures unique to Iran’s oil fields. Certificates of origin from Oman, the UAE, Iraq, Malaysia, or Singapore should be thoroughly investigated. Shipowners or charterers involved in STS transfers should request documentation regarding vessel STS history or verification of the last time the tank of the offloading vessel was empty, to ensure the cargo is not of Iranian origin.
Verify insurance. Parties should verify that vessels have adequate and legitimate insurance coverage, and are not relying on sanctioned insurance providers, or on new and untested providers without valid basis.
Verify flag registration. Vessels registered in jurisdictions known to service shadow fleet vessels, or that have flown multiple flags in a short period of time should be investigated as to ownership, voyage history, and flag history. The IMO’s Global Integrated Shipping Information (GISIS) database should be checked, to see if the vessel is flying a “FALSE” or “UNKNOWN” flag.
Review shipping documentation. Any indication that shipping documentation has been manipulated is a red flag that should be fully investigated. Documents related to STS transfers should establish that the cargo was delivered to the port reflected on the shipping documentation.
Know your customer (KYC) and know your vessel (KYV). In addition to conducting KYC due diligence (enhanced as appropriate), there should be KYV due diligence conducted on vessels, vessel owners, ultimate beneficial owners and group ultimate owners, and operators involved in contracts, shipments, and related maritime transactions. For vessels, this includes researching the IMO number and vessel history, including travel patterns, available STS history, ownership history, insurance, flag history, ties to evasive activities, actors, or regimes, and assessing risks associated with the owners, operators, or managers.
Monitor for manipulation of vessel location data. Irregularities in AIS data (including gaps in the data) could indicate manipulation, a serious red flag, warranting enhanced due diligence before further engagement.
Implement contractual controls. Contracts should contain representations and warranties that counterparties are not engaging in activity that violate, or that would cause a U.S. person to violate, U.S. sanctions laws, and that allow termination when such circumstances arise. In addition, contracts should allow termination based on certain types of suspicious activity.
Refuse service or port entry to sanctioned vessels. Port agents, operators, and terminals should engage in due diligence to ascertain whether a vessel is sanctioned, and should refuse service or port entry to such vessels.
Leverage available resources. A fair amount of information is available through open-source databases and from organizations in the maritime sector. These resources should be consulted.
The U.S. government continues to prioritize efforts to curtail Iran’s ability to generate revenue from its energy sector. Iran-linked networks have been finding ways to thwart U.S. sanctions. Companies in the maritime sector are particularly at risk of sanctions violations, which – even if inadvertent – potentially carry steep penalties, as the OFAC sanctions program is a “strict liability” regime. Up-to-date sanctions compliance programs are essential. Katten is ready to assist in implementing and upgrading sanctions compliance programs, and guiding clients through these deep and turbulent waters.
Bigelow Jury Verdict Could Increase Challenges To “Made In USA” Labels
The jury in the Banks v. R.C. Bigelow, Inc. litigation has returned its verdict, awarding consumers $2.3 million – short of the $3.26 million that plaintiffs’ counsel had requested. The Banks litigation challenged Bigelow’s “Manufactured in the USA 100%” claim used on some of its tea packaging. Plaintiffs argued that the claim was false because the company imported its tea; however, the company’s position in the litigation was that the claim referred to the US-based facilities where the teas were blended and packaged. Notably, due to an earlier-issued summary judgment order from the judge (finding that the challenged claim was literally false), the only questions before the jury were the amount of damages and whether there was intentional conduct by the company supporting an award of punitive damages. While the jury awarded compensatory damages, it did not find that there was proof sufficient to support a punitive damages award by clear and convincing evidence.
Manufacturers and retailers who wish to affix qualified or unqualified “Made in USA” statements on any products advertised or sold in the United States must comply with the FTC’s Labeling Rule at 16 C.F.R. 323 or Made in USA Policy Statement, respectively, on using these claims. To use an unqualified “Made in USA” claim, the product’s significant parts and processing must be of U.S. origin, containing no or negligible foreign content, and the final assembly should occur in the USA. Even if a product is not “all or virtually all” made in the USA per FTC guidance, advertisers may still be able to make qualified U.S. origin claims. Examples of qualified U.S. origin claims include, “Made in USA from imported parts,” or “60% U.S. content.” A retailer may make any qualified claim about U.S. content that is truthful and substantiated. These qualifications or disclosures should be sufficiently clear and conspicuous to consumers viewing the U.S. origin claim.
The FTC’s U.S. origin regulations are applicable not only to express U.S. origin claims, but also to implied U.S. origin claims. An implied U.S. origin claim may be inferred from the product’s packaging as a whole, including the use of specific phrases, images, and the broader context of the transaction. While references to the USA or American imagery alone might not constitute a U.S. origin claim, these images in combination with explicit language or other elements on the label could run afoul of FTC guidance and may require qualification.
The plaintiffs’ bar has pursued Made in the USA (and other national origin) labeling challenges either by sending demand letters or by filing lawsuits with some consistency over the past 5 years, with a peak 14 pieces of litigation filed in 2021. Due to the outcome in the Banks trial, there is some concern that the bar will refocus its attention on companies that are using “Made In USA” statements or references in their marketing. Companies using such labeling statements should confirm that their labels meet the FTC’s guidance.