Client Advisory – OFAC Sanctions Russian Oil Giants, Targets Energy and Military Industrial Base Under Executive Order 14024
On October 22, 2025, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced sweeping new sanctions targeting Russia’s energy sector, citing the Kremlin’s continued refusal to engage in good-faith negotiations to end the war in Ukraine. The action designates Russia’s two largest oil companies, Rosneft Oil Company (Rosneft) and Lukoil OAO (Lukoil), along with dozens of their subsidiaries, pursuant to Executive Order 14024. As a result, all property and interests in property of both Rosneft and Lukoil are blocked if they fall under U.S. jurisdiction or are controlled by U.S. persons. Crucially, this blocking extends automatically to any entity that is 50% or more owned, directly or indirectly, by Rosneft or Lukoil — even if that entity has not been specifically designated by OFAC.
Concurrently with these designations, OFAC issued Russia-related General License 124A, “Authorizing Petroleum Services and Other Transactions Related to the Caspian Pipeline Consortium and Tengizchevroil Projects;” Russia-related General License 126, “Authorizing the Wind Down of Transactions Involving Rosneft or Lukoil;” Russia-related General License 127, “Authorizing Certain Transactions Related to Debt or Equity of, or Derivative Contracts Involving, Rosneft or Lukoil;” and Russia-related General License 128, “Authorizing Certain Transactions Involving Lukoil Retail Service Stations Located Outside of Russia.”
General License 124A
GL 124A creates a project-specific safe harbor for the Caspian Pipeline Consortium (CPC) and Tengizchevroil (TCO). When related to these projects, it authorizes (i) petroleum services that would otherwise be barred by the January 10, 2025, E.O. 14071 determination; and (ii) transactions otherwise prohibited by E.O. 14024 when they involve Rosneft, Lukoil, or entities they own ≥50% (directly or indirectly, individually or in the aggregate).
In addition, GL 124A clarifies that the license does not authorize any other transactions prohibited by the Russian Harmful Foreign Activities Sanctions Regulations, 31 C.F.R. part 587 (RuHSR), including dealings with other blocked persons, unless separately authorized.
General License 126
GL 126 authorizes transactions ordinarily incident and necessary to wind down dealings with Rosneft, Lukoil, and entities they own ≥50% of through 12:01 a.m. EST, November 21, 2025; payments to a blocked person must go to a blocked account; excludes Directive 2 and Directive 4 activity, as well as other RuHSR-barred dealings.
General License 127
GL 127 authorizes, through 12:01 a.m. EST, November 21, 2025, (i) divestment/transfer to non-U.S. persons of debt or equity issued/guaranteed by Rosneft, Lukoil, or their ≥50% affiliates; (ii) facilitation/clearing/settlement of trades placed before 4 p.m. EDT, October 22, 2025; and (iii) wind-down of derivative contracts entered before that time, with payments to blocked persons in connection with derivatives required to go to blocked accounts. In addition, U.S. persons may not sell to blocked persons or purchase or invest except as ordinarily incident and necessary to divestment. The other prohibitions in Directive 2/4 and other RuHSR continue to apply.
General License 128
GL 128 authorizes, through 12:01 a.m. EST, November 21, 2025, the purchase of goods/services from, and the maintenance, operation, or wind-down of, Lukoil retail service stations located outside Russia and in existence on or before October 22, 2025; payments to any blocked person, other than the stations themselves, must go to a blocked account; and excludes Directive 2/4 and other RuHSR prohibitions.
Foreign Financial Institutions and the Secondary Sanctions Risk
As OFAC has specifically warned, the sanctions on Rosneft and Lukoil create significant secondary sanctions risks for foreign financial institutions and other non-U.S. entities that continue to transact with them. Such measures may include blocking or imposing strict conditions on an institution’s ability to open or maintain a correspondent account in the United States, effectively cutting them off from the U.S. financial system and global dollar transactions. In our view, these potential secondary sanctions are aimed at deterring international flow of funds to Rosneft and Lukoil and degrading Russia’s capacity to finance its military actions.
More broadly, OFAC made clear that foreign financial institutions that conduct or facilitate significant transactions or provide any service involving Russia’s military-industrial base, including any persons blocked pursuant to E.O. 14024, run the risk of secondary sanctions.
Compliance Considerations
U.S. companies and financial institutions, particularly those with exposure to the Russian energy sector or who engage in international trade, finance, or logistics, should:
Perform a comprehensive risk assessment of extant operations and contractual relationships.
Thoroughly screen all counterparties and transactions to identify any direct or indirect affiliations with Rosneft, Lukoil, or their subsidiaries.
Examine existing agreements and supply chains for prospective vulnerabilities arising from the newly designated entities.
Amend internal sanctions compliance protocols and systems to incorporate the recent designations.
Fulfill reporting obligations to OFAC with respect to any blocked property, in accordance with applicable U.S. sanctions regulations.
Vigilantly monitor relationships with foreign financial institutions to mitigate risks associated with secondary sanctions.
Ascertain whether ongoing activities are encompassed within the scope of the above general licenses. If the activities are not covered by an existing general license, companies may want to consider applying for a specific license from OFAC.
Listen to this article
Hermès Bags Win- Antitrust Claims Against Hermès Dismissed by Federal Court
Recently, United States District Judge James Donato dismissed an antitrust class action lawsuit against Hermès, holding that although Hermès may reserve the Birkin bag for its highest-paying customers, “that in itself is not an antitrust violation.”
The Birkin and Kelly handbags from Hermès are perhaps the most coveted handbags. Named after the late actress and singer Jane Birkin and the late Grace Kelly, Princess of Monaco, these handbags are not only expensive, but extremely difficult to purchase. Birkin bags and Kelly bags are not available for purchase online; they are sold exclusively in Hermès retail stores. However, according to the lawsuit, Hermès has implemented a policy whereby Birkin and Kelly bags are only offered to customers with a well-established purchase history with Hermès. Allegedly, only once a customer has purchased enough “ancillary products” from Hermès – such as shoes, scarves, belts, jewelry, and home goods – will the customer qualify for the opportunity to purchase a Birkin or Kelly bag.
Thus, in the lawsuit, Plaintiffs alleged that Hermès has implemented an unlawful tying arrangement in violation of antitrust laws. Tying occurs when a seller conditions the sale of one product (the tying product – here, Birkin and Kelly bags) on the buyer’s purchase of a second product (the tied product – here, other Hermès products). Tying arrangements are forbidden under antitrust laws on the theory that, if the seller has market power over the tying product, the seller can leverage this market power through tying arrangements to exclude sellers of the tied product. Generally, to establish that a tying arrangement violates antitrust laws, a plaintiff must prove: (1) that the defendant tied together the sale of two distinct products or services; (2) that the defendant possesses enough economic power in the tying product market to coerce its customers into purchasing the tied product; and (3) that the tying arrangement affects a not insubstantial volume of commerce in the tied product market.
In its motion to dismiss Plaintiffs’ Second Amended Complaint (Plaintiffs had already amended their complaint twice in response to Hermès’ prior motions to dismiss), Hermès pointed out that Plaintiffs failed to plead a viable tying market. In their original complaint, Plaintiffs alleged a single-brand market limited to Hermès handbags – implying that Hermès had no competitors at all. However, after receiving Hermès’ first motion to dismiss, Plaintiffs alleged that Hermès handbags are within the “luxury handbag” market in which Hermès competes with “elite designer and luxury brands like Gucci, Prada, and Louis Vuitton.” After the Court rejected that purported tying market, Plaintiffs’ Second Amended Complaint alleged that Hermès competes in the market for “elitist luxury handbags,” which are limited to Hermès, Chanel, and Bottega Veneta. The Court agreed with Hermès, finding that this was not a “cognizable tying market.” The Court also found that the Second Amended Complaint failed to adequately allege that Hermès possessed sufficient market power in this so-called “elitist luxury handbag market.”
In its motion, Hermès also pointed out that Plaintiffs had failed to define a viable tied product market in which the alleged competitive effects of Hermès’ tying arrangement could be assessed. In their Second Amended Complaint, Plaintiffs grouped a host of disparate products together in a single “Ancillary Products” market, which they described as “the market for luxury ready-to-wear apparel and accessories.” However, as Hermès argued in its motion, Plaintiffs’ definition of the purported tied product market could not sustain an antitrust claim because the varying “Ancillary Products” are not “economic substitutes” for one another. In other words, a scarf or hat is not interchangeable with, or an economic substitute for, the other “Ancillary Products” in the tied product market, such as jewelry and dishware. Again, the Court agreed with Hermès, finding that the tied product market alleged by Plaintiffs was a “kaleidoscope” of products, including scarves, clothing, footwear, watches, jewelry, fragrances, accessories (such as hats, gloves, and sunglasses), and home goods (such as tableware, furniture, and blankets). The Court held that the Second Amended Complaint was “bereft of any facts that might support lumping such a hugely diverse array of non-substitutable products into a single market.”
Antitrust laws are designed to protect competition. Notably, during one of the case management conferences in this matter, Judge Donato aptly noted that Plaintiffs had not adequately alleged or explained how competition was being harmed and Judge Donato even suggested that Hermès’ business model might be pro-competitive because anyone who does not want to buy the ancillary Hermès products in order to purchase a Birkin or Kelly bag can simply purchase a luxury designer bag from Chanel or Bottega Veneta.
As a result of Judge Donato’s most recent order, the case was finally dismissed with prejudice. However, Plaintiffs have since filed a notice of appeal to the Ninth Circuit Court of Appeals.
Antitrust and Competition Law – Competition Law in the Americas Episode 2 | Litigation Hot Spots – Key Trends in the USA and Mexico [Podcast]
In the latest Big Law Redefined Podcast Competition Law in the Americas series episode, host Miguel Flores Bernés (Greenberg Traurig Mexico City), shareholder in the firm’s Antitrust Practice, and guest Bill Katz (Greenberg Traurig Dallas, TX), co-chair of the firm’s Antitrust Practice, discuss the evolving landscape of antitrust litigation in the USA and Mexico.
Their conversation highlights Mexico’s recent regulatory transformations, including the new Comisión Nacional Antimonopolios (CNA), specialized judges, and heightened enforcement across sectors like transport, health care, and energy.
Bill shares insights from recent U.S. cases involving hot topics such as non-compete clauses and labor issues, emphasizing the importance of clear communication and preparation in complex antitrust litigation.
Bill stresses the need for strong compliance policies and proactive training, noting how poor email practices can create major risks.
Both Miguel and Bill underscore the growing convergence of global competition enforcement and the necessity for companies to be litigation-ready—through robust document preservation, compliance protocols, and expert engagement.
The episode closes with practical insights: invest in preparation, proactive compliance, and clear internal communication to navigate an increasingly complex and interconnected antitrust environment across the Americas.
NAD Weighs in on “Review Hijacking”
The Federal Trade Commission filed its first “review hijacking” case in which a marketer purported repurposes reviews of another product on behalf of a new product.
According to the FTC complaint, the defendant asked Amazon to create numerous variation relationships for its supplement products with different formulations. The company began selling two new products and requested that Amazon combine the new products in a variation relationship with three of its established products, all with different formulations, according to the FTC.
The FTC alleged that by manipulating product pages, the company misrepresented the reviews, the number of Amazon reviews and the average star ratings of some products, and that some of them were number one best sellers or had earned an Amazon Choice badge.
Most recently, the National Advertising Division considered a case where the challenger alleged that the respondent purportedly utilized Amazon and TikTok consumer reviews for a health supplement product in order to promote a different health supplement product.
According to the NAD, the products were “substantially different” and that it was improper for their reviews to be merged. Respondent was advised to implement remedial action, including, contacting the platform providers to remove illegitimate reviews.
Consult an FTC compliance lawyer to discuss how this decision may potentially impact your advertising practices, including, without limitation, the interpretation of the meaning of “substantially different.”
Beyond the Click-to-Cancel Rule: the FTC Finds its Power in the Amazon Settlement
On September 25, in a landmark resolution that underscores the FTC’s renewed focus on digital consumer protection, Amazon agreed to pay $2.5 billion—including a $1 billion civil penalty and $1.5 billion in consumer refunds—under the Settlement Order in FTC v. Amazon. The case, brought before Judge John H. Chun in the Western District of Washington, targeted Amazon’s Prime subscription program, alleging that the company enrolled consumers without proper consent and made cancellation unnecessarily difficult, in violation of the FTC Act and the Restore Online Shoppers’ Confidence Act (ROSCA).
In addition to monetary relief, the Settlement Order imposes injunctive terms that will shape Amazon’s operations for the next decade. Among them, Amazon must include a clearly labeled “decline” option, disclose all material terms before collecting billing information, and ensure that consumers can cancel “through the same medium the consumer used to consent to the Negative Option Feature.” The company must also maintain detailed records of every iteration of its enrollment and cancellation screens—down to hidden links and hover-over text.
This settlement comes on the heels of the U.S. Court of Appeals for the Eighth Circuit’s July decision striking down the FTC’s proposed “Click-to-Cancel Rule.” While there was much talk in the wake of that decision about what it might mean for enforcement in this space, this Settlement Order reinforces that the Eighth Circuit’s decision had minimal practical impact. Indeed, even without the “Click-to-Cancel” rule, corporations with subscription and auto-renewal business models must take steps to ensure that their enrollment and cancellation practices meet the FTC’s expectations for clarity, consent, and consumer control. The Amazon Settlement Order effectively achieves many of the same policy goals the proposed rule sought to codify—requiring that consumers be fully informed before enrollment, affirmatively consent to charges, and have access to a straightforward, frictionless path to cancel.
This case underscores that the FTC can—and will—use its existing statutory authority to pursue enforcement actions without waiting for new rulemaking. In announcing the Settlement, FTC Chair Lina Khan emphasized that the FTC would “continue to vigorously protect Americans from “dark patterns” and other unfair or deceptive practices in digital markets,” practices the FTC alleges were utilized by Amazon to “trick[] and trap[] people into recurring subscriptions without their consent.”
The FTC v. Amazon settlement exemplifies a shifting enforcement paradigm: user experience design has become a legal compliance issue, not just a marketing or product concern. Companies should review their digital customer journeys with a compliance lens—ensuring that consent is explicit, disclosures are clear and conspicuous, and cancellation is no more difficult than enrollment.
Supreme Court to Hear Arguments on Fired FTC Commissioner
The U.S. Supreme Court has scheduled oral arguments related to President Donald Trump’s removal of Federal Trade Commission (FTC) Commissioner Rebecca Slaughter for December 8, 2025. Last month, the Supreme Court stayed a district court’s order that required her reinstatement.
The questions at issue are as follows: “(1) Whether the statutory removal protections for members of the Federal Trade Commission violate the separation of powers and, if so, whether Humphrey’s Executor v. United States, 295 U.S. 602 (1935), should be overruled. (2) Whether a federal court may prevent a person’s removal from public office, either through relief at equity or at law.”
Although the administration removed the two Democratic Commissioners in March and both had challenged the action, Commissioner Alvaro Bedoya formally resigned in June. Therefore, the current case involves only Commissioner Slaughter. At this time, the FTC is operating with three Republican Commissioners, and even before the ongoing government shutdown started, there did not seem to be any movement to fill either of the two vacancies.
Automotive Update- October 2025
Foley is here to help you through all aspects of rethinking your long-term business strategies, investments, partnerships, and technology. Contact the authors, your Foley relationship partner, or our Automotive Team to discuss and learn more.
Key Developments
Foley & Lardner partners Vanessa Miller and Mark Aiello share insights on the challenges and potential of autonomous vehicles (AVs) in their ITS International article, “Rise of the Transformers.”
Foley & Lardner’s “Made in America: End-to-End Guide to Developing Your U.S. Manufacturing Footprint” series delves into the critical decisions U.S. manufacturers face as they rethink where and how they build. The most recent article in the series is Clearing the Path: Environmental Permitting in the Era of Renewed American Manufacturing.
Foley & Lardner partner Gregory Husisian shared insights on the Trump administration’s reliance on alternative trade measures as the U.S. Supreme Court reviews the use of the International Emergency Economic Powers Act (IEEPA) to impose tariffs in the SupplyChainDive article, “What tools does Trump have to impose tariffs?”
An October 17 executive order announced 25% tariffs on medium- and heavy-duty trucks and parts, as well as 10% tariffs on buses, will take effect November 1, 2025 in response to a Section 232 national security investigation. The same order includes an extension of certain tariff relief programs for automakers until 2030, as well as new provisions to offset the cost of certain duties related to engine production and certain steel and aluminum duties. “Automobile manufacturers may apply to the [Commerce] Secretary for an import adjustment offset amount equal to 3.75 percent of the aggregate Manufacturer’s Suggested Retail Price (MSRP) value of all automobiles assembled in the United States by the manufacturer, as determined annually by the Secretary, from April 5, 2025, through April 30, 2030.”
A number of automakers and trade groups including the Alliance for Automotive Innovation and the German Association of the Automotive Industry (VDA) have warned of the risk of semiconductor supply disruptions after chipmaker Nexperia halted shipments due to a Dutch government takeover from its Chinese owner.
Ford temporarily cut production of at least five models, and Stellantis will temporarily idle its Warren Truck Assembly plant, due to a fire at a significant aluminum supplier.
Suppliers expressed more pessimism about the outlook for the industry than automakers and dealers in the latest Automotive News Auto Industry Confidence Index.
Global automakers could collectively incur a $30 billion reduction in 2025 operating profits because of import tariffs, according to analysis released this month from Moody’s Ratings.
China’s rare earths exports fell 31% in September 2025 from August. This preceded the imposition of new restrictions on Chinese exports of rare earths and other critical materials due to national security concerns. China produces roughly 90% of the global refined supply of rare-earth minerals.
Mexican lawmakers postponed discussions until late November concerning a proposal to impose tariffs of up to 50% on vehicles, steel and other products imported from China and other nations with which it lacks a trade agreement.
OEMs/Suppliers
GM is expected to be the only U.S. automaker with a notable direct supply of American-made rare-earth magnets due to the automaker’s previous efforts to reduce reliance on Chinese exports by securing long-term purchase agreements with new suppliers.
Stellantis will invest $13 billion in U.S. manufacturing by the end of the decade, in an initiative that is expected to increase domestic production by 50% and add more than 5,000 jobs across plants in Michigan, Illinois, Indiana and Ohio. The automaker recently announced the return of Mauro Pino to oversee North American manufacturing operations.
BorgWarner indicated it is seeing rising interest in range-extender architectures in certain markets.
Daimler Truck and Toyota Motor will combine their Japanese truck units into a new joint company, ARCHION Holdings, that is scheduled to begin operations in April 2026.
Linamar will acquire the North American assets of Aludyne Inc. for $300 million, in a deal that is expected to significantly expand Linamar’s manufacturing footprint in the region.
Market Trends and Regulatory
Kelley Blue Book analysis indicates the U.S. new-vehicle average transaction price (ATP) rose 3.6% year-over-year in September 2025, and surpassed $50,000 for the first time.
Since 2010, the average auto loan balance has risen 57% and delinquencies have increased by more than 50%, according to a study published this month by VantageScore.
The portion of subprime auto loans that are 60 days or more overdue on payments hit a record of more than 6% this year, according to Fitch Ratings.
Ford will recall nearly 1.5 million vehicles in the U.S. due to the risk of rearview camera malfunctions.
AlixPartners estimated automotive factories in Europe are running at 55% capacity on average amid market challenges that include heightened competition from Chinese automakers and reduced consumer demand. The consultancy also predicted that up to eight automotive plants in the EU may face closure in the years ahead.
Global aluminum supplies are projected to enter a deficit beginning between 2027 and 2028, according to predictions from Citi and Wood Mackenzie.
China’s vehicle exports for the first nine months of 2025 were up 14.8% year-over-year, and domestic vehicle sales rose 7.8% YOY for the same period.
Proposed regulations in China would require all passenger vehicles sold domestically to have “mechanical door releases accessible from both inside and outside the car.” This follows concerns over the risk of malfunction of electronically-operated car door handles.
Autonomous Technologies and Vehicle Software
Waymo announced plans to enter the European market with the launch of robotaxi service in London next year.
Lyft Inc. will partner with autonomous vehicle developer Tensor Auto to deploy a fleet of hundreds of robotaxis in North America and Europe beginning in 2027.
GM plans to debut “eyes-off” highway driving capabilities on the Cadillac Escalade IQ in 2028.
Stellantis will partner with Pony AI to gradually roll out robotaxi services in certain European cities in 2026, beginning with testing in Luxembourg in the coming months.
Hybrid and Electric Vehicles
Automotive News provided an update on canceled or postponed U.S. EV models.
Tesla’s third quarter 2025 net income fell 37% year-over-year to $1.37 billion, and total revenue increased 12% YOY to a record-high $28 billion.
GM reported a one-time $1.6 billion charge in Q3 2025 resulting from a “strategic realignment” in EV manufacturing capacity, as well as “contract cancellation fees and commercial settlements associated with EV-related investments.” The automaker recently extended temporary layoffs for 280 workers until early 2026 due to a temporary shutdown at its Factory Zero EV plant in Detroit-Hamtramck that affects production of the GMC Hummer EV and Cadillac Escalade IQ.
GM has recently canceled programs and initiatives that include production of the BrightDrop electric commercial van produced at its CAMI Assembly plant in Ontario, the expansion of a joint venture battery materials plant in Quebec, and the HYDROTEC hydrogen fuel cell development program, which included a planned $55 million hydrogen plant with Piston Automotive in Detroit.
Ford delayed a lithium supply deal with Australia’s Liontown Resources Ltd. and reduced scheduled volumes by half.
A number of battery companies that attended The Battery Show North America this month in Detroit emphasized opportunities in energy storage systems amid the expectation for muted EV demand, while expressing concerns over the supply chain ramifications of the One Big Beautiful Bill Act’s foreign entity of concern (FEOC) eligibility restrictions to the 45X advanced manufacturing production tax credit.
GM announced the all-electric 2027 Chevrolet Bolt will begin shipping to customers in the first quarter of 2026.
What Every Multinational Should Know About … Best Practices for a Customs Disclosure in the New Tariff Environment
In the current global trade environment, importers are facing an unprecedented convergence of pressures. A sharp rise in new tariffs, the increasingly sophisticated data-mining of entry data by U.S. Customs and Border Protection (CBP), and a more aggressive government-enforcement posture have made even minor compliance failures potentially costly. In this context, the voluntary self-disclosure mechanism — long recognized by trade professionals as a key risk-mitigation tool — has taken on new urgency. For importers that uncover potential underpayments of tariffs, a properly executed voluntary disclosure can significantly limit financial liability, demonstrate good faith, and enhance the importer’s broader compliance program.
This article explores the evolving importance of voluntary disclosures, identifies the key benefits they offer and sets forth best practices for maximizing their effectiveness. By adopting a thorough and well-documented approach, importers can turn a compliance failure into an opportunity for strengthening their compliance environment, all while minimizing or eliminating the risk of penalties.
I. Drivers of the Rising Importance of Voluntary Disclosures
Several recent developments have converged to increase the strategic value of voluntary self-disclosures for importers:
Tariff Escalation Amplifies Risk Exposure. The imposition of high tariffs under Section 232 (national security tariffs) and Section 301 (special China tariffs), along with elevated global and reciprocal tariffs covering every country (with some up to 50 percent) has magnified the monetary consequences of compliance failures. Errors that once triggered minimal duty corrections can now give rise to substantial liabilities. For example, a seemingly minor misclassification or undervaluation error may, when aggregated across multiple entries, result in significant unpaid duties and interest. Failure to apply the country-of-origin rules or United States-Mexico-Canada Agreement (USMCA) requirements correctly can have a major tariff impact, because failing to understand qualification rules can result in triggering certain Trump tariffs. Importers that fail to proactively correct customs errors may face unexpected bills for back-tariffs and additional penalties.
Enhanced Data Analytics and Enforcement Algorithms. CBP has taken full advantage of the fact that importers are required to submit detailed tariff-related information in the Automated Commercial Environment system (more commonly referred to as ACE). Using sophisticated data mining and AI, CBP can flag anomalies in declared values, country of origin, classification, valuation, USMCA compliance, and other tariff-impacting data fields. Importers whose transactional data deviates from industry-sector norms, the entry declarations of their competitors, or historical patterns are increasingly subject to post-entry reviews, with CBP having the ability to confirm potential errors by issuing Form 28 Requests for Information or Form 29 Notices of Action.
Increased Emphasis on Trade Enforcement. Federal agencies, particularly CBP and the Department of Justice (DOJ), have been directed to adopt a more aggressive enforcement posture. Executive orders and Presidential Proclamations have called for heightened tariff collection and stiffer penalties for trade violations. DOJ has increased staffing for trade-related enforcement action; anecdotal information from importers shows an increasingly aggressive enforcement posture. In this high-penalty, high-tariff environment, proactive disclosures are the best available option for limiting exposure and potentially costly penalties.
Greater Possibilities for Whistleblower Actions. DOJ has announced that it will be increasing the use of the False Claims Act (FCA) to target tariff underpayments. FCA actions can be initiated by the government or in reaction to whistleblower tips. It is a certainty that plaintiff law firms will be looking to bring more of these cases to further implement the high-tariff, high-penalty, high-enforcement environment priorities of the Trump trade team. In this environment, FCA cases (and whistleblower payouts) potentially are much more lucrative.
II. The Legal and Strategic Value of Voluntary Disclosures
Voluntary self-disclosures offer a pathway for importers to resolve past import violations with significantly reduced or eliminated penalties, provided the disclosure meets certain procedural and substantive requirements. Given the high-tariff, high-enforcement environment detailed above, voluntary self-disclosures represent a significant form of risk reduction. The governing regulation, 19 C.F.R. § 162.74, specifies that voluntary disclosures made before the commencement of a formal investigation are a mitigating factor in CBP’s penalty determinations. In cases involving negligence or mistakes (as opposed to fraud), CBP generally issues no penalty at all if the importer discloses the violation, completes a comprehensive disclosure, and repays any back-tariffs owed (plus interest).
Key Benefits of Voluntary Disclosures Include:
Penalty Mitigation: To achieve the most direct benefit of paying no penalty, the timing of the disclosure is critical; to qualify, a disclosure must precede any CBP investigation related to the disclosed conduct. Notably, a disclosure can still lock in voluntary self-disclosure credit even after receiving a Form 28 Request for Information or Form 29 Notice of Action, provided that CBP has not initiated a formal investigation.
Demonstration of Good Faith: A voluntary disclosure signals to CBP that the importer takes its compliance obligations seriously. This can enhance the company’s credibility in future audits, inquiries, or applications for trusted trader programs, such as CTPAT.
Control of Narrative and Scope: A disclosure enables the company to present the facts in its own words, control the disclosure of the violation, and propose corrective measures to prevent a recurrence of the issue. Proceeding as a voluntary self-disclosure allows a more proactive framing than allowing CBP to uncover the violation and draw its own conclusions, especially since, in the latter scenario, the importer likely is facing stricter deadlines and has less control over how the review unfolds.
Strengthened Internal Compliance Framework: The process of preparing a disclosure typically involves developing a methodology to identify all import errors, a root cause analysis, a compliance systems review, and a corrective compliance action plan. In addition to allow the accurate completion of the customs review, these steps also allow the importer to improve internal controls and reduce the likelihood of future violations.
III. Best Practices for Effective Voluntary Disclosures
To maximize the benefits of a voluntary disclosure and ensure it is accepted by CBP, importers must ensure the completed disclosure is timely, complete, and supported by robust documentation. Below are key best practices for importers to consider:
Timely Action and Use of Marker Letters. Importers should act promptly upon discovering a potential violation. If additional time is needed to conduct an internal investigation, the company should consider submitting a marker letter. This preliminary notice, submitted before any CBP inquiry has begun, preserves the company’s eligibility for penalty mitigation while allowing time to gather necessary data and conduct a thorough review.
Monitoring CBP Correspondence. Even while thinking about filing a disclosure, importers must remain vigilant for signs that CBP may already be aware of the issue. Notices such as Form 28 Requests for Information or Form 29 Notices of Action may indicate that the agency has detected potential discrepancies. Even when such notices are received, the importer may still submit a disclosure, provided CBP has not yet initiated a formal investigation. Submitting a marker letter promptly after receiving such correspondence (i.e., before the response is due) can preserve the benefits of disclosure.
Deciding on the Scope: Limited vs. Comprehensive Disclosures. Importers must determine whether to disclose only specific errors (a limited disclosure) or to conduct a full review and disclosure of all potentially affected entries over a full five-year review period. A limited disclosure may focus on specific ports, specific products or product lines, issues, or date ranges, and is appropriate when internal controls are strong and the issue is contained. A comprehensive disclosure, by contrast, should be undertaken when the scope of the violation is uncertain, when internal compliance controls have been weak, or when systemic issues are suspected. The choice involves a strategic balancing of legal risk, resource investment, and the desire for closure. If a limited disclosure path is chosen, importers should carefully identify whether any additional issues are noted during the review that would warrant expanding the scope of the limited disclosure or perhaps turning it into a full disclosure.
Conducting a Thorough Internal Review. A rigorous internal review forms the foundation of an effective voluntary disclosure. The review should address:
Nature and Root Cause of the Violation: Was the issue caused by misclassification, undervaluation, incorrect country of origin reporting, or other errors? What internal failures allowed the mistake to persist? Common root causes include inadequate training, miscommunications with suppliers, poor oversight of customs brokers, a poor or incomplete Customs Classification Index, or a missing transfer pricing study for related parties that meets CBP (and not IRS) standards.
Scope of Affected Entries: The importer must identify all entries impacted by the violation. CBP generally disfavors extrapolations or estimates for full disclosures, preferring line-by-line documentation of affected transactions. The one exception is where statistical sampling is used, which requires following the CBP statistical sampling requirements (covered below).
Time Period Covered: Full disclosures must generally reach back to the five-year statute of limitations. Companies should trace the issue to the first entry and not stop at the point of liquidation.
Review of Similar Risks in Other Areas: Importers should examine whether the same or similar violations may have occurred in other business units, product lines, or types of entries. This requires coordination with global affiliates and other internal stakeholders. If necessary, this may lead to a limited disclosure covering a single business unit becoming a full disclosure, perhaps involving different importer of record numbers.
Comprehensive and Transparent Documentation. CBP will evaluate the disclosure based on the clarity, transparency, and completeness of the submission. The disclosure should include:
A narrative describing the events leading to the violation, its discovery, and the internal response.
An explanation of the methodology used to identify and analyze affected entries.
Detailed calculations of duties owed, with supporting analysis and spreadsheets.
Any prior communications with CBP that are relevant to the issue, including the filing of and responses to post-summary corrections, protests against liquidation, and advisory opinion requests.
In addition, importers should be prepared to provide copies of all relevant documents, including invoices, purchase orders, bills of lading, contracts, commercial invoices, and other supporting information.
Use of Statistical Sampling. In high-volume situations, importers may use statistical sampling to estimate the impact of the violation. This approach must meet CBP standards for reliability, representativeness, and ability to accurately extrapolate from the sample to the full universe of attributed entries. Best practices include:
Consulting with trade statisticians or professionals familiar with CBP expectations.
Clearly defining the population of entries.
Using random sampling with proper stratification if necessary.
Ensuring that confidence intervals and error margins are defensible.
Explaining how projected liability was calculated from the sample data.
Working through the CBP guidance regarding statistical sampling to show how each requirement was met.
Internal and External Coordination. An effective disclosure typically requires contributions from multiple departments:
Legal Counsel: To oversee the disclosure, prepare the narrative and Customs Manual (if needed), and maintain privilege where appropriate.
Customs Brokers: To provide entry data and insights into declaration processes.
Compliance Personnel: To lead root-cause analysis and ensure process improvements.
IT and Data Teams: To extract, validate, and analyze relevant data.
External Consultants: To support sampling and data review, or for remedial planning when internal resources are insufficient.
Addressing Multi-Agency Issues. Some customs errors may have implications for filings with other federal agencies, such as the Food & Drug Administration, the Environmental Protection Agency, or the National Highway Traffic Safety Administration. A disclosure that addresses only CBP obligations, without considering related regulatory violations, may be insufficient. A comprehensive, multi-agency disclosure plan should be developed when other regulatory obligations are implicated.
Including a Corrective Action/Customs Compliance Plan. CBP places significant weight on the remedial measures taken by the importer to prevent recurrence. A strong corrective action plan may include:
Creating or updating a Customs Manual, standard operating procedures, or tariff management tools.
Creating or updating a Customs Classification Index.
Creating or updating a system for tracking and attributing assists (production-related aids provided by the importer to the foreign manufacturer).
New or enhanced training for relevant personnel.
Corrective entries or protests filed as needed, such as for entries falling within the Post-Summary Corrections period.
Be Careful in Seeking Limited Disclosures. A common pitfall is disclosing only a limited set of issues when a systemic review shows that errors are more widespread. CBP expects disclosures to be complete and candid. Attempting to cherry-pick entries or downplay certain aspects of the violation can result in:
Rejection of the disclosure or an investigation of entries outside the scope of the limited disclosure.
Loss of penalty mitigation benefits for any entries outside the scope of the limited disclosure.
Increased risk of future enforcement actions.
Where multiple types of errors are discovered during the review, it is often best to bundle them into a full disclosure, even if a limited disclosure initially seemed appropriate. Where this occurs, the importer should make a supplemental filing initiating a full disclosure to document the expanded scope of the disclosure.
Follow Up and Confirm Closure. Even after a disclosure is filed, the process is not over. Importers should:
Monitor the status of the disclosure with CBP.
Respond promptly to any CBP questions or requests for additional documentation.
Confirm that CBP is granting offsetting.
Confirm that CBP has issued a closing letter or decision accepting the disclosure (which it may not issue if the disclosure shows a net overpayment after offsetting, which sometimes occurs).
Retain all disclosure documentation in case of future audits or enforcement actions.
As the U.S. government intensifies enforcement of import regulations, the voluntary self-disclosure process has become an increasingly vital tool for responsible importers. A well-executed disclosure not only limits financial exposure but also signals institutional integrity and commitment to compliance.
To be effective, however, voluntary disclosures must be more than reactive acknowledgments of past errors. They must be timely, transparent, provide complete coverage of all errors, and be thoroughly documented. By following best practices — from a root-cause analysis and documentation to interdepartmental coordination and corrective action — importers can ensure that their disclosures achieve their intended purpose: resolving past violations while positioning the organization for a better-managed importing environment.
Clear Skies Ahead? Predicting the Use of the Floor Trader Exemption in Event Contract Markets to Avoid Swap Dealer Registration
The availability of prediction markets has exploded for American consumers, as contracts that allowed people to bet on the outcome of the 2024 presidential election gained popularity.1 Prediction markets are generally “platforms where participants buy and sell contracts based on the outcomes of future events.”2 These contracts cover a wide variety of events, from the outcome of sports games and the weather to political elections.
Event Contracts and Binary Options
Typically, event contracts are offered by prediction markets designated as contract markets (DCMs) by the Commodity Futures Trading Commission (CFTC)3. The CFTC views the event contracts as “binary options,”4 which the agency states is a type of options contract “in which the payout will depend entirely on the outcome of a yes/no proposition.” Binary options, in turn, are also considered “swaps” under the Commodity Exchange Act (CEA) because they “provide for [a] payment… that is dependent on the occurrence, nonoccurrence, or the extent of the occurrence of an event or contingency associated with a potential financial, economic, or commercial consequence.”5 Retail investors and institutional investors alike can access DCMs to trade these event contracts.
Given that these markets are very nascent, building market volume and liquidity in an event contract will require participants willing to take either side of a binary contract to meet the trading demand of other counterparties. That is, there is a real need for dealers to enter these markets to provide liquidity, price discovery and efficient market operations.
Since event contracts are considered to be swaps under the CEA, however, dealers in these contracts may find themselves quickly bumping into the requirement to register as swap dealers with the CFTC. For participants wishing to provide liquidity in these contracts, is there an alternative approach that would not require swap dealer registration?
This advisory refreshes an old debate about whether the CFTC’s floor trader exemption offers a viable pathway for market makers looking to provide liquidity in prediction markets.
Swap Dealer Registration and the Floor Trader Exemption
A swap dealer is defined as any person who (i) holds itself out as a dealer in swaps; (ii) makes a market in swaps; (iii) regularly enters into swaps with counterparties as an ordinary course of business for its own account; or (iv) engages in any activity causing it to be commonly known in the trade as a dealer or market maker in swaps, unless such person enters into swaps for their own account (but not as part of a regular business).6 There is also a de minimis exemption from being considered a swap dealer, which requires that the gross notional amount of such person’s swap dealing activity be less than $8 billion over a 12-month period.7 Under the current $8 billion de minimis threshold, CFTC staff estimated that 99.95 percent of the baseline $221 trillion swaps market is subject to swap dealer regulation.8
Swap dealers must register with the CFTC and become members of the National Futures Association (NFA).9 Swap dealers are subject to various regulatory requirements, including annual requirements, maintaining books and records, swap data reporting requirements under Part 45 of the CFTC’s regulations, and more.10 Because these are relatively onerous regulatory requirements, there are exemptions from registering as a swap dealer, which will be discussed below.
One such exemption is the floor trader provision (referred to herein as the “Floor Trader Exemption”), which provides that a registered floor trader need not consider cleared swaps executed on or subject to the rules of a DCM or swap execution facility (SEF) from the calculation of the de minimis exception described above. As a result, a registered floor trader can trade any amount of cleared swaps executed on, or subject to the rules of, a DCM or SEF without needing to register as a swap dealer, as they are not counted towards an individual’s $8 billion-dollar notional limit under the de minimis exception, provided certain conditions in the rule are met, such as not participating in any market making program offered by a DCM or SEF.11
CFTC No Action Letter 19-1412 provides additional relief to registered floor traders from certain provisions listed in the Floor Trader Exemption. The relief clarified that a floor trader is allowed to (i) enter into swaps other than those traded on DCMs and SEFs and (ii) use an affiliated person to negotiate the terms of such non-DCM/SEF swaps while still claiming the Floor Trader Exemption. In addition, the Floor Trader Exemption relieves floor traders from having to file periodic risk reports required by CFTC Regulation 23.600(c)(2).13
Dealer/Trader Distinction
One key item that participants should consider is whether their activity would be considered dealing or whether it is considered trading— the former results in a participant having to register as a swap dealer.14
Participants can refer to the distinction between dealer and trader in the Securities Exchange Act of 1934, as amended (the “Exchange Act”), for guidance on whether their activity constitutes “dealing.”15 The Exchange Act defines the term “dealer” as “any person engaged in the business of buying and selling securities . . . for such person’s own account through a broker or otherwise.”16 But the Exchange Act also excludes from the dealer definition a “trader,” defined as “any person that buys or sells securities for such person’s own account, either individually or in a fiduciary capacity, but not as a part of a regular business.”17 Dealers must also register with the Securities and Exchange Commission (SEC) as a broker-dealer, become a member of the Financial Industry Regulatory Authority (FINRA) and comply with additional federal securities laws.
In the past, the SEC and the courts have identified some activities that are typical for dealers, but are not usually engaged in by ordinary traders, including but not limited to the following:
purchasing or selling securities as principal from or to customers;
carrying a dealer inventory in securities (or any portion of an affiliated broker-dealer’s inventory);
quoting a market in or publishing quotes for securities (other than quotes on one side of the market on a quotations system generally available to non-broker-dealers, such as a retail screen broker for government securities) in connection with the purchase or sale of securities permitted under Rule 15a-1;
holding itself out as a dealer or market-maker or as being otherwise willing to buy or sell one or more securities on a continuous basis;
engaging in trading in securities for the benefit of others (including any affiliate), rather than solely for the purpose of the OTC derivatives dealer’s investment, liquidity, or other permissible trading objective;
providing incidental investment advice with respect to securities;
participating in a selling group or underwriting with respect to securities; or
engaging in purchases or sales of securities from or to an affiliated broker-dealer except at prevailing market prices.18
Market participants typically characterize on-exchange trading for a proprietary account as “trader” activity rather than as “dealer” activity, so long as the trading does not meet any of the abovementioned characteristics.
Likewise, activity that is conducted on-exchange (e.g., a DCM) for a proprietary account tends to fall within the “trader” exception to the dealer definition because it is seen as “not as part of a regular business”. However, suppose an individual is conducting a significant amount of swaps activity off-exchange. In that case, the SEC is more likely to view such activity as “dealing” since it can be viewed as “part of a regular business.” As such, individuals who are seeking to avoid swap dealer registration and claim the Floor Trader Exemption should limit the amount of swaps trading they conduct off-exchange.
Floor Trader Exemption – Regulatory Requirements
Even if the Floor Trader Exemption is claimed, floor traders are still subject to compliance with other swap dealer regulations. These include CFTC Regulations “23.201, 23.202, 23.203, and 23.600 (other than 23.600(c)(2)) with respect to each of [the floor trader’s] swaps (including swaps that are not DCM and SEF cleared swaps) as if it were a swap dealer.”19 These provisions relate to recordkeeping (and keeping such records open to CFTC inspection) and risk management (excluding periodic risk exposure reports). In addition, floor traders must comply with affiliate aggregation requirements for swaps other than those traded on a DCM or SEF to determine whether such floor trader otherwise qualifies as a swap dealer.
The following chart highlights regulatory requirements for swap dealers compared to floor traders.
CFTC/NFA Requirement
Applicable to Swap Dealers
Applicable to Floor Traders
CFTC Registration
☒
☒
NFA Registration
☒
☒
NFA Annual Dues/Member Questionnaire
☒
☒
Registered Principals
☒
☒
Affiliate Aggregation
☒
☒
Business Conduct Standards
☒
☒*
Recordkeeping
☒
☒
Risk Management Program
☒
☒
Third-Party Service Providers
☒
☒*
AML Program
☒
☐
Associated Persons
☒
☐
Business Continuity/Disaster Recovery
☒
☐*
Capital and Financial Requirements
☒
☐
Supervision and Compliance
☒
☐*
Swap Data Reporting
☒
☐
Swap Documentation
☒
☐
*An asterisk denotes general CFTC/NFA requirements or Interpretive Notices that may be relevant for general compliance with CFTC Regulations or NFA rules.
Could Floor Trader Registration Solve the Liquidity Problem?
The CFTC issued the Floor Trader Exemption and later relief to “encourage new liquidity providers to trade cleared swaps on registered venues without regulatory uncertainty, benefiting market participants seeking to access liquid, competitive cleared swaps markets”20 and noted that relief may encourage “floor traders to provide liquidity to exchanges in non-dealing capacities, such as proprietary trading.”21
The Floor Trader Exemption has seen little uptake since the relief was issued in 2019. We posit that as predictive markets and other markets that operate as DCMs continue to expand their offerings of event contracts, which are considered swaps as described above, the Floor Trader Exemption could provide important relief for market participants who may otherwise need to register as a swap dealer.
Conclusion
The Floor Trader Exemption could provide a unique opportunity for individuals seeking to trade large amounts of event contracts or other cleared swaps on a DCM. By using the Floor Trader Exemption, individuals could avoid the full onerous requirements of registering as a swap dealer while still being able to trade any amount of DCM cleared swaps, including event contracts.
1 Mark Hayes, Predicting the Future of Prediction Markets, FIA (Apr. 17, 2025), available at: https://www.fia.org/marketvoice/articles/predicting-future-prediction-markets.
2 Can Prediction Markets Become Bigger Than the Stock Market?, Certuity (July 16, 2025), available at: https://certuity.com/insights/prediction-markets/.
3 See e.g., How is Kalshi Regulated?, available at: https://help.kalshi.com/kalshi-101/how-is-kalshi-regulated.
4 CFTC/SEC Investor Alert: Binary Options and Fraud, CFTC, available at: https://www.cftc.gov/LearnAndProtect/AdvisoriesAndArticles/fraudadv_binaryoptions.html
5 7 U.S.C. § 1a(47)(A); see also Nadex Contracts Categorized as ‘Swaps’ Under Dodd-Frank (2013), available at: https://www.nadex.com/notices/nadex-amends-fix-connection-fees/.
6 See 7 U.S.C. § 1a(49).
7 Id.
8 Statement of Commissioner Brian D. Quintenz Regarding DSIO Staff Report on the Swap Dealer De Minimis Exception (July 8, 2019), available at: https://www.cftc.gov/PressRoom/SpeechesTestimony/quintenzstatement070819.
9 See 17 C.F.R § 23.21; see also Swap Dealer (SD) Registration, NFA, available at: https://www.nfa.futures.org/registration-membership/who-has-to-register/sd-msp.html.
10 See generally Swap Dealer (SD) Regulatory Obligations, NFA, available at: https://www.nfa.futures.org/members/sd/regulatory-obligations/index.html.
11 See paragraph 6(iv) of the “swap dealer” definition in 17 C.F.R. §1.3.
12 CFC Letter No. 19-14, No-Action Relief for Certain Conditions of the Floor Trader Provision (June 27, 2019), available at: https://www.cftc.gov/system/files/csl/final/pdfs/19/1561667900/19-14.pdf.
13 Id.
14 As discussed above, the swap dealer definition includes any person who “[e]ngages in any activity causing it to be commonly known in the trade as a dealer or market maker in swaps.” See paragraph 1(iv) to the swap dealer definition in 17 C.F.R. § 1.3.
15 See Further Definition of “Swap Dealer,” “Security-Based Swap Dealer,” “Major Swap Participant,” “Major Security-Based Swap Participant and “Eligible Contract Participant.” Release No. 34-66868, Commodity Futures Trading Commission and Securities and Exchange Commission, 77 FR 30596, 30607 (May 23, 2012) (“the dealer-trader distinction… in general provides an appropriate framework for interpreting the statutory definition of the term ‘swap dealer.'”).
16 15 U.S.C § 78c(a)(5).
17 15 U.S.C § 78c(a)(5)(B).
18 Definition of Terms in and Specific Exemptions for Banks, Savings Associations, and Savings Banks Under Sections 3(a)(4) and 3(a)(5) of the Securities Exchange Act of 1934, Exchange Act Release No. 47,364, 68 Fed. Reg. 8686 (Feb. 24, 2003) (quoting OTC Derivatives Dealers, Exchange Act Release No. 40,594, 63 Fed. Reg. 59362 (Nov. 3, 1998)).
19 Id.
20 CFTC Staff Issues No-Action Relief for Floor Traders Engaged in Swaps Activity, CFTC (June 27, 2019), available at: https://www.cftc.gov/PressRoom/PressReleases/7950-19.
21 83 Fed. Reg. 27444, 27469 (June 12, 2018).
Textile & Packaging EPR Is Here- What Consumer Brands Need to Do Now (U.S. & Canada)
Businesses that manufacture, sell, ship, or distribute products must now determine whether their packaging and clothing is subject to emerging extended producer responsibility (EPR) requirements as EPR deadlines in various jurisdictions have arrived or are pending.
EPR is reshaping obligations for textiles and packaging across the United States and Canada. Laws now require producers to finance, and in many cases administer, end‑of‑life collection, recycling, reuse, and reporting, often via producer responsibility organizations (PROs). Key developments include California’s enacted textile EPR (SB 707), pending textile EPR bills in New York and Washington, and active packaging EPR programs in Oregon, Colorado, California, Maine, and Minnesota. Canada continues to expand full packaging EPR, notably in Ontario, Alberta, and British Columbia.
U.S. Textile EPR (Selected Highlights)California (Enacted): SB 707 requires textile/apparel producers to participate in a PRO and to implement an approved plan covering collection, repair, reuse, and recycling. Civil penalties for intentional violations can reach $50,000 per day once the plan is approved or by July 1, 2030, whichever occurs first.1
New York (Pending): Senate/Assembly bills (e.g., S3217A/A6193A) would establish EPR for textiles with producer collection plans submitted to the Department of Environmental Conservation (DEC).2
Washington (Pending): HB 1420 proposes a statewide textile EPR program funded by manufacturers, with PRO membership and reporting requirements.3
U.S. Packaging EPR (Active Jurisdictions)Oregon: Recycling Modernization Act (SB 582). Producer reporting began March 31, 2025, and the program commenced July 1, 2025; producers participate through a state‑approved PRO.4
Colorado: HB 22‑1355 requires producers to register (initial deadline was Oct. 1, 2024) and begin reporting in 2025–2026, with fees funding statewide recycling from 2026 onward; participation is generally through the state‑designated PRO.5
California: SB 54 establishes a single statewide PRO and imposes aggressive recyclability, source‑reduction, and recycling‑rate targets by 2032; major fee obligations ramp beginning in 2027.6
Maine: Rules effective Dec. 25, 2024; Maine will appoint a single Stewardship Organization; first comprehensive producer reports are anticipated in 2027 for 2026 data.7
Minnesota: Enacted in 2024; phased implementation under the Minnesota Pollution Control Agency, with PRO membership and statewide program milestones rolling out through the decade.8
Canada Packaging EPR (Selected Provinces)Ontario: Blue Box Regulation requires producer registration, PRO contracts, and annual supply reporting (generally due May 31). Transition continues through 2025.9
Alberta: PPP EPR launched April 1, 2025, with regulator (ARMA) oversight fees and phased expansion (Phase 2 on Oct. 1, 2026); producers also pay PRO fees and must provide verified data.10
British Columbia: Recycle BC remains fully operational (province‑wide producer funding since 2014), with annual reporting and fee schedules administered via the PRO.11
Compliance Playbook: What to Do This Quarter
Map Coverage & Assign Owners: Inventory sales by jurisdiction and product (textiles vs. packaging). Assign Legal/Tax/Sustainability leads and a PRO liaison.
Join the Right PROs: Confirm enrollment with the designated PROs (e.g., Circular Action Alliance for many U.S. packaging programs; Recycle BC/Circular Materials in Canada). Ensure all legal entities/brands are covered.
Lock Reporting Calendars: Calendar March 31 / May 31 reporting touchpoints (jurisdiction‑specific). Add fee milestones (e.g., Oregon July cycles; Alberta oversight and PRO invoices).
Stand-Up Data & Verification: Build BOM/weight data by SKU and jurisdiction. Alberta requires third‑party verification; expect more verification requirements elsewhere.
Design for Compliance: Begin eco‑modulation (recyclable/reusable/compostable packaging; design for durability/repair in textiles) to lower fees and meet 2030–2032 targets.
Track Legislative Risk: Monitor New York and Washington textile bills and adjust internal playbooks to mirror California SB 707 structures if enacted.
ConclusionEPR obligations have arrived, with real registration, reporting, and fee requirements, and for textiles in California; significant penalties on the horizon.
Organizations must centralize ownership, join the correct PROs, industrialize their data, and begin design‑for‑recycling/repair to stay ahead on both sides of the border.
By staying in front of and monitoring the extended producer responsibility requirements and deadlines, manufacturers and sellers of consumer goods will be prepared to face this convoluted regulations across various jurisdictions.
Net-Zero Framework for International Shipping Postponed for One Year – International Maritime Organization Bows to U.S. Opposition
The International Maritime Organization (IMO) Marine Environmental Protection Committee (MEPC) declined to formally adopt a mandatory greenhouse gas (GHG) reduction scheme for the shipping industry – known as the Net-Zero Framework (NZF) – at its extraordinary session held last week (October 14-17). The NZF had been in the works for several years and had gained wide consensus before IMO’s recent decision. The decision creates considerable uncertainty in the sector, coming amid intense U.S. opposition that appears unlikely to wane, and the MEPC continues to pursue adoption of the NZF.
Key Takeaways
The MEPC deferred a decision to make the NZF legally binding until October 2026
The U.S. vehemently opposed adoption of the NZF, threatening to impose trade, port, and other restrictions on countries supporting the measure
The MEPC will continue work to define fundamental elements of the NZF and achieve consensus on its adoption
European Union (EU) measures regulating shipping GHG emissions will remain in place, and other countries may consider similar measures
The IMO decision creates considerable regulatory uncertainty for stakeholders across the shipping supply chain, and they should prepare to engage policymakers on several fronts
Background
The NZF would establish a legally binding regulatory framework to achieve net-zero GHG emissions “by or around, i.e. close to, 2050,” as articulated in the 2023 IMO Strategy on Reduction of GHG Emissions from Ships, agreed by the MEPC in July 2023. If adopted, the NZF would be included as a new chapter 5 in Annex VI to the International Convention for the Prevention of Pollution from Ships (MARPOL).
The NZF combines a global fuel standard and GHG emissions pricing mechanism applicable to ships over 5,000 gross tonnage. The scheme endorsed by the MEPC in April creates two tiers of GHG fuel intensity (GFI) targets, a Base Target (BT) and a more stringent Direct Compliance Target (DCT). In simplified terms, ships that fail to meet the targets generate “compliance deficits” and would be required to acquire Remedial Units (RUs), while ships that exceed the DCT could generate bankable Surplus Units (SUs). RUs would be acquired by making “pricing contributions” to a yet-to-be-established IMO Net-Zero Fund. Ships that use “Zero or Near-Zero GHG emission technologies, fuels and/or energy sources” (ZNZs) would be eligible to receive “Rewards” (annual compensation) from the IMO Net-Zero Fund.
Recent IMO Actions
The MEPC approved the text of the NZF at its 83rd meeting in April (MEPC 83) and had targeted formal approval needed to make it legally binding at its extraordinary session held last week (October 14-17). However, support for the NZF weakened in the intervening months amid U.S. threats of trade and other retaliation measures against countries supporting the measure. The MEPC ultimately adopted a resolution to adjourn the ES until October 2026 without approving the NZF.
In a statement issued after the extraordinary session, the MEPC affirmed its intention to continue work on developing NZF implementation guidelines to further define fundamental aspects of the scheme and achieve consensus on adopting the measure. Work to develop these guidelines is already beginning at this week’s meeting of the Intersessional Working Group on the Reduction of Greenhouse Gas Emissions from Ships.
The U.S. first signaled its “unequivocal” opposition to the NZF on April 9, 2025, when it announced its withdrawal from MEPC 83, urging other governments to “reconsider” their support for the agreement and warning it could consider “reciprocal measures.” The U.S. escalated these threats in a joint statement issued August 12, 2025, by the U.S. Departments of State, Transportation, Energy, and Commerce, and ultimately detailed retaliatory measures it planned to consider in a policy statement issued on the eve of last week’s MEPC ES, including targeted port access and visa restrictions, sanctions, penalties, and port fees. The U.S. has made clear its intent to “levy these remedies against nations that sponsor this European-led neocolonial export of global climate regulations.”
IMO adoption of the NZF would have triggered a process to consider changes to European Union (EU) measures regulating shipping GHGs – the Emissions Trading System (ETS) (Directive (EU) 2023/959) and FuelEU Maritime regulation (Regulation (EU) 2023/1805). The decision to postpone consideration of the NZF means these measures remain intact and, more broadly, that the shipping industry will continue to face a patchwork of regional and/or country-specific regulations governing GHG emissions and maritime fuel.
What’s Next
Going forward, ship owners, charterers, and other supply-chain stakeholders, including fuel suppliers and ship builders, should monitor developments closely and engage on multiple fronts, including:
IMO/MEPC efforts to achieve consensus on the NZF, which could require negotiating significant changes, likely with significant U.S. input;
IMO/MEPC efforts to better define key elements of the NZF through implementation guidelines to be developed by IMO bodies in the coming months;
U.S. efforts to gain leverage over NZF negotiations through a variety of trade or punitive measures; and
Efforts in other regions and countries, including the EU, to develop and/implement measures to regulate GHG emissions from ships that visit their ports.
Finally, companies in other sectors should note that the Trump administration’s approach to the NZF mirrors its broader pattern of leveraging international environmental disputes to advance domestic industrial priorities and leverage bilateral trade. As such, companies affected by other international schemes, such as the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), should consider how the Trump administration’s approach to the NZF may inform its approach to these schemes.
IEEPA Tariffs Head to Supreme Court: Could Refunds Be Next? What Businesses Should Know
On Nov. 5, the U.S. Supreme Court will hear the Administration’s appeal of the split decision upholding the Court of International Trade’s order striking down use of the International Emergency Economic Powers Act (IEEPA) as a basis for imposing tariffs on trading partners around the world. Court observers expect a decision soon after oral argument. A ruling could unlock significant tariff refunds for importers — but the path forward remains uncertain, and businesses should be ready to act.
The case concerns two sets of tariffs imposed by the Administration under IEEPA: (1) the fentanyl/immigration tariffs imposed on Canada, China and Mexico in February and March 2025, as subsequently amended, and (2) the reciprocal tariffs imposed on most trading partners in April 2025, as subsequently amended.
How Refunds Could Play Out If the Court Affirms
If the decision of the U.S. Court of Appeals for the Federal Circuit (CAFC) is affirmed, the federal government could be required to refund the challenged IEEPA tariffs paid by importers. The court may hold that all, some or none of the challenged tariffs are lawful, or remand the case for additional proceedings. However, no clear procedure or timeline exists for unwinding the tariffs collected.
Three potential refund scenarios include:
The court could dictate refund eligibility requirements and deadlines;
The Administration could issue guidance in implementing the refund process; or
Importers could be instructed to simply rely on the conventional tariff refund process.
Although additional tariffs imposed on Brazil and India under IEEPA are not directly at issue, the Court’s ruling could impact their viability — depending on what, if any, guardrails the Court places on the Administration’s use of the IEEPA to set tariffs on trading partners.
What Steps Businesses Can Take Now
The attached fact sheet provides guidance on preparing for potential IEEPA refunds. Polsinelli will issue another e-alert updating guidance once the Supreme Court acts.