Robinson+Cole Hosts Market Briefing on Export Opportunities in Indonesia

Melissa Grosso, Senior International Trade Specialist; Andrew Billard, commercial attaché at the U.S. Embassy Jakarta; and Jeffrey J. White, chair of Robinson+Cole’s Manufacturing Industry Team

On September 19, 2017, our Manufacturing Industry Team proudly hosted an informal market briefing on export opportunities in Indonesia with Andrew Billard, commercial attaché at the U.S. Embassy Jakarta. Presented by the U.S. Commercial Service Connecticut office, the program offered insight into the Indonesian market, Southeast Asia’s largest economy, and provided an overview of export opportunities. In addition, Mr. Billard met with attendees to discuss their company’s market potential in Indonesia.

Thank you to both Andrew and Melissa for an outstanding program!

WHY INDONESIA?

Indonesia ranks 8th in the world based on purchasing power parity, and averaging over 5% growth over the last decade. Growth is projected by the IMF to reach 5.1% for 2017 due to strong private consumption. President Joko Widodo (known as “Jokowi”) took office in October 2014 and has pledged to improve infrastructure, diversify the economy, and reduce barriers to doing business in Indonesia as a means of increasing economic growth.

More background on the Indonesian market is available in the Country Commercial Guide.

MARKET OPPORTUNITIES: A SNAPSHOT

  • Consumer-related market opportunities continue to lead growth in the world’s fourth- largest country, and expansion in the retail, health, education, telecom and financial services sector have boomed in the last few years. The Indonesian consumer is ranked as one of the most confident in the world, and 50% of Indonesia’s 255 million citizens are under the age of 30.
  • Indonesia’s aviation market is growing at 20% per year and favors U.S. products. Aircraft replacement parts and services are a valuable and significant market. There is also demand for air traffic control and airport logistics services and ground support equipment.
  • Indonesia’s under-developed public infrastructure remains a major national challenge and could present significant opportunities in aviation, rail, ports and land transport, as well as in municipal infrastructure projects such as water supply and wastewater systems.
  • As the Indonesian military expands its budget, there are opportunities for U.S. defense manufacturers to sell a range of military aircraft, vehicles, communications systems, spare parts, and maintenance services. Monitoring and protection of sea-borne traffic for both national security and fisheries enforcement presents new opportunities.
  • Important opportunities outside of Jakarta remain in energy and electricity transmission services. The Government of Indonesia has announced its intention to increase electricity generation by 35,000 MW by 2019. It is not going to meet that goal, but growth in power generation projects, conventional and renewable, and including Independent Power Producers, is expected to continue for the next decade.

Hurricanes Force Manufacturers to Consider Impact on Employees

Hurricanes Harvey and Irma caused widespread property damage and flooding, and some manufacturers may not be able to reopen their businesses for several months. To assist followers of this blog, I have set out below a few of questions which manufacturers have asked in the last few weeks. I have also set out links to the United States Department of Labor’s FACT SHEETS, which are an excellent source of information. Keep in mind that state laws may require a different answer than those below, which are based on federal law. Before taking action, manufacturers should have a quick conversation with the lawyer of their choice. Continue Reading

Supply Chain Problems After The Hurricanes: What Manufacturers Should Be Aware Of

As the recovery effort continues after Hurricane Harvey and Hurricane Irma, some manufacturers are starting to deal with supply chain slowdowns or shortages.  The most widely reported issue that impacts both manufacturers and consumers is the shortage of fuel.  However, these natural disasters have also impacted suppliers that operate in these areas.

For those manufacturers impacted by these shortages or slowdowns, here are some things to pay attention to going forward:

  1. Nearly all commercial contracts have a “force majeure” clause, which is typically what a supplier will cite if they cannot deliver product on time.  These clauses often refer to natural disasters, acts of God, and other events that excuse non-performance for a period of time.
  2. Under most state law, the triggering event must have been beyond the party’s control and not due to any fault or negligence by the non-performing party.
  3. If a supplier claims “force majeure,” it typically has the burden of not only establishing that a “force majeure” event took place, but whether it did anything to mitigate the impact of the shortage.  So, if one of your suppliers has sent you a letter stating as much, you should ask for evidence on these points.
  4. Typically, if a force majeure event occurs, a supplier cannot favor one customer over another.  Instead, the supplier must allocate production and deliveries among its customers.  Although I am sure many in the manufacturing world would say this is unrealistic to expect, a well-documented response (sometimes by legal counsel) can aid in these efforts.
  5. Finally, one common issue that manufacturers often consider is whether they can “set-off” (i.e., refuse to pay outstanding invoices while the force majeure event is in effect).  State law on the right to setoff can be all over the map so we typically urge our clients to do an analysis before engaging in any self-help.

Superfund Reform May Be a Slow Go

As we previously reported, the current administration set out to make Superfund reform a priority. Shortly after taking over as EPA Administrator, Scott Pruitt convened a task force to provide recommendations for restructuring and streamlining the Superfund cleanup process. Over the summer, Administrator Pruitt endorsed 42 recommendations from the task force. The recommendations included, among others:

  • Developing a target list of sites on the National Priorities List (NPL) that are moving too slowly towards completion, including a Top 10 Administrator’s Emphasis List for sites that need “immediate and intense action.”
  • Encouraging the use of early or interim removal and remedial actions at complex sites.
  • Providing reduced oversight incentives, such as reduced oversight costs, to cooperative, high-performing potentially responsible parties (PRPs).
  • Discouraging PRPs from delaying the process through negotiation by actively using unilateral administrative orders.
  • Reducing financial assurance requirements for cooperating PRPs.
  • Identifying opportunities for third party oversight of PRP-led cleanups.
  • Encouraging integration of reuse outcomes into remedial planning.
  • Exploring liability transfer and risk management approaches at PRP-led cleanups.

Recently, however, EPA officials acknowledged that there are a number of hurdles to implementing the recommendations. Budget cuts and declining EPA staff could impact both EPA’s ability to swiftly take steps necessary to carry out the recommendations, as well as to conduct the necessary follow-up to ensure effective implementation. EPA officials have also acknowledged that some of the recommendations, such as third party oversight of cleanups, are subject to further review and refinement.

Despite these challenges, Superfund remains a priority at EPA, and it is getting more attention than it has in years past. EPA is already looking at ways to expedite cleanups and minimize protracted negotiations at PRP-led sites. In addition, because a number of the recommendations provide some level of flexibility, we might begin seeing PRPs attempting to use the recommendations to negotiate for novel or flexible approaches at individual sites, even in advance of sweeping implementation by EPA.

Breaking News: Manufacturers Breathe Relief as Court Strikes Down DOL Overtime Rule

 The United States District Court for the District of Texas issued a broad decision today invalidating the U.S. Department of Labor’s attempt to amend the so-called “White Collar” Exemption by doubling the minimum salary paid to such individuals.  Read the decision here.

I have previously posted about the DOL Overtime Rule.  See “Time Running Out for Compliance with New DOL Overtime Regulation” (September 19, 2016) and “New Wage and Hour Requirements for Certain Employees of Manufacturers” (May 31, 2016).  While the Trump Administration had announced that it would not implement the Obama-era regulation (which doubled the minimum salary to be paid employees to qualify as being exempt from minimum wage and overtime requirements), the DOL continued to argue that it had the statutory right to do so.

In its holding today, the Court rejected that assertion.  In a carefully worded decision which potentially opens the door to a broad reconsideration of the “White Collar exemption,” the Court held that the DOL’s decision to double the salary threshold to be considered exempt was contrary to Congressional intent.  The Court reasoned that in adopting the Fair Labor Standards Act, Congress clearly indicated that employees who performed executive, administrative and professional activities on behalf of management were not eligible for minimum wage or overtime.  While Congress broadly defined these categories, it left to the task to the DOL to more clearly define them.  Yet, by doubling the salary threshold, the DOL essentially abdicated its role to define the limits of what Congress intended.

The Court wrote, “[t]his significant increase would essentially make an employer’s duties, functions, or tasks irrelevant if the employee’s salary falls below the new minimum salary level.  As a result, entire categories of previously exempt employees who perform ‘bona fide executive, administrative, or professional capacity’ duties would now qualify for [minimum wage and overtime][ based on salary alone.  * * * * This is not what Congress intended . . . .”

 The Court’s decision likely will not be the final word on the matter.  Yet, by again focusing on the intent of Congress in adopting the FLSA, the Court seems to be signaling a desire to limit “lawmaking by regulation.”

No “Summer Slow-Down” for Manufacturers – Regulatory Changes Continue

 

Readers of this space may recall my recent posts highlighting court and legislative changes to employment laws, regulations and policies affecting manufacturers.  See e.g. “‘Manufacturing’ Law: Courts Also Move to Fill the Void,” “INTERESTING UPDATE: ‘Manufacturing’ Law: Courts Join the States to Fill the Void,” and “The DOL Seeks to Change the Tide.”  While Congress may have taken August off for vacation, local governments have not.  The breathtaking speed by which long-established practices are being challenged and changed has not slowed down.  Two examples help to make this point.

On July 19, San Francisco adopted the “Parity in Pay Ordinance” prohibiting covered employers from either asking about an applicant’s salary history or considering an applicant’s salary history when deciding whether to hire and what salary to offer.  Effective January 1, 2018, San Francisco becomes another jurisdiction to adopt a salary history inquiry ban.

These local bans on salary history require hiring officials to dramatically change their practices.  What once may have been a routine question (“how much did you make in your last job and how much do you need to be paid to work for me”) becomes a legal minefield – legal or illegal depending on the status of the interview-application process.  San Francisco’s ban prohibits a manufacturer from considering salary history, even when the applicant spontaneously offers it.  So, if during the interview the applicant discloses that she or he earned a six-figure salary in the prior job and the manufacturer’s proposed salary range was capped at a far lower amount, the likelihood that the applicant would either reject the offer or accept it only until the next opportunity cannot be considered.

The New York City Department of Consumer Affairs published new regulations under the “Freelance Isn’t Free” Act, rules which became effective on July 24.  Among other things, those rules prohibit freelance employees from prospectively waiving rights under the Act, ban prohibitions on bringing an action in court to enforce the individual’s rights, and otherwise ban waivers of the right to bring class or collective actions.  Any provisions in conflict with these rules are automatically void and unenforceable.

These changes may require the wholesale modification of standard independent contractor or freelance agreements.

As I have noted before, the rapidly changing landscape requires manufacturers pay close attention to changing standards in their jurisdictions.  Every individual involved in the hiring process, whether in HR or not, should become familiar with applicable local rules.

TSCA Implementation Update: EPA Finalizes Framework Rules and Announces Scope For First Risk Evaluations

 

Thank you to my colleague, Emilee Mooney Scott, for this post. Emilee is an associate in our Environmental & Utilities Practice Group.

TSCA Framework Rules Promulgated

As we outlined last year, the Toxic Substances Control Act (“TSCA”) was recently updated to provide EPA with much broader authority to regulate “existing” chemical substances (i.e., those that are already in use in commerce).  EPA’s review of existing chemical substances under its new TSCA authority will follow these three steps: 1) Prioritization; 2) Risk Evaluation; and 3) Risk Management (as we explained in further detail in December).

On July 20, 2017, EPA issued the final rules on the Prioritization and Risk Evaluation processes.  Notably, the final rule specifies that when EPA conducts a risk evaluation, it will not evaluate all possible conditions of use, but will instead focus on the conditions of use that raise the greatest potential for risks.  This will conserve agency (and industry) resources by limiting the need for data and analysis on conditions of use that are uncommon or risks that are remote.

Risk Evaluations Underway

The TSCA reform bill also directed EPA to identify a slate of ten substances that would skip the prioritization step and proceed directly to the risk evaluation step.  EPA recently published the risk evaluation scope for each of these first ten substances.  EPA has opened a docket for each substance, and will accept comments on risk evaluation scopes until September 19, 2017.  The table below provides links to the risk evaluation scopes (and any supporting documents), the use and exposure pathways and hazards identified by EPA, and the docket that interested parties may use to leave comments.

Substance Use and Exposure Pathways Hazards Docket
1,4-Dioxane Used in consumer products. Present in groundwater, ambient air and indoor environments.  High reported releases to the environment. Possible human carcinogen. EPA-HQ-OPPT-2016-0723
1-Bromopropane Used in consumer products. Present in drinking water, indoor environments, surface water, ambient air, groundwater, soil. Estimated to have high releases to the environment. Possible human carcinogen. EPA-HQ-OPPT-2016-0741
Asbestos Used in chlor-alkali production, consumer products, coatings and compounds, plastics, roofing products, and other applications. Also found in certain imported products such as brakes, friction products, gaskets, packing materials and building materials. Known human carcinogen; Acute and chronic toxicity from inhalation exposures. EPA-HQ-OPPT-2016-0736
Carbon Tetrachloride Used in commercial/industrial products. Present in biomonitoring, drinking water, indoor environments, surface water, ambient air, groundwater, soil. High reported releases to the environment. Probable human carcinogen. EPA-HQ-OPPT-2016-0733
Cyclic Aliphatic Bromide Cluster (HBCD) Flame retardant in extruded polystyrene foam, textiles, and electrical and electronic appliances Acute aquatic toxicity EPA-HQ-OPPT-2016-0735
Methylene Chloride Used in consumer products. Present in drinking water, indoor environments, ambient air, groundwater, and soil Probable human carcinogen EPA-HQ-OPPT-2016-0742
N-Methylpyrrolidone (NMP) Used in consumer products. Present in drinking water and indoor environments. High reported releases into the environment. Reproductive toxicity. EPA-HQ-OPPT-2016-0743
Pigment Violet 29 Used in consumer products. Estimated to have moderate releases to the environment. Aquatic toxicity. EPA-HQ-OPPT-2016-0725
Trichloroethylene (TCE) Used in consumer products. Present in drinking water, indoor environments, surface water, ambient air, groundwater, and soil. Probable human carcinogen. EPA-HQ-OPPT-2016-0737
Tetrachloroethylene (perchloroethylene) Used in consumer products and dry cleaning. Present in biomonitoring, drinking water, indoor environments, ambient air, groundwater, soil. High reported releases to the environment. Probable human carcinogen. EPA-HQ-OPPT-2016-0732

In December 2016 and January 2017 EPA also issued proposed rules that would 1) ban the use of TCE in aerosol degreasing and spot cleaning; 2) ban the use of TCE in vapor degreasing; and 3) ban the use of methylene chloride and NMP in consumer and most commercial coating removal products.  These rules have not yet been finalized, and the new administration has repeatedly extended the comment deadlines.

While the proposed TCE rules face an uncertain fate, they do potentially forecast how risk evaluations might proceed.  The proposed TCE rules do not include any restrictions on what is presently the most common use of TCE in the United States: as a precursor in refrigerant manufacturing.  When TCE is used in refrigerant manufacturing, the use occurs in a closed system with very limited potential for worker exposure or releases to the environment.  In other words, when a discrete use of a high-priority substance poses little risk, it may be allowed to continue even in the face of a total ban on other uses.  Manufacturers aware of such low-risk uses should take advantage of opportunities for public comment to make sure EPA is aware as well.

The False Claims Act: Why It Is Relevant To All Manufacturers

This week, we are pleased to have a guest post from Kevin Daly.  Attorney Daly is a member of the firm’s Manufacturing Industry Group and also its Trade Compliance Team. 

The False Claims Act (FCA) is a major civil enforcement tool used by the federal government to redress fraud causing monetary loss to the government.  In the 2016 fiscal year, the federal government recovered over $4.7 billion in FCA judgments and settlements.  While in the manufacturing sector it most frequently affects government contractors, its reach can be broader and it is a statute that all manufacturers should be aware of.

WHAT IS IT?

The FCA is a civil statute that prohibits presenting false or fraudulent claims for payment to the federal government, or causing the presentment of such claims.  The law also prohibits making, using or causing to be made or used a false statement to conceal or avoid paying an obligation to the government.

HOW IS IT ENFORCED?

The FCA permits private citizens with knowledge of alleged FCA violations to enforce the statute by suing alleged wrongdoers on the government’s behalf and sharing in the government’s monetary recovery if successful.  The majority of FCA lawsuits are brought by these private “relators”; the government may bring FCA lawsuits itself but such direct enforcement actions are relatively rare.  The FCA’s “qui tam” provision authorizing suits by private relators is a potentially lucrative mechanism for whistleblowers (who could be current or former employees, customers or others in a business relationship, or competitors) who believe that a company has defrauded the government.  Companies or individuals found to have violated the FCA are liable for treble damages plus civil penalties of $10,957 to $21,916 per violation.  (These penalties are adjusted annually to account for inflation).

WHO DOES IT APPLY TO?

The potential for FCA liability is present for manufacturers that sell directly to the federal government, and, in some instances, even to manufacturers with no government contracts.

The FCA was first enacted during the Civil War to provide a remedy against suppliers who defrauded the government in selling supplies to the Union Army.  The FCA is still used to address such “procurement fraud” cases today.  These cases often involve overcharging the government by, for example, charging for substandard goods, providing goods less expensive than what was ordered and billed for, overcharging for a product, or billing for a higher quantity of good than what was provided.  Additionally, the FCA is used to enforce compliance with contractual provisions and statutory and regulatory requirements governing government contractors.  These cases rely on the theory that, by submitting a claim for payment, a contractor expressly or impliedly represents that it is in compliance with the applicable requirements.  Most courts have permitted the government to bring FCA cases on this theory.  For these reasons, FCA risk is particularly present in manufacturing sectors that rely on purchases by the federal government, such as military equipment.

DOES IT APPLY TO NON-GOVERNMENT CONTRACTORS?

Even manufacturers that do not do business with the federal government directly can face FCA liability if their downstream customers bill the federal government.  For example, the single largest sector for FCA enforcement is the healthcare industry.  The government has used the FCA to enforce regulatory requirements applicable to pharmaceutical and medical device manufacturers, such as FDA marketing regulations and the anti-kickback statute.  These manufacturers can face FCA liability, even though in most cases they do not bill government health care programs directly, on the theory that the manufacturer has caused a pharmacy, hospital, or other provider to submit a false claim when the manufacturer violates these statutes and regulations.

Additionally, even companies with no relationship to the federal government can face FCA liability in certain situations.  Recently, some relators have brought FCA lawsuits against companies that have allegedly made false statements in customs paperwork.  These cases allege that, because the FCA prohibits making false statements to avoid paying an obligation to the government, false statements that reduce the import duty owed (e.g. by misstating the country of origin of the goods, the value of the goods, or the nature of the goods) violate the FCA.  Manufacturers that produce their goods overseas or import materials from overseas could face lawsuits of this nature.

The FCA is a technical, rapidly evolving area of the law.  It carries the potential to affect manufacturers a variety of sectors, in some instances even without a direct relationship to the federal government.

The DOL Seeks to Change the Tide

While local state and city governments have been working to expand the scope of workplace protections, the Federal government has begun “undoing” some of the aggressive advancements of the Obama Administration.

On June 7, the Department of Labor (DOL) announced in a brief statement that it was withdrawing two significant guidance documents – one with respect to JOINT EMPLOYERS and the other dealing with INDEPENDENT CONTRACTORS.

The Joint Employer Guidance sought to expand the circumstances under which one business could be held responsible for the employment, labor and civil rights liabilities of a separate, but related second business.  The DOL Guidance sought to expand worker protections and the ability to collect remedies from parent corporations (when liability was imposed as a result of the acts of a subsidiary) or franchisors (when liability was imposed as a result of the actions of a franchisee).  The now repealed guidance suggested that such liability could be imposed whenever the related-entity exerted “indirect” control over the labor and employment actions of the another entity even if such power was not exercised, a common claim when faced with parent-subsidiary or franchise agreements.  The DOL now returns to the previous standard that such liability can only be imposed on a business which has “direct control” other the business found to be liable.

DOL also withdrew its guidance on Independent Contractors.  Under the now withdrawn guidance, the DOL had taken the position that “most” independent contractors were really “employees” under the common law.  As a result, the DOL had taken the position that such workers were entitled to minimum wage and time-and-a-half for overtime.  The DOL did not address the impact (if any) the withdrawn guidance would have on a much-publicized Federal-State Worker Misclassification Initiative.  Under that initiative, believing that the misclassification of workers had a substantial negative impact on the collection of state and federal payroll and other taxes, 37 states partnered with DOL to share data and take steps to increase collection efforts.  The future of the initiative seems uncertain.

Given the budgetary pressure faced by state and local government, the DOL’s action may have limited immediate impact on collection efforts.  Yet, manufacturers and other employers have a better chance defending these “misclassification cases” now that the DOL appears to have taken a more traditional view.

The Year of Change continues.

Superfund Changes Afoot

Since taking over as EPA Administrator, Scott Pruitt has made it clear that he intends to focus on—and overhaul—the Superfund program. Calling the program “at the center of the Agency’s core mission”, Pruitt has put in place a couple of initiatives in an effort to streamline and improve the Superfund process and cleanups. In addition, industry groups have weighed in with their own ideas for how to improve the program. These changes and recommendations are summarized below.

Delegation of Authority for Superfund Remedies Estimated at $50 Million or More

On May 9, 2017, Administrator Pruitt issued a memorandum delegating authority for approval of Superfund remedies estimated to cost $50 million or more to the Administrator. The stated purpose of this delegation is to create efficiency and consistency for large, expensive Superfund sites. EPA employees are directed to get the Administrator’s office involved in these sites as early as possible and throughout the remedy evaluation process to ensure efficiency.

While the purpose of the delegation is efficiency, questions remain about how the delegation will work in practice. Oftentimes, a cost estimate for remediation is not developed until well into the Superfund process, so it is unclear how early the Administrator’s office will get involved on these sites. In addition, what will happen to sites with a remedy estimated at more than $50 million that were approved before the memo took effect? We can likely expect potentially responsible parties to seek the Administrator’s input on these remedies.

Task Force for Superfund Restructuring

On May 22, 2017, Administrator Pruitt convened a task force to provide recommendations on how to restructure and improve the Superfund cleanup process. The task force is directed to consider the following issues:

  • Streamlining and improving protections such as bona fide prospective purchaser status, “comfort letters”, and prospective purchaser agreements.
  • Developing non-traditional approaches for financing cleanups.
  • Reducing EPA administrative/oversight costs.
  • Streamlining and improving remedy selection at sediment sites.
  • Improve stakeholder involvement (state and local governments, public-private partnerships).

The task force’s recommendations are due by June 21, 2017. It remains to be seen what the task force will conclude, but given the issues to be addressed, we can expect some recommendations that could benefit potentially responsible parties at these sites.

Industry Requests for Regulatory Reform

A number of industry groups recently offered EPA their own suggestions for how to improve the Superfund program. Some of the suggestions include:

  • Relaxation of conservative exposure scenarios in risk assessment.
  • Consideration of future land use in developing remedial alternatives.
  • Reformation of agency oversight cost policy to incorporate a concept of reasonableness.
  • Limitations on EPA review time for documents.
  • Adoption of a third-party licensed site professional program.

Given the focus on the Superfund program and the overall goal of streamlining the process, it is certainly possible that some of these ideas could be championed by this Administration.

 

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