American Trade & Manufacturing Blog

Trump Administration Notifies Congress of Intent to Renegotiate NAFTA

Posted in TPA

Today the Trump Administration sent a letter notifying Congress of its intent to renegotiate NAFTA.  The notification was required by the Bipartisan Congressional Trade Priorities and Accountability Act of 2015 (TPA).  By complying with this and other requirements in TPA, legislation required to implement a renegotiated NAFTA will be subject to streamlined procedures in Congress.

The Administration may now initiate negotiations with Canada and Mexico 90 or more days after sending the letter.  The Administration is required by TPA to continue to consult with the House Ways & Means Committee and the Senate Finance Committee, as well as the House Advisory Group on Negotiations and the Senate Advisory Group on Negotiations.  In addition, at least 30 days before initiating negotiations, a detailed and comprehensive summary of the negotiation’s specific objectives and how a renegotiated NAFTA would further those objectives and benefit the United States must be published on the U.S. Trade Representative website.

Unlike the draft of the letter that was leaked several weeks ago, the notification letter does not give much detail on the Administration’s objectives in renegotiating NAFTA other than to update and modernize the agreement.  The letter says that the Administration will seek new provisions to address intellectual property rights, regulatory practices, state-owned enterprises, services, customs procedures, sanitary and phytosanitary measures, labor, environment, and small and medium enterprises.  The Administration earlier raised concerns about NAFTA’s rules of origin provisions and dispute mechanism for trade remedy cases, but neither are mentioned in the letter.

The Administration has said that a renegotiated NAFTA will be the template for future agreements, possibly with the United Kingdom and Japan.  Thus, it will be important for interested parties to engage in the negotiations, even if their issues are not prominent in NAFTA.

U.S. Solar Manufacturer Files Global Safeguards Case Against Imports

Posted in Trade Remedies

On April 26, 2017, Suniva, Inc., a U.S. solar panel manufacturer that recently filed for bankruptcy, filed a trade petition asking the Trump Administration to provide relief from the serious injury that U.S. producers are alleged to be suffering at the hands of foreign imports of solar cells and panels.  Filed under a rarely invoked provision of the U.S. trade laws, the petition seeks an initial tariff of $0.40 per watt on all solar cells imported into the United States, from any country, and an initial floor price on solar modules of $0.78 per watt.  Suniva is also asking for a recommendation that the President negotiate with trading partners to address the global supply chain imbalance in and overcapacity of solar cells and modules.  A fact sheet on the petition is available here.

Also known as the “Global Safeguards” provision, section 201 of the Trade Act of 1974 allows a U.S. industry to petition for relief from the injurious effects of imports.  A successful case must show that the product at issue is being imported into the United States in such increased quantities as to be a substantial cause of serious injury or threat of serious injury to the petitioning industry.  The objective of a section 201 safeguards proceeding is not to remedy unfair trade, but to provide temporary relief to allow a U.S. industry to adjust to import competition.  There is thus no requirement to show that the imports under investigation are being subsidized or sold at less than fair value, as is the case in traditional antidumping and countervailing duty investigations.  Relief can include import duties and quotas and is potentially (though not necessarily) global in scope.  Initial relief is limited to four years, with the possibility of extending for an additional four years.

The U.S. International Trade Commission (“ITC”) has up to 150 days to make a determination of whether the U.S. solar cell and panel industry is seriously injured or threatened with serious injury, and must then transmit its recommendation to the President within 180 days.  The President has sole discretion to decide what relief, if any, will be provided to the domestic industry, and can adopt, modify, reject, or ignore the ITC’s recommendations.  Once the ITC’s recommendation is transmitted, the President has 60 days to make a final decision.

Commerce Officially Launches Investigation to Determine Whether Steel Imports Should be Restricted on National Security Grounds

Posted in Announcements, National Security, Trade Remedies

The Trump Administration has officially launched an investigation into whether steel imports should be restricted on national security grounds pursuant to Section 232 of the Trade Expansion Act of 1962.

Section 232 is a rarely-used provision of U.S. trade law and was last invoked in 2001.  The statute provides that investigations may be initiated upon request of the head of any department or agency, upon application of an interested party, or may be self-initiated by the Secretary of Commerce.  Commerce’s self-initiation of an investigation pursuant to this seldom invoked authority is an important indication of the Administration’s willingness to aggressively use all trade remedies available to address unfair trade practices.

Secretary Ross will conduct an investigation to determine the effects of steel imports on the national security of the United States in accordance with the statute.  At the end of the investigation, the Secretary will submit a report to the President on the findings.  If the Secretary finds that steel is being imported in such quantities or under such circumstances as to threaten to impair the national security, the Secretary will also recommend actions that should be taken to adjust steel imports.

The exact nature of how the investigation will proceed is still being set up.  While the statute provides the Secretary of Commerce 270 days to conduct an investigation and submit a report to the President, President Trump and Secretary Ross have indicated that this investigation will be significantly expedited.

Data Flows from China Could Be Significantly Restricted

Posted in National Security

This article is co-authored by Stephen Claeys and Shawn Chang of the Telecom, Media, & Technology practice.

Proposed Chinese regulations (open in Google Chrome for English translation) could substantially limit the ability of companies in China from sending data outside of that country.   If implemented, the regulations would potentially affect almost any type of business or data flow.

The regulations are to implement China’s wide-ranging Cybersecurity Law, which goes into effect on June 1.  This law already raised concerns due to its new security review requirements for data sent outside of China and a broadened scope for information that must be kept inside of China, among other troublesome provisions.

The proposed regulations increase these concerns because it vaguely defines the data subject to security review, such as data that could impact “national security and social public interests” that suggests that the Chinese government in some situations could have the ability to review any data sent overseas.  In addition, the regulations’ definition of companies subject to the national security review and server localization requirements is also vague.  Almost any company that uses telecommunications or Internet services could be subject to the regulation, including if the data flows are within a company.

Comments on the draft regulations are due by May 11.  However, an effective effort to meaningfully change the regulations would likely require a broad strategy involving not only business interests but also government-led responses.

Clues on the Future of NAFTA and Trade Agreements

Posted in Trade Agreement Compliance

While trade played a large role in the President Trump’s election, there have been few specifics on the new Administration’s objectives in that area.  This has been particularly the case regarding the Administration’s plans for revising NAFTA and negotiating new trade agreements.  The recently leaked draft letter from the Acting U.S. Trade Representative to notify Congress of the Administration’s intent to revisit NAFTA provides insight into the Administration’s thinking.

The purpose of the letter is to comply with one of the Congressional consultation requirements under the Bipartisan Congressional Trade Priorities and Accountability Act of 2015 (TPA).  TPA requires certain consultations with Congress regarding the initiation and conduct of trade negotiations, as well as consideration of specified negotiating objectives, in order for a trade agreement’s implementing legislation to receive streamlined consideration by Congress.  In this case, the aim of the letter would be to meet the TPA requirement to provide 90 day-notice of the President’s intent to initiate trade negotiations, as well as the date on which the President intends to initiate negotiations, the United States’ specific objectives for the negotiations, and whether the President is seeking a new agreement or change an existing agreement.  A draft of the letter was presumably provided to Congress to get input and ensure agreement that the letter would meet TPA’s requirements.

Much has already been written about how the negotiating objectives described in the letter are similar to many provisions of the Trans-Pacific Partnership agreement (TPP), which President Trump pulled out of soon after he was negotiated.  This is certainly the case.  The objectives of eliminating barriers for digital trade, stronger requirements for science-based food safety protections, improved trade facilitation practices, better services market access, more vigorous intellectual property rights protections, broader investment rights, and disciplines on state-owned enterprises, among others, closely follow TPP.

However, this does not necessarily signify a change in the Administration’s negative view of TPP.  The Administration, instead, likely recognized that many of the “21st century” trade issues addressed by TPP are needed for truly updating NAFTA.   There are also some significant aspects of TPP provisions missing from the letter.  For example, the intellectual property rights portion of the letter does not mention protections for pharmaceuticals or trade secrets.  The customs portion likewise does not raise increasing de minimus for customs purposes, which is a significant issue regarding Canada.

The draft letter also reflects several themes that the President has already stated about trade policy.  Although trade in agriculture and services are mentioned, improving trade in manufactured products gets greater focus.  Likewise, pointing to the U.S. trade deficit with Canada and Mexico as the reason for seeking a revised NAFTA is in line with the Administration’s view that a prime purpose of trade agreements should be to decrease trade deficits.  The objective in the letter of leveling the playing field on tax treatment reflects the President’s past stated concerned about Mexico’s value-added tax system discriminating against U.S. exports while benefiting Mexican exports.  The letter’s government procurement objective reiterates the Administration’s position of preserving and possibly expanding “Buy America” requirements and the letter repeats past Administration statements about eliminating NAFTA’s Chapter 19 dispute settlement provision for antidumping and countervailing duty determinations.

Nonetheless, despite the above similarities between the letter and the Administration’s stated trade positions, the letter also contains some significant departures.  The most notable is the lack of any objective regarding currency manipulation, which is contrary to past Administration statements about trade agreements needing to contain currency provisions.  Similarly, the letter’s language about a revised NAFTA creating non-economic benefits, such as in national security, is inconsistent with the Administration’s previous statements that trade agreements should be judged on economics alone, rather than as tools of foreign policy and national security.  Finally, the letter’s reference in the environment objective to promoting sustainable development is surprising given the Administration’s general environmental policies.

In sum, the letter shows that the Administration is willing to seek some, but not all, of the provisions in TPP, while also continuing to pursue its own trade policy objectives.  The disjointed nature of the letter also indicates that the Administration is still working internally to develop a coherent set of trade agreement objectives.  There are indications that the letter was not well received on either side of the aisle in Congress, so further revisions of the letter are expected.

New Executive Order Aims to Enhance Antidumping and Countervailing Duty Collection

Posted in Customs Law, Dumping and Subsidies, Manufacturing, Trade Remedies

On Friday, March 31, 2017, President Trump signed a new executive order aimed at enhancing antidumping and countervailing duty collection. The order charges U.S. Customs & Border Protection (CBP) to develop an action plan focused on ensuring that importers of goods subject to trade remedy orders provide adequate security to ensure payment of all duties, and to combat trade law violations.

CBP collects duties at the border, including antidumping and countervailing duties. But the agency’s collection efforts can easily be frustrated where importers lack U.S. assets sufficient to satisfy their debts to the Government, and otherwise do not have U.S. customs bonds on file in amounts sufficient to cover their duty obligations. As the Government Accountability Office has previously found, more than $2.3 billion in trade remedies duties went uncollected between 2001-2014. Further, a relatively small number of importers account for a significant quantity of these uncollected duties. The new executive order requires CBP to design and implement an action plan to address this troubling trend.

While the executive order does not provide specifics on what a responsive plan might look like, it states that the plan must be consistent with existing law that directs that importers’ liability for duties be secured through adequate customs bonds, and that directs CBP to perform risk importer assessments aimed at protecting the revenue. Accordingly, CBP’s plan will most probably involve developing methods to identify companies likely to default, prevent repeat offenders from incurring further liability, and ensure that companies importing goods subject to antidumping duties.

The order also directs CBP to work with rights-holders to ensure that intellectual property rights are being enforced at the border. It further requires the Attorney General to work with the Department of Homeland Security to prioritize trade enforcement, and to create recommended processes and procedures toward this end.

The order was welcomed by U.S. manufacturers, who have long complained that the benefits of trade remedy orders, meant to allow them to recover from injuries caused by dumped and subsidized imports, are fatally undermined by under-collection and evasion.  Jeff Henderson, president of the Aluminum Extruders Council, an organization of U.S.-based producers of aluminum extrusions, stated that his organization is “deeply grateful that the new administration, and its newly confirmed Secretary of Commerce, Wilbur Ross, are taking concrete steps to fully enforce existing trade remedies and provide domestic producers the relief they deserve.”

U.S. Department of Commerce Seeks Comments Regarding China’s Non-Market Economy Status

Posted in Announcements

As part of the antidumping investigation of Certain Aluminum Foil from the People’s Republic of China, the U.S. Department of Commerce (Commerce) is soliciting comments regarding China’s status as a non-market economy. The Tariff Act of 1930 defines “non-market economy country” as any foreign country that does not “operate on market principles of cost or pricing structures, so that sales of merchandise in such country do not reflect the fair value of the merchandise.” Commerce is soliciting information and comments by May 3, 2017 regarding the following six statutorily enumerated factors:

  • The extent to which the currency of the foreign country is convertible into the currency of other countries;
  • The extent to which wage rates in the foreign country are determined by free bargaining between labor and management;
  • The extent to which joint ventures or other investments by firms of other foreign countries are permitted in the foreign country;
  • The extent of government ownership or control of the means of production;
  • The extent of government control over allocation of resources and over price and output decisions of enterprises; and
  • Other relevant factors.

Commerce is conducting its inquiry in the context of December 11, 2016 changes to China’s Protocol of Accession to the World Trade Organization (WTO). On December 12, 2016, China initiated WTO consultations with the U.S. and European Union (E.U.) regarding its continued treatment as a non-market economy country in U.S. and E.U. antidumping proceedings. Commerce is unlikely to change its treatment of China as a non-market economy under U.S. law, but the information that it collects during this inquiry will be important to the U.S. defense against China’s WTO claims.

Please feel free to contact us if you have any questions or would like to discuss further.

Treasury Publishes List of Boycotting Countries

Posted in Compliance

On March 30, 2017, the U.S. Department of the Treasury (Treasury) published its current list of countries that require cooperation with an international boycott. Treasury, along with the U.S. Department of Commerce (Commerce), administers antiboycott laws and associated guidelines that were enacted in response to the Arab League’s boycott of Israel. Treasury’s rules apply to U.S. taxpayers, including members of a controlled group, regardless of whether the transaction involves U.S. goods or services. The agency’s rules do not prohibit conduct, but instead impose reporting requirements on U.S. taxpayers and their related companies. Taxpayers that have cooperated with an unsanctioned boycott are denied certain tax benefits as penalty. Reports of operations in or related to boycotting countries, boycott requests, and boycott agreements must be filed on IRS Form 5713 and attached to the taxpayer’s federal income tax return.

Treasury’s official boycott list, which is published periodically, is intended to alert the public to those countries that require or may require participation in, or cooperation with, an international boycott. Treasury’s current list,[1] published on March 30, 2017, includes the following countries:

  • Iraq
  • Kuwait
  • Lebanon
  • Libya
  • Qatar
  • Saudi Arabia
  • Syria
  • United Arab Emirates
  • Yemen

All nine of these countries have previously been designated as boycotting countries.

Notably, Commerce maintains separate antiboycott regulations, and unlike Treasury’s, Commerce’s regulations include prohibitions as well as reporting requirements. Commerce, however, does not publish an official boycotting list.

U.S. antiboycott laws and regulations are complex and impact both U.S. and foreign companies that conduct business overseas, particularly in the Middle East. Although often overlooked, the failure to comply with these complex laws and regulations may result in significant penalties.

[1] List of Countries Requiring Cooperation With an International Boycott, 82 Fed. Reg. 15,793 (Dep’t Treasury Mar. 30, 2017).

USTR Releases 2017 National Trade Estimate Report

Posted in Manufacturing, Trade Agreement Compliance, Trade Negotiations, Trade Policy

The Office of the U.S. Trade Representative (USTR) today released its 2017 National Trade Estimate Report on Foreign Trade Barriers (NTE).  USTR publishes the NTE annually to provide the President and Congress with “an inventory of the most important foreign barriers affecting U.S. exports of goods and services, foreign direct investment by U.S. Persons, and protection of intellectual property rights.”  This year’s NTE comes in the wake of statements from the Trump Administration that foreshadow potentially contentious negotiations between the United States and major trading partners.  On March 29, USTR sent a draft notice to the Senate Finance and House Ways and Means committees regarding the Administration’s objectives for renegotiating NAFTA.  And on March 30, President Trump commented on Twitter that his April 6-7 meetings with Chinese President Xi Jinping would be “very difficult” because of persistent U.S. trade deficits with China.

China: The NTE includes a list of Chinese industrial policies “that seek to limit market access for imported goods, foreign manufacturers and foreign service suppliers, while offering substantial government guidance, resources and regulatory support to Chinese industries.”  These range from information technology policies restricting purchases of foreign equipment and services for purported national security reasons, to subsidies for basic industries like steel and aluminum that have driven “massive excess capacity in China.”  Of particular concern is the ongoing implementation of the “Made in China 2025” policy, which promotes manufacturing in high-tech industries, as well as the application of advanced manufacturing technologies in traditional industries.  The U.S. Chamber of Commerce explains that Made in China 2025 “aims to leverage the power of the state to alter competitive dynamics in global markets” and that it “risks precipitating market inefficiencies and sparking overcapacity, globally.”  A recent report by the EU Chamber of Commerce in China similarly describes Made in China 2025 as “a large-scale import substitution plan aimed at nationalizing key industries, or at least severely curtailing the position of foreign businesses in them.”

NAFTA countries: The NTE emphasizes Canadian barriers to agricultural trade, including price discounts for Canadian dairy producers and import restrictions on U.S. grain exports to Canada.  It also notes concerns with Canadian subsidies to the aerospace sector, including nearly $300 million in assistance to airplane manufacturer Bombardier in February 2017.  With respect to Mexico, the NTE highlights problematic customs procedures like verifications of textile imports and licensing requirements for steel products that have restricted U.S. exports to Mexico.

Commerce Calls for Information on U.S. Pipeline Construction and Maintenance for Domestic Sourcing Plan

Posted in Manufacturing, Trade Policy

The Commerce Department’s Office of Policy and Strategic Planning is currently seeking information on the construction and maintenance of American pipelines to inform its forthcoming plan to the President for the domestic sourcing of pipeline materials.  In accordance with the President’s January 24, 2017 Presidential Memorandum on the “Construction of American Pipes,” the agency is collecting information for its plan on “the domestic sourcing of materials for the construction, retrofitting, repair, and expansion of pipelines inside the United States.”  The Commerce Department seeks information to enhance its understanding of the following items:

  • Current pipeline construction technology and requirements
  • Potential advances in pipeline technology
  • Domestic and foreign supply chain for pipeline materials
  • All other information considered pertinent to the development of Commerce’s domestic sourcing plan

This is an excellent opportunity for members of multiple U.S. industries to comment on the current and anticipated availability of American raw materials, inputs, and other construction and maintenance materials for new and existing pipelines.  Timothy C. Brightbill, a partner in Wiley Rein’s International Trade Practice, recently discussed in a Steel Business Briefing article, that, in particular, the data for this request are poised to show that U.S. manufacturers have the ability “to immediately produce much greater quantities of US line pipe using American-made steel.”

Responses to Commerce’s request for information are due by April 7, 2017, either electronically via regulations.gov or by mail to the Office of Policy and Strategic Planning.  Commerce will protect business proprietary information that is marked as such and filed in paper submissions.  Additional information on the submission of responses to Commerce is found in the notice posted by the agency here.

Note:  Wiley Rein represents U.S. clients in the line pipe and steel industries.

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