American Trade & Manufacturing Blog

ITC begins digital trade investigations as AEI calls for removal of Chinese digital trade barriers

Posted in Trade Policy, World Trade Organization

The U.S. International Trade Commission (ITC) is beginning a comprehensive three-part investigation into digital trade and the impact of digital trade barriers, just as the American Enterprise Institute (AEI) has released a new study calling for a World Trade Organization (WTO) case to be filed against China’s barriers to digital trade and e-commerce.

The ITC investigations were announced earlier this week.  The first investigation will focus on market opportunities and key foreign trade restrictions.   The ITC will hold a public hearing on April 4, with requests to appear at the hearing due March 21.   Written submissions to the Commission are due April 21.   The schedule for the two subsequent investigations will be announced shortly.

AEI’s paper calls for action on China’s digital trade barriers.   The paper, authored by Claude Barfield, states that “China’s digital Great Firewall and the new National Security and Cybersecurity Laws threaten vital high-technology sectors of the US economy.”  AEI calls for a WTO case against China’s censorship practices, and also urges the Trump Administration and the U.S. Trade Representative to take trade retaliation against China if it fails to remove these damaging digital trade barriers.

According to AEI, the Internet sector now constitutes $966 billion, or nearly 6 percent of the U.S. economy.   However, China is blocking U.S. e-commerce while building its own competitors.  Currently, eight of the world’s 25 most trafficked websites are completely blocked in China – including those of Apple, Google, Facebook, Twitter, and YouTube.

The United States is not limited to WTO actions in this regard.   It can also use existing U.S. law, such as Section 301, to challenge illegal or unreasonable foreign trade practices that burden or restrict U.S. commerce.  Under Section 301, the President has the authority to impose tariffs or other restrictions after an investigation of the illegal foreign practices.

If the Trump Administration is looking for a way to hit China hard, remove illegal trade barriers, and strengthen the U.S. economy, it should not hesitate to challenge China’s Great Firewall.

Trump Administration Imposes Fresh Sanctions on Iran

Posted in Economic Sanctions

On February 3, 2017, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned more than two dozen individuals and entities related to Iran’s ballistic missile program and the Islamic Revolutionary Guard Corps – Qods Force (IRGC-QF).  The move comes amid escalating tensions between the Trump Administration and the Iranian government.

The new sanctions were triggered by Tehran’s ballistic missile test on January 29, 2017.  The sanctions target 25 individuals and entities, including Chinese firms suspected of supporting Iran’s missile program.  These entities and individuals include MKS International Co., Ltd., East Star Company, and Ofog Sabze Darya Company, as well as three China-based brokers involved in the procurement of dual-use technology and materials for Iran’s ballistic missile program.  The sanctions also target IRGC-QF’s Lebanon-based network working with Hezbollah, including Maher Trading and Construction Company, Reem Pharmaceutical, Mirage for Engineering and Trading, and Mirage for Waste Management and Environmental Services.  The property and interests in property of the designated individuals and entities are now blocked, and U.S. persons are generally prohibited from engaging in transactions with them.

According to Administration officials, this action was taken outside the scope of the Joint Comprehensive Plan of Action (JCPOA), which was finalized in 2015 and is intended to restrict Iran’s nuclear activities in exchange for easing international sanctions against the country.  The JCPOA, and the earlier easing of the Iranian sanctions, remain in place.  However, the Trump Administration has indicated that the U.S. government is reviewing its overall policy towards Iran, suggesting that further changes to the sanctions regime could be forthcoming.

OFAC Amends Sudanese Sanction Regulations

Posted in Economic Sanctions, Export Controls

The Office of Foreign Asset Controls (OFAC) has announced that it is issuing a general license for activities prohibited by the Sudanese Sanctions Regulations.  Effectively, that will make the sanctions’ prohibitions inoperative going forward, even as the Sudanese Sanctions Regulations themselves remain in place.  OFAC’s new rules, which become effective today, authorize all transactions that were prohibited under the Sudanese Sanctions Regulations and Executive Orders 13067 and 13412, including the processing of transactions involving persons in Sudan, the importation and exportation of goods, services, and technology to Sudan, and transactions involving property in which the Government of Sudan has an interest.  Specifically, the amendment to the Sudanese Sanctions Regulations has the following effect:

  • All property and interest in property blocked under the Sudanese Sanction Regulations will be unblocked;
  • All trade between the United States and Sudan that was previously prohibited by the Sudanese Sanction Regulations will be authorized;
  • All transactions by U.S. persons relating to the petroleum or petrochemical industries in Sudan that were previously prohibited by the Sudanese Sanction Regulations will be authorized; and
  • The facilitation of transactions between Sudan and third countries by U.S. persons previously prohibited by the Sudanese Sanctions Regulations will be permitted.

The amendment affects only the Sudanese Sanctions Regulations, found at 31 C.F.R. Part 538, and does not affect obligations under any other provision of 31 C.F.R. or requirements established by any other agency. Continue Reading

USTR Files Landmark WTO Complaint, on Behalf of Wiley Rein Client, on China’s Subsidies to Aluminum Producers

Posted in Announcements, Antidumping, World Trade Organization

On behalf of Wiley Rein LLP’s client, Century Aluminum, United States Trade Representative Michael Froman today filed one of the largest and most complicated World Trade Organization (WTO) cases in recent years. The landmark case challenges China’s subsidization of its aluminum industry and seeks to remedy the injury the Chinese government’s policies are causing to the U.S. aluminum industry. For the first time, this case directly challenges the systemic distortions of China’s state-directed economy. Wiley Rein had a crucial role in developing this case over the past year, working in coordination with our SIGNAL Group subsidiary. The Wiley Ream team includes myself; partner Robert E. DeFrancesco, III; associates Laura El-Sabaawi and Adam M. Teslik; special counsel Ying Lin; and international trade analyst John W. Clayton, Jr.

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U.S. International Trade Commission Seeks Comments on Petitions for Import Duty Reductions

Posted in Customs Law, Manufacturing

Today, the U.S. International Trade Commission began accepting comments on the more than three thousand petitions filed with the agency last year requesting that the Government temporarily suspend import duties on products ranging from herbicidal chemicals to ping-pong tables.

Traditionally, duty reductions were obtained by having members of Congress sponsor individual bills on specific goods, which would then then packaged together in a combined “miscellaneous tariff bill.” However, after the last few attempts to put together such a bill failed due to concerns that the individual bills constituted earmarks, Congress passed the American Manufacturing Competitiveness Act of 2016, which passed the authority to receiving and vetting duty reduction proposals on to the Commission.

As in the past, an individual petition will only make it into the final proposed bill if the duty loss that would occur is less than $500,000/year. Further, proposals regarding goods manufactured in the United States are highly unlikely to make it through the petition process. Likewise, if a petition has been crafted to benefit a specific imported product to the disadvantage of identical or directly competitive imports, this may also weigh against the petition’s inclusion in the final bill.

Having collected petitions for duty reductions last year, the Commission is now seeking comments on the submitted petitions. Commenters may oppose, support, or provide neutral information with respect to specific petitions. Companies that believe that their U.S. production operations could be negatively affected by a petition may be particularly interested in filing comments in opposition. Similarly, importers of products that are like or directly competitive with the products subject to petitions may also be interested in filing opposition comments, while parties that stand to benefit from petitions may wish to supply information to round out the Commission’s understanding of the relevant industry or product.

Comments must be received by 5:15 p.m EST on February 24, 2017, and must be filed through the Commission’s online commenting system. A complete list of submitted petitions can be viewed here.

U.S. Trade Representative Notes China’s Lack of Progress on Overcapacity, State-Owned Enterprises

Posted in Trade Agreement Compliance, Trade Policy, World Trade Organization

In a new report on China’s compliance with its WTO obligations, the U.S. Trade Representative (USTR) highlights a number of shortcomings, including industrial overcapacity and the prominence of state-owned enterprises (SOEs).  The report emphasizes that “excess capacity in China . . . hurts U.S. industries and workers not only because of direct exports from China to the United States, but because lower global prices and a glut of supply make it difficult for even the most competitive producers to remain viable.”  The report highlights the Chinese government’s role in sustaining overcapacity in multiple industries, as well as its failure to address the problem despite commitments to do so:

  • “Chinese government actions and financial support in manufacturing industries like steel and aluminum have contributed to massive excess capacity in China, with the resulting overproduction distorting global markets and hurting U.S. producers and workers in both the United States and third-country markets such as Canada and Mexico . . . .”
  • “China has no comparative advantage with regard to the energy and raw material inputs that make up the majority of costs for steelmaking, yet China’s capacity has continued to grow and is estimated to have exceeded 1.16 billion metric tons in 2016 . . . .”
  • In the aluminum industry, “Large new facilities are being built with government support, including through energy subsidies, as China’s primary aluminum production accounted for 54 percent of global production from January through October 2016. As a consequence, China’s aluminum excess capacity is contributing to a severe decline in global aluminum prices, harming U.S. plants and workers.”

In another area of concern that is related to the overcapacity problem, USTR noted that a Chinese 2013 plan for SOE reform “has not yet led to significant reform of state-owned enterprises” and that “China has rebuffed U.S. requests” for “intensive dialogue with China on state-owned enterprise governance issues . . . .”

The complete 2016 Report on China’s WTO Compliance is available via USTR’s website, here.

Commerce Continues Important SIMA Program for Monitoring Steel Imports

Posted in Announcements, Compliance

On Thursday, the International Trade Administration of the Department of Commerce extended the Steel Import Monitoring and Analysis (SIMA) system, a significant steel import monitoring program, for an additional five years.  The program has now been in place for 12 years, since 2005, and provides timely and streamlined public access to steel import data.  As Commerce explains, this program “provides all interested stakeholders with a more informed understanding of changing market conditions in a transparent manner.”

Under the program, importers of steel products are required to obtain a license from Commerce prior to their completion of the necessary customs entry summary documentation.  The process to comply with this requirement is fast and automated, with Commerce estimating that it takes no longer than ten minutes to complete.  These licenses function as a valuable monitoring tool.  The SIMA program has been extended through March 21, 2022.

Webinar: Trade Policies in the Trump Administration: Part One

Posted in Uncategorized

President-elect Trump’s campaign focused heavily on international trade issues such as free trade agreements, import tariffs, and trade deficits. However, the campaign discourse may differ from the reality of the new Administration. Cut through the rhetoric and identify the challenges and opportunities presented by the Trump Administration. Join us for the first of our two-part webinar series to learn how new trade policies will affect domestic and foreign organizations.

What You Will Hear:

  • Trade remedies opportunities for U.S. manufacturers
  • The future of the WTO, dispute settlement, and trade agreements
  • Economic sanctions regimes: Iran, Cuba, and others
  • Potential uses of U.S. trade laws to aid U.S. manufacturing, exports, and infrastructure spending
  • Thinking outside the box – how to recalibrate corporate trade strategy to maximize results
  • Global barriers to competition – is this a new opportunity to address vexing problems and concerns?

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Last Weeks of the Year See a Flurry of FCPA Enforcement

Posted in Compliance, FCPA

The last two weeks of 2016 have seen a flurry of Foreign Corrupt Practices Act (FCPA) enforcement actions: a $519 million settlement against Israel’s Teva Pharmaceutical, an action in the billions against Brazilian construction conglomerate Odebrecht and its petrochemical unit, Braskem, and a $75 million settlement by Kentucky-based General Cable Corporation.

Teva’s December 22 settlement landed it in fourth place on the list of the ten biggest FCPA enforcement actions ever.  Teva, the world’s largest manufacturer of generic drugs, was accused of violating the FCPA by hiring a Ukrainian government official as a consultant and by bribing government doctors in Mexico.  The Teva managers responsible for overseeing compliance were allegedly “unable or unwilling” to enforce the company’s anti-corruption program.

On December 21, Odebrecht/Braskem was assessed a combined penalty worth an estimated $4.5 billion to resolve bribery charges with U.S., Brazilian and Swiss enforcement authorities.  The U.S. Department of Justice (DOJ) stated that Odebrecht “systematically paid hundreds of millions of dollars to corrupt government officials in countries on three continents.”  Odebrecht will pay ten percent of its final criminal fine to the United States, ten percent to Switzerland and ten percent to Brazil.  The U.S. portion of the fine should therefore be approximately $450 million, which would put Odebrecht/Braskem in at least fifth place on the list of the top ten FCPA penalties.  The exact final fine amount will be set during sentencing on April 17, 2017.

Finally, on December 29, General Cable entered into a $75.75 million settlement agreement with the DOJ and U.S. Securities and Exchange Commission to resolve FCPA violations in Angola, Bangladesh, China, Egypt, Indonesia and Thailand.  The company, a producer of copper, aluminum and fiber optic wires, is alleged to have paid $13 million from 2002 to 2013 to third-party agents and distributors. At least some of the money was then allegedly used to bribe government officials to obtain business.

With the two latest entrants to the top-ten list, four of the ten largest FCPA enforcement actions ever were concluded this year, making 2016 an extremely busy – and lucrative – year for FCPA enforcement.

Could Section 301 Return to Prominence?

Posted in Trade Agreement Compliance, Trade Negotiations, Trade Policy, Trade Remedies, World Trade Organization

Of the policy questions related to the incoming Trump Administration, one of the most compelling is whether the new President will revive Section 301 of the Trade Act of 1974 as a major component of U.S. trade policy.  Mr. Trump’s call to “direct all appropriate agencies to use every tool under American and international law . . . including the application of tariffs consistent with Section 201 and 301 of the Trade Act of 1974” suggests that he might.  But can the new Administration take unilateral action under Section 301 without violating U.S. law or U.S. commitments under the World Trade Organization (“WTO”) Agreements?

Section 301 was one of the key levers in U.S. trade policy before the creation of the WTO, particularly with respect to Japanese practices that U.S. companies and the U.S. government believed were anticompetitive and discriminatory.  It has remained largely dormant since then, except for the occasional petition resulting in a new WTO case.

Section 301 includes both mandatory and discretionary components.  Mandatory action requires violation of a trade agreement, but the discretionary component does not.  Rather, it allows the U.S. government to take action if a foreign government practice is unreasonable or discriminatory and burdens or restricts U.S. commerce.  Section 301, moreover, only requires resorting to dispute resolution under trade agreements if the issue is covered by a trade agreement.  A WTO panel has also explained that

The statutory language . . . gives the USTR the broad discretion we outlined above as regards the entire scope of U.S. trade relations, only a part of which comes within the orbit of WTO obligations.  Within the discretion allowed, the statutory language leaves it to the USTR to apply the provisions of the Trade Act which relate to the entire gamut of U.S. trade relations in a manner which is consistent with U.S. interests and obligations.

The answer, then, appears to be yes – the new Administration could bring back unilateral U.S. action under Section 301, without violating either U.S. law or WTO rules, but only for a limited subset of issues that are not covered by the WTO Agreements.  Reviving Section 301 would be controversial, but if a truly harmful trade policy cannot be addressed through dispute resolution, the use of Section 301 may actually result in freer trade and expanded opportunities for U.S. firms, and not the trade apocalypse that some foresee.