The Office of the U.S. Trade Representative (USTR) has released President Donald Trump’s 2020 Trade Policy Agenda and 2019 Annual Report, detailing how the Trump administration’s trade actions have resulted in “a ‘blue-collar boom’ with higher wages, more jobs and a stronger economy for all.”  The report details several of President Trump’s trade accomplishments over the past year, including the signing of trade agreements with Mexico, Canada, China and Japan, as well as enforcement actions and efforts to reform the World Trade Organization (WTO). The report states that the president’s trade agenda for 2020 will be to continue to “rebalance America’s trade relationships to benefit American workers, aggressively enforce U.S. trade laws, and take prompt action in response to unfair trade practices by other nations.”

This “America First” trade agenda includes:

  • Pursuing balanced and reciprocal trade agreements with the United Kingdom, the European Union and Kenya, which would be the United States’ first free trade agreement in sub-Saharan Africa.
  • Enforcement of commitments in trade agreements, including “robust enforcement” of commitments by trading partners to the United States-Mexico-Canada Agreement (USMCA), the China Phase One Agreement, and WTO agreements.
  • Further negotiations with Japan for a comprehensive trade agreement.
  • Pursuing a Phase Two Agreement with China that continues to require structural reforms and other changes to China’s economic and trade systems.
  • Limiting the WTO to its original purpose of serving as a forum for nations to negotiate trade agreements, monitor compliance with agreements, and facilitate the member-driven resolution of international trade disputes.

Regarding the WTO, the report notes that the United States has engaged significantly with other WTO members on various issues of concern, including implementation of existing WTO rules, reform of the dispute settlement system and new ideas and proposed changes for a trade regulatory system first implemented over 25 years ago. Noting the USTR’s recent report on the WTO Appellate Body (see Trump and Trade Update of February 12, 2020), the report references the Appellate Body’s repeated failure to apply the rules of the WTO agreements in a manner that adheres to the text of those agreements as negotiated and agreed by WTO members. The annual report also notes that the United States continues to push for improving transparency and compliance with basic notification obligations. The report highlights efforts to advance proposals on e-commerce and digital trade. Overall, as part of its 2020 trade agenda, the USTR will continue to undertake efforts to reform the WTO so that it “reflects current economic realities and strengthens free-market economies.”

To read a fact sheet on the 2020 Trade Policy Agenda and 2019 Annual Report, click here.

The Office of the U.S. Trade Representative (USTR) has issued a Federal Register notice seeking public comment on the possible extension of Section 301 tariff exclusions for certain products that it granted on May 6, 2019, in the ongoing trade dispute with China. These exclusions were in the third batch of exclusions granted as part of the first round of Section 301 tariffs placed on imports of Chinese goods with an annual trade value of approximately $34 billion (List/Tranche 1 products). These exclusions (see Trump and Trade Update of May 10, 2019) are scheduled to expire on May 14, 2020. The USTR is considering a possible extension of up to 12 months for these exclusions and seeks public comment on whether to extend particular ones.

USTR states that it will evaluate the possible extension of each exclusion on a case-by-case basis. The focus of the evaluation will be “whether, despite the first imposition of these additional duties in July 2018, the particular product remains available only from China.” These issues should be addressed in submitting any comments:

  • Whether the particular product and/or a comparable product is available from sources in the United States and/or in third countries.
  • Any changes in the global supply chain since July 2018 as to the particular product, or any other relevant industry developments.
  • The efforts, if any, the importers or U.S. purchasers have undertaken since July 2018 to source the product from the United States or third countries.

The USTR notes that it will continue to consider whether the imposition of additional duties on the products covered by the exclusion will result in severe economic harm to the commenter or other U.S. interests.

Comments will be accepted between March 12 and April 12, 2020. All submissions must be made electronically via the www.regulations.gov portal on docket number USTR-2020-0009. The USTR strongly recommends that those wishing to comment complete Exclusion Extension Comment: Form A, which will be posted on the public docket. Importers and purchasers may also submit Exclusion Extension Comment: Form B containing business confidential information via email to 301bcisubmissions@ustr.eop.gov, which will not be made available to the public. If filing a Form B, parties, the USTR notes, must also file a public Form A.

The USTR is considering the possible extension of product exclusions only for those exclusions granted in May 2019; no other extensions under any other product exclusion notices issued by the USTR will be considered.

In a ruling by the U.S. Court of Appeals for the Federal Circuit (Federal Circuit),  a three-judge panel has upheld a lower court’s ruling that Congress’s delegation of authority over trade does not violate the Constitution. This ruling is the result of a complaint filed in June 2018 by several steel-related trade groups alleging that Section 232 of the Trade Expansion Act of 1962 (Section 232) is an unconstitutional delegation of power to the president. The American Institute for International Steel, Inc. (AIIS), among other plaintiffs, sued the United States in the U.S. Court of International Trade (CIT), arguing that President Donald Trump’s imposition of a 25 percent tariff on certain imported steel products under Presidential Proclamation 9705 and pursuant to Section 232 is unconstitutional because the authority it confers is “so unconstrained as to constitute legislative power that is Congress’s alone under Article I of the Constitution and so cannot be delegated.”

On March 25, 2019, the CIT rejected this challenge, concluding that the issue is controlled by the Supreme Court’s Algonquin decision, which declares Section 232 does not violate the nondelegation doctrine (see Trump and Trade Update of March 25, 2019). AIIS appealed the decision to the Federal Circuit, arguing that Algonquin does not apply in this case and that Section 232 is “facially unconstitutional” because it improperly delegates legislative authority to the president. In its appeal, AIIS argued that certain Supreme Court decisions issued after Algonquin undermine this decision, making it no longer binding. Affirming the CIT’s 2019 decision, the Federal Circuit, however, found “no basis” for overruling Algonquin as nothing in that decision’s analysis “rests on a premise about judicial review that later Supreme Court decisions have changed.”

The case is American Institute for International Steel v. United States, case number 19-1727, before the U.S. Court of Appeals for the Federal Circuit.

On February 27, 2020, President Donald Trump issued a Presidential Memorandum declining to impose Section 232 tariffs on imports of titanium sponge. While concurring with the findings of the Department of Commerce’s Section 232 report that imports of titanium sponge threaten to impair national security, the president declined to take action in the form of Section 232 tariffs at this time.  Instead, Trump issued a directive for the secretaries of Commerce and Defense, with other executive branch officials, to form a working group to address national security concerns.

This Section 232 investigation under the Trade Expansion Act was initiated in March 2019 (see Trump and Trade Update of March 5, 2019) as a result of a petition filed by Titanium Metals Corporation alleging that the quantity or circumstances of U.S. titanium sponge imports threaten national security. On November 19, 2019, Secretary of Commerce Wilbur Ross submitted a report to the president finding that imports of titanium sponge, accounting for 68 percent of all titanium sponge consumed in the United States in 2018, did threaten to impair the national security by placing the U.S. titanium sponge producer’s operation under severe financial stress. The secretary found that “low-priced titanium sponge imports, as well as low-priced titanium scrap imports, depress the price of U.S. titanium sponge and discourage recapitalization and modernization of the remaining active producer’s aging production facility.” The report also found that if the remaining U.S. facility ceased operation, the United States would have “no active domestic capacity to produce titanium sponge for national defense and critical infrastructure needs.” Over 94 percent of titanium sponge imports in 2018 were from Japan. Nevertheless, Ross recommended that no action be taken at this time to adjust imports under Section 232.

The working group has been directed to invite Japanese officials to participate in discussions in order to agree upon measures “to ensure access to titanium sponge in the United States for use for national defense and critical industries in an emergency.” In addition, the Secretary of Defense has been tasked with seeking new appropriations to increase access to titanium sponge for national defense and critical industries and to support domestic production capacity for the production of titanium sponge to meet national defense requirements.

There are growing concerns that the recent outbreak of a novel coronavirus, SARS-CoV­-2, which causes “coronavirus disease 2019” (abbreviated as COVID-19), will have a serious negative impact on the global economy. U.S. businesses who depend on Chinese suppliers may soon be facing product shortages and supply chain disruptions. This client update (i) addresses whether U.S. businesses need to be concerned about possible exposure to the virus from goods imported from China, and (ii) identifies contractual considerations to help companies manage potential supply chain risks based on their relationships with Chinese suppliers, customers and transportation providers.

Key Notes:

  • The risk of coronavirus transmission from imported goods is currently considered highly unlikely.
  • U.S. businesses should engage in contingency planning, including evaluating alternative sourcing and the potential future need for increased transportation capacity.
  • Disruptions may affect contracts between U.S. businesses and Chinese suppliers, and U.S. businesses and buyers of finished goods.
  • Transportation contracts should be reviewed for minimum volume commitments and capacity protections.

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Huttig Building Products, Inc. (Huttig) has become the latest U.S. importer to file a lawsuit against President Donald Trump’s recent Section 232 tariffs on certain steel and aluminum derivative products. In a complaint filed at the U.S. Court of International Trade (CIT), Huttig argues that the president’s January 24, 2020 Proclamation imposing a 25 percent tariff on derivative steel products and a 10 percent tariff on derivative aluminum products under Section 232 of the Trade Expansion Act of 1962 (Section 232) is unlawful (see also, Trump and Trade Updates of January 28, 2020 and February 14, 2020).

In its complaint, Huttig alleges that “it will be adversely affected by these tariffs. Huttig did not have an opportunity to provide input into the President’s decision to impose these tariffs because the Secretary of Commerce did not undertake the required investigation or publish any report of his findings.” The complaint states that:

  • No public announcement on the implementation of these tariffs was made until the day Proclamation 9980 was signed;
  • Section 232 requires the Department of Commerce (Commerce) to investigate whether imports of the products at issue actually threaten U.S. national security;
  • Within 270 days of initiating an investigation, Commerce must submit a report to the president, within 90 days thereafter the president must decide if he agrees with the findings of the report; and within 15 days thereafter must decide what action to implement.

The complaint states that none of these statutory requirements occurred before President Trump issued the January 24, 2020 Proclamation. Without these actions, Huttig asserts, the additional tariffs were unlawful under the Section 232 statutory requirements, and Hutting was denied “equal protection of the laws as guaranteed by the Fifth Amendment’s Due Process clause.”

The complaint also states that the derivative steel and aluminum products subject to new Section 232 tariffs represent “a negligible portion” of overall U.S. imports of derivative articles of steel and aluminum and a negligible portion of the overall U.S. market for such derivative products. Because the Proclamation omits numerous steel and aluminum derivative products that “represent a far larger portion” of overall U.S. imports of such products, Huttig claims that the tariffs are “not rationally related to the purported threat to the national security of the United States.” Huttig asks the CIT to declare Proclamation 9980 void; to permanently enjoin the United States (i.e., the defendant) from implementing the Proclamation or enforcing it; and to order Customs and Border Protection to refund any duties owed.

The case is Huttig Building Products, Inc. et al. v. U.S. et al., case number 1:20-cv-00045, in the U.S. Court of International Trade.

On February 24, 2020, the Department of Commerce’s Bureau of Industry and Security (BIS) issued a Federal Register notice announcing amendments to the Export Administration Regulations (EAR) that revise export licensing policy toward the Russian Federation and Yemen based on national security and foreign policy concerns. Under the EAR, BIS has established various “Country Group” designations that broadly establish licensing requirements based on the country of destination for an export of an item controlled for export from the United States.

Russia has been moved from the more favorable export licensing treatment of Country Group A to Country Group D. It has been removed from Country Groups A:2 (Missile Technology Control Regime) and A:4 (Nuclear Suppliers Group) and added to the more restrictive Country Groups D:2 (Nuclear) and D:4 (Missile Technology). BIS notes that this change was made to address U.S. concerns about diversion of U.S.-origin items to or from Russia for prohibited end uses and end users. BIS has revised the licensing policy for items to Russia to a “presumption of denial” when the items are controlled for such reasons as: (i) proliferation of chemical and biological weapons; (ii) nuclear nonproliferation; and (iii) missile technology under the EAR. These amendments “address U.S. concerns about Russia’s lack of cooperation and accountability for U.S.-origin items and diversion to unauthorized or prohibited proliferation activities, end uses, and end users. Specifically, Russia has not been cooperative in allowing BIS to perform pre-license checks or post-shipment verifications related to U.S.-origin goods.”

Yemen has been moved from Country Group B to Country Group D — specifically, Country Group D:1 (National Security). BIS notes that this change has been made to address concerns about diversion of U.S.-origin items in Yemen for unauthorized purposes, including prohibited proliferation activities, end uses, and end users. According to BIS, the “ongoing conflict in Yemen has fostered international terrorism and instability in the Arabian Peninsula, including the proliferation of small arms, unmanned aerial systems, and missiles.”

As a result of these amended Country Group designations, a number of license exceptions will no longer be available for Russia and Yemen, and items previously allowed to be exported without a license may now require approval from BIS. U.S. goods on the dock for loading or en route aboard a carrier to a port of export as of February 24, 2020, may proceed to that destination under the previous license exception eligibility or without a license. Any U.S. goods not actually exported before midnight on February 25, 2020 will, as necessary, require a license in accordance with these Country Group amendments.

For only the fourth time, the Office of the U.S. Trade Representative (USTR) has published a Federal Register notice announcing Section 301 tariff exclusions for certain imported Chinese products appearing on List 2. These products have been subject to Section 301 tariffs since August 23, 2018, when President Donald Trump announced additional import duties on Chinese goods with an annual trade value of approximately $16 billion.

This notice provides an exclusion for one product: skateboards with electric power for propulsion, of a power not exceeding 250 W (described in statistical reporting number 8711.60.0050). It also offers a technical amendment converting a previously granted exclusion of a specially prepared product description to an exclusion of a 10-digit Harmonized Tariff Schedule of the United States (HTS) subheading. Products under HTS subheading 3910.00.0000, described as “Silicones in primary forms,” are now fully excluded.

The one product-specific exclusion will be retroactive to August 23, 2018, and remain in effect until October 1, 2020. The technical amendment will apply to the original date of the granted exclusion, October 2, 2019, until October 1, 2020. These exclusions apply to any product that satisfies the description in the annex of the Federal Register notice, regardless of whether the company using the exclusion filed the request. Each exclusion is governed by the scope of the HTS heading and the product description appearing in the annex of the exclusion notice; it is not governed by the product description set out in any particular exclusion request. U.S. Customs and Border Protection will soon issue instructions on entry guidance and implementation. The USTR will continue to issue determinations on pending requests on a periodic basis.

The Office of the U.S. Trade Representative (USTR) has published a Federal Register notice announcing additional Section 301 tariff exclusions for certain imported Chinese products appearing on List 3. These products have been subject to Section 301 tariffs since September 24, 2018, when President Donald Trump announced additional import duties on Chinese goods with an annual trade value of approximately $200 billion.

This batch of approved product exclusions covers one 10-digit Harmonized Tariff Schedule (HTS) subheading in its entirety and 46 specially-prepared product descriptions covering, in total, 67 separately-filed exclusion requests. The excluded HTS subheading is 6505.00.8015, which covers “hats and other headgear, knitted or crocheted, or made up from lace, felt or other textile fabric, in the piece (but not in strips), whether or not lined or trimmed; hair-nets of any material, whether or not lined or trimmed: not in part of braid; nonwoven disposable headgear without peaks or visors.” The exclusions with specially-prepared product descriptions include but are not limited to: various chemicals; certain stuff sacks of man-made fibers; leather covers for telecommunication devices; certain wood flooring; various types of fabrics wholly of cotton; certain woven and non-woven fabrics made of synthetics, polyester, or polyethylene terephthalate; certain portable outdoor cookers; certain aluminum clamps and sewer hose supports; certain aluminum shovels; certain fuel filters for internal combustion engines; certain digital electronic scales; certain lottery ticket vending terminals; certain hand-operated gate valves; certain 48V rectifiers for telecommunications wireline and wireless apparatus; certain power supplies for cable networks for converting voltage; certain other power supplies with varying input and output wattage; certain electrical inverters; tags for acousto-magnetic security systems; certain printed circuit board assemblies; certain toddler beds made of wood; and certain fireplace mantels made of wood.

These product exclusions will be retroactive to September 24, 2018, and remain in effect until August 7, 2020. These exclusions apply to any product that satisfies the description in the annex of the Federal Register notice, regardless of whether the company using the exclusion filed the request. Each exclusion is governed by the scope of the HTS heading and the product description appearing in the annex of the exclusion notice; it is not governed by the product description set out in any particular exclusion request. U.S. Customs and Border Protection will soon issue instructions on entry guidance and implementation. USTR will continue to issue determinations on pending requests on a periodic basis.

The Office of the U.S. Trade Representative (USTR) has announced in a forthcoming Federal Register notice that the United States will increase the tariffs imposed on aircraft imported from the European Union (EU) from 10% to 15% on March 18, 2020. These tariffs resulted from an October 2019 ruling by a World Trade Organization (WTO) arbitrator allowing the United States to take “countermeasures” – implement retaliatory tariffs – against the EU concerning “adverse effects” arising from EU subsidies provided to Airbus (see Trump and Trade Update of October 4, 2019). That ruling determined that the United States could take countermeasures at a level not to exceed $7.49 billion annually; this determination was essentially affirmed in December 2019, resulting in the USTR’s decision to enforce U.S. retaliatory rights in this long-running WTO dispute between the United States and the EU over both parties’ subsidies for large civil aircraft manufacturers (see Trump and Trade Update of December 9, 2019).

An annex to the notice provides a full listing of the EU products that were first subject to tariffs in October 2019 and remains substantially the same but with higher duty rates. EU items subject to these additional tariffs on March 18, 2020, include certain new airplanes and other new aircraft. Removed from the October 2019 tariff list is prune juice; added to the list is kitchen chopping or mincing knives.

The USTR indicated the United States “remains open to a negotiated settlement that addresses current and future subsidies to Airbus provided by the EU and certain current and former member States.”