In a February 13, 2020 letter to President Donald Trump, members of the New Democrat Coalition (NDC), a group of Congressional Democrats generally supportive of free trade, demanded that the final Section 232 report on automobiles and auto parts submitted to the president in February 2019 be released. Referencing provisions in the Consolidated Appropriations Act for 2020 that require the release of the report by January 19, 2020 (see Trump and Trade Update of January 22, 2020), the NDC members stated that President Trump and the Department of Commerce are in violation of the law and that this “willful disregard for these laws threatens American workers as well as the balance of power that is so essential to our Constitution.” The letter reiterates that NDC members do not believe that imported automobiles and auto parts are a national security threat, noting that President Trump has admitted this publicly.

The Department of Commerce’s Bureau of Industry and Security (BIS) has issued a Federal Register notice renewing the temporary general license for Huawei Technologies Co., Ltd. and 114 of its non-U.S. affiliates on the Entity List until April 1, 2020. As published on May 22, 2019, this temporary general license authorizes certain activities, including those necessary for the continued operations of existing networks and equipment, the support of existing mobile services, and cybersecurity research critical to maintaining the integrity and reliability of existing and fully operational networks and equipment (see Trump and Trade Update of May 21, 2019). This renewal is the third extension BIS has granted since Huawei was placed on the Entity List. BIS continues to remind exporters, reexporters and transferors subject to the notice that they are required to maintain certifications and other records, to be made available when requested by BIS, regarding their use of the temporary general license. This temporary general license does not relieve parties of their Export Administration Regulations (EAR) obligations as to other licensing requirements for exports to the People’s Republic of China. When not covered by the scope of the temporary general license, exports to listed Huawei entities will require a license and “license applications will continue to be reviewed under a presumption of denial.”

PrimeSource Building Products, Inc., a U.S. importer of various steel derivative products, filed a complaint (subsequently amended) in the U.S. Court of International Trade (CIT) on February 4, 2020, arguing that President Donald Trump’s Proclamation No. 9980 is unlawful and unconstitutional. This proclamation expanded the implementation of steel and aluminum tariffs under Section 232 of the Trade Expansion Act of 1962 and directed the secretary of commerce to adjust these tariffs to also apply to certain steel and aluminum derivatives beginning on February 8, 2020 (see Trump and Trade Update of January 28, 2020). The complainant alleges that:

  • The imposition of Section 232 duties on these derivative products is procedurally deficient because the Department of Commerce failed to provide reasonable notice to the public or hold public hearings and thus failed to follow statutory and regulatory procedures for a Section 232 investigation;
  • The implementation of these duties occurred 638 days after the statutory time period for such an action lapsed;
  • In providing “assessments,” “determinations” and “information” to the president on specific Harmonized Tariff System subheadings subject to additional Section 232 duties, the secretary of commerce violated all of the Section 232 statutory provisions;
  • PrimeSource was deprived of its Fifth Amendment due process constitutional rights; and
  • Section 232 is unconstitutional because it represents an unlawful delegation of legislative authority from Congress to the president.

In addition to its complaint, PrimeSource filed a motion seeking a temporary restraining order (TRO) to halt the duties during the lawsuit. After three days of telephonic hearings and negotiations on the TRO, CIT Chief Judge Timothy Stanceu had yet to rule on PrimeSource’s motion. Instead, the original TRO motion was withdrawn and a new TRO motion was filed on February 12, 2020. In its new motion, instead of seeking a broad restraining order to halt the collection of duties on all affected imports of steel and aluminum derivative products, PrimeSource narrowed the scope to cover only its own imports. Counsel for the Department of Commerce did not consent to any injunctive relief but detailed in its own filing the amount of security U.S. Customs and Border Protection (CBP) would consider necessary to protect the United States and offered two options should the CIT enter any order restraining CBP from collecting duties from PrimeSource pursuant to Proclamation No. 9980.

On February 13, 2020, Judge Stanceu issued an order that the parties had agreed on the terms of an injunctive order that could be entered upon mutual consent and without the Department of Commerce admitting that PrimeSource has “demonstrated a likelihood of success on the merits.” This removed the need for Judge Stanceu to rule on the merits of the pending, but to be withdrawn, TRO motion. As a result, the parties have agreed under the order to an injunction barring CBP from collecting Section 232 tariffs on PrimeSource’s imported steel derivative products. The order also sets bonding requirements until CIT enters a final judgment in the case.

The case is PrimeSource Building Products Inc. v. United States et al., case number 1:20-cv-00032, in the U.S. Court of International Trade.

The Office of the U.S. Trade Representative (USTR) has released its Report on the Appellate Body of the World Trade Organization (WTO), providing an in-depth assessment of the Appellate Body’s alleged “failure to comply with WTO rules and interpret WTO agreements as written.” In a press release, USTR Robert Lighthizer stated, “For more than 20 years, successive Administrations and the U.S. Congress have voiced significant concerns that the Appellate Body has failed to function according to the rules agreed by the United States and other WTO Members … Unfortunately, the conduct of the Appellate Body has converted the WTO from a forum for discussion and negotiation into a forum for litigation. President Trump is committed to a trade agenda that benefits all Americans, and a reassessment of the WTO and its role is a key part of that agenda.”

The report argues that “the Appellate Body has added to U.S. obligations and diminished U.S. rights by failing to comply with WTO rules, addressing issues it has no authority to address, taking actions it has no authority to take, and interpreting WTO agreements in ways not envisioned by the WTO Members who entered into those agreements. This persistent overreaching is plainly contrary to the Appellate Body’s limited mandate, as set out in WTO rules.” The report offers numerous examples, including:

  • The Appellate Body consistently ignores mandatory deadlines for deciding appeals;
  • The Appellate Body allows individuals who have ceased to serve on the Appellate Body to continue deciding appeals as if their term had been extended by WTO members in the Dispute Settlement Body;
  • The Appellate Body makes findings on issues of fact, including issues of fact relating to WTO members’ domestic law, although members authorized it to address only legal issues;
  • The Appellate Body issues advisory opinions and otherwise opines on issues not necessary to assist the WTO Dispute Settlement Body in resolving the dispute before it;
  • The Appellate Body insists that dispute settlement panels treat prior Appellate Body interpretations as binding precedent;
  • The Appellate Body asserts that it may ignore WTO rules that explicitly mandate that it advise a WTO member to bring a WTO-inconsistent measure into compliance with WTO rules; and
  • The Appellate Body oversteps its authority and opines on matters within the authority of WTO members acting through the Ministerial Conference, General Council and Dispute Settlement Body.

The report also argues that the Appellate Body’s overreaching has “taken away rights and imposed new obligations” on WTO members through erroneous interpretations of WTO agreements. It has done so by attempting to fill in “gaps” in those agreements and “reading into them rights or obligations” to which the United States and other WTO members never agreed. Overall, the report states that these failings have had “dire consequences” for the United States and for all WTO members and that the WTO dispute settlement system continues to lose the credibility required to function properly and maintain public support.

Because the WTO Appellate Body – a seven-member panel – has only one member due to the United States’ blocking of new appointments to the panel since 2017, it is currently unable to render any decisions. The report concludes that concerns and complaints about the dispute settlement system and Appellate Body have been ignored for far too long: “Honest and candid dialogue about how and why the WTO arrived at the current situation is necessary if any reform is to be meaningful and long lasting. This will require WTO Members to engage in a deeper discussion of why the Appellate Body has felt free to depart from what Members agreed to. Without this understanding, there is no reason to believe that simply adopting new or additional text, in whatever form, will solve these endemic problems.”

The Office of the U.S. Trade Representative (USTR) has published a Federal Register notice approving exclusions from the Section 301 tariff for four imported Chinese products appearing on the first list/tranche of goods valued at $34 billion. The products are:

  • Centrifugal pumps, submersible, designed for use in artificial lift systems for extracting oil and gas (described in statistical reporting number 8413.70.2004);
  • Pistons and housings for hydraulic fluid power pumps of the type used in power lawn mowers (described in statistical reporting number 8413.91.9050 prior to January 1, 2019; described in statistical reporting number 8413.91.9060 effective January 1, 2019);
  • Furnace roll end-shafts of steel (described in statistical reporting number 8417.90.0000); and
  • Multi-phase AC motors of an output of at least 5.8 kW but not exceeding 14.92 kW, each assembled with planetary gears and a gearbox (described in statistical reporting number 8501.52.4000).

The product exclusions will apply retroactively to July 6, 2018 and will expire on October 2, 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.

China’s Ministry of Finance has announced that retaliatory tariffs it implemented on a range of U.S. goods in response to the U.S. government’s Section 301 tariffs will be reduced February 14, 2020 on certain products from 10 percent to 5 percent, and on others from 5 percent to 2.5 percent. China first implemented these retaliatory tariffs in May 2019 after trade negotiations faltered and the United States increased the tariff rates on imports of certain Chinese products. (See Trump and Trade Update of May 14, 2019.)

These Chinese tariff rate reductions will occur on the same date that the United States will reduce its tariff rate from 15 percent to 7.5 percent on $120 billion worth of goods imported from China (i.e., List/Tranche 4A) (see Trump and Trade Update of January 16, 2020). China also indicated that it would continue to apply any previously granted product exclusion requests, as well as continue to review previously submitted requests seeking exclusion from China’s tariffs. Trade officials from both China and the United States have indicated that any further tariff rate reductions or the removal of additional tariffs on products will depend upon progress in “Phase Two” trade negotiations between the countries.

Note to Readers: In linking to the Ministry of Finance’s announcement (and its several attachments), you will need to apply a text language translator.

On February 6, 2020, the Office of the U.S. Trade Representative (USTR) announced that the United States was initiating free trade agreement negotiations with the Republic of Kenya. The announcement came shortly after President Donald Trump met with Kenyan President Uhuru Kenyatta and after the third meeting of the U.S.-Kenya Trade and Investment Working Group, which was established in August 2018 in an effort to foster a stronger bilateral trade relationship. In a brief statement, USTR Robert Lighthizer said, “We believe this agreement with Kenya will complement Africa’s regional integration efforts, including in the East African Community and the landmark African Continental Free Trade Area (AfCFTA), and the United States pledges its continued support to help the AfCFTA achieve its fullest potential.” He added that a high-standard agreement with Kenya can serve as a model for additional agreements across Africa.

According to the USTR’s U.S.-Kenya Trade and Investment Relationship fact sheet, two-way trade in goods between the United States and Kenya was $1.1 billion in 2019, up 4.9% from 2018. After formally notifying Congress of its intent to negotiate the trade agreement with Kenya, the USTR will publish a notice in the Federal Register seeking public comment on the direction, focus and content of the trade negotiations. The USTR will then notify Congress of its objectives for the negotiations at least 30 days before trade negotiations begin.

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 April 18, 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 April 18, 2019) are scheduled to expire on April 18, 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 February 16 and March 16, 2020. All submissions must be made electronically via the www.regulations.gov portal on docket number USTR-2020-0002. 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 April 2019; no other extensions under any other product exclusion notices issued by the USTR will be considered.

In his State of the Union address to Congress last night, President Donald Trump spoke of the “great American comeback” and claimed that “[t]he years of economic decay are over.  The days of our country being used, taken advantage of, and even scorned by other nations are long behind us.” His prepared speech focused briefly on international trade issues, stating that new U.S. factories are under construction and “companies are not leaving; they are coming back to the USA.”

Explaining that “unfair trade is perhaps the single biggest reason that I decided to run for President,” Trump noted passage of the United States-Mexico-Canada Agreement (USMCA) into law, claiming that the agreement “will create nearly 100,000 new high-paying American auto jobs, and massively boost exports for our farmers, ranchers, and factory workers. It will also bring trade with Mexico and Canada to a much higher level, but also to be a much greater degree of fairness and reciprocity.” He added that USMCA is “the first major trade deal in many years to earn the strong backing of America’s labor unions.”

Trump spoke briefly about his promise to “impose tariffs to confront China’s massive theft of America’s jobs” after years of China exploiting the trade relationship. “Now we have changed that, but, at the same time, we have perhaps the best relationship we’ve ever had with China, including with President Xi. They respect what we’ve done because, quite frankly, they could never really believe that they were able to get away with what they were doing year after year, decade after decade, without someone in our country stepping up and saying, ‘That’s enough.’” He claimed that the recently signed “Phase One” trade agreement with China will “defend our workers, protect our intellectual property, bring billions and billions of dollars into our treasury, and open vast new markets for products made and grown right here in the USA.”

In his only other remarks on international relations, the president touched upon economic sanctions toward Cuba and Venezuela and his support of those countries’ citizens to restore democracy.  Trump stated that “my administration reversed the failing policies of the previous administration on Cuba” and that the United States is “leading a 59-nation diplomatic coalition against the socialist dictator of Venezuela, Nicolás Maduro.” Despite recent tensions with Iran and stalled talks with North Korea, Trump made no reference to how his administration may continue to address relations with these countries.

Shortly after the president’s address, the White House released a series of fact sheets on the various topics covered in his message, including “President Donald J. Trump is Fighting for Fairer Trade that Benefits American Workers.”

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 two 10-digit Harmonized Tariff Schedule (HTS) subheadings in their entirety and 117 specially-prepared product descriptions covering 156 separately-filed exclusion requests. The two HTS subheadings are 8425.31.0100 and 8708.93.7500, which involve electric motor winches and certain clutches and parts thereof. The specially-prepared product description exclusions include but are not limited to: various categories/types of imported fish and seafood products; certain silica, oxides, herbicides, and fertilizers; certain laundry detergent powder; types of “supported catalysts” for certain chemicals, carbonates, sulfides and oxides; certain biodegradable plastic bags; certain disposable gloves; certain polyester rugs and fabrics; certain types of rear-view mirrors; certain non-woven fiberglass and polyester composite panels; certain toilet paper holders of brass with chrome or nickel finish; certain items for use on recreational vehicles (RVs); certain industrial sewing machines for footwear; certain types of bath and shower faucets; certain water pressure balance valves; certain pressure regulating valves of brass; certain types of printed circuit boards; certain types of electrical adapters, plugs and extension cords; certain non-motorized bicycles and trailers for towing behind bicycles; certain kayaks of high-density polyethylene; certain upholstered seats and parts of seats consisting of fabric or leather; certain steel lockers, display racks or tables; certain bamboo furniture; certain luminaries with light-emitting diodes (LEDs); and, certain electric household table, floor and desk lamps.

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.