Since publication of yesterday’s update (see Trump Administration Increases Section 301 Import Tariff on Third Tranche of Chinese Products from 10% to 25%), questions have been raised as to whether the tariff increase affects shipments from China in process, or “on the water.” The USTR has indicated that products of China that are covered and “that were exported to the United States prior to May 10, 2019, are not subject to the additional duty of 25 percent, as long as such products are entered into the United States prior to June 1, 2019. Such products remain subject to the additional duty of 10 percent for this interim period.” Further, on May 10, 2019, U.S. Customs and Border Protection posted a message indicating that:

  • For subject goods entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. Eastern time May 10, 2019, and exported to the United States on or after May 10, 2019, report the following HTS numbers and duty rates:
    • HTS: 9903.88.03 and 9903.88.04
    • Duty Rate: 25 percent
  • For subject goods entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. Eastern time May 10, 2019, and before June 1, 2019, and exported to the United States before May 10, 2019, report the following HTS number and duty rate:
    • HTS: 9903.88.09
    • Duty Rate: 10 percent

President Donald Trump has announced further action against Iran by imposing sanctions on its iron, steel, aluminum and copper sectors, the country’s largest non-petroleum-related sources of export revenue. In an executive order, the president implemented blocking sanctions on any person determined by the secretary of the Treasury, in consultation with the secretary of State, to be operating in these industry sectors of Iran, or to be a person that owns, controls or operates an entity that is a part of these sectors. The sanctions will apply to persons and entities knowingly engaging in a significant transaction for the sale, supply or transfer to Iran of significant goods or services used in connection with the iron, steel, aluminum or copper sectors of Iran, or knowingly engaging in a significant transaction for the purchase, acquisition, sale, transport or marketing of iron, iron products, aluminum, aluminum products, steel, steel products, copper or copper products from Iran. These terms are not defined in the executive order, and the Department of the Treasury’s Office of Foreign Assets Control has not defined them in a list of FAQs concerning these new sanctions.

Persons currently engaged in transactions involving these industry sectors of Iran will have 90 days from May 8, 2019, to wind down all operations and transactions without being subject to these sanctions. The executive order also authorizes sanctions on correspondent and payable-through accounts on foreign financial institutions, which further tightens secondary sanctions on non-U.S. persons and their ability to conduct business in Iran without exposure to U.S. jurisdiction.

With this action, the Trump administration has now imposed (or re-imposed) sanctions on Iran’s top three exports – oil, petrochemicals and metals. In a brief statement, Trump said that this “action targets Iran’s revenue from the export of industrial metals—10 percent of its export economy—and puts other nations on notice that allowing Iranian steel and other metals into your ports will no longer be tolerated.” He added that “Tehran can expect further actions unless it fundamentally alters its conduct.”

On the eve of the first anniversary of the United States withdrawing from the Joint Comprehensive Plan of Action (JCPOA) (see Trump and Trade Update dated May 8, 2018), the Islamic Republic of Iran announced that it “has shown considerable restraint in the past one year after the illegal withdrawal of the United States from the JCPOA and violations of United Nations Security Council resolutions.” In a statement from its Supreme National Security Council, Iran noted that the parties remaining in the JCPOA since the U.S. withdrawal have not established any mechanisms “to compensate for US sanctions” and that it has no option other than “reducing commitments.”

Iran has indicated that it may not continue to commit to limits imposed on its retention of enriched uranium and heavy water reserves. The statement indicates that the remaining JCPOA countries “will be given sixty days to fulfill their obligations, especially in banking and oil fields. If they fail to meet Iran’s demands in the time given, then the Islamic Republic of Iran will suspend compliance with the uranium enrichment limits and measures to modernise the Arak Heavy Water Reactor.”

In response to Iran’s announcement, the U.S. Department of State issued a press statement on President Trump’s New Iran Strategy, indicating that one year after withdrawing from the JCPOA, “President Trump has made good on his promise to counter Iran in a comprehensive campaign of maximum pressure.” It notes that Iran’s announcement it intends to expand its nuclear program “is in defiance of international norms and a blatant attempt to hold the world hostage. Its threat to renew nuclear work that could shorten the time to develop a nuclear weapon underscores the continuing challenge the Iranian regime poses to peace and security worldwide.”

Today, the Office of the U.S. Trade Representative (USTR) formally published a notice in the Federal Register confirming what President Donald Trump tweeted out last Sunday: U.S. imports of Chinese products, valued at $200 billion, that have been subject to a Section 301 10 percent tariff since September 24, 2018, will face a 25 percent tariff starting at 12:01 a.m. Friday, May 10, 2019 (see Trump and Trade Update of May 6, 2019).

The current 10 percent duty rate had been originally scheduled to increase to 25 percent on January 1, 2019; however, Trump on several occasions postponed the increase while trade negotiations with China continued. In the past week, USTR Robert Lighthizer indicated that China was retreating from specific commitments made in earlier rounds of talks. As noted in today’s Federal Register notice, “In light of the lack of progress in discussions with China, the President has directed the Trade Representative to increase the rate of additional duty to 25 percent.” The list of products included in this third tranche of tariffs implemented on Chinese products can be found here. China’s Ministry of Commerce has indicated that it will retaliate but did not specify how or when.

Today’s Federal Register notice also confirms that the USTR is in the process of implementing an exclusion request process for the products covered by this tariff increase, including the procedures for submitting requests and an opportunity for interested persons to oppose them.

Just days after it became publicly known that U.S. Trade Representative (USTR) Robert Lighthizer was preparing to implement an exclusion request process for the third tranche of imported Chinese products valued at $200 billion and subject to a 10 percent tariff under Section 301 of the Trade Act of 1974 (see Trump and Trade Update of May 3, 2019), President Donald Trump on May 5, 2019, tweeted that those same tariffs would soon increase to 25 percent.

As these tweets read, the president not only intends to raise the tariff level to 25 percent by Friday, May 10, 2019, but also is considering a 25 percent tariff on imports from China valued at $325 billion – essentially placing a tariff on all products imported from China into the United States.

While TrumpandTrade.com is not in the habit of posting updates based solely on the president’s tweets (nothing has been formally posted on the White House or USTR websites), we deemed this development to be newsworthy. It appears that no one else in the Trump administration was aware that such an announcement would be made on the eve of a scheduled Chinese trade delegation visit to Washington, D.C. this week to continue negotiations to end the “trade war”; and Lighthizer and Treasury Secretary Steven Mnuchin have reported that such discussions were close to concluding. It now remains to be seen whether Trump’s negotiating strategy of threatening to raise the tariff and implement further tariffs will exert more pressure on China and lead to a favorable conclusion of negotiations, or result in China retaliating.

In February 2019, U.S. Trade Representative (USTR) Robert Lighthizer testified before the House Ways & Means Committee regarding U.S.-China trade issues (see Trump and Trade Update of February 28, 2019). During the hearing, Lighthizer testified that an exclusion request process would be instituted on the third tranche of imported Chinese products subject to a 10 percent tariff since September 24, 2018, only if that tariff were increased to 25 percent. Despite Congress’s instruction in the recent appropriations law funding the federal government through September that such an exclusion request process be implemented (see Trump and Trade update of February 19, 2019), the Office of the USTR reiterated that it would only institute such a process if the tariffs were raised to 25 percent.

The USTR’s response was not well-received by many members of the committee, and in follow-up written responses to questions raised at the February hearing, and now published by the Ways & Means Committee, Lighthizer stated that “Members of Congress believe that we should have an exclusion process for List 3. For this reason, we have begun preparations to launch a process by the end of the month.” To date, however, the Section 301 web page on the USTR’s website contains no such exclusion process and no notice has been published in the Federal Register. Trump and Trade continues to monitor this situation and will report further once USTR provides an official notice.

The U.S. International Trade Commission (USITC) has released its report assessing the likely impact of the United States-Mexico-Canada Agreement (USMCA) on the U.S. economy as a whole and on specific industry sectors and the interests of U.S. consumers. The report, United States-Mexico-Canada Agreement: Likely Impact on the U.S. Economy and Specific Industry Sectors (Investigation No. TPA-105-003, USITC Publication 4889, April 2019), was prepared at the request of the U.S. Trade Representative (USTR) and required by the Bipartisan Congressional Trade Priorities and Accountability Act of 2015.

In preparing its report, the USITC investigated the USMCA’s expected impact on the U.S. gross domestic product; exports and imports; aggregate employment and employment opportunities; and the production, employment and competitive position of industries likely to be significantly affected by the agreement. On its website, the USITC listed these main findings:

  • The elements of the USMCA that would have the most significant effects on the U.S. economy are: (1) provisions that reduce policy uncertainty about digital trade; and (2) certain new rules of origin applicable to the automotive sector. The report also notes that for many industry sectors, particularly services industries, the USMCA’s new international data transfer provisions should be of interest, including provisions that largely prohibit forced localization of computing facilities and restrictions on cross-border data flows.
  • Because NAFTA has already eliminated duties on most qualifying goods and significantly reduced nontariff measures, the USMCA’s emphasis is on reducing remaining nontariff measures on trade and the U.S. economy; addressing other issues that affect trade, such as workers’ rights; harmonizing regulations from country to country; and deterring certain potential future trade and investment barriers.
  • The USMCA would strengthen and add complexity to the rules of origin requirements in the automotive sector by increasing regional value content (RVC) requirements. The USMCA’s requirements on this matter are estimated to increase U.S. production of automotive parts and employment in the sector but also to lead to a small increase in the prices and small decrease in the consumption of vehicles in the United States.
  • The USMCA would establish commitments to open flows of data, which would positively impact a wide range of industries that rely on international data transfers. The agreement would reduce the scope of the investor-state dispute settlement (ISDS) mechanism, a change that, based on modeling results, would reduce U.S. investment in Mexico and would lead to a small increase in U.S. investment at home and output in the manufacturing and mining sectors.
  • Labor standards and rights would be strengthened, if enforced under the USMCA, including those related to collective bargaining in Mexico, which would promote higher wages and better labor conditions in that country.
  • New intellectual property rights provisions would increase protections for U.S. firms that rely on intellectual property.

Continue Reading U.S. International Trade Commission Releases Report on the Likely Impact of the United States-Mexico-Canada Agreement

The Office of the U.S. Trade Representative has released another list of products that have been granted exclusions from the Section 301 tariffs on imported goods from China, granting exemptions in response to 348 separate exclusion requests for products that meet 21 specially prepared product descriptions. The exclusions cover a wide range of products, including certain pumps, roller machines, water oxidizers/chlorinators, ratchet winches, elevators and conveyors, goods used on forklifts and other work trucks, parts of drill sharpening machines, outer shells, parts of mechanical awnings and shades, parts of shredders, steering wheels for watercrafts, pressure regulators, pipe brackets for air brake control valves, push pins and C-poles for solenoid valves, ball bearings, inductor baseplates, parts of soldering irons and soldering machines, motor vehicle gear shift switch assemblies, pressure switches for heat pumps and air-conditioning condensers, instruments to measure or check voltage or electrical connections.

These exclusions will apply to any product meeting the description in the annex of the notice, regardless of whether the importer filed an exclusion request. The scope of each exclusion is governed by the scope of the 10-digit Harmonized Tariff Schedule of the United States (HTSUS) headings and product descriptions in the annex; they are not governed by the product description set out in any particular exclusion request. These exclusions apply as of July 6, 2018, which was the implementation date for the tariffs implemented by the president toward imported Chinese products worth $34 billion, and will extend for one year from the date of this notice in the Federal Register (to April 18, 2020). U.S. Customs and Border Protection (CBP) will issue instructions on entry guidance and implementation.

In a series of actions on April 17, the Trump administration announced the implementation of additional sanctions on the “Troika of Tyranny” in the Western Hemisphere (see Trump and Trade Update of November 16, 2018). President Donald J. Trump and his National Security Advisor John Bolton have long held that Cuba, Venezuela and Nicaragua are the cause of great human suffering and the impetus of enormous regional instability, and have increasingly focused the administration’s attention on these three countries. In announcing these additional sanctions, Trump said in a brief press statement that “When Venezuela is free, and Cuba is free, and Nicaragua is free, this will become the first free hemisphere in all of human history.”

In remarks to the press, Secretary of State Mike Pompeo announced that under Title III of the Cuban Liberty and Democratic Solidarity Act (also known as Libertad), U.S. citizens who had their property confiscated by the Castro regime will now be able to file suit against those who traffic in such properties, effective May 2, 2019. While this provision of Libertad has been in place since 1996, all previous presidential administrations had suspended this provision. Pompeo stated that “Implementing Title III in full means a chance at justice for Cuban Americans who have long sought relief for Fidel Castro and his lackeys seizing property without compensation. For the first time, claimants will be able to bring lawsuits against persons trafficking in property that was confiscated by the Cuban regime. Any person or company doing business in Cuba should heed this announcement.” He further advised that companies doing business in Cuba investigate whether they are connected “to property stolen in service of a failed communist experiment.” Assistant Secretary for Western Hemisphere Affairs Kimberly Breier took questions during this State Department briefing, which focused on the concerns of European and Canadian companies that could be affected by any such lawsuits. Canada and the European Union released a joint statement noting their “strong opposition to the extraterritorial application of unilateral Cuba-related measures that are contrary to international law.”

National Security Advisor Bolton noted in a speech that the United States would also be re-imposing limits on the amounts of money that Cuban Americans can send to relatives on the island, as well as the frequency of transactions, and ordering new restrictions on travel to Cuba by U.S. citizens.

Regarding Venezuela, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) placed the Banco Central de Venezuela (i.e., the Central Bank of Venezuela) on the Specially Designated Nationals (SDN) List, for operating in the financial sector of the Venezuelan economy. Treasury Secretary Steven Mnuchin stated that this action was being taken in order “to prevent it from being used as a tool of the illegitimate Maduro regime, which continues to plunder Venezuelan assets and exploit government institutions to enrich corrupt insiders.” As a result of this action, all property and interests in property of the bank, and any entity that is owned, directly or indirectly, 50 percent or more by the bank that are in the United States or in the possession or control of U.S. persons are blocked and must be reported to OFAC. Further, OFAC’s regulations generally prohibit all dealings by U.S. persons that involve the Central Bank of Venezuela. OFAC did note that it has issued amendments to current Venezuela-related general licenses and issued new general licenses, “which include authorizations to ensure that U.S. persons may continue to engage in and facilitate non-commercial, personal remittances and the provision of humanitarian assistance to the people of Venezuela.”

Rounding out the Trump administration’s tightening of sanctions on the “Troika of Tyranny,” OFAC also placed Laureano Ortega Murillo, the son of Nicaraguan President Daniel Ortega and Vice President Rosario Murillo, on the SDN List, as well as Nicaraguan bank Banco Corporativo SA (BanCorp). Sigal Mandelker, Under Secretary of the Treasury for Terrorism and Financial Intelligence stated that, “Treasury is sanctioning Laureano Ortega Murillo and BanCorp for their roles in corruption and money laundering for the personal gain of the Ortega regime.”

On April 10, 2019, the Coalition for Fair Trade in Ceramic Tile (Coalition) filed petitions with the U.S. Department of Commerce (Commerce) and the U.S. International Trade Commission (Commission) seeking antidumping (ADD) and countervailing (CVD) duties on imports of ceramic tile products from the People’s Republic of China (PRC). The Coalition consists of U.S. ceramic tile producers American Wonder Porcelain, Florida Tile, Inc., Crossville, Inc., Florim USA, Dal-Tile Corporation, Landmark Ceramics, Del Conca USA, Inc. and StonePeak Ceramics (all members of the Tile Council of North America). According to the Coalition, “a surge of imports of ceramic tile from the PRC has entered the United States at aggressively low and unfair prices” and has benefited from PRC government subsidies.

Ceramic tile products are articles containing a mixture of minerals including clay (generally hydrous silicates of alumina or magnesium) that are treated to develop a fired bond. The products the Coalition seeks to include in the scope of the investigations include ceramic flooring and wall tile, countertop tile, paving tile, hearth tile, porcelain tile, mosaic cubes, finishing tile and the like, whether it is glazed or unglazed, is or is not on a backing, regardless of the water absorption coefficient by weight, regardless of the extent of vitrification, and regardless of end use, size, thickness and weight. The Coalition states that ceramic tile products enter the United States under Harmonized Tariff Schedule of the United States (HTSUS) subheadings 6907.21.10.05, 6907.21.10.11, 6907.21.10.51, 6907.21.20.00, 6907.21.30.00, 6907.21.40.00, 6907.21.90.11, 6907.21.90.51, 6907.22.10.05, 6907.22.10.11, 6907.22.10.51, 6907.22.20.00, 6907.22.30.00, 6907.22.40.00, 6907.22.90.11, 6907.22.90.51, 6907.23.10.05, 6907.23.10.11, 6907.23.10.51, 6907.23.20.00, 6907.23.30.00, 6907.23.40.00, 6907.23.90.11, 6907.23.90.51, 6907.30.10.05, 6907.30.10.11, 6907.30.10.51, 6907.30.20.00, 6907.30.30.00, 6907.30.40.00, 6907.30.90.11, 6907.30.90.51, 6907.40.10.05, 6907.40.10.11, 6907.40.10.51, 6907.40.20.00, 6907.40.30.00, 6907.40.40.00, 6907.40.90.11, 6907.40.90.51. The product may also enter the United States under HTSUS subheadings 6914.10.80.00, 6914.90.80.00, 6905.10.00.00 and 6905.90.00.50. The scope excludes ceramic bricks properly classified under HTSUS 6904.10.00.10 through 6904.90.00.00.

Products covered would also include ceramic tile produced in the PRC that undergoes minor processing in a third country before importation into the United States, as well as ceramic tile produced in the PRC that undergoes minor processing after importation into the United States. Such minor processing includes, but is not limited to, one or more of the following: beveling, cutting, trimming, staining, painting, polishing, finishing, or any other processing that would otherwise not remove the ceramic tile from the proposed scope of the investigation if performed in the PRC of the in-scope product.

According to the Coalition, ceramic tile imports from the PRC during the 2016-2018 period increased 18.6 percent while keeping a flat average unit value during that period. In providing historical context for the growth in imports from the PRC, the Coalition states that imports of ceramic tile from the PRC were less than 300 million square feet in 2009 but had risen to nearly 700 million square feet by 2018. As a result, the Coalition claims that subsidized and unfairly priced ceramic tile imports from the PRC are having significant, negative price effects causing lost sales and lost revenue to the domestic industry. The Coalition argues that the imports threaten even more harm in the absence of any relief due to the massive production capacity of PRC producers and the many export-oriented subsidy programs offered by the PRC government.

The petition lists a large number of foreign producers and exporters that shipped ceramic tile products to the United States at allegedly dumped and subsidized prices from the PRC, as well as U.S. importers of those products.

Commerce will determine by April 30, 2019, whether to formally initiate the investigations and, if Commerce does, the Commission will decide within 25 days after that whether there is a reasonable indication of existing material injury or threat of material injury to the ceramic tile domestic products industry that will require continuation of the investigations.

Thompson Hine is monitoring this matter closely. For additional information or to obtain a copy of the petitions, please contact us.