Evelyn Suarez will be a presenter in the upcoming WIT-LA Webinar The Ties the Bind: U.S., Mexico & Canada. The focus will be on the USMCA, formerly known as NAFTA, and ways to move forward following the negotiations. This webinar is open to WIT Members and Guests. More information, including a registration link, below.
How the Trump Administration’s Trade Policy affects your international business and what you can do about it?
The Trump Administration’s aim of remaking global trade is fully underway. White House officials describe their new approach as “bold, creative and disruptive.” Over the past year, we have witnessed the imposition of tariffs not only against imports from China but also against steel and aluminum from our traditional allies (Canada, Mexico, the European Union (EU) and Japan) based upon national security grounds. At the same time, Customs & Border Protection (CBP) is asking more questions at the border about what exactly is being imported, where it comes from and how much it costs. For CBP, details matter. CBP is also focusing on goods that might be covered by anti-dumping or countervailing (AD/CVD) duties. CBP inquiries come in the form of a Request for Information (Customs Form 28).
Our trading partners have not taken the imposition of tariffs against their countries lightly and have imposed retaliatory tariffs. This has led to the tit-for-tat trade war, regularly covered by mainstream press, which affects not only U.S. importers but U.S. exporters.
At the same time, the Administration has modified the Korea-U.S. Free Trade Agreement (KORUS) and finalized the renegotiation of NAFTA (now called the United States-Mexico-Canada Agreement (USMCA)). USMCA has yet to be approved by the U.S. Congress, a necessary step for the agreement to become the law of the land. The Administration has also notified Congress of its intent under Trade Promotion Authority (TPA) to negotiate agreements with Japan, the EU and the United Kingdom. It is certainly welcome news that the Administration intends to negotiate market access opening agreements.
So how does this affect your business?
- Tariffs and Quotas: If you import goods or are a U.S. manufacturer that purchases imported goods you may be facing higher costs because of hefty tariffs of as much as 25%. If you are an exporter, you might find yourself facing unexpected tariffs in the country you are exporting to. Farmers have been hit especially hard by retaliation.
- Steel and Aluminum Tariffs
On March 8, 2018, the President issued two proclamations, under his authority under the Trade Expansion Act of 1962 to protect the national security, on steel and aluminum products, imposing tariffs in the amount of 25% and 10% respectively. The tariffs continue for steel products for all countries except for Argentina, Brazil and South Korea (covered by quotas) and for aluminum products for all countries except for Argentina (covered by quotas). Australia is not covered by either tariffs or quotas. For the time being, the tariffs remain for Canada and Mexico even though USMCA has been renegotiated. There is a product exclusion process administered by the U.S. Department of Commerce Bureau of Industry & Security (BIS).
There are other national security investigations pending that could lead to more tariffs, most notably regarding automobiles and auto parts, but also on uranium and titanium sponge.
- Tariffs on Chinese Imports
As a result of an investigation under Section 301 of the Trade Act of 1974 into China’s unfair trade policies and practices primarily relating to intellectual property and forced technology transfers, tariffs on $50 billion worth of goods are subject to a 25% ad valorem duty. A third tranche of goods in the amount of $200 billion are now subject to a 10% ad valorem duty. Whether the duties on the $200 billion will be increased to 25% depends upon the ongoing negotiations between China and the U.S. Product exclusions were considered for the first two tranches totaling $50 billion and the process for those imports is now closed. At the current time, there is no process for product exclusion for the $200 billion despite pressure by some in Congress.
- Steel and Aluminum Tariffs
- More enforcement by CBP at the border
CBP is charged with enforcement of these policies and collection of the revenue. As a result, you may be getting more questions about what you are importing, where it comes from and how much it costs. CBP might also ask questions regarding compliance with other U.S. government agency requirements, such as CPSC, FCC, USDA, FDA. These are often complicated questions resting on customs and other government agency laws. If you get a Form 28, it is likely that CBP thinks that there has been a mistake, or even worse – an intentional deception – in the importation of the imported product. Companies receiving such inquiries are well-advised to consult with an experienced customs attorney. There are a variety of ways of mitigating penalties, which the customs attorney can advise on. CBP may even be mistaken in its belief that there has been an infraction.
So what are some of the ways to mitigate the pain of these trade policies and increased enforcement at the border?
- Examine your supply chains and make changes if possible.
- Review your tariff classifications.
- Make sure you are declaring the correct country of origin for your product. Value chains are complicated but so are rules of origin.
- Review how your international transactions are structured. You may be able to take advantage of a lower value by use of the “first sale” rule. This is complicated.
- Make sure your product really qualifies for any preferential tariff treatment claimed under free trade agreements or preferential programs, such as GSP, AGOA etc.
- There is a fine line between “tariff engineering” and what can be considered customs fraud so great care must be taken in making these changes which often also trigger questions by CBP.
- For steel and aluminum tariffs, there is a product exclusion process. Take advantage of it.
- The steel and aluminum tariffs are being challenged in court and at the World Trade Organization. Learn how you can preserve your rights in the event these challenges are successful.
- In the future, there may be a product exclusion process for the third tranche of $200 billion worth of Chinese imports imposed under Section 301.
- Avoid surprises that cost money. Make sure your product is not subject to an AD/CVD order.
- Ask for a scope ruling if you think your product is wrongfully caught by an AD/CVD order.
- Evaluate the use of duty deferral programs (FTZ’s, bonded warehouse, duty drawback, TIBs).
- For the future consider contract terms that allow adjustments for unexpected costs as a result of sudden increases in tariffs.
- Consider what to do if your competitor is not paying the extra duties.
- Keep your Congressional delegation informed as to the impact of these policies on your business.
- Last but not least, stay informed. In the past year, there have been many costly changes but there have also been opportunities to mitigate such costs.
Section 301 Tariff List
Summary: In response to an investigation surrounding China’s failure to protect intellectual property and forced technology transfers, the Office of the United States Trade Representative (USTR) announced on April 3, 2018, its list of products for imposition of a proposed 25 percent ad valorem duty. The list, covering 1,300 tariff lines, is intended to be applied to about $50 billion worth of Chinese goods said to benefit from Beijing’s “made in China 2025” industrial policy. The list, which is provided in the Notice of Determination and Request for Public Comment in Resource # 1 below, covers a broad range of products including semiconductors, engines, agricultural and textile machinery, batteries, tires, “industrial robots,” medical products and instruments used in aeronautical and space navigation.
China’s cabinet, the State Council, immediately announced that China will retaliate with tariffs covering 105 categories of products affecting $50 billion of Chinese imports of U.S. products to match the U.S. proposal. Beijing has targeted the largest American exports – including sorghum and beef – but has also targeted products in the U.S. Farm Belt as well as autos and airplanes.
Neither the U.S. nor Chinese tariffs take effect immediately. Chinese officials said that they are watching how the U.S. implements its program.
Comments and Opportunity to be heard: USTR has announced that public comments on the recommended tariffs are due May 11. The Section 301 Committee will hold a public hearing on May 15. Post-hearing comments are due May 22.
If you import a product on the list, you may wish to submit comments and/ or even testify at a public hearing. Even if you are indirectly affected by the tariffs, you may wish to comment or testify. The tariffs could make equipment and inputs that you rely upon more expensive.
- Notice of Determination and Request for Public Comment Concerning Proposed Determination of Action Pursuant to Section 301: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation – https://www.wsj.com/public/resources/documents/USTRlistofproducts04032018.pdf
- S. Trade Representative Report “Findings of the Investigation Into China’s Acts, Policies and Practices Related to Technology Transfer, Intellectual Property, and Innovation under Section 301 of the Trade Act of 1974 – https://ustr.gov/sites/default/files/Section%20301%20FINAL.PDF
- Section 301 Fact Sheet – https://ustr.gov/sites/default/files/USTR%20301%20Fact%20Sheet.pdf
Evelyn Suarez Speaks at U.S. Trade Policy Panel on WTO Participation and Potential Violation
Evelyn Suarez spoke at the U.S. Trade Policy Panel on WTO Participation and Potential Violation, presented by the International Trade and Investment Law Society. The panel discussion took place on April 2, 2018, at the American University Washington College of Law in Washington, DC.
The program description reads:
Featuring experienced trade negotiators and WTO litigators to speak on both domestic and international impact of the recent tariffs on Steel and Aluminum, Section 301 investigation against China on intellectual property, Canada’s WTO challenge on US trade rule book; more generally, the legal implication of US trade policy, and new direction of Free Trade Agreement under the WTO.
Moderator: Patrick Macrory, Director, International Trade Law Center at International Law Institute; Partner, Appleton Luff
Warren H. Maruyama, Partner, Hogan Lovells
James R. Cannon, Jr., Partner, Cassidy Levy Kent
Evelyn M. Suarez, The Suarez Firm
Vanessa P. Sciarra, Vice President for Legal Affairs and Trade & Investment Policy, National Foreign Trade Council (NFTC)
Steel Exclusion Requests
Who can file? Only individuals or organizations operating in the United States that use steel products (e.g., flat, long, semi-finished, pipe and tube, and stainless) in business activities (e.g., construction, manufacturing, supplying steel products to users) in the United States may submit an Exclusion Request.
Reasons for exclusions:
- Product is not produced in the United States in;
- a sufficient and reasonably available amount or
- a satisfactory quality
- Product needed to support a specific U.S. national security requirement (e.g, critical infrastructure or national defense systems)
Requirements: must contain information on
- Single type of steel product it requires using a 10-digit HTSUS code, including its specific dimension. A separate Exclusion request must be submitted on each distinct type and dimension of steel product to be imported.
- The quantity of product requirement (stated in kilograms) under a one-year exclusion
- A full description of the properties of the steel product it seeks to import, including chemical composition, dimensions, strength, toughness, ductility, magnetic permeability, surface finish, coatings, and other relevant data
Reasons for rejection
- Does not sufficiently address the specified reporting requirements
- Cites the improper HTSUS code
- Provides incorrect product descriptions
Where filed: Upload request to www.regulations.gov under Docket Number BIS-2018-0006
When: Any time
Processing time: Approximately 90 days
Notifications: Posted on www.regulations.gov
For further information contact: firstname.lastname@example.org or by phone at 202.482.5642
Questions: Given the fluid situation as to coverage and exclusions, you may have questions regarding the announced steel and aluminum tariffs. Should you have any questions, please contact Evelyn Suarez at email@example.com or 202.552.0310.
For the full post on the steel and aluminum tariffs, please see: