The Office of the U.S. Trade Representative (USTR) is holding a public hearing today regarding its ongoing Section 301 Investigation of France’s Digital Services Tax (DST) (see Trump and Trade Update of July 11, 2019). The French DST law imposes a 3% tax on annual revenues generated by companies that provide certain digital services to, or aimed at, French users. The tax applies only to companies with annual revenues from the covered services of at least €750 million globally and €25 million in France. As President Donald Trump has noted, the services covered are ones where U.S. firms are global leaders. The list of the witnesses appearing to testify is available on USTR’s website.
In a Federal Register notice published on August 21, the Department of Commerce’s Bureau of Industry and Security (BIS) announced that it has added 46 non-U.S. affiliates of Huawei Technologies Co., Ltd. (Huawei) to the Entity List because they “pose a significant risk of involvement in activities contrary to the national security or foreign policy interests of the United States.” This is in addition to the 68 Huawei entities listed in May 2019 (see Trump and Trade Update of May 17, 2019); similarly, BIS has imposed a license requirement for all items subject to the Export Administration Regulations (EAR) for exports to these Huawei entities. Any export/reexport from the United States or shipments involving U.S.-origin items or technology to Huawei or any of these listed affiliates will require an export license from BIS; while these license applications will be reviewed by the agency on a case-by-case basis, the review will be conducted under a “presumption of denial.”
The additions (and certain modifications/clarifications made to the original list of 68 entities) affect affiliates of Huawei in 25 different countries: Argentina, Australia, Bahrain, Belarus, Belgium, Brazil, People’s Republic of China, Costa Rica, Cuba, Denmark, France, India, Indonesia, Italy, Kazakhstan, Mexico, New Zealand, Panama, Portugal, Romania, Russia, South Africa, Sweden, Thailand and the United Kingdom. BIS stated that “without the imposition of a license requirement to these affiliated entities, there is reasonable cause to believe that Huawei would seek to use them to evade the restrictions imposed by its addition to the Entity List.”
In addition to these Entity List additions, BIS announced via Federal Register notice that it has extended the temporary general license it issued in May 2019 (see Trump and Trade Update of May 21, 2019) that partially continued the availability of exports under the Export Administration Regulations (EAR) for exports, reexports and transfers (in-country) to Huawei Technologies Co., Ltd. and its affiliates. The temporary general license has been extended through November 18, 2019, and does not relieve parties of other obligations under the EAR as to other licensing requirements for exports to the People’s Republic of China. For U.S. persons currently exporting to Huawei entities under the temporary general license, a review of this extension is highly recommended. In addition to the extension of another 90 days, BIS has made several clarifications as to authorized transactions under the license to improve “public understanding of the intended scope of the temporary general license.” BIS also highlights that the Entity List does not create a license requirement for imports, including imports from entities on the Entity List. The agency notes that Entity List-based license requirements do not apply to services, “provided the service in question does not involve the export, reexport, or transfer (in-country) of items that are subject to the EAR.” When providing a service, however, a U.S. person must determine if there will be an export of any physical items, software or technology requiring license authorization.
The Department of Commerce’s International Trade Administration (Commerce or ITA) has announced the self-initiation of inquiries into possible circumvention involving exports of certain corrosion-resistant steel products (CORE) made with substrate from China or Taiwan, completed in Costa Rica, Guatemala, Malaysia, South Africa and the United Arab Emirates (UAE), and then exported to the United States. In undertaking these inquiries, ITA will determine whether imports of CORE completed in each of these countries using Chinese-origin substrate, or imports of CORE completed in Malaysia using Taiwanese-origin substrate, are circumventing the antidumping duty (AD) and countervailing duty (CVD) orders on CORE from China or the AD order on CORE from Taiwan.
AD/CVD circumvention inquiries are typically initiated in response to allegations made by the U.S. industry. However, Commerce’s regulations allow for a self-initiated inquiry when ITA determines from available information that an inquiry is warranted. In its announcement, Commerce noted that this is the first time it has self-initiated circumvention inquiries “based on its own monitoring of trade patterns, and the first self-initiation of multi-country circumvention inquiries.” ITA data indicate that imports of CORE from these countries into the United States increased in value by 29,210 percent (Costa Rica), 35,944 percent (Guatemala), 151,216 percent (Malaysia), 629 percent (South Africa) and 5,571 percent (UAE) over a 45-month period before and after the initiations of the original AD/CVD investigations on Chinese and Taiwanese CORE in 2016.
If ITA preliminarily determines that circumvention is occurring, Customs and Border Protection (CBP) will be instructed to begin collecting cash deposits on imports of CORE completed in these countries using Chinese-origin or Taiwanese-origin substrate. These duties would be imposed on future imports, and on any unliquidated entries since the date Commerce initiated these circumvention inquiries.
The U.S. Trade Representative (USTR) released a press statement announcing the list of imports from China that will face a Section 301 10 percent tariff (see also Trump and Trade Update of May 14, 2019). Implementation of the tariff on approximately $300 billion worth of Chinese products will occur in two phases. For most products, the tariff will go into effect on September 1, 2019, as announced by President Donald Trump on August 1, 2019 (see Trump and Trade Update of August 1, 2019). The USTR determined, however, that certain products should be spared the tariff until December 15, 2019. In its statement, the USTR announced that certain products have been removed from the tariff list based on health, safety, national security and other factors and will not be assessed the 10 percent tariff.
List 4A (additional tariffs as of September 1, 2019) includes but is not limited to the following broad categories of products imported from China: certain live animals; various forms of animal carcasses and meat cuts; certain milk, butter, yogurt and creams; certain fats and oils; certain cheeses; certain flower bulbs, trees, plants and shrubs; certain vegetables, fruits and nuts; certain coffee and teas; certain spices and extracts; certain prepared meats; certain sugars, powders and syrups; certain mixes for bakers wares; certain pastas and cereals; certain forms of ice cream and edible ice; certain forms of wine, brandy, whiskies, rum and other alcoholic beverages; certain tobacco products; various organic chemicals and essential oils; certain plastic and rubber articles; certain rawhides and animal skins; certain printed books, newspapers, pictures and other products of the printing industry; various woven and knitted fabrics; certain items of men’s/boys’ and women’s/girls’ and baby clothing; numerous types of gloves, mittens, shawls and scarves; certain bed linens and bedspreads; certain items of footwear; certain cutlery, ceramic and glassware items for household table or kitchen purposes; certain natural or cultured pearls, precious or semi-precious stones, precious metals; certain articles made of iron or steel; certain alloy or nonalloy steel; certain items made from aluminum, and other articles made of base metal; certain boilers, machinery and mechanical appliances; certain electrical machinery and equipment; certain sound recorders, loudspeakers and recording and video devices; certain televisions, video monitors and projectors; certain motorcycles; tanks and warships; contact lenses and certain corrective eyewear and sunglasses; certain cameras; various wristwatches and clocks; certain wind, stringed, keyboard, percussion and other musical instruments; military weapons; certain sporting good articles for hockey, lacrosse, baseball, badminton and fishing; and certain pens and pencils.
List 4B (additional tariffs as of December 15, 2019) includes but is not limited to the following broad categories of products imported from China: certain food products; certain organic chemicals; cell phones, laptop computers, video game consoles; certain toys; computer monitors; certain items of footwear; certain items of men’s/boys’ and women’s/girls’ clothing; certain pet toys; certain paper products; certain woven and knitted fabrics; numerous types of gloves, mittens, shawls and scarves; fireworks; certain bed linens and bedspreads; various umbrellas; certain cutlery, ceramic and glassware items for household table or kitchen purposes; copying machines; flashlights; certain radio broadcast receivers; certain cameras and projectors; various types of clocks and watches; certain string musical instruments; certain infant chairs and booster seats; certain play yards for children; certain articles for Christmas festivities; certain sporting good articles for hockey, baseball, badminton and fishing; and certain toiletry and hair products.
There are products with similar descriptions covered under each list. Only by reviewing and comparing the appropriate HTS subheading and product description will U.S. importers be able to determine which list covers an imported Chinese product.
The USTR will soon publish in the Federal Register additional details and lists of the tariff lines affected by today’s announcement. The USTR confirmed that it intends to conduct an exclusion request process for products subject to this 10 percent tariff but has not announced when it will begin.
President Trump yesterday signed an executive order imposing additional sanctions on the Venezuelan government. The order, “Blocking Property of the Government of Venezuela,” blocks all property and interests in property of the Venezuelan government within the jurisdiction of the United States. It authorizes the secretary of Treasury, in consultation with the secretary of State, to block all property and interests in property of the persons who have been determined to have “materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of” the Venezuelan government, or any person acting directly or indirectly for it. This action also restricts the entry of sanctioned persons into the United States.
As support for this action, Trump’s order referenced the “continued usurpation of power by Nicolas Maduro and persons affiliated with him, as well as human rights abuses, including arbitrary or unlawful arrest and detention of Venezuelan citizens, interference with freedom of expression, including for members of the media, and ongoing attempts to undermine Interim President Juan Guaidó and the Venezuelan National Assembly’s exercise of legitimate authority in Venezuela.” In a statement released today, the White House noted that “[t]his Executive Order directly targets those who undermine either the democratically elected National Assembly of Venezuela or Interim President Juan Guaidó.”
The U.S. Department of the Treasury announced yesterday that Secretary of the Treasury Steven Mnuchin is designating China as a “currency manipulator,” stating that “China has taken concrete steps to devalue its currency, while maintaining substantial foreign exchange reserves despite active use of such tools in the past. The context of these actions and the implausibility of China’s market stability rationale confirm that the purpose of China’s currency devaluation is to gain an unfair competitive advantage in international trade.” Mnuchin’s move follows the decision of the People’s Bank of China (PBOC) to allow the yuan, also known as the renminbi, to fall to its lowest level in more than a decade. The PBOC’s decision is perceived as a response to President Donald Trump’s tweet last week stating that products on the yet-to-be finalized List 4 of imports from China valued at $300 billion will be assessed a 10 percent tariff starting September 1 (see Trump and Trade Update of August 1).
The Omnibus Trade and Competitiveness Act of 1988 directs the Treasury secretary to “consider whether countries manipulate the rate of exchange between their currency and the United States dollar for purposes of preventing effective balance of payments adjustments or gaining unfair competitive advantage in international trade.” In a recent Treasury report submitted to Congress, it noted “China’s long history of facilitating an undervalued currency through protracted, large-scale intervention in the foreign exchange market.” Under the Trade Facilitation and Trade Enforcement Act of 2015, the actions the president may take include engaging with the International Monetary Fund “for additional rigorous surveillance” of China’s macroeconomic and exchange rate policies, prohibiting the Overseas Private Investment Corporation from financing projects in China, and prohibiting the federal government from entering into procurement contracts with Chinese companies. These remedial actions, however, may only be taken “one year after the commencement of enhanced bilateral engagement.” This decision may influence the U.S. Department of Commerce to adopt a proposed rule to treat currency manipulation and undervaluation as countervailable subsidies in trade remedy cases (see Trump and Trade Update of May 24).
On August 2, 2019, the Office of the U.S. Trade Representative (USTR) issued its first batch of Section 301 product exclusions for imported Chinese products appearing on List 3. These products, which have an annual trade value of approximately $200 billion, have been subject to Section 301 tariffs since September 24, 2018. The USTR determined that 10 specific products will be excluded from the tariffs, covering 15 separate exclusion requests: (1) certain container units of plastics; (2) certain injection molded polypropylene plastic caps or lids; (3) certain kayak paddles; (4) high tenacity polyester yarn not over 600 decitex; (5) certain nonwovens; (6) pet cages of steel; (7) certain carts used for household shopping; (8) certain truck trailer skirt brackets; (9) certain inflatable boats; and (10) certain inflatable kayaks and canoes.
These exclusions were issued shortly after the USTR established in its June 24 Federal Register notice a product exclusion process for List 3 products covered by Section 301 tariffs (see Trump and Trade Update of June 20). The exclusions apply to any product that satisfies the description in the annex of the August 2 notice, regardless of whether the company using the exclusion filed the request. The exclusions apply retroactively to September 24, 2018, and will extend for one year after publication of the August 2 notice. 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.
It has not been officially announced yet, but President Donald Trump tweeted today (see below) that products on the yet-to-be-finalized Tranche/List 4 of imports from China valued at $300 billion will be assessed a 10 percent tariff starting September 1. While noting that this week’s trade negotiations between the U.S. and Chinese governments were constructive after faltering in May 2019 (see Trump and Trade Update of May 14, 2019), the president stated that China has yet to purchase any agricultural products and has not made any effort to reduce its sales of fentanyl, which China had agreed to do in June during a meeting on the sidelines of the Group of 20 summit in Japan. It appears that the president will now instruct USTR Robert Lighthizer to implement this 10 percent tariff under Section 301 of the Trade Act of 1974.
…buy agricultural product from the U.S. in large quantities, but did not do so. Additionally, my friend President Xi said that he would stop the sale of Fentanyl to the United States – this never happened, and many Americans continue to die! Trade talks are continuing, and…
— Donald J. Trump (@realDonaldTrump) August 1, 2019
…We look forward to continuing our positive dialogue with China on a comprehensive Trade Deal, and feel that the future between our two countries will be a very bright one!
— Donald J. Trump (@realDonaldTrump) August 1, 2019
Trump and Trade will continue to monitor and report on this latest development in the U.S.-China trade war.
On July 30, 2019, JSW Steel (USA), Inc. (JSW) filed a complaint against the United States and, specifically, the Department of Commerce (Department) for denying its product exclusion requests for certain steel imports that otherwise are subject to a 25 percent tariff under President Donald Trump’s March 2018 proclamation implementing such tariffs under Section 232 of the Trade Expansion Act of 1962. The complaint seeks declaratory relief from the U.S. Court of International Trade (CIT) determining that the Department’s denial of JSW’s product exclusion requests was arbitrary and capricious, and that the requests should have been granted and ordering the Department to provide JSW a refund of any tariffs paid. Alternatively, JSW asks that the matter be remanded to the Department for proper review and consideration.
While other complaints have been filed at the U.S. Court of International Trade concerning the Trump administration’s Section 232 actions (see Trump and Trade Update dated March 25, 2019), they have unsuccessfully challenged the president’s application of the Section 232 national security provisions to steel imports. Instead, this complaint challenges the administrative process and manner in which the Department’s Bureau of Industry and Security (BIS) reviews product exclusion requests and denied JSW’s request.
The complaint alleges, among other issues, that the BIS “ignored record evidence establishing that the steel slab JSW USA imports is not presently available in the U.S. market, and instead issued the same boilerplate denial to each and every one of JSW USA’s exclusion requests.” In doing so, the complaint alleges, the BIS “yielded to the objections of three competitive domestic steel producers – United States Steel Corporation, AK Steel Corporation, and Nucor Corporation …” and “undertook no effort to verify their claims, ignored the conclusive evidence that these companies are unable to produce the subject products in the required quality or quantity, and failed even to offer any reasoned basis for its decisions.” The resulting denial of JSW’s product exclusion request was arbitrary and capricious or otherwise unlawful in violation of the Administrative Procedures Act, the complaint claims. JSW alleges that the president’s proclamation and the Department’s regulations concerning the review and processing of Section 232 exclusion requests “direct” that an exclusion be granted “for imported steel products that are not immediately available in sufficient quality and quantity in the United States.” JSW references the implementing rule for the Section 232 steel tariffs and exclusion request process in which the term “immediately” means whether the product is currently produced or could be produced “within eight weeks” in the United States in order to support its position that the volumes needed by the domestic steel user described in the exclusion request cannot be satisfied unless the request is granted. Arguing that the Department’s rule places the burden on an objector to show that it can produce a “substitute product” within the requisite timeframe, JSW alleges that the three objectors simply filed blanket objections with no meaningful supporting evidence that they could in fact produce the identified steel products in “a sufficient and reasonably available amount.”
The case is JSW Steel (USA), Inc. v. United States, Court No. 19-00133, before the U.S. Court of International Trade.
The Office of the U.S. Trade Representative released today its first batch of product exclusions for List 2 of the Section 301 tariffs on imports from China valued at $16 billion. List 2 products were assessed a 25 percent tariff as of August 23, 2018. This batch of exclusions covers 69 specially prepared product descriptions, resulting from 292 separate exclusion requests. These product descriptions include: numerous polyethylene-based chemicals, film, sheets and products; certain polyol blends; polyvinyl chloride film; spark-ignition rotary or reciprocating internal combustion piston engines to be installed in agricultural or horticultural machinery or equipment, 4,476 W or more but not more than 37.6 kW; certain gas or propane engines; heat guns; apparatus capable of generating and projecting liquid particles of a size that simulates haze, fog, snow or bubbles; oral irrigators (dental water-jet machines); certain electric motors and related parts; amorphous silicon solar charges; certain motorcycles; digital clinical thermometers; cooking and infrared thermometers; and fingertip pulse oximeters.
As noted by the USTR in past approval notices, these exclusions are available for any product that meets the description in the annex to the related Federal Register notice, regardless of whether the importer filed an exclusion request. The scope of each exclusion is governed by the scope of the product descriptions in the annex and is not governed by the product description set out in any particular request for an exclusion.
These product exclusions will apply as of August 23, 2018, and will extend for one year after the publication of this notice in the Federal Register. U.S. Customs and Border Protection will shortly issue instructions on entry guidance, implementation of these exclusions and refund procedures.