On May 20, 2019, the Department of Commerce’s Bureau of Industry and Security (BIS) issued a 90-day temporary general license that partially restored the export licensing requirements under the Export Administration Regulations (EAR) for exports, reexports and transfers (in-country) to Huawei Technologies Co., Ltd. and its 68 affiliates (Huawei), which were added to the Entity List on May 16, 2019 (see Trump and Trade Update of May 17, 2019). The temporary general license permits these activities:

  • Continued Operation of Existing Networks and Equipment, subject to other provisions of the EAR, necessary to maintain and support existing and currently fully operational networks and equipment, including software updates and patches, subject to legally binding contracts and agreements executed between Huawei and third parties on or before May 16, 2019.
  • Support to Existing Handsets, subject to other provisions of the EAR, necessary to provide service and support, including software updates or patches, to existing Huawei handsets that were available to the public on or before May 16, 2019.
  • Cybersecurity Research and Vulnerability Disclosure, subject to other provisions of the EAR, the disclosure to Huawei of information regarding security vulnerabilities in items owned, possessed or controlled by Huawei when related to the process of providing ongoing security research critical to maintaining the integrity and reliability of existing and currently fully operational networks and equipment, as well as handsets.
  • Engagement as Necessary for Development of 5G Standards by a Duly Recognized Standards Body, subject to other provisions of the EAR, engagement with Huawei as necessary for the development of 5G standards as part of a duly recognized international standards body (e.g., Institute of Electrical and Electronics Engineers (IEEE), Internet Engineering TaskForce (IETF), International Organization for Standards (ISO), International Telecommunications Union (ITU), European Telecommunications Standards Institute (ETSI), 3rd Generation Partnership Project (3GPP), Telecommunications Industry Association (TIA), and GSM Association (GSMA or Global System for Mobile Communications)).

If an export transaction satisfies these temporary general license conditions and is limited to one or more of these activities, then BIS’s licensing policy in effect before May 16, 2019, will be applied in any review of a license application; and the authority of “no license required” (NLR) or a license exception available before May 16 will be applicable. A certification statement, however, must be prepared by any exporter making an export shipment under this temporary general license. This statement must specify how the export, reexport or transfer meets the scope of the temporary general license and must be retained by the exporter.

The temporary general license is effective through August 19, 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. All other transactions not “explicitly authorized” in the temporary general license remain subject to the restrictions placed on Huawei due to its addition to the Entity List, and require a license with a BIS policy of “presumption of denial.”

On May 17, 2019, the United States, Canada and Mexico concluded an agreement in which the United States agreed to remove the Section 232 tariffs for steel and aluminum imports from those countries and Canada and Mexico agreed to remove all retaliatory tariffs imposed on U.S. goods. Accordingly, President Donald Trump issued proclamations declaring that the United States “has successfully concluded discussions with Canada and Mexico on satisfactory alternative means to address the threatened impairment of the national security posed by steel articles imports from Canada and Mexico. … These measures are expected to allow imports of steel articles from Canada and Mexico to remain stable at historical levels without meaningful increases, thus permitting the domestic industry’s capacity utilization to continue at approximately the target level recommended in the Secretary’s [Section 232] report. In my judgment, these measures will provide effective, long-term alternative means to address the contribution of these countries’ imports to the threatened impairment of the national security.”

The agreement provides that Canada and Mexico will implement measures to prevent the importation of steel and aluminum into the United States that is unfairly subsidized or sold at dumped prices, and also to prevent the transshipment into the United States of aluminum and steel made outside of Canada, Mexico or the United States. Canada and Mexico agreed to a process for monitoring and a mechanism to prevent surges in imports of steel and aluminum from their countries. If surges in imports of specific steel and aluminum products occur, the United States may re-impose Section 232 tariffs on those products. Any retaliation by Canada and Mexico would then be limited to steel and aluminum products. The countries will also terminate all pending disputes between them before the World Trade Organization (WTO) regarding the Section 232 tariffs.

The U.S. Trade Representative has released joint statements with Canada and Mexico regarding this resolution.

On May 16, 2019, President Donald Trump issued a proclamation reducing Section 232 tariffs on steel imports from Turkey from 50 percent to 25 percent, which had been in effect since August 2018 (see Trump and Trade Update of August 17, 2018). This tariff decrease will become effective May 21, 2019, at 12:01 a.m. Eastern time. In support of the decision, the president referenced the steep decrease in steel imports from Turkey (48 percent in 2018) and steel imports generally (12 percent in 2018), as well as the increased capacity utilization of the U.S. steel industry.

On the same day, Trump issued another presidential proclamation terminating as of May 17, 2019, Turkey’s designation as a beneficiary developing country under the Generalized System of Preferences (GSP) program. Turkey had been participating in the GSP program since 1975. In his decision to terminate Turkey’s designation, the president explained that Turkey’s level of economic development is high enough to be removed from the list of beneficiary countries. This decision follows the March 4, 2019, announcement of the U.S. Trade Representative (USTR) expressing the president’s intention to terminate Turkey’s designation due to the higher level of economic development of Turkey evidenced by “[a]n increase in Gross National Income (GNI) per capita, declining poverty rates, and export diversification, by trading partner and by sector” (see also Trump and Trade Update of March 5, 2019). Because of Turkey’s designation now as a developed country, Trump in the same proclamation announced that Turkey is no longer exempt from Section 201 safeguard measures and is now subject to Section 201 tariffs currently in place on imports of crystalline silicon photovoltaic cells and large residential washers.

President Donald Trump today announced that his administration would delay for six months any action on the determination of the Department of Commerce (Commerce) in the Section 232 national security investigation into imports of automobiles and automobile parts. This investigation under Section 232 of the Trade Expansion Act of 1962 was self-initiated by Commerce in June 2018 (see Trump and Trade Update of June 1, 2018) and, while a final report and determination was presented to the president on February 17, 2019, the report has not been made public.

Nevertheless, Trump issued a proclamation directing the U.S. Trade Representative to negotiate agreements with other countries to address “the national security threat, which is causing harm to the American automobile industry.” The proclamation states that the investigation concluded that imports of automobiles and certain automobile parts are “weakening our internal economy” and threaten to impair the national security. The proclamation notes that the Section 232 determination found that “automotive research and development (R&D) is critical to national security” and “increases in imports of automobiles and automobile parts, combined with other circumstances, have over the past three decades given foreign-owned producers a competitive advantage over American-owned producers.” Importantly, the president concluded that “United States defense and military superiority depend on the competitiveness of our automobile industry and the research and development that industry generates.” The proclamation states that if agreements are not concluded within 180 days, the president will determine whether and what further action must be taken, particularly as to protected foreign markets, such as those in the European Union and Japan.

The Federal Register notice filed by the Department of Commerce’s Bureau of Industry and Security (BIS) to be published on Tuesday, May 21, 2019, indicates that the U.S. government has added Huawei and 68 of its non-U.S. affiliates to the Entity List because BIS has found that “there is reasonable cause to believe that Huawei Technologies Co., Ltd. (Huawei) has been involved in activities determined to be contrary to the national security or foreign policy interests of the United States.” These Huawei affiliates are located in 26 destinations: Belgium, Bolivia, Brazil, Burma, Canada, Chile, China, Egypt, Germany, Hong Kong, Jamaica, Japan, Jordan, Lebanon, Madagascar, Netherlands, Oman, Pakistan, Paraguay, Qatar, Singapore, Sri Lanka, Switzerland, Taiwan, United Kingdom and Vietnam. According to the notice, these affiliates are also being added to the Entity List out of concern that Huawei would use these entities to evade the restrictions placed on it by its addition to the Entity List.

The Entity List identifies persons and companies reasonably believed by BIS to be involved, or pose a significant risk of being or becoming involved, in activities contrary to the national security or foreign policy interests of the United States. For Huawei and its 68 affiliates, BIS has now imposed a license requirement for all items subject to the Export Administration Regulations (EAR) and a license review policy of presumption of denial. Accordingly, any export, re-export from the United States or shipments involving U.S.-origin items or technology to Huawei or one of its 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,” a high threshold to overcome in the granting of any licenses. BIS has indicated that no license exceptions under the EAR will be available for Huawei-related exports.

While this notice is scheduled to be formally published in the Federal Register on May 21, 2019, it is effective as of May 16, 2019. Shipments, however, that were en route aboard a carrier to a port of export or re-export on May 16 may proceed to that destination under the previous eligibility for a License Exception or where no license was required.

President Donald J. Trump has issued an executive order, “Securing the Information and Communications Technology and Services Supply Chain,” that declares a national emergency as to the threats against information and communications technology and services in the United States. It delegates authority to the secretary of Commerce to prohibit transactions posing an unacceptable risk to the national security of the United States or the security and safety of U.S. persons. In a brief press statement, the White House noted, “The President has made it clear that this Administration will do what it takes to keep America safe and prosperous, and to protect America from foreign adversaries who are actively and increasingly creating and exploiting vulnerabilities in information and communications technology infrastructure and services in the United States.”

The executive order prohibits transactions that involve information and communications technology or services designed, developed, manufactured or supplied by persons owned by, controlled by or subject to the jurisdiction or direction of a foreign adversary whenever the secretary of Commerce determines that a transaction would pose a threat to national security. Any determination by the secretary of Commerce to prohibit such transactions will be based on consultations with other departments and agencies of the U.S. government. Commerce has announced that it will issue regulations within the next 150 days to establish procedures for reviewing these transactions. The executive order also requires the director of National Intelligence to prepare an assessment within the next 40 days on the risks to the United States and critical infrastructure systems “from information and communications technology or services designed, developed, manufactured, or supplied by persons owned by, controlled by, or subject to the jurisdiction or direction of a foreign adversary.” The secretary of Homeland Security must prepare an assessment within the next 80 days “evaluating vulnerabilities in hardware, software, and services that threaten the national security of the United States.”

In what is viewed as directly related to this executive order, the Department of Commerce announced that a forthcoming Federal Register notice will add China’s Huawei Technologies Co. Ltd. and its affiliates to the Entity List of the Bureau of Industry and Security (BIS). A Commerce press release states that “this action stems from information available to the Department that provides a reasonable basis to conclude that Huawei is engaged in activities that are contrary to U.S. national security or foreign policy interest. This information includes the activities alleged in the Department of Justice’s public superseding indictment of Huawei, including alleged violations of the International Emergency Economic Powers Act (IEEPA), conspiracy to violate IEEPA by providing prohibited financial services to Iran, and obstruction of justice in connection with the investigation of those alleged violations of U.S. sanctions.” Once a party is placed on the Entity List, any sale, export or transfer of controlled technology to such an entity by a U.S. person or company requires an export license from BIS, and in most instances, consideration of such an export license is processed under an overall agency “policy of denial.”

After trade negotiations between China and the United States faltered last week, China announced on May 13, 2019, that it would retaliate against the United States’ increase in Section 301 tariffs on certain Chinese products from 10 percent to 25 percent (see Trump and Trade Update of May 9, 2019). China’s Ministry of Finance announced that as of June 1, 2019, it will increase the tariffs on imports of U.S. goods valued at approximately $60 billion in response to the increase in tariffs implemented by the United States. While not adding goods to its list at this time, China will be increasing the tariffs it imposed on over 5,000 U.S. products on September 24, 2018 (see Trump and Trade Update of September 19, 2018). With the May 13 announcement, the Ministry of Finance indicated that on June 1, 2019, 2,493 U.S. products will now be subject to a 25 percent tariff; 1,078 products will be increased to a 20 percent tariff; and 974 products will be subject to a 10 percent tariff. A 5 percent tariff will remain in place on 595 U.S. products. (Note: All of the linked documents related to the announcement by China’s Ministry of Finance are in Chinese. As soon as English translations become available, they will be posted.)

In response, President Donald Trump and U.S. Trade Representative (USTR) Robert Lighthizer have begun the process of implementing tariffs on another $300 billion of imports of Chinese products, which would result in U.S. tariffs on virtually all imported goods from China. In remarks to reporters, Trump stated, “China has been taking advantage of the United States for many, many years.” This morning, the president tweeted, “China buys MUCH less from us than we buy from them, by almost 500 Billion Dollars, so we are in a fantastic position.”

Yesterday, Lighthizer began the process of potentially raising tariffs on all remaining imports from China by requesting comments from the public and scheduling a public hearing on the proposal. Public comments on this proposed action must be submitted to the USTR no later than June 17, 2019. Parties wishing to testify at the hearing on June 17, 2019, must submit a request to appear no later than June 10, 2019. Any rebuttal comments resulting from these filings and the hearing must be submitted by June 24, 2019. The USTR requests comments as to any aspect of the proposed action, including:

  • The specific tariff subheadings to be subject to increased duties, including whether the subheadings listed in the annex should be retained or removed, or whether subheadings not currently on the list should be added.
  • The level of the increase, if any, in the rate of duty.
  • The appropriate aggregate level of trade to be covered by additional duties.

The USTR requests that commenters address whether imposing increased duties on a particular product would be practicable or effective to obtain the elimination of China’s acts, policies and practices, and whether imposing additional duties on a particular product would cause disproportionate economic harm to U.S. interests, including small or medium-sized businesses and consumers. The docket number for this proceeding is USTR-2019-0004. The full proposed product list of Chinese goods that could be covered by this action is available here.

On March 7, 2019, Cambria Company LLC filed petitions on behalf of the domestic industry with the U.S. Department of Commerce (Commerce) and the U.S. International Trade Commission (Commission) seeking antidumping and countervailing duties on imports of certain quartz surface products from India and Turkey. According to the petitions, quartz surface product imports from these two countries are being sold at less than fair value in the United States and receive countervailable subsidies, causing material injury and threatening further material injury to the U.S. industry if duties are not imposed.

The covered quartz surface products consist of:

Slabs and other surfaces created from a mixture of materials that includes predominately silica (e.g., quartz, quartz powder, cristobalite, glass powder) as well as a resin binder (e.g., an unsaturated polyester). The incorporation of other materials, including, but not limited to, pigments, cement or other additives does not remove the merchandise from the scope of the investigation. However, the scope of the investigation only includes products where the silica content is greater than any other single material, by actual weight. Quartz surface products are typically sold as rectangular slabs with a total surface area of approximately 45 to 60 square feet and a nominal thickness of one, two or three centimeters. However, the scope of this investigation includes surface products of all other sizes, thicknesses and shapes. In addition to slabs, the scope of this investigation includes, but is not limited to, other surfaces such as countertops, backsplashes, vanity tops, bar tops, work tops, tabletops, flooring, wall facing, shower surrounds, fire place surrounds, mantels and tiles. Certain quartz surface products are covered by the investigation whether polished or unpolished, cut or uncut, fabricated or not fabricated, cured or uncured, edged or not edged, finished or unfinished, thermoformed or not thermoformed, packaged or unpackaged, and regardless of the type of surface finish.

In addition, quartz surface products are covered by the investigation whether or not they are imported attached to, or in conjunction with, non-subject merchandise such as sinks, sink bowls, vanities, cabinets and furniture. If quartz surface products are imported attached to, or in conjunction with, such non-subject merchandise, only the quartz surface product is covered by the scope.

The petitions note that covered quartz surface products include material matching the scope description that has been finished, packaged or otherwise fabricated in a third country, including by cutting, polishing, curing, edging, thermoforming, attaching to or packaging with another product, or any other finishing, packaging or fabrication that would not otherwise remove the merchandise from the scope of the investigation if performed in the country of manufacture of the quartz surface products. The products subject to the scope are currently classified in the Harmonized Tariff Schedule of the United States (HTSUS) under the subheading 6810.99.0010. Subject merchandise may also enter under subheadings 6810.11.0010, 6810.11.0070, 6810.19.1200, 6810.19.1400, 6810.19.5000, 6810.91.0000, 6810.99.0080, 6815.99.4070, 2506.10.0010, 2506.10.0050, 2506.20.0010, 2506.20.0080 and 7016.90.10.

The scope of the proposed investigation does not cover quarried stone surface products, such as granite, marble, soapstone or quartzite. Specifically excluded from the scope of the investigations are certain crushed glass surface products.

According to the petitions, imports of the covered quartz surface products have doubled from 2017 to 2018 in volume (from 7,146,422 to 14,675,372 square feet), and nearly doubled in value (from $62,159,496 to $106,062,082). In the petitions, Cambria Company LLC states that it has not yet identified any specific examples of lost sales and revenues due to these imports from India and Turkey but that there should be evidence of such losses at the distributor and fabricator level. As a result, the petitioner claims that unfairly priced quartz surface product imports are having direct, significant adverse effects on the domestic industry, such as price suppression, resulting in lost sales and lost revenue to the U.S. industry.

Regarding countervailable subsidies, the petitions allege that the Indian producers receive subsidies for “Export Oriented Units,” the Export Promotion of Capital Goods Scheme, special financing for exports and participation in Special Economic Zones. For Turkish producers, the alleged subsidies include preferential tax treatment for revenue earned on export sales, numerous preferential credit programs for export sales and preferential loans for investments in export-oriented businesses.

The petitions identify numerous alleged Indian and Turkish producers and exports of the covered products to the United States at allegedly dumped and subsidized prices. The petitions also identify known U.S. importers of the covered quartz surface products from India and Turkey.

Commerce will determine by May 28, 2019, whether to formally initiate the antidumping investigation and countervailing duty investigation and, if Commerce does, the Commission will decide 25 days thereafter whether there is a reasonable indication of existing material injury or threat of material injury to the domestic industry that will require continuation of the investigation.

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

On the same day that the Office of the U.S. Trade Representative (USTR) raised the Section 301 tariff rate to 25 percent on imports from China valued at $200 billion that had been subject to a 10 percent tariff rate since September 24, 2018, the USTR also announced its fourth batch of products to be excluded from the Section 301 tariffs entirely. These approved exclusions are established in two different formats: (1) as a full exclusion for an existing 10-digit Harmonized Tariff Schedule of the United States (HTSUS) subheading, or (2) as a partial exclusion under an HTSUS subheading and further defined in specially prepared product descriptions. The approvals cover 515 exclusion requests, including five 10-digit HTSUS subheadings and 35 specially prepared product descriptions.

Generally, the approved exclusions cover certain push-button switches; stereoscopic microscopes; adapter rings, tubes, sleeves, assemblies and other items for use with optical microscopes; ultra violet or infrared LED light therapy devices; certain remote control devices for use with model cars and aircraft, pet collars or garage doors; coils, coil assemblies and other parts of electromagnets; certain AC/DC electric motors of limited outputs; numerous parts and products under HTSUS 8481.90.9040 for use in hydraulic solenoid control valves; machinery for mixing or reconstituting beverages for human consumption; vibrating or roller conveyors; certain dust collection and air purification machinery and equipment; certain water filtering, purifying or distillation machinery; certain marine propulsion outboard motor engines; rider-type, counterbalanced fork-lift trucks; certain printed circuit assemblies for ATMs; certain pressure reducing valves; and grooved pulleys.

These product exclusions will apply as of the July 6, 2018, effective date of the $34 billion Section 301 trade action, which had assessed a 25 percent tariff on these items, and will extend for one year after the publication of this notice. U.S. Customs and Border Protection will shortly issue instructions on entry guidance, implementation of these exclusions and refund procedures.

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