On February 19, 2019, the Coalition for Acetone Fair Trade (Coalition) filed a petition with the U.S. Department of Commerce (Commerce) and the U.S. International Trade Commission (Commission) seeking antidumping duties (ADD) on imports of acetone from Belgium, Korea, Saudi Arabia, Singapore, South Africa and Spain. The Coalition consists of U.S. acetone producers AdvanSix Inc., Altivia Petrochemicals, LLC and Olin Corporation. According to the Coalition, acetone imports from these countries are being sold at less than fair value in the United States – with the U.S. market in a state of “significant oversupply” – and causing material injury and threatening further material injury to the domestic industry if ADD are not imposed.

Acetone, also known as propan-2-one, β-ketopropane (or “beta-ketopropane”), ketone propane, methyl ketone, dimethyl ketone, DMK, dimethyl carbonyl, propanone, 2-propanone, dimethyl formaldehyde, pyroacetic acid, pyroacetic ether and pyroactic sprit, is an isomer of the chemical formula C3H6O, with a specific molecular formula of CH3COCH3 or (CH3)2CO. Acetone is a solvent for fats, oils, waxes, resins, rubber, plastics, lacquers, varnishes and rubber cements. It is used in the manufacture of coatings, plastics, pharmaceuticals and cosmetics, as well as in the production of other solvents and intermediates. The Coalition states that acetone enters the United States under Harmonized Tariff Schedule of the United States (HTSUS) subheadings 2914.11.1000 and 2914.11.5000. The Chemical Abstracts Service (CAS) registry number for acetone is 67-64-1. The proposed scope of the petition also includes acetone that is combined or mixed with other products, including, but not limited to, benzene, diethyl ether, methanol, chloroform and ethanol. For such combined products, the petition states that only the acetone component would be covered by the scope of the investigation.

According to the Coalition, of total U.S. imports from December 2017 to November 2018, acetone imports from these countries represented 26.8 percent from Belgium, 38.6 percent from Korea, 4.7 percent from Saudi Arabia, 4.9 percent from Singapore, 10.8 percent from South Africa and 11.3 percent from Spain. The Coalition claims that imports of acetone from these countries increased 61 percent from 2016 to 2017 and that imports for 2018 represented a 64 percent increase over 2017. As a result, the Coalition claims that unfairly priced acetone imports are having significant, negative price effects resulting in lost sales and revenue to the domestic industry.

The petition lists both a large number of foreign producers and exporters that shipped acetone products to the United States at allegedly dumped prices from these countries as well as the U.S. importers of those products.

Commerce will determine by March 11, 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 domestic acetone 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 February 15, 2019, President Trump signed the Consolidated Appropriations Act, 2019 (Act) that fully funds the government for the remainder of the fiscal year ending on September 30, 2019. With Congress and the president agreeing on these appropriations, a second partial government shutdown was averted. Included in the Act is a provision authorizing additional funding for the Department of Commerce’s Bureau of Industry and Security (BIS) to support the Section 232 steel and aluminum product exclusion request process. $4.55 million in funding has been designated through September 30, 2019 for contractor support for the review and processing of the overwhelming number of product exclusion requests that have been filed in these investigations. Further, in the explanatory statement accompanying the Act, BIS will now be required to provide quarterly reports to relevant congressional committees providing updates on the implementation of the exclusion process. These reports must include:

  1. the number of exclusion requests received;
  2. the number of exclusion requests approved and denied;
  3. the status of efforts to assist small- and medium-sized businesses in navigating the exclusion process;
  4. department-wide staffing levels for the exclusion process, including information on any staff detailed to complete this task; and
  5. department-wide funding by source appropriation and object class for costs undertaken to process the exclusions.

While the Office of the U.S. Trade Representative (USTR) received no additional funding in the Act for its review and processing of the Section 301 China-related tariff exclusion request process, the explanatory statement requires USTR to initiate an exclusion request process for the third round of tariffs implemented on September 24, 2018 involving $200 billion in Chinese products imported into the United States (see Trump and Trade Update of September 19, 2018). In stating that “[i]t is concerning that there is no exclusion process for goods subject to tariffs in round 3 of the Section 301 proceedings, as was done in the first two rounds,” Congress notified USTR to “establish an exclusion process” for these tariffs within 30 days of enactment of this Act (i.e., by March 17, 2019). Congress instructed USTR to follow the same procedures established for the exclusion request process of the prior two lists of China tariffs. USTR is also required to consult with relevant congressional committees concerning the nature and timing of this exclusion process and the status of the process.

Key Notes:

  • President Trump’s recent executive order merely “encourages” use of goods, products and materials produced in the United States, rather than requires such use.
  • Financial assistance programs are targeted.
  • Each agency administering covered programs is required to respond to the president by May 31, 2019 on areas where Buy American principles can be maximized.
  • Stakeholders should monitor developments.

On January 31, 2019, President Donald Trump issued Executive Order 13858, “Strengthening Buy-American Preferences for Infrastructure Projects.” In the opening policy statement, the order seeks to “maximize, consistent with law, the use of goods, products, and materials produced in the United States, in Federal procurements and through the terms and conditions of Federal financial assistance awards.” During a January 31 press conference, Trump stated, “We want American roads, bridges, and railways, and everything else to be built with American iron, American steel, American concrete, and American hands … By signing this order today, we renew our commitment to an essential truth: It matters where something is made, and it matters very greatly.”

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On February 1, 2019, the American Institute of Steel Construction, LLC (AISC) filed a petition with the U.S. Department of Commerce (Commerce) and the U.S. International Trade Commission (Commission) seeking antidumping duties (ADD) and countervailing (CVD) duties on imports of fabricated structural steel (FSS) products from Canada, Mexico and the People’s Republic of China. FSS products are steel products that have been fabricated for assembly or installation into a structure and are intended to provide structural support and to ensure that a structure can bear certain loads or weight. According to the AISC, FSS imports from these countries have been dumped and subsidized, capturing U.S. market share directly from the domestic industry, which is represented by the AISC, causing material injury and threatening to cause further material injury to the domestic industry if ADD and CVD are not imposed.

FSS products covered in the petition include angles, columns, beams, plates, hollow structural shapes, channels and other steel products that have been fabricated into articles suitable for erection or assembly into a variety of structures (e.g., buildings, industrial and utility projects, parking decks, arenas and convention centers, medical facilities and ports, transportation and infrastructure facilities). Typical fabrication processes include cutting, drilling, welding, joining, bolting, bending, punching, pressure fitting, molding, adhesion and other finishing processes. The targeted FSS products are imported under Harmonized Tariff Schedule of the United States (HTSUS) subheadings 7308.90.9590, 7308.90.3000, 7308.90.6000, 7216.91.0010, 7216.91.0090, 7216.99.0010, 7216.99.0090, 7228.70.6000, 7301.10.0000, 7301.20.1000, 7301.20.5000, 7308.40.0000, 7308.90.9530 and 9406.90.00300.

The AISC is claiming injury from these alleged unfairly priced and subsidized imports, stating that “between 2015 and 2017, and throughout 2018,” FSS imports surged into the United States and captured market share at the direct expense of the domestic industry. These imports from Canada, China and Mexico allegedly entered the U.S. market in such large and increasing quantities by offering prices well below those of domestically produced FSS, forcing domestic producers to lower prices and leaving them in a vulnerable position. The AISC alleges these FSS imports surged into the U.S. market, increasing by more than 20 percent despite an increase in apparent domestic consumption of only 7.9 percent. As a result, the AISC argues in its petition that these FSS imports increased their market share, growing from 18.5 percent in 2015 to 20.4 percent in 2017. The petition also alleges substantial government subsidies, including provision of major inputs for less than adequate remuneration, tax reductions and exemptions, preferential loans, grants, preferential tax rates and export financing.

The petition lists a large number of foreign producers and exporters that shipped FSS products to the United States at allegedly dumped and subsidized prices from these three countries and the U.S. importers of those products.

Commerce will determine by March 1 whether to formally initiate the investigations and, if it 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 FSS 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.

In his second State of the Union address to Congress, President Donald Trump noted that he campaigned on several core promises, including “to defend American jobs and demand fair trade for American workers.” He argued that his administration has “moved with urgency and historic speed to confront problems neglected by leaders of both parties over many decades” and indicated that “one priority is paramount – reversing decades of calamitous trade policies.”

His prepared speech included comments on the ongoing trade dispute with China and the Section 301 tariffs imposed on $250 billion worth of imported Chinese products. He noted that his administration continues to work on a new trade deal with China, but that any final agreement “must include real, structural change to end unfair trade practices, reduce our chronic trade deficit, and protect American jobs.” On the other major trade issue of 2018, the president called NAFTA an “historic trade blunder” and “catastrophe” that has now been addressed by the new United States-Mexico-Canada Agreement (USMCA). Trump called on Congress to pass the agreement in order to “bring … back our manufacturing jobs, [expand] American agriculture, [protect] intellectual property, and ensur[e] that more cars are proudly stamped with four beautiful words: made in the USA.”

In his only other significant remarks on trade, the president asked Congress to pass the United State Reciprocal Trade Act, arguing that the United States should be able to issue “the exact same tariff on the same product that they sell to us” if another country places an unfair tariff on a U.S. product. See also Trump and Trade Update of January 25 for more details on this act and other recently introduced trade- and tariff-related legislation.

Concerning economic sanctions and relations with certain “rogue” countries, the president announced that he will meet again with Kim Jong-un, Supreme Leader of North Korea, on February 26-27, 2019, in Vietnam, acknowledging that “much work remains to be done.” Trump highlighted his administration’s recent decision to officially recognized the legitimate government of Venezuela and its new interim president, Juan Guaidó. President Trump noted that he has “acted decisively to confront the world’s leading state sponsor of terror: the radical regime in Iran” and “put in place the toughest sanctions ever imposed on a country” after withdrawing from the “disastrous Iran nuclear deal.”

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 Has Forged New Trade Agreements to Revitalize American Industry and Agriculture.”

The U.S. Trade Representative (USTR) is required by law to report annually to Congress on compliance by the People’s Republic of China (China) and the Russian Federation (Russia) with commitments made in connection with their accession to the World Trade Organization (WTO), including both multilateral commitments and any bilateral commitments made to the United States. In releasing the reports on February 5, 2019, the USTR stated, “China and Russia present unique and serious challenges for members of the WTO and the multilateral trading system, largely because of their failure to embrace the pursuit of open, market-oriented policies.” China became a member of the WTO in 2001 – see 2018 China WTO Compliance Report; Russia joined the WTO in 2012 – see 2018 Russia WTO Compliance Report.

China Report – In Part 1 of the report that provides an assessment of China’s WTO membership, the USTR states that China’s compliance with WTO rules is “poor” and highlights the country’s “continued embrace of a state-led, mercantilist approach to the economy and trade, despite WTO members’ expectations – and China’s own representations – that China would transform its economy and pursue the open, market-oriented policies endorsed by the WTO.” The report notes China’s failure to adhere to multiple bilateral and multilateral commitments, including commitments to refrain from forcible technology transfers; open its electronic payment services market; and review applications of agricultural biotechnology products in a timely and science-based manner. The report also notes China’s continuing use of export and import substitution subsidies in sectors as diverse as automobiles, textiles, advanced materials, medical products and agriculture, despite explicit prohibitions in the WTO Agreement. It highlights that China repeatedly deploys illegal export restraints, such as export quotas, export licensing, minimum export prices, export duties and other restrictions, to “provide substantial cost advantages to a wide range of downstream producers in China at the expense of foreign producers, while creating pressure on foreign producers to move their operations, technologies and jobs to China.” In the report, the USTR finds that “[a]ny review of China’s trade regime also shows that China’s regulatory system is so opaque that it is often difficult for U.S. companies – or even the U.S. government – to fully understand China’s legal requirements in a particular area of the economy. This problem is exacerbated by China’s extremely poor record of adhering to its transparency obligations as a WTO member.” Part 2 of the report provides a detailed analysis of China’s trade regime from a WTO perspective, including identifying and explaining China’s policies and practices that disadvantage or harm U.S. companies.

Russia Report – This report states that “the United States and others welcomed Russia into the WTO’s rules-based system with the hope of expanding the benefits of open and freely competitive markets. The reality has been disappointing.” It notes that U.S. trade with Russia has fluctuated since Russia’s WTO admission in 2012, and criticizes the continued promulgation of Russia’s protectionist measures and disregard of general WTO principles. While the report indicates that Russia has implemented its scheduled tariff reductions and lifted its transit ban on poultry products, importing into the country remains “a difficult task.” Non-tariff trade barriers remain an issue of concern, and Russia continues to have “a less than transparent customs legal regime” and other “arbitrary behind-the-border measures and other discriminatory practices to exclude U.S. exports.” While Russia strengthened its intellectual property rights (IPR) regime as part of its WTO accession, the report indicates that “reliable and effective implementation of those rules has stalled.” Overall, the USTR concludes that “[d]espite Russia’s continued reliance on inward-looking, protectionist economic policies, the United States will continue to press Russia to comply with its WTO commitments and pursue market-based principles. But, at the end of the day, Russia must decide its future and take responsibility for its actions and the impact of those actions on its citizens.”

The Congressional Research Service (CRS), a nonpartisan staff to congressional committees and Members of Congress, has released an overview report, International Trade and Finance: Overview and Issues for the 116th Congress, in which it offers a brief review of President Donald Trump’s first two years in office and policy issues that the new 116th Congress may address. The policy issues include: the impact of trade and trade agreements on the U.S. economy; the causes and consequences of the U.S. trade deficit; the implications of technological developments for U.S. trade policy; and the intersection of economics and national security.

The report acknowledges that the president has focused his trade policy on “reevaluating many U.S. international trade and economic policies and relationships.” The report also notes that members of Congress “exert significant influence over U.S. economic and trade policy and its implementation through their legislative, appropriations, and oversight roles” and that “[g]iven current debates, fundamental questions about the future direction of trade and international economic issues may be key areas of interest for the 116th Congress.” Some of the trade issues discussed in the report are:

  • Tariff Actions Undertaken by the Trump Administration – summarizing imposed and/or increased tariffs under: (1) Section 201 of the Trade Act of 1974 on U.S. imports of washing machines and solar products; (2) Section 232 of the Trade Expansion Act of 1962 on U.S. imports of steel and aluminum, and potentially autos, auto parts and uranium; and (3) Section 301 of the Trade Act of 1974 on U.S. imports from China; and retaliatory tariffs implemented by other countries.
  • U.S.-China Trade and Key Issues – summarizing China’s economic rise and increasing U.S. tensions over various economic and trade issues “stemming largely from China’s incomplete transition to an open-market economy,” including: (1) China’s industrial policies and Made in China 2025 initiative; (2) China’s policies on technology, innovation, and intellectual property and its economic espionage; and (3) China’s Belt and Road Initiative.
  • U.S. Bilateral and Regional Trade Agreements and Negotiations – summarizing a number of trade actions and negotiations the Trump administration has undertaken concerning free trade agreements, including: (1) the U.S.-Mexico-Canada Agreement (USMCA); (2) modifications to the U.S.-South Korea (KORUS) free trade agreement; (3) ongoing U.S.-European Union trade negotiations; (4) U.S.-Japan trade negotiations; and (5) the call for launching U.S.-United Kingdom free trade agreement negotiations.
  • The World Trade Organization – summarizing the state of affairs and growing challenges facing the World Trade Organization (WTO) and calls for reforms of its functions, including: (1) the lack of any modernization of its rules since 1995 despite numerous multilateral and plurilateral negotiations; (2) the entrenched differences in priorities among leading emerging market economies, developing countries and advanced economies; and (3) skepticism over the WTO’s dispute settlement system.

In addition to these high-profile trade matters, the CRS report also provides details on more general trade issues such as intellectual property rights, labor and environmental conditions in trade agreements, and select U.S. import policies. It concludes with an overview of foreign direct investment in the United States and a review of international financial institutions and markets relied upon to discuss and coordinate economic policies.

International trade matters, at times, dominated the 2018 political landscape. Those of us at Trump and Trade expect 2019 to be no different. While the CRS report offers a broad overview of the policy debates that remain, we recommend a quick review of it. The report itself concludes that these issues “provide the backdrop for a potential robust and complex debate in the 116th Congress over a range of trade and finance issues.”

As reported in our post of January 25, 2019, members of the 116th session of Congress are seeking ways to address President Donald Trump’s authority to unilaterally impose tariffs under various statutes. This trend continued on January 30, 2019, with the bipartisan introduction of the Bicameral Congressional Trade Authority Act. Introduced by Sens. Mark Warner (D-VA) and Pat Toomey (R-PA), this bill would restore to Congress its Article I constitutional authority over foreign trade and commerce, specifically focusing on tariffs implemented under the claim of “national security.” The senators stated that recent Trump administration Section 232 actions have been economically disruptive and have damaged U.S. relationships with its allies, including Mexico, Canada, Japan, the EU and India. Continue Reading Additional Legislation Introduced in Congress Seeks to Curtail Executive Branch’s Authority to Implement Section 232 Tariffs

With the 35-day partial federal government shutdown ending on January 26, 2019, the U.S. government’s trade-oriented agencies have reopened and are beginning to work through massive backlogs of work as personnel resume full-time operations. What follows is a listing of the current operational status of many of these agencies:

U.S. Customs and Border Protection (CBP)

While CBP staffed ports “as normal” during the shutdown to ensure that the “flow of trade {is} as close to normal as possible,” other functions were curtailed. Due to the lapse in federal funding, however, the CBP website and certain databases were not actively managed. While no formal announcement has been made by CBP, these resources are once again fully operational, including the Customs Rulings Online Search System (CROSS) and the AD/CVD search database.

U.S. Department of Commerce – Bureau of Industry and Security (BIS)

No official statement has been issued by BIS officials, but the Department of Commerce is once again fully operational. While export enforcement continued during the shutdown, other functions of BIS were severely curtailed, including the filing of export license applications. SNAP-R (BIS’s electronic filing system) is back up and accepting licensing applications; however, it is expected that the review-and-approval process for applications will be delayed due to the expected high volume of filings BIS expects to receive.

U.S. Department of Commerce – International Trade Administration (ITA)

ITA is once again fully operational and has issued a memorandum stating that “any delay and confusion caused by the closure of the Federal Government will best be minimized by uniformly tolling all Enforcement and Compliance deadlines for the effective duration of the recent closure (i.e., 40 days), with the exception of requests for administrative reviews of suspension agreements and antidumping duty (AD) and countervailing duty (CVD) orders.” ITA has indicated that this determination applies to every proceeding, with the exception of court-ordered redeterminations. For AD and CVD orders and suspension agreements with December and January anniversary months, all requests for administrative reviews are now due by February 28, 2019.

U.S. Department of State – Directorate of Defense Trade Controls (DDTC)

DDTC has posted a notice on its website stating that it “has returned to full operational status with all electronic application systems placed in normal operational mode and the 3pm daily pick-up and drop-off service restored.” In resuming full operations, the agency notes that “Priority will be placed on issuance of licenses in the system at the time of implementation of lapse of funding operations on December 22, 2018. New licenses will be accepted; however, industry is advised of the likelihood of longer than normal processing times due to the high volume of licenses DDTC expects to receive.”

U.S. Department of the Treasury – Office of Foreign Assets Control (OFAC)

As previously reported, Treasury continued to have critical staff reporting to work to maintain core operations, even though OFAC’s operations were significantly curtailed. OFAC is again fully functional, and its sanctions web pages and licensing portal are operating.

U.S. International Trade Commission (ITC)

The ITC has publicly stated that all investigations that were active and ongoing when the shutdown began will be tolled by 35 days; a formal notice soon to be published in the Federal Register will provide more detailed information. The ITC website notes that “specific schedules for each investigative proceeding, including those pending before an Administrative Law Judge, will be revised and new schedules posted. We hope in a week or more for revised schedules to be finalized.” The ITC website is once again fully operational, and EDIS (the ITC’s electronic filing system) was live and accepting filings as of January 30. The HTS Search Tool and Dataweb are once again fully operating.

Office of the U.S. Trade Representative (USTR)

USTR has announced that it has returned to “full operating status.” Bilateral trade negotiations continued during the shutdown, particularly those between the United States and China, which face a March 1 deadline before U.S. retaliatory tariffs increase on certain imports of certain Chinese products on March 2 from 10 percent to 25 percent; however, no notice has been provided regarding how the lengthy shutdown will affect the processing of Section 301 product exclusion requests.

The U.S. Department of Justice (DOJ) unsealed two separate indictments on Monday, January 28, 2019, charging Chinese telecommunications giant Huawei with 23 counts of criminal activity. In the Eastern District of New York (EDNY), a 13-count indictment was released charging four defendants affiliated with Huawei. In the indictment, Huawei Technologies Co., Ltd., Huawei Device USA Inc., Skycom Tech Co. Ltd. (Skycom) and Huawei’s Chief Financial Officer Wanzhou Meng were charged with a variety of crimes, including bank fraud, conspiracy to commit bank fraud, wire fraud and violations of the International Emergency Economic Powers Act (IEEPA), which serves as the statutory authority for the Iranian Transactions Sanctions Regulations (ITSR). In the Western District of Washington, the second unsealed indictment charges Huawei Device Co., Ltd. and Huawei Device USA, Inc. with 10 counts of theft of trade secrets conspiracy, attempted theft of trade secrets, wire fraud and obstruction of justice where Huawei employees were allegedly encouraged to steal technology from T-Mobile USA, Inc., a large U.S. telecommunications company. Continue Reading Chinese Telecom Giant Huawei Charged with Substantive Sanctions Violations; 23 Total Criminal Charges Overall