The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) has extended the public comment period for its November 19, 2018 advance notice of proposed rulemaking (ANPRM) for “Review of Controls of Certain Emerging Technologies.” In a December 10, 2018 announcement, Deputy Assistant Secretary for Export Administration Matthew Borman extended the deadline from December 19, 2018, until January 10, 2019, in response to public demand for an extension. The comment requirements and issues to be addressed are provided in BIS’s November 19, 2018 ANPRM. (See Trump and Trade Update of November 19, 2018.)
The U.S. International Trade Commission (USITC) determined December 7, 2018, by a 5-0 unanimous vote of its commissioners that U.S. industry is materially injured by reason of imports of common alloy aluminum sheet from China. This finding follows the determination of the U.S. Department of Commerce’s International Trade Administration (ITA) in early November that such imports are subsidized and sold in the United States at less than fair value. (See Trump and Trade Update of November 9, 2018.) These are the first trade remedy cases that the Trump administration has “self-initiated,” starting a process that usually begins with a petition from the domestic industry. It’s been more than 25 years since the last self-initiated trade remedy case.
As a result of the USITC’s final affirmative injury determination, the ITA will now issue antidumping and countervailing duty orders on imports of common alloy aluminum sheet from China. The USITC, however, made a negative finding concerning critical circumstances as to imports of this product from China. As a result, imports of common alloy aluminum sheet from China will not be subject to retroactive antidumping or countervailing duties.
The USITC’s public report, Common Alloy Aluminum Sheet from China (Inv. Nos. 701-TA-591 and 731-TA-1399 (Final), USITC Publication 4861, December 2018), will contain the views of the USITC and information developed during the investigations. The report will be available by January 11, 2019; when available, it may be accessed on the USITC’s Official Publication Log.
On December 1, 2018, President Donald Trump announced his intention to formally terminate the North American Free Trade Agreement (NAFTA) in 2019. Addressing the press aboard Air Force One, Trump stated that he will terminate the agreement within six months in an effort to get the U.S. Congress to move on implementing the United States-Mexico-Canada Agreement (USMCA): “And so Congress will have a choice of the USMCA or pre-NAFTA, which worked very well.” In accordance with NAFTA Article 2205, “A party may withdraw from this Agreement six months after it provides written notice of withdrawal to the other Parties.” While the president can announce his intention to withdraw from the agreement and even deliver written notice of termination, it remains open for debate if congressional approval is required for complete termination to take effect.
These comments set the stage for a showdown with congressional leaders on the passage of the USMCA and whether it can be done within the president’s desired timeline. Senator Ron Wyden, the ranking member of the Senate Finance Committee, issued a statement shortly after the USMCA was signed on November 30, 2019 indicating that he still has some concerns about the negotiated USMCA: “Over the coming months I will push to see that these concerns are addressed before Congress considers this proposal.” To implement the USMCA, a majority in each chamber of Congress is required to pass the law; as a result of the mid-term congressional elections in November, Trump will need bipartisan support to obtain that majority.
At a dinner meeting on December 1, 2018, at the G-20 summit in Buenos Aires, U.S. President Donald Trump and Chinese President Xi Jinping agreed to begin negotiations on changes regarding forced technology transfer, intellectual property protection, non-tariff barriers, cyber intrusions and cyber theft, services and agriculture. Both agreed to seek completion of such discussions over the next 90 days. As part of the deal, Trump agreed to postpone the import tariff increase on the third tranche of Chinese products from 10 percent to 25 percent scheduled for January 1, 2019. Xi agreed to purchase a not yet agreed upon, but “very substantial,” amount of agricultural, energy, industrial and other products from the United States to reduce the trade imbalance between the United States and China. If the talks do not result in a deal, the Trump administration will implement the 25 percent tariff on the third tranche of Chinese products.
In a brief press statement, Trump stated: “This was an amazing and productive meeting with unlimited possibilities for both the United States and China. It is my great honor to be working with President Xi.”
On the sidelines of the international G-20 (Group of Twenty) forum in Buenos Aires, Argentina, U.S. President Donald Trump, Canadian Prime Minister Justin Trudeau and Mexican President Enrique Peña Nieto signed today the new United States-Mexico-Canada Agreement (USMCA), launching the formal process to replace the North American Free Trade Agreement (NAFTA). During the signing ceremony, Trump stated, “This new agreement will ensure a future of prosperity and innovation for Mexico, Canada and the United States.”
Today’s ceremony is a significant milestone for Trump, who focused on the modernization of the NAFTA in his presidential campaign, and follows an intense period of negotiations completed in September 2018 (see Trump and Trade Update, October 2, 2018). The signing ceremony also occurred on Nieto’s final day in office and despite the parties’ continuing disagreement over the Section 232 tariffs the United States has placed on steel and aluminum imports from Canada and Mexico. In brief remarks, Trudeau raised the need to remove these tariffs, stating that “With hard work, good will and determination, I’m confident we will get there,” and adding that “Our shared interests, prosperity and security demand it.”
While the USMCA has now been signed, the trade agreement must still be ratified by Congress. Trump notified Congress on August 31, 2018 of his intent to sign the agreement, and this notification triggered certain procedures under the Trade Promotion Authority (TPA) (formally known as the Trade Preferences Extension Act of 2015). Now that the USMCA is signed, the Trump administration has 60 days under TPA to report to Congress changes to U.S. law that are required to comply with the terms of the agreement. Also, within 105 days of the agreement being signed, the U.S. International Trade Commission (ITC) must complete a study of the agreement’s economic impact (see Trump and Trade Update, October 16, 2018 and ITC Notice of Investigation). Eventually, the Congress will have to pass legislation to implement the USMCA, a final step in the implementation process which may have become more difficult with the Democratic Party assuming control of the House of Representatives in the next session of Congress in January 2019. While Trump expressed confidence today that the USMCA will pass Congress in the new year, bilateral opposition in both houses of Congress is mounting, which may lead to more side letters on certain issues or concessions on other unrelated legislation. The legislatures in Mexico and Canada must also ratify the trade agreement, but approval in both without much pushback is expected. Most trade analysts are predicting that the terms of the agreement may not truly be finalized and implemented until well into 2019.
On September 18, 2018, the U.S. Trade Representative (USTR) announced the exclusion request process for the Trump administration’s second tranche of products covered under the Section 301 trade action against China for its unfair policies and practices involving forced technology transfers and intellectual property rights. On August 16, 2018, the United States implemented retaliatory tariffs of 25 percent on U.S. imports of 279 Chinese products covering an estimated trade value of $16 billion in 2018. Parties interested in this Section 301 product exclusion process should be aware that the deadline for requesting an exclusion from the applicable tariffs for any of these products is December 18, 2018.
Exclusion requests must be filed via www.regulations.gov on Docket USTR-2018-0032. While not mandatory, the USTR has encouraged interested parties to use its exclusion request form to submit exclusion requests, which may be accompanied by supporting documentation. Each request must specifically identify a particular product and provide supporting data and the rationale for the proposed exclusion. Each request will be evaluated on a case-by-case basis.
The USTR has specified that the following information must be provided:
- Identification of the particular product in terms of the physical characteristics (e.g., dimensions, material composition or other characteristics) that distinguish it from other products within the covered 8-digit subheading. The USTR will not consider requests that identify the product at issue in terms of the identity of the producer, importer or ultimate consumer, actual use or chief use, trademarks or tradenames, nor requests that identify the product using criteria that cannot be made available to the public.
- The 10-digit subheading of the HTSUS applicable to the particular product requested for exclusion.
- The annual quantity and value of the Chinese-origin product that the applicant purchased in each of the last three years.
Each exclusion request should address (1) whether the particular product is available only from China or whether a comparable product is available from other sources, (2) whether the imposition of the tariff will cause “severe economic harm to the requestor,” and (3) whether the product is strategically important to the “Made in China 2025” program or other Chinese industrial programs. There is a process for filing requests containing business confidential information; however, such submissions must also be accompanied by a public version of the request.
The Office of the U.S. Trade Representative (USTR) has released an updated Section 301 report concerning China’s forced technology transfers and infringement of intellectual property rights. This report updates the original March 22, 2018 investigation findings and follows the U.S. government’s imposition of import tariffs on July 6, 2018, August 23, 2018 and September 24, 2018 on approximately $250 billion of Chinese products as part of the Trump administration’s response to China’s unfair trade practices. “We completed this update as part of this Administration’s strengthened monitoring and enforcement effort,” USTR Robert Lighthizer said. The report concludes that “China fundamentally has not altered its acts, policies, and practices related to technology transfer, intellectual property, and innovation, and indeed appears to have taken further unreasonable actions in recent months.” The updated report highlights these continuing trade practices by China:
- Cyber-enabled Theft – The report states that China continues to conduct and support cyber-enabled theft and intrusions into the commercial networks of U.S. companies, as well as other means, in attempts to illegally to obtain information. This conduct provides the Chinese government with unauthorized access to intellectual property, including trade secrets or confidential business information, as well as technical data, negotiating positions and sensitive and proprietary internal business communications.
- Foreign Ownership Restrictions – While China relaxed some of its foreign ownership restrictions and made certain other incremental changes in 2018, the report indicates that the Chinese government persists in using foreign investment restrictions to require or force the transfer of technology from U.S. companies to Chinese entities.
- Discriminatory Licensing Restrictions – The report notes that (1) China continues to maintain discriminatory licensing restrictions by denying foreign patent holders basic patent rights to stop a Chinese entity from using the technology after a licensing agreement ends and (2) the United States has requested consultations and is pursuing dispute settlement under the provisions of the World Trade Organization.
- Foreign Direct Investment in the United States – Despite a decline in Chinese investment in the United States in 2018, the report concludes that the Chinese government continues to direct and unfairly facilitate the systematic investment in, and acquisition of, U.S. companies and assets by Chinese entities, to obtain cutting-edge technologies and intellectual property and to generate large-scale technology transfer in industries deemed important by state industrial plans.
- “Made in China 2025” – Since the initial Section 301 investigation findings, the report states that China has intentionally downplayed and limited attention to its technology-related industrial policies, even though it still targets the same high-technology industries. Instead, China continues to set explicit market share and other targets to be filled by Chinese producers both domestically and globally.
The USTR has indicated that it intends to continue its efforts to monitor any new developments and actions regarding China’s acts, policies and practices related to technology transfer, intellectual property and innovation.
U.S. Customs and Border Protection (CBP) issued a significant ruling in September that distinguished between North American Free Trade Agreement (NAFTA) country-of-origin marking rules and the country-of-origin rules applying to products subject to Section 301 tariffs and trade remedy duties. In its ruling, CBP determined that Chinese-origin components imported into Mexico for assembly into an electric motor satisfied the requirements for marking the assembled product as a product of Mexico in accordance with the NAFTA Marking Rules; however, it ruled that the Chinese-origin components were not “substantially transformed” in Mexico and that the assembled final product remained a product of China subject to the U.S. government’s Section 301 retaliatory tariffs on imports of Chinese electric motors and to any potential trade remedy duty. CBP’s determination requires importers to understand thoroughly their supply chains, including the manufacturing processes of their suppliers and the origin of components used in those manufacturing processes.
On November 19, 2018, the Bureau of Industry and Security (BIS) at the Department of Commerce issued an Advance Notice of Proposed Rulemaking (ANPRM) seeking public comment on criteria for identifying emerging technologies essential to U.S. national security. In the National Defense Authorization Act (NDAA) for Fiscal Year 2019, Congress passed the Export Control Reform Act of 2018, which included a section aimed at establishing controls on “emerging” and “foundational” technologies. Section 1758 of the NDAA outlined a process for interagency review considering both public and classified information, in addition to inputs from various interagency committees. Once an emerging or foundational technology is identified, the NDAA authorizes the BIS to establish appropriate controls on the export, reexport or transfer of that technology.
The BIS is seeking input from all interested parties on: (1) how to define emerging technology; (2) criteria to apply to determine whether there are specific technologies within certain categories, which are listed below, that are important to U.S. national security; (3) sources to identify technologies ; (4) other general technology categories that warrant review; (5) the status of development of these technologies; (6) the impact specific emerging technology controls would have on U.S. technological leadership; and (7) any other approaches to the issue of identifying emerging technologies, including the stage of development or maturity level.
The BIS will issue a separate ANPRM to identify foundational technologies important to U.S. national security but will accept public comments on treating emerging and foundational technologies as separate types of technology.
Written comments addressing the BIS’s seven criteria must be submitted no later than December 19, 2018. Written comments must be filed through the Federal eRulemaking Portal at https://www.regulations.gov in Docket No. BIS 2018-0024.
Representative Technology Categories
- Biotechnology, such as:
- Synthetic biology;
- Genomic and genetic engineering; or
- Artificial intelligence (AI) and machine learning technology, such as:
- Neural networks and deep learning (e.g., brain modelling, time series prediction, classification);
- Evolution and genetic computation (e.g., genetic algorithms, genetic programming);
- Reinforcement learning;
- Computer vision (e.g., object recognition, image understanding);
- Expert systems (e.g., decision support systems, teaching systems);
- Speech and audio processing (e.g., speech recognition and production);
- Natural language processing (e.g., machine translation);
- Planning (e.g., scheduling, game playing);
- Audio and video manipulation technologies (e.g., voice cloning, deepfakes);
- AI cloud technologies; or
- AI chipsets.
- Position, Navigation, and Timing (PNT) technology.
- Microprocessor technology, such as:
- Systems-on-Chip (SoC); or
- Stacked Memory on Chip.
- Advanced computing technology, such as memory-centric logic.
- Data analytics technology, such as:
- Automated analysis algorithms; or
- Context-aware computing.
- Quantum information and sensing technology, such as:
- Quantum computing;
- Quantum encryption; or
- Quantum sensing.
- Logistics technology, such as:
- Mobile electric power;
- Modeling and simulation;
- Total asset visibility; or
- Distribution-based Logistics Systems (DBLS).
- Additive manufacturing (e.g., 3D printing);
- Robotics, such as:
- Micro-drone and micro-robotic systems;
- Swarming technology;
- Self-assembling robots;
- Molecular robotics;
- Robot compliers; or
- Smart Dust.
- Brain-computer interfaces, such as
- Neural-controlled interfaces;
- Mind-machine interfaces;
- Direct neural interfaces; or
- Brain-machine interfaces.
- Hypersonics, such as:
- Flight control algorithms;
- Propulsion technologies;
- Thermal protection systems; or
- Specialized materials (for structures, sensors, etc.).
- Advanced Materials, such as:
- Adaptive camouflage;
- Functional textiles (e.g., advanced fiber and fabric technology); or
- Advanced surveillance technologies, such as faceprint and voiceprint technologies.
On October 16, 2018, the U.S. Trade Representative (USTR) notified Congress of the Trump administration’s plans to enter into free trade agreement negotiations with the United Kingdom (UK) after the UK has exited the European Union. (See Trump and Trade Update dated October 17, 2018.) The USTR is seeking to remove both tariff and non-tariff barriers and to achieve free, fair, and reciprocal trade. To further develop its negotiating objectives, USTR has requested public comments on such an agreement, including U.S. interests and priorities.
The USTR is specifically seeking comments on these issues:
- General and product-specific negotiating objectives for the proposed agreement.
- Relevant barriers to trade in goods and services between the United States and the UK that should be addressed in the negotiations.
- The economic costs and benefits for U.S. producers and consumers of the removal or reduction of tariffs and removal or reduction of non-tariff barriers on articles traded with the UK.
- Treatment of specific goods (described by U.S. Harmonized Tariff Schedule numbers) under the proposed agreement, including comments on: (i) product-specific import or export interests or barriers; (ii) experience with particular measures that should be addressed in the negotiations; and (iii) ways to address export priorities and import sensitivities in the context of the proposed agreement.
- Customs and trade facilitation issues that should be addressed in the negotiations.
- Sanitary and phytosanitary measures and technical barriers to trade that should be addressed in the negotiations.
- Other measures or practices that undermine fair market opportunities for U.S. businesses, workers, farmers and ranchers that should be addressed in the negotiations.
Written comments addressing USTR’s negotiating objectives must be submitted no later than January 15, 2019. USTR’s Trade Policy Staff Committee will hold a public hearing on these negotiating objectives on January 29, 2019; any request to appear and testify must be submitted by January 15, 2019. Requests to testify and written comments must be filed through the Federal eRulemaking Portal at https://www.regulations.gov on Docket No. USTR-2018-0036.