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.

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 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.

Early in his presidency, President Donald Trump undertook a review of U.S. policy toward Cuba and announced, via a presidential memorandum in June 2017, revisions to that policy to once again restrict certain travel and limit the sale of goods and technology that might benefit the Cuban military. (See Trump and Trade Update of June 20, 2017.) In November 2017, the Departments of Commerce and the Treasury implemented regulatory changes to the United States’ longstanding Cuba sanctions that had been revised and relaxed under President Obama. (See Treasury’s Fact Sheet and Commerce’s Cuba web page.) The Trump administration’s actions sought to tighten sanctions against the Cuban military and intelligence services, including their holding companies, and to increase sanctions related to traveling to and conducting business in Cuba.

In early November 2018, National Security Advisor John Bolton gave a speech in Miami on U.S. policy toward Latin America. He labeled Cuba, Venezuela and Nicaragua the “Troika of Tyranny in this hemisphere,” stating that these countries are the “cause of immense human suffering, the impetus of enormous regional instability, and the genesis of a sordid cradle of communism in the Western Hemisphere.” Under the Trump administration, Bolton stated, the United States will continue to “maintain sanctions until, among other things, all political prisoners are freed, freedoms of assembly and expression are respected, all political parties are legalized, and free and internationally supervised elections are scheduled.” In the coming weeks, he further noted, additional entities owned or controlled by the Cuban military and intelligence services will be added to the restricted list of entities with which financial transactions by U.S. persons would be prohibited.

On November 15, 2018, the Department of State released a fully updated list of sanctioned Cuban entities, including 30 new entities and newly identified subentities of previously listed companies. U.S. companies that continue to conduct limited and licensed business activities in Cuba should be certain to screen all parties to their transactions against this updated list.

On November 7, 2018, the Department of Commerce’s International Trade Administration (ITA) issued an affirmative final determination in the antidumping duty (AD) and countervailing duty (CVD) investigations of imports of common alloy aluminum sheet from the People’s Republic of China (China). These investigations were self-initiated by the Trump administration last year (see Trump and Trade Updates dated April 18, 2018 and November 29, 2017), and were the first self-initiated investigations by the ITA in nearly 30 years.

In the AD investigation, ITA assigned a dumping rate of 49.85 percent for certain mandatory and otherwise eligible Chinese companies, while assigning a China-wide rate of 59.72 percent on other companies. In the CVD investigation, the ITA calculated a subsidy rate of between 46.48 percent and 55.02 percent for certain mandatory Chinese companies, while determining a rate of 116.49 percent for other Chinese companies that were specifically subject to the investigation. The China-wide subsidy rate is 50.75 percent. (See the AD case decision memorandum and CVD case decision memorandum.)

The ITA Fact Sheet notes that merchandise covered by these investigations is common alloy aluminum sheet, which is a flat-rolled aluminum product having a thickness of 6.3 mm or less, but greater than 0.2 mm, in coils or cut to length, regardless of width. Common alloy aluminum sheet within the scope of this investigation includes both not clad aluminum sheet, as well as multi-alloy, clad aluminum sheet. With respect to not clad aluminum sheet, common alloy sheet is manufactured from a 1XXX-, 3XXX-, or 5XXX-series alloy as designated by the Aluminum Association. With respect to multi-alloy, clad aluminum sheet, common alloy sheet is produced from a 3XXX-series core, to which cladding layers are applied to either one or both sides of the core. Subject merchandise includes common alloy sheet that has been further processed in a third country, including but not limited to annealing, tempering, painting, varnishing, trimming, cutting, punching, and/or slitting, or any other processing that would not otherwise remove the merchandise from the scope of the investigations if performed in the country of manufacture of the common alloy sheet. Common alloy sheet is currently classifiable under HTSUS subheadings 7606.11.3060, 7606.11.6000, 7606.12.3090, 7606.12.6000, 7606.91.3090, 7606.91.6080, 7606.92.3090, and 7606.92.6080. Further, merchandise that falls within the scope of these investigations may also be entered into the United States under HTSUS subheadings 7606.11.3030, 7606.12.3030, 7606.91.3060, 7606.91.6040, 7606.92.3060, 7606.92.6040, 7607.11.9090. Excluded from the scope of these investigations is aluminum can stock, which is suitable for use in the manufacture of aluminum beverage cans, lids of such cans, or tabs used to open such cans.

The U.S. International Trade Commission (ITC) is scheduled to make its final determinations regarding injury on December 20, 2018. If the ITC makes affirmative final determinations that imports of common alloy aluminum sheet from China materially injure, or threaten material injury to, the domestic industry, the ITA will issue AD and CVD orders. If, however, the ITC makes negative final injury determinations, the investigations will be terminated and no orders will be issued.

On November 1, 2018, U.S. Attorney General Jeff Sessions announced the creation of a “China Initiative” aimed at identifying priority Chinese trade theft cases for investigation and enforcement. In prepared remarks, Sessions emphasized that “This theft is not just wrong; it poses a grave threat to our national security. And it is unlawful.” The new initiative comes after several high-profile investigations of Chinese enterprises and citizens concerning espionage and theft of key U.S. technologies and intellectual property. It would also appear that this new action directed at China is yet another approach President Trump and his administration are taking in an effort to address what it views as China’s unfair intellectual property and technology transfer policies and practices.

The new China Initiative will be led by Assistant Attorney General John Demers, who currently leads the Department of Justice’s (DOJ) National Security Division, and will include cross-functional support from various U.S. Attorneys and members of the Federal Bureau of Investigation. In a published fact sheet, Sessions established several goals for the initiative, including:

  • Identify priority trade secret theft cases, ensure that investigations are adequately resourced and work to bring them to fruition in a timely manner and according to the facts and applicable law;
  • Develop an enforcement strategy concerning non-traditional collectors (e.g., researchers in labs, universities and the defense industrial base) that are being coopted into transferring technology contrary to U.S. interests;
  • Apply the Foreign Agents Registration Act (FARA) to unregistered agents seeking to advance China’s political agenda, bringing enforcement actions when appropriate;
  • Equip U.S. Attorneys with intelligence and materials they can use to raise awareness of these threats within their districts;
  • Implement the Foreign Investment Risk Review Modernization Act (FIRRMA) for DOJ (related to national security reviews of certain foreign direct investment in U.S. companies holding critical technology);
  • Identify opportunities to better address supply chain threats, especially ones impacting the telecommunications sector, prior to the transition to 5G networks;
  • Identify Foreign Corrupt Practices Act (FCPA) cases involving Chinese companies that compete with U.S. businesses;
  • Increase efforts to improve Chinese responses to requests under the Mutual Legal Assistance Agreement (MLAA) with the United States; and
  • Evaluate whether additional legislative and administrative authorities are required to protect our national assets from foreign economic aggression.

In concluding his remarks, Sessions stated, “We will not allow our sovereignty to be disrespected, our intellectual property to be stolen, or our people to be robbed of their hard-earned prosperity. We want fair trade and good relationships based on honest dealing. We will enforce our laws—and we will protect America’s national interests.”

The Office of the U.S. Trade Representative (USTR) has announced that President Trump is moving forward with additional tariffs in its Section 301 investigation involving China’s acts, policies and practices related to forced technology transfers and intellectual property rights. The USTR has finalized a third list of Harmonized Tariff Schedule (HTS) subheadings resulting in additional tariffs of $200 billion on imports of Chinese products. The additional tariffs will go into effect September 24, 2018, and will be 10 percent at the start. The USTR has stated that these tariffs will increase to 25 percent on January 1, 2019. Continue Reading United States to Implement Additional Import Tariffs on $200 Billion of Chinese Products

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. This was in addition to the $34 billion in tariffs implemented in June 2018.

With these tariffs in place, the U.S. Trade Representative (USTR) has announced procedures to request the exclusion of products subject to this additional duty. In a notice published today in the Federal Register, the USTR has provided the criteria and detailed guidance for any product exclusion request application. Each request must specifically identify a particular product and provide supporting data and the rationale for the proposed exclusion. The USTR will not consider exclusion requests using criteria that cannot be made available to the public. Each request will be evaluated on a case-by-case basis. The USTR has specified, however, 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, ultimate consumer, actual use or chief use, or trademarks or tradenames. The USTR will not consider 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.

Continue Reading U.S. Trade Representative Announces Section 301 Product Exclusion Process for Second List of Chinese Products Subject to 25 Percent Tariff

The U.S. Trade Representative (USTR) has closed the public comment period on whether to take further action in the form of an additional 10 or 25 percent tariff on certain products imported into the United States from China with an annual trade value of approximately $200 billion. Nearly 6,000 comments were received during the comment period, which focused on the third list (or tranche) of over 6,000 Harmonized Tariff Schedule (HTS) subheadings proposed by the USTR on July 17, 2018 (see annex to 83 Federal Register 33608). This followed a marathon six-day public hearing featuring a parade of witnesses who mostly complained of the injury their U.S. companies would face if these tariffs were implemented. Highlighting this concern, more than 150 U.S. trade groups filed a joint letter opposing the proposed tariffs and arguing that, if implemented, such tariffs and the continuing “tit-for-tat tariff escalation with China only serves to expand the harm to more U.S. economic interests, including farmers, families, businesses, and workers.” The letter states that any tariffs will serve to only invite additional Chinese retaliation and “cause significant supply chain disruptions” since the assumptions that U.S. companies “can simply move their production out of China are incorrect.”

Despite the outcry that U.S. companies, manufacturers, service providers and consumers will bear the brunt of any new proposed tariffs, President Trump on Friday, September 7, 2018, in remarks to reporters, stated that “the $200 billion we are talking about could take place very soon” and that his administration is prepared to seek tariffs on another $267 billion on Chinese goods “if I want.”