The Office of the U.S. Trade Representative (USTR) has issued a Federal Register notice seeking public comment on the possible extension of Section 301 tariff exclusions for certain products that it granted on April 18, 2019, in the ongoing trade dispute with China. These exclusions were in the third batch of exclusions granted as part of the first round of Section 301 tariffs placed on imports of Chinese goods with an annual trade value of approximately $34 billion (List/Tranche 1 products). These exclusions (see Trump and Trade Update of April 18, 2019) are scheduled to expire on April 18, 2020. The USTR is considering a possible extension of up to 12 months for these exclusions and seeks public comment on whether to extend particular ones.

USTR states that it will evaluate the possible extension of each exclusion on a case-by-case basis. The focus of the evaluation will be “whether, despite the first imposition of these additional duties in July 2018, the particular product remains available only from China.” These issues should be addressed in submitting any comments:

  • Whether the particular product and/or a comparable product is available from sources in the United States and/or in third countries.
  • Any changes in the global supply chain since July 2018 as to the particular product, or any other relevant industry developments.
  • The efforts, if any, the importers or U.S. purchasers have undertaken since July 2018 to source the product from the United States or third countries.

The USTR notes that it will continue to consider whether the imposition of additional duties on the products covered by the exclusion will result in severe economic harm to the commenter or other U.S. interests.

Comments will be accepted between February 16 and March 16, 2020. All submissions must be made electronically via the www.regulations.gov portal on docket number USTR-2020-0002. The USTR strongly recommends that those wishing to comment complete Exclusion Extension Comment: Form A, which will be posted on the public docket. Importers and purchasers may also submit Exclusion Extension Comment: Form B containing business confidential information via email to 301bcisubmissions@ustr.eop.gov, which will not be made available to the public. If filing a Form B, parties, the USTR notes, must also file a public Form A.

The USTR is considering the possible extension of product exclusions only for those exclusions granted in April 2019; no other extensions under any other product exclusion notices issued by the USTR will be considered.

In his State of the Union address to Congress last night, President Donald Trump spoke of the “great American comeback” and claimed that “[t]he years of economic decay are over.  The days of our country being used, taken advantage of, and even scorned by other nations are long behind us.” His prepared speech focused briefly on international trade issues, stating that new U.S. factories are under construction and “companies are not leaving; they are coming back to the USA.”

Explaining that “unfair trade is perhaps the single biggest reason that I decided to run for President,” Trump noted passage of the United States-Mexico-Canada Agreement (USMCA) into law, claiming that the agreement “will create nearly 100,000 new high-paying American auto jobs, and massively boost exports for our farmers, ranchers, and factory workers. It will also bring trade with Mexico and Canada to a much higher level, but also to be a much greater degree of fairness and reciprocity.” He added that USMCA is “the first major trade deal in many years to earn the strong backing of America’s labor unions.”

Trump spoke briefly about his promise to “impose tariffs to confront China’s massive theft of America’s jobs” after years of China exploiting the trade relationship. “Now we have changed that, but, at the same time, we have perhaps the best relationship we’ve ever had with China, including with President Xi. They respect what we’ve done because, quite frankly, they could never really believe that they were able to get away with what they were doing year after year, decade after decade, without someone in our country stepping up and saying, ‘That’s enough.’” He claimed that the recently signed “Phase One” trade agreement with China will “defend our workers, protect our intellectual property, bring billions and billions of dollars into our treasury, and open vast new markets for products made and grown right here in the USA.”

In his only other remarks on international relations, the president touched upon economic sanctions toward Cuba and Venezuela and his support of those countries’ citizens to restore democracy.  Trump stated that “my administration reversed the failing policies of the previous administration on Cuba” and that the United States is “leading a 59-nation diplomatic coalition against the socialist dictator of Venezuela, Nicolás Maduro.” Despite recent tensions with Iran and stalled talks with North Korea, Trump made no reference to how his administration may continue to address relations with these countries.

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 is Fighting for Fairer Trade that Benefits American Workers.”

The Office of the U.S. Trade Representative (USTR) has published a Federal Register notice announcing additional Section 301 tariff exclusions for certain imported Chinese products appearing on List 3. These products have been subject to Section 301 tariffs since September 24, 2018, when President Donald Trump announced additional import duties on Chinese goods with an annual trade value of approximately $200 billion.

This batch of approved product exclusions covers two 10-digit Harmonized Tariff Schedule (HTS) subheadings in their entirety and 117 specially-prepared product descriptions covering 156 separately-filed exclusion requests. The two HTS subheadings are 8425.31.0100 and 8708.93.7500, which involve electric motor winches and certain clutches and parts thereof. The specially-prepared product description exclusions include but are not limited to: various categories/types of imported fish and seafood products; certain silica, oxides, herbicides, and fertilizers; certain laundry detergent powder; types of “supported catalysts” for certain chemicals, carbonates, sulfides and oxides; certain biodegradable plastic bags; certain disposable gloves; certain polyester rugs and fabrics; certain types of rear-view mirrors; certain non-woven fiberglass and polyester composite panels; certain toilet paper holders of brass with chrome or nickel finish; certain items for use on recreational vehicles (RVs); certain industrial sewing machines for footwear; certain types of bath and shower faucets; certain water pressure balance valves; certain pressure regulating valves of brass; certain types of printed circuit boards; certain types of electrical adapters, plugs and extension cords; certain non-motorized bicycles and trailers for towing behind bicycles; certain kayaks of high-density polyethylene; certain upholstered seats and parts of seats consisting of fabric or leather; certain steel lockers, display racks or tables; certain bamboo furniture; certain luminaries with light-emitting diodes (LEDs); and, certain electric household table, floor and desk lamps.

These product exclusions will be retroactive to September 24, 2018, and remain in effect until August 7, 2020. These exclusions apply to any product that satisfies the description in the annex of the Federal Register notice, regardless of whether the company using the exclusion filed the request. Each exclusion is governed by the scope of the HTS heading and the product description appearing in the annex of the exclusion notice; it is not governed by the product description set out in any particular exclusion request. U.S. Customs and Border Protection will soon issue instructions on entry guidance and implementation. USTR will continue to issue determinations on pending requests on a periodic basis.

The Department of the Treasury’s Office of Foreign Assets Control (OFAC) has sanctioned eight individuals and one entity in response to Russia’s continued aggression toward Ukraine and attempted occupation of Crimea, which the United States continues to view as an illegitimate annexation since it occurred in 2014. OFAC has designated and placed on the Specially Designated Nationals (SDN) List seven Crimean officials of the “so-called Republic of Crimea, who have asserted governmental authority over the Crimean Peninsula without the authorization of Ukraine”:

  • Yuri Gotsanyuk, the so-called Prime Minister of the so-called Republic of Crimea
  • Mikhail Razvozhaev, the so-called Acting Governor of Sevastopol
  • Vladimir Nemtsev, the so-called Chairman of the Legislative Assembly
  • Sergei Danilenko, the so-called Chairman of the Sevastopol Election Commission
  • Lidia Basova, the so-called Deputy Chairman of the Sevastopol Election Commission
  • Ekaterina Pyrkova, the so-called Secretary of the Sevastopol Election Commission
  • Ekaterina Altabaeva, the so-called member of the Federation Council of the Russian Federation representing Sevastopol

OFAC has also designated and placed on the list Grand Service Express, a Moscow-based private railway company operating passenger rail service between the Russian mainland and the Crimean Peninsula over the newly opened Kerch Strait Bridge, and its CEO Alexander Ganov.

As a result of this action, all property and interests in property of these persons/entities in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC. Because U.S. persons are generally prohibited from dealing with entities on the SDN List, persons who engage in certain transactions with these designated persons may themselves be exposed to designation. OFAC has indicated that any foreign financial institution that knowingly facilitates a significant financial transaction or provides significant financial services for the sanctioned persons and entity could be subject to U.S. correspondent account sanctions or payable-through account sanctions.

On January 29, 2019, President Donald Trump signed the United States-Mexico-Canada Agreement (USMCA) and in remarks at the White House stated that the agreement is “the largest, fairest, most balanced, and modern trade agreement ever achieved.” He added that the agreement is “a colossal victory for our farmers, ranchers, energy workers, factory workers, and American workers in all 50 states” and that it is “estimated to add another 1.2 percent to our GDP and create countless new American jobs.”  U.S. Trade Representative Robert Lighthizer stated, “President Trump set out to chart a new course. The Trump trade policy is designed to create more manufacturing jobs, protect America’s competitive advantage in technology and innovation, secure greater market access for American businesses, farmers, ranchers, and, critically, to change the stale politics of trade by creating bipartisan consensus around a new model that works better for all Americans. The USMCA achieves each of these goals.”

With Mexico’s ratification of the agreement in June 2019, Canada remains the sole party still needing to approve and ratify the USMCA. With the recent resumption of its parliamentary session this year, Canada’s House of Commons has now introduced the necessary implementing legislation. While debate is expected, Canada’s Conservative Party, the main opposition party, has stated that it will not obstruct the process. Canada is expected to ratify the USMCA no later than April 2020.

On January 24, 2020, President Donald Trump issued a Presidential Proclamation directing the Department of Commerce to adjust the tariff rate on imports of derivative steel and aluminum products into the United States. In earlier proclamations (see Trump and Trade Update of March 8, 2018), the president directed Secretary of Commerce Wilbur Ross to monitor imports of aluminum articles and steel articles and to inform the White House of any circumstances that might indicate the need for further action under the provisions of Section 232 of the Trade Expansion Act of 1962. In this proclamation, President Trump states that Secretary Ross “has informed me that domestic steel producers’ capacity utilization has not stabilized for an extended period of time at or above the 80 percent capacity utilization level identified … as necessary to remove the threatened impairment of the national security.” While imports of steel and aluminum articles have declined since the imposition of the tariffs and quotas, the proclamation states, imports of certain derivatives of steel and aluminum have significantly increased, essentially circumventing the existing Section 232 tariffs on primary steel and aluminum products and eroding “the customer base for U.S. producers of aluminum and steel and undermin[ing] the purpose of the proclamations adjusting imports of aluminum and steel articles to remove the threatened impairment of the national security.”

As a result, President Trump has announced that he will adjust the Section 232 steel and aluminum tariffs to also apply to certain derivatives of these articles. Beginning on February 8, 2020, all imports of identified derivative aluminum articles will be subject to an additional 10 percent duty rate (excluding imports from Argentina, Australia, Canada and Mexico) and all imports of identified derivative steel articles will be subject to an additional 25 percent duty rate (excluding imports from Argentina, Australia, Brazil, Canada, Mexico and South Korea).

The annex for derivative aluminum products subject to these new Section 232 tariffs lists six Harmonized Tariff System (HTS) subheadings covering certain stranded wire, cables, plaited bands and the like, including slings and similar articles, not electrically insulated, as well as certain automobile bumper stampings and body stampings for tractors for agricultural use. The annex for derivative steel products includes four HTS subheadings covering certain nails, tacks, drawing pins, corrugated nails and staples, as well as certain automobile bumper stampings and body stampings for tractors for agricultural use. As with the original Section 232 tariffs on certain steel and aluminum articles, the Department of Commerce (via the Bureau of Industry and Security (BIS)) may, upon authorization by Secretary Ross, authorize exclusions from these additional tariffs.

In a Memorandum Opinion for the Deputy Counsel to President Donald Trump, the Department of Justice’s Office of Legal Counsel (DOJ) determined that “the President may direct the Secretary of Commerce not to publish a confidential report to the President under Section 232 of the Trade Expansion Act of 1962, notwithstanding a recently enacted statute requiring publication within 30 days, because the report falls within the scope of executive privilege and its disclosure would risk impairing ongoing diplomatic efforts to address a national-security threat and would risk interfering with executive branch deliberations over what additional actions, if any, may be necessary to address the threat.”

This opinion is the result of President Trump’s self-initiation of a Section 232 national security investigation in May 2018 to determine the effects on the national security of imports of automobiles – including cars, SUVs, vans and light trucks – and automotive parts.  See Thompson Hine International Trade Update of June 1, 2018.  At the time of its initiation, many members of Congress argued against the investigation because other Trump administration Section 232 actions had been economically disruptive and were damaging U.S. relationships with its allies, including Mexico, Canada, Japan, the EU and India.  A bipartisan Senate group, with the support of numerous trade associations, introduced legislation to require the president to secure approval from Congress before taking action under Section 232.  See Trump and Trade Update of February 1, 2019.  While this legislation did not proceed beyond the Senate committees with jurisdiction over it, the most recent appropriations bill passed and signed into law in December 2019 required the Department of Commerce to release a public version of the Section 232 report no later than January 19, 2020.  That date passed without its release, and it was later learned that Commerce Secretary Wilbur Ross relied on the DOJ Memorandum Opinion as grounds for refusing to issue the report.

The DOJ opinion concludes that the Trump administration can “rely on the constitutional doctrine of executive privilege to decline to release the report at the deadline”, arguing that it “is a quintessential privileged presidential communication—a report from a Cabinet Secretary to the President advising him of the officer’s opinions and recommending decisions by the President.”  Since it is a confidential presidential communication, the opinion finds that the disclosure of even a public version of the report “would risk impairing ongoing diplomatic efforts to address a national-security concern.”   The opinion states that disclosure would “risk interfering with executive branch deliberations over what additional actions, if any, may be necessary to address the threat.”

The DOJ opinion acknowledges that Congress may have “a legitimate interest in ultimately reviewing the report to understand the basis for the President’s exercise of his section 232 authority” but argues that “it is hard to see how Congress’s legislative interest would be significantly advanced by mandating disclosure of the report now, as opposed to after the conclusion of international negotiations and the President’s decision-making process.”  Nevertheless, the opinion notes that this conclusion does not mean that the report should remain confidential forever.

Senators from both parties expressed frustration and disappointment with the Commerce’s refusal to release the report.  Senator Pat Toomey (Republican – Pennsylvania) released a statement, noting that “[b]y refusing to make public the statutorily-required report on automobile tariffs, the Department of Commerce is willfully violating federal law.”

The Committee on Foreign Investment in the United States (CFIUS) has published its final regulations to fully implement the updated national security review process of foreign direct investments in the United States as set forth in the Foreign Investment Risk Review Modernization Act (FIRRMA). This law made various amendments to the CFIUS review process, including requiring regulations for the reporting of transactions involving certain non-controlling investments and certain real estate transactions that previously fell outside CFIUS’s jurisdiction. After issuing proposed rules in September 2019 (See Trump and Trade Update of September 24, 2019), the Department of the Treasury (Treasury) has recently finalized these regulations pertaining to “Certain Investments in the United States by Foreign Persons” and “Certain Transactions by Foreign Persons Involving Real Estate in the United States.” Consistent with the statutory requirements of FIRRMA, these final regulations will become effective on February 13, 2020. Treasury also released a fact sheet, “Final CFIUS Regulations Implementing FIRRMA.”

To a large extent, after a review of all public comments submitted from the September rulemaking notice, relatively few revisions were made. Below is a summary of key aspects of the final rules:

Certain Non-Controlling Investments in the United States

CFIUS now has jurisdiction to review certain non-controlling investments that allow foreign persons: (1) access to material nonpublic technical information in the possession of the U.S. business, (2) membership or observer rights on the board of directors (or equivalent corporate body) of the U.S. business, or (3) involvement in substantive decision-making regarding actions related to critical technologies, critical infrastructure, or sensitive personal data. Many of these terms and concepts are defined and discussed in the final rule, including the terms: “material nonpublic information”, “substantive decision-making,” “critical infrastructure”, and “critical technologies” (with these last two terms remaining broadly defined to allow CFIUS latitude in its reviews). However, in the final rule, CFIUS has provided a list of identifying covered investments in 28 critical infrastructure sectors that would be of concern in any national security review. For the first time, CFIUS has specific authority to review transactions in which a U.S. business maintains sensitive personal data of U.S. citizens that may be exploited in a manner that threatens national security. “Sensitive personal data” is defined to include 10 categories of data (including financial, geolocation, and health data) maintained or collected by U.S. businesses. The regulations also create an exception from “covered investments” for a foreign person defined as an “excepted investor,” so long as any such person is from an “excepted foreign state” (see below). Further, declarations will be required by CFIUS when a foreign government has a substantial interest (a voting interest of 25 percent or more by a foreign person or a voting interest of 49 percent or more by a foreign government in a foreign person) in a covered non-controlling investment transaction.

Certain Real Estate Transactions in the United States

CFIUS will now have the authority to review certain real estate transactions involving foreign persons when the public or private real estate is located near designated airports, maritime ports, military installations or sensitive government facilities. Review of such transactions could be warranted if the foreign person would have the ability to collect intelligence on activities being conducted at such sites or could otherwise expose national security activities to foreign surveillance. To be a covered real estate transaction, the involved foreign person would have to have certain property rights, such as (1) physical access to the real estate; (2) the right to exclude others from physically accessing the property; (3) the right to improve or develop the real estate; or (4) the right to attach fixed or immovable structures or objects to the property. CFIUS has provided a list of 190 military installations and sites that would be locations of concern in any national security review and will rely on the Department of Transportation to identify any airports and maritime ports of concern. There are certain exceptions for transactions in an “urbanized area” or “urban cluster,” as defined by the Census Bureau.  Further exceptions will apply to real estate transactions involving a foreign person’s purchase or lease of a single housing unit, for transactions involving certain commercial office space in a multi-unit commercial office building, or for retail trade or food service establishments. While there will be no mandatory filing requirements for real estate transactions, CFIUS has cautioned that only by filing a voluntary notice or a short-form declaration providing notification of a covered real estate transaction will the involved parties potentially qualify for a safe harbor letter.

Excepted Foreign States

For both of the above-mentioned covered transactions, CFIUS has established the concept of “excepted foreign state[s],” defined as those states with compliance laws, orders and regulations similar to those of the United States concerning foreign investments assessed for national security purposes. CFIUS has initially identified Australia, Canada, and the United Kingdom (including Northern Ireland) as excepted foreign states due to their “robust intelligence sharing and defense industrial base integration mechanisms with the United States.” This list may be expanded in the future.  It is important to note that there remain certain criteria that investors from any excepted foreign state must meet in order to be eligible for exemption and that this concept does not apply in instances where the foreign direct investment would result in control of the U.S. business.

Pilot Program on Critical Technology and Assessment of CFIUS Filing Fees

CFIUS also announced that the pilot program requiring mandatory reporting of certain transactions involving critical technology will continue.  However, a notice of proposed rulemaking will be issued in the near future proposing to revise the mandatory declaration requirement from one based upon North American Industry Classification System (NAICS) codes to one based on export control licensing requirements. Despite numerous commenters asking CFIUS to narrow the term “critical technologies”, no changes were made to this definition as FIRRMA does not give CFIUS “discretion to change this statutory definition through these regulations.” As such, these final rules do not “ independently define emerging and foundational technologies,” a term set forth under critical technologies. Instead, CFIUS will continue to defer to the Department of Commerce’s separate (and still pending) rulemaking as to the scope of emerging and foundational technologies. Finally, a separate proposed rule will be published at a later date regarding the authorization granted under FIRRMA for the Treasury Department to assess and collect fees with respect to CFIUS filings.

The U.S. Senate has approved by a vote of 89 to 10 the required implementing legislation for the U.S.-Mexico-Canada Agreement (USMCA). After months of negotiations by Democrats in the House of Representatives with U.S. Trade Representative Robert Lighthizer (see Trump and Trade Updates of December 10, 2019 and December 16, 2019), H.R. 5430 was quickly passed through the various House committees and passed by a wide, bipartisan vote of 385 to 41 on December 19, 2019. Upon receipt in the Senate, the bill was referred to the Senate Finance Committee for consideration. However, the Senate parliamentarian ruled that the Committees on Health, Education, Labor, and Pensions; Environment and Public Works; Appropriations; Foreign Relations; Commerce, Science, and Transportation; and the Budget also had jurisdiction and oversight. On January 15, 2020, all Senate committees favorably approved the legislation and reported it to the full Senate for consideration.

Debate in the Senate was limited to 20 hours under the rules set forth in the Trade Promotion Authority (TPA) legislation – often referred to as “fast track” authority. TPA allows Congress to consider required implementing legislation under expedited procedures for any trade agreements that require changes in U.S. law. Under TPA procedures, the legislation may come to the floor without action and receives an up-or-down vote with no amendments allowed. Now that the Senate has passed H.R. 5430, the legislation will be sent to President Donald Trump, who has indicated the White House will schedule a signing ceremony for the new law during the week of January 20, 2020.

Upon presidential signature, it should be noted, the new USMCA will still not enter into force. While Mexico has ratified the USMCA (see Trump and Trade Update of June 20, 2019), Canada must still consider and ratify the agreement, and its legislative body does not reconvene until January 27, 2020.

 

On January 15, 2020, after two years of negotiations and retaliatory measures in a tariff trade war, the United States and China signed a “phase one” trade agreement that President Donald Trump called “historic” and “transformative.” In remarks during the signing ceremony, Trump said, “Today, we take a momentous step — one that has never been taken before with China — toward a future of fair and reciprocal trade, as we sign phase one of the historic trade deal between the United States and China. Together, we are righting the wrongs of the past and delivering a future of economic justice and security for American workers, farmers, and families.”

In very brief remarks to the press, Chinese Vice Premier Liu He stated that it was a “great agreement,” adding that it was “good for China, good for the United States, and good for the whole world” and “conducive to world peace and prosperity.” During the signing ceremony, Ambassador Robert Lighthizer added, “The United States and China are two great countries with two great economies, but two very different economic systems. It is imperative that we develop trade and economic rules and practices that allow us both to prosper. The alternative is not acceptable for either of us.” He noted that this “phase one” agreement is a “big step forward in writing the rules needed and developing the practices that we must have going forward.”

Intellectual Property and Technology Transfer Protections

On the two key issues that ostensibly triggered the Section 301 investigation and resulting tariffs on imports from China into the United States, critics have argued and, to some extent, USTR officials have acknowledged, that additional work on intellectual property protections and forced technology transfers remains necessary in phase two of the negotiations. However, under the agreement’s IP chapter, numerous concerns in the areas of trade secrets, patents and pharmaceutical-related intellectual property, geographical indications, trademarks, and enforcement against pirated and counterfeit goods appear to be preliminarily addressed. China must put forth an action plan that will outline the structural changes it will take to implement its obligations. Under the Technology Transfer chapter of the agreement, the parties have agreed to: (i) prohibit the forcing or pressuring of foreign companies to transfer their technology as a condition for market access, administrative approvals, or receipt of any advantages; (ii) require that any transfer or licensing of technology be based on market terms that are voluntary and reflect mutual agreement; (iii) prohibit state-directed or supported outbound investment aimed at acquiring foreign technology in sectors and industries targeted by a party’s industrial policies; and (iv) ensure that enforcement and administrative proceedings are impartial, fair, transparent, and non-discriminatory.

Financial Services Reform

The Financial Services chapter of the agreement addresses many of China’s existing trade and investment barriers that have reduced market access for and the competitiveness of U.S. companies supplying or seeking to supply financial services in China. This includes certain commitments for China — some to be initiated as soon as April 1, 2020 — in the banking, insurance, securities, and credit rating services sectors. Non-tariff trade barriers to be modified include eliminating foreign equity limitations and discriminatory regulatory requirements.

Agreements by China to Import More U.S. Goods and Agricultural Products

As a part of the agreement, China has pledged to increase imports of U.S. goods and services by at least $200 billion over the next two years. The annexes to the agreement include commitments covering a variety of U.S. manufactured goods, food, agricultural and seafood products, energy products, and services. According to a fact sheet on Expanding Trade, China has made the following commitments:

  • China’s imports of U.S. manufactured goods, such as industrial machinery, electrical equipment, pharmaceutical products, aircraft, vehicles, optical and medical instruments, iron and steel, solar-grade polysilicon, hardwood lumber, and chemical products, among other goods, will total at least $120.0 billion in 2020 and at least $131.9 billion in 2021.
  • China’s imports of U.S. agricultural products, such as soybeans, cotton, grains, meats, ethanol, seafood, and the full range of other agricultural products will total at least $80 billion over the next two years. China will also strive to purchase an additional $5 billion of agricultural products annually.
  • China’s imports of energy products from the United States, such as liquefied natural gas, crude oil, and metallurgical coal, will total at least $30.1 billion in 2020 and at least $45.5 billion in 2021.
  • China’s imports of U.S. services, such as financial services, insurance services, cloud services, and travel services, will total at least $99.9 billion in 2020 and at least $112.2 billion in 2021.

Currency Manipulation

The agreement states that each party “shall respect the other party’s autonomy in monetary policy, in accordance with its domestic law.”  The USTR has indicated that China under the agreement agreed to strong commitments on currency practices regarding currency devaluations and exchange rates. As a result, and as a prelude to the signing ceremony, on January 13, 2020, the Department of the Treasury released its semi-annual Report on Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States. The report concluded that no major U.S. trading partner at this time meets the criteria for designation as a currency manipulation or enhanced analysis. Thus, while China has been removed from the list, it does remain on Treasury’s Monitoring List as meriting “close attention to their currency practices.”

Dispute Resolution and Enforceability

Both Trump and Lighthizer repeatedly stated that the agreement was enforceable. The Dispute Resolution chapter of the agreement ensures “the effective implementation of the agreement and [allows] the parties to resolve disputes in a fair and expeditious manner.” It calls for regular bilateral consultations at both the principal level and the working level. It establishes procedures for addressing disputes related to the agreement and allows each party to take proportionate responsive actions that it deems appropriate. This includes allowing a party to suspend obligations under the agreement or to take other remedial actions proportionate to an alleged violation, including imposing remedial tariffs if done in “good faith.” China has made a promise not to retaliate for any such remedial actions taken in good faith, but the agreement also allows a party to withdraw from the terms of the agreement if it believes an action is taken in “bad faith.” The parties may also agree, in writing, to amend the agreement.

Phase Two Negotiations and Section 301 Tariffs

While no firm date was given, Trump indicated that phase two of the negotiations would start soon, and that the Section 301 tariffs on imports from China will remain in place for now. He stated, “We’re negotiating with the tariffs. We have 25 percent on $250 billion worth of goods. And then we’re bringing the 10 percent down to 7.5 percent on $300 billion worth of goods plus [see also Trump and Trade Update on this announcement]…. but I’m leaving them on, because otherwise we have no cards to negotiate with.” It should be noted that China has not made any commitment at this time to reduce or remove any of its retaliatory tariffs.

To view the full text of the agreement and multiple fact sheets about it, click on the following links: