In a proposed rule scheduled for publication in the May 28, 2019 Federal Register, the International Trade Administration (ITA) of the Department of Commerce (Commerce) is proposing to modify two regulations that would clarify how ITA determines the existence of a benefit resulting from a subsidy in the form of currency manipulation and undervaluation and how companies in the traded goods sector of an economy can constitute a group of enterprises for purposes of determining whether a subsidy is specific. In a Commerce press release, Secretary Wilbur Ross stated, “This change puts foreign exporters on notice that the Department of Commerce can countervail currency subsidies that harm U.S. industries … Foreign nations would no longer be able to use currency policies to the disadvantage of American workers and businesses.”

Continue Reading Department of Commerce’s Proposed Rule to Allow Currency Manipulation and Undervaluation as Countervailable Subsidy

In a filing with the Office of Management and Budget (OMB) seeking emergency clearance for an information collection and form approval, the Office of the U.S. Trade Representative (USTR) formally indicated that it is “establishing a process by which U.S. stakeholders can request the exclusion of particular products classified within a covered tariff subheading from the additional duties that went into effect on September 21, 2018 [10%], and May 10, 2019 [increased to 25%].” This relates to those Chinese products listed under Tranche 3, which covers imported products from China valued at $200 million. In this filing with OMB, USTR stated that it expects “the window for submitting exclusion requests will open on or around June 30, 2019.”

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

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

Continue Reading Commerce Issues Temporary General License for Certain Huawei Technologies Transactions

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

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

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

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

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

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

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

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

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

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

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

Continue Reading President Trump Issues Executive Order on Information Security; Huawei Technologies to Be Placed on “Entity List”

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

Continue Reading China Retaliates, United States Announces Additional Section 301 Tariffs as Trade Negotiations Falter

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