Two recent federal government actions have highlighted national security concerns related to the nation’s power grid. First, on May 1, 2020, President Donald Trump issued an executive order that will likely lead to restrictions on the procurement and use of electric equipment from certain foreign adversaries for use in the U.S. power grid. Second, on May 4, 2020, Secretary of Commerce Wilbur Ross announced the initiation of a Section 232 investigation into whether certain transformer components used in electrical power grids are being imported in quantities that threaten national security.

Key Notes:

  • By executive order, the secretary of energy is now authorized to review and block any acquisition, importation, transfer or installation of any bulk-power system electric equipment in which a foreign country or foreign person has an interest.
  • A list of prohibited suppliers of electric equipment may be forthcoming.
  • In addition, a Section 232 investigation has been initiated into transformers and certain components, which may result in increased tariffs on these items.

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The Office of the U.S. Trade Representative (USTR) has issued a Federal Register notice excluding certain List/Tranche 4 products (imports from China with an annual trade value of $300 billion) from China Section 301 tariffs. The exemptions cover three 10-digit Harmonized Tariff System (HTS) subheadings and five specially-prepared product descriptions, which cover 27 separately submitted exclusion requests. Three of the product-specific exclusions are related to hospital/medical products involved in the response to the COVID-19 pandemic.

The excluded HTS subheading are: (1) 3306.20.0000 – Preparations for oral or dental hygiene, including denture fixative pastes and powders; yarn used to clean between the teeth (dental floss), in individual retail packages: Yarn used to clean between the teeth (dental floss); (2) 6506.10.6030 – Other headgear, whether or not lined or trimmed: Safety headgear: Other – Motorcycle helmets; and (3) 8512.10.4000 – Electrical lighting or signaling equipment (excluding articles of heading 8539), windshield wipers, defrosters and demisters, of a kind used for cycles or motor vehicles; parts thereof: Lighting or visual signaling equipment of a kind used on bicycles: Visual signaling equipment.

The exclusions with specially-prepared product descriptions include but are not limited to: tumblers or disposable graduated liners for plastic pitchers of a type used in healthcare facilities; certain disposable identification wristbands of plastics, designed to be worn by patients during medical procedures; certain manually operated pill or tablet crushers of plastics for capturing and storing the resulting powders; certain tracking devices designed to be attached to other devices for Bluetooth connections; and certain wireless communication apparatus for receiving audio data to be played on wireless speakers.

These exclusions will apply from September 1, 2019, through September 1, 2020. 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. The USTR will continue to issue determinations on pending requests on a periodic basis.

An exclusion can apply to any product that fits within a description provided in the annex of the Federal Register notice, regardless of which company submitted the original request. Please contact us to discuss whether we can assist in determining if your product might fit within one of these exclusions.

On May 6, 2020, Secretary Wilbur Ross announced that the Department of Commerce will initiate an investigation into whether the quantities or circumstances of imports of mobile cranes into the United States threaten to impair the national security. This investigation is the result of a petition filed by The Manitowoc Company, Inc. (Manitowoc) on December 19, 2019. This is the second Section 232 investigation initiated by Commerce in May 2020 and now the seventh overall investigation the Trump administration has initiated pursuant to Section 232 of the Trade Expansion Act of 1962 to determine the effect of imports on U.S. national security. As required by the statute, Commerce Secretary Ross will send a letter to the Secretary of Defense seeking input into the investigation and will also notify other relevant executive branch officials. The investigation will be conducted by the Department’s Bureau of Industry and Security (BIS), and a more detailed Federal Register notice concerning the investigation and the submission of public comments will be published in the near future.

In its petition seeking the investigation, Manitowoc alleges that increased imports from Germany, Austria, and Japan and intellectual property (IP) infringement by foreign competition have harmed the U.S. mobile crane manufacturing industry. Manitowoc alleges that low-priced imports and IP infringement have caused the closure of one of its two production facilities in the United States and eliminated hundreds of manufacturing jobs. Specifically, the petition cites U.S. International Trade Commission (USITC) import data showing that imports of mobile cranes increased 152% between 2014 and 2019 and a USITC Section 337 determination in April 2015 that a Chinese manufacturer misappropriated six trade secrets and infringed on a patent, resulting in the USITC banning the sale of Chinese crawler cranes (and their components) in the United States.

In response to the announcement that the Section 232 investigation would proceed, Manitowoc President and Chief Executive Officer Barry L. Pennypacker stated, “These imports jeopardize the domestic industry’s ability to supply cranes to the U.S. military and support critical infrastructure, thereby undermining the national security of the United States. We are confident this investigation will demonstrate the urgent need for [President Donald Trump] to provide immediate and meaningful relief for Manitowoc. This petition is about protecting our American workforce and preserving our longstanding commitments to the U.S. military.”

Further details on this Section 232 investigation and BIS’s procedures and timing will be provided in a future Trump and Trade post.

The Export-Import Bank of the United States (EXIM) has announced the launch of its “Strengthening American Competitiveness“ initiative aimed at supporting the Program on China and Transformational Exports (“China Program”).  This program focuses on enabling U.S. exports to obtain financing support comparable to such support for Chinese exports to enhance global leadership of exports from the United States.

In December 2019, EXIM was reauthorized for seven years and charged with reserving at least 20% of the agency’s total financing authority for support to the China Program.  The Trump administration intends to use EXIM as a significant tool to support financing for U.S. exports.  EXIM’s President and Chairman, Kimberly Reed, has explained that the China Program sets a “goal of reserving $27 billion, to support the extension of loans, guarantees, and insurance that are fully competitive with the rates, terms, and other conditions established by the People’s Republic of China.”  Financing under the China Program aims to “neutralize export subsidies for competing goods and services” provided by China, and support U.S. leadership in specific industries, including artificial intelligence, biotechnology, wireless communications, renewable energy, semiconductor manufacturing, water treatment and sanitation, and high-performance computing.

EXIM is providing a series of teleconferences on this initiative that will focus on how EXIM can support “Made in the U.S.A.” exports.  The schedule of teleconferences is as follows:

  • May 7, 2020 – Renewable energy
  • May 14, 2020 – Wireless communication (5G)
  • May 21, 2020 – Biotechnology and biomedical sciences
  • May 28, 2020 – Semiconductors
  • June 11, 2020 – Artificial intelligence; high-performance and quantum computing
  • June 18, 2020 – Water treatment and sanitation
  • June 25, 2020 – Emerging financial technologies
  • July 9, 2020 – Space technology

To register for the teleconferences, please visit the EXIM webpage.  If you have questions about the teleconferences, contact external@exim.gov.

 

In collaboration with our foreign law firm partners, we continue to update our chart of COVID-19 measures taken by governments around the world. Today’s update includes new information for many countries as indicated in the chart: Global Government Measures Taken in Response to COVID-19.

Please see our Trump and Trade Update of April 7 for discussion of this initiative.

On May 6, 2020, the Office of the U.S. Trade Representative (USTR) released a Federal Register notice seeking public comment on whether extensions for up to 12 months should be granted for particular products that have received exclusions in the China Section 301 process from the 25 percent tariffs on imports from China with an annual trade value of $200 billion (List/Tranche 3).   These product exclusions were listed in 11 Federal Register notices:

At this time, the USTR is not considering product exclusion Federal Register notices issued after March 26, 2020.  All of the exclusions in the listed Federal Register notices are set to expire on August 7, 2020.

The 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 August 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 August 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.

The USTR is seeking public comments from interested parties on whether to extend any particular exclusion for up to 12 months. The period for comment runs from May 1, 2020 until June 8, 2020.  Comments must be submitted on the public docket on USTR’s web portal at https://comments.USTR.gov under Docket No. USTR-2020-0015 – “Section 301 – China $200 Billion Trade Action (List 3) Comments Concerning the Extension of Particular Exclusions Granted Under the August 2019 through March 2020 Product Exclusion Notices”.  New users will first have to create an account in order to submit comments.  For parties wishing to include Business Confidential Information (BCI), the USTR notes that such information will not be publicly available when comments are posted on the docket.  Parties may also upload supporting documents that can also be marked as public or BCI.

On May 4, 2020, the U.S. International Trade Commission (USITC) released the results of its investigation to identify imported products related to the COVID-19 pandemic response. The report and database identify 112 U.S. Harmonized Tariff System (HTS) numbers covering a “mix of COVID-19 related” goods, including test kits/instruments;  disinfectants and sterilization products; pulse oximeters and equipment for medical imaging, diagnostics and oxygen therapy; medicines/pharmaceuticals; non-PPE medical consumables and hospital supplies; and personal protective equipment.  Of the 112 identified HTS numbers, the report determined that products in 76 of the numbers are imported duty-free, with 36 subject to some form of a general duty rate. Notably, 55 of the HTS numbers are subject to additional duty rates in the ongoing China Section 301 investigation, with 39 headings subject to 25 percent additional tariffs and 16 subject to 7.5 percent additional tariffs when the products are imported from China.

The investigation was requested by Congress (see Trump and Trade Update of April 8, 2020) and provides trade-related information for each product. Specifically, the USITC produced a database that provides the following information for each product it identified:

  • the 10-digit HTS number for the imported article and its description;
  • the general duty rate;
  • any special or additional rates of duty imposed on the article, the dates on which the rates were imposed, and the authorities under which they were imposed;
  • whether any such duties have been suspended and, if so, the date of suspension as well how long suspension is scheduled to last;
  • the total range of duty rates imposed on such articles, including any special or additional rate of duty; and
  • the major countries of origin for each HTS number identified, and the import value of that HTS number for each country for the years 2017-2019.

COVID-19 Related Goods: U.S. Imports and Tariffs (Investigation No. 332-576, USITC publication 5047, April 2020) is available on the USITC’s website at https://www.usitc.gov/publications/332/pub5047.xlsx.  The USITC will provide any updated data runs on its website through June 30, 2020. Because many of the HTS numbers encompass goods not related to COVID-19, the report is careful to note, the data may substantially overstate the value of U.S. imports of such related goods.

In response to the report and data, House Ways and Means Committee Chairman Richard E. Neal (D-MA) called for a 90-day suspension of all tariffs on products identified by the USITC and relevant to the COVID-19 pandemic response. He added that such tariff suspensions “must be subject to a straightforward and easily administrable process for affected stakeholders to object.”  Chairman Neal’s complete analysis of the USITC’s report is available here. Senate Finance Committee Chairman Chuck Grassley (R-Iowa) stated that the report “is excellent work by the ITC to centralize trade-related information on products that may be needed to respond to the ongoing pandemic. It will help inform policymaking both in Congress and in the Administration.”

The USITC is an independent, nonpartisan, factfinding federal agency, and this general factfinding investigation and the resulting database convey the USITC’s objective findings and independent analyses with no recommendations on policy or other matters.

The Office of the U.S. Trade Representative (USTR) has issued a Federal Register notice exempting Section 301 tariffs for certain List 3 (imports from China with an annual trade value of $200 billion) products. The exemptions cover two 10-digit Harmonized Tariff System (HTS) subheading and 144 specially-prepared product descriptions, which cover 185 separately submitted exclusion requests.

The excluded HTS subheading are: (1) 4819.50.4060 (Cartons, boxes, cases, bags and other packing containers, of paper, paperboard, cellulose wadding or webs of cellulose fibers; box files, letter trays and similar articles, of paper or paperboard of a kind used in offices, shops or the like: Other packing containers, including record sleeves: Other); and (2) 6902.20.5020 (Refractory bricks, blocks, tiles and similar refractory ceramic constructional goods, other than those of siliceous fossil meals or similar siliceous earths:  Containing by weight more than 50 percent of alumina (Al2O3 ), of silica (SiO2 ) or of a mixture or compound of these products: Other).

The exclusions with specially-prepared product descriptions include but are not limited to: Certain dried fruits and vegetables in powder form; various chemical compounds (CAS Nos. are provided); certain disposable clothes of non-woven textiles with organic surface-active preparations for washing skin; natural and artificial powdered graphite; certain plate-type supported catalysts; certain vinyl floor coverings; certain expandable rubber garden hoses; certain non-radial pneumatic tires for ATVs and UTVs; certain cases and backpacks made of man-made fibers; certain bamboo plywood sheets and laminated flooring; certain printable glitter paper; certain graphite sinks and pedestals; flat and convex rear-view mirrors for vehicles; certain microscope slides and laboratory glassware; certain kitchen or household steel parts to trash can lids; certain rail air brake parts; certain kitchen and table utility implements and handtools; certain carburetors and crankcases of aluminum or steel; certain vacuum pumps; certain hydraulic jacks; certain machine tool castings; certain regulating valves; certain power supply components; certain nickel-metal hydride batteries; certain detectors for indoor security applications; certain cable and wire harnesses; certain bumpers for motor vehicles, ATVs and UTVs; certain carbon steel products meeting Society of Automotive Engineers (SAE) standards; certain parts for bicycles; certain parts for HVAC thermometers; certain upholstered chairs; certain outdoor aluminum seats and tables; certain light-emitting diode (LED) desk and floor lamps; and certain modular, prefabricated buildings.

These exclusions will apply from September 24, 2018, through August 7, 2020. 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. The USTR will continue to issue determinations on pending requests on a periodic basis.

An exclusion can apply to any product that fits within the description in the annex of the Federal Register notice, regardless of which company submitted the original request. Please contact us to discuss whether we can assist in determining if your product might fit within one of these exclusions.

We and our foreign law firm partners continue to update our chart of COVID-19 measures taken by governments around the world. The most recent version was published today and is available here. This update includes new information for most countries as noted in the chart.

Please see our Trump and Trade Update of April 7 for discussion of this initiative.

On April 29, 2020, the U.S. Department of the Treasury’s Office of Investment Security published an interim rule in the Federal Register that establishes a range of fees for formal written voluntary notices filed on or after May 1, 2020 with the Committee on Foreign Investment in the United States (CFIUS). The interim rule largely tracks the proposed regulations and adopts the sliding scale fee structure published on March 9, 2020 (see Trump and Trade Update of March 18, 2020). CFIUS has also issued a fact sheet and guidance for paying the filing fees. Public comments on the interim rule will be accepted until June 1, 2020.

Under the interim rule, all formal written notifications submitted on or after May 1, 2020 for “covered transactions” under 31 C.F.R. Part 800 or “covered real estate transactions” under Part 802, will be subject to filing fees ranging from $750 to $300,000, depending on the value of the transaction. Generally, valuation will be calculated based on the total value of all consideration that has been or will be paid in the context of the transaction by or on behalf of the foreign person who is a party to the transaction. The guidelines for valuation were discussed in the previous post.

CFIUS explained that there is no fee to submit a short-form declaration with CFIUS. However, the fees will apply to notices filed by parties at the end of the declaration process and full notifications made to CFIUS of a transaction subject to a mandatory short-form declaration. Notably, CFIUS may waive portions of a fee or the entire payment if “extraordinary circumstances relating to national security warrant such a waiver.”

The filing fee structure previously proposed remains unchanged:

Value of the Transaction Fee
Less than $500,000 No fee
Equal to or greater than $500,000
but less than $5,000,000
$750
Equal to or greater than $5,000,000
but less than $50,000,000
$7,500
Equal to or greater than $50,000,000
but less than $250,000,000
$75,000
Equal to or greater than $250,000,000
but less than $750,000,000
$150,000
Equal to or greater than $750,000,000 $300,000

Comments can be submitted online at www.regulations.gov or by mail to U.S. Department of the Treasury, Attention: Laura Black, Director of Investment Security Policy and International Relations, 1500 Pennsylvania Avenue NW, Washington, D.C. 20220.