EU Releases Proposed List for Retaliatory Tariffs on U.S. Products

The European Union has just released a list of U.S. products for retaliatory tariffs following the recent announcement by the U.S. of its intent to levy additional duties on European products. The EU list covers nearly $23 billion worth of U.S. goods including tractors, luggage, frozen fish, fruit, wine, ketchup, nuts, and orange juice.  The proposed list is available for public comment until May 31, 2019.

The U.S. and EU retaliatory measures follow the long running dispute over the respective subsidies to Boeing and Airbus.  Both parties are awaiting WTO decisions on the dispute settlement proceedings before the measures will go into effect and will determine the permissible level of damages.   The U.S. valuation decision is expected this summer and the EU decision by May 2020.  The U.S. list is expected to cover $11 billion worth of goods.

These recent retaliatory tariffs emerge amid growing trade tensions between the two blocks as they initiate negotiations for a transatlantic trade agreement.  However, EU Trade Commissioner Cecilia Malmstrom stated that “I still believe that dialogue is what should prevail between important partners such as the EU and the US….”

On April 15, 2019, the EU agreed to launch trade negotiations with the U.S. on the condition that the U.S. does not impose new tariffs on EU good and that the U.S. agrees to remove existing steel and aluminum tariffs.  The EU has adopted negotiating mandates for the talks, but agricultural products have been excluded. The EU, which considers this issue a red line, stated that “agriculture will certainly not be part of these negotiations.”

That said, with the exception of France (and an abstention from Belgium), the EU Member States expressed their support for a trade agreement with the U.S. Germany, particularly, champions a trade deal, due to its substantial car and car part exports industry. France, on the other hand, opposes negotiations with the U.S. in light of President Donald Trump’s announcement to withdraw the U.S. from the Paris Climate Agreement.

On the U.S. side, Senate Finance Committee Chairman Chuck Grassley (R-Iowa) stated that the U.S. cannot proceed unless agriculture is part of the talks.  Clearly, the situation is fluid and is creating uncertainty for importers of EU products into the U.S. and exporters of U.S. products into the EU.

What does the Brexit Flextension Mean for Business?

On 10 April 2019, the European Union granted the United Kingdom a flexible extension, coined a “flextension”, until 31 October.  This additional period of time is intended, to allow the UK to ratify the Brexit Deal, an agreement devised between the EU and the UK for the orderly exit of the UK from the bloc. The Deal includes a transition period, a controversial solution to manage the border between Ireland and Northern Ireland, and provides for such things as citizens’ rights and the legal status of goods in transit at the moment of Brexit. The flextension will end as soon as the Deal is ratified, if it happens before the end of October.  Should the UK Parliament not find a majority to support the Deal, the UK could be forced to seek another extension or risk crashing out of the EU on Halloween.

The so-called “cliff edge” Brexit remains a real possibility considering that the Deal has been rejected by Members of the UK Parliament three times already, and successful cross-party negotiations is not by any means a foregone conclusion.  The UK certainly will continue its no deal preparations, including efforts to strike post-Brexit trade agreements with third countries; to date, the agreements it has secured cover only about 11 per cent of UK trade by value. The UK also could use this time to reconsider its Brexit strategy, which ranges from holding a second referendum to attempting to amend the Political Declaration attached to the Deal which delineates mutual commitments concerning the future UK-EU relationship to abandoning Brexit altogether. Continue Reading

Trump Administration Proposes Tariffs on Imports of EU Products

In response to a long running dispute with the European Union (EU) over subsidies to Airbus, the U.S. Trade Representative (USTR) has proposed additional tariffs on certain products of the EU covering approximately $11 billion in trade.  The proposed list covers 317 tariff subheadings and includes fish, cheese, olive oil, wine, leather handbags, textiles, wool sweaters, outerwear, glassware, and table linens. In addition, helicopters and aircraft from four member states, France, Germany, Spain, and the United Kingdom, will also be subject to additional tariffs.

The Trump administration has not yet announced the additional duty rates.  This latest trade action, announced on April 8, 2019, is pursuant to Section 301 of the Trade Act of 1974, the same provision used in 2018 for the 10-25% additional tariffs on $250 billion of Chinese products imported into the U.S.

The administration will be holding a public hearing on the proposed list of products at the International Trade Commission in Washington, DC. on May 15, 2019. Requests to appear must be submitted by May 6, 2019.  Written comments may also be submitted by May 28, 2019.

The trade dispute dates back to a 2004 U.S. challenge in the World Trade Organization (WTO) to EU subsidies of Airbus which had “adverse effects” on the U.S.  According to the USTR, the final list of products will be announced and go into effect this summer once the WTO issues its final findings on the dispute settlement proceedings.  According to the USTR, once in place, the tariffs will be applied until the EU removes the Airbus subsidies.

WTO Panel Issues Landmark Decision Regarding Actions Taken to Protect National Security Interests

On Friday, April 5th, a World Trade Organization (WTO) panel issued its decision in a landmark dispute between Russia and Ukraine.  The dispute, Russia – Measures Concerning Traffic In Transit, marks the first time a WTO panel has been tasked with determining whether it has jurisdiction to review actions taken by a WTO Member to protect its own national security interests.

The dispute was brought by Ukraine in September 2016 after Russia imposed various restrictions preventing Ukraine from using Russian road and rail transit to trade goods destined for Kazakhstan, the Kyrgyz Republic, Mongolia, Tajikistan, Turkmenistan, and Uzbekistan.  In defense, Russia claimed that its actions were not subject to WTO review because they constituted actions necessary to protect Russia’s “essential security interests” during an “emergency in international relations” between Russia and Ukraine.  Actions taken by a WTO Member during a war or an emergency in international relations are excepted from WTO review pursuant to Article XXI of the General Agreements on Tariff and Trade 1994 (GATT).  The Trump Administration has cited Article XXI as exempting from WTO jurisdiction its decision to impose duties on imports of steel and aluminum products pursuant to Section 232 of the Trade Expansion Act of 1962 (Section 232).  Continue Reading

USTR Publishes 2nd List of Exclusions on Chinese Tariffs

On Monday, March 25, the Office of the United States Trade Representative (USTR) granted a second set of exclusions to the first list of Chinese goods subject to a 25% ad valorem duty (84 FR 11152). As part of the Section 301 action on China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation, USTR released the first list of products (Tranche 1) subject to this additional duty on June 20, 2018, totaling $34 billion in Chinese imports. The duty went into effect on July 6, 2018, and the granted exclusions will be applied as of that date and extend for one year after the March 25th publication date.

USTR is reviewing requests on a rolling basis and published the first set of granted exclusions on December 28, 2018 (83 FR 67463). USTR has not issued a publication date for a third round of granted exclusions, however, it will likely be several months before all determinations are made.

Currently, 1,004 exclusion requests have been granted, 5,312 have been denied, and the remaining 4,520 are still under consideration. An exclusion request status report is available on the USTR Section 301 navigation site and is updated on a weekly basis. Requestors should carefully monitor USTR’s updates to determine the status of their exclusion request.  If a request is denied, USTR advises there is still a possibility that the product could qualify for an exclusion if a later filed request covering the same 10-digit HTS provision is granted.  That said, there are a number of instances where USTR granted a specific request and created a new HTS carve-out limited to the scope of products described in the granted request, and denied all other petitions at the 10-digit level.  In such cases, only products meeting the description set forth in the new HTS provision would qualify for the exclusion.

USTR initiated a similar exclusion process for Tranche 2 ($16 billion) on September 18, 2018, which concluded on December 18, 2018. To date, the agency has issued no final determinations on exclusion requests filed for Tranche 2.  USTR has not yet initiated an exclusion process for  products covered by Tranche 3 ($200 billion), which are subject to a 10% ad valorem duty effective as of September 24, 2018.

China Amends Law to Ban Theft of Foreign Trade Secrets

Last week, China amended a draft of a proposed foreign-investment law in an effort to address global concern over forced technology transfers.  The new law, which bans officials from divulging corporate secrets, was approved by the Chinese legislature on Friday.  The amendments were made shortly before the law was put to a vote and are seen as a concession to the U.S. as part of the ongoing trade negotiations.

Chinese forced technology transfers are one of three main unfair trade practices enumerated in the Section 301 Report that formed the basis for “301 tariffs” aimed at Chinese imports.

While the amendments to the foreign investment law appear to be a step in the right direction, it remains unclear what their impact will be given that Chinese law already banned the sharing of trade secrets.  The new law is set to go into effect next January.

On Tuesday, before the U.S. Senate Finance Committee, U.S. Trade Representative Lighthizer expressed hope that U.S. and Chinese negotiators are in the final stages of trade negotiations.  It remains to be seen what kinds of enforcement provisions will be incorporated into any U.S.-China agreement concerning forced technology transfers.

Bipartisan Legislation Introduced to Delay Section 232 Tariffs on Autos

U.S. Reps. Terri Sewell (D-AL) and Fred Upton (R-MI) on Wednesday introduced legislation (H.R. 1710) that would preclude President Trump from imposing  Section 232 tariffs on imported automobiles and automotive parts until the U.S. International Trade Commission (USITC) conducts “a study of the economic well-being, health, and vitality of the United States auto-motive industry.”  The bill seeks to require the USITC to analyze a number of specific factors including the “effect an increase in automotive manufacturing costs would have on jobs in the United States.”  The bill would also require the USITC to submit a report of its findings to the White House and Congress along with any “appropriate” recommendations.

The proposed legislation mirrors the “Automotive Jobs Act of 2019” that was introduced in the U.S. Senate (S. 121) in January by Sens. Doug Jones (D-AL), Lamar Alexander (R-TN), and Marsha Blackburn (R-TN).   Sen. Jones introduced the first iteration of the “Automotive Jobs Act” in the Senate in July, 2018 (S. 3266).

Last month, the Department of Commerce concluded its report on the national security impact of imported cars, which has not yet been made public.  The White House has 90 days from the submission of the Department’s report to decide whether to act on the recommendation in the report.  The President’s decision is currently due by May 18, 2019.  Under the proposed legislation, the report from the Department of Commerce would be deemed as not submitted until the USITC’s report is submitted to the President and Congress and the report is reviewed by the President.

Presently there is no indication of immediate action on either bill, which would need to be supported by two-thirds of Congress to override a Presidential veto.

Senate Finance Committee Asks USTR Lighthizer:  What is the Future of the WTO?

On Tuesday, U.S. Trade Representative Robert Lighthizer testified before the Senate Finance Committee to discuss a question that is central to the Trump Administration’s trade policy agenda:  What is the future of the World Trade Organization (WTO)?  As the 25th anniversary of the 1994 creation of the WTO (in its current form) approaches, the Trump Administration has been vocal in its criticism of the WTO’s shortcomings and failure to abide by the text of the agreements as written in 1994.  The Administration has pledged, as part of its overall trade policy, to seek critical reforms that will improve and reform the WTO’s functions going forward.  And, as Senator Wyden put it, trade issues including WTO challenges are one of the least known and biggest problems facing the United States’ ability to create good paying jobs and to expand our markets.

Ambassador Lighthizer answered questions on a number of topics relating to the WTO and, more generally, current U.S. trade policies: Continue Reading

European Commission Pushes Ahead with Preliminary EU-U.S. Trade Talks

European Commissioner for Trade Cecilia Malmström was in Washington, D.C. last week for exploratory trade talks with U.S. officials.  Although Malmström does not yet have a mandate to move ahead on EU-U.S. trade negotiations, which requires authorization by the European Council, both sides surely had plenty to discuss at this stage.

Two months ago, both the EU and the United States released their respective negotiating directives that highlight a disagreement over whether to include agriculture within the scope of any trade talks. While the European Commission intends to limit negotiations to industrial goods and conformity assessment, the United States is pushing for a more far-reaching trade deal that also covers agricultural goods.  The EU also wants to include discussions regarding automotive products within the scope of any trade negotiations on industrial goods, which it argues is required under World Trade Organization (WTO) rules on preferential trade agreements (i.e., these must cover “substantially all trade” between members).  Malmström is likely to also seek clarification on whether the Trump Administration intends to impose tariffs on certain EU automotive products.  If it does, the EU has indicated the possibility that it will suspend any trade talks and retaliate.  If the two sides can find common ground on these issues, however, the European Commission has stated that it hopes to conclude trade talks with the U.S. by November 2019. Continue Reading

Duty Preferences for India and Turkey to Be Revoked

On Monday, March 4th, President Trump announced that India and Turkey will no longer benefit from the United States’ Generalized System of Preferences (“GSP”) program.  The GSP program, established by the Trade Act of 1974, is designed to promote economic development by eliminating duties on certain eligible products when imported from a beneficiary country or territory.  On March 23, 2018, President Trump signed a law renewing the GSP program through December 31, 2020.

According to the Office of the U.S. Trade Representative (“USTR”), neither India nor Turkey meet the statutory eligibility criteria to continue as beneficiary countries under the GSP program.  USTR has found that Turkey is “sufficiently economically developed and should no longer benefit from preferential market access to the United States market.”  With respect to India, USTR concluded that the country failed to provide “equitable and reasonable access to its markets in numerous sectors.”  India is the largest single beneficiary of the GSP program, with GSP-eligible imports worth $5-6 billion.

The Indian GSP eligibility determination was the result of a review of India’s GSP eligibility initiated in April 2018.  Six months earlier, USTR announced new enforcement measures for GSP, including a triennial review process for each beneficiary country examining that country’s compliance with the 15 eligibility criteria established by Congress.  One of those criteria is that the GSP beneficiary country must provide the United States with equitable and reasonable market access.  In its latest pronouncement, USTR explained that “intensive” discussions with India regarding its trade barriers, particularly in the dairy and medical device industries, had been unsuccessful.  In a statement from the Ministry of Commerce and Industry on Tuesday, India rejected the United States’ characterization of the negotiations, claiming that it was “agreeable to a very meaningful, mutual acceptable package.”

Monday’s notice to Congress marks the beginning of a 60-day waiting period before duty-free treatment of the GSP-eligible imports from Turkey and India will end.

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