President Xi Jinping announced on Tuesday that China will begin a “new phase of opening up” that will shift the Chinese economy towards a market-based model.  While it is not the first time the Chinese President has made these or similar promises, the remarks clearly are designed to forestall threatened U.S. tariffs and reduce  trade tension with the United States.

The promised reforms include strengthening protections for intellectual property, increasing foreign access to financial and manufacturing sectors of the Chinese economy, and lowering tariffs on vehicles and other goods.

President Xi addressed the automobile industry by promising to eventually reduce ownership restrictions for foreign car makers and to lower tariffs on foreign vehicles.  The U.S. automobile industry currently faces relatively high tariffs when shipping to China.  While on its face the announcement Tuesday appears positive for U.S. auto manufacturers, President Xi noted that the trade reforms would only be available to those countries that do not “violate” rules established by the WTO.  Given that China formally challenged the U.S. in the WTO on Tuesday regarding steel and aluminum tariffs, the availability of Chinese trade concessions to American automotive manufacturers remains elusive. 
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The Trump Administration is using an infrequently used provision of the trade laws, Section 301 of the Trade Act of 1974 to impose an additional 25% tariff on $50 billion worth of Chinese products imported into the U.S.  The proposed list covers 1300 tariff lines and includes medicaments, pumps and valves, machinery for the oil and gas, agriculture, food, beverage, and apparel industries, motors, generators, trucks, bulldozers, railway cars, automobiles, helicopters, airplanes, and boats, and consumer products such as dishwashers, microwaves, TV’s, and VCR’s. (see full list here)

The proposed list covers the following sectors (See blog post from March 21):

  • New advanced information technology
  • Automated machine tools and robotics
  • Aerospace and aeronautical equipment
  • Maritime equipment and high tech shipping
  • Modern rail transport equipment
  • New energy vehicles and equipment
  • Power equipment
  • Agricultural equipment
  • New materials
  • Biopharma and advanced medical products


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Late last week, the Government of China announced that it would be removing export taxes on many steel products, including wire, rods, bars, billets, and stainless steel plate, as of January 1, 2018.  The move is part of a number of tax changes.  The steel export tax has not prohibited massive volumes of Chinese steel from being shipped to other markets in the face of overwhelming overcapacity at home.  But the absence of the export tax will make it even easier for Chinese steel producers to export steel products around the world.  Notably, China typically adjusts export tax levels on an annual basis as a policy measure to encourage or discourage certain exports.  Thus, this latest decision signals not only the Government of China’s continued active intervention in the market, but its support for even greater exports of Chinese steel, which the world can hardly absorb.
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Last week, the United States filed its first legal analysis of the China non-market economy issue in a dispute at the World Trade Organization brought by China against the European Union.

As we have reported here and here, the question of whether the United States would continue to treat China as an non-market economy (“NME”) for purposes of the Department of Commerce’s antidumping duty analysis was recently decided by the Administration.  In a 200-page memorandum issued at the end of October, Commerce announced that it would continue to apply alternative dumping methodologies with respect to China given the substantial evidence that China continues to be an NME.

That has not stopped China from initiating dispute settlement proceedings at the World Trade Organization (“WTO”) against the European Union (DS516) and the United States (DS515).  In each dispute, China is challenging the WTO member’s applied antidumping duty methodology with respect to imports from China, which China believes are prohibited under a provision of its 2001 Protocol of Accession to the WTO and inconsistent with provisions of the WTO Antidumping Duty Agreement and the General Agreement on Trade and Tariffs (“GATT 1994”). 
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The U.S. Department of Commerce self-initiated antidumping and countervailing investigations of common alloy aluminum sheet from China on November 28.  An accompanying fact sheet estimates dumping margins on the subject merchandise to be between 56.54 and 59.72 percent, and estimates a subsidy rate above de minimis.  Trade cases are typically initiated in response to petitions filed by a domestic industry alleging that dumped or unfairly subsidized goods are being exported to the U.S. market.  Self-initiation authority, however, can be exercised whenever the Secretary determines that a formal trade remedy investigation is warranted based on available information.

The Department’s use of self-initiation authority has been judicious and rare.  In an agency-issued press release Secretary Wilbur Ross stated, “{w}e are self-initiating the first trade case in over a quarter century, showing once again that we stand in constant vigilance in support of free, fair, and reciprocal trade.”  The Department further noted that it last self-initiated a countervailing duty investigation in 1991 on softwood lumber from Canada, and last self-initiated an antidumping duty investigation in 1985 on semiconductors from Japan. 
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On October 26, 2017, the Department of Commerce  announced the results of an investigation concluding that China is a non-market economy (“NME”) country for purposes of Commerce’s antidumping analysis.  Commerce’s decision continues the long-standing practice of the agency with respect to the antidumping methodology it applies to cases involving China.

Commerce was spurred to review its position on China’s NME status, last addressed in 2006, following the December 11, 2016 change in China’s Protocol of Accession to the World Trade Organization (“WTO”).  By way of background, the WTO Antidumping Agreement permits WTO member countries to impose duties on dumped imports.  Those duties are calculated as either the difference between the imported product’s export price and the comparable home market price, or the difference between the export price and a constructed value based on the product’s cost of production.  Sometimes, however, those home market prices or costs of production do not reflect market forces, particularly in NME countries.
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On Friday, October 27, 2017, the Department of Commerce announced its affirmative preliminary determination in the antidumping duty investigation on aluminum foil from China.  The Department calculated preliminary dumping margins of 96.81 and 162.24 percent for the two mandatory respondents under investigation.  Additionally, the Department set the rate for the PRC-wide entity at 162.24 percent and the rate all other companies found to be separate from the PRC-wide entity at 138.16 percent.
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On Monday September 18th, U.S. Trade Representative Robert Lighthizer warned that China’s trade practices represent “a threat to the trading system that is unprecedented.”  This was his first public speech since being confirmed in May as USTR.

The World Trade Organization (“WTO”) cannot “successfully manage mercantilism on this scale,” said Lighthizer at an

On September 12th, the Commerce Department announced preliminary subsidy rates in its countervailing duty (“CVD”) investigation of certain tool chests and cabinets from China.  The rates calculated for the two examined Chinese producers and most other Chinese producers/exporters range from 17.32 to 32.07 percent.  See the Fact Sheet here.

In addition, thirty-one Chinese companies that failed to respond to Commerce’s initial inquiries received a “total” adverse rate of 112.99 percent.   The scope of this investigation, which Commerce modified based on petitioner’s recommendations, covers certain metal tool chests and tool cabinets, with drawers, (tool chests and cabinets), from China.  As a result of Commerce’s preliminary determination, imports of covered tool chests and cabinets from China that enter the United States will be subject to cash deposits consistent with the preliminary subsidy rates. 
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Four days after President Trump signed a memorandum directing the U.S. Trade Representative (“USTR”) to determine whether to initiate a Section 301 investigation of Chinese laws, policies, practices, or actions that may be harming the intellectual property rights of U.S. persons, USTR Lighthizer formally announced the initiation of an investigation on August 18, 2017.

The public is encouraged to participate in the investigation by submitting comments and appearing at a public hearing in Washington, DC.  Comments and requests to appear at the hearing must be submitted by Thursday, September 28, 2017. The public hearing will be held in the main hearing room of the U.S. International Trade Commission (“USITC”) on Tuesday, October 10, 2017.
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