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On February 28, 2023, the U.S. Department of Commerce announced the first funding opportunity under the CHIPS and Science Act (“CHIPS Act”), bipartisan legislation signed into law in 2022. The funding opportunity provides “manufacturing incentives to restore U.S. leadership in semiconductor manufacturing, support good-paying jobs across the semiconductor supply chain, and advance U.S. economic and…

On February 24, 2022, the Biden Administration announced the release of six executive-branch reports and a White House “capstone” report pursuant to Executive Order (EO) 14017 on America’s Supply Chains (February 24, 2021), which established a policy of pursuing more resilient, diverse, and secure American supply chains.  These reports culminated year-long sectoral assessments of the…

The historic infrastructure bill, now approved by the U.S. Congress and pending President Biden’s signature, includes broad policy provisions designed to improve governmental sourcing from U.S. manufacturing sectors.  These new statutory authorities aim to:

  • Expand domestic preference procurement policies applicable to federal financial assistance programs for public works infrastructure;
  • Increase the domestic component content requirements

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The United States International Trade Commission (“USITC”) has finalized recommended modifications to the Harmonized Tariff Schedule of the United States (“HTSUS”). The revisions, which are set to go into effect on January 1, 2022, conform the HTSUS with World Customs Organization (“WCO”) amendments to the Harmonized System commodity codes.  A detailed report of all changes…

On March 1, 2021, the U.S. Court of International Trade (CIT) issued a decision with important ramifications for any company that uses “first sale” to reduce customs duty liability for goods imported into the United States.  The CIT’s ruling in Meyer Corp., U.S. v. United States calls into question the continued viability of first sale for suppliers located in non-market economies. This development has meaningfully altered the risk profile associated with using first sale for transactions in China and Vietnam.  All companies relying on first sale should review their first sale programs to evaluate the impact of this ruling and take adequate precautions.

The First Sale Rule

The first sale rule permits importers to declare a lower customs value—and by extension, to lower the customs duty liability—for certain types of qualifying importations. To be eligible, an importation must involve a multi-tiered transaction (i.e., there must be three or more parties involved in the sequence of sales leading to the importer). Under U.S. law, the earliest sale in such a sequence of transactions may be declared as the customs value provided that the goods are clearly destined for the United States at the time of such sale and the first sale value otherwise satisfies the requirements applicable to any transaction value (i.e., it must be a bona fide sale that has been conducted at arm’s length).

First sale is thus commonly described as having “three elements”: the first sale in a multi-tiered transaction may be used as a customs value provided (1) it is a bona fide sale, (2) the goods are clearly destined for the United States at the time of the transaction, and (3) the value is an arm’s length price.

Meyer v. United States

The CIT’s decision in Meyer hinges on additional language from the seminal 30-year-old case that established first sale as a viable basis for customs valuation—language that has frequently been quoted, but seldom, if ever, scrutinized for meaning.  The CIT interpreted that language to impose an overlooked requirement, namely that any legitimate first sale must be (4) absent any distortive non-market influences. While the first three requirements for the use of first sale are frequently assessed and litigated, the fourth requirement, the CIT notes, “has generally been neglected.”…
Continue Reading U.S. Importers Should Reevaluate “First Sale” Customs Programs

As a result of the partial government shutdown which began on December 22, 2018, about 800,000 federal employees are currently on furlough or working without pay.  Nine federal departments have been shutdown:  Department of Commerce; Department of Treasury; Department of Agriculture; Homeland Security Department; Department of the Interior; Deparment of Justice; Department of State; Department…

Last Friday, the U.S. International Trade Commission (“ITC”) formally launched an investigation into the economic benefits of the new U.S.-Mexico-Canada Agreement (“USMCA”) that is to replace NAFTA.

Under the Trade Promotion Authority (“TPA”) law, known as the Bipartisan Congressional Trade Priorities and Accountability Act of 2015, the ITC must prepare a report that assesses the likely impact of the Agreement on the U.S. economy as a whole and on specific industry sectors, as well as the interests of U.S. consumers.  This report, which will be made public, is due to the President and Congress no more than 105 days after the President signs the agreement. The TPA requires the President to wait 90 days from the date of the notification before signing the USMCA.  President Trump notified Congress of his intent to enter into the new trade agreement on August 31, 2018.  Therefore, the earliest the President may sign the agreement is November 30, 2018.

Congress is expected to wait until the ITC report is issued before voting on the new agreement.  In fact, Senate majority leader Mitch McConnell recently told Bloomberg in an interview that the vote on USMCA will be a “next-year issue.”

If Congress does not pass the TPA, the President has threatened to withdraw from NAFTA.  …
Continue Reading ITC Initiates Investigation of the Likely Impact of USMCA

On Monday, President Trump and President Moon Jae-in of South Korea signed a revised U.S.-Korea (known as “KORUS”) free trade agreement on the sidelines of the United National General Assembly meeting this week in New York.  In April 2017, President Trump indicated that he wanted to either renegotiate or terminate the then-five year old agreement.  Since then, the parties have engaged in trade talks, under the auspices of the existing KORUS review procedures and otherwise, to update key provisions.  Early on, the United States appeared to be primarily focused on changes to help reduce the United States’ bilateral trade deficit.  In March 2018, the Office of the United States Trade Representative issued a summary of the agreed-upon outcomes of the negotiations, and released the draft text earlier this month, with emphasis on how the revisions will “rebalanc{e} our trade” and “reduce the trade deficit.”

The changes to KORUS focus on the auto sector, customs procedures, and pharmaceutical reimbursement.  With respect to autos, the largest change is a 20-year extended phase-out period for the current 25% U.S. tariff on imports of light trucks from Korea.  That tariff will now expire in 2041, instead of 2021, which, according to the U.S. International Trade Commission, will delay the anticipated increase of 59,000 Korean truck imports.  Korea has also agreed to increasing the quota of U.S.-origin autos that meet U.S. safety standards (but not Korean safety standard) from 25,000 to 50,000 per manufacturer, per year.  Korea further agreed to recognizing U.S. standards for auto parts exports necessary to service U.S. vehicles in Korea and a harmonized testing system for emissions standards.  With respect to improving customs procedures, Korea will address onerous and costly customs verification procedures for U.S. exports, which have been …
Continue Reading United States and South Korea Sign Updated FTA

On April 13, 2018, the Treasury Department released its biannual report to Congress on the Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States, which declined to formally label China a currency manipulator under the Omnibus Trade and Competitiveness Act of 1988 (the “1988 Act”).

This is the third such report issued since President Trump took office.  Like the prior Trump Administration foreign exchange policy reports (April 2017 and October 2017), the latest report also concluded that China’s bilateral trade surplus, material current account surprise, and intervention in the foreign exchange market, together, do not require “enhanced analysis” and “enhanced bilateral engagement” under the Trade Facilitation and Trade Enforcement Act of 2015 (the “2015 Act”).

The latest report, however, continues to place China on Treasury’s foreign exchange “Monitoring List” under the 2015 Act.  The report lists China alongside Japan, Korea, Germany, Switzerland, and India as “major trading partners that merit close attention to their currency practices and macroeconomic policies.”  According to the report,…
Continue Reading Treasury Declines to Name China a Currency Manipulator