Trump Reconsiders TPP Stance, May Have Renewed Interest in Multilateral Agreement

Ahead of talks with Japanese Prime Minister Shinzo Abe scheduled for this week, President Trump told a group of governors and lawmakers in a meeting on Thursday, April 12th that the United States was looking to rejoin the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (“TPP”).  President Trump withdrew from the TPP in January, 2017, just days after his inauguration, calling the agreement a “disaster.”

On Friday April 13th, however, President Trump repeated his previous stipulation that the United States would “only join {the TPP} if the deal were substantially better than the deal offered to {President} Obama.”  He explained that, “{the United States} already {has} BILATERAL deals with six of the eleven nations” in  the TPP, and we “are working to make a deal with the biggest of those nations, Japan, who has hit us hard on trade for years!” Continue Reading

Treasury Declines to Name China a Currency Manipulator

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

UK Unpacks Encryption Controls

Despite the fact that export controls on dual-use goods derive from international agreements such as the Wassenaar Arrangement, significant differences can be seen as controls are implemented by different countries. The same is true in the European Union notwithstanding the fact that the EU’s dual-use regulation (Council Regulation (EC) No. 428/2009) is binding on its 28 Member States.  Accordingly, while Regulation 428/2009 exempts telecom and information security equipment with encryption where there is limited cryptography functionality and/or products are mass-marketed and cannot be readily changed (the “Cryptography Note”), the exact scope of the exemptions is determined by each Member State. Continue Reading

China Promises Economic Reforms and to Lessen Tariffs on Automobiles

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.  Continue Reading

Trump Administration Considering Using IEEPA to Block Chinese Acquisitions

According to Bloomberg, the Trump administration is considering using the International Emergency Economic Powers Act (IEEPA) to block Chinese investments in industries or technologies “deemed important” to the U.S.  (This statute has been used primarily to authorize economic sanctions and embargoes administered by the Office of Foreign Assets Control).  To utilize IEEPA, the President must first declare that there is a national emergency in response to an “unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States.”  If the President were to declare a national emergency aimed at Chinese investment it would mark the first time IEEPA has been used to address unfair trade practices.

This development is the latest in a series of steps taken by the Trump administration to curtail Chinese investment in the U.S.  The recently proposed Foreign Investment Review Modernization Act (“FIRRMA”) would expand the jurisdiction of the Committee on Foreign Investment in the United States (“CFIUS”) to include investments in “critical technology” and “critical infrastructure”, and would also make it easier for regulatory agencies to review investments made by state-owned enterprises.  This legislative proposal is largely viewed as focused on regulating Chinese investment.  The Trump administration already exercised existing CFIUS-related authority to block the acquisition of Lattice Semiconductor Corp. by Canyon Bridge Capital Partners, a Chinese firm.

Trump Administration Releases Proposed List of Chinese Products for Additional 25% Tariffs

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

Continue Reading

U.S. to Raise “Misleading” Food Labeling Rules in NAFTA Discussions

The New York Times reported on March 20 that the United States was seeking to table a proposal in the NAFTA negotiations to limit the placement of consumer warnings on food packaging with respect to foods that are high in sugar, salt, or fat.  According to a copy of the negotiating document obtained by the Times, the U.S. proposal would prevent the use of any warning symbol, shape or color that “inappropriately denotes that a hazard exists from consumption of the food or nonalcoholic beverages.”

USTR Lighthizer confirmed the United States has concerns with warning and consumption labels used by trading partners at a March 21 hearing before the U.S. Ways and Means Committee on U.S. trade policy, including and the status of NAFTA negotiations.   During a line of questioning pursued by Rep. Lloyd Doggett (D-TX) inquiring specifically about the NYT article, Ambassador Lighthizer stated that while the United States was against obesity, it did not support the use of food label warning requirements “to create a protectionist environment.”  Separately, a USTR spokesperson emphasized that “the United States supports science-based labeling that is truthful and not misleading.” Continue Reading

Trump Announces 25% Tariffs on Chinese Goods

As an update to an earlier blog post the Trump administration is using Section 301 of the Trade Act of 1974 to impose additional tariffs, up to $50 billion per year, on certain products manufactured in China and imported into the U.S. and has announced that the proposed list of affected products will be issued by the U.S. Trade Representative (“USTR”) within fifteen days. We have heard that the list could be published as early as March 27th.  Original reports included apparel, footwear, electronics, and home goods.  According to today’s statements by USTR Robert Lighthizer, the sectors will include aerospace, information and communication technology, and machinery.

The proposed tariffs will be an across the board 25 percent ad valorem duty on covered products.  Following the release of the proposed list, the public will have thirty days to comment.  Importing and exporting companies should file comments to ensure that certain products either remain on or are removed from the proposed list.  Unlike the steel and aluminum tariffs recently imposed under Section 232, there is not a process, other than the filing of comments, to get specific products excluded.  The notice will also announce the date for a public hearing.  USTR, with the assistance of the interagency Section 301 Committee, will review all comments and then publish the final determination in the Federal Register and implement the new tariffs.

Potential Tariffs on Apparel, Footwear, Electronics, and Home Goods from China

The Trump Administration is planning on dusting off another infrequently used provision of the trade laws, Section 301 of the Trade Act of 1974, to impose additional tariffs on apparel, footwear, electronics, and home goods manufactured in China and imported into the U.S.  The potential tariffs could reach between $30-$60 billion per year.  The Trump Administration announced its proposed Section 301 tariffs as a response to China’s improper transfer of technology and failure to protect U.S. intellectual property rights.  Many industries are concerned about the potential added costs such tariffs represent and are organizing to oppose them.

Commerce Secretary Wilbur Ross and U.S. Trade Representative Robert Lighthizer are expected to testify before Congressional committees Wednesday and Thursday.  Additional information is expected to be released later in the week, including the list of covered products, proposed tariff rates, and the implementation date.  As with the recent Section 232 tariffs on steel and aluminum products, there is speculation that the Administration may include an exclusion process to remove specific products from the list of affected products.  It is also thought that there may be an opportunity for public comment opposing or supporting the proposal.  This blog will be updated as new information is released by the Trump Administration.

 

Sanctions Penalties Tick Up Again

Penalties for violations of sanctions rules administered by the Office of Foreign Assets Control (OFAC) ticked up again yesterday.  Most violations of OFAC’s rules now face statutory penalties of $295,141 or twice the value of the underlying transaction.  Penalties for violations of OFAC’s narcotics trafficking regulations are now set at $1,466,485, with penalties for violations of other OFAC regulations ranging from $13,333 to $86,976. Continue Reading

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