Section 232 Update

Dear Friends,

By now, you have probably seen that the President issued two new proclamations regarding the imposition of additional duties on imports of steel (25%) and aluminum (10%) under Section 232 of the Trade Expansion Act of 1962, as amended.  The proclamations do the following:  (1) extend the temporary exemption applicable to imports of covered articles from Argentina, Australia and Brazil while the details associated with permanent exemptions are finalized; (2) extend the temporary exemption applicable to imports of covered articles from Canada, Mexico and the EU through May 30, 2018; (3) address issues related to the application of the additional duties when foreign trade zones are involved; and (4) clarify that “[n]o drawback shall be available” with respect to section 232 duties.  The steel proclamation also finalizes the permanent exemption afforded imports of covered steel articles from South Korea.  Imports of aluminum covered articles from South Korea are not covered by a permanent exemption and are, therefore, subject to the additional 10% duties as of May 1, 2018.  Copies of the April 30th proclamations are attached here for your reference:  2018-09841 and 2018-09840.

Since the issuance of the proclamations, it has been reported that the permanent exemption to be afforded Brazil will only apply to steel imports (in exchange for a limit on Brazilian steel exports to the USA) and that aluminum imports will be subject to the additional 10% duty.  It is also been reported that the permanent exemption to be afforded Argentina will cover both steel and aluminum imports (again, in exchange for a limit on Argentine exports to the USA).

In terms of Canada and Mexico, the permanent exemptions appear to be tied to the on-going NAFTA negotiations.  While those negotiations have reportedly made substantial progress in recent weeks, it is not clear whether a deal will be able to be announced in the next couple of weeks.  The Administration has recently expressed concern that if a deal is not reached by May 21, 2018, then any revised agreement would need to be voted on by the next Congress, due to timing issues associated with applicable legal requirements (e.g., the Administration has to provide notice of any deal to Congress, the U.S. International Trade Commission has to do a study of any new deal, etc.).  This is problematic because the next Congress (which will be sworn in in January 2019) will not have had an opportunity to help direct the negotiations (as the current Congress has) and may have a different composition as a result of the elections in October.  As a result, expect the U.S. Administration to put on a full court press to get a deal done (or at least announced) before May 21st.  If that does not happen, then there is an increased chance that the section 232 duties will go into effect for Canada and Mexico June 1, 2018.

In terms of the EU, the Administration has made clear that the key to getting a permanent exemption from the section 232 duties is agreeing to an export quota, or other voluntary-export-restraint-type agreement.  The EU, however, has made it clear that it will not agree to any sort of quota or VRA.  It has, however, reportedly offered to enter into negotiations with the United States for a new ‘trade in goods’ free trade agreement.  It will be an interesting few weeks to be sure as these discussions play out.

In the meantime, we recommend that any company which imports covered articles from Canada, Mexico or the EU (or relies on covered articles from these countries imported by other U.S. parties) consider preparing product exclusion petitions now.  While exclusions are not needed currently, there is a meaningful chance that such exclusions will be needed in the near future (i.e., June 1st).  Given the delay in the processing of product exclusion petitions, it is important that companies which are impacted be proactive in protecting their interests (e.g., not languishing at the back of a very long line, etc.).

We hope that this update is helpful.  We are assisting numerous clients deal with these section 232 issues.  If you would like to discuss any of this further, please let us know.

Best regards,
Ted

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Trump on Trade/NAFTA’s Future – Part III

Dear Friends,

On the NAFTA front, there were two further developments this past week of which we wanted to be sure you were aware.

The first was a notice from the U.S. Trade Representative’s Office published in the Federal Register on Tuesday requesting public comment and input on what the U.S. position should be in negotiations with Canada and Mexico to modernize NAFTA.  Specifically, the USTR is interested in comments addressing the following topics:

(a) General and product-specific negotiating objectives for Canada and Mexico in the context of a NAFTA modernization.
(b) Economic costs and benefits to U.S. producers and consumers of removal of any remaining tariffs and removal or reduction of non-tariff barriers on articles traded with Canada and Mexico.
(c) Treatment of specific goods (described by HTSUS numbers), including comments on (1) Product-specific import or export interests or barriers, (2) Experience with particular measures that should be addressed in negotiations, and (3) Addressing any remaining tariffs on articles traded with Canada, including ways to address export priorities and import sensitivities related to Canada and Mexico in the context of the NAFTA.
(d) Customs and trade facilitation issues that should be addressed in the negotiations.
(e) Appropriate modifications to rules of origin or origin procedures for NAFTA qualifying goods.
(f) Any unwarranted sanitary and phytosanitary measures and technical barriers to trade imposed by Canada and Mexico that should be addressed in the negotiations.
(g) Relevant barriers to trade in services between the United States and Canada and Mexico that should be addressed in the negotiations.
(h) Relevant digital trade issues that should be addressed in the negotiations.
(i) Relevant trade-related intellectual property rights issues that should be addressed in the negotiations.
(j) Relevant investment issues that should be addressed in the negotiations.
(k) Relevant competition-related matters that should be addressed in the negotiations.
(l) Relevant government procurement issues that should be addressed in the negotiations.
(m) Relevant environmental issues that should be addressed in the negotiations.
(n) Relevant labor issues that should be addressed in the negotiations.
(o) Issues of particular relevance to small and medium-sized businesses that should be addressed in the negotiations.
(p) Relevant trade remedy issues that should be addressed in the negotiations.
(q) Relevant state-owned enterprise issues that should be addressed in the negotiations.

Comments on these issues (or any others) must be submitted to USTR by June 12, 2017.  In formulating any comments, it is important to keep in mind that this Administration has a different perspective than previous ones when it comes to modernizing or liberalizing NAFTA.  We believe that this effort (at least from a US perspective) will be aimed more squarely at benefitting the United States than previous efforts (which may have looked more at benefitting the NAFTA region as a whole, or US companies with operations in Mexico or Canada).  The following quote from the summary is clear (and consistent with the Administration’s messaging on trade to date): 

“The United States intends to commence negotiations with Canada and Mexico regarding modernization of the North American Free Trade Agreement (NAFTA). The NAFTA was negotiated more than 25 years ago, and, while our economy and U.S. businesses have changed considerably over that period, NAFTA has not. The United States seeks to support higher-paying jobs in the United States and to grow the U.S. economy by improving U.S. opportunities under NAFTA.”

Emphasis added.  A copy of the notice is available here.

The second development relates to a study the USTR requested the U.S. International Trade Commission undertake related to NAFTA imports.  The study, entitled “Probable Economic Effect of Providing Duty-Free Treatment for Currently Dutiable Imports,” will examine the impact of providing duty-free treatment to imports of currently dutiable imports from Canada and Mexico.  Specifically, the ITC will provide a report containing its advice as to the probable economic effect of providing such treatment on (i) industries in the United States producing like or directly competitive products, and (ii) consumers.  The ITC has been asked to look at every dutiable article in the Harmonized Tariff Schedule.  The ITC has also been asked to specifically address the probable economic effects of eliminating tariffs on any dutiable agricultural imports from Canada or Mexico.   

The report is due by August 16, 2017.  A copy of the ITC notice of initiation can be found here and the USTR’s letter to the ITC can be found here.

*     *     *

These efforts to modernize NAFTA/trade with Canada and Mexico represent a ‘once in a generation’ opportunity.  Every company that produces articles in the NAFTA territory, sources articles in the NAFTA territory or competes with articles produced or sourced in the NAFTA territory has a strong incentive to participate in this process.  Given how quickly it is moving, companies need to assess their opportunities/challenges and decide how best to engage now.  Those who do not do so will likely find themselves at a competitive disadvantage once this process is over. 

We are helping numerous clients perform this assessment, as well as develop and implement strategies (offensive or defensive) to maximize the potential benefits.  If you have any questions about how to go about this, please let us know.

Best regards,
Ted

 

Miscellaneous Tariff Bills — Hope Becoming Reality – III

Dear Friends,

This Friday, October 14, 2016, marks the opening of a 60-day window for filing miscellaneous tariff bill (MTB) petitions with the U.S. International Trade Commission (ITC) through its online portal. The MTB process allows importers to seek a temporary suspension or reduction of duties of up to $500,000 per year for each eligible product. If you import products that are not produced in the U.S. (and are not in direct competition with U.S. manufactured products), this is an opportunity that must not be overlooked.  

We participated in an ITC training session on using the online portal yesterday and believe companies should find it to be a relatively straight-forward process.  We are assisting a number of clients prepare and/or file MTB petitions and would be happy to discuss this opportunity with you further.  If you would like to do so, just let us know. 

Best regards,
Ted

 

Miscellaneous Tariff Bills — Hope Becoming Reality II

Dear Friends,

Just a brief reminder that the MTB process is scheduled to begin in less than a month.  The U.S. International Trade Commission will begin accepting petitions for duty suspension/reduction on qualifying articles October 14, 2016.  This will start a 60-day period for accepting petitions.  Given the large number of petitions expected to be filed, and the limited time (and resources) available to review those petitions, the ITC has recommended that interested parties make their submissions as early in the process as possible, as it cannot guarantee that all petitions will be able to be reviewed.

If you are considering whether to submit a petition for duty suspension/reduction, please let us know.  While the petition itself is not particularly complex, there are certain issues that can trip companies up in this process (i.e., not defining the product narrowly enough thereby exceeding the $500,000 a year in revenue loss, etc.).  Again, given the number of petitions expected to be filed, and the ITC’s limited time and resources, petitions with any defect whatsoever may be deemed ineligible.

We are helping numerous clients with their petitions and would be happy to help you determine whether this is worth pursuing and, if so, steering you through it.

Best regards,

Ted

*See original post:  Miscellaneous Tariff Bills — Hope Becoming Reality

Miscellaneous Tariff Bills — Hope Becoming Reality

Dear Friends,

As you may have heard, the long awaited renewal of the Miscellaneous Tariff Bill (MTB) process is one step away from becoming reality.  The House passed the American Manufacturing Competitiveness Act by a vote of 415-2, and the Senate unanimously passed the same legislation on May 10th.  The President is expected to sign the bill shortly.

This legislation is uncommonly popular, and uncommonly bipartisan—and with good reason. The benefit here is a potential boon to downstream U.S. manufacturers, with as much as $500,000 in annual duty savings for each covered product.  Because benefits are limited to products with no or limited domestic production, there is little political downside to granting such relief.

What you need to know.

In the short term, there will be just one opportunity to obtain temporary duty suspension via the MTB process—a 60-day window this Fall during which a petition can be filed with the USITC.  (The next opportunity to take advantage of the MTB process won’t be until 2019.)  As a result, the time to begin preparing is now.

The main objective at this point should be to identify the products you import and pay duties on which either (1) are not manufactured in the United States or (2) are not manufactured in sufficient quantities to fulfill your sourcing requirements.  The $500,000 limitation on duty savings is calculated on a per article basis.  Consequently, to maximize duty benefits, the goal is to identify potentially eligible articles by as narrow a description as possible.

If you are interested in submitting a petition, please let us know.  We have extensive experience with the MTB process, and would be glad to help.

Best regards,

Ted

Miscellaneous Tariff Bills — A(nother) Glimmer of Hope?

Dear Friends:

It appears that Congress is once again trying to breathe new life into the miscellaneous tariff bill process.

It is being reported that a plan is circulating on Capital Hill to revise the process for introducing and passing these tariff suspension bills.  The plan, which is based on the plan discussed in our January 29, 2015 update (below), as well as on an earlier plan, involves having the U.S. International Trade Commission solicit petitions for temporary duty suspensions, review and analyze those petitions (with input from the Administration and the public) to ensure that the requirements are met and there is no domestic opposition, and preparing a report for Congress with its analysis and recommendations.  Congress would then draft the MTB legislation.

While this is a positive development, it is not certain to be adopted.  The plan strives to comply with the ban on earmarks by no longer having members of Congress introduce individual bills, but it remains to be seen if enough House Republican lawmakers will agree.  If they do, then it is possible we will see the process adopted sometime in the next few months.  House leadership has indicated that they are striving to get this process in place prior to the July recess.

Tariff suspension bills can provide a significant benefit to companies that import dutiable items that cannot be sourced here in the United States, and is something most companies should consider.  If you would like to discuss the possibility of seeking tariff suspension on a given article, or the process more generally, please let us know.

Best regards,

Ted

Environmental Goods — Potential Savings Opportunity

Dear Friends:

Further to the below, we wanted to let you know that the United States will hold its first negotiations today with the thirteen other WTO members who committed to negotiate the Environmental Goods Agreement (EGA). Over the coming months, the WTO members will negotiate product coverage under the EGA, building upon the list of the 54 environmental goods on which the APEC Leaders agreed to either reduce or eliminate tariffs on by the end of 2015.

As you know, the U.S. Trade Representative has solicited written comments from industry in preparation for the negotiations, held a public hearing and meetings with Congress and other interested stakeholders and requested that the U.S. International Trade Commission conduct two studies to help inform the United States’ negotiating strategy on product coverage under the EGA. The U.S. International Trade Commission is expected to release the results of the studies in August and October.

As the negotiations move forward, the U.S. Trade Representative said that it will continue to consult with industry and other stakeholders to ensure that the EGA delivers concrete benefits to the United States. While time is short, if you are interested in participating in the process (e.g., having a product added to the list for consideration for duty free treatment), there are still steps companies can take to try to get considered. If you’d like to discuss this further, please let us know.

We hope that this is helpful. We will continue to keep you apprised of developments with the EGA.

Best regards,

Ted