U.S. Assistance for Exporters with Ex-U.S. Customs Disputes

In light of a couple of recent successes we have had, we wanted to remind you of the opportunity to enlist the assistance of U.S. Customs and Border Protection (CBP) if you (or your customers) run into disputes with customs administrations outside of the United States

As you may recall, in 2015, CBP published a notice entitled, “Notice of Opportunity and Procedures to Request Assistance on Tariff Classification and Customs Valuation Treatment by Other Customs Administrations Affecting United States Exports” (copy available here), which was aimed at companies that run into tariff classification and/or customs valuation disputes with customs administrations outside of the United States.  In short, the notice reminds companies that the rules for tariff classification and customs valuation are based on international/harmonized standards, there are international forums where questions/disputes as to how these rules should be applied can be addressed (e.g., the WCO Harmonized System Committee and the WTO Technical Committee on Customs Valuation), and the U.S. government actively participates in these forums.  Accordingly, CBP encourages U.S. exporters who run into such issues abroad (e.g., another country classifying a product differently than the U.S. exporter believes to be correct, a country requiring an impermissibly high customs value, etc.) to raise these issues.  CBP will review the issue, and if it agrees with the U.S. exporter’s position, it will intercede with the other country’s customs administration on the U.S. company’s behalf.  If that does not work, the issue can be raised at the appropriate international forum.

 This process has proven beneficial for several clients which have been dealing with customs disputes in other countries.  Most recently, on behalf of two different clients, we helped CBP secure victories on the proper tariff classification of certain high-tech products at the WCO Harmonized System Committee meeting last monthThe U.S. positions on the proper tariff classification of these articles differed from the positions taken by customs administrations in Korea and India, respectivelyWe helped brief the issue and engaged in outreach with the other member administrations.  The HSC reviewed the substantive issues and voted (overwhelmingly) in favor of the U.S. position in both cases.  These were important victories given that the positions taken by the other countries were the basis for millions of dollars in additional duty exposure for one client, and meaningful customs penalties for many of the other client’s local customers (i.e., the importers of the U.S. company’s products)

 In short, if you are exporting product from the United States and run into a dispute with a local customs administration over the proper tariff classification or customs valuation of your product, and are unable to resolve it locally, you should keep this in mind as a potential option for resolving it.

 We hope this is helpful.  If you have any questions, please let us know.


Further Flare Up in US-EU Trade War

Further to our earlier post, and as expected, the European Commission released today a preliminary list of U.S.-origin products that it is considering subjecting to additional duties upon importation into the European Union as a result of the dispute with the United States over aircraft subsidies (copy attached – tradoc_157861 (1)).  The EC has requested authorization from the WTO to adopt countermeasures (e.g., duties) worth up to $12 billion.  This WTO has appointed an arbitrator to determine the appropriate level for the countermeasures and it will be sometime before a final decision is reached.  In the meantime, the EC published this preliminary list.  It advised that it is considering imposing additional customs duties of up to 100% on products covered by the final list and that, it is accepting public comments through May 31, 2019.  The list includes food items (e.g., fish, fruits, juices, ketchup, sauces, wines, spirits, etc.), coal, chemicals, medical supplies, polymers and plastics, handbags, briefcases, suitcases, construction equipment, tractors, parts for motorcycles and for bicycles, games, etc. 

 All companies that trade with the EU should review the attached list and consider their options (including working with affiliates or customers in the EU to file comments on the proposed list). 

 We have a great deal of experience working through these issues, both here in the United States and in the EU, and would be happy to answer any questions or otherwise help you worth through this. 

 We hope this is helpful.


Flare Up in US-EU Trade War

Yesterday, the U.S. Trade Representative stoked the fires of simmering trade dispute between the United States and the European Union.  Specifically, the USTR published a preliminary list of EU products that will be subject to additional duties upon importation into the United States as a result of a dispute over aircraft subsidies (the underlying dispute has been the subject of WTO litigation for many years).

 The United States has requested permission to impose countermeasures (i.e., additional duties) against EU products worth $11.2 billion a year.  The list includes aircraft and aircraft parts imported from France, Germany, Spain and/or the United Kingdom, as well as many other unrelated articles imported from any EU country (e.g., certain fish, cheeses, olive oils, wines, textiles, apparel, ceramics, metals, tools, motorcycles, lenses, oscilloscopes, etc.).  The WTO is considering the appropriate amount of the retaliation and a final list will be published once that is done.  In the meantime, interested parties may file comments with the USTR on what articles should be on the list.

 The EU has also brought a case at the WTO regarding U.S.-subsidies for domestic aircraft production.  In response to yesterday’s announcement that the United States was moving forward, the EU has said that it will also seek permission from the WTO to impose retaliatory duties on U.S.-origin products under its case.

 All companies that trade with the EU should review the attached list and consider its options.  These duties are in addition to the duties the United States currently imposes on steel and aluminum, and is threatening to impose on automobiles and auto parts, from the EU under Section 232.  The EU has imposed its own additional duties on U.S. products and is threatening to add to that here.   

 We hope this is helpful.  If you have any questions about these issues (including how to cope), please let us know.


A Possible Armistice in the U.S.-EU Trade War

Dear Friends,

Just a short note to let you know that an armistice may be in the works in the U.S.-EU trade war.

President Trump met with European Commission President Juncker at the White House today.  Following the meeting, the two each gave short statements to the media assembled in the Rose Garden. 

President Trump started by saying that the United States and EU were entering a “new phase” in their $1 billion bilateral trade relationship.  He went on to state that the two sides “agreed today . . .to work together towards zero tariffs, zero non-tariff barriers and zero subsidies on non-auto industrial goods.”  He also mentioned that the EU had agreed to buy “a lot of soybeans” and to start importing more liquefied natural gas (the EU will be a “massive buyer of LNG”).  The two sides also agreed to start a dialogue on standards to help ease trade/reduce barriers and to work together to reform the WTO and combat unfair trade practices by other countries (read:  China).  He concluded by saying that these negotiations will start “now” and that the two sides will resolve both the U.S. steel and aluminum duties, as well as the EU retaliatory duties.

President Juncker gave a shorter statement that (largely) corroborated what President Trump said.  The two sides would negotiate a zero tariff agreement on industrial goods, cooperate more on energy and agriculture, begin a dialogue on standards and work together to reform the WTO.  He also said there was agreement that, as long as the parties are negotiating, no further tariffs would be imposed and existing tariffs would be reassessed.

This is a positive development.  That said, the devil is always in the details.  For example, it is not yet clear whether the United States will lift the 232 duties on steel and aluminum for EU origin products immediately, or only once an agreement is formally reached, etc.  Stay tuned for more.  In the meantime, if you have any questions, please let us know.

Best regards,

Section 301 Update III

Dear Friends,

The White House announced today that, not only is the section 301 investigation alive and well, but sanctions will be imposed shortly.  More specifically, the announcement states that the United States will: 

(1) implement “specific investment restrictions and enhanced export controls for Chinese persons and entities related to the acquisition of industrially significant technology” shortly after they are announced by June 30, 2018;

(2) continue to pursue litigation at the WTO for China’s alleged violation of TRIPS; and

(3) impose an additional 25% duty on a list of $50 billion worth of Chinese-origin imports; the list of products subject to the additional 25% duty “will be announced by June 15, 2018[.]”

A copy of the announcement is attached for your reference. 

If you import articles produced by a WFOE and are interested in joining our coalition of companies pursuing that exemption, please let us know.

Best regards,

Dear Friends,

Further to the below, while there were some mixed signals sent yesterday, the Administration clarified today that the imposition of the section 301 duties is being suspended.  It is being reported that China and the United States have made enough progress in negotiations to warrant suspending the imposition of tariffs (as well as China’s retaliatory tariffs) for now.

While this is a positive development, it is also subject to change.  As a result, for now, we are recommending that companies continue to pursue exclusions just in case.

If you have any questions, please let us know.

Best regards,

Dear Friends,

Further to the below, we wanted to provide a brief update on the Section 301 situation and request your assistance.

First, the update.  Roughly, 2,900 comments were submitted in response to the list of Chinese-origin articles the USTR proposed to subject to an additional 25% duty upon importation into the United States.  The comments were both opposed to, and in favor of, the imposition of additional duties (with the vast majority being opposed either broadly, or with regard to the inclusion of specific articles on the proposed list).  A 3-day hearing was also held this past week where approximately 125 individuals provided verbal comments either in opposition to, or in favor, of the additional duties.  Rebuttal comments are due this coming Tuesday, May 22nd.

Now the request — we assisted several clients prepare comments and testimony opposing the imposition of the additional duties.  We also assisted these clients in discussions with their respective Congressional delegations and were able to get commitments of support.   We advanced several different arguments during this process, but one, in particular, seemed to resonate especially well.  Based on that positive feedback, we wanted to follow-up with all of you to see if your companies are similarly-situated and, if so, if you would be willing to join our effort to gain a broad-based exemption.

In short, we requested that USTR categorically exempt from the proposed additional duties products manufactured in China by wholly foreign-owned enterprises (“WFOEs”).

As explained in greater detail in our previous updates (below), the USTR concluded that China used foreign ownership/joint venture requirements, compulsory technology transfers, the acquisition of U.S. companies and assets, etc. to obtain cutting edge U.S. technology and that those practices were “unreasonable or discriminatory and burden or restrict U.S. commerce”[.]  It was then determined that the “appropriate” remedy “to obtain the elimination” of those practices was to impose an additional 25% duty on the identified articles.  So, stated simply, the USTR’s goal is to identify articles on which the imposition of additional duties will force China to change its unfair policies.

WFOEs, which are, by definition, owned entirely by non-Chinese entities, are not subject to the ownership restrictions (i.e., a WFOE does not have a joint venture partner).  WFOEs in most industries are also not subject to compulsory technology transfer through government licensing, for example.  As a result, the imposition of additional duties on articles produced in China by WFOEs will have no impact on Chinese government policy (i.e., there is no “forced” technology transfer when the manufacturer involved is a WFOE, therefore, assessing duties on articles produced by a WFOE does not make sense).

Accordingly, we requested that the USTR categorically exempt from any Section 301 duties articles produced in China by a WFOE.  We also pointed out that such an exemption would be easily administrable from a customs perspective.  A new ‘special program indicator’ could be created that, when used, meant that the importer was certifying that the articles being imported were produced by a WFOE (similar to how claims are made now under our more recent free trade agreements).  Such a certification would be subject to audit/verification by U.S. Customs and Border Protection.  The manufacturer identification (or MID) codes could also be used to help ensure that only articles produced (not just sold) by the WFOE were entered under the exemption.

We believe that such a request has a meaningful chance of success for a couple of reasons.  The first is that exempting articles produced by WFOEs is consistent with the Section 301 determination (i.e., the goal is to get China to lift its restrictive ownership requirements so U.S./foreign companies can operate without local joint venture partners; WFOEs are already entirely foreign owned).  Second, this exemption request is a lot easier to justify than picking and choosing among the large number of compelling stories U.S. companies told in the context of their HTS-specific requests (i.e., assuming the USTR wants to provide some exemptions, our categorical request would be easier to grant than picking and choosing from among the numerous HTS-specific requests companies made).  Finally, it is also administrable.

As mentioned, our WFOE exemption has received positive feedback at a number of levels.  Accordingly, if you are opposed to the imposition of the Section 301 duties (either because you are on the list in this round, or you fear being on the list in the next potential round) and the articles you import are produced by a WFOE, please let us know.  Regardless of whether you filed comments already or not, we believe that you have the opportunity to engage with the Administration on this issue as part of our coalition.

We hope this is helpful.  If you have any questions, please let us know.

Best regards,

US to Impose Trade Measures on China as a Result of Section 301 Investigation

Dear Friends,

The President signed an executive memorandum earlier today that all companies that (i) import anything from China, (ii) do business in China, or (iii) export anything to China, should be aware of.  A copy of the memorandum is attached.

The memorandum was issued in response to an investigation the U.S. Trade Representative (USTR) conducted into whether “China’s laws, policies, practices, or actions that may be unreasonable or discriminatory and that may be harming American intellectual property rights, innovation, or technology development” under section 301 of the Trade Act of 1974, as amended.  Based on the USTR’s investigation, the President has concluded that:

“First, China uses foreign ownership restrictions, including joint venture requirements, equity limitations, and other investment restrictions, to require or pressure technology transfer from U.S. companies to Chinese entities.  China also uses administrative review and licensing procedures to require or pressure technology transfer, which, inter alia, undermines the value of U.S. investments and technology and weakens the global competitiveness of U.S. firms.

Second, China imposes substantial restrictions on, and intervenes in, U.S. firms’ investments and activities, including through restrictions on technology licensing terms.  These restrictions deprive U.S. technology owners of the ability to bargain and set market-based terms for technology transfer.  As a result, U.S. companies seeking to license technologies must do so on terms that unfairly favor Chinese recipients.

Third, China directs and facilitates the systematic investment in, and acquisition of, U.S. companies and assets by Chinese companies to obtain cutting-edge technologies and intellectual property and to generate large-scale technology transfer in industries deemed important by Chinese government industrial plans.

Fourth, China conducts and supports unauthorized intrusions into, and theft from, the computer networks of U.S. companies.  These actions provide the Chinese government with unauthorized access to intellectual property, trade secrets, or confidential business information, including technical data, negotiating positions, and sensitive and proprietary internal business communications, and they also support China’s strategic development goals, including its science and technology advancement, military modernization, and economic development.”  

Based on this, the President has directed the USTR to:

(1)    Publish a list of products imported from China to subject to increased duties by Friday, April 6, 2018;

(2)    Pursue WTO challenges to China’s “discriminatory licensing practices”; and

(3)    Report back to the President on progress on (1) and (2) within 60 days.

The President also directed the Secretary of the Treasury to propose appropriate actions to “address concerns about investment in the United States directed or facilitated by China in industries or technologies deemed important to the United States” and to report back within 60 days.

It is being widely-reported that the list of products to be targeted with increased duties represents approximately $60 billion in Chinese imports and impacts a range of industries, including high tech products, consumer electronics, apparel, footwear, etc.  The draft list is reported to include approximately 1,300 tariff lines.  Once published, the public will have 15 days to provide comments on the USTR’s proposal.  Any duties ultimately imposed will be in addition to any other duties currently payable (e.g., normal duties, AD/CVD, etc.).

On the investment front, there are underway efforts in Congress to update/strengthen the Committee on Foreign Investment (CFIUS) process, but this signals a desire by the President to not wait and, possibly, go further than what Congress is currently contemplating.

Finally, it is expected that China will impose retaliatory measures on articles imported from the United States in response to today’s announcement.  It is expected that a range of U.S. exports will be impacted, but most notably, agricultural exports. 

We hope that this update is helpful.  We will continue to monitor and provide updates on developments as they arise.  In the meantime, if you would like to discuss the issues involved here further, just let us know.

Best regards,



International Trade-Related Executive Orders

Dear Friends,

What an interesting time to be working in international trade! 

We are writing to make sure you saw the Executive Orders President Trump issued over the past few days on international trade issues.  All of the Executive Orders are available here.

The Presidential Executive Order Addressing Trade Agreement Violations and Abuses was signed on April 29, 2017.  It directs the Secretary of Commerce and the United States Trade Representative to conduct “comprehensive performance reviews” of all international trade and investment agreements the United States is a party to, as well as trade relations with those WTO member countries with which the United States does not have a trade agreement, but does have a significant trade deficit in goods. The goal of these reviews is to (i) identify violations or abuses by our trading partners, (ii) trade or investment agreements that have not created new U.S. jobs, had favorable effects on our trade balance, increased U.S. exports, etc., and (iii) make recommendations to address the issues identified in (i) and (ii). 

Based on statements President Trump has made to date, we expect that NAFTA as it relates to trade with Mexico, the Korea-U.S. Free Trade Agreement, the WTO Government Procurement Agreement and others to receive negative marks under the standards to be used in the performance reviews.  What will be more interesting are the recommendations that are made to address those perceived shortcomings (e.g., revising rules of origin, withdrawing from agreements, etc.).  The performance reviews must be submitted to the President by October 26, 2017.

The Presidential Executive Order on Establishment of Office of Trade and Manufacturing Policy was also signed on April 29, 2017.  It creates a new Office of Trade and Manufacturing Policy (OTMP) within the White House.  The stated mission of the OTMP “is to defend and serve American workers and domestic manufacturers while advising the President on policies to increase economic growth, decrease the trade deficit, and strengthen the United States manufacturing and defense industrial bases.”

These Executive Orders encapsulate much of the President’s trade policy, which is focused on (1) seeking to identify and remedy unfair trading practices, and (2) reducing the trade-in-goods deficits the United States has with other countries.  Companies should be viewing these Executive Orders as a creating an opportunity to engage with the Administration to help shape the recommendations for addressing the problems that they perceive exist with trade.

We are assisting numerous clients navigate these issues.  If you would like to discuss your specific situation and what you should be doing further, just let us know.

Best regards,