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

 

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CBP Proposal to Require Personal Data from Importers

Dear Friends,

We are writing to provide an update on a U.S. Customs an Border Protection (CBP) proposal we first alerted you to last October regarding revisions to CBP’s Importer ID Input Record (CBP Form 5106).  As you may recall, CBP’s proposed revisions amounted to a significant expansion of Form 5106, requiring, among other things, significant personal data about corporate officers of importers of record.

CBP has now considered all comments it received (summarized and responded to here), and has issued a revised proposal (along with a revised version of the form), which are being sent to the Office of Management and Budget for final approval.  This process presents another 30-day window for public comments, which commences with the publication of today’s Federal Register notice.

The changes CBP made in response to the last round of comments are detailed in its revised proposal.  Among the most noteworthy new information/clarifications is that:

  • Providing certain information is now optional, including the DUNS Number for the Importer, and the most sensitive personally identifying information for company officers, including social security numbers and passport information.
  • CBP will allow form 5106 to be submitted through what it describes as a “secure” “mobile application”, eliminating the need to provide this sensitive data through a third party, such as a broker.
  • Existing importers will only need to file a new CBP Form 5106 when changes are made to the Importer’s Name, Identification Number, IRS Number/SSN, or Address; new forms will NOT be required for other changes to company information required in section 3 of the form.

While some of the concerns raised by our previous comments have been addressed in the revised proposal, others have not (e.g., our recommendation that CBP consider requiring different data from different entities on the basis of certain specified risk factors, with a view towards gathering more data from those entities which pose the most significant risk).

We would be happy to prepare an additional comment letter, in the same format as we did following CBP’s previous proposal, for submission in response to today’s Federal Register notice.  As before, the cost for participating in this effort will not be significant.  If you would like to participate, or have any further questions, please let us know.

Best regards,

Ted

ADD/CVD — Aluminum Extrusions

Dear Friends:

You may be aware that there are antidumping and countervailing duty orders on imports of “aluminum extrusions” from China. This means that additional duties (often more than 300%) apply to these products upon importation. The term “aluminum extrusions” is defined quite broadly and includes a wide range of articles. While the scope includes HTS tariff subheadings, these are not dispositive as to whether a given article is within the scope (and thereby subject to the additional duties) or not. Instead, it is the narrative scope description (not the HTS classifications) that control. The scope of these orders is set forth in the following Federal Register notice .

A number of our clients, in a range of industries, have been surprised by the breadth of these orders. The broad scope combined with the fact that many covered articles will be classified in subheadings that are not flagged in ABI, has lead many importers to inadvertently fail to deposit the estimated ADD/CVD upon importation. US Customs has been quite aggressive in this area and we recommend that all clients review the scope of the orders against their imports to make sure that the proper duties are being tendered upon importation. We have assisted numerous clients with this process and would be happy to discuss how best to go about doing so.

In addition, it is important that you understand your options for minimizing the duty impact these order have. For example, there are options to reduce the duties owed on these products under the orders. The Department of Commerce has a process by which foreign manufacturers and exporters can obtain their own – and often much lower – duty rate for imports. Depending on the volume that a company exports to the United States, they may qualify to be reviewed for their own rates; and even if your suppliers are not among the largest exporters, they may still be able to obtain much lower rates than the default rates applied generally to PRC entities.

The next opportunity to request such a review is coming this May. As a result, if you are importing articles subject to these orders, we recommend that you consider your options now. We have identified the issues that an importer or user of aluminum products should consider and can provide an overview of what needs to be done to participate at Commerce to potentially lower your exposure. If this information would be useful to you, please let us know.

Best regards,

Ted