Section 301 – Advance Copy of Federal Register Notice

Dear Friends,

Further to the below, the U.S. Trade Representative published on its website today an advance copy of the Federal Register notice related to Friday’s announcement.  A copy is attached here for your reference.

The notice confirms that an additional duty of 25% will be imposed on articles classified in the tariff subheadings included in Annex A of the notice as of July 6, 2018.  The notice also creates a new Chapter 99 subheading for entry purposes (entries of articles classified in the tariff subheadings identified in Annex A have to use the new Chapter 99 classification as a secondary classification, so the additional 25% duty can be assessed) and addresses foreign trade zone admissions.

The notice also sets the schedule for providing comments on the second list of articles proposed to be assessed an additional 25% duty.  This is the list of 284 tariff classifications the interagency Section 301 Committee identified as benefitting from China’s industrial policies, including Made in China 2025 (Annex C in the attached notice).  These 284 tariff classifications represent approximately $16 billion worth of imports from China.  The public comment schedule is as follows:

  • June 29, 2018 – deadline to file a notice requesting to provide testimony at the public hearing
  • July 23, 2018 – written comments due
  • July 24, 2018 – public hearing at the U.S. International Trade Commission
  • July 31, 2018 – rebuttal, post-hearing comments due

This notice does not provide the specifics for the product petition exclusion process referenced on Friday.  Instead, this notice says that the details of the product petition exclusion process will be included in a future Federal Register notice.

We are assisting numerous clients detail with these issues (e.g., re-aligning supply chains, filing comments, seeking Congressional support for exclusion requests, etc.) and would be happy to discuss this with you further, if helpful.

Best regards,

Ted

 

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Section 301 – US Imposes Additional Duties

Dear Friends,

Earlier today, the White House issued a statement confirming that the United States will impose an additional 25% customs duty on $50 billion worth of imports from China.  The additional duty will be assessed on goods that “contain industrially significant technologies[,]” including those “related to China’s Made in China 2025 strategic plan to dominate the emerging high-technology industries[,]” according to the statement.  The statement goes on to say that the additional duty is “essential to preventing further unfair transfers of American technology and intellectual property to China, which will protect American jobs.  In addition, they will serve as an initial step toward bringing balance to the trade relationship between the United States and China.”  Finally, the statement indicates that the United States will consider further additional duties if China retaliates (which it is expected to do).  A copy of the White House statement is attached.

Following the issuance of the White House statement, the U.S. Trade Representative published a notice on its website containing the list of products/tariff classifications that will be subject to the additional 25% duty.  The list is broken down into two pieces and focuses on “industrial” (not consumer) products.

The first piece contains 818 of the original 1,333 tariff classifications proposed in the list published on April 6, 2018.  These 818 tariff classifications represent approximately $34 billion worth of imports from China and the additional 25% duty will be assessed beginning on July 6, 2018.  A copy of this list is attached here: List 1.

The second piece contains 284 new tariff classifications identified by the interagency Section 301 Committee as benefitting from China’s industrial policies, including Made in China 2025.  These 284 tariff classifications represent approximately $16 billion worth of imports from China.  This list of tariff classifications will be subject to a new/separate public notice and comment process (including a hearing).  The details are expected to be published shortly.  A decision will be made whether to impose additional duties on products on this second list thereafter.  A copy of this list is attached: List 2.

The USTR notice also states that it will “soon provide an opportunity for the public to request exclusion of particular products from the additional duties subject to this action.”  This process will be detailed in a subsequent Federal Register notice.

We recommend that all clients review both lists published by the USTR.  We also recommend that clients keep their eye on the news.  It is widely expected that China will retaliate by imposing duties on U.S. exports to China.  In such a case, it is likely that the administration will seek to expand the second list of products subject to additional duties (the President had previously threatened to impose duties on an additional $100 billion worth of Chinese imports).  Finally, it is also important to stay tuned for the Federal Register notice that will be published with additional details, including on the product exclusions process.

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

Best regards,

Ted

Section 232 Duties on Steel & Aluminum — Process for Product Exclusions

Dear Friends, 

Further to the below, the Department of Commerce will publish procedures for (i) requesting product-based exclusions from the section 232 duties on steel and aluminum, and (ii) objecting to such requests, in tomorrow’s Federal Register (an advance copy of the Federal Register notice is attached here).  Any company potentially interested in seeking an exclusion for one or more articles covered by the section 232 duties should review the notice.  In particular, there are a number of key items worth noting:

(1) exclusion petitions may be submitted only by “individuals or organizations using [steel or aluminum] articles . . . in business activities . . . in the United States”;

(2) objections to exclusion petitions may be submitted by “any individual or organization in the United States”; 

(3) any approved exclusion petitions will be limited to a specific article (unless Commerce specifies a broader exclusion is granted) and to the petitioner (i.e., you cannot generally get the benefit of someone else’s exclusion petition); you can, however, file “follow-on” petitions;

(4) exclusions petitions must be filed electronically, using a specific form created for this purpose; objections must be filed within 30 days of an exclusion petition being filed, also using a specific form; petitions can cover only a single 10-digit Harmonized Tariff Schedule classification; and the review process will generally take 90 days from date of filing; and

(5) approved exclusions will be effective 5 business days after the approval is published; and will “generally” be good for 1 year.

Product exclusion petitions will only be approved “if an article is not produced in the United States in a sufficient and reasonably available amount, is not produced in the United States in a satisfactory quality, or for a specific national security consideration.”  We expect that Commerce will approve petitions only sparingly, and primarily for valid national security-related considerations. 

Product based exclusions can be filed beginning tomorrow, March 19, 2018.  If you are considering doing so, we recommend filing as soon as possible.  That said, it is important that your petition be as well prepared as possible (e.g., consider scope issues, the import data, whether there are any national security implications/allies in the federal government, any likely objections, etc.) to give it the best chance of success.  We are assisting many clients prepare petitions and would be happy to discuss this with you further.  If you are interested in doing so, please let us know.

Best regards,
Ted

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

 

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