Canada-U.S. Blog

Trade Lawyers Cyndee Todgham Cherniak and Susan K. Ross

Canada Is Imposing Emergency Steel Safeguards on 7 Steel Products and Conducting an Injury Inquiry

Posted in Canada's Steel Safeguard

On October 11, 2018, Canada’s Department of Finance announced that effective October 25, 2018, Canada will be imposing emergency tariff rate quotas on 7 categories of steel products.  The Department of Finance has prepared a report and there will be an Order in Council under section 55 of the Customs Tariff to implement the emergency steel safeguard tariff rate quotas before the Canadian International Trade Tribunal determines if the protection is warranted. The Report indicates that certain steel goods are being imported into Canada in increased quantities. The Report further finds that:

“…the importation in increased quantities of steel goods is the result of the effect of the obligations, including tariff concessions, incurred by Canada under WTO agreements and of unforeseen developments, including global overcapacity in steel production and the fact that a number of WTO members have taken or are considering taking measures to restrict importation of steel into their markets, which appears to have caused or threaten to cause significant trade diversion into Canada.”

What products are covered by Canada’s steel safeguard?

Canada is imposing emergency tariff rate quotas of 7 categories of steel products:

  1. Heavy Plate
  2. Concrete Reinforcing Bar;
  3. Energy Tubular Products;
  4. Hot-Rolled Steel;
  5. Painted Steel;
  6. Stainless Steel Wire; and
  7. Wire Rod.

For more information as to the goods covered by these general headings, please refer to the Backgrounder.  Also, refer to Customs Notice 18-17.  Also refer to the Canadian International Trade Tribunal Notice of Commencement of Safeguard Inquiry – Certain Steel Products.

Are any countries excluded?

Yes. The following countries are excluded:

  1. The United States (U.S steel is covered by existing countermeasures introduced on July 1, 2018);
  2. Mexico (partial exclusion covers heavy plate, rebar, hot-rolled steel, painted steel and stainless steel wire rod; energy tubular products and wire rod is subject to the steel safeguard measures);
  3. Chile
  4. Israel;
  5. Developing Countries (such as Vietnam, except that rebar from Vietnam is subject to the steel safeguard measures) -the list of the developing countries is set out in Customs Notice 18-17.

What will be the Tariff Rate Quota?

Canada is imposing a surtax of 25% on imports above certain volume levels.  But, the quotas are not simple.  The quotas are based on:

  1. the type of steel product (7 categories);
  2. 50 day time periods; and
  3. the country of export.

The quotas during the 220 day safeguard inquiry are as follows:

Product Quota for 220 day period (MTs)
Heavy Plate 51,672
Concrete Reinforcing Bar 141,328
Energy Tubular Products 257,392
Hot-Rolled Sheet 61,196
Pre-Painted Steel 46,540
Stainless Steel Wire 1,868
Wire Rod 46,052

The quotas will be applied on 50 days cycles as follows:

 

Product First 50 days Second 50 Days Third 50 Days Final 50 days
Heavy Plate 12,918 12,918 12,918 12,918
Concrete Reinforcing Bar 35,332 35,332 35,332 35,332
Energy Tubular Products 64,348 64,348 64,348 64,348
Hot-Rolled Sheet 15,299 15,299 15,299 15,299
Pre-Painted Steel 11,635 11,635 11,635 11,635
Stainless Steel Wire 467 467 467 467
Wire Rod 11,513 11,513 11,513 11,513

 

Canada will impose a quantitative limit on countries (one country cannot fill the entire quota).  For each steel product category, a limit is imposed on the share of the total quota that may be filled by a single country. This limit is equal to the highest import share from a single country based on historical import volumes for that product. If the volume of imports of a product category from a single country reaches the limit, then all subsequent imports of that product category from the country will be subject to the surtax for the remainder of the 200-day provisional safeguard period.

Who Is Affected?

Importers will have to pay the surtaxes on import volumes above the 50 days quota limit.  The quotas will be applied on a first come first served basis.  As a result, any importer will not know if there is quota available.  According to Customs Notice 18-17, paragraph 6:

“Importers may request shipment-specific import permits (specific permits) from Global Affairs Canada, which will be valid for 14 days. Goods for which an importer obtained a specific permit, valid at the time of accounting, are exempt from the applicable safeguard surtax. Imports of goods that do not have a specific permit, or are in excess of the quantity of an import permit at the time of accounting, are subject to the safeguard surtax.”

What this means is that overseas shipments may be on the water when the import permit is applied for.  The 14 day limit means that the goods must land within 14 days of the shipment specific import permit.

What Happens at the Canadian International Trade Tribunal (CITT)?

On October 10, 2018, the Governor-in-Council issued Order in Council 2018-1275 and made An Order Referring to the Canadian International Trade Tribunal, for Inquiry into and Reporting on, the Matter of the Importation of Certain Steel Goods directing the CITT to commence a safeguard inquiry.

The CITT is an independent, Canadian quasi-judicial administrative tribunal that adjudicates a variety of international trade cases and matters. The CITT is the place to go to receive a fair, timely, transparent and effective resolution of a trade-related dispute and/or government-mandated inquiry/dispute, provided that the trade-related dispute is within an area of the Tribunal’s jurisdiction.

On October 11, 2018, the CITT has commenced a safeguard inquiry (GC-2018-001).  The CITT will look into whether the safeguard measures are warranted.  The CITT will determine whether any of the 7 categories of steel products are being imported into Canada in such increased quantities and under such conditions as to be the principle cause of serious injury or threat thereof to Canadian producers of like or directly competitive goods.

The CITT’s proposed schedule is as follows:

  • October 11, 2018 – Notice of Commencement of inquiry.questionnaires posted online;
  • October 29, 2018 – Notices of participation are due;
  • October 31, 2018 – Replies to questionnaires are due and a case management conference will be held;
  • November 26, 2018 – The CITT will distribute the record;
  • December 6, 2018 (noon) – case briefs are due from all parties (there will be page limits imposed);
  • December 13, 2018 (noon) – reply briefs are due from all parties;
  • December 17, 2018 – The CITT will decide which witnesses will testify;
  • December 27, 2018 – Deadline for procedural and preliminary matters;
  • January 3-22, 2019 – Public Hearings in Ottawa.

Who should participate?

Importers of the 7 steel products, users of the 7 steel products, foreign producers of the 7 steel products and foreign governments should participate in the CITT proceedings.

For more information, please contact Cyndee Todgham Cherniak at 416-307-4168 or at cyndee@lexsage.com. Alternatively, visit www.lexsage.com.

Canada’s Process to Ratify USMCA

Posted in Canada's Federal Government, NAFTA, NAFTA Renegotiations, Provincial Governments, Trade Agreeements, U.S. Federal Government, USMCA

On September, 2018, the United States, Canada, and Mexico announced that a new NAFTA was agreed and would be called the United States-Mexico-Canada Agreement (“USMCA”) (also known as NAFTA 2.0).  The text of the USMCA was posted on the United States Trade Representative website. LexSage has published an USMCA Resource Guide with USMCA Chapters, NAFTA Chapters and TPP (not CPTPP) Chapters and comparison tables.

The USMCA is not yet law in any of the United States, Canada or Mexico.  The text of the agreement needs to be scrubbed by the government lawyers.  The USMCA needs to be signed.  Then each country must takes the necessary steps to ratify and implement that trade agreement.  None of this is guaranted.

Canada, must take domestic procedures to implement the USMCA into domestic law.  Canada takes the following steps to implement a free trade agreement (or any treaty) in Canadian law:

Step 1: Signing Order (Instrument of Full Powers): This step should be taken before the signing ceremony. A signing order (that is, an Instrument of Full Powers) will designate one or more persons who have the authority to sign the treaty on behalf of Canada.  This is expected to take place in late November 2018 as it is expected that the USMCA will be formally signed at the end of November.

Step 2: Tabling the Treaty in the Parliament: The signed treaty is tabled in the House of Commons for discussion (not for a vote).  Before 2008, treaties were not brought to all members of Parliament.  In January 2008, Prime Minister Harper changed the procedures of ratifying treaties and added this step in order to improve transparency and the democratic process.  Global Affairs Canada has the 2008 Policy on its website. However, there is no vote on the treaty. There may be a full discussion about the treaty, but no opportunity to vote, undo the signature or change the text of the negotiated treaty.

The Clerk of the House of Commons distributes to all MPs (Members of Parliament) the full text of the treaty along with an Explanatory Memorandum about the treaty (often prepared by the negotiating team with input from the Minister responsible for the treaty).  The Explanatory Memorandum covers the following points:

  • Subject Matter: a description of the treaty;
  • Main Obligations: a description of the main obligations that will be imposed upon Canada by the treaty, should it be brought into force;
  • National Interest Summary: a description of the reasons why Canada should become a party;
  • Ministerial Responsibility: a listing of Ministers whose spheres of responsibility are implicated by the contents of the treaty;
  • Policy Considerations: an analyze as how the obligations contained in the treaty, as well as how the treaty’s implementation by Government departments are or will be consistent with the Government’s policies;
  • Federal-Provincial-Territorial implications: a determination of whether the obligations in the treaty relate in whole or in part to matters under provincial constitutional jurisdiction;
  • Time Considerations: details of any upcoming dates or events that make the ratification a matter of priority;
  • Implementation: a brief description of how the treaty will be implemented in Canadian law, including a description of the legislative or other authority under which it will fall (which will have already been determined by the Department of Justice);
  • Associated Instruments: information on any international instruments of any kind that are related to this treaty;
  • Reservations and Declarations: a description of any reservations or declarations;
  • Withdrawal or denunciation: a description of how the treaty could be terminated; and
  • Consultations: a description of the consultations undertaken with the House of Commons, self-governing Aboriginal Governments, other government departments and non-governmental organizations prior to the conclusion of the treaty, as appropriate.

The House of Commons then has 21 sitting days to consider the treaty before the Executive may take necessary steps to ratify the treaty (Step 4). The MPs often debate the treaty.

Step 3: Motion in House of Commons: When there is a majority government or sufficient support in the House of Commons, a motion will be tabled to recommend action, including ratification of the treaty.  The vote is not required.  The vote does not have legal effect.  If the vote fails, the government cannot be toppled.

Step 4: Order-in-Council (Instrument of Ratification): After the treaty has been in the House of Commons for 21 sitting days, the ratification of the treaty may occur.  The ratification process is controlled by Cabinet.  There is no requirement to pass legislation in the Parliament to ratify a signed treaty. The Governor-in-Council (Cabinet) prepares an Order-in-Council authorizing the Minister of Foreign Affairs to sign an Instrument of Ratification or Accession.

Step 5: Federal Implementing Legislation: Treaties must be implemented in Canadian law in order to have legal effect.  An implementing bill is tabled in the House of Commons.  The implementing bill contains the changes required to Canadian law at the national level to implement the provisions of the treaty.  The MPs debate the implementing bill and may suggest changes to the implementing laws.  The MPs cannot require changes to the substance of the treaty.  However, the MPs may ask questions of the Government and the questions must be answered.

After the implementing bill passes in the House of Commons, the implementing bill is sent to the Canadian Senate.  The implementing bill is debated in the Senate.  It is possible that the Senate will not pass the implementing bill.  This happened in 1988 when the Senate would not pass the Canada-United States Free Trade Agreement Implementation Act, which triggered a federal election.

Step 6: Provincial/Territorial Implementing Legislation: It may be possible that implementing legislation is also required at the provincial level.

Step 7: Regulatory Changes: Often new regulations and/or changes to existing regulations are required to implement treaty provisions. The passing/changing of regulations is controlled by Cabinet.

Step 8: Taking Effect: The date that a treaty comes into force, or the terms and conditions necessary for the treaty to come into force, are established in the treaty itself.  CPTPP will be different than typical treaties in terms of when it will take effect.  We will comment on how the CPTPP will take effect after reviewing the text.

Step 9: Other Changes to Policies, Guides, Procedures of Government: Government departments will make necessary changes to government policies, guides, procedures, etc.  These changes take place over time and are not completed at the time the treaty takes effect.

For more information, please contact Cyndee Todgham Cherniak at 416-307-4168 or at cyndee@lexsage.com. Alternatively, visit www.lexsage.com.

The USMCA Rules of Origin: Changes Affecting Auto Manufacturers and Auto Parts Makers

Posted in Buy America, Canada's Federal Government, Cross-border trade, NAFTA, NAFTA Renegotiations, origin, Politics, Trade Agreeements, Transportation, U.S. Federal Government

Late in the evening on September 30, 2018, the United States, Canada and Mexico announced the conclusion of negotiations of the United States – Mexico – Canada Agreement (”USMCA”) (also known as NAFTA 2.0). While the text of USMCA remains to be finalized, formally signed and ratified by each of the three countries, a preliminary text of the new requirements has been published on the USTR website. LexSage has published an USMCA Resource Guide with USMCA Chapters, NAFTA Chapters and TPP (not CPTPP) Chapters and comparison tables.

Now is the time for auto manufacturers and auto parts makers to strategize how their organizations can optimize their position within a newly framed North American auto industry.

Canadian auto manufacturers will now need to ensure that the parts that they purchase meet new and complex requirements set out in the USMCA.  If they do not, their vehicles may not qualify as “originating”.  Vehicles produced that are not “originating”, will not enjoy duty free treatment under the USMCA when they are exported to one of USMCA countries (i.e, Canada, U.S., Mexico).

This means that Canadian auto parts makers selling their parts to auto manufactures in any of the three countries will need to ensure that their parts meet these new requirements. Doing so will permit continuing sales and arguably, present new business opportunities, replacing other parts suppliers who are not prepared or cannot fulfill the requirements of the new rules.

As published on October 1, the USMCA provides the following content rules that must be met for vehicles and/or auto parts to qualify as “originating” for use in the auto industry.

1. Vehicles

The USMCA requires higher levels of North American Content (Regional Value Content) requirements starting in 2020. North American (U.S./Canada/Mexico) content requirements will increase from their current NAFTA content requirements, starting in 2020.  Depending on the type of vehicle, the content requirements will differ.

(a) Passenger Vehicles and Light Trucks:

(i) North American Content requirements: Starting in 2020, passenger vehicles and light trucks must meet a 66% North American content requirement to qualify as “originating” under the USMCA.  That requirement will then increase each year until 2023 when the content required will be 75%; and

(ii) Certain parts must be “originating”: a vehicle produced in North America will qualify as “originating” and, thereby, enjoy duty free treatment under the USMCA, only if each of the engine, transmission, body and chassis, axle, suspension system, steering system and advanced battery is “originating”.  Further details on this requirement will be provided by each country.

(b) Heavy Trucks: 

Starting in 2020, heavy trucks must meet a 60% North American content requirement to qualify as “originating”.  That requirement will rise to 70% in 2027.

2. Parts for use in passenger vehicles and light trucks

Higher levels of North American content/Regional Value will be required starting in 2020. Depending on the part, different content requirements will apply.  Parts for use in passenger vehicles and light trucks have been broken down into three categories: core parts; principal parts and complementary parts.  Different content requirements apply, depending on the category of the part:

(i) Core Parts for use in passenger vehicles and light trucks: North American Content (Regional Value Content) required will rise to 73%/85% by 2023: The list of core parts for use in passenger vehicles and light trucks includes certain: engines, engine parts, vehicle bodies, gear boxes, drive axles, shock absorbers, lithium ion batteries and steering wheels.   Depending on which method is used to calculate the North American content, in 2020, these parts will need to have 66% (net cost method)/76% (transaction method) North American content to qualify as “originating”.  Thereafter the content requirement will rise incrementally to 75% (net cost method)/85% (transaction method) North American content in 2023. There are some exceptions to these requirements;

(ii) Principal Parts for use in passenger vehicles and light trucks: North American Content (Regional Value Content) required will rise to 70%/80% by 2023: Similar requirements will apply to listed principal parts for use in passenger vehicles and light trucks.  The list of principal parts is long and includes certain: tires, rear-view mirrors, hydraulic fluid pumps, compressors, air conditions, electronic brake systems, clutches and shaft couplings, and airbags. Starting in 2020, principal parts will need to have 62.5% (net cost method)/72.5% (transaction value method) North American content to qualify as “originating”.  The required North American content will rise to 70% (net cost method)/80% (transaction value method) by 2023; and

(iii) Complementary Parts for use in passenger vehicles and light trucks: North American Content (Regional Value Content) required will rise to 65%/75% by 2023:  The list of complementary parts includes certain: pipes, locks, catalytic converters, valves, electric motors, batteries, distributors and windshield wipers, defrosters & demisters.  To qualify as “originating”, complimentary parts will need to have 62% (net cost method)/72% (transaction value method) North American content starting in 2020.  The required North American content will rise to 65% (net cost method)/75% (transaction value method) by 2023.

3. Parts for use in heavy trucks

North American content/Regional Value content will increase starting in 2020. Depending on the part, different content requirements will apply:  Parts for use in heavy trucks have been broken down into two categories: principal parts and complementary parts.  Different content requirements apply, depending on the category of the part:

(i) Principal Parts for use in heavy trucks: North American Content (Regional Value Content) required will rise to 70%/80% by 2027: The list of principal parts includes certain: engines, engine parts, air/gas pumps, compressors, fans, air conditioners, seat belts, brakes, gear boxes, drive axles, mufflers and radiators.  For principal parts to be “originating”, they will need to have 60% (net cost method)/70% (transaction value method) North American content starting in 2020.  The required North American content will rise to 70% (net cost method)/80% (transaction value method) by 2027.

(ii) Complementary Parts for use in heavy trucks: North American Content (Regional Value Content) required will rise to 60%/70% by 2027:  The list of complementary parts includes certain: pumps, brake systems, bearings, electromagnetic couplings, clutches, and ignition/start equipment.  Starting in 2020, complimentary parts will need to have 54% (net cost method)/64% (transaction value method) North American content to qualify as “originating”.  The required North American content will rise to 60% (net cost method)/70% (transaction value method) by 2027.

4. 70% North American Steel and Aluminum Content Requirements

Adding further complexity, the USMCA will introduce new requirements relating to the steel and aluminum purchases made by the vehicle producer. A passenger vehicle, light truck or heavy truck will qualify as “originating” only if at least 70% of the vehicle producer’s purchases of steel and aluminum is “originating”.

5. Labour Value Content Requirements

In addition to each of the above requirements, vehicles will qualify as “originating” only if the vehicle producer certifies that 40-45% (depending on the type of vehicle) of its production activities such as costs of manufacturing, assembly, R&D and information technology, are carried out by workers who earn at least US $16/hours. There are detailed restrictions on which costs can be used and to what extent they may be used as part of the calculation.

6. Partial Exemption from US 232 duties on Canadian produced autos exported to the U.S.

Canada and the U.S. signed a side letter that provides that the U.S. will provide at least a 60-day exemption from any future measures under Section 232. During that 60-day exemption period, the U.S. and Canada would seek to negotiate an appropriate outcome. In the event that, following the 60-day exemption period, the U.S. applies Section 232 measures, Canada has secured an exemption from those measures for: (i) 2.6 million passenger vehicles/year; (ii) light trucks; and (iii) U.S.$32.4 billion/year of auto parts.

The published text of the USMCA currently is undergoing a full legal review to ensure that it accurately reflects the agreement of the three countries.  Once completed, the leaders of each of the U.S., Canada and Mexico will formally sign the agreement which then will be submitted for ratification by each country.  While the ratification process in Canada and Mexico may proceed relatively quickly, the ratification process in the U.S. could take some time.  This means that the USMCA is not likely to come into effect until 2019.

This is the time for auto manufacturers and auto parts makers to carefully review their sourcing, manufacturing operations and labor content.  The new rules are complex but achieving “originating” status for your products will help to preserve existing customer demand and generate new sales opportunities.

Should you require any assistance, please do not hesitate to contact Heather Innes at 416-350-1234 or heather@lexsage.com.

KORUS – Who Gets the Benefits?

Posted in Aerospace & Defence, Border Security, Corporate Counsel, Cross-border trade, Customs Law, Legal Developments, tariffs, Trade Agreeements, Trade Remedies

Published by the Journal of Commerce in September 2018.

While we are all understandably caught up in the trade war with China and wait to see whether additional tariffs will be imposed on more Chinese-made goods, the Korea – U.S. Free Trade Agreement revisions have been made public by the U.S. Trade Representative. Those changes include: extending the duty reduction on truck which now go to zero duty in 2041; Korea doubles to 50,000 the U.S.-made vehicles permitted per manufacturer per year; vehicle testing requirements are to be harmonized – U.S. testing accepted in Korea;  eco-credits or the CAFÉ standards are to be expanded by Korea; pharmaceutical reimbursements will become compliant regarding Korea’s Premium Pricing Policy for Global Innovative Drugs; and “long-standing” concerns about how Korea conducts origin verification audits will be addressed.

As a result, Korea became subject to product-specific quota levels regarding the 232/steel and aluminum tariffs.

Certainly, the auto industry is happy the market access door was opened a bit wider, but what more is there?  U.S. domestic industry which relies on antidumping and countervailing duty will be pleased by some attempts at greater transparency consisting of advance notice of in-person verifications; prior to initiation, the respondent is to be provided with a list of the topics to be addressed, including the types of supporting documentation required; any written report must describe the methods and procedures relied up and the results, and be made public; and the investigating authority must disclose to each party receiving an individual rate, an easily understood explanation about the calculations so the party may “easily” validate those calculations, including source references, and allow time for a response.

Undoubtedly the broadest benefit comes from attempts at greater transparency and certainty regarding verification audits.  KORUS Article 22.2.3 calls for the creation of a Joint Committee to oversee implementation of the agreement. That Joint Committee is now to establish a Rules of Origin Verification Working Group under the Committee on Trade in Goods to:

  1. Seek to resolve concerns arising from verification of origin claims;
  2. Develop further guidelines to address systemic concerns with verification practices and prevent such concerns from arising in the future;
  3. Monitor verifications taking “excessive” lengths of time or that do not seem to be reaching conclusion; and
  4. Present findings, reports and recommendations to the Committee on Trade in Goods as appropriate.

The attachment lists the relevant principles to follow:

  • Knowledge-based self-certification which allows the certificate of origin to be completed by the exporter or producer regardless of location or address; and permits minor errors or discrepancies (undefined) in the certification, questionnaire or other documents to be corrected without penalty and upon at least 5 working days’ notice;
  • Verifications are to be conducted through information requests to the importer, exporter or producer (not others);
  • Reaffirm that verifications will only be conducted where there is doubt as to the goods originating status and based on risk management principles that facilitate the movement of low risk goods;
  • Provide written advance rulings, in lieu of verbal advice;
  • Increase efforts to ensure that verification information requests clearly identify the specific goods being verified, are limited in scope to that necessary to determine the origin of the goods under review, and includes providing clear guidance to importers, exporters and producers regarding specific information required to prove origin; and
  • Endeavor to conclude verifications expeditiously, typically no later than 90 days after receiving the necessary information, and no later than 12 months from initiation, allowing for extensions in exceptional cases.

Article 15 of KORUS deals with electronic commerce. There were no changes to those provisions, even in the face of the festering di minimis issue perplexing U.S. authorities, and surely since the KORUS is more than 10 years old, those provisions could have used an update.  Given the rules of origin in KORUS are similar to those in other agreements, do international traders really think changes aren’t needed there, either? The closest we get to a change in those rules is an agreement by the U.S. to expeditiously process a request from Korea to treat certain products on the basis of a lack of commercial availability. In particular, that request is directed at yarn classified under 5108, 5403.39, 5504.10 and 5507.00, HTSUS. Perhaps most striking is the glaring omission of anything to do with trade in services, one of the fastest growing sectors of the U.S. economy.

When taken as a whole, there is not much there to talk about. The only other noteworthy provision is one whereby Korea agrees in 2018 to revise its Premium Pricing Policy for Global Innovative Drugs, meaning it will quit giving such obvious benefits to local drug companies when it comes to pricing their products versus those from foreign pharmaceutical companies.

While not meaning to undercut the advances the agreement does contain, was the outcome really worth the hoopla?

China 301 List 2 – Effective August 23, 2018 – in US and China

Posted in Border Security, Corporate Counsel, Countermeasures, Cross-border deals, Cross-border trade, Customs Law, Imports Restrictions, Legal Developments, tariffs, Transportation

USTR Lighthizer yesterday published notice that the 25% tariff on goods appearing on List 2 will become effective on August 23, 2018. For those who wonder if filing comments makes a difference, the answer is yes! In his announcement, USTR Lighthizer made the point the list dropped from 284 to 279 tariff items based on testimony and comments which had been received.  None of this, of course, helps those companies which are taking a serious financial hit from these tariffs, but then once the official notice is published in the Federal Register, an exclusion request will be included, and so companies should be gearing up to do two things:

  1. File exclusion requests for any products on Lists 1 and 2; and
  2. File comments for those products on List 3.

While those impacted hope for a quick resolution, prudence dictates planning for a List 4.   List 1 is discussed in the general press as worth $34 billion. List 2’s goods are worth $16 billion, and List 3’s good are worth $200 billion. Both President Trump and USTR Lighthizer have spoken of imposing additional tariffs on $500 billion worth of goods imported from China. If that happens, any product not on the other lists will end up on List 4.

It continues to be a significant challenge to predict how events will play out. Nonetheless, the Administration has repeatedly said the tariffs seek to change China’s behavior. The fact that China published a proposal on August 3, 2018 to impose its own retaliatory tariffs at 5%, 10%, 20% and 25% without an effective date certainly suggests the back and forth will continue.

The nature of the notice published by USTR also infers the tariffs will continue. The USTR made a point of stating: “Specifically, the Section 301 investigation revealed:

  • China uses joint venture requirements, foreign investment restrictions, and administrative review and licensing processes to require or pressure technology transfer from U.S. companies.
  • China deprives U.S. companies of the ability to set market-based terms in licensing and other technology-related negotiations.
  • China directs and unfairly facilitates the systematic investment in, and acquisition of, U.S. companies and assets to generate large-scale technology transfer.
  • China conducts and supports cyber intrusions into U.S. commercial computer networks to gain unauthorized access to commercially valuable business information.”

It certainly seems this trade war will take a long time to resolve.  Do you know on which lists your products appear? Have you filed comments? Any exclusions requests? Which remedy applies to which of your goods? By what deadline must you file?  Have you consulted with your trade advisors to know which options are best for your business?

The latest USTR announcement can be found here: https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/august/ustr-finalizes-second-tranche .

*** China has just announced its own revised List 2 on which an additional 25% tariff will be imposed on goods imported from the U.S. More details can be found here: http://www.mofcom.gov.cn/article/ae/ai/201808/20180802773926.shtml – where both the announcement and the list of affected products were published. This is China’s version of a $16 billion list of products.

For the most current information, please feel free to visit the Tricks of the Trade page of MSK’s blog, which offers updates on these tariffs and other topics relating to international trade.

China 301 List 3 Products – New Schedule Published

Posted in Border Security, Countermeasures, Cross-border trade, Customs Law, Imports Restrictions, Legal Developments, Politics, tariffs, Trade Remedies

In the August 7, 2018 Federal Register, U.S. Trade Representative Lighthizer published the latest official timeline for those planning to participate in the China 301 List 3 proceedings. The relevant dates are:

August 13, 2018 – due date for filing requests to be a witness and a summary of expected testimony;

August 20-23, 2018 – public hearing dates;

September 6, 2018 – due date of submission of comments and post-hearing rebuttal comments – this deadline was previously announced as September 5, 2018.

For those planning to participate in this part of the 301 case, these are the dates by which to be governed.

China 301 List 3 Comments Deadline Changed

Posted in Border Security, Corporate Counsel, Cross-border deals, Cross-border trade, Customs Law, Trade Agreeements, Trade Remedies

There is a new publication which appeared on the USTR website on August 2, 2018. In it, USTR clarifies the August 17, 2018 deadline for comments regarding products on the China 301 List 3 has also been extended to September 5, 2018.

China 301 List 3 – 25% Duty ???

Posted in Aerospace & Defence, Border Security, Buy America, Corporate Counsel, Countermeasures, Customs Law, Imports Restrictions, Legal Developments, NAFTA, Trade Agreeements, Trade Remedies, World Trade Organization

On August 1, 2018, USTR Lighthizer issued a press release indicating he was following through with President Trump’s direction and will consider raising the rate of duty from 10% to 25% on those products on China 301 List 3. A formal notice in the Federal Register is expected soon.

Mr. Lighthizer also announced the written comment period is being extended to September 5, 2018, while the deadline to request to appear at the public hearing is changed to August 13, 2018. The hearing itself is still scheduled for August 20 to 23, 2018.

China 301 – List 3 Now A Reality

Posted in Aerospace & Defence, Border Security, Corporate Counsel, Cross-border deals, Cross-border trade, Customs Law, Export Controls & Economic Sanctions, Exports, Imports Restrictions, Legal Developments, NAFTA, Trade Agreeements, Trade Remedies

Late on July 10, 2018, U.S. Trade Representative Lighthizer released a list of the next Chinese-made products targeted for additional duties, this time at a 10% rate and worth about $200 billion.  The statement in support of this action can be found here: USTR Statement Supporting China 301 List 3; and the list of affected products here: China 301 List 3 Products. As before, the list of products is released in Federal Register pre-publication format.

The dates to keep in mind are as follows:

July 27, 2018:  Due date for filing requests to appear and a summary of expected testimony at the public hearing, and for filing pre-hearing submissions;

August 17, 2018:  Due date for submission of written comments;

August 20 – 23, 2018:   Public hearing;

August 30, 2018:  Due date for submission of post-hearing rebuttal comments.

This new List 3 bears Docket No. USTR-2018-0026.  If you are considering filing comments, keep in mind USTR wants to hear about “whether imposing increased duties on a particular product would be practicable or effective to obtain elimination of China’s acts, policies, and practices, and whether maintaining or imposing additional duties on a particular product would cause disproportionate economic harm to U.S. interests, including small- or medium-sized businesses and consumers.”

USTR has also published the form to be used by companies seeking exclusion from the China 301 List 1 tariffs, see China 301 Exclusion Request Form. At this point, the objection and reply forms have not been published. Companies considering seeking an exclusion will want to consider the same factors which have been material throughout these proceedings:

1) Can the product be sourced only in China;

2) If other sourcing is available, is there sufficient production;

3) Any exclusion request will have to be based on more than there being a price difference;

4) Is there a national security consideration; and

5) Any other pertinent factors.