Since the beginning of the Biden Administration, and particularly since earlier in 2021, U.S. companies and importers have been looking forward to the prospect of a reduction in the tariffs originally imposed in 2018 and 2019 following the Section 301 investigation against China or, at a minimum, a resumption of the exclusion process that was largely suspended in 2020 aside from extensions in limited circumstances. While several avenues for the elimination or reduction of Section 301 duties have presented themselves, to date, none have been adopted. Nevertheless, the coming months may offer several opportunities for U.S. companies interested in reducing their Section 301 duty liability to advocate for relief. Continue Reading Section 301 Duties on Imports from China: Current Status of Prospects for Relief
The much anticipated proposal for a Regulation prohibiting products made with forced labor on the EU market was published by the European Commission (“Commission”) on 14 September 2022, one year after the initiative was first announced by Commission President Ursula von der Leyen in her 2021 State of the Union speech. The proposed forced labor instrument has the potential to significantly impact the supply chains of not only EU companies, but also of any non-EU company that sells products into the EU. The instrument would apply to any company that exports products from the EU or that sells products on the EU market, irrespective of where those companies are based, to which products they are selling, and to which countries and suppliers they source from. Continue Reading The Proposed EU Ban on Goods Made With Forced Labor
The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) recently released preliminary guidance on the implementation of a price cap policy on Russian crude oil and petroleum products. This policy has major implications for maritime service providers and maritime supply chains.
The price cap policy will be implemented by the United States, together with the G7 and the EU. The policy has two components: (1) a ban on services related to the maritime transportation of Russian origin crude oil (effective December 5, 2022) and petroleum products (effective February 5, 2022) (collectively referred to as “seaborne Russian oil”), and (2) an exception for services related to shipments of seaborne Russian oil purchased at or below a price cap. The U.S. ban on the importation of Russian crude oil, petroleum, and petroleum fuels, oils and products of their distillation into the United States will remain in place.
The level of the price cap has not yet been set. It will be established by cooperating countries via a consultative process. OFAC anticipates publishing additional, detailed guidance regarding the price cap plan closer to the implementation dates. Continue Reading OFAC Releases Preliminary Guidance on Implementation of the Russian Oil Price Cap
On 29 August 2022, the European Union’s (“EU”) International Procurement Instrument (“IPI”) will enter into force. The IPI was adopted on 23 June 2022 after more than a decade of legislative preparations and discussions. It provides for a new trade policy tool which is designed to address the perceived lack of a level playing field in global procurement markets.
The IPI will enable the European Commission (“Commission”) to impose measures limiting non-EU companies’ access to the EU public procurement market if these companies’ governments do not offer similar access to EU businesses. Specifically, the IPI envisages two types of measures that can be applied: i) a “score adjustment” penalty on tenders submitted by suppliers from the targeted third country; or ii) the exclusion of such tenders from the procurement process. Such IPI measures would be applied following an investigation by the Commission, and after consultations with the country concerned. Continue Reading EU’s International Procurement Instrument to Enter into Force at the End of August
The United States has requested dispute settlement consultations with Mexico under Chapter 31 of the United States-Canada-Mexico Agreement (“USMCA”) concerning a range of energy policies adopted by the Government of Mexico that the United States believes discriminate against U.S. interests in violation of the USMCA. According to a press release issued by the Office of the U.S. Trade Representative Katherine Tai:
Mexico’s policies have largely cut off U.S. and other investment in the country’s clean energy infrastructure, including significant steps to roll back reforms Mexico previously made to meet its climate goals under the Paris Agreement. Mexico’s policy changes threaten to push private sector innovation out of the Mexican energy market. To reach our shared regional economic and development goals and climate goals, current and future supply chains need clean, reliable, and affordable energy.
Canadian Trade Minister Mary Ng has indicated that Canada has joined the United States in challenging these actions through the same dispute settlement mechanism. This is the first time that the United States and Canada have both pursued USMCA dispute settlement consultations with Mexico on policies of mutual concern.
The Uyghur Forced Labor Prevention Act (UFLPA) supports the existing prohibition on the importation of goods into the United States made with forced labor under Section 307 of the Tariff Act of 1930 (19 U.S.C. § 1307). Enforcement of the UFLPA began on June 21, 2022. Companies with supply chains that have links to Xinjiang specifically and China more generally should be concerned about the implications of UFLPA enforcement.
The UFLPA requires U.S. Customs and Border Protection (CBP) to apply a presumption that imports of all goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part in the Xinjiang Uyghur Autonomous Region of China (Xinjiang), or by entities on the UFLPA Entity List (described below), are prohibited from entry into the United States under 19 U.S.C. § 1307. The scope of the UFLPA extends to goods made outside of or shipped through China that include inputs made wholly or in part in Xinjiang. There is no de minimis exception. Priority enforcement areas include polysilicon, cotton, and tomatoes.
On June 6, 2022, President Biden issued a declaration of emergency with respect to the availability of electricity generation capacity in the United States, and pursuant to this declaration, authorized the U.S. Secretary of Commerce to permit certain solar cells and modules from Cambodia, Malaysia, Thailand, and Vietnam to be temporarily imported without antidumping duty and countervailing duties (“AD/CVD”) in response to an ongoing anticircumvention proceeding.
As background, U.S. Department of Commerce (“Commerce”) is currently conducting an anticircumvention inquiry into whether imports from these four Southeast Asian countries are circumventing the AD/CVD orders on crystalline silicon photovoltaic (“CSPV”) cells and modules, i.e., solar cells and panels, from China. If Commerce makes an affirmative circumvention finding, solar cells and modules manufactured in these countries may be presumed to be subject to the China CSPV AD/CVD orders. Due to the possibility that high AD/CVD rates could then apply to these imports, many participants in the renewable energy industry were concerned that this investigation could adversely affect the U.S. solar industry, and negatively impact U.S. clean energy efforts. Questions about the retroactive nature of any tariffs that could be imposed through this anticircumvention proceeding due to the recently modified regulations also have caused uncertainty in the industry, which in turn led several market participants to announce suspensions of U.S. solar projects.
On June 1, 2022, the United States and Taiwan announced the launch of the “U.S.-Taiwan Initiative on 21st Century Trade” (“Initiative”) designed to strengthen bilateral economic and trade relationships between the two parties. Representatives from the United States and Taiwan intend to meet later in June to “develop an ambitious roadmap for negotiations for reaching agreements with high standard commitments and economically meaningful outcomes” in 11 specific areas affecting bilateral trade and economic cooperation. Concurrent with the launch of the Initiative, the U.S. Trade Representative (“USTR”) published a request for public comments in order to help the agency develop negotiating objectives and positions for these upcoming meetings. Comments must be filed with USTR by July 8, 2022.
On May 23, 2022, President Biden announced the launch of negotiations for the long-awaited Indo-Pacific Economic Framework for Prosperity (“IPEF”). The IPEF had been under consideration for some time, but was finally announced during the President’s first trip to Asia.
These negotiations are beginning with a total of 12 countries in addition to the United States: Australia, Brunei, India, Indonesia, Japan, the Republic of Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, and Vietnam. Many of the countries on the list had been predicted (e.g., Australia, Indonesia, Japan, Korea, New Zealand and Singapore), but some were unexpected (e.g., Brunei and the Philippines). While Taiwan had indicated interest in joining, it was excluded from this launch largely because of concerns that its inclusion would prove an irritant to China, which might in turn dissuade other countries from joining. Nevertheless, there appears to be support in the Administration and elsewhere for continued bilateral engagement on trade and investment issues. On May 27, 2022, Fiji also joined the IPEF, the first Pacific Island nation to join the framework.
We are likely witnessing the beginning of the largest disruption to global supply chains in the post-World War II era. Between the COVID pandemic, the ongoing U.S.-China trade war, severe weather events, cyber attacks, and now the Russian invasion of Ukraine, policymakers around the world are starting to understand that supply chain disruption is the new normal and beginning to prioritize supply chain security and resilience during what is expected to be a period of long-term international instability.
While it is difficult to predict how long Russia’s war against Ukraine will last, many commentators believe that war may be long and protracted. As long as the conflict lasts, we would expect more sanctions and other measures to be promulgated. This will prompt supply chain realignments, including greater decoupling from the Russian economy. These measures will start as temporary but could become long-term or even permanent.
In addition, China’s de facto alliance with Russia since the start of the war will likely provide additional momentum for de-coupling with China as well, including the development of regional and plurilateral approaches to onshoring/reshoring and “friend-shoring” supply chains. These shifts of alignments will have major consequences for the production and movement of goods, ranging from automobiles, semiconductors, and oil and gas, to food and agricultural commodities. Global companies will increasingly be faced with choosing between abiding by Western sanctions and export controls or Chinese and Russian law.