The European Commission’s recently released proposal for a Carbon Border Adjustment Mechanism (CBAM) forms a critical part of the European Union’s Fit for 55 Package, discussed in a previous blog. The proposed EU CBAM will require importers of certain products into the EU to pay for the tons of carbon emissions embedded in those products in the form of CBAM certificates, the price of which would be tied to the price of emissions allowances under the EU Emissions Trading System (ETS). The CBAM is expected to be phased in gradually from 2023 in the form of detailed emissions reporting requirements, transitioning to full implementation by 2026. Although the EU CBAM has yet to be approved and details of the mechanism remain to be fleshed out via implementing acts, companies would benefit by evaluating their potential exposure now, not just to the EU CBAM but also to the measures that may be implemented in response by other countries, including the United States.
Luke Tillman and Rebecca Robinson recently published an article in Law 360 assessing US regulations governing the importation of certain types of artwork and cultural antiquities. The article explores how these laws may also be implicated in museum efforts to repatriate some of these items.
On July 13, 2021, the U.S. Court of Appeals for the Federal Circuit (“CAFC”) released its opinion reversing the U.S. Court of International Trade’s (“CIT”) decision that President Trump had unlawfully doubled tariffs on imports of steel from Turkey under Section 232 of the Trade Expansion Act of 1962 (“Section 232”). The CIT had initially found that such action was beyond the President’s authority as it was taken outside the timeframe set forth in Section 232. Our prior blog post discussing Section 232 cases at the CIT, including that decision, can be found here.
In Transpacific Steel LLC v. U.S., the CAFC found that the increase in Section 232 tariffs on Turkish steel was permissible because the initial proclamation imposing tariffs on steel imports had allowed for future adjustments. According to the CAFC, under the statute, the President can take a “continuing course of action” which allows later modification, including the increase of import restrictions. The CAFC concluded that the CIT’s narrow reading of the statute obstructs the statutory purpose of Section 232, and would impede the President’s ability to effectively address the national security issues raised by the Department of Commerce. The CAFC also reversed the CIT’s finding that the tariff increase had violated equal protection rights under the Fifth Amendment. One member of the CAFC panel, Judge Reyna, dissented, arguing that the CIT correctly found that the President exceeded his authority under Section 232.
While this decision concerned a temporary increase in 232 tariffs with respect to imports of steel from Turkey, its impact could be much broader, in that the Biden Administration may rely on this decision to adjust any of the Section 232 duties on steel and aluminum imports more freely. Currently, it is unclear what President Biden’s next steps with regard to these Section 232 tariffs will be, and now, he may have a freer hand in modifying these tariff levels to effectuate broader trade and industrial policies.
Yesterday, the European Commission published the long-awaited “Fit for 55” Package designed to drive forward the EU’s objective to radically reduce dependence on fossil fuels. As European Commission President von der Leyen stated in the press conference, the “fossil fuel economy has reached its limits”. Consisting of over a dozen initiatives, including both new and revised proposals, it aims to ensure that the European Green Deal’s objective of reducing carbon emissions by at least 55% below 1990 levels is met by 2030, ahead of the 2050 climate neutrality objective.
On June 24, 2021, US Customs and Border Protection (CBP) issued a Withhold Release Order (WRO) pursuant to 19 USC 1307 against Xinjiang, China-based Hoshine Silicon Industry Co. Ltd. and its subsidiaries (Hoshine). The WRO instructs CPB personnel to detain shipments of silica-based products produced by Hoshine and its subsidiaries, including “materials and goods (such as polysilicon) derived from or produced using those silica-based products.”
On the same day, the US Commerce Department’s Bureau of Industry and Security (BIS) added Hoshine Silicon Industry (Shanshan) Co., Ltd and four other Xinjiang-based companies to the Entity List based on allegations of their participation “in the practice of, accepting, or utilizing forced labor” in their production processes.
On June 23, 2021, the Department of Labor (DOL) published a Federal Register notice updating its List of Goods Produced by Child Labor or Forced Labor (TVPRA List) to include polysilicon from China.
Meanwhile, the US Senate Foreign Relations Committee (SFRC) advanced a bill that, if passed, would impose additional restrictions on the importation of goods from China’s Xinjiang Province.
US Customs and Border Protection (CBP) maintains a comprehensive set of regulations restricting the importation of various pieces of artwork, antiquities, and cultural property. On June 16, 2021, CBP published in the Federal Register a final rule amending those regulations to reflect the imposition of new import restrictions on certain archeological material imported from Turkey.
The final rule recognizes that the artwork and cultural antiquities from Turkey are in jeopardy of pillage. It adds Turkey to the list of countries which have a bilateral agreement with the United States imposing import restrictions on the cultural patrimony from their respective countries and provides a Designated List identifying the types of archaeological material that are now governed by the restrictions.
Economists from the Federal Reserve Bank of New York recently published a report analyzing the US-China trade deficit after the imposition of Section 301 tariffs on imports from China in 2018. They concluded that the trade deficit narrowed, but attributed a significant part of this narrowing to duty evasion on the part of Chinese exporters and/or their U.S. importers. Specifically, the authors concluded that U.S. importers artificially reduced the value of their imports from China in order to reduce the “entered value” of those goods, which was the basis on which the additional Section 301 duties were calculated. This reduction in entered value reduced the overall value of Chinese imports during the period, which in turn reduced the U.S.-China trade deficit. The authors estimate that the United States lost approximately $10 billion in duty revenue through this possible underreporting of entered value.
The German Federal Parliament has adopted a new Act on Corporate Due Diligence Responsibilities in Supply Chains (‘the Supply Chain Act’) on Friday, June 11, 2021, due to enter into effect on January 21, 2023. By virtue of the Supply Chain Act, companies with a significant presence in Germany, as further explained below, must ensure compliance with human rights and environmental concerns in their business operations and impose equivalent due diligence responsibilities on their suppliers, irrespective of where they are located.
The Supply Chain Act could be of particular interest to the extractive industry, including oil and gas companies, and suppliers of the German automotive industry, but other industries will be affected as well given that the Act applies in principle across all sectors and covers both manufacturing and services, including, in principle, financial services.
On May 27, 2021, the U.S. Department of Commerce (Commerce) issued its affirmative final determination in the countervailing duty (CVD) investigation of Passenger Vehicle and Light Truck Tires (PVLT) from Vietnam, in which it concluded that the Vietnamese Dong (VND) was undervalued, and that this undervaluation constituted a countervailable subsidy under U.S. trade law. This is only the second CVD investigation in which currency undervaluation, as a form of countervailable subsidy, has been at issue (the other case being certain twist ties from China, see here), and is the first instance where Commerce made a final substantive decision as to the currency undervaluation issue. For that reason, PVLT from Vietnam establishes new law in several important areas, and is likely to be used as a template for future Commerce decisions in this area.
This week Steptoe launched “Supply Chain University,” a series of short videos in which we dive into the legal, policy, and advocacy issues involving supply chains. As events over the past 18 months have shown, now more than ever, companies around the world are being forced to navigate challenges that threaten the operation—or, in some cases, the fundamental viability—of their supply chains, and some of these developments are reshaping the landscape of global trade.
As part of the series, Steptoe partner Jeff Weiss speaks with industry and legal professionals, as well as academics, about trending supply chain topics ranging from the Biden administration’s executive order on supply chains to artificial intelligence to cybersecurity issues, and much more. We are taking a critical look at how supply chain issues intersect with almost every industry and impact your business, and the trade implications of new policy developments.
Visit the Supply Chain University page here.