On January 15, 2021, the Office of the United States Trade Representative (“USTR”) published a report detailing the findings of its investigation under Section 301 of the Trade Act of 1974 (“Section 301”) into Vietnam’s currency policies. The report concludes that “Vietnam’s acts, policies, and practices with respect to currency valuation, including excessive foreign exchange market interventions and other related actions, taken in their totality, are unreasonable and burden or restrict U.S. commerce.” Although such findings permit USTR to adopt measures, such as tariffs, in response to Vietnam’s policies, USTR has declined to take such action at this time.
On January 13, 2021 the US Department of Homeland Security’s Customs and Border Protection (CBP) announced that, effective immediately, all cotton and tomato products imported from China’s Xinjiang Uyghur Autonomous Region (XUAR) will be barred from entering the United States. The ban, officially called a Withhold Release Order (WRO), is “based on information that reasonably indicates the use of detainee or prison labor and situations of forced labor” according to CBP. This region-wide order joins a growing list of WROs targeting alleged forced labor in China.
Under this WRO, all cotton or tomato products originating from XUAR will be detained at all US ports of entry pending the submission to CBP within three months of entry of satisfactory proof that the products were not produced with forced labor. If CBP is unsatisfied with the provided evidence the products will be seized and potential civil and criminal investigations and penalties could occur. This particular WRO also includes apparel, textiles, tomato seeds, canned tomatoes, tomato sauce and other goods made with either cotton or tomatoes from XUAR. CBO has clarified that the WRO “applies to cotton and tomatoes grown in that region and to all products made in whole or in part using this cotton or these tomatoes, regardless of where the downstream products are produced.” Importers of record are responsible for ensuring no part of their product has cotton or tomato inputs that were harvested or produced at any point in their supply chain via forced labor from XUAR.
Buried inside the Consolidated Appropriations Act, 2021, which the President signed into law on December 27, 2020, is a critical provision that will help keep US trade flowing during the COVID-19 pandemic. Specifically, the bankruptcy relief section temporarily amends the US Bankruptcy Code to provide relief to customs brokers, a group that has been adversely impacted by the economic downturn due to disruptions in international trade and the resulting wave of bankruptcies that has put many of their importer-clients out of business.
Customs brokers perform a vital function in the process of importing goods into the United States that benefits importers and the US government. By industry practice, customs brokers often advance payment of estimated duties, taxes, and fees on behalf of their importing clients or otherwise guarantee payment to the US Government through their automated clearing house accounts. This practice – which is essentially a public service – facilitates the smooth execution of the steps necessary to import goods into the United States, and the prompt payment of large amounts of duties, taxes, and fees to the federal government every month. To an extent, it also confers liquidity to importers.
On 30 December 2020, the European Union and the United Kingdom signed the “EU-UK Trade and Cooperation Agreement” (EU-UK TCA or the Agreement) setting out the terms for their future economic and commercial relations after the UK definitively leaves the EU Single Market and Customs Union on January 1, 2021.
The British Parliament approved the deal by a large majority on the same day. The EU will provisionally apply the Agreement until the European Parliament delivers its approval sometime in February or March.
The Agreement comes after a year of fractious and often acrimonious negotiations. Unsurprisingly, given the context and the premises for the negotiations set down by the UK from the start, the deal is more a divorce agreement than a springboard for closer economic ties.
The latter ambition would be typical in any other trade negotiation: the usual point of trade deals is to facilitate greater fluidity of exchange, and therefore greater economic integration, between two hitherto relatively separate economic spaces.
Yet here, the parties took as a starting point 45 years of deep economic, legal and social integration between the UK and the rest of the EU. Political events in the UK having precipitated its withdrawal from the EU, the EU-UK TCA is the trade equivalent of a separation agreement between an old married couple. The legacy of economic, social and security arrangements going back decades dictate that the “leaving” party cannot make an entirely clean break with its former partner. For its part, the other party seeks to protect its interests, including putting in place mechanisms to manage relations with its former partner going forward. All of these elements are reflected in the terms of this Great Divorce. And, as is typical of divorce, the immediate effect is likely to leave both parties worse off.
The future direction of the World Trade Organization (“WTO”) hinges not only on the consensus agreement of the Members in appointing the WTO’s next Director-General, but also on the ability of that Director-General to forge a path forward to resolve the myriad issues currently facing the organization.
In August of this year, Roberto Azevêdo stepped down from his position as WTO Director-General, leaving his post open and eight candidates from around the globe in the running. After months of campaigning, this pool was narrowed to two candidates: Nigeria’s Ngozi Okonjo-Iweala and Korea’s Trade Minister Yoo Myung-hee. On 28 October 2020, the WTO Committee Chairs of the selection process announced that Ms. Okonjo-Iweala was the candidate with the widest support. However, Ms. Okonjo-Iweala must be formally appointed by consensus by the General Council; a prospect that remains tenuous in light of the opposition of the United States. The United States was the only WTO Member to say that it would not support Ms. Okonjo-Iweala, but instead has reiterated that Minister Yoo “must” lead the WTO. See USTR Statement on the WTO Director-General Selection Process.
The European Commission (EC) on Thursday 17 December issued long-anticipated proposals for new digital technology regulation in the European Union (EU): the Digital Services Act (DSA) and the Digital Markets Act (DMA). Once formally adopted as EU Regulations, these proposals will set a new benchmark for regulating internet platform services. Given their international reach and implications for global tech businesses, they also raise a series of implications for international trade. However, it’s still too early to predict whether the DSA and DMA may become the target of any new international trade actions. Since the proposed Regulations remain at the consultations stage, tech companies have so far reacted cautiously. To the extent the US ultimately adopts similar safeguards, the EU’s new proposals may ultimately reflect a new international consensus on internet platform regulation. Failing that, some may frame them as an effort to maintain the ramparts of “fortress Europe” against international competition in digital services.
The new initiative is described in the linked article by members of Steptoe’s Brussels office, including former EU Ambassador to the United States David O’Sullivan and partners Charles Helleputte, Charles Whiddington and Philip Woolfson.
Recently-published reports from the U.S. government suggest that, due to COVID and U.S.-China trade tensions, U.S. policy is likely to continue a trend towards incentivizing supply chain de-coupling in the ICT sector where feasible.
On October 20, 2020, the Cyberspace Solarium Commission issued a white paper, “Building a Trusted Supply Chain,” that sets out a “five-pillar” plan to “reinvigorate American high-tech manufacturing and secure the United States’ Information and Communications Technologies (ICT) supply chains,” with a focus on materials, semiconductors, and finished ICT equipment. Established by Congress in 2018, the Commission is comprised of commissioners from both the public and private sectors and is co-chaired by Senator Angus King (I-ME) and Rep. Mike Gallagher (R-WI). This most recent white paper follows a lengthier report issued by the Commission in March 2020 that proposed a strategy of “layered cyber deterrence” as part of an ICT industrial base strategy to “reduce critical dependencies on untrusted” ICTs.
Partners Hunter Johnston and Jeff Weiss have co-authored a four-part article series on carbon capture, utilization, and storage (CCUS) for Law360. Use of CCUS technologies and products are critical to achieving national and global decarbonization goals. Part four of the article includes a discussion on potential trade law and policy, international regulatory cooperation, and standards and conformity assessment issues that are relevant for CCUS. See below for relevant links:
- Part one discusses the need and new momentum for CCUS.
- Part two reviews key decarbonization developments in the European Union, including a potential carbon border adjustment mechanism and the need to ensure that a CBAM recognizes the important role of CCUS in meeting emissions reduction targets.
- Part three looks at the potential for CCUS and decarbonization in the United States.
- Part four considers how the interests of multiple stakeholders may align around CCUS, identifies issues to be resolved, and makes recommendations for promoting global adoption of CCUS and decarbonized supply chains, including considerations for ensuring compliance with global trade rules and for US-EU cooperation.
On December 14, 2020, the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) is scheduled to publish an interim final rule modifying certain elements of the exclusion process for steel and aluminum imports subject to tariffs pursuant to Section 232 of the Trade Expansion Act of 1962 (“Section 232”).
When President Trump imposed Section 232 tariffs on imports of steel and aluminum, Commerce was directed to set up a process that allows companies to request exclusions for products that are not “produced in the United States in a sufficient and reasonably available amount or of a satisfactory quality.” BIS had previously issued three interim final rules regarding the exclusion process. The new rule responds to some of the comments received in response to those prior interim final rules, with the following key changes:
- The Creation of General Approved Exclusions (“GAEs”): For certain products that have not received objections in the past, BIS will issue GAEs. Unlike regular Section 232 tariff exclusions, GAEs can be used by any importing entity, do not have a quantity limitation, and will last for an indefinite period of time. However, companies cannot obtain retroactive refunds on tariffs using a GAE. Companies should check if any of their imported products are among the listed GAEs.
- New Certification Requirements: Due to concerns that requesters are asking for higher than necessary amounts in their exclusion requests, companies will be subject to additional certification requirements regarding requested volumes.
- Revising the Definition of “Immediately”: Previously, material was considered to be available “immediately” from domestic producers if it could be provided within eight weeks. The new rule adjusts that definition so that “immediately” either means produced and delivered within eight weeks, or produced and delivered in a timeframe that is equal to or earlier than the time required to obtain the product from the requester’s foreign supplier.
In addition to these modifications, BIS also clarified the language in certain parts of the rule, and changed the page limits on attachments that companies can submit during the exclusion process. Comments on this rule are due on February 12, 2021. BIS noted that it expects to issue at least one more interim final rule in response to comments it has received about the exclusion process.
On November 24, 2020, the U.S. Department of Commerce (“Commerce”) issued a preliminary affirmative determination in the countervailing duty (“CVD”) investigation of twist ties from China. What is particularly noteworthy about this preliminary determination is Commerce’s decision to countervail the undervaluation of China’s currency, the Renminbi (“RMB”). This marks only the second occasion – following the investigation of Passenger Vehicle and Light Truck (“PVLT”) Tires from Vietnam earlier this year – that Commerce has countervailed a country’s undervalued currency, and the first time it has done so against China. As discussed further below, Commerce’s determination relied on an analysis of the RMB from the U.S. Department of the Treasury (“Treasury”) which differed in meaningful respects from Treasury’s analysis of the Vietnamese Dong (“Dong”) in the investigation of PVLT Tires from Vietnam, suggesting that a less objective, more qualitative analysis may be applied against the RMB in future cases.
Under U.S. law, a subsidy program is countervailable when it meets three criteria. Specifically, the program must constitute (a) a financial contribution provided by a government authority or public body, (b) to a specific firm or industry, that (c) yielded a benefit to the recipient.
The currency undervaluation allegations examined in the PVLT Tires from Vietnam and Twist Ties from China investigations were based on regulations issued by Commerce earlier this year to interpret these terms in the context of currency undervaluation. Regarding the requirement of specificity, Commerce’s new rule provides that enterprises that buy or sell goods internationally (i.e., enterprises in the traded goods sector) may comprise a “group” of enterprises for specificity purposes.