The European Commission published its Communication on An Open, Sustainable and Assertive Trade Policy on 18 February 2021 (the Communication). This follows a consultation on the EU’s Trade Policy Review which closed in November 2020.

The Communication seeks to reset the course of the EU’s trade policy in the context of global uncertainty and increased competition. Its key theme is “open strategic autonomy”, a concept characterized by three main elements:

1) furthering openness and engagement by making strategic use of the size and attractiveness of the EU Single Market;

2) enhancing the resilience and sustainability of value chains. The Commission in this regard seeks as a priority to identify strategic dependencies in supply chains, also to be addressed by industrial policy reviews; and

3) demonstrating assertiveness and encouraging rules-based cooperation in the implementation of EU trade policy to further support the EU’s geopolitical interests.

In line with its overarching objective of open strategic autonomy, the Communication suggests that the EU’s trade policy will focus on three core priorities:

  1. support the recovery from the pandemic and the fundamental transformation of the EU economy in line with its green and digital objectives;
  2. shape global rules for a more sustainable and fairer globalization; and
  3. increase the EU’s capacity to pursue its interests and enforce its rights, including autonomously where needed. In this regard, the EU will seek appropriate means to ensure effective implementation and enforcement of provisions on sustainable development in EU trade agreements, to level-up social, labor and environmental standards globally, but also to defend itself against unfair trading practices.

Continue Reading The European Commission’s Communication on an Open, Sustainable and Assertive Trade Policy

Recent decisions from the U.S. Court of International Trade (“CIT”) have clarified the basis for legal challenges to the tariffs imposed by the Trump Administration on imports of steel and aluminum products on the grounds of national security. While the court has generally rejected wholesale challenges to these duties, other cases suggest that parties appealing the denial of specific exclusions to these duties might have some ability to obtain relief.

In Universal Steel Products, Inc. et al. v. the United States et al., a three-judge panel held that the duties did not violate obligations under Section 232 of the Trade Expansion Act of 1962 (“Section 232”) or the Administrative Procedure Act (“APA”). See Universal Steel Products Inc. et al. v. The United States et al., 2021 WL 401283 (C.I.T. 2021). Plaintiffs in Universal Steel Products claimed that the report issued by the Department of Commerce (“Commerce”) on steel and aluminum imports, and the subsequent presidential proclamations imposing tariffs on these products, contravened various procedural requirements. In its decision, the CIT found that the report was not reviewable under the APA as it was not a final agency decision. The court also concluded that the decision whether imports pose a national security threat under Section 232 is made at the president’s discretion and cannot be reviewed by a court. Finally, the CIT rejected arguments that the duration and timing of the tariffs imposed by the president did not comply with Section 232’s statutory provisions. This follows a decision by the CIT in 2019, where the court rejected a challenge to Section 232 as an impermissible delegation of statutory authority to the President by Congress.  See American Institute for Int’l Steel, Inc. et al v. United States, 376 F.Supp.3d 1335 (C.I.T. 2019), aff’d, 806 Fed.Appx. 982 (Fed. Cir.), cert. denied, 141 S.Ct. 133 (2020).

While the court is unlikely to support broad challenges to presidential authority in this area, it has shown a willingness to review clear procedural violations. Last month, the CIT dismissed all but one of the claims in Primesource Building Products Inc. v. U.S. et al., 2021 WL 276338 (C.I.T. 2021), a case that contested the expansion of Section 232 tariffs to derivative steel products like fasteners.  The CIT dismissed the plaintiff’s arguments that the proclamation broadening the tariffs was unconstitutional and unlawful under the Section 232 statute. The one claim that the CIT did not dismiss relates to whether the imposition of tariffs on downstream products after the 105-day statutory deadline triggered by the receipt of Commerce’s 232 report was lawful under Section 232. The CIT stated that it would examine whether later “assessments” made by Commerce that led to the expansion of the tariffs could be considered another report under the statute, thus extending the deadline. The court’s decision to consider limitations on the timing of any Section 232 action recalls a prior case in 2019 where the CIT struck down an increase in the duty rate from 25 percent to 50 percent specifically as to Turkish imports. In Transpacific Steel LLC v. United States, 474 F.Supp.3d 1332 (C.I.T. 2020), not only did the court find that this action violated the timeframe set forth by the Section 232 statute, it also concluded that there was no national security basis for an action that only increased tariffs with regard to Turkish imports. The CIT also held that the increase in this duty rate constituted a violation of the plaintiff’s equal protection rights under the U.S. Constitution.

Continue Reading CIT Rejects Broad Challenge to Section 232 Duties on Steel and Aluminum Imports, But Challenges to Denied Exclusions Have More Success

Jeff Weiss, who is co-chair of Steptoe’s trade policy and negotiations group and leads Steptoe’s Supply Chain team, co-authored an article with Livia Lam titled “US Trade and Domestic Economic Policy Should Align” for Law360.  The article, published on February 1, highlights the long-standing incoherence between US trade policy and domestic economic policy and the consequences of that disconnect.  It then suggests a number of tools that should be integrated into US trade policy to better align the two and make US trade policy more progressive.

Law360 – US Trade And Domestic Economic Policy Should Align

Jeff Weiss, who is co-chair of Steptoe’s trade policy and negotiations group and leads Steptoe’s Supply Chain team, co-authored an article titled “Effective Supply Chain Management in an Era of Decoupling” for Bloomberg Law. The article, published January 29, highlights the unstable nature of global supply chains, due to disruptions from Covid-19, China-US trade tensions, and other factors. It notes that, as a result, a significant number of efforts are already underway in the US and other countries to consider de facto policies of “de-coupling” – namely, mandating or incentivizing the replacement of traditional long and linear supply chain networks with regionally concentrated supply chain clusters to achieve health, national security, or other objectives. The article then discusses how companies can be proactive by creating an integrated, holistic approach to supply chains and manage their supply chains on their terms.

The Government of Canada intends to add certain Plastic Manufactured Items to the list of substances appearing on Schedule 1 of the Canadian Environmental Protection Act (CEPA), fulfilling the Trudeau Government’s commitment to act on plastic waste released into the Canadian environment.  Importantly, the listing functions as a regulatory mechanism and necessary first step for later enacting prohibitions on certain plastic wastes, but does not, in and of itself, prohibit the sale or use of any plastic consumer or industrial products.

The Proposed Order,[1] which is expected to become effective in 2021, amends Schedule 1 to list Plastic Manufactured Items as a class of materials considered by the Canadian Government to be toxic under CEPA, Canada’s primary environmental protection act.[2]  In support of the Proposed Order, the Canadian Government compiled a Science Assessment on Plastic Pollution,[3] which outlines the bases for the conclusions that plastic pollution is an ongoing problem that requires mitigation under CEPA, and that such pollution poses an actual or potential risk of harm to the environment and human or animal health.

The addition of Plastic Manufactured Items to Schedule 1 authorizes the Canadian Government to propose and implement policies, consistent with CEPA, that are designed to address and mitigate plastic pollution throughout the supply chain, including: manufacturing, transportation, commerce, consumption, and disposal.  Despite the Government’s actions, however, a significant amount of confusion regarding the scope and intent of future regulatory actions remains to be addressed; in the meantime, numerous industry associations have submitted comments expressing concerns over the method of regulatory action, the lack of specificity and corresponding consequences that may result from such activity, and potential commercial and international trade impacts.  The provinces of Alberta and Ontario have expressed some of these same concerns.[4]

Continue Reading Grasping at Straws: Regulatory and Trade Considerations Regarding Canada’s Proposed Single Use Plastics Policy

Since 1 January 2021, the United Kingdom of Great Britain and North Ireland (the UK) has ceased to be part of the Single Market of the European Union (EU).[1]  This date marked the end of the transition period provided for under the Withdrawal Agreement of 31 January 2020 between the UK and the EU.[2] During the transition period, the UK remained in the EU customs territory and thus continued to be integrated into EU trade policy and enforcement actions, including trade remedies. The UK’s departure from the EU at the start of 2021 will have multiple consequences for EU trade remedy investigations and for the EU’s approach to trade remedy measures more generally going forward.

In light of these changes, the EU published a notice on 18 January 2021, laying down some of the practical implications of the UK’s departure.[3]

One immediate consequence of UK’s exit from the EU customs territory is that all trade remedy measures (anti-dumping, countervailing and safeguards) in force on 1 January 2021 will apply going forward only to imports into the 27 member states of the EU from third party States. This will include EU imports of UK originating steel products that are subject to EU steel safeguard measures.[4] Likewise, any new trade remedy measures the EU may adopt after 1 January 2021 following an investigation initiated before or after that date will only affect imports into the EU-27, i.e. excluding the UK.

One complication is imports into Northern Ireland.  Pursuant to Part Three of the Withdrawal Agreement, though theoretically no long part of customs territory of the EU, after 1 January 2021, Northern Ireland will continue to be subject to EU customs procedures and rules, in order to maintain borderless trade flows on the island of Ireland.  EU trade remedy measures will therefore be applicable to goods entering Northern Ireland from outside the EU unless it can be proven that their final sales destination of sales is Northern Ireland. This includes goods entering into Northern Ireland from Great Britain, subject to any future amendments to the rules. The EU will soon make available a separate notice concerning the technical details in this respect.

Continue Reading Practical Implications of Brexit to EU Trade Remedy Investigations and Measures

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.

Continue Reading USTR Finds Vietnam’s Currency Undervaluation To Be Unreasonable And Burden Or Restrict U.S. Commerce, But Delays Responsive Action

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.

Continue Reading US Announces Region-Wide Ban on Cotton and Tomato Imports from Xinjiang

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.

Continue Reading Coronavirus Relief Package Provides Bankruptcy Protection to US Customs Brokers to Help Keep Trade Flowing

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.

Continue Reading The Brexit Agreement: the Great Divorce