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.

Continue Reading Recent Reports Suggest Supply Chain De-Coupling Policies Likely to Continue

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:

  1. Part one discusses the need and new momentum for CCUS.
  2. 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.
  3. Part three looks at the potential for CCUS and decarbonization in the United States.
  4. 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.

Continue Reading Commerce Takes Action Against Allegedly Undervalued Currencies

The European Union (EU) currently has in place a safeguard order against 26 product categories of steel. The EU first adopted a provisional measure in July 2018 and a definitive one in January 2019, the latter having been amended several times. The EU measure places an additional tariff (of 25%) upon the listed steel products where imports exceed a quota (with some country-specific quotas, and other general quotas applicable to other countries). The measure was adopted, in essence, because the European Commission determined that there had been an increase of imports into the EU, caused by unforeseen developments, including the increased use of trade defense instruments globally and in particular the US Section 232 measure of March 2018. The latter measure diverted steel exports to the EU and which threatened to cause injury to the EU steel industry.

Under the Withdrawal Agreement between the EU and the UK, EU safeguard measures currently apply to the UK and will do so until the conclusion of the transition period for the UK’s withdrawal from the EU on 31 December 2020. The UK Government currently has to decide whether to transition existing EU trade remedy measure to equivalent UK measures on 1 January 2021. In the case of the steel safeguard measure, the Government issued a Notice of Determination on 30 September 2020 to transition 19 of the 26 products, with adjustments being made to the level of the quotas for each product category. The EU for its part is in the process of amending its tariff rate quotas in light of the end of the transition period and the UK’s exit from the umbrella of the EU’s safeguard measure.

Continue Reading The United Kingdom (UK) Steel Safeguard Transition

In today’s MLex, Steptoe Senior Counselor and former EU Ambassador to the United States David O’Sullivan provided some thoughts on how to make progress on U.S.-EU agricultural issues to repair the bilateral trade relationship.

Ditch food-safety hangups to get trade deal with Biden, former EU ambassador to US says

19 Nov 20 | 17:45 GMT
Author: Joanna Sopinska

In Brief
The EU should be ready to offer some concessions on agriculture to US President-elect Joe Biden to de-escalate trade tensions and rebuild the trans-Atlantic relationship, a former EU ambassador to the US has said. This would require EU countries to put aside “all the old” disagreements on “chlorinated chicken, hormone beef and GMOs” and look instead for “things where there could be a bit of movement on both sides,” David O’Sullivan said.

Continue Reading Overcoming Obstacles to US-EU Agricultural Trade

On 23 October 2020, the Japan-UK Comprehensive Economic Partnership Agreement (JUK Agreement) was signed in Tokyo by Japan’s Foreign Minister Toshimitsu Motegi and UK International Trade Secretary Liz Truss. This is the first new international trade agreement the UK has concluded with a major economy since officially leaving the European Union (EU) in January 2020.

The UK-Japan negotiations were conducted with remarkable speed. There was enormous pressure from business leaders on both sides to have a deal in place before the end of the so-called “Withdrawal Agreement” period on 31 December 2020, i.e. the period following the UK’s formal departure from the EU, during which the UK has continued to be treated as an EU Member State (including continued coverage under existing EU trade agreements). The EU had concluded a comprehensive free trade agreement with Japan in 2018 which entered into force in February 2019 (the Japan-EU Economic Partnership Agreement (Japan-EU EPA)). Both the UK and Japan were keen to at least replicate its terms in a UK-Japan deal by late 2020, to ensure continuity. Time therefore was of the essence. On 9 June this year, Ms. Truss and Mr. Motegi met by videoconference and affirmed each other’s intention to engage in formal negotiations. On 7 August, they met again in person, this time in London, to confirm further intensification of the negotiations. Just over three months after launch of formal negotiations, on 11 September, the JUK Agreement was agreed in principle.

Continue Reading The Japan-UK Comprehensive Economic Partnership Agreement: EU Wine in UK Bottles?

On October 19, 2020, Brazil and the United States announced the signing of a Protocol on Trade Rules and Transparency (Protocol). The Protocol updates the 2011 Agreement on Trade and Economic Cooperation (ATEC) between the two countries with new annexes in three areas: Trade Facilitation and Customs Administration, Good Regulatory Practices, and Anti-Corruption. The agreement represents the culmination of a long process. In 2016, former Brazilian president Michel Temer signaled interest in receiving additional investment from the United States. This outreach intensified the dialogue between the two countries, and the discussions gained momentum until the elections of Donald Trump in 2016 and Jair Bolsonaro in 2018. After a meeting between the presidents at Mar-a-Lago in March 2020, there were high hopes in the business community for the negotiation of an ambitious trade deal between the two largest economies in the hemisphere.

The revised Protocol, however, is not a comprehensive trade agreement. The agreement does not include tariff reductions, measures designed to promote cooperation in strategic sectors, such as energy or infrastructure, or disciplines on express shipments. Moreover, the Protocol does not address agriculture, nor does it cover digital trade issues, such as Brazil’s plan to impose a tax on electronic commerce, which has proven to be a flashpoint between the US and a number of its trading partners.

Nevertheless, the Protocol does contain important provisions – primarily based on the relevant chapters of USMCA — that could help facilitate trade between the US and Brazil in the medium and long term:

  • Trade Facilitation and Customs Administration: the Annex includes important provisions on advance rulings, penalties, single window, authorized economic operator, automation, and the use of electronic documentation in line with the parties’ obligations in the WTO Trade Facilitation Agreement.
  • Good Regulatory Practices: the Annex addresses the importance of internal coordination and transparency in regulatory development, regulatory impact assessment, information quality, regulatory agendas, retrospective review of existing regulations, and other internationally-recognized GRPs.
  • Anti-Corruption: the Annex contains provisions addressing money laundering, the recovery of proceeds of corruption, the denial of a safe haven for foreign public officials that engage in corruption, and additional protections for whistleblowers. For Brazil, including strong anticorruption provisions supports President Bolsonaro’s flagship project against corruption that has been criticized with the shutdown of Operation Car Wash.

Although bilateral discussions toward a comprehensive trade agreement appear highly unlikely in the short- or medium-term due to strong congressional opposition, the Protocol could have a positive impact on bilateral trade flows over time – if it is faithfully implemented. Issues encountered by businesses in the three areas covered by the Protocol can create barriers to trade that, in many cases, are more substantial with regard to market access from a cost perspective than tariffs. For this reason, stakeholders should take advantage of opportunities for formal and informal engagement during the implementation process (e.g., some provisions have transition periods) to shape emerging laws and policies and help ensure that the commitments are met, which will reduce the incidence of trade barriers and other bilateral irritants in the long-term.

It is worth noting that the Administration’s mini-trade deals, including the recent ones with Japan and Brazil, have raised significant concerns from leading Democrats in Congress about executive branch circumvention of the congressional role in trade negotiations. As a result, Congress is likely to demand significantly more oversight of USTR as the price for any subsequent TPA legislation after the TPA Act expires next year.

With the results of the US presidential election now clear, many in Washington and around the world are beginning to contemplate what international trade policy might look like after President Elect Joseph R. Biden, Jr. takes office in January 2021. Predicting that policy is difficult, since international trade issues did not take center stage during the presidential campaign. However, statements the President Elect made during the campaign, prevailing sentiments in Congress, and Biden’s reputation as a believer in multilateral institutions developed during his nearly five decades in public office, offer some clues as to the broad outlines of his international trade policy. Overall, we expect that the Biden Administration will signal more predictability and a more rules-based multilateral orientation for US international trade policy than its predecessor. At the same time, it will be difficult to unwind some Trump Administration trade policies that enjoy political support, and in certain areas, we are likely to see significant policy continuity in the short- to medium-term.

Continue Reading Client Advisory: The US Trade Agenda in the Biden Administration

In early October, the European Commission launched “Access2Markets”, a web-based portal designed to provide practical information, tips and guidance to companies involved in import and export activities relating to the European Union (EU). This new online portal is set up in response to requests from stakeholders, in particular small and medium enterprises, for simplified and free access to guidance about customs and regulatory conditions for goods entering the EU from third countries, and about the equivalent conditions in third countries for goods originating from the EU.

The Access2Markets portal offers a single information point for useful information relevant to trading activities. It groups together information and guidance previously scattered in separate databases and tools, such as the Market Access Database, Trade Helpdesk, TARIC – EU Customs Tariff, and List rules concerning non-preferential origin. It also simplifies the complex set of EU-relevant import and export rules set out in the network of trade agreements the EU has entered into with over 70 countries and regions over the past 40 years. The new data pool covers a full spectrum of international trade-related topics encompassing information about tariffs (including both nomenclature and explanatory notes used for classification), applicable taxes at both the national and regional levels, rules of preferential and non-preferential origin, product requirements (e.g., labelling and marking), customs procedures and formalities, VAT/excise duties/sales taxes, non-tariff trade barriers in third countries, and trade statistics by individual good and country. Continue Reading The EC Launches an Online Tool to Facilitate an Understanding of International Trade Rules