Overview

Donald Trump emphasized international trade throughout his presidential campaign and has made it his signature issue since taking office. Our team is closely monitoring his administration's international trade activities, and we update this website frequently to provide current profiles of seven crucial areas identified by President Trump as well as timely information on key trade-related appointments and policy developments.

Please click on "UPDATES" for the latest news, including:

  • Department of Commerce Preliminarily Determines Countervailing Duties for U.S. Imports of Chinese Aluminum Sheet
  • House Committee Holds Hearing on Effects of Tariff Increases on U.S. Economy and Jobs
  • Senate Finance Committee Holds Hearing on Market Access Challenges in China
  • U.S. Department of Treasury Sanctions Certain Russian Oligarchs, Government Officials, Energy Companies and Rosoboroneksport
  • USTR Releases 2018 National Trade Estimate Report on Foreign Trade Barriers

Please click on "Publications" for our latest communications, including:

If you have questions about how the Trump administration may affect your international trade concerns, please contact your relationship attorney or any member of our International Trade team.

UPDATES
Department of Commerce Preliminarily Determines Countervailing Duties for U.S. Imports of Chinese Aluminum Sheet

4/18/18 – In its self-initiated investigation, the Department of Commerce has preliminarily determined that countervailing duties (CVD) should be assessed for imports of aluminum sheet from China to counteract Chinese government subsidies. Commerce calculated a 31.20 percent CVD rate for Chinese respondent Yong Jie New Material Co., Ltd.; a 34.99 percent CVD rate for respondents Henan Mingtai Industrial Co., Ltd. and Zhengzhou Mingtai Industry Co., Ltd.; and a 33.10 percent CVD rate of for all other Chinese producers and exporters. Due to their failure to cooperate in the investigation, Commerce assigned a 113.30 percent CVD rate to respondents Chalco Ruimin Co., Ltd. and Chalco-SWA Cold Rolling Co., Ltd.

These rates are preliminary, and the investigation will continue into its final phase. Nevertheless, Customs and Border Protection will require cash deposits based on these preliminary rates for the merchandise covered under the scope of the investigation. Such merchandise is common alloy aluminum sheet, which is a flat-rolled aluminum product having a thickness of 6.3 mm or less, but greater than 0.2 mm, in coils or cut-to-length, regardless of width. Common alloy sheet is currently classifiable under the Harmonized Tariff Schedule of the United States (HTSUS) subheadings 7606.11.3060, 7606.11.6000, 7606.12.3090, 7606.12.6000, 7606.91.3090, 7606.91.6080, 7606.92.3090 and 7606.92.6080. Merchandise that falls within the scope of these investigations may also be entered into the United States under HTSUS subheadings 7606.11.3030, 7606.12.3030, 7606.91.3060, 7606.91.6040, 7606.92.3060, 7606.92.6040 and 7607.11.9090. Specifically excluded from the scope of this investigation is aluminum can stock, which is suitable for use in the manufacture of aluminum beverage cans, lids of such cans, or tabs used to open such cans.

Commerce is scheduled to announce its final determination in this CVD investigation no later than August 30, 2018. In addition, the related antidumping investigation into aluminum sheet from China continues with a preliminary determination in that investigation due by June 15, 2018. For additional background on this investigation, see Commerce’s Fact Sheet on this CVD investigation and Thompson Hine’s International Trade Update dated November 29, 2017.

House Committee Holds Hearing on Effects of Tariff Increases on U.S. Economy and Jobs

4/13/18 – On April 12, 2018, the House of Representatives' Committee on Ways and Means held a hearing to explore the effects on the U.S. economy and jobs of the tariff increases related to Section 232 and Section 301 investigations. Before the hearing, Chairman Kevin Brady stated, "In enforcing our trade laws, we should always take a targeted approach to address unfair practices while avoiding harm to U.S. workers and job creators. Our private sector witnesses will discuss the impact of recently announced U.S. tariff increases on their businesses, including product and country coverage of the tariffs, the process to comment on and apply for exclusions from the tariffs, and the effects of possible retaliation on U.S. exporters." In his opening comments, Brady highlighted China's questionable trade policies and practices, but also asked, "How do you avoid punishing Americans for China's misbehavior?"

While most members of the committee and witnesses acknowledged that China engages in unfair trade practices, opinions on the appropriate response and strategy varied. The chairman acknowledged his belief that tariffs are taxes that will "ultimately be passed onto consumers. Like taxes, they also curtail economic growth, discourage new investment, delay new hiring, and put American workers at a huge disadvantage to foreign competitors." Ranking Member Richard Neal indicated that the logic of the tariffs is "pretty direct" given China's behavior, but that the tariffs "will bring disruption to the U.S. economy" and, thus, a key question is whether the Trump administration "has a plan to use these tariffs effectively." Several other members of the committee questioned whether the president and his trade advisers have a long-term strategic trade policy, with Representative Ron Kind going so far as to assert that the president's trade agenda is "seriously off the rails" with its unilateral actions, threats to "blow up" NAFTA, and failure to undertake any new, meaningful bilateral trade agreement negotiations since taking office.

Industry witnesses expressed a variety of viewpoints. Kevin Kennedy, president of Kennedy Fabricating, stated, "The impact is that it's already shifting our jobs and work outside of the U.S. What was presented as a tariff on foreign steel has effectively become a tax on U.S. manufacturers like us." Ann Wilson of the Motor & Equipment Manufacturers Association noted that her industry operates in an integrated global supply chain in which tariffs could cause disruptions and increased costs, and cautioned restraint before additional tariffs are imposed. In supporting the president's implementation of tariffs, Roger Newport of AK Steel Corporation testified that the steel industry "has taken the brunt of [China's] unfair trade practices over the last several decades" and that it is "only a matter of time before others are afflicted by unfair trade." Links to all witnesses' written testimony are provided below.

Before the hearing, a group of over 100 industry associations "representing U.S. manufacturers, farmers and agribusinesses, retailers, technology companies, importers, exporters, and other supply chain stakeholders" submitted a letter to the committee expressing "deep concern" with the potential impact of the president's tariffs toward China and the escalating tariff threats. The group added that these tariffs and threats "will not effectively advance our shared goal of changing these harmful Chinese practices."

Witnesses' Statements:

  • Kevin Kennedy, President, Kennedy Fabricating
  • John Wolfe, Chief Executive Officer, Northwest Seaport Alliance
  • Roger Newport, Chief Executive Officer, AK Steel Corporation
  • John Heisdorffer, President, American Soybean Association
  • Calvin Dooley, President and Chief Executive Officer, American Chemistry Council
  • Ann Wilson, Senior Vice President, Motor & Equipment Manufacturers Association
  • Scott Paul, President, Alliance for American Manufacturing
Senate Finance Committee Holds Hearing on Market Access Challenges in China

4/12/18 – On April 11, 2018, the Senate Finance Committee held a hearing regarding the challenges that U.S. businesses, manufacturers and service providers face when trying to access the Chinese market. Links to the witnesses’ written testimony are provided below. Before the committee, these industry witnesses consistently indicated that a long-term strategy – with clear objectives and a timeline – was needed to address China’s trade practices. Perhaps, most poignantly, Dean Garfield, president and CEO of the Information Technology Industry Council, stated, “The U.S.-China relationship is as complex as it is important. The relationship has always been – and likely will continue to be – one of both competition and cooperation. We need to approach managing difficulties in the bilateral trade relationship with the nuance and deliberation they deserve, recognizing that both action and inaction will have consequences for years to come, in positive and negative respects.” He later added that the United States, regardless of China’s practices, must rebalance its approach to strengthening the U.S. economy because, “Regardless of whether China plays by the rules or not, it will continue to develop significant capacity for technological development, innovation, and growth. The United States must be prepared to compete.”

Christine Bliss, president of the Coalition of Services Industries, highlighted in her testimony significant market barriers in the services industry, including China’s treatment of data and technology, its restrictive measures in the insurance and securities markets, and its barriers in the banking and securities industries. She said that despite these barriers, China “represents a significant opportunity for U.S. services firms” given the size of its market. Linda Dempsey, vice president of International Economic Affairs of the National Association of Manufacturers, added that “there are few places in the world where [U.S.] manufacturers sell more or have increased sales” outside of our NAFTA partners … but “there are few places in the world where trade has proven more challenging for American manufacturing.” These challenges must be addressed, she stated, and “China simply must follow the same rules as everyone else.” While targeted actions, such as tariffs, can provide short-term relief, Dempsey argued that the United States should “be pursuing a truly modern, innovative and comprehensive bilateral trade agreement with China that wholly restructures our economic relationship.” Thea Lee, president of the Economic Policy Institute, added that China’s practices remain inconsistent with international rules and norms, “not just WTO rules on prohibited subsidies and dumping, but also international conventions on workers’ rights, public health, human rights, environmental protections, intellectual property rights, and consumer safety.” She concurred with the other witnesses that China is strategically playing a “long game, while the U.S. is egregiously shortsighted. Our trade policies in the past have been so inadequate in scale and slow in implementation that by the time we take action, it is often a decade too late, with the result that our trade actions are ineffective, if not counterproductive.”

Overall, while clearly criticizing the Chinese government for its trade policies, practices and continuing barriers, the witnesses were at times equally critical of the U.S. government’s approach to China and its own failure to develop and implement long-term economic and infrastructure development strategies.

Witnesses’ Statements:

  • Dean C. Garfield, President and CEO, Information Technology Industry Council
  • Christine Bliss, President, Coalition of Services Industries
  • Linda Dempsey, Vice President, International Economic Affairs, National Association of Manufacturers
  • Thea M. Lee, President, Economic Policy Institute
U.S. Department of Treasury Sanctions Certain Russian Oligarchs, Government Officials, Energy Companies and Rosoboroneksport

4/6/18 – The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC), in consultation with the Department of State, has sanctioned numerous Russian oligarchs and the companies they own or control, 17 senior Russian government officials, and a state-owned Russian weapons trading company. In his announcement, Treasury Secretary Steven Mnuchin stated, “The Russian government engages in a range of malign activity around the globe, including continuing to occupy Crimea and instigate violence in eastern Ukraine, supplying the Assad regime with material and weaponry as they bomb their own civilians, attempting to subvert Western democracies, and malicious cyber activities. Russian oligarchs and elites who profit from this corrupt system will no longer be insulated from the consequences of their government’s destabilizing activities.”

The full list of individuals and entities being placed on OFAC’s Specially Designated Nationals (SDN) list is available here. With the placement of these persons and entities on the SDN list, U.S. persons are now generally prohibited from engaging in transactions with them, and all assets subject to U.S. jurisdiction of these designated individuals and entities are frozen. OFAC has cautioned that non-U.S. persons could face sanctions for knowingly facilitating significant transactions for or on behalf of these Russian individuals or entities.

Generally, the Russian oligarchs placed on the SDN list are known for their involvement in Russia’s energy sector and are close allies to Russian President Vladimir Putin or are current Russian government officials. Many of the companies these oligarchs own or control have also been sanctioned and placed on the SDN List. They are: B-Finance Ltd.; Basic Element Limited; EN+ Group PLC; JSC EuroSibEnergo; United Company RUSAL PLC; Russian Machines; GAZ Group; Agroholding Kuban; Gazprom Burenie, OOO; NPV Engineering Open Joint Stock Company; Ladoga Menedzhment, OOO; Russian Machines; and Renova Group. OFAC has cautioned that this list of companies owned or controlled by the sanctioned Russian oligarchs should not be viewed as exhaustive, and reminds U.S. persons and companies of OFAC’s 50 percent rule. Under this rule, property and interests in property of entities directly or indirectly owned 50 percent or more in the aggregate by one or more persons or entities placed on the SDN list are considered blocked regardless of whether such entities appear on the list. Appropriate party screening and due diligence will increasingly be necessary when U.S. persons or companies engage in transactions in Russia.

Given the scope of these sanctions, OFAC has issued General License No. 12 to allow for U.S. companies currently engaged in transactions with these Russian companies to wind down operations and conclude contracts or other agreements that were in effect before April 6, 2018. All activities with these Russian companies must conclude by June 5, 2018. OFAC has issued General License No. 13, authorizing U.S. persons to undertake any necessary transactions necessary to divest or transfer any debt, equity or other holdings in EN+ Group PLC, GAZ Group and United Company RUSAL PLC by May 7, 2018.

Due to Russia’s continued support of the Assad regime and its destabilizing activities in Syria, OFAC has sanctioned Rosoboroneksport, a state-owned Russian weapons trading company, and its related bank, Russian Financial Corporation. Rosoboroneksport has been placed on OFAC’s SDN list and its Sectoral Sanctions Identifications (SSI) list, a list identifying persons and entities operating in certain sectors of the Russian economy (such as financial services, energy, metals and mining, engineering and defense) under which the United States has placed certain additional restrictions limiting U.S. companies from engaging in specific transactions with such SSI listed entities.

USTR Releases 2018 National Trade Estimate Report on Foreign Trade Barriers

4/2/18 – The Office of the U.S. Trade Representative (USTR) has released its annual report on significant foreign trade barriers, providing an inventory of the most important foreign barriers affecting U.S. exports of goods and services, foreign direct investment by U.S. persons and protection of intellectual property rights. The term “trade barriers” does not have a fixed definition but is broadly defined by the USTR as government laws, regulations, policies or practices that either protect domestic goods and services from foreign competition, artificially stimulate exports of particular domestic goods and services, or fail to provide adequate and effective protection of intellectual property rights. The report classifies foreign trade barriers into 10 different categories, including import policies, government procurement, export subsidies, lack of intellectual property protections and service/investment barriers.

While the voluminous report covers 64 countries, customs territories and regional associations, as well as all 20 U.S. free trade agreements, this update focuses on those countries of major interest for TrumpandTrade.com readers. The report provides little detail regarding ongoing NAFTA renegotiations, stating only that the parties have entered into discussions “seeking to update and rebalance the NAFTA.” Regarding the U.S.-Korea Free Trade Agreement (KORUS), the report notes that an agreement in principle was reached on March 28, 2018 to decrease the large U.S. trade deficit in industrial goods. Particularly, the report notes efforts and improvements in increasing U.S. automobile exports to South Korea through a commitment to double the number of U.S. automobile exports, to 50,000 cars per manufacturer per year that can meet U.S. safety standards (in lieu of Korean standards) and enter the Korean market without further modification. The parties will also harmonize testing requirements, and Korea will recognize U.S. standards for auto parts.

Concerning Russia, the report notes that sanctions implemented between the two countries, in response to Russia’s actions in Ukraine, have “created uncertainty for American firms and reduced prospects for market penetration. The U.S. Government continues to engage with industry to analyze and assess the impact of sanctions on trade in the broader context of U.S. national interests. Furthermore, because the U.S. Government has curtailed its bilateral engagement with Russia … our ability to raise and resolve market access barriers in Russia has been severely limited.”

With regard to China, the report states that “China continued to pursue a wide array of industrial policies in 2017 that seek to limit market access for imported goods, foreign manufacturers and foreign services suppliers, while offering substantial government guidance, resources and regulatory support to Chinese industries. The beneficiaries of these constantly evolving policies are not only state-owned enterprises but also other domestic companies attempting to move up the economic value chain.” Specifically, the report notes the Section 301 investigation regarding China’s “unreasonable or discriminatory” technology transfer and intellectual property practices.

Despite the ongoing embargoes, sanctions or otherwise severe trade restrictions in place by the United States, the report makes no references to trade with Cuba, Iran or Syria.

President Trump Announces Trade Enforcement Actions to Address China’s Unfair Practices Related to Technology Transfer and Intellectual Property

3/22/18 – Announcing that China’s unfair trade practices in the areas of technology transfers and intellectual property result in harm to the U.S. economy of at least $50 billion per year, President Trump issued a Presidential Memorandum announcing the findings of his administration’s Section 301 investigation into these practices by the People’s Republic of China. This trade action is the result of a Section 301 investigation initiated on August 18, 2017 pursuant to the Trade Act of 1974 to determine whether acts, policies and practices of the Government of China related to technology transfer, intellectual property, and innovation are actionable under that statute. The Office of the U.S. Trade Representative (USTR) has prepared a report on the findings of its investigation detailing the acts, policies and practices undertaken by China that are harmful to the United States. According to the report:

  • China uses joint venture requirements, foreign ownership/investment restrictions, equity limitations, and administrative review and licensing processes to force or pressure technology transfers from American companies.
  • China uses discriminatory technology licensing processes and restrictions to transfer technologies from U.S. companies to Chinese companies.
  • China directs and facilitates systematic investments and acquisitions in U.S. companies and assets that result in large-scale technology transfers in industries deemed important to China’s industrial plans.
  • China conducts and supports cyber intrusions into U.S. computer networks to gain access to valuable business information, such as intellectual property, trade secrets or other confidential business information.

According to the USTR, these unfair technology transfers and intellectual property policies are part of China’s intentional efforts to seize economic leadership in advanced technology as described in its industrial plans, such as “Made in China 2025.” In making the announcement, USTR Robert Lighthizer stated, “President Trump has made it clear we must insist on fair and reciprocal trade with China and strictly enforce our laws against unfair trade. This requires taking effective action to confront China over its state-led efforts to force, strong-arm, and even steal U.S. technology and intellectual property. Years of talking about these problems with China has not worked. The United States is committed to using all available tools to respond to China’s unfair, market-distorting behavior. China’s unprecedented and unfair trade practices are a serious challenge not just to the United States, but to our allies and partners around the world.”

In the Presidential Memorandum, President Trump directed his administration to take the following actions to respond to China’s acts, policies and practices involving the unfair and harmful acquisition of U.S. technology:

  • WTO Case: At the direction of the president, the USTR will file a complaint regarding China’s discriminatory technology licensing practices through a World Trade Organization (WTO) dispute settlement proceeding.
  • 25 Percent Ad Valorem Duties: The USTR will propose additional tariffs on certain products of China, with an annual trade value commensurate with the harm caused to the U.S. economy resulting from China’s unfair policies. The proposed product list subject to the tariffs will include aerospace, information and communication technology, and machinery.
  • Investment Restrictions: The president also has directed his administration to respond to Chinese investment aimed at obtaining key U.S. technologies. Relevant departments and agencies will work with the Treasury Department to propose measures addressing China’s investment practices involving the acquisition of sensitive technologies.

Regarding the 25 percent duties, the USTR will publish a proposed list of products subject to these additional tariffs within the next 15 days. Once published in the Federal Register, the public will have 30 days to comment on the proposed tariff action. Further, the USTR will hold a public hearing at a date yet to be determined. Once the USTR has conducted its review and analysis, a final determination on the products to be covered under any additional tariffs will be published and go into effect.

For more details on the initiation of the investigation, see Thompson Hine LLP’s International Trade & Intellectual Property Update

President Trump Requests Extension of Trade Promotion Authority

3/21/18 – As expected, President Trump has formally requested from Congress a three-year extension of Trade Promotion Authority (TPA) pursuant to the Bipartisan Congressional Trade Priorities and Accountability Act of 2015. In requesting the extension of TPA, which is due to expire July 1, 2018, the president noted, “Extension of trade authorities procedures is essential to fulfill that task and to demonstrate to our trading partners that my Administration and the Congress share a common goal when it comes to trade.” In his Presidential Message to Congress seeking TPA renewal, the president stated that his administration “has launched a new era in American trade policy, driven by a determination to use the leverage available to us as the world’s largest economy to open foreign markets, and to obtain more efficient global markets and fairer treatment for American workers. One of the major pillars supporting my trade policy is the pursuit of better trade deals.”

TPA, also referred to as “fast track authority,” is the process that allows the president to negotiate certain international trade agreements that Congress will consider for approval under expedited legislative procedures, provided the president observes certain statutory obligations. TPA defines how Congress has chosen to exercise its constitutional authority over a particular aspect of trade policy, while giving the president added leverage to negotiate trade agreements by effectively assuring U.S. trade partners that final agreements will be given timely and unamended consideration.

Department of Commerce Releases Requirements for Requesting Product-Based Exclusions from the Section 232 Aluminum and Steel Tariffs

3/16/18 (Updated 3/19/18) – The Department of Commerce has released information setting forth the process for how parties in the United States may submit requests for product-based exclusions from tariffs implemented by President Trump under Section 232 of the Trade Expansion Act of 1962 to protect national security from threats resulting from imports of aluminum and steel, as previously detailed in two presidential proclamations. See Trump and Trade Update dated March 13, 2018. The March 8, 2018 proclamations authorize the secretary of Commerce to grant exclusions from the tariffs upon the request of affected parties if the steel or aluminum articles are determined not to be produced in the United States in a sufficient and reasonably available amount or of a satisfactory quality or based upon specific national security considerations.

In a Federal Register notice published Monday, March 19, 2018, Commerce is issuing an “interim” final rule seeking comments on the manner in which it intends to implement the requirements for submissions requesting product-based exclusions from the tariff remedies. While interim in nature, the notice indicates that sufficient conditions have been met to immediately implement the rule and, in turn, the requirements for seeking a product-based exclusion. Because, the notice states, normal clearance procedures would prevent or hinder the collection of information for national security purposes, and a delay in an effective date while seeking public comment could harm national security, the requirements for requesting product-based exclusions from the Section 232 aluminum and steel tariffs will be effective March 19.

The notice provides specific guidance as to how individuals or companies using steel or aluminum articles in business activities (e.g., construction, manufacturing or supplying steel/aluminum to users) in the United States may submit product-based exclusion requests. The notice is clear that these exclusions will be limited to entities located in the United States, since allowing those not engaged in business activities in the United States to seek such exclusions “could undermine the adjustment of imports that the President determined was necessary to address the threat to national security posed by the current import[s]” of these articles. Further, any approved exclusions will be made on a product basis and will be limited to the individual or organization that submitted the request, unless Commerce approves a broader application of that particular product’s exclusion. The notice also makes clear that the country-based exemptions to be handled through negotiations by the U.S. Trade Representative are separate and apart from the product-specific exclusion process.

Commerce is requiring that submissions requesting exclusion be filed using specific forms – Steel Exclusion Forms and Aluminum Exclusion Forms – that will be posted shortly on Commerce’s website. Forms for objecting to exclusion requests will also be posted at these web pages. Commerce notes that information submitted in exclusion requests and objections to submitted exclusion requests will be subject to public review and made available for public inspection and copying. Parties that have proprietary or business confidential information they believe to be relevant for consideration will need to indicate so on the forms. A party making an exclusion request must specify its business activities in the United States that provides it authorization and sufficient reason to request an exclusion. Exclusion requests (i.e., forms) that are incomplete will be denied. There is no time limit for submitting a product-based exclusion request.

The review process for considering an exclusion request (and any objections) will normally not exceed 90 days. Approved exclusions will be effective five business days after publication of the responses in the appropriate dockets for aluminum (Docket No. BIS-2018-0002) and steel (Docket No. BIS-2018-0006) on www.regulations.gov. Starting on that date, the requesting party will be able to rely upon the approved exclusion request in calculating the duties owed on the product imported in accordance with the terms listed in the approved exclusion request. Exclusions will generally be approved for one year.

EU Publishes List of U.S. Products It May Target in Retaliation for Section 232 Aluminum and Steel Tariffs

3/16/18 – The European Union (EU) has published a list of U.S. products it might target in retaliation if President Trump moves forward with tariffs on imports of steel and aluminum from the Section 232 investigations. The list is divided into two categories:

  • Part A is a list of U.S. products that face immediate retaliation if the United States implements its steel tariffs. These products could face proportional EU tariffs of up to 25 percent. The EU also plans to file a complaint over the U.S. tariffs with the World Trade Organization (WTO).
  • Part B is a list of U.S. products that would also be included if the WTO rules that the U.S. aluminum and steel tariffs are illegal.

The EU has indicated in a notice seeking comments that the publication of this list is a procedural step in preparing a response to any potential U.S. tariffs. The European Commission, which coordinates trade policy for the 28 EU members, has invited comments from private stakeholders affected by the forthcoming U.S. tariffs of 25 percent on steel imports and 10 percent on aluminum imports. The commission is considering, as a first step, suspending tariff concessions under Article 8 of the WTO Agreement on Safeguards and, as a second step, subsequently and at the appropriate level, imposing increased customs duties on certain products from the United States.

The Thompson Hine Trump and Trade team recommends that U.S. companies that export to Europe review this proposed list to determine any potential impact on business activities. For additional background on the Section 232 investigations, the Department of Commerce’s reports and the subsequent presidential proclamations, please see Thompson Hine’s International Trade Update of March 13, 2018. 

OFAC Sanctions Russia for Malicious Cyber Activity

3/15/18 – The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) has sanctioned five entities and 19 individuals it has identified as engaging in Russian cyber activity, including “attempted interference in U.S. elections, destructive cyber-attacks, and intrusions targeting critical infrastructure,” according to Treasury Secretary Steven Mnuchin. The Treasury Department indicated that these sanctions were in response to interference in the 2016 U.S. election and the execution of destructive cyber-attacks, including the NotPetya attack attributed to the Russian military that is believed to be the most destructive and costly attack in history. The sanctions are also in response to continuing efforts by Russian government cyber actors who have targeted U.S. government entities and multiple critical U.S. infrastructure sectors, including energy, nuclear and commercial facilities and the water, aviation and critical manufacturing sectors. The White House also joined France, Germany and the United Kingdom in condemning the recent use of a military-grade nerve agent in an attempt to murder two UK citizens and noted that this incident further demonstrates the reckless and irresponsible conduct of the Russian government.

The sanctions are being implemented pursuant to Executive Order 13694, which targets malicious cyber actors, and under the Countering America’s Adversaries Through Sanctions Act (CAATSA). Particularly, the sanctions include the Federal Security Service (FSB) and Main Intelligence Directorate (GRU), a Russian military intelligence organization, which have both been key actors in Russia’s ongoing efforts to undermine cybersecurity. As a result of these designations, all property and interests in property of the designated entities/persons subject to U.S. jurisdiction are blocked and U.S. persons are generally prohibited from engaging in transactions with them.

President Trump Signs Proclamations for Section 232 Tariffs on Aluminum and Steel

3/8/18 – President Trump has signed two proclamations imposing 25 percent tariffs on imports of steel mill products and 10 percent tariffs on wrought and unwrought aluminum pursuant to his announcement on
March 1, 2018
. The president stated that these actions were necessary to address global overcapacity and unfair trade practices in the steel and aluminum industries and to protect national security. As our previous
updates have indicated, these tariffs are being implemented pursuant to Section 232 of the Trade Expansion Act of 1962, which provides the president with authority to adjust imports entering the United States in quantities or under circumstances that threaten to impair national security. The tariffs are scheduled to be implemented 15 days from today, on March 23, 2018.

Pursuant to the proclamation on steel, “steel articles” for which tariffs will be levied are defined at the Harmonized Tariff Schedule (HTS) six‑digit level as: 7206.10 through 7216.50; 7216.99 through 7301.10; 7302.10; 7302.40 through 7302.90; and 7304.10 through 7306.90, including any subsequent revisions to these HTS classifications.

Pursuant to the proclamation on aluminum, “aluminum articles” are defined in the Harmonized Tariff Schedule as: (a) unwrought aluminum (HTS 7601); (b) aluminum bars, rods and profiles (HTS 7604); (c) aluminum wire (HTS 7605); (d) aluminum plate, sheet, strip and foil (flat rolled products) (HTS 7606 and 7607); (e) aluminum tubes and pipes and tube and pipe fitting (HTS 7608 and 7609); and (f) aluminum castings and forgings (HTS 7616.99.51.60 and 7616.99.51.70), including any subsequent revisions to these HTS classifications.

After insisting last week that the tariffs would cover steel and aluminum imports from all countries, President Trump scaled back that threat in the actual proclamations. Citing the need for “flexibility” and “cooperation” with allies and those who “treat us fairly on both trade and the military,” the president offered some restraint in implementing the tariffs. President Trump recognized that Canada and Mexico present a “special case” and will be excluded for now from the tariffs, indicating that his administration will continue ongoing discussions with those countries to address concerns (i.e., NAFTA negotiations). The president stated that he “welcomes any country with which we have a security relationship to discuss alternative ways to address our concerns, including our concerns about global excess capacity.” His administration will provide appropriate avenues, via negotiations with the U.S. Trade Representative, for potentially modifying or removing a tariff under certain conditions for individual countries.

The White House also announced that there will be a mechanism, via the Department of Commerce, for U.S. parties to apply for exclusion of specific products based on demand that is unmet by domestic production or on specific national security considerations. The proclamations make clear that such relief will be provided only after a request for exclusion is made “by a directly affected party located in the United States.” Exclusion request procedures are scheduled to be issued by March 18, 2018.

We will continue to monitor this significant development and will publish further updates and details as information becomes available.

President Declares That United States Will Impose Tariffs of 25 Percent on Steel Imports and 10 Percent on Aluminum Imports

3/1/18 – In the category of “we can’t make this stuff up,” there reportedly has been in the past 24 hours an all-out war within the Trump administration over any tariffs to be implemented as a result of the Section 232 investigations into steel and aluminum imports. On February 16, the Department of Commerce publicly released reports on the national security impact of U.S. imports of steel mill products and of wrought and unwrought aluminum, finding that these imports threaten to impair the national security and recommending a range of remedy options, including tariffs and quotas. In the weeks since, U.S. industry and members of Congress have weighed in on the potential impact of these prospective tariffs and quotas on the U.S. economy, taxpayers and other industries reliant upon steel and aluminum imports, and the potential negative impact of tariffs and quotas on key U.S. allies.

A press announcement was initially planned for today, March 1, to announce the president’s decision, then it was postponed, then it was ostensibly cancelled. The scheduling problems appeared to be related to reports that National Economic Council Director Gary Cohn and White House trade adviser Peter Navarro were seeking vastly different remedies. Cohn reportedly wanted a more targeted approach to applying any tariffs, while Navarro was pushing for global tariffs at rates higher than recommended in Commerce’s reports. Chief of Staff John Kelly, Defense Secretary James Mattis and National Security Adviser H.R. McMaster had also sought a more nuanced response. When the White House announced instead that a meeting today with steel and aluminum industry executives would take place, it was expected to be nothing more than a “listening session” for the president.

And, it was … right up until the end of the session. After receiving comments from industry executives and repeatedly mentioning bad trade deals that have destroyed U.S. companies, the president said, “We’re going to take care of the situation, okay? So steel and aluminum will see a lot of good things happen. We’re going to have new jobs popping up. We’re going to have much more vibrant companies.” And then, in response to a question from the White House press pool, the president announced ­– likely to the surprise of his staff and everyone in the room – that he intended to implement tariffs for an unlimited time period of 25 percent on steel imports and 10 percent on aluminum imports, stating that “it’s [the policy is] being written now.”

A transcript of the “listening session” is available here. By the end of the trading day, the Dow Jones Industrial Average had fallen almost 2 percent; however, U.S. steel and aluminum companies saw gains. China and the European Union have already announced they will retaliate, either through their own measures or through remedies obtained in the WTO dispute settlement process. Stay tuned!

President Trump Releases 2018 Trade Policy Agenda and Annual Report

3/1/18 – The Office of the U.S. Trade Representative has released the Trump administration’s Trade Policy Agenda and Annual Report detailing how the administration “is promoting free, fair, and reciprocal trade and strongly enforcing U.S. trade laws.” USTR Robert Lighthizer, in releasing the report, stated that, “President Trump has launched a new era in American trade policy. His agenda is driven by a pragmatic determination to use the leverage available to the world’s largest economy to obtain fairer treatment for American workers.”

The policy rests on these five major pillars:

  • Adopting Trade Policies that Support Our National Security
  • Strengthening the U.S. Economy
  • Negotiating Better Trade Deals
  • Aggressively Enforcing U.S. Trade Laws and U.S. Rights under Existing Agreements
  • Reforming the Multilateral Trading System

The report adheres closely to past statements and well-known positions of President Trump’s trade team. According to Lighthizer, “President Trump is keeping his promises to the American people on trade, from withdrawing the United States from the flawed Trans-Pacific Partnership, to renegotiating NAFTA, to strongly enforcing U.S. trade laws. We are already seeing the results of President Trump’s agenda pay off for American workers, farmers, ranchers, and businesses.”

Of note in this voluminous report are these planned policy actions and activities:

  • Trade Agreements – The United States will continue to renegotiate the North American Free Trade Agreement and amend the Korea-U.S. Free Trade Agreement. The Trump administration will prepare for a potential bilateral agreement with the United Kingdom once the UK leaves the European Union. It will also pursue other bilateral agreements in the Indo-Pacific and African regions. The administration’s primary goals in NAFTA negotiations are to modernize provisions and to rebalance NAFTA for fair, reciprocal trade. The goals for KORUS are also to establish a more balanced trade relationship and to eliminate non-tariff barriers to exports of U.S.-made motor vehicles and motor vehicle parts.
  • Enforcing/Defending U.S. Trade Laws – The report states that the Trump administration will continue to “use all tools available” to combat unfair trade, and that there are “no successful trade agreements without enforcement.” The report highlights, but provides little new information or insight into, many of the trade actions undertaken in 2017 (i.e., trade actions under Sections 201, 232 and 301 of the Trade Act of 1974) and ongoing antidumping and countervailing duty investigations.
  • China – Several sections of the report discuss China and state that the scope of its economy means that “its economic practices increasingly affect the United States and the overall global economic and trade system.” It notes, however, that despite China’s WTO membership, the country is “moving further away from market principles” and as a result the United States “will resist efforts by China – or any other country – to hide behind international bureaucracies in an effort to hinder the ability of the United States to take robust actions, when necessary, in response to unfair trade practices abroad.”
  • World Trade Organization – The administration will work with all WTO members “who share the U.S. goal of using the organization to create rules that will lead to more efficient markets, more trade and greater wealth for our citizens.” However, the report notes that the United States is “concerned that the WTO is not operating as the contracting parties envisioned and, as a result, is undermining America’s ability to act in its national interest.”

A fact sheet on the report can be viewed here. Congress requires the USTR to submit the President’s Trade Policy Agenda and Annual Report by March 1 each year. 

President Trump Comments on Trade to U.S. Governors

2/27/18 – In wide-ranging remarks during a business session with U.S. governors, President Trump yesterday repeatedly broached the topic of international trade. The president reiterated his commitment to working on fair and reciprocal trade deals and highlighted specific trade issues:

  • Mexico – “You know, with Mexico … we probably lose $130 billion a year…. And, at some point, we have to get stronger and smarter, because we cannot continue to lose that kind of money with one country.”
  • Canada – “We lose a lot with Canada. People don’t know it. Canada is very smooth. They have you believe that it’s wonderful. And it is — for them…. So we have to start showing that we know what we’re doing.”
  • WTO – “World Trade Organization – a catastrophe…. makes it almost impossible for us to do good business. We lose the cases, we don’t have the judges. We have a minority of judges.”
  • China – “[W]e probably lost $504 billion, last year, on trade…. Other Presidents should have solved this problem long before I got here. And they’ve been talking for 25 years. And you know what happened? Nothing.”
  • Steel – “I want to bring the steel industry back into our country. If that takes tariffs, let them take tariffs, okay? Maybe it will cost a little bit more, but we’ll have jobs. Let it take tariffs.”
  • Aluminum – “I want to bring aluminum back into our country. These plants are all closing or closed.”
  • Section 232 Trade Actions – “Recently, we put a tariff on washing machines because we were getting killed ….. That was two months ago. You have to see the activity on new plants being built for washing machines and for solar panels. We had 32 solar-panel plants. Of the 32, 30 were closed, and 2 were on life-to-life resuscitation. They were dead. Now they’re talking about opening up many of them — reopening plants that have been closed for a long time.” 

In closing comments on trade, President Trump stated that “we’re going to straighten it out. We’ve already started. I mean, the first year is just — we laid the seeds.”

United States Implements More Sanctions on North Korea

2/26/18 – The Treasury Department has issued additional North Korea-related sanctions in an ongoing effort to disrupt North Korean shipping and trading companies that continue to support the Kim Jong-un regime. The action targets one person, 27 entities and 28 vessels located, registered or flagged in North Korea, China, Singapore, Taiwan, Hong Kong, the Marshall Islands, Tanzania, Panama and the Comoros Islands. The sanctions seek to increase pressure on North Korea by hindering the regime’s capacity to conduct evasive maritime activities that facilitate illicit coal and fuel transports and eroding its abilities to ship goods through international waters. In expanding the sanctions and targeting vessels, shipping companies and other third party logistics companies allegedly working on behalf of North Korea, Treasury Secretary Steven Mnuchin stated, “The President has made it clear to companies worldwide that if they choose to help fund North Korea’s nuclear ambitions, they will not do business with the United States.”

The Treasury Department’s Office of Foreign Assets Control (OFAC), the State Department and the U.S. Coast Guard also issued a North Korea Sanctions Advisory alerting the public to the significant risks to those continuing to enable shipments of goods to and from North Korea. North Korea is known to employ deceptive shipping practices, including falsifying and concealing information, physically altering vessel identification and transferring products via ship-to-ship transfers while at sea and not in ports. The advisory notes that the North Korean shipping industry is a significant avenue by which the country evades sanctions to fund its nuclear weapons and ballistic missile programs: “As such, the United States will continue targeting persons, wherever located, who facilitate North Korea’s illicit shipping practices.” The advisory provides two annexes for additional guidance: (1) an overview of U.S. and United Nations sanctions relevant to the shipping industry, including a non-exhaustive list of bases for which persons can be sanctioned by OFAC; and (2) a list of North Korean vessels that are capable of engaging in ship-to-ship transfers.

Department of Defense Supports Section 232 Findings of Impact on “National Security” But Urges Caution in Applying Any Remedy

2/23/18 – In an undated memo from the Department of Defense (DoD) to the Department of Commerce that was released last night, DoD concurred with Commerce’s recent Section 232 reports on steel and aluminum that have been submitted to President Trump for review. DoD agreed that “imports of foreign steel and aluminum based on unfair trading practices impair the national security” but noted that U.S. military requirements for steel and aluminum only represent approximately 3 percent of U.S. production and would not impact DoD’s ability to acquire necessary product to meet national defense demands.

Overall, DoD focused on the potential “negative impact” of Commerce’s recommendations (i.e., tariffs and quotas) on key allies. DoD recommended that an inter-agency working group be convened to “further refine the targeted tariffs, so as to create incentives for trade partners to work with the U.S. on addressing the underlying issue of Chinese transshipment.” If the president takes action on steel, DoD suggested “waiting before taking further steps on aluminum.” The delayed action on aluminum “may be sufficient to coerce improved behavior of bad actors.” DoD emphasized that the United States needed to “reinforce to our key allies that these actions are focused on correcting Chinese overproduction and countering their attempts to circumvent existing antidumping tariffs – not the bilateral U.S. relationship.” 

Republican Senators Urge President to Re-Engage in TPP Negotiations

2/21/18 – Twenty-five Republican senators authored a letter to President Trump encouraging his administration to re-engage in Trans-Pacific Partnership (TPP) free trade agreement discussions, which he abandoned shortly after taking office in January 2017. Despite the withdrawal of the United States from TPP negotiations, the remaining 11 countries continued negotiating the newly approved Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which is scheduled to be signed by its member countries March 8. This prompted a recent statement by President Trump that he may be interested in the multilateral deal if it could be made “substantially better.”

The senators urged the president to prioritize TPP engagement since increased economic engagement with the involved countries “has the potential to substantially improve the competitiveness of U.S. businesses, support millions of U.S. jobs, increase U.S. exports, increase wages, fully unleash America’s energy potential, and benefit consumers.” In addition, the letter highlights the senators’ belief that re-engaging in TPP discussions can serve as a counter-balance to China’s influence in the region and as another platform to address and modernize trade with Canada and Mexico, which are parties to the CPTPP.

Commerce Releases Section 232 Steel and Aluminum Reports Submitted to President Trump Last Month

2/16/18 – Secretary of Commerce Wilbur Ross released today the Section 232 reports prepared by the Commerce Department and submitted to President Trump last month on the national security impact of U.S. imports of steel mill products and of wrought and unwrought aluminum. As expected, Commerce found that the quantities and circumstances of steel and aluminum imports “threaten to impair the national security.” The reports remain under consideration by the president. He is required to make a decision on the steel recommendations by April 11, 2018, and on the aluminum recommendations by April 19, 2018. The president can take a range of actions or no action, based on the analyses and recommendations provided in these reports.

In summary, the reports recommend:

  • Aluminum: (1) a tariff of at least 7.7% on all aluminum exports from all countries; (2) a 23.5% tariff on all products from China, Russia, Venezuela and Vietnam, with all other countries subject to quotas equal to 100% of their 2017 exports to the United States; or (3) a quota on all imports from all countries equal to a maximum of 86.7% of their 2017 exports to the United States.
  • Steel: (1) a global tariff of at least 24% on all imports; (2) a tariff of at least 53% tariff on imports from Brazil, China, Costa Rica, Egypt, India, Malaysia, Korea, Russia, South Africa, Thailand, Turkey and Vietnam, with all other countries subject to quotas by product on imports equal to 100% of their 2017 exports to the United States; or (3) a quota on all steel products from all countries equal to 63% of each country’s 2017 exports to the United States.

Key Findings of the Steel Report:

  • The United States is the world’s largest importer of steel. Imports are nearly four times exports.
  • Six basic oxygen furnaces and four electric furnaces have closed since 2000, and employment has dropped by 35% since 1998.
  • World steelmaking capacity is 2.4 billion metric tons, up 127% from 2000, while steel demand grew at a slower rate.
  • Recent global excess capacity is 700 million tons, almost seven times the annual total of U.S. steel consumption. China is by far the largest producer and exporter of steel and the largest source of excess steel capacity. China’s excess capacity alone exceeds total U.S. steel-making capacity.
  • In an average month, China produces nearly as much steel as the United States does in a year. For certain types of steel, such as for electrical transformers, only one U.S. producer remains.
  • As of February 15, 2018, the United States had 169 antidumping and countervailing duty orders in place on steel, of which 29 are against China, and there are 25 ongoing investigations.

Key Findings of the Aluminum Report:

  • Aluminum imports have increased to 90% of total demand for primary aluminum, up from 66% in 2012.
  • From 2013 to 2016 aluminum industry employment fell by 58%, six smelters shut down, and only two of the remaining five smelters are operating at capacity, even though demand has grown considerably.
  • At today’s reduced military spending, military consumption of aluminum is a small percentage of total consumption and therefore is insufficient by itself to preserve the viability of the smelters. For example, there is only one remaining U.S. producer of the high-quality aluminum alloy needed for military aerospace. Infrastructure, which is necessary for our economic security, is a major use of aluminum.
  • The Department of Commerce recently brought trade cases to try to address the dumping of aluminum. As of February 15, 2018, the United States had two antidumping and countervailing duty orders in place on aluminum, both against China, and there are four ongoing investigations against China.

The tariffs and quotas recommended would be in addition to any duties already in place. The reports recommend that a process be put in place to allow the secretary of Commerce to grant requests from U.S. companies to exclude specific products if the United States lacks sufficient domestic capacity or for national security considerations. Any exclusions granted could result in changed tariffs or quotas for the remaining products to maintain the overall effect.

BIS Sanctions 21 Russia-Related Entities

2/16/18 – The Department of Commerce’s Bureau of Industry and Security (BIS) has sanctioned 21 entities determined by the U.S. government to be acting contrary to the national security or foreign policy interests of the United States. BIS has taken this action to ensure the efficacy of existing sanctions on the Russian Federation (Russia) for violating international law and fueling the conflict in eastern Ukraine. These entities have been placed on the BIS Entity List, which identifies entities and other persons that are subject to specific license requirements for the export, reexport and/or transfer (in-country) of specified items. Engaging in transactions with any of these entities now entails additional export licensing requirements and approval from BIS. The license review policy for each listed entity is identified in the License Review Policy column on the Entity List.

White House Holds Meeting to Discuss Aluminum and Steel Trade Actions

2/14/18 – President Trump and several Cabinet members hosted a meeting with congressional Republicans and Democrats on February 13, 2018 at the White House to discuss possible trade remedies in the Section 232 steel and aluminum investigations. The purpose of a Section 232 investigation is to determine the effect of imports on the national security of the United States, and the president stated that his administration is reviewing the final Department of Commerce reports submitted last month and considering all options. He told those attending that quotas and tariffs are options on the table.

In opening the discussions, President Trump stated that while he wants to keep prices down, he also wishes to "make sure that we have a steel industry and aluminum industry, and we do need that for national defense. If we ever have a conflict, we don't want to be buying the steel from a country that we're fighting because somehow that doesn't work very well." Several senators urged caution, however, including Senator Roy Blunt, who said, "we do need to be careful here that we don't start a reciprocal battle on tariffs" because the United States not only makes aluminum and steel but also must buy and import these products to satisfy domestic demand. Others cautioned President Trump on the issue of jobs, noting that with so many items manufactured in the United States using steel and aluminum, import tariffs could actually result in a net job loss. In response, the president stated, "In one case, you're going to create jobs. You may have a higher price or maybe a little bit higher, but you're going to have jobs. In the other case, you may have a lower price, but you're not going have jobs; it's going to be made in China and other places."

Senator Pat Toomey cautioned the president to proceed cautiously under Section 232 for national security reasons, arguing that U.S. defense needs account for only about 3 percent of domestic steel consumption. "So I think it's implausible to believe that we're not able to meet the needs of our defense industry," he said, indicating that invoking national security concerns could be difficult to support and invite retaliation. Others urged caution in the scope of any enforcement action resulting from the investigations. Commerce Secretary Ross noted that Section 232 remedies do not require "the same tariff on every single country. It doesn't have to mean the same tariff on every single product. It can be applied in a much more surgical way. And we presented the President with a range of alternatives that goes from a big tariff on everything from everywhere, to very selective tariffs from a very selective group of countries."

The meeting also included brief comments by multiple participants on other trade matters, including South Korea (the KORUS FTA is a "very bad trade deal"), China (is "violating the international rules, stealing our intellectual property, overproducing steel products"), Canada (has "treated us very, very unfairly when it comes to lumber and timber"), and NAFTA (the renegotiations are "making real headway" but still working through a number of issues).

A full transcript of the meeting is available on the White House website: Remarks by President Trump, Members of Congress, and Members of the Cabinet in Meeting on Trade.

Canadian Solar Cell Companies File Suit Against U.S. Tariffs

2/9/18 – As discussed during our recent “Trump and Trade: One Year Later” webinar, 2018 will not only be a year of monitoring continued trade enforcement activities by the Trump administration, but also a year to monitor how affected countries and industries will react to such trade actions. Yesterday’s update noted WTO action by various countries regarding the recent Section 201 global safeguard decisions, and now three Canadian companies that manufacture crystalline silicon photovoltaic cells (i.e., solar cells) have filed a complaint with the U.S. Court of International Trade against the United States and the safeguard measures in the recent Section 201 solar cell cases. The Canadian plaintiffs have claimed that the import tariffs will “inflict severe and irreversible injury” on them when the U.S. International Trade Commission’s injury finding determined that imports from Canada “do not meet the prerequisites for including a NAFTA country in a global safeguard action,” and that imports from Canada do not constitute a “substantial share” of total imports or “contribute importantly to the serious injury, or threat thereof” caused by U.S. solar cell imports. The complaint specifically claims that provisions of the NAFTA Implementation Act bar the president from taking safeguard actions against a NAFTA country. The plaintiffs seek to enjoin the United States from implementing or enforcing the safeguard measures. The case is Silfab Solar Inc., et al. v. United States, et al., case number, 1:18-cv-00023, in the U.S. Court of International Trade.

WTO Members Formally Request Consultations With the U.S. Regarding Solar Cell and Washing Machine Trade Actions

2/8/18 – As expected, the European Union, China, South Korea and Taiwan have formally requested WTO consultations with the United States over the Trump administration’s Section 201 global safeguard measures on imports of certain solar cells and washing machines. The countries requested consultations under Article 12.3 of the WTO Agreement on Safeguards, which entitles affected countries who are exporters with a “substantial interest” in the products concerned to have an “adequate” opportunity for prior consultations before application of the safeguard measure can be imposed by the United States.

While requests for consultation are not formal challenges and do not initiate the WTO’s dispute settlement procedures, such consultations are often the precursor to a further action. WTO rules allow for safeguard measures such as temporary restrictions on imports; however, they also require the country imposing such measures and import restrictions to maintain balanced trade with those countries affected. It is possible that if consultation fails to resolve concerns, these countries could eventually retaliate by imposing their own trade restrictions.

Examples of these requests are provided here: China; South Korea.

Trade Deficit Increases in Trump’s First Year

2/7/18 – The Department of Commerce has released its 2017 year-end report on U.S. International Trade in Goods and Services, revealing a sharp increase in the overall trade deficit during President Trump’s first year in office. For 2017, the goods and services deficit increased to $566 billion, a $61.2 billion (12.1 %) increase from 2016. Exports were $2,329.3 billion in 2017, up $121.2 billion (5.5%) from 2016. Imports were $2,895.3 billion in 2017, up $182.5 billion (6.7%) from 2016.

U.S. Bureau of Economic Analysis Chart: 2017 Trade Gap Is $566 Billion

The 2017 figures show surpluses, in billions of dollars, with South and Central America ($34.3), Hong Kong ($32.5), Netherlands ($24.5), Belgium ($14.8) and Australia ($14.6). Deficits were recorded, in billions of dollars, with China ($375.2), the European Union ($151.4), Mexico ($71.1), Japan ($68.8), Germany ($64.3), Ireland ($38.1), Italy ($31.6), Malaysia ($24.6), India ($22.9), South Korea ($22.9), Thailand ($20.4), Canada ($17.6), Taiwan ($16.7), France ($15.3), Switzerland ($14.3), Indonesia ($13.3) and OPEC ($13). Of note, the deficit with China increased $28.2 billion to $375.2 billion in 2017, and the deficit with Mexico increased $6.7 billion to $71.1 billion in 2017.

President Trump Comments on Trade in State of the Union Address

1/31/18 – In a lengthy State of the Union address, President Trump covered many issues and highlighted his administration’s achievements over the past year in claiming a “new American moment.” On international trade matters, Trump broke no new ground in reiterating his administration’s position that it will promote only “free, fair and reciprocal trade.” In his opening remarks on trade, the president stated that “America has also finally turned the page on decades of unfair trade deals that sacrificed our prosperity and shipped away our companies, our jobs, and our Nation’s wealth. The era of economic surrender is over.” While not mentioning any specific trade agreements, he indicated that his administration will continue to work to “fix bad trade deals and negotiate new ones.” Trump noted increased sanctions on Cuba and Venezuela while again urging Congress to address what he views as “fundamental flaws in the terrible Iran nuclear deal.”

While he did not specifically address the numerous trade actions currently pending (i.e., Sections 201, 232 and 301 investigations), the president appeared to reference the ongoing Section 301 investigation against China regarding that country’s intellectual property and technology transfer policies and practices when he said, “We will protect American workers and American intellectual property through strong enforcement of our trade rules.” Many trade policy experts took that statement as a signal the U.S. government will be announcing and implementing remedies soon in response to the Section 301 investigation. Overall, President Trump’s comments were a reaffirmation of his administration’s now well-known positions on trade negotiations and enforcement.

In conjunction with the address, the White House released a Fact Sheet providing details on the various trade achievements from President Trump’s first year in office.

Senate Republicans Send President Trump a Letter in Support of NAFTA

1/31/18 – On the eve of the State of the Union, 35 Republican Senators sent a letter to President Trump reaffirming their belief in the benefits of the North American Free Trade Agreement (NAFTA). They urged the president to keep NAFTA in place but supported efforts to modernize the trade agreement. Overall, the letter extols the value of the existing agreement and is seen by many as a reminder that many Republicans and business leaders remain concerned over threats to withdraw from NAFTA.

Treasury Department Releases Russian Oligarch Report; State Department Declines to Implement New Sanctions

1/30/18As required by Section 241 of the Countering America’s Adversaries Through Sanctions Act (CAATSA) (see our Trump and Trade Update dated 10/30/17), the Treasury Department has submitted to Congress a detailed and classified report identifying senior Russian political figures, Russian oligarchs and Russian parastatal entities (companies in which Russian state ownership is at least 25 percent and that had revenues of $2 billion or more). While the list of parastatal entities remains classified, Treasury has released an unclassified report on the list of senior Russian political figures and oligarchs. This unclassified list includes virtually every senior member of Vladimir Putin’s inner circle and nearly 100 Russian billionaires; the classified list reportedly details the relationships these individuals have with President Putin and any information on their involvement in corrupt activities. This report is not a sanctions list; the inclusion of individuals or entities in any portion of the report does not impose sanctions on those individuals or entities, nor does it create any other restrictions, prohibitions or limitations on dealings with such persons by either U.S. or foreign persons. However, many of those listed are already sanctioned for their alleged involvement in the illegal annexation of the Crimea region of Ukraine, malicious cyber incursions into the United States, and interference in the 2016 U.S. presidential election. The Treasury Department stated that it will rely on all available sources of information, including the classified version of this report, when making determinations about additional sanctions in the future. Putin responded to the release of the list by calling it “nonsense” that would “reduce our bilateral relationship to zero.”

In a related move, the State Department announced that the president would postpone any sanctions on persons or entities engaging in any significant transactions involving the Russian defense or intelligence sectors pursuant to Section 231 of CAATSA. Under CAATSA, President Trump is required to impose at least five sanctions on persons or entities that may be engaging in such transactions; however, he is allowed to postpone these sanctions. A spokesperson for the State Department indicated that no actions would be taken at this time as the law was already “serving as a deterrent.”

Business Roundtable Publishes Analysis of Economic Consequences of NAFTA Withdrawal

1/29/18 – While the sixth round of negotiations among trade officials from Canada, Mexico and the United States proceeded in Montreal last week on the North American Free Trade Agreement (NAFTA), the nonpartisan Business Roundtable released an economic analysis concluding that termination of NAFTA would have a significant net negative impact on the U.S. economy and employment. The analysis, prepared by Trade Partnership Worldwide, LLC, quantifies the harmful impacts of NAFTA withdrawal by examining how the re-imposition of "most-favored-nation" tariffs on U.S. trade with Mexico and Canada would affect the U.S. economy. The analysis also shows that withdrawing from NAFTA would:

  • Result in the net loss of 1.8 million U.S. jobs within the first year.
  • Reduce U.S. exports to Canada and Mexico by 17.4 percent each and lower U.S. companies' global exports by 2.5 percent.
  • Diminish U.S. households' purchasing power by almost $654 per household due to higher prices and lower wages caused by increased tariffs.
  • Shift economic activity away from North America and toward U.S. competitors, including China, which would experience a GDP increase of 0.2 percent and a net employment increase of 2 million jobs.

Overall, the analysis concludes that termination would re-impose high tariff costs on U.S. exports and imports, which would reduce the competitiveness of U.S. businesses both domestically and abroad. U.S. exports would drop, both to Canada and Mexico and globally, as U.S. output becomes more expensive, making U.S. businesses less competitive in these markets.

President Trump’s Remarks to the World Economic Forum

1/26/18In remarks to attendees at the World Economic Forum in Davos, Switzerland, President Trump proclaimed that “the world is witnessing the resurgence of a strong and prosperous America” that has dramatically cut taxes and eliminated burdensome regulations, and is reforming bureaucracy and ensuring its laws are enforced fairly. While acknowledging his “America First” stance, the president stated that this does not mean “America alone.” Instead, he indicated that “when the United States grows, so does the world. American prosperity has created countless jobs all around the globe, and the drive for excellence, creativity, and innovation in the U.S. has led to important discoveries that help people everywhere live more prosperous and far healthier lives.”

Regarding international trade, the president stated that his administration will continue to work to reform the system “so that it promotes broadly shared prosperity and rewards to those who play by the rules. We cannot have free and open trade if some countries exploit the system at the expense of others. We support free trade, but it needs to be fair and it needs to be reciprocal. Because, in the end, unfair trade undermines us all.” He stressed that the United States “will no longer turn a blind eye to unfair economic practices, including massive intellectual property theft, industrial subsidies, and pervasive state-led economic planning. These and other predatory behaviors are distorting the global markets and harming businesses and workers, not just in the U.S., but around the globe.” He concluded his remarks on trade by reiterating that the United States “will enforce our trade laws and restore integrity to our trading system. Only by insisting on fair and reciprocal trade can we create a system that works not just for the U.S. but for all nations.”

TPP Members Reach Agreement on Major Trade Pact

1/23/18 – Toshimitsu Motegi, the Japanese government official in charge of Trans-Pacific Partnership (TPP) negotiations, announced today that the 11 countries still participating in the negotiations had agreed on a newly revised TPP, which will now be called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). This resolution followed last-minute objections from Canada at a TPP summit in Vietnam last November. Motegi said that the 11 nations plan to sign the agreement on March 8 in Chile. President Donald Trump withdrew the United States from the original TPP deal on his third day in office.

One of Canada’s issues concerned an exemption to protect Canadian cultural products from the effects of free trade. Motegi said that the parties agreed to exchange a side letter with Canada over the issue after the pact goes into effect. It is also reported that Canada secured real gains in labor and environmental standards and the removal of text related to intellectual property.

Motegi called the agreement “epoch-making for Japan as well as for the future of the Asia-Pacific region,” and expressed hope that the United States will rejoin the deal eventually.

President Trump Imposes New Tariffs on Washing Machines and Solar Cells and Modules

1/23/18 – Under Section 201 of the Trade Act of 1974, President Donald Trump has imposed new tariffs on imported large residential washing machines and imported solar cells and modules, marking the first time the United States has imposed global safeguard restrictions since 2002. These new tariffs were based on recommendations by the U.S. International Trade Commission.

In the Section 201 washing machines case that domestic producer Whirlpool requested last summer, the president instituted a 20 percent tariff rate on the first 1.2 million imports, which will decrease by 2 percent annually the next two years. For imports beyond the first 1.2 million units, the president imposed a 50 percent tariff rate, which will decrease by 5 percent annually the next two years. For additional information on this tariff, the covered washers, and other adjustments, please see the Presidential Proclamation to Facilitate Positive Adjustment to Competition from Imports of Large Residential Washers. The U.S. Trade Representative has also released a Fact Sheet that sets forth details on the Tariff-Rate Quotas being applied.

In the Section 201 solar cell and module case that domestic producers Suniva and SolarWorld requested last year, the president imposed a 30 percent tariff rate the first year, which will decrease by 5 percent annually the next three years. Under this plan, the first 2.5 gigawatts of imported cells will be excluded from the additional tariff. For additional information on this tariff, the covered crystalline silicon photovoltaic (CSPV) cells, and other adjustments, please see the Presidential Proclamation to Facilitate Positive Adjustment to Competition from Imports of Certain Crystalline Silicon Photovoltaic Cells. The U.S. Trade Representative has also released a Fact Sheet that sets forth details on the additional duties being applied.

In announcing these Section 201 actions, President Trump stated that his administration “is committed to defending American companies, and they’ve been very badly hurt from harmful import surges that threaten the livelihood of their workers, of jobs, actually, all over this country — many different industries.” With regard to washing machines and solar cells, he stated that these trade actions “uphold the principle of fair trade and demonstrate to the world that the United States will not be taken advantage of anymore.”

Commerce Submits Report on Section 232 Aluminum Investigation

1/23/18 – On January 19, the Department of Commerce submitted its Section 232 report to the White House on the national security implications of aluminum imports one business day ahead of its statutory deadline. The president now has 90 days from that date, January 19, to determine whether he agrees with the Commerce Department’s findings or will use his “statutory authority to adjust imports,” according to the Trade Expansion Act of 1962, to devise his own remedy. Commerce’s report was confidential, and Commerce stated that it will publish a summary of the report only after the president announces his decision.

The domestic aluminum industry is in support of any action specifically addressing Chinese overcapacity, said Aluminum Association President and CEO Heidi Brock this past Sunday, January 21. According to an industry source at the recent 2018 Aluminum Symposium, such an action must be carefully measured to ensure that it does not result in increased costs for U.S. consumers and does not create a situation where a key source of supply, like Canada, is affected. China has questioned whether a Section 232 investigation is consistent with U.S. WTO obligations, arguing that the WTO’s legal framework does not permit members to impose trade restrictions through an “abusive invocation” of national security.

USTR Releases Annual Reports on China's and Russia's Compliance With WTO Obligations, States That Supporting China's Accession to WTO Was a Mistake

1/19/18 – Today, the U.S. Trade Representative (USTR) made available its statutorily required reports on how the People's Republic of China (China) and the Russian Federation (Russia) are complying with the commitments they made to the World Trade Organization (WTO) resulting from their accession to the organization. China became a member of the WTO in 2001, and Russia joined the WTO in 2012. According to the USTR, China and Russia have "failed to embrace the market-oriented economic policies championed by the WTO and are not living up to certain key commitments they made when they joined the WTO."

Regarding China, the report states that China largely remains a state-led economy while using "the imprimatur of WTO membership to become a dominant player in international trade." As a result, USTR stated that "it seems clear that the United States erred in supporting China's entry into the WTO on terms that have proven to be ineffective in securing China's embrace of an open, market-oriented trade regime." The report seems to cast doubt on whether the USTR believes the WTO's dispute settlement mechanism will be sufficient to address China's non-market economy policies. Nevertheless, USTR stated that it will continue to pursue WTO cases against China that were initiated by previous administrations and "take all other steps necessary to rein in harmful state-led, mercantilist policies and practices pursued by China, even when they do not fall squarely within WTO disciplines."

Below are additional highlights of the 2017 Report to Congress On China's WTO Compliance:

  • "Today, almost two decades after it pledged to support the multilateral trading system of the WTO, the Chinese government pursues a wide array of continually evolving interventionist policies and practices aimed at limiting market access for imported goods and services and foreign manufacturers and service suppliers."
  • "China's regulatory authorities do not allow U.S. companies to make their own decisions about technology transfer and the assignment or licensing of intellectual property rights. Instead, they continue to require or pressure foreign companies to transfer technology as a condition for securing investment or other approvals."
  • "China is determined to maintain the state's leading role in the economy and to continue to pursue industrial policies that promote, guide and support domestic industries while simultaneously and actively seeking to impede, disadvantage and harm their foreign counterparts, even though this approach is incompatible with the market-based approach expressly envisioned by WTO members and contrary to the fundamental principles running throughout the many WTO agreements."
  • "Many of the policy tools being used by the Chinese government … are largely unprecedented, as other WTO members do not use them, and include a wide array of state intervention and support designed to promote the development of Chinese industry in large part by restricting, taking advantage of, discriminating against or otherwise creating disadvantages for foreign enterprises and their technologies, products and services."

Below are selected highlights of the 2017 Report on the Implementation and Enforcement of Russia's WTO Commitments:

  • "So far, Russia's actions strongly indicate that it has no intention of complying with many of the promises it made to the United States and other WTO Members. This trend is very troubling."
  • "Russia has done little in 2017 to demonstrate a commitment to the principles of the WTO or to many of the specific commitments that it made" in the negotiations leading to Russia's membership in the WTO.
  • "The agricultural sector continues to be one of the most challenging sectors for U.S. exporters. In addition to the import ban on nearly all agricultural goods from the United States and other WTO Members, Russia continues to erect barriers to U.S. agricultural exports."
  • "In 2017, notwithstanding a few tariff reductions, Russia increasingly appeared to turn away from the principles of the WTO, instead turning inward through the adoption of local content policies and practices. Russia continued to rely on arbitrary behind-the-border measures and other discriminatory practices to exclude U.S. exports."
New Section 232 Petition Seeks Investigation Into Effects of Uranium Imports on U.S. National Security

1/17/18 Energy Fuels Inc. and Ur-Energy Inc. (the “Petitioners”) have jointly submitted a petition to the U.S. Department of Commerce for relief under Section 232 of the Trade Expansion Act of 1962 from imports of uranium products from state-owned and state-subsidized enterprises in Russia, Kazakhstan and Uzbekistan. According to the petition, such imports now supply nearly 40 percent of U.S. demand and threaten U.S. national security. Despite uranium’s critical role in the United States supporting clean electricity and the national defense, “imports of cheap, foreign state-subsidized uranium have swelled in recent years to the point that domestic suppliers currently provide less than 5% of our nation’s demand.” As recently as 1980, the Petitioners argue, “U.S. producers supplied nearly 100% of our domestic uranium needs, and in 1989 the DOC initiated a Section 232 investigation at the request of the U.S. Department of Energy (“DOE”) because of concerns that uranium imports exceeded 37.5% at that time. The problem is far worse now.” The petition also notes that China is significantly growing its state-owned nuclear enterprises and intends to penetrate the U.S. market with nuclear fuel that will directly compete with U.S. uranium miners. Under U.S. law, the Petitioners argue that the warheads in U.S. nuclear weapons must be manufactured from uranium sourced from U.S. mines; tritium (an essential component of nuclear weapons) must be produced in a U.S. reactor using domestic uranium; and highly-enriched and fabricated uranium fuel for the U.S. Navy must be U.S. in origin. If this import trend continues and the condition of the U.S. uranium mining industry continues to worsen, the Petitioners contend that the United States will lose the ability to supply these essential national security requirements with domestic sources. The petition seeks remedies that will set a quota to limit U.S. uranium imports, effectively reserving 25 percent of the U.S. nuclear market for U.S. uranium production. It also seeks implementation of a requirement for U.S. federal utilities and agencies to buy U.S. uranium in accordance with President Trump’s Buy American policy.

Once the Department of Commerce initiates the investigation, it will have 270 days to prepare a report for the president. Following receipt of that report, the president will have 90 days to act on any recommendations and take action if necessary to “adjust the imports of an article and its derivatives” and/or pursue other lawful non-trade related actions necessary to address the threat. A full copy of the petition is available on Energy Fuels’ website.

President Trump Reluctantly Continues to Waive Nuclear Sanctions on Iran

1/12/18 – President Trump has announced that he will continue to waive nuclear-related sanctions toward Iran despite his misgivings about the multi-party agreement with Iran known as the Joint Comprehensive Plan of Action (JCPOA, or commonly known as the Iran nuclear agreement) and Iran’s continued support for international terrorism, its human rights abuses and its continuing censorship at home. In a White House statement, the president indicated that “I have been very clear about my opinion of that deal. It gave Iran far too much in exchange for far too little.” He added, “Despite my strong inclination, I have not yet withdrawn the United States from the Iran nuclear deal.”* He then briefly identified his conditions for either fixing the agreement or ultimately withdrawing from the JCPOA.

While President Trump will continue to work with Congress on legislation regarding Iran, he indicated that it must have four “critical components”: (1) Iran must allow immediate inspections of potential nuclear sites; (2) Iran can never possess a nuclear weapon; (3) there must be no expiration date prohibiting Iran’s efforts to develop or acquire nuclear weapons under any deal; and (4) Iran’s long-range missile capabilities are inseparable from Iran’s nuclear weapons ambitions and will also be subject to severe sanctions. In closing, the president stated:

“Today, I am waiving the application of certain nuclear sanctions, but only in order to secure our European allies’ agreement to fix the terrible flaws of the Iran nuclear deal. This is a last chance. In the absence of such an agreement, the United States will not again waive sanctions in order to stay in the Iran nuclear deal. And if at any time I judge that such an agreement is not within reach, I will withdraw from the deal immediately. No one should doubt my word. I said I would not certify the nuclear deal—and I did not. I will also follow through on this pledge. I hereby call on key European countries to join with the United States in fixing significant flaws in the deal, countering Iranian aggression, and supporting the Iranian people. If other nations fail to act during this time, I will terminate our deal with Iran. Those who, for whatever reason, choose not to work with us will be siding with the Iranian regime’s nuclear ambitions, and against the people of Iran and the peaceful nations of the world.”

In a later press briefing, White House officials stated that the administration intends to work with European allies for a follow-on agreement that puts in place certain triggers that Iran could not exceed. They stressed that this “would not entail direct negotiations with the Iranians, [sic] this would be something the United States works out with our European partners only. It would be an agreement amongst the United States and our European partners to re-impose multilateral sanctions should the Iranians surpass the new triggers that we would lay out.”

* Under the Iran Nuclear Agreement Review Act, implemented in 2015 at the time of the JCPOA, the president must certify to Congress every 90 days that the suspension of sanctions under the nuclear agreement is warranted and that Iran remains in compliance with its obligations to terminate its illicit nuclear weapons program. In July 2017, Trump reluctantly certified that Iran was in compliance with the terms of the JCPOA (see Trump and Trade Alert of July 18, 2017); however, in October 2017, the president declined to certify that Iran was in compliance with the agreement (see Trump and Trade Alert of October 13, 2017).

OFAC Sanctions Additional Iranian Individuals and Entities for Human Rights Abuses and Support of Weapons Proliferation

1/12/18 – The Department of the Treasury’s Office of Foreign Assets Control (OFAC) has designated 14 individuals and entities for sanctions arising from serious human rights abuses and censorship in Iran and support of designated Iranian weapons proliferators. According to Treasury Secretary Steven T. Mnuchin, “The United States will not stand by while the Iranian regime continues to engage in human rights abuses and injustice. We are targeting the Iranian regime, including the head of Iran’s judiciary, for its appalling mistreatment of its citizens, including those imprisoned solely for exercising their right to freedom of peaceful assembly, and for censoring its own people as they stand up in protest against their government. We are also targeting Iran’s ballistic missile program and destabilizing activities, which it continues to prioritize over the economic well-being of the Iranian people.”

While the majority of these persons and entities are Iranian, several are located in Malaysia and China and have been sanctioned for their support of the Iranian regime. The full list is available on Treasury’s website. This decision is not formally related to an expected Trump administration announcement later today regarding an extension of the relaxation of sanctions on Iran under the Joint Comprehensive Plan of Action (i.e., JCPOA or Iran nuclear agreement) but indicates that the United States will continue to sanction Iran in non-nuclear areas outside the scope of the JCPOA.

United States and South Korea Hold Initial Meeting on Renegotiating Free Trade Agreement

1/8/18 – On January 5, the United States and South Korea held their first meeting to discuss potential renegotiation of the U.S.- South Korea (KORUS) free trade agreement. In addition to discussing procedural and timetable issues, the United States discussed proposals to move toward fair and reciprocal trade in key industrial goods sectors, such as autos and auto parts, and to resolve cross-cutting and sector-specific barriers affecting U.S. exports. South Korea noted its interest in resolving "sensitive issues," including the investor-state dispute settlement (ISDS) clause and trade remedies.

At the conclusion of the negotiating session, Ambassador Robert Lighthizer said, "We have much work to do to reach an agreement that serves the economic interests of the American people. Our goals are clear: we must achieve fair and reciprocal trade between our two nations. We will move forward as expeditiously as possible to achieve this goal."

The United States first announced its intent to seek modifications to KORUS in July 2017. During President Trump's visit to Seoul in November 2017, the two countries agreed to expedite the talks. The U.S. delegation is led by Michael Beeman, Assistant U.S. Trade Representative for Japan, Korea and APEC. South Korea's delegation is led by Myung-hee Yoo, Director General from the Ministry of Trade, Industry and Energy (MOTIE).

President Trump Releases National Security Strategy

12/18/17 – President Trump has released his first National Security Strategy (NSS), a statutorily mandated document that sets forth how the president intends to put his national security vision into practice on behalf of the United States. The strategy identifies four vital national interests, or “four pillars”: (1) Protect the American people, the homeland, and the American way of life; (2) Promote American prosperity; (3) Preserve peace through strength; and (4) Advance American influence.

To promote American prosperity, the NSS states that a strong economy is necessary to “restore our national power.” The NSS highlights that the United States for 70 years has embraced and advanced an international economic system “rooted in American principles of reciprocity, free markets, and free trade [that] served our economic and security interests.” Today, however, “American prosperity and security are challenged by an economic competition playing out in a broader strategic context” in which other countries do not share our belief in such a system and “espouse free trade rhetoric and exploit its benefits, but only adhere selectively to the rules and agreements.” In response, President Trump “will no longer turn a blind eye to violations, cheating, or economic aggression.”

The NSS sets forth a broad policy to promote free, fair and reciprocal economic relationships. The NSS reiterates the president’s commitment to address continuing trade imbalances, break down trade barriers, pursue enforcement actions and defend against economic aggression. To that end, the NSS sets forth these trade-related “priority actions” that the Trump administration will undertake:

  • Adopt new trade and investment agreements and modernize existing ones: The United States will pursue bilateral trade and investment agreements with countries that commit to fair and reciprocal trade and will modernize existing agreements to ensure that they are consistent with those principles. Agreements must adhere to high standards in intellectual property, digital trade, agriculture, labor and the environment.
  • Counter unfair trade practices: The United States will counter all unfair trade practices that distort markets using all appropriate means, from dialogue to enforcement tools.
  • Counter foreign corruption: Using our economic and diplomatic tools, the United States will continue to target corrupt foreign officials and work with countries to improve their ability to fight corruption so U.S. companies can compete fairly in transparent business climates.
  • Work with like-minded partners: The United States will work with like-minded partners to preserve and modernize the rules of a fair and reciprocal economic order. Together, we will emphasize fair trade enforcement actions when necessary, as well as multinational efforts, to ensure transparency and adherence to international standards within trade and investment projects.
  • Facilitate new market opportunities: The United States will partner with countries as they build their export markets, promote free market competition and incentivize private sector growth. We will expand U.S. trade and investment opportunities and increase the market base for U.S. goods and services.
USTR Lighthizer Criticizes WTO at Opening of its 11th Ministerial Conference

12/12/17 – At the introductory session for the 11th Ministerial Conference of the World Trade Organization (WTO), Ambassador Robert Lighthizer acknowledged that the WTO is an important institution but then proceeded in his opening statement to criticize the organization and its focus. He stated that the WTO is “losing its essential focus on negotiation and becoming a litigation-centered organization,” claiming that member countries “seem to believe they can gain concessions through lawsuits that they could never get at the negotiating table.”

Lighthizer argued that the WTO “cannot sustain a situation in which new rules can only apply to the few, and that others will be given a pass in the name of self-proclaimed development status. There is something wrong, in our view, when five of the six richest countries in the world presently claim developing country status.” He opined that “it is impossible to negotiate new rules when many of the current ones are not being followed” and that some members are “intentionally circumventing” their obligations. He indicated that addressing these concerns and the transparency of the WTO will be a top priority for the United States.

WTO Issues Annual Report on Trade-Related Developments

12/5/17 – The Trade Policy Review Body of the World Trade Organization (WTO) has released its annual report, Overview of Developments in the International Trading Environment, that covers the implementation of trade-related measures across the WTO membership in the last 12 months (from mid-October 2016 to mid-October 2017). WTO Director-General Roberto Azevêdo stated that "the Report aims to offer a horizontal, objective and fact-based view of developments across the trade landscape" and is not intended to be indicative of any WTO member state's compliance with WTO trade measures.

The report shows that 108 new trade-restrictive measures were established during the past year, while WTO member states implemented 128 new measures that facilitate trade. Import-facilitating measures implemented during the annual review period in the context of the expanded Information Technology Agreement amounted to roughly $385 billion. There was also a slight deceleration both in the initiation of trade remedy investigations and in the termination of measures compared to the previous annual overview. Anti-dumping measures continue to make up the bulk (83 percent) of all trade remedy matters. The main sectors affected by trade remedy investigations during the review period were electrical machinery and related parts, iron and steel, articles of iron and steel, and wood and articles of wood.

The report further indicates that international trade flows rebounded strongly during the 2016-2017 review period after a sharp slowdown in the previous reporting period. World merchandise trade volume growth in the first half of 2017 was 4.2 percent, well above the 1.3 percent increase recorded for the whole of 2016. World real gross domestic product growth at market exchange rates is projected to pick up to 2.8 percent in 2017 from 2.3 percent in 2016. The WTO's latest trade forecast has world merchandise trade volume increasing by 3.6 percent in 2017, with growth placed within an expected range from 3.2 percent to 3.9 percent, which reflects past forecast performance. The pace of expansion should moderate to 3.2 percent in 2018, set within a wider range from 1.4 percent to 4.4 percent, which reflects the greater uncertainty of longer-term forecasts.

Fifth Round of NAFTA Negotiations Concludes

11/22/17 – Upon the conclusion of the fifth round of renegotiations of the North American Free Trade Agreement (NAFTA), U.S. Trade Representative Robert Lighthizer issued the following statement:

“While we have made progress on some of our efforts to modernize NAFTA, I remain concerned about the lack of headway. Thus far, we have seen no evidence that Canada or Mexico are willing to seriously engage on provisions that will lead to a rebalanced agreement. Absent rebalancing, we will not reach a satisfactory result. A rebalanced, updated NAFTA will promote greater prosperity for American workers, farmers, ranchers and businesses and strengthen the North American region as a whole. Our teams will be meeting again next month in Washington. I hope our partners will come to the table in a serious way so we can see meaningful progress before the end of the year.”

The parties have agreed to hold the sixth round of negotiations January 23-28, 2018 in Montréal, Canada. In the meantime, negotiators will continue to work in intersessional meetings in Washington, D.C. throughout mid-December and will report back to the chief negotiators on the progress achieved.

U.S. Trade Representative Releases Updated NAFTA Negotiating Objectives

11/20/17 – The Office of the U.S. Trade Representative (USTR) has released an updated summary of U.S. objectives for the renegotiation of the North American Free Trade Agreement (NAFTA). The new objectives update the previous objectives published in July (see our 7/18/17 update), and come after four rounds of negotiations among the United States, Mexico and Canada. The updated objectives reflect the goals of text proposals the United States has tabled in the NAFTA negotiations so far. The objectives include increased market access for agriculture, new transparency and administrative measures, expanded investment and intellectual property objectives, and completed negotiations on the chapters of Competition and Small- and Medium-Sized Enterprises. According to the USTR, the objectives for Trade in Goods include the first-ever objective for trade deficit reduction and an improvement in the U.S. trade balance with NAFTA countries.

The updated objectives “represent a serious effort to renegotiate the Agreement to update its provisions to the best 21st century standards and rebalance the benefits of the deal so that each country succeeds. U.S. proposals reflecting these objectives are supported by a diverse group of American interests. If these objectives are achieved, the United States will obtain more open, equitable, secure, and reciprocal market access, and the entire NAFTA region will benefit.”

Remarks by President Trump on His Trip to Asia

11/16/17 – In brief remarks upon returning from his 12-day trip throughout Asia, President Trump defined the trip by three core goals: 
(1) uniting the world against "the nuclear menace" posed by North Korea;
(2) strengthening "America’s alliances and economic partnerships in a free and open Indo-Pacific" region; and
(3) insisting on "fair and reciprocal trade."

On this last goal, the president stated that "fairness and reciprocity – are an open invitation to every country that seeks to do business with the United States, and they are a firm warning to every country that cheats, breaks the rules, and engages in economic aggression." He announced that the United States "is ready to make bilateral trade deals with any nation in the region that wants to be our partner in fair and reciprocal trade." The United States, he added, "will never again turn a blind eye to trading abuses, to cheating, economic aggression, or anything else from countries that profess a belief in open trade, but do not follow the rules or live by its principles themselves. No international trading organization can function if members are allowed to exploit the openness of others for unfair economic gain."

As a result of this trip and meeting with other leaders, President Trump stated that "We have established a new framework for trade that will ensure reciprocity through enforcement actions, reform of international organizations, and new fair trade deals that benefit the United States and our partners." Shortly after these remarks, the White House released a fact sheet providing highlights and summaries of U.S. efforts and accomplishments during the Asia trip, including efforts "to end years of one-sided and unbalanced trade that has left too many Americans behind."

Commerce, State and Treasury Implement Changes to Cuba Sanctions Policy

11/14/17 – The Office of Foreign Assets Control (OFAC) at the Department of the Treasury and the Bureau of Industry and Security (BIS) at the Department of Commerce have announced amendments to the Cuban Assets Control Regulations and Export Administration Regulations, respectively, to implement changes to the Cuba sanctions program announced by President Trump in June 2017 with the issuance of the National Security Presidential Memorandum on Strengthening the Policy of the United States Toward Cuba (NSPM). See our June 20, 2017 update for background information. These changes, in effect as of November 9, 2017, roll back many of the initiatives and regulatory changes implemented by former President Obama in seeking to normalize relations with Cuba. In announcing these changes, Treasury Secretary Steven Mnuchin stated, “We have strengthened our Cuba policies to channel economic activity away from the Cuban military and to encourage the government to move toward greater political and economic freedom for the Cuban people.” The State Department has also released a list of entities under the control of, or acting for or on behalf of, the Cuban military, intelligence, or security services or personnel with which direct financial transactions are now prohibited “as it would disproportionately benefit such services or personnel at the expense of the Cuban people or private enterprise in Cuba.”

These revised regulations include:

  1. Persons subject to U.S. jurisdiction are prohibited from engaging in certain direct financial transactions with entities identified by the State Department on the Cuba Restricted List. Certain transactions will be excluded from this prohibition pursuant to exceptions detailed in the NSPM.
  2. BIS has established a general policy of denial for license applications to export items for use by entities on the Cuba Restricted List, unless the transaction is otherwise consistent with the NSPM.
  3. While announcing that the United States continues to maintain a comprehensive embargo on trade with Cuba, BIS has amended its licensing policy for Cuba and portions of three license exceptions available for exports and reexports to Cuba: License Exceptions Gift Parcels and Humanitarian Donations, Consumer Communications Devices and Support for the Cuban People (SCP).
  4. Under the SCP license exception, OFAC will require that each traveler engage in a full-time schedule of activities that result in meaningful interaction with individuals in Cuba. Such activities must enhance contact with the Cuban people, support civil society in Cuba or promote the Cuban people's independence from Cuban authorities.
  5. OFAC has revised and expanded the definition of the term “prohibited officials of the Government of Cuba.”

More detailed information regarding these regulatory changes is available:

Trans-Pacific Partnership Moves Forward Without the United States

11/13/17 – Despite the absence of the United States, the remaining members of the Trans-Pacific Partnership Agreement (TPP), which was originally signed in February 2016, announced that they had reached an agreement on “core elements” of the terms of an agreement, now termed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). While acknowledging that several key issues remain to be negotiated, the trade ministers from the remaining 11 countries issued a joint statement stating that the revised agreement “maintains the high standards, overall balance and integrity of the TPP while ensuring the commercial and other interests of all participants and preserving our inherent right to regulate, including the flexibility of the parties to set legislative and regulatory priorities. Ministers also affirm the right of each party to preserve, develop and implement its cultural policies. Ministers consider that the CPTPP reflects the desire of the parties to implement the TPP outcomes among themselves.”

While the text of the draft CPTPP was not released, an outline was released with the joint statement. Also, several provisions of the original TPP covering state-owned enterprises, services and investment non-confirming measures, dispute settlement and cultural exemptions have, for the moment, been suspended pending further discussions.

U.S. International Trade Commission Releases Remedy Recommendations in Section 201 Solar Cell Investigation

11/1/17 – As previously detailed in our September 26 Trump and Trade Update, the U.S. International Trade Commission (ITC) unanimously determined that crystalline silicon photovoltaic (CSPV) cells (or solar cells) were being imported into the United States in such quantities that they were causing substantial injury to the U.S. solar equipment industry. On October 31, 2017, the ITC issued its remedy recommendations to address the injury and to facilitate the efforts of the domestic industry to "make a positive adjustment to import competition."

The recommendations varied among the four ITC commissioners but included quantitative import restrictions and tariff rate quotas (TRQs). Three commissioners recommended TRQs, while the fourth suggested quantitative restrictions only. The commissioners further recommended international negotiations "to address the underlying cause of the increase in imports of CSPV products and alleviate the serious injury thereof." Commissioner Broadbent found that the main cause of the increase in imports was global oversupply of solar cells from China and specifically recommended negotiations with that country. Others acknowledged this global oversupply but also recommended that imports from certain countries (including Canada and other free trade agreement countries) be excluded because they were not the root cause of injury to the U.S. solar cell industry. Suniva, the primary petitioner in the case, which had requested a price floor, called the recommendations "disappointing" and urged the president to reject the ITC's recommendations and follow the recommendations of the domestic industry.

The ITC will now forward its report, which will contain the injury determination, remedy recommendations, certain additional findings, and the basis for them, to President Trump by November 13, 2017. The president will make the final decision on whether to provide relief to the U.S. solar cell industry and on the type and amount of any relief. The Office of the U.S. Trade Representative has issued a formal notice requesting comments on the ITC's injury determination and remedy recommendations. Any public comments are due by November 20, 2017; the USTR will also hold a public hearing on December 6, 2017. The president will have until January 12, 2018 to make a final decision on any remedy.

Department of Commerce Issues Memorandum on China's Continued Nonmarket Economy Status

10/31/17 – In support of its preliminary determination in the antidumping duty investigation of imports of aluminum foil from the People's Republic of China, the Department of Commerce has released a 205-page memorandum finding that China continues to be considered a nonmarket economy (NME) country in trade remedy cases because it "does not operate sufficiently on market principles to permit the use of Chinese prices and costs for purposes of the Department's antidumping analysis." At its core, the memo concludes, "the framework of China's economy is set by the Chinese government and the Chinese Communist Party (CCP), which exercise control directly and indirectly over the allocation of resources through instruments such as government ownership and control of key economic actors and government directives. The stated fundamental objective of the government and the CCP is to uphold the 'socialist market economy' in which the Chinese government and the CCP direct and channel economic actors to meet the targets of state planning. The Chinese government does not seek economic outcomes that reflect predominantly market forces outside of a larger institutional framework of government and CCP control."

The memo provides a detailed analysis of the six statutory criteria for determining whether a country is a market economy in trade remedy cases as set forth in the Tariff Act of 1930. Among the factors detailed in the memo are the Chinese government's continuing restrictions on foreign investment, the level of Chinese government ownership of various entities, the government's ability to set and control prices, and the continued functioning of  China's legal system as "an instrument by which the Chinese government and the CCP can secure discrete economic outcomes, channel broader economic policy, and pursue industrial policy goals."

Commerce Issues Preliminary Determination in China Aluminum Foil Dumping Investigation

10/30/17 – The Department of Commerce (Commerce) has announced its affirmative preliminary determination in the antidumping duty (AD) investigation of imports of aluminum foil from the People’s Republic of China (China). While the preliminary antidumping duty rates, ranging from 96 percent to more than 162 percent, will not be finalized by Commerce until late February 2018, Commerce will instruct U.S. Customs and Border Protection (CBP) to require cash deposits based on these preliminary rates.

The merchandise covered by these investigations is aluminum foil having a thickness of 0.2 mm or less, in reels exceeding 25 pounds, regardless of width. The implications of this trade remedy action, however, are potentially more far reaching and may affect U.S.-China trade relations. The preliminary determination comes just weeks before President Trump travels to China, and China was quick to state that it was “strongly dissatisfied” with the determination. A key issue in this investigation is the U.S. government’s continued treatment of China’s economy as a “nonmarket economy.” Commerce relied upon surrogate/third-country pricing analysis to conclude that China was dumping its aluminum foil in the U.S. market. Upon China’s accession to the World Trade Organization (WTO), other WTO members were allowed to use such a nonmarket economy methodology in antidumping duty matters involving China. Commerce continues to use this methodology, arguing that China still does not operate as a market economy due to continuing government price controls and other governmental involvement. China argues that this clause in its accession agreement has now expired and that its goods must be accorded market economy status.

State Department Publishes List of Russian Defense and Intelligence Sector Entities Under New Sanctions Law

10/30/17 – Section 231 of the Countering America’s Adversaries Through Sanctions Act (CAATSA), enacted on August 2, 2017, mandates that the president must impose certain sanctions on persons the president determines knowingly engage in a significant transaction with a person that is part of, or operates for or on behalf of, the defense or intelligence sectors of the government of the Russian Federation. The sanctions include, among others, prohibitions concerning property transactions, export license restrictions, Export-Import Bank assistance restrictions, debt and equity restrictions, visa ramifications for corporate officers, and U.S. government procurement prohibitions. The intent of Section 231 of the CAATSA is to respond to Russia’s behavior as to the crisis in eastern Ukraine, cyber intrusions and attacks, and human rights abuses.

On October 27, 2017, the State Department provided a list of those Russian defense and intelligence agencies that may face sanctions under CAATSA. At this time, however, this designation is not a determination regarding imposition of actual sanctions against these Russian entities; the CAATSA requires the imposition of sanctions beginning on or after January 29, 2018. In a short briefing, senior State Department staff indicated that over the next 180 days, the department will take a close look at transactions and dealings with these entities that it thinks may fall within the scope of the sanctions provision of CAATSA, and engage with partners and allies to determine whether any transactions undertaken with entities on the list are problematic. At that time, sanctions may be implemented.

Over the course of the next three months, U.S. companies should assess the amount and type of business transactions they may be conducting with Russian entities on the State Department list. Ultimately, persons who are determined to “knowingly engage in a significant transaction” with a person specified on the list may face sanctions. In determining whether a transaction is “significant” for purposes of CAATSA, the Department of State will consider the totality of the facts and circumstances surrounding the transaction and weigh various factors on a case-by-case basis. Clearly, issues of national security and U.S. foreign policy interests will be factors in such an analysis.

Fourth Round of NAFTA Negotiations Leaves All Parties Unsatisfied

10/19/17 – After four rounds of negotiations, the United States, Canada and Mexico are beginning to express frustration concerning the discussions and proposals to revise and update the North American Free Trade Agreement (NAFTA). In an October 17 joint statement, the parties indicated that they have put forward “substantially all initial text proposals” but that these proposals have “created challenges” and highlighted “significant conceptual gaps” among the three countries.

Acknowledging that one of President Trump’s clear objectives is the reduction of the U.S. trade deficit with its NAFTA partners, U.S. Trade Representative Robert Lighthizer stated that he was “surprised and disappointed by the resistance to change from our negotiating partners.” In his closing remarks, Ambassador Lighthizer said, “As difficult as this has been, we have seen no indication that our partners are willing to make any changes that will result in a rebalancing and a reduction in these huge trade deficits. Now I understand that after many years of one-sided benefits, their companies have become reliant on special preferences and not just comparative advantage. Countries are reluctant to give up unfair advantage. But the President has been clear that if we are going to have an agreement going forward, it must be fair to American workers and businesses that employ our people at home.”

In response, Canadian Foreign Affairs Minister Chrystia Freeland called the U.S. list of proposals “unconventional” and “troubling,” stating that some of them would “turn back the clock on 23 years of predictability, openness and collaboration under NAFTA.”

Mexican Secretary of the Economy Ildefonso Guajardo Villarreal said, “We must ensure that decisions we make today do not come back to haunt us tomorrow,” adding that, in order for the negotiations to be fruitful, “we must understand that we all have limits.”

Mexico will host the fifth round of negotiations November 17-21, 2017, and the parties have agreed that additional rounds will be necessary and scheduled during the first quarter of 2018.

President Trump Declines to Certify to Congress That Iran Is in Compliance With the JCPOA

10/13/17 – In brief remarks, President Trump announced that in addition to his administration’s new Iran strategy, he “cannot and will not” certify to Congress that the continued suspension of sanctions against Iran under the Joint Comprehensive Plan of Action (JCPOA) is appropriate. Reiterating his often stated claim that “the Iran Deal was one of the worst and most one-sided transactions the United States has ever entered into,” the president stated that he needed “negotiators who will much more strongly represent America’s interest.” The president added that, “Since the signing of the nuclear agreement, the regime’s dangerous aggression has only escalated. At the same time, it has received massive sanctions relief while continuing to develop its missiles program. Iran has also entered into lucrative business contracts with other parties to the agreement.”

Arguing that he will not “continue down a path whose predictable conclusion is more violence, more terror, and the very real threat of Iran’s nuclear breakout,” President Trump directed his administration to work with Congress and allies “to address the deal’s many serious flaws so that the Iranian regime can never threaten the world with nuclear weapons.” He added that should a solution not be reachable, “then the agreement will be terminated. It is under continuous review, and our participation can be cancelled by me, as President, at any time.”

President Trump’s “New Strategy on Iran” and Congressional Developments

10/13/17 – After a nine-month review, consultations with his national security staff and discussions with members of Congress, President Trump has announced a new U.S. strategy on relations with Iran. In a statement, the White House announced that the “new Iran strategy focuses on neutralizing the Government of Iran’s destabilizing influence and constraining its aggression, particularly its support for terrorism and militants.” While not providing specifics, the announcement indicated that the United States would work to deny Iran, and particularly the Islamic Revolutionary Guard Corps (IRGC), funding; counter Iran’s efforts to develop its ballistic missiles and other asymmetric weapons capabilities; and “deny the Iranian regime all paths to a nuclear weapon.”

Regarding the Joint Comprehensive Plan of Action (JCPOA), Trump stated that Iran’s “activities severely undercut whatever positive contributions to ‘regional and international peace and security’ [the JCPOA] sought to achieve,” adding that Iranian officials have sought to “exploit loopholes and test the international community’s resolve.” While not yet making a full statement on whether he will refuse to re-certify to Congress Iranian compliance under the JCPOA, which must be done by October 15, 2017, Trump clearly indicated that current Iranian behavior cannot be tolerated and that “the deal must be strictly enforced, and the IAEA must fully utilize its inspection authorities.”

Congressional Activity on Iran

On October 12, 2017, the House Foreign Affairs Committee, chaired by Rep. Ed Royce (R-CA), passed the Iran Ballistic Missiles and International Sanctions Enforcement Act (HR 1698). The legislation seeks to expand sanctions against Iran for its continuing efforts to develop intercontinental ballistic missile capabilities. In remarks prior to the committee markup of HR 1698, Chairman Royce stated, “As flawed as the [JCPOA] deal is, I believe we must now enforce the hell out of it. Let’s work with allies to make certain that international inspectors have better access to possible nuclear sites, and we should address the fundamental sunset shortcoming, as our allies have recognized.” Committee member statements, witness testimony and a webcast of the October 11, 2017 hearing on the legislation are available on the House Foreign Affairs Committee's website. The legislation currently has 320 cosponsors in the House of Representatives. HR 1698 will next be reported to the full House for further debate and consideration.

In the Senate, on October 13, 2017, Senators Bob Corker (R-TN) and Tom Cotton (R-AK) announced their intention to introduce legislation to amend the Iran Nuclear Agreement Review Act of 2015 (Public Law No. 114-17), to address certain provisions in the JCPOA, particularly an elimination of the deal’s sunset on limitations placed on Iran’s future development of any nuclear program. The legislation, which has not yet been formally introduced, would penalize Iran if it fails to abide by guidelines related to centrifuge research and development. Ultimately, under the proposed restrictions in the legislation, any violations by Iran could result in the reinstatement of U.S. sanctions, especially if it were to come within a year of gaining nuclear capability.

President Trump Reportedly to Refuse Certifying Iran's Compliance with JCPOA

10/6/17 – The White House has acknowledged that while no decision is final, President Trump is likely to decline to recertify that Iran is in compliance with the terms of the Joint Comprehensive Plan of Action (JCPOA), which is more commonly known as the Iran nuclear deal. Trump is expected to publicly announce his position on the JCPOA and an overall strategy toward Iran next week; any final determination must be issued by October 15, 2017. Until then, the TrumpandTrade.com team offers this summary of the 2015 law that would be triggered should Trump not recertify to Congress that Iran is in compliance with the JCPOA.

Under the Iran Nuclear Agreement Review Act of 2015 (Public Law No. 114-17), the president must submit to Congress every 90 days a compliance certification indicating that (1) Iran is fully implementing the terms of the JCPOA, (2) it has not committed a material breach, (3) it has taken no actions to advance its nuclear weapons program, and (4) the suspension of sanctions remains warranted. Under this law, there are clear and detailed provisions pertaining to congressional oversight of Iranian compliance under the JCPOA should the president not submit a certification of Iran's compliance. Subsection (e) of the law provides for expedited consideration of "qualifying legislation" introduced within 60 calendar days of the date when the president does not submit a certification stating Iran is in compliance with the JCPOA.

The term "qualifying legislation" is defined to mean only a bill that (1) is titled, "A bill reinstating statutory sanctions imposed with respect to Iran” and (2) states, after the enacting clause, "Any statutory sanctions imposed with respect to Iran pursuant to __________ that were waived, suspended, reduced, or otherwise relieved pursuant to an agreement submitted pursuant to section 135(a) of the Atomic Energy Act of 1954 are hereby reinstated and any action by the United States Government to facilitate the release of funds or assets to Iran pursuant to such agreement, or provide any further waiver, suspension, reduction, or other relief pursuant to such agreement is hereby prohibited," with the blank space filled with the law or laws under which sanctions are to be reinstated. Such qualifying legislation must be introduced in the House by either the majority leader or minority leader or in the Senate by the majority leader or minority leader (or one of their designees).

Any such legislation is to receive expedited consideration; if any committee to which the bill has been referred has not reported out the bill within 10 legislative days, that committee will no longer have oversight of the bill. Each chamber (House and Senate) has slightly different rules under the law in which to consider any bill. In the House, all points of order against any qualifying legislation are waived as are any motions against its consideration; two hours of debate are allowed; and no motions for reconsideration will be allowed. In the Senate, all points of order pertaining to any qualifying legislation are also waived; no motions to postpone or reconsider will be allowed, but certain (undefined) debatable motions and appeals can be considered; 10 hours of debate are allowed; and no motion to recommit will be allowed. If one chamber does not introduced qualifying legislation and the other chamber considers and passes such legislation, that bill once passed over to the other chamber must be considered under the expedited procedures (as previously discussed) under this law.

CFIUS 2015 Annual Report: National Security Filings Increase, as Does Focus on China

10/3/17 – The Committee on Foreign Investment in the United States (CFIUS), an inter-agency committee headed by the Department of the Treasury, is authorized to review transactions that could result in the control of U.S. businesses by foreign persons or companies in order to determine the effect of such transactions on the national security of the United States. Once a little-known committee, CFIUS has become more widely known in the past decade amid growing concern over foreign investment in the United States, and the potential security implications of certain foreign entities owning and controlling U.S. companies and/or technology. In fact, in September 2017, President Trump took the rare step of actually blocking a transaction: the proposed acquisition of Lattice Semiconductor Corporation by Canyon Bridge Capital Partners LLC, a subsidiary of Chinese state-owned China Venture Capital Fund Corporation Limited. Such a move indicates that the parties were unable to allay the national security concerns of CFIUS’s agency members. It further highlights Trump’s “America First” outlook and the likelihood that CFIUS reviews will become more common and stringent under the Trump administration.

The recently released CFIUS 2015 Annual Report indicates the following trends:

  • In 2015, 143 transactions were reviewed by CFIUS, continuing the general upward trend since 2009, when 65 notices were filed. Further, it is believed that filings increased again in 2016 and that 2017 will be a record year with more than 200 filings.
  • In 2015, 42 percent of reviews were conducted for industries in the Manufacturing sector; 32 percent in the Finance, Information and Services Sector; 18 percent in the Mining, Utilities and Construction industries; and 8 percent in the Wholesale Trade, Retail Trade, and Transportation sectors.
  • For the fourth consecutive year, China has led foreign countries in the number of CFIUS reviews, with 29 conducted in 2015. Over the three-year period from 2013 to 2015, Chinese foreign investment underwent 74 CFIUS reviews; the next closest country was Canada with 49 reviews, followed by the United Kingdom with 47 reviews.
  • While the majority of reviews conclude with approval by CFIUS, in 2015 the parties to 11 transactions had to agree to and adopt mitigation measures to ensure that the parties remained in compliance with various agency requirements to remove any national security risks.
  • The annual report must highlight any “perceived adverse effects” of transactions reviewed by CFIUS, and the 2015 report for the first time indicates there could be national security concerns regarding potential acquisitions of U.S. companies that hold “substantial pools of potentially sensitive data about U.S. persons and businesses that … could be in any number of sectors, including, for example, the insurance sectors, health services, and technology services.”

While not stated in the report, the statistics on the length of time a transaction is under review reveal that in 2015 there was a significant increase in the length of time transactions remained active before CFIUS. By law, CFIUS must complete a review within 90 days, with several triggers that may require a more thorough investigation during that time. Historically, most transactions have concluded within the more informal 30-day review period; however, 2015 data indicate that nearly half of the year’s 143 transactions went into the more formal 45-day investigation period.

Trump Nominates Two Individuals for U.S. International Trade Commission

10/2/17 – President Trump has made further nominations to the U.S. International Trade Commission (ITC), an independent, quasi-judicial federal agency with broad investigative responsibilities on matters of trade. The agency investigates the effects of dumped and subsidized imports on domestic industries and conducts global safeguard investigations. The ITC also adjudicates cases involving imports that allegedly infringe intellectual property rights.

The ITC is led by six commissioners who are nominated by the president and confirmed by the U.S. Senate. No more than three commissioners may be of any one political party. Currently, there are only four commissioners, with several serving beyond their original terms of nine years. To date, the president has nominated the following persons:

Dennis M. Devaney has been nominated for the remainder of a nine-year term expiring June 16, 2023. Devaney is currently practice team leader and counsel with the Varnum law firm. He earned his B.A. and M.A. from the University of Maryland in 1968 and 1970, respectively. He received his law degree from Georgetown University Law Center in 1975. From 1970 to 1972, he served on active duty with the U.S. Naval Security Group.

Randolph J. Stayin has been nominated for the remainder of a nine-year term expiring June 16, 2026. Stayin was born and raised in Cincinnati, Ohio. He graduated from Dartmouth College and received a law degree from the University of Cincinnati Law School. He served as chief of staff to Senator Robert Taft, Jr. and was the senator’s trade advisor in negotiating the passage of the Trade Act of 1974. Stayin’s 40+ years in the practice of law have focused on international trade policy and trade regulation. He has litigated antidumping and countervailing duty investigations, sunset reviews, trademark infringement, 301 unfair trade practices, 201 safeguards, 232 national security, Generalized System of Preferences, export regulation, trade sanctions, anti-boycott issues and U.S. Customs enforcement. He has practiced before the ITC, the U.S. Department of Commerce, the Office of the U.S. Trade Representative, the Court of International Trade, the Court of Appeals for the Federal Circuit, NAFTA dispute panels, and NAFTA and Uruguay Round/WTO negotiations.

These two nominations are in addition to the nomination of Jason Kearns in June 2017 for the remainder of a nine-year term expiring December 16, 2024. Kearns currently serves as chief international trade counsel (Democratic staff) to the Committee on Ways and Means in the House of Representatives. In that position, he advises members on legislation concerning trade and on oversight issues involving the Office of the U.S. Trade Representative and other agencies involved in international trade policy and regulation. Before that, he served for three years in the Office of the General Counsel of the U.S. Trade Representative. From 2000 through 2003, Kearns worked in the international trade group of the law firm, WilmerHale. Kearns holds a M.P.P. from the Kennedy School of Government at Harvard University, a J.D. from the University of Pennsylvania and a B.A. from the University of Denver.

OFAC Issues Further Sanctions on North Korea

9/27/17 – Just days after the issuance of an executive order imposing a range of sanctions on North Korea, the Treasury Department’s Office of Foreign Assets Control (OFAC) has taken further action by placing eight North Korean banks and 26 individuals linked to North Korean financial networks on the Specially Designated Nationals List (SDN List). As a result of this action, any property or interests in property of the designated persons in the possession or control of U.S. persons or within the United States must be blocked. “We are targeting North Korean banks and financial facilitators acting as representatives for North Korean banks across the globe,” said Treasury Secretary Steven T. Mnuchin.

OFAC has designated the following eight North Korean banks: Agricultural Development Bank, Cheil Credit Bank, Hana Banking Corporation Ltd, International Industrial Development Bank, Jinmyong Joint Bank, Jinsong Joint Bank, Koryo Commercial Bank Ltd. and Ryugyong Commercial Bank. Also, two other banks already on the SDN List have been further designated as being part of the government of North Korea ­– the Foreign Trade Bank of the Democratic People’s Republic of Korea and the Central Bank of Democratic People’s Republic of Korea. Foreign Trade Bank is North Korea’s primary foreign exchange bank.

The individuals sanctioned by OFAC are North Korean nationals operating in China, Russia, Libya and the United Arab Emirates who act as representatives of North Korean banks.

U.S. International Trade Commission Finds That Imports Injure U.S. Solar Equipment Manufacturers

9/26/17 – The U.S. International Trade Commission (ITC) has determined that increased imports of crystalline silicon photovoltaic cells (whether or not partially or fully assembled into other products) are being imported into the United States in such increased quantities as to be a substantial cause of serious injury to the U.S. solar equipment industry. After its 4-0 vote, the ITC must now undertake the remedy phase of the investigation. The ITC will hold a public hearing on October 3, 2017 and submit a report containing its injury determination, remedy recommendations, certain additional findings and the basis for them to President Trump by November 13, 2017. The president is solely responsible for any final decision on whether to impose a remedy and, if so, the form, amount and duration of the remedy. In determining what action to take, if any, the president will also take into account the U.S. industry’s efforts to make a positive adjustment to import competition, factors related to the national economic interest of the United States and certain other statutory factors.

This investigation was initiated under Section 201 of the Trade Act of 1974. Section 201 investigations are often referred to as “global safeguard investigations” and are not country-specific, targeting instead imports of the product under investigation from all sources. When a petition or request is filed, the ITC must determine whether an article is being imported in such increased quantities as to be a substantial cause of serious injury or threat of serious injury to a U.S. industry.

The complaint was filed in April 2017 by two U.S. solar equipment manufacturers – Suniva, Inc. and SolarWorld Americas, Inc. – who argued that nearly 30 U.S. solar panel producers ceased manufacturing operations from 2012 to 2016, the period of investigation in the case, largely due to a five-fold increase of imports into the United States. This surge was led by China, whose shipments to the United States rose by more than 700 percent, according to ITC data gathered during the investigation. The Solar Energy Industries Association (SEIA), the national trade association of the U.S. solar energy industry that represents installers, project developers, manufacturers, contractors, financiers and nonprofits, opposed the investigation, arguing that any tariff imposed as a remedy could double U.S. solar panel prices and significantly reduce demand for solar energy. The SEIA argued that up to 88,000 solar jobs, a third of the industry’s employment, could ultimately be lost since only a fraction of solar jobs are in manufacturing.

OFAC Implements Additional Sanctions on North Korea

9/22/17 – President Trump has issued a new executive order implementing further sanctions in response to North Korea’s “provocative, destabilizing, and repressive actions,” particularly its recent intercontinental ballistic missile launches and its nuclear test of September 2, 2017. The new sanctions, to be implemented by the Department of the Treasury’s Office of Foreign Assets Control (OFAC), target individuals and entities that engage in trade with North Korea as well as the financial institutions that facilitate such trade. The executive order also authorizes the secretary of the treasury, in consultation with the secretary of state, to impose sanctions on certain persons:

  • Industries: those who operate in the construction, energy, financial services, fishing, information technology, manufacturing, medical, mining, textiles or transportation industries in North Korea;
  • Ports: those who own, control or operate any port in North Korea, including any seaport, airport, or land port of entry; and
  • Imports/Exports: those who have engaged in at least one significant importation from or exportation to North Korea of any goods, services or technology.

These sanctions also target and allow OFAC to block property and interests in property of persons determined to be a North Korean person, including a North Korean person that has engaged in commercial activity that generates revenue for the government of North Korea or the Workers’ Party of Korea.

Further, the new sanctions state that (1) no aircraft in which a foreign person has an interest that has landed at a place in North Korea may land at a place in the United States within 180 days of departure from North Korea, and (2) no vessel in which a foreign person has an interest that has called at a port in North Korea within the previous 180 days, and no vessel in which a foreign person has an interest that has engaged in a ship-to-ship transfer with such a vessel within the previous 180 days, may call at a port in the United States. See new General License 10 for limited exceptions to these shipping prohibitions.

The executive order also provides the authority for OFAC to impose sanctions on any foreign financial institution that knowingly conducts or facilitates any significant transaction on behalf of certain designated North Korean individuals and entities or any significant transaction in connection with trade with North Korea. Under this new authority, the sanctions measures can be either restrictions on correspondent or payable-through accounts or blocking sanctions. The secretary of the treasury will also have the authority to block any funds originating from, destined for or passing through accounts linked to North Korea that come into the United States or possession of a U.S. person. See updated General License 3-A for limited exceptions to these prohibitions.

The White House indicated that these sanctions are specifically targeted towards the shipping and financial industries, noting that North Korea is dependent on these networks to facilitate international trade. Separately, Treasury Secretary Mnuchin stated that “[f]oreign financial institutions are now on notice that, going forward, they can choose to do business with the United States or with North Korea, but not both.” These additional sanctions towards North Korea are effective as of September 21, 2017.

Department of Homeland Security Bans Use of Russian Security Software

9/14/17 – Acting Secretary of the Department of Homeland Security (DHS) Elaine Duke has issued a Binding Operational Directive (BOD 17-01) directing federal executive branch departments and agencies to take actions related to the use or presence of information security products, solutions and services supplied directly or indirectly by AO Kaspersky Lab or related entities. The directive requires all federal departments and agencies to identify any use or presence of Kaspersky products on their information systems in the next 30 days; to develop detailed plans to remove and discontinue present and future use of the products in the next 60 days; and at 90 days from September 13, 2017, unless directed otherwise by DHS based on new information, to begin to implement the agency plans to discontinue use and remove the products from information systems.

This directive is the result of an interagency review and analysis pertaining to potential information security risks presented by using this Russian entity’s products due to connections between Kaspersky Lab officials and Russian intelligence agencies. Under Russian law, Russian intelligence agencies are allowed to request or compel assistance from Kaspersky and to intercept communications transiting Russian networks. DHS determined that “The risk that the Russian government, whether acting on its own or in collaboration with Kaspersky, could capitalize on access provided by Kaspersky products to compromise federal information and information systems directly implicates U.S. national security.” DHS has indicated that Kaspersky Lab will be provided the opportunity to submit a written response addressing the department’s concerns or to mitigate those concerns.

This directive comes just months after the General Services Administration removed the company from its list of approved vendors and after high-profile news reports concerning potential Russian interference in the 2016 U.S. presidential election. In addition to any national security implications, trade analysts also see this decision as another form of sanctioning Russia. The U.S. government’s banning of Kaspersky products from its departments and agencies has the potential to significantly undermine Kaspersky Lab’s market position in the United States and probably elsewhere.

United Nations Adds to Sanctions Against North Korea

9/13/17The United Nations (UN) Security Council unanimously passed resolution 2375 (2017) on Monday, further sanctioning the Democratic People’s Republic of Korea for its most recent nuclear test, and reaffirmed that North Korea must immediately suspend all activities related to its ballistic missile and nuclear programs in a complete, verifiable and irreversible manner. This latest round of UN sanctions bans the supply, sale or transfer of all condensates and natural gas liquids to North Korea and bans North Korean exports of its textiles, such as fabrics and apparel products. The UN Security Council further limited the direct or indirect supply, sale or transfer to North Korea of all refined petroleum products beyond 500,000 barrels during an initial period of three months – beginning on October 1, 2017 and ending on December 31, 2017 – and exceeding two million barrels per year during a period of 12 months beginning on January 1, 2018 and annually thereafter. The resolution allows for all UN member states to inspect, with the consent of the flag state, vessels on the high seas if member states have information that provides reasonable grounds to believe that the cargo of such vessels contains items of which the supply, sale, transfer or export is prohibited by past UN Security Council resolutions pertaining to North Korea. In addition to further freezing assets and implementing travel bans on several persons, the UN Security Council also agreed to prohibit UN member states from providing work authorizations for North Korean nationals to work in their jurisdictions in an effort to prevent foreign earnings from being expropriated into North Korea in support of Kim Jong-un’s nuclear weapons program.

The UN Security Council urged the resumption of multilateral negotiations to diplomatically and peacefully resolve matters. In her comments, Ambassador Nikki Haley acknowledged that this new round of sanctions would “cut deep” but that the United States is not “looking for war.” She said, “The North Korean regime has not yet passed the point of no return. … If it proves that it can live in peace, the world will live in peace with it. … The choice is theirs.”

OFAC Sanctions Chinese and Russian Entities and Individuals Supporting North Korea

8/25/17 – The Department of the Treasury’s Office of Foreign Assets Control (OFAC) has designated 16 Chinese and Russian entities and individuals for activities related to the support of North Korea’s Kim Jong-un. These sanctions intentionally target third-country companies and individuals that (1) assist already-designated persons who support North Korea’s nuclear and ballistic missile programs, (2) deal in the North Korean energy trade, (3) facilitate its exportation of workers and (4) enable sanctioned North Korean entities to access the U.S. and international financial systems. These sanctions complement United Nations Security Council Resolution 2371 enacted on August 5, 2017. Treasury Secretary Steven Mnuchin stated, “It is unacceptable for individuals and companies in China, Russia, and elsewhere to enable North Korea to generate income used to develop weapons of mass destruction and destabilize the region. We are taking actions consistent with UN sanctions to show that there are consequences for defying sanctions and providing support to North Korea, and to deter this activity in the future.” For details on the 16 entities and persons that have been placed on OFAC’s Specially Designated Nationals List, see OFAC’s Federal Register notice.

USTR Initiates Section 301 Investigation into China’s Acts, Policies and Practices Related to Technology Transfer, Intellectual Property and Innovation

8/25/17 – Less than a week after President Trump issued a presidential memorandum directing the U.S. Trade Representative (USTR) to determine whether to investigate China regarding certain intellectual property and technology transfer issues, USTR Robert Lighthizer formally initiated a Section 301 investigation into the matter on August 18, 2017. In announcing the investigation, he stated that, “[a]fter consulting with stakeholders and other government agencies, I have determined that these critical issues merit a thorough investigation.” Details of the four areas of investigation and information regarding public comments were provided in a Federal Register notice.

Specifically, the public is invited to submit written comments to USTR no later than September 28, 2017 on: (1) the acts, policies and practices of the Chinese government described in the Federal Register notice; (2) information on other acts, policies and practices of China relating to technology transfer, intellectual property and innovation as described in the president’s memorandum, which might be included in the investigation and/or addressed through other trade avenues; (3) the nature and level of burden or restriction on U.S. commerce caused by the applicable acts, policies and practices of the government of China and/or any economic assessment of that burden or restriction; and (4) whether actionable conduct exists under Section 301 of the Trade Act of 1974 and what action, if any, should be taken. A public hearing will be held on October 10, 2017; persons wishing to testify at the hearing must provide written notification of their desire to speak and provide a summary of their proposed testimony by September 28, 2017.

NAFTA Renegotiation Begins!

8/16/17 – U.S. Trade Representative Robert Lighthizer, Canadian Foreign Affairs Minister Chrystia Freeland and Mexican Secretary of the Economy Ildefonso Guajardo Villarreal have started the first round of NAFTA renegotiation in Washington, D.C. with opening statements and an ambitious agenda that is scheduled to take the negotiations through August 20.

In his opening statement, Lighthizer indicated that all the parties acknowledge that the trade agreement needs to be updated and modernized to address economies that are different than when NAFTA was implemented in the 1990s. After addressing modernization, however, he stated, “the tough work begins.” While the agreement has benefited many Americans, Lighthizer added that “for countless Americans, the agreement has failed … We cannot ignore the huge trade deficits, the lost manufacturing jobs, the businesses that have closed or moved because of incentives – intended or not – in the current agreement.”  He also made clear that President Trump is “not interested in a mere tweaking of a few provisions and a couple of updated chapters. We feel that NAFTA has fundamentally failed many, many Americans and needs major improvement.”

President Trump Directs USTR to Examine China's Intellectual Property & Forced Technology Transfer Policies

8/15/17 – Asserting in a presidential memorandum that "Violations of intellectual property rights and other unfair technology transfers potentially threaten United States firms by undermining their ability to compete fairly in the global market," President Trump has directed U.S. Trade Representative Robert Lighthizer to investigate any of China's laws, policies, practices or actions that may be unreasonable or discriminatory and may be harming American intellectual property rights.

In response, Lighthizer stated, "The United States has for many years been facing a very serious problem. China[’s] industrial policies and other practices reportedly have forced the transfer of vital U.S. technology to Chinese companies. We will engage in a thorough investigation and, if needed, take action to preserve the future of U.S. industry. Thousands of jobs are at stake for our workers and for future generations. This will be one of USTR's highest priorities, and we will report back to the President as soon as possible."

This trade action is reported to be one of several trade actions that the Trump administration may take against China in the coming months to address alleged intellectual property violations and the theft of American trade secrets. China's actions in this area were highlighted most recently by USTR in its annual Special 301 Report to Congress released in April 2017. This report stated that the "USTR continues to place China on the Priority Watch List because longstanding and new IP concerns strongly merit attention. China is home to widespread infringing activity, including trade secret theft, rampant online piracy and counterfeiting, and high levels of physical pirated and counterfeit exports to markets around the globe."

In brief remarks on the topic, Trump indicated that once the investigation is complete, the USTR may use "all available options" to address and enforce any actions against any threat of further Chinese IP violations. For a more detailed analysis see our client alert, Trump Administration Moves Against Chinese IP Violations.

President Trump Signs Into Law H.R. 3364 Regarding Sanctions Against Iran, Russia and North Korea

8/2/17 – Today, President Trump signed into law the Countering America’s Adversaries Through Sanctions Act, which strengthens and expands statutory sanctions on Iran, Russia and North Korea. In a statement released by the White House, the president said, “I favor tough measures to punish and deter bad behavior by the rogue regimes in Tehran and Pyongyang. I also support making clear that America will not tolerate interference in our democratic process, and that we will side with our allies and friends against Russian subversion and destabilization.” The statement goes on to say that “the bill remains seriously flawed – particularly because it encroaches on the executive branch’s authority to negotiate.”

In a separate statement issued the same day, the president again asserted that the legislation “is significantly flawed,” stating that, “In its haste to pass this legislation, the Congress included a number of clearly unconstitutional provisions.”

See our July 26th update for additional background information.

Trump Administration Update: Key Players in International Trade

7/28/17 – In an ongoing effort to provide readers with a current reference list of key trade policy officials and advisers in the Trump administration, the Trump and Trade team at Thompson Hine has prepared a presentation for our readers’ use. View or download the PDF.

House Passes Bill for Additional Sanctions Against Iran, Russia and North Korea

7/26/17 – On July 25, the House of Representatives passed legislation that would impose additional sanctions on Iran, North Korea and Russia. The bill would increase sanctions on those involved in Iran’s human rights abuses, its support for terrorism, as well as its ballistic missile program. For Russia, the bill would ensure that existing economic sanctions remain as long as Russian aggression continues by empowering Congress to review and disapprove any sanctions relief that the president may seek. The bill also includes the text of H.R. 1644, The Korean Interdiction and Modernization of Sanctions Act, which was passed by the House in May by a vote of 419-1, and seeks to expand sanctions targeting North Korea’s nuclear weapons program.

As noted in a previous post, the Senate has also passed legislation (S. 722) to implement additional sanctions on Iran and Russia; the Senate bill does not contain provisions on North Korea sanctions. Because different bills were passed in each chamber and the House bill included additional sanctions against North Korea, it is expected that the Senate will take up consideration of H.R. 3364 for any final vote. Interestingly, given President Trump’s perceived ambivalence on the Ukraine-related Russia sanctions, the votes for passage by each chamber – 419 to 3 in the House and 98-2 in the Senate – likely make any passage of a final bill veto-proof.

NAFTA Renegotiations to Begin on August 16

7/20/17 – The Office of the U.S. Trade Representative (USTR) has announced that the first round of renegotiation of the North America Free Trade Agreement (NAFTA) will occur August 16-20, 2017 in Washington, D.C. Reportedly, the plan is to hold seven rounds of talks at three-week intervals, at alternating sites among the three countries, with a goal of completing the negotiations by early 2018.

John Melle, the assistant U.S. Trade Representative for the Western Hemisphere, will serve as the U.S. chief negotiator for the NAFTA negotiations. Since joining USTR in 1988, Melle has held a number of positions covering Mexico, Canada, the Caribbean and Central America. As assistant USTR for the Western Hemisphere, he is responsible for developing, coordinating and implementing the United States’ trade policy for the region.

OFAC and State Department Sanction 18 Additional Iranian Entities/Persons

7/18/17 – Almost immediately after the Trump administration’s announcement that Iran was in compliance with the terms of the Joint Comprehensive Plan of Action (JCPOA), the Department of the Treasury’s Office of Foreign Assets Control (OFAC) and the State Department designated an additional 18 Iranian entities and individuals for engaging in activities supporting Iran’s continued testing of ballistic missiles, as well as for engaging in activities supporting Iran’s military or Iran’s Islamic Revolutionary Guard Corps (IRGC).

OFAC has designated three networks supporting Iran’s military and/or the IRGC through the development of unmanned aerial vehicles and military equipment for the IRGC, the production and maintenance of fast attack boats for the IRGC-Navy, or the procurement of electronic components for entities that support Iran’s military. Additional persons and entities were added to OFAC’s Specially Designated Nationals List for Iran-based transnational criminal organization activities, including the theft of U.S. and western software programs which, at times, were sold to the Iranian government. A complete listing of OFAC designations is available on Treasury’s website.

The State Department designated two entities for engaging in activities that have materially contributed to, or pose a risk of materially contributing to, the proliferation of weapons of mass destruction or their means of delivery: the IRGC’s Aerospace Force Self Sufficiency Jihad Organization, which is involved in Iranian ballistic missile research and flight test launches, and the IRGC’s Research and Self Sufficiency Jehad Organization, which is responsible for the research and development of ballistic missiles.

The State Department stated that Iran continues to test and develop ballistic missiles in direct defiance of United Nations Security Council Resolution 2231, and referred to the JCPOA’s statement regarding the participants’ anticipation that “full implementation of this JCPOA will positively contribute to regional and international peace and security.” In announcing these new sanctions, however, State Department officials stated that “Iran’s other malign activities are serving to undercut whatever ‘positive contributions’ to regional and international peace and security were intended to emerge from the JCPOA.” In announcing these new sanctions, the Trump administration stated that it is continuing to conduct a full review of U.S. policy toward Iran and that the United States during this review will continue to aggressively counter Iran’s activities in the region.

Trump Administration Again Certifies that Iran Is in Compliance With JCPOA Terms

7/18/17 – The Trump administration has again certified that Iran is in compliance with the terms of the Joint Comprehensive Plan of Action (JCPOA), an international agreement to curtail Iran’s development of nuclear weapons. This certification to Congress must occur every 90 days and followed confirmation by the international monitors and other signatories to the JCPOA that Iran is meeting the terms of the agreement. Reports are, however, that President Trump begrudgingly agreed to the certification after multiple meetings with his national security staff and is demanding that his staff develop a new strategy to confront Iran because he does not want to continue to indefinitely recertify Iran’s compliance.

In making the announcement, State Department officials noted that President Trump intends to impose new sanctions on Iran for ongoing “malign activities” in non-nuclear areas such as ballistic missile development and support for terrorism. “We do expect to be implementing new sanctions” related to missiles and Iran's “fast boat program,” one State Department official indicated.

USTR Releases Summary of Objectives for NAFTA Renegotiation

7/18/17 – U.S. Trade Representative Robert Lighthizer has released a detailed and comprehensive summary of the negotiating objectives for the renegotiation of the North American Free Trade Agreement (NAFTA). In a brief statement upon the release, Lighthizer stated that the Trump administration will seek an agreement “that reduces the U.S. trade deficit and is fair for all Americans by improving market access in Canada and Mexico for U.S. manufacturing, agriculture, and services.” The summary notes that the “new NAFTA must continue to break down barriers to American exports. This includes the elimination of unfair subsidies, market-distorting practices by state owned enterprises, and burdensome restrictions of intellectual property. The new NAFTA will be modernized to reflect 21st century standards and will reflect a fairer deal, addressing America’s persistent trade imbalances in North America. It will ensure that the United States obtains more open, equitable, secure, and reciprocal market access, and that our trade agreement with our two largest export markets is effectively implemented and enforced.”

The negotiating objectives include a new digital economy chapter and stronger labor and environmental obligations that are currently in NAFTA side agreements. These objectives reflect the negotiating standards established by Congress in the Bipartisan Congressional Trade Priorities and Accountability Act of 2015, which requires that the USTR release objectives at least 30 days before formal negotiations begin. Negotiations will now start no earlier than August 16, 2017.

USTR and Commerce Request Comments Regarding Administration’s Reviews of Trade Agreement Violations and Abuses

6/29/17As we previously reported, Executive Order 13796 of April 29, 2017 requires the United States Trade Representative (USTR) and the secretary of Commerce, in consultation with the secretary of State, secretary of the Treasury, attorney general and the director of the Office of Trade and Manufacturing Policy, to conduct comprehensive performance reviews of all bilateral, plurilateral and multilateral trade agreements and investment agreements to which the United States is a party and all trade relations with countries governed by the rules of the World Trade Organization (WTO) with which the United States does not have free trade agreements but with which the United States runs significant trade deficits in goods.

USTR and Commerce are seeking comments that they will consider as part of these performance reviews and in preparation of the subsequent report to the president. Specifically, commenters should submit information related to one or more of the following assessments:

  • The performance of individual free trade agreements (FTAs) and bilateral investment treaties (BITs) to which the United States is a party.
  • The performance of the WTO agreements with regard to our trade relations with those trading partners with which the United States does not have an FTA but with which the United States runs significant trade deficits in goods. The trading partners subject to these performance reviews are China, the European Union, India, Indonesia, Japan, Malaysia, Switzerland, Taiwan, Thailand and Vietnam.
  • The performance of U.S. trade preference programs.

Written comments are due by 11:59 p.m. EDT on July 31, 2017. USTR and Commerce prefer electronic submissions made through the Federal eRulemaking Portal. The docket number is USTR-2017-0010. For additional information, please see the Federal Register notice on this matter.

OFAC and BIS Designate Additional Individuals and Entities Under the Ukraine/Russian-Related Sanctions

6/23/17 – On June 20, 2017, pursuant to four executive orders (EOs), the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) and the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) subjected to U.S. economic sanctions more individuals and entities involved in the ongoing Crimean conflict between Russia and Ukraine. These actions were deemed necessary to counter attempts to circumvent current U.S. sanctions. Treasury Secretary Steven Mnuchin stated, “This administration is committed to a diplomatic process that guarantees Ukrainian sovereignty, and there should be no sanctions relief until Russia meets its obligations under the Minsk agreements.”

OFAC designated 38 individuals and entities under the Ukraine-related EOs, including:

  • Alexander Babakov, the Russian Federation’s Special Presidential Representative for Cooperation with Organizations Representing Russians Living Abroad;
  • Oboronlogistika, OOO, the Russian Defense Ministry’s sole executor for the procurement of goods, works, and services for maritime transport of military troops and freight on the territory of the so-called Republic of Crimea; and
  • The following seven banks for operating or assisting in financial transactions in Crimea: Tsmrbank, OOO; Taatta, AO; Joint Stock Company Black Sea Bank of Development and Reconstruction; Joint Stock Commercial Bank Rublev; Joint Stock Company Commercial Bank North Credit; IS Bank, AO; and VVB, PAO.

OFAC also identified a number of subsidiaries owned 50 percent or more by Transneft, which was made subject to the Sectoral Sanctions Identification (SSI) List on September 12, 2014 pursuant to EO 13662. Transneft and its 50 percent or more subsidiaries are subject to Directive 2, which prohibits U.S. persons from dealing in new debt of greater than 90 days’ maturity of sanctioned entities. The complete listing of individuals and entities is available on Treasury’s website.

BIS has added 10 entities to the Entity List on the basis of 15 C.F.R. § 744.11 (license requirements that apply to entities acting contrary to the national security or foreign policy interests of the United States) of the EAR. The 10 entities added to the Entity List consist of two entities in the Crimea region of Ukraine and eight entities in Russia. For a complete list of these entities, please see the Federal Register notice.

USTR Lighthizer Testifies Before Senate Finance Committee on the President’s Trade Policy Agenda

6/22/17 – U.S. Trade Representative Robert Lighthizer testified yesterday before the Senate Finance Committee, stating that “the President has instructed me to negotiate trade deals that put American workers, farmers and ranchers, families, and businesses first, and to complement those negotiations with a vigorous enforcement agenda.”

In his testimony, Lighthizer confirmed that the United States intends to begin NAFTA negotiations on August 17, 2017. In the meantime, he stated that USTR staff is talking to congressional offices and stakeholders to develop policy outcomes for the negotiations. USTR is reviewing the more than 12,400 comments received to date and will hold several days of public hearings beginning on June 27. He indicated that USTR staff will continue to work closely with Congress to develop and refine U.S. negotiating objectives, consistent with the Trade Promotion Authority, and publish a detailed summary of those objectives at least 30 days before the negotiations begin.

On trade enforcement, Lighthizer stated that he has instructed USTR’s Office of General Counsel, in accordance with the president’s directives in Executive Order 13796, to examine U.S. trade relationships and identify issues that can be addressed through enforcement of U.S. trade laws. The Trump administration believes that “too little has been done in this area in recent years, and we are actively assessing ways to get tough on countries who do not respect our economic system. We have also been active in identifying countries that have serious problems with protection of intellectual property, and we are reviewing and amending our action plans to ensure that we can identify violations and take appropriate enforcement actions.”

USTR has requested a 6 percent increase for its FY 2018 budget. Lighthizer indicated this additional funding would be used to implement the Interagency Center on Trade Implementation, Monitoring, and Enforcement, and would allow USTR to hire eight additional staff members to support the mission of that office.

View the full written testimony of USTR Lighthizer.

President Trump Announces New Cuba Policy

6/20/17 – After several months of internal review, the Trump administration on June 16 announced revisions to U.S. policy toward Cuba. The internal review, led by the president’s National Security Council, engaged in an interagency review that included input from the Treasury Department, State Department, Commerce Department, Department of Agriculture, Department of Homeland Security and the Department of Transportation. Additionally, President Trump met with members of Congress. In making the announcement, a senior administration official stated that the president’s “basic policy driver was his concern that the previous policy was enriching the Cuban military and the intelligence services that contribute so much to oppression on the island. And that's the opposite of what he wanted to achieve, which is to have the benefits of any economic commerce with the United States go to the Cuban people.”

One White House senior official acknowledged that all the regulatory and policy changes initiated by President Obama from December 2014 through 2016 would be difficult to undo; however, the revised policy under the Trump administration will once again restrict certain travel and seek to limit providing any advantages to the Cuban military (particularly the Cuban military monopoly, Grupo de Administración Empresarial) while seeking to continue to allow “American individuals and entities to develop economic ties to the private, small business sector in Cuba.” The Office of Foreign Assets Control (OFAC), the Bureau of Industry and Security (BIS) and the State Department are expected to update their lists of denied parties within the next 30 days. OFAC and BIS will also issue new regulations within that time to implement these policy changes. The president’s new policy will not become effective until those regulations are issued. The U.S. embassy in Havana will remain open, and Cuba will be allowed to maintain its embassy in Washington.

The policy clarifies that any further improvements in the United States-Cuba relationship will “depend entirely on the Cuban government’s willingness to improve the lives of the Cuban people, including through promoting the rule of law, respecting human rights, and taking concrete steps to foster political and economic freedoms.”

As further details on the regulatory changes that will be implemented to address these policies become available, Thompson Hine’s International Trade practice group will follow up with a detailed client bulletin. View the “National Security Presidential Memorandum on Strengthening the Policy of the United States Toward Cuba.”

Senate Passes Bill for Additional Sanctions Against Iran and Russia

6/19/17 – After several months of negotiations in the Committee on Foreign Relations, the full Senate on June 15, 2017 considered and passed a bipartisan bill by a vote of 98-2 seeking to hold both Iran and Russia accountable for their recent destabilizing activities in world affairs. S. 722 at Title I contains the Iran component of the legislation and was authored by Senators Corker (R-Tenn.), Menendez (D-N.J.), Rubio (R-Fla.), Cardin (D-Md.), Cotton (R-Ark.) and Casey (D-Pa.). It expands sanctions on Iran for ballistic missile development, support for terrorism, transfers of conventional weapons and human rights violations. The Countering Iran’s Destabilizing Activities Act of 2017 contains the following key provisions:

  • New mandatory ballistic missile sanctions: imposes mandatory sanctions on persons involved with Iran’s ballistic missile program and those that transact with them.
  • New terrorism sanctions: applies terrorism sanctions to the Islamic Revolutionary Guard Corps and codifies individuals who are currently sanctioned due to Iranian support for terrorism.
  • Enforcement of arms embargo: requires the president to block the property of any person or entity involved in specific activities related to the supply, sale, or transfer of prohibited arms and related material to or from Iran.

The text of Title II of S. 722 maintains and substantially expands sanctions against the government of Russia in response to the violation of the territorial integrity of the Ukraine and Crimea, its cyber-attacks and interference in elections, and its continuing aggression in Syria. This portion of the bill will:

  • Provide for a mandated congressional review if sanctions are relaxed, suspended or terminated.
  • Codify and strengthen existing sanctions contained in executive orders on Russia, including the sanctions’ impact on certain Russian energy projects and on debt financing in key economic sectors.
  • Impose new sanctions on: corrupt Russian actors; those seeking to evade sanctions; those involved in serious human rights abuses; those supplying weapons to the Assad regime; those conducting malicious cyber activity on behalf of the Russian government; those involved in corrupt privatization of state-owned assets; and those doing business with the Russian intelligence and defense sectors.
  • Allow broad new sanctions on key sectors of Russia’s economy, including mining, metals, shipping and railways.
  • Require a study on the flow of illicit finance involving Russia and a formal assessment of U.S. economic exposure to Russian state-owned entities.

S. 722 will shortly cross over to the House of Representatives, where it will be assigned to the appropriate committee(s) for consideration. As such, this legislation, while significant, is not yet a law.

Congressional Republicans Urge President Trump Not to Reverse Course on Cuba

6/12/17 – Groups of Senate and House Republicans have sent letters to President Trump urging him not to reverse Obama administration policies that began to relax longstanding economic sanctions and open up the country for limited trade. Seven House Republicans wrote President Trump stating, “Reversing course would incentivize Cuba to once again become dependent on countries like Russia and China. Allowing this to happen could have disastrous results for the security of the United States.” The letter also argued that reversing course would “threaten” efforts to combat human trafficking, illicit drug trade, cybercrime and fraud identification. Reps. Tom Emmer (MN), Rick Crawford (AR), Ted Poe (TX), Darin LaHood (IL), Roger Marshall (KS), James Comer (KY) and Jack Bergman (MI) signed that letter.

Similarly, Republican Senators John Boozman (AR), Mike Enzi (WY) and Jeff Flake (AZ) wrote to Secretary of State Rex Tillerson and National Security Adviser H.R. McMaster to “strongly urge you to weigh carefully any rollback of policies that would endanger” benefits such as the growth in Cuban entrepreneurs, expanded opportunity for U.S. businesses and the national security benefit of preventing the island nation from becoming “a client state of nations that view US interests as counter to their own.”

It is expected that during a trip to Miami, Florida later this week, President Trump will announce the results of his administration’s inter-agency review of existing Cuba policy. Many reports are indicating that he may tighten some restrictions on travel and business activities.

U.S.-Mexico Sugar Trade Agreement – NAFTA Renegotiation Precursor?

6/8/17 – On June 6, 2017, the United States and Mexico agreed to revise previously signed suspension agreements that will continue to suspend antidumping and countervailing duty investigations and prevent the imposition of additional duties on imports of sugar into the United States. The revised agreement is intended to prevent dumping of Mexican sugar and correct for subsidies the Mexican sugar industry receives. The agreement addresses many of the concerns the U.S. sugar industry had with the previous agreement, including the pricing of raw sugar sold to Mexico mills, the percentage of refined sugar that may be imported into the United States, the determining factors between refined and raw sugar, and increased enforcement measures. U.S. refiners argue that Mexican sugar producers have been circumventing the 2014 suspension agreements’ requirement that forced them to send nearly half of their exports to U.S. refineries by exporting sugar that was technically raw but could be sold at higher prices and used directly in beverage and food production with minimal processing. The fact sheet released with the announcement, “Draft Amendments to Mexican Sugar Suspension Agreements,” is available on Commerce’s website.

While the terms of the revised agreements were not supported by the Coalition for Sugar Reform or the American Sugar Alliance, Secretary of Commerce Wilbur Ross agreed to the terms of the deal in principle and stated that he was confident that it “defends American workers across many industries and is the best way to ensure stability and growth.” The U.S. Chamber of Commerce stated that the deal “demonstrates the willingness of both governments to work through difficult issues in a constructive manner.” Indeed, a number of trade analysts believe this agreement on sugar is a hopeful sign for North American Free Trade Agreement (NAFTA) renegotiation efforts; there had been concern that if these sugar trade talks failed, it would be unlikely that a renegotiated NAFTA would be plausible. These negotiations and the terms of the agreements may be an early indication that U.S. trade negotiators may be willing to negotiate deals where significant and broad progress is achieved but certain key industries remain unsatisfied.

Industry Comments on Section 232 Steel Import Investigation

6/2/17 – As comments in the ongoing Section 232 investigation into steel imports are being filed, we highlight two recent submissions that reflect the dichotomy of views on this trade issue. Both the American Iron and Steel Institute (AISI) and the National Foreign Trade Council (NFTC) filed comments with the Department of Commerce on May 31, 2017. AISI represents members of the steel industry that account for nearly 70 percent of U.S. steelmaking capacity. NFTC represents more than 200 U.S. companies with over $3 trillion in worldwide sales, including companies that rely on the steel industry.

AISI Comments: “[T]he U.S. steel industry has relied on our trade laws to seek to address the impact of unfairly traded steel imports in our market. While the antidumping and countervailing duty laws have provided some relief … they leave openings for steel products not subject to orders to continue to surge into our market. … The U.S. steel industry has been severely impacted by repeated surges in dumped and subsidized imports that have flooded the U.S. market in recent years. These surges are the result of foreign government interventionist policies in the steel sector that have fueled massive and growing global overcapacity in steel, particularly in China. If left unaddressed, this global steel crisis will threaten the very viability of the U.S. steel industry, and therefore will threaten the national security of the United States.” AISI urges the Department of Commerce to use the Section 232 investigation to implement a “more comprehensive and broad-based” solution to safeguard national security. See AISI’s full comments.

NFTC Comments: “We are … extremely concerned about the notion of seeking to remedy unfair trade or global overcapacity through an overly broad definition of ‘national security’ and the use of sweeping trade restrictions under Section 232. We do not believe that this is the proper role of a ‘national security’ related remedy, which should be more narrowly focused on two considerations: (a) what specific national security needs are not being met; and (b) whether a targeted remedy that is not unduly disruptive to the rest of our national economy can ensure essential supply to our defense sector. If the focus is something different, such as to remedy unfair trade practices, we believe the proper course of action is for the industry to seek relief under the laws established for those purposes, such as the antidumping and countervailing duty laws. These laws have well-established procedural requirements for determining injury and assessing the appropriate scope and level of remedies.” NFTC urges the Department of Commerce to balance the interests of steel consuming industries “against the advisability of restrictions for national security reasons,” the uncertainty that could be introduced if any “broad-based” or “sweeping” restrictions or trade barriers are created, and the potential for retaliation. See NFTC’s full comments.

CRS Issues Report on NAFTA as Renegotiation Approaches

5/30/17 – On May 24, 2017, the non-partisan Congressional Research Service (CRS) released a report on the North American Free Trade Agreement (NAFTA). In addition to providing a short history of the trade agreement and an overview of certain key provisions, this timely report provides insight into certain trade trends and the agreement’s economic effects on the three member countries. The report also sets forth potential topics for any NAFTA renegotiation, including Automotive Sector; Services; E-Commerce, Data Flows and Data Localization; Intellectual Property Rights; State-Owned Enterprises; Investment; Dispute Settlement; Labor; Environment; Energy; Customs and Trade Facilitation; and Sanitary and Phytosanitary Standards.

Commerce Holds Public Hearing in Section 232 Steel Investigation; Ross Suggests Final Report Could Be Submitted to President in June

5/25/17 – On May 24, 2017, the Department of Commerce held a public hearing as part of its investigation under Section 232 of the Trade Expansion Act of 1962 into the impact of steel imports on national security (see our previous update for more information). In opening remarks, Commerce Secretary Wilbur Ross stated that the purpose of the investigation is to “determine if the steel being imported into this country impairs our national economic and military security” and that the key question is, “Does the problem rise to the level of crisis sufficient to warrant action beyond existing countervailing duty and antidumping cases?” Ross said the investigation will further seek to recommend what action(s) the president should take in response if the investigation concludes that steel imports are threatening to impair U.S. national security: “Should it cover all steel from everywhere? What do we do in terms of the 20+ percent of steel imports from our NAFTA partners? Should all products be covered? Is some sort of tariff rate quota appropriate? Or a more broadly based tariff? Are there products or countries that should be excluded? Is there some more innovative solution? If we go the tariff route, should it be broadly applied or a tariff schedule for groups of products?”

Under the Section 232 law, if the Commerce secretary determines that imports threaten to impair U.S. national security, the president will then have 90 days to decide whether to support that determination and to take any necessary action to adjust imports or take other non-trade-related actions to protect national security. While this investigation was only initiated in April 2017 and the Department of Commerce has 270 days to complete the investigation (i.e., by mid-January 2018), Ross indicated that he hopes to submit a report to Trump by the end of June.

The panel hearing the testimony yesterday consisted of officials from the Department of Commerce’s Bureau of Industry and Security (BIS), the International Trade Administration, the U.S. Geological Survey, the Department of Defense and the Defense Logistics Agency. Approximately 37 individuals and company officials testified at the hearing, including Rep. Marcy Kaptur (D-Ohio), Chinese and Russian government officials, U.S. steel industry representatives, the president of the United Steelworkers union, and representatives from various U.S. companies that rely heavily on steel in the manufacturing of their products. While not yet available, the hearing transcript as well as submitted written hearing statements and other public comments will be posted on the BIS Electronic FOIA web page. Written comments will be accepted until May 31, 2017 and should be submitted to Brad Botwin, Director, Industrial Studies, Office of Technology Evaluation, Bureau of Industry and Security, U.S. Department of Commerce, 1401 Constitution Avenue NW, Room 1093, Washington, D.C. 20230 or by email to Steel232@bis.doc.gov. For those who wish to view the nearly four-hour hearing, it is available on YouTube.

Trump Administration Continues Waiver of Nuclear-Related Sanctions on Iran, Sanctions Iranian Officials for Ballistic Missile Program

5/18/17 – The Trump administration has renewed a necessary waiver regarding U.S. sanctions on Iran’s crude oil exports. This will allow Iran to continue to sell its oil in the international market despite existing U.S. sanctions that must be periodically waived under the terms of the 2015 nuclear deal with Iran.

The Treasury Department’s Office of Foreign Assets Control (OFAC), however, has placed two senior Iranian defense officials on OFAC’s Specially Designated Nationals (SDN) List for their involvement in Iran's solid-fueled ballistic missile program. Morteza Farasatpour, a senior defense official with Iran's Defense Industries Organization (DIO) and Rahim Ahmadi, a senior official serving as the Director of Iran's Shahid Bakeri Industries Group (SBIG), along with Iran-based company Matin Sanat Nik Andishan, have been placed on the SDN List for activities in support of Iran's ballistic missile program.

These actions were taken in conjunction with the State Department’s release of its semi-annual report to Congress detailing sanctions imposed on persons responsible for or complicit in human rights abuses committed against citizens of Iran or their family members.

As a reminder to our readers, on Friday, May 19, Iran will hold its presidential vote that could also have a major impact on the status of the nuclear deal. Current President Hassan Rouhani, considered a moderate who oversaw the negotiation and implementation of the nuclear deal, is running for re-election. While he faces competition from several other candidates, his principal challenger is hardline conservative cleric Ebrahim Raisi.

Trump Issues Executive Order Directing USTR and Secretary of Commerce to Review Trade Agreement Violations and Abuses

5/1/17 – On April 29, 2017, his 100th day in office, President Trump announced an executive order directing the U.S. trade representative (USTR) and secretary of the Department of Commerce to commence a review of “all bilateral, plurilateral, and multilateral trade agreements and investment agreements to which the United States is a party” and “all trade relations with countries governed by the rules of the World Trade Organization (WTO) with which the United States does not have free trade agreements but with which the United States runs significant trade deficits in goods.” In a press briefing, Secretary of Commerce Wilbur Ross clarified that this executive order differs from others previously signed by the president in that it will focus “more narrowly on the agreements themselves,” even those that do not result in deficits, and not on the behavior of individual countries.

The review of each agreement must be submitted to the president within 180 days (late October 2017) and identify violations or abuses of any U.S. trade agreement, including the WTO, as well as any trade preference programs and investment agreements. The review will identify trade agreements and programs that “have failed with regard to such factors as predicted new jobs created, favorable effects on the trade balance, expanded market access, lowered trade barriers, or increased United States exports.”

In signing the executive order, President Trump has authorized the secretary of Commerce, the USTR and other heads of executive departments and agencies to “take every appropriate and lawful action to address violations of trade law, abuses of trade law, or instances of unfair treatment.”

While Secretary Ross made clear that the review would cover all trade agreements, the United States has only 20 such agreements and much U.S. trade occurs with countries who are members of the WTO. He stated that the WTO has “a ‘most favored nation clause,’ meaning that of all the countries with whom we do not have a free-trade agreement, we must charge the same tariff on the same item to those – each of those countries as we charge to the others. So that’s a significant impediment toward getting to anything like a reciprocal agreement.” He also criticized the WTO agreement for not effectively dealing with non-tariff trade barriers and intellectual property rights, as well as claiming there were certain structural problems with the agreement, especially the dispute settlement provisions. When asked if the United States would consider withdrawing from the WTO, Ross replied that, while the review has not yet begun, “as [with] any multilateral organization, there's always the potential for modifying the rules of it.”

China
Department of Commerce Preliminarily Determines Countervailing Duties for U.S. Imports of Chinese Aluminum Sheet

4/18/18 – In its self-initiated investigation, the Department of Commerce has preliminarily determined that countervailing duties (CVD) should be assessed for imports of aluminum sheet from China to counteract Chinese government subsidies. Commerce calculated a 31.20 percent CVD rate for Chinese respondent Yong Jie New Material Co., Ltd.; a 34.99 percent CVD rate for respondents Henan Mingtai Industrial Co., Ltd. and Zhengzhou Mingtai Industry Co., Ltd.; and a 33.10 percent CVD rate of for all other Chinese producers and exporters. Due to their failure to cooperate in the investigation, Commerce assigned a 113.30 percent CVD rate to respondents Chalco Ruimin Co., Ltd. and Chalco-SWA Cold Rolling Co., Ltd.

These rates are preliminary, and the investigation will continue into its final phase. Nevertheless, Customs and Border Protection will require cash deposits based on these preliminary rates for the merchandise covered under the scope of the investigation. Such merchandise is common alloy aluminum sheet, which is a flat-rolled aluminum product having a thickness of 6.3 mm or less, but greater than 0.2 mm, in coils or cut-to-length, regardless of width. Common alloy sheet is currently classifiable under the Harmonized Tariff Schedule of the United States (HTSUS) subheadings 7606.11.3060, 7606.11.6000, 7606.12.3090, 7606.12.6000, 7606.91.3090, 7606.91.6080, 7606.92.3090 and 7606.92.6080. Merchandise that falls within the scope of these investigations may also be entered into the United States under HTSUS subheadings 7606.11.3030, 7606.12.3030, 7606.91.3060, 7606.91.6040, 7606.92.3060, 7606.92.6040 and 7607.11.9090. Specifically excluded from the scope of this investigation is aluminum can stock, which is suitable for use in the manufacture of aluminum beverage cans, lids of such cans, or tabs used to open such cans.

Commerce is scheduled to announce its final determination in this CVD investigation no later than August 30, 2018. In addition, the related antidumping investigation into aluminum sheet from China continues with a preliminary determination in that investigation due by June 15, 2018. For additional background on this investigation, see Commerce’s Fact Sheet on this CVD investigation and Thompson Hine’s International Trade Update dated November 29, 2017.

House Committee Holds Hearing on Effects of Tariff Increases on U.S. Economy and Jobs

4/13/18 – On April 12, 2018, the House of Representatives' Committee on Ways and Means held a hearing to explore the effects on the U.S. economy and jobs of the tariff increases related to Section 232 and Section 301 investigations. Before the hearing, Chairman Kevin Brady stated, "In enforcing our trade laws, we should always take a targeted approach to address unfair practices while avoiding harm to U.S. workers and job creators. Our private sector witnesses will discuss the impact of recently announced U.S. tariff increases on their businesses, including product and country coverage of the tariffs, the process to comment on and apply for exclusions from the tariffs, and the effects of possible retaliation on U.S. exporters." In his opening comments, Brady highlighted China's questionable trade policies and practices, but also asked, "How do you avoid punishing Americans for China's misbehavior?"

While most members of the committee and witnesses acknowledged that China engages in unfair trade practices, opinions on the appropriate response and strategy varied. The chairman acknowledged his belief that tariffs are taxes that will "ultimately be passed onto consumers. Like taxes, they also curtail economic growth, discourage new investment, delay new hiring, and put American workers at a huge disadvantage to foreign competitors." Ranking Member Richard Neal indicated that the logic of the tariffs is "pretty direct" given China's behavior, but that the tariffs "will bring disruption to the U.S. economy" and, thus, a key question is whether the Trump administration "has a plan to use these tariffs effectively." Several other members of the committee questioned whether the president and his trade advisers have a long-term strategic trade policy, with Representative Ron Kind going so far as to assert that the president's trade agenda is "seriously off the rails" with its unilateral actions, threats to "blow up" NAFTA, and failure to undertake any new, meaningful bilateral trade agreement negotiations since taking office.

Industry witnesses expressed a variety of viewpoints. Kevin Kennedy, president of Kennedy Fabricating, stated, "The impact is that it's already shifting our jobs and work outside of the U.S. What was presented as a tariff on foreign steel has effectively become a tax on U.S. manufacturers like us." Ann Wilson of the Motor & Equipment Manufacturers Association noted that her industry operates in an integrated global supply chain in which tariffs could cause disruptions and increased costs, and cautioned restraint before additional tariffs are imposed. In supporting the president's implementation of tariffs, Roger Newport of AK Steel Corporation testified that the steel industry "has taken the brunt of [China's] unfair trade practices over the last several decades" and that it is "only a matter of time before others are afflicted by unfair trade." Links to all witnesses' written testimony are provided below.

Before the hearing, a group of over 100 industry associations "representing U.S. manufacturers, farmers and agribusinesses, retailers, technology companies, importers, exporters, and other supply chain stakeholders" submitted a letter to the committee expressing "deep concern" with the potential impact of the president's tariffs toward China and the escalating tariff threats. The group added that these tariffs and threats "will not effectively advance our shared goal of changing these harmful Chinese practices."

Witnesses' Statements:

  • Kevin Kennedy, President, Kennedy Fabricating
  • John Wolfe, Chief Executive Officer, Northwest Seaport Alliance
  • Roger Newport, Chief Executive Officer, AK Steel Corporation
  • John Heisdorffer, President, American Soybean Association
  • Calvin Dooley, President and Chief Executive Officer, American Chemistry Council
  • Ann Wilson, Senior Vice President, Motor & Equipment Manufacturers Association
  • Scott Paul, President, Alliance for American Manufacturing
Senate Finance Committee Holds Hearing on Market Access Challenges in China

4/12/18 – On April 11, 2018, the Senate Committee on Finance held a hearing regarding the challenges that U.S. businesses, manufacturers and service providers face when trying to access the Chinese market. Links to the witnesses’ written testimony are provided below. Before the committee, these industry witnesses consistently indicated that a long-term strategy – with clear objectives and a timeline – was needed to address China’s trade practices. Perhaps, most poignantly, Dean Garfield, president and CEO of the Information Technology Industry Council, stated, “The U.S.-China relationship is as complex as it is important. The relationship has always been – and likely will continue to be – one of both competition and cooperation. We need to approach managing difficulties in the bilateral trade relationship with the nuance and deliberation they deserve, recognizing that both action and inaction will have consequences for years to come, in positive and negative respects.” He later added that the United States, regardless of China’s practices, must rebalance its approach to strengthening the U.S. economy because, “Regardless of whether China plays by the rules or not, it will continue to develop significant capacity for technological development, innovation, and growth. The United States must be prepared to compete.”

Christine Bliss, president of the Coalition of Services Industries, highlighted in her testimony significant market barriers in the services industry, including China’s treatment of data and technology, its restrictive measures in the insurance and securities markets, and its barriers in the banking and securities industries. She said that despite these barriers, China “represents a significant opportunity for U.S. services firms” given the size of its market. Linda Dempsey, vice president of International Economic Affairs of the National Association of Manufacturers, added that “there are few places in the world where [U.S.] manufacturers sell more or have increased sales” outside of our NAFTA partners … but “there are few places in the world where trade has proven more challenging for American manufacturing.” These challenges must be addressed, she stated, and “China simply must follow the same rules as everyone else.” While targeted actions, such as tariffs, can provide short-term relief, Dempsey argued that the United States should “be pursuing a truly modern, innovative and comprehensive bilateral trade agreement with China that wholly restructures our economic relationship.” Thea Lee, president of the Economic Policy Institute, added that China’s practices remain inconsistent with international rules and norms, “not just WTO rules on prohibited subsidies and dumping, but also international conventions on workers’ rights, public health, human rights, environmental protections, intellectual property rights, and consumer safety.” She concurred with the other witnesses that China is strategically playing a “long game, while the U.S. is egregiously shortsighted. Our trade policies in the past have been so inadequate in scale and slow in implementation that by the time we take action, it is often a decade too late, with the result that our trade actions are ineffective, if not counterproductive.”

Overall, while clearly criticizing the Chinese government for its trade policies, practices and continuing barriers, the witnesses were at times equally critical of the U.S. government’s approach to China and its own failure to develop and implement long-term economic and infrastructure development strategies.

Witnesses’ Statements:

  • Dean C. Garfield, President and CEO, Information Technology Industry Council
  • Christine Bliss, President, Coalition of Services Industries
  • Linda Dempsey, Vice President, International Economic Affairs, National Association of Manufacturers
  • Thea M. Lee, President, Economic Policy Institute
USTR Releases 2018 National Trade Estimate Report on Foreign Trade Barriers

4/2/18 – The Office of the U.S. Trade Representative (USTR) has released its annual report on significant foreign trade barriers, providing an inventory of the most important foreign barriers affecting U.S. exports of goods and services, foreign direct investment by U.S. persons and protection of intellectual property rights. The term “trade barriers” does not have a fixed definition but is broadly defined by the USTR as government laws, regulations, policies or practices that either protect domestic goods and services from foreign competition, artificially stimulate exports of particular domestic goods and services, or fail to provide adequate and effective protection of intellectual property rights. The report classifies foreign trade barriers into 10 different categories, including import policies, government procurement, export subsidies, lack of intellectual property protections and service/investment barriers.

While the voluminous report covers 64 countries, customs territories and regional associations, as well as all 20 U.S. free trade agreements, this update focuses on those countries of major interest for TrumpandTrade.com readers. The report provides little detail regarding ongoing NAFTA renegotiations, stating only that the parties have entered into discussions “seeking to update and rebalance the NAFTA.” Regarding the U.S.-Korea Free Trade Agreement (KORUS), the report notes that an agreement in principle was reached on March 28, 2018 to decrease the large U.S. trade deficit in industrial goods. Particularly, the report notes efforts and improvements in increasing U.S. automobile exports to South Korea through a commitment to double the number of U.S. automobile exports, to 50,000 cars per manufacturer per year that can meet U.S. safety standards (in lieu of Korean standards) and enter the Korean market without further modification. The parties will also harmonize testing requirements, and Korea will recognize U.S. standards for auto parts.

Concerning Russia, the report notes that sanctions implemented between the two countries, in response to Russia’s actions in Ukraine, have “created uncertainty for American firms and reduced prospects for market penetration. The U.S. Government continues to engage with industry to analyze and assess the impact of sanctions on trade in the broader context of U.S. national interests. Furthermore, because the U.S. Government has curtailed its bilateral engagement with Russia … our ability to raise and resolve market access barriers in Russia has been severely limited.”

With regard to China, the report states that “China continued to pursue a wide array of industrial policies in 2017 that seek to limit market access for imported goods, foreign manufacturers and foreign services suppliers, while offering substantial government guidance, resources and regulatory support to Chinese industries. The beneficiaries of these constantly evolving policies are not only state-owned enterprises but also other domestic companies attempting to move up the economic value chain.” Specifically, the report notes the Section 301 investigation regarding China’s “unreasonable or discriminatory” technology transfer and intellectual property practices.

Despite the ongoing embargoes, sanctions or otherwise severe trade restrictions in place by the United States, the report makes no references to trade with Cuba, Iran or Syria.

President Trump Announces Trade Enforcement Actions to Address China’s Unfair Practices Related to Technology Transfer and Intellectual Property

3/22/18 – Announcing that China’s unfair trade practices in the areas of technology transfers and intellectual property result in harm to the U.S. economy of at least $50 billion per year, President Trump issued a Presidential Memorandum announcing the findings of his administration’s Section 301 investigation into these practices by the People’s Republic of China. This trade action is the result of a Section 301 investigation initiated on August 18, 2017 pursuant to the Trade Act of 1974 to determine whether acts, policies and practices of the Government of China related to technology transfer, intellectual property, and innovation are actionable under that statute. The Office of the U.S. Trade Representative (USTR) has prepared a report on the findings of its investigation detailing the acts, policies and practices undertaken by China that are harmful to the United States. According to the report:

  • China uses joint venture requirements, foreign ownership/investment restrictions, equity limitations, and administrative review and licensing processes to force or pressure technology transfers from American companies.
  • China uses discriminatory technology licensing processes and restrictions to transfer technologies from U.S. companies to Chinese companies.
  • China directs and facilitates systematic investments and acquisitions in U.S. companies and assets that result in large-scale technology transfers in industries deemed important to China’s industrial plans.
  • China conducts and supports cyber intrusions into U.S. computer networks to gain access to valuable business information, such as intellectual property, trade secrets or other confidential business information.

According to the USTR, these unfair technology transfers and intellectual property policies are part of China’s intentional efforts to seize economic leadership in advanced technology as described in its industrial plans, such as “Made in China 2025.” In making the announcement, USTR Robert Lighthizer stated, “President Trump has made it clear we must insist on fair and reciprocal trade with China and strictly enforce our laws against unfair trade. This requires taking effective action to confront China over its state-led efforts to force, strong-arm, and even steal U.S. technology and intellectual property. Years of talking about these problems with China has not worked. The United States is committed to using all available tools to respond to China’s unfair, market-distorting behavior. China’s unprecedented and unfair trade practices are a serious challenge not just to the United States, but to our allies and partners around the world.”

In the Presidential Memorandum, President Trump directed his administration to take the following actions to respond to China’s acts, policies and practices involving the unfair and harmful acquisition of U.S. technology:

  • WTO Case: At the direction of the president, the USTR will file a complaint regarding China’s discriminatory technology licensing practices through a World Trade Organization (WTO) dispute settlement proceeding.
  • 25 Percent Ad Valorem Duties: The USTR will propose additional tariffs on certain products of China, with an annual trade value commensurate with the harm caused to the U.S. economy resulting from China’s unfair policies. The proposed product list subject to the tariffs will include aerospace, information and communication technology, and machinery.
  • Investment Restrictions: The president also has directed his administration to respond to Chinese investment aimed at obtaining key U.S. technologies. Relevant departments and agencies will work with the Treasury Department to propose measures addressing China’s investment practices involving the acquisition of sensitive technologies.

Regarding the 25 percent duties, the USTR will publish a proposed list of products subject to these additional tariffs within the next 15 days. Once published in the Federal Register, the public will have 30 days to comment on the proposed tariff action. Further, the USTR will hold a public hearing at a date yet to be determined. Once the USTR has conducted its review and analysis, a final determination on the products to be covered under any additional tariffs will be published and go into effect.

For more details on the initiation of the investigation, see Thompson Hine LLP’s International Trade & Intellectual Property Update.

Department of Defense Supports Section 232 Findings of Impact on “National Security” But Urges Caution in Applying Any Remedy

2/23/18 – In an undated memo from the Department of Defense (DoD) to the Department of Commerce that was released last night, DoD concurred with Commerce’s recent Section 232 reports on steel and aluminum that have been submitted to President Trump for review. DoD agreed that “imports of foreign steel and aluminum based on unfair trading practices impair the national security” but noted that U.S. military requirements for steel and aluminum only represent approximately 3 percent of U.S. production and would not impact DoD’s ability to acquire necessary product to meet national defense demands.

Overall, DoD focused on the potential “negative impact” of Commerce’s recommendations (i.e., tariffs and quotas) on key allies. DoD recommended that an inter-agency working group be convened to “further refine the targeted tariffs, so as to create incentives for trade partners to work with the U.S. on addressing the underlying issue of Chinese transshipment.” If the president takes action on steel, DoD suggested “waiting before taking further steps on aluminum.” The delayed action on aluminum “may be sufficient to coerce improved behavior of bad actors.” DoD emphasized that the United States needed to “reinforce to our key allies that these actions are focused on correcting Chinese overproduction and countering their attempts to circumvent existing antidumping tariffs – not the bilateral U.S. relationship.” 

Commerce Releases Section 232 Steel and Aluminum Reports Submitted to President Trump Last Month

2/16/18 – Secretary of Commerce Wilbur Ross released today the Section 232 reports prepared by the Commerce Department and submitted to President Trump last month on the national security impact of U.S. imports of steel mill products and of wrought and unwrought aluminum. As expected, Commerce found that the quantities and circumstances of steel and aluminum imports “threaten to impair the national security.” The reports remain under consideration by the president. He is required to make a decision on the steel recommendations by April 11, 2018, and on the aluminum recommendations by April 19, 2018. The president can take a range of actions or no action, based on the analyses and recommendations provided in these reports.

In summary, the reports recommend:

  • Aluminum: (1) a tariff of at least 7.7% on all aluminum exports from all countries; (2) a 23.5% tariff on all products from China, Russia, Venezuela and Vietnam, with all other countries subject to quotas equal to 100% of their 2017 exports to the United States; or (3) a quota on all imports from all countries equal to a maximum of 86.7% of their 2017 exports to the United States.
  • Steel: (1) a global tariff of at least 24% on all imports; (2) a tariff of at least 53% tariff on imports from Brazil, China, Costa Rica, Egypt, India, Malaysia, Korea, Russia, South Africa, Thailand, Turkey and Vietnam, with all other countries subject to quotas by product on imports equal to 100% of their 2017 exports to the United States; or (3) a quota on all steel products from all countries equal to 63% of each country’s 2017 exports to the United States.

Key Findings of the Steel Report:

  • The United States is the world’s largest importer of steel. Imports are nearly four times exports.
  • Six basic oxygen furnaces and four electric furnaces have closed since 2000, and employment has dropped by 35% since 1998.
  • World steelmaking capacity is 2.4 billion metric tons, up 127% from 2000, while steel demand grew at a slower rate.
  • Recent global excess capacity is 700 million tons, almost seven times the annual total of U.S. steel consumption. China is by far the largest producer and exporter of steel and the largest source of excess steel capacity. China’s excess capacity alone exceeds total U.S. steel-making capacity.
  • In an average month, China produces nearly as much steel as the United States does in a year. For certain types of steel, such as for electrical transformers, only one U.S. producer remains.
  • As of February 15, 2018, the United States had 169 antidumping and countervailing duty orders in place on steel, of which 29 are against China, and there are 25 ongoing investigations.

Key Findings of the Aluminum Report:

  • Aluminum imports have increased to 90% of total demand for primary aluminum, up from 66% in 2012.
  • From 2013 to 2016 aluminum industry employment fell by 58%, six smelters shut down, and only two of the remaining five smelters are operating at capacity, even though demand has grown considerably.
  • At today’s reduced military spending, military consumption of aluminum is a small percentage of total consumption and therefore is insufficient by itself to preserve the viability of the smelters. For example, there is only one remaining U.S. producer of the high-quality aluminum alloy needed for military aerospace. Infrastructure, which is necessary for our economic security, is a major use of aluminum.
  • The Department of Commerce recently brought trade cases to try to address the dumping of aluminum. As of February 15, 2018, the United States had two antidumping and countervailing duty orders in place on aluminum, both against China, and there are four ongoing investigations against China.

The tariffs and quotas recommended would be in addition to any duties already in place. The reports recommend that a process be put in place to allow the secretary of Commerce to grant requests from U.S. companies to exclude specific products if the United States lacks sufficient domestic capacity or for national security considerations. Any exclusions granted could result in changed tariffs or quotas for the remaining products to maintain the overall effect.

WTO Members Formally Request Consultations With the U.S. Regarding Solar Cell and Washing Machine Trade Actions

2/8/18 – As expected, the European Union, China, South Korea and Taiwan have formally requested WTO consultations with the United States over the Trump administration’s Section 201 global safeguard measures on imports of certain solar cells and washing machines. The countries requested consultations under Article 12.3 of the WTO Agreement on Safeguards, which entitles affected countries who are exporters with a “substantial interest” in the products concerned to have an “adequate” opportunity for prior consultations before application of the safeguard measure can be imposed by the United States.

While requests for consultation are not formal challenges and do not initiate the WTO’s dispute settlement procedures, such consultations are often the precursor to a further action. WTO rules allow for safeguard measures such as temporary restrictions on imports; however, they also require the country imposing such measures and import restrictions to maintain balanced trade with those countries affected. It is possible that if consultation fails to resolve concerns, these countries could eventually retaliate by imposing their own trade restrictions.

Examples of these requests are provided here: China; South Korea.

Trade Deficit Increases in Trump’s First Year

2/7/18 – The Department of Commerce has released its 2017 year-end report on U.S. International Trade in Goods and Services, revealing a sharp increase in the overall trade deficit during President Trump’s first year in office. For 2017, the goods and services deficit increased to $566 billion, a $61.2 billion (12.1 %) increase from 2016. Exports were $2,329.3 billion in 2017, up $121.2 billion (5.5%) from 2016. Imports were $2,895.3 billion in 2017, up $182.5 billion (6.7%) from 2016.

The 2017 figures show surpluses, in billions of dollars, with South and Central America ($34.3), Hong Kong ($32.5), Netherlands ($24.5), Belgium ($14.8) and Australia ($14.6). Deficits were recorded, in billions of dollars, with China ($375.2), the European Union ($151.4), Mexico ($71.1), Japan ($68.8), Germany ($64.3), Ireland ($38.1), Italy ($31.6), Malaysia ($24.6), India ($22.9), South Korea ($22.9), Thailand ($20.4), Canada ($17.6), Taiwan ($16.7), France ($15.3), Switzerland ($14.3), Indonesia ($13.3) and OPEC ($13). Of note, the deficit with China increased $28.2 billion to $375.2 billion in 2017, and the deficit with Mexico increased $6.7 billion to $71.1 billion in 2017.

President Trump Comments on Trade in State of the Union Address

1/31/18 – In a lengthy State of the Union address, President Trump covered many issues and highlighted his administration’s achievements over the past year in claiming a “new American moment.” On international trade matters, Trump broke no new ground in reiterating his administration’s position that it will promote only “free, fair and reciprocal trade.” In his opening remarks on trade, the president stated that “America has also finally turned the page on decades of unfair trade deals that sacrificed our prosperity and shipped away our companies, our jobs, and our Nation’s wealth. The era of economic surrender is over.” While not mentioning any specific trade agreements, he indicated that his administration will continue to work to “fix bad trade deals and negotiate new ones.” Trump noted increased sanctions on Cuba and Venezuela while again urging Congress to address what he views as “fundamental flaws in the terrible Iran nuclear deal.”

While he did not specifically address the numerous trade actions currently pending (i.e., Sections 201, 232 and 301 investigations), the president appeared to reference the ongoing Section 301 investigation against China regarding that country’s intellectual property and technology transfer policies and practices when he said, “We will protect American workers and American intellectual property through strong enforcement of our trade rules.” Many trade policy experts took that statement as a signal the U.S. government will be announcing and implementing remedies soon in response to the Section 301 investigation. Overall, President Trump’s comments were a reaffirmation of his administration’s now well-known positions on trade negotiations and enforcement.

In conjunction with the address, the White House released a Fact Sheet providing details on the various trade achievements from President Trump’s first year in office.

Commerce Submits Report on Section 232 Aluminum Investigation

1/23/18 – On January 19, the Department of Commerce submitted its Section 232 report to the White House on the national security implications of aluminum imports one business day ahead of its statutory deadline. The president now has 90 days from that date, January 19, to determine whether he agrees with the Commerce Department’s findings or will use his “statutory authority to adjust imports,” according to the Trade Expansion Act of 1962, to devise his own remedy. Commerce’s report was confidential, and Commerce stated that it will publish a summary of the report only after the president announces his decision.

The domestic aluminum industry is in support of any action specifically addressing Chinese overcapacity, said Aluminum Association President and CEO Heidi Brock this past Sunday, January 21. According to an industry source at the recent 2018 Aluminum Symposium, such an action must be carefully measured to ensure that it does not result in increased costs for U.S. consumers and does not create a situation where a key source of supply, like Canada, is affected. China has questioned whether a Section 232 investigation is consistent with U.S. WTO obligations, arguing that the WTO’s legal framework does not permit members to impose trade restrictions through an “abusive invocation” of national security.

USTR Releases Annual Reports on China's and Russia's Compliance With WTO Obligations, States That Supporting China's Accession to WTO Was a Mistake

1/19/18 – Today, the U.S. Trade Representative (USTR) made available its statutorily required reports on how the People's Republic of China (China) and the Russian Federation (Russia) are complying with the commitments they made to the World Trade Organization (WTO) resulting from their accession to the organization. China became a member of the WTO in 2001, and Russia joined the WTO in 2012. According to the USTR, China and Russia have "failed to embrace the market-oriented economic policies championed by the WTO and are not living up to certain key commitments they made when they joined the WTO."

Regarding China, the report states that China largely remains a state-led economy while using "the imprimatur of WTO membership to become a dominant player in international trade." As a result, USTR stated that "it seems clear that the United States erred in supporting China's entry into the WTO on terms that have proven to be ineffective in securing China's embrace of an open, market-oriented trade regime." The report seems to cast doubt on whether the USTR believes the WTO's dispute settlement mechanism will be sufficient to address China's non-market economy policies. Nevertheless, USTR stated that it will continue to pursue WTO cases against China that were initiated by previous administrations and "take all other steps necessary to rein in harmful state-led, mercantilist policies and practices pursued by China, even when they do not fall squarely within WTO disciplines."

Below are additional highlights of the 2017 Report to Congress On China's WTO Compliance:

  • "Today, almost two decades after it pledged to support the multilateral trading system of the WTO, the Chinese government pursues a wide array of continually evolving interventionist policies and practices aimed at limiting market access for imported goods and services and foreign manufacturers and service suppliers."
  • "China's regulatory authorities do not allow U.S. companies to make their own decisions about technology transfer and the assignment or licensing of intellectual property rights. Instead, they continue to require or pressure foreign companies to transfer technology as a condition for securing investment or other approvals."
  • "China is determined to maintain the state's leading role in the economy and to continue to pursue industrial policies that promote, guide and support domestic industries while simultaneously and actively seeking to impede, disadvantage and harm their foreign counterparts, even though this approach is incompatible with the market-based approach expressly envisioned by WTO members and contrary to the fundamental principles running throughout the many WTO agreements."
  • "Many of the policy tools being used by the Chinese government … are largely unprecedented, as other WTO members do not use them, and include a wide array of state intervention and support designed to promote the development of Chinese industry in large part by restricting, taking advantage of, discriminating against or otherwise creating disadvantages for foreign enterprises and their technologies, products and services."

Below are selected highlights of the 2017 Report on the Implementation and Enforcement of Russia's WTO Commitments:

  • "So far, Russia's actions strongly indicate that it has no intention of complying with many of the promises it made to the United States and other WTO Members. This trend is very troubling."
  • "Russia has done little in 2017 to demonstrate a commitment to the principles of the WTO or to many of the specific commitments that it made" in the negotiations leading to Russia's membership in the WTO.
  • "The agricultural sector continues to be one of the most challenging sectors for U.S. exporters. In addition to the import ban on nearly all agricultural goods from the United States and other WTO Members, Russia continues to erect barriers to U.S. agricultural exports."
  • "In 2017, notwithstanding a few tariff reductions, Russia increasingly appeared to turn away from the principles of the WTO, instead turning inward through the adoption of local content policies and practices. Russia continued to rely on arbitrary behind-the-border measures and other discriminatory practices to exclude U.S. exports."
New Section 232 Petition Seeks Investigation Into Effects of Uranium Imports on U.S. National Security

1/17/18 Energy Fuels Inc. and Ur-Energy Inc. (the “Petitioners”) have jointly submitted a petition to the U.S. Department of Commerce for relief under Section 232 of the Trade Expansion Act of 1962 from imports of uranium products from state-owned and state-subsidized enterprises in Russia, Kazakhstan and Uzbekistan. According to the petition, such imports now supply nearly 40 percent of U.S. demand and threaten U.S. national security. Despite uranium’s critical role in the United States supporting clean electricity and the national defense, “imports of cheap, foreign state-subsidized uranium have swelled in recent years to the point that domestic suppliers currently provide less than 5% of our nation’s demand.” As recently as 1980, the Petitioners argue, “U.S. producers supplied nearly 100% of our domestic uranium needs, and in 1989 the DOC initiated a Section 232 investigation at the request of the U.S. Department of Energy (“DOE”) because of concerns that uranium imports exceeded 37.5% at that time. The problem is far worse now.” The petition also notes that China is significantly growing its state-owned nuclear enterprises and intends to penetrate the U.S. market with nuclear fuel that will directly compete with U.S. uranium miners. Under U.S. law, the Petitioners argue that the warheads in U.S. nuclear weapons must be manufactured from uranium sourced from U.S. mines; tritium (an essential component of nuclear weapons) must be produced in a U.S. reactor using domestic uranium; and highly-enriched and fabricated uranium fuel for the U.S. Navy must be U.S. in origin. If this import trend continues and the condition of the U.S. uranium mining industry continues to worsen, the Petitioners contend that the United States will lose the ability to supply these essential national security requirements with domestic sources. The petition seeks remedies that will set a quota to limit U.S. uranium imports, effectively reserving 25 percent of the U.S. nuclear market for U.S. uranium production. It also seeks implementation of a requirement for U.S. federal utilities and agencies to buy U.S. uranium in accordance with President Trump’s Buy American policy.

Once the Department of Commerce initiates the investigation, it will have 270 days to prepare a report for the president. Following receipt of that report, the president will have 90 days to act on any recommendations and take action if necessary to “adjust the imports of an article and its derivatives” and/or pursue other lawful non-trade related actions necessary to address the threat. A full copy of the petition is available on Energy Fuels’ website.

Department of Commerce Issues Memorandum on China's Continued Nonmarket Economy Status

10/31/17 – In support of its preliminary determination in the antidumping duty investigation of imports of aluminum foil from the People's Republic of China, the Department of Commerce has released a 205-page memorandum finding that China continues to be considered a nonmarket economy (NME) country in trade remedy cases because it "does not operate sufficiently on market principles to permit the use of Chinese prices and costs for purposes of the Department's antidumping analysis." At its core, the memo concludes, "the framework of China's economy is set by the Chinese government and the Chinese Communist Party (CCP), which exercise control directly and indirectly over the allocation of resources through instruments such as government ownership and control of key economic actors and government directives. The stated fundamental objective of the government and the CCP is to uphold the 'socialist market economy' in which the Chinese government and the CCP direct and channel economic actors to meet the targets of state planning. The Chinese government does not seek economic outcomes that reflect predominantly market forces outside of a larger institutional framework of government and CCP control."

The memo provides a detailed analysis of the six statutory criteria for determining whether a country is a market economy in trade remedy cases as set forth in the Tariff Act of 1930. Among the factors detailed in the memo are the Chinese government's continuing restrictions on foreign investment, the level of Chinese government ownership of various entities, the government's ability to set and control prices, and the continued functioning of  China's legal system as "an instrument by which the Chinese government and the CCP can secure discrete economic outcomes, channel broader economic policy, and pursue industrial policy goals."

Commerce Issues Preliminary Determination in China Aluminum Foil Dumping Investigation

10/30/17 – The Department of Commerce (Commerce) has announced its affirmative preliminary determination in the antidumping duty (AD) investigation of imports of aluminum foil from the People’s Republic of China (China). While the preliminary antidumping duty rates, ranging from 96 percent to more than 162 percent, will not be finalized by Commerce until late February 2018, Commerce will instruct U.S. Customs and Border Protection (CBP) to require cash deposits based on these preliminary rates.

The merchandise covered by these investigations is aluminum foil having a thickness of 0.2 mm or less, in reels exceeding 25 pounds, regardless of width. The implications of this trade remedy action, however, are potentially more far reaching and may affect U.S.-China trade relations. The preliminary determination comes just weeks before President Trump travels to China, and China was quick to state that it was “strongly dissatisfied” with the determination. A key issue in this investigation is the U.S. government’s continued treatment of China’s economy as a “nonmarket economy.” Commerce relied upon surrogate/third-country pricing analysis to conclude that China was dumping its aluminum foil in the U.S. market. Upon China’s accession to the World Trade Organization (WTO), other WTO members were allowed to use such a nonmarket economy methodology in antidumping duty matters involving China. Commerce continues to use this methodology, arguing that China still does not operate as a market economy due to continuing government price controls and other governmental involvement. China argues that this clause in its accession agreement has now expired and that its goods must be accorded market economy status.

CFIUS 2015 Annual Report: National Security Filings Increase, as Does Focus on China

10/3/17 – The Committee on Foreign Investment in the United States (CFIUS), an inter-agency committee headed by the Department of the Treasury, is authorized to review transactions that could result in the control of U.S. businesses by foreign persons or companies in order to determine the effect of such transactions on the national security of the United States. Once a little-known committee, CFIUS has become more widely known in the past decade amid growing concern over foreign investment in the United States, and the potential security implications of certain foreign entities owning and controlling U.S. companies and/or technology. In fact, in September 2017, President Trump took the rare step of actually blocking a transaction: the proposed acquisition of Lattice Semiconductor Corporation by Canyon Bridge Capital Partners LLC, a subsidiary of Chinese state-owned China Venture Capital Fund Corporation Limited. Such a move indicates that the parties were unable to allay the national security concerns of CFIUS's agency members. It further highlights Trump’s “America First” outlook and the likelihood that CFIUS reviews will become more common and stringent under the Trump administration.

The recently released CFIUS 2015 Annual Report indicates the following trends:

  • In 2015, 143 transactions were reviewed by CFIUS, continuing the general upward trend since 2009, when 65 notices were filed. Further, it is believed that filings increased again in 2016 and that 2017 will be a record year with more than 200 filings.
  • In 2015, 42 percent of reviews were conducted for industries in the Manufacturing sector; 32 percent in the Finance, Information and Services Sector; 18 percent in the Mining, Utilities and Construction industries; and 8 percent in the Wholesale Trade, Retail Trade, and Transportation sectors.
  • For the fourth consecutive year, China has led foreign countries in the number of CFIUS reviews, with 29 conducted in 2015. Over the three-year period from 2013 to 2015, Chinese foreign investment underwent 74 CFIUS reviews; the next closest country was Canada with 49 reviews, followed by the United Kingdom with 47 reviews.
  • While the majority of reviews conclude with approval by CFIUS, in 2015 the parties to 11 transactions had to agree to and adopt mitigation measures to ensure that the parties remained in compliance with various agency requirements to remove any national security risks.
  • The annual report must highlight any “perceived adverse effects” of transactions reviewed by CFIUS, and the 2015 report for the first time indicates there could be national security concerns regarding potential acquisitions of U.S. companies that hold “substantial pools of potentially sensitive data about U.S. persons and businesses that … could be in any number of sectors, including, for example, the insurance sectors, health services, and technology services.”

While not stated in the report, the statistics on the length of time a transaction is under review reveal that in 2015 there was a significant increase in the length of time transactions remained active before CFIUS. By law, CFIUS must complete a review within 90 days, with several triggers that may require a more thorough investigation during that time. Historically, most transactions have concluded within the more informal 30-day review period; however, 2015 data indicate that nearly half of the year’s 143 transactions went into the more formal 45-day investigation period.

OFAC Sanctions Chinese and Russian Entities and Individuals Supporting North Korea

8/25/17 – The Department of the Treasury’s Office of Foreign Assets Control (OFAC) has designated 16 Chinese and Russian entities and individuals for activities related to the support of North Korea’s Kim Jong-un. These sanctions intentionally target third-country companies and individuals that (1) assist already-designated persons who support North Korea’s nuclear and ballistic missile programs, (2) deal in the North Korean energy trade, (3) facilitate its exportation of workers and (4) enable sanctioned North Korean entities to access the U.S. and international financial systems. These sanctions complement United Nations Security Council Resolution 2371 enacted on August 5, 2017. Treasury Secretary Steven Mnuchin stated, “It is unacceptable for individuals and companies in China, Russia, and elsewhere to enable North Korea to generate income used to develop weapons of mass destruction and destabilize the region. We are taking actions consistent with UN sanctions to show that there are consequences for defying sanctions and providing support to North Korea, and to deter this activity in the future.” For details on the 16 entities and persons that have been placed on OFAC’s Specially Designated Nationals List, see OFAC’s Federal Register notice.

USTR Initiates Section 301 Investigation into China’s Acts, Policies and Practices Related to Technology Transfer, Intellectual Property and Innovation

8/25/17 – Less than a week after President Trump issued a presidential memorandum (please see update directly below) directing the U.S. Trade Representative (USTR) to determine whether to investigate China regarding certain intellectual property and technology transfer issues, USTR Robert Lighthizer formally initiated a Section 301 investigation into the matter on August 18, 2017. In announcing the investigation, he stated that, “[a]fter consulting with stakeholders and other government agencies, I have determined that these critical issues merit a thorough investigation.” Details of the four areas of investigation and information regarding public comments were provided in a Federal Register notice.

Specifically, the public is invited to submit written comments to USTR no later than September 28, 2017 on: (1) the acts, policies and practices of the Chinese government described in the Federal Register notice; (2) information on other acts, policies and practices of China relating to technology transfer, intellectual property and innovation as described in the president’s memorandum, which might be included in the investigation and/or addressed through other trade avenues; (3) the nature and level of burden or restriction on U.S. commerce caused by the applicable acts, policies and practices of the government of China and/or any economic assessment of that burden or restriction; and (4) whether actionable conduct exists under Section 301 of the Trade Act of 1974 and what action, if any, should be taken. A public hearing will be held on October 10, 2017; persons wishing to testify at the hearing must provide written notification of their desire to speak and provide a summary of their proposed testimony by September 28, 2017.

President Trump Directs USTR to Examine China's Intellectual Property & Forced Technology Transfer Policies

8/15/17 – Asserting in a presidential memorandum that "Violations of intellectual property rights and other unfair technology transfers potentially threaten United States firms by undermining their ability to compete fairly in the global market," President Trump has directed U.S. Trade Representative Robert Lighthizer to investigate any of China's laws, policies, practices or actions that may be unreasonable or discriminatory and may be harming American intellectual property rights.

In response, Lighthizer stated, "The United States has for many years been facing a very serious problem. China[’s] industrial policies and other practices reportedly have forced the transfer of vital U.S. technology to Chinese companies. We will engage in a thorough investigation and, if needed, take action to preserve the future of U.S. industry. Thousands of jobs are at stake for our workers and for future generations. This will be one of USTR's highest priorities, and we will report back to the President as soon as possible."

This trade action is reported to be one of several trade actions that the Trump administration may take against China in the coming months to address alleged intellectual property violations and the theft of American trade secrets. China's actions in this area were highlighted most recently by USTR in its annual Special 301 Report to Congress released in April 2017. This report stated that the "USTR continues to place China on the Priority Watch List because longstanding and new IP concerns strongly merit attention. China is home to widespread infringing activity, including trade secret theft, rampant online piracy and counterfeiting, and high levels of physical pirated and counterfeit exports to markets around the globe."

In brief remarks on the topic, Trump indicated that once the investigation is complete, the USTR may use "all available options" to address and enforce any actions against any threat of further Chinese IP violations. For a more detailed analysis, see our client alert, Trump Administration Moves Against Chinese IP Violations.

Branstad Approved by Senate as U.S. Ambassador to China

5/23/17 – Iowa Governor Terry Branstad was confirmed by the Senate to be the U.S. ambassador to China by a vote of 82-13. Despite his long friendship with Chinese President Xi Jinping, Ambassador Branstad will likely face many challenges as the Trump administration continues to criticize China’s trade and economic policies. His diplomatic efforts will be further complicated by factions competing in the White House to wrest control over the country’s China policy.

U.S.-China 100-Day Plan Starts to Come into Focus

5/12/17 – As we previously reported on April 10, during the U.S. visit last month of China’s President Xi Jinping, the two countries established a new cabinet-level framework for negotiations – the United States-China Comprehensive Dialogue – and agreed to a 100-day action plan under this framework. On May 11, 2017, Secretary of Commerce Wilbur Ross announced that the two countries had agreed to address issues involving agricultural trade, financial services, investment and energy. As concrete progress is made under the 100-day plan, the parties, Secretary Ross indicated, will begin discussions on a one-year plan to further solidify actions promoting U.S.-China economic engagement and cooperation.

These initial actions are set forth in a Department of Commerce press release covering 10 key issues that should be accomplished by July 16, the conclusion of the 100-day period since the leaders met. Actions to be taken include consultations on U.S. beef exports to China, Chinese exports of cooked poultry to the United States, biotechnology issues, U.S. liquid natural gas exports to China, the operation of U.S. financial service firms in China, as well as other banking and market access issues. Secretary Ross acknowledged that these actions address only 10 items and that “there are probably 500 items we could potentially discuss … So we’re going to do for the rest of the one-year plan another set of prioritization – what things can we reasonably accomplish within that period and then see if we can reach agreement.”

President Trump Will Not Label China a Currency Manipulator

4/13/17 – President Trump indicated in an interview with the Wall Street Journal on April 12, 2017 that his administration will not label China a currency manipulator. Despite repeated campaign statements that he would do so upon taking office, Trump said in the interview that, “They’re not manipulators,” and indicated that the Treasury Department will not list China as a currency manipulator in its semi-annual report due to be released on April 15. In the interview, he stated that he did not want this issue to hinder efforts to obtain China’s cooperation in addressing increasingly aggressive actions by North Korea.

Labeling a country a currency manipulator triggers an investigation by the Treasury Department and can lead to tariffs or other economically punitive measures. However, most economists agree that for the past several years China has not been devaluing its currency but, in fact, has raised the value of the yuan. Senate Minority Leader Chuck Schumer immediately criticized the president, stating that Trump’s “failure to name China a currency manipulator is symptomatic of a lack of real, tough action on trade against China.”

U.S. & China Establish “100-Day Plan” on Trade

4/10/17 – President Trump hosted Chinese President Xi Jinping late last week for a series of meetings regarding multiple issues, including the state of the bilateral relationship between the United States and China. On the trade front, the two presidents agreed to elevate existing bilateral talks to reflect the importance of making progress on issues. In doing so, they established a new cabinet-level framework for negotiations, the United States-China Comprehensive Dialogue, which will have four pillars: the Diplomatic and Security Dialogue; the Comprehensive Economic Dialogue; the Law Enforcement and Cybersecurity Dialogue; and the Social and Cultural Issues Dialogue.

In his meetings with President Xi, President Trump noted the challenges caused by the Chinese government’s intervention in its economy and raised serious concerns about the impact of China’s industrial, agricultural, technological and cybersecurity policies on U.S. jobs and exports. Trump reportedly underscored the need for China to take concrete steps to level the playing field for American workers, stressing repeatedly the need for reciprocal market access.

In his comments on the meetings, Secretary of State Rex Tillerson stated that “The chief goal of our trade policies is the prosperity of the American worker. To that end, we will pursue economic engagement with China that prioritizes the economic well-being of the American people.” In addition to the four pillars of dialogue listed above, Secretary of the Treasury Steven Mnuchin raised another “dialogue” that he and Secretary of Commerce Wilbur Ross will lead, which “will be focused on trade, investment, and other economic opportunities between both countries.” Mnuchin indicated that this dialogue will focus on a more balanced economic relationship, specifically on trade.

Commerce Moves to Review China’s “Nonmarket Economy” Status

4/3/17 – The Trump administration on April 3, 2017 issued a notice of initiation and request for public comment and information pertaining to whether the People’s Republic of China (PRC) should continue to be treated as a nonmarket economy (NME) country under the antidumping and countervailing duty laws. The notice in the Federal Register indicates that this inquiry is part of the Department of Commerce’s less-than-fair-value investigation of certain aluminum foil from the PRC.

The notice states that the Department of Commerce has treated the PRC as an NME country in all past antidumping duty investigations and administrative reviews. Yet, under the agreement with the PRC regarding its accession to the World Trade Organization (WTO), the PRC believes that WTO members were required to begin treating it as a market economy in December 2016. The department is conducting this inquiry in order to obtain the most recent data and information available from U.S. industry, and the notice states that U.S. law allows it to review the PRC's nonmarket economy status "at any time."

The timing of this notice is interesting, given that Chinese President Xi Jinping is traveling to the United States for talks later this week.

Congressional Research Service Releases U.S.-China Trade Report

2/23/17 – The Congressional Research Service, a public policy research congressional support agency, has released an in-depth analysis of U.S.-China trade and economic issues. Given the significant amount of political rhetoric that the Trump campaign generated towards China, and the stance of Peter Navarro, who is President Trump’s chairman of the newly formed National Trade Council, an outspoken China critic and author of “Death by China,” this timely report could be a valuable read by those in the international trade arena.

The 80-page report covers a wide variety of specific issues and highlights that U.S.-China economic ties have expanded substantially over the past three decades. Total U.S.-China merchandise trade rose from $2 billion in 1979 (when economic reforms began) to $579 billion in 2016. China is currently the United States’ second-largest merchandise trading partner, its third-largest export market, and its biggest source of imports. It also notes that many U.S. firms view participation in China’s market as critical to staying globally competitive.

Despite these growing commercial ties, the report notes that the U.S.-China bilateral economic relationship has become increasingly complex and often fraught with tension. From the U.S. perspective, many trade tensions stem from China’s incomplete transition to a free market economy. Major areas of concern expressed by U.S. policymakers and stakeholders include China’s alleged widespread cyber economic espionage against U.S. firms; relatively ineffective record of enforcing intellectual property rights; discriminatory innovation policies; mixed record on implementing its World Trade Organization (WTO) obligations; extensive use of industrial policies (such as financial support of state-owned firms and trade and investment barriers) in order to promote and protect industries favored by the government; and interventionist policies to influence the value of its currency.

There are different views on how the United States could better address commercial disputes with China. Trump administration officials contend that the United States should take a more aggressive stance against China’s trade policies, such as by increasing the number of U.S. WTO dispute settlement cases brought against China, expanding the use of U.S. trade remedy laws on certain imports from China, designating it as a “currency manipulator” and/or threatening to impose sanctions against China unless it addresses various policies that hurt U.S. economic interests.

The report, “China-U.S. Trade Issues,” provides background and analysis of U.S.-China commercial ties, including history, trends, issues and outlook.

Background

During the presidential campaign, Donald Trump frequently attacked China for its unfair trade policies, and stated that as president he would:

  1. instruct the Treasury Secretary to label China a currency manipulator;
  2. direct the U.S. Trade Representative to bring trade cases against China; and
  3. use his presidential power to remedy trade disputes, including the application of punitive import tariffs, if China refuses to stop its illegal activities.

In the run-up to inauguration, the president even challenged the longstanding “One China” approach that has served as the cornerstone of diplomatic relations among the United States, China and Taiwan since the 1970s. Will Trump’s provocative statements, if either implemented by the United States or addressed by China, result in a trade war with China, or will they provide leverage in future negotiations with China on these and possibly other trade issues?

Cuba
President Trump Comments on Trade in State of the Union Address

1/31/18 – In a lengthy State of the Union address, President Trump covered many issues and highlighted his administration’s achievements over the past year in claiming a “new American moment.” On international trade matters, Trump broke no new ground in reiterating his administration’s position that it will promote only “free, fair and reciprocal trade.” In his opening remarks on trade, the president stated that “America has also finally turned the page on decades of unfair trade deals that sacrificed our prosperity and shipped away our companies, our jobs, and our Nation’s wealth. The era of economic surrender is over.” While not mentioning any specific trade agreements, he indicated that his administration will continue to work to “fix bad trade deals and negotiate new ones.” Trump noted increased sanctions on Cuba and Venezuela while again urging Congress to address what he views as “fundamental flaws in the terrible Iran nuclear deal.”

While he did not specifically address the numerous trade actions currently pending (i.e., Sections 201, 232 and 301 investigations), the president appeared to reference the ongoing Section 301 investigation against China regarding that country’s intellectual property and technology transfer policies and practices when he said, “We will protect American workers and American intellectual property through strong enforcement of our trade rules.” Many trade policy experts took that statement as a signal the U.S. government will be announcing and implementing remedies soon in response to the Section 301 investigation. Overall, President Trump’s comments were a reaffirmation of his administration’s now well-known positions on trade negotiations and enforcement.

In conjunction with the address, the White House released a Fact Sheet providing details on the various trade achievements from President Trump’s first year in office.

Commerce, State and Treasury Implement Changes to Cuba Sanctions Policy

11/14/17 – The Office of Foreign Assets Control (OFAC) at the Department of the Treasury and the Bureau of Industry and Security (BIS) at the Department of Commerce have announced amendments to the Cuban Assets Control Regulations and Export Administration Regulations, respectively, to implement changes to the Cuba sanctions program announced by President Trump in June 2017 with the issuance of the National Security Presidential Memorandum on Strengthening the Policy of the United States Toward Cuba (NSPM). See our June 20, 2017 update for background information. These changes, in effect as of November 9, 2017, roll back many of the initiatives and regulatory changes implemented by former President Obama in seeking to normalize relations with Cuba. In announcing these changes, Treasury Secretary Steven Mnuchin stated, “We have strengthened our Cuba policies to channel economic activity away from the Cuban military and to encourage the government to move toward greater political and economic freedom for the Cuban people.” The State Department has also released a list of entities under the control of, or acting for or on behalf of, the Cuban military, intelligence, or security services or personnel with which direct financial transactions are now prohibited “as it would disproportionately benefit such services or personnel at the expense of the Cuban people or private enterprise in Cuba.”

These revised regulations include:

  1. Persons subject to U.S. jurisdiction are prohibited from engaging in certain direct financial transactions with entities identified by the State Department on the Cuba Restricted List. Certain transactions will be excluded from this prohibition pursuant to exceptions detailed in the NSPM.
  2. BIS has established a general policy of denial for license applications to export items for use by entities on the Cuba Restricted List, unless the transaction is otherwise consistent with the NSPM.
  3. While announcing that the United States continues to maintain a comprehensive embargo on trade with Cuba, BIS has amended its licensing policy for Cuba and portions of three license exceptions available for exports and reexports to Cuba: License Exceptions Gift Parcels and Humanitarian Donations, Consumer Communications Devices and Support for the Cuban People (SCP).
  4. Under the SCP license exception, OFAC will require that each traveler engage in a full-time schedule of activities that result in meaningful interaction with individuals in Cuba. Such activities must enhance contact with the Cuban people, support civil society in Cuba or promote the Cuban people's independence from Cuban authorities.
  5. OFAC has revised and expanded the definition of the term “prohibited officials of the Government of Cuba.”

More detailed information regarding these regulatory changes is available:

President Trump Announces New Cuba Policy

6/20/17 – After several months of internal review, the Trump administration on June 16 announced revisions to U.S. policy toward Cuba. The internal review, led by the president’s National Security Council, engaged in an interagency review that included input from the Treasury Department, State Department, Commerce Department, Department of Agriculture, Department of Homeland Security and the Department of Transportation. Additionally, President Trump met with members of Congress. In making the announcement, a senior administration official stated that the president’s “basic policy driver was his concern that the previous policy was enriching the Cuban military and the intelligence services that contribute so much to oppression on the island. And that's the opposite of what he wanted to achieve, which is to have the benefits of any economic commerce with the United States go to the Cuban people.”

One White House senior official acknowledged that all the regulatory and policy changes initiated by President Obama from December 2014 through 2016 would be difficult to undo; however, the revised policy under the Trump administration will once again restrict certain travel and seek to limit providing any advantages to the Cuban military (particularly the Cuban military monopoly, Grupo de Administración Empresarial) while seeking to continue to allow “American individuals and entities to develop economic ties to the private, small business sector in Cuba.” The Office of Foreign Assets Control (OFAC), the Bureau of Industry and Security (BIS) and the State Department are expected to update their lists of denied parties within the next 30 days. OFAC and BIS will also issue new regulations within that time to implement these policy changes. The president’s new policy will not become effective until those regulations are issued. The U.S. embassy in Havana will remain open, and Cuba will be allowed to maintain its embassy in Washington.

The policy clarifies that any further improvements in the United States-Cuba relationship will “depend entirely on the Cuban government’s willingness to improve the lives of the Cuban people, including through promoting the rule of law, respecting human rights, and taking concrete steps to foster political and economic freedoms.”

As further details on the regulatory changes that will be implemented to address these policies become available, Thompson Hine’s International Trade practice group will follow up with a detailed client bulletin. View the “National Security Presidential Memorandum on Strengthening the Policy of the United States Toward Cuba.”

Congressional Republicans Urge President Trump Not to Reverse Course on Cuba

6/12/17 – Groups of Senate and House Republicans have sent letters to President Trump urging him not to reverse Obama administration policies that began to relax longstanding economic sanctions and open up the country for limited trade. Seven House Republicans wrote President Trump stating, “Reversing course would incentivize Cuba to once again become dependent on countries like Russia and China. Allowing this to happen could have disastrous results for the security of the United States.” The letter also argued that reversing course would “threaten” efforts to combat human trafficking, illicit drug trade, cybercrime and fraud identification. Reps. Tom Emmer (MN), Rick Crawford (AR), Ted Poe (TX), Darin LaHood (IL), Roger Marshall (KS), James Comer (KY) and Jack Bergman (MI) signed that letter.

Similarly, Republican Senators John Boozman (AR), Mike Enzi (WY) and Jeff Flake (AZ) wrote to Secretary of State Rex Tillerson and National Security Adviser H.R. McMaster to “strongly urge you to weigh carefully any rollback of policies that would endanger” benefits such as the growth in Cuban entrepreneurs, expanded opportunity for U.S. businesses and the national security benefit of preventing the island nation from becoming “a client state of nations that view US interests as counter to their own.”

It is expected that during a trip to Miami, Florida later this week, President Trump will announce the results of his administration’s inter-agency review of existing Cuba policy. Many reports are indicating that he may tighten some restrictions on travel and business activities.

Background

Donald Trump's position on Cuba changed drastically over the course of the presidential campaign, rendering it difficult to predict what his Cuban policy will be now that he is president. During the primaries, Trump broke ranks with other Republicans, stating that he supported President Obama's decision to re-engage diplomatically with Cuba. Then, in the final days of the campaign, and while stumping in Florida, Trump described President Obama's move to normalize relations with Cuba as a "very weak agreement" and, while Trump thought that an agreement was fine, he "would do whatever is necessary to get a good agreement." After Fidel Castro’s death, however, Trump repeated his threat to reverse Obama's decision to reopen diplomatic and commercial relations with Cuba if Cuba is unwilling to make a better deal. Those who support the recent changes in U.S. policy toward Cuba hope that these latest comments are merely nods to Cuban-American supporters in Florida. After all, Trump is a businessman who, at one time, controlled a company that considered a business opportunity in Cuba. Only time will tell if President Trump will actually roll back any of the recent changes adopted under the Obama administration.

For more information on the normalization of relations with Cuba under the Obama administration, please see our Cuba publications.

Enforcement
Trump Nominates Two Individuals for U.S. International Trade Commission

10/2/17 – President Trump has made further nominations to the U.S. International Trade Commission (ITC), an independent, quasi-judicial federal agency with broad investigative responsibilities on matters of trade. The agency investigates the effects of dumped and subsidized imports on domestic industries and conducts global safeguard investigations. The ITC also adjudicates cases involving imports that allegedly infringe intellectual property rights.

The ITC is led by six commissioners who are nominated by the president and confirmed by the U.S. Senate. No more than three commissioners may be of any one political party. Currently, there are only four commissioners, with several serving beyond their original terms of nine years. To date, the president has nominated the following persons:

Dennis M. Devaney has been nominated for the remainder of a nine-year term expiring June 16, 2023. Devaney is currently practice team leader and counsel with the Varnum law firm. He earned his B.A. and M.A. from the University of Maryland in 1968 and 1970, respectively. He received his law degree from Georgetown University Law Center in 1975. From 1970 to 1972, he served on active duty with the U.S. Naval Security Group.

Randolph J. Stayin has been nominated for the remainder of a nine-year term expiring June 16, 2026. Stayin was born and raised in Cincinnati, Ohio. He graduated from Dartmouth College and received a law degree from the University of Cincinnati Law School. He served as chief of staff to Senator Robert Taft, Jr. and was the senator’s trade advisor in negotiating the passage of the Trade Act of 1974. Stayin’s 40+ years in the practice of law have focused on international trade policy and trade regulation. He has litigated antidumping and countervailing duty investigations, sunset reviews, trademark infringement, 301 unfair trade practices, 201 safeguards, 232 national security, Generalized System of Preferences, export regulation, trade sanctions, anti-boycott issues and U.S. Customs enforcement. He has practiced before the ITC, the U.S. Department of Commerce, the Office of the U.S. Trade Representative, the Court of International Trade, the Court of Appeals for the Federal Circuit, NAFTA dispute panels, and NAFTA and Uruguay Round/WTO negotiations.

These two nominations are in addition to the nomination of Jason Kearns in June 2017 for the remainder of a nine-year term expiring December 16, 2024. Kearns currently serves as chief international trade counsel (Democratic staff) to the Committee on Ways and Means in the House of Representatives. In that position, he advises members on legislation concerning trade and on oversight issues involving the Office of the U.S. Trade Representative and other agencies involved in international trade policy and regulation. Before that, he served for three years in the Office of the General Counsel of the U.S. Trade Representative. From 2000 through 2003, Kearns worked in the international trade group of the law firm, WilmerHale. Kearns holds a M.P.P. from the Kennedy School of Government at Harvard University, a J.D. from the University of Pennsylvania and a B.A. from the University of Denver.

Executive Order Calls for Omnibus Report on Significant Trade Deficits

4/3/17 – President Trump signed an executive order on March 31 requiring that the secretary of Commerce prepare and submit a report that examines the causes of trade deficits within 90 days (i.e., by June 29, 2017). The analysis will focus on the major causes of trade deficits, including, as applicable, differential tariffs, non-tariff barriers, injurious dumping, injurious government subsidization, intellectual property theft, forced technology transfer, denial of worker rights and labor standards, and any other form of discrimination against the commerce of the United States or other factors contributing to the deficit. The report will also assess the effects of trade relationships on the production capacity and strength of the manufacturing and defense industrial bases of the United States and on employment and wage growth in the United States, and identify imports and trade practices that may be impairing the national security of the United States.

In signing the order, the president stated that he was “ordering the first-ever comprehensive review of America’s trade deficits and all violations of trade rules that harm the United States and the workers of the United States.” The executive order states that “For many years, the United States has not obtained the full scope of benefits anticipated under a number of international trade agreements or from participating in the World Trade Organization. The United States[’] annual trade deficit in goods exceeds $700 billion, and the overall trade deficit exceeded $500 billion in 2016.” In announcing the order, President Trump stated that, “We're going to investigate all trade abuses, and, based on those findings, we will take necessary and lawful action to end those many abuses.”

Secretary of Commerce Wilbur Ross has indicated that the study will focus on the countries primarily responsible for the U.S. trade deficit: China, Japan, Germany, Mexico, Ireland, Vietnam, Italy, South Korea, Malaysia, India, Thailand, France, Switzerland, Taiwan, Indonesia and Canada.

Executive Order Directs Homeland Security to Develop Plan to Collect Unpaid Tariffs

4/3/17 – Asserting that importers who evade antidumping and countervailing duties in place against them expose U.S. employers to unfair competition and deprive the U.S. government of lawful revenue, President Trump signed an executive order, “Establishing Enhanced Collection and Enforcement of Antidumping and Countervailing Duties and Violations of Trade and Customs Laws,” on March 31. The order directs the secretary of Homeland Security, in consultation with the secretary of the Treasury, the secretary of Commerce and the United States trade representative, to develop an implementation plan by June 29, 2017 that would (1) require covered importers (those who, based on a risk assessment conducted by Customs and Border Protection, pose a risk to the revenue of the United States) to provide security for antidumping and countervailing duty liability through bonds and other legal measures, and (2) identify other appropriate enforcement measures.

According to the order, $2.3 billion in antidumping and countervailing duties owed to the government remained uncollected as of May 2015. President Trump stated, “I'm signing [this] executive order to ensure that we fully collect all duties imposed on foreign importers that cheat. They're cheaters. From now on, those who break the rules will face the consequences – and they'll be very severe consequences.”

Background

Before his inauguration, President Trump stated that he intends to increase trade enforcement measures against countries and specific companies that he believes are harming U.S. interests at home and abroad. His recommendations targeting offending countries include:

  1. identifying violations of trade agreements and using applicable remedies to address such trade abuses;
  2. bringing trade cases against China – whether in the United States or at the World Trade Organization (WTO);
  3. applying tariffs under Section 201 and 301 of the Trade Act of 1974 and Section 232 of the Trade Expansion Act of 1962;
  4. placing a 45 percent tariff on all goods from China and a 35 percent tariff on goods from Mexico, which would upend the North American Free Trade Agreement (NAFTA); and
  5. increasing economic sanctions against certain countries like Cuba, Syria and Iran.

President Trump has also repeatedly stated that he would place import tariffs as high as 35 percent on U.S. companies that participate in offshore manufacturing and impose a 15 percent tax on U.S. companies that outsource jobs.

FTAs
President Trump Requests Extension of Trade Promotion Authority

3/21/18 – As expected, President Trump has formally requested from Congress a three-year extension of Trade Promotion Authority (TPA) pursuant to the Bipartisan Congressional Trade Priorities and Accountability Act of 2015. In requesting the extension of TPA, which is due to expire July 1, 2018, the president noted, “Extension of trade authorities procedures is essential to fulfill that task and to demonstrate to our trading partners that my Administration and the Congress share a common goal when it comes to trade.” In his Presidential Message to Congress seeking TPA renewal, the president stated that his administration “has launched a new era in American trade policy, driven by a determination to use the leverage available to us as the world’s largest economy to open foreign markets, and to obtain more efficient global markets and fairer treatment for American workers. One of the major pillars supporting my trade policy is the pursuit of better trade deals.”

TPA, also referred to as “fast track authority,” is the process that allows the president to negotiate certain international trade agreements that Congress will consider for approval under expedited legislative procedures, provided the president observes certain statutory obligations. TPA defines how Congress has chosen to exercise its constitutional authority over a particular aspect of trade policy, while giving the president added leverage to negotiate trade agreements by effectively assuring U.S. trade partners that final agreements will be given timely and unamended consideration.

Republican Senators Urge President to Re-Engage in TPP Negotiations

2/21/18 – Twenty-five Republican senators authored a letter to President Trump encouraging his administration to re-engage in Trans-Pacific Partnership (TPP) free trade agreement discussions, which he abandoned shortly after taking office in January 2017. Despite the withdrawal of the United States from TPP negotiations, the remaining 11 countries continued negotiating the newly approved Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which is scheduled to be signed by its member countries March 8. This prompted a recent statement by President Trump that he may be interested in the multilateral deal if it could be made “substantially better.”

The senators urged the president to prioritize TPP engagement since increased economic engagement with the involved countries “has the potential to substantially improve the competitiveness of U.S. businesses, support millions of U.S. jobs, increase U.S. exports, increase wages, fully unleash America’s energy potential, and benefit consumers.” In addition, the letter highlights the senators’ belief that re-engaging in TPP discussions can serve as a counter-balance to China’s influence in the region and as another platform to address and modernize trade with Canada and Mexico, which are parties to the CPTPP.

TPP Members Reach Agreement on Major Trade Pact

1/23/18 – Toshimitsu Motegi, the Japanese government official in charge of Trans-Pacific Partnership (TPP) negotiations, announced today that the 11 countries still participating in the negotiations had agreed on a newly revised TPP, which will now be called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). This resolution followed last-minute objections from Canada at a TPP summit in Vietnam last November. Motegi said that the 11 nations plan to sign the agreement on March 8 in Chile. President Donald Trump withdrew the United States from the original TPP deal on his third day in office.

One of Canada’s issues concerned an exemption to protect Canadian cultural products from the effects of free trade. Motegi said that the parties agreed to exchange a side letter with Canada over the issue after the pact goes into effect. It is also reported that Canada secured real gains in labor and environmental standards and the removal of text related to intellectual property.

Motegi called the agreement “epoch-making for Japan as well as for the future of the Asia-Pacific region,” and expressed hope that the United States will rejoin the deal eventually.

United States and South Korea Hold Initial Meeting on Renegotiating Free Trade Agreement

1/8/18 – On January 5, the United States and South Korea held their first meeting to discuss potential renegotiation of the U.S.- South Korea (KORUS) free trade agreement. In addition to discussing procedural and timetable issues, the United States discussed proposals to move toward fair and reciprocal trade in key industrial goods sectors, such as autos and auto parts, and to resolve cross-cutting and sector-specific barriers affecting U.S. exports. South Korea noted its interest in resolving "sensitive issues," including the investor-state dispute settlement (ISDS) clause and trade remedies.

At the conclusion of the negotiating session, Ambassador Robert Lighthizer said, "We have much work to do to reach an agreement that serves the economic interests of the American people. Our goals are clear: we must achieve fair and reciprocal trade between our two nations. We will move forward as expeditiously as possible to achieve this goal."

The United States first announced its intent to seek modifications to KORUS in July 2017. During President Trump's visit to Seoul in November 2017, the two countries agreed to expedite the talks. The U.S. delegation is led by Michael Beeman, Assistant U.S. Trade Representative for Japan, Korea and APEC. South Korea's delegation is led by Myung-hee Yoo, Director General from the Ministry of Trade, Industry and Energy (MOTIE).

Trans-Pacific Partnership Moves Forward Without the United States

11/13/17 – Despite the absence of the United States, the remaining members of the Trans-Pacific Partnership Agreement (TPP), which was originally signed in February 2016, announced that they had reached an agreement on “core elements” of the terms of an agreement, now termed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). While acknowledging that several key issues remain to be negotiated, the trade ministers from the remaining 11 countries issued a joint statement stating that the revised agreement “maintains the high standards, overall balance and integrity of the TPP while ensuring the commercial and other interests of all participants and preserving our inherent right to regulate, including the flexibility of the parties to set legislative and regulatory priorities. Ministers also affirm the right of each party to preserve, develop and implement its cultural policies. Ministers consider that the CPTPP reflects the desire of the parties to implement the TPP outcomes among themselves.”

While the text of the draft CPTPP was not released, an outline was released with the joint statement. Also, several provisions of the original TPP covering state-owned enterprises, services and investment non-confirming measures, dispute settlement and cultural exemptions have, for the moment, been suspended pending further discussions.

President Trump Addresses International Trade in UN Speech

9/20/17 – In his remarks at the opening session of the General Assembly of the United Nations, President Donald Trump spoke on a wide range of topics, including international trade. On that subject, Trump said, “In America, we seek stronger ties of business and trade with all nations of good will, but this trade must be fair and it must be reciprocal. For too long, the American people were told that mammoth multinational trade deals, unaccountable international tribunals, and powerful global bureaucracies were the best way to promote their success. But as those promises flowed, millions of jobs vanished and thousands of factories disappeared. Others gamed the system and broke the rules. And our great middle class, once the bedrock of American prosperity, was forgotten and left behind, but they are forgotten no more and they will never be forgotten again. While America will pursue cooperation and commerce with other nations, we are renewing our commitment to the first duty of every government: the duty of our citizens. This bond is the source of America's strength and that of every responsible nation represented here today.”

Two-Step Process for Negotiating Trade Deals

2/1/17 – On January 31, 2017, the new Trump administration indicated there would be a “two-step process” for negotiating trade deals. White House Press Secretary Sean Spicer stated in a press briefing, “I think, number one, we're going to reexamine all of the current trade deals, figure out if we can re-improve them. But secondly, I think we're going to start talking to other countries around the globe, including some of those TPP partners. I think of the 11 other countries, five of them we have current trade deals with. So you would examine those to see if we can improve upon them and then look at the other countries in there and see if there's a willingness to engage with some of those other countries.” Asked about any potential changes to the roles of official U.S. trade negotiators, Spicer indicated that the “U.S. Trade Representative is clearly the leader of negotiating trade deals.”

Separately, when asked about trade with countries that are parties to the TPP, White House National Trade Council Director Peter Navarro stated that the Trump administration intends to “negotiate bilateral trade deals with every single country that comprised the TPP.”

President Trump Issues Memorandum Directing USTR to Withdraw the United States from Trans-Pacific Partnership

1/24/17 – As one of his first acts in office, on January 23, 2017, President Donald Trump issued a memorandum instructing the U.S. Trade Representative to take the necessary steps to withdraw the United States as a signatory to the Trans-Pacific Partnership (TPP) trade agreement, which was negotiated by President Obama but had yet to enter into force. As a candidate, Trump dubbed TPP “a potential disaster for our country,” and his position remains at odds with many Republican officials and TPP proponents who argue that abandoning the TPP will close off key trade markets in the Asia-Pacific region and “gut” U.S. leadership in this region of the world.

U.S. ratification of the TPP is essentially a precondition for it to come into force. The agreement requires ratification by at least six TPP parties representing 85 percent of the gross domestic product of the original signatories to the deal. With the action taken by the president, the 85 percent threshold cannot be met and TPP as a multilateral trade agreement is likely dead.

The TPP involved 12 nations that cover 40 percent of the global economy, but it was also viewed by many as a way in which the United States could counter-balance the rise of China as an economic influence in southeast Asia. Instead of TPP, President Trump has indicated that his administration will pursue bilateral trade agreements with TPP members with whom the United States does not already have agreements. At a press briefing, White House Press Secretary Sean Spicer stated, “The beautiful thing about a bilateral agreement is that if any one of the two parties in the agreement decides at any time they want to get out of the agreement or they’re not being treated fairly, they can renegotiate it much easier.”

While President Trump has made his position clear regarding the TPP agreement, it remains to be seen what his administration’s overall Asia-Pacific trade policy will be other than to pull the United States out of its TPP commitments.

Background

The Trans-Pacific Partnership (TPP) is a trade agreement signed in February 2016 among 12 Pacific Rim countries – Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam – to remove tariffs, promote trade and establish an investor-state mechanism for resolving disputes.

In both June and October 2016, Donald Trump stated that he would withdraw the United States from the TPP, as part of his “7 Point Plan To Rebuild the American Economy by Fighting for Free Trade” and as part of his plan for his first 100 days in the White House.

U.S. withdrawal from the TPP would destroy the pact because the TPP does not enter into effect until six signatories representing at least 85 percent of the original 12 signatories’ total gross domestic product (GDP) ratify the agreement, and the United States represents nearly 62 percent of the TPP’s GDP.

Iran
President Trump Reluctantly Continues to Waive Nuclear Sanctions on Iran

1/12/18 – President Trump has announced that he will continue to waive nuclear-related sanctions toward Iran despite his misgivings about the multi-party agreement with Iran known as the Joint Comprehensive Plan of Action (JCPOA, or commonly known as the Iran nuclear agreement) and Iran’s continued support for international terrorism, its human rights abuses and its continuing censorship at home. In a White House statement, the president indicated that “I have been very clear about my opinion of that deal. It gave Iran far too much in exchange for far too little.” He added, “Despite my strong inclination, I have not yet withdrawn the United States from the Iran nuclear deal.”* He then briefly identified his conditions for either fixing the agreement or ultimately withdrawing from the JCPOA.

While President Trump will continue to work with Congress on legislation regarding Iran, he indicated that it must have four “critical components”: (1) Iran must allow immediate inspections of potential nuclear sites; (2) Iran can never possess a nuclear weapon; (3) there must be no expiration date prohibiting Iran’s efforts to develop or acquire nuclear weapons under any deal; and (4) Iran’s long-range missile capabilities are inseparable from Iran’s nuclear weapons ambitions and will also be subject to severe sanctions. In closing, the president stated:

“Today, I am waiving the application of certain nuclear sanctions, but only in order to secure our European allies’ agreement to fix the terrible flaws of the Iran nuclear deal. This is a last chance. In the absence of such an agreement, the United States will not again waive sanctions in order to stay in the Iran nuclear deal. And if at any time I judge that such an agreement is not within reach, I will withdraw from the deal immediately. No one should doubt my word. I said I would not certify the nuclear deal—and I did not. I will also follow through on this pledge. I hereby call on key European countries to join with the United States in fixing significant flaws in the deal, countering Iranian aggression, and supporting the Iranian people. If other nations fail to act during this time, I will terminate our deal with Iran. Those who, for whatever reason, choose not to work with us will be siding with the Iranian regime’s nuclear ambitions, and against the people of Iran and the peaceful nations of the world.”

In a later press briefing, White House officials stated that the administration intends to work with European allies for a follow-on agreement that puts in place certain triggers that Iran could not exceed. They stressed that this “would not entail direct negotiations with the Iranians, [sic] this would be something the United States works out with our European partners only. It would be an agreement amongst the United States and our European partners to re-impose multilateral sanctions should the Iranians surpass the new triggers that we would lay out.”

* Under the Iran Nuclear Agreement Review Act, implemented in 2015 at the time of the JCPOA, the president must certify to Congress every 90 days that the suspension of sanctions under the nuclear agreement is warranted and that Iran remains in compliance with its obligations to terminate its illicit nuclear weapons program. In July 2017, Trump reluctantly certified that Iran was in compliance with the terms of the JCPOA (see Trump and Trade Alert of July 18, 2017); however, in October 2017, the president declined to certify that Iran was in compliance with the agreement (see Trump and Trade Alert of October 13, 2017).

OFAC Sanctions Additional Iranian Individuals and Entities for Human Rights Abuses and Support of Weapons Proliferation

1/12/18 – The Department of the Treasury’s Office of Foreign Assets Control (OFAC) has designated 14 individuals and entities for sanctions arising from serious human rights abuses and censorship in Iran and support of designated Iranian weapons proliferators. According to Treasury Secretary Steven T. Mnuchin, “The United States will not stand by while the Iranian regime continues to engage in human rights abuses and injustice. We are targeting the Iranian regime, including the head of Iran’s judiciary, for its appalling mistreatment of its citizens, including those imprisoned solely for exercising their right to freedom of peaceful assembly, and for censoring its own people as they stand up in protest against their government. We are also targeting Iran’s ballistic missile program and destabilizing activities, which it continues to prioritize over the economic well-being of the Iranian people.”

While the majority of these persons and entities are Iranian, several are located in Malaysia and China and have been sanctioned for their support of the Iranian regime. The full list is available on Treasury’s website. This decision is not formally related to an expected Trump administration announcement later today regarding an extension of the relaxation of sanctions on Iran under the Joint Comprehensive Plan of Action (i.e., JCPOA or Iran nuclear agreement) but indicates that the United States will continue to sanction Iran in non-nuclear areas outside the scope of the JCPOA.

President Trump Declines to Certify to Congress That Iran Is in Compliance With the JCPOA

10/13/17 – In brief remarks, President Trump announced that in addition to his administration’s new Iran strategy, he “cannot and will not” certify to Congress that the continued suspension of sanctions against Iran under the Joint Comprehensive Plan of Action (JCPOA) is appropriate. Reiterating his often stated claim that “the Iran Deal was one of the worst and most one-sided transactions the United States has ever entered into,” the president stated that he needed “negotiators who will much more strongly represent America’s interest.” The president added that, “Since the signing of the nuclear agreement, the regime’s dangerous aggression has only escalated. At the same time, it has received massive sanctions relief while continuing to develop its missiles program. Iran has also entered into lucrative business contracts with other parties to the agreement.”

Arguing that he will not “continue down a path whose predictable conclusion is more violence, more terror, and the very real threat of Iran’s nuclear breakout,” President Trump directed his administration to work with Congress and allies “to address the deal’s many serious flaws so that the Iranian regime can never threaten the world with nuclear weapons.” He added that should a solution not be reachable, “then the agreement will be terminated. It is under continuous review, and our participation can be cancelled by me, as President, at any time.”

President Trump’s “New Strategy on Iran” and Congressional Developments

10/13/17 – After a nine-month review, consultations with his national security staff and discussions with members of Congress, President Trump has announced a new U.S. strategy on relations with Iran. In a statement, the White House announced that the “new Iran strategy focuses on neutralizing the Government of Iran’s destabilizing influence and constraining its aggression, particularly its support for terrorism and militants.” While not providing specifics, the announcement indicated that the United States would work to deny Iran, and particularly the Islamic Revolutionary Guard Corps (IRGC), funding; counter Iran’s efforts to develop its ballistic missiles and other asymmetric weapons capabilities; and “deny the Iranian regime all paths to a nuclear weapon.”

Regarding the Joint Comprehensive Plan of Action (JCPOA), Trump stated that Iran’s “activities severely undercut whatever positive contributions to ‘regional and international peace and security’ [the JCPOA] sought to achieve,” adding that Iranian officials have sought to “exploit loopholes and test the international community’s resolve.” While not yet making a full statement on whether he will refuse to re-certify to Congress Iranian compliance under the JCPOA, which must be done by October 15, 2017, Trump clearly indicated that current Iranian behavior cannot be tolerated and that “the deal must be strictly enforced, and the IAEA must fully utilize its inspection authorities.”

Congressional Activity on Iran

On October 12, 2017, the House Foreign Affairs Committee, chaired by Rep. Ed Royce (R-CA), passed the Iran Ballistic Missiles and International Sanctions Enforcement Act (HR 1698). The legislation seeks to expand sanctions against Iran for its continuing efforts to develop intercontinental ballistic missile capabilities. In remarks prior to the committee markup of HR 1698, Chairman Royce stated, “As flawed as the [JCPOA] deal is, I believe we must now enforce the hell out of it. Let’s work with allies to make certain that international inspectors have better access to possible nuclear sites, and we should address the fundamental sunset shortcoming, as our allies have recognized.” Committee member statements, witness testimony and a webcast of the October 11, 2017 hearing on the legislation are available on the House Foreign Affairs Committee’s website. The legislation currently has 320 cosponsors in the House of Representatives. HR 1698 will next be reported to the full House for further debate and consideration.

In the Senate, on October 13, 2017, Senators Bob Corker (R-TN) and Tom Cotton (R-AK) announced their intention to introduce legislation to amend the Iran Nuclear Agreement Review Act of 2015 (Public Law No. 114-17), to address certain provisions in the JCPOA, particularly an elimination of the deal’s sunset on limitations placed on Iran’s future development of any nuclear program. The legislation, which has not yet been formally introduced, would penalize Iran if it fails to abide by guidelines related to centrifuge research and development. Ultimately, under the proposed restrictions in the legislation, any violations by Iran could result in the reinstatement of U.S. sanctions, especially if it were to come within a year of gaining nuclear capability.

President Trump Reportedly to Refuse Certifying Iran's Compliance with JCPOA

10/6/17 – The White House has acknowledged that while no decision is final, President Trump is likely to decline to recertify that Iran is in compliance with the terms of the Joint Comprehensive Plan of Action (JCPOA), which is more commonly known as the Iran nuclear deal. Trump is expected to publicly announce his position on the JCPOA and an overall strategy toward Iran next week; any final determination must be issued by October 15, 2017. Until then, the TrumpandTrade.com team offers this summary of the 2015 law that would be triggered should Trump not recertify to Congress that Iran is in compliance with the JCPOA.

Under the Iran Nuclear Agreement Review Act of 2015 (Public Law No. 114-17), the president must submit to Congress every 90 days a compliance certification indicating that (1) Iran is fully implementing the terms of the JCPOA, (2) it has not committed a material breach, (3) it has taken no actions to advance its nuclear weapons program, and (4) the suspension of sanctions remains warranted. Under this law, there are clear and detailed provisions pertaining to congressional oversight of Iranian compliance under the JCPOA should the president not submit a certification of Iran's compliance. Subsection (e) of the law provides for expedited consideration of "qualifying legislation" introduced within 60 calendar days of the date when the president does not submit a certification stating Iran is in compliance with the JCPOA.

The term "qualifying legislation" is defined to mean only a bill that (1) is titled, "A bill reinstating statutory sanctions imposed with respect to Iran” and (2) states, after the enacting clause, "Any statutory sanctions imposed with respect to Iran pursuant to __________ that were waived, suspended, reduced, or otherwise relieved pursuant to an agreement submitted pursuant to section 135(a) of the Atomic Energy Act of 1954 are hereby reinstated and any action by the United States Government to facilitate the release of funds or assets to Iran pursuant to such agreement, or provide any further waiver, suspension, reduction, or other relief pursuant to such agreement is hereby prohibited," with the blank space filled with the law or laws under which sanctions are to be reinstated. Such qualifying legislation must be introduced in the House by either the majority leader or minority leader or in the Senate by the majority leader or minority leader (or one of their designees).

Any such legislation is to receive expedited consideration; if any committee to which the bill has been referred has not reported out the bill within 10 legislative days, that committee will no longer have oversight of the bill. Each chamber (House and Senate) has slightly different rules under the law in which to consider any bill. In the House, all points of order against any qualifying legislation are waived as are any motions against its consideration; two hours of debate are allowed; and no motions for reconsideration will be allowed. In the Senate, all points of order pertaining to any qualifying legislation are also waived; no motions to postpone or reconsider will be allowed, but certain (undefined) debatable motions and appeals can be considered; 10 hours of debate are allowed; and no motion to recommit will be allowed. If one chamber does not introduced qualifying legislation and the other chamber considers and passes such legislation, that bill once passed over to the other chamber must be considered under the expedited procedures (as previously discussed) under this law.

Stay tuned …

Iran Sanctions: U.S. Agencies Continue to Implement Processes for Identifying Potentially Sanctionable Entities

9/29/17 – Under the Joint Comprehensive Plan of Action (JCPOA), the United States and several other countries agreed to ease certain sanctions on Iran in exchange for Iran’s commitment to limit its nuclear program. This relaxation, however, was limited in scope to any nuclear-related sanctions, and the United States and other parties to the JCPOA continue to have the authority to sanction Iran for any activity related to efforts to further develop its ballistic missile program. The United States may continue to sanction Iran for such activity under Executive Orders 12938 and 13382, and the Departments of State and Treasury continue their efforts to identify sanctionable entities.

The Government Accountability Office released a report September on 28, 2017 examining (1) the extent to which State and Treasury have continued since issuance of the JCPOA to identify entities that are potentially sanctionable and (2) entities that have actually been sanctioned since January 2016. According to the report, State and Treasury have placed 33 entities and 25 individuals on the Specially Designated Nationals List since January 2016.

President Trump Signs Into Law H.R. 3364 Regarding Sanctions Against Iran, Russia and North Korea

8/2/17 – Today, President Trump signed into law the Countering America’s Adversaries Through Sanctions Act, which strengthens and expands statutory sanctions on Iran, Russia and North Korea. In a statement released by the White House, the president said, “I favor tough measures to punish and deter bad behavior by the rogue regimes in Tehran and Pyongyang. I also support making clear that America will not tolerate interference in our democratic process, and that we will side with our allies and friends against Russian subversion and destabilization.” The statement goes on to say that “the bill remains seriously flawed – particularly because it encroaches on the executive branch’s authority to negotiate.”

In a separate statement issued the same day, the president again asserted that the legislation “is significantly flawed,” stating that, “In its haste to pass this legislation, the Congress included a number of clearly unconstitutional provisions.”

See our July 26th update below for additional background information.

House Passes Bill for Additional Sanctions Against Iran, Russia and North Korea

7/26/17 – On July 25, the House of Representatives passed legislation that would impose additional sanctions on Iran, North Korea and Russia. The bill would increase sanctions on those involved in Iran’s human rights abuses, its support for terrorism, as well as its ballistic missile program. For Russia, the bill would ensure that existing economic sanctions remain as long as Russian aggression continues by empowering Congress to review and disapprove any sanctions relief that the president may seek. The bill also includes the text of H.R. 1644, The Korean Interdiction and Modernization of Sanctions Act, which was passed by the House in May by a vote of 419-1, and seeks to expand sanctions targeting North Korea’s nuclear weapons program.

As noted in a previous post, the Senate has also passed legislation (S. 722) to implement additional sanctions on Iran and Russia; the Senate bill does not contain provisions on North Korea sanctions. Because different bills were passed in each chamber and the House bill included additional sanctions against North Korea, it is expected that the Senate will take up consideration of H.R. 3364 for any final vote. Interestingly, given President Trump’s perceived ambivalence on the Ukraine-related Russia sanctions, the votes for passage by each chamber – 419 to 3 in the House and 98-2 in the Senate – likely make any passage of a final bill veto-proof.

OFAC and State Department Sanction 18 Additional Iranian Entities/Persons

7/18/17 – Almost immediately after the Trump administration’s announcement that Iran was in compliance with the terms of the Joint Comprehensive Plan of Action (JCPOA), the Department of the Treasury’s Office of Foreign Assets Control (OFAC) and the State Department designated an additional 18 Iranian entities and individuals for engaging in activities supporting Iran’s continued testing of ballistic missiles, as well as for engaging in activities supporting Iran’s military or Iran’s Islamic Revolutionary Guard Corps (IRGC).

OFAC has designated three networks supporting Iran’s military and/or the IRGC through the development of unmanned aerial vehicles and military equipment for the IRGC, the production and maintenance of fast attack boats for the IRGC-Navy, or the procurement of electronic components for entities that support Iran’s military. Additional persons and entities were added to OFAC’s Specially Designated Nationals List for Iran-based transnational criminal organization activities, including the theft of U.S. and western software programs which, at times, were sold to the Iranian government. A complete listing of OFAC designations is available on Treasury’s website.

The State Department designated two entities for engaging in activities that have materially contributed to, or pose a risk of materially contributing to, the proliferation of weapons of mass destruction or their means of delivery: the IRGC’s Aerospace Force Self Sufficiency Jihad Organization, which is involved in Iranian ballistic missile research and flight test launches, and the IRGC’s Research and Self Sufficiency Jehad Organization, which is responsible for the research and development of ballistic missiles.

The State Department stated that Iran continues to test and develop ballistic missiles in direct defiance of United Nations Security Council Resolution 2231, and referred to the JCPOA’s statement regarding the participants’ anticipation that “full implementation of this JCPOA will positively contribute to regional and international peace and security.” In announcing these new sanctions, however, State Department officials stated that “Iran’s other malign activities are serving to undercut whatever ‘positive contributions’ to regional and international peace and security were intended to emerge from the JCPOA.” In announcing these new sanctions, the Trump administration stated that it is continuing to conduct a full review of U.S. policy toward Iran and that the United States during this review will continue to aggressively counter Iran’s activities in the region.

Trump Administration Again Certifies that Iran Is in Compliance With JCPOA Terms

7/18/17 – The Trump administration has again certified that Iran is in compliance with the terms of the Joint Comprehensive Plan of Action (JCPOA), an international agreement to curtail Iran’s development of nuclear weapons. This certification to Congress must occur every 90 days and followed confirmation by the international monitors and other signatories to the JCPOA that Iran is meeting the terms of the agreement. Reports are, however, that President Trump begrudgingly agreed to the certification after multiple meetings with his national security staff and is demanding that his staff develop a new strategy to confront Iran because he does not want to continue to indefinitely recertify Iran’s compliance.

In making the announcement, State Department officials noted that President Trump intends to impose new sanctions on Iran for ongoing “malign activities” in non-nuclear areas such as ballistic missile development and support for terrorism. “We do expect to be implementing new sanctions” related to missiles and Iran's “fast boat program,” one State Department official indicated.

Senate Passes Bill for Additional Sanctions Against Iran and Russia

6/19/17 – After several months of negotiations in the Committee on Foreign Relations, the full Senate on June 15, 2017 considered and passed a bipartisan bill by a vote of 98-2 seeking to hold both Iran and Russia accountable for their recent destabilizing activities in world affairs. S. 722 at Title I contains the Iran component of the legislation and was authored by Senators Corker (R-Tenn.), Menendez (D-N.J.), Rubio (R-Fla.), Cardin (D-Md.), Cotton (R-Ark.) and Casey (D-Pa.). It expands sanctions on Iran for ballistic missile development, support for terrorism, transfers of conventional weapons and human rights violations. The Countering Iran’s Destabilizing Activities Act of 2017 contains the following key provisions:

  • New mandatory ballistic missile sanctions: imposes mandatory sanctions on persons involved with Iran’s ballistic missile program and those that transact with them.
  • New terrorism sanctions: applies terrorism sanctions to the Islamic Revolutionary Guard Corps and codifies individuals who are currently sanctioned due to Iranian support for terrorism.
  • Enforcement of arms embargo: requires the president to block the property of any person or entity involved in specific activities related to the supply, sale, or transfer of prohibited arms and related material to or from Iran.

The text of Title II of S. 722 maintains and substantially expands sanctions against the government of Russia in response to the violation of the territorial integrity of the Ukraine and Crimea, its cyber-attacks and interference in elections, and its continuing aggression in Syria. This portion of the bill will:

  • Provide for a mandated congressional review if sanctions are relaxed, suspended or terminated.
  • Codify and strengthen existing sanctions contained in executive orders on Russia, including the sanctions’ impact on certain Russian energy projects and on debt financing in key economic sectors.
  • Impose new sanctions on: corrupt Russian actors; those seeking to evade sanctions; those involved in serious human rights abuses; those supplying weapons to the Assad regime; those conducting malicious cyber activity on behalf of the Russian government; those involved in corrupt privatization of state-owned assets; and those doing business with the Russian intelligence and defense sectors.
  • Allow broad new sanctions on key sectors of Russia’s economy, including mining, metals, shipping and railways.
  • Require a study on the flow of illicit finance involving Russia and a formal assessment of U.S. economic exposure to Russian state-owned entities.

S. 722 will shortly cross over to the House of Representatives, where it will be assigned to the appropriate committee(s) for consideration. As such, this legislation, while significant, is not yet a law.

Iran’s President Hassan Rouhani Wins Re-Election

5/22/17 – Press reports have confirmed that Iran’s president Hassan Rouhani, a moderate who negotiated the joint nuclear deal and who has sought more positive relationships with western powers, won re-election over the hard-right conservative challenger, cleric Ebrahim Raisi. Rouhani reportedly received 57 percent of the vote to Raisi’s 38.5 percent, with the remaining votes split among other minor candidates. While this result is being viewed by many as a positive outcome for Iran’s ongoing efforts to engage with the rest of the world, it remains to be seen if Iran’s Supreme Leader Ayatollah Ali Khamenei, who has final say over all state issues and limits the president's power, will limit any further efforts by Rouhani in this area. In response to the election results, U.S. Secretary of State Rex Tillerson stated:

“What we hope – what I would hope – is that Rouhani now has a new term, and that he use that term to begin a process of dismantling Iran’s network of terrorism, dismantling its financing of the terrorist network, dismantling of the manning and the logistics and everything that they provide to these destabilizing forces that exist in this region. That’s what we hope he does. We also hope that he puts an end to [Iran’s] ballistic missile testing. We also hope that he restores the rights of Iranians to freedom of speech, to freedom of organization, so that Iranians can live the life that they deserve. That’s what we hope this election will bring. I’m not going to comment on my expectation. But we hope that if Rouhani wanted to change Iran’s relationship with the rest of the world, those are the things he could do.”

Trump Administration Continues Waiver of Nuclear-Related Sanctions on Iran, Sanctions Iranian Officials for Ballistic Missile Program

5/18/17 – The Trump administration has renewed a necessary waiver regarding U.S. sanctions on Iran’s crude oil exports. This will allow Iran to continue to sell its oil in the international market despite existing U.S. sanctions that must be periodically waived under the terms of the 2015 nuclear deal with Iran.

The Treasury Department’s Office of Foreign Assets Control (OFAC), however, has placed two senior Iranian defense officials on OFAC’s Specially Designated Nationals (SDN) List for their involvement in Iran's solid-fueled ballistic missile program. Morteza Farasatpour, a senior defense official with Iran's Defense Industries Organization (DIO) and Rahim Ahmadi, a senior official serving as the Director of Iran's Shahid Bakeri Industries Group (SBIG), along with Iran-based company Matin Sanat Nik Andishan, have been placed on the SDN List for activities in support of Iran's ballistic missile program.

These actions were taken in conjunction with the State Department’s release of its semi-annual report to Congress detailing sanctions imposed on persons responsible for or complicit in human rights abuses committed against citizens of Iran or their family members.

As a reminder to our readers, on Friday, May 19, Iran will hold its presidential vote that could also have a major impact on the status of the nuclear deal. Current President Hassan Rouhani, considered a moderate who oversaw the negotiation and implementation of the nuclear deal, is running for re-election. While he faces competition from several other candidates, his principal challenger is hardline conservative cleric Ebrahim Raisi.

Trump Administration Undergoing Interagency Review of Iran Deal

4/20/17 – On April 18, 2017, the U.S. Department of State certified to House Speaker Paul Ryan that Iran is compliant through April 18th with its commitments under the Joint Comprehensive Plan of Action (JCPOA). However, Secretary Tillerson raised concerns about Iran's role as a state sponsor of terrorism and alerted Congress to an effort directed by the president to evaluate whether continuing to lift sanctions would be in U.S. national security interests.

"Iran remains a leading state sponsor of terror, through many platforms and methods. President Donald J. Trump has directed a National Security Council-led interagency review of the Joint Comprehensive Plan of Action that will evaluate whether suspension of sanctions related to Iran pursuant to the JCPOA is vital to the national security interests of the United States."

In further comments after releasing the letter, the secretary strongly rebuked the deal, stating that, "This deal represents the same failed approach of the past." He added that it ''fails to achieve the objective of a non-nuclear Iran'' and ''only delays their goal of becoming a nuclear state.''

The full text of the letter:

The Honorable Paul D. Ryan
Speaker of the House of Representatives
Washington, DC 20515

Dear Mr. Speaker:

This letter certifies that the conditions of Section 135(d)(6) of the Atomic Energy Act of 1954 (AEA), as amended, including as amended by the Iran Nuclear Agreement Review Act of 2015 (Public Law 114-17), enacted May 22, 2015, are met as of April 18, 2017.

Notwithstanding, Iran remains a leading state sponsor of terror through many platforms and methods. President Donald J. Trump has directed a National Security Council-led interagency review of the Joint Comprehensive Plan of Action (JCPOA) that will evaluate whether suspension of sanctions related to Iran pursuant to the JCPOA is vital to the national security interests of the United States. When the interagency review is completed, the administration looks forward to working with Congress on this issue.

Sincerely,

Rex W. Tillerson

Iran Retaliates for Ballistic Missile Sanctions Implemented in February by President Trump

3/27/17 – In retaliation for restrictions that the Trump administration imposed on companies and people connected with Iran’s ballistic missile program (see our previous update on this topic), Iran has imposed sanctions on 15 U.S. companies for alleged human rights violations and cooperation with Israel. Iran's foreign ministry stated that the companies had "flagrantly violated human rights" and cooperated with Israel in its "terrorism" against the Palestinians and the expansion of Jewish settlements. It is not immediately clear if any of these U.S. companies actually have any dealings with Iran or whether they would be affected in any way by this action, which includes seizure of their assets and a ban on contacts with them.

ZTE Pleads Guilty to Illegal Exports to Iran and North Korea

3/9/17 – On March 7, 2017, Zhongxing Telecommunications Equipment Corporation and ZTE Kangxun Telecommunications Ltd., known collectively as “ZTE,” agreed to combined civil and criminal penalties of $1.19 billion for the illegal shipment of telecommunications equipment to Iran and North Korea in violation of the Export Administration Regulations (EAR), the Iranian Transactions and Sanctions Regulations (ITSR) and the International Emergency Economic Powers Act (IEEPA). ZTE is one of the world’s largest manufacturers of telecommunications equipment, and relies heavily on U.S. companies and U.S.-origin goods for components. The civil penalty is the largest ever imposed by the Bureau of Industry and Security at the Department of Commerce (BIS) and the Office of Foreign Assets Control at the Department of the Treasury (OFAC), and the combined penalties are the largest fine and forfeiture ever levied by the U.S. government in an export control case.

This investigation and resulting penalties serve as important reminders to both U.S. and foreign companies that there is a steep price to pay for attempting to circumvent U.S. economic sanctions and export control laws and regulations. A robust compliance program with regular training and auditing is essential, as is a commitment from company officials in supporting compliance, in order to avoid this kind of outcome.

While this investigation was initiated prior to President Trump assuming office, the tone of administration officials in announcing this settlement echoes their campaign promise of more forceful trade enforcement. In announcing the settlement, Commerce Secretary Ross stated, “We are putting the world on notice: the games are over. Those who flout our economic sanctions and export control laws will not go unpunished – they will suffer the harshest of consequences. Under President Trump’s leadership, we will be aggressively enforcing strong trade policies with the dual purpose of protecting American national security and protecting American workers.”

Read our full client update on this topic.

Iranian Persons and Entities Designated by OFAC as a Result of Recent Ballistic Missile Tests

2/3/17 – On February 3, 2017, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated 13 individuals and 12 entities for placement on its Specially Designated Nationals (SDN) List. This move comes just days after National Security Advisor Michael Flynn placed Iran “on notice” in response to its recent ballistic missile tests. John Smith, acting director of OFAC, said, “Today’s action is part of Treasury’s ongoing efforts to counter Iranian malign activity abroad that is outside the scope of the JCPOA [Joint Comprehensive Plan of Action]. We will continue to actively apply all available tools, including financial sanctions, to address this behavior.”

Read our full client update on this topic.

Trump Administration Puts Iran “On Notice”

2/2/17 – In response to a recent ballistic missile test conducted by Iran, President Trump’s National Security Advisor Michael Flynn made a brief press statement February 1, 2017, condemning the testing and stating that it is in violation of United Nations Security Council Resolution 2231. Flynn stated that the Obama administration “failed to respond adequately” to Iranian transgressions under the nuclear deal with Iran implemented in January 2016 and noted that President Trump has criticized such agreements “as being weak and ineffective.” Without providing any further details, Flynn announced that the United States was “officially putting Iran on notice.”

Background

On July 14, 2015, the P5+1 (China, France, Germany, Russia, the United Kingdom and the United States), the European Union, and Iran reached a Joint Comprehensive Plan of Action (JCPOA) to ensure that Iran’s nuclear program will be used exclusively for non-military, peaceful means. On January 16, 2016, the JCPOA was formally implemented and certain trade and economic sanctions against Iran were relaxed. From its inception, the deal has had its share of proponents and critics, and was a hot-button issue during the presidential election.

President Trump has been inconsistent in his view of the deal. He originally promised to renegotiate it; eventually, however, he told the American Israel Public Affairs Committee (AIPAC), "My number one priority is to dismantle the disastrous deal with Iran." The deal is not a treaty (requiring Senate ratification) but reflects non-binding commitments by the parties, along with verification measures. If he wanted, Trump could issue executive orders to restore sanctions on Iran and announce that the United States will no longer participate in the JCPOA. Walking away from the deal and reintroducing sanctions will be problematic, however, because the other participants in the deal will likely want to maintain it for both strategic and political reasons.

For more information on the scope of the JCPOA, please see our Iran publications.

NAFTA
Canadian Solar Cell Companies File Suit Against U.S. Tariffs

2/9/18 – As discussed during our recent “Trump and Trade: One Year Later” webinar, 2018 will not only be a year of monitoring continued trade enforcement activities by the Trump administration, but also a year to monitor how affected countries and industries will react to such trade actions. Yesterday’s update noted WTO action by various countries regarding the recent Section 201 global safeguard decisions, and now three Canadian companies that manufacture crystalline silicon photovoltaic cells (i.e., solar cells) have filed a complaint with the U.S. Court of International Trade against the United States and the safeguard measures in the recent Section 201 solar cell cases. The Canadian plaintiffs have claimed that the import tariffs will “inflict severe and irreversible injury” on them when the U.S. International Trade Commission’s injury finding determined that imports from Canada “do not meet the prerequisites for including a NAFTA country in a global safeguard action,” and that imports from Canada do not constitute a “substantial share” of total imports or “contribute importantly to the serious injury, or threat thereof” caused by U.S. solar cell imports. The complaint specifically claims that provisions of the NAFTA Implementation Act bar the president from taking safeguard actions against a NAFTA country. The plaintiffs seek to enjoin the United States from implementing or enforcing the safeguard measures. The case is Silfab Solar Inc., et al. v. United States, et al., case number, 1:18-cv-00023, in the U.S. Court of International Trade.

Senate Republicans Send President Trump a Letter in Support of NAFTA

1/31/18 – On the eve of the State of the Union, 35 Republican Senators sent a letter to President Trump reaffirming their belief in the benefits of the North American Free Trade Agreement (NAFTA). They urged the president to keep NAFTA in place but supported efforts to modernize the trade agreement. Overall, the letter extols the value of the existing agreement and is seen by many as a reminder that many Republicans and business leaders remain concerned over threats to withdraw from NAFTA.

Business Roundtable Publishes Analysis of Economic Consequences of NAFTA Withdrawal

1/29/18 – While the sixth round of negotiations among trade officials from Canada, Mexico and the United States proceeded in Montreal last week on the North American Free Trade Agreement (NAFTA), the nonpartisan Business Roundtable released an economic analysis concluding that termination of NAFTA would have a significant net negative impact on the U.S. economy and employment. The analysis, prepared by Trade Partnership Worldwide, LLC, quantifies the harmful impacts of NAFTA withdrawal by examining how the re-imposition of "most-favored-nation" tariffs on U.S. trade with Mexico and Canada would affect the U.S. economy. The analysis also shows that withdrawing from NAFTA would:

  • Result in the net loss of 1.8 million U.S. jobs within the first year.
  • Reduce U.S. exports to Canada and Mexico by 17.4 percent each and lower U.S. companies' global exports by 2.5 percent.
  • Diminish U.S. households' purchasing power by almost $654 per household due to higher prices and lower wages caused by increased tariffs.
  • Shift economic activity away from North America and toward U.S. competitors, including China, which would experience a GDP increase of 0.2 percent and a net employment increase of 2 million jobs.

Overall, the analysis concludes that termination would re-impose high tariff costs on U.S. exports and imports, which would reduce the competitiveness of U.S. businesses both domestically and abroad. U.S. exports would drop, both to Canada and Mexico and globally, as U.S. output becomes more expensive, making U.S. businesses less competitive in these markets.

Fifth Round of NAFTA Negotiations Concludes

11/22/17 – Upon the conclusion of the fifth round of renegotiations of the North American Free Trade Agreement (NAFTA), U.S. Trade Representative Robert Lighthizer issued the following statement:

“While we have made progress on some of our efforts to modernize NAFTA, I remain concerned about the lack of headway. Thus far, we have seen no evidence that Canada or Mexico are willing to seriously engage on provisions that will lead to a rebalanced agreement. Absent rebalancing, we will not reach a satisfactory result. A rebalanced, updated NAFTA will promote greater prosperity for American workers, farmers, ranchers and businesses and strengthen the North American region as a whole. Our teams will be meeting again next month in Washington. I hope our partners will come to the table in a serious way so we can see meaningful progress before the end of the year.”

The parties have agreed to hold the sixth round of negotiations January 23-28, 2018 in Montréal, Canada. In the meantime, negotiators will continue to work in intersessional meetings in Washington, D.C. throughout mid-December and will report back to the chief negotiators on the progress achieved.

U.S. Trade Representative Releases Updated NAFTA Negotiating Objectives

11/20/17 – The Office of the U.S. Trade Representative (USTR) has released an updated summary of U.S. objectives for the renegotiation of the North American Free Trade Agreement (NAFTA). The new objectives update the previous objectives published in July (see our 7/18/17 update), and come after four rounds of negotiations among the United States, Mexico and Canada. The updated objectives reflect the goals of text proposals the United States has tabled in the NAFTA negotiations so far. The objectives include increased market access for agriculture, new transparency and administrative measures, expanded investment and intellectual property objectives, and completed negotiations on the chapters of Competition and Small- and Medium-Sized Enterprises. According to the USTR, the objectives for Trade in Goods include the first-ever objective for trade deficit reduction and an improvement in the U.S. trade balance with NAFTA countries.

The updated objectives “represent a serious effort to renegotiate the Agreement to update its provisions to the best 21st century standards and rebalance the benefits of the deal so that each country succeeds. U.S. proposals reflecting these objectives are supported by a diverse group of American interests. If these objectives are achieved, the United States will obtain more open, equitable, secure, and reciprocal market access, and the entire NAFTA region will benefit.”

Fourth Round of NAFTA Negotiations Leaves All Parties Unsatisfied

10/19/17 – After four rounds of negotiations, the United States, Canada and Mexico are beginning to express frustration concerning the discussions and proposals to revise and update the North American Free Trade Agreement (NAFTA). In an October 17 joint statement, the parties indicated that they have put forward “substantially all initial text proposals” but that these proposals have “created challenges” and highlighted “significant conceptual gaps” among the three countries.

Acknowledging that one of President Trump’s clear objectives is the reduction of the U.S. trade deficit with its NAFTA partners, U.S. Trade Representative Robert Lighthizer stated that he was “surprised and disappointed by the resistance to change from our negotiating partners.” In his closing remarks, Ambassador Lighthizer said, “As difficult as this has been, we have seen no indication that our partners are willing to make any changes that will result in a rebalancing and a reduction in these huge trade deficits. Now I understand that after many years of one-sided benefits, their companies have become reliant on special preferences and not just comparative advantage. Countries are reluctant to give up unfair advantage. But the President has been clear that if we are going to have an agreement going forward, it must be fair to American workers and businesses that employ our people at home.”

In response, Canadian Foreign Affairs Minister Chrystia Freeland called the U.S. list of proposals “unconventional” and “troubling,” stating that some of them would “turn back the clock on 23 years of predictability, openness and collaboration under NAFTA.”

Mexican Secretary of the Economy Ildefonso Guajardo Villarreal said, “We must ensure that decisions we make today do not come back to haunt us tomorrow,” adding that, in order for the negotiations to be fruitful, “we must understand that we all have limits.”

Mexico will host the fifth round of negotiations November 17-21, 2017, and the parties have agreed that additional rounds will be necessary and scheduled during the first quarter of 2018.

NAFTA Renegotiation Begins!

8/16/17 – U.S. Trade Representative Robert Lighthizer, Canadian Foreign Affairs Minister Chrystia Freeland and Mexican Secretary of the Economy Ildefonso Guajardo Villarreal have started the first round of NAFTA renegotiation in Washington, D.C. with opening statements and an ambitious agenda that is scheduled to take the negotiations through August 20.

In his opening statement, Lighthizer indicated that all the parties acknowledge that the trade agreement needs to be updated and modernized to address economies that are different than when NAFTA was implemented in the 1990s. After addressing modernization, however, he stated, “the tough work begins.” While the agreement has benefited many Americans, Lighthizer added that “for countless Americans, the agreement has failed … We cannot ignore the huge trade deficits, the lost manufacturing jobs, the businesses that have closed or moved because of incentives – intended or not – in the current agreement.”  He also made clear that President Trump is “not interested in a mere tweaking of a few provisions and a couple of updated chapters. We feel that NAFTA has fundamentally failed many, many Americans and needs major improvement.”

NAFTA Renegotiations to Begin on August 16

7/20/17 – The Office of the U.S. Trade Representative (USTR) has announced that the first round of renegotiation of the North America Free Trade Agreement (NAFTA) will occur August 16-20, 2017 in Washington, D.C. Reportedly, the plan is to hold seven rounds of talks at three-week intervals, at alternating sites among the three countries, with a goal of completing the negotiations by early 2018.

John Melle, the assistant U.S. Trade Representative for the Western Hemisphere, will serve as the U.S. chief negotiator for the NAFTA negotiations. Since joining USTR in 1988, Melle has held a number of positions covering Mexico, Canada, the Caribbean and Central America. As assistant USTR for the Western Hemisphere, he is responsible for developing, coordinating and implementing the United States’ trade policy for the region.

USTR Releases Summary of Objectives for NAFTA Renegotiation

7/18/17 – U.S. Trade Representative Robert Lighthizer has released a detailed and comprehensive summary of the negotiating objectives for the renegotiation of the North American Free Trade Agreement (NAFTA). In a brief statement upon the release, Lighthizer stated that the Trump administration will seek an agreement “that reduces the U.S. trade deficit and is fair for all Americans by improving market access in Canada and Mexico for U.S. manufacturing, agriculture, and services.” The summary notes that the “new NAFTA must continue to break down barriers to American exports. This includes the elimination of unfair subsidies, market-distorting practices by state owned enterprises, and burdensome restrictions of intellectual property. The new NAFTA will be modernized to reflect 21st century standards and will reflect a fairer deal, addressing America’s persistent trade imbalances in North America. It will ensure that the United States obtains more open, equitable, secure, and reciprocal market access, and that our trade agreement with our two largest export markets is effectively implemented and enforced.”

The negotiating objectives include a new digital economy chapter and stronger labor and environmental obligations that are currently in NAFTA side agreements. These objectives reflect the negotiating standards established by Congress in the Bipartisan Congressional Trade Priorities and Accountability Act of 2015, which requires that the USTR release objectives at least 30 days before formal negotiations begin. Negotiations will now start no earlier than August 16, 2017.

U.S.-Mexico Sugar Trade Agreement – NAFTA Renegotiation Precursor?

6/8/17 – On June 6, 2017, the United States and Mexico agreed to revise previously signed suspension agreements that will continue to suspend antidumping and countervailing duty investigations and prevent the imposition of additional duties on imports of sugar into the United States. The revised agreement is intended to prevent dumping of Mexican sugar and correct for subsidies the Mexican sugar industry receives. The agreement addresses many of the concerns the U.S. sugar industry had with the previous agreement, including the pricing of raw sugar sold to Mexico mills, the percentage of refined sugar that may be imported into the United States, the determining factors between refined and raw sugar, and increased enforcement measures. U.S. refiners argue that Mexican sugar producers have been circumventing the 2014 suspension agreements’ requirement that forced them to send nearly half of their exports to U.S. refineries by exporting sugar that was technically raw but could be sold at higher prices and used directly in beverage and food production with minimal processing. The fact sheet released with the announcement, “Draft Amendments to Mexican Sugar Suspension Agreements,” is available on Commerce’s website.

While the terms of the revised agreements were not supported by the Coalition for Sugar Reform or the American Sugar Alliance, Secretary of Commerce Wilbur Ross agreed to the terms of the deal in principle and stated that he was confident that it “defends American workers across many industries and is the best way to ensure stability and growth.” The U.S. Chamber of Commerce stated that the deal “demonstrates the willingness of both governments to work through difficult issues in a constructive manner.” Indeed, a number of trade analysts believe this agreement on sugar is a hopeful sign for North American Free Trade Agreement (NAFTA) renegotiation efforts; there had been concern that if these sugar trade talks failed, it would be unlikely that a renegotiated NAFTA would be plausible. These negotiations and the terms of the agreements may be an early indication that U.S. trade negotiators may be willing to negotiate deals where significant and broad progress is achieved but certain key industries remain unsatisfied.

CRS Issues Report on NAFTA as Renegotiation Approaches

5/30/17 – On May 24, 2017, the non-partisan Congressional Research Service (CRS) released a report on the North American Free Trade Agreement (NAFTA). In addition to providing a short history of the trade agreement and an overview of certain key provisions, this timely report provides insight into certain trade trends and the agreement’s economic effects on the three member countries. The report also sets forth potential topics for any NAFTA renegotiation, including Automotive Sector; Services; E-Commerce, Data Flows and Data Localization; Intellectual Property Rights; State-Owned Enterprises; Investment; Dispute Settlement; Labor; Environment; Energy; Customs and Trade Facilitation; and Sanitary and Phytosanitary Standards.

U.S. Trade Representative Sets Public Hearing and Seeks Comment on NAFTA Renegotiation

5/23/17 – The Office of the U.S. Trade Representative (USTR) has published a notice in the Federal Register seeking public input on possible changes to the North American Free Trade Agreement (NAFTA) to inform the development of U.S. negotiating positions. A hearing to discuss those comments is scheduled for Tuesday, June 27, 2017. Written comments must be submitted by Monday, June 12, 2017 under docket number USTR-2017-0006 on www.regulations.gov and include the heading “NAFTA Negotiations.”

To assist the Office of the USTR as it develops its negotiating objectives and positions for the agreement, the Trade Policy Staff Committee has requested the submission of comments on general and product-specific negotiating objectives for Canada and Mexico in the context of a NAFTA modernization, as well as the following more specific trade issues: 

  • Economic costs and benefits to U.S. producers and consumers of removal of any remaining tariffs and removal or reduction of non-tariff barriers on articles traded with Canada and Mexico.
  • Treatment of specific goods (describedbyHTSUS numbers), including comments on:
    • Product-specific import or export interests or barriers,
    • Experience with particular measures that should be addressed in negotiations, and
    • Addressing any remaining tariffs on articles traded with Canada, including ways to address export priorities and import sensitivities related to Canada and Mexico in the context of the NAFTA.
  • Customs and trade facilitation issues that should be addressed in the negotiations.
  • Appropriate modifications to rules of origin or origin procedures for NAFTA qualifying goods.
  • Any unwarranted sanitary and phytosanitary measures and technical barriers to trade imposed by Canada and Mexico that should be addressed in the negotiations.
  • Relevant barriers to trade in services between the United States and Canada and Mexico that should be addressed in the negotiations.
  • Relevant digital trade issues that should be addressed in the negotiations.
  • Relevant trade-related intellectual property rights issues that should be addressed in the negotiations.
  • Relevant investment issues that should be addressed in the negotiations.
  • Relevant competition-related matters that should be addressed in the negotiations.
  • Relevant government procurement issues that should be addressed in the negotiations.
  • Relevant environmental issues that should be addressed in the negotiations.
  • Relevant labor issues that should be addressed in the negotiations.
  • Issues of particular relevance to small and medium-sized businesses that should be addressed in the negotiations.
  • Relevant trade remedy issues that should be addressed in the negotiations.
  • Relevant state-owned enterprise issues that should be addressed in the negotiations

Public versions of comments, with business confidential information redacted, will be open to public inspection.

USTR Formally Notifies Congress of Intent to Modernize NAFTA

5/18/17 - The Trump administration formally notified Congress of its intent to renegotiate the North American Free Trade Agreement (NAFTA) with Canada and Mexico, starting a 90-day clock for statutorily required consultations. This notification means that NAFTA negotiations with Canada and Mexico can begin no earlier than August 16, 2017. In the letter from U.S. Trade Representative Robert Lighthizer, the administration indicated it would consult closely with Congress to develop negotiating positions. The letter notes that while NAFTA was negotiated 25 years ago, the U.S. economy and businesses have changed, resulting in outdated provisions in the agreement. In particular, negotiations will include “new provisions to address intellectual property rights, regulatory practices, state-owned enterprises, services, customs procedures, sanitary and phytosanitary measures, labor, environment, and small and medium enterprises.”

In very brief comments, Lighthizer stated, “Today, President Trump fulfilled one of his key promises to the American people … USTR will now continue consultations with Congress and American stakeholders to create an agreement that advances the interests of America’s workers, farmers, ranchers, and businesses.” The Office of the U.S. Trade Representative in the near future will publish a notice in the Federal Register requesting public input on the direction, focus and content of the NAFTA negotiations.

Canada and Mexico File Comments in Response to Executive Order Regarding Omnibus Report on Significant Trade Deficits

5/11/17 – In response to President Trump’s Executive Order 13786 requiring that the secretary of Commerce prepare and submit a report that examines the causes of trade deficits, the governments of Canada and Mexico have filed formal comments with the Department of Commerce ahead of the public hearing to be held on May 18, 2017.

While Mexico’s formal report is detailed, it notes:

The US trade deficit with Mexico is explained mainly by the way North American value chains are integrated. Mexico is the main supplier for many US industries, and this supplier relationship naturally creates trade deficits. Imports from Mexico enable US manufacturers to remain competitive in global markets, enhancing their ability to export to other countries and to provide American consumers with high quality goods at more competitive prices. The Mexican-US partnership strengthens both countries’ position in global markets and enhances our regional competitiveness to the benefit of workers, consumers and producers on both sides of the border.

The comments also note the strong ties and regional supply chains created under the North American Free Trade Agreement (NAFTA), and that “American manufacturing jobs depend on Mexican manufacturing jobs and vice-versa, since workers on both sides of the border work together in the production of goods to successfully compete in global markets.”

Canada’s formal report highlights the fact that the United States normally has a trade surplus with Canada and that “[o]ur trade is characterized by a high level of integrated production, with companies on both sides of the border using inputs from the other.” Further, the comments note that the U.S. relies on imports of Canadian raw materials and intermediate goods that ensure the competitiveness of U.S. manufactured products, and that the two countries have long cooperated to reduce impediments to trade.

To review other comments submitted for the record, visit www.regulations.gov and search for Docket ID: ITA-2017-0003; International Trade Administration.

NAFTA Status Report

5/10/17 – President Trump emphasized international trade throughout his campaign and has made it a major issue since taking office in January. Many of his executive orders and press statements have focused on broad trade issues, such as directing his administration to review trade agreement violations and abuses, to undertake an analysis on trade deficits, and to implement his “Buy American, Hire American” strategy. Trump has also taken specific trade actions, such as withdrawing the United States from the Trans-Pacific Partnership on the first day of his presidency and determining that China is not a currency manipulator. One major campaign trade issue/promise, however, remains unresolved at the 100-day mark of the Trump presidency: the status of the North American Free Trade Agreement (NAFTA).

Trump has been critical of NAFTA, but his intentions have varied from vowing outright withdrawal to identifying key provisions that must be renegotiated to stating that the 25-year-old agreement needs to be completely revised and updated. While discussions on NAFTA among the leaders of Canada, Mexico and the United States have occurred, no formal actions have been taken yet. Many questions remain, and Trump administration officials at times offer conflicting statements pertaining to the trade agreement. For our readers, we have prepared a status report (PDF) regarding NAFTA.

Draft Notice to Congress Indicates Intent to Begin Renegotiating NAFTA

4/3/17 – In a draft letter to the Senate and House of Representatives, the Trump administration appeared closer to formally announcing and notifying Congress of its intent to begin renegotiating the North American Free Trade Agreement (NAFTA). The draft notes that the “persistent U.S. deficit in goods trade with Canada and Mexico demands that this administration take swift action to revise the relationship to reflect and respond to new 21st century challenges. The NAFTA was negotiated 25 years ago and while our economy and businesses have changed considerably over that period, the NAFTA has not.”

The draft includes a list of 19 specific negotiating objectives, including issues surrounding trade in goods, rules of origin, customs matters and enforcement cooperation, trade in services, government procurement, transparency and regulatory reform, the operations of state-owned and state-controlled enterprises, and trade remedies.

Regarding trade remedies, the administration’s objectives include (1) seeking a safeguard mechanism to allow a temporary revocation of tariff preferences, if increased imports from NAFTA countries are a substantial cause of serious injury or threat of serious injury to the U.S. domestic industry, and (2) seeking to preserve the ability of the United States to vigorously enforce and promote its trade remedy laws. Another objective is eliminating NAFTA’s separate Chapter 19 dispute settlement procedures for antidumping and countervailing duty cases, arguing that panels have ignored the appropriate standard of review and applicable law, and aberrant panel decisions have not been effectively reviewed and corrected.

Sending the draft NAFTA notice to the congressional committees of jurisdiction is required under the provisions of the Trade Promotion Authority law. Further, it appears to be part of an ongoing effort by the Trump administration to negotiate with Congress on a final, official notice that will trigger a 90-day consultation process before NAFTA negotiations can begin. The Senate, however, has yet to confirm Robert Lighthizer as U.S. trade representative, and shortly after the draft notice was leaked, the White House quickly noted that it does not yet know the “final form” the official notice will take.

Congressional Research Service – Renegotiation of NAFTA: What Actions Do Not Require Congressional Approval?

2/1/17 – In a recent legal analysis, the Congressional Research Service (CRS) opined that while President Trump may have limited authority to renegotiate NAFTA, any significant modifications requiring changes to U.S. laws that originally implemented the agreement in 1993 could require Congressional consent. The analysis states that, “The Constitution gives Congress specific authority over international trade, including powers to impose and collect tariffs and duties and to regulate international commerce. U.S. free trade agreements, including NAFTA, have historically been approved and implemented as congressional-executive agreements by a majority vote of each house of Congress. In the NAFTA-implementing law, Congress approved NAFTA as it existed in 1993. Accordingly, major changes to the agreement would arguably require legislative approval. Furthermore, the President arguably lacks the authority to terminate the domestic effect of federal statutes implementing NAFTA without going through the full legislative process for repeal.”

Background

The North American Free Trade Agreement (NAFTA) is a trilateral agreement between Canada, Mexico and the United States that went into effect January 1, 1994. The agreement removed certain barriers to trade and investment between the countries, including eliminating almost all tariffs among the countries. During his campaign for president, Donald Trump repeatedly criticized NAFTA, calling it “the worst trade deal the U.S. has ever signed, [which] has [killed] and continues to kill American jobs.”

As part of his plan for his first 100 days in the White House, President Trump stated that he "will announce [his] intention to renegotiate NAFTA or withdraw from the deal," which would inevitably result in an increase in tariffs between the United States and Mexico. A NAFTA withdrawal or renegotiation would force companies with supply chain arrangements involving two or more of the NAFTA countries to re-evaluate their costs and benefits in the wake of possible changes.

Russia
U.S. Department of Treasury Sanctions Certain Russian Oligarchs, Government Officials, Energy Companies and Rosoboroneksport

4/6/18 – The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC), in consultation with the Department of State, has sanctioned numerous Russian oligarchs and the companies they own or control, 17 senior Russian government officials, and a state-owned Russian weapons trading company. In his announcement, Treasury Secretary Steven Mnuchin stated, “The Russian government engages in a range of malign activity around the globe, including continuing to occupy Crimea and instigate violence in eastern Ukraine, supplying the Assad regime with material and weaponry as they bomb their own civilians, attempting to subvert Western democracies, and malicious cyber activities. Russian oligarchs and elites who profit from this corrupt system will no longer be insulated from the consequences of their government’s destabilizing activities.”

The full list of individuals and entities being placed on OFAC’s Specially Designated Nationals (SDN) list is available here. With the placement of these persons and entities on the SDN list, U.S. persons are now generally prohibited from engaging in transactions with them, and all assets subject to U.S. jurisdiction of these designated individuals and entities are frozen. OFAC has cautioned that non-U.S. persons could face sanctions for knowingly facilitating significant transactions for or on behalf of these Russian individuals or entities.

Generally, the Russian oligarchs placed on the SDN list are known for their involvement in Russia’s energy sector and are close allies to Russian President Vladimir Putin or are current Russian government officials. Many of the companies these oligarchs own or control have also been sanctioned and placed on the SDN List. They are: B-Finance Ltd.; Basic Element Limited; EN+ Group PLC; JSC EuroSibEnergo; United Company RUSAL PLC; Russian Machines; GAZ Group; Agroholding Kuban; Gazprom Burenie, OOO; NPV Engineering Open Joint Stock Company; Ladoga Menedzhment, OOO; Russian Machines; and Renova Group. OFAC has cautioned that this list of companies owned or controlled by the sanctioned Russian oligarchs should not be viewed as exhaustive, and reminds U.S. persons and companies of OFAC’s 50 percent rule. Under this rule, property and interests in property of entities directly or indirectly owned 50 percent or more in the aggregate by one or more persons or entities placed on the SDN list are considered blocked regardless of whether such entities appear on the list. Appropriate party screening and due diligence will increasingly be necessary when U.S. persons or companies engage in transactions in Russia.

Given the scope of these sanctions, OFAC has issued General License No. 12 to allow for U.S. companies currently engaged in transactions with these Russian companies to wind down operations and conclude contracts or other agreements that were in effect before April 6, 2018. All activities with these Russian companies must conclude by June 5, 2018. OFAC has issued General License No. 13, authorizing U.S. persons to undertake any necessary transactions necessary to divest or transfer any debt, equity or other holdings in EN+ Group PLC, GAZ Group and United Company RUSAL PLC by May 7, 2018.

Due to Russia’s continued support of the Assad regime and its destabilizing activities in Syria, OFAC has sanctioned Rosoboroneksport, a state-owned Russian weapons trading company, and its related bank, Russian Financial Corporation. Rosoboroneksport has been placed on OFAC’s SDN list and its Sectoral Sanctions Identifications (SSI) list, a list identifying persons and entities operating in certain sectors of the Russian economy (such as financial services, energy, metals and mining, engineering and defense) under which the United States has placed certain additional restrictions limiting U.S. companies from engaging in specific transactions with such SSI listed entities.

USTR Releases 2018 National Trade Estimate Report on Foreign Trade Barriers

4/2/18 – The Office of the U.S. Trade Representative (USTR) has released its annual report on significant foreign trade barriers, providing an inventory of the most important foreign barriers affecting U.S. exports of goods and services, foreign direct investment by U.S. persons and protection of intellectual property rights. The term “trade barriers” does not have a fixed definition but is broadly defined by the USTR as government laws, regulations, policies or practices that either protect domestic goods and services from foreign competition, artificially stimulate exports of particular domestic goods and services, or fail to provide adequate and effective protection of intellectual property rights. The report classifies foreign trade barriers into 10 different categories, including import policies, government procurement, export subsidies, lack of intellectual property protections and service/investment barriers.

While the voluminous report covers 64 countries, customs territories and regional associations, as well as all 20 U.S. free trade agreements, this update focuses on those countries of major interest for TrumpandTrade.com readers. The report provides little detail regarding ongoing NAFTA renegotiations, stating only that the parties have entered into discussions “seeking to update and rebalance the NAFTA.” Regarding the U.S.-Korea Free Trade Agreement (KORUS), the report notes that an agreement in principle was reached on March 28, 2018 to decrease the large U.S. trade deficit in industrial goods. Particularly, the report notes efforts and improvements in increasing U.S. automobile exports to South Korea through a commitment to double the number of U.S. automobile exports, to 50,000 cars per manufacturer per year that can meet U.S. safety standards (in lieu of Korean standards) and enter the Korean market without further modification. The parties will also harmonize testing requirements, and Korea will recognize U.S. standards for auto parts.

Concerning Russia, the report notes that sanctions implemented between the two countries, in response to Russia’s actions in Ukraine, have “created uncertainty for American firms and reduced prospects for market penetration. The U.S. Government continues to engage with industry to analyze and assess the impact of sanctions on trade in the broader context of U.S. national interests. Furthermore, because the U.S. Government has curtailed its bilateral engagement with Russia … our ability to raise and resolve market access barriers in Russia has been severely limited.”

With regard to China, the report states that “China continued to pursue a wide array of industrial policies in 2017 that seek to limit market access for imported goods, foreign manufacturers and foreign services suppliers, while offering substantial government guidance, resources and regulatory support to Chinese industries. The beneficiaries of these constantly evolving policies are not only state-owned enterprises but also other domestic companies attempting to move up the economic value chain.” Specifically, the report notes the Section 301 investigation regarding China’s “unreasonable or discriminatory” technology transfer and intellectual property practices.

Despite the ongoing embargoes, sanctions or otherwise severe trade restrictions in place by the United States, the report makes no references to trade with Cuba, Iran or Syria.

OFAC Sanctions Russia for Malicious Cyber Activity

3/15/18 – The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) has sanctioned five entities and 19 individuals it has identified as engaging in Russian cyber activity, including “attempted interference in U.S. elections, destructive cyber-attacks, and intrusions targeting critical infrastructure,” according to Treasury Secretary Steven Mnuchin. The Treasury Department indicated that these sanctions were in response to interference in the 2016 U.S. election and the execution of destructive cyber-attacks, including the NotPetya attack attributed to the Russian military that is believed to be the most destructive and costly attack in history. The sanctions are also in response to continuing efforts by Russian government cyber actors who have targeted U.S. government entities and multiple critical U.S. infrastructure sectors, including energy, nuclear and commercial facilities and the water, aviation and critical manufacturing sectors. The White House also joined France, Germany and the United Kingdom in condemning the recent use of a military-grade nerve agent in an attempt to murder two UK citizens and noted that this incident further demonstrates the reckless and irresponsible conduct of the Russian government.

The sanctions are being implemented pursuant to Executive Order 13694, which targets malicious cyber actors, and under the Countering America’s Adversaries Through Sanctions Act (CAATSA). Particularly, the sanctions include the Federal Security Service (FSB) and Main Intelligence Directorate (GRU), a Russian military intelligence organization, which have both been key actors in Russia’s ongoing efforts to undermine cybersecurity. As a result of these designations, all property and interests in property of the designated entities/persons subject to U.S. jurisdiction are blocked and U.S. persons are generally prohibited from engaging in transactions with them.

BIS Sanctions 21 Russia-Related Entities

2/16/18 – The Department of Commerce’s Bureau of Industry and Security (BIS) has sanctioned 21 entities determined by the U.S. government to be acting contrary to the national security or foreign policy interests of the United States. BIS has taken this action to ensure the efficacy of existing sanctions on the Russian Federation (Russia) for violating international law and fueling the conflict in eastern Ukraine. These entities have been placed on the BIS Entity List, which identifies entities and other persons that are subject to specific license requirements for the export, reexport and/or transfer (in-country) of specified items. Engaging in transactions with any of these entities now entails additional export licensing requirements and approval from BIS. The license review policy for each listed entity is identified in the License Review Policy column on the Entity List.

Treasury Department Releases Russian Oligarch Report; State Department Declines to Implement New Sanctions

1/30/18As required by Section 241 of the Countering America’s Adversaries Through Sanctions Act (CAATSA) (see our Trump and Trade Update dated 10/30/17), the Treasury Department has submitted to Congress a detailed and classified report identifying senior Russian political figures, Russian oligarchs and Russian parastatal entities (companies in which Russian state ownership is at least 25 percent and that had revenues of $2 billion or more). While the list of parastatal entities remains classified, Treasury has released an unclassified report on the list of senior Russian political figures and oligarchs. This unclassified list includes virtually every senior member of Vladimir Putin’s inner circle and nearly 100 Russian billionaires; the classified list reportedly details the relationships these individuals have with President Putin and any information on their involvement in corrupt activities. This report is not a sanctions list; the inclusion of individuals or entities in any portion of the report does not impose sanctions on those individuals or entities, nor does it create any other restrictions, prohibitions or limitations on dealings with such persons by either U.S. or foreign persons. However, many of those listed are already sanctioned for their alleged involvement in the illegal annexation of the Crimea region of Ukraine, malicious cyber incursions into the United States, and interference in the 2016 U.S. presidential election. The Treasury Department stated that it will rely on all available sources of information, including the classified version of this report, when making determinations about additional sanctions in the future. Putin responded to the release of the list by calling it “nonsense” that would “reduce our bilateral relationship to zero.”

In a related move, the State Department announced that the president would postpone any sanctions on persons or entities engaging in any significant transactions involving the Russian defense or intelligence sectors pursuant to Section 231 of CAATSA. Under CAATSA, President Trump is required to impose at least five sanctions on persons or entities that may be engaging in such transactions; however, he is allowed to postpone these sanctions. A spokesperson for the State Department indicated that no actions would be taken at this time as the law was already “serving as a deterrent.”

USTR Releases Annual Reports on China's and Russia's Compliance With WTO Obligations, States That Supporting China's Accession to WTO Was a Mistake

1/19/18 – Today, the U.S. Trade Representative (USTR) made available its statutorily required reports on how the People's Republic of China (China) and the Russian Federation (Russia) are complying with the commitments they made to the World Trade Organization (WTO) resulting from their accession to the organization. China became a member of the WTO in 2001, and Russia joined the WTO in 2012. According to the USTR, China and Russia have "failed to embrace the market-oriented economic policies championed by the WTO and are not living up to certain key commitments they made when they joined the WTO."

Regarding China, the report states that China largely remains a state-led economy while using "the imprimatur of WTO membership to become a dominant player in international trade." As a result, USTR stated that "it seems clear that the United States erred in supporting China's entry into the WTO on terms that have proven to be ineffective in securing China's embrace of an open, market-oriented trade regime." The report seems to cast doubt on whether the USTR believes the WTO's dispute settlement mechanism will be sufficient to address China's non-market economy policies. Nevertheless, USTR stated that it will continue to pursue WTO cases against China that were initiated by previous administrations and "take all other steps necessary to rein in harmful state-led, mercantilist policies and practices pursued by China, even when they do not fall squarely within WTO disciplines."

Below are additional highlights of the 2017 Report to Congress On China's WTO Compliance:

  • "Today, almost two decades after it pledged to support the multilateral trading system of the WTO, the Chinese government pursues a wide array of continually evolving interventionist policies and practices aimed at limiting market access for imported goods and services and foreign manufacturers and service suppliers."
  • "China's regulatory authorities do not allow U.S. companies to make their own decisions about technology transfer and the assignment or licensing of intellectual property rights. Instead, they continue to require or pressure foreign companies to transfer technology as a condition for securing investment or other approvals."
  • "China is determined to maintain the state's leading role in the economy and to continue to pursue industrial policies that promote, guide and support domestic industries while simultaneously and actively seeking to impede, disadvantage and harm their foreign counterparts, even though this approach is incompatible with the market-based approach expressly envisioned by WTO members and contrary to the fundamental principles running throughout the many WTO agreements."
  • "Many of the policy tools being used by the Chinese government … are largely unprecedented, as other WTO members do not use them, and include a wide array of state intervention and support designed to promote the development of Chinese industry in large part by restricting, taking advantage of, discriminating against or otherwise creating disadvantages for foreign enterprises and their technologies, products and services."

Below are selected highlights of the 2017 Report on the Implementation and Enforcement of Russia's WTO Commitments:

  • "So far, Russia's actions strongly indicate that it has no intention of complying with many of the promises it made to the United States and other WTO Members. This trend is very troubling."
  • "Russia has done little in 2017 to demonstrate a commitment to the principles of the WTO or to many of the specific commitments that it made" in the negotiations leading to Russia's membership in the WTO.
  • "The agricultural sector continues to be one of the most challenging sectors for U.S. exporters. In addition to the import ban on nearly all agricultural goods from the United States and other WTO Members, Russia continues to erect barriers to U.S. agricultural exports."
  • "In 2017, notwithstanding a few tariff reductions, Russia increasingly appeared to turn away from the principles of the WTO, instead turning inward through the adoption of local content policies and practices. Russia continued to rely on arbitrary behind-the-border measures and other discriminatory practices to exclude U.S. exports."
New Section 232 Petition Seeks Investigation Into Effects of Uranium Imports on U.S. National Security

1/17/18 Energy Fuels Inc. and Ur-Energy Inc. (the “Petitioners”) have jointly submitted a petition to the U.S. Department of Commerce for relief under Section 232 of the Trade Expansion Act of 1962 from imports of uranium products from state-owned and state-subsidized enterprises in Russia, Kazakhstan and Uzbekistan. According to the petition, such imports now supply nearly 40 percent of U.S. demand and threaten U.S. national security. Despite uranium’s critical role in the United States supporting clean electricity and the national defense, “imports of cheap, foreign state-subsidized uranium have swelled in recent years to the point that domestic suppliers currently provide less than 5% of our nation’s demand.” As recently as 1980, the Petitioners argue, “U.S. producers supplied nearly 100% of our domestic uranium needs, and in 1989 the DOC initiated a Section 232 investigation at the request of the U.S. Department of Energy (“DOE”) because of concerns that uranium imports exceeded 37.5% at that time. The problem is far worse now.” The petition also notes that China is significantly growing its state-owned nuclear enterprises and intends to penetrate the U.S. market with nuclear fuel that will directly compete with U.S. uranium miners. Under U.S. law, the Petitioners argue that the warheads in U.S. nuclear weapons must be manufactured from uranium sourced from U.S. mines; tritium (an essential component of nuclear weapons) must be produced in a U.S. reactor using domestic uranium; and highly-enriched and fabricated uranium fuel for the U.S. Navy must be U.S. in origin. If this import trend continues and the condition of the U.S. uranium mining industry continues to worsen, the Petitioners contend that the United States will lose the ability to supply these essential national security requirements with domestic sources. The petition seeks remedies that will set a quota to limit U.S. uranium imports, effectively reserving 25 percent of the U.S. nuclear market for U.S. uranium production. It also seeks implementation of a requirement for U.S. federal utilities and agencies to buy U.S. uranium in accordance with President Trump’s Buy American policy.

Once the Department of Commerce initiates the investigation, it will have 270 days to prepare a report for the president. Following receipt of that report, the president will have 90 days to act on any recommendations and take action if necessary to “adjust the imports of an article and its derivatives” and/or pursue other lawful non-trade related actions necessary to address the threat. A full copy of the petition is available on Energy Fuels’ website.

State Department Publishes List of Russian Defense and Intelligence Sector Entities Under New Sanctions Law

10/30/17 – Section 231 of the Countering America’s Adversaries Through Sanctions Act (CAATSA), enacted on August 2, 2017, mandates that the president must impose certain sanctions on persons the president determines knowingly engage in a significant transaction with a person that is part of, or operates for or on behalf of, the defense or intelligence sectors of the government of the Russian Federation. The sanctions include, among others, prohibitions concerning property transactions, export license restrictions, Export-Import Bank assistance restrictions, debt and equity restrictions, visa ramifications for corporate officers, and U.S. government procurement prohibitions. The intent of Section 231 of the CAATSA is to respond to Russia’s behavior as to the crisis in eastern Ukraine, cyber intrusions and attacks, and human rights abuses.

On October 27, 2017, the State Department provided a list of those Russian defense and intelligence agencies that may face sanctions under CAATSA. At this time, however, this designation is not a determination regarding imposition of actual sanctions against these Russian entities; the CAATSA requires the imposition of sanctions beginning on or after January 29, 2018. In a short briefing, senior State Department staff indicated that over the next 180 days, the department will take a close look at transactions and dealings with these entities that it thinks may fall within the scope of the sanctions provision of CAATSA, and engage with partners and allies to determine whether any transactions undertaken with entities on the list are problematic. At that time, sanctions may be implemented.

Over the course of the next three months, U.S. companies should assess the amount and type of business transactions they may be conducting with Russian entities on the State Department list. Ultimately, persons who are determined to “knowingly engage in a significant transaction” with a person specified on the list may face sanctions. In determining whether a transaction is “significant” for purposes of CAATSA, the Department of State will consider the totality of the facts and circumstances surrounding the transaction and weigh various factors on a case-by-case basis. Clearly, issues of national security and U.S. foreign policy interests will be factors in such an analysis.

Department of Homeland Security Bans Use of Russian Security Software

9/14/17 – Acting Secretary of the Department of Homeland Security (DHS) Elaine Duke has issued a Binding Operational Directive (BOD 17-01) directing federal executive branch departments and agencies to take actions related to the use or presence of information security products, solutions and services supplied directly or indirectly by AO Kaspersky Lab or related entities. The directive requires all federal departments and agencies to identify any use or presence of Kaspersky products on their information systems in the next 30 days; to develop detailed plans to remove and discontinue present and future use of the products in the next 60 days; and at 90 days from September 13, 2017, unless directed otherwise by DHS based on new information, to begin to implement the agency plans to discontinue use and remove the products from information systems.

This directive is the result of an interagency review and analysis pertaining to potential information security risks presented by using this Russian entity’s products due to connections between Kaspersky Lab officials and Russian intelligence agencies. Under Russian law, Russian intelligence agencies are allowed to request or compel assistance from Kaspersky and to intercept communications transiting Russian networks. DHS determined that “The risk that the Russian government, whether acting on its own or in collaboration with Kaspersky, could capitalize on access provided by Kaspersky products to compromise federal information and information systems directly implicates U.S. national security.” DHS has indicated that Kaspersky Lab will be provided the opportunity to submit a written response addressing the department’s concerns or to mitigate those concerns.

This directive comes just months after the General Services Administration removed the company from its list of approved vendors and after high-profile news reports concerning potential Russian interference in the 2016 U.S. presidential election. In addition to any national security implications, trade analysts also see this decision as another form of sanctioning Russia. The U.S. government’s banning of Kaspersky products from its departments and agencies has the potential to significantly undermine Kaspersky Lab’s market position in the United States and probably elsewhere.

OFAC Sanctions Chinese and Russian Entities and Individuals Supporting North Korea

8/25/17 – The Department of the Treasury’s Office of Foreign Assets Control (OFAC) has designated 16 Chinese and Russian entities and individuals for activities related to the support of North Korea’s Kim Jong-un. These sanctions intentionally target third-country companies and individuals that (1) assist already-designated persons who support North Korea’s nuclear and ballistic missile programs, (2) deal in the North Korean energy trade, (3) facilitate its exportation of workers and (4) enable sanctioned North Korean entities to access the U.S. and international financial systems. These sanctions complement United Nations Security Council Resolution 2371 enacted on August 5, 2017. Treasury Secretary Steven Mnuchin stated, “It is unacceptable for individuals and companies in China, Russia, and elsewhere to enable North Korea to generate income used to develop weapons of mass destruction and destabilize the region. We are taking actions consistent with UN sanctions to show that there are consequences for defying sanctions and providing support to North Korea, and to deter this activity in the future.” For details on the 16 entities and persons that have been placed on OFAC’s Specially Designated Nationals List, see OFAC’s Federal Register notice.

President Trump Signs Into Law H.R. 3364 Regarding Sanctions Against Iran, Russia and North Korea

8/2/17 – Today, President Trump signed into law the Countering America’s Adversaries Through Sanctions Act, which strengthens and expands statutory sanctions on Iran, Russia and North Korea. In a statement released by the White House, the president said, “I favor tough measures to punish and deter bad behavior by the rogue regimes in Tehran and Pyongyang. I also support making clear that America will not tolerate interference in our democratic process, and that we will side with our allies and friends against Russian subversion and destabilization.” The statement goes on to say that “the bill remains seriously flawed – particularly because it encroaches on the executive branch’s authority to negotiate.”

In a separate statement issued the same day, the president again asserted that the legislation “is significantly flawed,” stating that, “In its haste to pass this legislation, the Congress included a number of clearly unconstitutional provisions.”

See our July 26th update below for additional background information.

House Passes Bill for Additional Sanctions Against Iran, Russia and North Korea

7/26/17 – On July 25, the House of Representatives passed legislation that would impose additional sanctions on Iran, North Korea and Russia. The bill would increase sanctions on those involved in Iran’s human rights abuses, its support for terrorism, as well as its ballistic missile program. For Russia, the bill would ensure that existing economic sanctions remain as long as Russian aggression continues by empowering Congress to review and disapprove any sanctions relief that the president may seek. The bill also includes the text of H.R. 1644, The Korean Interdiction and Modernization of Sanctions Act, which was passed by the House in May by a vote of 419-1, and seeks to expand sanctions targeting North Korea’s nuclear weapons program.

As noted in a previous post, the Senate has also passed legislation (S. 722) to implement additional sanctions on Iran and Russia; the Senate bill does not contain provisions on North Korea sanctions. Because different bills were passed in each chamber and the House bill included additional sanctions against North Korea, it is expected that the Senate will take up consideration of H.R. 3364 for any final vote. Interestingly, given President Trump’s perceived ambivalence on the Ukraine-related Russia sanctions, the votes for passage by each chamber – 419 to 3 in the House and 98-2 in the Senate – likely make any passage of a final bill veto-proof.

OFAC and BIS Designate Additional Individuals and Entities Under the Ukraine/Russia-Related Sanctions

6/23/17 – On June 20, 2017, pursuant to four executive orders (EOs), the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) and the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) subjected to U.S. economic sanctions more individuals and entities involved in the ongoing Crimean conflict between Russia and Ukraine. These actions were deemed necessary to counter attempts to circumvent current U.S. sanctions. Treasury Secretary Steven Mnuchin stated, “This administration is committed to a diplomatic process that guarantees Ukrainian sovereignty, and there should be no sanctions relief until Russia meets its obligations under the Minsk agreements.”

OFAC designated 38 individuals and entities under the Ukraine-related EOs, including:

  • Alexander Babakov, the Russian Federation’s Special Presidential Representative for Cooperation with Organizations Representing Russians Living Abroad;
  • Oboronlogistika, OOO, the Russian Defense Ministry’s sole executor for the procurement of goods, works, and services for maritime transport of military troops and freight on the territory of the so-called Republic of Crimea; and
  • The following seven banks for operating or assisting in financial transactions in Crimea: Tsmrbank, OOO; Taatta, AO; Joint Stock Company Black Sea Bank of Development and Reconstruction; Joint Stock Commercial Bank Rublev; Joint Stock Company Commercial Bank North Credit; IS Bank, AO; and VVB, PAO.

OFAC also identified a number of subsidiaries owned 50 percent or more by Transneft, which was made subject to the Sectoral Sanctions Identification (SSI) List on September 12, 2014 pursuant to EO 13662. Transneft and its 50 percent or more subsidiaries are subject to Directive 2, which prohibits U.S. persons from dealing in new debt of greater than 90 days’ maturity of sanctioned entities. The complete listing of individuals and entities is available on Treasury’s website.

BIS has added 10 entities to the Entity List on the basis of 15 C.F.R. § 744.11 (license requirements that apply to entities acting contrary to the national security or foreign policy interests of the United States) of the EAR. The 10 entities added to the Entity List consist of two entities in the Crimea region of Ukraine and eight entities in Russia. For a complete list of these entities, please see the Federal Register notice.

Senate Passes Bill for Additional Sanctions Against Iran and Russia

6/19/17 – After several months of negotiations in the Committee on Foreign Relations, the full Senate on June 15, 2017 considered and passed a bipartisan bill by a vote of 98-2 seeking to hold both Iran and Russia accountable for their recent destabilizing activities in world affairs. S. 722 at Title I contains the Iran component of the legislation and was authored by Senators Corker (R-Tenn.), Menendez (D-N.J.), Rubio (R-Fla.), Cardin (D-Md.), Cotton (R-Ark.) and Casey (D-Pa.). It expands sanctions on Iran for ballistic missile development, support for terrorism, transfers of conventional weapons and human rights violations. The Countering Iran’s Destabilizing Activities Act of 2017 contains the following key provisions:

  • New mandatory ballistic missile sanctions: imposes mandatory sanctions on persons involved with Iran’s ballistic missile program and those that transact with them.
  • New terrorism sanctions: applies terrorism sanctions to the Islamic Revolutionary Guard Corps and codifies individuals who are currently sanctioned due to Iranian support for terrorism.
  • Enforcement of arms embargo: requires the president to block the property of any person or entity involved in specific activities related to the supply, sale, or transfer of prohibited arms and related material to or from Iran.

The text of Title II of S. 722 maintains and substantially expands sanctions against the government of Russia in response to the violation of the territorial integrity of the Ukraine and Crimea, its cyber-attacks and interference in elections, and its continuing aggression in Syria. This portion of the bill will:

  • Provide for a mandated congressional review if sanctions are relaxed, suspended or terminated.
  • Codify and strengthen existing sanctions contained in executive orders on Russia, including the sanctions’ impact on certain Russian energy projects and on debt financing in key economic sectors.
  • Impose new sanctions on: corrupt Russian actors; those seeking to evade sanctions; those involved in serious human rights abuses; those supplying weapons to the Assad regime; those conducting malicious cyber activity on behalf of the Russian government; those involved in corrupt privatization of state-owned assets; and those doing business with the Russian intelligence and defense sectors.
  • Allow broad new sanctions on key sectors of Russia’s economy, including mining, metals, shipping and railways.
  • Require a study on the flow of illicit finance involving Russia and a formal assessment of U.S. economic exposure to Russian state-owned entities.

S. 722 will shortly cross over to the House of Representatives, where it will be assigned to the appropriate committee(s) for consideration. As such, this legislation, while significant, is not yet a law.

Background

The United States and Russia have a long history of strained relations, culminating in 2014 with the United States instituting economic sanctions against Russia for its occupation of the Crimean region of Ukraine. The occupation was widely criticized by allies of the United States, including the European Union, which instituted its own sanctions against Russia. Notably, the United States imposed sanctions on certain members of Russian President Vladimir Putin’s inner circle. During his presidential campaign, however, Donald Trump praised President Putin, calling him a stronger leader than President Obama. This has led to speculation that President Trump will attempt to roll back sanctions and normalize relations with Russia, which could complicate the United States' relationship with other allies in Europe and elsewhere, who will rely on U.S. support for NATO as a bulwark against possible Russian government action in the region.

Archive

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