On February 1, President Trump issued three executive orders (“EOs”) imposing broad tariffs on U.S. imports from Canada, Mexico, and China, initially to be effective on February 4. Invoking Presidential authority under the International Emergency Economic Powers Act (“IEEPA”), the EOs expand the national emergency declared by
Continue Reading Trump Administration Imposes Tariffs on Imports from Canada, Mexico, and China
Section 301 Tariffs and Proceedings: Recent and Potential Developments
Alert December 19, 2024
As discussed in our prior client alert, President-elect Trump’s second term is expected to bring important changes to U.S. trade policy, including with respect to U.S. tariffs. Among the tools Trump may use to modify existing U.S. tariffs is Section 301 of the Trade Act of 1974 (“Section 301”), which provided the vehicle for imposition of tariffs against China under the first Trump administration. More recently, the Biden administration has initiated new proceedings under Section 301, while also modifying existing Section 301 tariffs against China. This alert provides an overview of Section 301, explores how Section 301 has been used by recent administrations to increase tariffs on imports from China, and surveys other Section 301 actions, including currently pending investigations. This alert also examines how a second Trump administration could reactivate or modify Section 301 tariffs that were previously announced, but have been suspended or terminated.
Overview of Section 301
Section 301 is an investigative tool under U.S. trade law that allows the Office of the U.S. Trade Representative (“USTR”) to pursue unilateral trade retaliation against countries that impose unfair trade barriers against the United States. USTR may launch Section 301 investigations in response to the filing of a petition submitted by an “interested party,” or upon USTR’s own initiative. Once a Section 301 investigation is launched, the statutory deadline for completion is typically between 12 and 18 months. Under the first Trump administration, USTR often did not use the full period provided under the statute, instead completing certain investigations several months before the statutory deadline.
As part of the investigative process, USTR must request consultations with the foreign government whose conduct is at issue, and it will generally also solicit public comments and hold a hearing as part of its investigation. At the end of the investigation, USTR is authorized to impose duties or other trade restrictions where it has determined:
- that the rights of the United States under any trade agreement are being denied;
- that an act, policy, or practice of a foreign country violates, is inconsistent with, or otherwise denies the United States the benefits of any trade agreement; or
- that an act, policy, or practice of a foreign country is unjustifiable and burdens or restricts U.S. commerce.
Once imposed, Section 301 tariffs must be terminated after four years unless an extension is requested. As explained below, USTR under certain conditions can also modify existing Section 301 duties or reinstitute previously suspended or terminated Section 301 actions.Continue Reading Section 301 Tariffs and Proceedings: Recent and Potential Developments
Trade Policy Under a Second Trump Administration and Implications for Business
November 25, 2024, Covington Alert
The inauguration of President Trump on January 20 is expected to bring important changes to U.S. trade policy that are likely to affect companies that supply international customers, or are reliant on global supply chains. As discussed in our prior client alert, international trade is expected to be a key focus of President Trump, who has repeatedly expressed a preference for using tariffs as a policy tool to create perceived leverage for dealmaking with international partners on both economic and non-economic issues. Recent announcements by the Trump transition team regarding cabinet and staff appointments reinforce the view that trade policy under a second Trump administration could involve significant unilateral U.S. action, including the imposition of substantial new tariffs and a hawkish stance toward China. These new tariffs could be implemented swiftly after Trump takes office, or could alternatively be subject to more extensive investigative and reporting procedures, depending on the legal authority invoked. New tariff measures, as well as other trade actions Trump has proposed, could lead to retaliatory responses by U.S. trading partners, including key U.S. allies. This alert explores how trade policy may be implemented by a second Trump administration, and considers how companies may prepare for and mitigate the risks associated with these developments.
Cabinet Nominations and Other Economic Appointees
In recent weeks, Trump has announced several cabinet and staff appointments for his second administration, including individuals responsible for implementing trade policy. Key among them is Howard Lutnick, chairman and CEO of a Wall Street investment firm and co-chair of Trump’s transition team, whom Trump has selected to be Secretary of Commerce. Echoing Trump’s own views, Lutnick has been a strong advocate for using tariffs as an industrial policy tool and bargaining chip to rebalance U.S. trade, though he has suggested tariff measures under a second Trump administration may be more “targeted” than the universal 10 to 20 percent tariffs proposed by Trump during his campaign. In announcing Lutnick’s forthcoming nomination, Trump noted Lutnick would lead the administration’s “Tariff and Trade agenda,” and that he would have direct responsibility over the Office of the United States Trade Representative (“USTR”). As USTR is a separate agency established by Congress within the Executive Office of the President to lead on trade issues, it is uncertain if the announcement was referring to informal oversight over USTR or a formal restructuring of the agency. Should Trump seek to consolidate USTR within or under the Commerce Department, he may face opposition from Congress, whose approval would be required for such a reorganization. Continue Reading Trade Policy Under a Second Trump Administration and Implications for Business
The Impact of the U.S. Elections on Trade and International Supply Chains
October 28, 2024, Covington Alert
The upcoming U.S. presidential election on November 5 will have important implications for U.S. trade policy that are likely to affect companies reliant on international supply chains. There are important differences in how former President Donald Trump and Vice President Kamala Harris approach the use of trade tools to advance U.S. policies and priorities, including whether such tools should be deployed unilaterally, or as part of a collective action with U.S. allies.
For instance, a victory by Harris will likely signal continuity in the current approach of the Biden administration, in which trade has not been a central policy priority, but has instead taken a backseat to—and been used as a tool to support—other key policies on climate, technology, human rights, and industrial development. While a Harris administration is therefore unlikely to pursue new trade initiatives aimed at increased market access, a Harris administration may consider joint action with U.S. allies and likeminded trading partners, or at least be receptive to input from such partners in pursuing trade-related actions.
In contrast, trade is expected to take center stage under a second Trump administration, with unilateral action expected to be the preferred approach. Trump has repeatedly referred to tariffs as his policy tool of choice, and views tariffs as important in creating leverage for dealmaking with international partners on both economic and non-economic issues. Trump and his economic advisors also view the U.S. trade balance as an important measure of economic performance, and bilateral trade deficits are likely to face scrutiny and provoke potential action.
This alert explores certain key trade issues to be confronted by the next administration, assesses how each candidate may approach these issues differently, and considers how companies may prepare for and mitigate the risks associated with each candidate’s approach.
Divergent Approaches to U.S. Tariffs
While Congress has primary constitutional authority over tariffs and other trade policy matters, the President has broad authority to adjust tariffs and impose other import restrictions under certain statutes, without approval from Congress. The outcome of the U.S. election will determine to a great extent the importance that tariffs will play as a U.S. policy tool over the next four years.Continue Reading The Impact of the U.S. Elections on Trade and International Supply Chains
USTR Seeks Public Comment in Second Phase of Four-Year Review of Necessity for Section 301 Tariffs on Chinese Imports
On November 1, 2022, the Office of the U.S. Trade Representative (“USTR”) published a questionnaire for interested parties to use in commenting on the effects of the tariffs imposed on Chinese imports under Section 301 of the Trade Act of 1974 (“Section 301 Tariffs”). USTR issued the questionnaire pursuant to its October 17, 2022 notice initiating the second phase of its statutory four-year review of the Section 301 Tariffs. Questionnaire responses may address the tariffs’ impact on the whole economy, specific sectors and industries, or individual tariff headings. Responses may be submitted between November 15, 2022, and January 17, 2023. This process offers a new opportunity for companies to make a record with the Biden Administration regarding the future of the Section 301 actions, including as to specific product categories that should not be subject to duties if the tariffs remain in force.
Background
The United States imposed the Section 301 Tariffs after determining in March 2018 that China’s technology transfer and intellectual property policies and practices harmed U.S. companies. Between July 2018 and September 2019, the United States applied four tranches of tariffs on over $360 billion in Chinese imports.
The administration is defending the List 3 and List 4A tariffs against legal challenges pending before the U.S. Court of International Trade. On April 1, 2022, the court remanded those lists to USTR for further explanation or reconsideration, and USTR filed its remand determination responding to significant comments on the List 3 and List 4A tariffs on August 1, 2022. The court is now evaluating the sufficiency of that remand determination.
Under the statute, Section 301 Tariffs expire after four years unless a representative of a domestic industry that benefited from the tariffs submits a written request for continuation.[1] Accordingly, on May 3, 2022, USTR initiated its statutory four-year review of the Section 301 Tariffs in advance of their expiration beginning on July 6, 2022. (See our prior alert.) Prior to launching the statutorily mandated review, the Biden Administration’s principal action with respect to the Section 301 Tariffs was to reinstate a limited set of previously expired product exclusions. Those 352 reinstated exclusions are now set to expire on December 31, 2022.Continue Reading USTR Seeks Public Comment in Second Phase of Four-Year Review of Necessity for Section 301 Tariffs on Chinese Imports
IPEF Partners Adopt Ministerial Statement and Negotiation Objectives
On September 8 and 9, top trade officials of the United States and the other Indo-Pacific Economic Framework (“IPEF” or “Framework”) partner countries—Australia, Brunei Darussalam, Fiji, India, Indonesia, Japan, Republic of Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand and Vietnam—launched formal negotiations in Los Angeles.
This marked the first in-person ministerial-level meeting since the IPEF launched on May 23, 2022 and follows three informal meetings since May 2022, the latest event being the virtual ministerial on July 26-27, discussed in detail in our previous post.
The Los Angeles ministerial involved intensive discussions on what to include in the scope of the Framework. Ultimately, the IPEF partners reached consensus on ministerial statements for each of the four IPEF framework pillars: Trade, Supply Chain, Clean Economy, and Fair Economy. All 14 IPEF partners have joined three of the pillars, and 13 joined the fourth—with just India opting out of the Trade pillar. While this near unanimous support for the four pillars is certainly a positive sign, the real work begins now.
This blog post summarizes how the ministerial statements characterize the four pillars and outlines next steps for the Framework and key remaining questions.
Takeaways from the Ministerial Statements
The ministerial statements confirmed the four pillars of negotiation and provided added clarity on the scope and content of each pillar. While the statements add little to the substance, they indicate a political commitment among the partners to the Framework.Continue Reading IPEF Partners Adopt Ministerial Statement and Negotiation Objectives
Biden Administration Hosts the First Indo-Pacific Economic Framework Ministerial: Updates, Outlook, and Remaining Questions
On July 26-27, 2022, the Biden Administration hosted a two-day virtual meeting with top trade officials from the 13 other partners of the Indo-Pacific Economic Framework for Prosperity (“IPEF” or “Framework”)—Australia, Brunei Darussalam, Fiji, India, Indonesia, Japan, the Republic of Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, and Vietnam. This was the first ministerial meeting since the 13 initial participants[1] agreed on May 23, 2022 to launch “collective discussions towards future negotiations” on the Framework. The IPEF currently focuses on four “pillars”: (1) Trade; (2) Supply Chains; (3) Clean Energy, Decarbonization, and Infrastructure; and (4) Tax and Anti-Corruption. Touted as a “21st century economic arrangement designed to tackle 21st century economic challenges,” the IPEF is said to offer what Commerce Secretary Gina Raimondo calls a “innovative and flexible approach,” and is “internationally designed not to be a ‘same old, same old’ traditional free trade agreement.”
The Framework’s novel approach, however, has raised a flurry of unanswered questions. Key U.S. stakeholders, for instance, have questioned the Biden Administration’s decision not to discuss tariff reductions or market access as part of the IPEF negotiations. Concerns have been raised about the enforceability of any agreements concluded among Framework partners. Potential agreements within each pillar remain largely unknown or undisclosed, even though the Framework partners have spent months engaged in a “scoping exercise” to define the components of each pillar.
This latest ministerial meeting added little clarity. No joint statement was released at the end of the meeting, suggesting that more remains to be done before formal, text-based negotiations begin. But as negotiators approach the one-year anniversary of President Biden’s announcement of the initiative at the October 2021 East Asia Summit meeting, there is growing expectation of more concrete outcomes. The dates for the next ministerial meeting have not been formally announced, though informal reports speculate that the Framework partners may hold the next meeting in September 2022, possibly as the first in-person ministerial.
This alert outlines the scope and objectives of the IPEF’s four pillars, the progress to date and next steps, key remaining questions, and stakeholder reactions thus far.Continue Reading Biden Administration Hosts the First Indo-Pacific Economic Framework Ministerial: Updates, Outlook, and Remaining Questions
USTR Initiates Four-Year Review of Necessity for Section 301 Tariffs on Chinese Imports
On May 3, 2022, the Office of the U.S. Trade Representative (“USTR”) announced that it is initiating a statutory four-year review of necessity for the tariffs imposed on Chinese imports under Section 301 of the Trade Act of 1974 (“Section 301 Tariffs”). USTR’s review will examine whether to extend the tariffs currently in place on over $360 billion in Chinese imports.
Background
The Section 301 Tariffs were imposed based on the U.S. Administration’s determination in March 2018 that China’s technology transfer and intellectual property policies are harming U.S. companies. Between July 2018 and September 2019, the United States imposed four tranches of escalating tariffs on imports from China.
- USTR imposed additional tariffs of 25 percent ad valorem on $34 billion of Chinese imports, effective July 6, 2018 (“List 1”).
- USTR imposed duties of 25 percent ad valorem on an additional $16 billion of Chinese imports, effective August 23, 2018 (“List 2”).
- USTR subsequently “modified” these tariff actions by imposing additional duties on supplemental lists of products in September 2018 (“List 3”) and September 2019 (“List 4A”).
By statute, the Section 301 Tariffs are set to expire four years after the tariffs were imposed, absent a written request for continuation submitted during the final sixty days of the four-year period by a representative of the domestic industry that has benefited from the tariffs.[1] The List 1 tariffs are set to expire July 6, 2022, and the List 2 tariffs are set to expire August 23, 2022. If a request is filed, the statute directs USTR to conduct a “review of necessity” regarding any extension of the tariffs.
First Phase of the Four-Year Review
USTR’s four-year review will proceed in two phases. In this first phase of the review process, USTR is notifying representatives of domestic industries that have benefited from the Section 301 Tariffs of the possible termination of the tariffs and of the opportunity to request a continuation of the tariffs.Continue Reading USTR Initiates Four-Year Review of Necessity for Section 301 Tariffs on Chinese Imports
USTR Reinstates Limited Exclusions from Tariffs on Chinese Imports
International Trade, Public Policy (U.S.), Technology
On March 23, 2022, the Office of the U.S. Trade Representative (“USTR”) announced its decision to reinstate through December 31, 2022, 352 previously granted exclusions from tariffs imposed on Chinese imports under Section 301 of the Trade Act of 1974 (“Section 301 Tariffs”). The reinstated exclusions are a subset of a limited group of 549 exclusions that were previously extended and thus were eligible for possible reinstatement, and it remains unclear if and when a broader exclusion process might be forthcoming.
Background
The Section 301 Tariffs are based on the U.S. Administration’s determination in March 2018 that China’s technology transfer and intellectual property (“IP”) policies are harming U.S. companies. Between July 2018 and September 2019, the United States imposed four escalating tranches of tariffs on imports from China. U.S. tariffs on over $360 billion in Chinese imports remain in place despite the “Phase One” agreement that the parties reached in January 2020.
For each of the four tranches or “Lists,” USTR established a process for requesting product-specific exclusions from the Section 301 Tariffs. In total, USTR granted over 2,200 exclusions. USTR also opened a process for submitting comments on whether to extend the duration of particular exclusions. Based on that process, USTR extended 549 exclusions spanning products covered by Lists 1 – 4, but most of these exclusions expired by December 31, 2020, with the remainder expiring on March 25 and April 18, 2021.
On October 8, 2021, days after USTR Katherine Tai announced that her office would open a “targeted” tariff exclusion process, USTR published a Federal Register notice inviting public comment on whether and how long USTR should reinstate 549 product exclusions that were granted and subsequently extended. USTR published on its website a list of all 549 exclusions. The notice indicated that USTR would focus on evaluating whether, despite imposition of the Section 301 Tariffs, “the particular product remains available only from China.” Additionally, USTR would consider whether reinstating an exclusion would “impact or result in severe economic harm to the commenter or other U.S. interests,” or affect the goal of obtaining the elimination of China’s problematic IP policies.
Reinstated Section 301 Tariff Exclusions
On March 23, 2022, USTR announced its decision to reinstate 352 product exclusions among those identified in its October 8, 2021 notice. USTR stated that its determination was based on public comments received as well as input from advisory committees and other U.S. agencies.
All reinstated exclusions are retroactive to import entries made on or after October 12, 2021, that are unliquidated or that are liquidated but remain protestable. The reinstated exclusions expire on December 31, 2022, though the notice provides that USTR “may consider further extensions as appropriate.”
Continue Reading USTR Reinstates Limited Exclusions from Tariffs on Chinese Imports
Revocation of Russia’s Most-Favored-Nation Trade Status: What Companies Need to Know
On March 11, 2022, President Biden announced that the United States, acting in coordination with the European Union (“EU”) and leaders of major economies belonging to the Group of Seven (“G7”), would begin taking steps to revoke most-favored-nation (or “MFN”) trade status for Russia. MFN trade status—known as Permanent Normal Trade Relations (“PNTR”) status in the United States—is a term used to describe the nondiscriminatory treatment granted among most of the world’s trading partners. Days after the President’s address, on March 16, the House passed to formally revoke PNTR for Russia, and also stripping Belarus of MFN treatment. The bill now moves to the Senate, where timing for its consideration is uncertain.
MFN status is a fundamental principle in the international trading system established under the World Trade Organization (“WTO”), and as a general rule, WTO Members are required to accord MFN status to all other WTO Members. Having acceded to the WTO in 2012, Russia is generally entitled to MFN treatment by other WTO Members. In response to Russia’s invasion of Ukraine, however, several other WTO Members have joined the United States, the EU, and the G7 in stating an intent to revoke MFN treatment for Russia, invoking an “essential security” exception that permits WTO-inconsistent measures where a Member considers such measures to be “necessary for the protection of its essential security interests.” Statements issued by the White House and G7 Leaders emphasized the coordinated nature of the initiative across economies, and the intent to continue to pursue additional collective action to deny Russia the benefits of WTO membership.
While certain G7 countries, such as Canada, have already withdrawn Russia’s trade benefits by means of executive action, revocation of Russia’s PNTR status in the United States will require congressional action. While the House has passed a bill to do so, specific timing for consideration of that legislation in the Senate is still unknown. A revocation of Russia’s MFN status will increase tariff rates applicable to certain U.S. imports from Russia, and may also provoke Russia to take responsive, retaliatory actions against international firms. This alert provides background on Russia’s current trade status, analyzes congressional action to date on the issue, and describes the potential international trade implications for U.S. firms of a change in Russia’s trade status.
Background on Russia’s Trade Status
Under the principle of MFN treatment, WTO Members are required to treat imports of goods and services from any WTO Member as favorably as they treat the imports of like goods and services from any other WTO Member. In practice, this means that MFN treatment is the basic “non-discriminatory” treatment to which all WTO Members are generally entitled. Russia has been accorded MFN treatment by most major economies since it became a WTO Member in August 2012.
Continue Reading Revocation of Russia’s Most-Favored-Nation Trade Status: What Companies Need to Know