US “China Tariffs” - What to Expect from a Biden Administration

Section 2: Special Tariffs
Since trade policy almost always involves the application of tariffs, we begin with “China Tariffs – What to Expect from the Biden Administration,” an issue top of mind for many executives who have business interests in China and the United States.

US “China Tariffs” - What to Expect from a Biden Administration

The outgoing Trump Administration has aggressively applied double-digit Section 301 tariffs on numerous imports from China – costing many companies millions of dollars – with the incoming Biden Administration unlikely to unwind the tariffs in 2021.

Ongoing Section 301 Actions Launched Under the Trump Administration

  • President Trump has levied retaliatory tariffs of up to 25 percent on four “lists” of Chinese goods valued annually at $370 billion, including both finished products and manufacturing inputs, in response to alleged Chinese intellectual property rights violations.
  • The US Trade Representative (USTR) underwent a request process under which certain products were excluded from the tariffs, but most granted exclusions expired on December 31, 2020, and the few that were extended were only for COVID-19 related reasons.
  • Litigation seeking to invalidate the latest two lists is pending in the US Court of International Trade, but any relief is not likely to come for several years.
  • On January 7, 2021, the President is set to impose a new 25 percent tariff on $1.3 billion worth of French handbags, cosmetics, and soaps in response to its digital services tax, and USTR has imposed and still plans to impose more r Section 301 tariffs against the European Union in a longstanding dispute over US WTO rights in large civil aircraft.
  • The Treasury Department recently labeled Vietnam a currency manipulator, increasing the likelihood that President Trump will impose a Section 301 tariff against Vietnamese goods before the end of his term.

A Cautious Approach Under the Biden Administration

  • Although the President-elect will likely maintain the status quo with China, for the time being, it is possible that the Biden Administration will establish new exclusion processes to reduce the impact on US domestic production.
  • While the Biden Administration’s multilateral approach in dealing with unfair country trade violations makes new Section 301 actions less likely, it will be very difficult politically for President-elect Biden to eliminate altogether the Section 301 tariffs already in place.
  • While expressing a desire to work with China on its unfair trade practices and expressing disfavor toward the retaliatory tariffs, President-elect Biden has emphasized strengthening domestic production and has nominated former China enforcement head Katherine Tai as his USTR.

How We Can Help

Arent Fox will continue to monitor the Trump Administration’s final Section 301 actions and the incoming Biden Administration’s actions in this area. We can assist companies in understanding the application of these tariffs and identify opportunities for tariff exclusions and other mitigation initiatives.

201 Food Fight in 2021 and Why You Should Care

The Trump Administration brought back to life Section 201 safeguard measures to protect domestic industries from global imports. The move sets the groundwork for additional import investigations to come. We expect the International Trade Commission (ITC) to expedite the process.

Ongoing Cases, Litigation, and Outlook

  • The ITC recommended extending the Large Residential Washers safeguard measures.
  • Domestic importers challenged actions by the US Trade Representative (USTR) with respect to bifacial modules in the Solar safeguard, which is still unresolved and will provide insight into the Executive Branch’s authority to modify safeguard measures.
  • More recently, the ITC instituted a global Section 201 Investigation into Blueberries, on the USTR’s (not the industry’s) behest.
  • The ITC instituted global monitoring factfinding investigations on fresh or chilled strawberries and bell peppers. These factfinding investigations may expedite investigations into whether Section 201 safeguard measures are necessary to remedy injury by imports.
  • The ITC received a request from the USTR to institute a global, monitoring factfinding investigations on squash and cucumbers for the same purpose.

What to Know

  • The ITC’s determination in the Blueberries investigation will be submitted to the President by March 29, 2021. The President cannot act without first seeing this report.
  • Strawberries, Bell Peppers, Squash, and Cucumbers are likely close behind.
  • We believe it is possible the Biden Administration will not request any additional investigations, but these investigations already in motion will continue and recommendations will be presented to the new President.
  • Still, President-elect Biden may reject any findings and recommendations by the ITC. Tariffs imposed under Section 201 often invite retaliation by the affected party so let’s hope these cases disappear.  

How We Can Help

Arent Fox attorneys have been deeply involved in the ITC’s Section 201 investigations, monitoring proceedings, and related litigation. We can help guide you through general questions about the investigations and all the way through the process in the event you may be impacted by these additional tariffs.

US Steel Import Enforcement – Licensing Changes For 2021 Require Origin Where Steel is “Melted and Poured”

As of October 13, 2020, changes to the Steel Import Monitoring and Analysis (SIMA) System are in effect.

Changes to SIMA Requirements

  • SIMA reporting now requires imports to specify the country of “melt and pour” in addition to the country of origin and the country of export for crude steel. This is defined as the original location where the raw steel is (1) first produced in a steel-making furnace in a liquid state, and then (2) poured into its first solid shape (semi-finished or finished).
  • SIMA license requirements, set to expire in 2022, have been extended indefinitely and the scope of goods requiring licenses has been expanded.
  • The value limit for shipments qualifying for “low value” licenses has been increased from $250 to $5,000.
  • The Department of Commerce (DOC) has launched a modernized online platform for importers to apply for licenses. Though legacy licenses will be carried over to the new system, users will need to re-register to activate their accounts.
  • DOC has announced a corresponding Aluminum Import Monitoring and Analysis (AIM) system, which will take effect on January 25, 2021. The AIM system requires importers to report the “country of smelt” for the largest and second-largest volume of primary aluminum, but not the country of pour.

What to Know

  • The addition of the country of melt and pour on SIMA licenses requires importers to track new information. We recommend adding this field to mill certificates for all shipments requiring licenses.
  • The online platform should be used for qualifying shipments as of October 2020.
  • This expansion of SIMA data reporting requirements is clearly designed to provide the DOC with new tools to detect US import surges which could lead to more stringent enforcement efforts and the imposition of new or increased US tariffs. These actions also permit a more targeted application of other import restrictions, such as Section 232 tariffs. 
  • Illegal transshipment of steel imports into the US will continue to be a priority enforcement area in the Biden era.

How We Can Help

The reporting of additional import data often triggers trade facilitation or trade enforcement. The Arent Fox team has a particularly strong understanding of the global steel industry and past US trade actions in this arena. We can help company executives understand the new changes to the SIMA rules as well as provide strategic advice on how to improve a company’s trade compliance and mitigate its exposure to risks of unwarranted penalties and import delays.

US 232 Tariffs – Changes in the Exclusion Process

On December 14, 2020, the Department of Commerce, Bureau of Industry and Security (BIS) published a notice announcing changes to the process for seeking exclusions from the 25% tariff on steel and 10% tariff on aluminum.

Changes to the Exclusion Process

  • BIS has adopted Generally Approved Exclusions (GAEs) for specific products. GAEs can be used by any importer to avoid payment of the additional tariffs without making an exclusion request. The first approved tranche of GAEs, which includes 108 steel and 15 aluminum products, will take effect on December 29, 2020. There is no retroactive relief for products subject to this type of exclusion.
  • There is now a streamlined review process for “No Objection” requests, requiring BIS to “immediately assess” and automatically grant requests without objections that do not pose national security concerns.
  • Requesters will now need to submit a certification to ensure that the volumes listed in exclusion requests are consistent with past use of steel or aluminum. For products on which they previously received an exclusion, the requester must certify that the full amount of the prior exclusion was used or note a “legitimate business reason” for the remaining volume.
  • The definition of the term “immediately” has been revised for purposes of the exclusion process to mean “produced and delivered within eight weeks or, if not possible, then produced and delivered within a time frame that is equal to or earlier than that needed by the requester as demonstrated by the time required to obtain the product from the requester’s foreign supplier.”

What to Know

  • The issuance of GAEs is a welcome development for importers. The reference to a “first” tranche means that there will be more GAEs to come. Though BIS notes that GAEs will be issued without involvement from the public, this is an area where coordinated lobbying efforts by US stakeholders will likely be focused going forward.
  • New certification requirements will require better tracking of exclusion use and more targeted projections for the volumes requested in new submissions.
  • President-elect Biden has said that he will conduct a review of the Section 232 tariffs, but we do not expect any immediate changes to the tariff rates or to the exclusion process. Given the administration’s focus on American workers and reshoring, it is likely the tariffs will remain in effect in some form, but with modifications to reduce the adverse impact on US downstream manufacturing competitiveness and to repair some key trading relationships. We expect more focus on China.   

How We Can Help

Our team at Arent Fox can provide strategic advice on duty mitigation related to Section 232 tariffs as well as the process for seeking and filing for an exclusion.

New Subsidy Analysis Resulting in Higher Rates: Currency Undervaluation in Vietnam and China

For the first time, and then again in quick succession, the Department of Commerce (DOC) applied its new regulations on Treatment of Alleged Currency Undervaluation, published in February 2020.

DOC’s Determinations

  • On October 30, 2020, the DOC preliminarily determined that both respondents in PVLT (Passenger Vehicle and Light Truck) Tires investigation were subsidized in 2019 by the government of Vietnam’s undervaluation of the Vietnamese dong.
  • On November 24, 2020, the DOC preliminarily determined that China’s undervaluation of the Renminbi is a countervailable subsidy.

What to Know

  • DOC’s regulations were a long time in the making, however, the final rule released in February 2020 does not shed much light on the topic past its general subsidy analysis, providing the DOC with a number of “normally” escape hatches.
  • It is unknown whether the DOC, at least preliminarily, will for non-market economies, analyze whether
    • a country’s currency is undervalued; and
    • whether that undervaluation equates to an unfair, countervailable subsidy.
  • Although we expect litigation on the issue, we do not expect a major rollback during the Biden Administration.

How We Can Help

Arent Fox attorneys are closely monitoring how the DOC and Treasury will apply the currency undervaluation rule, and the arguments to be made that best benefit our clients. To discuss updates regarding currency undervaluation investigations and how you may be impacted by additional countervailing duty rates, please contact a member of the Arent Fox team.

Products from Vietnam Facing Additional Tariffs: Section 301 Currency Undervaluation

The Trump Administration pulled Vietnam deeper into its trade offensive under the guise of currency manipulation, and we do not expect the Biden Administration to provide an immediate reprieve. On October 8, 2020, the United States Trade Representative (USTR) published a notice of initiation of an investigation pursuant to Section 301 of the Trade Act of 1974 into the acts, policies, and practices of Vietnam relating to currency practices, opening the door for additional tariffs on imports from Vietnam. 

This Section 301 Investigation 

  • The USTR acted on evidence showing that the Vietnamese dong was undervalued. 
  • A public hearing for parties to voice their opinions to the USTR was held on December 29, 2020, where many US businesses voiced opposition to the tariffs. 

What to Know

  • Post-hearing briefs are due January 7, 2020, before the transition from the Trump Administration to the Biden Administration. 
  • Although we expect the USTR to move quickly, for recommendations to be presented to the Trump Administration, USTR must complete the investigation, providing its conclusions and proposed actions to the public, and allow for comment.
  • President-elect Biden may reject any findings and recommendations by the USTR after inauguration. 
  • On December 16, 2020, the Department of the Treasury announced that both Vietnam and Switzerland are currency manipulators. This determination will likely inform policy actions to address the underlying causes of currency undervaluation. 
  • Considering the Biden Administration’s strong comments to support US business and to fully consider all of the current trade actions before making any changes, we do not expect the Biden Administration to end this investigation. It remains unclear what additional actions may be taken if these currency cases proceed to a remedy phase. 

How We Can Help 

Arent Fox is an experienced advisor on the application of Section 301 tariffs and the tariff exclusion request process. Specific to this investigation, Arent Fox can provide updates regarding currency undervaluation investigations and how your company may be impacted by additional tariffs.

Arent Fox’s Advance Look at Hot Button Trade Issues For 2021

Our Trade Team Analyzes What Happens Next in Six Critical Areas

Looking towards 2021 and a new Administration, Arent Fox’s International Trade & Investment group has prepared a series of primers on six key areas that can impact your business: The Biden Transition, Special Tariffs, Customs, Trade LitigationExport Controls, and Trade Policy. Each section contains short overviews of the critical trends in those areas. Click the links below to access each section.

To download a PDF copy of our complete analysis, click here


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