On Monday, July 30, 2018, the World Trade Organization (WTO) released new resources regarding trends in global trade. The resources issued by the WTO are the latest editions of the annual publications of World Trade Statistical Review, Trade Profiles and World Tariff Profiles.

World Trade Statistical Review provides an in-depth analysis of trends in global trade, including the types of goods and services being traded.

Trade Profiles provides a concise overview of global trade by providing key indicators on trade for 197 economies and highlighting the breakdown of exports and imports for each economy.

World Tariff Profiles is a joint publication of the WTO, the United Nations Conference on Trade and Development (UNCTAD) and the International Trade Centre (ITC). The publication provides comprehensive information on the tariffs and non-tariff measures imposed by over 170 countries and customs territories.

Additional information about the publications and additional data can be found on the WTO’s website with links to download the publications.

On July 10, 2018, the Trump Administration announced a list of proposed tariffs on $200 billion of Chinese goods pursuant to Section 301 of The U.S.  Trade Act of 1974.  The proposed products are potentially subject to a 10 percent ad valorem duty. The United States Trade Representative (USTR) has targeted products from the “Made in China 2025” sectors in response to China’s unfair practices and policies with respect to foreign, including U.S., technologies and intellectual property.  Made in China 2025 is a strategic plan to make China a leader in a wide range of key global industries, such as advanced technologies, aerospace, and telecommunications, among others.

The list of proposed tariffs and the process for public notice and comment are provided in the Federal Register.  USTR is providing an opportunity to submit comments on the proposed list, which should include a discussion of the potential harm to U.S. interests, the potential effectiveness of tariffs on the proposed products, and other relevant information.  The important deadlines are as follows:

  • July 27, 2018 – Due date for filing requests to appear and for filing pre-hearing submissions
  • August 17, 2018 – Due date for the submission of written comments
  • August 20-23, 2018 – Public Hearing
  • August 30, 2018 – Due date for the submission of post-hearing rebuttal comments

At the conclusion of the public comment period and the public hearing, USTR will consult with federal agencies, such as the Department of Labor, Department of Commerce, and Department of Homeland Security, to determine the final list of products subject to the 10 percent ad valorem duty.  There are no statutory timeframes for the publication of the final list, though USTR is expected to move as quickly as possible.

Fox Rothschild’s International Trade team is actively involved and prepared to assist companies that wish to participate in this process. Please contact Brittney Powell or Lizbeth Levinson for more information.

 

 

In a recent opinion, the US Court of International Trade (CIT) found that certain fabric covered pool floats should be classified as plastics — not textiles — for tariff purposes.  Despite the textile elements of the floats, the sequential application of the General Rules of Interpretation led the CIT to find that the air-filled plastic bladder which allowed the product to float in water gave the floats their “essential character.”

The products at issue are floats for a swimming pool which a generally designed with an outer perimeter containing a plastic bladder which is covered with fabric.  Inside the perimeter is a fabric mesh which “suspends” the user’s body at or just below the water’s surface.  The floats also contain a flexible steel rod around the perimeter which allowed the floats to be folded neatly for storage and then “sprung” into a usable position. US Customs and Border Protection (CBP) had classified the floats as textiles under subheading 6307.90.98 for “[o]ther made up articles, including dress patters: Other: Other” and subject to a 7% duty.  The producer of the floats asserted that the products should be classified under subheading 3926.90.75 for “[o]ther articles of plastics and articles of other materials of headings 3901 to 3914: Other: Pneumatic mattresses and other inflatable articles, not elsewhere specified or included” and subject to 4.2% duty.

At the core of the dispute was the intersection of the textile and plastic elements of the the products. The CIT began its analysis under General Rule of Interpretation (GRI) 1 and determined that neither proposed heading, 6307 or 3926, fully described the floats which contained significant components of both textile and plastic.  CBP argued that, like life jackets which are classified as textiles, the were no separate components to the textile floats which required evaluation beyond GRI 1. Nevertheless, the Court found the textile and plastic components to be distinct and, therefore, pursuant to GRI 2, the mixed-material products were to be evaluated in accordance with GRI 3. Under GRI 3(b), if a material or component of the imparts the “essential character” of the good, then product should be classified based on that defining material or component.

CBP argued that the product was entirely covered in textiles and, significantly, without the textile mesh which suspends the user, the float would not function as intended.  The CIT, however, determined that the air-filled plastic bladders around the perimeter where the component which gave the floats their essential character.  As the Court found, even if one conceded that the mesh component is necessary for proper function, without the bladders, the mesh would lack support to help the user float. Accordingly, the CIT determined that heading 3926 was the correct heading.

In a separate part of its opinion, the CIT declined to classify certain floats designed for babies as general exercise equipment in part because the packaging lauded the products ability to keep babies “comfortable and happy.”

 

On June 27, 2018, a coalition of U.S. steel users, the American Institute for International Steel (“AIIS”), and two steel trading companies filed a complaint in the United States Court of International Trade (“CIT”) challenging the Trump Administration’s imposition of a 25% tariff increase for steel products.  AIIS’ challenge, however, is not made to the scope of the tariff or the countries effected, but to the constitutionality of the tariff itself.

The tariff increase is was enacted in March 2018 under Presidential Proclamation 9705. The President has authority to make such proclamations pursuant to Section 232 of the Trade Expansion Act of 1962 (19 U.S.C. 1862).  Section 232 directs the Secretary of Commerce, upon the application of any department, agency or interested party, to undertake an investigation of the effect of the importation of a product on national security.  The President then has 90 days to determine whether to concur with the finding of the Secretary with respect to the potential national security implications of a product.

AIIS alleges that Section 232 is an unconstitutional delegation of Congress’s exclusive authority to lay duties and regulate commerce with foreign nations under Article I of the U.S. Constitution.  Specifically, AIIS asserts that the broad definition of “national security” under Section 232 lacks an “intelligible principle” to circumscribe the President’s authority under the statute. Under Section 232, the President may consider the “close relation” of economic warfare and our national security, including the effect on domestic industries and the “weakening of our internal economy” in making a determination regarding the imposition of tariffs in the name of national security.

As evidence of the alleged lack of an intelligible principle, AIIS points to the fact that the President is not required consider, for example, the source of products (i.e., whether the products are imported from close allies), the specifications and use of the products as they relate to national security concerns (i.e., the fact that some steel imports are used to manufacture weapons or other products that aid national security), or the possible negative economic ramifications of protectionism on national security grounds (i.e., economic retaliation).  In addition, Section 232 does not contain any provision for judicial review of the President’s determination.

The government has not yet filed a response to the Complaint and whether the Court will entertain these constitutional challenges remains to be seen.  Nevertheless, as protectionist policies and threats of trade wars continue to mount, all industries must continually evaluate not only the effect of changes in relevant tariffs, but consider whether novel challenges such as those raised by AIIS may be necessary to protect the rights of industry members.

On Tuesday, May 29, 2018, the U.S. Court of International Trade (CIT) ruled that the anti-dumping and countervailing duties for steel nails from Vietnam do not apply to zinc wall anchors.

In August 2016, OMG Inc. asked the Department of Commerce to determine whether wall anchors were within the scope of the anti-dumping and countervailing duties imposed on steel nails imported from Vietnam. The Department of Commerce determined that zinc wall anchors from Vietnam that were imported by OMG Inc. fit unambiguously within the scope of the anti-dumping and countervailing duty orders.

The CIT considered the common meaning of the term “nail” by consulting dictionary meanings and trade usage, and it reversed the previous scope ruling from the Department of Commerce. The CIT determined that because OMG’s zinc anchor is a unitary article of commerce, the entire product must be considered as a whole, and the entire item did not fit within the definition of a nail. Based on trade usage, the pin (a component) is considered a nail, but the unitary article of commerce is considered an anchor, not a nail.

The CIT remanded the case to the Department of Commerce for further consideration consistent with the CIT’s opinion.

The case is OMG Inc. v. United States, case number 1:17-cv-00036-GSK, in the U.S. Court of International Trade. You can read the full opinion here.

In a May 22, 2018 Opinion and Order, the U.S. Court of International Trade (“CIT) upheld the U.S. Department of Commerce’s (“Commerce”) use of a Thai nail producer, rather than a Dubai producer, as a surrogate for the calculation of anti-dumping duties to be assessed on two nail producers from the United Arab Eremites (“UAE”).  As a result, the nails will be assessed an 0.87% duty rate, not the 7.8% rate that the nails had been preliminary assigned.

In determining the appropriate anti-dumping duty to be assessed, Commerce had considered using, among others, the financial statements of Overseas International Steel Industry LLC (“OISI”), a Dubai-based subsidiary of one of the UAE nail producers at issue.  Commerce determined, however, that the subsidiary acted as “toll processor,” meaning that it was a service provider that used subcontractors to convert raw materials to finished products, but did not actually produce nails itself.  Accordingly, because OISI was not a producer, Commerce found that its financial records lacked some significant line items, including for material costs and inventory.  Therefore, Commerce determined that the financial records of a Thai nail producer, L.S. Industry Co. Ltd. (“LSI”), were a more fitting basis for its calculation of a constructed value profit on which the anti-dumping duties were based. As a result of using LSI’s financial statements, the anti-dumping duty calculation fell from the 7.8% rate contained in Commerce’s preliminary determination to 0.87%.

Before the CIT, a domestic nail producer argued that Commerce had erred in its determination that OISI was not the proper analog because OISI uses the same raw materials and production process as the UAE producer and that the financial statements sufficiently reflect all necessary information, such as material costs and inventory.

The CIT determined that, even if the domestic producer’s arguments were true, there was still not a sufficient basis to overcome “the presumption of administrative regularity” that insulates Commerce’s decision making.  The CIT found that Commerce had concluded that OISI was a toll producer and, therefore, did not consider its financial statements.  Instead, Commerce determined that LSI’s was the best surrogate and based its well-supported analysis on LSI’s financials.  Ultimately, the CIT found that there was no clear error demonstrated in the record which would warrant the Court’s substitution of its judgment for that of Commerce.

 

On May 8, President Trump announced that the United States would withdraw from the Iran nuclear deal completed in 2015, otherwise known as the Joint Comprehensive Plan of Action (JCPOA). The scuttling of the deal re-imposes sanctions on the country that had been suspended as part of the agreement. In an Alert published Thursday, partner Nevena Simidjiyska examines this development and the specific sanctions involved, and discusses its impact on U.S. companies doing business with Iran.

The White House, Washington, D.C.Pursuant to the JCPOA, which was signed under President Obama in 2015, Iran agreed to limit its nuclear program by curbing its enrichment of uranium, spent fuel processing, and research and development activities. In exchange, the U.S. lifted most “secondary sanctions” targeting non-U.S. persons and companies that transact business with Iran and allowed the importation of certain Iranian products into the U.S. In addition, the U.S. allowed non-U.S. entities that are owned or controlled by U.S. persons to engage in certain transactions with Iran under OFAC’s General License H. A number of foreign affiliates of U.S. companies started doing business and made investments in Iran pursuant to these authorizations.

The U.S. government will reinstate all sanctions against Iran that were lifted by the JCPOA, including General License H. The reinstatement will take place in two phases – 90 and 180 days after the May 8 withdrawal – to allow U.S. and non-U.S. businesses to wind down their existing business with Iran. The sanctions that will be re-imposed and the authorizations that will be revoked are listed below. All parties engaged in any of the activities listed below should take necessary steps to wind down these activities by the dates indicated to avoid sanctions and enforcement actions under U.S. law.

To read the full text of the Alert, we invite you to visit the Fox Rothschild website.

In a recent decision, the Federal Circuit reversed a holding by the US Court of International Trade (“ITC”) and held that the US Department of Commerce (“Commerce”) should perform a substantial transformation analysis to determine the country of origin before applying circumvention analysis.

The case centered on 2010 Antidumping (“AD”) and Countervailing Duties (“CVD”) Orders (the “Order”) regarding the importation of oil country tubular goods (“OCTG”) from China. Generally, OCTG are steel tubes used in the drilling and extracting oil.  The Orders expressly referenced both unfinished, “green” tubes and those that had been finished through heat treating, threading, or other processes.

In subsequent evaluations, United States Customs and Border Protection (“Customs”) determined that OCTG that had left China as green tubes but had been subject to heat treatments in third countries had been “substantial transformed” so as to assume the country of origin of the finishing country and not be subject to the AD and CVD. Nevertheless, in a 2014 Scope Ruling Commerce determined that heat treating did not substantially transform the OCTG and, therefore green tubes finished other countries were subject to the Orders.

Bell Supply, a U.S. steel importer which arranges for the heat treatment and finishing of OCTG in Indonesia of green tubes from China challenged the 2014 Scope Ruling before the ITC.  Bell Supply argued that Commerce was improperly expanding the scope of the Orders which contained no reference to tubes finished in third countries such as Indonesia.  Bell Supply asserted that Commerce should be conduct an inquiry as to whether the Indonesian tubes were an effort to circumvent the AD or CVD under 19 U.S.C. 1677j, but not otherwise evaluate the country of origin.  The ITC agreed that Commerce’s reading expanded the scope of the Orders beyond their express text. Moreover, the ITC held that Commerce should not have applied a substantial transformation test on the tubes from Indonesia and should only have performed a circumvention inquiry if it believed the foreign producers were indeed attempting to evade AD or CVD.

On remand, Commerce again determined that the OCTG fell within the purview of the Orders.  This time, Commerce focused on the specific language of the Orders which assess AD and CVD on both finished and unfinished OCTG.  The ITC again rejected Commerce’s determination, finding that the Orders were silent with respect to the circumstances at issue — a green tube finished in third country.

In the Final Results of Second Redetermination Pursuant to Remand (the “Second Redetermination”), Commerce concluded that OCTG finished in third countries, despite their initial production in China, were not subject to the Orders.  Commerce also performed a circumvention inquiry and found no evidence of circumvention.

A group of U.S. domestic steel producers appealed Commerce’s subsequent scope ruling sustaining the Second Redetermination.  Consistent with its prior determinations, the ITC found that Commerce’s revised approach correctly determined that the the OCTG from third countries are not covered by the Orders.  On appeal the domestic steel producers argued that: (1) the OCTG were covered by the Orders from the time they were produced in China through their importation into the United States; and (2) that the OTCG should be considered “finished” OTCG “from China”.

The Federal Circuit quickly dispensed with the first argument, finding that OTCG were imported as finished products and, therefore, could not still be considered unfinished products as they left China.

With regard to the second argument, the Federal Circuit found that Commerce’s determination should begin with a determination – under the substantial transformation analysis –  as to the origin of the finished products.  The Federal Circuit rejected the argument that this constitutes an expansion of the scope of the Orders.  Instead, the Court held that the determination of origin is the first step because if a product is not substantially transformed in a third country, the origin may remain in a country subject to AD and CVD.  If the product is determined not to originate from a country subject to an AD or CVD Order, however, Commerce should then perform a circumvention analysis pursuant to section 1677j.

The Federal Circuit’s holding appears to have established a two part evaluation for products which originate from countries subject to AD and CVD.  One potential limitation on the broad application of this new test may be the specific reference in the Orders to both finished and unfinished OTCG which set up a central dispute regarding the intended scope of the Orders.  Nevertheless, any company involved in the importation of goods which are modified in third countries needs to be aware of this holding and evaluate its products under the analysis announced.

 

 

In an earlier post, we examined the U.S. Court of International Trade’s (CIT) opinion in which it sustained the U.S. Department of Commerce’s (“Commerce”) shift of position on antidumping duties for frozen fish fillets from Vietnam.

Two recently filed complaints brought before the CIT, however, have challenged Commerce’s application of antidumping duties to certain separate-rate respondents. The plaintiffs in the respective complaints, various Vietnamese fish fillet producers, allege that Commerce has improperly assigned them a duty rate from an outdated, prior review.

In the most recent administrative review of antidumping duties on Vietnamese fish fillets, Commerce calculated certain duties based on the sole mandatory respondent, GODACO Seafood Joint Stock Company (“GODACO”).  Commerce determined that GODACO failed to cooperate to the best of its ability and, accordingly, assigned duty rate of $2.39 per kilogram of fillets based on the adverse facts available. Commerce preliminarily applied this same antidumping duty to all non-mandatory respondents, including the plaintiff companies.

When Commerce released the final results of its administrative review on March 23, 2018, however, the plaintiff companies were assigned an antidumping duty of $3.87 per kilogram, the antidumping duty rate set as part of a new shipper review completed more than five years ago.

In the Decision Memorandum accompanying the results, Commerce asserted that it was bound to “pull forward” the prior duty rate under the CIT’s decision in Albemarle Corp. v. United States, Case No. 2015-1288, 2015-1289, 2015-1290 (May 2, 2016).  The plaintiff companies dispute the application of Albemarle, asserting that they have been unreasonably and punitively assigned a duty rate which exceeds the most recent antidumping duty by more than a dollar.  Moreover, the plaintiff companies note that duty rate assigned to them based on their status as separate-rate respondents is now higher than other Vietnamese companies who did not respond or cooperate with U.S. authorities in any way.

Commerce has not yet filed its response defending this alleged departure from agency practice.  If Commerce’s response relies on Albemarle as controlling precedent, however, it could signal a significant shift in the Department’s policies.

On March 19, 2018, the Department of Commerce published procedures for product-specific exclusions from the Section 232 tariffs on steel and aluminum products, and has begun to accept exclusion requests.  Each exclusion request will be available for public comment for 30 days after filing. After the 30-day public comment period, the Department of Commerce will review the exclusion request and any objections, and will make a determination. According to Commerce, processing of exclusion requests will normally not exceed 90 days.  Determinations will also be posted for public review on regulations.gov. In evaluating exclusion requests, the Department of Commerce, in consultation with other Administration officials, will consider whether a product is produced in the U.S. of a satisfactory quality or in a sufficient and reasonably available amount.

Only individuals and organizations operating in the U.S. that use steel or aluminum in business activities (e.g., construction, manufacturing, or supplying steel or aluminum to users) in the U.S. may request an exclusion. Separate requests must be submitted on each distinct type and dimension of steel or aluminum product to be imported. The request must include a full factual description of the specific product, including: 1) the single type of steel or aluminum product required using a 10-digit HTSUS code, including specific dimensions; 2) the quantity of product required (in kilograms) under a one year exclusion; and 3) a full description of the properties of the steel or aluminum product, including chemical composition, dimensions, strength, toughness, ductility, etc. Only fully completed exclusion requests will be considered.

Any individual or organization in the U.S. may file objections, but Commerce will only consider information directly related to the exclusion request. Organizations submitting objections must provide specific information on the product that their company can provide that is comparable to the steel or aluminum product that is the subject of the exclusion request. Such information should include the steel or aluminum products manufactured in the U.S., their production capabilities in the U.S., a discussion on the suitability of their products for the application(s) identified by the exclusion requestor, and the delivery time and availability of the products they manufacture relative to the specifications provided.

Approvals will be made on a product basis and are limited to the applicant, unless the DOC approves a broader application.

The forms for submitting steel and aluminum exclusion requests, and objections to specific exclusion requests, are available on regulations.gov.  The steel docket number is BIS-2018-0006 and the aluminum docket number is BIS-2018-0002.

Please contact Brittney Powell or Lizbeth Levinson for questions about applying for an exclusion from the steel or aluminum tariffs.