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various Vietnamese fish fillet producers, allege that Commerce has improperly assigned them a duty rate from an outdated, prior review.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.

On March 8, 2018, the President of the United States issued two Presidential Proclamations announcing the imposition of tariffs on imported steel and aluminum products under Section 232 of the Trade Expansion Act of 1962.  This law allows the President to impose additional tariffs on imports when national security is impacted.

The proclamations impose worldwide tariffs on all countries (with a few exceptions as noted below) of 10% on aluminum imports and 25% on steel imports.  These tariffs apply in addition to any antidumping or countervailing duties collected on affected imports.  The tariffs are imposed on imports of steel mill products, which are defined at the 6-digit level of the Harmonized Tariff Schedule (“HTS”) 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 codes.  The tariffs are imposed on imports of the following aluminum articles: (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.

The Customs and Border Protection (“CBP”) will begin to collect tariffs on goods entered, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern daylight time on March 23, 2018, and the tariffs will continue unless actions are expressly reduced, modified, or terminated.  There is no set duration for tariffs; however, the Department of Commerce will monitor and review the status of imports with respect to national security on an ongoing basis.  Importers of record are liable for the payment of tariffs to CBP.  CBP has instructed importers to report the following HTS classifications for imported merchandise subject to the additional duty (in addition to the regular HTS classifications): HTS 9903.80.01 (25 percent ad valorem additional duty for steel mill products) and 9903.85.01 (10 percent ad valorem additional duty for aluminum products).

Country-Wide Exemptions

Certain countries have been granted exemptions from the tariffs at the President’s discretion, which apply to imports based on the country of origin, not the country of export.  As of the date of this post, imports from the following countries have been exempted until April 30, 2018: Canada, Mexico, Australia, Argentina, South Korea, Brazil and  member countries of the European Union (Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom).  As of May 1, 2018, imports from all countries will be subject to the tariffs.  Additional countries may be exempted, and the status of the currently exempted countries may change after May 1, 2018.

Please contact Brittney Powell or Lizbeth Levinson for the latest developments regarding the Section 232 steel and aluminum tariffs.

The Trade Facilitation Agreement (TFA) marked its first anniversary last week. The TFA entered into force on February 22, 2017 when the World Trade Organization (WTO) obtained the required two-thirds acceptance from its members.

The WTO members are continuing to work towards fully implementing the TFA. Implementation of the TFA is expected to have positive effects on international trade, with a particular emphasis on the benefit for developing and least developed countries (LDCs).

One unique component of the TFA is the ability of developing countries and LDCs to set their own timetable for implementation based on that county’s capabilities. Developed countries committed to immediate implementation of Category A commitments from the date the TFA entered into force. Developing countries and LDCs have committed to implementation of commitments that have been designated as Category A, and these countries have more time for Category B and Category C commitments.

According to the TFA Database, as of the one-year anniversary, 107 members have notified their Category A commitments, 49 their Category B commitments and 39 their Category C commitments.

The TFA aims to accelerate the movement of goods between countries by increasing the cooperation between customs and other appropriate authorities on trade facilitation and customs compliance. Read more about the TFA here.

On January 30, 2018, the Alliance Rubber Co. filed antidumping (“AD”) and countervailing duty (“CVD”) petitions on rubber bands from China, Sri Lanka, and Thailand. The petitioner alleges that the subject merchandise from these countries is being sold in the U.S. at less than fair value. The petitioner also alleges the governments of China, Sri Lanka, and Thailand are subsidizing the foreign producers, giving them an advantage in the U.S. market. Importers of subject merchandise are liable for any potential antidumping or countervailing duties imposed.

The U.S. International Trade Commission (“ITC”) will investigate to determine whether the U.S. industry is being materially injured or threatened with material injury due to imports of subject merchandise from China, Sri Lanka, or Thailand. The U.S. Department of Commerce will determine whether the foreign companies are selling at less than fair value, or whether the foreign exporters are being subsidized by the foreign governments. Affirmative findings from both agencies are required for either AD or CVD duties to be imposed. The ITC will issue its preliminary determinations in the AD/CVD investigations by March 16, 2018. Unless extended, the Department of Commerce must issue its preliminary CVD determinations by April 26, 2018, and its preliminary AD determinations by July 10, 2018. The deadlines for the Department of Commerce’s preliminary determinations are subject to postponement.

The petitioner alleges the following dumping margins:

  • Thailand: 60.82 percent
  • China: 27.16 percent
  • Sri Lanka: 48.63 percent

Scope

Merchandise covered by these proceedings is currently classified in the Harmonized Tariff System of the United States (“HTSUS”) under sub-heading 4016.99.35.10 (Rubber Bands Made of Vulcanized Rubber, Except Hard Rubber, of Natural Rubber). Notably, this sub-heading pertains only to vulcanized rubber bands. The written description of the scope, provided below, is dispositive.

The products subject to the AD/CVD investigations are bands made of bands made of vulcanized rubber, with a flat length, as measured end-to-end by the band lying flat, no less than 1/2 inch and no greater• than 10 inches; with a width, which measures the dimension perpendicular to the length, of at least 3/64 inch and no greater than 2 inches; and a wall thickness from .020 inch to .125 inch. Vulcanized rubber has been chemically processed into a more durable material by the addition of sulfur or other equivalent curatives or accelerators. Subject products are included regardless of color or inclusion of printed material. The scope includes vulcanized rubber bands which are contained or otherwise exist in various forms and packages, such as, without limitation, vulcanized rubber bands included within a desk accessory set or other type of set or package, and vulcanized rubber band balls, but excludes Bedford Elastitags®, and bands that are being used at the time of import to fasten an imported product.

Projected Schedule

Petition is Filed – January 30, 2018
DOC Initiates Investigations – February 20, 2018
ITC Staff Conference – February 20, 2018
ITC Post-Conference Briefs – February 23, 2018
ITC Preliminary Determinations Issued – March 16, 2018
DOC Preliminary CVD (un-extended) – April 26, 2018
DOC Preliminary AD (un-extended) – July 10, 2018
DOC Preliminary CVD (extended) – July 2, 2018
DOC Preliminary AD (extended) – August 29, 2018

For more information, please contact Lizbeth Levinson  or Brittney Powell.

On January 12, 2018, President Trump issued a statement announcing that he will approve certain sanctions waivers necessary in order to preserve the Iran nuclear deal. At the same time, he called on the U.S.’s European allies to work with the U.S. to fix the flaws of the Iran nuclear deal (the Joint Comprehensive Plan of Action or the JCPOA), or he would terminate the deal.

President Trump began his statement by condemning the Iranian regime as the world’s leading state sponsor of terror. He also added 14 more Iranian individuals and entities to the Specially Designated Nationals and Blocked Persons List.

In his statement, President Trump explained that he is open to working with Congress on bipartisan legislation dealing with Iran. However, any bill must include four critical components. First, the bill must allow immediate inspection by international inspectors at all nuclear sites. Second, it must demand that Iran not come close to possessing nuclear weapons. Third, there must be no expiration date on these requirements. Finally, the bill must subject Iran’s long-range missile program to the same sanctions imposed on its nuclear weapons program.

Although President Trump waived the application of certain nuclear sanctions, he stated that “this is a last chance.” He called on the U.S.’s European allies to fix the Iran deal and made it clear that if the allies cannot agree on a new supplemental JCPOA, President Trump will not waive sanctions again to stay in the deal. The President also reserved the right to withdraw from the deal immediately if he determines that an agreement is not within reach.

The President’s full statement can be found here.

In an attempt to become a modern hub in Southern China for domestic and international arbitration, the Government of Shenzhen announced at the end of December 2017 that it was combining two arbitration centers. The previous Shenzhen Court of International Arbitration (“SCIA”) and the Shenzhen Arbitration Commission will be combined into one center called the Shenzhen Court of International Arbitration.

The merger of the two institutions will help integrate the resources of both institutions and further build the Shenzhen arbitration platform.

This is part of China’s One Belt, One Road Initiative, which calls for investment in and development of trade routes in that region. The One Belt, One Road Initiative is part of the growth of Chinese exports and a push by China to expand its trading network.

Both the SCIA and the Shenzhen Arbitration Commission had jurisdiction to handle contract disputes and various types of commercial disputes. In December 2016, the SCIA promulgated new arbitration rules relying heavily on the UNCITRAL Arbitration Rules, which made the SCIA the first Chinese institution to make this move.

The UNCITRAL Arbitration Rules provide comprehensive procedural rules regarding arbitral proceedings arising out of commercial relationships. The UNCITRAL Arbitration Rules provide a model arbitration clause, set out rules regarding appointing arbitrators, and establish rules related to the effect and interpretation of the awards.

Once the combination is effective, cases submitted to either of the institutions will be handled by the SCIA. It is still unclear what rules will apply to cases that the parties had agreed to submit to the Shenzhen Arbitration Commission and which panel of arbitrators will be used to arbitrate those cases. The combination into one arbitration body does mean that arbitration rules consistent with international standards, like the UNCITRAL Arbitration Rules, will likely be applied to more cases in China.

In a customs classification case, Chemtall, Inc. v. United States, the U.S. Court of Appeals for the Federal Circuit affirmed a U.S. Court of International Trade (“CIT”) ruling that the vinyl polymer acrylamide tertiary butyl sulfonic acid was properly classified under the Harmonized Tariff Schedule of the United States (“HTSUS”).

The Federal Circuit was called on to distinguish between “Amides” and “Other” in a heading of the HTSUS that covers amides, their derivatives and salts thereof. The case considered the appropriate duty rate for the product that Chemtall, Inc. (“Chemtall”) is importing.

The HTSUS is a hierarchical structure for describing all goods in trade for duty, quota, and statistical purposes. Goods are classified in accordance with the General and Additional U.S. Rules of Interpretation, starting at the 4-digit heading level to find the most specific provision and then moving to the subordinate categories. The United States International Trade Commission maintains and publishes the HTSUS. However, the Bureau of Customs and Border Protection of the Department of Homeland Security (“CBP”) is responsible for interpreting and enforcing the HTSUS.

The Federal Circuit affirmed the CIT determination that the chemical product of the plaintiff-appellant Chemtall, acrylamide tertiary butyl sulfonic acid, is not an amide, but rather is a derivative of an amide.

The significance of this categorization is that derivatives of amides are subject to a higher duty rate, which is almost double that of amide imports. The categorization that Chemtall argued applied carries a 3.7% duty rate. However, the federal judge affirmed the decision of the CBP to apply the higher 6.5% duty rate for the product.

The full opinion of Chemtall, Inc. v. United States, case number 2016-2380, in the U.S. Court of Appeals for the Federal Circuit can be found here.

Some of the most important trade partners of the U.S. are raising concerns about the proposed U.S. plan to overhaul its tax code. The finance ministers of Europe’s five largest economies voiced concerns about the tax plan in a letter sent to Treasury Secretary Steven Mnuchin on Monday, December 11, 2017.

The letter was signed by Germany’s Peter Altmaier, France’s Bruno Le Maire, the U.K.’s Philip Hammond, Italy’s Pier Carlo Padoan and Spain’s Cristobal Montoro Romero.

The E.U. leaders are generally concerned that U.S. businesses will gain a competitive edge on international markets once the tax proposal is enacted. In the letter, the leaders voiced concern that the U.S. tax overhaul contains protectionist measures that could violate double-taxation treaties and breach the World Trade Organization (WTO) rules.

The letter mentions certain provisions in both the proposed House and Senate bills. Two provisions in particular have prompted pushback from the E.U. leaders.

First, the 20% excise tax provisions on payments to foreign affiliated companies that is included in the proposed House bill would impact payments that are made for foreign goods or services. The finance ministers said that this could discriminate in ways that are at odds with the WTO rules and impose a tax on profits of non-U.S. companies that do not have a U.S. permanent establishment.

The finance ministers also criticized the anti-abuse tax provisions of the proposed Senate bill. The letter states that the anti-abuse tax provisions would impact genuine commercial arrangements of payments to foreign companies taxed at an equivalent or higher rate than in the U.S. The letter further explains that this could be harmful for international banks and insurers because it would make cross-border, intragroup financial transactions subject to a 10% tax that would be non-deductible. The E.U. leaders are concerned that this would distort international financial markets.

In response to the letter, a Treasury spokesperson said that they “appreciate the views of the finance minsters” and are “working closely with Congress as they finalize the legislation.”

In consultation with the Department of State and pursuant to Executive Order 13662, the Director of the Office of Foreign Assets Control (“OFAC”) has updated Directive 4, which will expand sanctions on the Russian energy industry.

The new rules issued by OFAC prohibit certain activities by a U.S. person or within the United States, except where such activities are otherwise authorized by law or a license. The rules bar persons subject to U.S. jurisdiction from providing, exporting, reexporting (directly or indirectly) goods, services (except financial services), or technology in support of exploration or production for deepwater, Arctic offshore or shale projects that have the potential to produce oil in the Russian Federation, or in maritime area claimed by the Russian Federation and extending from its territory, and that involve any person determined to be subject to Directive 4.

Additionally, Directive 4 further prohibits the provision, exportation, or reexportation (directly or indirectly) of goods, services (except for financial services), or technology in support of exploration or production for deepwater, Arctic offshore, or shale projects that meet all three of the following criteria: (1) the project was initiated on or after January 29, 2018; (2) the project has the potential to produce oil in any location; and (3) any person determined to be subject to Directive 4, including their property or interests in property, either has a 33% percent or greater ownership interest in the project or owns a majority of the voting interests in the project.

Examples of prohibited projects include, for example, drilling services, geological services, and mapping technologies. The prohibitions do not apply to the provision of financial services, for example, clearing transactions or providing insurance related to such activities.

The full text of Directive 4, as amended, can be found here.  For a listing of persons that are subject to a directive under Executive Order 13662, see OFAC’s Sectoral Sanctions Identifications List.

Recently OFAC also announced new sanctions on Russia’s financial sector and energy sector, as set forth in the revised Directive 1 and Directive 2, respectively.