AFS Trade Webinar: Update on Section 232 Steel & Aluminum - - PowerPoint PPT Presentation

AFS Trade Webinar: Update on Section 232 Steel & Aluminum Tariffs and Retaliation Measures

Presented by Teresa Polino, Partner, Arent Fox Aman Kakar, Associate, Arent Fox 202.350.3745 202.350.3632 teresa.polino@arentfox.com aman.kakar@arentfox.com

June 22, 2018 ARENT FOX LLP LA / NY / SF / DC

Agenda

• Section 232 Tariffs on Steel and Aluminum
• Retaliation from Trading Partners
• Section 301 Tariffs on China
• China’s Retaliation for Section 301 Tariffs
• Enforcement Options

June 22, 2018 ARENT FOX LLP LA / NY / SF / DC

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Section 232: National Security Actions

• On March 8, President Trump issued Presidential Proclamations imposing a 25

percent ad valorem tariff on certain steel articles and a 10 percent ad valorem tariff

• n certain aluminum articles.
• The Proclamations were issued pursuant to Section 232 of the Trade Expansion Act
• f 1962.
• In Section 232 proceedings, the Department of Commerce issues a report to the

President’ with investigation findings on whether certain imports threaten to impair America’s national security.

• Once the DOC issues the report, the President has wide latitude to take actions to

curb imports.

June 22, 2018 ARENT FOX LLP LA / NY / SF / DC

Background: What are they?

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Section 232: National Security Actions

• In Section 232 investigations, the DOC must consider the following factors:
• domestic production needed for projected national defense requirements
• capacity of domestic industries to meet such requirements
• availability of the human resources, products, raw materials, and other supplies

and services essential to the national defense

• the requirements of growth of such industries and such supplies and services
• the impact of foreign competition on the economic welfare of individual

domestic industries; and any substantial unemployment, decrease in revenues

• f government, loss of skills or investment, or other serious effects resulting from

the displacement of any domestic products by excessive imports

June 22, 2018 ARENT FOX LLP LA / NY / SF / DC

Background: What are they?

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Section 232: Country Exemptions

• Initially, the U.S. exempted Australia, Argentina, Brazil, Canada, EU, Mexico

and South Korea from the 232 tariffs on covered steel and aluminum imports.

• However, on March 31, 2018, the President issued a proclamation applying the

Section 232 tariffs to Canada, Mexico and EU.

• As of June 1, 2018, Steel Section 232 tariffs are applied to all countries except

Argentina, Australia, Brazil and South Korea. Argentina, Brazil and South Korea agreed to absolute quotas for Steel with the administration.

• Aluminum Section 232 tariffs are applied to all countries except Argentina

and Australia. Argentina agreed to absolute quotas for aluminum with the administration.

June 22, 2018 ARENT FOX LLP LA / NY / SF / DC

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Section 232: Who is impacted?

• Everyone that manufactures, exports and/or imports into the U.S. any of

the “covered” products cited in either of these two investigation reports.

• Product exclusion process is available.
• Importer of Record is liable for payment of all duties.

June 22, 2018 ARENT FOX LLP LA / NY / SF / DC

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Section 232: Product Exclusion

• The Department of Commerce has issued procedures for requesting exclusions for

specific products currently subject to the Section 232 tariffs on steel and aluminum.

• The exclusions will be approved on a product specific basis, limited to the company

that requested it and likely limited to volume requested and valid only for a year.

• No deadline for submitting product exclusion request.
• Objections to product exclusion must be filed within 30 days of posting of the

request for comment.

• Commerce intends to decide on each request within 90 days of filing.
• If approved, relief will be retroactive to the date the exclusion is posted for public

comment.

June 22, 2018 ARENT FOX LLP LA / NY / SF / DC

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Section 232: Product Exclusion

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As of June 18, 2018: exclusions requested 42 GRANTED/56 DENIED

Steel 20,003

Aluminum 2,503

Section 232: Auto/Auto Parts Case

• On May 23, 2018, the Department of Commerce initiated a

Section 232 investigation into imports of automobiles, including SUVs, vans and light trucks, and automotive parts.

• Within 270 days (Feb. 17, 2019) the DOC must submit a report

the President with its findings and recommendation.

• The President has 90 days after receiving the DOC report to

determine whether he concurs with findings and must take action to adjust imports 15 days after taking action.

June 22, 2018 ARENT FOX LLP LA / NY / SF / DC

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Section 232: Auto/Auto Parts Timeline

• June 29: written comments, data, analyses due
• June 29: request to appear at public hearing due
• July 13: rebuttal comments due
• July 19 & 20: public hearing in Washington, D.C.
• Tariffs on Auto/Auto Parts likely to be announced by

September, ahead of mid-terms

June 22, 2018 ARENT FOX LLP LA / NY / SF / DC

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Section 232: Retaliatory Actions

June 22, 2018 ARENT FOX LLP LA / NY / SF / DC

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Canada

July 1 $12.8 Billion PRC April 2 $3 Billion EU June 22 $3.2 Billion Mexico June 5 $3 Billion

India

• Aug. 4

$240 Million Turkey No Date $266 Million Russia and Japan No Date/ Products

Retaliation from Canada

Effective Date of Tariffs: July 1st Annual U.S. Export Value: Approximately $12.8 billion Type of Retaliation: 25% tariffs on steel products and 10% tariffs on other products Products Covered (Example): List not finalized; final comments submitted June 15

June 22, 2018 ARENT FOX LLP LA / NY / SF / DC

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(25% Tariff)

• Stainless steel and stainless steel products,

including bar, rods, wire, and casing or tubing used in drilling for oil or gas

• Iron and non-alloy steel products, including bars,

rods, wire, tubes, and pipes

• Alloy steel and alloy steel products, including bars,

rods, and wire

• Angles, shapes, and section of other alloy steel
• Other casing or tubing, of a kind used in drilling for
• il or gas

(10% Tariff)

• Aluminum products, including bars, rods, profiles,

wire, pipes, tubes, pipe fittings, sheets and strips, aluminum structures, and other articles of aluminum

• Parts of iron or steel for stoves, ranges, grates,

cookers, barbeques, braziers, plate warmers, and

• ther similar non-electric domestic appliances
• Refrigerator-freezers, water heaters, dishwashing

machines, laundry washing machines

• Boats, including sailboats and motor boats

Retaliation from Canada

Other Products Covered:

June 22, 2018 ARENT FOX LLP LA / NY / SF / DC

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(10% Tariff)

• Processed foods, including yogurt, prepared foods, orange juice, ketchup,

mayonnaise, mustard, soups, waters and whiskies

• Consumer goods, shaving cream, dishwasher detergents, soaps, perfumes,

candles, toilet paper, tableware and kitchenware, tablecloths, mowers, sleeping bags, mattresses, pens

• Chemicals and other similar products, including insecticides and herbicides

Retaliation from Mexico

Effective Date of Tariffs: June 5th Annual U.S. Export Value: Approximately $3 billion Type of Retaliation: Tariffs of 7% to 25% Products Covered:

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• Steel products, including plates, rods, bars, tubes and pipes (25% Tariff)
• Products coated in aluminum (15% Tariff)

Other Products:

• Fans (10%)
• Motor boats, except for outboard motor (15%)
• Lamps and lighting fixtures (15%)
• Food preparations (15%)
• Pork and ham products (15-20%)
• Apples (20%)
• Cranberries (20%)
• Potatoes (20%)
• Cheese products, including fresh, grated or powder (20-

25%)

• Tennessee or bourbon whiskey (25%)

Retaliation from the European Union

Effective Date of Tariffs: June 22 Annual U.S. Export Value: $3.2 billion Type of Retaliation: Tariffs of 25%-50% for initial list, tariffs of 10%-25% for second list Products Covered:

June 22, 2018 ARENT FOX LLP LA / NY / SF / DC

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(25% Tariff)

• Steel and steel products
• Iron and non-alloy steel and products, including tubes, pipes and hollow profiles
• Stainless steel and stainless steel products, including bars and rods, pallets, flat-rolled steel, nuts,

wire, tubes and pipes

• Products of alloy steel other than stainless
• Aluminum, including plates, sheets and strip
• Products of iron and steel including cooking ware
• Doors, windows, and their frames of iron or steel
• Motor boats, sailboats, yachts, row boats and canoes
• Motorcycles

Retaliation from the European Union

Other Products Covered (25% Tariff):

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• Ovens, air heaters, and sinks
• Textiles, apparel and footwear (t-shirts, jeans, cotton pants and trousers,

shoes, bedlinen)

• Make-up, manicure and pedicure preparations
• Bourbon and whiskey
• Corn, sweetcorn, kidney beans and rice
• Cranberries and cranberry juice, peanut butter, orange juice
• Tobacco (tobacco from leaves, water-pipe tobacco, chewing tobacco,

cigarettes, and cigars)

Retaliation from China

Effective Date of Tariffs: April 2nd Annual U.S. Export Value: Approximately $3 billion Type of Retaliation: 25% tariffs on pork and aluminum scrap and 15% tariffs on other products Products Covered:

June 22, 2018 ARENT FOX LLP LA / NY / SF / DC

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(25% Tariff)

• Aluminum scrap

(15% Tariff)

• Stainless steel products, including pipes
• Other steel products
• Seamless tubes, pipes and hollow profiles of

iron and steel

Retaliation from China

Other Products Covered:

June 22, 2018 ARENT FOX LLP LA / NY / SF / DC

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(25% Tariff)

• Modified ethanol and other alcohols of any

concentration

• Pork products

(15% Tariff)

• Sparkling wine and other wine
• Nuts
• Ginseng
• Coconuts, plantains, nuts, strawberries,

watermelon, apples, and other fruits

Retaliation from India

Effective Date of Tariffs: August 4 Annual U.S. Export Value: $240 million Type of Retaliation: Tariffs of 10%-50% Products Covered:

June 22, 2018 ARENT FOX LLP LA / NY / SF / DC

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• Motorcycles (50%)
• Cast articles of iron or steel(15%)
• Threaded Nuts (15%)
• Stainless Steel Fittings (15%)
• Apples (25%)
• Walnuts (20%)
• Almonds (20%)
• Lentils (10%)
• Chickpeas (10%)

Retaliation from Turkey

Effective Date of Tariffs: Not announced Annual U.S. Export Value: $266 million Type of Retaliation: Tariffs of 5%-50% Products Covered: list not final

June 22, 2018 ARENT FOX LLP LA / NY / SF / DC

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• Motor cars and vehicles for the transport of people (35%)
• Structures and parts of structures of iron and steel (30%)
• Machines and mechanical appliances (10%)
• Apparatus based on use of x-rays (5%)

Retaliation from Turkey

Other Products Covered:

June 22, 2018 ARENT FOX LLP LA / NY / SF / DC

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• Undenatured ethyl alcohol, including spirits, liqueurs, and other spirituous beverages

(40%)

• Poly vinyl chloride (32%)
• Beauty or make-up preparations, including sunscreen (30%)
• Certain articles of plastics (30%)
• Unmanufactured tobacco (25%)
• Rice (20%)
• Fuel wood (15%)
• Food preparations (10%)
• Polyamides (10%)
• Paper, uncoated paper, kraft liner board and paperboard (10%)
• Coal, coke, and petroleum coke (5-10%)
• Nuts (5%)

Retaliation from Japan and Russia

June 22, 2018 ARENT FOX LLP LA / NY / SF / DC

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• Effective Date of Tariffs: Not specified
• Annual U.S. Export Value: Not specified
• Type of Retaliation: Not specified
• Products Covered: Not specified

Response from Japan and Russia

Section 301- Retaliatory Duties

June 22, 2018 ARENT FOX LLP LA / NY / SF / DC

Background: What are they?

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• Section 301 of the Trade Act of 1974 provides the United States with the authority to

enforce trade agreements and respond to restrictive foreign trade barriers or unreasonable or discriminatory practices that burden or restrict U.S. commerce.

• Section 301 cases can be self-initiated by the USTR or by an industry petition.
• If USTR determines that the foreign trade policies in question do have the above

effects, the USTR may take action to “obtain the elimination of that act, policy, or practice.”

• Authorized retaliatory actions under Section 301 include the imposition of duties or

import restrictions.

Section 301- Retaliatory Duties

June 22, 2018 ARENT FOX LLP LA / NY / SF / DC

China Investigation

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• USTR initiated an investigation under Section 301 into the acts, policies, and

practices of China related to technology transfer, intellectual property, and innovation in August 2017.

• In March 2018, USTR released a report detailing harmful and restrictive Chinese

policies resulting in harm to the U.S. economy of at least $50 billion per year.

• In response, President Trump directed the USTR to publish a proposed list of

Chinese products to be subject to additional 25 percent ad valorem tariffs, among

• ther actions.
• On April 3, 2018, the USTR published a proposed list of products that could be

subject to the Section 301 tariff.

Section 301- Product List

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• On June 15, USTR released a list of 818 tariff lines from PRC on which 25% ad

valorem duties will be assessed starting July 6.

• In addition USTR, will establish a process to request exclusion of particular product

covered under Sec. 301 action that are available only from China or “cause sever economic harm to U.S. interest.”

• In addition, USTR released a list of 284 additional tariff lines that it proposes to add

to the Sec. 301 list.

• Additional 284 tariff lines will undergo a public notice and comment process:
• June 29: Request to appear and summary of expected testimony
• July 23: Submission of written comments
• July 24: Public Hearing at 9:30 AM in Washington, D.C.
• July 31: Post-hearing Rebuttal Comments

Section 301- Product List

Source: The Peterson Institute for International Economics at https://piie.com/blogs/trade-investment-policy-watch/trump-china-and-tariffs-soybeans-semiconductors (Trump, China, and Tariffs: From Soybeans to Semiconductors).

June 22, 2018 ARENT FOX LLP LA / NY / SF / DC

Covered Products

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Section 301- Product List

Source: The Peterson Institute for International Economics at https://piie.com/blogs/trade-investment-policy-watch/trump-china-and-tariffs-soybeans-semiconductors (Trump, China, and Tariffs: From Soybeans to Semiconductors).

June 22, 2018 ARENT FOX LLP LA / NY / SF / DC

Products Removed

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Section 301- Product List

• $1.3 billion worth of aluminum removed from the original list
• Final Sec. 301 List only covers aluminum electrolytic fixed capacitors (HTS

8532.22.00) and brazed aluminum plate-fin heat exchangers (HTS 8419.50.10). All

• ther aluminum products were removed
• Other products excluded: more than 150 products containing steel, medicines and

medical equipment, clothing and textiles, garbage disposal and weapons.

• Steel products were removed after domestic companies supported tariffs during

hearings.

June 22, 2018 ARENT FOX LLP LA / NY / SF / DC

Products Removed

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Section 301- Product List

Source: The Peterson Institute for International Economics at https://piie.com/blogs/trade-investment-policy-watch/trump-china-and-tariffs-soybeans-semiconductors (Trump, China, and Tariffs: From Soybeans to Semiconductors).

June 22, 2018 ARENT FOX LLP LA / NY / SF / DC

Products Added

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Section 301- Response from China

• China has initiated a WTO case against the Section 301 actions

(DS543).

• On June 16, China announced that it would impose 25% tariffs
• n $34 billion worth of U.S. goods which will also take effect on

July 6, 2018.

• In addition, China also released a second list on which it will

impose 25% tariffs at a later date.

• Products are heavily concentrated in transportation-related

goods and meat, seafood, agricultural products.

June 22, 2018 ARENT FOX LLP LA / NY / SF / DC

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Section 301- U.S. Response to China

• On June 18, 2018, President Trump directed USTR to formulate

a list of goods on which the United States will impose a 10% tariff on an additional $200 billion worth of goods from China in response to China’s retaliation.

• USTR will announce a list of additional tariffs and provide a

public comment process for the new list.

• China has already announced that it will take swift action to

counteract the newest announcement

June 22, 2018 ARENT FOX LLP LA / NY / SF / DC

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Section 301- Retaliatory Duties

• The White House previously announced the implementation of

specific investment restrictions and enhanced export controls for Chinese persons and entities, which will be announced by June 30, 2018.

June 22, 2018 ARENT FOX LLP LA / NY / SF / DC

Status of Case Against China

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Enforcement Options

• Antidumping and Countervailing Duty Investigations
• Section 201 Investigations
• Accurate Origin Markings

June 22, 2018 ARENT FOX LLP LA / NY / SF / DC

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Enforcement Options: AD/CVD

• “Dumping” – When a foreign producer sells a product in the U.S. at a price below

that producer's sales price in the country of origin ("home market"), or at a price lower than the cost of production.

• The difference between the price (or cost) in the foreign market and the price in the U.S.

market is called the dumping margin.

• “Subsidy” - Foreign governments subsidize industries when they provide

financial assistance to benefit the production, manufacture or exportation of goods.

• Subsidies can take many forms, such as direct cash payments, credits against taxes, and loans

at terms that do not reflect market conditions.

June 22, 2018 ARENT FOX LLP LA / NY / SF / DC

Definitions

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Enforcement Options: AD/CVD

• World Trade Organization (“WTO”) Agreement allows governments to act against

dumping and government subsidies where there is genuine (“material”) injury to the competing domestic industry.

• Local laws to address unfair pricing (antidumping) and foreign government

subsidies (countervailing).

• AD/CVD “Order” imposes duties equal to the amount of the dumping (company-

specific) or subsidies (country-specific), in addition to usual Customs duties, taxes, fees, VAT, etc.

• Offset amount = AD or CVD “duty margin”
• expressed as a %
• applied to entered value of imported goods

June 22, 2018 ARENT FOX LLP LA / NY / SF / DC

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Section 201: Safeguard Actions

• Under Section 201 of the Trade Act of 1974, domestic industries seriously injured or threatened

with serious injury by a surge in imports may petition the USITC for import relief.

• The USITC determines whether “an article is being imported in such increased quantities that it

is a substantial cause of serious injury, or threat thereof, to the U.S. industry producing an article like or directly competitive with the imported article.”

• A substantial cause is defined as “a cause which is important and not less than any other cause”
• It is important to note that both the injury standard (i.e. “serious injury or thereat thereof”) and

the causation standard are higher in a Section 201 investigations as compared to AD/CVD material injury determinations.

• Unlike AD/CVD cases, there is no requirement that the USITC find that the imports are unfairly

traded i.e. dumped or subsidized) in order for Section 201 relief to be granted.

June 22, 2018 ARENT FOX LLP LA / NY / SF / DC

Background: What are they?

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Section 201: Safeguard Actions

• If the USITC makes an affirmative determination of serious injury under Section 201, the

investigation proceeds to a remedy phase.

• During the remedy phase the USITC recommends to the President specific actions to

address the serious injury to the domestic industry.

• Traditionally, the remedies have taken the form of tariffs, quotas, tariff rate quotas, trade

adjustment assistance or a combination of remedies.

• Remedies can be ordered for a max. of 4 years, possible to extend once (max. 8 years

total).

• Certain countries and or products may be excluded from the remedy.

June 22, 2018 ARENT FOX LLP LA / NY / SF / DC

Background: What are they?

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Section 201: Safeguard Actions

• Global safeguard investigations are not country specific.
• However, the USITC Commissioners who make affirmative injury determinations are

required to make additional separate findings for countries with which the U.S. has free trade agreements.

• The President has the ultimate authority to decide whether to impose a remedy and the type

and duration of the remedy.

• President can order a remedy different than what the ITC recommends – but he must

explain his decision in a report to Congress.

• President must act within 60 days of USITC recommendation and remedies go in effect no

later then 15 days from the Presidential Proclamation.

June 22, 2018 ARENT FOX LLP LA / NY / SF / DC

Background: What are they?

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Enforcement Options: Foreign Origin Marking

• No country of origin marking
• Marking with incorrect country of origin
• Insufficient or inadequate marking
• Not permanent or conspicuous enough
• Not in English
• Not legible
• Not in close proximity or equal size to U.S. place name.

June 22, 2018 ARENT FOX LLP LA / NY / SF / DC

Common Issues on Foreign Origin Marking

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Enforcement Options: Foreign Origin Marking

• CBP may initiate enforcement action based on:
• Tips from competitors
• Routine inspections at the Port.
• If CBP discovers goods were improperly marked, it will issue a

Notice to Mark and/or Notice to Redeliver.

• Penalties apply to unintentional mislabeling and criminal

penalties apply for fraud/intentional removal, alteration or destruction of markings

June 22, 2018 ARENT FOX LLP LA / NY / SF / DC

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Enforcement Options: Foreign Origin Marking

• A private party may alert CBP of country of origin marking

violations by:

• Submitting an e-allegation at http://eallegations.cbp.gov
• Informing of the violation via a moiety claim
• Initiating whistleblower action under the FCA
• Treble damages plus minimum civil penalty $10,957 maximum $21,916 per false claim
• r statement.
• U.S. v. Victaulic –reverse false claims action against importer who failed to mark or

properly mark imported pipe fittings with the country of origin

June 22, 2018 ARENT FOX LLP LA / NY / SF / DC

Private Party Enforcement of Customs Marking Requirements

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Enforcement Options: “Made in the USA” Claims

• Private individuals, including competitors, can pursue various actions against

known or suspected violations of the “Made in U.S.A.” mark or other false origin designation.

• Write warning letters to the alleged violator
• File a detailed complaint with the FTC outlining the allegations and

providing any evidence in support

• Complaints may be filed online at www.ftccomplaintassistant.gov
• Bring lawsuit for “false designation of origin” (federal law) and / or for “false

advertising” (state law). See, e.g., 15 USC 1125 (a).

June 22, 2018 ARENT FOX LLP LA / NY / SF / DC

FTC Enforcement: Private Party Initiation

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