USFIA Washington Counsel Says Section 301 Exclusion Applications Likely to Reopen

David Spooner, Washington counsel for the U.S. Fashion Industry Association, said that while the U.S. trade representative's China policy speech was underwhelming, he doesn't think the possibility of renewing 549 exclusions that expired at the end of last year will be the only olive branch to importers hurt by the China trade war. "Will we see other [expired] exclusions open to renewal? A new window open for exclusions? I hear 'yes.' When that will happen, and what that will look like, remains unclear," Spooner said at a virtual USFIA conference Nov. 9.

However, if the USTR does not act to allow importers to apply again to avoid the Section 301 tariffs, it's possible other branches of the government could force the administration's hand, he said.

The Trade Act of 2021, which passed the Senate as part of a much broader bill on competition with China, had language that reestablished an exclusion process, and set some criteria the Office of the U.S. Trade Representative would have to follow in granting them. It also said the exclusions would last 18 months.

"The criteria are quite vague and would give USTR all sorts of discretion to deny the requests," he said. Even so, he said he's heard from Democratic trade staffers that this plank of the bill "might be stripped from the bill when it moves in the House."

House Ways and Means Trade Subcommittee Chairman Earl Blumenauer, D-Ore., told International Trade Today back in June that he wasn't inclined to force a policy on USTR Katherine Tai. "I want to work with the administration on this and see where they're at," he said at that time (see 2106170040).

If Congress doesn't act, Spooner said, it's conceivable that the Court of International Trade case would force USTR to abandon the List 3 and List 4a tariffs, but that will take years to decide. He noted that the Department of Justice stipulated that if the plaintiffs prevail, they would be refunded Section 301 tariffs on the entries that had not been liquidated as of July 6. The refundability of tariffs where entries were liquidated before that date is not certain, he said.

The Trade Act of 2021 that required an exclusion process also renewed the Generalized System of Preferences benefits program and Miscellaneous Tariff Bill. Blumenauer has introduced his own versions of those bills, and since they are revenue bills, they must originate in the House.

The two versions of the GSP bill are quite similar, though the House version would renew the program through the end of 2024, not the beginning of 2027, and it would add more stringent environmental protections to the list of eligibility requirements.

The products covered by MTB vary only slightly between the two chambers' versions. However, Blumenauer wants future MTB lists to be narrower. MTB is defended as an aid to manufacturers, but includes tariff waivers on a number of consumer products, including scissors, leather belts, certain shoes, electric rice cookers, certain portable stoves, drip coffee makers, leather basketballs, table saws, certain sports rackets, swim goggles, plastic pet carriers, aquarium plastic plants, nail clippers, tweezers, curtain hardware, steam irons and certain microwave ovens.

In a Q&A after his talk, Spooner said he wishes he knew whether the ultimate renewal of GSP and MTB would be closer to the Senate bill or the House Democrats' text. He said one of the reasons the big China package from the Senate has not moved in the House is because there are provisions "that the House has its own view on."

International Trade Today also asked if the fact that the Senate language for the Uyghur Forced Labor Prevention Act was attached to the National Defense Authorization Act meant that their version would be more likely to become law. Importers prefer the Senate version to the House version because there is a longer runway before enforcement of the rebuttable presumption begins, and because there is a way for importers to avoid the rebuttable presumption of forced labor if they follow CBP guidance for due diligence.

USFIA President Julia Hughes said many bills in Congress are called "must-pass," but NDAA is one of another few that actually does pass. "If it is attached to NDAA we’re likely to see some version, even if it’s not the exact same language in the Senate," she said.

Spooner, a partner at Barnes & Thornburg, predicted that Indian goods on the Section 301 retaliation list over the digital services tax will soon face additional 25% tariffs (see 2106020047). The 26 subheadings covered include bras, Spooner said. The total import value in 2019 of the target list was $119 million.

Spooner said he doesn't agree with the tone of coverage about the yarn forward standard in CAFTA-DR (see 2110290056), which noted that the deputy USTR supported the stringent textiles rule of origin in that trade agreement. He said he thought the statement was drafted in such a way to "please the textile industry without making us go apoplectic." While he said it would be difficult for the U.S. to abandon the yarn forward rule, in his view the statement "hints at support for yarn forward without saying like it's like the Ten Commandments, it is written in stone, and will never change."

In the Q&A, a viewer asked Spooner if the authoritarian actions of Nicaragua's president could affect Nicaragua's ability to continue in the CAFTA-DR.

"There are no provisions in the CAFTA text itself which allow the United States to unilaterally kick countries out of CAFTA," he said, and he added that there is no way to even bring a dispute under CAFTA over transgressions against democracy, because the agreement doesn't talk about those issues.

"I think what’s more likely to [be] see[n] is OFAC sanctions against Nicaraguan officials," he said, referring to the Office of Foreign Assets Control, which administers and enforces U.S. economic and trade sanctions.