The Council of the European Union passed its negotiating directives for free trade talks with the U.S. on Jan. 18, and as expected, agriculture is not part of the scope. The EU also said it would require the lifting of the Section 232 tariffs on aluminum and steel before any deal is finalized. "These two proposed negotiating directives will enable the Commission to work on removing tariffs and non-tariff barriers to transatlantic trade in industrial goods, key goals of the July Joint Statement," EU Trade Commissioner Cecilia Malmstrom said.
Section 301 (too broad)
Measures of compliance among steel products importers are down since the imposition of sections 301 and 232 tariffs, said the American Institute for International Steel’s Customs Committee in its 2018 year-end report. CBP told the trade association that compliance measured by the letter of the law for imports in Harmonized Tariff Schedule chapters 72 and 73 was down to 96.46 percent in fiscal year 2018, and down to 97.8 percent when measured by major trade discrepancies, CBP told AIIS, the report said. “Issues with Section 232 and Section 301 entries presumably contributed to the reductions,” the report said.
More CBP scrutiny of first sale transactions has followed an increase in the use of first sale valuations in recent months, law firm Sandler Travis said in a blog post. The growth in first sale valuations, which allows importers to value goods at the price sold from a manufacturer to a middle man, is one result of the Section 301 tariffs on goods from China, the firm said. "At a time when volatility in trade policy has left some traditional methods of lowering costs unavailable and is threatening to eliminate others, importers are continuing to use the first sale rule to save millions of dollars in import duties each year," said the firm, which advertises its first sale services in the post.
Regulations.gov, the government website where businesses can see if other companies have objected to their tariff exclusion requests, went down Jan. 16. It's not clear how long it will take workers -- who have been affected by the partial federal government shutdown -- to get the issues resolved and get the site back online. A spokeswoman for the Office of the U.S. Trade Representative said the agency continues to work on exclusion requests on items on the first two tranches of the Section 301 tariffs list, and that "the time period to comment will be extended as applicable" because of the outage.
Eswar Prasad, a senior trade professor at Cornell University and the former head of the International Monetary Fund's China Division, expects that "some sort of compromise" will be reached with China just before the March 1 deadline for the tariff rate hike, and that after China accedes to certain U.S. demands, "at least they're going to back off additional hostilities." Prasad, speaking at the National Economists Club Jan. 17, said he expects all the tariffs on China to stay in place, as well as the Chinese retaliation -- though he does expect increased purchases of American soybeans to be part of the package.
A legislative effort from Rep. Sean Duffy, R-Wis., to expand the president's ability to impose new tariffs (see 1901160012) is a troubling prospect for retailers, according to the National Retail Federation. NRF Senior Vice President for Government Relations David French said Congress “should be working to protect local communities from an escalated trade war” brought on by the Trump administration’s Section 301 tariffs on Chinese imports and China’s retaliatory tariffs on U.S. goods. Duffy’s “misguided” legislation “would do the exact opposite, giving the executive branch limitless power to raise taxes in the form of tariffs,” French said. “Congress has already ceded far too much of its clear constitutional authority over tariffs, and we are witnessing the consequences unfold across the country. The idea that Congress would make matters even worse by further abdicating its role on trade policy is simply unconscionable.” Duffy's bill would give the president the ability to raise U.S. tariffs to match other countries' levels without having to justify the move through a safeguard or national security investigation.
International Trade Today is providing readers with some of the top stories for Jan. 7-11 in case they were missed.
U.S. Trade Representative Robert Lighthizer told Sen. Tim Kaine, D-Va., and nine other Democratic senators who wrote to him in October (see 1810230020) that there are no plans to allow for exemptions on the third round of Section 301 tariffs at the current rate. Those tariffs, now set at 10 percent on about 5,700 tariff lines that accounted for about $200 billion in Chinese imports in 2017, will jump to 25 percent March 2 if no deal is reached with China. Lighthizer said in his response, sent Jan. 11, that an exemption process will be implemented if the tariffs increase to 25 percent. A White House official had previously said there would be no exemptions for the 10 percent list (see 1812030042).
The Court of International Trade could be a venue for at least two more big cases involving constitutional implications this year, Crowell & Moring lawyer Daniel Cannistra said in the firm's litigation forecast for 2019. The next challenge may involve the Section 301 tariffs and whether a president "can unilaterally rewrite the tariff schedule for the purpose of negotiating trade agreements," Cannistra said. "The other constitutional issues that appear to be on the CIT’s horizon include the new United States-Mexico-Canada Agreement, which is sure to contain questions concerning executive authority over trade." The CIT is currently considering the constitutionality of the Section 232 tariffs on steel and aluminum (see 1812190044), and that case is "likely to be resolved in 2019," Cannistra said. According to Cannistra, "the consequences of these decisions will be profound. For example, if the CIT upholds one of these administration trade policies, what will it mean to a company’s global supply chain? Will production need to be relocated from one country to another? These shifts are not made overnight; the court’s decisions will affect companies for years."
Some new tariff provisions in the 2019 edition of the Harmonized Tariff Schedule have already been implemented, despite the ongoing partial federal government shutdown and the resulting lack of any official version published by the International Trade Commission. According to documents recently posted by the National Customs Brokers & Forwarders Association of America, changes affect classification for infant footwear, aluminum foil and paper, among other products. Extensive changes were also made to units of measure throughout the tariff schedule. On the other hand, changes made by a recent presidential proclamation, including the removal of African Growth and Opportunity Act (AGOA) benefits for Mauritania, have yet to be implemented by CBP, the NCBFAA has said. The following is a summary of the purported changes to the tariff schedule: