On February 25, the Senate Finance Committee held a confirmation hearing for the nominee for the U.S. Trade Representative (USTR), Katherine Tai. Tai’s strong performance in the hearing demonstrated her poise and a depth of knowledge on the issues. She was well-prepared for Senators’ questions and is likely to receive a swift confirmation in the Senate within the next couple weeks.

In her remarks, Tai spoke of the worker-centric trade policy of the Biden Administration, and emphasized that U.S. trade policy going forward would go beyond tariff reduction and removal of trade barriers. She said trade policy had fallen into a pattern where manufacturers or farmers felt they were being sacrificed for the good of another group. Tai said she would endeavor to get out of this pattern to a place where stakeholders were not pit against one another. Rather than rising standards for workers and the environment, we were witnessing a race to the bottom. The forced labor issue was the crudest example of the race to the bottom. All of this would inform the United States’ re-think of trade policy strategy, and how it could be conducted in a way that lifted all boats, not just increasing the size of the pie.

Tai was not specific about the details of initiatives she would pursue as USTR aside from the high-level Biden administration priorities of resiliency in supply chains for critical and essential goods, multilateral engagement, reform at the World Trade Organization, and climate and environmental policy. However Tai and the committee senators were all in agreements that enforcement of USMCA should be a top priority for USTR.

Chairman Ron Wyden (D-OR) said in his opening remarks that the United States “need[ed] a full blockade against other nations’ discriminatory policies aimed at knifing industries with taxes where America leads” referencing digital goods and services and illicit timber trade, and that implementation and enforcement of the USMCA would be critical to its success.

Ranking Member Mike Crapo (R-ID) focused his opening remarks on market access for agricultural goods and IP protection. Crapo said he was concerned that the Biden administration had suggested that the President would not sign any new trade agreements until he saw his domestic priorities achieved. He conveyed to Tai that trade policy was a domestic priority for American workers, and that the UK and China were moving forward with their own trade agreements. Crapo stated, “If the Biden Administration wants a ‘worker-centered’ trade policy as it claims it does, then our USTR should ensure that the international trading regime strongly reflects American values rather than those of China’s government.”

Tai will likely need further consultation with President Biden and other senior White House officials before she is able to elaborate on a clear and detailed vision for U.S. trade policy. Given her previous role working in Congress for the House Ways and Means Committee and her demonstrably strong relationships with Senators and Members of Congress, Congressional consultation and outreach on trade appears likely to be a major part of her role within the Administration.

Issue Areas

Tariffs

  • Tai did not face pressure from the senators for the Biden administration to lift tariffs imposed by the Trump administration. She did affirm that Trump-era tariffs (Section 232, 301, Boeing/Airbus) would remain tools in the U.S. government’s trade policy toolbox. Tai said she was aware of the disruptions tariffs had caused and would address them as appropriate after a review. She stated the need for an effective solution that took into consideration the whole slew of policy tools.
  • On the tariff exclusion process, Tai said she was aware of the many concerns that had arisen with the process. She would seek to address transparency, fairness, and speed in the tariff exclusion determination process.

China

  • Tai said the Biden Administration was still in the process of developing a new strategy, which would incorporate economic, trade, environmental and national security elements. She did maintain that China would be held to its commitments under the Phase One trade agreement.
  • Tai said she would seek to hold China accountable where China had clearly agreed to certain rules (such as WTO rules). In grey areas where there are no rules yet, she said the United States could create new rules, and/or consider other opportunities to think strategically on how to address the issues through working with allies.
  • Addressing China’s theft of intellectual property would require working with others by reaching out and having sometimes difficult conversations on how to capitalize on shared interests to make more effective policies together.
  • In his remarks, Sen. Mark Warner (D-VA) said trade negotiations had to protect the security of digital infrastructure, and that the United States should consider asking trading partners to prohibit certain Chinese technologies. “If we keep Huawei out of American domestic markets but it gets the rest of the world, we’re not going to be successful.” Tai agreed that the U.S. government should be “laser-focused” on this issue.
  • Rob Portman (R-OH) asked if Tai would commit to a top-to-bottom review of China policy at USTR as the agency did sixteen years ago when he was the USTR, and to provide the report to the committee. Tai responded that Biden was committed to an overall review of China, and USTR would be part of that review.

Supply Chains

  • Several senators raised the semiconductor supply chain issue, and Chairman Wyden said it would be a top issue for the committee.
  • Tai said that the assumptions supply chains were based on sought to maximize efficiency without regard for resiliency. Trade policy needed to be re-thought with resiliency issues in mind.
  • Tai would look to bring USTR’s talents and expertise to bear to review and craft a strategy on supply chains and supply chain resilience, referring to the Biden Administration executive order on supply chains from the previous day.
  • She said the Chinese were not shy about their ambitions, and that the United States could not compete with China by acting like China. The United States needed to conduct trade policy which was “true to ourselves and our traditions” and “more strategic, knowing the quantity and the strategy and ambition that we are up against.”

Bilateral and Multilateral Trade Agreements

  • Tai said implementation and enforcement of USMCA and all other existing U.S. trade agreements would be her priority. The US-UK FTA and other trade negotiations launched under the Trump Administration would need to be reviewed and objectives potentially updated. The negotiating objectives from the US-UK agreement, for example, were over two years old now, did not take into consideration the completion of Brexit or lessons learned from the pandemic.
  • Tai said the formula for TPP—the United States engaging robustly with economies with whom the United States had shared economic and strategic interests in Asia—remained a “solid equation.” But in 2021, Tai said the world looked very different from how it did in 2015 and 2016. She would have to review the CPTPP and work with the administration and Congress before considering any efforts to join the agreement.
  • Neither Tai not the Senators directly raised the issue of the lapsing of Trade Promotion Authority on July 1, 2021.

Environment

  • Tai believes trade policy has a lot to contribute to the climate effort. It would entail working with other countries, in cooperative and sometimes contentious ways. She said the rest of the world was coming up with its own climate solutions, and as other countries begin to regulate in this area, climate and trade policy would become a part of our competitive trade landscape.

Digital Services Tax

  • Tai said the Biden administration was committed to cooperative efforts at the OECD and G20 to address this issue. Tai acknowledged this issue would require close coordination between USTR and the Treasury Department.

World Trade Organization (WTO)

  • Tai stated that WTO reform is needed, and tough and constructive conversations needed to happen in Geneva. What is the value of the WTO is to its members? Is it accomplishing the goals that its founders and members expect of it? How does the WTO rise to the challenges of today’s world?

General System of Preferences (GSP)

  • When asked about India and GSP/market access, Tai said she would work with Congress on GSP renewal and welcome dialogue with the Indians but did not commit to any specific action or timeline.

Investor-State Dispute Settlement (ISDS)

  • Sheldon Whitehouse (D-RI) said the United States had “bullied” smaller countries like Togo through the ISDS process, calling actions by the tobacco industry there through ISDS as “disgraceful.” Tai said President Biden had articulated his opposition to ISDS because of its chilling effects for policymaking.

USTR Process

  • Elizabeth Warren (D-MA) said U.S. trade negotiations were a “rigged process” that produced “rigged outcomes” that stacked the deck against the interests of American families. Warren sought to have more representatives from labor on USTR trade advisory committees.
  • Warren was also concerned about transparency in the negotiation process and asked for trade agreement draft text to be shared with the public as least two months before Congress was asked to fast-track approval.
  • Tai was unable to agree to commit to these asks, but said she would review the advisory committee composition, and seek to bring transparency and connecting with the American people on trade to her work on the daily basis.
  • Tai committed to Sen. Pat Toomey (R-PA) she would follow the procedures and timelines under Trade Promotion Authority, and appear for a mock mark-up should a trade agreement need to be reviewed by Congress. However, she could not commit to Sen. Toomey that her aim in trade negotiations with other developed nations would be “zero tariffs, zero quotas, zero obstacles” to the exchange of goods. Tai said she may have agreed with that five or ten years ago, but that trade policies today needed to have a more nuanced outlook that considered lessons learned over the past few years.
  • Bob Menendez (D-NJ) said USTR was an agency that did not have an inspector general (IG). Tai said she was unaware of the legalities around having an IG in an agency under the Executive Office of the President, but that she was committed to accountability at USTR.
  • Tai committed to working with Ranking Member Crapo on the issue of filling the Chief Innovation IP Coordinator position at USTR.

 

 

 

 

In ruling NY N317139 (February 23, 2021), Customs and Border Protection (CBP) discussed the classification of adjustable bed base, the Reverie Adjustable Bed, with Bluetooth or Wi-Fi connectivity made to accommodate mattresses of various sizes. As stated in the ruling, the adjustable bed has a regulable metal sub-frame with vibration motors and a textile-covered steel or wood platform that is comprised of four articulated sections corresponding to a person’s upper torso, hips, thighs, and calves/feet. The ruling also states that the bed consists of ports that are mounted on the frame to allow for the connection and control of accessories that can include a heating pad, audio-vibration feedback, a cooling fan, a temperature sensor, etc. As imported, the adjustable bed is disassembled and it does not include either a mattress or the aforementioned accessories.

CBP determined that the applicable subheading for the adjustable bed is 9403.20.0035, HTSUS, which provides for “Other furniture and parts thereof: Other metal furniture: Household: Other: Mechanically adjustable bed or mattress base, not foldable, having the characteristics of a bed or bed frame, of a width exceeding 91.44 cm, of a length exceeding 184.15 cm, and of a depth exceeding 8.89 cm.” The rate of duty is Free.

On February 18, 2021, the European Commission unveiled its new trade strategy. The strategy aims to address the economic fallout from the coronavirus, climate change, and growing international tensions, while also reaffirming support for a rules-based multilateral trading system. The proposed measures range from WTO reform and digital trade initiatives, to tackling forced labor by developing enforcement mechanisms and requiring companies to monitor supply chains.

Valdis Dombrovskis, Executive Vice President of the European Commission, stated that the EU is “pursuing a course that is open, strategic and assertive, emphasizing the EU’s ability to make its own choices and shape the world around it through leadership and engagement, reflecting our strategic interests and values.”

The announcement comes in the context of China’s economic rise and on the heels of the December, 2020 agreement in principle between the EU and China on negotiations for a Comprehensive Agreement on Investment (CAI). In 2020, China overtook the U.S. as the EU’s top trade in goods partner at $710 billion. An outcome spurred, in part, by China’s ability to recover from the economic impacts of COVID-19 more quickly than other major trading partners.

The ambitions new strategy highlights the EU’s appetite to take on a leadership role in a post-COVID trading system while offering an opportunity for increased transatlantic engagement with respect to China.

An outline of the strategy is provided below:

WTO REFORM

The Commission will:

  1. Seek the adoption of a first set of reforms of the WTO focusing on enhancing the WTO’s contribution to sustainable development, and launch negotiations on reinforced rules to avoid distortions of competition due to state intervention. It will give priority to enhancing transatlantic cooperation on WTO reform.
  2. Work to restore a fully-functioning WTO dispute settlement with a reformed Appellate Body.

SUPPORTING THE GREEN TRANSITION AND PROMOTE RESPONSIBLE AND SUSTAINABLE VALUE CHAINS

The Commission will:

  1. Take forward initiatives and actions that promote climate and sustainability considerations in the WTO.
  2. Seek commitments from G20 partners on climate neutrality, strengthen cooperation on other aspects of the green deal such as biodiversity, sustainable food policy, pollution and the circular economy, and propose to make the respect of the Paris agreement an essential element in all future agreements.
  3. Improve the effective implementation and enforcement of sustainable development chapters in trade agreements through the early review in 2021 of the 15-point Action Plan. The outcome of the review will feed into ongoing and future negotiations.
  4. Promote sustainable and responsible value chains through a proposal on mandatory due diligence, including effective action and enforcement mechanisms to ensure that forced labor does not find a place in the value chains of EU companies. Bridging the time towards binding provisions, the Commission will provide guidance to assist EU business in taking the appropriate measures already now in line with international due diligence guidelines and principles.

SUPPORTING THE DIGITAL TRANSITION AND TRADE IN SERVICES

The Commission will:

  1. Seek the rapid conclusion of an ambitious and comprehensive WTO agreement on digital trade, including rules on data flows, in full compliance with the EU’s data protection framework, and provisions on enhancing consumer trust ensuring a high level of consumer protection.
  2. Explore the possibility of closer regulatory cooperation with like-minded partners on issues of relevance for digital trade.

STRENGTHENING THE EU’S REGULATORY IMPACT

The Commission will:

  1. Enhance regulatory dialogues with like-minded partners in strategic areas for EU competitiveness. This will require early identification of priority areas for regulatory cooperation and closer dialogue with EU and international standard organizations.
  2. Develop a closer transatlantic partnership on the green and digital transformation of our economies including through the EU-US Trade and Technology Council.

STRENGTHENING THE EU’S PARTNERSHIPS WITH NEIGHBORING, ENLARGEMENT COUNTRIES AND AFRICA

The Commission will:

  1. Deepen trade and economic relations with other countries in Europe, including the Western Balkans and countries that have concluded DCFTAs with the EU, focusing in particular on closer regulatory cooperation in support of the green and digital transitions. It will modernize its trade and investment relations with those countries in the Southern Neighborhood interested in fostering closer integration with the European Union.
  2. Reinforce its engagement with African countries by:
  3. enhancing political dialogue and cooperation with the African Union and its Members and the smooth implementation of AfCFTA, including engagement with the private sector and promoting common standards in Africa to enhance regional and continental integration.
  4. deepening and widening its existing trade agreements with African regional economic communities and strengthen their sustainability dimension.
  5. exploring further the possibility of enhancing links and synergies between different trade arrangements with African countries, for example through more harmonized rules of origin in trade with the EU.
  6. pursuing sustainable investment agreements with Africa and the Southern Neighborhood.

STRENGTHENING THE EU’S FOCUS ON IMPLEMENTATION AND ENFORCEMENT OF TRADE AGREEMENTS, AND ENSURE A LEVEL PLAYING FIELD

The Commission will:

  1. Seek to consolidate the EU’s partnerships with key growth regions – in the Asia Pacific and Latin America – by creating the conditions to conclude negotiations and ratify outstanding bilateral agreements.
  2. Make full use of the Chief Trade Enforcement Officer’s (CTEO) role to maximize benefits of negotiated outcomes for companies, in particular SMEs and farmers, and to eliminate hurdles that impair on the potential of the agreements to deliver, including on sustainable development.
  3. Further strengthen the EU’s tools to confront new challenges and to protect European companies and citizens from unfair trading practices, including via the preparation of an anti-coercion instrument. In addition, the Commission will explore options for an EU strategy for export credits.
  4. Develop new online tools to support EU businesses, in particular SMEs.

For more information please see our previous posts below or reach out to John Brew, Jeffrey Snyder, Frances Hadfield, or Clayton Kaier

European Union (EU) Archives | International Trade Law (cmtradelaw.com)

On February 18, 2021, U.S. Customs and Border Protection (CBP) released a one-pager on a July, 28 2020, Administrative Ruling related to domestic warehouses and fulfillment centers.

What is the Scope of this Ruling?

19 U.S.C. § 1321(a)(2)(c) enables CBP to admit qualifying merchandise duty- and tax-free provided that the merchandise is imported by “one person on one day” and has a total fair retail value in the country of shipment of $800 or less. On July 28, 2020, CBP issued an administrative ruling recognizing fulfillment centers and domestic warehouses as the “one person” for unsold merchandise. Under this ruling, foreign owners/sellers of unsold merchandise may also qualify as the “one person” provided their identity is presented to CBP and the total value of their merchandise imported on one day is $800 or less.

What is CBP Doing to Enforce?

Through informed compliance, CBP is working closely with its trade partners to identify and educate entities who are affiliated with large volumes of ineligible shipments. CBP may take enforcement action, including against egregious and repeat violators, including placing holds on ineligible shipments, revoking Section 321 privileges, or requiring formal entry until sustained compliance is achieved.

What Can You Do to Facilitate Compliance?

Domestic Warehouse and Fulfillment Center Consignees who receive over $800 of unsold merchandise in one day can coordinate with merchandise owners to help ensure their shipments comply with Section 321 regulations. Ø Merchandise Owners may qualify for Section 321 provided the total value of their shipments do not exceed $800 on one day, and their identity (first and last name or name of company) is presented to CBP via the manifest or Entry Type 86 filing. Ø Shippers and Carriers should refer to CBP’s CAMIR and CATAIR updates to ensure the merchandise owner’s identity is presented appropriately to CBP. See below examples.

For more information please see our previous posts below or reach out to John Brew, Frances Hadfield, or Clayton Kaier.

Customs Archives | International Trade Law (cmtradelaw.com)

On February 18, 2021, the House reintroduced the Uyghur Forced Labor Prevention Act (see press and bill) in the 117th Congress. Sponsored by Representatives James McGovern (D-MA), Chris Smith (R-NJ), Thomas R. Suozzi (D-NY), Vicky Hartzler (R-MO), Tom Malinowski (D-NJ), Mike Gallagher (R-WI), and Jennifer Wexton (D-VA), the legislation updates H.R. 6210 from the 116th Congress and is introduced less than a month after accompanying legislation from Senators Marco Rubio (R-FL), Jeff Merkley (D-OR).

The legislation would:

  • Prohibit all imports from the Xinjiang Uyghur Autonomous Region (XUAR) of China unless the Commissioner of U.S. Customs and Border Protection can certify that the goods being imported to the U.S. are not produced, either wholly or in part, with forced labor and the Commissioner submits to Congress a report outlining such a determination;
  • Authorize the President to apply targeted sanctions on anyone responsible for the labor trafficking of Uyghurs and other Muslim ethnic minorities;
  • Require financial disclosures from U.S. publicly traded businesses about their engagement with Chinese companies and other entities engaged in mass surveillance, mass internment, forced labor, and other serious human rights abuses in the XUAR;
  • Directs the Secretary of State to submit to Congress a public determination whether the practice of forced labor or other human rights abuses targeting Uyghurs and other Muslim minorities in the XUAR constitute crimes against humanity or genocide, and directs the Secretary to develop a diplomatic strategy to address forced labor in the XUAR; and
  • Require a strategy report from the Forced Labor Enforcement Task Force (established by the United States-Mexico-Canada Agreement Implementation Act) and regular updates on the steps taken to enforce the import prohibition on forced labor made goods from the XUAR.

For more information on actions addressing human rights and forced labor abuses, please see our previous posts below or contact

Joshua BoswellJeffrey L. Snyder  Frances P. Hadfield & Clayton Kaier

January 29, 2021 post

Forced Labor/U.K. Modern Slavery Act Archives | International Trade Law (cmtradelaw.com)

 

In ruling NY N317145 (February 10, 2021), Customs and Border Protection (CBP) discussed the classification of 100% nitrile rubber gloves, or “BestSafe-Nitrile Gloves.” As stated in the ruling, the gloves are seamless and disposable. They are used for medical purposes but are also multi-use, such as for the food processing, beauty, IT industries, etc.

CBP determined that the applicable subheading for the gloves is 4015.19.1010, HTSUS, which provides for Articles of apparel and clothing accessories (including gloves, mittens and mitts), for all purposes, of vulcanized rubber other than hard rubber: Gloves, mittens, and mitts: Other: Other: Seamless: Disposable.”  The general rate of duty is 3% ad valorem.

Less than three weeks after the group’s initial addition to the list of Foreign Terrorist Organizations, the Biden administration removed Ansarallah (the Houthis in Yemen) from the list on February 16, 2021.  As a result, Ansarallah is no longer blocked pursuant to OFAC’s Global Terrorism Sanctions Regulations and U.S. persons do not require authorization from OFAC to engage in activities or transactions with Ansarallah. Simultaneously, the Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) removed five general licenses and three frequently asked questions from its website, given that they are no longer necessary.

The reversal comes shortly after the initial designation of the group on the last full day of the Trump Administration.  Ansarallah, a political movement and militia group in Yemen, have controlled the government in Yemen since 2015.  A protracted civil war has been ongoing since that time.  The designation was met with concern from the United Nations and other international aid organizations that were concerned it would greatly reduce the supply of Yemen’s food and other essential goods, which is nearly all imported, at a time when Yemen is facing imminent danger of famine.  The State Department noted that the lifting of the designation was not acceptance of the group’s conduct but a recognition of the dire humanitarian needs facing Yemen.

In the first material sanctions-related action of the new U.S. Administration, on February 11, 2021, President Biden issued Executive Order 14014 (EO) imposing sanctions on Myanmar (Burma) in response to the February 1, 2021, military coup and subsequent detention of government leaders, politicians, and others there. The sanctions focus on the defense sector of the Burmese economy, its military, and current military government, but provide authority to expand the scope of the sanctions. The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) subsequently sanctioned 10 individuals and three entities pursuant to the new authorities. Simultaneously, the Commerce Department’s Bureau of Industry and Security (BIS) tightened its existing licensing policy on Burma and previewed a potential substantial expansion of future export controls in the event the situation deteriorates further.

For more, please click here.

In light of increased U.S. actions and rising global concerns over reports of forced labor in Xinjiang, U.S. Customs and Border Protection (CBP) has issued the following Q&A responses:

General

Proof of Admissibility

Due Diligence/Best Practices

Miscellaneous

For more information on actions addressing human rights and forced labor abuses, contact our team and see previous posts below.

Forced Labor/U.K. Modern Slavery Act Archives | International Trade Law (cmtradelaw.com)

Xinjiang Archives | International Trade Law (cmtradelaw.com)

On February 10, 2021, the CIT issued a procedural order that requires all Section 301 cases to receive notice under a master case named “In Re Section 301 Cases, CIT Ct. No. 21-cv-00052.” The decision was made in an effort to streamline the more than 3,500 lawsuits the CIT has received from importers since September of last year. Additionally, the order requires a master answer from the United States to Answer Plaintiffs’ Complaints in a general manner and  defend against the pending lawsuits by March 12, 2021.

For more information on Section 301 tariffs please contact John Brew, Daniel Cannistra, Frances P. Hadfield, Brian McGrath, Walter (Sam) Boone, & Clayton Kaier  or refer to our previous posts below:

Section 301 Tariffs Archives | International Trade Law (cmtradelaw.com)