Q1 Regulatory Updates

GSP Expired On December 31, 2017

The Generalized System of Preferences (GSP) provides duty-free treatment to goods of designated beneficiary countries. The program was authorized by the Trade Act of 1974 to promote economic growth in the developing countries and was implemented on January 1, 1976.

The GSP periodically expires and must be renewed by Congress to remain in effect. The 2015 GSP reauthorization (H.R. 1295) expired on December 31, 2017. All previous GSP renewals that have taken effect after a lapse have included a retroactive clause providing refunds to importers of eligible goods imported during the lapse period.  Until further notice, importers are strongly encouraged to continue to flag GSP-eligible importations with the SPI “A,” even as they pay normal trade relations (column 1) duty rates on otherwise GSP-eligible importations. Importers may not file SPI “A” without duties.

NAFTA Renegotiations Stall on Contentious Issues

The NAFTA renegotiations continue, but the most difficult issues remain unresolved.    Some chapters are reportedly closed, and progress has been reported in each round, including the fifth round that concluded in Mexico City, but a great deal of work remains.  Officials are trying to lay the foundation to announce more progress at the sixth official round of negotiations, scheduled to take place in Montreal on Jan. 23-28, 2018.

The talks remain deadlocked over several proposals the United States brought to the table for the first time.  These include controversial items, such as a review of the NAFTA after five years (a sunset clause); increased U.S. content requirements for automobiles; and, that NAFTA 2.0 must reduce the U.S. trade deficit in goods.

Complicating the negotiations, the US Commerce Dept. affirmed on December 20, 2017 antidumping duty (AD) and countervailing duty (CVD) of 292% pursuant to a claim by Boeing that Bombardier is selling its CSeries aircraft in the United States at below market prices.  This impedes the NAFTA negotiations on a key point.  Canada wants to keep its ability to appeal such trade decisions to a panel of judges from NAFTA countries through what is known as Chapter 19, but the US wants to eliminate the Chapter 19 dispute settlement mechanism from the new agreement.

The dispute also portends how a tougher trade stance can ripple through integrated global supply chains.  More than 50 percent of C-Series components are sourced from the US, where the supply chain sustains over 7,000 US jobs.  More importantly, disputes can escalate.  Canada announced earlier this month that it would scrap a $5.2 billion purchase of new fighter jets from Boeing and purchase Australian jets instead.  The British government has warned Boeing it could lose U.K. defense contracts. British Prime Minister Theresa May has said she was “bitterly disappointed” by the tariffs, which threaten about 1,000 jobs in Northern Ireland.

Safeguard Tariffs on Imported Solar Cells

  • The ITC determined that increased solar cell and module imports are a substantial cause of serious injury to the domestic industry. Although the Commissioners could not agree on a single remedy to recommend, most of them favored an increase in duties with a carve-out for a specified quantity of imported cells.
  • After consultation with the interagency Trade Policy Staff Committee (TPSC), USTR recommended and the President chose to take action by applying the following additional duties:
Safeguard Tariffs on Imported Solar Cells and Modules
Year 1 Year 2 Year 3 Year 4
Tariff Incresae 30% 25% 20% 15%

The new tariffs shall be effective with respect to goods entered, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern standard time on February 7, 2018.

First 2.5 gigawatt of imported cells are excluded from the additional tariff.

SAFEGUARD TARIFFS ON IMPORTED LARGE RESIDENTIAL WASHERS

U.S. Trade Representative Robert Lighthizer announced on January 22, 2018 that President Trump has approved recommendations to impose safeguard tariffs on imported large residential washing machines and imported solar cells and modules.

For imports of large residential washers, the President approved applying a safeguard tariff-rate quota for three years with the following terms:

Tariff-Rate Quotas on Washers
Year 1 Year 2 Year 3
First 1.2 million unites of imported finished washers 20% 18% 16%
All subsequent imports of finished washers 50% 45% 40%
Tariff of covered parts 50% 45% 40%
Covered parts excluded from tariff 50,000 units 70,000 units 90,000 units

Agreement reached on Comprehensive and Progressive Agreement for Trans-Pacific Partnership

The United States withdrew from the Trans Pacific Partnership (TPP) on January 23, 2017, technically making it impossible for the Trade deal to go into force.  One year later, on January 23, 2018, François-Philippe Champagne, Canada’s Minister of International Trade,  announced that Canada and the 10 other remaining members of the original TPP (Australia, Mexico, Singapore, Canada, Chile, Japan, Singapore, Brunei, Peru, Vietnam and Malaysia) have concluded discussions in Tokyo, Japan, on a new Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).  The new Agreement is expected to be signed in March.

In an interview with CNBC from the World Economic Forum in Switzerland on Thursday, January 25, 2018 President Trump said he could rethink the Trans-Pacific Partnership if the U.S. can secure a better deal.

Also, in an interesting twist, as the United Kingdom prepares for Brexit, it has initiated informal talks on joining the CPTTP after the March 19, 2019 Brexit.

Running parallel to the CPTTP negotiations is the 16-nation Regional Comprehensive Economic Partnership (RCEP).  The RCEP, which includes China and India but not the U.S., should have a framework agreement in early 2018.

Sources:
Generalized System of Preferences Expired December 31, 2017 – www.cbp.gov
Summary of Objectives for the NAFTA Renegotiation – www.ustr.gov
Governors Look To Save NAFTA Amid Washington’s Tough Talk – www.nytimes.com 12/15/17
Boeing and Bombardier Trade Clash Poses More Risks for NAFTA – www.nytimes.com 12/18/17
NAFTA negotiations: Where we are – www.ehoganlovells.com
A lesson in the basic physics of NAFTA negotiations – www.thehill.com 11/12/17
U.S. Department of Commerce Finds Dumping and Subsidization of Imports of 100- to 150-Seat Large Civil Aircraft from Canada – www.commerce.gov 12/20/17
Boeing win in trade case would jeopardize U.S. jobs, Canada says – www.thestar.com 12/18/17
ITC report on ‘unforseen developments’ in solar case cites China’s WTO record – www.insidetrade.com 01/02/18
U.S. Trade Representative Requests Further Information on Remedy Recommendations for Imported Crystalline Silicon Photovoltaic Cells (IRB No. 570) – www.bryancave.com 12/13/17
Who needs America? – www.economist.com 11/16/17
Agreeing on RCEP – China’s favorite trade deal – set to drag into 2018 – www.japantimes.co.jp
President Trump Approves Relief for U.S. Washing Machine and Solar Cell Manufacturers – www.ustr.gov
Presidential Proclamation to Facilitate Positive Adjustment to Competition from Imports of Certain Crystalline Silicon Photovoltaic Cells – www.whitehouse.gov 01/23/18
President Trumps Full Remarks on NAFTA TPP in CNBC Interview” – www.cnbc.com 01/26/18
“Generalized System of Preferences (GSP)” – www.cbp.gov
“Summary of Objectives for the NAFTA Renegotiation” – www.ustr.gov Nov 2017
“Statement by Minister of International Trade On Successful Conclusion of Cormprehensive and Progressive Agreement For Trans-Pacific Partnership”