On Monday, June 29, 2015, President Obama signed into law a bill renewing Trade Promotion Authority (TPA) (H.R. 2146), as well as legislation reauthorizing Trade Adjustment Assistance (TAA 2015) and U.S. trade preference programs and enacting changes to U.S. trade remedy law (H.R. 1295) (hereinafter, “TAA-Preferences Bill”). The signing of the bills came after protracted debates in both the Senate and the House about the future of U.S. trade policy.
Renewal of TPA
After months of prodding by U.S. industry, members of the Obama administration and foreign trading partners, Congress finally reauthorized TPA through passage of H.R. 2146. By implementing TPA (often referred to as “fast track”), Congress has agreed to consider legislation that implements trade agreements under expedited legislative procedures, provided that the President meets certain negotiating objectives, and consultation and notice requirements, when negotiating a trade agreement. TPA’s expedited legislative procedures stipulate that Congress deliberate on the implementing legislation with a certain time frame (i.e., no filibuster) and without any amendments. This “no amendment” criteria is an essential part of TPA, since the executive branch would almost certainly have to reopen negotiations with its foreign negotiating partners if Congress could amend a trade agreement implementing bill and, as such, change certain terms within the agreement itself.
Although H.R. 2146 extends the typical requirements and procedures from past versions of TPA, this reauthorization does include some significantly distinct provisions. For instance, Congress has criticized recent administrations about the lack of transparency in free trade agreement negotiations. Therefore, H.R. 2146 provides additional oversight authority for Congress by inserting new obligations for the executive branch to consult with all members of Congress, and to provide all members with access to negotiating text. In addition, all members must have the ability to attend the actual negotiations. The TPA reauthorization also provides additional transparency to the public by requiring the executive branch to make the final text of any trade agreement public 60 days before the President can sign the agreement. Despite significant debate on the issue, H.R. 2146 did not include a negotiating objective on currency, which would have required the administration to include enforceable currency manipulation provisions in free trade agreements.
For some time, the Obama administration has understood that, until TPA was passed, the other members of the Trans-Pacific Partnership (a 12-party free trade agreement between countries of the Asia Pacific region currently under negotiation) (TPP) would not finalize the agreement with the United States. We expect that, in the coming months, the Obama Administration will work to wrap-up negotiations, since passage and implementation of the TPP stands as a potential cornerstone of Obama’s “reset” with Asia and overall foreign policy accomplishments. However, the enacted TPA does present one problem—Section 106(b) of H.R. 2146 provides that the trade authorities procedures shall not apply to any implementing bill with respect to a free trade agreement that the United States has entered with a country identified as a “Tier 3” country in the most recent U.S. Department of State Trafficking in Persons Report. Malaysia, one of the TPP negotiating members, is one such country, which would make the trade authorities/fast track procedures inapplicable to the TPP should Malaysia remain a member. We understand, however, that Congress intends to modify this provision in the upcoming Customs and Trade Facilitation Act.
Reauthorization of TAA 2015
TAA provides temporary assistance to U.S. workers who have been displaced by foreign trade. The Trade Adjustment Assistance Reauthorization Act of 2015 was enacted into law in Title IV of H.R. 1295. TAA 2015 reauthorizes the TAA for Workers, TAA for Firms and TAA for Farmers programs for six years through June 30, 2021. However, beneficiaries certified for benefits prior to July 1, 2021, will continue to receive benefits to the extent that funds are available and the recipient is eligible to receive benefits before June 30, 2022. TAA caps total annual funding for the program at $450 million for each of fiscal years 2015 through 2021, reduced from 2009 (more than $600 million) and 2011 ($575 million). TAA 2015 also does not provide benefits to public sector workers, which were included under the 2009 TAA renewal.
TAA 2015 did not make specific changes to the benefits and services, eligibility of companies/workers and federal/state implementation of the programs. For more information about the detailed administration of the TAA program, please reference the Department of Labor’s website here.
Reauthorization of U.S. Trade Preference Programs
Under H.R. 1295, Congress authorized an extension of three trade preferences programs—the generalized system of preferences (GSP), the preferential duty treatment program for Haiti under the Caribbean Economic Recovery Act (CBERA), and the preferential duty treatment program for sub-Saharan Africa under the African Growth and Opportunity Act (AGOA). Whereas importers would start losing the trade preference benefits of AGOA on September 30, 2015, and, at least, some of the trade preference benefits of CBERA on December 20, 2017, GSP expired almost two years ago on July 31, 2013. Considering that economic conditions have drastically improved in the regions at issue since the implementation of these programs and that many U.S. importers rely on these duty savings as a means of cutting costs, the extensions of AGOA, CBERA and GSP represent an important piece of legislation for both U.S. competitiveness and foreign relations.
Pursuant to enactment of H.R. 1295, AGOA has been extended until September 30, 2025. This reauthorization also extends the third-country fabric program, which allows U.S. apparel imports from least-developed sub-Saharan Africa countries to qualify for duty-free treatment even if the finished product contains yarns and fabrics originating from non-AGOA countries. In addition, the enactment of H.R. 1295 authorized a five-year extension of preferential duty treatment under CBERA as applicable to Haitian imports, meaning that a variety of products from Haiti will continue to receive duty-free entry into the United States until September 30, 2025.
With respect to GSP, H.R. 1295 renewed GSP and the preferential treatment of GSP-eligible articles from beneficiary developing countries through December 31, 2017. Similar to previous GSP reauthorizations, the bill provides for the retroactive application of preferential treatment for certain previously filed entries. As a result, importers have a right to any paid duties and fees on GSP-eligible articles subject to the retroactive application. In order to obtain a refund, the Act states that importers must submit a request to Customs and Border Protection (CBP) within 180 days of the Act’s effective date that should contain sufficient information to allow CBP to locate or reconstruct the entry.
We expect that, in the coming weeks, CBP will issue specific instructions on how to make the required request and claim refunds for previously-filed entries. In the past, CBP automatically processed a refund for entries filed via the Automated Broker Interface with the Special Program Indicator (SPI) of “A” or “A+”—the symbols that notify CBP of an entry containing GSP-eligible goods. CBP’s website currently states that importers should still flag GSP-eligible importations in order to allow CBP to process automatic duty refunds in the event of a GSP retroactive renewal. In light of this instruction, we suspect that CBP may process automatic refunds for flagged entries. However, importers may still need to file a request with CBP even if the automatic refund process is reinstated, pursuant to the requirements of H.R. 1295. For entries without an SPI, we expect that importers will have the ability to make a refund claim via post-entry amendment or protest procedures, since CBP has allowed the use of these processes in the past. Considering that a refund of duties and fees for a two-year period can represent a significant amount of money, we recommend that importers contact their brokers in order to determine whether they need to take any action to ensure the provision of applicable reimbursements.
Changes to U.S. Trade Remedy Law
The new U.S. trade remedy law changes have been enacted as part of the American Trade Enforcement Effectiveness Act. The changes are primarily as follows:
- strengthen penalties when a respondent fails to respond to a request for information or when the response is otherwise inadequate
- identify factors that the U.S. International Trade Commission may consider in evaluating injury to a domestic industry by imports
- increase Department of Commerce (DOC) discretion in determining to exclude comparison market sales from the antidumping (AD) margin calculation, and respondents’ costs of production if sales or costs are not reflective of sales and costs in the ordinary course of trade
- address distortions in potential surrogate values in non-market-economy proceedings
- reduce the burden on DOC by reducing the number of voluntary respondents.
The trade remedy law changes that have been passed as part of the TAA-Preferences Bill have been passed with widespread support among domestic producers. As is evident, the majority of these changes are to the advantage of the domestic industry and to the detriment of foreign respondents. Respondents and their attorneys should be mindful of these laws and how their interests in AD and countervailing duty (CVD) proceedings may be impacted going forward. As the administrative record in each AD and CVD proceeding develops, respondents and their attorneys should now be incentivized, more than ever, to pay close attention to the information that petitioners place on the record, which may be adverse to them, and avail themselves of the agency’s regulatory deadlines to rebut this information in order to defend their interests. Overall, active participation in DOC proceedings is the key to minimizing margin risks.
Customs and Trade Facilitation
Finally, the House of Representatives and Senate considered legislation (H.R. 644) on customs and trade facilitation issues. The two chambers, however, were not able to reconcile the differences between each chamber’s legislation. As a result, the Senate voted on June 24 to establish a conference committee with the House of Representatives.