On March 31, 2017 President Trump signed two Executive Orders aimed at fulfilling his campaign promises on “fair trade.” The first EO commissions a report on the practices of foreign trading partners contributing to the trade deficit and the second increases enforcement and collection of antidumping and countervailing duties. Below, we analyze the details of these EOs and what they may mean for the trade community.
The “Omnibus Report on Significant Trade Deficits” EO begins with a lengthy policy section that reflects a more refined vision of what President Trump repeatedly emphasized at his campaign rallies: 1) that the US “has not obtained the full scope of benefits” from a number of trade agreements or participating in the WTO, leading to a large trade deficit; and 2) that some of the US’ trading partners have engaged in “unfair and discriminatory trade practices” that put the country at a disadvantage.
The EO aims to address these challenges by commissioning a report on “unfair trade practices and the causes of United States trade deficits,” to be called the Omnibus Report on Significant Trade Deficits. The Omnibus Report on Significant Trade Deficits is due to President Trump by June 29, 2017 and will be prepared by the Secretary of Commerce and the United States Trade Representative, and other concerned agencies.
The EO requires the report to “identify those foreign trading partners with which the United States had a significant trade deficit in goods in 2016,” but does not define what constitutes a “significant trade deficit.” For each partner identified, the report must discuss the major causes of the trade deficit and various effects of their trading practices on the United States.
On April 2, 2017, Commerce Secretary Wilbur Ross painted the EO as an attempt to empirically analyze reasons for the trade deficit and theorized that in some cases, the reason is “innocent.” However, Mr. Ross also stated that “there’s a lot that’s due to cheating, there’s a lot due to dumping, there’s a lot that’s due to subsidies that are illegal, lot to do with a lot of things that are not inherent in free trade.”
While the results of the report are not yet known, its likely purpose is to support whatever tough trade actions the administration may pursue in the future. China, with more than 40 percent of the US trade deficit in goods, is sure to be a target of future actions. The US also has large trade deficits with Canada and Mexico, so the results of the report may factor into any future efforts to renegotiate NAFTA. Japan, Germany, India, and other countries have trade deficits with the US that suggest they may also be singled out.
Executive Order Establishing Enhanced Enforcement of Antidumping and Countervailing Duties and Violations of Trade and Customs Laws
The second EO sets its sight on importers that unlawfully evade antidumping and countervailing duties and enter unlawful goods. The EO is consistent with President Trump’s campaign promise to crack down on “bad trade actors” and directs the attorney general to give a high priority to prosecuting violations of trade law.
This EO is a continuation of an increased focus on aggressive enforcement that began a year ago under the previous administration, as detailed in our previous news alerts (August 23, 2016, August 8, 2016, August 4, 2016, May 23, 2016). The Customs and Border Protection (“CBP”) will release its plans complying with this EO by June 29, 2017.
The EO explains that as of May 2015, the Government has not collected $2.3 billion in antidumping and countervailing duties owed to it. The EO aims to focus on importers that often evade duties because they lack assets located in the United States. The EO directs the Secretary of Homeland Security to develop a plan within 90 days of the EO that requires “covered importers,” that pose a risk to the revenue of the United States, to provide security for antidumping and countervailing duty liability through bonds and “other legal measures” and identify any other appropriate enforcement measures. In fact, in the Q & A’s regarding this EO, CBP has stated that they are already in the “process of developing an implementation plan to provide increased security through bonding for final AD/CVD duties.” CBP is tasked with determining which importers pose a risk based on a risk assessment conducted by CBP. At the very least, many importers can expect increased bond amounts if their merchandise is subject to antidumping and countervailing duty orders.