On Friday, March 31, 2017, President Trump issued two trade-related Executive Orders (Orders): one commissions a study on U.S. trade deficits, and the other is intended to target foreign exporters that avoid countervailing duties and antidumping fines. A summary of both Orders follows.
Presidential Executive Order on Establishing Enhanced Collection and Enforcement of Antidumping and Countervailing Duties and Violations of Trade and Customs Laws
The first Order is aimed toward enhancing enforcement efforts against trade remedies violations and increased collection of antidumping (AD) and countervailing (CVD) duties at the U.S. border. The Order charges the U.S. government with the following:
- The Order tasks the Department of Homeland Security (DHS) to develop a plan, within the next ninety (90) days, that requires certain higher-risk importers to provide security for AD and CVD duty liability through a bond or other legal mechanisms. U.S. Customs and Border Protection (CBP) will identify high-risk importers based on their prior import history and their failure to fully or timely pay AD or CVD duties.
- The Order directs CBP to develop a strategy for combating violations of U.S. trade and customs laws and for blocking the entry of inadmissible goods at the border. Through the Order, the administration intends to strengthen the protection of Intellectual Property Rights (IPR) against counterfeit imports and directs the Department of Treasury and DHS to take steps to ensure CBP is able to: (1) provide information to IPR holders to determine whether there has been an IPR infringement or violation, and (2) share information regarding merchandise that is voluntarily abandoned before seizure, in cases where CBP reasonably believes that successful importation of the goods would have violated trade laws.
- The Order instructs the Attorney General to develop prosecution practices and devote additional resources as a "high priority" for the prosecution of significant violations of trade laws.
Acting Commissioner Kevin K. McAleenan, who was nominated as the Commissioner of CBP last week, lauded the Order in a press release issued by CBP. He stated that "[t]his Executive Order gives CBP and our partners at U.S. Immigration and Customs Enforcement important and powerful new tools to further level the playing field for critical U.S. industries." CBP plans to lead DHS efforts to implement the provisions set forth in the Order, in consultation with the Secretary of the Treasury, the Secretary of Commerce, and the United States Trade Representative (USTR).
For some U.S. importers, this new Order is only the latest development in a storm that has been gathering strength for some time. The Trump Administration has emphasized trade remedies enforcement on a number of occasions over the past few months. In his Joint Address to Congress on February 28, 2017, President Trump stressed his administration's goal of securing "true market competition" by focusing on the ability of U.S. manufacturers to compete with imports. An expansion of unfair trade investigations and increased trade remedy enforcement efforts are also flagged in the 2017 Trade Policy Agenda released by the USTR in March 2017.
Moreover, pursuant to the Enforce and Protect Act passed by Congress in 2016, CBP, through its newly formed Trade Remedy Law Enforcement Directorate (TRLED), has already been in the process of increasing its focus on investigations of trade remedy evasion or circumvention. On Capitol Hill, significant attention has been devoted to a lengthy audit report released by the Government Accountability Office (GAO), Congress's primary investigatory and audit agency. The August 2016 audit report concluded that an estimated $2.3 billion in AD and CVD duties went uncollected between 2001 and 2014. In its report, the GAO urged CBP to issue regular guidance on the collection and analysis of data as a means of addressing AD and CVD liquidation errors, and to take steps to mitigate nonpayment, using data and risk assessment strategies.
These increased efforts by the new administration for enhanced trade enforcement and duty collections, the formation of new enforcement Directorate at CBP, and the development of new rules and tools for tracking and confirming duties owed are serving to generate a perfect storm that must be watched closely. Domestic companies who import certain raw materials and intermediate goods must ensure that they are not unknowingly importing goods subject to AD and CVD orders. If your company is suddenly facing the assessment of AD or CVD duties or challenges to IPR, you need to understand their scope and implications for your business.
Presidential Executive Order Regarding the Omnibus Report on Significant Trade Deficits
The second Order directs the Commerce Department and USTR to launch a wide-ranging assessment of the reasons for U.S. trade deficits within the next three months. The review will focus on trade practices with sixteen countries with which the U.S. runs a substantial trade deficit in goods: China, Japan, Germany, Mexico, Ireland, Vietnam, Italy, Korea, Malaysia, India, Thailand, France, Switzerland, Taiwan, Indonesia, and Canada. Last year, the U.S. logged a trade deficit of $502.25 billion, the largest in four years, with China alone totaling $347 billion, far surpassing other major trading partners, such as Japan ($69 billion), Germany ($65 billion), and Mexico ($63 billion). Commerce Secretary Wilbur Ross said that he hopes the report will lead to solutions for reducing U.S. trade deficits and increasing exports.
The three-month review will analyze factors that have contributed to the trade deficit. As part of their review, officials are planning public meetings with the manufacturing industry, service providers, labor unions, the agricultural sector, and consumers. According to Secretary Ross, the report will examine deficits on a country-by-country, product-by-product basis and assess the extent to which deficits are driven by lax enforcement, asymmetrical tariff rules, currency misalignment, nontariff barriers, and other factors. President Trump said the report's findings will be used to "take necessary and lawful action to end those many abuses."
Secretary Ross echoed that one goal of the report is to provide the administration with empirical bases to inform significant decisions about trade policy. Although the report's findings are unlikely to be new information and will likely duplicate existing federal agency reports on various trade issues, including the impact of the trade deficit on employment and production capacity and national security, the report is another device that can aid administration officials in their decision-making on trade-related policy matters.
President Trump is scheduled to meet with Chinese President Xi Jinping later this week, and a discussion of the trade deficit is reportedly on the agenda. President Trump tweeted that "the meeting next week with China will be a very difficult one in that we can no longer have massive trade deficits." We expect trade issues will be a continued area of focus in coming months and will provide further guidance as and when the administration begins to seek public input from industry, labor, and consumer groups.