On March 31, 2017, President Donald J. Trump signed two Executive Orders on international trade and customs issues. The first of the two orders suggests that much tougher enforcement actions will be coming for import compliance especially, but not only, on merchandise (1) subject to antidumping (“AD”) or countervailing duty (“CVD”) orders, and (2) that may infringe on intellectual property rights (“IPR”). The second order requires a thorough report on trade deficits to support potential, as yet undefined, changes in trade policy to reduce those deficits. While relatively short on specifics, the orders strongly suggest that changes in U.S. import requirements – and an increase in enforcement actions – may be implemented in the coming months.
I. The Executive Order on Trade and Customs Enforcement
The first of the two orders is entitled Presidential Executive Order on Establishing Enhanced Collection and Enforcement of Antidumping and Countervailing Duties and Violations of Trade and Customs Laws. This order covers several points including import compliance, AD/CVD enforcement, and IPR. It contains general exhortations for federal agencies to pursue additional enforcement against violations of U.S. trade and customs laws; specific requests for new requirements for imports of AD/CVD merchandise; and instructions to agencies to broaden the involvement of rights holders in the enforcement of IPR. During the signing ceremony, President Trump said this order would “ensure that we fully collect all duties imposed on foreign importers that cheat. … From now on, those who break the rules will face the consequences — and they’ll be very severe consequences.”
Potential Implications for All Importers
This order has two sections that seem to apply to imports of all types, regardless of country or industry. The order instructs the Department of Homeland Security (“DHS”), through U.S. Customs and Border Protection (“CBP”), to “develop and implement a strategy and plan” to oppose violations of U.S. trade and customs laws, and to prevent inadmissible goods from entering the United States. Specifically, the plan is for “combating violations of United States trade and customs laws for goods and for enabling interdiction and disposal, including through methods other than seizure, of inadmissible merchandise[.]” While the order does not focus on any particular issue, it seems to be a clear call for additional enforcement action. The nature of that action will depend on the details chosen by CBP. CBP has 90 days — until June 29, 2017 — to both develop and implement the plan.
The second broadly applicable section of the order directs the U.S. Department of Justice to make the prosecution of trade cases a high priority. Similarly, this section is not directed to any industry or country. Specifically, the order instructs the Attorney General, in consultation with DHS, to “develop recommended prosecution practices and allocate appropriate resources to ensure that Federal prosecutors accord a high priority on prosecuting significant offenses related to violations of trade laws.” This instruction seems to indicate that the Trump Administration is gearing up to prosecute trade law violations more forcefully with court actions to make collections and, potentially, impose criminal penalties for non-compliance. It also raises the question of which types of trade offenses the Administration considers to be “significant”.
Potential Implications for AD/CVD Entries
The most detail in the order comes with respect to AD/CVD entries. These provisions suggest that importing goods subject to AD/CVD duties could become more costly for some importers. Specifically, the order instructs DHS to take the lead in developing a plan to impose bonding requirements based on risk assessments on entries subject to AD/CVD duties to protect U.S. revenue. The plan will require a particular subset of importers to “provide security for antidumping and countervailing duty liability through bonds and other legal measures”.
The subset of importers who may be affected by the DHS plan are those who import products subject to AD/CVD duties, and who meet one of the following criteria: (1) CBP has no record of prior imports from that importer (i.e., a new importer); (2) CBP has a record of the importer not fully paying ADs or CVDs; or (3) CBP has a record of the importer paying ADs or CVDs late. If an importer of goods subject to AD/CVD duties meets one of those three criteria, the importer will be deemed a “covered importer”. Covered importers will be subject to a risk assessment conducted by CBP, which will determine which of them pose a risk to U.S. revenue. Those covered importers who pose a risk to U.S. revenue will be required to “provide security for antidumping and countervailing duty liability through bonds and other legal measures”. In other words, for those importers, the costs associated with importing may increase.
The call for this type of plan on AD/CVD entries raises many questions ranging from what deadline will be used to consider AD/CVD duties late, to the implications for new importers with no CBP record. DHS has 90 days, until June 29, 2017, to develop the plan.
Potential Implications for Intellectual Property Rights Holders
Another provision of the order seeks to address long-standing concerns among IPR holders that CBP does not provide them with sufficient information about potentially infringing imports. To this end, the order directs the U.S. Department of the Treasury and DHS to “take all appropriate steps, including rulemaking if necessary”, to “ensure” that CBP is able to share information about potential IPR violations with rights holders. This includes the ability to share information about merchandise voluntarily abandoned before seizure.
II. The Executive Order on the Trade Deficit Report
The second Executive Order is entitled Presidential Executive Order Regarding the Omnibus Report on Significant Trade Deficits. The order requires the Department of Commerce (“the Department”) and the U.S. Trade Representative (“USTR”) to take the lead in preparing a report identifying trading partners with whom the U.S. has a “significant” trade deficit in goods, and analyzing the causes of those deficits. The report also will assess other angles of the trading relationship such as any unfair discrimination against U.S. commerce by the trading partner. The order states that “it is essential that policy makers and the persons representing the United States in trade negotiations have access to current and comprehensive information regarding unfair trade practices and the causes of United States trade deficits[,]” and the purpose of the report seems to be the provision of such information. The Department and USTR have 90 days, until June 29, 2017, to prepare the report.
During the signing ceremony, President Trump described the report as the “first-ever comprehensive review of America’s trade deficits and all violations of trade rules that harm the United States and the workers of the United States[.]”
We will continue to monitor the implementation of these orders and provide updates as appropriate.