Insights

Trump Administration Begins Crackdown on Trade Abuses

by: Olga Torres, Managing Member and Derrick Kyle, Associate

With the signing of two new executive orders, President Trump is taking the first steps in fulfilling two of his favorite campaign promises, both relating to trade: (1) no longer tolerating trade abuse that damages the American economy and (2) decreasing the national trade deficit. On March 31, President Trump, who has repeatedly stated that he is for free trade that is also fair, signed Presidential Executive Order on Establishing Enhanced Collection and Enforcement of Antidumping and Countervailing Duties (“AD/CVD”) and Violations of Trade and Customs Laws (“Trade Enforcement EO”)[1] and Presidential Executive Order Regarding the Omnibus Report on Significant Trade Deficits (“Omnibus Report EO”).[2]

Trade Enforcement EO

The Trade Enforcement EO acknowledges the harm caused by anti-dumping and countervailing duty evading importers and states: “Importers that unlawfully evade antidumping and countervailing duties expose United States employers to unfair competition and deprive the Federal Government of lawful revenue.” The executive order goes on to claim that $2.3 billion in AD/CV duties remain uncollected by the federal government. The Trade Enforcement EO applies to “covered importers,” which are defined in the EO as any importer of articles subject to antidumping or countervailing duties for which one of the following is true: 

  1. U.S. Customs and Border Protection (“CBP”) has no record of previous imports by the importer;      
  2. CBP has a record of the importer's failure to fully pay antidumping or countervailing duties; or
  3. CBP has a record of the importer's failure to pay antidumping or countervailing duties in a timely manner.

By June 29, the Secretary of Homeland Security, John Kelly, is tasked with developing a plan that will require covered importers that pose a risk to the revenue of the U.S. to provide additional security for AD/CVD liability through bonds and “other legal measures.” The plan will also identify “other appropriate enforcement measures.”

The Trade Enforcement EO also requires Mr. Kelly to develop and implement a strategy and plan for combating violations of trade and customs laws for goods and for enabling prohibition and disposal of inadmissible merchandise. The EO has special provisions related to the protection of intellectual property (“IP”) rights, as well, and requires the taking of appropriate steps to ensure that CBP can share with IP rights holders: (1) any information necessary to determine whether there has been an IP rights infringement or violation; and (2) any information regarding merchandise voluntarily abandoned, as defined in 19 CFR 127.12, before seizure, if CBP reasonably believes that the successful importation of the merchandise would have violated U.S. trade laws.

Finally, the Trade Enforcement EO directs Attorney General Jeff Sessions to assign a high priority to prosecuting significant offenses related to violations of trade laws.

Omnibus Report EO

The Omnibus Report EO leads with data regarding the United States’ annual trade deficit, stating the deficit in goods exceeds $700 billion and the overall trade deficit exceeded $500 billion in 2016. The EO goes on to blame the deficit on “unfair and discriminatory trade practices of some [U.S.] trading partners.” To combat the unfair and discriminatory practices, the EO claims it is necessary for policy makers and trade negotiators to have access to “current and comprehensive information regarding unfair trade practices and the causes of the United States trade deficits.” Pursuant to this aim, the EO requires Secretary of Commerce Wilbur Ross and the United States Trade Representative (“USTR”) Robert Lighthizer, and other heads of departments and agencies as needed, to prepare an Omnibus Report (the “Report”) concerning the U.S. significant trade deficits. The EO provides for a quick turn-around of only 90 days to submit the report to President Trump. For each identified trade partner, the Report will:

  1. assess the major causes of the trade deficit, including, as applicable, differential tariffs, non-tariff barriers, injurious dumping, injurious government subsidization, intellectual property theft, forced technology transfer, denial of worker rights and labor standards, and any other form of discrimination against the commerce of the United States or other factors contributing to the deficit;
  2. assess whether the trading partner is, directly or indirectly, imposing unequal burdens on, or unfairly discriminating in fact against, the commerce of the United States by law, regulation, or practice and thereby placing the commerce of the United States at an unfair disadvantage;
  3. assess the effects of the trade relationship on the production capacity and strength of the manufacturing and defense industrial bases of the United States;
  4. assess the effects of the trade relationship on employment and wage growth in the United States; and
  5. identify imports and trade practices that may be impairing the national security of the United States.

            The actual information gathered for the Report will go a long way in determining how the new administration will proceed with regards to the U.S. trade deficit.

Conclusion

The Trade Enforcement EO demonstrates that the Trump Administration means business when it comes to importers that continue to circumvent U.S. trade and customs laws. By directing the Attorney General to prioritize violators of trade laws, the President has sent a clear signal to the importing community that abuse of AD/CVD and other laws will not be tolerated. The Omnibus Report EO only directs an information gathering exercise at this point, but the information gathered will serve as a cornerstone for the shaping of future trade policy.

If you require assistance in understanding the effect these executive orders may have on your company, or if you would like to determine whether you may be subject to AD/CVD laws and regulations, or are otherwise implicated by the Trade Enforcement EO, please do not hesitate to contact us.

 

[1] Presidential Executive Order on Establishing Enhanced Collection and Enforcement of Antidumping and Countervailing Duties and Violations of Trade and Customs Laws, Office of the Press Secretary, The White House (Mar. 31, 2017), available at https://www.whitehouse.gov/the-press-office/2017/03/31/presidential-executive-order-establishing-enhanced-collection-and.

[2] Presidential Executive Order Regarding the Omnibus Report on Significant Trade Deficits, Office of the Press Secretary, The White House (Mar. 31, 2017), available at https://www.whitehouse.gov/the-press-office/2017/03/31/presidential-executive-order-regarding-omnibus-report-significant-trade.

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