The NAFTA (USMCA) loyalty oath?

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As has been widely reported, the new NAFTA agreement (USMCA) contains what has been branded a “loyalty oath” among the US, Canada and Mexico.

What is this “loyalty oath”?
In short, the oath says that in the event any USMCA member enters into a free trade agreement (FTA) with a non-market country, the other two remaining countries can leave the agreement and form their own bilateral trade pact.

Why is this clause in the USMCA?
This clause is likely an effort by the US Administration to isolate China economically since neither Canada or Mexico would want to leave the USMCA. This clause is also aimed at limiting the imports from China to Mexico/Canada for shipment into the US duty free.

Is a “loyalty oath” found in other trade agreements?
Currently, no, however this inclusion in the USMCA may be an indication of what will occur in future trade agreements to further isolate China from their trading partners.

Is the “loyalty oath” set in stone?
Right now, no, the disclaimer on the current USMCA text states: “Subject to Legal Review for Accuracy, Clarity, and Consistency Subject to Language Authentication“. Only upon ratification by all countries can we know for sure whether this is in the agreement.

What is a market or non-market economy?
This loyalty oath against non-market economies is likely aimed at China while not specifically named in the agreement. Beijing has asked for recognition as a “market economy” within the World Trade Organization (WTO) since their accession agreement expired in December 2016. If China is branded a “market economy”, this would limit trade remedies such as anti-dumping/countervailing duties to be used against Chinese imports.

What are the non-market economies around the world?
According to the European Union, besides China, the other non-market economies include Vietnam, Kazakhstan, Albania, Armenia, Azerbaijan, Belarus, Georgia, the Democratic People’s Republic of Korea, Kyrgyzstan, Moldova, Mongolia, Tajikistan, Turkmenistan, and Uzbekistan.

Where can I read the full text of the “loyalty oath”
I could not find any news sources that cited the USMCA section.

The exact text of the oath is copied below:

4. Entry by any Party into a free trade agreement with a non-market country, shall allow the other Parties to terminate this Agreement on six-month notice and replace this Agreement with an agreement as between them (bilateral agreement).

The official PDF on the US Trade Representative website can be accessed here: (last accessed October 9, 2018).

https://ustr.gov/sites/default/files/files/agreements/FTA/USMCA/32%20Exceptions%20and%20General%20Provisions.pdf

See Article 32.10 (4)

If you have any questions about NAFTA or the USMCA and how this may impact your business, call experienced trade attorney, David Hsu at 832-896-6288 or by email at dhsu@givensjohnston.com.

China to cut import tariffs on wide range of products.

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According to Reuters, China’s finance ministry will reduce import tariffs on textiles and metals from 11.5% to 8.4% on November 1st. Tariffs on wood and paper products, minerals and gemstones will be cut from 6.6% to 5.4%.

The reduction in tariffs on imports is part of Beijing’s efforts to increase imports this year and likely due to the current trade situation between China and the United States.

November 1st marks the second time in which China reduced import tariffs – the first reduction occured in early July and covered import tariffs on mostly consumer items – such as clothing, home appliances, fitness products among others.

US and China exchange tariff duties in trade war.

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Sorry for the lack of updates, Trump’s 232 and 301 duties have been occupying most of my time.

As you likely already know, yesterday, the Trump administration announced they will impose 10% duties on $200 billion worth of Chinese goods, earlier today, China announced retaliatory duties on $60 billion in US goods.

If you import from China and have questions about commenting, exclusion requests or other alternatives to minimize the tariff penalty – feel free to give me a call, 832.896.6288 or email me at dhsu@givensjohnston.com.

Trump threatens tariffs on $267 billion in Chinese goods (not a typo).

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President Trump said on Friday (September 8th) he is ready to impose tariffs on $267 billion in goods from China, on top of the current $200+ billion plus in tariffs on goods. This past July, Trump imposed tariffs on $50 billion in Chinese imports in July and then an additional $200 billion in tariffs.

With the threatened $267 billion, Trump will have imposed or threatened to impose a total of over $500 billion in imports from China. To put this amount into perspective, the US imported only $505 billion in Chinese goods in 2017. In short, Trump is threatening tariffs on everything imported from China.

On September 6th, the U.S. Trade Representative finished accepting comments on the List 3 of tariffs that could impact up to $200 billion in Chinese goods.

More updates will be posted as they become available.

If you have any questions about how List 1, 2, 3 and upcoming proposed tariffs will impact your business – or how you can file comments or exclusions, contact experienced trade and customs attorney – David Hsu at 832.896.6288 or by email at dhsu@givensjohnston.com.

Homeland Security records largest counterfeit seizure ever – $500 million.

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A little bit of background – Homeland Security Investigations (HSI) is a component of U.S. Immigration and Customs Enforcement (ICE). ICE is a federal agency under the Department of Homeland Security (DHS) and responsible for enforcing over 400 federal statutes within the United States.

Last Thursday (August 16th, 2018) was the culmination of a six year investigation into the importation and sale of fake luxury goods – ending with HSI officials reported seizing enough counterfeit luxury bags and belts to fill 22 shipping containers and the arrest of 33 people, all of Chinese descent.

HSI reported the seized goods included popular luxury brands “including Gucci, Tory Burch, Hermes, Coach, Burberry, Michael Kors and Louis Vuitton” along with knockoff Chanel perfume.

With an estimated loss in retail value of nearly $500 million, this seizure is the largest counterfeit seizure in history, besting the 2012 seizure of $325 million worth of fake goods.

If you have had problems with CBP seizing goods due to alleged counterfeit or trademark violations, call experienced trade and customs attorney David Hsu at 832.896.6288 or by email at dhsu@givensjohnston.com.

Current US Tariff Action Deadlines

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I receive many questions about the deadlines for all the various tariff actions, I thought I’d post all the upcoming deadlines for your convenience.

If you have any questions regarding any 301 or 232 duties or are interested in filing of comments or an exclusion, or need assistance filing a response to comments, feel free to contact David Hsu at 832.896.6288 or by email at dhsu@givensjohnston.com.

August 20-23 – Public hearing in DC for List 3

August 23, 2018 – 25% duty effective on List 2

September 6, 2018 – deadline to submit written comments for List 3

September 6, 2018 – deadline to submit post-hearing rebuttal comments

October 9, 2018 – deadline for product-specific exclusions for List 1

14 days after request for exclusion posted on docket – deadline for responses to requests for product-specific exclusion.

7 days after the close of response period – deadline for responses filed during the 14-day response period.

To Be Announced – 10% or 25% duty on List 3

How you can protect your company in light of the new China tariffs.

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Since “List 1” of the tariffs on Chinese goods became effective on July 6th, we’ve had many calls from importers, forwarders and brokers on the best practices moving forward. Here’s a quick summary of what any importer should do regarding their imports of Chinese goods –

  1. Apply for a company-specific exclusion from the tariffs. The U.S. Department of Commerce (Commerce) has published procedures for doing so on their website. The current approved exclusions are from steel tariffs with more exclusions to follow as Lists 2 and 3 take effect likely later this year.
  2. Review your classifications of imported merchandise. There may be more appropriate HTSUS numbers that your merchandise can be entered under and not subject to duties.
  3. Companies can also use the rules of origin to see if imported merchandise can be from another country other than China. This could result from moving the manufacture location, or moving the location of the “substantial transformation” of those goods.
  4. Adjust the valuation of the merchandise. See if the imported goods are properly valued.
  5. If merchandise is imported to the US for export out of the US, be sure property TIB, IT, T&E bonds are filed.
  6. No one likes surprises – it is best for importers, compliance, supply chain, sales and accounting to notify company management of potential tariff changes and the economic impact these new tariffs will have on profit and costs.

If you have any questions or want to know how your company can protect itself from these new duties, contact experienced trade attorney David Hsu at 832.896.6288 or by email at dhsu@givensjohnston.com.

ZTE pays $400 million into escrow, BIS removes ZTE from denied persons list.

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ZTE Company Logo from Wikipedia/ZTE.com

This just in, ZTE has complied with the terms of their agreement and placed $400 million into escrow. As a result, the US Department of Commerce, Bureau of Industry Security has terminated the April 15, 2018 denial order and removed ZTE from the denied persons list. The full release from the US DOC, BIS website can be found here.

Here’s a listing of all previous ZTE posts on this blog:

ZTE and Commerce sign escrow agreement – denial ban is one step closer to being lifted.

ZTE Open for US Business – sort of and only until August 1, 2018.

ZTE deal is good to go – House bill does not include Senate language “undoing” ZTE deal.

ZTE pays $1 billion fine, $400k into escrow soon.

In-depth details of the ZTE deal.

Senate passes amendment to undo Trump’s ZTE deal.

Deal reached between the US and ZTE.

ZTE facing $1.7 billion penalty?

The real reason Trump is working to reverse the 7 year ZTE ban? To help U.S. companies!

CNBC reports the US and ZTE are working on alternatives to the denial order issued against ZTE back in April of this year.

ZTE estimated to lose $3.1 billion due to US sanctions (Bloomberg).

Deal reached to allow ZTE to purchase U.S. hardware and software?

ZTE may need to change management and board in order to access US suppliers.

ZTE report to the HKEX on the impact of the US denial order: “major operating activities of the Company have ceased”.

ZTE and Huawei banned for sale to US military personnel.

ZTE banned from purchasing US technology for 7 years.

 

 

 

What should my company do regarding the Section 232 and Section 301 tariffs?

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We are fielding a lot of calls from importers, vendors, manufacturers, brokers and freight forwarders about what to do now that the Section 232 and Section 301 tariffs are in place.

We suggest:

  1. Review the list of products to determine your company’s exposure to Section 301 and Section 232 tariffs. The First Section 301 list can be found here.
  2. If there is a product on the second list of the Section 301 tariffs, you should participate in the comment process. The second list can be found here.
  3. If you are importing a product covered under Section 301 or Section 232, look into other alternatives for sourcing.
  4. This may be a good time to review your imported and exported goods and the classification used.
  5. Notify your customers, suppliers, vendors, buyers of potential price impacts of these new tariffs.
  6. Review pending purchase orders and pending shipments with companies in China, Canada, Mexico and the European Union.

If you have any questions about Section 232 or Section 301, contact experienced trade attorney David Hsu at 832-896-6288 or by email at dhsu@givensjohnston.com. We also assist in filing exclusion requests and submission of comments, call or email now for immediate assistance.

Breaking news – Section 301 Statement by US Trade Rep. Robert Lighthizer and list of Chinese goods impacted by $200 billion in tariffs.

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Robert Lighthizer, official portrait, work of the U.S. Federal Government

U.S. Trade Representative (USTR) Robert Lighthizer released a statement today regarding Section 301 of the Trade Act.

The full statement can be read here.

Here’s a summary of the statement:
1. Last Friday, US started imposing tariffs of 25% on $34 billion worth of Chinese imports.
2. Will eventually cover $50 billion in Chinese imports.
3. Tariffs are against products that benefit from China’s industrial policy and forced technology transfer practices.
4. China retaliated with $34 billion in tariffs and threats on $16 billion more.
5. In resopnse to China’s retaliation, President Trump ordered tariffs of 10% on an additional $200 billion in Chinese imports.

Brief history of the 301 tariffs:
1. Last August (2017), President Trump asked USTR to begin the Section 301 process. The basis of the 301 was due to China’s”abusive trading practices with regard to intellectual property and innovation.”
2. USTR conducted investigation, published 200 page report showing: “China has been engaging in industrial policy which has resulted in the transfer and theft of intellectual property and technology to the detriment of our economy and the future of our workers and businesses. ”
3. The USTR also found these “practices are an existential threat to America’s most critical comparative advantage and the future of our economy: our intellectual property and technology.”

To view the Federal Register notice and list of proposed tariffs on $200 billion of Chinese imports, click here.

If you have any questions how these 301 tariffs may impact your business, or if you would like to submit comments to the US Government, please contact experienced trade attorney David Hsu at 832-896-6288 or by email at dhsu@givensjohnston.com.