Japan/Korea trade war soon?

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As if 2020 has not had enough bad news – it appears South Korea and Japan are heading towards a trade war stemming from events that happened in WW2. The tense relations between the two nations results from a wartime labor compensation issue stemming from Japan’s forced labor during their colonial occupation of Korea and a focus on Japan’s use of “comfort women” during WW2.

In 2018, a court in South Korea seized assets from Mitsubishi Heavy Industries Limited and Japan’s Nippon Steel and Sumitomo Metal Corporation in order to compensate forced laborers and comfort women during Japanese colonial rule of Korea from 1910-1945. While we think assets include something tangible, in this instance the assets were stock shares from a joint venture between a Japanese and Korean company with a value of approximately $800,000.

In response to the court decision that would seize the assets, Japan made it more difficult for South Korea to import chemicals needed for semiconductor manufacturing. In response, South Korea took Japan off their “white list” nation of countries with favorable trade terms while South Korean citizens also started a boycott of Japanese goods.

A dispute likely won’t be coming to a resolution soon – South Korea claims Japan has never apologized and refuses to compensate the victims where as Japan claims South Koreans were compensated in 1965.

The next deadline is August 4th, when the South Korean court considers the Japanese parties have been served with the notice of damages paperwork and the liquidation process can begin.

New trade war? China advises its citizens to not visit Australia.

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According to the Japan Times website today, China’s Ministry of Culture and Tourism advised China’s citizens not to visit Australia due to racial discrimination and violence against Asians due to COVID-19 pandemic.

However, Australia believes Friday’s travel advisory is in retaliation for Australia advocating an investigation into the origins of the coronavirus pandemic. A claim verified when Chinese Ambassador to Australia – Cheng Jingye told Australian media that the country might face a Chinese boycott of its tourism and exports of wine, beef and other goods if the government pressed for a corona virus inquiry.

This travel advisory is in addition to the 80% tariffs China has placed on the import of Australian barley and a beef ban on Australian beef suppliers due to labeling issues. Australia argues they do not want a trade war and that no evidence supports dumping of Australian barley or errors in beef labeling.

If you have any trade, import, export, or compliance questions – feel free to contact David Hsu by phone/text at 832-896-6288 or by email at attorney.dave@yahoo.com.

China announces 80% tariffs on Australian barley – the new trade war?

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That escalated quickly! In addition to banning imports of Australian beef, the Chinese government announced on Monday, May 18th, 2020 an 80% tariff on Australian barley exports starting today.

The tariffs are likely in response to Australia’s government demanding an inquiry into the cause of the corona virus. The Chinese President Xi Jinping has claimed China acted “with openness and transparency” in their handling of the outbreak.

Also on Monday, the World Health Organization (WHO) also agreed to launch an independent probe into how they handled the international response to the corona virus. The countries requesting the investigation included African, European and other countries and is looking for a review of the WHO’s response to the corona virus outbreak.

In response to the new tariffs, Australia’s Minister for Trade Simon Birmingham on Monday night denied Australia had subsidized or dumped barley in China. Will be following this news carefully as China accounts for 33% of Australia’s total exports at $135 billion in 2019.

US pork exports to China increase while US faces meat shortage.

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As part of Phase 1 of the US/China trade deal, China agreed to purchase more US goods and one such product has been pork to replace 1/3 of China’s hog population that was decimated in mid-2018 due to African swine fever. Besides pork, China also imported more US beef and poultry products after lifting a prior ban on US poultry. However, one downside of the Phase 1 trade deal has been exasperated by the meat processing plant closing as a result of COVID-19 infections. This has created the issue of too much meat being exported and not enough fresh meat being stocked in US grocery stores.

The U.S. meat shortage and the Phase 1 goals of increasing exports to China seem to be opposing forces, raising the question of whether sales and shipments will or should be limited. Some restrictions would not be surprising given U.S. President Donald Trump’s more combative tone in his recent comments on trade with China.

March 2020 saw the second highest volume of pork to China with the US exporting 95,892 tons, with a combined total of 280,507 tons of pork and pork product exported so far in 2020 (an increase of 300% over the first three months of 2019) with chicken feet being the largest exported US poultry item to China. The combined value of all pork, beef and poultry exports to China for January to March of 2020 totaled $781 million.

If you have any questions about the China trade deal or the 301 duties, contact David Hsu anytime by phone/text at 832-896-6288 or by email at attorney.dave@yahoo.com.

Importer and company executives pay $5.2 million penalty under the FCA.

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The DOJ recently announced a $5.2 million settlement from importer, Blue Furniture Solutions, LLC, based on alleged importation of merchandise into the United States using false descriptions and invoices that claimed the merchandise was not within the scope of the antidumping duties on wooden bedroom furniture from China.

A whistleblower under the FCA’s qui tam provisions exposed Blue Furniture Solution’s intentional misrepresentations totaling $1.7 million in antidumping payments. The US Department of Justice (DOJ) intervened under the FCA.

One year later, on April 20, 2020, the DOJ announced the $.52 million settlement – in which the company pays $4.7 million and executives pay $550,000 for personal liability. Information on this case can be found in the following: United States ex rel. University Loft Company v. Blue Furniture Solutions, LLTC et al., No. 15-CV-588-LY (W.D. Tex.). The related criminal matter appeared under the case name United States v. Zeng, No. 19-CR-64-DCN (D.S.C.).

If you believe an importer is misrepresenting their customs entry to save on AD duties, or if you are a subject of an FCA investigation, contact experienced customs and trade law attorney David Hsu at 832-896-6288 by phone or text; or email attorney.dave@yahoo.com.

Corona virus’ January and February impact on trade.

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According to the Financial Times, global trade dropped 2.6 percent in February compared to the same time in 2019. This February drop also follows a 1.5 percent drop from January 2020. Specifically, China had a 7.3 percent fall in imports in January 2020 due to parts of the country shutting down in response to the Corona virus. For February, China had another 3.2 percent drop for the month.

The US did not show any impact in trade volume while the EU trade volume dropped 1.5 percent for February 2020. Will be interesting to see March and April numbers when reported.

General importing/exporting questions? Contact experienced trade attorney David Hsu by phone/email at: attorney.dave@yahoo.com.

Potential changes to the Foreign Direct Product Rule may hinder Huawei supply chain.

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The Trump administration has agreed to changes to the Foreign Direct Product Rule, which subjects some foreign-made goods based on U.S. technology or software to comply with U.S. regulations.  The proposed rule change requires foreign companies that use U.S. chip making equipment to obtain a license before they can supply certain semiconductor chips to Huawei.

The proposed rule change is to limit the number of foreign suppliers who continue to supply chips to Huawei. The new rule will greatly impact Huawei as most chip manufacturers use equipment produc Multiple articles on this subject cite the Taiwan-based “Taiwan Semiconductor Manufacturing Company” (TSMC). TSMC is Taiwan’s largest semiconductor manufacturer with over 15 fabs located throughout Taiwan.

If you have any questions whether you are subject to export controls or if you want to know how you are impacted, contact experienced export controls attorney David Hsu by phone/text at 832-896-6288 or by email at attorney.dave@yahoo.com.

What’s the current status of France’s proposed digital tax?

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Last year, France threatened a “digital tax” of 3% on digital revenue of big tech companies such as Facebook and Google. In response, the US threatened tariffs on $2.4 billion of French goods such as wine, cheese, and makeup.

On Monday, January 20th, France said they would delay the the tariffs for the remainder of 2020 in response to US pressure.

And earlier today, at the Davos World Economic Forum, US Treasury Secretary Steven Mnuchin reiterated the Trump administration’s claim a digital tax is discriminatory and in response, he threatened tariffs on auto manufacturers if a deal does not work out and the digtal tax is put into effect.

What’s next? Treasury Secretary Mnuchin and his counterpart, France’s foreign minister Bruno Le Maire met earlier today (Wednesday January 22nd), but no news has been released about an agreement between the US and France. Will post more news as it is released.

US China Trade Deal as of 12/13/2019.

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Official portrait of President Donald J. Trump, Friday, October 6, 2017. (Official White House photo by Shealah Craighead)

As you are aware, the Trump administration has confirmed a trade deal with China has been reached.

Phase one of the trade deal was just announced:

-List 1 remains at 25%

-List 2 remains at 25%

-List 3 remains at 25%

-List 4b is gone (4b was initially scheduled to take effect December 15th, and included consumer electronics such as cell phones, laptops, computers, etc.).

-“Most” (not all) of List 4a is going to drop to 7.5%.

We will monitor the Federal Register for what specifically is being reduced. If you have any further questions, contact experienced trade attorney David Hsu for immediate help by phone/text at 832-896-6288 or by email at attorney.dave@yahoo.com, dh@gjatradelaw.com.

U.S. House passes USMCA, next stop the Senate.

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As you are aware, the U.S. House of Representatives passed an updated version of the USMCA earlier this week. The passage by the House includes revisions to an agreement initially agreed to by the US, Mexico and Canada in September 2018.

The next step for the USMCA is the Senate, where it is not expected to be put to a vote until 2020.

What are some of the changes in the USMCA versus NAFTA?

  • If autos are to qualify for no tariffs, then 75% of the components must be manufactured in Canada, Mexico or the United States (currently at 62.5%).
  • 30% of the work on the vehicle must be performed by individuals making $16 or more per hour, with a 40% requirement in 2023.
  • The new agreement allows works in Mexico to unionize.
  • The definition of steel and aluminum for Mexico in regards to the automotive rules of origin includes “melted and poured” in North America.
  • USMCA will be subject to mandatory review every 6 years, if all parties agree, then there is a 16 year period for review, with subsequent reviews every 16 years.

If you have any further questions how your business may be impacted by the USMCA if and when it is passed next year, contact experienced trade attorney David Hsu by phone/text at 832-896-6288 or by email at attorney.dave@yahoo.com or dh@gjatradelaw.com.