Playing the Numbers Game: Sections 232 and 301 Adrienne Braumiller Braumiller Law Group, PLLC

Agenda Trade Acts: Source of Section Investigations

Trade Act Sources: Sec. 232 Sec. 232: Trade Expansion Act of 1962 Purpose: National security invocation. Petition brought by agency, interested party or Department of Commerce (DOC) alleging that imports of the product threaten national security. DOC investigates whether the product is imported in such quantities or under such circumstances so as to impair U.S. economic well-being (U.S. national security interests).

Sec. 232 (Cont’d) DOC concludes investigations, and makes recommendation to the President. President makes final decision, and then enacts tariffs or quotas as determined to negate impact of imports to national security. President can exclude specific countries or products, or institute other exemptions.

Trade Act Sources: Sec. 301 Sec. 301: Trade Act of 1974 Purpose: To eliminate unfair trade practices that adversely affect U.S. trade. The President solely authorized to take all appropriate action, including retaliation, to redress the unfair trade action or practice by a foreign government. Must consult with other country through WTO. 301 investigations can focus on just one country.

Trump’s Tariffs ADD/CVD cases often precede Sections 232 and 301 investigations for the threatened product. President Trump has enacted tariffs on $85 billion worth of goods or 3.6% of total imports, with an additional $200+ billion proposed - Statutory bases: Section 232 of the Trade Expansion Act of 1962 (National Security) Section 301 of the Trade Act of 1974 (Unfair Trade Practices)

Section 232: Steel & Aluminum On March 8, 2018, pursuant to national security considerations, President Trump signed two presidential proclamations announcing the imposition of tariffs on imported steel and aluminum under Section 232(b) of the Trade Expansion Act of 1962.

Section 232 Investigations On February 16, 2018, the Department of Commerce (DOC) recommended large restrictions on the imports of aluminum and steel, citing national security. Section 232 states national security includes economic security.

Section 232 Tariffs On March 23, 2018, Customs and Border Protection began collecting tariffs. Steel: 25% ad valorem tariff; HTS Codes 7206.10 through 7216.50, 7216.99-7301.10, 7302.10, 7302.40-7306.90 Aluminum: 10% ad valorem tariff; HTS Code 7601, wrought aluminum under 7604-7609, and castings and forgings under 7616.99.51 On August 10, 2018 Trump authorized the doubling of 232 tariffs on steel and aluminum from Turkey, Effective Aug. 23 the tariffs will jump from to 50% in the case of steel. It is uncertain when the higher tariff on aluminum may enter into force.

Section 232 Tariffs (Cont’d) No Set Benchmark for lifting 232 on steel and aluminum The Trump administration is not operating off a set benchmark for when to lift Section 232 tariffs, and any decision to end the duties is at the discretion of the president himself. Though Commerce in its Section 232 report set a threshold of 80 percent steel industry capacity utilization to judge the sector’s health, President Trump in impos­ing the tariffs was careful to say that we’re not looking at a specific thing. The President will likely consider­ the overall health of the industry, its ability to stand on its own, and whether arrangements have been reached with other countries to address issues such as overcapacity.

Product Exclusions On March 19, 2018, the DOC, Bureau of Industry and Security began accepting exclusion requests: For items not produced in the U.S. in a sufficient and reasonably available amount or of a satisfactory quality or based upon specific national security considerations. Exclusions generally are granted if there is no domestic availability and there are no overriding national security concerns with regard to the specific product. On June 20, 2018, DOC announced the first product exclusions; >15,000 requests remain.

Country Exemptions Steel Aluminum Australia: Exempt South Korea, Brazil, and Argentina: Exempt with Quotas Aluminum Argentina: Exempt with Quota

Section 232: Autos Written comments due June 29, 2018; rebuttal comments due July 13, 2018. Hearing: July 19, 2018. The Secretary of Commerce must submit to the President a report on the finding of the investigation by February 17, 2019.

Section 232: Uranium On July 18, 2018, the DOC initiated a Section 232 investigation into uranium imports: “The investigation will canvas the entire uranium sector from the mining industry through enrichment, defense, and industrial consumption”—DOC Secretary Ross Public Comment and Hearing Proceedings TBA; Report expected mid-2019

Section 232 vs. Section 301 Regulators: BIS for Section 232; USTR for Section 301 Objective: National Security for Section 232; Combating Unfair Trade Practices for Section 301 Exclusions: Section 301 is simpler The separate Section 232 exclusion requesters have had no opportunity to rebut opposition. Commerce Secretary Wilbur Ross has said that opposition from domestic suppliers means ex­clusions to those tariffs won’t be granted. Drawback: Available on Section 301 goods only

Section 301 Following a Memorandum from President Trump, on August 18, 2017, USTR initiated an investigation under Section 301 of the Trade Act of 1974 into the government of China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation.

Section 301 Investigation USTR and an interagency committee concluded that China’s policies harm the U.S. economy by over $50 billion annually, due to: Technology transfer through JV, investment, administrative, and licensing requirements Chinese investment in U.S. which generate large- scale technology transfer Industrial cyber espionage

Section 301 Tariffs List Based Approach List 1: 25% ad valorem tariff effective July 6, 2018; 818 product lines worth $34 billion List 2: 25% ad valorem tariff; proposed on 284 product lines worth $16 billion List 3: 10% - 25% ad valorem tariff; proposed on 6,031 product lines worth $200 billion

Section 301 Tariffs (Cont’d) List 1 25% ad valorem tariff, proposed on 818 products worth $34 billion After public review process, List 1 cut from 1,333 products to current list of 818 products Tariffs became effective July 6, 2018 USTR established process by which interested parties may request exclusions from List 1 tariffs, requests due October 9, 2018

List 1 Product Exclusions Criteria: Difficulty sourcing product from non-China alternative countries Exclusion would avert severe economic harm to U.S. business or U.S. interests Product not of strategic importance or related to “Made in China 2025”

List 1 Product Exclusions (Cont’d) Procedure: Exclusion requests due October 9, 2018 All exclusions retroactive to July 6, 2018 14 day response period; 7 day reply period List 2 and 3 exclusion procedures yet to be promulgated

Section 301 Tariffs List 2 25% ad valorem tariff, proposed on 284 products worth $16 billion Subject to public review process: Written comments - July 23, 2018 Hearing was July 24, 2018

Section 301 Tariffs (Cont’d) List 3 10% ad valorem tariff, proposed on 6,031 products worth $200 billion Subject to public review process: Written comments must be filed by September 6, 2018 The public hearing will take place August 20-23, 2018 Rebuttal comments will be due on August 30, 2018 More than 300 witnesses in hearings scheduled for every day Aug. 20-24, and again on Aug. 27

Section 301 Tariffs (Cont’d) “List 4” Tariffs on all Chinese products, worth $505.5 billion “I’m ready to go to 500”—President Trump, July 20, 2018 In 2017, the U.S. accepted $505.5 billion worth of Chinese imports

Section 301 Tariffs (Cont’d) USTR Ends Section 301 Exemption for U.S. Goods Returned After Repair, Alteration, Processing and Assembly On August 16th, the USTR announced that special tariff provisions for U.S. goods returned after assembly, repair, alterations and processing become subject to Section 301 tariffs on China Products on the tariff list properly claimed under Chapter 98 provisions were fully exempt from the 25 percent duty, but beginning 12:01 a.m. on Aug. 23, subheadings 9802.00.40, 9802.00.50, 9802.00.60 and 9802.00.80 will no longer be eligible for the carve-out if classified under a Chapter 1-97 tariff provision otherwise covered by the tariffs. The change affects both goods on Lists 1 and 2 USTR’s notice adds new U.S. Note 20(c) to Chapter 99, with language applying the tariffs to U.S. goods returned under subheadings 9802.00.40, 9802.00.50, 9802.00.60 and 9802.00.80

Domestic Response 80 Trade Associations: On August 8, a group of 80 trade associations, including the NAFTZ sent a letter to USTR asking for exclusions to Section 301 Chinese tariffs to be lib­erally granted. Requested one submission covering multiple 10- digit HTS product lines that fall within one 8-digit HTS product category “to minimize duplication of product exclusion requests as well as expedite and streamline the review process.” Also asked that applicants be allowed to rebut opposition to their requests before a final determination is made

International Response Chinese tit-for-tat retaliation: List 1: 25% ad valorem tariff, 545 products worth $34 billion, effective July 6, 2018 List 2: 25% ad valorem tariff, 114 products worth $16 billion, effective TBD List 3: TBD

Enforcement CBP Auditors Preparing Outreach on Safeguard Tariff Enforcement CBP auditors plan to work with the CEEs to provide more information to industry on complying with recent safeguard tariffs, per Thomas Jesukiewicz, Long Beach field director in CBP’s Regulatory Audit office. “It’s a progressive approach. Providing informed compli­ance, getting out there, letting you know what’s coming up, and then interpreting some of the complexities of these safeguards.” The informed compliance will be provided through a pamphlet and then possibly a site visit, he said. Companies that import goods already subject to antidumping or countervailing duties and that are also covered by safeguard duties will be more likely to see auditor scrutiny, he said.

Strategies for Impacted Products Participate in public comment/hearing proceedings Engage with your Congressmen and women Perform Classification Review Request product exclusions Change in Origin Re-sourcing Substantial Transformation Change in Classification Review current classifications Tariff engineering

Inadvisable “Solutions” Transshipment Documentation Changes Reducing Invoice Value

Braumiller Law Group, PLLC Questions? Adrienne Braumiller, Partner Braumiller Law Group, PLLC 5220 Spring Valley Road, Suite 200 Dallas, TX 75254 Ofc: (214) 348-9306 Adrienne@BraumillerLaw.com www.BraumillerLaw.com