1. Trade Actions by U.S. in 2018, Retaliation by Trading Partners:
Likely Events in 2019
Terence P. Stewart, Managing Partner Main: (202)
Law Offices of Stewart & Stewart Direct: (202)
2100 M St. NW, Suite
Washington D.C., Web:

2. Introduction
The U.S. under the Trump Administration has been concerned about the trade deficit in goods and its effects on the national economy.
Redoing free trade agreements, pursuing correction of perceived unfair trade practices of trading partners, and seeking to protect critical industries under a longstanding but seldom used law were added to traditional trade remedies.
2018 saw the completion of the USMCA negotiations and the imposition of wide ranging tariffs on more than $300 billion of imports and retaliation by six countries and planned retaliation by a seventh.

3. Additional U.S. Tariffs Introduced in 2018 or Possible in 2019
“Safeguard” Actions:
Solar panels (2018)
Large residential washing machines (2018)
Section 201
Aluminum (2018)
Steel (2018)
Autos & Auto Parts (report due February 2019)
Uranium (report due April 2019)
Section 232
Various practices by China (forced technology transfer, cyber attacks, etc.)
$250 billion subject to tariffs in three tranches (2018)
Section 301

4. § 201 of the Trade Act of 1974 “Safeguards”
Traditional trade remedy; WTO Safeguard Agreement & GATT Art. XIX
Statute has higher injury standard as no unfair trade practice is alleged
Requires showing that domestic industry is seriously injured and that imports are a substantial cause of the injury
Any remedy generally applies to all imports of the subject goods;
USITC makes injury finding; President decides whether to provide relief

5. § 201 Actions in 2017/2018 Solar Cells and Modules
Two industries filed petitions with the U.S. International Trade Commission under §201 in 2017; following affirmative findings by the USITC, President authorized relief in 2018
In place for four years (effective 2/7/2018)
Cells: Annual tariff-rate quota of 2.5 gigawatts  Imports above that level subject to 30% tariff
Modules: 30% tariff
Tariffs on both descend by 5% each year
Impact: U.S. imports of $7.06 billion in 2016
Solar Cells and Modules
In place for three years (effective 2/7/2018)
Washers: Annual TRQ of 1.2 million units subject to additional duty of 20% the first year, decreasing by 2% each year
Imports above quota  normal duty plus 50%, decreasing by 5% each year
Parts: Annual TRQ of 50,000 units the first year, increasing by 20,000 units each year
Imports above that  50% tariff, decreasing by 5% each year
Impact: U.S. imports of $1.7 billion in 2017
Large Residential Washers
Sources: USITC, Crystalline Silicon Photovoltaic Cells (Whether Assembled or Not Partially or Fully Assembled into Other Products) VoL. II, Investigation No. TA (Nov. 2017); USITC, Large Residential Washers., Investigation No. TA (Dec. 2017).

6. § 232 of Trade Expansion Act of 1962
“Upon request of the head of any department or agency, upon application of an interested party, or upon his own motion, the Secretary of Commerce shall immediately initiate an appropriate investigation to determine the effects on the national security of imports of the article which is the subject of such request, application, or motion.”
19 U.S.C. §1862(b)(1)(A).
If the investigation concludes imports “threaten to impair the national security,” the President can take action.
19 U.S.C. §1862(c).

7. § 232: Statutory Text
“to recognize the close relation of the economic welfare of the Nation to our national security” and “consider[] the impact of foreign competition on the economic welfare of individual domestic industries; and any substantial unemployment, decrease in revenues of the government, loss of skills or investment, or other serious effects resulting from the displacement of any domestic products by excessive imports.”
19 U.S.C. §1862(d).
The statute adopts broad interpretation of “national security,” requiring the Secretary of Commerce and the President:

8. National Security National Defense
Consistent with the broad statutory language, the Trump Administration has interpreted national security to include:
National Defense
Critical Infrastructure Needs
The general security and welfare of certain industries, beyond what is necessary to satisfy national defense requirements where industry is critical to the minimum operations of the economy and government
See Department of Commerce’s Steel Report at and Aluminum Report at

9. Commerce Steel Investigation Findings
U.S. is the world’s largest importer of steel
6 basic oxygen furnaces & 4 electric furnaces closed in the U.S. since 2000
For certain types of steel, only one U.S. producer
Employment down by 35% since 1998
World steelmaking capacity up to 2.4 bmt, up 127% from 2000
Recent global excess capacity 700 million tons, (China largest contributor)

10. Commerce Aluminum Investigation Findings
Imports meet 90% of U.S. primary aluminum demand
2013 – 2016: employment fell 58%
6 smelters closed, 2 of 5 operating at capacity
1 remaining producer of high-quality aluminum alloy
Primary aluminum production decreased by half from 2015
Needed for military aerospace

11. President’s Actions
U.S. imports of covered steel were $29 billion in 2017
25% tariffs on imports of steel from nearly all countries
U.S. imports of covered aluminum were $17.4 billion
10% tariffs on imports of aluminum from nearly all countries
Reaction of trading partners varied
The President also provided trading partners alternative avenues for resolution via bilateral negotiations
Source: Rachel F. Fefer, Vivian C. Jones, Et. Al., Cong. Research Serv., R45249, Section 232 Investigations: Overview and Issues for Congress 13 (2018).

12. International Response
7 imposed or announced retaliatory tariffs
Not allowed under WTO rules without first undertaking certain measures; many claimed WTO-consistency under Safeguard Agreement
9 requested WTO consultation
7 after imposing or announcing retaliatory tariffs
Included WTO challenges and unilateral retaliation:
Countries Responded by Filing WTO Challenge and by Retaliating

13. International Response
A number of countries sought negotiations with the United States:
Permanently exempt subject to quotas for steel (no agreement for aluminum)
Australia
Argentina
Brazil
South Korea
Permanently exempt subject to quotas for steel & aluminum
Permanently exempt for steel & aluminum EU
Canada
Mexico
No agreement as of 2/16/2019 so currently fully subject ; negotiations ongoing with Canada and Mexico; EU views as condition precedent to conclusion of any FTA talks with US
Temporary exemptions initially provided to these countries and the President provided until May 1, 2018, to negotiate “a satisfactory alternative” to keep exemptions.

14. Retaliation Against U.S. Exports
European Union
Agricultural & other products including bourbon, peanut butter, cranberries, & orange juice
10% or 25% tariffs
$3.2 billion worth of products
Another tranche planned for 2021 ($4.2 billion)
Canada
Steel, aluminum, coffee, ketchup, orange juice, paper products, & other consumer goods
$12.7 billion worth of products
Russia
Road construction equipment, oil & gas equipment, tools, & other items
25% to 40% tariffs
$0.35 billion worth of products
Another tranche planned for 2021
Source: Rachel F. Fefer, Vivian C. Jones, Et. Al., Cong. Research Serv., R45249, Section 232 Investigations: Overview and Issues for Congress16-17 (2018).

15. Retaliation Against U.S. Exports
Mexico
Pork, apples, potatoes, bourbon, cheeses, & other items
7% to 25% tariffs
$3.7 billion worth of products
China
Fruits, vegetables, wine, meats, steel products, aluminum waste, & other products
15% or 25% tariffs
$2.8 billion worth of products
Turkey
Foodstuffs, paper, plastic, structural steel, machinery, vehicles, & other items
4% to 140% tariffs
$1.8 billion worth of products
India
Nuts, apples, steel products, motorcycle, & other items
10% to 50% tariffs
$1.4 billion worth of products
Announced; Effective March1, 2019
Source: Rachel F. Fefer, Vivian C. Jones, Et. Al., Cong. Research Serv., R45249, Section 232 Investigations: Overview and Issues for Congress16-17 (2018).

16. § 232 at the WTO
9 countries filed WTO cases against the U.S. for imposing tariffs that they allege are not consistent with WTO obligations. US position is that WTO has no jurisdiction over national security actions of members.
Dispute settlement panels have been established for these proceedings.

17. U.S. filed a request for consultations with:
§ 232 at the WTO
The U.S. independently filed WTO cases against 6 countries for retaliating without using WTO procedures first.
U.S. filed a request for consultations with:
China (DS558)
EU (DS559)
Canada (DS557)
Mexico (DS560)
Turkey (DS561)
Russia (DS566)
Retaliation by India postponed several times; scheduled to commence on March 1, The United States will likely file a request for consultation soon thereafter.

18. § 232 Exclusion Process
In sufficient and reasonably available amount;
Satisfactory quality; or
There is a specific national security consideration warranting an exclusion.
BIS provides exclusions if the article is not produced in the U.S.:
Decision on 42.9%
14,301 approved
4,723 denied
As of mid-December, 44,389 steel exclusion requests
Decision on 19.1%
917 approved
229 denied
As of mid-December, 6,013 aluminum exclusion requests
Processing has restarted now that Commerce has reopened
Government partial shutdown stopped processing of requests
Source: Rachel F. Fefer, Vivian C. Jones, Et. Al., Cong. Research Serv., R45249, Section 232 Investigations: Overview and Issues for Congress1-2 (2018).

19. On Feb. 15, press reported Commerce likely to submit report on time.
§ 232 Autos & Auto Parts
May 23, 2018
Investigation initiated
June 21, 2018
Commerce extended comment period until June 29, (Other deadlines not changed)
Feb. 17, 2019
Commerce submitted a report to the President (confidential) (270 days after initiation)
May 18, 2019
If Commerce made an affirmative finding, the President must decide on action, if any, by this date (90 days after findings)
June 2, 2019
If President decides to act, he must implement action by this date (15 days to implement)
On Feb. 15, press reported Commerce likely to submit report on time.

20. Potential Impact
Would increase share of goods affected by § 232 tariffs from 4% to almost 20%*
U.S. motor vehicle and parts imports totaled $361 billion in 2017
Increase in the demand for and production of U.S.-made vehicles and parts
Tariffs on assembled autos and parts could make imported vehicles and parts more expensive
Increase in the price of U.S.-produced vehicles (at least where imported parts used)
On the other hand, tariffs on autos and parts would increase cost of imported products
Could make U.S.-produced autos less competitive internationally; and
Could result in retaliatory tariffs on autos and parts and on non-vehicular products
Retaliation by trading partners
* The initiation specifically states the investigation targets “automobiles, including cars, SUVs, vans and light trucks, and automotive parts”
Source: Rachel F. Fefer, Bill Canis, Et. Al., Cong. Research Serv., , Section 232 Auto Investigation 1-2 (2018).

21. Does not take into account potential delays due to Dec.-Jan. shutdown.
§232 Uranium
July 25, 2018
Investigation initiated
Sept. 10, 2018
Commerce extended comment period until Sept. 25, (Other deadlines not changed)
Apr. 21, 2019
Commerce must publish findings of investigation (270 days after initiation)
July 20, 2019
If Commerce makes an affirmative finding, the President must decide on action by this date (90 days after findings)
Aug. 4, 2019
If President decides to act, he must implement action by this date (15 days to implement)
Does not take into account potential delays due to Dec.-Jan. shutdown.

22. § 232: What 2019 Portends Section 232 tariffs on autos and auto parts
Bilateral agreements possible; indeed, ratification of USMCA by legislatures unlikely in any of the three countries if no resolution.
Monitor status of negotiations with Mexico & Canada on steel and aluminum
Congress has authorized additional funds for handling requests and is requiring quarterly reports;
Additional exclusion requests can be made.
Continued processing of exclusion requests
Challenge to 232 law as unlawful delegation likely resolved at U.S. Court of International Trade in first half of 2019 with appeal likely; WTO cases won’t be resolved.
Monitor status of CIT litigation and WTO cases
Outcome in Feb. 2019; means President will decide what action, if any, by mid-May 2019;
Legislation is possible to clarify when law can be used and/or block use on autos and auto parts.
Section 232 tariffs on autos and auto parts
Outcome of investigation in April 2019; if threat found, President to act by July 2019 if chooses to provide relief.
Section 232 tariffs on uranium

23. § 301 of the Trade Act of 1974
President can pursue removal of foreign act that violates int’l trade agreement or is unjustified, unreasonable, or discriminatory
Investigation may be self-initiated by USTR or interested party can file a petition
Where problem is covered by WTO agreement, the U.S. will pursue WTO challenge before seeking redress
USTR has 12 months from the date of initiation to determine whether any act, policy, or practice described in Section 301 exists, and if so, what action, if any, to take

24. § 301 Investigation on China IP Found:
Uses joint venture requirements, foreign ownership restrictions, & administrative review & licensing to force technology transfer
Utilizes discriminatory licensing restrictions that prevent U.S. firms from getting market-based returns for the IP
Directs and facilitates investments that generate large-scale technology & IP transfer to support China’s policy goals
Conducts and facilitates cyber intrusions into U.S. computer networks to get access to important business information
These practices have been a longstanding concern for both U.S. business & government.

25. § 301 Timeline on China IP Issues
USTR announces investigation
August 18, 2017
Report of USTR released
March 22, 2018
Memorandum from President to USTR
March 23, 2018
USTR releases initial list of 25% tariffs on $50B
April 3, 2018
China retaliates to initial list with proposal for 25% tariffs on $50B
April 4, 2018
President directs USTR to consider additional list of Chinese imports ($200B)to subject to 25% tariff if China retaliates
May 5, 2018

26. § 301 Timeline June 15, 2018 July 6, 2018 July 10, 2018
USTR released two-stage plan to impose first tranche
June 15, 2018
U.S. implements first tranche affecting $34B Chinese products with 25%
July 6, 2018
U.S. releases list of third tranche, $200B at 10% initially
July 10, 2018
U.S. implements second tranche affecting $16B Chinese products with 25%; China implements second tranche retaliation
August 23, 2018
U.S. implements third tranche affecting $200B of imports from China at 10%; China retaliates with third tranche on $60B of imports from the U.S.
September 24, 2018
Working dinner on 12/1 in Buenos Aires; Presidents Trump and Xi agree to stop increasing tariffs til 3/1 to permit negotiations to potentially resolve issues
December 2, 2018

27. § 301; US takes one issue to the WTO
U.S. requested consultations on China’s technology licensing practices on March 23, 2018 (DS542).
Panel established on November 21, 2018.
U.S. Action

28. § 301 at the WTO China Action
China responded to imposition of duties by US by filing two cases:
China initiated a WTO dispute settlement case against the U.S. on Apr. 4, 2018 (DS543).
China filed second case on Aug. 27, 2018, on the U.S. imposition of 2nd tranche of tariffs and any further related actions by the United States (DS565).
China Action

29. Impact of China’s Retaliation
China initially targeted products that were politically important to Trump constituents but as retaliation continued, China’s tariffs affected nearly all U.S. exports.
Sectors impacted:
Transportation Equipment
Vegetables
Soybeans
Beef, pork, seafood
Whiskey
Ethanol
Liquefied natural gas
Chemicals
Frozen vegetables and food ingredients
U.S. exports to China in 2017 were $129.9 billion; retaliation by China has been on about $110 billion, leaving only $20 billion in U.S. exports where no additional duties have been applied as retaliation.
Source:

30. Exclusion Process Tranche One Tranche Two Tranche Three
USTR has established an exclusion process for the first two tranches of tariffs.
Exclusion process announced
Deadline passed (October 9, 2018)
Tranche One
Deadline passed (December 18, 2018)
Tranche Two
No exclusion process when 10%
Appropriations law signed Feb. 15, 2019 requires USTR to establish process in 30 days
Tranche Three
13,748 Submitted
Granted
3,660 Denied
Prior Factors: whether product is available only from China; whether duties would cause severe economic harm to requestor or U.S. interests; and whether the product is important to China 2025 policy.

31. § 301: What 2019 Portends Monitor for resolution by March 1, 2019
Negotiations ongoing with additional round in Washington week of Feb. 18; possible extension of deadline if deal is close; possible meeting of Presidents Trump and Xi sometime in March to conclude. Resolution could result in lifting all tariffs imposed; if only partial resolution, could maintain tariffs at existing levels on some or all products.
Monitor for resolution by March 1, 2019
There will be an exclusion process for third tranche by March 17, 2019
The President has also threatened to impose tariffs on all remaining imports from China (as much as $267 billion)
If none, third tranche increases to 25% (unless further postponed)
Status of previously filed exclusion requests to be determined in 2019; 3rd tranche requests to be made;
Exclusions granted will apply to all products of that type and go back to date of additional tariffs
Monitor status of & submit exclusion requests, where appropriate

32. For additional information, please contact:
Terence P. Stewart, Managing Partner Main: (202)
Law Offices of Stewart & Stewart Direct: (202)
2100 M St. NW, Suite
Washington D.C., Web: