September 16, 2020

WTO Rules U.S. 301 Tariffs Are Inconsistent with WTO Rules; USTR Attacks WTO

Yesterday, the World Trade Organization (WTO) released the panel report from in the dispute settlement case filed by China to challenge the United States’ use of Section 301 and penalty tariffs. This case was based on the original List 1 and List 2 actions. The WTO report says “Regarding the imposition of additional duties on List 1 products, the Panel found that the United States had not provided an explanation demonstrating a genuine relationship of ends and means between the imposition of additional duties on these products and the public morals objective invoked by the United States. The Panel found, in particular, that the United States had not provided evidence in support of its assertion that the products on which it imposed additional duties benefitted from practices of China that the United States considered to be contrary to its public morals, nor evidence that would more generally demonstrate how the additional duties it applied to selected products otherwise contributed to its public morals objective.”

U.S. Trade Representative Robert Lighthizer responded with a statement that criticizes the World Trade Organization (WTO). USTR says the 2018 USTR report based on the 301 investigation found “thousands of pieces of evidence” relating to China’s unfair practices. He went on to say that “the United States must be allowed to defend itself against unfair trade practices, and the Trump Administration will not let China use the WTO to take advantage of American workers, businesses, farmers, and ranchers.” According to USTR the report will have no effect on the U.S. – China Phase One Agreement.

This decision by the WTO was expected to go against the U.S., but it highlights the major issues at the WTO today. The Trump Administration has regularly challenged the validity of the WTO dispute settlement process, and President Trump has often attacked the WTO on Twitter. We want to share a report from Bloomberg this morning that really captures the current situation:

“At what point is the World Trade Organization no longer relevant?

Over the past three years the U.S. has expertly poked at the WTO’s most vulnerable weaknesses and slowly rendered the organization ineffective in constraining President Donald Trump’s aggressive approach to trade policy.

Currently, the Geneva-based trade body’s three primary functions — negotiation, dispute settlement and monitoring — are largely dysfunctional.

The timing of the WTO’s quagmire couldn’t be worse. In the face of a global recession and a once-in-a-century pandemic the WTO no longer provides an effective deterrent to prevent nations from skirting trade rules and plunging into regional trade wars.

There isn’t even an active director-general to help lead the organization out of its morass after the last one stepped down at the end of August to escape the chaos.

This is the state of an organization whose overreaching goal is to help nations try to sort out the trade problems they face with each other.”

Hong Kong Asks Trump Administration to Drop “Made in China” Marking Rule

The Hong Kong government has formally written to the Trump Administration asking the U.S. to drop the “Made in China” labelling rule. As you know, the change in marking requirements was imposed by Presidential Proclamation in July as part of the Administration's response to sweeping national security laws that China imposed on Hong Kong. Secretary for Commerce and Economic Development Edward Yau Tang-wah asks the U.S. to consult with Hong Kong but said that “Depending on the response, we reserve our right to take the matter forward, including the dispute settlement system under the WTO.” The new marking requirement is set to take effect on November 9, 2020. You can read more here in coverage by the South China Morning Post.

State Department Issues New Travel Advisory for Hong Kong and China

On September 14th, the State Department issued a new travel advisory for China and for Hong Kong “due to COVID-19 and arbitrary enforcement of local laws.” The advisory contains extensive recommendations for U.S. citizens.

Senator Cotton Plans to Introduce Bill to Challenge Most Favored Nation Status for China

This week Senator Tom Cotton (R-AR) announced that he plans to introduce a bill that would annually review, and potentially revoke, China’s Most Favored Nation (MFN) status. In an interview with Fox Business Cotton said “It would be a great point of leverage every year to make sure the Chinese Communist Party is beginning to behave like a responsible actor.” If MFN is revoked, it would mean significantly increased tariffs on Chinese products. Later on Twitter, Cotton said “If we end China's permanent most-favored-nation status and instead make that status dependent on good behavior, America's corporate leaders will think twice about permanently outsourcing jobs to the communist nation.”

September 15, 2020

Last week HMTX Industries, an importer of vinyl floor tiles, filed a lawsuit in the Court of International Trade to challenge the China 301 Tariffs on List 3 and List 4. The lawsuit argues that the tariffs were “prosecuted in an untimely fashion and without statutory authorization.” The plaintiffs ask that List 3 and 4A tariffs be declared unlawful; duties be refunded and ask the U.S. Government not to impose List 3 and 4A duties in the future. Any company that imported products covered by Lists 3 or 4A and has paid the additional duties may challenge them at the CIT. However, the deadline to challenge List 3 301 duties may be as early as next week, so companies should review this information carefully. USFIA Associate Member Akin Gump, who represents HMTX Industries in the case, shared the following fact sheet providing background about the facts of the case and legal options.

If you would like to learn more, you can also read this summary shared by Arthur Bodek with USFIA Associate Member Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP (GDLSK).

September 16, 2020 
Yesterday U.S. Customs and Border Protection (CBP) released an update about the automated online application for submitting electronic vessel manifest confidentiality requests. CBP provides the following list of benefits for the trade community:

• Simplicity: It only takes a few minutes to complete the 4-step online application.
• Confirmation Notice: Upon submitting the online application, you will receive a confirmation notice alerting you that the application has been received.
• Quicker processing time: Online applications may be processed within 24 hours.
• Enhanced name recognition: With the online application, you can enter all applicable name variations as part of your confidentiality request. Achieving effective confidentiality requires that the name provided must exactly match the importer/consignee name as it is entered electronically in the Automated Commercial Environment (ACE) by the filer.
• Batch requests: See the CSV Template Download Guide for guidance on batch filing

You can learn more here or at cbp.gov

September 14, 2020 

U.S. Customs and Border Protection (CBP) today issued five Withhold Release Orders (WROs) targeting products that are made in the XUAR region in China. Three of the WROs cover products imported and sold by fashion brands and retailers. They are:

Apparel produced by Yili Zhuowan Garment Manufacturing Co., Ltd. and Baoding LYSZD Trade and Business Co., Ltd in Xinjiang Uyghur Autonomous Region, China. Information reasonably indicates that these entities use prison and forced labor in apparel production. CBP identified forced labor indicators including the restriction of movement, isolation, intimidation and threats, withholding of wages, and abusive working and living conditions.

Cotton produced and processed by Xinjiang Junggar Cotton and Linen Co., Ltd. in Xinjiang Uyghur Autonomous Region, China. Information reasonably indicates that this entity and its subsidiaries use prison labor in their raw cotton processing operations in Xinjiang. Cotton-processing factories and cotton farms in this region are prison enterprises that use convict labor.
Hair products made in the Lop County Hair Product Industrial Park in Xinjiang Uyghur Autonomous Region, China. Information reasonably indicates this site is manufacturing products with forced labor of the Uyghur people and other minority ethnic groups who are detained in “re-education” internment camps in Xinjiang. CBP identified forced labor indicators including highly coercive/unfree recruitment, work and life under duress, and restriction of movement.

On the CBP website, these WROs are now listed with dates from late August and early September, which may mean that the WROS could affect entries made earlier than today.