2021 will likely be a year of transition for US trade policy, rather than a year of abrupt change. President-elect Biden recently announced that he would appoint Katherine Tai as U.S. Trade Representative; she is currently the Chief Commercial Counsel for the House Ways and Means Committee. Many trade experts view his appointment as an indication that the Biden administration’s trade policy will remain focused on China law enforcement issues.
Trade policy during a global pandemic involves balancing complex foreign policy and competing national interests. While it is impossible to predict exactly what will happen with tariffs, trade policy, export controls and trade sanctions, we expect a combination of the following developments to take place in 2021.
In recent years, the Trump administration has made particularly aggressive use of the legal provisions of the Trade Expansion Act to justify the imposition of tariffs. Section 301 tariffs have been used against many products from China to offset the actions of the Chinese government regarding intellectual property issues. Section 232 has been used to raise tariffs on major steel and aluminum products from many countries, on the premise that such imports pose a threat to US national security. The use of both types of tariffs is currently being challenged in the US Court of International Trade (CIT).
Biden’s transition team has made it clear that it will take a multilateral approach to addressing trade issues associated with China. We anticipate that any de-escalation and/or removal of Section 301 or Section 232 tariffs will be implemented in phases.
It seems unlikely that Section 301 tariffs will be removed soon, as there is broad support in the business community for maintaining an aggressive stance against China on intellectual property, technology and investment issues. On the other hand, numerous complaints have been filed by a wide range of US companies that tariffs on covered products from China are hurting them and that the exclusion process has been less than opaque. Thus, there seems to be a real possibility of reopening the product exclusion process in a more transparent way, which could result in the granting of additional exclusions.
In addition, cases pending before the Court of International Trade (CIT) challenge a significant percentage of Section 301 tariffs. Ongoing litigation may provide an avenue to reduce or eliminate some or all of these tariffs, but even without litigation. , there may be changes to current policies and existing rates.
Section 232 tariffs may be easier to modify in order to defuse tensions between the United States and the rest of the world. If the Biden administration pursues a multilateral approach and seeks to cooperate with traditional U.S. allies, as expected, an easing of those tariffs could be on the way. Additionally, if the U.S. government loses pending CIT cases challenging changes to the product coverage list, that defeat could pave the way for importers to negotiate relaxation of at least some of the tariffs on the steel and aluminum.
Anti-dumping/countervailing duties (AD/CVD)
2021 will likely see a continued increase in enforcement actions to evade or circumvent AD/CVD duties. Along with new actions, Customs continues to focus on enforcement by sending an increasing number of Information Requests and Notices of Action to importers alleging that imports should have been declared subject to these duties. The Biden administration may be inclined to resort to more traditional trade remedies such as AD/CVD to protect American industry, rather than pursuing the more controversial remedies that the Trump administration has relied on.
In 2021, we expect to see many more AD/CVD cases filed, including more claims against China and products such as steel and aluminum, particularly if the item’s tariffs 232 and article 301 are deleted. Additionally, we anticipate more petitions against products from countries and regions such as India, Vietnam, Southeast Asia and Eastern Europe—places where importers have changed supply due to Section 301 tariffs or existing China AD/CVD orders.
We also expect an increase in the number of claims that products should be subject to countervailing duties due to currency manipulation by the government of the exporting country. On November 4, 2020, the U.S. Department of Commerce announced that it was preliminarily imposing countervailing duties on imports of passenger vehicles and light truck tires from Vietnam and twist ties from China due alleged monetary manipulations by these countries.
As more companies prioritize protecting their intellectual property – and with growing awareness of how International Trade Commission (ITC) remedies provide enormous competitive leverage – filings under Section 337 could rise again.
Similarly, the trend towards more non-patent cases is expected to continue. While approximately 90% of Section 337 cases previously involved claiming a patent, the caseload is increasingly diverse, with more complaints alleging misappropriation of trade secrets, infringement of trademarks or other “unfair acts” related to the importation of products. ITC will remain a crucial venue for high-stakes litigation at the intersection of trade and intellectual property.
Export controls and trade sanctions
President Trump will leave office with several export control and trade sanctions initiatives underway, and it is unclear whether the Biden administration will continue these initiatives, modify them, or reverse course altogether. Even though President Biden will generally enjoy the power to repeal many of Trump’s export control policies, these legacy policies will likely further complicate the early stages of Biden’s presidency.
The Trump administration leaves President Biden with a convoluted set of China-focused export regulation policies. In 2020, President Trump imposed enhanced export controls on Chinese “military end users,” issued an executive order prohibiting U.S. persons from trading in publicly traded securities issued by Chinese-owned or controlled companies by the Chinese army; imposed a new expanded “foreign-made direct product rule” related to Huawei; and added China’s largest semiconductor maker, Semiconductor Manufacturing International Corporation (SMIC), to the list of entities. We expect the Biden administration to pursue these policies in one way or another, as many of them relate to national security. However, Biden could ease some of these restrictions by establishing alternative licensing programs for low-tech items or by limiting or better defining the specific types of transactions subject to these export restrictions.
During the election campaign, President-elect Biden expressed support for a reintegration of the United States into the Joint Comprehensive Plan of Action (JCPOA) – aka the “Iran nuclear deal” – if Iran would commit again to abide by its terms. Since then, the other JCPOA member countries have alleged that Iran has exceeded the JCPOA’s enriched uranium limits and the Iranian government’s top nuclear scientist was killed in an apparent assassination on November 27, 2020, complicating potential efforts. of the United States to rejoin the JCPOA, likely to be very difficult.
Russia will present a host of sanctions challenges to the Biden administration, which will likely move quickly to impose additional sanctions on Russia in response to its cyberattacks against various US government agencies. Additionally, in enacting the National Defense Authorization Act for Fiscal Year 2021 (NDAA 2021), Congress directed the President to impose additional sanctions to continue blocking Russia’s completion of the North Pipelines. Stream 2 and TurkStream. We should receive an early indication of the Biden administration’s Russian sanctions strategy based on how it responds to the aforementioned cyberattacks and how it balances competing interests in enforcing the 2021 NDAA pipeline sanctions. Nord Stream 2 and TurkStream.
The Trump administration moved to severely restrict pre-existing travel authorizations to Cuba under the Cuban Assets Control Regulations (CACR) and generally took a negative view of U.S.-Cuban relations, but stopped short. to completely eliminate the various licensing programs of the CACR. Given that these licensing programs remain in place, it would be possible for the Biden administration to use these existing authorizations to more actively issue licenses allowing U.S. nationals to transact with Cuba, thereby establishing stronger U.S.-Cuban relations. friendships without directly repealing current policies.
Emerging and fundamental technologies
The Export Control Reform Act of 2018 (ECRA) authorized the Commerce Department to pass new regulations to restrict exports of certain “emerging and foundational technologies.” This process is still ongoing, and the incoming Biden administration will be given fairly wide latitude in determining whether or how to regulate exports of “emerging and foundational technologies” as required by ECRA.
Cortney Morgan, Handsome Jackson, Grant leaching, Nithya Nagarajan, Jeffrey Neley, Carlos Rodriguez and Robert Stang are partners and Julia Banegas and Stephen Brophy are lawyers in the law firm Husch Blackwell LLP. They practice in the International Trade and Supply Chain Group of the company’s technology, manufacturing and transportation industry team.