On May 21, the Office of the United States Trade Representative (USTR) established a process through which U.S. stakeholders may exclude products included in List 3 from a 25% tariff imposed pursuant to the investigation of China’s intellectual property practices under Section 301 of the Trade Act of 1974 (“Section 301”) (discussed here). The window to submit exclusion requests will open “on or around” June 30.
Further to our prior blog post, on May 13, 2019, at the direction of President Trump, the Office of U.S. Trade Representative (USTR) published a proposed tariff list covering approximately $300 billion worth of Chinese imports to be subject to higher duties pursuant to the determinations previously made under Section 301. USTR explained that the United States and China have been engaged in negotiations on a range of issues, including, among others, forced technology transfer, intellectual property protection, non-tariff barriers, cyber intrusions and cyber theft, services and agriculture. According to USTR, shortly in advance of the last scheduled round of negotiations, , China “retreated from specific commitments made in previous rounds”, prompting the United States to propose a fourth list of products subject to additional duties (see here and here for a discussion regarding Lists 1, 2, and 3).
On May 9, 2019, the Office of the United States Trade Representative (USTR) issued a Federal Notice indicating that tariffs on $200 billion worth of Chinese imports would be increased from 10% to 25%. These products are included in the third set of tariff categories (the first two sets are discussed here) announced by USTR in connection with the investigation under Section 301 of the Trade Act of 1974 into China’s acts, policies, and practices related to intellectual property (discussed here). The increase will go into effect on May 10, 2019 at 12:01 am eastern daylight time. Over the weekend, President Trump also threatened a 25% tariff will “shortly” be imposed on the remaining $325 billion worth of imports not currently subject to tariffs. For the prior three sets of Section 301 duties, there were proposed regulations with opportunity for public comment, and it seems likely that USTR would follow the same approach if there will be a fourth set.
On February 4, 2019, U.S. Customs and Border Protection (CBP) issued a withhold release order (WRO) against tuna and tuna products from the Tunango No. 61, a Taiwanese vessel, based on information obtained by CBP that indicated that tuna is harvested with the use of forced labor. The order will detain the entry of tuna and any such merchandise manufactured wholly or in part by the Taiwanese vessel at all U.S. ports. In the accompanying statement, CBP stated that importers of detailed shipments will have the opportunity to “export their shipments or demonstrate that the merchandise was not produced with forced labor.” This WRO is the most recent action resulting from CBP’s renewed focus on enforcement of the U.S. ban on imports of forced labor under Section 307 of the Tariff Act of 1930, and the first issued against a fishing vessel.
Following President Trump’s direction in connection with the Section 301 investigation into China’s acts, policies and practices related to intellectual property (discussed here), on June 15, 2018, the Office of U.S. Trade Representative (USTR) announced a 25% tariff increase on Chinese products valued at approximately $34 billion in 2018 trade values, with more tariff increases to come. Below, we describe USTR’s action and China’s response.
There are several legislative proposals pending in Congress targeting trade and investment involving China. If enacted, the proposals would prevent Chinese entities from acquiring certain U.S. technologies, prohibit U.S. government procurement from ZTE and Huawei, and limit U.S. issuers from receiving investments from Chinese parties.
Recent reports suggest that the Administration may declare an emergency under the International Emergency Economic Powers Act (IEEPA) to grant the Committee on Foreign Investment in the United States (CFIUS) authority to review transactions involving the transfer of U.S. technology and intellectual property (IP) to foreign entities, even where there is no transfer of “control” as currently required under existing CFIUS regulations. This executive action would follow a memorandum issued by President Trump directing the U.S. Government to propose possible restrictions on Chinese investment in U.S. companies due to concerns outlined by the Office of the United States Trade Representative (USTR) in connection with its Section 301 investigation. The potential CFIUS review of U.S. technology transfers to foreign entities would mirror one aspect of the pending Foreign Investment Risk Review Modernization Act of 2017 (FIRRMA).
Yesterday, President Trump issued a memorandum (“Memorandum”) directing his Administration to take several actions related to the investigation by the Office of U.S. Trade Representative (“USTR”) into China’s acts, policies, and practices (“APPs”) related to technology transfer, intellectual property, and innovation under Section 301 of the Trade Act of 1974 (“Section 301”). The actions include restrictions on Chinese investment in the United States and the imposition of higher customs duties on imports from China. At the signing ceremony, President Trump called this action “the first of many” against Chinese practices. USTR Ambassador Lighthizer echoed the President at a hearing before the Senate Finance Committee today, noting that the Administration “expects to bring additional [actions] in other areas where the [United States does not] have reciprocal response.”
Below we describe these actions and USTR’s findings in the Section 301 investigation.
Further to our alert published on November 13, 2017 regarding whether acts, policies, and practices (APPs) of China related to transfer of technology, intellectual property, and innovation are actionable under Section 301(b)(1) of the Trade Act of 1974 (Section 301), it is anticipated that the U.S. Trade Representative (USTR) will make affirmative findings and remedy recommendations well ahead of the August 2018 statutory deadline, potentially as early as January 2018. USTR is authorized to take specified actions (noted below), “subject to the specific direction, if any, of the President regarding such action[s]” and is authorized to take “all other appropriate and feasible action within the power of the President that the President may direct USTR to take.”
According to USTR officials, if the United States makes an affirmative determination, the next steps will likely proceed in two tracks: (1) the United States may elect to initiate a World Trade Organization (WTO) dispute regarding the APPs, if they are considered to be in violation of WTO commitments, and/or (2) the United States may take unilateral retaliatory action. Below, we comment briefly on both tracks.
President Trump issued an Executive Order prohibiting the proposed acquisition of Lattice Semiconductor (Lattice) by a Chinese consortium known as Canyon Bridge. Lattice is a semiconductor company primarily manufacturing programmable logic devices. The Executive Order prohibits the proposed acquisition and any substantially equivalent transaction, and requires the parties to permanently abandon the proposed transaction in 30 days. The Executive Order follows a lengthy review process with the Committee on Foreign Investment in the United States (CFIUS). This is only the fourth time since the enactment of the Exon-Florio Amendment in 1988 that a transaction has been formally blocked.