From an international trade standpoint, 2024 is poised to be an interesting year. This Update summarizes U.S. customs-related issues that we think should be top of mind for companies as the year progresses, including forced labor enforcement, Section 301 duties on products manufactured in China, and the presidential election’s potential impact on trade policy.
1. Forced labor enforcement efforts — Enforcement under the Uyghur Forced Labor Prevention Act (UFLPA) will likely be even more active in 2024 than it was in 2023.
In particular, we expect the Forced Labor Enforcement Task Force (FLETF) to increase the number of entities added to the UFLPA entity list (10 have been added since June 2023). Multiple U.S. Department of Homeland Security officials have stated (to the public, to Congress, etc.) that since the UFLPA went into effect, FLETF has been focused on developing and implementing a robust internal process for reviewing and acting on allegations but that, now that the process is in place, they expect to be able to move more quickly to add additional entities to the list. Companies should take this seriously. Given the nonpublic nature of the UFLPA listing process (at least up to the listing itself), it is important that all companies have conducted a UFLPA risk assessment, adopted compliance procedures/mitigation strategies, and be monitoring developments in their industry (e.g., news stories, nongovernmental organization reports) so they can pivot as necessary if allegations are made.
We also expect (based on the semiannual regulatory agenda issued by the Treasury Department) that U.S. Customs and Border Protection (CBP) will publish a “proposed rule to update, modernize, and streamline the process for enforcing the prohibition in 19 U.S.C. 1307 against the importation of merchandise that has been mined, produced, or manufactured, wholly or in part, in any foreign country by convict labor, forced labor, or indentured labor under penal sanctions” sometime during the year. If such a proposal is published, it will give the trade community an opportunity to provide meaningful feedback on issues related to how CBP has been enforcing Section 307 and the UFLPA to date — such as whether CBP should have to identify with specificity the reason for the detention (e.g., the specific part, component, or supplier of concern) or provide a reasoned explanation why a nonapplicability submission was not deemed to be sufficient.1
In short, forced labor enforcement will continue to be a frontline issue in 2024.
2. How the Section 301 China duty situation unfolds — As we have advised (see here), the Office of the U.S. Trade Representative (USTR) has been conducting the statutorily mandated review of the Section 301 China duties since October 2022. The results have been expected for some time, and a narrative is developing in the press that the delay means the Biden administration is considering making changes to the duties. For example, the administration could increase the duties on certain strategic products, such as semiconductors, electric vehicles, batteries, or medical devices. It could also reduce or eliminate the duties on other nonstrategic products. That said, it seems unlikely that the administration would do anything other than increase duties on products from China in an election year. The fact that, in its recent press release announcing that it was extending the Section 301 product exclusions that were scheduled to expire December 31 until May 31, 2024, the USTR said that the extension was in part to “facilitate the alignment of further decisions on these exclusions with the ongoing four-year review” suggests that a decision on whether to modify any of the duties will be made in the next few months.
The legal challenge to the Section 301 List 3 and List 4A duties is also progressing. The case is before the U.S. Court of Appeals for the Federal Circuit and a decision expected later this year.
3. Trade relations with allies — The United States has simmering trade disputes with many countries over the Section 232 duties on steel and aluminum, digital services taxes, U.S. subsidies and incentives under the Inflation Reduction Act of 2022, the CHIPS and Science Act, and other issues. To date, many of those disputes have been pushed off but not resolved. If the issues are not resolved in 2024, they could lead to the imposition/reimposition of duties and retaliatory duties.
4. What Congress does on customs issues (if anything) — There are many important trade issues that need congressional attention, but will they get it? For example, will the Generalized System of Preferences (GSP) program be renewed? If so, will the requirements change? If so, how will that impact companies that have been preserving GSP claims on their imports since the program expired at the end of 2020? Will the Miscellaneous Tariff Bill (MTB) process be finalized and/or reauthorized? Will the African Growth and Opportunity Act (AGOA) be renewed? Will any action be taken on Section 321/de minimis or on customs modernization? Many of these same issues were pending at the beginning of 2023. Whether any trade-related legislation passes or not, Congress (primarily individual members and committees) will certainly continue to play a role in trying to shape U.S. trade enforcement priorities through active engagement with companies and the administration (see, e.g., the House Select Committee on the Chinese Communist Party’s recent letter to the Secretary of Commerce and the USTR asking, in part, whether the United States can impose tariffs on components that have been incorporated into larger finished articles imported into the United States — so called “component tariffs”).
5. The U.S. presidential election — Trade and trade policy is certain to feature prominently in the general election given that various candidates have already suggested proposals such as imposing a 10% tariff on all imports, revoking China’s Most Favored Nation/ Normal Trade Relations status, imposing reciprocal tariffs based on other countries’ tariffs on U.S. imports, and the like. Trade (and the United States’ relationship with the rest of the world) will be a hot topic throughout the rest of 2024.
If your company has any questions about these issues, please reach out to the authors of this update or your Sidley contact.
1 See our other updates on this topic for additional background: “A Recent (Non-Uyghur Forced Labor Prevention Act) Federal Circuit Decision and Its Potential Impact on UFLPA Enforcement Efforts” (August 10, 2023) and “Recent U.S. Congressional Actions Likely to Spur Increased UFLPA Enforcement” (April 20, 2023).
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