In a demonstration of the importance of import trade regulation to the new administration, President Donald Trump signed two executive orders (EOs) related to trade enforcement on March 31.
The first EO — labeled as the Omnibus Report on Significant Trade Deficits (Omnibus Report EO) — directs the U.S. Department of Commerce (DOC) and U.S. Trade Representative (USTR), in consultation with other agencies, to prepare and submit a report to the President that (i) identifies the causes of the U.S. trade deficits, and (ii) analyzes the United States’ trade relationships with various countries and the effects of those relationships on U.S. manufacturing, labor and national security.
The second EO — entitled Establishing Enhanced Collection and Enforcement of Antidumping and Countervailing Duties and Violations of Trade and Customs Laws (Enhanced Enforcement EO) — directs the U.S. Department of Homeland Security, through U.S. Customs and Border Protection (CBP), in consultation with other agencies, to develop and implement a plan, based on a risk assessment by CBP, that will (i) enhance the collection of unpaid duties and fees owed to the U.S. Government, and (ii) ensure the protection of intellectual property rights by combating the importation of counterfeit goods.
The final shape that these initiatives will take is uncertain, but it is anticipated that, in the coming months, the agencies will open proceedings addressing the issues identified in the EOs and will seek public comment.
Omnibus Report EO
The Omnibus Report EO is born out of the administration’s concern regarding U.S. trade deficits, which may signify an unfair playing field in the United States’ relations with major trading partners. Therefore, the President has called upon the DOC and USTR to generate a report that uses the U.S. trade balance as a barometer for the country’s trading strength, identifying the causes for bilateral trade deficits, conducting country-specific analyses related to these deficits, and assessing the effects of the deficits on manufacturing, labor and national security. The Omnibus Report EO requires the DOC and USTR to deliver a report of their findings to the President within 90 days.
The EO does not specify the report’s intended use. However, the EO’s stated goal is to address other nations’ policies that the administration has labeled as trade abuses. Indeed, during the signing of the EO, the President stated that the report will be used to take “necessary and lawful action to end those many abuses.”
Although not explicitly stated, it is likely that the report will be used in future antidumping (AD) and countervailing duty (CVD) investigations and even for national security investigations conducted by the Committee on Foreign Investment in the United States (CFIUS). Specifically, the report may be submitted to the U.S. International Trade Commission as evidence of injury or continued injury caused by subject imports, in future AD/CVD investigations and sunset reviews. Additionally, if the report identifies certain trading practices of countries and/or industries as threats to national security, the administration and Congress may use it to call for heightened CFIUS scrutiny of certain transactions that relate to countries or industries identified in the report.
Enhanced Enforcement EO
The Enhanced Enforcement EO is linked to recent customs legislation: Title IV of the Trade Facilitation and Trade Enforcement Act of 2015, also known as the Enforce and Protect Act of 2015. Both the EO and the 2015 legislation are intended to enhance CBP’s capabilities related to trade enforcement. The Enhanced Enforcement EO tasks the Department of Homeland Security, through CBP and in consultation with other agencies, to develop and implement two plans — one that addresses AD/CVD duty collection issues and one that addresses the importation of counterfeit goods. Moreover, the Enhanced Enforcement EO instructs the Attorney General to develop practices to bolster enforcement of the two plans and “to accord a high priority to prosecuting significant offenses related to violations of trade laws.”
Trade Remedies Enforcement
The first plan is intended to combat the practice whereby importers establish shell companies in an attempt to evade AD/CVD duty payments. Once AD/CVD duties come due, the shell company is dissolved, leaving the duties unpaid. Moreover, it has proven difficult to impose liability on the individuals involved in this practice because of challenges both in identifying the individuals and in piercing the corporate legal structure to pursue claims against them. The result has been to incentivize a pattern of persistent noncompliance.
To address this issue, through the plan that is to be developed and implemented pursuant to the EO, CBP is considering the adoption of new, predictive analysis technology to identify importing entities that pose the highest risk of noncompliance. Once identified, the high-risk importers will be required to provide enhanced bonding at the time of importation of goods subject to AD/CVD duties.
The new enhanced bonding measures may be subject to challenge at the World Trade Organization (WTO), given that the WTO rebuked the United States’ previous attempt to implement enhanced bonding measures.1 However, because the new measures have yet to be developed, it is too early to tell whether they will be structured in a way that is consistent with the United States’ WTO obligations.
In addition to enhanced bonding, CBP is considering, through a future rulemaking process, instituting a process by which it will begin to suspend and revoke importer numbers, which are required to import merchandise into the United States. The importer numbers will be suspended or revoked for importers that fail to respond to instructions to pay duties, taxes and fees over a certain period.
Intellectual Property Rights Enforcement
The second plan under the Enhanced Enforcement EO is intended to enhance the protection of intellectual property rights by combating the importation of counterfeit goods. CBP is considering how to better address the inflow of counterfeit goods by providing alternative tools in addition to seizure, which alone has proven insufficient to remedy the problem and requires the expenditure of considerable enforcement resources. One alternative that may likely be implemented is an expansion of the voluntary abandonment pilot program, which allows for the voluntary abandonment of detained goods, thus avoiding the burden on both CBP and the importer imposed by the formal seizure process.
1 See Appellate Body Report, United States – Customs Bond Directive for Merchandise Subject to Anti-Dumping/Countervailing Duties, WT/DS345/AB/R, circulated July 16, 2008.
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