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  Miller & Company P.C.
4929 Main Street
Kansas City, Missouri 64112
Phone: (816) 561-4999
Fax: (816) 561-5999
Web: www.millerco.com
 


IMPORT/EXPORT MANAGEMENT:
WHAT HAPPENS NOW?


 

Much has been said and written on international trade during the campaign and since the election of Donald J. Trump.  While the campaign rhetoric was strident, the reality of governing may well be very different, and President-elect Trump’s comments since the election may be revealing a softening of the campaign rhetoric.  A similar change in tone was evident November 10, 2016 at the White House Oval Office meeting with President Obama and the identification of some members of the transition team.  A new website has appeared – https://www.greatagain.gov/ identifying the major subject matters to be addressed by a Trump Administration. Most importantly, the Trade Reform section of the website does not directly reference withdrawal from NAFTA, the WTO, other specific trade agreements, or specific unilateral Presidential trade actions that were prominently mentioned in the campaign.

There are a variety of mechanisms that can be utilized by the President-elect to immediately impact current import supply chains.  If implemented, other nations may implement retaliatory actions that will impact current supply chains.  The net result is the significant potential of a multi-lateral trade war impacting all countries.  Historically, the Smoot-Hawley tariff was the last major U.S. effort to increase U.S. Customs duties and restrict imports.  Historians credit it with a profound impact globally, both financially and militarily.

We urge clients to review their supply chains and contractual relationships for imports and exports to identify potential concerns.  Consider alerting Senior Management in your Company to the potential financial impact on the issues described herein for 2017 contingency budget plans.  Contact or call Marshall Miller, Sean Murray, Brian Murphy, or Chuck Ballard to discuss any issues/concerns.

Based upon President-elect Trump’s campaign rhetoric, consider the following:

1. WORLD TRADE ORGANIZATION/FREE TRADE AGREEMENTS/UNILATERAL SPECIAL TRADE AGREEMENTS
On January 1, 1995 the U.S. became a member of the World Trade Organization that includes 164 countries.  It provides a framework of trade policies and a significant reduction in global Customs duty rates.  The U.S. is a party to 14 Free Trade Agreements covering 20 countries. The U.S. also provides preferential treatment under six unilateral Special Trade Programs covering many developing countries (GSP, AGOA, ATPA, ATPDEA, CBTPA, and Products of Insular Possessions). During the campaign President-elect Trump indicated he would terminate or renegotiate all the above-referenced trade agreements.  The President has the following specific unilateral authority not requiring Congressional action.

  • Trade Act of 1974.  Multiple provisions of the Act provide significant authority to terminate, withdraw, and impose duty rate increases or import restrictions:
    • Section 125(a) requires all trade agreements to contain a unilateral withdrawal provision.
    • Section 125(b) provides the President with authority to revoke any Presidential Proclamation implementing tariff reductions.
    • Section 125(c) provides the President with authority to proclaim increased duty rates up to 50% above January 1, 1975 U.S. Column 2 rates that are very significantly higher than current duty rates. 
    • Section 125(e) provides the President with authority to invoke higher duty rates.

These provisions are enacted at 19 U.S.C. § 2135.

2. POTENTIAL SPECIFIC SUBJECT MATTER PRESIDENTIAL UNILATERAL TRADE ACTIONS

  • U.S. BALANCE OF PAYMENTS

Contrary to the election rhetoric, the major countries with significant negative balance of payments with the U.S. are not Free Trade Agreement countries but China, Germany, and Japan.

  • Section 122 of the Trade Act of 1974 (19 U.S.C. § 2132) provides the President with authority to impose temporary import surcharges not to exceed 15% and/or temporary quotas for 150 days subject to Congressional extension.
  • UNFAIR TRADE PRACTICES

The phrase “unfair trade practices” covers a broad range of potential actions.

  • Section 301 of the Trade Act of 1974 (19 U.S.C. § 2411) allows the United States Trade Representative (USTR), at the direction of the President, to take action to impose higher tariffs on imports.
  • NATIONAL SECURITY

National Security is another legal basis for the President taking affirmative action to limit or restrict imports.

  • Section 232(b) of the Trade Expansion Act of 1962 (19 U.S.C. § 1862) authorizes the President to restrict imports, based upon the Secretary of Commerce’s Report.
  • INTERNATIONAL ECONOMIC EMERGENCY

Under the International Emergency Economic Powers Act of 1977 (IEEPA) the President has substantial authority to implement import restraint measures after declaring a national emergency.

3. U.S. AGENCY TRADE REMEDY LAWS – The U.S. International Trade Commission and the U.S. Department of Commerce are empowered to conduct investigations and recommend affirmative actions on a wide range of subject matters:

  • Antidumping and Countervailing Duties
  • Denial of U.S. Rights under Trade Agreements
  • Intellectual Property Infringement
  • National Security
  • Safeguard Laws

The investigations may be initiated by interested party petitions or self-initiated by the Agencies.  Only the Safeguard Laws require a Presidential determination.            

4. TPP/TTIP/RCEP - Unapproved and unfinished agreements including the Trans-Pacific Partnership (TPP) and the Trans-Atlantic Trade and Investment Partnership (TTIP) are in serious jeopardy.  TPP is currently under Congressional review.  TPP includes 11 Pacific Rim countries and excludes China and India.  It is a central pillar of the U.S. Asian shift essential for strategic, military, and economic purposes.  TTIP is a proposed European Union/U.S. Agreement.  It is under negotiation with a 2019/2020 target date.  China has sponsored the Regional Comprehensive Economic Partnership (RCEP) alternative to TPP that does not include trade rules, eliminates Customs duties, and excludes the U.S.

5. CUBA SANCTIONS - President Obama relaxed many of the Cuban sanctions by Presidential Proclamations over the past two years.   These Proclamations could be revoked, including the general travel license and favorable licensing for telecommunications equipment, civil aviation equipment, agriculture, infrastructure, civil aircraft and parts, sales to consumers and other materials.  The return of Cuba to the list of state sponsors of terrorism could also occur.   

6. IRAN - Withdrawal from the Joint Comprehensive Plan of Action (JCPOA) could occur.  Doing so will mean the reversal of Office of Foreign Assets Control (OFAC) General License H allowing non-U.S. subsidiaries to engage in local business in Iran.  It will also mean that civil aviation sales (with a license) will also be terminated. 

7. RUSSIA - Potentially some of the sanctions related to the Crimea and Ukraine could be lifted.  Russians on the Specially Designated Nationals List, the Entity List, and the Sectoral Sanctions List and Blocked Persons could be changed. 

8. FTZ OPPORTUNITY – If any of the additional Customs duties and/or trade restrictions are initiated, foreign-trade zone status becomes an attractive business management opportunity.

We highly recommend that our clients ensure contracts relating to imports and exports from potentially impacted countries have adequate provisions addressing risks, liabilities, and responsibilities in the event additional duties, quotas, sanctions, or other supply chain measures are enacted (e.g., force majeure) and to allow companies to avoid contractual penalties.  We look forward to discussing any questions or concerns about these matters further with you and identifying potential measures to mitigate risks to your supply chain.

 

About Our Firm

Miller & Company is a law firm serving a diverse clientele in import, export, and foreign-trade zone law. Within these areas of specialized practice, we have received global recognition for our involvement in the development of the U.S. Foreign-Trade Zones Program.

Disclaimer: This communication is provided by Miller & Company P.C. and intended for educational and informational purposes only and does not constitute the rendering of legal counsel or other professional services. Before you act on any information provided in this newsletter, you should seek professional advice regarding its applicability to your specific circumstance.

To learn more about our firm, you can visit our website at www.millerco.com