Countries Steel for Stiff Duties; NAFTA Talks Wrap Up March 5

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By Rossella Brevetti, Brian Flood, Bengt Ljung, and Susan McInerney

The possibility of duties on imported steel and aluminum will eclipse talks to upgrade the North American Free Trade Agreement this week.

While President Donald Trump already said he plans to impose 25 percent tariffs on steel imports and 10 percent on aluminum, the real action won’t start until he signs a formal order, which he said will come this week. Commerce Secretary Wilbur Ross March 2 said the president seems to favor a global tariff with no exceptions.

That could provoke responses from various trade partners. Senior trade officials from China, South Korea, and Brazil were in Washington last week talking with U.S. officials and working to persuade the administration not to impose the duties, apparently to no avail. And the European Union is teeing up countermeasures should the president go ahead with the tariffs.

The president’s plan is also catching flak from industry groups ranging from automakers to farm groups, who are concerned about rising prices and retaliation.

Next up is NAFTA, with round seven of talks to revise the pact slated to wrap up March 5. Negotiators from Canada, Mexico, and the U.S. clinched a deal on regulatory best practices, the first official “chapter” completed in the latest talks in Mexico City. Trade analysts and industry representatives will be watching to see what progress has been made in other of the pact’s 30 chapters.

Pacific Rim Pact, Special 301

Senior trade officials from the 11 countries that remained steadfast in their support for the original TPP are winging their way to Santiago, where they’ll sign the new Comprehensive and Progressive Agreement for Trans-Pacific Partnership on March 8. Once the pact is signed, the race for ratification begins.

The CPTPP is the successor agreement to the 12-nation accord President Donald Trump ditched shortly after taking office a year ago. The deal will set up a free trade bloc linking 500 million people and economies with a combined economic output of more than $10 trillion.

The Trump administration has been making noises about possibly rejoining the fold if the U.S. gets a “better deal.” But officials from the CPTPP countries—such as Australia, Chile, Japan, and Peru—have made clear that all countries must approve a return by the U.S.

On the home front, the Office of the U.S. Trade Representative March 8 will hold a public hearing for its Special 301 Review on intellectual property rights. China isn’t the only country posing intellectual property (IP) challenges, according to comments filed with USTR. Canada, Mexico, and India are also cause for concern, they said.

USTR is scheduled to release the Special 301 report around April 30. The report identifies countries that deny adequate and effective intellectual property rights protections or “fair and equitable market access to U.S. persons who rely on intellectual property protection,” USTR said.

Tariff Fallout

Countries are already gearing up to respond to the steel and aluminum tariffs—aimed at safeguard U.S. industry—if the president signs off on them.

Lobbying continues at all levels in the EU and from the member states themselves. The subject will certainly come up when the Swedish prime minister meets Trump March 6, for example.

In addition, the EU’s College of Commissioners is poised to consider what countermeasures it may take against the steel-and-aluminum decision March 7. Nervous U.S. industries, especially agriculture, will be watching. The college is composed of commissioners from the 28 EU member states.

Under discussion will be a draft list of U.S. products that will be slapped with punitive duties if the U.S. forges ahead with the tariffs, the European Commission said.

The EU will also work with other trading partners to seek World Trade Organization consultations with the U.S., the spokesman said.

NAFTA: Moving Forward

Top North American officials will meet March 5 at the conclusion of the seventh NAFTA round to discuss what’s next.

Kenneth Smith Ramos, Mexico’s chief NAFTA negotiator, said in a tweet at the start of the round that negotiators hoped to advance NAFTA modernization chapters such as telecommunications, digital trade, technical barriers to trade, sanitary and phytosanitary measures, referring to measures to protect humans, animals, and plants from diseases, pests, or contaminants, and good regulatory practices. So far, negotiators have clinched a deal on good regulatory practices.

Officials directing the negotiating teams—U.S. Trade Representative Robert Lighthizer, Mexican Economy Secretary Ildefonso Guajardo, and Canadian Foreign Minister Chrystia Freeland—are expected to announce the next NAFTA round. Negotiators are thought to be zeroing in on the second week of April to hold the next round.

The NAFTA talks face timing challenges, with campaigning for Mexican federal election likely to begin in late March and the U.S. midterm elections in November.

One agriculture industry source, who spoke to Bloomberg Law on background, said negotiators were clearing obstacles in areas where there was less controversy, but they still have a long way to go on Trump administration proposals aimed at reducing the U.S. trade deficit. Among them is a proposal to raise the North American content in NAFTA auto rules from 62.5 percent to 85 percent. The rules of origin group will reconvene sometime after the conclusion of the round.

Oh, Nuts!

Things could get salty when Well Luck Co. faces off against the Justice Department in oral arguments at the Federal Circuit Court of Appeals March 9.

The company argues that Customs and Border Protection misclassified its entries of roasted, salted, and/or flavored sunflower seeds for snacking. The company argues that its imports should be classified under a tariff provision for sunflower seeds, which allows for duty-free entry. Customs, however, classified them under a provision for prepared or preserved fruits and nuts, which carries a duty rate of 17.9 percent.

The company appealed a ruling by the Court of International Trade, which sided with Customs after finding that Well Luck’s seeds were too processed to fit under the company’s preferred tariff provision.

‘Tariff Engineering’

The Justice Department has until March 5 to file a legal brief explaining why Ford Motor Co.’s imports of Transit Connect vans should face hefty import duties.

Ford imported its Transit Connect vans with features like a second row of seats and additional footwells and windows, so that they would classify as passenger vehicles, subject to import duties of just 2.5 percent. But after the vans cleared customs, they were quickly modified to serve as cargo vehicles, which would normally carry import duties of 25 percent.

The government appealed a Court of International Trade ruling that sided with Ford, after the trade court ruled that Ford’s actions were a legitimate form of “tariff engineering.”

The government’s brief is due to the Federal Circuit Court of Appeals by March 5.

Out and About

Virginia Gov. Ralph Northam (D) is hosting the 10th Annual Governor’s Conference on Agricultural Trade March 5 in Richmond. In addition to Ted McKinney, undersecretary for trade and foreign agricultural affairs at the Department of Agriculture, participants will hear from Canadian, Mexican, and Japanese officials.

How to protect electronic commerce customers from counterfeit products will be the topic of a Senate Finance Committee hearing March 6. Officials from the U.S. Customs and Border Protection and the Government Accountability Office, among others, will discuss how to better enforce intellectual property rights and prevent imports of illegal counterfeits at the border.

The economic impact of the new Comprehensive and Progressive Agreement for Trans-Pacific Partnership on member and non-member countries will be discussed at an event hosted by the Wilson Center March 7. Officials from member countries Canada, Japan, Peru, and Singapore, among others, will participate.

Georgetown University’s School of Law March 8-9 is hosting a two-day International Trade Update, with NAFTA, trade with China, and how trade disputes are handled in Canadian, Mexican, and U.S. trade tribunals on the agenda. Speakers include Rep. Sander Levin (D-Mich.); Kenneth Smith Ramos, who heads the Mexican Ministry of the Economy’s Trade and NAFTA Office; and Philip Chen, USTR’s chief counsel for China trade enforcement, among others.

To contact the reporters on this story: Rossella Brevetti in Washington at rbrevetti@bloomberglaw.com; Brian Flood in Washington at bflood@bloomberglaw.com; Bengt Ljung in Brussels at correspondents@bloomberglaw.com; Susan McInerney in Washington at smcinerney@bloomberglaw.com

To contact the editor responsible for this story: Jerome Ashton at jashton@bloomberglaw.com

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