U.S., China Dish on Trade; NAFTA Technical Talks Continue

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By Rossella Brevetti, Brian Flood, and Susan McInerney

The spotlight is on Beijing this week, where high-level U.S. and Chinese officials will huddle in a last-ditch effort to head off a potential trade war.

Treasury Secretary Steven Mnuchin, U.S. Trade Representative Robert Lighthizer, White House economic adviser Larry Kudlow, and White House trade adviser Peter Navarro will lead the American delegation. Word is the meetings will take place May 3-4.

What’s on the agenda? That’s the million-dollar question.

Sources expect the U.S. to seek concessions on financial services and currency manipulation. Trade analysts also will be watching for any movement on efforts to rein in intellectual property violations by Beijing and possible concessions on automobiles. China’s State Council is considering proposals to cut import duty on passenger cars by about half.

Members of Congress will watch from a far, as they leave Washington for a week-long work period back in their districts.

Mayday

Exemptions granted by the U.S. on aluminum and steel tariffs expire May 1. Trading partners European Union Argentina, Australia, Brazil, Canada, Mexico, and South Korea are pleading for permanent exemptions.

No Deal!

The hoped-for NAFTA breakthrough—an agreement in principle—fizzled as the trade ministers from the U.S., Mexico, and Canada made progress, but not enough.

Technical-level discussions will continue before the ministers reconvene again in Washington. Mexican Economy Secretary Ildefonso Guajardo said ministers are next due to meet on May 7.

“Our officials will continue to be meeting both virtually but also here in Washington [trilaterally and bilaterally],” Canada’s Foreign Minister Chrystia Freeland told reporters April 27. “We need to spend some time at home consulting about what we have achieved. We will then be reconvening in a week or so in Washington.”

The U.S. wants an agreement it can submit to the current Congress under trade promotion authority procedures, which require the administration to adhere to strict notification requirements before Congress can consider the deal. But clashes over the U.S. proposal sunset proposal to end NAFTA after five years unless the parties agree to keep it, government procurement, dispute settlement, and highly technical details of auto rules nixed hopes for an early May conclusion, private sector sources told Bloomberg Law.

Steel Duty Sidestep

U.S. steel producers Steel Dynamics Inc., California Steel Industries, AK Steel Corp., ArcelorMittal USA LLC, Nucor Corp., and United States Steel Corp. will be watching to see what the Commerce Department announces about evasion of U.S. duties on certain steel products.

Some Chinese companies tried to get around U.S. duties on certain steel products by shipping their merchandise through Vietnam, Commerce found in a preliminary ruling in December. U.S. law allows Commerce to take corrective action when producers or exporters try to avoid duties by shipping subject merchandise through third countries, often with minor processing or assembly, before it enters the U.S.

Commerce is expected to announce its final ruling on the investigation on May 3. If Commerce continues to find circumvention, the imports will be hit with duties. “We think Commerce was correct when it made its preliminary decision. We expect the final analysis will confirm the determination of circumvention,” trade attorney Paul Rosenthal of Kelley Drye & Warren LLP in Washington, counsel for ArcelorMittal USA LLC, told Bloomberg Law in an email.

Compression Hosiery

The U.S. Court of Appeals for the Federal Circuit will hear oral arguments in a pair of trade cases this week.

On May 2, the medical products importer Sigvaris Inc., of Peachtree City, Ga., will try to convince the appeals court that its imports of hosiery should be exempt from import duties.

Sigvaris imported “graduated compression hosiery,” which is designed to encourage blood flow to the wearer’s legs. The company argues that these imports treat chronic venous disease, which causes painful swelling of the legs, and so they should be classified under a duty-free provision for goods designed for handicapped persons.

The Court of International Trade had sided with U.S. Customs and Border Protection that the goods should fall under a different tariff provision for hosiery, which carries import duties of 14.6 percent. The trade court said the hosiery are designed to address the symptoms of early stages of chronic venous disease, and that people suffering from the early stages of this disease are not “handicapped” because they are not seriously limited in their ability to perform major life activities like walking, caring for oneself, or working.

The case is Sigvaris, Inc. v. United States, Fed. Cir., No. 17-02237, oral arguments 5/2/18.

Wind Towers from Vietnam

The Wind Tower Trade Coalition, a U.S. industry group, on May 3 will push for the Federal Circuit to reverse a trade court ruling that eliminated duties on certain imports of wind towers from Vietnam.

CS Wind Vietnam Co. originally was subjected to anti-dumping duties of 51.54 percent on its wind towers. But the company successfully challenged that rate at the Court of International Trade, leading the Commerce Department to lower CS Wind’s rate to 0 percent.

The U.S. imported roughly $79 million worth of utility scale wind towers from Vietnam in 2011, before the duties were put in place, according to Commerce.

The case is CS Wind Vietnam Co., Ltd. v. United States, Fed. Cir., No. 17-01913, oral arguments 5/3/18.

Out and About

The American Iron and Steel Institute and the Steel Manufacturers Association hold their annual meeting April 30-May 2.

The U.S. Chamber of Commerce holds its Ninth China Business Conference May 1-2, with U.S. Trade Representative Robert Lighthizer participating.

The Brookings Institution sponsors a program on U.S.-Japan trade relations May 2 with speakers including Akira Amari, a member of the Japanese House of Representatives.

The Washington International Trade Association sponsors a program on China 2025, Beijing’s plan to upgrade its manufacturing base and transform the country into a high-technology powerhouse.

Save the Date

Parties interested in commenting on a new investigation of proposed modifications to the U.S.-Korea Free Trade Agreement dealing with duties for certain motor vehicles must submit them to the International Trade Commission by May 1.

The deadline for submitting comments to the ITC about the president’s request to extend trade authorization procedures is May 2.

To contact the reporters on this story: Rossella Brevetti in Washington at rbrevetti@bloomberglaw.com; Brian Flood in Washington at bflood@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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