New Articles

Steel Import Licenses Must Include Country of “Melt and Pour”

steel

Steel Import Licenses Must Include Country of “Melt and Pour”

The U.S. Department of Commerce’s (Commerce) Steel Import Monitoring and Analysis System (SIMA) will be modified effective October 13, 2020, to require that the country where the steel was “melted and poured” to be identified in the license application. Other changes in the final rule published on September 11, 2020, include adding coverage for eight additional HTS numbers in order to synchronize the system with the coverage of Section 232 for basic steel mill products; increasing the low-value license to $5,000, and allowing multiple uses; and extending the SIMA program indefinitely.

The new rule defines “melted and poured” as “the original location where the raw steel is: (A) First produced in a steel-making furnace in a liquid state; and then (B) Poured into its first solid shape…The first solid state can take the form of either a semi-finished product (slab, billets or ingots) or a finished steel mill product.”

The reporting requirement does not apply to raw materials used in steel manufacturing. The new required information on the country of “melt and pour” may also be useful in investigating circumvention of duties.

The SIMA website will shut down from October 9 until October 13, 2020 when the new website is updated and goes live. Commerce has created a page with the latest updates regarding SIMA. In the interim, Commerce stressed that there will be limited availability for manual license processing.

______________________________________________________________

Nithya Nagarajan is a Washington-based partner with the law firm Husch Blackwell LLP. She practices in the International Trade & Supply Chain group of the firm’s Technology, Manufacturing & Transportation industry team.

Camron Greer is an Assistant Trade Analyst in Husch Blackwell LLP’s Washington D.C. office.

foundational technologies

BIS Seeks Comments on Identifying “Foundational Technologies”

The U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) recently published an Advanced Notice of Proposed Rulemaking (“ANPRM”) regarding the identification and review of controls for certain “foundational technologies.” This ANPRM represents another step toward implementation of the “emerging and foundational technology” provisions set forth in the Export Control Reform Act (“ECRA”) of 2018, which has been slow to get off the ground. Section 1758 of the ECRA requires that “foundational technologies” be identified and that BIS establish appropriate controls for that technology under the Export Administration Regulations (“EAR”).

The ANPRM solicits public comments concerning the definition of and criteria for identifying “foundational technologies” in order to apply controls to “emerging technologies” and “foundational technologies” which are essential to U.S. national security, pursuant to the ECRA. Specifically, BIS is asking interested parties to submit comments by October 26, 2020, responding to the following topics:

-How to further define foundational technology to assist in the identification of such items;

-sources to identify such items;

-criteria to determine whether controlled items identified in AT level Export Control Classification Numbers (ECCNs), in whole or in part, or covered by EAR99 categories, for which a license is not required to countries subject to a U.S. arms embargo, are essential to U.S. national security;

-the status of development of foundational technologies in the United States and other countries;

-the impact specific foundational technology controls may have on the development of such technologies in the U.S.;

-examples of implementing controls based on end-use and/or end-user rather than, or in addition to, technology-based controls;

-any enabling technologies, including tooling, testing, and certification equipment, that should be included within the scope of a foundational technology; and

-any other approaches to the issue of identifying foundational technologies important to U.S. national security, including the stage of development or maturity level of a foundational technology that would warrant consideration for export control.

BIS explained that it does not seek to expand jurisdiction over technologies that are not already subject to the EAR. BIS, through an interagency process, seeks to determine whether there are specific foundational technologies that warrant more restrictive controls.  Interested parties may submit comments through the federal rulemaking portal (regulations.gov) or via mail to BIS.

Husch Blackwell encourages clients and companies to review the recent ANPRM for applicability.

______________________________________________________________

Cortney O’Toole Morgan is a Washington D.C.-based partner with the law firm Husch Blackwell LLP. She leads the firm’s International Trade & Supply Chain group.

Julia Banegas is an attorney in Husch Blackwell LLP’s Washington, D.C. office.

Camron Greer is an Assistant Trade Analyst in Husch Blackwell LLP’s Washington D.C. office.

section 232

Commerce Commences Section 232 Investigation on Imports of Vanadium

The Commerce Department announced on June 2, 2020, that it is starting another Section 232 investigation that could result in the imposition of tariffs or potentially other restrictions on imports of vanadium. The agency stated that it will review and determine “whether the present quantities or circumstances of vanadium imports into the United States threaten to impair the national security.”

Vanadium is a chemical element with the symbol “V” and is assigned atomic number 23.  A general description of it is a hard, silvery-grey, malleable transition metal. It is an artificially isolated element, which is rarely found in its natural state, but one of its key properties once isolated artificially is to prevent oxidation. Various applications that rely on vanadium include use in the production of ferrovanadium, which is a steel additive. The chemical properties of vanadium also increase the strength of the steel and it is therefore used in products such as high-carbon steel alloys and high-speed tool steels for use “aircraft, jet en­gines, ballistic missiles, energy storage, bridges, buildings, and pipelines. Vanadium is a key component in aerospace applications due to its strength-to-weight ratio, the best of any engineered material,” Commerce said and “U.S. demand is supplied entirely through imports.”

This new 232 investigation is the result of the filing of a request by two domestic U.S. vanadium producers, AMG Vanadium and U.S. Vanadium, in November 2019. The allegation claims that the “domestic industry is adversely impacted by unfairly traded low-priced im­ports, limited export markets due to value-added tax regimes in other vanadium producing countries, and the distortionary effect of Chinese and Russian industrial policies,” according to Commerce’s press release.

The notice of initiation, of the 232 investigation was published in the Federal Register on June 3rd. Comments must be filed by July 20, 2020, and any rebuttal comments are due by August 17, 2020.  Those interested in submitting comments should ensure that it addresses the following:

-the quantity of imports,

-domestic production and capacity needed to meet national defense requirements, and

-the impact of foreign competition on the vanadium industry, among other things.

Husch Blackwell continues to monitor the Section 232 investigations and will provide further updates as more information becomes available.

_______________________________________________________________________

Nithya Nagarajan is a Washington-based partner with the law firm Husch Blackwell LLP. She practices in the International Trade & Supply Chain group of the firm’s Technology, Manufacturing & Transportation industry team.

Turner Kim is an Assistant Trade Analyst in Husch Blackwell LLP’s Washington D.C. office.

countervailing duty

Commerce Modifies Countervailing Duty Regulations to Address Currency Undervaluation

The Commerce Department issued its final rule amending the countervailing duty regulations to address potential currency undervaluation. This revision to Commerce’s regulations will take effect in 60 days and will apply to all new investigations and administrative reviews that begin on or after April 6, 2020. The new rules would effectively clear the way for the U.S. to start applying punitive tariffs on goods from countries accused of having undervalued currencies.

Under the revised regulations, Commerce in the conduct of its countervailing duty proceedings will now have the authority to take into consideration the real effective exchange rates to determine the extent to which a currency is undervalued. They will also be able to seek the Treasury Department’s formal, non-binding evaluation on whether the foreign government’s actions were responsible for the undervaluation. If Commerce determines that there is undervaluation of the currency and that the undervaluation resulted from government action, Commerce will then potentially consider currency exchanges by the exporters and/or traders to be a subsidy given that the exporter or trader would effectively receive more domestic currency in return for their exchanges of U.S. dollars than they otherwise would have been able to receive under the old rules.

In the conduct of its countervailing duty investigations and reviews, Commerce will now look at each individual exporter’s currency exchanges, and specifically, the amount of additional domestic currency received in exchanges due to undervaluation. It will then potentially add the currency subsidy amount to the exporter’s overall countervailing duty rate. The move would give new muscle to U.S. complaints about currency manipulation that have in the past targeted economies like China and Japan and thus turn the more than $6 trillion-a-day global currency market into a new battlefield in the Trump administration’s trade wars. The new rule was opposed by the Treasury Department when it was first proposed in May 2019 as it would allow U.S. companies to file trade complaints with the Commerce Department over specific imported products by treating undervalued currencies as a form of an unfair subsidy.

The new regulations have far-reaching effects as it would allow the U.S. to impose countervailing duties on goods from countries accused of manipulating their currencies, even in cases where they were not officially found to be a currency manipulator by the U.S. Department of Treasury. Previous administrations have examined this issue but have delayed or resisted efforts to take such actions as it could potentially lead to currency wars amongst trading partners.

Commerce’s announcement is the result of campaign promises from the 2016 election. “This Currency Rule is an important step in ensuring that unfair trade practices are properly remedied,” said Secretary of Commerce Wilbur Ross in a statement. “While successive administrations have balked at countervailing foreign currency subsidies, the Trump Administration is taking action to level the playing field for American businesses and workers.”

In a question and answer section attached to Monday’s announcement, the Commerce Department said it would preserve the final power to make any determination about whether a currency’s value presented an unfair subsidy for that country’s exporters. The statutes governing Treasury’s mandate to monitor currencies and Commerce’s power to impose anti-subsidy duties had different criteria, Commerce said.

“Hence, the two processes may result in different outcomes as to a particular country, theoretically including the possibility of applying countervailing duties to a country that does not meet the criteria for designation under the laws Treasury administers,” the statement said.

Commerce also said the new rule would allow it to specifically impose currency-related tariffs against China even if the Treasury did not label it a currency manipulator. The Treasury last month lifted a designation of China as a manipulator just days before Trump signed a “Phase One” trade deal with China that included language on currencies, though the new rule appears to give the U.S. powers to act that go beyond what was included in last month’s deal.

The Commerce Department put some purported caveats on its powers, saying it would “not normally include monetary and related credit policy of an independent central bank or monetary authority” in determining whether foreign governments had acted inappropriately to weaken currencies. “Commerce will seek and generally defer to Treasury’s expertise in currency matters,” it said.  This statement, however, leaves a lot of room open for potential unilateral action by Commerce, as Commerce has reserved for itself the authority to find that undervaluation exists, even if Treasury in its bi-annual report makes a determination that a particular currency is artificially weak but not undervalued. This type of broad authority is similar to Commerce’s authority to conduct Particular Market Situation (“PMS”) investigations resulting in contested decisions and appeals to the Court of International Trade.

Auto Tariffs Spark Lawsuit Against Department of Commerce

Once again, auto tariffs have made the news. This time, it involves the Cause of Action Institute (CoA), the Department of Commerce , and a lawsuit. The lawsuit, at the request of the CoA, is in response to an information request that the Department of Commerce did not release. Originally, the CoA requested a copy of Commerce Secretary’s final report to the President regarding the Section 232 investigation.

Commerce claims that the information contained in their report justifies the proposed auto-tariffs, but the government refuses to release this report. The public should not have to take the government’s word that the report supports tariffs when the administration withholds the document it claims support its position. The tariffs will harm American consumers and businesses, and the public has a right to see the information contained in the report. We are dedicated to placing this vital information into the public sphere, ensuring that the government complies with its statutory obligations, and we look forward to a robust debate about the merits of the report,” said James Valvo, counsel and senior policy advisor at Cause of Action Institute.

This request occurred on two occasions, with the Department of Commerce stating it wouldn’t release the report to the public. Now the CoA is fighting in the name of transparency by holding the Department of Commerce accountable for not releasing the report within the statutory time-frame.

Steel Makers Unite to Appeal ITC Import Decision

Washington, DC – US producers of grain-oriented electrical steel (GOES) have said they will file an appeal of the negative decision on “material injury” by the US International Trade Commission (ITC).

The AK Steel Corp., ATI Flat Rolled Producers, and the United Steelworkers Union, which represents workers engaged in the production of GOES at ATI Flat Rolled, will join forces to fight the ITC’s decision.

The International Union, United Automobile, Aerospace and Agricultural Implement Workers of America, which represents workers engaged in the production of GOES at AK Steel Corporation, also expressed its support for the appeal.

GOES is a flat-rolled alloy, specialty steel product that’s used primarily in the production of laminated cores for large and medium-sized electrical power transformers and distribution transformers.

The petitions cover GOES in either sheet or strip form, in coils or in straight lengths imported from the Czech Republic, China, South Korea, and Russia.

“We are very disappointed by the negative determination by the ITC,” said David A. Hartquist of Kelley, Drye & Warren LLP, the Washington, DC-based counsel to petitioners.

“We believe the case warranted an affirmative determination and that the majority decision contains fundamental errors of fact and law,” he said.

The Department of Commerce, he said, “found antidumping margins of up to 159 percent, which caused lost sales and significant financial injury to the US producers, which in our judgment met the legal standard for an affirmative determination.”

The petitioners also filed an appeal on September 16, 2014 to a similar ITC decision covering imports from Germany, Japan and Poland.

10/24/2014