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BIS Seeks Comments on Identifying “Foundational Technologies”

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Archives, Global Trade Daily, Imports/Exports, In The News

BIS Seeks Comments on Identifying “Foundational Technologies”

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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.

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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.

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Archives, Global Trade Daily, Imports/Exports, News

USTR, DOC, and Department of Agriculture Issue Plan to Investigate Foreign Imports of Certain Perishable Produce

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On September 1, 2020 the Office of the United States Trade Representative (USTR), Department of Agriculture, and Department of Commerce issued a 32-page report outlining the Trump Administration’s plan to address increased foreign imports of perishable fruits and vegetables. Following the public hearings held in August, the Administration published this report in hopes to open a dialogue with senior Mexican Government officials over the next 90 days regarding specific produce.

The USTR requested that the U.S. International Trade Commission (ITC) formally initiate an investigation under Section 201of the Trade Act of 1974 (Global Safeguard Investigation) with respect to imports of blueberries. Additionally, USTR intends to request that the ITC monitor and investigate imports of strawberries and bell peppers, which could lead to an expedited Section 201 investigations later this year.

The USTR is separately pursuing negotiations with the Mexican government to address U.S. industry concerns over imports of strawberries, bell peppers, and other perishable products. Section 201 investigations occur when a country experiences an unexpected surge in the import quantity of a certain product. The most recent Section 201 investigation was used to limit imports of solar panels and washing machines in 2018.

Other initiatives include the Department of Commerce improving communication with U.S. farmers responsible for growing the subject produce and assisting them in understanding trade remedy laws and procedures.

Similarly, the Department of Agriculture will develop a market promotion strategy for domestically produced produce and work with producers to maximize the use of existing agriculture programs. USTR, the Department of Commerce, and the Department of Agriculture will establish an interagency working group to monitor seasonal and perishable fruit and vegetable products, coordinate as appropriate regarding future investigations and trade actions, and provide technical assistance to Congress in developing legislation on this issue.

The interagency announcement regarding imports of certain fruits and vegetables follows media reports that U.S. farmers are on track to receive a record $37.2 billion in subsidies from the government this year.

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Stephen Brophy is an attorney in Husch Blackwell LLP’s Washington, D.C. office focusing on international trade.

Turner Kim is an Assistant Trade Analyst 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.

heirloom tomato
Archives, Global Trade Daily, Imports/Exports

ALL THE WORLD TREASURES AN HEIRLOOM – TOMATO, THAT IS

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Everyone Can Enjoy an Heirloom

Spring weather heralds the start of weekend farmers markets offering colorful fruits and vegetables, artisanal cheeses, and home-made baked goods. Along the east coast, tomatoes play a starring role at the local farmers markets. Green, yellow, orange, brown, grape tomatoes, cherry tomatoes, large, small – the variety seems endless.

Farmers markets are a great way to shop fresh and seasonal, but if you can’t get there, you can still find an increasingly impressive selection of tomatoes at your local grocery store. Are the tomatoes in the organic corner market the same tomatoes you get from the farmer? Unlikely. For the most part local farmers cannot sustain supply to large grocery chains where consumers are demand tomatoes year round. To meet that demand, the business of the heirloom tomato has grown global.

Pimp my Tomato

Italians made tomatoes a kitchen staple, but the tomato didn’t originate in Europe. Researchers have traced its origin to the “pimp,” a pea-sized red fruit that grows naturally in Peru and Southern Ecuador. As with so many foods we love, the Mexicans domesticated the tomato and Spanish explorers brought it home, where locals created a sweeter and tastier, but also more vulnerable, tomato.

Whether due to the preferences of grocers or their shoppers, the market overwhelmingly demands that growers focus on the few breeds of tomatoes that dominate our grocery shelves today. Producers worked to change the characteristics of tomatoes through cross-pollination in order to increase yield, to produce uniform shapes and sizes with smooth skin, and to render the tomatoes hardier for transport. Tomatoes are picked while green and artificially ripened with ethylene gas, sacrificing better taste for better looks (the flavor comes from the sugars that develop as the tomato ripens naturally).

partial-dg-pimp-tomato-graphic-for-web

Photo: The pimp fruit by David Griffen, Smithsonian.com

The New (Old) Tomato

The strict definition of heirloom tomato is a variety of tomato that has been openly pollinated for more than 50 years. Today, most experts would consider heirlooms as any non-hybrid tomato. Unlike heirlooms, many hybrid vegetables and fruits, while resilient and uniform, produce seeds that cannot reproduce. Therefore, the open pollination principle for heirlooms is key. As a result, it is the seed savers and gardeners with a flair for history that helped propel heirloom tomatoes to their elite status.

In the last decade, consumers started going back to the tomato’s heirloom roots. Top restaurants, prominent chefs, cooking magazines, the farm-to-table movement, and the proliferation of farmers markets have all put heirloom tomato flavor on display. Americans have become more tomato-curious than ever.

Regional is the New Local

Generally speaking, the entire world loves a tomato. As the most consumed vegetable in the world, we devour 130 million tons of tomatoes every year, of which 88 million are sold fresh. The remaining 42 million tons are destined for processing into tomato sauce and other products. China, the European Union, India, the United States, and Turkey are the world’s top producers.

Trade in tomatoes tends to be regional. Asia, Europe, and Africa represent 45 percent, 22 percent, and 12 percent, respectively, of global production, and much of what’s grown in one region is traded there. France, for example, is the fifth largest producer of tomatoes in Europe, exporting one quarter of its production across the European continent, primarily to Germany.

North American Tomato Trade – A Tasty NAFTA Product

About half of fresh tomatoes consumed in the United States are imported. The government applies tariffs to fresh tomatoes from countries we don’t have a free trade agreement with, and the tariffs fluctuate based on the timing of the U.S. growing season. From March 1 to July 14 (when Florida’s volume is highest and California and southeastern producing states begin to ship commercial tomatoes), it’s 3.9 cents per kilogram. Between July 15 until August 31, it goes down to 2.8 cents per kilogram (availability of locally grown tomatoes is highest). September 1 to November 14, it goes up again to 3.9 cents per kilogram. For the remainder of our winter, November 15 until March 1, it goes back down to 2.8 cents per kilogram.

Nearly all of fresh tomatoes we import into the United States come from Mexico (89 percent) and Canada (10 percent) duty-free under NAFTA. NAFTA partners are also the primary destinations for exported American tomatoes, with 77 percent of our exports going to Canada and 20 percent to Mexico. (The United States manufactures 96 percent of the tomatoes it uses in processing.)

Even though they enter the United States duty-free, tomatoes from Mexico are subject to minimum prices that vary based on the season; the price floor for winter tomatoes ranges from 31 cents to 59 cents, while summer tomato prices vary between 24.6 to 46.8 cents, depending on the tomato category. This is because Mexico has gotten very efficient at producing tomatoes year-round, which concerns some segments of American growers, particularly in Florida.

Florida growers are seeking changes to U.S. antidumping and countervailing duty proceedings in the current renegotiations of NAFTA to allow them to pursue dumping cases based on pricing in one specific season versus relying on three years of data, as is currently required. This proposal has created rifts among U.S. growers – primarily Southeast growers who support it and Western growers who fear its consequences. Mexico has also expressed strong opposition. American producers of other fruits and vegetables have also publicly opposed the proposal. They worry Mexico could use the same approach against American exporters of perishable produce.

Global, Regional, Local – It’s All Good

Our love for tomatoes will not recede any time soon. Improvements in technology are helping farmers increase their yields while maintaining or even reducing the acreage they are devoting to tomatoes. But even as trade routes for tomatoes are increasing and broadening, the allure and specialness of a locally-grown fresh tomato remains.

Tomatoes are the most popular plant for amateur home gardeners like myself. And with spring in full bloom, it’s only a matter of time before local tomatoes explode onto the scene in our neighborhood farmers market, exhibiting their versatility and flavor. The heirloom tomato has once again returned to prominence – just sprinkle a little salt on it, and take a satisfying bite. Trust me, you won’t regret it.

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Ayelet Haran

Ayelet Haran is a contributor to TradeVistas. She is a government affairs and policy executive in the life sciences industry. She holds a Master’s of Public Administration degree in International Economic Policy from Columbia University.

This article originally appeared on TradeVistas.org. Republished with permission.

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Archives, Global Trade Daily, International Trade

IMPORTED TOMATOES FROM MEXICO HAVE SOME U.S. GROWERS SEEING RED

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Tomato Trade Tensions Simmering Again

Nothing says “summer” like a fresh tomato. And thanks to trade, tomatoes aren’t just a seasonal treat for Americans. A trade policy battle, however, over our favorite little red vegetable that had simmered on the back burner for decades recently heated up again and might have threatened our ability to enjoy tomatoes year round.

While NAFTA – now replaced by the U.S.-Mexico-Canada Agreement (USMCA) – eliminated trade barriers for most agricultural exports, trade in tomatoes between the United States and Mexico remains complicated to this day. U.S. growers have made a fresh push for the Administration to protect domestic tomato production against imports of increasingly competitive Mexican produce.

Seasons of Discontent

The United States is the second largest producer of tomatoes in the world, but with each American eating an average of more than 20 pounds of tomatoes a year, we import them to satisfy high demand. Mexico is the largest exporter in the world and the United States’ top international supplier. Of the $2.4 billion worth of tomatoes the United States imported in 2019, $2.1 billion came from Mexico, representing 87.5 percent of total U.S. tomato imports.

MX imports of tomoatoes

Although Mexico exports a wide variety of seasonal produce to the United States ranging from bell peppers to blueberries, it’s trade in tomatoes that has been a consistent source of tension. That’s because tomatoes are one of the highest valued fresh vegetable crops in the United States and Mexican tomatoes directly compete with tomatoes grown in the state of Florida during the winter and early summer.

Over the last two decades, U.S. tomato production has declined substantially while Mexican imports increased. And while Florida is still the top tomato state in the nation, production there has declined steadily since 2000. Florida once had 300 tomato growers, but now has fewer than 50. Labor is one major reason for this change. Fresh tomatoes are largely picked by hand – and farm workers are increasingly hard to find and expensive.

MX v FLA

Animated Suspension

Throughout this downward trend, the American tomato industry has complained that Mexican growers have an unfair advantage. The Mexican tomato industry has significantly ramped up production not just thanks to lower labor costs, but also extensive support from the Mexican government in the form of capital for producers, investment in infrastructure and technology to modernize the industry, and other subsidies throughout the supply chain.

The American tomato industry first filed a case with U.S. trade agencies back in the 1970s seeking relief from competition from low priced tomatoes from Mexico, which they alleged were being sold at less than fair market value in the United States (or “dumped”). The antidumping case was ultimately dropped, but after NAFTA was enacted, Florida tomato growers renewed their complaint, claiming Mexican tomatoes were a threat to the domestic industry. The U.S. International Trade Commission found in favor of U.S. growers. Facing potential antidumping tariffs on their exports, Mexican growers in 1996 entered into what’s known as a “suspension agreement.”

By law, the Commerce Department can suspend an antidumping duty or countervailing duty investigation when the parties in the case reach an agreement that meets certain statutory and policy criteria. Under the tomato suspension agreement, the Mexican industry agreed to reduce production and meet a minimum price floor for fresh tomatoes. Suspension agreements require ongoing monitoring to ensure compliance through a process that is completely separate from NAFTA or USMCA. The tomato suspension agreement of 1996 has been updated and expanded three times: in 2002, 2008 and 2013.

To-may-to, To-mah-to, Let’s Call the Whole Thing Off

The suspension agreements were intended to prevent further dumping and injury to the U.S. tomato industry. However, growers in the U.S. southeast have said the agreements were not successful in achieving that goal because provisions were either unenforceable or subject to loopholes. With those concerns in mind, the Florida Tomato Exchange submitted a request to the Commerce Department in November 2018 to terminate the 2013 suspension agreement.

In February 2019, the Commerce Department notified the Mexican government of its intention to withdraw. On May 7, the U.S. government officially terminated the 2013 suspension agreement and enacted a 17.56 percent duty on imported Mexican tomatoes. Some expressed concern the move would stir up a trade war between the two countries, leading to higher prices for consumers and a reduction in the winter tomato supply as Mexican growers shifted their acreage to other crops, though the Administration stated its willingness to resolve the dispute even as its antidumping investigation continued.

Then, in September 2019, the Administration announced a new suspension agreement had been reached with Mexican exporters, effectively putting an end to the investigation. The new agreement is meant to protect U.S. producers from being undercut on prices. It includes audits and border inspections to prevent imports of low-quality tomatoes that could have a similar effect of depressing prices.

USMCA’s Rotten Tomatoes

At the same time that the antidumping investigation was playing out, USMCA was picking up steam on Capitol Hill. After receiving bipartisan support in the House and Senate, USMCA was signed into law on January 29, 2020 and entered into force on July 1, 2020, officially replacing NAFTA. It is easy to see why most American farmers and ranchers rallied support for USMCA. Canada is the top market for U.S. farm products, with Mexico following in the number two spot. U.S. agricultural exports to both countries totaled $44 billion in 2018.

However, one vocal segment of the U.S. agriculture industry was not entirely happy with the USMCA provisions. Fresh produce growers in the U.S. southeast expressed concern that Mexico continued to undercut their prices, dumping cheap fruits and vegetables in the market during their peak harvest time. Farmers from states including Georgia and Florida argued they had watched NAFTA erode their share of the U.S. market and that USMCA was an opportunity to provide a remedy.

American growers from the southern region pushed for new protections in USMCA through antidumping and countervailing duty provisions as a way to even the playing field from what they see as unfair subsidies, labor and environmental practices by Mexico that make U.S.-grown specialty crops like tomatoes and blueberries less competitive.

To create some leverage in the USMCA negotiations, lawmakers from the southeast region introduced legislation, the Defending Domestic Produce Production Act, designed to make it easier for seasonal growers to petition the Commerce Department and the U.S. International Trade Commission to investigate Mexico’s subsidies and dumping of cheap produce. This change would measure injury to industries with short harvest windows (like tomatoes and strawberries) on a seasonal basis rather than having to prove nation-wide, year-round harm.

Congressional letter on tomatoes

Hybrid Views in the Produce Industry

But the U.S. produce industry is not unified in its criticism of seasonal produce imports from Mexico or in its support for a trade remedy to the problem. Growers and distributors in western states like California and Arizona argued against including changes in USMCA because many of those companies work in both the United States and Mexico to ensure fresh produce is available year round. They also worried that Mexico would use the same approach against American produce like apples and grapes. Industry groups in Nogales, Arizona opposed the changes as well, citing a negative ripple effect on their economy if the produce from Mexico that passes through gateway communities were significantly reduced.

Twenty-three Senators and U.S. House members from Arizona, Texas, and California sent a letter to the U.S. Trade Representative opposing attempts to insert seasonal antidumping language into USMCA. The lawmakers wrote: “using USMCA as a vehicle for pursuing seasonal agriculture trade remedies risks pitting different regions of the country against each other.”

While the Trump Administration initially seemed sympathetic to the southeastern growers’ complaints, the provisions ultimately did not make it into USMCA given the concerns of other producers in the sector who would be potential targets for retaliation from Mexico. But the Administration committed to continue an investigation into the issue.

Is the Dispute Ripening Again?

In August 2020, USTR, the U.S. Department of Agriculture, and U.S. Department of Commerce held two hearings to collect feedback about whether trade policies are harming American seasonal produce growers. The hearings are part of an effort promised by the Administration to respond to any trade distorting practices within two months of USCMA going into effect.

At the listening sessions, lawmakers and growers from southeastern states spoke out about how their sector is impacted by subsidies and other practices by Mexico that they believe are hurting American agriculture. Senator Marco Rubio (R-FL) asked the Administration to use Section 301 authority to investigate and potentially take retaliatory action against Mexico.

Following the hearings, U.S. Trade Representative Robert Lighthizer said he is working with USDA Secretary Sonny Perdue and Commerce Secretary Wilbur Ross to come up with a plan to address the growers’ concerns by September 1. What action the Administration may take to protect American producers – notably located in states like Florida that may be key for the president’s re-election bid – remains to be seen.

What we do know is that southeastern produce growers seem cautiously optimistic that the new suspension agreement for tomatoes will be more effective than past iterations. And while most Americans are likely unaware of the ongoing tomato trade tension between the U.S. and Mexico, shoppers undoubtedly benefit from year-round access to affordable fresh produce.

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Sarah Hubbart provides communications strategy, content creation, and social media management for TradeVistas. A native of rural Northern California, Sarah has melded communications and policy throughout her career in Washington, D.C., serving in government affairs, issues management, and coalition building roles in the agricultural sector. She is an alum of California State University, Chico and George Washington University.

This article originally appeared on TradeVistas.org. Republished with permission.

AD/CVD
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Commerce Proposes Modifications to AD/CVD Laws to Strengthen Enforcement

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The U.S. Department of Commerce (“Commerce”) announced in a Federal Register notice that it is proposing significant changes to its antidumping and countervailing duty regulations. The last time such sweeping changes were undertaken were in 1997 after the WTO went into effect. Commerce is requesting comments on the proposed changes by September 14, 2020.

Among the most significant changes outlined in Commerce’s proposal are the changes to its conduct of scope proceedings, which determine whether a certain product is subject to the scope of an AD or CVD order; and to circumvention proceedings where importers are alleged to be avoiding duties, often by using components from the subject country to assemble the product in another country not subject to the relevant AD/CVD order. Currently, both types of proceedings are governed by the same set of regulations in 19 C.F.R. §351.225. Commerce’s proposal would separate the two proceedings into unique regulatory frameworks.

The proposed modifications also affect the following areas of analysis which are often contentious in the context of scope rulings and circumvention proceedings:

Proposed Changes to Scope Rulings/Proceedings

-The proposed changes to the scope would “codify and clarify” Commerce’s analysis with respect to mixed media products that involve commingled goods where a single item in a commingled product may be subject to an AD/CVD order. Mixed media products generally refer to a set of packaged goods that contain multiple products (g. a plastic toolbox with nails, screws, a level, a hammer, and a couple of screwdrivers where only the nails and screws are potentially subject to an AD/CVD order and the remaining items when examined individually are not).

-The changes would codify Commerce’s longstanding “substantial transformation” test or analysis, which is used to determine the country of origin of a product or products.

-The changes would codify the analytic framework in which the primary analysis in any scope inquiry is the language of the scope itself.

Proposed Changes to Circumvention Proceedings

-The proposed changes to the circumvention regulations would grant Commerce the authority to self-initiate anti-circumvention proceedings without the filing of a request or petition by the U.S. domestic industry.

-The changes would enhance Commerce’s ability to make circumvention determinations that would apply to the exporting country as a whole rather than on a company-specific basis.

-The changes would codify Commerce’s current practice with respect to various issues including the valuation methodology for parts and components; the criteria for determining whether a product is “later developed,” and the criteria for determining whether any alterations to the merchandise at issue are “minor.”

Proposed Changes to Both Scope Proceedings and Circumvention Proceedings

-The proposed regulations would also make other changes, including modifications of the deadlines in scope and circumvention proceedings and modifications to the information a party must provide in any request for initiation of a scope or circumvention proceeding.

-Perhaps most importantly, the proposed modifications to both the scope and circumvention regulations would retroactively impose duties on any unliquidated entries, dating back to the date on which the preliminary determination was issued during the original investigation, rather than to the date that the scope or circumvention inquiry was initiated, as is the case under the current regulations.

-The proposal also creates a new regulation to address procedures and standards related to Commerce’s consideration of covered merchandise referrals from Customs and Border Protection (“CBP”) in Enforce and Protect Act (“EAPA”) investigations.

Proposed Changes to New Shipper Reviews

-In addition to the proposed scope changes, Commerce also has proposed major changes with respect to new shipper reviews. These include: (1) requiring more detailed information at the outset of a request for a new shipper review so that Commerce can “expend its resources in conducting a new shipper review only where there is a reasonable likelihood that there ultimately will be a bona fide sale for Commerce to review;” (2) limit requests for new shipper reviews to only those producers or exporters who can demonstrate the existence of a bona fide sale by providing certain documentation, including a certification from an unaffiliated U.S. customer that it did not purchase subject merchandise from the relevant producer or exporter during the period of investigation and that the customer will provide information requested by Commerce. The proposed regulations would also codify some of the factors Commerce will consider in determining if a sale is bona fide.

Proposed Other Changes Affecting AD/CVD Procedural Filings

-Other changes in the proposal include allowing Commerce to impose a certification requirement on importers to ensure subject merchandise is properly classified as subject to AD/CVD duties.

-Commerce also proposes to amend the regulations governing reimbursement certifications to account for updated procedures.

-Commerce also proposes to set a deadline for parties to comment on industry support in investigations.

Additionally, the proposed rules make modifications to entry of appearance filing requirements and clarify or codify practices which Commerce has adopted as a matter of practice. For example, Commerce proposes to amend the rules to reflect that an interested party that submits a scope ruling application does not need to file an entry of appearance. Similarly, for circumvention inquiries, Commerce proposes to amend the rules to reflect that an interested party that submits a request for circumvention inquiry need not file an entry of appearance.

The proposed changes to the AD/CVD laws, especially the changes to scope and circumvention proceedings and new shipper reviews, will make it more difficult for foreign exporters and U.S. importers to reduce or eliminate potential antidumping and countervailing duties.

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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.

Stephen Brophy is an attorney in Husch Blackwell LLP’s Washington, D.C. office focusing on international trade.

Jeffrey Neeley is a Washington-based partner with the law firm Husch Blackwell LLP. He leads the firm’s International Trade Remedies team.

AFTE
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AFTE SEEKS TO SHARPEN THE TEETH OF THE U.S.-MEXICO-CANADA AGREEMENT

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The Alliance for Trade Enforcement—a Washington, D.C.-based coalition of trade associations and business groups dedicated to ending unfair trade practices—submitted a letter to U.S. Trade Representative Robert E. Lighthizer to coincide with Mexican President Andrés Manuel López Obrador’s July 8 visit to the White House.

President López Obrador met with President Trump and senior administration officials to commemorate the United States-Mexico-Canada Agreement (USMCA), which entered into force that same day.

In the letter, AFTE commends Lighthizer for holding Canada and Mexico to the commitments outlined in USMCA, including the upholding of intellectual property protections, improving enforcement of Mexico’s anti-piracy strategy, and reducing barriers to the Canadian market for U.S. dairy farmers. But AFTE also urged the trade ambassador to continue working to eliminate unfair trade barriers that harm American companies and “workers in every industry, from manufacturing and agriculture to the biopharmaceutical and service sectors.”

“Our coalition looks forward to working with Ambassador Lighthizer to level the playing field between American businesses and our trading partners,” said AFTE Executive Director Brian Pomper.

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Archives, Global Trade Daily, International Trade

INTERNET CENSORSHIP IN CHINA IMPACTS GLOBAL TRADE

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Unfree Speech

Online censorship can take many forms. With over four billion global Internet users in 2019, the lines around how we express ourselves online are being drawn and redrawn around the world.

In Europe, democratic governments are considering bans on so-called fake news and fines on social media companies that fail to delete “harmful” content. In the United States, tech companies are under fire for under- or overdoing their monitoring and expunging of material on their platforms that may be “extremist,” “hateful,” or merely repugnant or wrong-headed to some. Although free and open speech is fundamental to any democracy, U.S. culture is growing ever more hostile to dissenting opinions or genuine debate. The “cancel culture” is a harmful form of societal censorship.

When it comes to systemic state-sponsored censorship, North Korea, China, Russia, and Iran impose the harshest restrictions on Internet use by citizens and companies. Censorship is a tool of state control over the populace in those countries.

In China, political dissent or criticism of the Chinese Communist Party is punished, independent bloggers silenced, credentialed journalists from international publications denied access, and scholars made to fall in line with party views. But it isn’t only political speech that is banned or filtered. China maintains a system of surveillance and blocking technologies that comprise the “Great Firewall” between its citizens and many of the world’s largest commercial websites. The Senate recently held a hearing to discuss censorship of foreign companies in China as well as the government’s use of market power to extend the reach of censorship beyond its borders.

Firewalls and Filters

China’s State Internet Information Office appears to spearhead the monitoring and filtering of Internet traffic into and within China, but the endeavor is so extensive that as many as twelve other agencies comprise China’s censorship apparatus. The government exercises control over information technology infrastructure and deploys sophisticated software to scrub, deflect or block content and sites it deems illegal. China’s telecommunications companies, including China Telecom, China Unicom and China Mobile are enlisted to carry out and enforce state censorship measures, as are Baidu, Alibaba and Tencent, China’s main Internet platforms. Controlling much of the allowable content in China, these companies maintain strict filters – censoring themselves and their users – to comply with government requirements.

China ISPs enlisted

Content deemed illegal is required to be removed or sites are blocked altogether. The U.S. Trade Representative’s 2019 Report to Congress on China’s WTO Compliance cites industry calculations that “China currently blocks more than 10,000 sites, affecting billions of dollars in business, including communications, networking, app stores, news, and other sites.” Blocked sites include Dropbox, Facebook, Instagram, YouTube, Google search and Gmail, and foreign news services such as The Guardian and the Wall Street Journal. Services required for day-to-day business operations such as cloud storage are restricted to service portals approved by the Ministry of Industry and Information Technology, not privately-owned or controlled channels where the government could lose visibility and access to the data transmitted.

As a second line of defense, the Chinese government prohibits or strictly licenses wholly- or partially owned foreign firms seeking to provide value-added telecommunications services such as Internet-based calls, videoconferencing services, online search and data processing, or virtual private network (VPN) services.

Corporate Choices and the Cost of Censorship

In 2010, Google famously defied the Chinese government’s requirements to filter the content returned by its search algorithm. When Google redirected its users to its uncensored Hong Kong site, the Chinese government blocked it. Taking it a step further, the government throttled Google’s services, degrading them to the point where users become inclined to abandon the service, causing Google to lose substantial market share and withdraw from China. Washington DC-based think tank Information Technologies and Innovation Foundation (ITIF) estimates Google lost $32.5 billion in potential search revenue from 2013 to 2019. Eventually, Google began developing Dragonfly, a search engine designed to comply with China’s censorship requirements.

Other U.S. companies have contorted themselves to avoid censorship. U.S.-headquartered Marriott International apologized for listing Taiwan as a separate country after Chinese authorities shut down its website. International airlines fell in line too, changing their websites to refer to Taiwan as part of China under threat they would be banned from operating in China.

The Chinese government is also becoming more brazen about leveraging its market power to ensure foreign corporations and their employees avoid criticizing its policies outside of China. We are all familiar with the NBA’s backpedaling after initially supporting its employees’ right to exercise free speech in the United States in expressing support for Hong Kong. Increasingly, foreign firms will face a choice between protecting their right and the rights of their employees to freedom of expression or protecting their business dealings in China.

Foreign firms face choice rev

Not Just a China Problem

According to an analysis from Google, more than 40 governments now engage in broad-scale restrictions of online information, “a tenfold increase from just a decade ago.” Among the examples cited, YouTube has been blocked in Turkey. Several countries in Eastern Europe interfere with the popular blogging service, LiveJournal. Guatemala suppressed WordPress blogs during its 2009 political crisis. Iran stifles dissent by blocking social media platforms. Vietnam actively filters political content from social media.

Censorship Map revised

Do Global Trade Rules Address Censorship?

Within the trade community, voices are growing louder that China’s Internet controls constitute a barrier to market access and are therefore a violation of China’s global trade obligations.

Foreign companies and industry have argued that China’s censorship measures are not even-handed; they are applied to non-Chinese products or service providers selectively and in ways that are more restrictive than those applied to domestic providers. They point to examples of similar content that draws a permanent ban of a foreign site whereas the domestic site is merely required to remove specific content.

The Chinese government’s guidelines for permissible or illegal content are vague, unpublished and not transparent. The criteria for IP addresses, domains and website addresses that are permanently or routinely blocked are a state secret. Foreign companies operating in China or seeking to export to China have no way to understand the basis or seek redress for limitation on their access to the Chinese market.

Weakening foreign industry’s case, however, is their acknowledgement that the market access commitments many WTO members have undertaken may not apply to all Internet trade. In the WTO agreement on services, a member’s commitments to national treatment and market access apply only to services specifically listed by members in their schedules. When the agreement was negotiated, many of today’s value-added Internet services did not exist.

The WTO agreements covering trade in goods and services permit measures “necessary to protect public morals,” to maintain public order or to protect national security, with the limitation that those measures should not be applied in a manner that would constitute a means of arbitrary or unjustifiable discrimination or “a disguised restriction on international trade.” Legal experts debate whether a WTO suit against China’s censorship is winnable, and China experts are dubious whether China would comply regardless.

Trade Rules Cant Fight Censorship

Cyber Sovereignty or Cyber Superpower?

China’s policy footing is unabashedly oriented to exercise absolute control over access to Internet content and services within its own borders. Centrally, the Chinese Communist Party will thwart communication it perceives “subverts state power or undermines national unity.”

The question is, how far will the government go to exercise influence over international norms for cyber governance? And how much state support will be thrown behind freeing itself from dependence on foreign technologies and services to become a global cyber superpower? Is censorship being used to lock foreign competitors out of China’s market to protect local competitors? How far will China go to censor communication it perceives as a threat outside China?

The apps we use that are created by mainland Chinese companies likely contain code to scan and block prohibited websites or language the Chinese government finds objectionable. But beyond sanitizing content, the government may specifically target sites for censorship outside of China.

The Chinese government recently disabled a social media platform in Hong Kong that was used to organize anti-China protests. Its actions may portend a broader approach to Internet censorship in Hong Kong which, according to the Hong Kong Internet Service Providers Association is home to more than 100 data centers operated by local and International companies that transit over 80 percent of web traffic for mainland China.

The Nexus of Censorship and Trade

Government measures to disrupt Internet access or prevent the dissemination of information online are generally considered to infringe upon the basic human right to freedom of expression. Now, industry actors along with open Internet advocates are leading the charge to consider censorship antithetical to the global trading system. At the center of the debate is China, the country with the most extensive censorship program in the world and which holds significant market power in the global economy.

The implications of commercial censorship run the gamut, from stifling key sales channels for exporters to China, to limiting or prohibiting foreign companies from providing Internet services in China, to extraterritorial censorship of overseas Internet sites and services. At a recent hearing on censorship and trade, Senator Bob Casey (D-PA) stated, “The actions undertaken by China are clearly insidious and counter to the necessary conditions of a fair global economic system.” That may be so, but global trade rules and institutions as they exist today are inadequate to alter China’s approach or mitigate the global impacts of China’s censorship.

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Andrea Durkin is the Editor-in-Chief of TradeVistas and Founder of Sparkplug, LLC. Ms. Durkin previously served as a U.S. Government trade negotiator and has proudly taught international trade policy and negotiations for the last fifteen years as an Adjunct Professor at Georgetown University’s Master of Science in Foreign Service program.

This article originally appeared on TradeVistas.org. Republished with permission.

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LATEST: Canada Announces Retaliatory Tariffs on U.S. Imports

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On August 7, 2020, Canada’s Deputy Prime Minister Chrystia Freeland announced that Canada will be imposing retaliatory tariffs on $2.7 billion worth of U.S. imports in response to President Trump’s decision to re-implement a 10% ad valorem tariff on non-alloyed unwrought aluminum from Canada (HTS subheading 7601.10).

During a news conference, Freeland stated, “We will impose dollar-for-dollar countermeasures in a balanced and perfectly reciprocal retaliation.” These decisions come after the two countries, along with Mexico, recently implemented the USMCA to further facilitate trade.

Following the announcement, the Canadian Department of Finance issued a notice containing a list of over sixty aluminum goods subject to a 10% rate that will take effect on September 16, 2020.

According to the notice, interested parties (Canadian companies or Canadian industry associations) should provide written comments by September 6, 2020 to fin.tariff-tarif.fin@canada.ca.

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Stephen Brophy is an attorney in Husch Blackwell LLP’s Washington, D.C. office focusing on international trade.

Turner Kim is an Assistant Trade Analyst 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.

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U.S. Re-Imposes 10% Tariff on Specific Aluminum Imports from Canada

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On August 6, 2020, the White House issued a proclamation stating that the U.S. would re-impose 10% tariffs on imports of non-alloyed unwrought aluminum under subheading 7601.10 from Canada starting August 16, 2020.  The subject products make up the majority of U.S. aluminum imports from Canada.

President Donald Trump explained that the re-imposition of tariffs was necessary in his view, stating that:

“Canada is the largest source of United States imports of non-alloyed unwrought aluminum, accounting for nearly two-thirds of total imports of these articles from all countries in 2019 and approximately 75 percent of total imports in the first five months of 2020. The surges in imports of these articles from Canada coincides with a decrease in imports of these articles from other countries and threatens to harm domestic aluminum production and capacity utilization.”

The proclamation went on to state that “the United States will monitor for import surges of articles that continue to be exempt from the tariff proclaimed in Proclamation 9704, to ensure that exports of non-alloyed unwrought aluminum to the United States are not simply reoriented into increased exports of alloyed, further processed, or wrought aluminum articles,” the proclamation said, meaning that tariffs on additional aluminum articles could follow in the future. Additionally, under the previous agreement between the two countries, Canada is allowed to place retaliatory tariffs on U.S. aluminum products.

The White House has not stated whether or not it will reinstate the 25% tariffs on imports of steel.

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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.

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

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Opportunity to Request Administrative Review

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On August 4, 2020, Commerce announced in the Federal Register the opportunity to request an annual administrative review for products that are currently subject to antidumping and countervailing duties.

The products and countries that have August anniversary months are the following:

-Seamless Line and Pressure Pipe from Germany

-Sodium Nitrite from Germany and China

-Finished Carbon Steel Flanges from India and Italy

-Brass Sheet & Strip; Tin Mill Products from Japan

-Polyethylene Retail Carrier Bags from Malaysia, Thailand, and China

-Light –Walled Rectangular Pipe and Tube from Mexico, Korea, and China

-Dioctyl Terephthalate; Large Power Transformers; Low Melt Polyester Staple Fiber from Korea

-Small Diameter Carbon and Alloy Seamless Standard Line and Pressure Pipe from Romania

-Ripe Olives from Spain

-Certain Frozen Fish Fillets from Vietnam

-Steel Propane Cylinders from Thailand

-Silicomanganese from Ukraine

-Various Products from China

As part of this annual review process, Commerce intends to select respondents based on an analysis of U.S. Customs and Border Protection (CBP) data for U.S. imports during the period of review, which is released only to legal counsel for interested parties.

Any party wishing to participate in the antidumping and countervailing duty review process or who may be affected by duties on the products identified in the Federal Register notice should file a request for review no later than August 31, 2020.  In order to be eligible to participate in the review, a party must either be an exporter or importer of the specific products and during the specific time periods identified in the Federal Register notice.

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