December at-a-glance…taxes, tariffs & trade

Additional insight into President-elect Biden’s perspective on trade

President-elect Biden has said his focus will be “domestic first” before turning his attention to trade deals abroad. To help us understand what to expect when he does focus internationally, NAFEM’s legal team at Barnes & Thornburg shared the following insights during a recent NAFEM Taxes, Tariffs and Trade Working Group meeting:

  • It’s unlikely the Section 301 tariffs on imports from China will be addressed in the first 100 days of the Biden administration. Additionally, it’s unknown whether the Trump administration will extend the Section 301 tariff product exclusions past the current December 31 deadline.
  • A quick reversal of the Section 232 tariffs on imported steel and aluminum also is unlikely in the first 100 days. President-elect Biden has indicated that he may consider removing the tariffs from U.S. allies in the future.
  • President-elect Biden has said he only will rejoin the defunct Trans-Pacific Partnership (TPP) if participating Pacific nations renegotiate stricter terms to hold China accountable. In January 2017, President Trump withdrew the U.S. from the trade agreement between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam and the United States, signed in February 2016.

New trade agreement to cover 30 percent of global economy

Fifteen member countries accounting for 30 percent of the world’s population and 30 percent of global GDP signed the Regional Comprehensive Economic Partnership (RCEP) free-trade agreement November 15. Signatories include Australia, Brunei, Cambodia, China, Indonesia, Japan, Laos, Malaysia, Myanmar, New Zealand, the Philippines, Singapore, South Korea, Thailand and Vietnam. The RCEP takes effect once it is signed by at least six members of the Association of Southeast Asian Nations (ASEAN) and three other countries. The RCEP establishes common rules for e-commerce, trade and intellectual property and is expected to eliminate 90 percent of tariffs on imports between the signatories.

U.S. challenges Canadian dairy industry under USMCA

The U.S. filed the first ever enforcement action under the United States–Mexico–Canada Agreement (USMCA) challenging the process by which Canada provides U.S. dairy farmers access to its market. Canadian International Trade Minister Mary Ng said, “I’m very confident Canada is meeting its obligations under the USMCA.” United States Trade Representative (USTR) Robert Lighthizer said, “If the United States and Canada are not able to resolve our concerns through consultations, we may request the establishment of a USMCA dispute-settlement panel to examine the matter.”

Know your supply chain

Sanctions continue to be imposed on companies purchasing products or components from suppliers found to be using forced labor. According to Nicholas Galbraith, NAFEM legal counsel, Barnes & Thornburg, the Office of Foreign Assets Control (OFAC) has sanctioned China’s Xinjiang Production and Construction Corps (XPCC), located in China’s Xinjiang Uyghur Autonomous Region, for human rights violations. The sanctions prohibit U.S. persons from transacting with XPCC as well as any entity in which XPCC directly or indirectly owns 50 percent or greater interest. Of OFAC’s 13 withhold release orders in 2020 that prohibit goods from entering the U.S., eight were from items produced in China’s Xinjiang Uyghur Autonomous Region. “It’s imperative to know your supply chain,” Galbraith said. “Consider audits, certifications and ongoing training of both your suppliers and your internal teams. Members should anticipate additional scrutiny of entities involved in forced labor, particularly in China.”