US CHINA TRADE WAR–UNIVERSAL TRADE WAR, TPP IN LAME DUCK, SPOTTING POTENTIAL AD CASES, CUSTOMS, FALSE CLAIMS ACT, VITAMIN C ANTITRUST, IP AND 337

Lotus Garden Boat Buildings Yue Feng Pagoda Summer Palace BeijinTRADE IS A TWO WAY STREET

“PROTECTIONISM BECOMES DESTRUCTIONISM; IT COSTS JOBS”

PRESIDENT RONALD REAGAN, JUNE 28, 1986

US CHINA TRADE WAR OCTOBER 7, 2016

INTERVIEW ON WHAT US COMPANIES CAN DO IN THE PRESENT TRADE CRISIS

Just did an interview on what US companies can do to cope with the current trade crisis.  Hope you will find it of interest.  http://www.turbineagency.com/industry-insights/2016/10/25/accelerateb2b-how-do-global-trade-deals-really-impact-us-businesses

Dear Friends,

This blog post contains several new article and articles that have been posted on the Harris Moure blog, www.chinalawblog.com from the HM Trade Practice Group, including Adams Lee, Emily Lawson and myself.  The new articles also reflect my discussions during my recent three-week trip to China meeting with various Chinese companies, the Chinese Ministry of Commerce (“MOFCOM”), and Chinese trade lawyers.

The most important point is that the US China Trade War is expanding and has now become a universal trade war.  Although the US continues to bring numerous antidumping (AD) and countervailing duty (CVD) cases against China, the Chinese government is now bringing and will bring numerous AD and CVD cases against the US.

In the recent Chinese antidumping case against Distiller Grains from the US, the Chinese government has levied a 33% rate against $1.6 billion in US exports to China.  There are rumors that the Chinese government may soon bring AD and CVD cases targeting $15 billion in US exports of soybeans to China.

Meanwhile numerous countries have adopted their own AD and CVD laws modeled on the US and EU and are bringing cases not only against China, but also against the US.

The only recent trade developments that would break the retaliation cycle are the Trans Pacific Partnership (TPP) and the TTIP deal with Europe and both trade agreements are in serious trouble.

In addition, set forth below are articles on how to spot an AD and CVD trade case coming and what do when your company is a target of a trade case, magnesium and steel cases, trade cases against Europe, and Trade Adjustment Assistance by David Holbert, who heads the Northwest Trade Adjustment Assistance Center.  In addition, there are a number of articles on Customs law, False Claims Act, including an FCA case against Furniture and Customs enforcement action against Honey.  Finally, there is an article on recent Second Circuit Decision in the Vitamin C Antitrust Case and the antidumping back story, a Criminal Trade Secrets case, a new 337 case and the Section 337 article translated into Chinese.

If anyone has any questions or wants additional information, please feel free to contact me at my new e-mail address bill@harrismoure.com.

Best regards,

Bill Perry

TRADE POLICY AND TPP

US CHINA ANTIDUMPING TRADE WAR IS NOW A UNIVERSAL ANTIDUMPING TRADE WAR

As Donald Trump and Hilary Clinton duel during the Presidential debate about who can be more protectionist, during my recent trip to China I learned that what was once a US China Trade War has now become a universal trade war.  Country after country have adopted the US and EC Antidumping law and are filing case after case against other countries and the US.

Thus countries, such as EC, Canada, Mexico, Brazil, Argentina, India, Turkey, Ukraine, Russia, China, Indonesia, Malaysia, Korea, Japan, Taiwan, Australia Thailand, South Africa, and Vietnam, all are filing antidumping and countervailing duty cases against each other and the United States.  These countries have adopted the US law which finds dumping in 90% of the cases.  The US and the EC have created a Frankenstein in the antidumping law and the whole World has adopted it.

Although Donald Trump, Hilary Clinton and many US politicians want to adopt a mercantilist trade policy which favors pushing exports and protecting US industries from imports, the US politicians simply do not understand retaliation.  What the US can do to other countries, those countries can do back.  President Reagan understood the retaliation danger of protectionism and a mercantilist trade policy, but many present day US politicians do not.  So all of these countries are following the US lead and implementing a mercantilist trade policy.

Free trade agreements, such as the TPP and the TTIP, which would break this cycle are now all in deep trouble as each country wants to put its industries first and make their country and industries great again.  The rise in nationalism results in trade wars in which country after country will fire trade guns against each other.  As Jack Ma of Alibaba recently mentioned on CNN, real wars start when trade stops.  See http://money.cnn.com/2016/09/02/technology/jack-ma-alibaba-g20/

During my recent trip to China, in the attached notice, ddgs-list-of-dumping-margin-of-each-company_en ddgs-preliminary-finding-summary-translation_en, on September 23, 2016, the Chinese government announced a 33% preliminary antidumping duty targeting $1.6 billion in imports from the United States of DDGS, Distiller’s Dried Grains with or without Solubles, which is used as an ingredient for animal feed.

During this trip, officials at the Chinese Ministry of Commerce (“MOFCOM”) told me that more trade cases will be coming next year against the US.  In fact, there are rumors that the Chinese government will soon bring an AD and CVD case targeting $15 billion in US soybean exports to China.  This is the number one US export to China.  Now that China is bringing more trade cases against the US, these cases will hurt US companies and the jobs that go with them.

On the US side, the election of either Donald Trump or Hilary Clinton in November will mean more US trade cases next year against not only China, but many other countries as well.

On September 22, 2016, MOFCOM in China initiated an escape clause/safeguard action against Sugar from Brazil, Cuba, Guatemala, Australia, South Korea and Thailand alleging tariffs up to 155.90%.

On September 15, 2016, India brought its own antidumping case against Polybutadiene Rubber from South Korea, Russia, South Africa, Iran and Singapore.

Taiwan has brought a Steel antidumping case against China.

More and more cases will be filed in 2017 around the World and many will target the United States, China, and numerous other countries.  Compromise is the best way to settle trade disputes, but it is very difficult, if not impossible, to settle US antidumping and other trade cases.  What is “fair” trade for the United States is “fair” trade for every other country.  Many countries want to make their industries Great again.

TPP IN THE LAME DUCK KEEPS ON TICKING

As mentioned in my last blog post, I believe that if Hilary Clinton is elected, President Obama will push for the Trans Pacific Partnership (“TPP”) to come up for a vote during the Lame Duck Session.  Many Congressional leaders appeared to  oppose tbringing up TPP in the Lame Duck.  But with Hilary Clinton’s resurgence in the Polls after the first debate, there is more talk about the TPP coming up in the Lame Duck, the period after the Presidential election and before the end of the year, as President Obama pushes hard for passage of the legislation.

On September 16, 2016, Ohio Governor Republican John Kasich in an interview with CNN stated that he supports passage of the TPP and will support President Obama in this legislative push in the Lame Duck.  See http://edition.cnn.com/2016/09/15/politics/john-kasich-trans-pacific-partnership/index.html

Governor Kasich made clear that he feels “it’s his “responsibility and duty as a leader” — no matter the political cost — to help President Barack Obama push the Trans-Pacific Partnership through Congress.

Kasich stated that

“I have never been an ideological supporter of free trade. The ideologues used to come to me and be frustrated with me.  But when you look at these agreements in a real sense – and this one is much different than even NAFTA.”

Kasich added that when Russian and Chinese leaders oppose the TPP, that is one reason to vote for the TPP, “We have to do this.”

Kasich further stated,

“This is the first time the candidates in both major political parties say they are opposed to free trade. It’s astounding to me.  I welcome the fact that people will criticize me for putting my country ahead of my party.”

The interview came after Kasich met with President Obama in the Oval Office with former New York City Mayor Michael Bloomberg, former George W. Bush administration Treasury Secretary Hank Paulson, Atlanta Mayor Kasim Reed and others for a meeting on the 12-nation Pacific Rim deal.

Kasich further stated:

“This is an opportunity for the Congress to carry out its responsibility. Frankly, if I have to come down here and spend some time lobbying my Republican colleagues, I’m more than glad to do that.

There’s definitely some people I can call and talk to.  This is a big deal. I mean, if we were to just walk away with this — with both candidates saying they don’t want this — we turn our backs on Asia.

He also played down the political potency of Trump’s anti-trade position in manufacturing-heavy Ohio, saying it’s not why Trump might win the state.

On September 26, 2016, Robert Samuelson, a well-known economist, published an article entitled “Will TPP Rise from the Dead”, stating:

With Obama’s term ending and his already-modest influence eroding by the day, TPP seems dead. But it may still be in intensive care.

In a speech to the Peterson Institute for International Economics, a Washington think tank, Rep. Kevin Brady, R-Texas, chairman of the House Ways and Means Committee whose jurisdiction includes trade agreements, said that the TPP could still be ratified in the lame-duck session after the election and before a new Congress takes office.

Samuelson went on to state that Brady gave two major reasons to approve the TPP.

First, geopolitical:  The TPP would enhance US influence in the Pacific region and offset China’s growing economic and political power. TPP would give the United States a major role in regulating global commerce in the 21s century. The trade agreement codifies rules on “intellectual property” (patents, copyrights), data flows and state-owned firms

Ratification would be a strong signal to Asia that the United States intends to remain a Pacific power.

“The second reason is economic: Asia remains a fast-growing region. TPP would eliminate most tariffs among the 12 member countries, aiding American exporters in these markets. The advantage may be particularly important in services (tourism, consulting, finance and engineering), where U.S. firms are especially strong. In 2015, the United States had a $762 billion deficit in goods trade (machinery, steel, medical equipment) and a $262 billion surplus in services trade, leaving an overall deficit of $500 billion.  According to the Peterson Institute, the 12 countries in the TPP accounted for about 36% of the world economy and 24% of global trade in 2014.”

Samuelson goes on to quote Brady on why he does not dismiss TPP’s prospects as bleak, “People change once they get into office.”

Samuelson then states:

Translation: The campaign’s anti-trade and anti-globalization rhetoric might recede before the realities of governing. Although Brady didn’t say so, one implication is that a victorious Hillary Clinton might put up only token opposition to TPP, both because the case for approval is strong and because she might feel obligated to Obama for his political support.

But Brady went on to state that getting a deal would be difficult. With many Democrats adamantly opposed to TPP, President Obama would need to rely on Republicans to approve the agreement. But if President Obama cannot round up enough Democratic votes to ensure victory, Republicans will not go out on a political limb and bring the agreement up during the Lame Duck.

“We are running out of time,” Brady told the Peterson audience. As Samuelson stated, “The TPP may yet wind up in the political morgue.”

TRADE

CHINA IMPORTS: KNOW YOUR RISKS

By Adams Lee, Harris Moure International Trade Group

Every year U.S. producers file 10-15 petitions asking the U.S. government to investigate whether certain products imported into the US are sold at unfair prices (antidumping or AD) or are unfairly subsidized (countervailing duty or CVD). Many of the AD/CVD cases target products imported from China. Odds are good that at least two new AD/CVD petitions will be filed by Halloween and as many as five by year end.

Our clients often ask our international trade lawyers how they can determine the likelihood of a AD/CVD petition that could adversely affect their ability to compete in the US market. Each AD/CVD petition is unique to the product and industry it covers, but most AD/CVD investigations fall within a handful of categories. Understanding what has led to the filing of previous AD/CVD petitions can help you as a producer, exporter, or importer, recognize if and when to expect a new AD/CVD petition that could directly affect you. The following are some of the indicators you should be checking to determine whether your imported into the USA product will be next.

The Regulars. Certain domestic industries have been frequent filers of AD/CVD actions. Companies in these industries are veterans of AD/CVD actions; they don’t ask if a new petition will be filed, only when it will be filed.

  • Steel of all types (carbon steel, stainless steel, flat products, pipe, rebar, wire rod, wire, etc.) from all over the world. The latest wave of steel AD/CVD investigations are being completed with high AD/CVD margins in most cases.
  • Softwood Lumber from Canada. The latest round of the US-Canada Lumber wars is set to begin as new AD/CVD petitions are likely to be filed in October 2016. Filing a new AD/CVD petition may be necessary to push US-Canada negotiations to a meaningful level.

The Big Box Effect. When Walmart, Lowes, or Target switch their sourcing of a product from a domestic manufacturer to a foreign (read Chinese) one, it is quite common for the jilted domestic supplier to file an AD/CVD petition in an effort to save their business. Boltless steel shelving units, wood flooring, ironing tables, and candles are all examples of this, and all involving products from China.

US Products Squeezed by Imports. It is not uncommon for an AD/CVD petition to be filed by a US producer that makes a higher quality product but is starting to lose out to foreign producers with lower quality but cheaper products. Frozen shrimp from multiple countries, garlic from China, and wooden bedroom furniture from China are some examples of this.

Pressure from Downstream Customers. Many AD/CVD petitions involve products that are material inputs used to make a downstream finished product. Petitions can be triggered by larger downstream producers switching to, or just threatening to switch to imports to pressure smaller upstream suppliers to lower prices.  Many chemical products from China, tire products from China and other countries, kitchen racks from China are examples of this.

AD/CVD Actions on Upstream ProductsSometimes AD/CVD actions filed by other domestic industries trickle down and harm downstream domestic industries. For example, US wire rod producers filed AD/CVD petitions that resulted in AD/CVD duties against imported wire rod. But these wire rod duties ended up hurting US wire producers, who in turn filed their own AD/CVD duties against imported wire.

Dying Dinosaurs/Last Survivors. Some AD/CVD petitions are filed by the remaining members of a nearly extinct domestic industry dealing with decreasing demand and increased import pressure. Sometimes the AD/CVD actions allow the surviving US producers to stay in the US market protected from import competition.  Examples of this are wooden bedroom furniture, magnesium and innersprings from China.

Other Countries’ AD/CVD actions. The US is not the only country that acts to protect its domestic industries from unfair foreign trade. AD/CVD actions filed in Canada, India, the EU, Brazil, and even China are warning signs of industries facing tight competitive pressure. Imports blocked from one market are often diverted to other available markets. A prime example of this are products from China which first had AD/CVD filed in the EU before the US took action.

All of the above scenarios are good indicators of an imminent filing of a new United States’ AD/CVD petition, so if you are seeing these market conditions in your industry, an AD/CVD petition is probably in your near future.

WHAT SHOULD YOU DO WHEN THE CUSTOMS ANTIDUMPING AND COUNTERVAILING DUTY BOGEYMAN IS COMING AFTER YOUR IMPORTED CHINA PRODUCTS

By Adams Lee, Harris Moure International Trade Group

In China Imports Know Your Risks (above), I wrote about how companies can recognize impending antidumping (AD) or countervailing duty (CVD) petitions. In this post I address what you as an importer, exporter or foreign producer should do if you see an AD/CVD storm looming.

The first thing you should do is determine whether the AD/CVD petition will directly hit your primary operations. The second thing you should do is figure out how best to defend yourself interests if the AD/CVD petition is headed directly your way. The third thing you should do if you do get hit by AD/CVD duties is to figure out damage control going forward.

  1. New AD/CVD Petition – Are my products affected? AD/CVD petitions include a proposed scope definition that identifies the products covered. AD/CVD scope definitions can be complicated and unclear. They may be broader or narrower than the Customs tariff classifications normally used to identify such imports. Even if you think your products are outside the scope of the petition, U.S. Customs may disagree. U.S. Customs commonly demands that you first pay an AD/CVD deposit, assuming that your products are within the scope of the AD/CVD petition, and then Customs will return your deposit only if you get a Department of Commerce (DOC) ruling that your products are actually outside the scope. For example, with aluminum extrusions from China, the DOC has received around a hundred scope ruling requests to clarify whether certain products are included or excluded from the scope of that order.

Once you know the scope definition, you can evaluate the degree to which the AD/CVD action could impact your business.  Sometimes you and your customer can find alternatives to replace the subject AD/CVD products with either non-subject products or by your sourcing from non-subject countries. If you have options to switch away from the products covered by the AD/CVD action, it may not be necessary to participate in the AD/CVD investigation.

  1. AD/CVD investigations – How to defend? If your product is squarely within the scope of the AD/CVD petition and the U.S. market is worth fighting for, you should determine the best way to prepare for the AD/CVD investigation. If you have enough time before a petition is filed, you theoretically can try to adjust your sales to remedy whatever is causing the dumped or subsidized sales, most commonly by raising your prices for certain products or customers or by modifying your production operations by lowering or reallocating costs. Unfortunately, most companies are not proactive about planning to avoid AD/CVD actions and instead react only after a petition is filed. We find this especially true of our clients that import from China, as opposed to Europe.

Once an AD/CVD investigation is initiated, foreign producers and exporters and US importers should try to defend their interests before the two agencies responsible for making AD/CVD determinations: The International Trade Commission (ITC) determines whether a domestic industry is injured or threatened with injury by reason of the subject imports and the Department of Commerce (DOC) determines how much the subject imports are dumped or subsidized.

In ITC investigations, the best defenses are presented when the foreign producers, US importers, and US purchasers can organize and explain why the subject imports should not be blamed for any decline in the domestic industry’s performance. Because the ITC examines a broad range of data regarding the US market for the subject product, a comprehensive explanation of relevant market conditions is necessary to a winning argument.

In DOC investigations, the foreign producer and exporters are the primary respondents to the DOC’s questionnaires. These companies must provide extensive corporate structure, sales and cost data, often through multiple rounds of questionnaires. The DOC uses the submitted data to calculate AD/CVD margins.  Unaffiliated US importers usually do not need to submit data in DOC investigations and reviews, but they often will closely monitor the DOC’s proceedings because they will ultimately be responsible for paying the AD/CVD duties. See Sourcing Product From China: You Should Know About Importer of Record Liability.

The key to any AD/CVD defense is participating fully in both the DOC’s and the ITC’s investigations. If you don’t participate, you have no chance of winning. If a party does not respond on time or with complete responses, the DOC and the ITC can apply the adverse facts available that inevitably lead to higher AD/CVD margins. US importers should at least actively monitor DOC’s proceedings because their final AD/CVD liability often depends on how well the Chinese producers and exporters are able to respond to DOC’s questionnaires. It is not uncommon for the Chinese producer or exporter to mount a weak or no defense, leaving the U.S. importer essentially “holding the bag.” There are many things you can and should do to try to prevent this from happening to you.

  1. How to Plan for Life with AD/CVD. The overwhelming majority of AD/CVD petitions lead to orders for imposing AD/CVD duties.  But depending on the scope definition of the AD/CVD order, it may be possible for you to maintain your business operations by identifying alternative out-of-scope products or by switching your product sourcing to a non-subject country. But in switching sourcing, US importers should be careful to avoid actions that could be considered schemes designed primarily to evade AD/CVD duties, as the DOC can extend orders through circumvention investigations. Customs too can conduct its own investigation of duty evasion allegations.

Also, because the United States uses a retrospective AD/CVD system, foreign suppliers and US importers have the opportunity each year to try to lower their dumping margin. Since AD/CVD duties are “remedial”, foreign producers and U.S. importers have ample opportunity to adjust their production and sales operations so that they can sell “fairly” to the U.S. market, as defined by the U.S. trade laws and with proper planning and disciplined execution, companies can sometimes make even minor adjustments to reduce or eliminate their AD/CVD duty liability.

Bottom Line: You are not without defenses when the AD/CVD bogeyman appears to be heading for you. There are things you can do both to stop it from attacking your business and things you can do to restore your business once attacked.

Editor’s Note: This post focuses on products exported from China to the United States, but its advice applies with equal force to products exported from any other country to the United States and with nearly equal force to products exported from any other country to any other country that also has AD/CVD sanctions.

CAFC MAGNESIUM METAL DECISION

On October 6, 2016, in the attached decision, cafc-magnesium, the Court of Appeals for the Federal Circuit affirmed the Commerce Department’s decision that replacement of stainless steel retorts used to produce magnesium metal was an overhead expense and not a direct cost in the Magnesium Metal from China antidumping case.

STEEL TRADE CASES

CARBON AND ALLOY STEEL CUT-TO-LENGTH PLATE FROM CHINA AND KOREA

On September 7, 2016, in the attached fact sheet, clt-plate-cvd-prelim-fs-090716, Commerce issued an affirmative preliminary CVD determination in the initial investigation of certain carbon and alloy steel cut-to-length plate from China and a negative preliminary determination in the CVD investigation of imports from Korea.

China CVD rate best on all facts available is 210.50% and Korea’s CVD rate is 0.

CARBON AND ALLOY STEEL CUT-TO-LENGTH PLATE FROM BRAZIL, SOUTH AFRICA AND TURKEY

On September 16, 2016, in the attached fact sheet, factsheet-multiple-ctl-plate-ad-prelim-091616, Commerce announced its affirmative preliminary determinations in the AD investigations of imports of certain carbon and alloy steel cut-to-length plate from Brazil, South Africa, and Turkey.

Brazil’s antidumping rate is 74.52%.  South Africa’s antidumping rates range from 87.72% to 94.14%.  Turkey’s antidumping rates range from 42.02% to 50%.

STAINLESS STEEL SHEET AND STRIP FROM CHINA

On September 12, 2016, in the attached fact sheet, factsheet-prc-stainless-steel-sheet-strip-ad-prelim-091216, Commerce announced its affirmative preliminary determination in the AD investigation of imports of stainless steel sheet and strip from China.  The antidumping rates range from 63.86% to 76.64%.

TRADE CASES AGAINST EUROPE

EUROPEAN TARGETS IN ANTIDUMPING AND COUNTERVAILING DUTY CASES AND WHAT CAN BE DONE TO GET BACK IN THE US MARKET AGAIN

Recently, there have been several articles about the sharp rise in AD and CVD/trade remedy cases in the last year.  By the second half of 2016, the US Government has reported that twice as many AD and CVD cases have been initiated in 2015-2016 as in 2009.

China is not the only target.  AD cases have been recently filed against a number of European countries, including Carbon and Alloy Steel Plate from Austria, Belgium, Germany, and Italy; Steel Flanges from Italy and Spain; and Rubber from Poland.

In addition, there are outstanding AD and CVD orders against Germany on brass sheet and strip, seamless pipe, sodium nitrite and non-oriented electrical steel.  In addition to Germany, other EU Countries have been hit on various steel products, including a number of stainless steel products, from Spain, Belgium and Italy; brass sheet and strip from France and Italy, isocyanurates from Spain, pasta from Italy, paper from Portugal and Uranium from France. The oldest US AD order in place today is pressure sensitive plastic tape from Italy, which was issued in 1977.

Under US law Commerce determines whether dumping is taking place.  Dumping is defined as selling imported goods at less than fair value or less than normal value, which in general terms means lower than prices in the home/foreign market or below the fully allocated cost of production.  Antidumping duties are levied to remedy the unfair act by raising the US price so that the products are fairly traded.

Commerce also imposes Countervailing Duties to offset any foreign subsidies provided by foreign governments so as to raise the price of the subsidized imports.

AD and CVD duties can only be imposed if there is injury to the US industry, which is determined by the ITC.  But in determining injury, the law directs the ITC to cumulate, that is add together all the imports of the same product from the various foreign countries.

The real question many companies may have is how can AD and CVD rates be reduced so that the European company can start exporting to the US again.  US AD and CVD laws are considered remedial, not punitive statutes.  Thus, every year in the month in which the AD or CVD order was issued, Commerce gives the parties, including the domestic producers, foreign producers and US importers, the right to request a review investigation based on sales of imports that entered the US in the preceding year.

Thus, the AD order on electrical steel from Germany was issued in December 2014.   In December 2016, the German producer can request a review investigation of the electrical steel that entered, was actually imported into, the US during the period December 1, 2015 to November 31, 2016.

EU companies may ask that it is too difficult to export a 17 metric ton container of covered product to the US, requesting a nonaffiliated importer to put up an AD of 50 to over 100%, which can require a payment of $1 million USD or more.  In contrast to European law, however, the US AD and CVD law is retrospective.  Thus the importer posts a cash deposit when it imports products under an AD or CVD order, and the importer will get back the difference plus interest at the end of the review investigation.

More importantly, through a series of cases, Commerce has let foreign producers export smaller quantities of the product to use as a test sale in a review investigation if all other aspects of the sale are normal.  Thus in a chemical case, we had the exporter put a metric ton of the chemical in question in a container with other products and that metric ton served as the test sale to establish the new AD rate.

EU Companies may also ask how we can make sure that we are not dumping.  The answer is dump proofing and computer programs.  In contrast to China, EU companies are considered market economy companies and, therefore, Commerce must use actual prices and costs in the European country to determine whether it is dumping or not.  Computer programs can be used to reduce the dumping margin significantly by modeling US prices and EU home market prices to eliminate or significantly reduce antidumping rates.

How successful can companies be in reviews?  In one EU Steel case, we dropped the dumping rate from over 17% in the initial investigation to 0% in the review investigation.  In a chemical from China case, we dropped a dumping rate of over 200% to 0%, allowing the Chinese company to become the exclusive exporter of the product for decades per order of the US government.

Playing the AD and CVD game in review investigations can significantly reduce AD and CVD rates and get the EU company back in the US market again

TRADE ADJUSTMENT ASSISTANCE FOR FIRMS/COMPANIES

David Holbert, who heads the Northwest Trade Adjustment Assistance Center (“NWTAAC”), is writing a series of posts on the NWTAAC website on how Trade Adjustment Assistance for Firms/Companies helps injured companies injured by imports.  This is the first post.

Imports are Like a Thousand Flash Floods Injuring US Companies That Are Not Competitive

The issue of trade competition and lost jobs is well discussed in the media.  I work with small and medium-sized enterprises (SMEs) who are negatively affected by trade competition, what is often called “trade impact” in policy lingo. It’s a big issue. According to the U.S Trade Representative, the United States’ 30 million SMEs account for nearly two-thirds of net new private sector jobs in recent decades.

For large companies or from a macro-economic perspective, import competition may seem like a rising tide – one that can be anticipated, prepared for or proactively mitigated. For small and medium-sized businesses, not equipped with diverse product lines, resources or change acumen, import competition feels more like a flash flood.

What is it like for those companies?  When trade impact hits, sales drop off, often suddenly.

  • Contract manufacturers build to specification for customers, often larger companies. For this group, trade impact could mean the loss of a major customer moving operations to a foreign country (and finding parts suppliers there), or simply an importer arriving on the scene with lower cost products.
  • For a consumer products company, trade impact will probably first arrive with falling sales to the big retail chains since they are the most sensitive to supplier prices.
  • For a commodity producer things are a little more predictable. There may be a change in currency valuation or the rise of a new industry in a foreign country. Regardless, these highly price sensitive markets will suddenly have a lower price option.
  • Commercial products producers will usually have more time. When imports arrive they will sell to generally more informed customers who usually value factors other than price. But the fall will come, just more slowly.

Sales could fall off for many reasons. How do you know its trade related? You ask or you ask around. It shouldn’t take long to find out.

Imports arrive product by product. Companies move offshore factory by factory.  A domestic company makes that product, is part of the supply chain needed to make the product or is part of that commodity industry. When the imports arrive (or the factory moves), that one company or set of suppliers or community of producers is directly in the way. All of this happens in what can seem to be a relatively normal looking manufacturing neighborhood. Across the street there might be a company making another product that is experiencing no trade competition. Next door a third company might have gone through trade impact years ago and has adjusted. For small and medium sized companies, trade impact can be surprisingly direct and specific.

Here are some examples of what I’m talking about.

  • A commercial products company makes a specialized tool. A couple of other U.S. and European companies make similar products with some parity between price and features. One year they are at the big industry trade show and see a product, similar to theirs (and the others), but priced about 40% lower. Three months later sales started slipping.
  • A contract manufacturer that machines metal parts had gravitated away from stainless steel to titanium and built for several competitors in the same industry. Foreign producers had mastered stainless steel over the last decade. But as of a recent year, those producers finally mastered titanium as well. One by one, the manufacturer’s customers started buying imports. Once one did, it had a cost advantage, so the others had to go along also.
  • A nut grower was maintaining a slim profit. Then, a certain country decided to incentivize its nut growers to achieve more efficiency and export capability. It took a while, but when the imported nuts started arriving, they were at a price point below break-even for the domestic producer.
  • A safety products producer sold through a variety of retailers. One year, seemingly out of the blue, the big box stores stopped ordering. It didn’t take long to figure out why. A similar imported product was on the shelves at about half the price.

In future posts I’ll cover the steps to recovery. They are many effective tools in the economic recovery toolbox.  In many cases, companies that employed these resources are now unrecognizable through increased scale and product changes. Interestingly, a surprising number become significant exporters.

My role at the Northwest Trade Adjustment Assistance Center is to help small and medium-sized companies that are negatively impacted by trade competition through grants of up to $75,000.  Our non-profit organization administers a federal program serving companies in Washington, Oregon, Idaho and Alaska. You can learn more about us at NWTAAC.org.

CUSTOMS LAW

IMPORTING GOODS FROM CHINA: THE RISKS ARE RISING

By Adams Lee, Harris Moure International Trade Group

Last month I wrote about how importers from China need to be on their guard since U.S. Customs and Border Protection (CBP) has implemented new regulations to investigate allegations of antidumping (AD) and countervailing duty (CVD) evasion. See Importing From China: One More (New) Thing You Need To Know.

It didn’t take long, as U.S. Customs has already begun its first wave of investigations: Wheatland Tube, a US steel pipe producer, on September 14, 2016 announced it had filed with CBP an allegation of duty evasion on imports of Chinese circular welded steel pipe.

CBP has published a timeline for conducting its investigations and a process diagram (EAPA Investigation Timeline) and this newly filed allegation will be a test case to see how CBP will conduct its new duty evasion investigations. Hopefully, CBP will soon address many of the questions raised by the new regulations. How will parties be allowed to participate? What information from the investigation will be made public? How will CBP define “reasonable suspicion” of duty evasion?

This steel pipe investigation is likely to be the first of many CBP duty evasion investigations that are to come, many (probably most) of which will target Chinese products subject to AD/CVD duties. For how to figure out the risk quotient for the products you import from China, check out China Imports: Know Your Risks.

The new antidumping and countervailing duty regulations will unquestionably require an increased number of importers and foreign manufacturers to formally respond to CBP’s questions in response to allegations. Given the strong political pressure by domestic U.S. industries calling for tougher enforcement of US trade laws (not to mention the rising opposition to free trade among the American populace), Chinese producers and exporters and US importers should be prepared for increased CBP activity. CBP is likely looking to punish someone hard to set an example of their improved enforcement.

Getting Your China Products Through U.S. Customs: The 101

By Emily Lawson, Harris Moure International Trade Group

If you are importing products from China you need to do your homework to make sure your incoming shipments into the United States comply with U.S. Customs laws and regulations. Compliance with U.S. Customs laws and regulations is critical in avoiding your shipments being detained or seized, and/or penalties assessed. Common issues importers of products from China typically face include the following:  

  Not determining proper classification and duty rate for products. If you plan to import and sell on a Delivered Duty Paid basis, you should consider customs duties in your costs and that means you should know all of your applicable duty rates before you import. Also certain products are subject to high antidumping or countervailing duties in addition to regular customs duties, which may be as high as 300%.

   Failing to mark the product with the country of origin of manufacture.  Generally goods of foreign origin for import into the U.S. or immediate containers of the goods must be marked legibly and in a conspicuous location with the country of origin in English. Failure to do so accurately  can result in civil and even possibly criminal penalties.

  Not properly marking wood packing material. All wood packing material for products imported into the U.S. must be properly  treated and marked prior to shipping. Failure to meet the treatment and marking requirements may cause shipments to be delayed and penalties issued. 

  Failing to provide complete commercial invoices. Customs regulations provide that specific data must be included on the commercial invoice for U.S. Customs purposes, including a detailed description of the merchandise, and correct value information. Omission of this information may result in improper declaration to U.S. Customs at the time of import and expose you to penalties.

  Failing to meet other U.S. Government agency requirements.  Goods imported for sale in the U.S. must satisfy the same legal requirements as those goods manufactured in the United States. U.S. Customs enforces the laws of other agencies in the U.S., including, the Food and Drug Administration, the Consumer Product Safety  Commission (CPSC), and the Environmental Protection Agency, in addition to others. Therefore, if toys, for example, are exported to the U.S., detailed CPSC requirements, including for testing, must be met prior to export.

   Distribution of many trademarked and copyrighted items. Items which are trademarked and copyrighted are restricted by contractual agreements that give exclusive rights to specific companies to distribute the product in the U.S. Imports of improperly  trademarked or copyrighted items can be seized at the U.S. border and can subject you as the importer to penalties.

 Taking the time to identify  the required U.S. Customs laws and regulations for the products to be shipped to the U.S. from China will help you maintain seamless delivery  of your merchandise to U.S. customers and avoid civil and criminal penalty  exposure.

FALSE CLAIMS HAMMER GETS BIGGER — THIRD CIRCUIT HOLDS FCA’S APPLICATION TO FALSE STATEMENTS MADE TO US CUSTOMS

On October 5, 2916, the Third Circuit Court of Appeals  in the attached decision in United States ex rel Customs Fraud Investigations, LLC. v. Vitaulic Company, us-vs-vitaulic, reversed the Federal District Court and held that a failure to label imported goods with the proper country of origin is actionable under the False Claim Act (“FCA”).  Vitaulic had imported millions of pounds of steel pipe with the wrong country of origin.

In holding that this is an actionable claim under the FCA, the Court stated:

These actions, according to CFI, give rise to the present qui tam action under the so-called “reverse false claims” provision in the False Claims Act (FCA).  Typically, a claim under the FCA alleges that a person or company submitted a bill to the government for work that was not performed or was performed improperly, resulting in an undeserved payment flowing to that person or company. The FCA was enacted as a reaction to rampant fraud and price gouging by merchants supplying the Union army during the Civil War. In this case, by contrast, the allegation is not that Victaulic is obtaining monies from the government to which it is not entitled, but rather that it is retaining money it should have paid the government in the form of marking duties. Wrongful retention cases such as these are known as “reverse false claims” actions.

The Court went on to state:

Of particular importance here, the Senate Report discussed “customs duties for mismarking country of origin,” and how such duties would be covered by the amended reverse false claims Provision. . . .

The plain text of the FCA’s reverse claims provision is clear: any individual who “knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government” may be subject to liability. As alleged by CFI in the amended complaint, Victaulic declined to notify the Bureau of Customs and Border Protection of its pipe fittings’ non-conforming status. This failure to notify resulted in the pipe fittings being released into the stream of commerce in the United States and, consequently, marking duties being owed and not paid.

From a policy perspective, the possibility of reverse false claims liability in such circumstances makes sense in the context of the larger import/export regulatory scheme created by Congress. Because of the government’s inability to inspect every shipment entering the United States, an importer may have an incentive to decline to mention that its goods are mismarked on the assumption that the mismarking will not be discovered. In doing so, an importer avoids its obligation under 19 U.S.C. § 1484 to provide the government with such information as is necessary to enable the Bureau of Customs and Border Protection to determine whether the merchandise may be released from government custody or whether it must be properly marked, re-exported or destroyed.

HONEY AND FURNITURE

FURNITURE

On September 30, 2016, Ecologic Industries LLC and OMNI SCM LLC controlled by a Daniel Scott Goldman agreed to pay $1.525 million to settle a civil False Claims Act suit alleging it conspired to make false statements to avoid paying duties on wooden furniture imported from China to avoid the antidumping duties on Wooden Bedroom Furniture from China.  The companies sell furniture for student housing.

The case was filed by a whistleblower Matthew Bissanti, who is the former president and director of OMNI.  The Justice Department reported that Bissanti will receive $228,750 as his share of the settlement.

HONEY

On Aug 12, 2016, in the attached notice, to-bee-or-not-to-bee_-cbp-and-partners-seized-132-drums-of-hone, Customs and Border Protection announced seizure of 42 tons of illegally imported Chinese honey.  The honey was contained in 132 fifty-five gallon drums that were falsely declared as originating from Taiwan to evade antidumping duties applicable to Chinese honey. The evaded antidumping duties on this shipment of Chinese honey would be nearly $180,299.

ANTITRUST LAW

VITAMIN C ANTITRUST CASE—THE REAL ANTIDUMPING BACK STORY

On September 20, 2016, the Second Circuit Court of Appeals handed down its attached decision in the Vitamin C Antitrust case against the Chinese companies, In Re: Vitamin C Antitrust Litigation, vitamin-c-13-4791_opn-2d-cir-sept-20-2016.  In its decision, the Court of Appeals reversed the Federal District Court’s decision that the Chinese Vitamin C companies had fixed prices in violation of the US antitrust because Chinese government action, in effect, insulated the Chinese companies from US antitrust liability.

The Court of Appeals made the correct decision because as indicated below, I have personal knowledge as to the reason the Chinese government set the Vitamin C export price scheme in place to raise Chinese export prices—to deter US and other Antidumping cases.

As the Court of Appeals stated in its opinion:

the Chinese Government filed a formal statement in the district court asserting that Chinese law required Defendants to set prices and reduce quantities of vitamin C sold abroad, and because Defendants could not simultaneously comply with Chinese law and U.S. antitrust law . . .

The Court of Appeals then reversed the District Court “on international comity grounds” and ordered the District Court to dismiss the complaint with prejudice.

In effect, the Second Circuit held that based on comity grounds, that is, respect for Chinese law as evidenced by a formal statement and submission of the Chinese government that the Chinese government lawfully set up a scheme to raise Vitamin C prices, the Federal District Court should have dismissed the case.  The Court of Appeals held that the District Court should have deferred to the Chinese government and exempted the Chinese companies from the application of the US antitrust law based on the state action defense.  It should be noted that the Federal Government and State Governments through state action can insulate US domestic companies from the application of the US antitrust law.

The Court of Appeals specifically determined in the decision that:

The official statements of the Ministry should be credited and accorded deference. . . .The  2002  Notice,  inter  alia,  demonstrates  that  from  2002  to  2005,  the relevant time period alleged in the complaint, Chinese law required Defendants to participate in the PVC regime in order to export vitamin C. This regulatory regime allowed vitamin C manufacturers the export only vitamin C subject to contracts that complied with the “industry‐wide negotiated” price.

Although the 2002 Notice does not specify how the “industry‐wide negotiated” price was set, we defer to the Ministry’s reasonable interpretation that the term means what it suggests—that members of the regulated industry were required to negotiate and agree upon a price.  . . ..

In this context, we find it reasonable to view the entire PVC regime as a decentralized means by which the Ministry, through the Chamber, regulated the export of vitamin C by deferring to the manufacturers and adopting their agreed upon price as the minimum export price. In short, by directing vitamin C manufacturers to coordinate export prices and quantities and adopting those standards into the regulatory regime, the Chinese Government required Defendants to violate the Sherman Act. . . .

Because we hold that Defendants could not comply with both U.S. antitrust laws and Chinese law regulating the foreign export of vitamin C, a true conflict exists between the applicable laws of China and those of the United States.

The Court of Appeals went on to state:

Moreover, there is no evidence that Defendants acted with the express purpose or intent to affect U.S. commerce or harm U.S. businesses in particular. Rather, according to the Ministry, the regulations at issue governing Defendants’ conduct were intended to assist China in its transition from a state‐run command economy to a market‐driven economy, and the resulting price‐fixing was intended to ensure China remained a competitive participant in the global vitamin C market and to prevent harm to China’s trade relations. While it was reasonably foreseeable that China’s vitamin C policies would generally have a negative effect on Plaintiffs as participants in the international market for vitamin C, as noted above, there is no evidence that Defendants’ antitrust activities were specifically directed at Plaintiffs or other U.S. companies.

The purpose of the Chinese export scheme was not to damage US customers or businesses.  In fact, just the opposite was true.  The Chinese government wanted to keep exports flowing.

What was the concern of the Chinese government?  US and other antidumping cases, which could wipe Chinese exports out of the US market for decades.  This was the true number one anticompetitive threat that the Chinese government and companies were facing.  Was this a realistic threat?  Sure was.

The period that the export price scheme was set in place was 2002-2005.  On July 11, 2002, after losing an antidumping case in the mid-90s against Saccharin from China despite very high antidumping rates because of a no injury determination by the US International Trade Commission (“ITC”), PMC, the sole US producer of saccharin, filed a second antidumping case against saccharin from China.  The Chinese Chamber of Commerce in charge of the Saccharin case was the Chamber of Commerce for Medicines, the same Chamber in charge of the Vitamin C case.

On July 2, 2003, the Commerce Department issued an antidumping order against all imports of saccharin from China with rates ranging from an individual dumping rate of 249.39% to 329.29% for all other Chinese companies, effectively blocking all Chinese saccharin from China.  The Antidumping Order was in effect for 10 years.

Although one company that I represented was after three and a half years able to reduce its dumping rate down to 0%, all other Chinese saccharin was blocked out of the US market for 10 years.  Market prices for saccharin in the US soared from a low $1.50 per pound in the investigative period to a price well over $10 a pound.

And US plaintiff companies in the Vitamin C case were complaining about the price rise in Vitamin C exports to the US??!!  I am sure the increase was not 10 times.

Since I represented the Chinese saccharin industry in the Saccharin antidumping case, the Chamber of Commerce for Medicine and I were very aware of the devastating effect a US or other antidumping case could have on Chinese companies and exports.  After the antidumping order was issued, in the Summer of 2003 the Chamber called me to a meeting with the Chinese Vitamin C producers and the Chinese Ministry of Commerce (“MOFCOM”} to discuss how to deter US and other antidumping cases.  The Chamber and MOFCOM were very worried that intense Chinese price competition would lead to a wave of antidumping cases against the Vitamin C companies.

The Vitamin C companies, the Chamber and MOFCOM asked what can we do if there is a threat of an antidumping case.  Since Commerce and all other countries treat China as a nonmarket economy country and refuse to use actual prices and costs in China to determine antidumping cases, the general practice of dump proofing where antidumping consultants use computer programs to eliminate the unfair act, dumping, is not an option for Chinese companies.

The only remedy I could think of was that the Chinese government impose an export price floor.  That approach worked in the 90s with another Chamber of Commerce when there was a threat of a US antidumping case against Silicon Carbide from China.  The US Silicon Carbide producer in the one company US industry never filed their threatened antidumping case against China because of the export price floor the Chamber with MOFCOM’s consent put in place.

After suggesting that the Chamber set up an export price floor with MOFCOM’s involvement, I went on to state that MOFCOM would have to issue a law, regulation or action to show that the Government mandated the establishment of the system to insulate the Chinese companies from attack under the US antitrust laws.

The Chamber did set up the export price system for Vitamin C exports to stop US and other antidumping cases from being filed against the Chinese companies.  No Vitamin C antidumping cases were filed because the export price system was put in place.

As indicated by the Second Circuit, MOFOM did take government action to set up the export price scheme, which, in turn, insulated the Chinese companies from US antitrust liability.

The lesson of the story is that although the purpose of US antitrust law is to protect consumers and competition in the US market, the real threat to US consumers and market competition is the US antidumping law.

CRIMINAL IP/TRADE SECRET CASE

On October 5, 2016, the Justice Department in the attached notice, chinese-national-sentenced-to-prison-for-conspiracy-to-steal-tr, announced the sentencing of Mo Hailong, a/k/a Robert Mo, a Chinese national to three years in Federal prison for a conspiracy to steal trade secrets.  Mr. Mo Hailong was the Director of International Business of the Beijing Dabeinong Technology Group Company, commonly referred to as DBN. DBN is a Chinese conglomerate with a corn seed subsidiary company, Kings Nower Seed.

According to the plea agreement, Mo Hailong admitted to participating in a long-term conspiracy to steal trade secrets from DuPont Pioneer and Monsanto. Mo Hailong participated in the theft of inbred corn seeds from fields in Iowa and elsewhere for the purpose of transporting the seeds to DBN in China. The stolen inbred, or parent, seeds were the valuable trade secrets of DuPont Pioneer and Monsanto.

U.S. Attorney Kevin E. VanderSchel stated:

“Mo Hailong stole valuable proprietary information in the form of seed corn from DuPont Pioneer and Monsanto in an effort to transport such trade secrets to China. Theft of trade secrets is a serious federal crime, as it harms victim companies that have invested millions of dollars and years of work toward the development of propriety technology. The theft of agricultural trade secrets, and other intellectual property, poses a grave threat to our national economic security. The Justice Department and federal law enforcement partners are committed to prosecuting those who in engage in conduct such as Mo Hailong.”

SECTION 337 AND IP CASES

NEW 337 CASES

On October 6, 2016, Nite Ize, Inc. filed a major 337 case against Device Holders, many of which come from China.  The relevant parts of the ITC notice along with the names of the Chinese respondent companies are below.

Commodity:

Device Holders

Filed by:

James B. Altman

Firm/Organization:

Foster, Murphy, Altman & Nickel, PC

Behalf of:

Nite Ize, Inc.

Description:

Letter to Lisa R. Barton, Secretary, USITC; requesting that the Commission conduct an investigation under section 337 of the Tariff Act of 1930, as amended, regarding Certain Device Holders, and Components Thereof. The proposed respondents are Shenzhen Youtai Trade Company Limited, d/b/a NoChoice, China; REXS LLC, Lewes, DE; Spinido, Inc., Brighton, CO; Luo, Qiden, d/b/a Lita International Shop, China; Guangzhou Kuaguoyi E-commerece co., ltd., d/b/a Kagu Culture, China; Shenzhen New Dream Technology Co., Ltd., d/b/a Newdreams, China; Shenzhen Gold South technology Co., Ltd. d/b/a Baidatong, China; Zhao Chunhui d/b/a Skyocean, China; Sunpauto Co., ltd., HK; Wang Zhi Gang d/b/a China; Dang Yuya d/b/a Sminiker, China; Shenzhen Topworld Technology Co.,    d/b/a IdeaPro, Hong Kong; Lin Zhen Mei d/b/a Anson, China; Wu Xuying d/b/a Novoland, China; Shenzhen New Dream Sailing Electronic Technology Co., Ltd., d/b/a MegaDream, China; Zhongshan Feiyu Hardware technology Co., Ltd d/b/a YouFo, China; Ninghuazian Wangfulong Chaojishichang Youxian Gongsi, Ltd., d/b/a EasybuyUS, China; Chang Lee d/b/a Frentaly, Duluth, GA; Trendbox USA LLC d/b/a Trendbox, Scottsdale, AZ; Timespa d/b/a Jia Bai Nian (Shenzhen) Electronic Commerce Trade CO., LTD., China; Tontex d/b/a Shenzhen Hetongtai Electronics Co., Ltd., China; Scotabc d/b/a ShenChuang Opto-electronics Technology Co., Ltd., China; Tenswall d/b/a Shenzhen Tenswall International Trading Co., Ltd., La Puente, CA; Luo Jieqiong d/b/a Wekin, China; Pecham d/b/a Baichen Technology Ltd., Hong Kong; Cyrift d/b/a Guangzhou Sunway E-Commerce LLC., China; Rymemo d/b/a Global Box, LLC., Dunbar, PA; Wang Guoxiang d/b/a Minse, China; Yuan I d/b/a Bestrix, China; Zhiping Zhou d/b/a Runshion, China; Funlavie, Riverside, CA; Huijukon d/b/a Shenzhen Hui Ju Kang technology Co., Ltd., China; Zhang Haujun d/b/a CeeOne, China; Easy Acc d/b/a Searay LLC., Newark, DE; Barsone d/b/a Shenzhen Senweite Electronic Commerce Ltd., China; Oumeiou d/b/a Shenzhen Oumeiou Technology Co., Ltd., China; Grando d/b/a Shenzhen Dashentai Network Technology Co., Ltd., China; Shenzhen Yingxue Technology Co., Ltd., China; Shenzhen Longwang Technology Co., Ltd., d/b/a LWANG, China; Hu Peng d/b/a AtomBud, China

CHINESE VERSION OF 337 ARTICLE

Set forth below is a Chinese version of the 337 English article published last month followed by the original English version.

阻止来自中国的侵权产品:337条款调查案

随着亚马逊和eBay加大力度引入中国卖家,以及越来越多的中国制造商另辟蹊径生产本身的产品,向我们在中国的律师咨询有关盗版产品和仿冒问题的公司数目也随之猛增。若该问题涉及到把侵权产品进口到美国,拥有美国知识产权的公司可以采取强大的补救措施进行反击。其中一个最强有力的补救措施就是337条款调查案,它可以用来阻止侵权产品进入美国,无论该产品生产自何处。

337条款调查案(该名称源自于19 U.S.C. 1337法令)可用来打击侵犯版权、商标、专利或商业秘密的进口品。但是由于注册商标和版权拥有人一般上可以采取其它的法律行动,337条款调查案对专利、未注册商标和商业秘密的拥有人尤其有效。虽然该调查案通常局限于知识产权,正在对钢铁产品进行的337调查案中,美国钢铁业试图将不公平行为的定义扩大以便将入侵计算机系统和违反反垄断行为包含在内。

首先,美国国际贸易委员会(“ITC”)会发起337条款的调查。如果ITC发现某进口货侵犯了特定的知识产权,可以发出排除令(exclusion order),美国海关就会扣留所有侵权的进口货。

大量种类各异的产品已经因337条款调查案而被禁止入口:从玩具(魔方拼图、椰菜娃娃)、鞋类(匡威运动鞋)、大型机器(造纸机)、消费类产品(首饰盒、汽车配件、电子香烟和烫发器)到高科技产品(电脑、手机和半导体芯片)等等。

337条款是知识产权和贸易的混合型法令,某个美国产业必须证明受到了伤害。伤害证明的要求很低,几乎所有的案例都符合此要求——只许一些销售损失就能证明伤害。对符合美国产业的要求可说是关键所在。美国产业通常是一家持有相关知识产权的公司。如果该知识产权是一项注册商标、版权或专利,美国产业的要求范围已扩大至凡在美国进行的工厂和设备、劳动力或资本的重大投资,以及专利权开发的实质性投资,包括工程、研发或授权许可,均可视为国内产业。然而,ITC最近提高了美国产业的要求,让专利“流氓”或非执业实体更难提出337调查案诉求。

337条款调查案由行政法官(ALJ)负责审理,诉讼过程迅速且激烈,一般上只需12至15个月来完成。ITC收到一份337调查的申请后,有30天的时间来决定是否立案。一旦确定立案,ITC会将诉状和调查通知答辩方。外国被诉方有30天的时间应诉,美国国内的被诉方则只有20天的时间应诉。如果进口商或外国被诉方没有做出回应,ITC会可认定公司放弃抗辩而发出排除令。

ITC在337调查案中所采取的是“对物”管辖权,也就是针对进口到美国的产品进行管辖。这很合理:ITC无权管制外国公司,但有权管制其进口产品。一般而言,337条款调查案和大多数的普通诉讼案不同,申诉方可以打赢一家1)不可能送达诉状、2)未能出庭聆讯,以及3)不可能被追讨款项的中国公司。

337条款调查案所采取的补救措施是颁布排除令,阻止答辩方的侵权产品进入美国。但是在某些特殊情况下,如果某个产品非常容易制造,ITC可以发布普遍排除令,不分来源地禁止所有同类侵权产品进入美国。以我处理过的魔方拼图案件为例,Ideal公司(申请人)把超过400家台湾公司列为侵犯其普通法商标的答辩人。ITC在1983年发布了普遍排除令(General Exclusion Order),阻止非Ideal公司制造的魔方产品进入美国市场,这一禁令沿用至今。除了排除令,ITC也可以发布制止令(cease and desist orders),禁止美国进口商继续售卖相关侵权产品。

337条款调查案的双方也可以选择庭外和解,但是和解协议必须经由ITC复审。我们经常协助客户尽早解决337条款调查案,以减少他们的诉讼费用。在20世纪90年代初期,RCA针对中国进口的电视提出了337条款调查。所有涉及的中国公司通过与RCA签署授权许可协议,迅速地解决了该调查案。

337条款调查案中的答辩人通常可以通过修改本身产品的设计来避开相关的侵权指责。约翰迪尔(John Deere)曾经指控把拖拉机漆成绿色和黄色的中国公司侵犯了约翰迪尔的商标,因而提出了一项著名的337条款调查案。大部分的中国答辩人与申诉人达成协议并改变拖拉机的颜色,例如蓝红色。

关键点:337条款调查案是ITC发起的强有力诉讼案,美国公司应该把它视为阻止侵权产品进入美国市场的手段。另一方面,涉及这些调查案的美国进口商和外国答辩人应该认真地对待它们,并且迅速做出回应,因为排除令发出后可延续多年有效。

 STOP IP INFRINGING PRODUCTS FROM CHINA AND OTHER COUNTRIES USING CUSTOMS AND SECTION 337 CASES

With Amazon and Ebay having increased their efforts at bringing in Chinese sellers and with more and more Chinese manufacturers branching out and making their own products, the number of companies contacting our China lawyers here at Harris Moure about problems with counterfeit products and knockoffs has soared. If the problem involves infringing products being imported into the United States, powerful remedies are available to companies with US IP rights if the infringing imports are products coming across the US border.

If the IP holder has a registered trademark or copyright, the individual or company holding the trademark or copyright can go directly to Customs and record the trademark under 19 CFR 133.1 or the copyright under 19 CFR 133.31.  See https://iprr.cbp.gov/.

Many years ago a US floor tile company was having massive problems with imports infringing its copyrights on its tile designs.  Initially, we looked at a Section 337 case as described below, but the more we dug down into the facts, we discovered that the company simply failed to register its copyrights with US Customs.

Once the trademarks and copyrights are registered, however, it is very important for the company to continually police the situation and educate the various Customs ports in the United States about the registered trademarks and copyrights and the infringing imports coming into the US.  Such a campaign can help educate the Customs officers as to what they should be looking out for when it comes to identifying which imports infringe the trademarks and copyrights in question.  The US recording industry many years ago had a very successful campaign at US Customs to stop infringing imports.

For those companies with problems from Chinese infringing imports, another alternative is to go to Chinese Customs to stop the export of infringing products from China.  The owner of Beanie Babies did this very successfully having Chinese Customs stop the export of the infringing Beanie Babies out of China.

One of the most powerful remedies is a Section 337 case, which can block infringing products, regardless of their origin, from entering the U.S.  A Section 337 action (the name comes from the implementing statute, 19 U.S.C. 1337) is available against imported goods that infringe a copyright, trademark, patent, or trade secret. But because other actions are usually readily available to owners of registered trademarks and copyrights, Section 337 actions are particularly effective for owners of patents, unregistered trademarks, and trade secrets. Although generally limited to IP rights, in the ongoing Section 337 steel case, US Steel has been attempting to expand the definition of unfair acts to include hacking into computer systems and antitrust violations.

The starting point is a section 337 investigation at the US International Trade Commission (“ITC”).  If the ITC finds certain imports infringe a specific intellectual property right, it can issue an exclusion order and U.S. Customs will then keep out all the infringing imports at the border.

Section 337 cases have been brought and exclusion orders issued against a vast range of different products: from toys (Rubik’s Cube Puzzles, Cabbage Patch Dolls) to footwear (Converse sneakers) to large machinery (paper-making machines) to consumer products (caskets, auto parts, electronic cigarettes and hair irons) to high tech products (computers, cell phones, and semiconductor chips).

Section 337 is a hybrid IP and trade statute, which requires a showing of injury to a US industry. The injury requirement is very low and can nearly always be met–a few lost sales will suffice to show injury. The US industry requirement can be a sticking point. The US industry is usually the one company that holds the intellectual property right in question. If the IP right is a registered trademark, copyright or patent, the US industry requirement has been expanded to not only include significant US investment in plant and equipment, labor or capital to substantial investment in the exploitation of the IP right, including engineering, research and development or licensing.  Recently, however, the ITC has raised the US industry requirement to make it harder for patent “trolls” or Non Practicing Entities to bring 337 cases.

Section 337 cases, however, are directed at truly unfair acts.  Patents and Copyrights are protected by the US Constitution so in contrast to antidumping and countervailing duty cases, respondents in these cases get more due process protection.  The Administrative Procedures Act is applied to Section 337 cases with a full trial before an Administrative Law Judge (“ALJ”), extended full discovery, a long trial type hearing, but on a very expedited time frame.

Section 337 actions, in fact, are the bullet train of IP litigation, fast, intense litigation in front of an ALJ.  The typical section 337 case takes only 12-15 months. Once a 337 petition is filed, the ITC has 30 days to determine whether or not to institute the case. After institution, the ITC will serve the complaint and notice of investigation on the respondents. Foreign respondents have 30 days to respond to the complaint; US respondents have only 20 days. If the importers or foreign respondents do not respond to the complaint, the ITC can find the companies in default and issue an exclusion order.

The ITC’s jurisdiction in 337 cases is “in rem,” which means it is over the product being imported into the US. This makes sense: the ITC has no power over the foreign companies themselves, but it does have power over the imports. What this means in everyday terms is that unlike most regular litigation, a Section 337 case can be effectively won against a Chinese company that 1) is impossible to serve, 2) fails to show up at the hearing, and 3) is impossible to collect any money from.

The remedy in section 337 cases is an exclusion order excluding the respondent’s infringing products from entering the United States. In special situations, however, where it is very easy to manufacture a product, the ITC can issue a general exclusion order against the World.  In the Rubik’s Cube puzzle case, which was my case at the ITC, Ideal (the claimant) named over 400 Taiwan companies as respondents infringing its common law trademark. The ITC issued a General Exclusion Order in 1983 and it is still in force today, blocking Rubik’s Cube not made by Ideal from entering the United States. In addition to exclusion orders, the ITC can issue cease and desist orders prohibiting US importers from selling products in inventory that infringe the IP rights in question

Section 337 cases can also be privately settled, but the settlement agreement is subject to ITC review. We frequently work with our respondent clients to settle 337 cases early to minimize their legal fees. In the early 1990s, RCA filed a section 337 case against TVs from China. The Chinese companies all quickly settled the case by signing a license agreement with RCA.

Respondents caught in section 337 cases often can modify their designs to avoid the IP right in question. John Deere brought a famous 337 case aimed at Chinese companies that painted their tractors green and yellow infringing John Deere’s trademark. Most of the Chinese respondents settled the case and painted their tractors different colors, such as blue and red.

Bottom Line: Section 337 cases are intense litigation before the ITC, and should be considered by U.S. companies as a tool for fighting against infringing products entering the United States. On the flip side, US importers and foreign respondents named in these cases should take them very seriously and respond quickly because exclusion orders can stay in place for years.

If you have any questions about these cases or about US trade policy, TPP, the antidumping or countervailing duty law, trade adjustment assistance, customs, False Claims Act or 337 IP/patent law in general, please feel free to contact me.

Best regards,

Bill Perry

 

 

US CHINA TRADE WAR–TPP POLITICS, TAAF THE ANSWER, $2 BILLION MISSING DUMPING DUTIES AS CASES RISE, CUSTOMS LAW CHANGES, SOLAR CELLS, 337 CUSTOMS STOP INFRINGING IMPORTS

US Capitol North Side Construction Night Washington DC ReflectioFIRM UPDATE

In mid-August, Adams Lee, a well- known Trade and Customs lawyer from White & Case in Washington DC, has joined us here at Harris Moure in Seattle.  Adams has handled well over 100 antidumping and countervailing duty cases.  Attached is Adams’ bio, adams-lee-resume-aug-16, and his article is below on the new Customs Regulations against Evasion of US Antidumping and Countervailing Duty Orders.

Adams and I will both be in China from Sept 11th to October 1st in Beijing, Shanghai and Nanjing.  If anyone would like to talk to us about these issues, please feel free to contact me at my e-mail, bill@harrismoure.com.

TRADE IS A TWO WAY STREET

“PROTECTIONISM BECOMES DESTRUCTIONISM; IT COSTS JOBS”

PRESIDENT RONALD REAGAN, JUNE 28, 1986

US CHINA TRADE WAR SEPTEMBER 8, 2016

Dear Friends,

Trade continues to be at the center of the Presidential primary with a possible passage of the Trans Pacific Partnership during the Lame Duck Session.  This blog post contains the sixth, and maybe the most important, article on Trade Adjustment Assistance for Companies of a several part series on how weak free trade arguments have led to the sharp rise of protectionism of Donald Trump and Bernie Sanders and the now possible demise of the Trans Pacific Partner (“TPP”).

The first article outlined the problem and why this is such a sharp attack on the TPP and some of the visceral arguments against free trade.  The second article explored in depth the protectionist arguments and the reason for the rise of Donald Trump and Bernie Sanders.  The third article explored the weak and strong arguments against protectionism.  The fourth article discussed one of the most important arguments for the TPP—National Security.  The fifth article discussed why the Commerce Department’s and the US International Trade Commission’s (ITC) policy in antidumping (“AD”) and countervailing duty (“CVD”) cases has led to a substantial increase in protectionism and national malaise of international trade victimhood.

The sixth article provides an answer with the only trade program that works and saves the companies and the jobs that go with them—The Trade Adjustment Assistance for Firms/Companies program along with MEP, another US manufacturing program.  The Article will describe the attempts by both Congress and the Obama Administration to kill the program, which may, in fact, have resulted in the sharp rise in protectionism in the US.

To pass the TPP, Congress must also provide assistance to make US companies competitive in the new free trade market created by the TPP.  Congress must restore the trade safety net so that Congress can again vote for free trade agreements, and the United States can return to its leadership in the Free Trade area.  The Congress has to fix the trade situation now before the US and the World return to the Smoot Hawley protectionism of the 1930s and the rise of nationalism, which can lead to military conflict.

In addition, set forth below are articles on a possible new antidumping case on Aluminum Foil from China and the rise of AD and CVD cases, the $2 billion in missing AD and CVD duties, the new Customs regulations to stop Transshipment in AD and CVD cases, the upcoming deadlines in the Solar Cells case in both English and Chinese, recent decisions in Steel cases,  antidumping and countervailing duty reviews in September against Chinese companies, and finally an article about how to stop imports that infringe US intellectual property rights, either using US Customs law or Section 337 at the US International Trade Commission (“ITC”).

If anyone has any questions or wants additional information, please feel free to contact me at my new e-mail address bill@harrismoure.com.

Best regards,

Bill Perry

TRADE PROTECTIONISM IS STILL A VERY BIG TOPIC OF THE PRESIDENTIAL ELECTION; THE TPP PROBABLY IS NOT COMING UP IN THE LAME DUCK

As mentioned in my last newsletter, I believe that if Hilary Clinton is elected, President Obama will push for the Trans Pacific Partnership (“TPP”) to come up for a vote during the Lame Duck Session.  The Congress, however, has other ideas.

In early August, U.S. House Speaker Paul Ryan stated that he saw no reason to bring up the TPP in the Lame Duck because “we don’t have the votes.”  Ryan went on to state:

“As long as we don’t have the votes, I see no point in bringing up an agreement only to defeat it.  They have to fix this agreement and renegotiate some pieces of it if they have any hope or chance of passing it. I don’t see how they’ll ever get the votes for it.”

Democratic Senator Ron Wyden stated in late August that he will not take a position on the TPP until Senate Majority Leader Mitch McConnell brings the TPP up for a vote.  But on August 26th, Mitch McConnell stated that passage of the Trans-Pacific Partnership will be the next president’s problem, saying that the Senate will not vote on the treaty this year:

“The current agreement, the Trans-Pacific [Partnership], which has some serious flaws, will not be acted upon this year.  It will still be around. It can be massaged, changed, worked on during the next administration.”

With this statement, McConnell appears to have killed passage during the Obama Administration.

But businesses continue to push for the TPP.  On Sept 6th, the California Chamber of Commerce urged its Congressional delegation to pass the TPP.  In the attached Sept 7th letter, 9-7finaltppletter, the Washington State Council on International Trade also urged its Congressional delegation to pass TPP, stating:

“with 40 percent of Washington jobs dependent upon trade, it is paramount that we prioritize policies and investments that increase our state’s international competitiveness. That is why it is so important that you join us in calling for an immediate vote on the TPP; according to a newly released Washington Council on International Trade-Association of Washington Business study, Washington could have already increased our exports by up to $8.7 billion and directly created 26,000 new jobs had the TPP been implemented in 2015.

While the U.S. has some of the lowest import duties in the world on most goods, our local Washington exporters are faced with thousands of tariffs that artificially inflate the cost of American-made goods. TPP will help eliminate these barriers . . ..

TPP aligns with Washington’s high standards, setting 21st century standards for digital trade, environmental protections, and labor rules .  . . .  If we want to increase our competitiveness and set American standards for global trade, we must act now with the TPP.

This election season’s rhetoric has been hostile toward trade, but the TPP’s benefits for our state are undeniable. It is imperative that our state steps up to advocate for the family wage jobs and economic opportunities created by trade, and the time to do so is now.”

Despite the Congressional opposition, ever the optimist, President Obama keeps pushing for passage during the Lame Duck.  On August 30th, the White House Press Office stated:

“The president is going to make a strong case that we have made progress and there is a path for us to get this done before the president leaves office.”

On September 1, 2016, at a Press Conference in Hangzhou, China for the G20 meeting, President Obama said he is still optimistic about passage of the Trans-Pacific Partnership trade agreement. Obama argued that the economic benefits of the pact would win out once the “noise” of the election season subsides.

The President said he plans to assure the leaders of the other countries that signed the TPP that the U.S. will eventually approve the deal despite the very vocal opposition from Democratic and Republican lawmakers and Presidential candidates.

President Obama went to state:

“And it’s my intention to get this one done, because, on the merits, it is smart for America to do it. And I have yet to hear a persuasive argument from the left or the right as to why we wouldn’t want to create a trade framework that raises labor standards, raising environmental standards, protects intellectual property, levels the playing field for U.S. businesses, brings down tariffs.”

Obama stated that although other countries, such as Japan, have troubles passing the TPP, the other countries:

“are ready to go.  And what I’ll be telling them is that the United States has never had a smooth, uncontroversial path to ratifying trade deals, but they eventually get done”

“And so I intend to be making that argument. I will have to be less persuasive here because most people already understand that. Back home, we’ll have to cut through the noise once election season is over.  It’s always a little noisy there.”

As mentioned in the last blog post, one of the strongest arguments for the TPP is National Security.  Trade agreements help stop trade wars and military conflict.  But despite that very strong point, the impact of free trade on the average manufacturing worker has not been beneficial.

In a recent e-mail blast, the Steel Workers make the point:

“Because of unfair trade, 1,500 of my colleagues at U.S. Steel Granite City Works in Granite City, Illinois are still laid-off. It’s been more than six months since our mill shut down.

Worker unemployment benefits are running out. Food banks are emptying out. People are losing their homes. City services might even shut down.

But there’s finally reason for hope. The Commerce Department recently took action to enforce our trade laws by placing duties on unfairly traded imports from countries like China. That will help ensure steel imports are priced fairly — and allow us to compete . . . .

All told, nearly 19,000 Americans have faced layoffs across the country because of the steel imports crisis.

China is making far more steel than it needs. China knows this is a problem, and repeatedly has pledged to cut down on steel production. But nothing has changed . . . .

China’s steel industry is heavily subsidized by its government, and it also doesn’t need to follow serious labor or environmental rules. But China has to do something with all that steel, so it dumps it into the United States far below market value.”

In a recent Business Week article, Four Myths about Trade, Robert Atkinson, the president of the Information Technology and Innovation Foundation, made the same point stating:

The Washington trade establishment’s second core belief is that trade is an unalloyed good, even if other nations engage in mercantilism. . . . it doesn’t matter if other nations massively subsidize their exporters, require U.S. companies to hand over the keys to their technology in exchange for market access, or engage in other forms of mercantilist behavior.  . . .

But China and others are proving that this is folly. In industry after industry, including the advanced innovation-based industries that are America’s future, they are gaming the rules of global trade to hold others back while they leap forward. . ..

It’s a reflection of having lost competitive advantage to other nations in many higher-value-added industries, in part because of foreign mercantilist policies and domestic economic-policy failures.

The Author then goes on to state the US must be tough in fighting mercantilism and “vigilantly enforce trade rules, such as by bringing many more trade-enforcement cases to the WTO, pressuring global aid organizations to cut funding to mercantilist nations, limiting the ability of companies in mercantilist nations to buy U.S. firms, and more.”

But this argument then runs into reality.  As indicated below, Commerce finds dumping in about 95% of the cases.  Thus, there are more than 130 AD and CVD orders against China blocking about $30 billion in imports.  Presently more than 80 AD and CVD orders are against raw materials from China, chemicals, metals and various steel products, used in downstream US production.  In the Steel area, there are AD and CVD orders against the following Chinese steel products:

carbon steel plate, hot rolled carbon steel flat products, circular welded and seamless carbon quality steel pipe, rectangular pipe and tube, circular welded austenitic stainless pressure pipe, steel threaded rod, oil country tubular goods, steel wire strand and wire, high pressure steel cylinders, non-oriented electrical steel, and carbon and certain alloy steel wire rod.

There are ongoing investigations against cold-rolled steel and corrosion resistant/galvanized steel so many Chinese steel products from China are already blocked by US AD and CVD orders with very high rates well over 100%.

AD and CVD orders stay in place for 5 to 30 years and yet the companies, such as the Steel Industry, still decline.  After 40 years of protection from Steel imports by AD and CVD orders, where is Bethlehem Steel today?  The Argument seems to be that if industries simply bring more cases, the Commerce Department is even tougher and the orders are enforced, all US companies will be saved, wages will go up and jobs will be everywhere.

The reality, however, is quite different.  In fact, many of these orders have led to the destruction of US downstream industries so does hitting the Chinese with more trade cases really solve the trade problem?

More importantly, although Commerce does not use real numbers in antidumping cases against China, it does use actual prices and costs in antidumping steel cases against Korea, India, Taiwan, and many other countries.  In a recent antidumping case against Off the Road Tires from India, where China faces dumping rates of between 11 and 105%, the only two Indian exporters, which were both mandatory respondents, received 0% dumping rates and the Commerce Department in a highly unusual preliminary determination reached a negative no dumping determination on the entire case.

Market economy countries, such as Korea and India, can run computer programs to make sure that they are not dumping.  This is not gaming the system.  This is doing exactly what the antidumping law is trying to remedy—elimination of the unfair act, dumping.

Antidumping and countervailing duty laws are not penal statutes, they are remedial statutes and that is why US importers, who pay the duties, and the foreign producers/exporters are not entitled to full due process rights in AD and CVD cases, including application of the Administrative Procedures Act, decision by a neutral Administrative Law Judge and a full trial type hearing before Commerce and the ITC, such as Section 337 Intellectual Property cases, described below.

In fact, when industries, such as the steel industry, companies and workers along with Government officials see dumping and subsidization in every import into the United States, this mindset creates a disease—Globalization/International Trade victimhood.  We American workers and companies simply cannot compete because all imports are dumped and subsidized.

That simply is not true and to win the trade battles and war a change in mindset is required.

In his Article, Mr. Atkinson’s second argument may point to the real answer.  The US government needs to make US manufacturing companies competitive again:

It must begin with reducing the effective tax rate on corporations. To believe that America can thrive in the global economy with the world’s highest statutory corporate-tax rates and among the highest effective corporate-tax rates, especially for manufacturers, is to ignore the intense global competitive realities of the 21st century. Tax reform then needs to be complemented with two other key items: a regulatory-reform strategy particularly aimed at reducing burdens on industries that compete globally, and increased funding for programs that help exporters, such as the Export-Import Bank, the new National Network for Manufacturing Innovation, and a robust apprenticeship program for manufacturing workers. . . .

if Congress and the next administration develop a credible new globalization doctrine for the 21st century — melding tough trade enforcement with a robust national competitiveness agenda — then necessary trade-opening steps like the Trans-Pacific Partnership will once again be on the table and the U.S. economy will begin to thrive once again.

When it comes to Trade Adjustment Assistance, however, as Congressman Jim McDermott recently stated in an article, workers do not want handouts and training.  They want jobs.  The only trade remedy that actually provides jobs is the Trade Adjustment Assistance for Firms/Companies program and MEP, another manufacturing program.

FREE TRADE REQUIRES COMPETITIVE US COMPANIES— TAA FOR FIRMS/COMPANIES AND THE MEP MANUFACTURING PROGRAM ARE THE ANSWER

On August 17th, in a letter to the Wall Street Journal, the author referred to “the longstanding Republican promotion of trade as an engine of growth.” The author then goes on to state:

But what Donald Trump sees and the Republican elites have long missed is that for trade to be a winner for Americans, our government must provide policies for our industries to be the most competitive in the world. Mr. Zoellick and others promoted trade without promoting American competitiveness.  . . .

Mr. Zoellick should take a lesson from the American gymnasts in Rio and see how competitiveness leads to winning.

Although Donald Trump might agree with that point, there are Government programs already in effect that increase the competitiveness of US companies injured by imports, but they have been cut to the bone.

This is despite the fact that some of the highest paying American jobs have routinely been in the nation’s manufacturing sector. And some of the highest prices paid for the nation’s free trade deals have been paid by the folks who work in it. What’s shocking is the fact that that isn’t shocking anymore. And what’s really shocking is that we seem to have accepted it as the “new normal.” Now where did that ever come from?

How did we get here? How did we fall from the summit? Was it inexorable? Did we get soft? Did we get lazy? Did we stop caring? Well perhaps to some extent. But my sense of it is that too many of us have bought into the idea of globalization victimhood and a sort of paralysis has been allowed to set in.

Now in my opinion that’s simply not in America’s DNA. It’s about time that this nation decided not to participate in that mind set any longer. Economists and policy makers of all persuasions are now beginning to recognize the requirement for a robust response by this nation to foreign imports – irrespective of party affiliation or the particular free trade agreement under consideration at any given moment.  Companies, workers and Government officials need to stop blaming the foreigner and figure out what they can do to compete with the foreign imports.

There is no doubt in my mind that open and free trade benefits the overall U.S. economy in the long run. However, companies and the families that depend on the employment therein, indeed whole communities, are adversely affected in the short run (some for extended periods) resulting in significant expenditures in public welfare and health programs, deteriorated communities and the overall lowering of America’s industrial output.

But here’s the kicker: programs that can respond effectively already exist. Three of them are domiciled in our Department of Commerce and one in our Department of Labor:

  • Trade Adjustment Assistance for Firms (Commerce)
  • The Hollings Manufacturing Extension Partnership (Commerce)
  • Economic Adjustment for Communities (Commerce)
  • Trade Adjustment Assistance for Displaced Workers (Labor)

This Article, however, is focused on making US companies competitive again and the first two programs do just that, especially for smaller companies.  Specific federal support for trade adjustment programs, however, has been legislatively restrictive, bureaucratically hampered, organizationally disjointed, and substantially under-funded.

The lessons of history are clear. In the 1990’s, after the end of the Cold War and the fall of the Soviet Union, the federal government reduced defense industry procurements and closed military facilities. In response, a multi-agency, multi-year effort to assist adversely affected defense industries, their workers, and communities facing base closures were activated. Although successes usually required years of effort and follow on funding from agencies of proven approaches (for example the reinvention of the Philadelphia Naval Shipyard into a center for innovation and vibrant commercial activities), there was a general sense that the federal government was actively responding to a felt need at the local level.

A similar multi-agency response has been developed in the event of natural disasters, i.e., floods, hurricanes, tornadoes and earthquakes. Dimensions of the problem are identified, an appropriate expenditure level for a fixed period of time is authorized and the funds are deployed as needed through FEMA, SBA and other relevant agencies such as EDA.

The analogy to trade policy is powerful.  When the US Government enters into Trade Agreements, such as the TPP, Government action changes the market place.  All of a sudden US companies can be faced, not with a Tidal Wave, but a series of flash floods of foreign competition and imports that can simply wipe out US companies.

A starting point for a trade adjustment strategy would be for a combined Commerce-Labor approach building upon existing authorities and proven programs, that can be upgraded and executed forthwith.

Commerce’s Trade Adjustment Assistance for Firms (TAAF) has 11 regional (multi-state) TAAF Centers but the program has been cut to only $12.5 million annually. The amount of matching funds for US companies has not changed since the 1980s. The system has the band-width to increase to a run rate of $50 million.  Projecting a four-year ramp up of $90 million (FY18-FY21), the TAA program could serve an additional 2,150 companies.

Foreign competitors may argue that TAA for Firms/Companies is a subsidy, but the money does not go directly to the companies themselves, but to consultants to work with the companies through a series of knowledge-based projects to make the companies competitive again.  Moreover, the program does not affect the US market or block imports in any way.

Does the program work?  In the Northwest, where I am located, the Northwest Trade Adjustment Assistance Center has been able to save 80% of the companies that entered the program since 1984.  The MidAtlantic Trade Adjustment Assistance Center in this video at http://mataac.org/howitworks/ describes in detail how the program works and why it is so successful—Its flexibility in working with companies on an individual basis to come up with specific adjustment plans for each company to make the companies competitive again in the US market as it exists today.

Increasing funding will allow the TAA for Firms/Companies program to expand its bandwidth and provide relief to larger US companies, including possibly even steel producers.  If companies that use steel can be saved by the program, why can’t the steel producers themselves?

But it will take a tough love approach to trade problems.  Working with the companies to forget about Globalization victimhood and start trying to actually solve the Company’s problems that hinder its competitiveness in the market as it exists today.

In addition to TAA for Firms/Companies, another important remedy needed to increase competitiveness is Commerce’s Manufacturing Extension Partnership (MEP), which has a Center in each State and Puerto Rico.  MEP provides high quality management and technical assistance to the country’s small manufacturers with an annual budget of $130 million. MEP, in fact, is one the remedies suggested by the TAA Centers along with other projects to make the companies competitive again.

As a consequence of a nation-wide re-invention of the system, MEP is positioned to serve even more companies. A commitment of $100 million over four years would serve an additional 8,400 firms. These funds could be targeted to the small manufacturing firms that are the base of our supply chain threatened by foreign imports.

Each of these programs requires significant non-federal match or cost share from the companies themselves, to assure that the local participants have significant skin in the game and to amplify taxpayer investment.  A $250 million commitment from the U.S. government would be a tangible although modest first step in visibly addressing the local consequences of our trade policies. The Department of Commerce would operate these programs in a coordinated fashion, working in collaboration with the Department of Labor’s existing Trade Adjustment Assistance for Displaced Workers program.

TAA for Workers is funded at the $711 million level, but retraining workers should be the last remedy in the US government’s bag.  If all else fails, retrain workers, but before that retrain the company so that the jobs and the companies are saved.  That is what TAA for Firms/Companies and the MEP program do.  Teach companies how to swim in the new market currents created by trade agreements and the US government

In short – this serious and multi-pronged approach will begin the process of stopping globalization victimhood in its tracks.

Attached is White Paper, taaf-2-0-white-paper, prepares to show to expand TAA for Firms/Companies and take it to the next level above $50 million, which can be used to help larger companies adjust to import competition.  The White Paper also rebuts the common arguments against TAA for Firms/Companies.

ALUMINUM FOIL FROM CHINA, RISE IN ANTIDUMPING CASES PUSHED BY COMMERCE AND ITC

On August 22, 2016, the Wall Street Journal published an article on how the sharp rise of aluminum foil imports, mostly from China, has led to the shutdown of US U.S. aluminum foil producers.  Articles, such as this one, often signal that an antidumping case is coming in the near future.

Recently, there have been several articles about the sharp rise in antidumping and countervailing duty/trade remedy cases in the last year.  By the second half of 2016, the US Government has reported that twice as many antidumping (“AD”) and countervailing duty (“CVD”) case have been initiated in 2015-2016 as in 2009.

China is not the only target.  AD cases have been recently filed against steel imports from Austria, Belgium, Brazil, China, France, Germany, Italy, Japan, South Korea, South Africa, Taiwan, and Turkey; Steel Flanges from India, Italy and Spain; Chemicals from Korea and China, and Rubber from Brazil, Korea, Mexico and Poland.

The potential Aluminum Foil case may not be filed only against China.  In addition to China, the case could also be filed against a number of foreign exporters of aluminum foil to the United States.

Under US law Commerce determines whether dumping is taking place.  Dumping is defined as selling imported goods at less than fair value or less than normal value, which in general terms means lower than prices in the home/foreign market or below the fully allocated cost of production.  Antidumping duties are levied to remedy the unfair act by raising the US price so that the products are fairly traded.

Commerce also imposes Countervailing Duties to offset any foreign subsidies provided by foreign governments so as to raise the price of the subsidized imports.

AD and CVD duties can only be imposed if there is injury to the US industry, which is determined by the US International Trade Commission (“ITC”).  But in determining injury, the law directs the ITC to cumulate, that is add together all the imports of the same product from the various foreign exporters.  Thus if a number of countries are exporting aluminum foil in addition to China, there is a real incentive for the US aluminum foil industry to file a case against all the other countries too.

There are several reasons for the sharp rise in AD and CVD cases.  One is the state of the economy and the sharp rise in imports.  In bad economic times, the two lawyers that do the best are bankruptcy and international trade lawyers.  Chinese overcapacity can also result in numerous AD and CVD cases being filed not only in the United States but around the World.

Although the recent passage of the Trade Preferences Extension Act of 2015 has made it marginally better to bring an injury case at the ITC, a major reason for the continued rise in AD and CVD cases is the Commerce and ITC determinations in these cases.  Bringing an AD case, especially against China, is like the old country saying, shooting fish in a barrel.

By its own regulation, Commerce finds dumping and subsidization in almost every case, and the ITC in Sunset Review Investigations leaves antidumping and countervailing duty orders in place for as long as 20 to 30 years, often to protect single company US industries, resulting in permanent barriers to imports and the creation of monopolies.

Many readers may ask why should people care if prices go up a few dollars at WalMart for US consumers?  Jobs remain.  Out of the 130 plus AD and CVD orders against China, more than 80 of the orders are against raw materials, chemicals, metals and steel, that go directly into downstream US production.  AD orders have led to the closure of downstream US factories.

Commerce has defined dumping so that 95% of the products imported into the United States are dumped.  Pursuant to the US Antidumping Law, Commerce chooses mandatory respondent companies to individually respond to the AD questionnaire.  Commerce generally picks only two or three companies out of tens, if not hundreds, of respondent companies.

Only mandatory companies in an AD case have the right to get zero, no dumping margins.  Only those mandatory respondent companies have the right to show that they are not dumping.  If a company gets a 0 percent, no dumping determination, in the initial investigation, the antidumping order does not apply to that company.

Pursuant to the AD law, for the non-mandatory companies, the Commerce Department may use any other reasonable method to calculate antidumping rates, which means weight averaging the rates individually calculated for the mandatory respondents, not including 0 rates.  If all mandatory companies receive a 0% rate, Commerce will use any other reasonable method to determine a positive AD rate, not including 0% rates.

So if there are more than two or three respondent companies in an AD case, which is the reality in most cases, by its own law and practice, Commerce will reach an affirmative dumping determination.  All three mandatory companies may get 0% dumping rates, but all other companies get a positive dumping rate.  Thus almost all imports are by the Commerce Department’s definition dumped.

Under the Commerce Department’s methodology all foreign companies are guilty of dumping and subsidization until they prove their innocence, and almost all foreign companies never have the chance to prove their innocence.

Commerce also has a number of other methodologies to increase antidumping rates.  In AD cases against China, Commerce treats China as a nonmarket economy country and, therefore, refuses to use actual prices and costs in China to determine dumping, which makes it very easy for Commerce to find very high dumping rates.

In market economy cases, such as cases against EU and South American countries, Commerce has used zeroing or targeted dumping to create antidumping rates, even though the WTO has found such practices to be contrary to the AD Agreement.

The impact of the Commerce Department’s artificial methodology is further exaggerated by the ITC.  Although in the initial investigation, the ITC will go negative, no injury, in 30 to 40% of the cases, once the antidumping order is in place it is almost impossible to persuade the ITC to lift the antidumping order in Sunset Review investigations.

So antidumping orders, such as Pressure Sensitive Tape from Italy (1977), Prestressed Concrete Steel Wire Strand from Japan (1978), Potassium Permanganate from China (1984), Cholopicrin from China (1984), and Porcelain on Steel Cookware from China (1986), have been in place for more than 30 years.  In 1987 when I was at the Commerce Department, an antidumping case was filed against Urea from the entire Soviet Union.  Antidumping orders from that case against Russia and Ukraine are still in place today.

In addition, many of these antidumping orders, such as Potassium Permanganate, Magnesium, Porcelain on Steel Cookware, and Sulfanilic Acid, are in place to protect one company US industries, creating little monopolies in the United States.

Under the Sunset Review methodology, the ITC never sunsets AD and CVD orders unless the US industry no longer exists.

By defining dumping the way it does, both Commerce and the ITC perpetuate the myth of Globalization victimhood.  We US companies and workers simply cannot compete against imports because all imports are dumped or subsidized.  But is strangling downstream industries to protect one company US industries truly good trade policy?  Does keeping AD orders in place for 20 to 30 years really save the US industry and make the US companies more competitive?  The answer simply is no.

Protectionism does not work but it does destroy downstream industries and jobs.  Protectionism is destructionism. It costs jobs.

US MISSING $2 BILLION IN ANTIDUMPING DUTIES, MANY ON CHINESE PRODUCTS

According to the attached recent report by the General Accounting Office, gao-report-ad-cvd-missing-duties, the US government is missing about $2.3 billion in unpaid anti-dumping and countervailing duties, two-thirds of which will probably never be paid.

The United States is the only country in the World that has retroactive liability for US importers.  When rates go up, US importers are liable for the difference plus interest.  But the actual determination of the amount owed by the US imports can take place many years after the import was actually made into the US.

The GAO found that billing errors and delays in final duty assessments were major factors in the unpaid bills, with many of the importers with the largest debts leaving the import business before they received their bill.

“U.S. Customs and Border Protection reported that it does not expect to collect most of that debt”.  Customs and Border Protection (“CBP”) anticipates that about $1.6 billion of the total will never be paid.

As the GAO report states:

elements of the U.S. system for determining and collecting AD/CV duties create an inherent risk that some importers will not pay the full amount they owe in AD/CV duties. . . . three related factors create a heightened risk of AD/CV duty nonpayment: (1) The U.S. system for determining such duties involves the setting of an initial estimated duty rate upon the entry of goods, followed by the retrospective assessment of a final duty rate; (2) the amount of AD/CV duties for which an importer may be ultimately billed can significantly exceed what the importer pays when the goods enter the country; and (3) the assessment of final AD/CV duties can occur up to several years after an importer enters goods into the United States, during which time the importer may cease operations or become unable to pay additional duties.

The vast majority of the missing duties, 89%, were clustered around the following products from China: Fresh Garlic ($577 million), Wooden Bedroom Furniture ($505 million), Preserved Mushrooms ($459 million), crawfish tail meat ($210 million), Pure Magnesium ($170 million), and Honey ($158 million).

The GAO Report concludes at page 56-47:

We estimate the amount of uncollected duties on entries from fiscal year 2001 through 2014 to be $2.3 billion. While CBP collects on most AD/CV duty bills it issues, it only collects, on average, about 31 percent of the dollar amount owed. The large amount of uncollected duties is due in part to the long lag time between entry and billing in the U.S. retrospective AD/CV duty collection system, with an average of about 2-and-a-half years between the time goods enter the United States and the date a bill may be issued. Large differences between the initial estimated duty rate and the final duty rate assessed also contribute to unpaid bills, as importers receiving a large bill long after an entry is made may be unwilling or unable to pay. In 2015, CBP estimated that about $1.6 billion in duties owed was uncollectible. By not fully collecting unpaid AD/CV duty bills, the U.S. government loses a substantial amount of revenue and compromises its efforts to deter and remedy unfair and injurious trade practices.

But with all these missing duties, why doesn’t the US simply move to a prospective methodology, where the importer pays the dumping rate calculated by Commerce and the rate only goes up for future imports after the new rate is published.

Simple answer—the In Terrorem, trade chilling, effect of the antidumping and countervailing duty orders—the legal threat that the US importers will owe millions in the future, which could jeopardize the entire import company.  As a result, over time imports from China and other countries covered by AD and CVD order often decline to 0 because established importers are simply too scared to take the risk of importing under an AD and CVD order.

CUTSOMS NEW LAW AGAINST TRANSSHIPMENT AROUND AD AND CVD ORDERS; ONE MORE LEGAL PROCEDURE FOR US IMPORTERS AND FOREIGN EXPORTERS TO BE WARY OF

By Adams Lee, Trade and Customs Partner, Harris Moure.

U.S. Customs and Border Protection (CBP) issued new attached regulations, customs-regs-antidumping, that establish a new administrative procedure for CBP to investigate AD and CVD duty evasion.  81 FR 56477 (Aug. 22, 2016). Importers of any product that could remotely be considered merchandise subject to an AD/CVD order now face an increased likelihood of being investigated for AD/CVD duty evasion. The new CBP AD/CVD duty evasion investigations are the latest legal procedure, together with CBP Section 1592 penalty actions (19 USC 1592), CBP criminal prosecutions (18 USC 542, 545), and “qui tam” actions under the False Claims Act, aimed at ensnaring US importers and their foreign suppliers in burdensome and time-consuming proceedings that can result in significant financial expense or even criminal charges.

The following are key points from these new regulations:

  • CBP now has a new option to pursue and shut down AD/CVD duty evasion schemes.
  • CBP will have broad discretion to issue questions and conduct on-site verifications.
  • CBP investigations may result in interim measures that could significantly affect importers.
  • CBP’s interim measures may effectively establish a presumption of the importer’s guilt until proven innocent.
  • Other interested parties, including competing importers, can chime in to support CBP investigations against accused importers.
  • Both petitioners and respondents will have the opportunity to submit information and arguments.
  • Failure to cooperate and comply with CBP requests may result in CBP applying an adverse inference against the accused party.
  • Failing to respond adequately may result in CBP determining AD/CVD evasion has occurred.

The new CBP regulations (19 CFR Part 165) establish a formal process for how it will consider allegations of AD/CVD evasion. These new regulations are intended to address complaints from US manufacturers that CBP was not doing enough to address AD/CVD evasion schemes and that their investigations were neither transparent nor effective.

AD/CVD duty evasion schemes typically involve falsely declaring the country of origin or misclassifying the product (e.g., “widget from China” could be misreported as “widget from Malaysia” or “wadget from China”).

Petitions filed by domestic manufacturers trigger concurrent investigations by the U.S. Department of Commerce (DOC) and the U.S. International Trade Commission (ITC) to determine whether AD/CVD orders should be issued to impose duties on covered imports. The DOC determines if imports have been dumped or subsidized and sets the initial AD/CVD rates.  CBP then has the responsibility to collect AD/CVD duty deposits and to assess the final amount of AD/CVD duties owed at the rates determined by DOC.

US petitioners have decried U.S. Customs and Border Protection (CBP) as the weak link in enforcing US trade laws, not just because of it often being unable to collect the full amount of AD/CVD duties owed, but also because how CBP responds to allegations of AD/CVD evasion. Parties that provided CBP with information regarding evasion schemes were not allowed to participate in CBP’s investigations and were not notified of whether CBP had initiated an investigation or the results of any investigation.

CBP’s new regulations address many complaints regarding CBP’s lack of transparency in handling AD/CVD evasion allegations. The new regulations provide more details on how CBP procedures are to be conducted, the types of information that will be considered and made available to the public, and the specific timelines and deadlines in CBP investigations:

  • “Interested parties” for CBP investigations now includes not just the accused importers, but also competing importers that submit the allegations.
  • Interested parties now have access to public versions of information submitted in CBP’s investigation of AD/CVD evasion allegations.
  • After submission and receipt of a properly filed allegation, CBP has 15 business day to determine whether to initiate an investigation and 95 days to notify all interested parties of its decision. If CBP does not proceed with an investigation, CBP has five business days to notify the alleging party of that determination.
  • Within 90 days of initiating an investigation, CBP can impose interim measures if it has a “reasonable suspicion” that the importer used evasion to get products into the U.S.

Many questions remain as to how CBP will apply these regulations to actual investigations.  How exactly will parties participate in CBP investigations and what kind of comments will be accepted?  How much of the information in the investigations will be made public? How is “reasonable suspicion” defined and what kind of evidence will be considered? Is it really the case that accused Importers may be subject to interim measures (within 90 days of initiation) even before they receive notice of an investigation (within 95 days of initiation)?

These new AD/CVD duty evasion regulations further evidence the government’s plans to step up its efforts to enforce US trade laws more effectively and importers must – in turn – step up their vigilance to avoid being caught in one of these new traps.

UPCOMING DEADLINES IN SOLAR CELLS FROM CHINA ANTIDUMPING CASE—CHANCE TO GET BACK INTO THE US MARKET AGAIN

There are looming deadlines in the Solar Cells from China Antidumping (“AD”) and Countervailing Duty (“CVD”) case.  In December 2016, US producers, Chinese companies and US importers can request a review investigation in the Solar Cells case of the sales and imports that entered the United States during the review period, December 1, 2015 to November 31, 2016.

December 2016 will be a very important month for US importers because administrative reviews determine how much US importers actually owe in AD and CVD cases. Generally, the US industry will request a review of all Chinese companies. If a Chinese company does not respond in the Commerce Department’s Administrative Review, its AD and CVD rate could well go to the highest level and for certain imports the US importer will be retroactively liable for the difference plus interest.

In my experience, many US importers do not realize the significance of the administrative review investigations. They think the AD and CVD case is over because the initial investigation is over.  Many importers are blindsided because their Chinese supplier did not respond in the administrative review, and the US importers find themselves liable for millions of dollars in retroactive liability.

In February 2016, while in China I found many examples of Chinese solar companies or US importers, which did not file requests for a review investigation in December 2015.  In one instance, although the Chinese company obtained a separate rate during the Solar Cells initial investigation, the Petitioner appealed to the Court.  The Chinese company did not know the case was appealed, and the importer now owe millions in antidumping duties because they failed to file a review request in December 2015.

In another instance, in the Solar Products case, the Chinese company requested a review investigation in the CVD case but then did not respond to the Commerce quantity and value questionnaire.   That could well result in a determination of All Facts Available giving the Chinese company the highest CVD China rate of more than 50%.

The worst catastrophe in CVD cases was Aluminum Extrusions from China where the failure of mandatory companies to respond led to a CVD rate of 374%.  In the first review investigation, a Chinese company came to us because Customs had just ruled their auto part to be covered by the Aluminum Extrusions order.  To make matters worse, an importer requested a CVD review of the Chinese company, but did not tell the company and they did not realize that a quantity and value questionnaire had been sent to them.  We immediately filed a QV response just the day before Commerce’s preliminary determination.

Too late and Commerce gave the Chinese company an AFA rate of 121% by literally assigning the Chinese company every single subsidy in every single province and city in China, even though the Chinese company was located in Guangzhou.  Through a Court appeal, we reduced the rate to 79%, but it was still a high rate, so it is very important for companies to keep close watch on review investigations.

The real question many Chinese solar companies may have is how can AD and CVD rates be reduced so that we can start exporting to the US again.  In the Solar Cells case, the CVD China wide rate is only 15%.  The real barrier to entry is the China wide AD rate of 249%

US AD and CVD laws, however, are considered remedial, not punitive statutes.  Thus, every year in the month in which the AD or CVD order was issued, Commerce gives the parties, including the domestic producers, foreign producers and US importers, the right to request a review investigation based on sales of imports that entered the US in the preceding year.

Thus, the AD order on Solar Cells from China was issued in December 2012.   In December 2016, a Chinese producer and/or US importer can request a review investigation of the Chinese solar cells that were entered, actually imported into, the US during the period December 1, 2015 to November 31, 2016.

Chinese companies may ask that it is too difficult and too expensive to export may solar cells to the US, requesting a nonaffiliated importer to put up an AD of 298%, which can require a payment of well over $1 million USD.  The US AD and CVD law is retrospective.  Thus the importer posts a cash deposit when it imports products under an AD or CVD order, and the importer will get back the difference plus interest at the end of the review investigation.

More importantly, through a series of cases, Commerce has let foreign producers export smaller quantities of the product to use as a test sale in a review investigation if all other aspects of the sale are normal.  Thus in a Solar Cells review investigation, we had the exporter make a small sale of several panels along with other products and that small sale served as the test sale to establish the new AD rate.

How successful can companies be in reviews?  In a recent Solar Cells review investigation, we dropped a dumping rate of 249% to 8.52%, allowing the Chinese Solar Cell companies to begin to export to the US again.

Playing the AD and CVD game in review investigations can significantly reduce AD and CVD rates and get the Chinese company back in the US market again

SOLAR CELLS FROM CHINA CHINESE VERSION OF THE ARTICLE

中国进口太阳能电池反倾销案即将到来的最后期限重返美国市场的机会

针对原产自中国的太阳能电池反倾销(“AD”)和反补贴税(“CVD”)案的期限迫在眉睫。2016年12月,美国制造商、中国公司和美国进口商可以要求当局复审调查于2015年12月1日至2016年11月31日的审查期间进口并在美国销售的太阳能电池案例。

2016年12月将会是美国进口商的一个重要月份,因为行政复审将决定美国进口商在AD和CVD案中的实际欠款。一般上,美国业者会要求当局对所有中国公司进行复审。如果一家中国公司没有对商务部的行政复审做出回应,它很可能被征收最高的AD和CVD税率,美国进口商也将被追溯征收特定进口产品的差额及利息。

就我的经验而言,许多美国进口商并没有意识到行政复审调查的重要性。他们认为初步调查结束后,AD和CVD案也就此结束。许多进口商因为其中国供应商没有对行政复审做出回应,导致他们本身背负数百万美元的追溯性责任而因此措手不及。

2016年2月,我在中国期间发现很多中国太阳能公司或美国进口商没有在2015年12月提出复审调查请求。在其中一个例子中,某中国公司虽然在太阳能电池初步调查期间获得了单独税率,但是申请人向法庭提出了上诉。该中国公司并不知道有关的上诉案,结果进口商由于无法在2015年12月提出复审要求,现在欠下了数百万美元的反倾销税。

在另一个与太阳能产品有关的案例中,某中国公司针对CVD案提出了复审调查的要求,却没有对商务部的数量和价值问卷做出回应。这很可能导致当局根据“所有可得的事实”(All Facts Available)来向该中国公司征收超过50%的最高对华CVD税率。

在众多的CVD案例中,中国进口的铝合金型材所面对的局面最糟糕,受强制调查的公司若无法做出相关回应可被征收374%的CVD税率。一家中国公司在首个复审调查时联系上我们,因为海关刚裁定他们的汽车零部件属于铝合金型材生产项目。更糟的是,一家进口商在没有通知该中国公司的情况下,要求当局对其进行CVD审查,而他们也不晓得当局已经向他们发出一份数量和价值问卷。我们立即在初审的前一天提交了QV做出了回应。

可是这一切都已经太迟了,虽然该中国公司位于广州,商务部却逐一地根据中国的每一个省份和城市的补贴,向该中国公司征收了121%的AFA税率。我们通过向法庭提出上诉,将税率减少到了79%,可是这一税率还是很高,因此所有公司都有必要仔细地关注复审调查。

很多中国太阳能产品企业最想知道的,是如何降低AD和CVD税率,好让我们能再次将产品进口到美国。以太阳能电池的案例来看,当局向中国征收的统一性CVD税率仅为15%。当局向中国征收的统一性AD税率高达249%,这才是真正的入市门槛。

不过,美国的AD和CVD法律被认为是补救性而不是惩罚性法规,所以商务部每年在颁布AD或CVD令后,会在该月份允许包括美国国内生厂商、外国生厂商和美国进口商在内的各方,对上一年在美国销售的进口产品提出复审调查的要求。

因此,针对中国进口的太阳能电池的AD令是在2012年12月颁布的。一家中国生厂商和/或美国进口商可以在2016年12月,要求当局对从2015年12月1日至2016年11月31日期间进口到美国的中国太阳能电池进行复审调查。

中国公司或许会问,要求一家无关联的进口商承担298%的AD税,也就是支付超过1百万美元的费用,以便进口大批的太阳能电池到美国,是否太困难也太贵了。美国的AD和CVD法律是有追溯力的。因此,在AD或CVD令下,进口商在进口产品时会支付现款押金,并在复审调查结束后取回差额加上利息。

更重要的是,在一系列的案例中,商务部已经允许外国生厂商在其它销售方面都正常的情况下,出口少量产品作为试销用途。所以在一宗太阳能电池的复审调查案中,我们让出口商在销售其它产品的同时,出售少量的电池板作为试销用途以建立新的AD税率。

公司在复审案中的成功率有多大?在最近的一宗太阳能电池复审调查案中,我们将倾销率从249%下降到8.52%,协助中国太阳能电池公司重新进口产品到美国。

在复审调查期间了解如何应对并采取正确的策略,可以大幅度降低AD和CVD税率,并让中国公司重返美国市场。

STEEL TRADE CASES

HOT ROLLED STEEL FLAT PRODUCTS

On August 5, 2016, in the attached fact sheet, factsheet-multiple-hot-rolled-steel-flat-products-ad-cvd-final-080816, Commerce issued final dumping determinations in Hot-Rolled Steel Flat Products from Australia, Brazil, Japan, Korea, the Netherlands, Turkey, and the United Kingdom cases, and a final countervailing duty determination of Hot-Rolled Steel Flat Products from Brazil, Korea, and Turkey.

Other than Brazil, Australia and the United Kingdom, most antidumping rates were in the single digits.

In the Countervailing duty case, most companies got rates in single digits, except for POSCO in Korea, which received a CVD rate of 57%.

SEPTEMBER ANTIDUMPING ADMINISTRATIVE REVIEWS

On September 8, 2016, Commerce published the attached Federal Register notice, pdf-published-fed-reg-notice-oppty, regarding antidumping and countervailing duty cases for which reviews can be requested in the month of September. The specific antidumping cases against China are: Crawfish Tailmeat, Foundry Coke, Kitchen Appliance Shelving and Racks, Lined Paper Products, Magnesia Carbon Bricks, Narrow Woven Ribbons, Off the Road Tires, Flexible Magnets, and Steel Concrete Reinforcing Bars.   The specific countervailing duty cases are: Kitchen Appliance Shelving and Racks, Narrow Woven Ribbons, Off the Road Tires, Flexible Magnets, and Magnesia Carbon Bricks.

For those US import companies that imported : Crawfish Tailmeat, Foundry Coke, Kitchen Appliance Shelving and Racks, Lined Paper Products, Magnesia Carbon Bricks, Narrow Woven Ribbons, Off the Road Tires, Flexible Magnets, and Steel Concrete Reinforcing Bars during the antidumping period September 1, 2015-August 31, 2016 or the countervailing duty period of review, calendar year 2015, the end of this month is a very important deadline. Requests have to be filed at the Commerce Department by the Chinese suppliers, the US importers and US industry by the end of this month to participate in the administrative review.

This is a very important month for US importers because administrative reviews determine how much US importers actually owe in AD and CVD cases. Generally, the US industry will request a review of all Chinese companies. If a Chinese company does not respond in the Commerce Department’s Administrative Review, its antidumping and countervailing duty rate could well go to the highest level and for certain imports the US importer will be retroactively liable for the difference plus interest.

STOP IP INFRINGING PRODUCTS FROM CHINA AND OTHER COUNTRIES USING CUSTOMS AND SECTION 337 CASES

With Amazon and Ebay having increased their efforts at bringing in Chinese sellers and with more and more Chinese manufacturers branching out and making their own products, the number of companies contacting our China lawyers here at Harris Moure about problems with counterfeit products and knockoffs has soared. If the problem involves infringing products being imported into the United States, powerful remedies are available to companies with US IP rights if the infringing imports are products coming across the US border.

If the IP holder has a registered trademark or copyright, the individual or company holding the trademark or copyright can go directly to Customs and record the trademark under 19 CFR 133.1 or the copyright under 19 CFR 133.31.  See https://iprr.cbp.gov/.

Many years ago a US floor tile company was having massive problems with imports infringing its copyrights on its tile designs.  Initially, we looked at a Section 337 case as described below, but the more we dug down into the facts, we discovered that the company simply failed to register its copyrights with US Customs.

Once the trademarks and copyrights are registered, however, it is very important for the company to continually police the situation and educate the various Customs ports in the United States about the registered trademarks and copyrights and the infringing imports coming into the US.  Such a campaign can help educate the Customs officers as to what they should be looking out for when it comes to identifying which imports infringe the trademarks and copyrights in question.  The US recording industry many years ago had a very successful campaign at US Customs to stop infringing imports.

For those companies with problems from Chinese infringing imports, another alternative is to go to Chinese Customs to stop the export of infringing products from China.  The owner of Beanie Babies did this very successfully having Chinese Customs stop the export of the infringing Beanie Babies out of China.

One of the most powerful remedies is a Section 337 case, which can block infringing products, regardless of their origin, from entering the U.S.  A Section 337 action (the name comes from the implementing statute, 19 U.S.C. 1337) is available against imported goods that infringe a copyright, trademark, patent, or trade secret. But because other actions are usually readily available to owners of registered trademarks and copyrights, Section 337 actions are particularly effective for owners of patents, unregistered trademarks, and trade secrets. Although generally limited to IP rights, in the ongoing Section 337 steel case, US Steel has been attempting to expand the definition of unfair acts to include hacking into computer systems and antitrust violations.

The starting point is a section 337 investigation at the US International Trade Commission (“ITC”).  If the ITC finds certain imports infringe a specific intellectual property right, it can issue an exclusion order and U.S. Customs will then keep out all the infringing imports at the border.

Section 337 cases have been brought and exclusion orders issued against a vast range of different products: from toys (Rubik’s Cube Puzzles, Cabbage Patch Dolls) to footwear (Converse sneakers) to large machinery (paper-making machines) to consumer products (caskets, auto parts, electronic cigarettes and hair irons) to high tech products (computers, cell phones, and semiconductor chips).

Section 337 is a hybrid IP and trade statute, which requires a showing of injury to a US industry. The injury requirement is very low and can nearly always be met–a few lost sales will suffice to show injury. The US industry requirement can be a sticking point. The US industry is usually the one company that holds the intellectual property right in question. If the IP right is a registered trademark, copyright or patent, the US industry requirement has been expanded to not only include significant US investment in plant and equipment, labor or capital to substantial investment in the exploitation of the IP right, including engineering, research and development or licensing.  Recently, however, the ITC has raised the US industry requirement to make it harder for patent “trolls” or Non Practicing Entities to bring 337 cases.

Section 337 cases, however, are directed at truly unfair acts.  Patents and Copyrights are protected by the US Constitution so in contrast to antidumping and countervailing duty cases, respondents in these cases get more due process protection.  The Administrative Procedures Act is applied to Section 337 cases with a full trial before an Administrative Law Judge (“ALJ”), extended full discovery, a long trial type hearing, but on a very expedited time frame.

Section 337 actions, in fact, are the bullet train of IP litigation, fast, intense litigation in front of an ALJ.  The typical section 337 case takes only 12-15 months. Once a 337 petition is filed, the ITC has 30 days to determine whether or not to institute the case. After institution, the ITC will serve the complaint and notice of investigation on the respondents. Foreign respondents have 30 days to respond to the complaint; US respondents have only 20 days. If the importers or foreign respondents do not respond to the complaint, the ITC can find the companies in default and issue an exclusion order.

The ITC’s jurisdiction in 337 cases is “in rem,” which means it is over the product being imported into the US. This makes sense: the ITC has no power over the foreign companies themselves, but it does have power over the imports. What this means in everyday terms is that unlike most regular litigation, a Section 337 case can be effectively won against a Chinese company that 1) is impossible to serve, 2) fails to show up at the hearing, and 3) is impossible to collect any money from.

The remedy in section 337 cases is an exclusion order excluding the respondent’s infringing products from entering the United States. In special situations, however, where it is very easy to manufacture a product, the ITC can issue a general exclusion order against the World.  In the Rubik’s Cube puzzle case, which was my case at the ITC, Ideal (the claimant) named over 400 Taiwan companies as respondents infringing its common law trademark. The ITC issued a General Exclusion Order in 1983 and it is still in force today, blocking Rubik’s Cube not made by Ideal from entering the United States. In addition to exclusion orders, the ITC can issue cease and desist orders prohibiting US importers from selling products in inventory that infringe the IP rights in question

Section 337 cases can also be privately settled, but the settlement agreement is subject to ITC review. We frequently work with our respondent clients to settle 337 cases early to minimize their legal fees. In the early 1990s, RCA filed a section 337 case against TVs from China. The Chinese companies all quickly settled the case by signing a license agreement with RCA.

Respondents caught in section 337 cases often can modify their designs to avoid the IP right in question. John Deere brought a famous 337 case aimed at Chinese companies that painted their tractors green and yellow infringing John Deere’s trademark. Most of the Chinese respondents settled the case and painted their tractors different colors, such as blue and red.

Bottom Line: Section 337 cases are intense litigation before the ITC, and should be considered by U.S. companies as a tool for fighting against infringing products entering the United States. On the flip side, US importers and foreign respondents named in these cases should take them very seriously and respond quickly because exclusion orders can stay in place for years.

 

If you have any questions about these cases or about the antidumping or countervailing duty law, US trade policy, trade adjustment assistance, customs, or 337 IP/patent law in general, please feel free to contact me.

Best regards,

Bill Perry

US CHINA TRADE WAR–PRESIDENTIAL TRADE POLITICS, TPP, COMMERCE AND ITC PUSH PROTECTIONISM

Washington Monument US Capital Evening Washington DCTRADE IS A TWO WAY STREET

“PROTECTIONISM BECOMES DESTRUCTIONISM; IT COSTS JOBS”

PRESIDENT RONALD REAGAN, JUNE 28, 1986

US CHINA TRADE WAR AUGUST 12, 2016

Dear Friends,

Trade continues to be at the center of the Presidential primary with a possible passage of the Trans Pacific Partnership during the Lame Duck Session.  The blog post contains the fourth and fifth articles of a several part series on how weak free trade arguments have led to the sharp rise of protectionism of Donald Trump and Bernie Sanders and the now possible demise of the Trans Pacific Partnership (“TPP”).

The first article outlined the problem and why this is such a sharp attack on the TPP and some of the visceral arguments against free trade.  The second article explored in depth the protectionist arguments and the reason for the rise of Donald Trump and Bernie Sanders.  The third article explored the weak and strong arguments against protectionism.

In this blog post, the fourth article discusses one of the most important arguments for the TPP—National Security.  The fifth article discusses why the Commerce Department’s and the US International Trade Commission’s (ITC) policy in antidumping and countervailing duty cases has led to a substantial increase in protectionism and national malaise of international trade victimhood.

Commerce finds dumping in 95% of the cases, and the ITC extends antidumping and countervailing duty orders for 20 to 30 years to protect one company US industries.  Those policies dramatically increase the perception of international trade victimhood—we US companies cannot compete because all imports are unfairly traded, a perception that is simply false.

The final article in my next blog post will be about the only trade program that works and saves the companies and the jobs that go with them—The Trade Adjustment Assistance for Firms/Companies program.  The Article will describe the attempts by both Congress and the Obama Administration to kill the program, which may, in fact, have resulted in the sharp rise in protectionism in the US.

Congress must again restore the trade safety net so that Congress can again vote for free trade agreements and the United States can return to its leadership in the Free Trade area.  The Congress has to fix the trade situation now before the US and the World return to the Smoot Hawley protectionism of the 1930s.

In addition, set forth are articles on developments involving steel trade litigation, including the restart of the Section 337 Steel Trade Case, and antidumping and countervailing duty reviews in August against Chinese companies.  Just recently on this blog, I published posts on the importance of importer of record in antidumping and countervailng duty cases and the False Claims Act hammer against transshipment

If anyone has any questions or wants additional information, please feel free to contact me at my new e-mail address bill@harrismoure.com.

Best regards,

Bill Perry

TRADE PROTECTIONISM IS STILL A VERY BIG TOPIC OF THE PRESIDENTIAL ELECTION BUT THE TPP MAY NOT DIE

Recently a reader of this blog commented that he believes electing Hilary Clinton will mean that the Trans Pacific Partnership (“TPP”) will die.  In my opinion, just the opposite is the case.  Although Hilary Clinton states that she is opposed to the TPP, President Obama is not and continues even recently to push passage of the TPP during the Lame Duck Session, that is the Congressional session after the President election.

I just returned from a trip to Washington DC, which included visits to various Congressional offices on Capitol Hill, and my opinion was confirmed by Congressional trade staff.  Many trade staff, especially in the Democratic offices, believe that TPP will come up in the Lame Duck session to take the issue off of a President Clinton’s desk and many believe it will pass.

On August 11,2016, at a campaign rally in Warren, Michigan, Clinton stated:

“My message to every worker in Michigan and across America is this: I will stop any trade deal that kills jobs or holds down wages, including the Trans-Pacific Partnership. I oppose it now, I’ll oppose it after the election and I’ll oppose it as president.  As a senator, I fought to defend New York’s manufacturers and steel-makers from unfair Chinese trading practices. And I opposed the only multilateral trade deal that came before the Senate while I was there, because it didn’t meet my high bar.”

Hilary Clinton, however, is being pushed to give her approval to the TPP. On July 27, 2016, the Wall Street Journal in an editorial entitled “Clinton’s Trade Opportunism” spoke with open dismay about the protectionist trade arguments coming out of both parties in the Presidential primary.

The cause of open trade is at a low ebb amid the rise of the Sanders-Warren progressives and the Trump tariff right, plus a lack of leadership in Washington. The latest trade liberalizer to recant is Tim Kaine, who said as recently as last Thursday that the Pacific Rim trade deal is “a significant improvement over the status quo,” only to declare his opposition after becoming Mrs. Clinton’s running mate.

Mr. Trump is now assailing Mr. Kaine for Herbert Hoover-come-lately hypocrisy, and he has a point. As Secretary of State, Mrs. Clinton helped negotiate the yet-to-be-ratified Trans Pacific Partnership and gave some 45 public speeches for TPP.  Then to fend off the Sanders challenge, she renounced the final TPP text in October 2015, and getting tough on China, outsourcing and other specters became stump sta­ples. By opposing TPP, she’s running against the last major initiative of a President of her own party, and the Philadelphia Democrats don’t seem to mind.

More remarkable is that no one takes her statements at face value. Her left-right critics think she’s setting up a trade double cross, while corporate CEOs assure us that she is merely making a tactical TPP feint and after the election she’ll push it through Congress.

This perception of trade insincerity does match the Clinton record. In the 1990s her husband promoted the North American Free Trade Agreement and most-favored nation status for China, and she endorsed both in her 2003 memoir ”Living History.”

In the 2007-2008 Democratic primaries, Mrs. Clinton said she would renegotiate the “mistake” that was Nafta, promised to defeat a pending deal with Colombia, and told an AFL· CIO town hall that a U.S.-South Korea pact would “put American jobs at risk.” At Foggy Bottom, she then lobbied Congress to pass the Colombia and Korea agreements, and she deleted her Nafta do-over faster than the emails on her private server.

The Democrat is now bowing deeper than ever to protectionist forces. After Mr. Trump gave an America First speech in June, the Clinton campaign responded in a press release that his rhetoric was “reckless” and his “incoherent approach” would “throw our economy into a recession.” Except for those minor details, the campaign added that he was stealing “Hillary’s best ideas,” which “seem to have moved straight from Hillary Clinton’s policy fact sheets to his teleprompter.”

So is the inner Hilary now a junior -achievement Donald? Who knows? Maybe this time she really has rolled left along with the Democratic Party and she means what she says, in which case she enjoys no particular pro-trade or pro­growth advantage over Mr. Trump.

But if Mrs. Clinton is merely triangulating again, then please spare us the lectures about “recklessness.” Other than pacifying the Warren-Sanders wing, Mrs. Clinton’s new posture gains her little or no 2016 advantage. She can’t outbid Mr. Trump on protectionism, one of the few policy matters that has sustained his attention since the 1980s, and his subtlety-free TPP opposition has already locked down most single-issue voters.

Meanwhile, Mrs. Clinton is damaging prospects for the 12-nation Pacific deal, if only by validating the claims of its opponents. This will make it harder for her to pass it if she is elected, especially if she lacks the will to face down the anti-trade caucus she is now indulging.

Assuming Mrs. Clinton still believes as she used to claim that TPP is critical for U.S. competitiveness and to balance China’s growing influence in the Asia-Pacific, she is undercutting its already dire chances in Congress. She is also knee-capping Japanese Prime Minister Shinzo Abe, who has made TPP central to his economic reform agenda.

Nearly seven of 10 voters tell pollsters they think Mrs. Clinton is untrustworthy, and the reason is no more mysterious than her political character. She’ll say or do anything to get elected, even if means “evolving” from pro­trade first lady to anti-trade presidential candidate to pro-trade Secretary of State to anti­trade candidate back to allegedly pro-trade President.

Mrs. Clinton’s cheerleaders says she’s the responsible candidate who knows better, but the evidence for this is awfully thin.

Although Hilary Clinton is saying she is opposed to the TPP, President Obama is not.  He continues to push for passage of the TPP during the lame duck session in Congress after the Presidential election.  On August 3, 2016, the Wall Street Journal in an article about the meeting between the President and the Singapore Prime Minister entitled, “President Holds the Line on TPP”, President Obama said he is still committed to passing the TPP this year because it “levels the playing field for our workers and helps to ensure countries abide by strong labor and environmental rules.”

The President admitted that the political environment is challenging, but went on to state he has a “better argument”:

”There’s a real problem but the answer is not cutting off globalization. The answer is how do we make sure that globalization, technology, automation-those things work for us, not against us. TPP is designed to do precisely that.”

Singapore Prime Minister Lew Hsien-Loong stated at the conference that he hopes the TPP will pass this year during the lame duck session, stating that not only was the economic impact of the trade agreement at stake, but also America’s leadership:

In terms of economic benefits, the TPP is a big deal.  I think in terms of America’s engagement of the region, you have put [your] reputation on the line. It is the big thing that America is doing in the Asia Pacific [region] in the Obama administration.”

Your partners, your friends who have come to the table, who have negotiated, each one of them has overcome some domestic political objection, some sensitivity, some political cost to come to the table and make this deal. If at the end, waiting at the altar, the bride doesn’t arrive, I think that people are going to be very hurt.”

Although her campaign rhetoric is anti-TPP, in the past Hilary Clinton has stated that she is not clearly opposed to the TPP.  She is opposed to it as written.  But with President Obama pushing for its passage before the inauguration, if Clinton wins, with a wink and a nod from Clinton, Obama will try to push it through in the lame duck session to take the TPP issue off of Clinton’s desk.  Since passage in Congress requires only a majority vote, many Congressional Trade staff in Democratic offices believe the TPP would pass in a lame duck session.

But if Donald Trump wins, all bets are off.  If he wins, no Republican will buck him to pass the TPP.  During the primary when Paul Ryan, Republican Speaker of the House, faced a challenger against the TPP, he recently stated that the TPP will not pass Congress during Obama’s term, and that Ryan has “problems” with the TPP as it is currently drafted.  Ryan stated:

“Obviously I’m for trade agreements.  I wrote [the fast-track trade bill] and I got it passed. But I think they made some pretty big mistakes in how they negotiated it and they gotta fix those. And I don’t know when that’s going to happen. . . We don’t have the votes for it now, and I believe they have to fix some of these things. And I don’t know if and when they’re going to be able to fix those things.”

But Donald Trump too is being pushed on the trade issue.  On August 9, 2016 the Wall Street Journal in an Editorial “Trump on the Economy” gave Trumps’s August 8th economic speech at the Detroit Economic Club high marks, but then pointed out “the poison pill of trade protectionism.”  The Journal went on to state:

Mr. Trump believes that a trade deficit equals lost American jobs, when there is no such connection.  The U.S. tends to run bigger trade deficits when the economy is strong, and vice versa.  By that logic the fastest way to cut the trade deficit is to have a recession, but that would only cost more jobs.

Raising taxes at the border -aka tariffs—wouldn’t keep jobs in the U.S. but would reduce the standard of living for U.S. consumers.  His promise to punish U.S. companies for investing overseas could end up costing more jobs if it caused companies to relocate more of their operations overseas to avoid the punishment.  Global supply chains are crucial to preserving U.S. manufacturing jobs.

The question with Mr. Trump is how much his trade agenda would interfere with his pro-growth domestic policies.  If Republicans in Congress blocked his worst trade instincts, the damage could be small.  If he used executive powers to wage a trade war, look out.  With the mercurial New Yorker, you never know.

On August 3, 2016, the same day of the Obama/Lee Meeting, six Republican representatives came out against taking up the TPP during the lame duck session. In a letter written by Republican Candice Miller of Michigan along with five other Republican representatives, the lawmakers state:

“TPP will set the template for trade for the next generation.  It will not only impact the current 12 member nations but also countries like South Korea and China that could join in the future. A ‘lame duck’ Congress should not vote on an agreement of this consequence — it would be an end-run around the American people immediately following an election.”

The key concern of the members is currency manipulation, further stating:

“The TPP does not include enforceable rules to stop currency manipulators. Once America has given up the leverage of gaining full access to its consumer markets, the possibility of prohibiting currency manipulation — or reaching equitable agreements in many other areas — will be lost forever.”

The letter states that “a great deal more work” has to be done to bring the TPP up to standard.

One Congressman Dave Trott of Michigan issued his own statement with the letter saying that he believes the TPP can work for the U.S. economy, but Obama has run out of time to fix the agreement and the issue should be passed to the next President:

“The President should respect the voters’ choice of a new chief executive and allow his successor to work with Congress to negotiate a stronger agreement that puts Michigan workers and businesses first,”

THE KEY ISSUE MISSED IN THE TPP DEBATE IS NATIONAL SECURITY—TRADE WARS CAN LEAD TO REAL WARS

But the key issue missed in the TPP debate is illustrated by Prime Minister Lee’s statement above.  America’s reputation is on the line.  The TPP is a “big thing” that America is doing in the Asia-Pacific.

On July 10, 2014, General David Petraeus stated regarding the ongoing TPP negotiations:

“The consequences for Washington getting the TPP right are huge, opening some of the world’s fastest-growing markets to more U.S. exports, improving American competitiveness, growing the global middle class, and fostering the prosperous, open and rules-based Asia that is in everyone’s interest.

But the fate of the trade pact is also tied closely to America’s national security.

Indeed, a paralyzed or collapsed TPP process would be seen by our allies, partners and adversaries across Asia as a body blow not only to the credibility of America’s economic leadership, but to our geopolitical position more broadly, deepening doubts about Washington’s staying power and strength. And this, in turn, would carry spillover effects in the security realm, exacerbating military tensions and territorial rivalries and ultimately raising the threat of conflict.”

On May 16, 2016 in a Wall Street Journal Article entitled “Abandoning the Pacific pact will tell America’s Asian allies that the U.S. is yielding to China. They will accommodate accordingly” Robert Zoellick, the former United States Trade Representative under President Bush, stated:

“In an uncertain world, America’s future security depends on both upgrading military capabilities and expanding economic opportunities. The Trans-Pacific Partnership, a trade accord among 12 countries accounting for almost 40% of the global economy, draws together these two strands of strategy. . . .

Strategists have long recognized the interrelationship between economics and security. . . .

The TPP supplies the economic foundation for this new Asia-Pacific security network. In this region, economics, trade and investment are the coins of the diplomatic realm. TPP recognizes both America’s concrete economic interests in Asia and demonstrates U.S. steadfastness. If the U.S. abandons TPP, our Asian allies and partners will perceive America as yielding to China, and they will accommodate accordingly. . . .

The U.S. strategy is designed to shape decisions in Beijing, not contain China. The U.S. and its partners have benefited from China’s amazing growth. Over the past three decades, China’s economic reformers have imported rules of the international trading system to transform internal markets. China now needs to make more complex supply-side reforms to increase consumption and growth led by the private sector. The U.S.-led network in the Asia Pacific, of which TPP is a vital part, welcomes China’s peaceful integration while discouraging aggression.

America’s Founding Fathers, and every generation since, recognized that economic strength at home is vital for U.S. security. In the 19th century, the U.S. became a Pacific power. The 20th century demonstrated that conflicts in East Asia can threaten the U.S., but also that U.S. security can underpin Asia’s prosperity. The U.S. now needs to create an economic and security network in the Asia-Pacific for the 21st century. Historians will look back on America’s embrace of TPP—or its failure to do so—as a turning point in U.S. global strategy.”

As we look at history, including the reasons for World War 2, one cause was trade conflict.  If trade conflict is not controlled and handled correctly, it can lead to military conflict and that is a very big reason for the TPP.

When I was at the US International Trade Commission as a young attorney, Catherine Bedell a former ITC Chairman, who had been a Congresswoman from Oregon, came by to give a speech, clearly stating that we were not just involved in economic conflicts.  Our job was really dealing with war and peace.

The sharp rise of US protectionism threatens the foundation of peace that has been in place since World War 2.  If every country goes nationalistic, that is when real wars can start.

ANOTHER REASON FOR THE SHARP RISE IN TRADE PROTECTIONISM—THE COMMERCE DEPARTMENT AND THE INTERNATIONAL TRADE COMMISSION

In addition to the weak free trade arguments, described in my blog post, another reason for the sharp rise in protectionism are the Commerce Department’s (“Commerce”) and the US International Trade Commission’s (“ITC”) determinations in antidumping and countervailing duty cases.  By its own regulation, Commerce finds dumping and subsidization in almost every case, and the ITC in Sunset Review Investigation leaves antidumping and countervailing duty orders in place for as long as 20 to 30 years, often to protect single company US industries, resulting in permanent barriers to imports and the creation of monopolies.

Many readers may ask why should people care if prices go up a few dollars at WalMart for US consumers?  Jobs remain.  As mentioned in past newsletters, however, out of the 130 plus antidumping and countervailing duty orders against China, more than 80 of the orders are against raw materials, chemicals, metals and steel, that go directly into downstream US production.

The Magnesium Antidumping order has led to the demise of the US Magnesium Dye Casting Industry and the movement of the light weight auto parts industry to Canada.  An antidumping order against Sulfanilic Acid, which has been in place for more than 30 years to protect a one company US industry, resulted in injury to the US optical brightener industry.  An antidumping order against electrolytic manganese dioxide, in part, resulted in the closure of Panasonic’s US battery factory.

AD and CVD orders do not save the US industries.  They can save one company US industries, but only by substantially injuring, if not destroying, their customers, the downstream industries.  Antidumping and countervailing duty orders against raw material inputs provide substantial incentive for production and manufacturing companies in the downstream industries to leave the United States taking their jobs with them to find cheaper raw material inputs.  What nontariff trade barriers did to Japan, the US is now doing to itself through its AD and CVD law.

Another problem with the Commerce Department’s methodology of finding dumping in almost 100% of the cases is that it fuels the myth advocated by the Steel industry, the Union, Donald Trump himself and Hilary Clinton herself that all imports are dumped and all imports are subsidized and the general feeling of global trade victimhood.  We US companies and workers simply cannot compete because all imports are unfairly traded, dumped and subsidized, so the answer is put up the protectionist walls.

Both Hilary Clinton and Donald Trump believe that they have to crack down on all unfair trade, which has been the catch word for dumping and subsidization.  In their acceptance speeches at their respective conventions, both candidates emphasized the need to get tough on unfair trade.  During the Primary, Clinton stated:

As President, I’ll aggressively pursue trade cases and impose consequences when China breaks the rules by dumping its cheap products in our markets. And I’ll oppose efforts to grant China so-called “market economy” status, which would weaken our tools for dealing with this behavior.  I’ve gone toe-to-toe with China’s top leaders on some of the toughest issues we face. I know how they operate – and they know that if I’m President, the games are going to end.

Donald Trump has been more explicit stating in his acceptance speech at the Republican convention:

We are going to enforce all trade violations, including through the use of taxes and tariffs, against any country that cheats.

This includes stopping China’s outrageous theft of intellectual property, along with their illegal product dumping, and their devastating currency manipulation.

But the problem is that the Commerce Department has defined dumping so that 95% of the products imported into the United States are dumped.  How does Commerce do it?

19 U.S.C § 1673d(c)(5)(B) of the Antidumping Law provides:

“If the estimated weighted average dumping margins established for all exporters and producers individually investigated are zero or de minimis margins, or are [based on AFA], the administering authority may use any reasonable method to establish the estimated all-others rate for exporters and producers not individually investigated . . . .”

Thus only mandatory companies, those companies individually investigated in an antidumping case, have the right to get zero, no dumping margins.  Only those mandatory respondent companies have the right to show that they are not dumping.  If a company gets a 0 percent, no dumping determination, in the initial investigation, the antidumping order does not apply to that company.

For all other foreign exporters, the Commerce Department may use any other reasonable method to calculate antidumping rates.  As the Department states in numerous cases, to non-mandatory companies not individually investigated, the Department assigns “a weighted-average of the rates individually calculated for the mandatory respondents, excluding any rates that were zero, de minimis, or based entirely on facts available . . . .”

What does this dense statutory language mean in practice?

It means if a foreign company, including a Chinese company, is not selected as a mandatory company to be individually investigated in an antidumping case, it will get a positive dumping rate, which is the average of dumping rates of those few companies selected as mandatory respondents, not including 0% dumping rates.

How many companies does Commerce generally select in antidumping cases against China and other countries to individually investigate? Recently, it has been two or three companies out of 10s and 100s of respondent companies involved in the case.

So if there are more than two or three respondent companies in an antidumping case, which is the reality in most cases, by its own law and practice, Commerce will reach an affirmative dumping determination.  All three mandatory companies may get 0% dumping rates, but all other companies get a positive dumping rate.  Thus almost all imports are by the Commerce Department’s definition dumped.

Under the Commerce Department’s methodology all foreign companies are guilty of dumping and subsidization until they prove their innocence, and almost all foreign companies never have the chance to prove their innocence.

So the issue is not whether the foreign company is dumping, the real issue is what is the dumping rate going to be?  Commerce has many methodologies to jack up antidumping rates.  In antidumping cases against China, Commerce treats China as a nonmarket economy country and, therefore, refuses to use actual prices and costs in China to determine dumping, which makes it very easy for Commerce to find very high dumping rates.

In market economy cases, Commerce has used zeroing to create antidumping rates.  What is zeroing?  In simple terms, dumping is first defined as selling products at prices in the United States below prices in the foreign home market.  Let’s assume a foreign producer sells the same products but at different times during the investigation.  Early in the investigation, the foreign company makes two sales at the same price in the home market and the US market of $2 per widget.  Later in the investigation period, it sells two widgets one in the home market at $4 and one in the US at $4.  No dumping right?  Wrong answer.

By zeroing, Commerce averages the prices in the foreign market and gives no credit for negative margins.  So the quote Normal Value, which is the average of the two prices, is $3 a widget.  When that Normal Value is compared to the $4 US price that is no dumping, which should result in a -1 dumping margin.  But Commerce does not give companies credit for not dumping.  Through zeroing no dumping margins just become 0s.  But when the normal value is compared to the $2 price, that is dumping and no credit is given for the negative dumping margin.  Because of zeroing, even though at the time the specific sales in question were made there was no dumping, Commerce creates a dumping margin.

The World Trade Organization has determined that zeroing is contrary to WTO Antidumping Agreement, but that has not stopped Commerce. It still uses zeroing in many cases, and recently came up with a new methodology “targeted dumping” to allow it to continue to use zeroing.  The WTO recently ruled that the “targeted dumping” methodology is contrary to the WTO Antidumping Agreement, but that will not stop Commerce.  Its duty is to find dumping margins even when they do not exist.

The impact of the Commerce Department’s artificial methodology is further exaggerated by the US International Trade Commission (“ITC”).  Although in the initial investigation, the ITC will go negative, no injury, in 30 to 40% of the cases, once the antidumping order is in place it is almost impossible to persuade the ITC to lift the antidumping order in Sunset Review investigations.

So antidumping orders, such as Pressure Sensitive Tape from Italy (1977), Prestressed Concrete Steel Wire Strand from Japan (1978), Potassium Permanganate from China (1984), Cholopicrin from China (1984), and Porcelain on Steel Cookware from China (1986), have been in place for more than 30 years.  In 1987 when I was at the Commerce Department, an antidumping case was filed against Urea from the entire Soviet Union.  Antidumping orders from that case against Russia and Ukraine are still in place today.

In addition, many of these antidumping orders, such as Potassium Permanganate, Magnesium, Porcelain on Steel Cookware, and Sulfanilic Acid, are in place to protect one company US industries, creating little monopolies in the United States.

Under the Sunset Review methodology, the ITC never sunsets antidumping and countervailing duty orders in many Reviews unless the US industry no longer exists.

By defining dumping the way it does, both Commerce and the ITC perpetuate the myth of Globalization victimhood.  We US companies and workers simply cannot compete against imports because all imports are dumped or subsidized.  But is strangling downstream industries to protect one company US industries truly good trade policy?  Does keeping Antidumping orders in place for 20 to 30 years really save the US industry and make the US companies more competitive?  The answer simply is no.

Protectionism does not work but it does destroy downstream industries and jobs.  Protectionism is destructionism. It costs jobs.

The problem with protected industries was best stated by President Ronald Reagan himself in his June 1986 speechBETTER COPY REAGAN IT SPEECH:

“the protected industry is so listless and its competitive instincts so atrophied that it can’t stand up to the competition. And that, my friends, is when the factories shut down and the unemployment lines start.”

Meeting all competition is the only thing that keeps companies strong.  Protection, such as that given to the US Steel industry, simply makes the companies weaker until the companies die on their own.

But Globalization victimhood could well lead to the demise of the Trans Pacific Partnership (“TPP”) and the loss of benefits to 100s, if not, thousands of US companies and industries, including agriculture, high tech and certain manufacturing companies.  Perception is reality in the United States, and the perception created by Commerce and the ITC is that every import is dumped and subsidized, and, therefore, the US simply cannot afford to sign another trade agreement.

In my next blog post, the final article in this series is the real answer to trade problems—Trade Adjustment Assistance for Firms/Companies, and how this program can be used to save trade injured US companies and the jobs that go with them without any impact on downstream industries whatsoever.  TAA for Firms/Companies creates jobs, not destroy them.

The first step to getting into the program, however, is to reject Globalization victimhood.  Those companies that take that step succeed and they succeed very well keeping the jobs in the United States where they belong, while those companies that fail to reject the mindset will die.

STEEL TRADE CASES

ITC RESTARTS STEEL 337 CASE

On August 5, 2016, in the attached notice, ITC STEEL 337 NOTICE, the ITC reversed the Order of the Administrative Law Judge suspending the 337 Steel investigation and started the investigation moving again.  In the notice, the ITC stated it would give its reasons in a forthcoming opinion.

On May 26, 2016, the US International Trade Commission (“ITC”) initiated the section 337 case against all Chinese steel imports on the basis of three primary counts:

“(1) a conspiracy to fix prices and control output and export volumes, in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1; (2) the misappropriation and use of U.S. Steel’s trade secrets; and (3) the false designation of origin or manufacturer, in violation of the Lanham Act, 15 U.S.C. § 1125(a).”

AUGUST ANTIDUMPING ADMINISTRATIVE REVIEWS

On August 5, 2016, Commerce published the attached Federal Register notice, FED REG AS PUBLISHED, regarding antidumping and countervailing duty cases for which reviews can be requested in the month of August. The specific antidumping cases against China are: Ironing Tables, Laminated Woven Sacks, Light-Walled Rectangular Pipe and Tube, Passenger Vehicle and Light Truck Tires, Petroleum Wax Candles, Polyethylene Retail Carrier Bags, Sodium Nitrite, Steel Nails, Sulfanilic Acid, Tetrahydrofurfuryl Alcohol, and Tow Behind Lawn Groomers.   The specific countervailing duty cases are: Laminated Woven Sacks, Light-Walled Rectangular Pipe and Tube, Passenger Vehicle and Light Truck Tires and Sodium Nitrite,

For those US import companies that imported : Ironing Tables, Laminated Woven Sacks, Light-Walled Rectangular Pipe and Tube, Passenger Vehicle and Light Truck Tires, Petroleum Wax Candles, Polyethylene Retail Carrier Bags, Sodium Nitrite, Steel Nails, Sulfanilic Acid, Tetrahydrofurfuryl Alcohol, and Tow Behind Lawn Groomers during the antidumping period August 1, 2015-July 31, 2016 or the countervailing duty period of review, calendar year 2015, the end of this month is a very important deadline. Requests have to be filed at the Commerce Department by the Chinese suppliers, the US importers and US industry by the end of this month to participate in the administrative review.

This is a very important month for US importers because administrative reviews determine how much US importers actually owe in AD and CVD cases. Generally, the US industry will request a review of all Chinese companies. If a Chinese company does not respond in the Commerce Department’s Administrative Review, its antidumping and countervailing duty rate could well go to the highest level and for certain imports the US importer will be retroactively liable for the difference plus interest.

In my experience, many US importers do not realize the significance of the administrative review investigations. They think the AD and CVD case is over because the initial investigation is over.  Many importers are blindsided because their Chinese supplier did not respond in the administrative review, and the US importers find themselves liable for millions of dollars in retroactive liability.

While in China recently, I found so many examples of Chinese solar companies or US importers, which did not file requests for a review investigation.  In one instance, although the Chinese companies obtained separate rates during the initial investigation, the Petitioner appealed to the Court.  Several Chinese companies and US importers did not know the case was appealed, and the importers now owe millions in antidumping duties because they failed to file a request for a review investigation in December 2015.

 

If you have any questions about these cases or about the antidumping or countervailing duty law, US trade policy, trade adjustment assistance, customs, or 337 IP/patent law in general, please feel free to contact me.

Best regards,

Bill Perry

 

 

 

 

 

IMPORTERS OF RECORD AND FALSE CLAIMS ACT HAMMER AGAINST TRANSSHIPMENT

House of Representatives US Capitol North Side Night Stars WashTRADE IS A TWO WAY STREET

“PROTECTIONISM BECOMES DESTRUCTIONISM; IT COSTS JOBS”

PRESIDENT RONALD REAGAN, JUNE 28, 1986

US CHINA TRADE WAR AUGUST 3, 2016 

Dear Friends,

Set forth below are two more articles on importer of record liability for antidumping and countervailing duties and the False Claims Act hammer against illegal transshipment around US antidumping and countervailing duties.

Best regards,

Bill Perry

IMPORTERS OF RECORD LIABILITY FOR ANTIDUMPING AND COUNTERVAILING DUTIES

The US Importer of Record is liable for antidumping and countervailing duties. The Importer of Record is the company listed in Block 26 of the U.S. Customs 7501 form. When I told a former US Senator this, he responded by saying he “thought the Chinese company was liable for the duties, not the US company.”

Under US Antidumping, Countervailing Duty and Customs laws, the Importer of Record must exercise reasonable care in importing products and in filling out Customs forms. The Importer of Record must correctly state the products’ country of origin and also whether Antidumping and Countervailing duties apply to the imported products. A knowingly false statement on a Customs form constitutes criminal fraud.

If AD or CVD rates go up in a subsequent review investigation, the Importer of Record is retroactively liable for the difference, plus interest. Retroactive liability for AD and CVD cases is a particular problem involving goods imported from China, because the Commerce Department treats China as a nonmarket economy (“NME”) country. Dumping is generally defined as selling products in the United States below their normal value, which generally means selling products in the United States below their prices in the home market or below the fully allocated cost of production.

Since China is a NME, Commerce refuses to use actual China prices and costs to determine whether a company is dumping. It instead uses complicated consumption factors for raw materials and other inputs and multiplies the factors by surrogate values from five to ten constantly changing countries to calculate a cost of production for the Chinese company. All this makes it impossible for the Chinese manufacturer/exporter to know whether it is dumping, never mind the US importer.

In the Mushrooms from China antidumping case, from the time the antidumping order was  issued in 1999 through numerous subsequent yearly review investigations, many antidumping rates were in the single digits because Commerce used India as the surrogate country. But when in 2012 Commerce switched from India to Columbia as the surrogate country, the Antidumping rates went from less than 10% to more than 200% because of surrogate values for straw and cow manure in Columbian import statistics. The Importers of Record then became liable for the difference in the duty rates, plus interest.

How can you as an importer of products from China (or from anywhere else for that matter) avoid getting hit with a massive antidumping or countervailing duty fee? Do not become the Importer of Record. The dollars saved by this can be staggering.

In the Wooden Bedroom Furniture from China initial investigation, for example, I represented a company importing from a Chinese furniture company.  Based on my advice, the importer pushed the Chinese furniture producer to become the importer of record for its own sales to the company.

In the initial investigation, the Chinese furniture company received an AD rate of 16%.  In the first review investigation, however, Commerce determined that the questionnaire data did not verify and issued the Chinese furniture company an AD rate of 216%.

The US company estimated that the Chinese producer exported $100 million, which created $200 million in retroactive liability for US importers.  The Chinese company then decided not to do the second review investigation creating another $200 million in retroactive liability for a total of $400 million in retroactive liability created by just one Chinese company.

My client, however, escaped liability because it was not the importer of record on the sales from that Chinese company, but many US import companies were not so lucky and went bankrupt.

If your company is the Importer of Record and its antidumping or countervailng duty rates go up, you need to realize that U.S. antidumping and countervailing duty laws are remedial, not penal statutes. This means requesting review investigations at the Commerce Department, appealing adverse rulings to the Courts and working with Customs can often substantially reduce your duties or even eliminate them entirely. Chinese exporters also can (and often do) use the Commerce review process to reduce their antidumping and countervailing duty rates so that they can export to the US again.

BEWARE THE FALSE CLAIMS ACT HAMMER WHEN IMPORTING PRODUCTS FROM CHINA

Chinese companies and the U.S. importers of their products often tell me that they are not concerned about U.S. Antidumping (“AD”) and Countervailing Duty (“CVD”) orders because they can “just get around those orders by transshipping the products to Malaysia, Vietnam, Philippines, Sri Lanka, India, or some country before sending them on to the United States.” Their plan is to relabel the products with a new country of origin and then export the products to the US free of AD and CVD duties, without US Customs and Border Protection (“CBP”) ever being the wiser.

Wrong.

Not only has CBP become expert at discovering such evasions, but the penalties — both civil and criminal — when caught have become very harsh. Importers that knowingly falsely label the country of origin on their imports are subject to significant fines and penalties under 19 USC 1592 and to criminal prosecution under 18 USC 542 (import by using false statement) and 18 USC 545 (smuggling). Lying about a product’s country of origin can subject you, the importer, to 20 years in Federal prison.

Immigration and Customs Enforcement (“ICE”) has conducted criminal investigations against a number of products under AD and CVD orders, including honey, saccharin, citric acid, lined paper products, pasta, polyethylene bags, shrimp, catfish, crawfish, garlic, steel, magnesium, pencils, wooden bedroom furniture, wire clothing hangers, ball bearings and nails. Many of these investigations have led to criminal convictions and large fines and penalties.

US importers have also been prosecuted and sentenced to prison for bringing in Chinese products, such as honey, garlic, wooden bedroom furniture and wire clothing hangers, by means of false Country of Origin statements so as to evade US AD and CVD orders.

Many Chinese companies do not realize that U.S. Customs laws can be used to go after not only US importers that have filed the false documents at Customs, but through a conspiracy charge against Chinese (and other foreign exporters) involved in setting up the transshipment. In one case, a Chinese seafood executive was arrested at a seafood show in Belgium based on a US extradition warrant for evasion of a US AD order and ending up spending six months in a Belgian prison before he was released.

US Customs, ICE and the Justice Department can be very tough investigators and prosecutors.

The real hammer against evasion of US AD and CVD orders, however, is the False Claims Act (“FCA”).  The FCA ( 31 U.S.C. § 3729) allows people or companies, designated a “Relator”, to file what are termed “qui tam” lawsuits against individuals or companies that directly or indirectly defrauded the Federal government.  Through qui tam lawsuits, the informants or “whistleblowers” may recover triple damages on the government’s behalf.  Anyone who knows of the fraud, including a competitor company, may file a qui tam lawsuit, and they do.

Relators can be competing companies in the United States, China or elsewhere or even individual employees working at those companies.  Relators file these qui tam actions to attack competitors and to get 15 to 30 percent of whatever the triple damages the U.S. Government recovers as a result of the lawsuit.

The most likely to file these lawsuits are your foreign competitors, Chinese competitor, U.S. competitors, U.S. importers, your employee at your Chinese exporting company, your employee at your U.S. importing company.  But sometimes they are brought by someone who simply learned of what you are doing.  Because the person or company that brings such an action can be awarded millions and even tens of millions of dollars, the incentive to file is huge. If you want to get a better idea of just how lucrative these lawsuits can be, do a Google search for lawyers looking to take on qui tam lawsuits. There are hundreds, if not thousands of lawyers, willing and eager to take such suits.  Reportedly the most lucrative Google keyword search is “qui tam”.

The qui tam relator’s lawsuit is filed confidentially and is not served on the defendants, but on the US Government.  The US Government then determines whether to intervene and pursue the action or settle the matter with the defendant. If the U.S. Government intervenes, it takes on primary responsibility for the case. If the U.S. Government decides not to intervene, the relator may dismiss the lawsuit or pursue the lawsuit on its own.

Under the False Claims Act, relators and the government can look backward as much as ten years after the date on which the violation was committed. When looking at imports over 10 years subject to antidumping orders with very high rates of over 50 to over 300%, the amounts being evaded are usually enormous. In one False Claims Act we handled, the antidumping duties evaded were over $80 million. When those duties were tripled, and additional penalty sums were added for false statements and attorneys’ fees, the complaint against numerous importers exceeded $300 million. Our original complaint has resulted in an ongoing penalty action for $80 million against one U.S. importer, with the relator entitled potentially to $12 to $24 million of this sum.

Both the U.S. Government and private companies and individuals have huge incentives to bring more False Claims Act cases against those who transship and seek to evade U.S. antidumping and countervailing duties.

If you are exporting to the United States or importing into the United States, you need to be wary of the hammer against transshipment—the False Claims Act.

US China Trade War–Trump, Weak Strong Free Trade Arguments, Steel, 337

US Treasury Department Albert Gallatin Statue Washington DCTRADE IS A TWO WAY STREET

“PROTECTIONISM BECOMES DESTRUCTIONISM; IT COSTS JOBS”

PRESIDENT RONALD REAGAN, JUNE 28, 1986

US CHINA TRADE WAR JULY 14, 2016 

Dear Friends,

This blog post is the third and fourth article of a several part series on how weak free trade arguments have led to the sharp rise of protectionism of Donald Trump and Bernie Sanders and the probable demise of the TPP and the strong arguments against protectionism.

The first article outlined the problem and why this is such a sharp attack on the Trans Pacific Partnership and some of the visceral arguments against free trade.  The second article explored in depth the protectionist arguments and the reason for the rise of Donald Trump and Bernie Sanders.

Subsequent articles will discuss why the Commerce Department’s policy has led to increased protectionism, the Probable Demise of the TPP, failure of Congressional Trade Policy and what can be done to provide the safety net that will allow Congress again to vote for free trade agreements so that the United States can return to its leadership in the Free Trade area.  The Congress has to fix the trade situation now before the US and the World return to the Smoot Hawley protectionism of the 1930s.

In addition, set forth are articles on developments involving steel trade litigation, including the suspension of Section 337 Steel Trade Case, antidumping and countervailing duty reviews against Chinese companies, and a new 337 case against Chinese companies.

If anyone has any questions or wants additional information, please feel free to contact me at my new e-mail address bill@harrismoure.com.

Best regards,

Bill Perry

WEAK FREE TRADE ARGUMENTS AND STRONG FREE TRADE ARGUMENTS

There are two reasons for the sharp rise in protectionism—Weak Free Trade Arguments and the Commerce Department’s methodology in antidumping and countervailing duty cases.

By its own regulation the Commerce Department finds dumping and subsidization in almost every single case, especially against China.  But the problem with the Commerce Department’s methodology, which is not based on reality, it fuels the myth advocated by the Steel industry, the Union and Donald Trump himself that all imports are dumped and all imports are subsidized and the general feeling of global trade victimhood.  We US companies and workers simply cannot compete because all imports are dumped and subsidized so the answer is put up the protectionist walls.

That is simply not true.  The next article will talk about the intricacies of the Commerce Department and why the Commerce Department’s methodology results in its finding dumping and subsidization in more than 95% of the cases and how that has had such a bad impact on the perceptions of the average American.

But before addressing that issue, this post will describe the Weak Free Trade Arguments Against Protectionism and the Strong Arguments against Protectionism.

WEAK FREE TRADE ARGUMENTS

But what are the free trade arguments that can counter the tidal wave of protectionism from Trump and Sanders supporters and the real collateral damage caused by trade agreements, including the 2.4 million jobs connected to granting China most favored nation status.  As the US International Trade Commission (“ITC”) reported in its May report on the Trans Pacific Partnership (“TPP”), if the Trade Agreement is enacted, although agricultural and service companies will benefit, manufacturing will see a net decrease in jobs “by $10.8 billion (0.1 percent) lower with the TPP Agreement” than without the Agreement.

On March 15, 2016 Morton Kondrake and Matthew Slaughter in a Wall Street Journal article made the theoretical economic case for free trade entitled, Making the Case for Trade Reagan’s ‘Protectionism is Destructionism’ Message was True” and spoke about the benefits of trade but then went on to state that the solution is simply “creative destructionism” and more job training and assistance to communities hurt by trade:

Divided though the four leading presidential candidates are on so many topics, united they stand on one: the assertion that trade hurts America.

All four oppose the U.S. ratifying the Trans-Pacific Partnership. All four demonize trade the same way. Donald Trump blasts that “foreigners are killing us on trade,” while Bernie Sanders inveighs against “disastrous trade agreements written by corporate America.” . . .

Where is the leader with the courage to tell the truth? To say that trade made this nation great, and that trade barriers will destroy far more jobs than they can ever “save.” To explain how trade translates into prosperity and new jobs, and how the disruptions inevitable in a trading economy can be managed for the benefit of those who need help. . . .

First, trade has generated substantial gains—not losses—for America overall.  .  . . The overall gains are large. Trade and related activities—spurred by accords such as the North American Free Trade Agreement, or Nafta, have boosted annual U.S. income today by about 10 percentage points of GDP relative to what it would have been otherwise. This translates into an aggregate gain of about $1.8 trillion in 2015—thousands of dollars per U.S. household every year.

Future trade agreements will bring more gains. A 2016 analysis by Peter A. Petri and Michael G. Plummer estimates that the TPP—which will eliminate more than 18,000 tariffs that other countries today impose on U.S. exports—will boost U.S. national income by about $130 billion annually. Part of this gain will be due to the higher average wages Americans earn as a result of more trade.

The second important pro-trade narrative is that creative destruction—the movement of people and capital from weaker businesses to stronger ones and new opportunities—is how many of the gains from trade arise. And because trade is only one of the forces driving this continual churn, the scale of creative destruction is vast. In December, for example, America’s creation of almost 300,000 payroll jobs was the net outcome of 5.4 million new jobs created and 5.1 million old jobs destroyed. Technology innovation and other drivers of long-run economic prosperity also entail more gains to “winners” than costs to “losers.”

This points to the third key theme: The way to support those affected by trade is not with tariffs that will destroy the jobs of other Americans that depend on trade. The solution is to drop trade barriers to maximize trade’s gains—and then design well-targeted supports for workers and communities that need help.  . . .

We need to build a broader, more-responsive safety net to assist workers in transition regardless of the reason. For instance, unemployment insurance and trade-adjustment assistance should become part of an integrated program that offers a menu of options to all displaced workers. . . .

But the problem with the Kondrake/ Slaughter article is that the person who created the term “creative destructionism” would not agree with their central thesis that creative destructionism is such a great benefit that everyone should embrace capitalism and free trade.  Joseph Schumpeter, the famous Harvard Economist,  in his book “Capitalism, Socialism and Democracy” first coined the term “creative destructionism”.  The central thesis of his book, however, was that Schumpeter did not believe that Capitalism could long survive and that is why he was an Austrian socialist.  He did not believe that Capitalism would long survive because of the collateral damage it creates and the gap between the rich and the poor.  Although Capitalism causes all boats to rise, there will always be a gap between the rich and the poor and people will focus on the gap rather than the fact that all boats are rising.

It is very difficult to throw theoretical economic arguments to counter the real loss of jobs in US manufacturing industries.  Will this rosy article of Free Trade truly offset the arguments made by the international trade losers of thousands of closed factories and millions of lost manufacturing jobs?  Don’t think so.  Simple theoretical arguments do not wash in the face of blown up factories and millions of lost jobs.

One economist who agrees with this point is Daniel Altman, an economist, who published in article entitled “Economics Has Failed America” on May 19, 2016 pointing out some real problems with the economic arguments in favor of free trade:

As a recovering economist writing on behalf of my erstwhile field, I would like to apologize to every American who has lost a job or a livelihood because of globalization. Economics has failed you. It has failed you because of ideology, politics, and laziness. It has failed you because its teachings are woefully incomplete, and its greatest exponents have done almost nothing to complete them.

There are “positive” questions in economics that have mathematical answers — things that simply must be true — and then there are “normative” questions that amount to value judgments on points of policy. In economics classes, we teach the former and usually stop short when faced with the latter. This leaves a hole in any discussion of economic policy; students acquire first principles but rarely consider real-world applications, because to do so would presuppose a social or political point of view.

In the case of free trade and globalization, this omission has been disastrous.  . . .

Yet the redistribution required to generate this broad improvement in living standards is hardly addressed, or sometimes even mentioned. To do so would be to step into the muddy mire of normative questions.

Should the government take from some people in order to give to others? Who should give the most, and who should receive? What exactly should they receive? . . .

Tyler Cowen and Alex Tabarrok of George Mason University offer this breezy guidance: “Job destruction is ultimately a healthy part of any growing economy, but that doesn’t mean we have to ignore the costs of transitioning from one job to another. Unemployment insurance, savings, and a strong education system can help workers respond to shocks.” It may be worth noting that Cowen is a frequent critic of unemployment insurance on his blog. . .  .

Finally, R. Glenn Hubbard . . . and Anthony Patrick O’Brien of Lehigh University are the only ones who mention the program designed to accomplish redistribution: “It may be difficult, though, for workers who lose their jobs because of trade to easily find others. That is why in the United States the federal government uses the Trade Adjustment Assistance program to provide funds for workers who have lost their jobs due to international trade. These funds can be used for retraining, for searching for new jobs, or for relocating to areas where new jobs are available. This program — and similar programs in other countries — recognizes that there are losers from international trade as well as winners.”

The Trade Adjustment Assistance (TAA) program has a budget of about $664 million, or roughly 0.004 percent of gross domestic product.

This means one dollar of every $25,000 in income generated by the United States goes to help people here who have been hurt by globalization. They don’t receive the cash directly; they just have to hope that the program — which offers retooling, retraining, and relocation, among other services — will aid their transition to new jobs.

There aren’t many beneficiaries, either.  . . .

The problem with Mr. Altman’s article is that he does not realize that there are two TAA programs and the one that works is the TAA for Companies program.  The funding for that program has been cut to $12.5 million a year.  He also does not realize that the best arguments against protectionism are not economic, they are historical.

Congressman Jim McDermott may have put it the best in a recent article, “Workers do not want a handout, they want jobs”:

Trump, Sanders voters don’t want handouts — they want jobs

A popular knock on voters who support Donald Trump or Bernie Sanders because they have been “left behind” by free trade, globalization and technological progress is that they want a handout from Uncle Sam.

But the truth is the opposite: These voters want to work. They want jobs. And that’s the key to understanding their support for Trump or Sanders. . . .

In this political season, I’ve been asking some of them and their friends, and their now-adult kids, which presidential candidates they find appealing. Only two find support:  Sanders, the Vermont socialist, and Trump, the New York billionaire. Both candidates appeal to a working class that is frustrated, fed up and downright angry.

Neither can be bought.

STRONG HISTORICAL ARGUMENTS IN FAVOR OF FREE TRADE

The strong arguments for Free Trade, however, are not economic.  The best arguments are historical: Japan, China, and the Smoot Hawley Tariff.  Those who do not learn from history are doomed to repeat it.

An even more important argument, however, is that protectionism does not work.  It does not save the companies and the President who understood that point was Ronald Reagan.

But first the historical arguments.

Japan

The recent experience of Japan can show what happens when a country listens to the Siren Calls of protectionism.

In the 1980s, when I joined the US International Trade Commission (“ITC”), the number one target country on the trade hit parade was not China.  It was Japan.  It was exporting numerous products to the United States that caused injury to various US industries.  In fact, I had lived in Japan and studied Japanese and thought after my career in Federal Government at the ITC and Commerce Department I would work on trade cases, including antidumping cases, against Japanese companies.

That did not happen.  Why?  In the early 1990s, after Ezra Vogel published his book “Japan as Number One”, the entire Japanese economy imploded.  Japanese exports dropped like a rock, and Japan entered what is called the lost decade, which now has become lost decades.

In my opinion, Japan’s lost decades have been caused by its trade policy.  Japan did exactly what Donald Trump is advocating, it put Japan first through its mercantilistic trade policy.  While living in Japan and later at the Commerce Department, I discovered numerous non- tariff trade barriers that Japan had put into place to protect its domestic industries.

American skis could not be sold in Japan because as one Japanese government official stated snow is different in Japan than the United States.  American beef could not be sold in Japan because as another Japanese government official stated Japanese intestines were shorter than American intestines.

In fact, in the trade area, there was antidumping case after antidumping case against Japanese companies.  The problem was prices in Japan were multiple times higher than the same product sold by the same company to the US.  In some cases, based on actual price comparisons and actual calculated antidumping rates, Japanese antidumping rates were over 400% because the Japanese company priced the same product in Japan four times higher than the same product sold in the United States.

In effect, the Japanese government’s anti-trade protectionist policy created a very high price market in Japan.  Japanese companies sold at very high prices in the Japanese market, ramped up production to drive down per unit costs and then used high prices in the Japanese market to fuel exported products at very low prices to the US market.  Classic dumping.

The Japanese government also made it very difficult for foreign companies, including US companies, to set up true joint ventures in Japan.  Keep the foreigner out was the motto of Japan.

But what was the ultimate effect of this high priced protectionist trade policy, massive bubbles in the land and stock markets.  At one point the land in the Imperial Palace in Tokyo was worth more than the land in the entire state of Illinois.  Those high land prices were used to fuel a very high stock market in Japan.  The Japanese stock market bubble burst and then land prices fell.  Japan entered a massive recession/depression and it lost decade(s) of economic growth.

Also when doing antidumping cases in other countries and the issue of using third country prices, I noticed that Petitioners always pushed Commerce to Japan because Japanese protected market prices were always higher than US prices.  Japanese raw material prices were higher too.  Because of trade cases in the US and other countries, Japanese production plants left Japan creating hollowed out industries as the companies sought to get around trade rules and also access to lower raw material costs.  After the US FTA with Korea, the best-selling car in Korea is the Toyota produced in the United States.

China

The other historical lesson is China.  In 1949 when Mao Tse Tung won the Chinese revolution, he also wanted to make China great again.  Mao decided that he would make China great by putting up on the protectionist walls and the Chinese themselves would make themselves self -sufficient by producing everything they needed.

In the Great Leap Forward in the early 1950s, Mao declared that the Chinese people would create backyard steel industries and Chinese peasants melted down cooking pots into raw steel to show that they could produce steel.  The Great Leap Forward led to one of greatest famines in World history and millions died.

When Deng Xiaoping came into power he immediately opened up the country.  Because of the Mao protectionist policies, China had fallen behind the World in technology.  Deng Xiaoping looked for ways to bring technology to China and develop their own.

Premier Zhu Rongyi, China’s great economic reformer, refused to follow the Japanese model and invited Western companies to set up joint ventures in China.

Thus, during the Obama Administration, when GM was having problems with its US manufacturing operations and facing bankruptcy, the one part of the company it was especially trying to save was its China operations.  The Buick had become the bestselling car in China.

As one Chinese individual remarked to me, why when China and many other countries have rejected the Socialist model is the United States moving towards the Socialist model and putting up protectionist walls.

Smoot Hawley

On April 25, 2016, former Congressman Don Bonker in an article entitled “Presidential Election Politics and Perils of Protectionism” warned that the anti- trade rhetoric in the Presidential election could lead to the return of the Smoot Hawley tariffs, stating:

This year’s presidential election is not lacking in absurdity, another example being a Republican billionaire and a socialist Democrat in sync on what has become a contentious issue, attacking trade agreements by declaring they are “disastrous” or being negotiated by “stupid people”.  . . .

What they have tapped into is the viral protectionism spreading across the country, embedded in Midwestern states that suffered job losses as American companies shifted their manufacturing operations to low-wage countries like Mexico and China.

Both Trump and Sanders are clueless or blatantly dismissive of the consequences of such actions, but their insane rhetoric could lead to a trade war, even a collapse of the world trading system, should either ever make it to the White House. . . .

In this raucous presidential campaign, both sides slamming America’s trade policy could put our country on the perilous path of protectionism, thus undermining America’s presumed role as the leader in today’s global economy. Someone should remind both Trump, if ever he listens, and Sanders, ever the demagogue, that we’ve been down that path before, and it proved devastating.

In the 1928 presidential election, the Republican candidate Herbert Hoover campaigned on the populist anti-trade issue, pledging to restrict foreign imports if elected, a message that resonated with the commodity producers and manufacturers who felt betrayed in an emerging global economy, which set the stage for a Republican Congress poised to run amok on limiting imports.

Indeed, shortly after the elections, newly formed trade associations mobilized an unbridled frenzy of logrolling, jockeying for maximum protection for commodity and industry producers leading to enactment of the Smoot-Hawley Tariff Act that hiked import fees, some up to 100 percent, on over 20,000 foreign products. . . .

Indeed, within a few months, America’s leading trade partners – Canada, France, Mexico, Italy, 26 countries in all – retaliated, causing world trade to plummet by more than half of the pre-1929 totals, one of several factors that precipitated the Great Depression. . .  ..

The Smoot Hawley tariff turned the Depression into the Great Depression.

PROTECTIONISM DOES NOT WORK—COMPANIES ARE NOT SAVED

The most important lesson, however, is that protectionism does not work.  The US Steel industry is a case study of this point.  After receiving 40 years of protectionism from steel imports, where are Bethlehem Steel, Jones and Loughlin and Lone Star Steel today—Green Fields.

Despite the antidumping order against Wooden Bedroom Furniture from China, that did not save the US furniture industry as many US factories and Chinese factories moved to Vietnam.  In fact, the Furniture case illustrates another point—the Whack a Mole problem in antidumping (“AD”) and countervailing duty (“CVD”) Trade cases.

Recently, the US Washing Machine industry dominated by Whirlpool screamed because after bringing AD and CVD cases against Samsung, Daewoo and LG in Korea, the companies moved to China so Whirlpool filed another case against China.  After AD and CVD orders are issued, multinationals and many other companies can move their production facilities to new countries which are not covered by US AD and CVD orders.  AD and CVD cases are meant to be rifle shots to stop unfair trade practices from a specific country, but US companies cannot bring AD and CVD cases against the World, although the US Steel Industry has tried.

In January 2008, Superior Graphite and SGL Carbon LLC filed an antidumping case against graphite electrodes from China, which lead to an antidumping order against China.  On July 13, 2016, after 8 years of protection, Superior announced the closing of its Russellville, Arkansas plant.  One reason was intense domestic competition and another reason imports from India.

The President that understood that protectionism does not work was Ronald Reagan.  Contrary to the implication in Donald Trump’s June 28, 2016 speech, entitled “Declaring American Economic Independence”, Reagan was not a protectionist.  He was very much a free trader, who specifically stated that protectionism does not work.

In his attached June 28, 2016speech, DJT_DeclaringAmericanEconomicIndependence, Donald Trump stated in part:

President Reagan deployed similar trade measures when motorcycle and semiconductor imports threatened U.S. industry. His tariff on Japanese motorcycles was 45% and his tariff to shield America’s semiconductor industry was 100%.

On June 28, 1986, 40 years to the day before, however, Ronald Reagan gave the attached speech BETTER COPY REAGAN IT SPEECH, about international trade and against protectionism, stating in part:

international trade is one of those issues that politicians find an unending source of temptation. Like a 5-cent cigar or a chicken in every pot, demanding high tariffs or import restrictions is a familiar bit of flimflammery in American politics. But cliches and demagoguery aside, the truth is these trade restrictions badly hurt economic growth.

You see, trade barriers and protectionism only put off the inevitable. Sooner or later, economic reality intrudes, and industries protected by the Government face a new and unexpected form of competition. It may be a better product, a more efficient manufacturing technique, or a new foreign or domestic competitor.

By this time, of course, the protected industry is so listless and its competitive instincts so atrophied that it can’t stand up to the competition. And that, my friends, is when the factories shut down and the unemployment lines start. We had an excellent example of this in our own history during the Great Depression. Most of you are too young to remember this, but not long after the stock market crash of 1929, the Congress passed something called the Smoot-Hawley tariff. Many economists believe it was one of the worst blows ever to our economy. By crippling free and fair trade with other nations, it internationalized the Depression. It also helped shut off America’s export market, eliminating many jobs here at home and driving the Depression even deeper.   . . .

Sometimes foreign governments adopt unfair tariffs or quotas and subsidize their own industries or take other actions that give firms an unfair competitive edge over our own businesses. On those occasions, it’s been very important for the United States to respond effectively, and our administration hasn’t hesitated to act quickly and decisively.  . . .

it’s going to be very important for the United States to make clear our commitment that unfair foreign competition cannot be allowed to put American workers in businesses at an unfair disadvantage. But I think you all know the inherent danger here. A foreign government raises an unfair barrier; the United States Government is forced to respond. Then the foreign government retaliates; then we respond, and so on. The pattern is exactly the one you see in those pie fights in the old Hollywood comedies: Everything and everybody just gets messier and messier. The difference here is that it’s not funny. It’s tragic. Protectionism becomes destructionism; it costs jobs.  . . .

So, the danger is approaching. Should this bill become law, foreign governments would respond, and soon a vicious cycle of trade barriers would be jeopardizing our hard-won economic prosperity.

The first part of Reagan’s speech almost sounds like a point by point rebuttal of Donald Trump’s June 2016 speech.  The last part of the speech specifically points out the perils of protectionism.  Ronald Reagan lived through the Great Depression and learned from history.  He did not want to repeat the Smoot Hawley Tariff Act mistake again.

Donald Trump points at two cases during the Reagan administration—Motorcycles and Semiconductor Chips.  The interesting point is that I was at the ITC and Commerce Department in the Reagan Revolution in the 1980s when the Motorcycles and Semiconductor Chips cases took place and have personal knowledge about what happened.  Those cases and the reason for them are very different from the trade actions that Donald Trump is talking about.

In the Motorcycles 201 case, in the early 1980s Harley Davidson sought temporary relief under the Escape Clause to help it adjust to import competition, especially from Japan.  It won the case and received a three-year tariff rate quota on imports of certain subassemblies from Japan.  The noteworthy point is that after two years in the mid- 1980s, Harley told the US government to lift the quota/tariff because it no longer needed the protection from imports.  The 201 case gave Harley the short term protection it needed to adjust to import competition.

Contrast that temporary relief with antidumping and countervailing duty orders against steel, chemicals and metals, some of which have been in place for 20 to 30 years.

In the 1980s Semiconductors cases, the Commerce Department was very tough in those case and even initiated its own 256K DRAM case.  The Semiconductor cases resulted in a Semiconductors agreement with Japan.  But while at the Commerce Department in the 1980s, the Secretary of Commerce was Malcolm Baldrige, a brilliant secretary.  Baldridge believe that his job was to protect the crown jewels of American manufacturing—the High Tech industry.

What Donald Trump is proposing is protecting the low tech manufacturing industries, such as the Steel industry.  Ronald Reagan did not fall into that trap.

If Donald Trump goes forward with his plans to use protectionist tariffs to protect the low tech industry, we can expect countries, such as China, Korea, Canada, Mexico and other countries, to retaliate against the US high tech industry. In February 2015, China fined Qualcomm, a US company, $1 billion for violations of the Chinese antimonopoly law.  That is $1 billion of the $10 billion Qualcomm had earned during 2014 selling computer chips to China.

In fact, the employment in the entire US steel industry is less than one high tech company.  So Trump’s idea is to protect the Steel Industry, but the sacrifice is the US High Tech industry with 100s of thousands of high paying jobs.

One of the problems in international trade is what the Chinese call the Frog in the Well syndrome.  The Frog lives inside the Well and thinks that is the World.  As House Speaker Paul Ryan has said many times, the vast majority of consumers live outside of the United States.  When I lived in Beijing during 2005-2007, the US Commercial Attaché gave a speech and mentioned that 75% of all Chinese have a color television set. That is now probably close to 95% of 1.6 billion people, a larger market than the US market.

But all this does not mean that nothing can be done to save US manufacturing companies that have been battered by imports.  As explained in past and subsequent articles, something can be done and it does not have any protectionist effect—The Trade Assistance for Firms/Companies program.  Although it receives only $12.5 million annually in support, the program saves US companies and the jobs that go with them but without putting any protectionist barriers in place.

STEEL TRADE CASES

ITC SUSPENDS STEEL 337 CASE

On May 26, 2016, the US International Trade Commission (“ITC”) initiated the section 337 case against Chinese steel import on the basis of three primary counts:

(1) a conspiracy to fix prices and control output and export volumes, in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1; (2) the misappropriation and use of U.S. Steel’s trade secrets; and (3) the false designation of origin or manufacturer, in violation of the Lanham Act, 15 U.S.C. § 1125(a).

On July 8, 2016, the ITC, in the attached order, ITC STEEL ORDER, temporarily suspended the Section 337 against steel imports brought by US on the grounds that the issues it raises fall within the Commerce Department’s jurisdiction in antidumping and countervailing duty cases.

The Commission’s order specifically states, in part:

U.S. Steel’s antitrust claims explicitly rely upon determinations by the Commission and the Commerce Department that the Chinese government subsidizes the Chinese steel industry, and that Chinese steel manufacturers sell their products at less than fair value. . . .

U.S. Steel’s false designation of origin claims are based explicitly upon Respondents’ alleged evasion of antidumping and countervailing duty orders issued by the Commerce Department. . . .

As discussed above, the Complaint identifies several ongoing Commerce Department investigations .  . . and the Commerce Department recently issued final determinations in these investigations finding countervailing duties and sales at less than fair value.

The record thus shows that the present matter comes at least “in part” within the purview of the antidumping and countervailing duty laws, and Section 337(b)(3) therefore requires that the Commission notify the Secretary of Commerce. . . .

The ITC’s suspension stays all discovery and motions in its investigation of U.S. Steel’s claims of an alleged price-fixing conspiracy involving misappropriation of trade secrets and false manufacturing designations in the importation of carbon and alloy steel products.

The suspension followed seven responses from a number of Chinese steel companies to U.S. Steel’s complaint arguing that the claims were based explicitly upon respondents’ alleged evasion of AD and CVD orders and identified several ongoing Commerce Department investigations into steel products.

STAINLESS STEEL SHEET AND STRIP FROM CHINA

On July 12, 2016, in the attached factsheet, factsheet-prc-stainless-steel-sheet-strip-cvd-prelim-071216, Commerce announced its affirmative preliminary determination in the countervailing duty (“CVD”) investigation of imports of stainless steel sheet and strip from China.  Since many Chinese companies refused to cooperate because of China’s nonmarket economy status, Chinese companies received CVD rates ranging from 57.3% to 193.12%

JULY ANTIDUMPING ADMINISTRATIVE REVIEWS

On July 5, 2016, Commerce published the attached Federal Register notice, OPPORTUNITY JULY 2016, regarding antidumping and countervailing duty cases for which reviews can be requested in the month of July. The specific antidumping cases against China are:   Carbon Steel Butt-Weld Pipe Fittings, Certain Potassium Phosphate Salts, Certain Steel Grating, Circular Welded Carbon Quality Steel Pipe, Persulfates, and Xanthan Gum

The specific countervailing duty cases are: Circular Welded Carbon Quality Steel Pipe, Potassium Phosphate Salts, Prestressed Concrete Steel Wire Strand, and Steel Grating.

For those US import companies that imported : Butt-Weld Pipe Fittings, Potassium Phosphate Salts, Steel Grating, Circular Welded Carbon Steel Pipe, Persulfates, Steel Wire Strand and Xanthan Gum during the antidumping period July 1, 2015-June 30, 2016 or the countervailing duty period of review, calendar year 2015, the end of this month is a very important deadline. Requests have to be filed at the Commerce Department by the Chinese suppliers, the US importers and US industry by the end of this month to participate in the administrative review.

This is a very important month for US importers because administrative reviews determine how much US importers actually owe in AD and CVD cases. Generally, the US industry will request a review of all Chinese companies. If a Chinese company does not respond in the Commerce Department’s Administrative Review, its antidumping and countervailing duty rate could well go to the highest level and for certain imports the US importer will be retroactively liable for the difference plus interest.

In my experience, many US importers do not realize the significance of the administrative review investigations. They think the AD and CVD case is over because the initial investigation is over.  Many importers are blindsided because their Chinese supplier did not respond in the administrative review, and the US importers find themselves liable for millions of dollars in retroactive liability.

While in China recently, I found so many examples of Chinese solar companies or US importers, which did not file requests for a review investigation.  In one instance, although the Chinese companies obtained separate rates during the initial investigation, the Petitioner appealed to the Court.  Several Chinese companies and US importers did not know the case was appealed, and the importers now owe millions in antidumping duties because they failed to file a request for a review investigation in December 2015.

NEW SECTION 337 INTELLECTUAL PROPERTY CASE FILED AT ITC AGAINST CHINA

On July 11, 2016, Cambria Company LLC filed section 337 case at the ITC against Quartz Slabs and Portions.  The proposed respondents, including a Chinese company, are: Stylen Quaza LLC DBA Vicostone USA, Dallas, Texas; Vicostone Joint Stock Company, Vietnam; Building Plastics Inc., Memphis, Tennessee; Fasa Industrial Corporation, Ltd, China; Foshan FASA Building Material Co., Ltd., China; Solidtops LLC, Oxford, Maryland; Dorado Soapstone LLC, Denver, Colorado; and Pental Granite and Marble Inc., Seattle, Washington.

If you have any questions about these cases or about the antidumping or countervailing duty law, US trade policy, trade adjustment assistance, customs, or 337 IP/patent law in general, please feel free to contact me.

Best regards,

Bill Perry

US CHINA TRADE WAR–WEAK FREE TRADE ARGUMENTS CREATE PROTECTIONISM AND PROBABLE DEMISE OF TPP, STEEL, ANTIDUMPING REVIEWS AND NEW 337 CASE

White House Night Pennsylvania Ave Washington DCTRADE IS A TWO WAY STREET

“PROTECTIONISM BECOMES DESTRUCTIONISM; IT COSTS JOBS”

PRESIDENT RONALD REAGAN, JUNE 28, 1986

US CHINA TRADE WAR MAY 19, 2016 UPDATE

Dear Friends,

The ITC has released its report on the Trans Pacific Partnership and a new 337 cases have been filed against US importers and Chinese companies on inflatable devices.

Best regards,

Bill Perry

ITC RELEASES TPP REPORT

On May 18, 2016, The US International Trade Commission (“ITC”) released its attached report on the Trans Pacific Partnership Agreement (“TPP”), ITC TPP REPORT.  The Main Findings of the ITC Report are set forth below.  The Report was a mixed bag finding that the overall US economy would grow by 0.23% by $57.23 billion by year 15 of the Agreement (2032) with agriculture being the biggest winner followed by services with a modest increase in employment.  But the ITC report also found that manufacturing, natural resources and the energy sectors would lose business by $10.8 billion (0.1 percent) lower with the TPP Agreement than it would be compared with baseline estimates without the agreement.

But the major gains with the TPP are in the other areas with the ITC finding that “the two new electronic commerce provisions that protect cross-border data flows and prohibit data localization requirements to be crucial to the development of cross-border trade in services.  . . .”

Outside Parties emphasized:

“the importance of TPP chapters addressing intellectual property rights, customs and trade facilitation, investment, technical barriers to trade, sanitary and phytosanitary standards, and state-owned enterprises.”

With the release of the ITC TPP Report, the Congress is free to take up the passage of the TPP.  U.S. Trade Representative Michael Froman stated that the ITC’s report will be just one of the arguments the Administration will use to push Congress to vote on the ratification of the agreement before President Barack Obama leaves office.  Froman specifically stated:

“The ITC report provides another strong argument for why TPP should be passed this year. It is part of a growing body of evidence that shows that TPP will benefit our economy at home and allow the U.S. to help set the rules of the road for trade in the Asia Pacific.”

Although Congressional experts originally indicated a possibility of taking the TPP up during the summer, the strong protectionist tide in the Presidential Election has prompted many experts both in and out of Congress to predict that the lame-duck session of Congress following the November elections as the first real opportunity for Congress to consider the TPP.

In a conference call with reporters, however, Froman revealed that USTR is moving forward with an expedited implementation of the TPP to make sure that the 11 other nations in the agreement are ready to comply with its terms as soon as the Agreement takes effect.  Usually the implementation process does not begin until the deal is ratified, but as USTR Froman states:

“We’ve begun an accelerated implementation process to be sure that we can give members of Congress the confidence they need that by the time the agreement enters into force that our trading partners will have fully complied with the terms of the agreement and that their constituents will get the full benefit of the deal.”

The ITC’s Report Main Findings are:

“The Commission used a dynamic computable general equilibrium model to determine the impact of TPP relative to a baseline projection that does not include TPP. The model estimated that TPP would have positive effects, albeit small as a percentage of the overall size of the U.S. economy. By year 15 (2032), U.S. annual real income would be $57.3 billion (0.23 percent) higher than the baseline projections, real GDP would be $42.7 billion (0.15 percent) higher, and employment would be 0.07 percent higher (128,000 full-time equivalents). U.S. exports and U.S. imports would be $27.2 billion (1.0 percent) and $48.9 billion (1.1 percent) higher, respectively, relative to baseline projections. U.S. exports to new FTA partners would grow by $34.6 billion (18.7 percent); U.S. imports from those countries would grow by $23.4 billion (10.4 percent).

Among broad sectors of the U.S. economy, agriculture and food would see the greatest percentage gain relative to the baseline projections; output would be $10.0 billion, or 0.5 percent, higher by year 15. The services sector would benefit, with a gain of $42.3 billion (0.1 percent) in output. Output in manufacturing, natural resources, and energy would be $10.8 billion (0.1 percent) lower with the TPP Agreement than it would be compared with baseline estimates without the agreement.

Many stakeholders consider two new electronic commerce provisions that protect cross-border data flows and prohibit data localization requirements to be crucial to the development of cross-border trade in services, and vital to optimizing the global operations of large and small U.S. companies in all sectors.

TPP would generally establish trade-related disciplines that strengthen and harmonize regulations, increase certainty, and decrease trade costs for firms that trade and invest in the TPP region. Interested parties particularly emphasized the importance of TPP chapters addressing intellectual property rights, customs and trade facilitation, investment, technical barriers to trade, sanitary and phytosanitary standards, and state-owned enterprises.

NEW SECTION 337 CASE FILED AGAINST CHINA

On May 19, 2016, Intex Recreation Corp. and Intex Marketing Ltd. filed a new section 337 case against imports of Inflatable Products and Processes for Making the Same from China.  The respondent companies are in China and Hong Kong.  Please see relevant notice below:

Letter to Lisa R. Barton, Secretary, USITC; requesting that the Commission conduct an investigation under section 337 of the Tariff Act of 1930, as amended, regarding Certain Inflatable Products and Processes for Making the Same. The proposed respondents are: Bestway (USA) Inc., Phoenix, Arizona; Bestway Global Holdings Inc., China; Bestway (Hong Kong) International Ltd., Hong Kong; Bestway Inflatables & Materials Corporation, China; and Bestway (Nantong) Recreation Corp., China.

If anyone wants a copy of the complaint, please feel free to contact me.

US CHINA TRADE WAR MAY 12, 2016 BLOG POST

Dear Friends,

As mentioned in my last blog post, as of May 1, 2016, I am no longer at the Dorsey law firm.  The transition is complete and my new law firm is Harris Moure, here in Seattle and my new e-mail address is bill@harrismoure.com.  The US China Trade War blog and newsletter are now coming from Harris Moure.

As also mentioned, Dan Harris, my partner, has a very famous blog, www.chinalawblog.com, which is followed by many companies that are interested in doing business in and with China.  Dan is determined to enlarge my readership so he is pushing me to write more smaller articles and take long articles, such as those on the TPP and the rise of protectionism in the US, and make them a series.

In that light, set forth below is the first of a several part series on how weak free trade arguments have led to the sharp rise of protectionism of Donald Trump and Bernie Sanders and the probable demise of the TPP.  The first article will outline the problem and why this is such a sharp attack on the Trans Pacific Partnership and some of the visceral arguments against free trade.  The second article will explore in depth the protectionist arguments and the reason for the rise of Donald Trump and Bernie Sanders and the weak free trade arguments to counter the protectionism.  The final article will focus on the Probable Demise of the TPP, failure of Congressional Trade Policy and what can be done to provide the safety net that will allow Congress again to vote for free trade agreements so that the United States can return to its leadership in the Free Trade area.

The Congress has to fix the trade situation now before the US and the World return to the Smoot Hawley protectionism of the 1930s.

In addition, set forth are several developments involving steel trade litigation, antidumping and countervailing duty reviews against Chinese companies and a new 337 patent case against Chinese companies.

If anyone has any questions or wants additional information, please see my blog, www.uschinatradewar.com or feel free to contact me at my new e-mail address bill@harrismoure.com.

Best regards,

Bill Perry

WEAK FREE TRADE ARGUMENTS CREATE THE RISE OF TRUMP/SANDERS PROTECTIONISM AND PROBABLE DEMISE OF TRANS PACIFIC PARTNERSHIP (“TPP”)

Three weeks ago former Democratic Congressman Don Bonker, a good friend, told me “The TPP is dead”.  Don has always been very skeptical that the Trans Pacific Partnership (“TPP”) would pass Congress.

Don also believes Hilary Clinton will beat Trump in a landslide, and the Democrats will take both the Senate and the House.  Although Clinton may win, I do not believe that it will be a blowout and do not believe the Republicans will lose both the Senate and especially the House.

Don told me he did not know one person voting for Trump.  My 95 old mother voted for Trump in the Massachusetts primary because as a former Republican state committeewomen, she saw a groundswell of Trump support from Democrats, with many, such as her hairdresser, asking “how do I become a Republican to vote for Trump”.  The last time she saw that was 1980 when Reagan won the Presidency and took Massachusetts.  In fact, the Massachusetts Registry of Voters has reported 100s of thousands of Democrats switching parties to vote for Trump.  Massachusetts is a very, very Blue Democratic state.

Another good friend, a Oregon factory owner, told me he is voting for Trump and all of his friends are voting for Trump.  A recent Quinnipac poll has Trump and Clinton in a dead heat in the three crucial swing states—Florida, Ohio and Pennsylvania.

This is momentum and the momentum at the present time is with Trump.  With momentum Trump will be able to expand his base, but it is questionable whether Clinton can do so.

But it is the second point of Don’s argument that is of interest to this audience.  If the Democrats take the Congress, he firmly believes the US will become much more protectionist because of the Democratic relationship to the labor unions.  All the labor unions are opposed to the TPP.

So the Democrats are becoming even more protectionist as well as the Republicans under Donald Trump.  This is a huge groundswell of US protectionism on both sides of the political equation, which could very well kill the TPP and move the United States down a very protectionist path.

On the Republican side, Trump himself has condemned the TPP and in Cosa Mesa, California and subsequent speeches stated that in a Trump Administration there will be no free trade agreements.  In fact, in an April 28, 2016 editorial on Trump’s recent Foreign Policy speech, the Wall Street Journal’s one sharp disagreement with Trump is his trade policy:

“Mr. Trump’s threats of trade wars with China, Mexico and Japan may please nationalists, but such brinkmanship could well provoke another global recession.  American interests must come first but the trade-offs are inevitably complex Republican and Democratic Presidents since the 1930s have concluded that trade is a net benefit to the economy. . . .”

In an April 27, 2016 article in the Wall Street Journal entitled “How Trump Killed Reaganism”, William Galston states:

Economic issues were secondary, which permitted business-oriented Republican elites to dominate their party’s economic agenda with free trade, a welcoming immigration policy and efforts to “reform”—that is, cut—major entitlement programs. As late as George W. Bush’s second term, these concerns remained paramount.

With the onset of the Great Recession, however, the alliance between the white working class and business elites began to fray. Workers blamed trade for the loss of millions of manufacturing jobs, and blamed immigrants for declining wages as well as for rising welfare expenditures and social disorder. Amid rising economic uncertainty, these voters were in no mood to put their remaining sources of economic reassurance—Social Security and Medicare—on the chopping block. “Limited government” meant cutting programs for the undeserving poor, not for working- and middle-class households.

Enter Donald Trump, who proposes to turn Reaganism on its head.  . . . Mr. Trump rejects current trade treaties as bad bargains struck by inept U.S. negotiators and paints immigration as an assault on American workers and society itself.

So it has come to this: A mercantilist isolationist is the odds-on favorite to win the Republican presidential nomination. Whether or not he goes on to win the general election, the Republican Party cannot return to what it once was.

The Reagan era has ended, and what comes next is anyone’s guess.

With the Indiana primary, Trump consolidated his position as the nominee for the Republican party, but what about Bernie Sanders on the Democratic side?  He won the Indiana primary and recently the West Virginia primary.  In response to my last article on the Trump Impact on Trade Policy, one Canadian exporter/US importer contacted me to say that Trump’s position on international trade is why it is better to support Senator Bernie Sanders:

I read your interview on LinkedIn about the Trump effect on International trade if he becomes President.  It was short, and sweet and pretty well summed up most people’s feelings who are in business.  We debate both him and Bernie Sanders up here in Canada and find it all fascinating.  The people who are supporting Trump would actually be better served supporting Sanders for his beliefs, with his policies better serving the “less” educated.  Trumps policies will bury his followers and they don’t seem to grasp it at all.  Protectionism is SO PASSE it’s scary they are even discussing it.

The e-mail illustrates an important problem with the Bernie Sanders alternative.  When it comes to international trade, Donald Trump and Bernie Sanders are two peas in a pod.  Frankly, on trade Bernie Sanders may be more protectionist than Donald Trump.  Why??

Trump has said that when he talks about high tariffs on Chinese imports, that is only a threat, a bargaining ploy to get better leverage in any negotiation with China and other countries.  Thus during the Florida debate Donald Trump clarified his stance on increased tariffs for foreign goods, stating that he would consider massive hikes as “threats” designed to force China and other countries to “behave.”

In the Florida debate, Trump specifically called the 45 percent “tax” on Chinese imports a threat:

It was not a tax, it was a threat. It will be a tax if they don’t behave. Take China as an example. I have many friends, great manufacturers, they want to go into China. They can’t. China won’t let them. We talk about free trade. It’s not true free trade, it’s stupid trade.

Trump went on to state that China is dumping its goods into the US market with “no tax, no nothing, no problems.” Trump further argued that U.S. manufacturers cannot get into the Chinese market:

I have the best people, manufacturers, they can’t get in. When they get in, they have to pay a tremendous tax.  If [China and other countries] don’t follow the rules and regulations so that we can have it equal on both sides, we will tax you. It doesn’t have to be 45, it could be less. But it has to be something because our country and our trade and our deals and most importantly our jobs are going to hell.

On the Democratic side, Bernie, who wants to keep labor union support, is not making threats.  In fact, Bernie Sanders on trade is just as protectionist, if not more protectionist than Donald Trump as illustrated on his Presidential website, which states, in part:

Bernie Sanders believes that the top priority of any trade deal should be to help American workers. Unfortunately, as Bernie has warned year after year, American trade policy over the last 30 years has done just the opposite. Multinational corporations – who have helped to write most of these trade deals – have benefited greatly while millions of American jobs have been shipped overseas.

American trade policy should place the needs of American workers and small businesses first.

Bernie’s strong opposition to destructive “free trade” deals began with NAFTA in 1993. . . .    As with NAFTA, Bernie warned in 2000 that Permanent Normal Trade Relations with China would help multinational corporations at the expense of workers and the environment. ….

The TPP follows in the footsteps of the previous pro-corporate trade deals. It lacks safeguards to protect American jobs and the environment while giving massive benefits to large multinational corporations. . . .

Bernie has stated repeatedly that his top priority is making sure that all Americans have access to good paying jobs. For this reason he has been a leader in Congress in the fight against the free trade agreements that have been negotiated over the past three decades. Bernie’s passionate warnings against these deals have, unfortunately for American workers, all been proven right as these trade deals have offshored a massive amount of decent paying jobs and have closed tens of thousands of factories across our country. . . .

Why is Bernie against most trade agreements?

He believes that free trade agreements like NAFTA, Permanent Normal Trade Relations with China, and the U.S.-Korea Free Trade Agreement have allowed too many American jobs to move overseas. . . .

As he said in 1993 on the House floor before voting against it, “NAFTA may be a good deal for the people who own our corporations, but it is a bad deal for American workers, for our family farmers, and it is bad for the environment.”

And Bernie is nothing if not consistent. Here he is over 20 years later warning against the Trans-Pacific Partnership:

“Let’s be clear: the TPP is much more than a “free trade” agreement. It is part of a global race to the bottom to boost the profits of large corporations and Wall Street by outsourcing jobs; undercutting worker rights; dismantling labor, environmental, health, food safety and financial laws; and allowing corporations to challenge our laws in international tribunals rather than our own court system.

With regard to trade with China, Bernie Sanders states on his Presidential website:

Bernie firmly believes that current trade relations with China are detrimental to job growth and wealth equality in the United States. Referring specifically to the 2015 Trans-Pacific Partnership [which does not include China], Bernie has decried trade deals with China as being “designed to protect the interests of the largest multi-national corporations at the expense of workers, consumers, the environment and the foundations of American democracy.” . . .

Time and time again, Bernie has voted against free trade deals with China. In 1999, Bernie voted in the House against granting China “Most Favored Nation” status. In 2000, Bernie voted against Permanent Normal Trade Relations with China which aimed to create jobs, but instead lead to the loss of more than 3 million jobs for Americans.

“Let’s be clear: one of the major reasons that the middle class in America is disappearing, poverty is increasing and the gap between the rich and everyone else is growing wider and wider is due to our disastrous unfettered free trade policy.” . . .

With these statements, Bernie Sanders sounds just like Donald Trump.  To see Bernie Sanders in action on trade, see his statements on the Senate floor against the Trans Pacific Partnership and China.  See http://feelthebern.org/bernie-sanders-on-trade/ and http://feelthebern.org/bernie-sanders-on-china/.

In his China speech, just like Senator Sessions, who advises Donald Trump on trade, Sanders confuses normal trade relations with China with a Free Trade Agreement, stating that PNTR was a free trade agreement with China.  When the US gave normal trade relations with China, it did not set up a Free Trade Agreement with China.  Permanent Normal Trade Relations (“PNTR”) only means that China is treated like all other countries, such as Iran, Syria, Russia, Ukraine and many other countries.  There is no unfettered free trade agreement with China.

Both the Democrats and the Republicans have now made international trade and free trade agreements one of the burning issues in the Presidential election.  On March 10, 2016, CNN Reporter Stephen Collinson in an article entitled, “How Trump and Sanders tapped America’s Economic Rage” stated:

Finally, somebody is listening. Donald Trump and Bernie Sanders might be poles apart in their politics and temperament, but they are voicing visceral feelings of economic disenfranchisement and alienation among pessimistic voters who feel they’ve been ignored for years.

The billionaire and the democratic socialist are in different ways speaking for vast populations of Americans who feel threatened by globalization, who question the benefits of “free trade” that political leaders have peddled for decades and who believe distant elites control the economy in ways detrimental to their lives and prospects.

It is turning out to be a potent electoral brew –which has lifted insurgent candidates like Trump and Sanders throughout the 2016 cycle and challenged foes like Hillary Clinton and establishment Republicans who have found it tougher to reconcile the grass-roots anger. . . .

Trump’s message is explosive, identifying culprits in what he sees as the corrupt cabal of Washington politicians and supposedly sinister outsiders, like illegal immigrants, job-stealing Chinese firms or tough negotiators who run rings around effete U.S. officials in places like Vietnam and Japan. To his backers, he is the fiercest shark in a global pool who, if nothing else, will have the rest of the world again fearing America’s bite. . . .

The story was similar on the Democratic side, where 57% of Democratic voters in Michigan said trade takes away U.S. jobs. Among people who thought so, Sanders was the most popular candidate.

“I think the key to him winning in Michigan was his clear message on the trade policies,” Sanders campaign manager Jeff Weaver told CNN . . . . “Michigan is a state that has been devastated by bad trade deals. He has opposed every one and Secretary Clinton has supported almost every one. People in Michigan know what the real impact of that is.”

But Sanders has established a narrative difficult to counter. His approach to Americans’ anxieties is to offer a “political revolution,” one that would rewrite the rules of the American economy — and the global one — according to a much more progressive blueprint.

His denunciations of Wall Street “oligarchs” and complaints of a “rigged” economy and a “corrupt” campaign finance system play into the feelings of his supporters that they are powerless to address the worsening conditions of their lives.

He hammers NAFTA and pacts with China, that have boosted global trade flows, fed America’s addiction for cheap goods from abroad, but also left a trail of victims in industrial states where the manufacturing base just could not compete with the low-wage rising economies of Asia and elsewhere.

And Clinton has also yet to come up with an effective riposte to assaults by Sanders on her paid speeches to Wall Street firms after she stepped down as secretary of state.

The Sanders win in Michigan has some of his supporters sensing that a campaign that seems inexorably trending away from him may at least thrive through the journey through primaries in Rust Belt states like Pennsylvania, Illinois and Wisconsin that often turn on blue-collar issues.

And even if he cannot catch Clinton, Sanders can take credit for dragging her to her left on economic questions, as she now speaks in her stump speech about the need to make hollowed out American communities “whole” again. . . .

To see the entire article, see http://www.cnn.com/2016/03/09/politics/sanders-trump-econom… 3/11/2016

Although it is certain that Hilary Clinton will win the Democratic nomination, Bernie Sanders has forced Clinton to move to the left and take a much tougher stance on international trade.  There is talk that Hilary may take Senator Sherrod Brown of Ohio, as her Vice President, a  very strong protectionist, who is viscerally opposed to the TPP.

The hot protectionist rhetoric of Donald Trump and Bernie Sanders have made international trade one of the center points of the election.  The simple truth is that when weak academic, theoretical economic arguments for free trade meet the hard visceral arguments of bombed out US factories and the loss of millions of manufacturing jobs, the free trade arguments melt away.

On March 15, 2016, the New York Times in an article entitled, “On Trade, Angry Voters Have a Point” stated:

Were the experts wrong about the benefits of trade for the American economy? . . .

Voters’ anger and frustration, driven in part by relentless globalization and technological change, may not propel either candidate to the presidency. But it is already having a big impact on America’s future, shaking a once-solid consensus that freer trade is, necessarily, a good thing.

“The economic populism of the presidential campaign has forced the recognition that expanded trade is a double-edged sword,” wrote Jared Bernstein, former economic adviser to Vice President Joseph R. Biden Jr.

What seems most striking is that the angry working class — dismissed so often as myopic, unable to understand the economic trade-offs presented by trade — appears to have understood what the experts are only belatedly finding to be true:  The benefits from trade to the American economy may not always justify its costs. . . .

In another study they wrote with Daron Acemoglu and Brendan Price from M.I.T., they estimated that rising Chinese imports from 1999 to 2011 cost up to 2.4 million American jobs. . . .

The Chinese export onslaught, however, left a scar on the American working class that has not healed. That disproportionate impact suggests Washington officialdom might do well to reassess its approach to future trade liberalization. . . .

Perhaps most important, the new evidence from trade suggests American policy makers cannot continue to impose all the pain on the nation’s blue-collar workers if they are not going to provide a stronger safety net.

That might have been justified if the distributional costs of trade were indeed small and short-lived. But now that we know they are big and persistent, it looks unconscionable.  (emphasis added.)

One of the reasons for the sharp rise in protectionism is the weak safety net, trade adjustment assistance, especially trade adjustment assistance for companies, which will be discussed in follow-up articles on this topic,

On March 15, 2016, Phyllis Schafly, a well-known Republican pundit, stated on Invstors.com that the Republican candidates are turning against trade deals, stating:

The first question asked of the presidential candidates at the most recent Republican debate, hosted by CNN in Miami on March 10, was “whether trade deals have been good for the American workers.”

Moderator Jake Tapper observed that one of Donald Trump’s “signature issues” has been his criticism of “disastrous trade deals” that have destroyed many good middle-class jobs that existed a generation ago. . . .

Ohio Gov. John Kasich likes to remind everyone that he “grew up in a blue collar family,” but votes he cast during his 18 years in Congress helped to decimate the manufacturing base of his home state. Kasich voted for the North American Free Trade Agreement in 1994, and in 2000 he voted to grant the “normal” trading privileges, which allowed China to enter the World Trade Organization. . . .

Sen. Ted Cruz once voted in favor of presidential trade authority before reversing himself on the subsequent vote last year. Cruz now says he opposes the TPP, but Congress has never rejected a trade deal after giving the president the authority to negotiate it.

“I am different in one primary respect, and that’s trade,” Trump insisted in the debate, explaining that “trade deals are absolutely killing our country.” He has proposed tariffs to offset abusive practices such as currency devaluation by “certain countries that are taking advantage of the United States and laughing at our stupidity.” . . . .

According to the 200-year-old theory of free trade, workers who lose manufacturing jobs to China should be able to find new jobs in other industries that benefit from a trade surplus, such as the pharmaceutical industry, or in non-tradable industries such as medicine and legal services. But millions of these workers, many of whom are men struggling to support their families, have not found adequate replacement jobs.

Some settle for lower-paying jobs, while others give up entirely, creating a social issue as well as an economic one. The percentage of men between 25 and 54 years old who are not employed has tripled in the last half century, and many who had been working at $40-per-hour manufacturing jobs are now receiving only $10-per-hour jobs at Wal-Mart or fast-food joints. . . .

In the general election in November, there will be millions of voters ready to cast their ballots for a candidate who stands up for American workers rather than catering to lobbyists who seek free-trade deals.

Pat Buchanan, a well-known Republican conservative, who also ran for the Presidency, stated in an April 4, 2016 commentary entitled  “What Trump has Wrought,” states:

But this city of self-delusion should realize there is no going back for America. For, whatever his stumbles of the last two weeks, Trump has helped to unleash the mightiest force of the 21st century: nationalism. Transnationalism and globalism are moribund.

Buchanan further states that Trump’s first issue is illegal immigration and building a wall along the Southern border to keep illegal immigrants out, but then goes on to state:

If immigration is the first issue where Trump connected with the people, the second is trade.  Republicans are at last learning that trade deficits do matter, that free trade is not free. The cost comes in dead factories, lost jobs, dying towns and the rising rage of an abandoned Middle America whose country this is and whose wages have stagnated for decades.

Economists who swoon over figures on consumption forget what America’s 19th-century meteoric rise to self-sufficiency teaches, and what all four presidents on Mount Rushmore understood.

Production comes before consumption. Who owns the orchard is more essential than who eats the apples. We have exported the economic independence Hamilton taught was indispensable to our political independence. We have forgotten what made us great.

China, Japan, Germany – the second, third and fourth largest economies on earth – all owe their prosperity to trade surpluses run for decades at the expense of the Americans. . . .

Patriotism, preserving and protecting the unique character of our nation and people, economic nationalism, America First, staying out of other nation’s wars – these are as much the propellants of Trumpism as is the decline of the American working and middle class.

Trump’s presence in the race has produced the largest turnout ever in the primaries of either party. He has won the most votes, most delegates, most states. Wisconsin aside, he will likely come to Cleveland in that position.

If, through rules changes, subterfuge and faithless delegates, party elites swindle him out of the nomination, do they think that the millions who came out to vote for Trump will go home and say: We lost it fair and square?

Do they think they can then go back to open borders, amnesty, a path to citizenship, the Trans-Pacific Partnership and nation building?

Whatever happens to Trump, the country has spoken. And if the establishment refuses to heed its voice, and returns to the policies the people have repudiated, it should take heed of John F. Kennedy’s warning: “Those who make peaceful revolution impossible, make violent revolution inevitable.”

For full article, see http://www.wnd.com/2016/04/what-trump-has-wrought/

The point is that both political wings of the the United States are becoming very protectionist in response to strong pressure from US voters.  On the right, Donald Trump, who is now the presumptive nominee of the Republican party, is firmly against all trade agreements, including the TPP.  On the left, Bernie Sanders in many ways is more protectionist than Trump and has succeeded in pulling Clinton to a much more protectionist position.

Understand that one reason newspapers, such as the Wall Street Journal, are attacking Trump on trade is that the Republican party traditionally has been very free trade, while the Democratic party, which relies on labor union support, has been much more protectionist.  The only reason that the TPP was completed is because Trade Promotion Authority was enacted into law last summer in 2015.  The only reason TPA passed the Congress is that the Republicans won both the Senate and the House.

Prior to the election, Senator Harry Reid, who heads the Democrats in the Senate, blocked all the trade bills, including the TPA, from coming to the Floor of Congress.

So to my liberal friends who think that Bernie Sanders would be more free trade than Donald Trump and the Republicans, that is simply not the fact.

Sanders has succeeded in pushing Hilary to be more protectionist and that is not good for the passage of the TPP. As John Brinkely of Forbes predicted several months ago, in a Presidential year with regards to the TPP, anything can happen and it has.  The United States is becoming much more protectionist.

Bill Reinsch, president of the National Foreign Trade Council, which has been a driving force for trade liberalization for over 100 years, recently stated:

There are always winners and losers in trade deals, but the losses tend to be short-term and specific while the gains are usually long-term and diffuse.  So you’ve got a growing mass of cranky, alienated voters.

Daniel Ikenson, director of the free market oriented Cato Institute’s Center for Trade Studies, recently stated:

It’s almost like there’s a reckoning coming due here.  The base of the Republican party is really growing increasingly skeptical of trade and Trump is the perfect demagogue to tap into that sentiment and magnify the concerns.

The next article in this series will deal first with the visceral gut wrenching arguments against free trade and the weak free trade arguments in response.  The article after that will deal with the probable demise of the TPP and finally the solution to the trade crisis, truly creating a safety net to help companies and workers adjust to import competition.  Only when there is a true safety net will the dialogue on free trade change.

THE ONGOING STEEL CASES

Many companies have been asking me about the ongoing Steel antidumping and countervailing duty cases so this section will address the Steel cases in more detail.

NEW STEEL ANTIDUMPING AND COUNTERVAILING DUTY CASE

On April 8, 2016 Arcelormittal USA LLC, Nucor Corp., and SSAB Enterprises LLC filed a new antidumping and countervailing duty case against imports of Certain Carbon and Alloy Steel-Cut-To-Length Plate from Austria, Belgium, Brazil, China, France, Germany, Italy, Japan, Korea, South Africa, Taiwan and Turkey.

APRIL 12 AND 13 USTR COMMERCE HEARINGS ON STEEL

On April 12, 2016, at a hearing in Washington DC members of Congress, union representatives and steel executives pushed the United States Trade Representative (“USTR”) to initiate antidumping proceedings at the Commerce Department against huge imports of subsidized and antidumping Chinese steel imports arguing that the administration needs to step in to protect domestic industry.

At the present time, however, there are very few major Chinese steel products not blocked by US antidumping and countervailing duty measures.  Preliminary determinations have been issued against galvanized and cold-rolled steel from China with very high antidumping and countervailing duty rates against both products, wiping them out of the US market.  Many, many Chinese steel products from China are currently covered by an antidumping (“AD”) order and often also a countervailing duty (“CVD”) order, including carbon steel plate, hot rolled carbon steel flat products, circular welded carbon quality steel pipe, light walled rectangular pipe and tube, circular welded carbon quality steel line pipe, circular welded austenitic stainless pressure pipe, steel threaded rod, oil country tubular goods, prestressed concrete steel wire strand, seamless carbon and alloy steel standard line and pressure pipe, high pressure steel cylinders, prestreessed concrete steel rail tire wire, non-oriented electrical steel, and carbon and certain alloy steel wire rod.

Despite 100s of outstanding AD and CVD orders against steel imports from China and other countries, the American steel market has shrunk to 86 million tons of production, competing against the more than 100 million tons China exports, out of 1.2 billion tons of total production.  But most of that Chinese steel was exported to other countries and third country imports from countries, such as Korea, Taiwan, India, and other countries, with low if not 0%, antidumping and countervailing duty rates are entering the United States.

Leo Gerard, president of the United Steelworkers, said the best way to save the American steel industry is for the Obama administration to step out publicly and get involved in initiating antidumping proceedings.

Although transshipment has been a substantial problem, if legitimate importers are involved, they expose themselves to criminal prosecution for Customs fraud.  US Customs law is certainly not a toothless as it is portrayed.

Sen. Amy Klobuchar, D-Minn., also urged the Commerce Department and Department of Homeland Security to step up enforcement at the nation’s ports, including increased inspections and possibly turning away ships carrying illegally subsidized steel.

U.S. Trade Representative Michael Froman, in opening statements as well as questions to the panelists, pointed to more than $1 billion in recent U.S. exports of steel products and touted the 149 current AD and CVD orders against imported steel, $900,000 in seizures for flouting those duty orders and a 10 percent increase in Commerce Department staff to work on unfair trade practice proceedings.

Democratic Senator Sherrod Brown of Ohio, Hilary Clinton’s possible running mate, urged the administration to support a section 201 petition if brought by a segment of the steel industry, which he said should lead to quick imposition of “appropriate” tariffs.  Steel pipe and tube producers seem to be most interested in the section 201 option. Other steel industry segments see it as too uncertain, given that the World Trade Organization has overturned all but one global safeguard the U.S. imposed in the past, including the 2001 section 201 steel case.

Senator Brown raised another option: WTO cases against China’s overcapacity, which appears to refer to a challenge claiming that the exports of its excess capacity driven by subsidies are undercutting or depressing the price of steel in the World market. “The only way to address this is with a WTO case,” Brown said. “China is in violation of its WTO obligations.”

NEW SECTION 337 UNFAIR TRADE CASE AGAINST ALL CHINESE CARBON ALLOY STEEL COMPANIES AND ALL STEEL PRODUCTS FROM CHINA

As mentioned in the last newsletter, on April 26, 2016, US Steel Corp filed a major 337 unfair trade case against all the Chinese steel companies seeking an exclusion order to bar all imports of carbon and alloy steel from China.

U.S. Steel Corp. is accusing Chinese steel producers and their distributors of conspiring to fix prices, stealing trade secrets and false labeling to avoid trade duties.  It is asking the U.S. International Trade Commission (“ITC”) to issue an exclusion order excluding all the Chinese steel from the US market and also cease and desist orders prohibiting importers from selling any imported steel that has already been imported into the United States.

Having worked at the ITC on 337 cases and later in private practice, section 337 is generally aimed at imports that infringe intellectual property rights, such as patents, trademarks or copyrights.  Moreover, one provision of section 337(b)(3) provides that when any aspect of a section 337 case relates to questions of dumping or subsidization, the Commission is to terminate the case immediately and refer the question to Commerce.

Also in the past when section 337 was used to bring antitrust cases, there was intense push back by the Justice Department.  Customs and Border Protection also may not be happy with the use of section 337 to enforce US Custom law.

But section 337 cases are not antidumping and countervailing duty cases.  There are no mandatory companies and lesser targets.  All the Chinese steel companies are targets, and this will be intense litigation with very tight deadlines.  If the individual Chinese steel companies do not respond to the complaint, their steel exports could be excluded in 70 days to six months.  Section 337 cases are hard- nosed litigation on a very fast track.

If you are interested in a copy of the complaint, please feel free to contact me.

On April 27, 2016, the Chinese Ministry of Commerce (“MOFCOM”) urged the ITC and US government to reject U.S. Steel’s request to ban all imports from China’s biggest steel mills over allegations of price-fixing and trade-secret theft.

MOFCOM stated that U.S. Steel’s request for an investigation under Section 337 of the Tariff Act was better suited for intellectual property disputes than for commodities like steel. The country said the complaint should be dismissed in favor of “dialogue, communication and joint efforts to address the problem of excess capacity” in the steel market.

UNION FILES SECTION 201 CASE ON ALUMINUM, BUT THEN WITHDRAWS IT 

As mentioned in my last blog post, on April 18, 2016 the United Steelworkers Union filed a section 201 safeguard case against aluminum imports from all countries at the US International Trade Commission (“ITC”).

But after intense pressure from the US Aluminum producers, on April 22nd the Union withdrew the petition.  Apparently, the US Aluminum producers have production facilities in Canada and also part of the Union was in Canada and not happy with the case.

MAY ANTIDUMPING ADMINISTRATIVE REVIEWS

On May 2, 2016, Commerce published the attached Federal Register notice, REVIEWS MAY 2016, regarding antidumping and countervailing duty cases for which reviews can be requested in the month of May. The specific antidumping cases against China are:  Aluminum Extrusions, Circular Welded Carbon Quality Steel Line Pipe, Citric Acid and Citrate Salt, Iron Construction Castings, Oil Country Tubular Goods, Pure Magnesium, and Stilbenic Optical Brightening Agents.

The specific countervailing duty cases are: Aluminum Extrusions and Citric Acid and Citrate Salt.

For those US import companies that imported :  Aluminum Extrusions, Circular Welded Carbon Quality Steel Line Pipe, Citric Acid and Citrate Salt, Iron Construction Castings, Oil Country Tubular Goods, Pure Magnesium, and Stilbenic Optical Brightening Agents during the antidumping period May 1, 2015-April 30, 2016 or the countervailing duty period of review, calendar year 2015, the end of this month is a very important deadline. Requests have to be filed at the Commerce Department by the Chinese suppliers, the US importers and US industry by the end of this month to participate in the administrative review.

This is a very important month for US importers because administrative reviews determine how much US importers actually owe in Antidumping and Countervailing Duty cases. Generally, the US industry will request a review of all Chinese companies. If a Chinese company does not respond in the Commerce Department’s Administrative Review, its antidumping and countervailing duty rate could well go to the highest level and for certain imports the US importer will be retroactively liable for the difference plus interest.

In my experience, many US importers do not realize the significance of the administrative review investigations. They think the antidumping and countervailing duty case is over because the initial investigation is over.  Many importers are blindsided because their Chinese supplier did not respond in the administrative review, and the US importers find themselves liable for millions of dollars in retroactive liability.

Recently, there are many examples of Chinese solar companies or US importers, which did not file requests for a review investigation.  In one instance, although the Chinese companies obtained separate rates during the initial investigation, the Petitioner appealed to the Court.  Several Chinese companies and US importers did not know the case was appealed, and the importers now owe millions in antidumping duties because they failed to file a request for a review investigation in December 2015.

NEW 337 CASE AGAINST CHINA

On May 5, 2016, Aspen Aerogels Inc. filed a 337 patent case at the ITC against imports of Composite Aerogel Insulation Materials and Methods for Manufacturing from China against Nano Tech Co., Ltd. and Guangdong Alison Hi-Tech Co., Ltd. In China.

If anyone wants a copy of the complaint, please feel free to contact me.

If anyone has any questions about these cases or about the US trade policy, trade adjustment assistance, customs, 337, IP/patent, products liability, US/China antitrust or securities law in general, please feel free to contact me.

Best regards,

Bill Perry

William E. Perry

Attorney

600 Stewart Street, Suite 1200
Seattle, Washington  98101
tel: 206.224.5657 – fax: 206.224.5659
cell: 206.235.4175
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US CHINA TRADE WAR–Trump, Trade Policy, NME, TPP, Trade, Customs, False Claims, Products Liability, Antitrust and Securities

Jefferson Memorial and Tidal Basin Evening at Cherry Blossom TimTRADE IS A TWO WAY STREET

“PROTECTIONISM BECOMES DESTRUCTIONISM; IT COSTS JOBS”

PRESIDENT RONALD REAGAN, JUNE 28, 1986

US CHINA TRADE WAR MARCH 11, 2016

MOVING TO NEW LAW FIRM, HARRIS MOURE

Dear Friends,

Have not been able to send out a new newsletter in April because we are in the process of moving to a new law firm.  As of May 1, 2016, I will no longer be at the Dorsey law firm. Dorsey will continue to represent clients in international trade and customs matters but will no longer be handling antidumping, countervailing duty, section 201, escape clause and other similar trade regulation cases.

My new law firm is Harris Moure, here in Seattle and my new e-mail address is bill@harrismoure.com.  The US China Trade War blog and newsletter will be coming with me, but coming from my new firm.

Although will miss my Dorsey friends, I am looking forward to Harris Moure, which can be found at http://www.harrismoure.com/.  With a Beijing office and lawyers that can speak fluent Chinese, the Harris firm is well known for helping US and other foreign companies move to China to set up manufacturing operations.  Dan Harris has a very famous blog, http://www.chinalawblog.com/, which is followed by many companies that are interested in doing business in and with China.

In addition, set forth are two major developments involving trade litigation against Chinese companies.

If anyone has any questions or wants additional information, please feel free to contact me at this Dorsey e-mail address until April 30th and then after that at bill@harrismoure.com.

Bill Perry

TRADE UPDATES

NEW SECTION 337 UNFAIR TRADE CASE AGAINST ALL CHINESE CARBON ALLOY STEEL COMPANIES AND ALL STEEL PRODUCTS FROM CHINA

On April 26, 2016, US Steel Corp filed a major 337 unfair trade case against all the Chinese steel companies seeking an exclusion order to bar all imports of carbon and alloy steel from China.  See the ITC notice below. U.S. Steel Corp. is accusing Chinese steel producers and their distributors of conspiring to fix prices, stealing trade secrets and false labeling to avoid trade duties.  It is asking the U.S. International Trade Commission (“ITC”) to issue an exclusion order baring all the Chinese steel from the US market and also cease and desist orders prohibiting importers from selling any imported Chinese steel that has already been imported into the United States.

The petition alleges that the Chinese companies:

work together to injure U.S. competitors, including U.S. Steel. Through their cartel, the China Iron and Steel Association (“CISA”), Proposed Manufacturer Respondents conspire to control raw material input prices, share cost and capacity information, and regulate production and prices for steel products exported to the United States. Proposed Manufacturer Respondents also share production schedules and time the release of products across multiple companies. This enables them to coordinate exports of new products to flood the U.S. market and destroy competitors.

4. Some of the Proposed Manufacturer Respondents have used valuable trade secrets stolen from U.S. Steel to produce advanced high-strength steel that no Chinese manufacturer had been able to commercialize before the theft. In January 2011, the Chinese government hacked U.S. Steel’s research computers and equipment, stealing proprietary methods for manufacturing these products. Soon thereafter, the Baosteel Respondents began producing and exporting the very highest grades of advanced high-strength steel, even though they had previously been unable to do so. Chinese imports created with U.S. Steel’s stolen trade secrets compete against and undercut U.S. Steel’s own products.

5.        Proposed Respondents create documentation showing false countries of origin and false manufacturers for Chinese steel products. They also transship them through third countries to disguise their country of origin, circumvent anti-dumping and countervailing duty orders, and deceive steel consumers about the origin of Chinese steel.

Having worked at the ITC on 337 cases and later in private practice, section 337 is generally aimed at imports that infringe intellectual property rights, such as patents, trademarks or copyrights.  Moreover, one provision of section 337(b)(3) provides that when any aspect of a section 337 case relates to questions of dumping or subsidization, the Commission is to terminate the case immediately and refer the question to Commerce.

Also in the past when section 337 was used to bring antitrust cases, there was intense push back by the Justice Department.  Customs and Border Protection also may not be happy with the use of section 337 to enforce US Custom law.

But section 337 cases are not antidumping and countervailing duty cases.  There are no mandatory companies and lesser targets.  All the Chinese steel companies are targets, and this will be intense litigation with very tight deadlines.  If the individual Chinese steel companies do not respond to the complaint, their steel exports could be excluded in 70 days to six months.  Section 337 cases are hard- nosed litigation on a very fast track.

If you are interested in a copy of the complaint, please feel free to contact me.

The ITC notice is as follows:

Tuesday, April 26, 2016

Commodity: Carbon and Alloy Steel Products

Pending Institution

Filed By: Paul F. Brinkman

Firm/Organization: Quinn Emanuel Urrquhart & Sullivan LLP

Behalf Of: United States Steel Corporation

Letter to Lisa R. Barton, Secretary, USITC; requesting that the Commission conduct an investigation under section 337 of the Tariff Act of 1930, as amended, regarding Certain Carbon and Alloy Steel Products. The proposed respondents are: Hebei Iron and Steel Co., Ltd., China; Hebei Iron & Steel Group Hengshui Strip Rolling Co., Ltd., China; Hebei Iron & Steel (Hong Kong) International Trade Co., Ltd., China; Shanghai Baosteel Group Corporation,China; Baoshan Iron & Steel Co., Ltd., China; Baosteel America Inc., Montvale, New Jersey; Jiangsu Shagang Group, China; Jiangsu Shagang International Trade Co, Ltd., China; Anshan Iron and Steel Group, China; Angang Group International Trade Corporation, China; Angang Group Hong Kong Co., Ltd., China; Wuhan Iron and Steel Group Corp., China; Wuhan Iron and Steel Co., Ltd., China; WISCO America Co., Ltd., Newport Beach, California; Shougang Group, China; China Shougang International Trade & Engineering Corporation, China; Shandong Iron and Steel Group Co., Ltd, China; Shandong Iron and Steel Co., Ltd., China; Jigang Hong Kong Holdings Co., Ltd., China; Jinan Steel International Trade Co., Ltd., China; Magang Group Holding Co. Ltd, China; Maanshan Iron and Steel Co., Ltd., China; Bohai Iron and Steel Group, China; Tianjin Pipe (Group) Corporation, China; Tianjin Pipe International Economic & Trading Corporation, China; TPCO Enterprise Inc., Houston, Texas; TPCO America Corporation, Gregory, Texas; Benxi Steel (Group) Co., Ltd., China; Benxi Iron and Steel (Group) International Economic and Trading Co., Ltd., China; Hunan Valin Steel Co., Ltd., China; Hunan Valin Xiangtan Iron and Steel Co., Ltd., China; Tianjin Tiangang Guanye Co., Ltd., China; Wuxi Sunny Xin Rui Science and Technology Co., Ltd., China; Taian JNC Industrial Co., Ltd., China; EQ Metal (Shanghai) Co., Ltd., China; Kunshan Xinbei International Trade Co., Ltd, China; Tianjin Xinhai Trade Co., Ltd., China; Tianjin Xinlianxin Steel Pipe Co. Ltd, China; Tianjin Xinyue Industrial and Trade Co., Ltd., China; and Xian Linkun Materials (Steel Pipe Supplies) Co., Ltd., China.

UNION FILES SECTION 201 CASE ON ALUMINUM, BUT THEN WITHDRAWS IT

On April 18, 2016 the United Steelworkers Union filed a section 201 safeguard case against imports of aluminum from all countries at the US International Trade Commission (“ITC”). Although the target appeared to be China because its overcapacity has affected the World aluminum market, in fact, not so much.   China has an export tax in place to prevent exports of primary aluminum.  The real targets were Canada and Russia.  Canada exports about $4 billion in aluminum to the US, and Russia exports about $1 billion.

But after intense pressure from the US Aluminum producers, on April 22th the Union withdrew the petition.  Apparently, the US Aluminum producers have production facilities in Canada and also part of the Union was in Canada and not happy with the case.

Moreover, at the request of Congress, the ITC is conducting a fact-finding investigation on the US aluminum industry. The report is due out June 24, 2017.  The Union may have decided to wait until the ITC issues the fact-finding report in June and then it will refile the 201 case.

But there are reports that as a result of the case the Canadian and US governments are discussing the aluminum trade problem, which may result in a settlement down the road.

If you have any questions about these cases or about the US trade policy, trade adjustment assistance, customs, 337, IP/patent, products liability, US/China antitrust or securities law in general, please feel free to contact me.

Best regards,

Bill Perry

Dear Friends,

On March 21, 2016 and March 17, 2016, after this post was sent out, I was interviewed on Donald Trump and the US China Trade War by the World Finance, a bi-monthly print and web outlet on the financial industry.

To see the video on the impact of Donald Trump on International Trade policy, please see  Could Trump Take the US Back to the Great Depression, http://www.worldfinance.com/inward-investment/asia-and-australasia/could-trump-take-the-us-back-to-the-great-depression

To see the video on the US China Trade War, click on the following link

http://www.worldfinance.com/inward-investment/asia-and-australasia/the-us-china-trade-war-explained

For more information on the specific points made in the two videos on the US China Trade War and Donald Trump, please see the lead article below on the Trump Impact on International Trade policy.

March 11 Blog Post

After returning from a two week trip to China to work on the Solar Cells case, this March blog post will cover trade policy, including Trump’s impact on Trade Policy, trade, Customs, False Claims Act, the recent ZTE Export Control debacle, 337, patents/IP, criminal IP cases, products liability, antitrust and securities. There are significant developments in the US antitrust area.

If anyone has any questions or wants additional information, please feel free to contact me.

Best regards,

Bill Perry

THE TRUMP IMPACT ON US TRADE POLICY

As stated in numerous past blog posts, one of the major reasons the Trans Pacific Partnership is running into problems in Congress along with a number of other trade issues, such as market economy for China, is the impact of the Presidential elections, especially the rise of Donald Trump. After Super Tuesday on March 1, 2016 and the Trump victories in seven different states many Republican pundits believe the game is over and Trump has won the Republican primary and will be the party’s nominee.

Thus Ed Rollins, who worked in the Reagan Administration and is a highly respected expert on the Republican party, published an article on March 2, 2016 on the Fox News website stating, “Trump is now unstoppable. It’s game over for Cruz, Rubio, Kasich and Carson.” Rollins goes on to state:

Game over! This was a rout, America. Winning seven states and the vast majority of delegates is a landslide. Donald Trump and the millions of his supporters have changed American politics and the Republican Party for the foreseeable future. . . .

Trump, who is an unconventional candidate, to say the least, has tapped into the anger and frustration across America and has mobilized voters to turn out in record numbers.

Love him or hate him, be inspired by him or be appalled by him, Trump has totally dominated a political cycle like no other politician I’ve seen in decades.

I admit I was a total skeptic, like many others. At first, I didn’t think he would run. Then I thought there was no way he could beat the all-star cast of elected officials running against him.

Then I underestimated his lack of substance and trite answers in the debates. Then I underestimated his lack of a real campaign.

Then I was convinced the political establishment was going to spend millions and take him out. And like the Energizer bunny he just keeps going and winning!

Trump is getting stronger by the day and his supporters are locked in and not going away. And no one has mastered the media like this since Teddy Roosevelt and his rough riders.

What’s ahead is a Republican Party that either becomes part of his movement or splinters into many pieces. No matter what Trump does or says, the nomination is his for the taking.

For the full article, see http://www.foxnews.com/opinion/2016/03/02/trump-is-now-unstoppable-its-game-over-for-cruz-rubio-kasich-and-carson.html?intcmp=hpbt2#

At most, there is only a 30% chance that some other Republican candidate can beat Trump, but with a 70% chance that Trump will be the Republican nominee, the question is can Trump beat Hilary Clinton? Many facts indicate that Trump could win and become the next President.

On February 29, 2016, the Boston Herald reported that my childhood state, Massachusetts, which is very liberal and very Democratic, is seeing a surge in Democratic voters switching parties to vote Republican for Trump. As the Boston Herald reported on February 29, 2016, “Amid Trump surge, nearly 20,000 Mass. voters quit Democratic party”. The Article goes on to state:

The primary reason? [Secretary of State Galvin said his “guess” is simple: “The Trump phenomenon” . . . . Galvin said the state could see as many as 700,000 voting in tomorrow’s Republican primary, a significant number given just 468,000 people are actually registered Republicans. In Massachusetts. unenrolled — otherwise known as independent — voters can cast a ballot in the primary of any party.

For full article see http://www.bostonherald.com/news/us_politics/2016/02/amid_tru… 3/1/2016

On February 29, 2016, Buck Fox in Investors Business Daily, one of the more well- known financial newspapers in the US, predicted that Trump would win the Presidency:

Let’s take a rare journalistic moment to answer definitively: Will Donald Trump win the presidency? Yes.

Good. Got that out of the way. No dialing a focus group. Tell it straight. … Answers. Trump rattles them off fearlessly. He doesn’t consult pollsters. He goes with his gut.

Which is one reason he’s wildly popular — dominating the Drudge debate poll with 57% — and on the way to delivering the inaugural address on Jan. 20, 2017, as the 45th president.

As Ann Coulter says, President Trump will be halfway through that speech as the Republican Party keeps debating his viability.

Don’t limit that hedge to GOP bureaucrats. Throw in 99% of TV pundits: Karl Rove, Brit Hume, George Will, Bill Kristol, Rich Lowry, Steve Hayes, Charles Krauthammer, S.E. Cupp, Mike Smerconish, Ben Ferguson, Jeff Toobin.

They share a maddening trait — smug, glib and handsomely paid while belittling Trump’s odds of winning. Even though that’s all he’s done while building a titanic real estate empire. . . .

The smart ones see a runaway Trump Train, with Los Angeles radio host Doug McIntyre —hardly a Don fan — conceding after Nevada’s rout, “Donald Trump will win the Republican nomination.”

No “maybe.” No “very well could.” Trump will claim the GOP trophy in July in Cleveland. And win it all in November. Why?

  1. Issues. Trump owns immigration, trade, Muslim terror, self-funding his campaign to ignore special interests. . . . .

For full article, see http://www.investors.com/politics/capital-hill/trump-towers-over-the-presidential-field/[2/29/2016 12:29:13 PM]

On March 1, 2016, Politico published an article “The media’s Trump reckoning: ‘Everyone was wrong’ From the New Yorker to FiveThirtyEight, outlets across the spectrum failed to grasp the Trump phenomenon.”

In a March 3, 2016 article, John Brinkley of Forbes asks “Why Is Trade Such A Big Deal In The Election Campaign?”, stating in part:

Did you ever think you’d see a day when international trade was a central issue in a U.S. presidential election?

That’s where we are in 2016. For one reason or another, all the presidential candidates have felt the need to stake out positions on trade.

Let’s look at the last half-century. Issues that animated presidential campaigns were the Cold War, civil rights, the Vietnam War, Watergate, nuclear weapons, inflation, budget deficits, health care costs, terrorism, national security, wars in Iraq and Afghanistan, a financial crisis, illegal immigration. But never trade.

Well, almost never. While running for president in 1992, Ross Perot warned that NAFTA would cause “a giant sucking sound” from Mexico, but he wasn’t able to elevate NAFTA to a prominent position in that year’s election debates.

This year the Republican front-runner Donald Trump, who says he knows a lot about trade, but has proven that he doesn’t, says he’ll repeal NAFTA and the Trans-Pacific Partnership if it takes effect before he becomes president.

He also says he wants to slap a 45 percent tariff on Chinese imports. It’s been pointed out that this would get us into a trade war. The Trump camp’s fatuous response is that we’re already in a trade war with China. That’s like saying your house is in fire, so let’s spray gasoline on it.

Sen. Bernie Sanders, who had a realistic shot at the Democratic nomination until Super Tuesday, has ranted and raved about free trade agreements throughout his campaign. He says they have cost millions of Americans their jobs, although there is no empirical evidence of that.

In her inimical please-all-the-people-all-the-time style, Democratic frontrunner Hilary Clinton says she doesn’t like the Trans-Pacific Partnership in its present form, but might change her mind if certain changes are made. She obviously thinks trade is important enough as a political issue that she has to bob and weave rather than take an unambiguous yes-or-no position. . . .

Why is trade such a volatile issue this year?

An obvious reason is that the Obama administration has negotiated and signed the most mammoth trade agreement in the history of the universe.

The TPP encompasses 12 countries and 40 percent of the world’s economy. . . .

And a third we can call The Trump Factor: the other GOP candidates are so scared of Trump that they feel they have to respond to everything he says, just to show that they’re not like him (which hardly seems necessary). . . .

Keeler said the prominence of trade in the 2016 presidential campaign “is surprising in the same way that everything about Donald Trump is surprising.”

For the full article, see

http://www.forbes.com/sites/johnbrinkley/2016/03/03/why-is-trade-such-a-big-deal-in-the-election-campaign/print/.

Why is trade policy so important in this election? It is not because Trump says it is so.  Instead, it is the reason Trump is doing so well in the Republican primary—his appeal to a large constituency that is being hammered by illegal immigration, hurt by trade and afraid of losing their jobs.  Several pundits have tried to explain what this election is really about and the reason for Trump’s rise:

Hundreds of workers in Indiana, who just saw their jobs heading to Mexico;

Disney employees being fired and forced to retrain foreign replacements;

and finally the systematic invasion of the country by illegal immigrants, who take American jobs away.

Middle class and lower middle class people are afraid of losing their jobs and their livelihood and are flocking to Trump.

In two word, this is economic nationalism.

One central core of Donald Trump’s strategy is the argument that the United States has been soft on trade and “does not win any more.” Trump specifically points to China as one of the biggest winners saying that China, Mexico and Japan all beat the US in trade.

Moreover, the Core Constituency of Trump, his followers, are blue collar workers, many without a college education, so-called Reagan Democrats, that work in companies, factories, service industries and often are in labor unions. These workers are in regular 9 to 5 jobs on a set salary, in the lower middle and middle class, who are not privileged and not protected, feel their livelihoods threatened by illegal immigration and trade deals that give other countries access to US markets.  These blue collar workers are white, black, and Hispanic, such as in the Nevada primary where many Hispanics voted for Trump.  These workers would normally vote Democratic, but they firmly believe that no party be it Democratic or Republican truly represents their interests and are willing to protect their jobs and way of life.  Along comes Donald Trump stating that he will stop illegal immigrants at the border, do away with trade agreements and stop imports from China saving their jobs.  He will make America great again.  For many, many workers this argument makes them solid Trump supporters.

In a March 2 article entitled Eight Reasons we need to start preparing for President Trump, Geoff Earle writing for the NY Post states

Reason 5:

Trump’s main demographic strength — working-class men and white voters — matches up well against one of Hillary Clinton’s chief weaknesses. He could go after Clinton in must-win Ohio, where “Trump’s rhetoric appeals to those blue-collar Democrats,” said GOP strategist Brian Walsh.

For full article, see http://nypost.com/2016/03/02/8-reasons-we-need-to-start-preparing-for-president-trump.

In listening to Donald Trump’s victory speech on Super Tuesday, he stated that he wants to be a unifier and that he will reduce corporate taxes and make it easier for US companies to repatriate profits and set up manufacturing in the US. No one has problems with Trump’s idea of using carrots to bring back US manufacturing.  The problem is with Trump’s idea of using trade sticks to force manufacturing back to the US by setting up high protectionist walls.

On February 29, 2016, The Wall Street Journal in an editorial entitled, “Making Depressions Great Again — The U.S. may renounce its trade leadership at a dangerous economic moment,” expressed its real concern that by using the Trade/Tariff sticks Trump could take the United States back to the 1930s and the Smoot Hawley Tariff that created the Great Depression:

Reviving trade is crucial to driving faster growth, yet the paradox of trade politics is that it is least popular when economic anxiety is high and thus trade is most crucial.

And so it is now: Four of the remaining U.S. candidates claim to oppose the Trans-Pacific Partnership, and Congress now lacks the votes to pass it.

The loudest voice of America’s new antitrade populism is Mr. Trump, who has endorsed 45% tariffs on Chinese and Japanese imports and promises to punish U.S. companies that make cookies and cars in Mexico. When Mr. Trump visited the Journal in November, he couldn’t name a single trade deal he supported, including the North American Free Trade Agreement (Nafta).

He says he’s a free trader but that recent Administrations have been staffed by pathetic losers, so as President he would make deals more favorable to the U.S., and foreigners would bow before his threats. “I don’t mind trade wars,” he said at Thursday’s debate.

He should be careful what he wishes. Trade brinksmanship is always hazardous, especially when the world economy is so weak. A trade crash could trigger a new recession that would take years to repair, and these conflicts are unpredictable and can escalate into far greater damage.

The tragic historic precedent is the Smoot-Hawley tariff of 1930, signed reluctantly by Herbert Hoover. In that era the GOP was the party of tariffs, which economist Joseph Schumpeter called the Republican “household remedy.” Smoot-Hawley was intended to protect U.S. jobs and farmers from foreign competition, but it enraged U.S. trading partners like Canada, Britain and France.

As economic historian Charles Kindleberger shows in his classic, “The World in Depression, 1929-1939,” the U.S. tariff cascaded into a global war of beggar-thy-neighbor tariff reprisals and currency devaluation to gain a trading advantage. Each country’s search for a protectionist advantage became a disaster for all as trade volumes shrank and deepened the Great Depression.

Kindleberger blames the Depression in large part on a failure of leadership, especially by a U.S. that was unwilling to defend open markets in a period of distress. “For the world economy to be stabilized, there has to be a stabilizer—one stabilizer,” he wrote. Britain had played that role for two centuries but was then too weak. The U.S. failed to pick up the mantle. . . .

Once the President recovered his trade bearings, Mitt Romney promised in 2012 to sanction China for currency manipulation and even ran TV ads claiming that “for the first time, China is beating us.”

Mr. Trump is now escalating this line into the centerpiece of his economic agenda—protectionism you can believe in. And what markets and the public should understand is that as President he would have enormous unilateral power to follow through. Congress has handed the President more power over the years to impose punitive tariffs, in large part so Members can blame someone else when antitrade populism runs hot. . . .

In an exchange with Bill O’Reilly on Feb. 10, Mr. Trump said that’s exactly what he plans to do. The Fox News host suggested a trade war is “going to be bloody.” Mr. Trump replied that Americans needn’t worry because the Chinese “will crash their economy,” adding that “they will have a depression, the likes of which you have never seen” in a trade war. He might be right about China, but the U.S. wouldn’t be spared.

The Trump candidacy thus introduces a new and dangerous element of economic risk to a world still struggling to emerge from the 2008 panic and the failed progressive policy response. A trade war would compound the potential to make depressions great again.

For the full editorial see http://www.wsj.com/articles/making-depressions-great-again-1456790200 3/1/2016.

President Ronald Reagan, who lived through the Great Depression and knew about the impact of the Smoot Hawley tariff on his generation, was a solid free trader stating on June 28, 1986 in the attached speech on international trade, BETTER COPY REAGAN IT SPEECH:

But cliches and demagoguery aside, the truth is these trade restrictions badly hurt economic growth. You see, trade barriers and protectionism only put off the inevitable.

Sooner or later, economic reality intrudes, and industries protected by the Government face a new and unexpected form of competition. It may be a better product, a more efficient manufacturing technique, or a new foreign or domestic competitor.

By this time, of course, the protected industry is so listless and its competitive instincts so atrophied that it can’t stand up to the competition. And that, my friends, is when the factories shut down and the unemployment lines start. We had an excellent example of this in our own history during the Great Depression. Most of you are too young to remember this, but not long after the stock market crash of 1929, the Congress passed something called the Smoot-Hawley tariff.

Many economists believe it was one of the worst blows ever to our economy. By crippling free and fair trade with other nations, it internationalized the Depression. It also helped shut off America’s export market, eliminating many jobs here at home and driving the Depression even deeper.

Ronald Reagan was a true free trader; Donald Trump is not.

But Trump’s rhetoric along with the strong positions of Bernie Sanders, have already had an impact on US trade policy.

Trans Pacific Partnership (“TPP”)

On February 22, 2016, despite strong opposition from Republican lawmakers and many Democratic Senators and Congressmen, in a speech before the National Governors Association, President Obama stated that he was cautiously optimistic that Congress would pass the TPP before he leaves office. President Obama specifically stated:

“I am cautiously optimistic that we can still get it done. Leader McConnell and Speaker Ryan both have been supportive of this trade deal.  We’re going to … enter this agreement, present it formally with some sort of implementation documents to Congress at some point this year and my hope is that we can get votes.”

But President Obama admitted that selling the TPP is not easy with the opposition of four of the top five candidates for the presidency — Donald Trump, Hillary Clinton and Sens. Bernie Sanders, I-Vt., and Ted Cruz, R-Texas. He further stated:

“The presidential campaigns have created some noise within and roiled things a little bit within the Republican Party, as well as the Democratic Party around this issue. I think we should just have a good, solid, healthy debate about it.  What all of you can do to help is to talk to your Congressional delegations and let them know this is really important.  All of you, though, can really lift up the benefits for your states, and talk to your congressional delegations directly.”

Obama can only submit legislation to implement the TPP to Congress after the U.S. International Trade Commission releases an extensive report on the agreement’s economic impact in mid-May.

As reported in my last newsletter, on February 5, 2016, in the Democratic debate, Hillary Clinton stated that she could support the TPP if the deal is changed, but also stated afterwards that she opposes the deal as currently written.  Meanwhile there is intense pressure on Clinton to stay opposed to the TPP as the labor unions have increased pressure on those Democratic Congressmen and Senators that voted in favor of the Trade Promotion Authority and were put on labor’s hit list.  On February 29, 2016, it was reported that labor unions were now targeting 28 moderate Democrats who supported “fast-track” trade promotion legislation.

California Rep. Scott Peters estimates his reelection campaign is likely to see a $200,000 to $300,000 drop in labor donations — about a seventh of his total contributions so far — and fewer ground volunteers knocking on doors unless he changes his trade stance. The two-term lawmaker, who won reelection by 3 percent of the vote, is likely to face ad buys, call-in campaigns and protests outside his office. As Peters further stated:

“We’ve lost some pretty important labor support as a result on the vote on TPA, and that’s painful … There’s no doubt there has been a political price.”

Labor’s attacks on the free traders could also be decisive in the reelection bids of California Rep. Ami Bera and New York Rep. Kathleen Rice. The White House has sought to counter the labor attacks by early endorsements, raised campaign funds and deployed Cabinet officials to praise members in their districts.

This makes passage of the TPP very doubtful in Congress. As Texas Rep Eddie Bernice Johnson said of the loss of the AFL-CIO backing:

“It gets your attention,” adding that trade is an “economic engine” for her Dallas district. “But I cannot neglect the stance and conditions of my district that I pledged heartily to represent.”

There’s a chance a TPP vote could get delayed until the Lame Duck session or the next administration and the next Congress, but AFL-CIO President Richard Trumka has stated:

“So they want to put it after the election because they think we’ll forget. Well, we’re not going to forget, and we’re not going to let the American worker forget, and we think they’ll have a tough time explaining their vote to workers who have lost jobs”

During a meeting with labor and trade protectionists, Oregon Congressman Earl Blumenauer reportedly slammed a notepad down on a table at the height of the debate, telling the group he was frustrated with the constant calls and picketing outside his home and district office. Blumenauer went on to state:

“I have a community that is very trade-dependent, but we also have people who are trade skeptics. So I’m just going to let the chips fall where they may.”

On March 7, 2016, former Congressman Don Bonker wrote the following article for the Seattle Times about the developments in the Trade area:

Trump’s trade rhetoric threatens U.S. economy, global standing, Trump’s fear tactics combined with viral protectionism spreading across the country is a monkey wrench for passage of Trans-Pacific Partnership.

Donald Trump’s political rhetoric, however absurd, is boastfully driving the debate among Republicans on issues such as immigration, but it’s his relentless jabs at U.S. trade policy that is more alarming.

Threatening to slap a 35 percent tariff on all imports from China definitely resonates with his support base, but it could undermine America’s leadership globally and also prove harmful in the Puget Sound area, given that such arbitrary tariffs are imposed on American importers, not Chinese suppliers, then passed on to distributors and ultimately result in higher consumer prices.

Trump, ever boastful of his business savvy, should also expect the Chinese to retaliate, as they predictably will, to restrict U.S. exports from Washington state and beyond.

Not surprisingly, Trump wants it both ways, asserting that free trade is terrible because we have “stupid” officials doing the negotiating, yet it could be wonderful if he calls the shots and has the final word (someone should inform him about the Constitution, which clearly states that “Congress shall regulate interstate and foreign commerce.”)

This may be how he cuts backroom business deals, but Trump’s approach would be unacceptable as leader of the world’s No. 1 economy.

Such fear tactics combined with viral protectionism spreading across the country, tapped into by Bernie Sanders and now Hillary Clinton switching her position on Trans-Pacific Partnership (TPP), is alarming to other nations who depend on America leadership in today’s global economy.

Using Trump’s words, “to make America great again,” our president must be a strong leader in today’s global economy, which Barack Obama has attempted to do with initiatives such as TPP. The partnership would give the U.S. a stronger presence in the Pacific Rim and provide a protective shield for Asian countries threatened by China’s enormous growth and influence in the region.

The TPP is destined for burial thanks to Trump’ rhetoric and growing protectionism among Democrats in Congress. It will be to China’s advantage given their own trade negotiations with the same countries.

If Trump is elected, will it put us in a trade war with China? In the 1928 presidential election, Herbert Hoover was less pompous than Trump but nonetheless called for higher tariffs that set the stage for a Republican Congress poised to run amok on limiting imports.

Shortly after the elections, hundreds of trade associations were formed that triggered an unbridled frenzy of logrolling, jockeying for maximum protection for commodity and industry producers leading to enactment of the Smoot-Hawley Tariff Act that hiked import fees up to 100 percent on over 20,000 imported products.

On the Senate side, another 1,200 amendments were added that proved so egregious, prompting Democrat Senator Thaedeus H. Caraway of Arkansas to declare that, “I might suggest that we have taxed everything in this bill except gall,” to which Senator Carter Glass of Virginia responded, “Yes, and a tax on that would bring considerable revenue.”

What Congress sent to the president proved so alarming it prompted 1,000 of nation’s leading economists to sign a petition urging President Hoover to veto the Smoot-Hawley Act, while The New York Times printed an ad that listed 46 states and 179 universities warning that signing the bill may prompt a fierce reaction.

Indeed within a few months, America’s leading trade partners — Canada, France, Mexico, Italy, 26 countries in all — retaliated, causing the world trade to plummet by more than half of the pre-1929 totals, one of several factors that precipitated the Great Depression.

Based on his campaign rhetoric, a Trump presidency would have plenty of gall, to be sure but it is certainly not what is needed to make America great again.

On March 9, I attended a reception here in Seattle with Congressman Dave Reichert, Chairman Subcommittee on Trade, House Ways and Means. Congressman Reichert stated that he is the first Washington State Congressman to become Chairman of the Trade Subcommittee.  He also stated that he is dedicated and personally committed to passing the TPP through Congress no matter how long it takes because of its importance for the economies of Washington State and the entire United States.

On March 10, 2016, however, the Wall Street Journal had a front page headline entitled, “Free Trade Loses Political Favor, Republican backing fades as voters voice surprising skepticism; Pacific pact seen at risk”. The Article states in part:

After decades in which successive Republican and Democratic presidents have pushed to open U.S. and global markets, resentment toward free trade now appears to have the upper hand in both parties, making passage this year of a sweeping Pacific trade deal far less likely and clouding the longer-term outlook for international economic exchange.

Many Democrats have long blamed free-trade deals for big job losses and depressed wages, especially in the industrialized Midwest, which has been battered over the years by competition from lower-cost manufacturing centers in countries like Japan, Mexico and China. . . .

But one big surprise Tuesday was how loudly trade fears reverberated among Republican voters in the primary contests in Michigan and Mississippi—evidence, many observers say, of a widening undercurrent of skepticism on the right about who reaps the benefits from loosened trade restrictions.

CHINA

Despite arguments by the Federalist Society in the attached article, Everything Trump Says About Trade With China Is Wrong, that Donald Trump’s arguments against China are simply wrong, Trump’s strong position and Hilary Clinton’s desire to keep Union support has forced her to take a much tougher stand on trade with China and the TPP. On February 23rd, 2016 in the attached commentary to the  Maine Press Herald, CLINTON ARTICLE CHINA, entitled “If elected president, I’ll level the playing field on global trade,” Hilary Clinton stated:

At the same time, China and other countries are using underhanded and unfair trade practices to tilt the playing field against American workers and businesses.

When they dump cheap products in our markets, subsidize state-owned enterprises, manipulate currencies and discriminate against American companies, our middle class pays the price. That has to stop.

Ninety-five percent of America’s potential customers live overseas, so closing ourselves off to trade is not a solution. . . .

As President, my goal will be to win the global competition for the good-paying manufacturing jobs of the future.

  • First, we have to strongly enforce trade rules to ensure American workers aren’t being cheated. Too often, the federal government has put the burden of initiating trade cases on workers and unions, and failed to take action until after the damage is done and workers have been laid off.

That’s backward: The government should be enforcing the law from the beginning, and workers should be able to focus on doing their jobs. To make sure it gets done, we should establish and empower a new chief trade prosecutor reporting directly to the president, triple the number of trade enforcement officers and build new early-warning systems so we can intervene before trade violations cost American jobs.

We should also hold other countries accountable for meeting internationally sanctioned labor standards – fighting against child and slave labor and for the basic rights of workers to organize around the world.

Second, we have to stand up to Chinese abuses. Right now, Washington is considering Beijing’s request for “market economy” status. That sounds pretty obscure. But here’s the rub – if they get market economy status, it would defang our anti-dumping laws and let cheap products flood into our markets. So we should reply with only one word: No.;

With thousands of state-owned enterprises; massive subsidies for domestic industry; systematic, state-sponsored efforts to steal business secrets; and blatant refusal to play by the rules, China is far from a market economy. If China wants to be treated like a market economy, it needs to act like one.

Third, we need to crack down on currency manipulation – which can be destructive for American workers. China, Japan and other Asian economies kept their goods artificially cheap for years by holding down the value of their currencies.;

I’ve fought against these unfair practices before, and I will do it again. Tough new surveillance, transparency and monitoring regimes are part of the answer – but only part. We need to expand our toolbox to include effective new remedies, such as duties or tariffs and other measures.

Fourth, we need to stop rewarding U.S. companies for shipping jobs overseas by closing loopholes and ending tax write-offs – and encouraging “in-sourcing” here in America instead. Two HVAC plants in Indiana recently decided to move abroad, costing 2,100 jobs – and likely pocketing a tax deduction.

They’re not just turning their back on the workers and community that supported them for years, they’re turning their back on America. As President, I’ll also end so-called “inversions” that allow multinational businesses to avoid paying U.S. taxes by moving overseas in name only.

Fifth, we have to set a high bar for any new trade agreements, and only support them if they will create good jobs, raise wages and advance our national security. I opposed the Trans-Pacific Partnership when it failed to meet those tests, and would oppose future agreements if they failed to meet that bar.;

America spent generations working with partners to develop strong and fair rules of the road for the global economy – but those rules only work if we enforce them. Tough enforcement and other smart policies to support a manufacturing renaissance are the only way we can ensure that trade helps American workers. If I’m elected President, that’s what I’ll do.

THE REASON TRADE IS AT THE CENTER OF THE DEBATE AND THE REAL TRADE ANSWER—TAA FOR COMPANIES

THE REASON

What is the reason that trade is the center of the Presidential debate? I believe at its core there are two fundamental reasons—failure to educate the general populace on the benefits of trade so that they understand how manufacturing in the US is connected in global supply chain with raw material inputs from abroad.

The second reason is the toxic domestic raw material heavy industry/Labor Union attack based on false arguments that all trade competition is caused by unfair trade and that companies can be saved by bringing trade remedy cases. This rhetoric has generated a Globalization victimhood way of thinking that all imports are unfairly traded, especially from China. This is despite the fact that 80 of the outstanding 120 antidumping orders against China are directed at raw materials, chemicals, metal and steel, which goes directly into downstream US production. Restrictions on raw material inputs hurts downstream US industries, which have no standing under US antidumping and countervailing duty laws to argue against the restrictions and have their arguments have any weight in the determination.

Years ago a United States Trade Representative (“USTR”) in the W Bush Administration spoke in Seattle and said that in the Trade area the major failure has been to educate the American public on the benefits of trade. Washington State, which is dependent on imports and exports, certainly knows the benefits of trade. The Ports in Washington State are incredibly important for the economic health of the State. Our largest trading partner is China to which Washington exports $20 billion every year. Thus the Washington Council for International Trade is pushing hard for the Trans Pacific Partnership. See http://wcit.freeenterpriseaction.com/v9xpssZ

But that is not true in many other states, especially in the Midwest and on the East Coast, which have adopted the trade victimization ideology. In addition, the Steel Industry and Labor Unions make three attacks against China—currency manipulation, cyber hacking and antidumping. When one looks deeper at these arguments, however, they fall apart.

CURRENCY MANIPULATION

Donald Trump and Hilary Clinton have been screaming about currency manipulation. But on May 22, 2015, on the Senate floor during the debate on Trade Promotion Authority (“TPA”) Senator Hatch made a very strong argument against the Stabenow and Portman Currency Amendment, which would have included tough provisions and sanctions, against currency manipulation. Senator Hatch clearly stated that the reason he opposed the Amendment was because President Obama under pressure from Treasury Secretary Lew stated that if the currency amendment was included, he would veto the TPA bill.

Why were President Obama and Treasury Secretary Lew opposed to tough sanctions against currency manipulation? Because those sanctions could be used against the United States. See Testimony of Senators Wyden and Hatch at http://www.c-span.org/video/?326202-1/us-senate-debate-trade-promotion-authority&live. As Senator Hatch stated:

I think I can boil this very complicated issue down to a single point: The Portman-Stabenow Amendment will kill TPA.

I’m not just saying that, Mr. President. It is, at this point, a verifiable fact.

Yesterday, I received a letter from Treasury Secretary Lew outlining the Obama Administration’s opposition to this amendment. . . . most importantly, at the end of the letter, Secretary Lew stated very plainly that he would recommend that the President veto a TPA bill that included this amendment.

That’s pretty clear, Mr. President. It doesn’t leave much room for interpretation or speculation. No TPA bill that contains the language of the Portman-Stabenow Amendment stands a chance of becoming law. . . .

We know this is the case, Mr. President. Virtually all of our major negotiating partners, most notably Japan, have already made clear that they will not agree to an enforceable provisions like the one required by the Portman-Stabenow Amendment. No country that I am aware of, including the United States, has ever shown the willingness to have their monetary policies subject to potential trade sanctions. . . .

Second, the Portman-Stabenow Amendment would put at risk the Federal Reserve’s independence in its ability to formulate and execute monetary policies designed to protect and stabilize the U.S. economy. While some in this chamber have made decrees that our domestic monetary policies do not constitute currency manipulation, we know that not all of our trading partners see it that way. . . .

If the Portman-Stabenow language is adopted into TPA and these rules become part of our trade agreements, how long do you think it will take for our trading partners to enter disputes and seek remedies against Federal Reserve quantitative easing policies? Not long, I’d imagine.

If the Portman-Stabenow objective becomes part of our trade agreements, we will undoubtedly see formal actions to impose sanctions on U.S. trade, under the guise that the Federal Reserve has manipulated our currency for trade advantage. We’ll also be hearing from other countries that Fed policy is causing instability in their financial markets and economies and, unless the Fed takes a different path, those countries could argue for relief or justify their own exchange-rate policies to gain some trade advantage for themselves.

CYBER HACKING

The trade critics also attack China for Cyber Hacking, but on September 29, 2015, in response to specific questions from Senator Manchin in the Senate Armed Services Committee, James R. Clapper, Director of National Intelligence, testified that China cyber- attacks to obtain information on weapon systems are not cyber- crime. It is cyber espionage, which the United States itself engages in.  As Dr. Clapper stated, both countries, including the United States, engage in cyber espionage and “we are pretty good at it.”  Dr. Clapper went on to state that “people in glass houses” shouldn’t throw stones.  See http://www.armed-services.senate.gov/hearings/15-09-29-united-states-cybersecurity-policy-and-threats at 1hour 8 minutes to 10 minutes.

In response to a specific question from Senator Ayotte, Director Clapper also specifically admitted that the attack on OPM and theft of US government employee data is state espionage and not commercial activity, which the US also engages in. See above hearing at 1 hour 18 and 19 minutes.  

Thus, the United States itself does not want to clearly define Cyber Hacking as unacceptable because it is state espionage and we the United States do it too and are pretty good at it.

DUMPING

As indicated in numerous past blog posts, more dumping and countervailing duty cases, some against China based on faked numbers, does not solve the trade problem. For over 40 years the Commerce Department has refused to use actual prices and costs in China to determine dumping resulting in antidumping and countervailing duty orders blocking about $30 billion in Chinese imports.  In doing so, however, China is treated worse the Iran, Russia, Syria and many other countries under the US antidumping law.

As indicated below, that issue comes to a boil on December 11, 2016 when pursuant to the China WTO Agreement, China is supposed to be treated as a market economy country. But Hilary Clinton states that if market economy treatment were given to China so they could be treated like Iran, we would “defang our antidumping laws.”  Nothing could be further from the truth.  Having worked at the Commerce Department, I am convinced that if China were to become a market economy, Commerce would still find very large dumping rates against China.

More importantly, the antidumping, countervailing duty and other trade laws do not work. They do not save US companies and industries.  We have a poster child to prove this point—The US Steel Industry.  After forty years of trade cases and protection from steel imports, where is the US steel industry today?

Many of the major steel companies, such as Bethlehem Steel, Lone Star Steel and Jones & Laughlin, have become green fields. The total employment of the US Steel industry now is less than one high tech company. A failure caused not because of the lack of  antidumping and countervailing duty protection covering billions of dollars in imports, but because as President Reagan stated back in 1986, protectionism does not work.  It does not save the companies, because these cases do not get at the root causes of the company’s and industry’s decline.

Donald Trump and Hilary Clinton have pointed to the closure of manufacturing plants in the US and their move to Mexico. But why did the factories close?

On March 4, 2016, the Wall Street Journal in an editorial entitled Trump on Ford and Nabisco The real reasons the companies left the U.S. for Mexico” clearly set out the reasons some of these companies left the United State to move to Mexico—Wages demands as high as $60 an hour from the Labor Unions coupled with sky high taxes to support public workers in Illinois.  As the Journal stated:

“Last summer, Deerfield, Illinois-based Mondelez, which owns Nabisco, announced that it would close nine production lines at its plant in Chicago—the largest bakery in the world—while investing in new technology at a facility in Salinas, Mexico. Mondelez made the decision after asking its unions for $46 million in concessions to match the annual savings it would achieve from shifting production to Mexico. . . .

Operating in Chicago is particularly expensive since Illinois has among the nation’s highest corporate and property taxes—which are soaring to pay for city employee pensions—and workers’ compensation premiums. Last year Illinois lost 56 manufacturing jobs per work day while employment increased in most other Midwest states including Wisconsin (18 a day), Indiana (20), Ohio (58) and Michigan (74).

As for Ford, Mr. Trump flogged the auto maker’s $2.5 billion investment in two new engine and transmission plants in Mexico. . . . One impetus behind Detroit’s Mexico expansion is the United Auto Workers new collective-bargaining agreement, which raises hourly labor and benefit costs to $60 in 2019—about $10 more than foreign auto makers with plants in the U.S.—from the current $57 for Ford and $55 for GM. The increasing wages make it less economical to produce low-margin cars.

Foreign car manufacturers including BMW, Honda, Volkswagen, Kia, Nissan and Mazda have also recently announced new investments in Mexico. Besides lower labor costs, one reason they give is Mexico’s free-trade agreements, which allow access to 60% of world markets. Mexico has 10 free-trade agreements with 45 countries including Japan and the European Union whereas the U.S. has only 14 deals with 20 countries.”

Companies have to be competitive with foreign competition, and labor unions must work with management to stay competitive with the rest of the World. The “More” statement of the famous US labor leader John L. Lewis no longer works if the labor union’s more leads to the closure of the US manufacturing company, which employs the workers in question.

THE ANSWER

Not only must US Companies be competitive, but countries, including the United States, must also be competitive and be willing to meet the competition from other countries. A major reason for the rise of Donald Trump is the failure of the US Congress to formulate a trade policy that works and promote the only US trade program that truly saves import injured manufacturing companies by helping them adjust to import competition—the Trade Adjustment Assistance (TAA) for Firms/Companies program.  As stated in prior blog posts, because of ideological purity among many Republican conservatives in Congress and the Senate, the TAA for Companies program has been cut to the bone to $12.5 million nationwide.  This cut is despite the fact that since 1984 here in the Northwest, the Northwest Trade Adjustment Assistance Center (“NWTAAC”) has been able to save 80% of the companies that entered the program.

To understand the transformative power of TAA for Companies, see the TAA video from Mid-Atlantic TAAC at http://mataac.org/howitworks/ , which describes in detail how four import injured companies used the program to change and turn their company around and make it profitable.  One of the companies was using steel as an input, and was getting smashed by Chinese imports.  After getting into the program, not only did the company become prosperous and profitable, it is now exporting products to China.

This cut back to $12. 5 million nationwide from $50 million makes it impossible for the TAA for Companies program to work with medium or larger US companies, which have been injured by imports. TAA for Companies is hamstrung by neglect with a maximum technical assistance per firm level that has not changed in at least 30 years.

In case you don’t know about TAAF, this is a program that offers a one-time, highly targeted benefit to domestic companies hurt by trade. The benefit is not paid to the companies, but to consultants, who help the company adjust to import competition.   To put that in context, the very much larger TAA for Worker Program’s appropriation for FY 2015 was $711 million to retrain workers for jobs that may not exist after the company has closed.

Congress needs to find a cure to the trade problem, and it is not more trade cases, which do not save US companies and the jobs that go with them. TAA for Companies works, but because of politics, ideology and the resulting Congressional cuts, TAA has been so reduced it is now marginalized and cannot do the job it was set up to do.

Both Republicans and Democrats have failed to formulate a trade policy that will help US companies injured by imports truly adjust to import competition and become competitive in the World again. This failure has created Donald Trump and possibly a new dangerous protectionist era in US politics, which could have a disastrous impact on the US economy.

TPP TEXT AND TRADE ADVISORY REPORTS

On November 5, 2015, the United States Trade Representative Office (“USTR”) released the text of the Trans Pacific Partnership Agreement (“TPP”).  This is an enormous trade agreement covering 12 countries, including the United States, Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam, and covers 40% of the World’s economy. To read more about the TPP and the political negotiations behind the Agreement see past newsletters and my blog, www.uschinatradewar.com.

The attached text of the Agreement is over 6,000 pages.Chapters 3 – 30 – Bates 4116 – 5135 Chapters 1 – 2 – Bates 1 – 4115 Annex 1 – 4 – Bates A-1-1074

On November 5th, the Treasury Department released the text of the Currency Manipulation side deal, Press Release – 12 Nation Statement on Joint Declaration Press Release – Joint Declaration Fact Sheet TPP_Currency_November 2015.

On December 2nd and 3rd, 2015 various trade advisory groups operating under the umbrella of the United States Trade Representative (“USTR”) Group issued reports on the impact of the TPP on various industries and legal areas. All the reports can be found at https://ustr.gov/trade-agreements/free-trade-agreements/trans-pacific-partnership/advisory-group-reports-TPP and attached are many of the reports, ITAC-2-Automobile-Equipment-and-Capital-Goods, ITAC-12-Steel ITAC-11-Small-and-Minority-Business, ITAC-9-Building-Materials-Construction-and-Non-Ferrous-Metals ITAC-10-Services-and-Finance-Industries ITAC-6-Energy-and-Energy-Services ITAC-2-Automobile-Equipment-and-Capital-Goods ITAC-3-Chemicals-Pharmaceuticals-Health-Science-Products-and-Services ITAC-5-Distribution-Services ITAC-8-Information-and-Communication-Technologies-Services-and-Electronic-Commerce.  Almost all of the reports are favorable, except for the Steel Report, which takes no position, and the Labor Advisory Report, which is opposed because it is the position of the Unions.

NEW TRADE AND CUSTOMS ENFORCEMENT BILL

President Obama signed the bipartisan Trade Facilitation and Trade Enforcement Act of 2015 (TFTE) on February 24. A copy of the bill, the conference report and summary of the bill are attached,  JOINT EXPLANATORY STATEMENT OF THE COMMITTEE OF CONFERENCE CONFERENCE REPORT TRADE FACILITATION AND TRADE ENFORCEMENT ACT OF 20152 Summary of TRADE FACILITATION AND TRADE ENFORCEMENT ACT OF 2015 Trade-and-Environment-Policy-Advisory-Committee.pdf.

The bill makes many changes to the Customs and Trade laws with a specific focus on enforcement, particularly of the Trade laws. One of the provisions focuses on concerns surrounding non-resident, small “fly-by-night” importers of record.  The TFTE authorizes the Customs and Border Protection (“CBP”) to set up an importer-of-record program.  Through the program, CBP must establish criteria that importers must meet to obtain an importer-of-record number.

In addition, CBP is to establish an importer risk assessment program to review the risk associated with certain importers, particularly new importers and nonresident importers, to determine whether to adjust an importer’s bond or increase screening for an importer’s entries.   Specifically, Section 115(a) of the law provides:

Not later than the date that is 180 days after the date of the enactment of this Act, the Commissioner shall establish a program that directs U.S. Customs and Border Protection to adjust bond amounts for importers, including new importers and nonresident importers, based on risk assessments of such importers conducted by U.S. Customs and Border Protection, in order to protect the revenue of the Federal Government.

Title IV of the Act, Prevention of Evasion of Antidumping and Countervailing Duty Orders, sets up a new remedy for companies that believe that antidumping and countervailing duty orders are being evaded by shipping through a third country or misclassification or some other means.  The Act creates the Trade Remedy Enforcement Division within Department of Homeland Security, which is charged with developing and administering policies to prevent evasion of US antidumping and countervailing duty orders. The Secretary of Treasury is also authorized to enter into agreements with foreign nations to enforce the trade remedy laws.

On Aug. 23, 2016, CBP must begin investigating allegations of trade remedy evasion according to established procedures.   Those procedures include that CBP must initiate an investigation within 15 business days of receiving an allegation from an interested party and then has 300 days to determine whether the merchandise was entered through evasion. If CBP finds that there is a reasonable suspicion that merchandise entered the U.S. through evasion, CBP is directed to suspend the liquidation of each unliquidated entry of such covered merchandise.

Any CBP evasion decision is subject to judicial review by the Court of International Trade. The act also provides an expanded range of penalties where evasion is found to have occurred, including the imposition of additional duties and referrals to other agencies for other civil or criminal investigations.

Section 433 of the Act also eliminates the ability of an importer of a new shipper’s merchandise to post a bond or security instead of a cash deposit. This provision will prevent a company from importing substantial quantities of merchandise covered by an antidumping and/or countervailing duty order and then fail to pay the appropriate duty.

Finally, section 701 of the act, Enhancement of Engagement on Currency Exchange Rate and Economic Policies with Certain Major Trading Partners of the United States, establishes a procedure for identifying trade partners that are suspected of currency manipulation and conducting a macroeconomic analysis of those partners. The key finding is under section 701(2)(B), where the Treasury Secretary is to publicly describe the factors used to assess under paragraph (2)(A)(ii) whether a country has a significant bilateral trade surplus with the United States, has a material current account surplus, and has engaged in persistent one-sided intervention in the foreign exchange market.

If the Treasury Secretary is unable to address currency manipulation issues with a trading partner, the act authorizes the President to take additional steps to prevent and remedy further manipulation. For instance, the president may prohibit the approval of new financing products, which can be waived only upon a finding of adverse impact on the U.S. economy or serious harm to national security.

ZTE EXPORT LAW VIOLATIONS—MORE FUEL ON THE FIRE OF THE US CHINA TRADE WAR

On March 8, 2015, the Commerce Department’s Bureau of Industry and Security (“BIS”) published the attached Federal Register notice, ZTE FED REG NOTICE, announcing that China based mega corporation ZTE and three of its affiliated companies have been added to the Entity List, which requires an export license before US made products can be exported to those companies. As China’s second largest telecommunications company, ZTE is also the world’s seventh largest producer of smartphones and has operations in the US and more than 160 other countries.

The Federal Register notice states:

The End-User Review Committee (“ERC”) composed of representatives of the Departments of Commerce (Chair), State, Defense, Energy, and, where appropriate, the Treasury has determined:

to add four entities—three in China and one in Iran—to the Entity List under the authority of § 744.11 (License requirements that apply to entities acting contrary to the national security or foreign policy interests of the United States) of the EAR. . . .

The ERC reviewed § 744.11(b) (Criteria for revising the Entity List) in making the determination to list these four entities. Under that paragraph, entities and other persons for which there is reasonable cause to believe, based on specific and articulable facts, have been involved, are involved, or pose a significant risk of being or becoming involved in, activities that are contrary to the national security or foreign policy interests of the United States . . . .

Pursuant to § 744.11 of the EAR, the ERC determined that Zhongxing Telecommunications Equipment Corporation (‘‘ZTE Corporation’’) . . . be added to the Entity List under the destination of China for actions contrary to the national security and foreign policy interests of the United States. Specifically, the ZTE Corporation document ‘‘Report Regarding Comprehensive Reorganization and Standardization of the Company Export Control Related Matters’’ (available at http://www.bis.doc.gov) indicates that ZTE Corporation has reexported controlled items to sanctioned countries contrary to United States law. The ZTE Corporation document ‘‘Proposal for Import and Export Control Risk Avoidance’’ (available at http://www.bis.doc.gov) describes how ZTE Corporation also planned and organized a scheme to establish, control, and use a series of ‘‘detached’’ (i.e., shell) companies to illicitly re-export controlled items to Iran in violation of U.S. export control laws.

Having looked at the internal confidential ZTE report, which Commerce in a very unusual situation has published as a public document on its website, ZTE truly has been caught red handed. The ZTE Report lays out a detailed scheme to evade US Export Control laws.  No country, including the United States or China, would tolerate such a scheme to systematically evade a country’s laws.

For more on the ZTE Action along with a link to the confidential ZTE document now posted on the Commerce Department website, see http://ftalphaville.ft.com/2016/03/08/2155724/has-the-cold-us-sino-trade-war-just-got-piping-hot/.

From the Chinese point of view, however, the Commerce Department has no credibility because its antidumping laws presently block about $30 billion in imports based on fake numbers. Because the US Government’s Import and Export Control Administration are both located in the Commerce Department, the Chinese government looks at all the Department’s decisions as US based protectionism.

The problem is that through its nonmarket economy methodology, which does not use actual costs and prices to determine dumping, Commerce has created a game, and the Chinese will play it. Sometimes Chinese companies talk to me about using the “houmen” back door and shipping products through different countries to evade US antidumping laws.  I always tell the Chinese companies that this is Customs fraud and they risk civil and criminal prosecution under US Customs and trade laws.

In fact, in the past Chinese honey suppliers that used transshipment to get around the US antidumping law were caught in the United States and hauled in front of Federal Court on criminal charges for evasion of US antidumping laws. I have heard of one Chinese company seafood executive arrested in Belgium and sent to Belgian jail on an extradition warrant for evasion of US antidumping laws.

With the enactment of the New Trade and Customs Enforcement Act, described above, the US government now has more ways of catching Chinese companies and US importers that try to evade US trade laws. As one Chinese friend told me, such actions are “too damned dangerous”.

Although US judgments are not enforceable in China, Chinese companies have to also realize, that like ZTE, they have grown up and have subsidiaries all around the World. US judgments may not be enforceable in China, but they are enforceable in Hong Kong and other countries, and every Chinese company I have ever dealt with has a Hong Kong bank account.  Through its scheme to evade US export control laws, ZTE now has major problems and those problems may now multiply worldwide.

CHINA’S NME STATUS—ANOTHER HOT TOPIC FOR 2016

As stated in prior newsletters, interest groups on both sides of the issue have increased their political attacks in the debate over China’s market economy status. On February 23, 2016, under intense pressure from the labor unions, Hilary Clinton stated that to give market economy status to China:

“would defang our anti-dumping laws and let cheap products flood into our markets. So we should reply with only one word: No.”

To summarize the issue, on December 11, 2016, pursuant to the WTO Agreement, the 15 year provision, expires. More specifically, the United States faces a looming deadline under the WTO Agreement with regard to the application of this nonmarket economy methodology to China.

Under Nonmarket economy methodology, Commerce does not use actual prices and costs in China to determine dumping, but constructs a cost from consumption factors in China multiplied by surrogate values from import statistics in 5 to 10 different countries and those values can change from preliminary to final determination and review to review. Because of this methodology no Chinese company and certainly no US importer that is liable for the duties, knows whether the Chinese company is truly dumping.  Fake numbers lead to fake results.

Section 15 of the China WTO Accession Agreement, which originated from the US China WTO Accession Agreement, provides:

  • Price Comparability in Determining Subsidies and Dumping . . .

(a) In determining price comparability under Article VI of the GATT 1994 and the Anti-Dumping Agreement, the importing WTO Member shall use either Chinese prices or costs for the industry under investigation or a methodology that is not based on a strict comparison with domestic prices or costs in China based on the following rules: . . .

(ii) The importing WTO Member may use a methodology that is not based on a strict comparison with domestic prices or costs in China if the producers under investigation cannot clearly show that market economy conditions prevail in the industry producing the like product with regard to manufacture, production and sale of that product. . . .

(d) Once China has established, under the national law of the importing WTO Member, that it is a market economy, the provisions of subparagraph (a) shall be terminated provided that the importing Member’s national law contains market economy criteria as of the date of accession. In any event, the provisions of subparagraph (a)(ii) shall expire 15 years after the date of accession. In addition, should China establish, pursuant to the national law of the importing WTO Member, that market economy conditions prevail in a particular industry or sector, the non-market economy provisions of subparagraph (a) shall no longer apply to that industry or sector.

In other words, pursuant to the China WTO Accession Agreement, Commerce’s right to use a nonmarket economy methodology “shall expire 15 years after the date of accession”. China acceded to the WTO on December 11, 2001 so Section 15(d) should kick in on December 11, 2016.

That provision specifies that an importing WTO member may use a methodology that is not based on a strict comparison with domestic prices and costs in China to determine normal value in an AD case, if producers of a given product under investigation cannot clearly show that market economy conditions prevail in their industry.

The question that is now being debated is whether Section 15(d) automatically ends the possibility of using a non-market economy methodology to China or if it can still be applied if petitioners can show that market conditions do not prevail for producers of the product under investigation.

As stated above, Hilary Clinton is under enormous pressure to be tough on China. On February 12th,The American Iron and Steel Industry made it clear that it wants China’s non-market economy status in antidumping cases to be at the forefront of the public debate.  Thus Thomas Gibson, AISI president and CEO, stated:

“We want to keep the issue in front of decision makers and in the public debate because there will be a new government a year from now. “

He further stated that the Obama administration has not shown any sign that it is considering treating China as a market economy in AD cases as a result of an expiring provision in the country’s accession protocol to the World Trade Organization. As Gibson further stated:

“We have not heard anyone in the administration say that they agree with China’s assertion that it is to be given market economy status automatically at the end of the year. I think the administration has heard our concerns.”

Deputy U.S. Trade Representative Michael Punke also reportedly stated in early February in Geneva that there was little administration interest in treating China as a market economy:

“The issue of China’s status is not automatic. The mere change of date at the end of the year does not automatically result in a change of status for China.”

Other US government officials have informally conceded that the administration has arrived at the conclusion that no automatic change of U.S. AD methodology is needed, a position clearly articulated by the Commerce Department.

In the attached February 24, 2016 statement to the US China Economic and Security Review Commission, HUFBAUER STATE, however, Gary Clyde Hufbauer, a well-known international trade expert at the Peterson Institute for International Economics, made the opposite argument noting first that the following countries have granted China market economy status in antidumping cases: New Zealand, Singapore, Malaysia and Australia. Hufbauer went on to state:

Some lawyers read the text differently. While they agree that Article 15(a)(ii) effectively disappears on December 11, 2016, they do not agree that the Protocol confines WTO members to a binary choice between MES (strict comparison of export prices with Chinese prices or costs) and NME (comparison with surrogate prices or costs). They point to the opening language in Article 15(a), which states:

…the importing WTO member shall use either Chinese prices or costs for the industry under investigation or a methodology that is not based on a strict comparison with domestic prices or costs in China….

To be sure, under Article 15(d), the whole of Article 15(a) disappears:

Once China has established, under the national law of the importing WTO Member, that it is a market economy, the provisions of subparagraph (a) shall be terminated….

The United States might well argue, come December 11, 2016, that China has not established that it has become, in all important respects, a market economy. The Commerce Department could modify its current surrogate practices and instead use a “mix-and-match” approach—claiming on a case-by-case basis that some Chinese prices or costs reflect market conditions and others do not. For the prices or costs that do not reflect market conditions, the Commerce Department could use surrogate prices or costs. This seems most likely in industries, such as steel, dominated by state-owned enterprises, with large losses financed by state-controlled banks.

Whether the United States takes a “mix-and-match” approach, rather than granting China blanket market economy status, will turn primarily on policy considerations, not legal parsing. The policy decision may reflect the general atmosphere of commercial relations with China late in 2016, including the evolution of the renminbi exchange rate (manipulated devaluation would inspire a harder line) and the outcome of US-China bilateral investment treaty (BIT) negotiations (success would have the opposite effect).

Assuming the United States adopts a “mix-and-match” approach, the stage will be set for China to initiate WTO litigation. In this scenario, the year 2018 seems the earliest date for a final decision by the WTO Appellate Body. My guess is that the Appellate Body would rule against the “mix-and-match” approach. Even so, China would not receive retroactive refunds for antidumping duties collected prior to the ruling.

Moreover, within China, the US denial of full-fledged MES would resonate strongly, in a negative way. Antagonism would be particularly strong if, as I expect, the European Union and other major countries accord MES in December 2016. Consequently, China would likely retaliate in opaque ways against US exporters and investors.

On balance, the United States would lose more than it gains from withholding full-fledged MES. A very large irritant would be thrown into US-China commercial relations, with a modest benefit to US industries that initiate AD proceedings. Even without the use of surrogate costs and prices, AD margins are typically high. Adding an extra 20 percent penalty, through the use of surrogate cost and price methodologies, will not do a great deal more to restrain injurious imports.

On February 25, 2016, Cecilia Malmström, the EU Commissioner for Trade, stated at a China Association Event in London that China is:

a major investment partner too. The EU has stocks of 117 billion pound sterling in the Chinese economy. And China is a growing source of foreign investment for the EU. Chinese investment in EU in 2014 is four times what it was in 2008.

And, if we just look at our exports alone, over 3 million jobs here in Europe depend on our sales in China. . . .

The second issue I want to raise is the question of changing the methodology in anti-dumping investigations concerning Chinese products, the so-called market economy status.

This is a sensitive issue. And it’s become even more so with the steel situation. That’s why the EU is conducting a thorough impact assessment and public consultation before we make up our minds on where to go.

But what is clear is that certain provisions of China’s protocol of accession to the WTO related to this issue will expire in December.

We need to be very careful how we approach this and we need to work cooperatively. We will need the constructive engagement of all Member States, including the UK.

On March 3, 2016, the executive council of the AFL-CIO labor union called on the US government to end the trade agreement TTIP negotiations if the EU makes China a market economy country.

TRADE

RAW ALUMINUM PROBLEMS

In light of the impact of the aluminum extrusions case on the US market, the import problem has now moved upstream. The next round of antidumping and countervailing duty cases against China looks like it will be on raw aluminum products.

On February 24, 2016, in a letter to the US International Trade Commission (“ITC”), WAYS MEANS LETTER ALUMINUM, House Ways and Means Committee Chairman Kevin Brady requested that the Commission conduct a section 332 fact finding investigation of the US aluminum industry. The letter specifically states:

The Committee on Ways and Means is interested in obtaining current information on relevant factors affecting the global competitiveness of the U.S. aluminum industry. The U.S. aluminum industry remains a globally successful producer of aluminum products. A healthy and growing aluminum industry is not only important to our economy, but is also vital for our national defense. ·

In order to better assess the current market conditions confronting the U.S. industry, we request that the U.S. International Trade Commission conduct an investigation under section 332(g) of the Tariff Act of 1930 ( 19 U.S.C. !332(g)), and provide a report setting forth the results of the investigation. The investigation should cover unwrought (e.g., primary and secondary) and wrought (e.g., semi-finished) aluminum products

To the extent that information is available, the report should contain:

  • an overview of the aluminum industry in the United States and other major global producing and exporting countries, including production, production capacity, capacity utilization, employment, wages, inventories, supply chains, domestic demand, and exports;

information on recent trade trends and developments in the global market for aluminum, including U.S. and other major foreign producer imports and exports, and trade flows through third countries for further processing and subsequent exports;

  • a comparison of the competitive strengths and weaknesses of aluminum production and exports in the United States and other major producing and exporting countries, including such factors as producer revenue and production costs, industry structure, input prices and availability, energy costs and sources, production technology, product in novation, exchange rates, and pricing, as well as government policies and programs that directly or indirectly affect aluminum production and exporting in these countries;
  • in countries where unwrought aluminum capacity has significantly increased, identify factors driving those capacity and related production changes; and
  • a qualitative and, to the extent possible, quantitative assessment of the impact of government policies and programs in major foreign aluminum producing and exporting countries on their aluminum production, exports, consumption, and domestic prices, as well as on the U.S. aluminum industry and on aluminum markets worldwide.

The report should focus primarily on the 2011-2015 time period, but examine longer term trends since 2011. To develop detailed information on the domestic aluminum market and industry, it is anticipated that the Commission will need to collect primary data from market participants through questionnaires. The Committee requests that the Commission transmit its report to Congress no later than 16 months following the receipt of this request. . . .

One major purpose of the investigation is to assess how China policies have affected the US aluminum industry.

President Heidi Brock of the US Aluminum Association, which represents the US aluminum industry, applauded the Ways and Means request for an ITC investigation:

“An investigation by the [ITC] will help us address ongoing issues in the global aluminum industry that are hurting the domestic market and leading to curtailments, closures and job losses. I am pleased that the Congress recognizes the continued economic importance of this vital industry and I applaud Chairman Brady’s leadership to move this issue forward.”

Recently, the U.S. industry has curtailed or closed 65 percent of U.S. aluminum capacity with many job losses for U.S. workers

The information collected by the ITC could be used as the basis for trade cases against China and other countries.

THE ONGOING STEEL CASES

Many companies have been asking me about the ongoing Steel antidumping and countervailing duty cases so this section will address the Steel cases in more detail.

As happened in the OCTG cases, where Chinese OCTG was simply replaced by imports from Korea, India, Taiwan, Philippines, Saudi Arabia, Ukraine, Thailand and Turkey, the same scenario is happening in other steel cases, such as the recent cold-rolled and corrosion-resistant/galvanized steel cases.

Based on the nonmarket economy antidumping methodology, which does not use actual prices and costs in China, in the recent cases Chinese steel companies were smashed with high antidumping rates of 200 to 300 percent. In the Cold Rolled Steel countervailing duty case, the Chinese companies and Chinese government simply gave up and received a rate over 200% and now under the Antidumping Law rates of over 200%.

COLD ROLLED STEEL FROM CHINA, BRAZIL, KOREA, INDIA AND RUSSIA—PRELIMINARY COUNTERVAILING DUTY AND ANTIDUMPING DETERMINATIONS

On December 16, 2015, Commerce issued its attached preliminary countervailing duty determination, factsheet-multiple-cold-rolled-steel-flat-products-cvd-prelim-121615, in Certain Cold-Rolled Steel Flat Products from Brazil, China, India, and Russia and No Countervailable Subsidization of Imports of Certain Cold-Rolled Steel Flat Products from Korea. The effect of the case is to wipe all Chinese cold rolled steel out of the United States with a countervailing duty (CVD) rate of 227.29%.

As also predicted, the countervailing duty rates for all the other countries were very low, if not nonexistent: Brazil 7.42% for all companies, India 4.45% for all companies, Korea 0 for all companies and Russia 0 to 6.33% for all companies.

The 227.29% CVD rate for all the Chinese companies was based on all facts available as the Chinese government and the Chinese steel companies simply refused to cooperate realizing that it was a futile exercise to fight the case at Commerce because of the surrogate value methodology and refusal to use actual prices and costs in China.

On March 1, 2016 Commerce issued its attached preliminary antidumping determination mirroring the rates in the preliminary CVD determination. Specifically, in a factsheet, factsheet-multiple-cold-rolled-steel-flat-products-ad-prelim-030116, Commerce announced its affirmative preliminary determinations in the antidumping duty  investigations of imports of certain cold rolled steel flat products from Brazil, China, India, Japan, Korea, Russia, and the United Kingdom.

As predicted, China’s antidumping rate was 265.79% as the Chinese companies simply gave up and did not participate because they believed that it would be impossible to get a good antidumping rate using nonmarket economy methodology.

For the other market economy countries, the results were mixed. Brazil received antidumping rates of 38.93% and Japan was 71.35%.

But India’s rate was only 6.78% and Korea had rates ranging from 2.17 to 6.85%. For Russia, the rates ranged from 12.62 to 16.89% and the United Kingdom rates were between 5.79 to 31.39%.

What does this mean? China is wiped out along with Japan and probably Brazil, but Korea, India, Russia and UK will continue to export steel to the US and simply take the Chinese market share.

Antidumping and countervailing duty cases do not save US industries.

CUSTOMS NEW “LIVE ENTRY” PROCEDURES FOR STEEL IMPORTS

On March 3, 2016, Customs announced a new effort to enforce trade rules against steel shipments at risk for evasion of antidumping and countervailing duty orders. It requires importers of record to provide the paperwork and pay the necessary duties before a given shipment is released into the U.S. market.

This live-entry requirement is already being applied to cut-to-length steel plate from China. Customs is considering requiring live-entry procedures for other high-risk steel imports subject to the 100 plus AD/CVD cases, but sidestepped a question on whether these procedures would apply to products other than steel.

This new live entry requirement slows up imports from entering the US commerce to that Customs can make sure everything in the shipment is correct before releasing it into the Commerce of the United States.

SOLAR CELLS REVIEW DETERMINATION

On December 18, 2015, in an attached decision, SOLAR CELLS AD PRELIM, the Commerce Department issued its preliminary determination in the 2013-2014 Solar Cells antidumping review investigation.  The antidumping rates range from 4.53% for Trina to 11.47% for Yingli.  The average dumping rate for the Chinese separate rate companies is 7.27%.

On December 31, 2015, Commerce issued its attached preliminary determination in the 2013 Countervailing duty case, DOC SOLAR CVD 2013, and the rates went up to 19.62% for three Chinese companies–JA Solar Technology Yangzhou Co., Ltd., Changzhou Trina Solar Energy Co., Ltd. and Wuxi Suntech Power Co., Ltd.

Meanwhile, requests for antidumping and countervailing duty review investigations in the Solar Cells case were due in December 2015 and in February 2016 for the Solar Products. While in China in February, I ran into many Chinese solar companies that were in serious trouble because they failed to request a review investigation.

MARCH ANTIDUMPING ADMINISTRATIVE REVIEWS

On March 1, 2015, Commerce published the attached Federal Register notice, MARCH REVIEWS, regarding antidumping and countervailing duty cases for which reviews can be requested in the month of March. The specific antidumping cases against China are: Chloropicrin, Circular Welded Austenitic Stainless Pressure Pipe, Glycine, Sodium Hexametaphosphate, and Tissue Paper Products.

The specific countervailing duty case is: Circular Welded Austenitic Stainless Pressure Pipe

For those US import companies that imported : Chloropicrin, Circular Welded Austenitic Stainless Pressure Pipe, Glycine, Sodium Hexametaphosphate, or Tissue Paper Products during the antidumping period March 1, 2015-February28, 2016 or the countervailing duty period of review, calendar year 2015, the end of this month is a very important deadline. Requests have to be filed at the Commerce Department by the Chinese suppliers, the US importers and US industry by the end of this month to participate in the administrative review.

This is a very important month for US importers because administrative reviews determine how much US importers actually owe in Antidumping and Countervailing Duty cases. Generally, the US industry will request a review of all Chinese companies. If a Chinese company does not respond in the Commerce Department’s Administrative Review, its antidumping and countervailing duty rate could well go to the highest level and for certain imports the US importer will be retroactively liable for the difference plus interest.

In my experience, many US importers do not realize the significance of the administrative review investigations. They think the antidumping and countervailing duty case is over because the initial investigation is over. Many importers are blindsided because their Chinese supplier did not respond in the administrative review, and the US importers find themselves liable for millions of dollars in retroactive liability.

While in China in February, I found so many examples of Chinese solar companies or US importers, which did not file requests for a review investigation. In one instance, although the Chinese companies obtained separate rates during the initial investigation, the Petitioner appealed to the Court.  Several Chinese companies and US importers did not know the case was appealed, and the importers now owe millions in antidumping duties because they failed to file a request for a review investigation in December.

CUSTOMS

RICO ACTION AGAINST CHINESE GARLIC EXPORTERS

In the attached complaint, GARLIC COMPLAINT, on January 28, 2016, Chinese garlic exporter Zhengzhou Harmoni Spice Co. Ltd. and its parent company sued a group of Chinese competitors in California federal court accusing them of deliberately defrauding the U.S. government in order to acquire preferential duty rates.

Zhengzhou Harmoni claimed the exporters, which the company says are affiliated to Chinese businessman Wenxuan Bai, are defrauding the system by lying and submitting falsified documents to Customs and Commerce in violation of the Racketeer Influenced and Corrupt Organizations Act. The company said their competitors’ allegedly unlawful conduct is unfairly eroding Harmoni’s market share because Harmoni rightly earned favorable rates from the federal government through the antidumping review process,

Zhengzhou Harmoni told the court that its parent company and exclusive importer enjoys a similar advantage in the U.S. marketplace, but accused the Bai-affiliated garlic exporters of unlawfully forming new corporate entities and revitalizing old ones in order to obtain coveted “new shipper” designations to garner preferential treatment.

Meanwhile, in a decision, CIT PREMIER GARLIC, in late January Premier Trading, Inc. v. United States, Premier, a U.S. garlic  importer of garlic from Qingdao Tiantaixing Foods Co. Ltd., one of the companies named in Harmoni’s RICO suit, sued Customs and Commerce in the U.S. Court of International Trade (“CIT”). Premier Trading Inc. alleged CBP’s enhanced bond requirements for shipments from QTF are resulting in delays and leaving fresh garlic to spoil.

On February 11, 2016, Judge Gordon of the CIT denied Premier’s motion for a preliminary injunction, stating at the outset that there was no likelihood of success on the merits:

It is apparent that QTF may potentially be subject to the higher PRC-wide rate as a consequence of Commerce’s preliminary determination in the 20th administrative review. Furthermore, there has been a long and documented pattern of non-payment and underpayment of antidumping duties subject to the Garlic Order (amounting to several hundred million dollars). . . . Customs, here, has also provided confidential documents regarding Plaintiff’s connection to other importers that mirror a pattern of non-payment and underpayment, which suggests, as Customs claims, that Plaintiff poses a similar risk to the revenue. . . . In light of these facts, it is hard to see merit in Plaintiff’s claim that Customs failed to provide an adequate explanation for the enhanced bonding requirement for Plaintiff’s entries. Accordingly, Customs’ imposition of a heightened bonding requirement on imports from QTF does not appear arbitrary or capricious. . . . Plaintiff has therefore failed to establish a likelihood of success on the merits.

Judge Gordon then found that there was no irreparable injury and that the balance of equities favored the Government. Judge Gordon then stated that Public Interest lies in favor of the Government:

Here, the public has an interest in protecting the revenue of the United States and in assuring compliance with the trade laws. See 19 U.S.C. § 1623. Enhanced bonding pending litigation serves both these interests. Additional security covers potential liabilities and protects against default, ensuring the correct antidumping duty is paid.

CUSTOMS PROTEST RULE APPEALED TO SUPREME COURT

Meanwhile, International Custom Products Inc. has filed an attached writ of certiorari on January 19, SUPREME COURT CERT PROTEST ISSUE, and asked the U.S. Supreme Court to review the constitutionality of a Customs rule requiring the full payment of duties by an importer before a court case can proceed, challenging the Federal Circuit’s conclusion that the policy meets due process requirements. The importer argues that the CPB rule requiring importers to fully pay imposed duties before bringing a court case is unconstitutional because it deprives the company of due process. The company has been disputing $28 million in tariffs it claims have been erroneously applied to its imports of white sauce due to the agency’s reclassification of the product.

FALSE CLAIMS ACT

GRAPHITE ELECTRODES

On February 22, 2016 in a settlement agreement, SETTLEMENT FCA GRAPHITE, Ameri-Source International Inc., a graphite electrodes company, paid $3 million to settle a false claims act case that it schemed to avoid antidumping duties on imports of graphite electrodes from China in violation of the False Claims Act. The complaint alleges that the importer misclassified the merchandise and lied about the country of origin to avoid paying anti-dumping duties on shipments of small-diameter graphite electrodes use for manufacturing.

Ameri-Source reportedly established a shell company in India to accept the imports of graphite rods from China for “jobwork,” and to re-export the materials to the U.S. to circumvent stateside customs regulations. The settlement resolves claims that Ameri-Source evaded anti-dumping duties on 15 shipments.

IP/PATENT AND 337 CASES

NEW 337 CASES

On January 21, 2016, Edgewell Personal Care Brands, LLC and International Refills Company Ltd. filed a new 337 patent case on Certain Diaper Disposal Systems and Components Thereof, Including Diaper Refill Cassettes against Munchkin, Inc., Van Nuys, CA; Munchkin Baby Canada Ltd., Canada; and Lianyungang Brilliant Daily Products Co. Ltd., in China.

On February 5, 2016, Simple Wishes, LLC filed a new section 337 on Pumping Bras against Tanzky, China; Baby Preg, China; Deal Perfect, China; and Buywish, China.

CRIMINAL PATENT CASES

On January 26, 2016, the US Justice Department announced that Chinese National Mo Hailong, Robert Mo, pled guilty to conspiring to steal trade secrets from Dupont, Pioneer and Monsanto. In a notice, Chinese National Pleads Guilty to Conspiring to Steal Trade Secrets _ OPA _, the Justice Department stated:

Specifically, Hailong admitted to participating in the theft of inbred – or parent – corn seeds from fields in the Southern District of Iowa for the purpose of transporting those seeds to China. The stolen inbred seeds constitute the valuable intellectual property of DuPont Pioneer and Monsanto.

During the conspiracy, Hailong was employed as director of international business of the Beijing Dabeinong Technology Group Company, a Chinese conglomerate with a corn seed subsidiary company, Kings Nower Seed. Hailong is a Chinese national who became a lawful permanent resident of the United States pursuant to an H-1B visa.

Hailong is scheduled to be sentenced at a date to be determined later in Des Moines, Iowa. Conspiracy to steal trade secrets is a felony that carries a maximum sentence of 10 years in prison and a maximum fine of $250,000. As part of Hailong’s plea agreement, the government has agreed not to seek a prison sentence exceeding five years.

NEW PATENT AND TRADEMARK COMPLAINTS AGAINST CHINESE, HONG KONG AND TAIWAN COMPANIES

On January 13, 2016, in the attached complaint, SHENZHEN PATENT CASE, PS Products Inc and Bill Pennington filed a patent case against Global Sources, Ltd. and affiliated parties, and Jiangsu Rayi Security Products, Co., Ltd. and Shenzhen Rose Industrial Co., Ltd.

On January 21, 2016, in the attached complaint, STAHLS PATENT CASEStahls’ Inc. filed a patent case against Vevor Corp., Shanghai Sishun Machinery Equipment Co., Ltd. and Saven Corp.

On January 25, 2016, in the attached complaint, UNICOLORS COPYRIGHT, Unicolors, Inc. filed a copyright infringement case against Jiangsu Global Development, Inc., T. Milano Ross Stores Inc., DD’s Discounts, Phool Fashion Ltd., the Vermont Country Store, Inc. and Trends Inc.

On January 26, 2016, in the attached complaint, BLUE RHINO PATENT CASE, Blue Rhino Global Sourcing filed a patent case against Guangdong Chant Group Co., Ltd.

On February 1, 2016, in the attached complaint, ZHEJIANG PATENT CASE, Otsuka Pharmaceutical Co., Ltd. filed a patent case against Stason Industrial Corp., Stason Pharmaceuticals Inc., Zhejiang Jinhua Conba Bio-Pharm Co., Ltd., Tai Heng Industry Co., Ltd, and Breckenridge Pharmaceutical Inc.

On February 5, 2016, in the attached complaint, VACCUUM TRADE SECRET CASE, IMIG, Inc., Nationwide Sales and Services Inc, Gumwand Inc. and Perfect Products Services and Supply Inc. filed a trade secrets and unfair competition case against Omi Electric Appliance Company Co., Ltd., Beijing China Base Startrade Co., Ltd. and Xi Shihui, a Chinese citizen.

On February 10, 2016, in the attached complaint, HUAWEI PATENT CASE, Blue Spike LLC filed a patent case against Huawei Technologies.

PRODUCTS LIABILITY CASES AND LACY ACT VIOLATIONS

THE RISE OF CHINESE PRODUCTS LIABILITY INSURANCE

While in China last month working on various cases, I learned that the People’s Insurance Company (“PICC”) is offering Chinese companies products liability insurance. Every US importer should demand that his Chinese supplier obtain product’s liability insurance.  Otherwise when something goes wrong, the US importer is on the hook for damages, not the Chinese company that created the problem.

PRODUCT LIABILITY COMPLAINTS

On January 26, 2016, in the attached complaint, CHINA FIREWORKS CASE, the Reynolds Family filed a products liability/wrongful death case on behalf of Russell Reynolds, who was killed when Chinese fireworks went off by mistake. The respondent companies are Pyro Shows of Texas, Inc., Pyro Shows, Inc., Czech International Trading, Jiangxi Lidu Fireworks Group Co., Ltd., Jiangxi Province Lidu Fireworks Corp., Ltd., Fireworks Corp., Ltd., Icon Pyrotechnic International Co., Ltd., Oriental Fireworks Co., Ltd. and Glorious Company.

On January 26, 2016, in the attached complaint, CHINA REFRIGERATOR, Allstate Insurance Company on behalf of Miguel Bejarno filed a products liability case against Electrolux Home Products Inc., Midea Group Co., Ltd. and Guangzhou Refrigeration Co., Ltd. because a Chinese produced refrigerator blew up and burned down a house causing extensive damage.

LARGEST LACEY ACT FINE IN HISTORY AGAINST LUMBER LIQUIDATORS FOR CHINESE HARDWOOD IMPORTS

On February 1, 2016, the Justice Department in the attached statement, Lumber Liquidators Inc. Sentenced for Illegal Importation of Hardwood and Re, announced that Lumber Liquidators Inc. was sentenced for illegal Importation of hardwood from China and related environmental crimes and agreed to pay 13 million, one of the largest penalties ever issued under the Lacey Act. The announcement states:

Virginia-based hardwood flooring retailer Lumber Liquidators Inc. was sentenced today in federal court in Norfolk, Virginia, and will pay more than $13 million in criminal fines, community service and forfeited assets related to its illegal importation of hardwood flooring, much of which was manufactured in China from timber that had been illegally logged in far eastern Russia, in the habitat of the last remaining Siberian tigers and Amur leopards in the world . . . .

In total, the company will pay $13.15 million, including $7.8 million in criminal fines, $969,175 in criminal forfeiture and more than $1.23 million in community service payments. Lumber Liquidators has also agreed to a five-year term of organizational probation and mandatory implementation of a government-approved environmental compliance plan and independent audits. In addition, the company will pay more than $3.15 million in cash through a related civil forfeiture. The more than $13.15 million dollar penalty is the largest financial penalty for timber trafficking under the Lacey Act and one of the largest Lacey Act penalties ever.

Lumber Liquidators pleaded guilty and was charged in October 2015 in the Eastern District of Virginia with one felony count of importing goods through false statements and four misdemeanor violations of the Lacey Act, which makes it a crime to import timber that was taken in violation of the laws of a foreign country and to transport falsely-labeled timber across international borders into the United States. . . . This is the first felony conviction related to the import or use of illegal timber and the largest criminal fine ever under the Lacey Act.

“The case against Lumber Liquidators shows the true cost of turning a blind eye to the environmental laws that protect endangered wildlife,” said Assistant Attorney General John C. Cruden for the Department of Justice’s Environment and Natural Resources Division. “This company left a trail of corrupt transactions and habitat destruction. Now they will pay a price for this callous and careless pursuit of profit.” . . .

“By knowingly and illegally sourcing timber from vulnerable forests in Asia and other parts of the world, Lumber Liquidators made American consumers unwittingly complicit in the ongoing destruction of some of the world’s last remaining intact forests,” said Director Dan Ashe of the U.S. Fish and Wildlife Service. “Along with hastening the extinction of the highly endangered Siberian tiger and many other native species, illegal logging driven by the company’s greed threatens the many people who depend on sustainable use of these forests for food, clean water, shelter and legitimate jobs. These unprecedented sanctions show how seriously we take illegal trade, and I am grateful to the Service special agents and wildlife inspectors, Homeland Security agents, and Justice Department attorneys who halted Lumber Liquidators’ criminal acts and held the company accountable under the law.”

According to a joint statement of facts filed with the court, from 2010 to 2013, Lumber Liquidators repeatedly failed to follow its own internal procedures and failed to take action on self-identified “red flags.” Those red flags included imports from high risk countries, imports of high risk species, imports from suppliers who were unable to provide documentation of legal harvest and imports from suppliers who provided false information about their products. Despite internal warnings of risk and noncompliance, very little changed at Lumber Liquidators.

ANTITRUST

There have been developments in the antitrust area.

CHINESE BAUXITE EXPORTERS WIN ANTITRUST CASE

On January 25, 2016, in the attached opinion in Resco Products, Inc. v. Bosai Minerals Group Co., Ltd. and CMP Tianjin Co., Ltd., BAUXITE OPINION, Chief District Judge Conti in the Western District of Pennsylvania granted summary judgment for the Chinese companies and dismissed the antitrust case. Resco brought the claim individually and as a class representative, against Bosai and CMP alleging a conspiracy in China to fix the price and limit the supply of refractory grade bauxite in violation of the Sherman Act, 15 U.S.C. § 1.

The Court concluded that any price floor or quota was set by the Chinese government’s Ministry of Commerce, not by the individual Chinese Bauxite companies. In its discussion of the facts, the Court stated:

In his declaration for the China Chamber of Commerce for Metals and Chemicals (“CCCMC”), Liu Jian (“Jian”), a CCCMC employee since 1995 and deputy director of the Bidding Office since 2006, . . . explained that “[a]t Bauxite Branch meetings, Bidding Office staff asked the Bauxite Branch members for their opinions about specific proposed quota amounts, quota bidding minimum prices, and other matters relating to quota bidding.” . . . but the authority and power to adopt quotas, and to establish the quota amount, minimum bidding price, and other terms, was always with MOFCOM, not the members or the CCCMC. MOFCOM could, and often did, set the quotas and minimum bidding prices at levels different than those favored by members. . . .

The Judge went on to state:

Here, plaintiff’s § 1 claim is based on its assertion that “[d]efendants and their co-conspirators colluded to fix export prices and quotas for bauxite from 2003 to 2009. . . .

In a per se case, “‘the plaintiff need only prove that the defendants conspired among each other and that this conspiracy was the proximate cause of the plaintiff’s injury.’”  . . .

In a vacuum, proposals to set bauxite quotas at specified levels being voted on at Bauxite Branch meetings appear to indicate explicit member participation in a conspiracy to limit output. However, the Bauxite Branch’s demonstrated lack of authority with respect to quotas invalidates such a finding. Since at least 2001, MOFCOM has been “responsible for deciding and announcing the types and the total quota quantity of commodities subject to bidding,” not the CCCMC or its Branches. . . . The quota announced by the Bidding Committee during each of the years of the alleged conspiracy never corresponded to a resolution of the Bauxite Branch. At its 2004 through 2006 meetings, the Bauxite Branch failed to pass any resolution related to quota amount, yet the Bidding Committee, an instrumentality of MOFCOM, still announced quotas in each of those years. . . . Any conspiracy to establish a limit equal to or higher than that imposed by the government could have no effect.

Consistent with the undisputed Declaration of the CCCMC, Bauxite Branch member votes for proposals concerning the yearly bauxite quota amount can only be construed as opinions offered to MOFCOM. .   . . These opinions were not that limits should be placed on bauxite output. The implementation of quotas was mandated by the Chinese government, not agreed to by private entities. . . .

Bauxite Branch members were asked for their opinions pertaining to the bauxite quota during meetings, “but the authority and power to adopt quotas, and to establish the quota amount, minimum bidding price, and other terms, was always with MOFCOM.” . . .

As discussed previously, the evidence adduced with respect to the quotas cannot support a § 1 claim, because the Chinese government – and not defendants – set the quotas.

Resco has appealed the District’s Court’s determination to the Court of Appeals.

CHINESE COMPANIES SETTLE SOLYNDRA SOLAR CASE

On February 26, 2016, in the attached settlement agreement, SOLYNDRA SETTLEMENT, Yingli Green Energy Holding Company Ltd. agreed to settle for $7.5 million a US antitrust case alleging that Chinese companies conspired to set prices with the objective of destroying Solyndra.

Solyndra previously settled the litigation against two other Chinese companies, Trina Solar Ltd. and Suntech Power Holdings Co. Ltd, for a total of $51 million, with Trina Solar paying $45 million and Suntech paying $6 million.

CHINA ANTI-MONOPOLY CASES

On February 3, 2016, T&D sent us their attached January report on Chinese competition law, T&D Monthly Antitrust Report of January 2016.  The main contents of the January report are:

(1) NDRC: Guideline on Leniency Policies in Horizontal Monopoly Agreement Cases has Begun to Seek for Opinions; (2) SAIC Held a Forum to Seek for Opinions and Comments on the Guideline on Prohibiting the Behavior of Abusing Intellectual Property Rights to Restrict or Eliminate Competition (the Sixth Draft); (3) MOFCOM Year-End Review: Positively Promoting Anti-monopoly Enforcement and Protecting Fair Competition of the Market; (4) SAIC: Anti-monopoly Law Enforcement Treats All Market Players the Same, etc. . . .

On February 5, 2016, T&D sent us the latest attached draft of Guideline on Undertakings’ Commitments in Anti-Monopoly Cases on February 3rd, 2015, Guideline on Undertakings’ Commitments in Anti-Monopoly Cases-EN-T&D.

SECURITIES

US LISTED CHINESE COMPANIES MOVING BACK TO CHINA TO RAISE MONEY

On February 29, 2016, it was reported that many U.S.-listed Chinese companies are leaving the United States and moving back to China as the easing of Chinese securities regulations has renewed the possibility of finding stronger valuations domestically.

Although there has been market volatility in China, US too has had volatility. Apparently, there is a perception that a stronger valuation can be found in Chinese domestic stock markets, where investors have a stronger understanding of the companies and the role they play.  In November, the China Securities Regulatory Commission began greenlighting IPO-bound companies and promised to take measures to help reform the country’s system for initial public offerings.

FOREIGN CORRUPT PRACTICES ACT

In February Dorsey& Whitney LLP issued its January February 2016 Anti-Corruption Digest, TIANJIN INVESTMENT COMPANY. The Digest states with regards to China:

China

Wang Qishan, the Secretary of the Central Commission for Discipline Inspection has given assurances that China’s anti-corruption efforts will continue in 2016. In a recent speech, Mr. Wang stressed that, “the strength of our anti-corruption efforts will not be lessened”.

This sentiment was echoed by the recent sentencing of two former officials:

According to state media, Li Dongsheng, China’s former deputy national police chief, has been sentenced to 15 years in prison for corruption. Reports state that Mr. Li stood accused of taking bribes totally ¥22 million ($3.3 million/£2.3 million) and abusing his power. It is said that Mr. Li will not appeal the verdict.

A former top official in the city of Guangzhou has reportedly admitted to taking ¥111 million ($17 million/£11.5 million) in bribes between 2000 and 2014. Wan Qingliang’s alleged corruption is said to have included taking bribes of more than ¥50 million ($7.6 million/£5.2 million) from a company that he had helped to win a government development project.

In a written statement the Nanning Intermediate People’s Court said that Mr. Wan raised no objection to the charge of corruption and that he showed remorse during the trial. It is said that Mr. Wan told the court that, “I have hurt the Party, the people and my family and I hope that the court can give me another chance.”  

Recently, Dorsey& Whitney LLP issued its attached February 2016 Anti-Corruption Digest, Anti_Corruption_Digest_Feb2016. The Digest states with regards to China:

China

China’s army has not been immune from President Xi Jinping’s anti-corruption drive and has seen a number of its officers investigated, including two former vice chairmen of the Central Military Commission.

To continue this drive, it has been reported that the military’s anti-corruption discipline inspection committee has established a hotline as a means for reports to be made regarding allegations of corruption in the People’s Liberation Army. It is said that the hotline will “fully utilize supervision by the masses” and complaints will be addressed in a “timely and earnest” fashion.

SECURITIES COMPLAINTS.

On March 8, 2016 Jacob Sheiner filed the attached class action securities complaint, TIANJIN INVESTMENT COMPANY, against a number of individuals and also Tianjin Tianhai Investment Co., Ltd. as well as GCL Acquisition, Inc.

If you have any questions about these cases or about the US trade policy, trade adjustment assistance, customs, 337, IP/patent, products liability, US/China antitrust or securities law in general, please feel free to contact me.

Best regards,

Bill Perry

US CHINA TRADE WAR–DEVELOPMENTS IN TRADE POLICY, TRADE, PRODUCTS LIABILITY, 337/IP ANTITRUST AND SECURITIES

Shanghai Bund at Night China Flags Cars with Trademarks obscuredTRADE IS A TWO WAY STREET

“PROTECTIONISM BECOMES DESTRUCTIONISM; IT COSTS JOBS”

PRESIDENT RONALD REAGAN, JUNE 28, 1986

US CHINA TRADE WAR NEWSLETTER JANUARY 13, 2016

Dear Friends,

This January newsletter will cover trade policy, trade, general litigation, 337/patents, antitrust and securities .

If anyone has any questions or wants additional information, please feel free to contact me.

Best regards,

Bill Perry

TRADE POLICY

TPP RUNS INTO HEADWINDS

As predicted in past blog posts, on December 28, 2015, the Wall Street Journal reported that the US Election Debate was complicating the passage of the Trans Pacific Partnership (“TPP”) in Congress. The Wall Street Journal specifically stated:

The trade agreement is expected to lead to some job losses and boost competition for some companies—including labor-intensive manufacturers and Detroit auto makers.

Still, many economists say it would generate overall gains to U.S. gross domestic product and increase incomes for many Americans in ways that improve the overall economy.

The TPP’s potential to create vocal middle-class losers makes the agreement harder to pass in an election year, since the winners, even if more numerous, are likely to be less motivated.

GOP lawmakers and officials, backed by big businesses, have more reliably supported trade agreements than Democrats, who tend to be closer to the labor movement. Among the broad electorate, blue-collar workers of both parties are skeptical of freer trade.

Recently Republican voters have emerged as bigger opponents, a shift not lost on the tea-party movement and Mr. Trump. In a recent Wall Street Journal/NBC News poll, 56% of Democrats said free trade is good for America, compared with 48% of Republicans.

Trade experts say Mr. Trump’s policies would make him, if elected, the biggest fan of tariffs since the late 19th century presidency of William McKinley. . . .

For Mr. Cruz or another GOP president, White House policy on trade would likely depend on whether the party is controlled by the pro-business wing that has dominated the party since World War II or shifts toward protectionist ideas espoused by Mr. Trump.

Meanwhile on December 10, 2015, Senate Majority Leader Mitch McConnell (R-Ky.) announced that there would be no vote on the TPP until after the election.  McConnell indicated that he was undecided on the vote, but he was sure that the TPP would be defeated if it were sent to Capitol Hill next spring or summer.  McConnell further stated:

“It certainly shouldn’t come before the election. I don’t think so, and I have some serious problems with what I think it is. But I think the President would be making a big mistake to try to have that voted on during the election. There’s significant pushback all over the place.

Yeah, I think it would be a big mistake to send it up before the election.

The next president, whoever that is, will have the authority to either revisit this one, if it doesn’t pass, or finish the European deal or other deals, and give Congress a chance to weigh in on it,”

McConnell who opposes the tobacco provisions in the TPP, has joined with Sen. Orrin G. Hatch (R-Utah), the Senate Finance Committee chairman, who was also a key supporter of the fast-track legislation, but has raised particular concerns about provisions related to pharmaceutical companies. Utah has a growing pharmaceutical industry.

McConnell’s and Hatch’s concerns have reduced the enthusiasm among the Republicans as the debate over trade policies on the 2016 campaign trail has become entangled in Presidential politics. Several top contenders for the GOP presidential nomination, including Donald Trump and Sen. Ted Cruz (Tex.), have denounced the pact, and all of the Democratic candidates, including Hillary Clinton and Bernie Saunders, oppose it.

On January 7, 2016, however, the White House pushed for a TPP vote sooner rather than later, arguing for a quick vote warning that a delay of the vote to the lame-duck session of Congress or into the next administration would be a significant lost opportunity. White House Press Secretary Josh Earnest said in a press briefing that Congress should act quickly to ratify the plan amid recent turbulence in the China stock market, which some media reports have said is in its worst shape since the global financial crisis.  He further stated that the best way for the U.S. economy to weather volatility in international markets is through the TPP:

“I’m not suggesting that Congress should fast-forward through that process and vote today.  But I am suggesting that we should move expeditiously through this process and that Congress should not wait until the end of the year or even next year to approve the Trans-Pacific Partnership agreement.”

One point in favor of TPP is that on January 4, 2016 the National Association of Manufacturers announced that they were in support of the TPP. NAM President and CEO Jay Timmons stated:

“After careful analysis, the NAM will support the TPP as it will open markets and put manufacturers in a much stronger position to compete in an important and growing region of the world.

We recognize this agreement is not perfect, and there are some principled objections to the TPP, so the NAM will continue to work closely with its members to address remaining barriers.

Importantly, we encourage the administration to work closely with the industry, Congressional leaders and the other TPP governments to address these key issues.”

Subsequently, a coalition of top U.S. CEOs from the Business Roundtable gave the TPP a firm endorsement, but urged the Obama administration to quickly alter portions of the deal that are not up to par. As the Business Round Table International Engagement Committee stated:

“We want Congress to approve the TPP this year. To that end, we are urging the administration to quickly address the remaining issues that impact certain business sectors in order to ensure the broadest possible benefits to all sectors of U.S. business, which will enable the broadest support possible for the TPP.”

But in addition to tobacco and pharmaceutical problems in the TPP, another issue is banking and data flows. On January 12, 2016, in a letter to three Cabinet Secretaries, a bipartisan group of 63 Congressional representatives urged the Obama administration officials to correct the Trans-Pacific Partnership’s exclusion of financial services from the agreement’s e-commerce chapter, warning that the current text of the deal leaves banks exposed to risky data storage rules. The letter stated:

“Omission of these disciplines in the TPP is a missed opportunity to ensure that all U.S. companies benefit from strong rules prohibiting localization requirements. We note that such disciplines can be included in trade agreements while maintaining the ability of U.S. regulators to protect consumers through prudential regulation.”

The TPP’s e-commerce chapter contains a general ban on the localization of data through the establishment of expensive in-country servers. But the lawmakers argued that the banking, insurance and securities industries are not different from other sectors that depend on the unimpeded flow of data to keep their businesses running in the World marketplace.  The letter further states:

“These types of requirements not only impair the competitiveness of U.S. companies but also reduce overall data security and create inefficiencies. We request that your agencies use all available measures to address the existing gaps in the TPP. In addition, going forward, we request that there be a single approach that prohibits localization requirements in future trade and investment agreements.”

Recently, John Brinkley writing for Forbes rebutted many of the Arguments against the TPP.  See http://www.forbes.com/sites/johnbrinkley/2016/01/13/for-trans-pacific-partnership-opponents-noting-short-of-perfect-will-suffice/#29e99cb6563d433c578b563d

TPP TEXT AND TRADE ADVISORY REPORTS

On November 5, 2015, the United States Trade Representative Office (“USTR”) released the text of the Trans Pacific Partnership Agreement (“TPP”).  This is an enormous trade agreement covering 12 countries, including the United States, Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam, and covers 40% of the World’s economy. To read more about the TPP and the political negotiations behind the Agreement see past blog posts.

The attached text of the Agreement is over 6,000 pages, Chapters 3 – 30 – Bates 4116 – 5135 Chapters 1 – 2 – Bates 1 – 4115 Annex 1 – 4 – Bates A-1-1074.

On November 5th, the Treasury Department released the attached text of the Currency Manipulation side deal, Press Release – 12 Nation Statement on Joint Declaration Press Release – Joint Declaration Fact Sheet TPP_Currency_November 2015,

On December 2nd and 3rd, 2015 various trade advisory groups operating under the umbrella of the United States Trade Representative (“USTR”) Group issued reports on the impact of the TPP on various industries and legal areas. All the reports can be found at https://ustr.gov/trade-agreements/free-trade-agreements/trans-pacific-partnership/advisory-group-reports-TPP and many of the reports are attached here, ITAC-16-Standards-and-Technical-Barriers-to-Trade Labor-Advisory-Committee-for-Trade-Negotiations-and-Trade-Policy ITAC-15-Intellectual-Property ITAC-9-Building-Materials-Construction-and-Non-Ferrous-Metals ITAC-10-Services-and-Finance-Industries ITAC-12-Steel ITAC-11-Small-and-Minority-Business ITAC-14-Customs-Matters-and-Trade-Facilitation ITAC-8-Information-and-Communication-Technologies-Services-and-Electronic-Commerce ITAC-6-Energy-and-Energy-Services ITAC-2-Automobile-Equipment-and-Capital-Goods ITAC-3-Chemicals-Pharmaceuticals-Health-Science-Products-and-Services ITAC-5-Distribution-Services Intergovernmental-Policy-Advisory-Committee-on-Trade ATAC-Sweeteners-and-Sweetener-Products ATAC-Grains-Feed-Oilseed-and-Planting-Seeds ATAC-Processed-Foods ATAC-Fruits-and-Vegetables ATAC-Animals-and-Animal-Products Agricultural-Policy-Advisory-Committee. Almost all of the reports are favorable, except for the Steel Report, which takes no position, and the Labor Advisory Report, which is opposed because it is the position of the Unions.

NEW TRADE AND CUSTOMS ENFORCEMENT BILL

On December 9, 2015, in the attached announcement, Trade-and-Environment-Policy-Advisory-Committee.pdf, Senate Finance Chairman Orrin Hatch, House Ways and Means Chairman Kevin Brady and Senate Finance Committee Ranking Member, Ron Wyden, announced a final agreement on the Trade Facilitation and Trade Enforcement Act of 2015.

A copy of the bill, the conference report and summary of the bill are attached, Summary of TRADE FACILITATION AND TRADE ENFORCEMENT ACT OF 2015 CONFERENCE REPORT TRADE FACILITATION AND TRADE ENFORCEMENT ACT OF 20152 JOINT EXPLANATORY STATEMENT OF THE COMMITTEE OF CONFERENCE. The bill has not yet passed the Senate.

CHINA’S NME STATUS—ANOTHER HOT TOPIC FOR 2016

Interest groups on both sides of the issue have increased their political attacks in the debate over China’s market economy status. On December 11, 2016, pursuant to the WTO Agreement, the 15 year provision, expires.

More specifically, the United States faces a looming deadline under the WTO Agreement with regard to the application of this nonmarket economy methodology to China. Section 15 of the China WTO Accession Agreement, which originated from the US China WTO Accession Agreement, provides:

  1. Price Comparability in Determining Subsidies and Dumping . . .

(a) In determining price comparability under Article VI of the GATT 1994 and the Anti-Dumping Agreement, the importing WTO Member shall use either Chinese prices or costs for the industry under investigation or a methodology that is not based on a strict comparison with domestic prices or costs in China based on the following rules: . . .

(ii) The importing WTO Member may use a methodology that is not based on a strict comparison with domestic prices or costs in China if the producers under investigation cannot clearly show that market economy conditions prevail in the industry producing the like product with regard to manufacture, production and sale of that product. . . .

(d) Once China has established, under the national law of the importing WTO Member, that it is a market economy, the provisions of subparagraph (a) shall be terminated provided that the importing Member’s national law contains market economy criteria as of the date of accession. In any event, the provisions of subparagraph (a)(ii) shall expire 15 years after the date of accession. In addition, should China establish, pursuant to the national law of the importing WTO Member, that market economy conditions prevail in a particular industry or sector, the non-market economy provisions of subparagraph (a) shall no longer apply to that industry or sector.

In other words, pursuant to the China WTO Accession Agreement, Commerce’s right to us a nonmarket economy methodology “shall expire 15 years after the date of accession”. China acceded to the WTO on December 11, 2001 so Section 15(d) should kick in on December 11, 2016.

That provision specifies that an importing WTO member may use a methodology that is not based on a strict comparison with domestic prices and costs in China to determine normal value in an AD case, if producers of a given product under investigation cannot clearly show that market economy conditions prevail in their industry.

The question that is now being debated is whether Section 15(d) automatically ends the possibility of using a non-market economy methodology to China or if it can still be applied if petitioners can show that market conditions do not prevail for producers of the product under investigation.

In November 2015 European Union Industry Commissioner Elzbieta Bienkowska told the European Parliament that geopolitical considerations must be weighed against the industrial interests of the EU in the evaluation of extending market economy status (NME) to China.

On October 30, 2015, it was reported that during a visit to China, German Chancellor Angela Merkel backs more ‘market economy status’ for China – with certain conditions. More specifically, German Chancellor Angela Merkel stated:

“Germany supports, in general, China’s claim to get the market economy status. At the same time China has to do some homework, for example in the area of public procurement. But we want to advance the process – as we want to do that with the EU-China investment agreement.”

Under the NME methodology, administering authorities in countries administering antidumping laws, such as the US Commerce Department, do not use actual costs and prices in China to determine antidumping rates. Instead the administering authorities use values in various surrogate countries, which in the Commerce Department’s case, can change between preliminary and final determinations and various review investigations to determine the foreign value.  As a result, neither the Commerce Department nor other foreign countries can know whether China is truly dumping.

The European Union Industry commission is seen as strongly favoring a change to market economy status for China, but the European parliament has not taken such a strong stand.

In the U.S., the Commerce Department has taken the position that it will not automatically bestow market economy status on China, but will consider if it meets the statutory criteria for doing so in the context of a specific case if it receives a properly filed petition.

Other countries that are not likely to bestow automatic market economy status to China at the end of 2016 are Japan, Canada, Brazil and India.

On Dec. 30, Chinese Foreign Ministry Spokesperson Lu Kang made clear that China is pushing for the granting of market economy status, stating:

“We hope that the EU can set a good example in obeying the WTO rules and take substantive actions to meet its obligations under Article 15 of the Protocol, which will also facilitate the development of China-EU economic and trade ties.”

Steel industries and unions in both the US and EU are fighting hard against giving China market economy status. As indicated below, steel experts have been pointing to the large overcapacity of the Chinese steel industry.  But with almost all Chinese steel blocked from entry into the US by large antidumping and countervailing duties, it is questionable how much weight such arguments will be given.

The only two major Chinese steel products still coming into the US are galvanized and cold-rolled steel, and based on surrogate values, Commerce just issued very high antidumping and countervailing duty rates against both products, wiping them out of the US market. Currently, if not all, almost all, steel products from China are covered by an AD order and often also a CVD order, including carbon steel plate, hot rolled carbon steel flat products, circular welded carbon quality steel pipe, light walled rectangular pipe and tube, circular welded carbon quality steel line pipe, circular welded austenitic stainless pressure pipe, steel threaded rod, oil country tubular goods, prestressed concrete steel wire strand, seamless carbon and alloy steel standard line and pressure pipe, high pressure steel cylinders, prestreessed concrete steel rail tire wire, non-oriented electrical steel, and carbon and certain alloy steel wire rod.

On Dec. 22, the United Steelworkers (“USW”) union, according to a USW press release, held a private meeting in Minnesota with White House Chief of Staff Denis McDonough, as well as Senators Amy Klobuchar (D-MN) and Al Franken (D-MN), at which they discussed the “urgency of federal, state and local government authorities to provide more immediate relief against the global onslaught of steel imports that have shut down half of the region’s steel sector mining jobs,”  Emil Ramirez, director for USW District 11 — which covers Midwestern states including Minnesota, Missouri and Montana — said at the meeting that the union is “at war with China’s illegal steel imports flooding into our market.” He added that China had in some months in 2015 dumped more than 100,000 tons of cold-rolled steel into the U.S. market, contributing to mining job losses in Northern Minnesota’s so-called “Iron Range” A day later, the union welcomed what it called a “whopping” 255.8% preliminary AD rate on Chinese corrosion-resistant steel based on surrogate values, despite the fact that all the other antidumping rates against other countries based on actual prices and costs were in the single digits or 0s.

On October 26, 2015, Leo Gerard, who heads the Steel Union, sent the following attached letter,USW CHINA NME , to USTR Michael Froman about steel imports and China’s market economy status:

Dear Ambassador Froman:

I am writing to you regarding the Transatlantic Trade and Investment Partnership (TTIP) and the potential for U.S manufacturing interests to be adversely affected by how the European Union (EU) may change its current treatment of the People’s Republic of China (China) as a non-market economy.

As you well know, under the terms of China’s Protocol of Access to the World Trade Organization, other WTO members had the right to treat the PRC as a non-market economy (NME) for purposes of antidumping and countervailing duty laws. One clause regarding the treatment of China expires on December 11, 2016, but the remaining language continues to operate. This has led to an active effort by China to end its treatment as a non-market economy by those countries which continue to treat it as such so as to gain preferential treatment. The media has suggested that while the EU has not decided how it will proceed, an internal EU memo argues for granting market economy treatment. This memo is not yet public. How China is treated under U.S. and EU antidumping laws is critical to workers and companies in both countries. With massive distortions in most aspects of the Chinese economy, changing China’s status before their economy in fact operates on market principles on a sustained and verifiable basis will have far reaching consequences for workers, companies and communities across the U.S. and the EU. If the EU makes a change in treatment of China under its antidumping law when China has not in fact truly engaged in comprehensive reform of its economy, there will be broad repercussions for how fair market conditions will be assessed in Europe and, in terms of U.S. exports to the EU, could result in dramatically lower opportunities for the export of America’s manufactured products.

As noted, press reports indicate that the EU is considering granting China market economy status in the near future, despite overwhelming evidence of the continued state-led direction, intervention, subsidization and control of that country’s economy and its firms. If the EU chooses to grant China this preferential status, either for the country as a whole or for individual sectors or firms, it will subject U.S. products to a potential risk of having to compete against unfairly traded products in the EU and, potentially, as components in products shipped to the U.S. or to third country markets. Thus, the EU’s decisions in this area must be addressed as part of the ongoing TTIP negotiations and that any alterations in their treatment of China as a NME be subject to dispute resolution and potential compensation for any adverse effects it may have on the U.S., producers and workers

The TPP negotiations have overshadowed the TTIP negotiations and, as a result, many important issues are receiving limited attention. The EU’s potential actions in this area must not be viewed simply as a matter for the EU Commission to consider but, rather, must be addressed in terms of their potential impact on the U.S. manufacturing sector and its employees.

I look forward to working with you on this important matter.

Sincerely,

Leo W. Gerard

International President

CHINA CURRENCY APPROVED BY THE INTERENATIONAL MONETARY FUND AS A MAIN WORLD CURRENCY

In the past, one of the arguments that Commerce has used to deny China market economy status is that the Chinese yuan/RMB is not convertible.   On November 30, 2015, however, in the attached announcement, IMF PRESS RELEASE, the International Monetary Fund (“IMF”) announced that the Chinese renminbi will become the fifth currency to be included in the organization’s international reserve asset that supplements member countries’ official reserves.

As the IMF stated the renminbi, or RMB, will join the U.S. dollar, the euro, the Japanese yen and the British pound on Oct. 1, 2016, in a basket of currencies known as the Special Drawing Right, which plays a critical role in providing liquidity to the global economic system, especially during financial crises, the IMF said.

IMF managing director Christine Lagarde stated that the executive board’s decision is “an important milestone” recognizing China’s integration in the international financial system:

“It is also a recognition of the progress that the Chinese authorities have made in the past years in reforming China’s monetary and financial systems. The continuation and deepening of these efforts will bring about a more robust international monetary and financial system, which in turn will support the growth and stability of China and the global economy.”

Lagarde’s decision was based on a paper prepared by IMF staff, which determined that the RMB is a “freely usable” currency.

The IMF. designation, an accounting unit known as the special drawing rights, bestows global importance. Many central banks follow this benchmark in building their reserves, which countries hold to help protect their economies in times of trouble. By adding the renminbi to this group, the IMF effectively considers a currency to be safe and reliable.

EXIM BANK RISES FROM THE DEAD BUT THEN RUNS INTO A NEW ROADBLOCK

Congress let the Export-Import (“EXIM”) Bank’s lending authority expire after June 30, but a number of Republicans in the House of Representatives, including Congressman Dave Reichert, currently Chairman Subcommittee on Trade, House Ways and Means,  joined Democrats to force a vote in October to resurrect the Bank. The House attached Ex-Im to a highway funding bill and stopped ten amendments that would have limited the bank’s scope. This highway/Ex-Im bill passed the House 363 to 64.  In December negotiators from both chambers of Congress reached an agreement that revived the bank’s lending authority through Sept. 30, 2019.

On December 3, 2015, the Senate passed the Transportation Bill with the Reauthorization of the EX-IM Bank, and on December 4, 2015, President Obama signed the bill into law.

The arguments for the EX-IM Bank are many, as Steve Myrow, who used to work at the EXIM Bank, stated in an Article in The Hill on July 9, 2014:

The debate over reauthorizing the Export-Import Bank has become the latest proxy battle between the conservative and establishment wings of the Republican Party. However, this issue should not be used as an ideological litmus test. Instead, it should evoke a practical and constructive dialogue about how best to level the playing field for American businesses overseas while protecting taxpayers here at home.

Founded in 1934, the Export-Import Bank’s mission has not changed throughout its 80-year history. Its raison d’être has always been to create jobs at home by financing the sale of American goods and services abroad. Ex-Im Bank does not compete with private-sector lenders, but rather seeks to match the foreign government support that U.S. firms’ foreign competitors enjoy.

When I served in the bank’s leadership in President George W. Bush’s administration, our overarching goal was to steer the bank between two beacons — one focused on creating jobs and the other on protecting the taxpayers.

We believed, as did members of Congress on both sides of the aisle, that an ideal way to navigate these two beacons was to convert the bank into one of the only truly self-sustaining government agencies.

By making the bank stand on its own two feet and rely solely on its revenue stream to fund its operations, we not only made it possible for companies to grow high-quality domestic jobs, but we earned a profit for the taxpayers.

Few government agencies can claim to have reduced the deficit, a fact that should be especially welcome during the current era of austerity.

Nevertheless, some of the bank’s Congressional detractors argue that it distorts the market by providing a subsidy. It’s true that in a perfect market, subsidies should not exist. But unfortunately, the real world is not a perfect market. Most countries that meaningfully benefit from international trade provide varying degrees of export subsidies.

Some identify specific firms as their national champions and others, like China, even provide financing on terms more akin to development assistance.

To put it another way, should the U.S. unilaterally disarm just because atomic weapons are undesirable? Of course not. We need a nuclear arsenal because other countries have them. The same is true for maintaining an export credit agency. Ex-Im Bank’s role is to ensure that U.S. exporters get a fair chance to compete based on quality, price and service, rather than on the basis of financing assistance.

For the full article, see http://thehill.com/blogs/pundits-blog/international/211664-congress-should-bank-on-success

But despite the many arguments in favor of the EXIM bank and the passage of the reauthorization, EXIM is not out of the woods yet. Senator Shelby, Chairman of the Senate Banking Committee, has held up nominations for the EXIM bank Board of Directors.  Because there is no quorum, the failure to appoint a new director means that no large projects, such as the sale of Boeing airplanes or sales of GE products, can be approved.

EXIM’s board of directors has only two of the five members it is supposed to have, including Chairman Fred Hochberg. That means it cannot approve loans above $10 million, which make up about a third, value-wise, of EXIM’s transactions.

More specifically, Democrats have sought consent for the nomination of Patricia Loui-Schmicker to the EXIM Bank board of directors, despite the fact that the White House sought a second term for her in March 2015. Loui-Schmicker is needed to give the Ex-Im bank five-member board a quorum. The panel reviews Ex-Im Bank loans above $10 million.

On January 11th, President Obama withdrew the nomination of Democrat Loui-Schmicker and nominated John Mark Mcwatters, a former staffer to House Financial Services Chairman Jeb Hensarling, to fill one of the vacant Republican seats on the Export-Import Bank’s board of directors. McWatters’ former boss, Hensarling, chairman of the House’s Financial Services Committee, has led efforts to shut down the Export-Import Bank.

Senate Banking Committee Chairman Richard Shelby, who opposed Ex-Im’s reauthorization last year, however, has expressed little interest in acting on any nominees to fill its board openings. On January 11, 2016, Senator Shelby indicated that clearing the panel’s backlog of nominees might not see much progress before his March 1 primary in Alabama, stating, “I’m in the primary now.  That’s what’s going to eat a lot of my time up – always does.”

When asked about the McWatters nomination, to fill one of the vacant Republican seats on the Export-Import Bank’s board of directors, Shelby stated, “I’m in a primary right now. We’re in no hurry to hold hearings.”

As Democratic Senator Sherrod Brown stated, “The Ex-Im Bank can’t operate because the Senate Banking Committee won’t do its job.”

No wonder Boeing is going to manufacture airplanes in China.

TRADE

ALUMINUM EXTRUSIONS FINAL 2013-2014 REVIEW INVESTIGATION

On November 20, 2015, the Commerce Department issued the attached final determination in the 2013-2014 antidumping review investigation of aluminum extrusions from China, ALUMINUM EXTRUSIONS FINAL. Based on surrogate values, Commerce issued antidumping rates of 86.01%, but for companies that did not cooperate, Commerce issued antidumping rates of only 33.28%.

In addition, in the attached Countervailing Final Determination for 2013, CVD Aluminum Extrusions 2013 Final Review Notice.3424528-01 CVD Aluminum Extrusions 2013 Decision Memo.3424530-01, Commerce issued a countervailing duty rate ranging from 3.59% to 222.82% with most companies receiving a rate of 61.36% rate.

MEXICO ALUMINUM EXTRUSIONS PROBLEM

Meanwhile, US producers are growing concerned over a large stockpile of aluminum extrusions at a casting facility in Mexico. Aluminicaste Fundición de México S. de RL de CV, a producer of secondary billet, slab and forging billet, is storing around 850,000 tonnes of aluminum extrusions at its San José Iturbide, Mexico, facility.

It was reported that the extrusions had been shipped directly from extrusion plants in China and were being remelted into billet at the Mexico facility. The source told the American Metals Market:

“Yes, it’s about 850,000 (tonnes) on the ground. The quality of the metal is very good. It’s coming from billets that are extruded in China, shipped to Mexico, and made back into billet. They are currently casting at full capacity, which is about 100,000 (tonnes) per year.”

“It’s a lot of metal. Even me, I have not seen that much metal before. It was 300,000 (tonnes) about a year ago and quickly grew to 850,000 (tonnes).”

The practice of importing extrusions from China and remelting them into billet is not illegal or known to violate any law.

NEW TRADE CASES COMING—RAW ALUMINUM

In light of the impact of the aluminum extrusions case on the US market, the import problem has now moved upstream. The next round of antidumping and countervailing duty cases against China looks like it will be on raw aluminum products.

As indicated in the attached letter, NEW ALUMINUM CASES COMING, on November 24, 2015, the US Aluminum Association and the Canadian Aluminum Producers complained about Chinese aluminum production and the subsidies they receive:

Dear Secretary Kerry and Minister McKenna,

We write to you representing aluminum producers in the United States and Canada. We are concerned about China’s state-planned and carbon intensive aluminum industry which has amassed considerable overproduction. This not only leads to a distortion of international trade impacting our entire value chain, but also undermines global efforts to decarbonize the economy. . .  .

Only ten years ago China supplied 24% of the world’s primary aluminum. Today, spurred by energy subsidies, Chinese manufacturers have more than doubled their output and supply 52% of all primary aluminum produced globally. At the same time, this massive increase in production entails a significant environmental consequence.

Aluminum production in China is the most carbon intensive in the world, with its coal-based smelters emitting significantly more greenhouse gases per ton of aluminum than its North American counterparts. In fact, a ton of aluminum produced in China is at least twice as carbon-intensive as that same metal produced in North America. Given the rapid expansion of high-carbon aluminum production in China, many of the efficiency and emission reduction gains made by the global aluminum industry over the last several decades are being offset. . . .

The U.S. and Canadian aluminum industry is concerned that overproduction in China will continue unabated and is insufficiently regulated. These commitments represent a critical opportunity for China to advance energy efficiency and emissions reductions targets in support of global commitments to address climate change.

We appreciate your support to help us to reestablish fair trade conditions and to make a significant contribution to advancing a low-carbon global economy. . . .

Letters, like this, are usually a sign that an antidumping/countervailing duty case is coming. In addition, US aluminum producers have launched a new China Trade Task Force with their target being “illegal” Chinese government subsidies. In a letter to USTR Michael Froman, the US producers asked USTR to intervene on behalf of an industry that supports thousands of jobs:

“Illegal Chinese subsidies — such as direct grants, interest free loans, transfers of low cost state owned land, and preferential regulatory treatment — have collapsed the global price of aluminum.

This price drop has forced aluminum smelters across the United States to close while Chinese government continues to prop-up its producers through these unfair and illegal subsidies.”

THE ONGOING STEEL CASES

Many companies have been asking me about the ongoing Steel antidumping and countervailing duty cases so this section will address the Steel cases in more detail.

As happened in the OCTG cases, where Chinese OCTG was simply replaced by imports from Korea, India, Taiwan, Philippines, Saudi Arabia, Ukraine, Thailand and Turkey, the same scenario is happening in other steel cases, such as the recent cold-rolled and corrosion-resistant/galvanized steel cases.

Based on the nonmarket economy antidumping methodology, which does not use actual prices and costs in China, in the two recent cases Chinese steel companies were smashed with high antidumping rates of 200 to 300 percent. In the Cold Rolled Steel countervailing duty case, the Chinese companies and Chinese government simply gave up and received a rate over 200%.

But all the other countries, including Russia, which has market economy status, received antidumping rates in the single digits or 0s for no dumping. Steel will continue to flow into the United States in large amounts because such small antidumping and countervailing duty rates simply will have no effect.

The decisions also indicate why the Unions and the Steel industry will fight very hard in Congress and before the Administration to push the Commerce Department to continue using the nonmarket economy methodology against China. It easy for Commerce to find dumping when it uses fake numbers/surrogate values from third countries, which have no relationship to actual prices and costs in China.

COLD ROLLED STEEL FROM CHINA, BRAZIL, KOREA, INDIA AND RUSSIA

On December 16, 2015, Commerce issued its attached preliminary countervailing duty determination, factsheet-multiple-cold-rolled-steel-flat-products-cvd-prelim-121615, in Certain Cold-Rolled Steel Flat Products from Brazil, China, India, and Russia and No Countervailable Subsidization of Imports of Certain Cold-Rolled Steel Flat Products from Korea. The effect of the case is to wipe all Chinese cold rolled steel out of the United States with a countervailing duty (CVD) rate of 227.29%.

The 227.29% CVD rate for all the Chinese companies was based on all facts available as the Chinese government and the Chinese steel companies simply refused to cooperate realizing that it was a futile exercise to fight the case at Commerce because of the surrogate value methodology and refusal to use actual prices and costs in China.

As also predicted, the countervailing duty rates for all the other countries were very low, if not nonexistent: Brazil 7.42% for all companies, India 4.45% for all companies, Korea 0 for all companies and Russia 0 to 6.33% for all companies.

CORROSION RESISTANT STEEEL PRODUCTS—GALVANIZED STEEL PRODUCTS FROM CHINA, INDIA, ITALY, KOREA AND TAIWAN

On December 22, 2015, in the attached factsheet, factsheet-multiple-corrosion-resistant-steel-products-122215, Commerce announced its affirmative preliminary determinations in the antidumping duty (AD) investigations of imports of corrosion-resistant steel products from China, India, Italy, and Korea, and its negative preliminary determination in the AD investigation of imports of corrosion-resistant steel products from Taiwan.

China received antidumping rates of 255.8%, but antidumping rates from the other countries were very low.

India received rates ranging from 6.64 to 6.92%.  Italy received rates from 0 to 3.11%.  Korea received rates from 2.99 to 3.51%.  Taiwan’s antidumping rates were all 0s.

Although the US industry was pleased with the rate against China, AK Steel Corp. stated, “we are disappointed that the preliminary dumping margins for India, Italy, South Korea and Taiwan were not higher as they do not appear to adequately address the dumping that we believe is occurring in the U.S. market.”

Because Commerce uses market economy methodology in antidumping cases against these countries, companies in those countries can use computer programs to eliminate or reduce significantly their antidumping rates. Foreign steel companies know they will be targeted by US antidumping and countervailing duty cases, and, therefore, prepare for such suits by eliminating the unfair acts.

The fact that the antidumping and countervailing duty rates in these cases are so low strongly indicate that the US Steel Industry’s problem is not steel imports. The problem is the US steel industry’s failure to modernize their facilities and remain competitive with the rest of the world.

In the parallel countervailing duty investigation, certain Chinese companies earned margins exceeding 235 percent while Taiwanese producers were given no CVD rates at all.

HOW NME METHODOLOGY IN ANTIDUMPING CASES LEADS TO OVER CAPACITY IN CHINESE STEEL AND ALUMINUM INDUSTRIES

Meanwhile, US experts complain about Chinese overcapacity in the Steel and Aluminum industries. In a December 1, 2015 article, one expert, Terence P. Stewart, Law Offices of Stewart and Stewart, which represents the Unions and various steel companies in US antidumping and countervailing cases against China, including the recent Off the Road Tires case against China, complained about Chinese overcapacity in the Steel and Aluminum industries and their distortive impact on the World steel and aluminum markets stating:

In the United States, the domestic steel industry is in the midst of a major crisis as they try to deal with waves of imports that seem to flow directly (i.e., imports from China) and indirectly (i.e., from other countries facing import challenges from China in their home markets and hence expanding their exports) from massive excess capacity in China and in other countries. . . .

The story is being repeated in the aluminum sector as well with many unwrought aluminum facilities being closed in the US and other western countries in recent years and some trade cases being filed. Indeed, Alcoa recently announced the idling of three facilities in the U.S. (New York and Washington) with a capacity of more than a half million tons —a significant portion of the remaining capacity in the United States. The problem again flows from massive excess capacity in China.

In both sectors, the underlying facts are similar. In the late 1990s, Chinese capacity amounted to 10-15 percent of global capacity. With massive government incentives, state ownership and support, by 2014 each industry had ballooned to have more than half of global capacity having accounted for nearly 80 percent of global capacity expansions. . . .

Without concerted efforts by China itself and its trading partners, the balance will be achieved only at the expense of countries that had nothing to do with the creation of the problem — a grossly inequitable and economically and politically unacceptable outcome. . . .

The Article goes on to complain that China should do this and do that, such as establishing “voluntary export restraints on all product sectors where it has serious excess capacity to reduce the problems it has created for its trading partners” and “China could implement the many remaining reforms needed to have its economy actually operate on market forces.” It should be noted that voluntary export restraints and prices floors are export restraints, which are specifically prohibited in the China-WTO Agreement.  In fact, when in the past the Chinese government tried to set price floors to deter dumping, the US government took the Chinese government to the WTO and US antitrust cases were filed against the Chinese companies.

The Article goes on to state:

All of China’s major trading partners need to encourage China to solve its internal problem quickly. Trading partners need to be prepared to act quickly to apply such pressure as will enable China to overcome any internal reluctance to face the significant challenges. This means using the tools that currently exist, including WTO disputes, to make clear the enormous damage being done to others by China’s subsidy practices. . . .

Finally, the U.S., EU and other trading partners with trade remedy laws that have found China to be a nonmarket economy, should ensure that their industries and workers can obtain the full measure of trade remedy relief existing laws, regulations and practices provide until such time as China has in fact achieved the serious reforms still needed for its economy to work on market principles.

Unfortunately, US industries and domestic experts never ask the real question. Why should the Chinese government and Chinese companies listen to these complaints when the US government and governments in other countries continue to attack China using antidumping and countervailing duty cases based on fake numbers?

As indicated above, US antidumping and countervailing duty orders and ongoing cases have the effect of blocking almost 100% of Chinese steel from the US market. Since the US steel industry, the Unions and their representatives have declared a trade war with China, why should the Chinese government and companies listen to the United States?

In talking with Chinese Government officials in the past, they told me that US antidumping cases could be ok because they could be used to regulate Chinese production. Some Chinese companies undoubtedly are truly dumping.  If Chinese companies get hit with real very high antidumping rates based on actual prices and costs in China, that could cause the company to shut down.

But when antidumping cases are based on phony numbers/surrogate values, which have no relationship to the actual situation in China, the US government creates a game and the Chinese government and the Chinese companies will simply play or not play the game. But they will not listen to sanctimonious arguments from US experts, who do not want the Chinese to compete on a level playing field with the US and other countries, such as Russia and Iran, and instead want to continue a trade war with China based on fake numbers.

SOLAR CELLS REVIEW DETERMINATION

On December 18, 2015, in the attached decision, the Commerce Department issued its preliminary determination in the 2013-2014 Solar Cells antidumping review investigation, SOLAR CELLS AD PRELIM. The antidumping rates range from 4.53% for Trina to 11.47% for Yingli.  The average dumping rate for the Chinese separate rate companies is 7.27%.

On December 31, 2015, Commerce issued its attached preliminary determination in the 2013 Countervailing duty case, DOC SOLAR CVD 2013, and the rates went up to 19.62% for three Chinese companies–JA Solar Technology Yangzhou Co., Ltd., Changzhou Trina Solar Energy Co., Ltd. and Wuxi Suntech Power Co., Ltd.

DRAWN STAINLESS STEEL SINKS FINAL

In the attached decision, on November 10, 2015, Commerce issued its final determination in the first 2012-2014 review in the Drawn Stainless Steel Sinks case with antidumping rates ranging from 2.82 to 9.83%, AD STEEL SINKS 2012-2014FED REG., AD DECISION MEMO 2012-2014

In addition, the countervailing duty rate for one company, Guangdong Dongyuan Kitchenware Industrial Co., Ltd. is  9.83%.  SeeCVD SINKS 2012-2013FEDREG

CIT REMANDS GLYCINE CASE BACK TO COMMERCE BECAUSE OF ITS PUNITIVE 453% ANTIDUMPING RATE.

On November 3, 2015, in Baoding Mantong Fine Chemistry Co., Ltd. v. United States, the Court of International Trade in the attached decision, BAODING VS US PUNITIVE CALCULATION, reversed the Commerce Department’ s determination in Glycine from China, holding that Commerce had issued a 453% punitive tariff against Baoding in violation of the remedial purpose of the statute. As the CIT stated:

“The court rules that Commerce failed to fulfill its obligation to determine the most accurate margin possible when it assigned Baoding a weighted average dumping margin of 453.79%, which on the record of this case was not realistic in any commercial or economic sense and punitive in its effect. The court directs Commerce to determine a new margin for Baoding that is the most accurate margin possible, that is grounded in the commercial and economic reality surrounding the production and sale of Baoding’s subject merchandise, and that is fair, equitable, and not so large as to be punitive.”

As Judge Stanceu further stated:

“In assigning Baoding such a huge margin, Commerce has lost sight of the purpose of the antidumping duty statute, which is remedial, not punitive. The 453.79 percent margin is undeniably punitive in effect, regardless of the department’s intent, and it violates the department’s obligation to treat every party before it fairly and equitably as well as the obligation to arrive at the most accurate margin possible.”

Judge Stanceu said the agency was misstating the law, and that the facts demonstrate that the margin assigned is “commercially impossible.”

ROLLR BEARINGS PRODUCED IN THAILAND FROM CHINA SUBPARTS CANNOT BE COVERED BY BEARINGS ORDER AGAINST CHINA

On December 22, 2015 in the attached decision, Peer Bearing Company-Changshan v. United States,PEER BEARING CASE, the Court of International Trade held that roller bearings made in Thailand from Chinese parts were not subject to an anti-dumping duty order against Chinese bearings because the production process in Thailand had the effect of substantially transforming the roller bearings into a product of Thailand, not China.

MELAMINE FROM CHINA ANTIDUMPING AND COUNTERVAILING DUTY ORDERS

On December 1, 2015, Commerce issued the attached antidumping and countervailing duty orders against Melamine from China, MELAMINE AD ORDERS. The Antidumping rate for China is 363.31% and the Countervailing Duties range from 154 to 156.9%.

LARGE RESIDENTIAL WASHERS FROM CHINA

On December 16, 2015, Whirlpool filed a major antidumping and countervailing duty case against Large Residential Washers from China. According to the Petition, the real target companies are the Korean companies, Samsung and LG, and their production facilities in China.

The specific products covered by the petition are:

the term “large residential washers” denotes all automatic clothes washing machines, regardless of the orientation of the rotational axis, with a cabinet width (measured from its widest point) of at least 24.5 inches (62.23 em) and no more than 32.0 inches (81.28 em), except as noted below.

Also covered are certain parts used in large residential washers, namely: (1) all cabinets, or portions thereof, designed for use in large residential washers; (2) all assembled tubs designed for use in large residential washers which incorporate, at a minimum: (a) a tub; and (b) a seal; (3) all assembled baskets 11 designed for use in large residential washers which incorporate, at a minimum: (a) a side wrapper; 12 (b) a base; and (c) a drive hub; 13 and (4) any combination of the foregoing parts or subassemblies.

Excluded from the scope are stacked washer-dryers and commercial washers. The term “stacked washer-dryers” denotes distinct washing and drying machines that are built on a unitary frame and share a common console that controls both the washer and the dryer. The term “commercial washer” denotes an automatic clothes washing machine designed for the “pay per use” segment . . .

The relevant pages of the petition, including the full scope, the list of Chinese exporters and US importers, are attached, Whirlpool Petition Scope Exporters Importers 121615.

NEW OFF THE REOAD TIRES CASE

On January 8, 2016, Titan Tire Corporation (Titan) and the United Steel, Paper, and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, ALF-CIO (USW) filed a new antidumping and countervailing duty case against Pneumatic Off-the-Road Tires from India, China and Sri Lanka.  The relevant parts of the petition, including the scope and the list of Chinese exporters and US importers, are attached, US Importers Pneumatic Tires Petition Volume I General Issues Injury Cover Scope 1-8-16 Chinese Exporters Pneumatic Tires .

The specific products covered by this antidumping and countervailing duty case are:

New pneumatic tires designed for off-the-road (OTR) and off-highway use, subject to exceptions identified below. Certain OTR tires are generally designed, manufactured and offered for sale for use on off-road or off-highway surfaces, including but not limited to, agricultural fields, forests, construction sites, factory and warehouse interiors, airport tarmacs, ports and harbors, mines, quarries, gravel yards, and steel mills. . . . .

While the physical characteristics of certain OTR tires will vary depending on·the specific applications and conditions for which the tires are designed (e.g., tread pattern and depth), all of the tires within the scope have in common that they are designed for off-road and off-highway use.

Except as discussed below, OTR tires included in the scope of the proceeding range in size (rim diameter) generally but not exclusively from 8 inches to 54 inches. The tires may be either tube-type40 or tubeless, radial or non-radial, and intended for sale either to original equipment manufacturers or the replacement market.

Certain OTR tires, whether or not attached to wheels or rims, are included in the scope. However, if a subject tire is imported attached to a wheel or rim, only the tire is covered by the scope. Subject merchandise includes certain OTR tires produced in the subject countries whether attached to wheels or rims in a subject country or in a third country. . . .

This is the second antidumping and countervailing duty case the USW has filed against off-the-road tires from China. The USW stated that un-mounted off-the-road tires from China are already covered by antidumping and countervailing duty orders, but that mounted tires from China are not subject to those duties. Thus, this second case has been brought to close the loophole.

Some of the Chinese companies named in the complaint are: BDP Intl Ltd (China), Betel Holding Group, Lizhong Group, Qingdao Huifuxin Tyre, Qingdao J & G International Trading Co., Qingdao Keter Tyre, Qingdao Milestone Tyres Co., Ltd., Qingdao Rhino International Co., Ltd., Qingdao STW Tire Co., Ltd., Qingdao Tide Tire, Shandong Hawk International Rubber Industry Co., Ltd., Shandong Taishan Tyre Co., Ltd. Shandong Zhaoyuan Shengrun Wheel Assembly Co., Ltd. Shandong guanxian Cartwheel Co., Ltd., Shenzhen CJG Model Products, THI Group Ltd., Trans Knight Inc., relleborg China/Trelleborg Wheel Systems (Xingtai) Ltd. , Weifang Jintongda Tyre Co., Ltd., Weifang Lutong Rubber Co., Ltd., Weihai Zhongwei Rubber Co., Ltd., Wendeng Sanfeng Tyre Co., Ltd., Wenling Yaoding Machinery Co., Ltd., Wuxi Kinetic Machinery Co., Ltd., Wuxi Superior Wheel Company LLC, Xingyuan Tire Group, Yantai Wonray Rubber Tire Co. Ltd.

JANUARY ANTIDUMPING ADMINISTRATIVE REVIEWS

On January 4, 2015, Commerce published the attached Federal Register notice, DOC JAN 2016 REVOEW INVESTIGATIONS AD AND CVD OPPTY, regarding antidumping and countervailing duty cases for which reviews can be requested in the month of January . The specific antidumping cases against China are: Calcium Hypochlorite, Carbon and Certain Alloy Steel Wire Rod, Crepe Paper Products, Ferrovanadium, Folding Gift Boxes, Potassium Permanganate, and Wooden Bedroom Furniture.

The specific countervailing duty cases are: Calcium Hypochlorite, Carbon and Certain Alloy Steel Wire Rod, Certain Oil Country Tubular Goods, Circular Welded Carbon Quality Steel Line Pipe.

For those US import companies that imported Calcium Hypochlorite, Carbon and Certain Alloy Steel Wire Rod, Crepe Paper Products, Ferrovanadium, Folding Gift Boxes, Potassium Permanganate, and Wooden Bedroom Furniture from China during the antidumping period January 1, 2015-December 31, 2015 or if this is the First Review Investigation, for imports imported after the Commerce Department preliminary determinations in the initial investigation, the end of this month is a very important deadline. Requests have to be filed at the Commerce Department by the Chinese suppliers, the US importers and US industry by the end of this month to participate in the administrative review.

This is a very important month for US importers because administrative reviews determine how much US importers actually owe in Antidumping and Countervailing Duty cases. Generally, the US industry will request a review of all Chinese companies. If a Chinese company does not respond in the Commerce Department’s Administrative Review, its antidumping and countervailing duty rate could well go to the highest level and for certain imports the US importer will be retroactively liable for the difference plus interest.

In my experience, many US importers do not realize the significance of the administrative review investigations. They think the antidumping and countervailing duty case is over because the initial investigation is over. Many importers are blindsided because their Chinese supplier did not respond in the administrative review, and the US importers find themselves liable for millions of dollars in retroactive liability.  In the recent Solar Cells 2012-2013 final review determination, for example, the following Chinese companies were determined to no longer be eligible for a separate antidumping rate and to have the PRC antidumping rate of 298:

(1) Shanghai Suntech; (2) Wuxi Sunshine; (3) Changzhou NESL Solartech Co., Ltd.; (4) CSG PVTech Co., Ltd.; (5) Era Solar Co., Ltd.; (6) Innovosolar; (7) Jiangsu Sunlink PV Technology Co., Ltd.; (8) Jiawei Solarchina Co., Ltd.; (9) Jinko Solar Co., Ltd.; (10) LDK Solar Hi-tech (Suzhou) Co., Ltd.; (11) Leye Photovoltaic Science Tech.; (12) Magi Solar Technology; (13) Ningbo ETDZ Holdings, Ltd.; (14) ReneSola; (15) Shanghai Machinery Complete Equipment (Group) Corp., Ltd.; (16) Shenglong PV-Tech; (17) Solarbest Energy-Tech (Zhejiang) Co., Ltd.; (18) Suzhou Shenglong PV–TECH Co., Ltd.; (19) Zhejiang Shuqimeng Photovoltaic Technology Co., Ltd.; (20) Zhejiang Xinshun Guangfu Science and Technology Co., Ltd.; (21) Zhejiang ZG-Cells Co., Ltd.; (22) Zhiheng Solar Inc.; and (23) LDK Hi-Tech Nanchang Co., Ltd.

GENERAL LITIGATION AND ARIBITRATION

DORSEY VICTORY IN SUPREME COURT HELPS FOREIGN COMPANIES

On December 1, 2015 the United States Supreme Court unanimously held that Dorsey’s client, OBB Personenverkehr AG (“OBB”), the national railway of the Republic of Austria, is entitled to foreign sovereign immunity in a lawsuit filed against it in federal court by a United States resident who was injured while boarding OBB’s train in Innsbruck, Austria.

The decision, authored by Chief Justice Roberts, has broad application and is significant in confirming that there are limits to the reach of American courts. It establishes that, in the commercial context, in order for a United States court to exercise jurisdiction over a foreign state, or an agency or instrumentality of a foreign state, the claims must be “based upon” commercial activity that occurred within the territorial limits of the United States. In reversing the Ninth Circuit Court of Appeals, the Supreme Court rejected the notion that a foreign state-owned railway could be sued in the United States, simply based upon the purchase of a Eurail pass on the Internet from a United State travel agency, curtailing the impact of the Internet on the jurisdictional reach of United States courts.  Instead, the Supreme Court held that courts must focus on what is “the ‘particular conduct’ that constitutes the ‘gravamen’ of the suit,” or its “essentials,” which here, was the accident that took place in Austria. In this case, the injured passenger could have sued in Austria instead, which forum afforded adequate legal remedies.

Dorsey lawyer Juan Basombrio, who argued the case before the Supreme Court on behalf of OBB, notes that the decision is significant from an international business and legal perspective: “Whereas the Ninth Circuit’s decision would have dragged foreign states and their agencies into United States court, the Supreme Court’s decision recognizes the importance of international comity; that is, the respect that nations afford to the courts of other nations with respect to matters that occur within their territory.”

Juan further notes that, “In a world that has become increasingly connected by international commercial transactions, and where there is also increasing friction in the relations between the United States and other nations, this is a seminal and important decision that will foster harmony between the United States and other nations at least in the commercial context.” Juan  explains that, “From the perspective of American business, this decision also will incentivize other nations to adopt similar rulings, which will protect American businesses from being dragged into court overseas.”

Finally, “The unanimous decision of the Supreme Court,” according to Juan, “also underscores that the Supreme Court is not a fractured Court, as it has been recently criticized, but instead can and has spoken with one voice in this important area of the law, which involves the foreign relations of the United States.”

Dorsey represented OBB at all stages of the litigation. Juan was lead counsel on the case from the trial court through the Supreme Court argument.

UKRAINE ATTACKS RUSSIA USING ARBITRATION

Ukrainian companies have initiated five arbitration proceedings against Russia that range from approximately $20 million to $1 billion.  The cases have been brought by a number of Ukrainian businesses including Ukraine’s largest bank, a real estate investment company, several petrol stations and a private airport.

The claims have been brought under a 1998 bilateral investment treaty meant to encourage economic cooperation and expansion between Ukraine and Russia and are to recover for alleged losses incurred after Russian troops invaded Crimea in 2014 and shut down or nationalized Ukrainian businesses without paying for them.

The claims were lodged at various times in the first half of 2015 in the Permanent Court of Arbitration in The Hague, an intergovernmental organization with approximately 115 member states. The parties that launched the claims include PrivatBank & Finance Co. Finilon LLC, or PrivatBank; and PJSC Ukrnafta, which is both publicly and privately owned and is one of Ukraine’s largest oil and gas companies.

The lawyer representing the Ukrainian companies stated:

Apparently, the bilateral investment treaty permits the investors of one country whose property has been appropriated by the other country to launch private arbitration proceedings either under the rules governing the Stockholm Chamber of Commerce or the United Nations Commission on International Trade Law.

IP/PATENT AND 337 CASES

337

On November 10, 2015, the Court of Appeals for the Federal Circuit (“CAFC”) in the attached Clear Correct v. ITC, CLEAR CORRECT V ITC, held that the International Trade Commission (“ITC”)  does not have the authority to expand the scope of Section 337 Intellectual property (“IP”) investigations to cover electronic transmissions of digital data imported into the United States.  In a 2-1 decision, the Court determined that such an expansion would:

run counter to the “unambiguously expressed intent of Congress.” . . . . Here, it is clear that “articles” means “material things,” whether when looking to the literal text or when read in context “with a view to [the term’s] place in the overall statutory scheme.” . . . . We recognize, of course, that electronic transmissions have some physical properties—for example an electron’s invariant mass is a known quantity—but common sense dictates that there is a fundamental difference between electronic transmissions and “material things.” . .  .

NEW 337 CASES

On November 5, 2015, Hydor USA, Inc. filed a section 337 case against imports for certain aquarium fittings and parts thereof from a Chinese company, Jebao Co., Ltd in Zhongshan City, Guangdong province, China.

On November 12, 2015, Belkin International, Inc. filed a section 337 case against imports of Computer Cables, Chargers, Adapters, Peripheral Devices and Packaging from China. The proposed respondents are: Dongguan Pinte Electronic Co., Ltd., China; and Dongguan Shijie Fresh Electronic Products Factory, China.

On November 17, 2015, FeraDyne Outdoors, LLC and Out RAGE, LLC filed a section 337 case against Arrowheads With Deploying Blades against the following Chinese respondents: Linyi Junxing Sports Equipment Co., Ltd., China; Ningbo Faith Sports Co., Ltd., China; Ningbo Forever Best Import & Export Co. Ltd., China; Ningbo Linkboy Outdoor Sports Co, Ltd., China; Shenzhen Zowaysoon Trading Company Ltd., China; Xiamen Xinhongyou Industrial Trade Co., Ltd., China; Xiamen Zhongxinyuan Industry & Trade Ltd., China; Zhengzhou IRQ Trading Limited Company, China; and Zhenghou Paiao Trade Co., Ltd., China.

On January 8, 2016, Covidien LP filed a section 337 case against imports of Surgical Stapler Devices from Chongqing QMI Surgical Co., Ltd., China.

CRIMINAL PATENT CASES

On January 5th, in U.S. v. Pangang Group Co. Ltd., the US government brought the attached criminal indictment, CHINA INDICTMENT, against Pangang Group Co. Ltd., a state-owned Chinese steel company, alleging that Pangang engaged in economic spying and stole manufacturing trade secrets from DuPont Co. through a California businessman and a former DuPont engineer, who have been sent to prison for their crimes.

Prosecutors claim Pangang stole trade secrets held by DuPont covering its proprietary method of manufacturing titanium dioxide, which is used to make cars, paper and other items appear whiter.

NEW PATENT AND TRADEMARK COMPLAINTS AGAINST CHINESE, HONG KONG AND TAIWAN COMPANIES

On November 4, 2015, SATA GmbH & Co. KG, a German corporation, filed a counterfeit trademark case against Zhejiang Refine Wufu Airt Tools Co., Ltd. and Prona Tools Inc. COUNTERFEIT SPRAY PAINT GUNS

On November 23, 2015, Penn Engineering & Manufacturing Corp. filed, a patent, trademark infringement and counterfeit case against Pemco Hardware, Inc., Dongguan Fenggang Pemco Hardware Factory, and Shenzhen Pemco Fastening Systems :Co., Ltd. PENN DONGGUAN

On December 3, 2015, Fellowship Filtering Technologies filed a patent case against Alibaba and Taobao Holding Ltd. and other Alibaba and Taobao companies. ALIBABA PATENT CASE

PRODUCTS LIABILITY CASES

On November 9, 2015, Neoteric Solution Inc. d/b/a Wowparts filed a products liability case against batteries supplied by Dongguan Hosowell Technology Co., Ltd, and Hosowell (HK) Technology Co., Ltd.DONGGUAN HOUSEWELL

On November 12, 2015, Momo Ren and Miao Xin Hu filed a class action products liability case for misbranding egg roll packages against Domega NY International Ltd., Dongguan City Tongxin Food Co., Ltd. and Net A Generation Food Stuffs Co., Ltd. EGG ROLL CASE

On November 23, 2015, Stephen and Diane Brooke filed a class action products liability case in the drywall area against The State-Owned Assets Supervision and Administration Commission of the State Council; Taishan Gypsum Co., Ltd. f/k/a Shandong Taihe Dongxin Co., Ltd.; Tai’an Taishan Plasterboard Co., Ltd.; Beijing New Building Materials Public Limited Co.; China National Building Material Co., Ltd.; Beijing New Building Materials (Group) Co., Ltd.; and China National Building Materials Group Corporation. BROOKE TAISHAN SAC

ANTITRUST

There have been developments in the antitrust area.

CHINA ANTI-MONOPOLY CASES

T&D NOVEMBER AND DECEMBER REPORT

In December and January T&D sent us their attached November and December reports on Chinese competition law. T&D Monthly Antitrust Report of November 2015 T&D Monthly Antitrust Report of December 2015

In early January 2016, T&D also sent us the latest attached draft translated into English of IPR Anti-monopoly Guideline from the National Development and Reform Commission of China (NDRC) released on the last day of 2015, i.e. December 31, 2015. IPR Guideline (draft) 20151231-EN

SECURITIES

FOREIGN CORRUPT PRACTICES ACT

Recently, Dorsey& Whitney LLP issued its attached December 2015 Anti-Corruption Digest,AntiCorruptionDigestDec2015. The Digest states with regards to China:

China: Setback in the Anti-Corruption Campaign

It has been reported that President Xi Jinping’s ongoing anti-corruption campaign has suffered a setback after a prominent official of the inspection team in charge of the government’s anti-corruption efforts, Liu Xiangdong, was removed from his post after allegedly being in possession of more than $31 million (£20 million) in cash.

Mr. Liu was accused of “violating inspection rules and leaking related secrets” and accepting large bribes. He was also stripped of his Communist Party membership and removed from his position, the Central Commission for Discipline Inspection, the party’s top anti- corruption committee, said in a statement on its website.

China: Corruption in the Education Sector

China’s anti-corruption campaign has already touched many of the country’s sectors and has now extended to the education sector with a number of officials at the Communication University of China being targeted.

The president of the university, Su Wuzhi, was reportedly removed from his post for having an office that was “severely beyond the official standards, using university funds to hold banquets in public venues and putting gifts sent to the university on display in his own office without registering them.”

Lv Zhisheng, the vice president of the university, was also removed from office for allegedly failing to enforce frugality rules, leading to “chaos in financial management” of the institution, such as expenditures in “fancy cars” which exceeded budgets.

An official announcement from the Education Ministry is said to have called for increased monitoring of the education sector to ensure that “the high aims” of the party were upheld.

SECURITIES COMPLAINTS

On November 24, 2015, the Securities and Exchange Commission filed an insider trading case against two Chinese individuals, Yue Han and Wei Han, who presently reside in China. SEC VERSUS HAN

On November 24, 2015, Amy Liu and a number of individuals filed a class action securities case for fraud against China North East Petroleum Holdings Ltd. (“CNEP”). Defendant CNEP is a Nevada corporation with its sole asset being ownership of Song Yrun North East Petroleum Technical Services Co., Ltd, a subsidiary operating in China. On September 5, 2013 CNEP transferred all CNEP assets and all CNEP liabilities to Ju Guizhi, a CNEP director and mother of CNEP CEO Wang Hongiun, for the purpose of effecting a merger into CLP Huaxing Equity Changchun City Investment Limited (“CLP”), a limited liability chinese corporation majority owned and controlled by Ju Guizhi and Wang Hongiun, NEVEDA SHAREHOLDERS SUIT.

On December 10, 2015, Shouming Zhang, a Chinese individual, filed the attached fraud case against several US companies and a Chinese individual alleging three Los Angeles-area companies and an attorney of swindling her into investing in an $8 million business deal with promises that she would obtain an EB-5 visa, CHINA NATIONAL COMPLAINT EB5.

Shoumin Zhang — whose visa application was denied — accuses Arcadia, California-based Americana One LLC of committing fraud and breach of contract by luring her into paying $500,000 for the supposed renovation of a commercial building. Zhang says that after she discovered the $8 million investment was a fraud, she visited the U.S. to personally ask AFRC and Americana One to seek a refund of her money.

Through the Immigrant Investor Pilot Program, the U.S. government offers EB-5 visas to foreigners who make certain business investments in the country. A website for AFRC offers consultations for the program, which allegedly requires only $500,000 of investment in exchange for permanent resident status in the U.S.

On December 14, 2015 Sally Mogle filed a class action securities case against Mattson Technology, Inc., Beijing E-Town Dragon Semiconductor Industry Investment Center and Dragon Acquisition Sub, Inc. and a number of individuals. BLOCK SEMICONDUCTOR ACQUISITION

On December 22, 2015, Philip Durgin filed a class action securities case against Mattson Technology, Inc., Beijing E-Town Dragon Semiconductor Industry Investment Center and Dragon Acquisition Sub, Inc. and a number of individuals. BEIJING DRAGON

If you have any questions about these cases or about the US trade policy, trade adjustment assistance, customs, 337, patent, US/China antitrust or securities law in general, please feel free to contact me.

Best regards,

Bill Perry

 

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