US CHINA TRADE WAR–TRADE, TRADE ADJUSTMENT, 337/IP, PRODUCTS LIABILITY

Lotus Garden Reflection Summer Palace Beijing, China“TRADE IS A TWO WAY STREET”

“PROTECTIONISM BECOMES DESTRUCTIONISM; IT COSTS JOBS”

PRESIDENT RONALD REAGAN, JUNE 28, 1986

US CHINA TRADE WAR NEWSLETTER JANUARY 11, 2015

Dear Friends,

As you may know, the blog posts are getting longer and longer as more trade and other actions take place against China. Because of the length, I, therefore, am breaking this post into two parts. This first post covers Trade, Customs, 337/IP and Products Liability.  The second post will cover FDA, Antitrust and Securities law.

On January 21st I gave a speech at the Brooklyn Law School on US China Trade Disputes.  Attached is a copy of the PowerPoint for the speech. BROOKLYN US CHINA TRADE POWERPOINT  Set forth is a link to Phonex Television, which covered the speech, http://v.ifeng.com/news/finance/201501/0166aceb-5bc1-48d8-a2f0-109a495aa914.shtml.  Phoenix Television has an estimated audience of 300 million people, and broadcasts in the PRC, Hong Kong, US, and other countries where there are Chinese communities.  It is the largest private Chinese-language broadcaster in the world.  In addition, the China Daily also covered the speech.  See http://usa.chinadaily.com.cn/world/2015-01/23/content_19386984.htm.

On January 21st, a major antidumping and countervailing duty case was filed against Uncoated Office Paper from China.  Attached is a copy of a short form of the petition along with a Wall Street Journal Article quoting me about the new petition.  The Next Trade Fight Office Paper – WSJ OFFICE PAPER CHINA BRAZIL PETITION

Finally, on January 22nd, Commerce announced its preliminary antidumping determination in the Tires from China case.  Attached is the Commerce Department factsheet.  TIRES AD PRELIM  The antidumping rates are from 19.17 to 36.26% with separate rates companies getting 27.72%.  The China wide rate is 87.99%.

The big problem with the Preliminary Determination is that except for the mandatory respondents, all the rest of the Chinese companies were hit with critical circumstances exposing US importers to millions of dollars in retroactive liability covering imports going back 90 days prior to the preliminary determination.

The only way to get rid of retroactive liability is to fight the case at the US International Trade Commission in the final injury case.  In the Solar Cells case on behalf of three importers I fought critical circumstances at the ITC and was able to eliminate close to $100 million in retroactive liability for US importers.  But it took a fight at the ITC to win the case as we won on a 4-2 vote at the ITC.  If the Commission had gone 3-3, we would have lost the argument.

If anyone has an interest in the Uncoated Paper case or the ITC investigation in the Tires case, please feel free to contact me.

NEWSLETTER

There have been major developments in the Solar Cells, trade, trade politics and trade, trade adjustment assistance, 337/IP, and Products Liability areas.

TRADE –– SOLAR PRODUCTS AND SOLAR CELLS CASES

SOLAR PRODUCTS

On December 16, 2014, Commerce issued its final determination in the Solar Products case. The Mandatory Respondents in the China case received rates ranging from 26.71% for Trina to 78.42% for Jinko and the Separate rate companies received rates of 52%, with the rest of China receiving an antidumping rate of 165.04%.

In addition, the Countervailing duty rates ranged from 27.64 to 49.79% with the all other rate being 38.72%.

Commerce also expanded the scope in the Chinese case to include all Chinese panels and modules with third country solar cells in them. The Fact Sheet, Federal Register notice and Issues and Decision Memos are attached.  CVD Solar Products I&D Memo-12-15-14 CVD Solar Products Final Determination-12-15-14 Certain Crystalline Silicon Photovoltaic Products Final Factsheet AD Solar Products I&D Memo-12-15-14 AD Solar Products Final Determination-12-17-14

The Taiwan rates are from 11.45 to 27.55% with the rest of Taiwan receiving a 19.5% rate.

On December 8, 2014, at the US International Trade Commission hearing on the injury case in the Solar Products case, in the attached testimony, WYDEN ACTUAL SPEECH SOLAR CELLS, Senator Wyden stated:

“In my role as Chairman of the Senate Finance Committee, I work very hard to make sure that trade benefits U.S. workers and companies. And a big part of my job is helping make sure that trade laws are enforced and our trading partners play by the rules.

The solar industry is an anchor of Oregon’s manufacturing base and is a central driver of Oregon’s innovation economy. It supports high skill, high wage jobs that are critical to helping attract investment and new economic opportunities for the 21st century economy.

Yet the solar industry has been under siege by its Chinese competitors for the last five years. It isn’t that American solar can’t compete; it is because China isn’t playing by the rules.

Chinese solar producers were bankrolled by the Chinese government. So they overproduced and dumped solar panels into the U.S. market at prices that were below the cost of production.

China viewed Solar World as such a threat, and these jobs as so strategically important, they used military computer hackers to steal sensitive documents from the company, according to charges filed by the Justice Department.

In short, China cheated and Oregon workers and families suffered. Jobs were lost, capacity diminished, and opportunities were drying up.

When I visited Solar World three years ago, I sounded the alarm. I said that China was taking America’s manufacturing jobs and the trade laws needed to be enforced.

After its own thorough investigation, this Commission found unanimously just two years ago that Chinese companies were injuring our industry by inundating the U.S. market with dumped and subsidized solar products. Trade remedies were imposed. I am grateful to this Commission for its efforts in the original investigation to redress unfair solar trade.

The trade laws worked, or so it seemed. But even while the first case was going on, the Chinese producers switched to a different tactic — keep dumping and subsidizing, but source non-Chinese cells through Taiwan and elsewhere to avoid paying the duties. Dumped and subsidized imports quickly returned, this time through the Taiwan loophole. The hard fought relief that the solar industry hoped to get from the original investigation was in jeopardy, and its fragile recovery in doubt.

The domestic industry was forced to defend itself again, filing the trade case that you are reviewing today. And this time, with the loophole closed, some improvement has started. Prices are no longer in free fall and solar companies like SolarWorld are starting to rehire for jobs that had once been lost. Just last month back in Oregon, I highlighted the role of your investigations in sparking hope that the industry might finally climb back from the brink.

I am back today to ask that this Commission secure the integrity of its original findings and conclude that Chinese and Taiwanese unfair trade has resulted in material injury and threatens additional material injury to U.S. producers, including those in Oregon. A strong determination from the Commission, coupled with antidumping and countervailing duties covering the full scope of unfair trade, will ensure the growth and resurgence of the domestic industry.

U.S. innovation and efficiency started the world-wide growth of solar and will continue to fuel that growth so long as unfair trade practices are fully addressed. Let us not allow the innovation economy to be undermined by innovative cheating on trade. Trade enforcement must keep pace with the times.

This Commission plays a critical role in ensuring that the trade rules are enforced as intended, that unfair trade is checked, and that American jobs and workers can compete on a level playing field. I again thank you for all of your hard work on this matter and urge you to fairly look at the facts and circumstances in this case, and apply the nation’s trade laws accordingly, so that the American solar industry can finally obtain lasting relief that it so urgently needs.”

Petitioners’ handouts from the ITC hearing are attached.  WILEY REIN SPEECH ITC KAPLAN ITC SPEECH

SOLAR CELLS

On December 31, 2014, the Commerce Department issued its preliminary determination in the first antidumping review investigation in the Solar Cells case. The Antidumping rates fell to 1.82% for Yingli Energy (China) Company (“Yingli”), 1.82% for separate rates companies and 238.56% for all other companies.

The reason for this low rate is that the Commerce Department refused to give a separate antidumping rate to one of the largest Chinese solar producer/exporter—Wuxi Suntech. As stated in prior newsletters, the Department is cracking down and making it much harder for Chinese companies with state ownership to obtain separate dumping rates. As the Department stated in its decision in the preliminary Solar Cells review investigation:

“we have concluded that where a government entity holds a majority ownership share, either directly or indirectly, in the respondent exporter, the majority ownership holding in and of itself means that the government exercises or has the potential to exercise control over the company’s operations generally, which may include control over, for example, the selection of management, a key factor in determining whether a company has sufficient independence in its export activities to merit a separate rate. Consistent with normal business practices, we would expect any majority shareholder, including a government, to have the ability to control, and an interest in controlling, the operations of the company, including the selection of management and the profitability of the company. Accordingly, we have considered the level of government ownership where necessary. . . .

Wuxi Sunshine, an exporter and company in the Wuxi Suntech Single Entity, reported that two of its three shareholders are state-owned companies. The business licenses of these two companies support Wuxi Sunshine’s assertions that these two shareholders are state-owned companies. The government of the People’s Republic of China (“GOC”) indirectly, through these two shareholders, owned a significant percentage of Wuxi Sunshine during the POR.

In this case, we preliminarily determine that the GOC, through its significant ownership interest in Wuxi Sunshine, is in a position to potentially control Wuxi Sunshine’s and therefore, the collapsed entities’ export activities. Moreover, we find the potential to control the collapsed entities’ export activities is further evidenced through the intertwined operations of the companies in the single entity. Because of the level of government ownership in Wuxi Sunshine, and the control or the potential to exercise control that such ownership establishes, we preliminarily conclude that Wuxi Sunshine, and thus the Wuxi Suntech Single Entity, does not satisfy the criteria demonstrating an absence of de facto government control over export activities. Consequently, we preliminarily determine that the Wuxi Suntech Single Entity is ineligible for a separate rate.”

Because of the fact that Wuxi Suntech was refused a separate rate, its new rate is the China Wide rate of 238.56% on its imports.

The Chinese separate rate companies were then given the lower antidumping rate of Yingli.

On the Countervailing duty side, Commerce issued preliminary rates ranging from 8.63 to 22.73% with 15.68% being assigned to all the other companies covered by the review.  The Federal Register notices and Decision Memos are attached.  AD Solar Panels 12-13 AR Prelim Results-12-31-14 CVD Solar Cells 12-12 AR Prelim Decision Memo-12-31-14 CVD Solar Cells Prelim Results- 12-31-14 AD Solar Cells 12-13 AR Decision Memo for Prelim Results-12-31-14

US CHINA SOLAR NEGOTIATIONS

As mentioned in my last update, on December 12th, USTR Michael Froman acknowledged that Washington and Beijing have held talks about the Solar cases for “some time”, but that no agreement had been reached. There was an opportunity for an Agreement when President Obama was in Beijing for the APEC meeting, but there was no agreement.

A major reason for this failure is because Solar World Americas, the petitioner in the U.S. trade remedy cases, stated that it could not accept the parameters that Chinese producers were willing to offer, and the U.S. government was unwilling to push the company to give ground. Knowledgeable sources have said that the floor price is the key sticking point.

From the Chinese companies’ point of view, the Commerce Department does not give good deals in antidumping and countervailing duty cases and thus it is very hard for the Chinese government to agree on a floor price, much higher than the Chinese export price, as the basis for any agreement.

The bottom line is that the Solar Products case will go to Antidumping and Countervailing Duty order, and any deal to succeed would have to be extremely unique, such as the US Canadian Lumber Agreement. The chance of such an agreement is probably small.

In addition, the Canadian government initiated a new antidumping and countervailing duty investigation against Solar Modules and Panels from China. The Complaint and Announcement are attached.   CANADIAN SOLAR COMPLAINT CANADIAN SOLAR ANNOUNCEMENT

Chinese solar cells and panels appear to be on the same trade path as other trade cases against China, as Europe, the US, Australia, India and now Canada have brought antidumping and countervailing duty cases against solar products from China. Many countries may soon block Chinese solar cells and panels out of their market.

IMPACT OF SOLAR CASE ON US INDUSTRY

On December 24, 2014, the China Daily published an article entitled “Commerce decision said to hurt US solar makers”. In the article, the China Daily states:

“US solar manufacturers are already feeling the impact of the latest US Commerce Department decision to levy tariffs on Chinese solar exports, according to the Coalition for Affordable Solar Energy.

Commerce’s decision to impose tariffs on solar modules from China will “undercut the growth of American solar jobs and hurt our domestic solar industry,” said Jigar Shah, president of the Coalition for Affordable Solar Energy (CASE), an organization that opposes the original petition filed by Solar World that led to the Commerce decision.

Since the decision, manufacturers like Georgia-based Suniva and Michigan-based Hemlock Semiconductor have been hurt, the company said in a Dec 17 statement. Hemlock Semiconductor said last week that it would close its $1.2 billion Clarksville, Tennessee, plant due to “ongoing challenges presented by global trade disputes,” according to the statement. The facility was never operational, but the closing would affect about 50 employees.

“As difficult as this is, the continued market adversity and complex political conditions have left no economically viable options for Hemlock Semiconductor to operate the site,” said Denise Beachy, president of Hemlock Semiconductor, in the release. “It is unfortunate for both the company and the community that these conditions have forced us to take this action.”

 SENATOR BROWN PROPOSES TOUGHER ANTIDUMPING AND COUNTERVAILING DUTY LAW THAT MAY VIOLATE WTO AGREEMENT AND WILL INJURE US IMPORTERS

On December 10, 2014, Democratic Senator Sherrod Brown introduced the attached legislation, SHERROD BROWN BILL, The Leveling the Playing Field Act, to amend the US antidumping and countervailing duty laws to make them tougher. Senator Brown wants to overturn court decisions that curtail the Commerce Department’s authority in using all facts available to punish Chinese exporters and US importers and also to make it harder for China to become a market economy country. Senator Brown stated in the attached press release, SHERROD BROWN PRESS RELEASE:

“There are encouraging signs of a comeback in American manufacturing, but that progress could be lost if we don’t have strong trade laws to level the playing field. Foreign companies who don’t play by the rules are actively trying to undermine the effectiveness of our trade laws. This bill would restore strength to our trade laws and ensure that American companies can compete in a fair marketplace.”

According to the Press Release,

“The Leveling the Playing Field Act restores strength to the AD/CVD statutes. Specifically, the bill:

  • Maintains Commerce’s discretion to use adverse facts available when a mandatory respondent does not cooperate with an investigation and clarifies that the agency is not obligated to determine what a margin would be if the respondent had participated;
  • Increases the number of factors and the length of time the ITC should use to evaluate injury or the threat of injury to U.S. producers to ensure a determination is based on a comprehensive assessment of a sector’s situation;
  • Closes the “new shipper” loophole used by companies to circumvent AD/CVD duties;
  • Increases penalties for failure to provide a country of origin certificate for merchandise covered under AD/CVD orders or for falsifying the information on the certificate;
  • Clarifies that Commerce has the authority to determine whether to include voluntary respondents in an investigation;
  • Clarifies that Commerce does not have to conduct an additional investigation to prove that disregarded product values used in non-market economy investigations are subsidized or dumped if the record already shows the product values to be distorted; and
  • Clarifies existing statutory provisions used to assess whether a country’s non-market economy status should be maintained.”

FACTS AVAILABLE CHANGE

One of the changes Senator Brown proposes making to the US antidumping law is to make it easier for the Commerce Department to use all facts available to punish foreign companies and US importers, where the foreign company does not cooperate to the best of its ability in the investigation. As the bill states in Section 2(d)(1)(B) and (2):

“SUBSIDY RATES AND DUMPING MARGINS IN ADVERSE INFERENCE DETERMINATIONS:

(B) in the case of an antidumping duty proceeding, use— ‘‘(i) a dumping margin based on any individual sale of the subject merchandise calculated with respect to any exporter or producer involved in the proceeding during the investigation or review,

‘‘(ii) an individual weighted average dumping margin calculated with respect to any exporter or producer involved in the proceeding during the investigation or a review

‘‘(iii) any dumping margin alleged in a petition filed under section 732(b) that was relied on by the administering authority to initiate the antidumping duty investigation, or

‘‘(iv) any dumping margin found in another antidumping duty proceeding with respect to a class or kind of merchandise that is the same or similar to and from the same country as subject merchandise involved in the proceeding.

‘‘(2) DISCRETION TO APPLY HIGHEST RATE.—

The administering authority has the discretion under paragraph (1), in selecting from among facts otherwise available, to apply any of the countervailable subsidy rates or dumping margins specified under that paragraph, including the highest such rate or margin.

‘‘(3) NO OBLIGATION TO MAKE CERTAIN ESTIMATES OR ADDRESS CERTAIN CLAIMS.

If the administering authority uses an adverse inference under subsection (b)(1)(A) in selecting among facts 8 otherwise available, the administering authority is not required, for purposes of subsection (c) or for any other purpose— . . . .

‘‘(B) to demonstrate that the countervailable subsidy rate or dumping margin used by the administering authority reflects the commercial reality of the interested party.”

These proposed changes to the law are a direct response to a set of decisions by the Court of International Trade and the Court of Appeals for the Federal Circuit finding that the law requires Commerce when making an all facts available determination to not simply use a presumption. Pursuant to the US antidumping and countervailing duty law, 19 USC 1677e(c), when the Commerce Department uses secondary information because the Chinese company has refused to cooperate or has not provided the information on time to replace the information provided Commerce “shall to the extent practicable, corroborate that information from independent sources that are reasonably at its disposable.” The Courts have interpreted this to mean that the secondary information must be “commercially reasonable”.

Those requirements, in turn, came from the antidumping and countervailing duty law and also from the WTO Antidumping Agreement, which the United States has signed, and states in Annex II, Best Information Available paragraph 7:

“If the authorities have to base their findings, including those with respect to normal value, on information from a secondary source, including the information supplied in the initiation of the investigation [the Petition], they should do so with special circumspection. In such cases, the authorities should, where practicable, check the information from other independent sources at their disposal, such as published price lists, official import statistics, and customs returns, and from the information obtained from other interested parties during the investigation.”

In fact, on December 18, 2014 in the attached United States – Countervailing Duty Measures on Certain Products from China decision, KEY FINDINGS wto2014_3483a FINDINGS AND CONCLUSIONS COMPLETE WTO REPORT, the WTO Appellate Body found the United States in violation of the WTO Agreement with regards to US countervailing duty cases against China on the very issues that Senator Brown wants to change the language of the law. Specifically, one of the WTO’s key findings is:

“Use of facts available: . . .

 The Appellate Body recalled that Article12.7 requires that an investigating authority [Commerce Department] must use those facts available that reasonably replace the missing “necessary” information that an interested party failed to provide. The Appellate Body also reiterated that ascertaining reasonable replacements for the missing information involves a process of reasoning and evaluation on the part of the investigating authority, although the evaluation that is required, and the form it may take, depend on the particular circumstances of a given case, including the nature, quality and amount of the evidence on the record and the particular determinations to be made. With respect to China’s claim of error under Article 11 of the DSU, the Appellate Body found that the Panel failed to address each of the 42 instances of the USDOC’s use of “adverse” facts available challenged by China.”

As the WTO further stated in its determination:

“. . . . Accordingly, the Appellate Body has explained that “there has to be a connection between the ‘necessary information’ that is missing and the particular ‘facts available’ on which a determination under Article 12.7 is based.” Therefore, “an investigating authority must use those ‘facts available’ that ‘reasonably replace the information that an interested party failed to provide’, with a view to arriving at an accurate determination.” The Appellate Body has further explained that “the facts available” refers to those facts that are in the possession of the investigating authority and on its written record. As determinations made under Article 12.7 are to be made on the basis of “the facts available”, “they cannot be made on the basis of non-factual assumptions or speculation.” Furthermore, in reasoning and evaluating which facts available can reasonably replace the missing information, “all substantiated facts on the record must be taken into account” by an investigating authority.”

In addition, in a long series of cases beginning in 1934 with a decision by the Court of Customs and Patent Appeals, the forerunner of the Court of Appeals for the Federal Circuit, C. J. Tower & Sons v. United States, 71 F. 2d 438 (C.C. P. A. 1934), Courts have held that US antidumping and countervailing duty laws are remedial, not penal statutes, and, therefore, respondents are not entitled to full due process of law. As the Court of Customs and Patent Appeals stated:

“[W]e cannot escape the conviction that the expressed purpose of Congress, in the Antidumping Act of 1921, was to impose not a penalty, but an amount of duty sufficient to equalize competitive conditions between the exporter and American industries affected . . . . It follows that the Antidumping Act of 1921 is not repugnant to the provisions of said Amendment V [to the U.S. Constitution], as denying to the importer due process of law . . . .”

C.J. Tower & Sons v. United States, 21 C.C.P.A. 417, 427–28, 71 F.2d 438, 445–46 (1934).

Federal Courts have found that the antidumping and countervailing duty laws are not penal statutes but remedial statutes. If the US antidumping and countervailing duty laws were truly penal statutes, US importers and Chinese exporters would be entitled to full due process of law under the US Administrative Procedure Act, including the right to a full trial proceeding, the right to cross examine witnesses and a decision by a neutral Administrative Law Judge. Chinese Companies and US importers, however, have no such right and that is why decisions are made by the US Commerce Department, which can take a prosecutorial approach to these cases.

In other words, in the face of WTO determinations and similar decisions of the Court of International Trade and the Court of Appeals for the Federal Circuit, Senator Brown’s amendments are to eliminate the requirement that any AFA determination reflect commercial reality and be a “reasonable” replacement for the missing information….”

The WTO Appellate Body went on to state:

“We also note that the instances challenged by China, and with respect to which it requests that we complete the legal analysis, include several instances wherein the USDOC [Commerce Department] relied on “adverse” facts available in support of its public body, benefit, specificity and export restraints determinations. The Panel found, however, with respect to China’s claim under Article 1.1(a)(1) of the SCM Agreement, that “in the 12 countervailing duty investigations challenged by China the United States acted inconsistently with Article 1.1(a)(1) of the SCM Agreement when the USDOC found that SOEs [State Owned Enterprises] public bodies based solely on the grounds that these enterprises were (majority) owned, or otherwise controlled, by the Government of China.” The Panel also found that the USDOC acted inconsistently with the obligations of the United States under Article 2.1(c) of the SCM Agreement in making its specificity determinations in the context of these investigations. The United States does not challenge these findings on appeal.

Nor does the United States challenge the Panel’s finding that “the USDOC’s initiation of two countervailing duty investigations [–i.e. Magnesia Bricks and Seamless Pipe–] in respect of certain export restraints is inconsistent with Article 11.3 of the SCM Agreement.” These findings therefore stand. Furthermore, we have found above that the USDOC acted inconsistently with the obligations of the United States under Article 14(d) and Article 1.1(b) of the SCM Agreement in making its benefit determinations in the context of the investigations in OCTG, Line Pipe, Pressure Pipe, and Solar Panels . . . . . .”

In its conclusion, the WTO determines:

“with respect to the Panel’s findings, in paragraphs 7.325 and 8.1.vii of the Panel Report, in respect of the [Commerce Department’s] USDOC’s use of “adverse” facts available in the Pressure Pipe, Line Pipe, Citric Acid, Lawn Groomers, OCTG, Wire Strand, Magnesia Bricks, Seamless Pipe, Print Graphics, Drill Pipe, Aluminum Extrusions, Steel Cylinders, and Solar Panels countervailing duty investigations, reverses the Panel’s finding that China had not established that the USDOC acted inconsistently with the obligations of the United States under Article 12.7 of the SCM Agreement by not relying on facts available on the record; and finds that it is unable to complete the legal analysis in this regard.”

In light of the many arguments by US trade officials arguing that China is violating the WTO agreement, the question must be asked: which country is violating the WTO Agreement now?

More importantly, one should understand that even when Commerce has been reversed by the Courts after Commerce has applied all facts available; this does not mean that the Chinese or any foreign company can begin shipping to the United States at a low rate again. The All Facts Available (“AFA”) rate that Commerce determines is always bad and has the effect of often shutting the foreign company out of the US market for years. The real impact of the AFA rate is not on the foreign exporter. It is on the US importer, the US company, which imports products into the US, and can be exposed to retroactive liability for antidumping rates as high as 100, 200, 300 or even more than 600% and millions, if not 10s of millions, of dollars in retroactive antidumping and/or countervailing duties.

The innocent party in these cases is the US importer, which is often an independent actor with no relationship to the Chinese exporter. The importer often has no control over whether or if the foreign/Chinese company responds to the antidumping or countervailing duty investigation or how the Chinese company responds. The reality is that once the US importer imports under an antidumping and/or countervailing duty order, the US importer is exposed to millions, if not 10s of millions, of dollars in retroactive liability and bankruptcy. As one importer told me, importing under an antidumping order is like importing cancer.

MARKET ECONOMY CHANGE

In addition, Senator Brown’s bill proposes to amend the US Antidumping and Countervailing Duty Law to provide an additional condition before China can be considered a market economy country. That provision specifically provides:

 SEC. 8. CLARIFICATION OF FACTORS FOR DETERMINING WHETHER A COUNTRY IS A NONMARKET ECONOMY COUNTRY.

Section 771(18)(B) of the Tariff Act of 1930 (19 U.S.C. 1677(18)(B)) is amended. . . (3) by inserting after clause (v) the following:

‘‘(vi) the extent to which the government of the foreign country enforces and administers its laws, legal and administrative procedures, and other policies in an open and transparent manner that affords all parties, whether foreign or domestic, due process and equal and non-discriminatory treatment under those laws, procedures, and policies . . . .

But the most discriminatory law may be the US nonmarket economy antidumping law, which refuses to treat China as any other country in the World, including Iran. Pursuant to US antidumping law, since China is a nonmarket economy country, Commerce refuses to use actual prices and costs in China to determine whether a Chinese company is dumping.   Dumping is defined as selling at prices in the United States below prices in the home market or below the fully allocated cost of production.  Since Commerce refuses to use actual costs and prices to determine whether the company is dumping, Commerce constructs a cost for the Chinese company using consumption factor information from China and “surrogate” values from import statistics in 5 to 10 different surrogate countries. Because of the surrogate values from surrogate countries, it is impossible for the Chinese company, never mind the US importer, to know whether the Chinese company is dumping.

The United States, however, 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:

 “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.

But where did the 15 years come from? It came from a demand by the United States in the US-China WTO Accession Agreement, so in accordance with a Treaty signed by the United States, on or after December 11, 2016 Commerce may no longer use a non-market economy methodology that is not based on a strict comparison with domestic prices or costs in China.

But the United States’ apparent position is that since the 15 years is in a Treaty, which was demanded by the United States, and not the US Antidumping and Countervailing Duty law, the United States does not have to follow the demand, which it made.

So what happens when the United States does not enforce and administer its “laws, legal and administrative procedures, and other policies in an open and transparent manner that affords all parties, whether foreign or domestic, due process and equal and non-discriminatory treatment under those laws, procedures, and policies”? What happens when the United States itself violates the WTO agreement?

 IMPORT ALLIANCE FOR AMERICA

This is why the Import Alliance for America is so important for US importers, US end user companies and also Chinese companies. The real targets of antidumping and countervailing duty laws are not Chinese companies. The real targets are US companies, which import products into the United States from China.

As mentioned in prior newsletters, we are working with APCO, a well-known lobbying/government relations firm in Washington DC, on establishing a US importers/end users lobbying coalition to lobby against the expansion of US China Trade War and the antidumping and countervailing duty laws against China for the benefit of US companies.

On September 18, 2013, ten US Importers agreed to form the Import Alliance for America. The objective of the Coalition will be to educate the US Congress and Administration on the damaging effects of the US China trade war, especially US antidumping and countervailing duty laws, on US importers and US downstream industries.

Recently, the Import Alliance established its own website. See http://www.importallianceforamerica.com.

We will be targeting two major issues—Working for market economy treatment for China in 2016 as provided in the US China WTO Agreement and working against retroactive liability for US importers. The United States is the only country that has retroactive liability for its importers in antidumping and countervailing duty cases.

The key point of our arguments is that these changes in the US antidumping and countervailing duty laws are to help US companies, especially US importers and downstream industries. We will also be advocating for a public interest test in antidumping and countervailing duty cases and standing for US end user companies.

Congressmen have agreed to meet importers to listen to their grievances regarding the US antidumping and countervailing duty laws. In addition to contacting US importers, we are now contacting many Chinese companies to ask them to contact their US import companies to see if they are interested in participating in the Alliance.

At the present time, Commerce takes the position that it will not make China a market economy country in 2016 as required by the WTO Accession Agreement because the 15 years is in a treaty and not in the US antidumping and countervailing duty law. Changes to the US antidumping and countervailing duty law against China can only happen because of a push by US importers and end user companies. In US politics, only squeaky wheels get the grease.

On August 7, 2014, we held an organizational meeting in Beijing, China at the headquarters of China Ocean Shipping Company (“COSCO”) with interested Chambers of Commerce and Chinese companies to explain the project in more detail and to seek help in contacting US importers about the Alliance.

We spoke to about 40 attendees, including attendees from the legal departments of the top 10 chambers of commerce, including Chemicals, Machinery and Electronics, Light Industrial Products, and Food, and the Steel, Wood Products and Hydraulics and Pneumatics & Seals Association.

In addition to describing the Import Alliance and the issues regarding 2016 in the US China Accession Agreement, we also discussed the US China Trade War in general. Introductory videos for the Organizational Meeting from Cal Scott of Polder Inc., the President of the Import Alliance, can be found at the following link https://vimeo.com/103556227 and for former Congressmen Don Bonker and Cliff Stearns of APCO can be found at the following link https://vimeo.com/103556226. The PowerPoint we used to describe the Import Alliance, the specific provisions in the US China WTO Agreement and the Trade War in general is attached FINAL WEB BEIJING IMPORT ALLIANCE POWERPOINT.

TRADE POLITICS AND TRADE AGREEMENTS

ONE ISSUE MOVING IN CONGRESS NEXT YEAR—TRADE

As stated in the last post, the November 4th Election and the Republican wave will have a dramatic impact on trade policy in Washington DC in 2015. On December 17, 2014, the last House of Representatives Race was decided in Arizona, and the Republican candidate won. In the new 2015 Congress, Republicans control the House 247 Republicans to 118 Democrats, which is the largest Republican majority in 87 years. In the Senate, with the defeat of the incumbent Democratic Senator Mary Landrieu in Louisiana by the Republican candidate, the Republicans control the Senate 54 to 46. In the Senate, however, Republicans will need Democratic votes to get over a 60 vote barrier created by the Filibuster Rule and also more Democratic votes if they want to overturn a Presidential veto.

On December 3rd in a speech to the Business Round Table in New York, President Obama agreed to work with Congressional leaders, including Republican leaders, to pass Trade Promotion Authority and the trade agreements. President Obama also stated that he needs to gain support from labor unions and environmental groups, which have been opposed to the trade agreements.

As President Obama stated, “I’m going to be talking to McConnell … and Boehner, Reid and Pelosi, and making a strong case on the merits as to why this has to get done.” The President further stated, “We have to be able to talk directly to the public about why trade is good for America, good for American businesses and good for American workers, and we have to dispel some of the myths.”

But the President first has to deal with his own Democratic party,

“Part of the argument that I’m making to Democrats is, don’t fight the last war. If you want to … locate in a low-wage country, with low labor standards and low environmental standards, there hasn’t been that much preventing you from doing so.”

“Ironically, if we are able to get Trans-Pacific Partnership done, then we’re actually forcing some countries to boost their labor standards, boost their environmental standards, boost transparency, reduce corruption, increase intellectual property protection. Those who oppose these trade deals, ironically, are accepting a status quo that is more damaging to American workers.”

Sen. Orrin Hatch, R-Utah, who is the new Chairman of the Senate Finance Committee, welcomed the Presidents statement, saying, “If past experience has taught us anything, it’s that we need presidential leadership to get TPA over the finish line. The president’s influence, particularly among members of his own party, will be a vital component to congressional efforts.”

US CHINA TRADE AGREEMENTS

 INTERNATIONAL TECHNOLOGY AGREEMENT (“ITA”) FALLS APART IN GENEVA

After President Obama’s “successful” APEC trip to Beijing in November, the hopes for an International Technology Agreement (“ITA”) were high, but the hopes disappeared when the Agreement came back to Geneva

With regards to ITA, in Beijing at the APEC meeting, the US government announced on November 10th that it had convinced China to eliminate tariffs on tech goods like advanced semiconductors and medical devices. The Chinese government agreed to U.S. demands to eventually eliminate tariffs on advanced semiconductors known as MCOs, magnetic resonance imaging (MRI) machines, and high-tech testing equipment, but the deal did not include tariff elimination on flat-panel displays.

But the WTO talks feel apart on December 12th because China and South Korea failed to reach agreement over liquid crystal display screens after eight days of negotiations. China wanted all countries to accept the same terms that it negotiated bilaterally last month with the U.S., which did not include LCD screens, while South Korea wanted them in.

The core group negotiating the updated ITA includes the EU, U.S., Japan, China, South Korea, Australia, Switzerland, Norway, New Zealand, Singapore, Taipei, Malaysia, Thailand, the Philippines, Hong Kong, Costa Rica, Israel, Croatia, Turkey, Bahrain, Montenegro, Iceland, El Salvador, Guatemala, Colombia, Dominican Republic and Albania. A fact sheet circulated by the White House noted that the expansion of the ITA pact would eventually eliminate tariffs on roughly $1 trillion in annual global sales of information technology products and boost the annual global GDP by an estimated $190 billion.

On December 12th the USTR issued the attached statement by US WTO Ambassador Michael Punke, USTR STATE ITA FAILURE, which states in part:

“The United States is grateful for all the hard work done this week to bring us this close to an ITA expansion agreement. We are gratified that the U.S.-China breakthrough last month allowed us all to get back to the table and that so much of the US-China breakthrough agreement has been embraced by our plurilateral process. Indeed that bilateral breakthrough is the pillar upon which a potential plurilateral deal rests. We appreciate this was widely recognized by participants. . . .

Through the consultations over the last few weeks, it became clear that certain Members had important interests that were not fully captured by the bilateral agreement. And those members came a long way toward accepting 99% of that agreement, but asked that small adjustments be made in order to be able to accept the deal. . . .

Like everyone in the room, we are disappointed not to be celebrating a deal this week. We missed a big opportunity. All of us will need to go back to our capitals and reflect hard on next steps.”

TRADE NEGOTIATIONS—TPA, TPP, TTIP/TA AND BALI/DOHA ROUND

 TPA FACED HEADWINDS IN CONGRESS BUT THEN THE ELECTION HAPPENED

As mentioned in past blog posts, in the trade world, the most important developments may be the Trans Pacific Partnership (TPP), Trans-Atlantic (TA)/ the Transatlantic Trade and Investment Partnership or TTIP negotiations and the WTO.  The TPP is a free trade agreement being negotiated by officials from the U.S., Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. These trade negotiations could have a major impact on China trade, as trade issues become a focal point in Congress and many Senators and Congressmen become more and more protectionist.

This has been a problem because the protectionism is coming from the Democratic side of the aisle. Democratic Senators and Congressmen are supported by labor unions. Although Democratic Congressmen have expressed interest in the TPP, to date, President Obama cannot get one Democratic Congressman in the House of Representatives to support Trade Promotion Authority (“TPA”) in Congress. Without bipartisan/Democratic support for these Trade Agreements, Republicans will not go out on a limb to support President Obama and risk being shot at by the Democrats during the elections as soft on trade.

As mentioned in prior blog posts, on January 29, 2014, the day after President Obama pushed the TPA in his State of the Union speech in Congress, Senate Majority leader Harry Reid stated that the TPA bill would not be introduced on the Senate Floor.

But then came the November 4th Republican wave election changing Trade Politics dramatically in Washington DC. Elections have consequences and in 2015 Republicans have taken the Senate and increased their numbers in House.

To summarize, on January 9, 2014, the Bipartisan Congressional Trade Priorities Act of 2014, which is posted on my blog in the January 2014 post, was introduced into Congress. The TPA bill gives the Administration, USTR and the President, Trade Promotion Authority or Fast Track Authority so that if and when USTR negotiates a trade deal in the TPP or the Trans-Atlantic negotiations, the Agreement will get an up or down vote in the US Congress with no amendments.

Under the US Constitution, Congress, not the President has the power to regulate trade with foreign countries. Article 1, Section 8, Clause 3, of the Constitution empowers Congress “to regulate Commerce with foreign nations” Thus to negotiate a trade agreement, the Congress gives the Executive Branch, the Administration/The President and United States Trade Representative (“USTR”), the Power to negotiate trade deals.

Because trade deals are negotiated with the foreign countries, the only way to make the system work is that under the TPA law when the Trade Agreement is negotiated, the Congress will agree to have an up or down vote on the entire Agreement and no amendments to the Agreement that has already been negotiated will be allowed.

On July 17th, all Republican members of the House Ways and Means Committee sent a letter to USTR Froman, which is posted on my blog, urging the Administration to build support for Trade Promotion Authority (TPA) and directing the Administration not to complete the Trans-Pacific Partnership (TPP) before TPA is enacted into law.

On November 4th, the Republican Wave Election took place.

Now the story continues . . . .

As indicated above, on December 3, 2014 at a Business Roundtable Meeting in New York City President Obama vowed to continue working with Congressional leaders on the TPA and the TPP deals.

Although there was substantial optimism about the President’s ability to work with the Republican Congress on trade policy, on December 5th Congressman Sander Levin, the top Democrat on the House Ways and Means Committee, continued to express skepticism over the Trans-Pacific Partnership. Congressman Levin told reporters that his many questions on the TPP regarding issues, such as agricultural market access, labor rights and currency manipulation rules, remain unanswered. He called on the Obama administration to give Congress a more prominent role in closing the deal. As Congressman Levin stated,

“I want there to be set up some structure so that there is regular consultation with the committees of jurisdiction as the negotiations ensue so that there is … full discussion of what is in the documents, and of what is being proposed by the administration, and what are the positions of other countries, and what are the likely bottom lines of this administration.”

Although the USTR has been continually briefing Congress on the TPP, Levin claimed that policy amounts to “considerable consultation” without “meaningful involvement” from the legislative branch. Levin stated that the administration’s positions on key areas remain shrouded in mystery. “At this point, can I tell you what is the administration’s position on tobacco? The answer is no. Can I tell you where they are on agriculture? No.”

Levin further stated:

“If you put the focus on TPA when you have so many outstanding issues, essentially what it does is force or stimulate members to say ‘yes’ or ‘no’ to TPP before so many of the outstanding issues have been resolved. So essentially I think it makes it more difficult, not less difficult, to get an effective TPP.”

On December 5, 2014, four Democratic Congressmen sent the attached letter, ACTUAL LETTER DEMS LABOR, to the Obama Administration stating that the Administration should use the TPP negotiation to push for labor reforms regarding the use of child and forced labor, specifically in Vietnam, Mexico, Peru and Malaysia. The four Congressmen/women stated:

December 4, 2014

In May, we wrote to you with 149 of our colleagues calling on you not to pursue the same approach to labor rights in free trade agreements that has failed in past pacts. In response, you noted that our free trade partners have made efforts to improve their labor conditions and that the proposed Trans-Pacific Partnership (TPP) “allows the United States to take a leading role in shaping global trade policy by raising standards, allowing us to make progress toward a global trading system that reflects our core values.”

However, a recent report by the Labor Department’s Bureau of international Labor Affairs (ILAB) disputes that assertion, and we have no indication that U.S. negotiators are taking a new approach to ensure labor rights are protected.

ILAB’s annual List of Goods Produced by Child Labor or Forced Labor report sheds light on some of the worst forms of labor abuses worldwide, and highlights the countries that produce goods using child and forced labor. Vietnam, Mexico, Peru, and Malaysia, one-third of the nations included in the TPP, were all cited for labor abuses in the report.

We are following up with you because we believe it is important that you take action to ensure that real, meaningfully enforceable labor protections are in the TPP, and we request a briefing for Members of Congress to better understand what specific new measures are being developed and what new assurances are being put in place during TPP negotiations.

The report has particularly troubling findings on several TPP member nations. Only four countries globally are cited for forced and child labor in their apparel sector, including Vietnam.

Over the course of the last year of TPP negotiations, electronics products from Malaysia were added to the list of goods produced through forced labor. Malaysia is one of only seven countries in which the Labor Department found worsening child or forced labor conditions in 2014. In addition, the report identified child labor violations in eleven sectors in Mexico- the fifth broadest usage of child labor cited in the report. By comparison, China uses child labor in six sectors.

Free trade agreements with nations that violate international child labor and forced labor standards not only undermine our moral authority, but they also capitalize on the lack of oversight and regulation in developing nations. Here in this country, we have fought hard to protect our workers, yet, our free trade policy undermines those protections by sending American jobs to countries that do not play by the rules. . . .

We have a responsibility to ensure that under no circumstances is it acceptable for children to work in sweatshops to produce the goods we consume. We can and must do better.

It is critically important that we make stronger efforts to end these worker abuses, with the Administration’s ongoing push for trade promotion authority, these ongoing issues must first be addressed.

Reps. Rosa DeLauro, D-Conn., George Miller, D-Calif., Loretta Sanchez, D-Calif., and Mark Pocan, D-Wis.

It should be noted as reported in past blog posts, the United States too uses “forced labor” prison labor to produce products. In fact, the Justice Department’s Business Development Group, Federal Bureau of Prisons, is presently soliciting manufacturing business from various companies. The Federal Bureau of Prisons is presently producing wood flooring and other products in the United States. I have been told that Canada recently stopped exports of wood flooring products from the United States, which were produced with prison labor.

In response to the Congressional letter, President Obama stated that his effort to revive TPA — which has not been in effect since 2007 — will require outreach to labor unions, which have traditionally been skeptical of trade liberalization.

On December 8th, labor unions, environmentalists and other opponents of the Trans-Pacific Partnership on Monday descended on Washington, D.C., to protest the latest round of negotiations, reiterating their claims that the pact will ravage the American workforce and place business interests above those of consumers.

On December 11, 2014 incoming House Ways and Means Trade Subcommittee Chairman Republican Pat Tiberi of Ohio, stated that while Republicans have been pleased with President Barack Obama’s bipartisan approach to a growing slate of trade policy issues next year, the White House will need to step up its engagement to ensure optimal results. In response to President Obama’s Business Roundtable speech, Tiberi stated:

“We are hopeful, but one speech does not provide enough leadership to get all this done. The trade representative is a very good one and we look forward to working with him. But at the end of the day, it’s got to be the President and he is going to have to show leadership and I think he may on this one.”

Tiberi, who has been in the House for 14-years and has served on Ways and Means since 2007, stated that he will do all he can to make sure the president’s bipartisan sentiments trickle down to the members on his panel and throughout the committee, stating:

“I am a big believer in trying to work with the other side. Having the President provide leadership on trade — and it appears as though he may — is pretty exciting with a Republican Senate and a Republican House in what is clearly the best opportunity since the President became President to do something on trade.”

Tiberi further stated:

“I think giving authority to persons within the administration to negotiate in the best interests of the United States is the best way to actually get a trade agreement, because there are a lot of complex issues that go into these negotiations both from our perspective and our potential trading partners’ perspective as well.”

Tiberi also stated that while lawmakers should always urge the administration to be more forthright about its negotiating efforts, the criticisms of trade agreements as job killers are largely misplaced, as those arguments ignore the jobs created by opening export markets and creating new investment opportunities. As Tiberi stated, “If the shoe were on the other foot and I were the U.S. trade representative, I wouldn’t necessarily be offended because I think we could always do a better job on the issue of transparency.”

On December 14th, Prime Minister Abe won reelection in Japan with a landslide, which will give Japan more flexibility in the TTP negotiations.

On January 5, 2015, after the new Congress was sworn in, US Senator Bernie Sanders, an independent that is on the Democratic side, attacked the Obama administration for an “incomprehensible” lack of transparency surrounding the ongoing Trans-Pacific Partnership negotiations and called for the release of the full version of the current TPP text.

In a letter to U.S. Trade Representative Michael Froman, Sanders said it was “troubling” and “unacceptable” that he and other lawmakers have only been able to get a thorough look at the TPP deal through unofficial leaks of various chapters. The Senator further stated:

“It is incomprehensible to me that the leaders of major corporate interests who stand to gain enormous financial benefits from this agreement are actively involved in the writing of the TPP while, at the same time, the elected officials of this country, representing the American people, have little or no knowledge as to what is in it. In my view, this is simply unacceptable.”

Sanders emphasized that Congressional review of the TPP deal text is mandatory because any trade agreement will not be open for amendments if the Administration reaches a deal to renew the president’s expired Trade Promotion Authority this year.

The Senator gave the USTR a deadline of Jan. 16 to provide him with a copy of the full composite text, without redactions, and requested that staff and experts of his choosing also be allowed access to the documents to take notes and “analyze the relevant statutory and economic implications” of the deal.

The USTR has repeatedly stressed that it will publish the TPP text “well before” it is signed to invite further comment from stakeholders. The agency also says it has a longstanding policy of giving members of Congress access to confidential documents on request, but some lawmakers have complained of procedural problems in getting access to the dcouments.

Sanders added that if his request is not fulfilled, he would like a full legal justification for USTR’s refusal and also vowed to file a bill that would mandate the publication of trade negotiating texts at the request of any member of Congress.

The Vermont independent sharply criticized Froman’s office for placing the interests of large multinational corporations over those of U.S. citizens and for gradually chipping away at the legislative branch’s oversight of international trade, stating:

“The Constitution of the United States gives Congress ‘the authority to regulate commerce with foreign nations. That is not my language. That is the Constitution of the United States of America.”

On January 6, 2015, after meeting in Washington D.C., US and Mexican government officials agreed to continue their efforts to finalize the ongoing TPP negotiations as soon as possible. In a Joint Statement the two countries said:

“We have made significant progress over the past year in setting the stage to finalize a high-standard and comprehensive agreement. With the end coming into focus, the United States, Mexico and the other 10 TPP countries are strongly committed to moving the negotiations forward to conclusion as soon as possible. The substantial new opportunities for U.S. and Mexican exporters that the TPP will offer will be enhanced by our work together in the HLED.”

A senior White Official also stated:

“We’re working closely together to conclude the historic Trans-Pacific Partnership trade agreement early this year. The leaders are most likely to focus on the dynamics of the various countries as we’re coming to the end of the negotiations of TPP. We think that there’s a chance to get this done in the relatively near future.”

On January 7, 2015, the AFL-CIO labor union called on the Obama administration to push for far-reaching improvements to Mexico’s labor and human rights regime and raised the possibility of dropping Mexico from the 12-nation Trans-Pacific Partnership talks if those reforms are not swiftly implemented.

AFL-CIO President Richard Trumka stated in a letter to President Obama:

“Mexico must eliminate the corrupt system of labor boards and allow workers to choose their representatives in a democratic manner free from intimidation. As a party to the ongoing Trans-Pacific Partnership negotiations, U.S. negotiators must demand that Mexico implement changes prior to entering into any trade agreement, as current laws are not in compliance with any credible labor chapter. . . .

The U.S. and Mexican government must work cooperatively to ensure that goods made with forced and child labor are not exported into the U.S. market. The Mexican government must vigorously enforce its labor laws in the agricultural sector and step up its efforts to combat child labor — not by criminalizing child workers and their families, but by providing educational opportunities and incentives.”

On January 7, 2015, Republican leaders started moving in both chambers of the U.S. Congress to build the case for renewing TPA indicating that a bill will be introduced in the early part of the year.

Senate Majority Leader Mitch McConnell, R-Ky., stated that talks to reinstate Trade Promotion Authority have been underway for some time and reiterated his belief that trade remains a critical area in which the Republican majority in Congress and President Barack Obama can find common ground, stating:

“We’re in active discussion on … trade promotion authority. It’s an enormous grant of power, obviously, from a Republican Congress to a Democratic president, but that’s how much we believe in trade as an important part of America’s economy.”

But neither McConnell nor Senate Finance Committee Chairman Orrin Hatch, R-Utah, could offer a specific
timetable for the legislation to be introduced, indicating that lawmakers are still ironing out the final details of the bill.

As McConnell further stated, “We think this is an area where we can make progress, and you can look for us to act on TPA,” I can’t give you the exact timing right now, or if I could, I probably wouldn’t yet.”

All of the political gamesmanship between Obama and Congress appears to have disappeared.  A spokesman for House Speaker John Boehner, R-Ohio, on Tuesday issued a statement urging the president to highlight the need for fresh TPA legislation in speech to Michigan auto workers.

Boehner spokesman Cory Fritz stated,

“The president can begin this year with yet another campaign-style event to try and take credit for an economy that Americans know could be doing a lot better, or he can stand up to those in his own political party and begin building a coalition to help boost American exports and job creation,” .

McConnell said he was happy that the president had become a “born-again free trader,” but stressed that Obama would have to weather resistance from traditional Democratic trade opponents if he is to be taken seriously in the quest to reinstate TPA.

“The big challenge for the president is going to be to get his own members to give him the authority to negotiate this deal and to send it up to us. He’s going to have to stand up to the AFL-CIO, he’s going to have to stand up to the political left and his party and help us do something important for the American people in the middle, the moderate center.”

TPP FOR CHINA??

On October 15th, the Peterson Institute for International Economic (”IIE”) released a study touting the benefits of a theoretical free trade agreement between China and the United States, including increased income and export gains, while also acknowledging that such an agreement could lead to 500,000 to 1 million lost U.S. jobs over a 10-year span. The opening chapter as well as an IIE powerpoint are attached.  IIE FREE TRADE AGREEMENT CHINA US CHINA FTA FIRST CHAPTER

On December 3, 2014, former U.S. Trade Representative Carla Hills in comments to the National Foreign Trade Council called for a free trade arrangement between the U.S. and China as a way of easing economic tensions and promoting better trade flows for international supply chains. Hills listed three possible options: bringing China into the Trans-Pacific Partnership (TPP) agreement; negotiating a separate free trade agreement with China; or completing a series of agreements, such as a bilateral investment treaty or through an expanded Information Technology Agreement, which would liberalize U.S-China trade on a sector basis.

Hills, who sits on the Board of the Peterson Institute for International Economics (IIE), pointed to the Study. The Report stated that trade could increase exponentially on both side, but could lead to 500,000 to 1 million lost U.S. jobs over a 10-year span.

As stated in my prior post, that is where Trade Adjustment Assistance for Companies comes into play. The Peterson study contends that because the economic benefits equate to roughly $1.25 million in national income gains per job lost, the U.S. should consider policy alternatives to offset job loss rather than simply abandon an FTA with China.

On December 10th, in a speech to the Export Council, President Obama invited China to follow TPP Rules, though not as a formal member, stating:

“And we hope that … China actually joins us, in not necessarily formally being a member of TPP, but in adopting some of the best practices that ensure fairness in operations.”

President Obama further stated, “They [China] will take whatever they can get. They will exploit every advantage that they have until they meet some resistance.”

Echoing a statement by Chinese President Xi Jinping at the APEC meeting, however, Obama also stated China has a “great interest in the relationship with the United States and [recognizes] the interdependence that has evolved between our two economies.” Everything the U.S. is trying to do in TPP has a “direct application” to China, which could be a reference to establishing new disciplines on state-owned enterprises and intellectual property protection.

Overall, Obama said the “key” to the U.S. trade relationship with China is to “continue to simply press them on those areas where trade is imbalanced, whether it’s on their currency practices, whether it’s on IP protection, whether it’s on their state-owned enterprises.” He said the bilateral investment treaty in which China has “shown an interest in negotiating could end up being a significant piece of business.”

The president also touted the breakthrough in the negotiations to expand the Information Technology Agreement (ITA) that the U.S. reached with China during the president’s trip to Asia last month. “And I think that it’s indicative of [China’s] interest in trying to get this right.”

CHINA AUSTRALIA FTA

On November 17th, Australia and China signed a free trade agreement to allow greater Australian agricultural exports and greater investment in China and increased Chinese exports to Australia. According to the Australian Prime Minister, the Agreement is predicted to add billions to the Australian economy create jobs and drive higher living standards.

INDIA US BILATERAL DEAL MOVES TRADE FACILITATION AGREEMENT FORWARD

 On November 27, 2014, the Trade Facilitation Agreement, which had been blocked by India, was back on track after a vote at the WTO. The TFA simplifies and harmonizes customs procedures and mandates customs reforms such as introducing transparency, risk based management by customs administrations, a “single window” for all government agencies dealing with imported merchandise, automation, electronic payment of duties and the separation of the payment of duties from the release of cargo, among other things. These improvements are intended to facilitate trade across borders, thereby reducing the costs for international traders and ultimately consumers.

On December 11th, the WTO reported that Hong Kong was the first country to ratify the Trade Facilitation Agreement, which will streamline global customs rules.  Irene Young , Hong Kong’s representative stated that “A multilateral TFA, which can significantly enhance trade flows, is very important to Hong Kong, China, and I believe it is no less so for other economies. Ultimately, the agreement will benefit all of us, but that is only possible when it actually comes into effect.”

In response, WTO Director-General Roberto Azevedo stated:

“I hope that other members will gain inspiration from this and will soon be able to follow Hong Kong, China’s lead.”

The TFA needs to be ratified by two-thirds of the WTO’s members to come into effect.

TRADE ADJUSTMENT ASSITANCE PROGRAM—REAUTHORIZATION

As stated in my last blog posts, I have made the case for the Trade Adjustment Assistance Program for Firms/Companies, which is presently funded at $16 million nationwide.

At the end of 2014, because of the efforts of Senator Sherrod Brown and Congressmen Adam Smith, Derek Kilmer and Sander Levin in the House, the TAA for Firms/Companies program was reauthorized in the Cromnibus Bill, which went through the Senate and the House and was signed into law by President Obama. Although Senator Brown advocated that the assistance for US companies in the TAA for Firms program be increased to $50 million, in fact, the program was cut from 16 million to $12.5M. As Senator Brown stated in the attached press release, BROWN PUSHES FOR REAUTHORIZATION.

“Fund TAA at the previous level of $575 million and Trade Adjustment Assistance for Firms at $50 million to provide financial assistance and expertise to import-affected manufacturers to help them become more competitive.”

In talking to one TAAC in the Midwest, the problem is that the money is so low that there are companies lined up to get assistance, but the money is committed as soon as it is authorized, so many companies will not get this vital assistance.

To summarize, on December 8th, a number of Democratic Congressmen, including ranking Ways and Means member, Sander Levin, and Congressmen Adam Smith and Derek Kilmer from Washington wrote in the attached letter, HOUSE CONGRESSIONAL LETTER, to Speaker Boehner and Minority Leader Nancy Pelosi asking that that the program be reauthorized:

“December 8, 2014

Dear Speaker Boehner and Leader Pelosi, . . .

We write to call your attention to the fast-approaching expiration of the Trade Adjustment Assistance (TAA) program and urge you to bring legislation to the floor that would enable this effective program to continue assisting both firms and workers beyond December 31, 2014.

Since its inception, TAA has helped both workers and businesses cope with job losses resulting from increased global competition. According to the U.S. Department of Labor (DOL), approximately two million workers nationwide have relied on TAA for Workers (T AAW) since 1975 to make ends meet and receive training necessary to find a new job in high-skill, growing industries. In addition, according to the Economic Development Agency’s 4th annual report, 882 trade-impacted firms have received assistance through TAA for Firms (TAAF) in 2013. These firms employed over 76,000 workers at the time of their entry into TAAF and at least one firm was located in 48 of the 50 states throughout the country.

TAAW not only helps hard-working Americans whose jobs have been adversely impacted by trade, but it allows those workers to reenter the workforce and contribute to our economy with better skills and training. The program provides training assistance and income support enabling dislocated workers to retrain for employment in competitive industries. The success of this program is proven by the fact that 75 percent of TAA workers secured a job 6 months after leaving the program and 90 percent of those workers remained employed a year thereafter.

TAAF is another critical component of this program that effectively assists U.S. companies impacted by imports remain competitive. TAAF offers a matching fund for outside expertise to help companies adjust their business models allowing them to regain their competitive advantage in the marketplace. The program makes it possible for companies to avoid layoffs, or, where layoffs have occurred, to rehire workers as the companies regain their competitive footholds. In the most recent report by the Department of Commerce on T AAF, it is reported that all the U.S. companies that were beneficiaries in 2011 were still in business in 2013.

TAA is a critical part of our nation’s competitiveness strategy in the face of a rapidly evolving world economy and its reauthorization enjoys bipartisan support. Congressional leadership and action to reauthorize TAA is needed to stop the termination of an effective program that helps American workers and firms compete, innovate, strengthen, and diversify America’s economy. We must do all we can to save jobs by helping firms readjust and workers regain their edge and competitiveness in the global marketplace.”

TAA for firms will become even more important with the passage of any free trade agreement, including the TPP.

ANTIDUMPING, COUNTERVAILING DUTY AND OTHER TRADE CASES

CIRCUMVENTION OF ALUMINUM EXTRUSIONS ORDER??

On December 11, 2014, in the attached letter to Assistant Secretary Paul Piquado at the Commerce Department, MCCONELL ALUMINUM EXTRUSIONS, Senate Majority leader, Mitch McConnell pressed Commerce on circumvention of the US antidumping order on Aluminum Extrusions from China stating:

“I write on behalf of my constituents at Kentucky’s Cardinal Aluminum. Cardinal, an aluminum extruder, employs over 500 people in Louisville and plays a vital economic role in the Commonwealth. My constituents have informed me that unfair trade practices from China are once again threatening Kentucky jobs.

In 2012. I introduced legislation with my Senate colleagues that-once enacted into law- allowed the Department of Commerce (DOC) to impose countervailing duties on certain imports from communist and nonmarket countries. This law and DOC’s subsequent implementation of countervailing duties and anti-dumping measures on a number of U.S. imports subsidized by foreign governments helped protect over a thousand Kentucky jobs.

Unfortunately, my constituents have informed me that they believe certain exporters are engaged in aluminum alloy dumping activities in the U.S. market. My constituents have conveyed to me that these and related injurious trade practices abroad have already led to a reduction in more than 75 jobs and threaten additional Kentucky jobs if no action is taken.

I am told that your department plans to review the scope of countervailing duties and anti-dumping duties that are intended to prevent these abuses of international trade practices. In addition to their concerns surrounding potential dumping activities, my constituents have expressed to me their concerns regarding the metrics involved in this review process.

As your department proceeds with its review and other related investigations to curb unfair trade practices, I ask that you give full and fair consideration to the concerns of my constituents. I have enclosed their correspondence for your convenience.

Thank you for your time and attention to this matter. I look forward to receiving your response.

Sincerely,

Mitch McConnell”

United States Senator

JANUARY ANTIDUMPING ADMINISTRATIVE. REVIEWS

On January 2, 2015, Commerce published the attached Federal Register notice, JANUARY REVIEWS, regarding antidumping and countervailing duty cases for which reviews can be requested in the month of January. The specific antidumping cases against China are: Crepe Paper Products,   Ferrovanadium, Folding Gift Boxes, Potassium Permanganate, and Wooden Bedroom Furniture.

The specific countervailing duty cases are Oil Country Tubular Goods and Circular Welded Carbon Quality Steel Line Pipe.

For those US import companies that imported Potassium Permanganate, Wooden Bedroom Furniture, OCTG and the other products listed above from China during the antidumping period January 1, 2014-December 31, 2014 or during the countervailing duty review period of 2014 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. Recently in the Shrimp from China antidumping case, for example, almost 100 Chinese exporters were denied a separate antidumping rate.

RUSSIA—US SANCTIONS AS A RESULT OF UKRAINE CRISIS

On September 3, 2014, I spoke in Vancouver Canada on the US Sanctions against Russia, which are substantial, at an event sponsored by Deloitte Tax Law and the Canadian, Eurasian and Russian Business Association (“CERBA”). Attached are copies of the powerpoint US SANCTIONS RUSSIA RUSSIAN TRADE PRACTICE for the speech and a description of our Russian/Ukrainian/Latvian Trade Practice for US importers and exporters. In addition, the blog describes the various sanctions in effect against Russia.

Pursuant to the OFAC regulations, U.S. persons are prohibited from conducting transactions, dealings, or business with Specially Designated Nationals and Blocked Persons (SDNs). The blocked persons list can be found at http://sdnsearch.ofac.treas.gov/. See also: www.treasury.gov/resource-center/sanctions/programs/pages/ukraine.aspx . The list includes the Russian company, United Shipbuilding, and a number of Russian Banks, including Bank Rossiya, SMP Bank, Bank of Moscow, Gazprombank OAO, Russian Agricultural Bank, VEB, and VTB Bank. The “Sectoral Sanctions Identification List” (the “SSI List”) that identifies specific Russian persons and entities covered by these sectoral sanctions can be found at www.treasury.gov/resource-center/sanctions/SDN-List/pages/ssi_list.aspx.

The sanctions will eventually increase more with the Congressional passage of the Ukraine Freedom Support Act, which will be attached to my blog, which President Obama signed into law on December 19, 2014.

Although the law provides for additional sanctions if warranted, at the time of the signing, the White House stated:

“At this time, the Administration does not intend to impose sanctions under this law, but the Act gives the Administration additional authorities that could be utilized, if circumstances warranted.”

The law provides additional military and economic assistance to Ukraine. According to the White House, instead of pursuing further sanctions under the law, the administration plans to continue collaborating with its allies to respond to developments in Ukraine and adjust its sanctions based on Russia’s actions. Apparently the Administration wants its sanctions to parallel those of the EU. As President Obama stated:

“We again call on Russia to end its occupation and attempted annexation of Crimea, cease support to separatists in eastern Ukraine, and implement the obligations it signed up to under the Minsk agreements.”

Russia, however responded in defiance with President Putin blasting the sanctions and a December 20th Russian ministry statement spoke of possible retaliation.

One day after signing this bill into law, the President issued an Executive Order “Blocking Property of Certain Persons and Prohibiting Certain Transactions with Respect to the Crimea Region of Ukraine” (the “Crimea-related Executive Order”). President Obama described the new sanctions in a letter issued by the White House as blocking:

New investments by U.S. persons in the Crimea region of Ukraine

Importation of goods, services, or technology into the United States from the Crimea region of Ukraine

Exportation, reexportation, sale, or supply of goods, services, or technology from the United States or by a U.S. person to the Crimea region of Ukraine

The facilitation of any such transactions.

The Crimea-related Executive Order also contains a complicated asset-blocking feature. Pursuant to this order, property and interests in property of any person may be blocked if determined by the Secretary of the Treasury, in consultation with the Secretary of State, that the person Is operating in Crimea or involved in other activity in Crimea.

The EU has also issued sanctions prohibiting imports of goods originating in Crimea or Sevastopol, and providing financing or financial assistance, as well as insurance and reinsurance related to the import of such goods. In addition, the EU is blocking all foreign investment in Crimea or Sevastopol.

Thus any US, Canadian or EU party involved in commercial dealings with parties in Crimea or Sevastopol must undertake substantial due diligence to make sure that no regulations in the US or EU are being violated.

On December 22, 2014, Russian oil giant Rosneft NK OAO on Monday dropped its bid to buy Morgan Stanley’s oil-trading and storage business, citing an “objective impossibility” of gaining regulatory clearance amid tense international relations in the wake of ongoing sanctions against Moscow.

IP/PATENT AND 337 CASES

337 CASES

There have been developments at the US International Trade Commission (“ITC”) in 337 cases and patent area.

In the attached petition, PRINT CARTRIDGES 337 PETITION, on December 23, 2014, Seiko Epson filed a new 337 patent case against Certain Ink Cartridges and Components Thereof against the following Chinese companies and US importers:

Zhuhai Nano Digital Technology Co., Ltd.; Nano Business & Technology, Inc.; Zhuhai National Resources & Jingjie Imaging Products Co., Ltd.; Huebon Co., Ltd.; Chancen Co.; Ltd.; Zhuhai Rich Imaging Technology Co., Ltd.; Shanghai Orink Infotech International Co., Ltd.; Orink Infotech International Co.; Ltd., Zinyaw LLC; Yotat Group Co., Ltd.; Yotat (Zhuhai) Technology Co., Ltd.; Ourway Image C0., Ltd.; Kingway Image Co., Ltd.; Zhuhai Chinamate Technology, Co., Ltd.; InkPro2day, LLC; Dongguan 0cBestjet Printer Consumables Co., Ltd.; OcBestjet Printer Consumables (HK) Co., Ltd.; Aomya Printer Consumables (Zhuhai) Co., Ltd.; and Zhuhai Richeng Development Co., Ltd.

PATENT AND IP CASES IN GENERAL

NEW PATENT AND TRADEMARK CASES AGAINST CHINESE, HONG KONG AND TAIWAN COMPANIES

On November 25, 2014, the attached new patent infringement complaint was filed by Invue Security Products, Inc. v. Hangzhou Langhong Technology Co., Ltd. and Langhong Technology USA Inc.  HANGZHOU PATENT

On December 5, 2014, the attached new patent infringement complaint was filed by Ultratech, Inc. dba Ultratech Cambridge Nanotech versus Esnure Nanotech (Beijing) Inc., Ensure Nanotech LLC d/b/a Ensure Scientific Group LLC and Dongjun Wang. CHINA NANOTECH PATENT CASE

On December 5, 2014, the attached new patent infringement complaint was filed Harvatech Corp. vs. Cree Inc., Cree Hong Kong Ltd., and CREE Shanghai Opto Development Ltd. CREE HONG KONG

On December 10, 2014, the attached new patent complaint was filed by Optical Tech IP LLC v. Huawei Technologies USA Inc. HUAWEI

On December 16, 2014, the attached new patent infringement complaint was filed by Hitachi Maxwell Ltd. vs. Top Victory Electronics (Taiwan Co. Ltd.), TPV International USA Inc., Envision Peripherals Inc., Top Victory Electronics (Fujian) Co., Ltd., TPV Electronics (Fujian) Co. Ltd., TPV Technology Ltd., and TPV Display Technology (Xiamen) Co., Ltd. XIAMEN FUJIAN PATENT CASE TVS

On December 18, 2014, the attached new patent complaints were filed Dynamic Hosting Company LLC versus Huawei Technologies USA Inc. and ZTE (USA) Inc. HUAWEI DYNAMIC HOSTING ZTE DYNAMIC HOSTING

On December 31, 2014, the attached new patent complaint was filed by Adaptive Data LLC versus Huawei Technologies USA Inc., Huawei Device USA Inc. and Huawei Technologies Co., Ltd. HUAWEI3

PRODUCTS LIABILITY

On December 10, 2014, the attached products liability complaint was filed by Diana Alvarez Gonzales et al v. Shandong Linglong Tyre Co., Ltd., Horizon Tire, Inc., Horizon Tire Corp., Bridgestone Americas Tire Operations LLC., and GCR Tire. SHANDONG TYRE COMPANY

On December 26, 2014, Tower Insurance Company filed the attached products liability complaint against Jarden Corp., Sunbeam Products, Inc. and Foshan Shunde Toppin Electrical Technology Co., Ltd. CHINESE HEATER PRODUCTS LIABILITY COMPLAINT

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