International Trade: Nationwide: An Overview
The U.S. international trade law agenda reflects the full range of challenges affecting the global marketplace, including concerns over food safety and energy prices, heightened border security, efforts to combat terrorism and promote national security, and conflicts over support for clean technology. The slow but steady economic recovery in the United States has brought with it a spate of new trade remedy actions, most targeting imports from Asia. The Obama Administration will likely continue to modify economic sanctions to address rapidly changing conditions in the Middle East, Burma and elsewhere and should complete an overhaul of export controls in the coming months. Meanwhile, the Administration has stepped up its enforcement activity under World Trade Organization rules to open markets for U.S. exports.
The following summarizes developments in key areas of practice.
The economic rebound continued to be reflected in U.S. import statistics – the total value of U.S. imports in FY 2011 increased by 10.5%, and total duties collected by U.S. Customs and Border Protection (CBP) increased by 16.4%. Given limited agency resources, the rebound in trade growth underscores the necessity for the government to complete the Automated Commercial Environment (ACE), the new automated system for handling imports and exports, incorporating “single window” and fully paperless concepts. This year will see a milestone in ACE development, as the so-called e-manifest system for rail and sea will be fully operational, and the exclusive method for cargo release, by the fall. ACE is a key component of CBP’s recently announced Trade Transformation initiative, which will include a “simplified entry” program, revision of the regulations governing - and rethinking the role of - customs brokers, creation of virtual “centers of expertise and excellence” aligned with industry sectors, and a “one U.S. government at the border” project. Traders also can expect to see renewed focus on food and product safety, antidumping and countervailing duty collection, and intellectual property rights enforcement, and the continued evolution and maturation of trusted trader programs. And Congress is expected to consider legislation this year giving CBP new tools to address new challenges to border security and trade facilitation.
In the heightened security environment of the last decade, foreign companies have faced significant legal and political uncertainty in deciding whether to acquire a U.S. company or even take a minority stake. Many high-profile deals have, in fact, fallen apart due to public scrutiny and controversy. Much of the attention has been focused on the work of the U.S. Committee on Foreign Investment in the United States (CFIUS), an interagency body chaired by the Treasury Department that is charged with reviewing the national security implications of transactions that will result in foreign control of a U.S. business. If CFIUS concludes that a transaction may present national security risks, then it may block or place conditions on the transaction, or even unwind a transaction that has already closed. CFIUS has the authority to review transactions in any sector, regardless of the size of the deal, and has often found that a transaction will result in foreign control over a U.S. business even when the foreign entity plans to take only a small ownership share. Once CFIUS has approved a deal, however, it will not reopen the examination. A legislative and regulatory overhaul in 2007-2008 has helped make the process more efficient and transparent. However, deal parties continue to notify their transactions for CFIUS review to provide legal certainty and to help inoculate themselves from public accusations that a deal presents national security risks. Given the wide sweep of CFIUS authority, an examination of whether and when to file for a CFIUS review has now become a routine part of the due diligence surrounding proposed deals.
Export Controls and Economic Sanctions
Building “higher walls” around sensitive technology while ensuring the competitiveness of the U.S. defense industrial base remain the twin goals of the Obama Administration’s ongoing export control reform effort. Launched as part of the Administration’s National Export Initiative to double U.S. exports by 2015, these reforms are expected to intensify as officials across three agencies harmonize U.S. export controls and centralize their administration and enforcement. To remain competitive, companies that deal in controlled items must adjust their compliance practices to take full advantage of regulatory changes and to prepare for more coordinated enforcement activity. Change is also the hallmark of the Administration’s approach to U.S. economic sanctions, which have been modified repeatedly in light of the evolving geopolitical situation. Whereas sanctions against Burma may be moderated if political reform continues, more stringent sanctions may be imposed against Syria, Iran and other regimes that the administration believes continue to repress pro-democracy movements. Recent Executive Orders indicate that the Obama Administration is willing to target third-country companies that undermine the effectiveness of U.S. economic sanctions, including companies that supply the information technology that permit the governments of Iran and Syria to engage in human rights abuses. Stepped-up enforcement of extraterritorial sanctions against Iran and associated divestment measures will present challenges for companies in the petroleum and natural gas industries and their business partners.
The Obama Administration was successful over the past year in securing Congressional approval for free trade agreements with Colombia and South Korea, both negotiated during the Bush Administration. (The U.S. Congress has yet to approve the free trade agreement with Panama.) Also inherited from the Bush Administration is the Doha Round of World Trade Organization negotiations, which the current U.S. trade team has had no success in moving forward. Instead, the Obama Administration has focused all its energies on the Asia Pacific region. The Trans-Pacific Partnership (TPP) negotiations include four countries with which the United States already has free-trade agreements in place – Australia, Chile, Peru and Singapore – as well as Brunei, Malaysia, New Zealand and Vietnam. Japan has expressed its interest in being included in the negotiations, as have Canada and Mexico. Even without these additional parties, U.S. negotiators face significant challenges in the TPP talks, both substantive and logistical. But the TPP talks have attracted substantial interest among industry groups because, if successful, the TPP could set the terms for Asia Pacific economic integration.
Russia finally concluded its multi-year negotiations on the terms of accession to the WTO. Russia currently has until July 2012 to accept those terms. But WTO rights will not apply as between Russia and the United States unless and until the U.S. Congress agrees to remove Russia from a 1974 law originally passed to address emigration restrictions.
In the past several years, a growing chorus had pronounced that the trade remedies tool had become obsolete as a means of protecting U.S. industry from import competition – until a half dozen new petitions were filed in Washington within a 24-hour period at the end of March 2011. Several more petitions were filed during the balance of 2011, including one in October 2011 launching antidumping and countervailing duty investigations of solar panels imported from China. The filing of a spate of petitions after a long quiet spell may reflect the fact that the U.S. economy’s recovery has brought an increase in imports of both consumer products (such as refrigerators, washers and wood flooring) and of inputs used in the production of goods manufactured in the United States (galvanized wire, chemicals used in paper production). It also suggests that U.S. industries considering the trade remedies option now believe that they can demonstrate a critical prerequisite to obtain relief – namely, that the financial injury they are suffering has been caused by unfair import competition, rather than other sources, such as the economic recession and the collapse of demand.
Trade restrictions and protectionism, in general, have recently become more pronounced due to persistent challenges facing the global economy. In an effort to remove such barriers, governments and companies around the world have continued to turn to WTO dispute settlement to enforce the broad-based international obligations agreed to by the 155 Members of the WTO. The Obama Administration, for instance, has embraced WTO dispute settlement as part of its National Export Initiative. At the same time, other governments have turned to WTO dispute settlement against, among other countries, the United States, to maintain or improve opportunities for their own industries. For example, from January 2011 thru May 2012, the United States has initiated dispute settlement proceedings in 3 instances (including two disputes against China and one against India), and has continued to pursue a number of longstanding disputes that were already active at the start of 2011 (including its longstanding dispute against alleged EU subsidies to Airbus). During the same period, the United States has been on the losing side of three separate disputes regarding technical barriers to trade involving tobacco product additives (initiated by Indonesia), the labeling of beef and pork products (initiated by Canada and Mexico), and the labeling of tuna (initiated by Mexico). Industries in developing and developed countries, alike, have derived tremendous benefits from their governments’ recourse to WTO dispute settlement, often with the assistance of outside counsel.