Solar Tariffs & Asia

The Senate passed a resolution (May 3) to nullify the Biden Administration’s two-year Asia solar tariff suspension put in place in June 2022. While the measure passed the Senate by a vote of 56-51 (3 Senators did not vote), President Biden vetoed the resolution. There is insuffient support in the Congress to overcome a veto.

Last June, the Biden Administration temporarily ended a trade dispute on solar manufacturing by lifting, for two years, certain solar tariffs on products made in Southeast Asia.

The Administration’s action was taken because of the initiation by the US Department of Commerce (March 2022) of, and resulting fallout from, a tariff circumvention investigation into certain solar products that are produced in Cambodia, Malaysia, Thailand, and Vietnam, where a US producer claimed that manufacturers in these countries were using parts made in China that otherwise would have been subject to higher tariffs.

The initiated investigation caused an uproar after overseas manufacturers and importers threatened to stop supplying products that could have, in turn, caused the stoppage of major US solar projects. In addition, the Solar Energy Industry Association (SEIA) announced at the time that it cut the worldwide solar deployment forecast by 46% in 2022 and 2023 primarily because of this circumvention case. SEIA claimed that 80% or more of solar projects in the United States could be at risk, impacting 100,000 US workers.

Despite the tariff pause decision, Commerce continued its circumvention investigation and, in December, the agency released a “preliminary determination” validating the accusation of tariff circumvention practices through some Asian countries. A final determination on the case has been deferred until August 17, 2023.

(posted: 5-4-23)

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China Planning a Ban on Critical Mineral Exports

Reporting from Nikkei Asia (April 6) says that China is considering a ban of exports of rare earth critical mineral technology, with the targeting of high performance magnets. Such magnets are used in cell phones, electric motors, robots and defense systems, among many other uses.

The reporting indicates that China will either ban or restrict exports of technology to process and refine rare-earth elements. It is also considering measures to prohibit or limit exports of alloy technology for making high-performance magnets derived from rare earths.

China reportedly still has a 70% world-wide market share worldwide in the production of rare earth minerals, including an 84% share of neodymium magnets and an over 90% share in samarium cobalt magnets, according to the Asia News Network.

There is speculation that China has indicated its plans to restrict critical minerals in retaliation for actions by the United States and other nations to restrict China’s access to semiconductor technology.

(posted:4-18-23)

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Apple Watch Decision & Imports

A December 2022 decision of the US International Trade Commission (ITC) that has the potential to restrict the import of currently-manufactured Apple Watches, was apparently upheld by the Biden Administration according to AliveCor, the company that requested ITC intervention.

The ITC has the authority to stop unfair trade practices, including the importation of products found to infringe a valid U.S. patent. ITC's ruling affirmed that Apple infringed AliveCor's intellectual property. AlivCor claimed that Apple stole its ECG heart monitoring technology, introduced its own ECG sensor in the smartwatch, and then blocked outside heart monitoring apps.

The ITC’s decision to restrict Apple Watch imports will go into effect assuming future favorable resolution of pending patent infringement appeals processes. It is possible, however, that Apple could negotiate licensing agreements with the company prior to that time to prevent any import restrictions.

(posted: 2-28-23)

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“Disruptive Technology” Strike Force

The Departments of Justice and Commerce announced (February 16) the creation of a Disruptive Technology Task Force, to “target illicit actors, strengthen supply chains and protect critical technological assets from being acquired or used by nation-state adversaries.”

The agencies say that the work of the Strike Force will be, among other things, to collaboratively investigate and prosecute criminal violations of export laws; enhance administrative enforcement of export controls; leverage international partnerships to coordinate law enforcement actions and disruption strategies; and strengthen the connectivity between the strike force and the Intelligence Community.

The announcement specifically calls out the efforts of China, Russia, Iran and North Korea to acquire western technology for activities that undermine human rights and threaten US national security. The key technologies important to these countries include those related to supercomputing and exascale computing, artificial intelligence, advanced manufacturing equipment and materials, quantum computing, and biosciences.

The Strike Force will operate in 12 metropolitan areas across the US.

(posted: 2-17-23)

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US Controls on Exported Technology

Bloomberg reported (January 28) that both Japan and the Netherlands agreed to restrict China’s access to advanced chipmaking machinery, including some of the same China export controls put in place by the US, to prevent the export of semiconductor lithography systems made by ASML and Nikon.

This agreement comes after the US Commerce Department announced (October 7) the implementation of new US export control rules intended to restrict China’s ability to acquire advanced computing chips, develop and maintain supercomputers, and manufacture advanced semiconductors. 

The Department claimed the restrictions are needed because China is using the technology to “produce advanced military systems including weapons of mass destruction; improve the speed and accuracy of its military decision making, planning, and logistics, as well as of its autonomous military systems; and commit human rights abuses. U.S. technology can also help China “monitor, track, and surveil their own citizens.” The announcement also specifically called out China’s efforts to use the technology to develop supercomputing technology and to become a world leader in artificial intelligence.

The rules do two key things: impose restrictive export controls on certain advanced computing semiconductor chips, transactions for supercomputer end-uses, and transactions involving certain entities on the Entity List (which was also updated); and, the rules put new controls on certain semiconductor manufacturing items and on transactions for certain integrated circuit end uses. This should restrict the ability of U.S. persons/businesses to support development or production of integrated circuits at semiconductor fabrication facilities in China without a license.

Both Samsung and the Taiwan Semiconductor Manufacturing Corporation (TSMC) reportedly sought, and received, temporary exemptions of associated with production inputs for current company manufacturing in China. Taiwan, through TSMC, produces some of the highest technology computer chips, has said that it will comply with the provisions of the new rules. The company's temporary exemption is said to be associated with less sensitive chip technology.

Seperately, the FY 2023 Omnibus Appropriations Act added new measures in law to address China’s access to US technology. One measure requres that before corporate acquisitions that include foreign entities, the US entity must notify the Federal Trade Commission (FTC) of subsidies by the foreign government (for example, the Chinese government) that could pose a strategic or economic threat to the US. The FTC would have authority to potentially stop merger/acquisition transactions.

The Act also limits the ability of NASA to collaborate with Chinese organizations, or host Chinese officials at its facilities. The Defense Department is specifically prohibited (short of an approved waiver) from working with the EcoHealth Alliance, a group known to have worked with Chinese labs including the Wuhan Institute of Virology, linked to the COVID-19 outbreak. The State Department is prohibited from using resources to process license applications for the export to China of satellites and components.

(updated: 1-30-23)

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EU Pollution Tax

The European Union (EU) agreed (December 13) to impose a “Carbon Border Adjustment Mechanism (CBAM).” The mechanism requires that importers of certain goods, primarily those that are carbon-intensive, to purchase so-called CBAM certificates to pay the difference between the carbon price paid in the country of production and the price of carbon allowances in the EU.

The EU claims that the law will incentivise non-EU countries “to increase their climate ambition and ensure that EU and global climate efforts are not undermined by production being relocated from the EU to countries with less ambitious policies.”

The CBAM will apply to iron and steel, cement, aluminum, fertilizers and electricity, potentially to indirect emissions (i.e.,those that result from an organization's activities, but are actually emitted from sources owned by other entities), and downstream products such as screws and bolts and “similar articles” of iron and steel.

The proposal has to be approved individually by member EU countries before being put into place.

(posted: 12-16-22)

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Genetically-Modified Corn & Mexico

At the end of 2020, the Mexican government announced that it will phase out imports of genetically-modified organism (GMO) corn by 2024, as well as the use of glyphosate which is generally used in tandem with GMO corn. The problem: more than 90% of US-produced corn is GMO corn, and is also grown using glyphosate.

Mexico currently imports an estimated 16 billion tons of US corn worth more than $4.5 billion, most of which is GMO yellow corn used for livestock or industrial purposes. Mexico is the second largest market for US corn exports, behind China.

Mexico grows white corn for human consumption domestically. Precisely why Mexico wants to phase out GMO corn imports could be based on a mix of several reasons, including that:

• Corn is deeply rooted in Mexico’s culture and identity. GMO corn is banned from being grown in Mexico in favor of domestic, non-GMO white corn varieties.

• Varieties of corn have been known to cross-pollinate, and there is concern about the degradation of Mexican corn varieties, as well as human health, if GMO corn obtained by Mexican persons is accidentally or purposefully used for farming.

• Glyphosate has a bad reputation as the active ingredient in Roundup weedkiller; the company which owns this product–Bayer AG–has had a mixed court case record from persons claiming the product causes cancer. US farmers are true believers in the product, however; farmers apparently love it from both cost and effectiveness perspectives, using it for a variety of agricultural products.

• While cross-border trade-loosening under the North American Free Trade Agreement (NAFTA) may have provided net benefits to Mexico, some believe it disproportionately undermined Mexican agriculture, particularly with respect to corn (see a 2018 article by The Counter).

The United States strongly disagrees with Mexico’s GMO corn decision, and has been working to negotiate a resolution to this matter, though there has so far been no breakthrough. The Wall Street Journal reported (November 30) that Mexico is offering to extend the deadline on yellow corn for livestock fodder by two years while its content is being studied, but that any corn for human consumption will be banned by the deadline.

The US is threatening to take the matter through the dispute settlement within the current U.S.-Mexico-Canada trade agreement, but time is running out. Mexico has so far not relented and US farmers are beginning to plan for production that would be exported into Mexico after the deadline.

(posted: 12-2-22)

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European Industrial Policy

The finance and economic ministers of both France and Germany called for (November 22) a European industrial policy in a joint statement. The statement suggests a EU industrial policy would be at least partly in response to U.S. industrial actions (e.g., grants and subsidies to industry) encompassed within the Inflation Reduction Act. 

The ministers added that the statement is the first step in a “Franco-German commitment line to advocate and advance” such an EU policy, and that the two countries will “pursue and engage in an ambitious, competitiveness-seeking future-oriented European industrial policy which aims at boosting European strategic sovereignty.”

Other key elements of the statement include that France and Germany will:

• Commit to “work jointly on providing adequate response” to vulnerable economic sectors to include “coordinating and aligning” support to companies hit by the energy crisis, “to prevent any breach to a fair level playing field within the internal market.”

• Implement joint purchases of gas through long term contracts to achieve lower prices for consumers and industry.

• Initiate new cooperation on hydrogen (e.g., set up a working group), and extend the scope of the current IPCEI batteries transnational cooperation effort.

• Build collaborative efforts on artificial intelligence and quantum computing with two new high-level working groups.

• Ensure a common strategy to ensure the free and secure flow, access and use of data, as well as trust in cloud services.

• Commit to the completion of Ariane 6 to guarantee “our independent and autonomous access to space,” and welcome European mini-launchers to foster innovation and cost-efficiency.

(posted: 11-23-22)

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US-UK Trade Agreement - None Coming

As reported in The Hill (November 14), the United Kingdom (UK) says it is not currently expecting action by the Biden Administration anytime soon to start trade agreement discussions.

Leaving the European Union (EU) via ”Brexit” left the UK without the special trade status afforded to EU countries through comprehensive trade agreements. For the near term, the UK expects the resolution of issues and concerns on a case-by-case basis within the parameters of regular trade rules.

Earlier this year, the U.S. and the UK did agree (March 2022) to an updated tariff approach on steel and aluminum imports from the UK. Specifically, the existing 25 percent tariff on the UK’s steel and aluminum products under Section 232 was dropped on “historically-based volumes” of such products. In return, the UK dropped retaliatory tariffs on an estimated $500 million worth of U.S. exports to the U.K that includes distilled spirits, agriculture products, and consumer goods.

(updated: 11-15-22)

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New U.S. Controls on Exported Technology

The Commerce Department announced (October 7) the implementation of new export control rules that are intended to restrict China’s ability to acquire advanced computing chips, develop and maintain supercomputers, and manufacture advanced semiconductors.

The basis for the restrictions are that China is using the technology to “produce advanced military systems including weapons of mass destruction; improve the speed and accuracy of its military decision making, planning, and logistics, as well as of its autonomous military systems; and commit human rights abuses. U.S. technology can also help China “monitor, track, and surveil their own citizens.” The announcement also specifically calls out China’s efforts to use the technology to develop supercomputing technology and to become a world leader in artificial intelligence.

The rules do two key things: impose restrictive export controls on certain advanced computing semiconductor chips, transactions for supercomputer end-uses, and transactions involving certain entities on the Entity List (which was also updated); and, the rules put new controls on certain semiconductor manufacturing items and on transactions for certain integrated circuit end uses. This should restrict the ability of U.S. persons/businesses to support development or production of integrated circuits at semiconductor fabrication facilities in China without a license.

Both Samsung and the Taiwan Semiconductor Manufacturing Corporation (TSMC) reportedly sought, and received, temporary exemptions of associated with production inputs for current company manufacturing in China. Taiwan, through TSMC, produces some of the highest technology computer chips, has said that it will comply with the provisions of the new rules. The company's temporary exemption is said to be associated with less sensitive chip technology.

(updated: 10-13-22)

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Enhancing Foriegn Investment Reviews

President Biden issued a new Executive Order (EO) intended to enhance foriegn investment reviews by formally specifying direction from the President on the risks the Committee on Foreign Investment in the United States (CFIUS) should consider when reviewing a covered transaction. The CFIUS review process is coordinated through the Treasury Department.

CFIUS advises the President on planned U.S. foreign investment that could have implications for national security. A CFIUS review could result in a Presidential decision to suspend or prohibit the transaction, which usually means investing persons or entities seek CFIUS approval in advance of any planned transaction.

The specific factors CFIUS must consider for transactions under the EO include:

• The effect on the resilience of critical U.S. supply chains that may have national security implications, including those outside of the defense industrial base, including those that could make the United States vulnerable to future supply disruptions of critical goods and services.

• The effect on U.S. technological leadership in areas affecting U.S. national security, including but not limited to microelectronics, artificial intelligence, biotechnology and biomanufacturing, quantum computing, advanced clean energy, and climate adaptation technologies.

• Investment trends that could have consequences for U.S. national security, such as more than one foreign transaction that indicate a broader trend on the part of an investor or in the broader industry that could undermine U.S. national security.

• Cybersecurity threats from foreign persons with the “capability and intent to conduct cyber intrusions or other malicious cyber-enabled activity.”

• Risk to sensitive data of persons that could lead to the targeting of individuals or groups of individuals that has national security implications.

This EO, at least in part, is tied to issues arising from efforts by Chinese companies to secure sensitive technology through joint ventures and minority stakes in companies.

(updated: 7-15-22)

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Asia Trade & Economic Framework

President Biden’s trip to Asia yielded a new multilateral framework that will guide future discussions with regional partners on economic and trade matters. The Indo-Pacific Framework on Prosperity includes the following four pillars:

• Connected Economy. Engage on ‘rules of the road’ in the digital economy such as standards on cross-border data flows and data localization; address issues is such as online privacy and discriminatory and unethical use of Artificial Intelligence; labor and environment standards; and corporate accountability provisions.

• Resilient Economy. Seek supply chain commitments to better anticipate and prevent disruptions in supply chains to create a more resilient economy and guard against price spikes including through an early warning system, mapping critical mineral supply chains, improving sector traceability, and coordinating on diversification efforts.

• Clean Economy. Seek commitments on clean energy, decarbonization, and infrastructure that promote good-paying jobs, including “concrete, high-ambition targets” to accelerate climate crisis efforts in areas of renewable energy, carbon removal, energy efficiency standards, and new measures to combat methane emissions.

• Fair Economy. Seek commitments to “enact and enforce” tax, anti-money laundering, and anti-bribery regimes, to include provisions on the exchange of tax information, the criminalization of bribery, and the effective implementation of beneficial ownership recommendations to strengthen our efforts to crack down on corruption.

The Biden Administration is generally not pursuing any comprehensive, multilateral trade agreement such as the Trans-Pacific Partnership (TPP) negotiated by the Obama Administration (and dropped by the Trump Administration) during this Asia trip, or otherwise. Instead, the Biden Administration is focusing on “bilateral” and “trilateral” ministerial and commercial dialogues, among other methods, to gradually advance trade goals. The Administration does claim, however, that at some point discussions with Asia partners will yield documented agreements in some form.

(updated: 5-24-22)

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Trade Forecast Drop

The World Trade Organization (WTO) dropped its projected trade growth forecast (April 12, 2022) 2022 by a significant margin. Specifically, world merchandise trade volume is expected to grow by just 3.0% in 2022 (down from 4.7% previously). The WTO blames the drop primarily on the conflict in Ukraine and China’s COVID-19 lockdown which is disrupting seaborne trade. These levels may be impacted further depending on the time length of both situations.

(updated: 4-19-22)

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Tariffs Reduced on Some Chinese Goods

The United States Trade Representative announced (March 24, 2022) that it has removed 352 Chinese products from a tougher tariff regime established under the Section 301 program. A total of 549 products were under consideration for removal. Goods excluded include industrial pumps and electric motors, certain car parts and chemicals, backpacks, bicycles, vacuum cleaners and other consumer goods.

Section 301 provides a means by which the United States can impose trade sanctions on foreign countries that violate U.S. trade agreements or engage in acts that are “unjustifiable” or “unreasonable” and burden U.S. commerce. The Trump Administration imposed additional tariffs, ranging from 7.5% to 25%, on approximately $370 billion worth of U.S. imports from China using Section 301 processes. As reported by Yahoo!Finance, China says this decision was beneficial to normalizing the trade flow of those products, and hoped bilateral trade relations would get back on a normal track.

(updated: 3-24-22)

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Steel & Aluminum Tariff Actions

The U.S. and the United Kingdom announced (March 22, 2022) an updated tariff approach on steel and aluminum imports from the UK. Specifically, the existing 25 percent tariff on the UK’s steel and aluminum products under Section 232 would be dropped on “historically-based volumes” of such products. In return, the UK will drop retaliatory tariffs on an estimated $500 million worth of U.S. exports to the U.K that includes distilled spirits, agriculture products, and consumer goods.

The U.S. and Japan announced (February 7, 2022) that the U.S. tariff approach will be adjusted where the current 25% tariff on steel will not be applied on the first 1.25 metric tons (the average of U.S. imports in 2019), with amounts above the level receiving the 25% tariff.

The U.S. and the European Union announced (October 2021) the elimination of steel, aluminum, and related retaliatory tariff actions against each other.

The U.S. and the European Union announced (June 2021) a five-year suspension of tariffs tied to an ongoing dispute related to aircraft manufacturing as well as a cooperation framework going forward.

(updated: 3-23-22)

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Biden Administration Trade Agenda

The Biden Administration released (March 1, 2022) a combined report that summarizes both trade results for 2021 and its trade agenda going forward. There is a lot of information in the report, particularly with respect to trade results and the status of each current trade agreement.

With respect to trade policy going forward, key areas of emphasis outlined in the report includes:

• Continuing to focus on actions that address forced labor in China and elsewhere.

• Advancing a “new generation of trade policies” in support of climate goals, such as encouraging “like minded” partners to reduce the intensity of emissions from steel aluminum production; advancing through regional agreements the scale-up of clean energy and climate friendly goods, services, and technologies; and supporting multilateral efforts on ocean plastics and illegal fishing.

• Using current-law tools such USMCA dispute settlement processes and Section 301 investigations.

• “Realigning” the U.S.-China trade relationship, though the document lacks any specifics beyond addressing forced labor matters via the Uyghur Forced Labor Prevention Act.

• Recommitting the U.S. to international institutions and multilateral efforts, including an Indopacific Economic Framework; reforming and strengthening the World Trade Organization; and advancing international taxation policies via the OECD.

• Working with Congress to evaluate the efficacy of current trade enforcement tools and identify areas where new tools may be needed.

(updated: 3-8-22)

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U.S. Solar Cell Tariffs

The White House announced (February 4, 2022) that it is extending, with modification, the Trump Administration-era tariff on solar cells. The tariff will range between 14-15 percent over a new four-year period, but will exclude from the tariff so-called "bifacial" cells, which can pick up light from both sides of a solar panel. This exclusion has potential impact to some large U.S. manufacturers, such as First Solar.

The current United States tariff on imported solar cells had been set to expire on February 6, 2022. The International Trade Commission (ITC) made a determined for the President (December 2021), that tariffs continue "to be necessary to prevent or remedy serious injury to the U.S. industry, and that there is evidence that the domestic industry is making a positive adjustment to import competition." Opponents believe that the tariffs have cost US jobs and slowed down viable US solar projects.

(updated: 2-5-22)

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Unverified List Additions from China

The U.S. Commerce Department announced that it has added the names of 33 Chinese company names to its "Unverified List" via a Final Rule (February 8, 2022). The Unverified List requires companies doing business with such entities to undertake greater due diligence  and risk assessment when working with such companies. Transactions are not necessarily prohibited, but they do require greater documentation. Included in the announced rationale is the suggestion that China was not cooperating sufficiently in US export control processes, with the statement that one purpose of this action is to "signal to the PRC government the importance of their cooperation in scheduling end-use checks."

(updated: 2-8-22)

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U.S. Wins Major Dairy Case 

The U.S. Trade Representative announced that the United States had prevailed in a significant dairy case via a dispute settlement panel mechanism that exists within the US-Mexico-Canada (USMC) trade agreement. The panel agreed with the United States that Canada is breaching its USMCA commitments by reserving most of the in-quota quantity in its dairy tariff-rate quotas for the exclusive use of Canadian processors. The decision should help improve the ability of U.S. dairy producers to sell their products in Canada.

(updated: 2-2-22)

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U.S.-E.U. Trade & Technology Council

The U.S. and the European Union recently formed a council to serve as a forum to discuss "increasing transatlantic trade and investment in products and services of emerging technology, strengthening our technological and industrial leadership, boosting innovation, and protecting and promoting critical and emerging technologies and infrastructure". The first meeting was held on September 29, 2021. 

(updated: 2-2-22)

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Trade Agreements/World Trade Organization (WTO)

There is no indication that the Biden Administration is considering the development of any significant trade agreements such as those advanced by the Obama Administration -- e.g., the Trans Pacific Partnership (TPP) and the Trans Atlantic Trade and Investment Partnership (TTIP). Neither the TPP or the TTIP were ever finalized and ratified, though the TPP was close to full ratification until the Trump Administration pulled the United States out of the agreement. Remaining TPP countries formed a new agreement, and China submitted a request in September 2021 to enter that agreement. 

The Biden Administration has reaffirmed its commitment the World Trade Organization (WTO), at the same time stating that some unspecified reforms are needed. The Trump Administration refused to appoint new members to the WTO Appellate Body (AB) which, ultimately, undermined the ability of the WTO to consider and make decisions on trade disputes. 

(updated: 2-2-22)

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