On Friday, March 31, 2017, President Trump signed two Executive Orders (EO) aimed at improving U.S. economic interests by 1) strengthening U.S. trade enforcement practices and 2) requiring relevant agencies to assess and report on the causes of significant trade deficits the U.S. has with foreign trading partners. One Order focuses on enhancing U.S. Customs and Border Protection’s (CBP) ability to collect antidumping and countervailing duties (AD/CVD) as well as ensuring the efficient enforcement of laws protecting intellectual property rights (IPR) holders. The other Order calls for a comprehensive report on the U.S. trade deficit on a per-country basis.
The President believes that these EOs will serve as part of the foundation for the revival of U.S. manufacturing, which he contends has been negatively impacted by U.S. trade deficits emanating from “bad deals”. These EOs come a week before President Trump is scheduled to meet with Chinese President Xi Jinping. China currently accounts for the greatest percentage of the U.S. trade deficit (15.9%). Despite the timing, U.S. Secretary of Commerce Wilbur Ross, and Director of the National Trade Council, Peter Navarro, maintain that the measures were not aimed at putting China on notice in advance of the Head of State meeting. Navarro commented that, “For the first time, we're looking at what's been the source of the large and persistent trade deficit that has contributed to job losses”.
Establishing Enhanced Collection and Enforcement of Antidumping and Countervailing Duties and Violations of Trade and Customs Laws
President Trump’s EO titled “Establishing Enhanced Collection and Enforcement of Antidumping and Countervailing Duties and Violations of Trade and Customs Laws” sets as policy the imposition of increased bonding requirements, as determined by risk assessments, on articles subject to AD/CVD when necessary to improve duty collection. The EO maintains that U.S. employers face unfair competition from importers that unlawfully evade AD/CVD. To improve duty collection, President Trump has ordered the Secretary of the Department of Homeland Security (DHS) to develop a plan within 90 days that would identify importers that pose a risk to U.S. revenue and enforce AD/CVD regulations through the imposition of bonds and other legal measures. Additionally, the EO calls for CBP to develop and implement an enforcement strategy for U.S. customs laws that include enabling interdiction and disposal of inadmissible goods, including methods other than seizure.
The EO also aims to improve U.S. IPR protections by improving the U.S. enforcement posture and coordination with potentially negatively affected rights holders. To assist CBP in combatting IPR violations, the EO enables the Secretaries of Treasury and Homeland Security to create rules helping CBP enforce IPR laws. The EO also calls for CBP to share appropriate information with affected IPR holders. Shareable information includes: details regarding any IPR infringement or violation, and any items voluntarily disposed that are in violation of IPR. Finally, the EO requires the Attorney General and Secretary of Homeland Security to develop a prosecution and enforcement plan which prioritizes trade and customs law violations.
This EO is also in line with components of the 2015 Trade Facilitation and Trade Enforcement Act (TFTEA), which strengthen CBP’s AD/CVD and IPR enforcement capabilities; including increased authorities for CBP to share information pertaining to counterfeit goods with affected IPR holders.
Presidential Executive Order Regarding the Omnibus Report on Significant Trade Deficits
The President’s EO “Regarding the Omnibus Report on Significant Trade Deficits” orders a comprehensive review of the U.S. trade deficit. The resulting report will address each foreign trading partner with which the U.S. had a “significant” trade deficit in goods in 2016. The EO stresses the importance of free and fair trade to the U.S. economy and argues the U.S. has not obtained the full scope of benefits anticipated under a number of international trade agreements or from participating in the World Trade Organization.
To determine the impact of the U.S. trade deficit on the U.S. economy, the President has ordered the Secretary of Commerce and the United States Trade Representative, in consultation with the Secretaries of State, Treasury, Defense, Agriculture, and Homeland Security, to provide a comprehensive report within 90 days. The report must contain clear identification of foreign trading partners with which the United States maintains a trade deficit and assess the causes of the deficit. Specifically, the report should identify whether differential tariffs, non-tariff barriers, dumping, government subsidization, intellectual property theft, forced technology transfer, denial of worker rights, labor standards, and other trade abuses are lead causes in the trade imbalance.
The report will further assess whether a given trade relationship unfairly burdens the production capacity and strength of manufacturing and defense industrial bases of the U.S. as well as the trade relationship’s impact on U.S. employment and wage growth. Finally, the report must identify importation and trade practices that negatively affect U.S. national security.
As mentioned in CBP’s press release on the issue, the EO on collection of AD/CVD and protecting IPR aligns with CBP’s trade enforcement mission. Given different factors and constraints involved, some of which are beyond CBP’s control, CBP recognizes the challenges in fully collecting all outstanding AD/CVD. A 2016 Government Accountability Office (GAO) study found that U.S. CBP did collect most of the outstanding AD/CVD from 2001 to 2014, but roughly $2.3 billion worth of AD/CVD remain uncollected as of May 2015. Most of this debt was concentrated among a small pool of importers.
While CBP has undertaken efforts to improve its collection of AD/CVD, there remains work to do in the areas of trade data collection and analysis; risk analysis of factors related to nonpayment; and enhanced risk management throughout the process to mitigate nonpayment. The Order on ADCVD collection should also include resource support to CBP for enhanced trade data processing technology. Despite existing challenges, CT Strategies firmly believes that duty collection can be improved through enhanced data services and processing technology, along with innovative risk management practices. The private sector has effective capabilities in these areas, of which CT Strategies will continue to make CBP aware, while also sharing our insight with solution providers on the Agency’s challenges.
We will continue to monitor Presidential Statements and Executive Orders. For any questions or concerns, please contact us: firstname.lastname@example.org.