Trade Cases

Leibowitz on Trade: Developments in Washington

April 12, 2018

Attorney and SMU contributor Lewis Leibowitz offers the following update on trade developments in Washington:

This week saw some important developments. Very few people have the slightest idea where all the talk on national security, intellectual property, NAFTA renegotiation and tariffs is actually going. At this point, the only trade restrictions are on steel and aluminum, with retaliatory tariffs from China in effect on $3 billion of imports from the U.S.

• Aluminum—Sanctions on Russian oligarchs and particularly Rusal, the largest Russian aluminum producer, are having a major impact on aluminum trading. Rusal’s chairman, Oleg Deripaska, is now a “Specially Designated National,” subject to financial sanctions imposed by the Treasury Department’s Office of Foreign Assets Control. Companies that buy aluminum from Rusal will be inconvenienced, because payments to Rusal are prohibited except to special accounts that will prevent money from flowing to Rusal. Rusal’s stock plunged 50 percent on Monday, but the price has stabilized the last couple of days. Companies that deal in significant quantities of aluminum, especially on the London Metal Exchange, should pay close attention to these sanctions. OFAC will permit “winding up” payments into restricted accounts until June 5.

• China—President Xi Xinping gave a major address on Monday at the Boao Forum for Asia touching on the trade disputes with the United States. He announced that tariffs into China would be cut in a number of major areas, including autos. The 25 percent tariff on imported cars attracted President Trump’s ire last week. The announcement of the reduction is a direct reaction to Mr. Trump’s criticism. This concession does not necessarily signal the end of danger of a trade war between the U.S. and China, but it is a calming signal. Commentators all praised the rhetoric, but did not see much in the way of concrete action in Mr. Xi’s speech.

China launched a new WTO dispute settlement case on April 5. A copy of China’s request for consultations with the United States was posted yesterday on the WTO website. As previously reported, China is characterizing the steel and aluminum tariffs as safeguard rather than national security measures for tactical reasons. The U.S. is sure to dispute that characterization. In addition, however, China is claiming violation of it rights under Article I of the General Agreement on Tariffs and Trade (GATT) because of the United States’ “selective application” of additional import duties. Article I is a “most favored nation” guarantee, essentially mandating equal treatment among WTO members. The dispute will play out over the next year or two in Geneva, along with several other issues.

• NAFTA—An agreement in principle on a renegotiated NAFTA is possible. Both the U.S. and Mexico have said they are about 80 percent of the way there. Canada is not so optimistic. For the steel and aluminum trade in the region, the May 1 deadline is approaching. That is date the exemptions for countries under the March 22 tariff proclamation on steel and aluminum are due to expire. No threats of termination of the exemptions for Canada and Mexico have been made, which is positive. However, anything can happen.

• Product exclusions—Commerce listed new exclusion requests yesterday. Borusan Mannesmann USA place 37 separate requests for exclusions totaling 135,000 metric tons, mostly oil country tubular goods. The Borusan requests more than double the number of published exclusion requests outstanding.

Lewis Leibowitz

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