USTR Tells Congress: No More Tariff Deferrals, Automatic Section 301 Exclusion Renewals

There are no plans to automatically extend Section 301 tariff exclusions, U.S. Trade Representative Robert Lighthizer said in answers to written questions from senators on the Finance Committee and members of the House Ways and Means Committee. When he was asked repeatedly by members of Congress if the exclusions would be extended automatically to help small businesses struggling due to the COVID-19 recession, he said no and that “USTR has not decided whether to possibly extend again the exclusions extended until the end of 2020.” Lighthizer testified at the hearings in June (see 2006180029 and 2006170008).

He was asked less often about whether another round of tariff deferrals was warranted, but there, too, the answer is clearly no. “We are aware of the severe economic effect of the COVID-19 crisis on small and medium-sized businesses and want to do what we can to speed their recovery,” he wrote. “At the same time, we want to avoid doing anything that might incentivize imports or undercut the competitiveness of Made-in-USA products.” He said that the original deferral struck the right balance. “Key to striking this balance is ensuring appropriate limitations on the deferment, such as making sure it is of short duration, is offered only to those businesses that can demonstrate financial hardship, and does not interfere with ongoing trade remedies, other trade actions, and national security measures.”

The deferment applied only to regular customs duties, but not to trade remedy tariffs. Sen. John Cornyn, R-Texas, told Lighthizer he was glad that the USMCA Implementation Act “eliminated the unfair and discriminatory language in the NAFTA statute that prevents products manufactured in a U.S. FTZ that meet the rules of origin from competing on an equal tariff and cost footing in the U.S. market with imports from Canada and Mexico.” He asked if USTR was seeking to reinstate the NAFTA approach through a technical correction. Lighthizer said yes, because in their view, changing the treatment is not consistent with a stronger rule of origin.

Asked about the possibility of a Generalized System of Preferences benefits program renewal, Lighthizer was noncommittal. “The Administration is still considering options for reauthorization and I look forward to working with your Committee on a potential reauthorization bill,” he said. GSP expires at the end of the year. The Caribbean Basin Trade Partnership Act expires even sooner, at the end of September. Although Lighthizer said that CBTPA helps strengthen U.S. and trading partners' supply chains, he was equally evasive about renewal of that trade preferences program.

The most commonly asked question was about additional 25% tariffs on European wines, which are part of the Airbus retaliatory list. Between the two committees, more than a half-dozen members complained that the tariffs are hurting restaurants and small wine distributors whose businesses have been decimated by the COVID-19 pandemic, and asked if wine could be removed when USTR does the carousel. Most pointedly, Finance Committee ranking member Sen. Ron Wyden, D-Ore, said: “If tariffs are currently not an effective point of pressure, what other actions are you seeking to force compliance?” The tariffs have been on European goods since last October, and their purpose is to drive the Europeans to reach a settlement on subsidies. “There is no set timeline for coming to agreement, but USTR will continue to act in the manner most likely to bring about resolution of this longstanding dispute,” he replied.

On wine specifically, Lighthizer merely said that everyone had an opportunity to explain the economic impact of the tariffs on U.S. businesses, and that those comments will be taken into account.

Several members of Congress questioned Lighthizer on the wisdom of reinstating 10% tariffs on Canadian aluminum, and suggested that move is not compatible with the USMCA requirement that automakers buy North American aluminum. He disagreed, but did say he's taking downstream aluminum producers' views into consideration on whether the surge of aluminum from Canada is a problem.

Sen. Bob Menendez, D-N.J., followed up with ethics questions about two career staffers at USTR who were planning to set up a business consulting with auto companies on how to comply with new USMCA rules of origin after they had a role in crafting those rules.

Lighthizer said that the men sought ethics counsel, and were told they would need to recuse themselves on auto matters while they were in USTR's employ. While they did not leave the USTR as quickly as they had originally planned, because of the COVID-19 pandemic, they did resign June 13, he said. He said there is no evidence they worked on setting up the business during their work time. But, he said, he thinks the policy that employees at the GS-15 level or below have no cooling-off period before lobbying USTR should be changed.