Lawyer Predicts Piecemeal Resolution to Section 232 Tariffs, Talks Future of Section 301 on Vietnam

Thompson Hine trade attorney Dan Ujczo expects the only activity on trade in the first eight months of Joe Biden's presidency will be on issues either so small that they don't make a splash -- such as the Miscellaneous Tariff Bill and the Generalized System of Preferences benefits program -- or on issues that have an immediate need for action.

The European Union has argued that solving the Airbus/Boeing tariffs on both sides and lifting Section 232 tariffs on steel and aluminum are both pressing issues. To create space for negotiation, the EU offered to lift the Boeing tariffs for six months if the U.S. does the same. While he sees Airbus-Boeing as “an in-the-moment issue,” Ujczo told us in an interview that he's not sure whether it will push its way to the front for action in 2021. “I do think it's possible,” he said. He said there will be advocacy arguing “this is an immediate issue, we need to do that now.”

He thinks it will take longer to get Section 232 tariffs lifted on the EU, and predicted the remaining tariffs and quotas will be lifted piecemeal as the U.S. accepts other countries' plans to increase antidumping enforcement on Chinese metals, and plans to fight transshipment. “That was the goal of the [Organization for Economic Cooperation and Development (OECD)] Global Forum on Steel Overcapacity, to come up with a harmonized plan to get each country to build the wall” against Chinese steel, he said. “But it didn't happen.”

“I’m not optimistic right now on global cooperation on steel and aluminum in China,” he said. “There’s too much self-interest at this time.” Each country would have to agree “to take more effective antidumping/countervailing duties” actions, he said, if it wanted to avoid the tariffs or quotas.

He said it would be challenging to get Korea to agree because its steel industry relies on semi-finished products from China, just as the U.S. relies on semi-finished products from Brazil. “It’s one thing to say we need to have global cooperation on this. The reality is challenging,” he said, as each country knows it has companies that are reliant on cheap imported steel from China.

So what does a solution look like, he asked, adding, “Is it a managed trade solution?” That's how he describes the agreement with Canada and Mexico. Those countries did not get hard quotas, like Brazil and South Korea, but rather a quota of sorts that covers the current level of exports, with room to grow.

Ujczo said he would prefer to see a global solution for Section 232 tariffs but doesn't think that will happen. “We’ll see a domino effect, and the question is how many dominos will fall into place?”

An issue that could come to the forefront before Section 232 could be whether there should be tariffs on Vietnamese imports. Former U.S. Trade Representative Robert Lighthizer, in the Trump administration, concluded that Vietnam's currency manipulation was burdening U.S. firms. People in trade think “that may become a hot-button issue early; I think the hope is that it doesn’t,” Ujczo said, adding, “I think the goal of the [Biden] administration will be to let that fall into the bucket of more mid- to long-term.” While Ujczo said it might be putting it too strongly to call the approach to Section 301 on Vietnam a litmus test, he said, “I think the Vietnam issue is going to be somewhat of a hallmark of how the administration's going to conduct policy.”

Will it be consistent with the Lighthizer view of the world, he asked, or will the administration let traditional mechanisms such as CBP enforcement of transshipment or country rule of origin work? He said he thinks CBP will do enforcement of transshipment and circumvention of existing orders when it comes to Vietnam, rather than broad tariffs imposed under Section 301.

As evidence, he points to more than 700 rulings around substantial transformation. “When you read them, the truth is, I think it drove many of us in the legal community crazy because there wasn’t a rhyme or reason from a legal perspective,” he said. But the way he interprets the body of rulings is that CBP is calling it like it sees it as companies try to move supply chains to other countries to avoid Section 301 tariffs on Chinese imports. They are drawing a line between attempts to call Chinese goods something else and real changes to production processes.

“They were able to kind of work around some of the legal issues to really target some of the companies that were really trying to do tariff evasion or circumvention,” he said.