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International Trade

What’s Ahead for US Trade Policy in 2021?

Jan. 25, 2021
New leadership inevitably brings change.

2021 will likely be a transition year for U.S. trade policy, rather than a year of abrupt shifts. President-elect Biden recently announced that he will nominate Katherine Tai as the United States Trade Representative; she is currently the chief trade lawyer for the House Ways and Means Committee. Many trade experts view her nomination as an indication that the Biden Administration’s trade policy will remain focused on China-enforcement issues.

Trade policy during a global pandemic involves the balancing of complex foreign policy with competing domestic interests. While it is impossible to predict exactly what will happen with tariffs, trade policy, export controls and trade sanctions, we anticipate some combination of the following developments will take place in 2021.

Tariffs

For the past several years, the Trump Administration has made particularly aggressive use of legal provisions in the Trade Expansion Act to justify the imposition of tariffs. Section 301 tariffs have been used against numerous products from China to offset Chinese government actions regarding intellectual property issues. Section 232 has been used to increase tariffs on major steel and aluminum products from many countries, centered on the premise that these imports pose a national security threat to the United States. The use of both types of tariffs is currently being challenged in the U.S. Court of International Trade (CIT).

The Biden transition team has been clear that it will take a multilateral approach to addressing trade issues associated with China. We anticipate that any de-escalation and/or removal of Section 301 or Section 232 tariffs will be implemented in phases.

It seems unlikely that Section 301 tariffs will be removed quickly, as there is widespread support in the business community for maintaining an aggressive stance against China on intellectual property, technology and investment issues. On the other hand, there have been numerous complaints from a wide spectrum of U.S. businesses that the tariffs on covered products from China are injuring them and that the exclusion process has been less than opaque. Thus, there seems to be a real possibility of reopening the product exclusion process in a more transparent manner, which could result in granting additional exclusions.

In addition, pending cases before the Court of International Trade (CIT) are challenging a large percentage of the Section 301 tariffs. The ongoing litigation may provide a pathway to scale back or eliminate some or all of these tariffs, but even without litigation, there could be changes to current policies and existing tariffs.

Section 232 tariffs may be easier  to change in order to deescalate the tensions between the United States and the rest of the world. If the Biden Administration pursues a multilateral approach and seeks cooperation with traditional allies of the United States, as expected, then an easing of such tariffs may be in the works. In addition, if the United States government loses the pending CIT cases challenging the modifications to the list of covered products, this defeat could pave the way for importers to negotiate an easing of at least some of the steel and aluminum tariffs.

Antidumping/Countervailing Duties (AD/CVD)

2021 will likely bring a continued uptick in enforcement actions for evading or circumventing antidumping/countervailing duties. Coupled with new actions, Customs continues to focus on enforcement by issuing an increasing number of Requests for Information and Notices of Action to importers alleging that entries should have been declared as subject to these duties. The Biden Administration may be inclined to more traditional trade remedies such as AD/CVD to protect U.S. industry, rather than pursuing the more controversial remedies the Trump Administration relied on.

In 2021, we expect to see significantly more AD/CVD cases filed, including more petitions against China and products such as steel and aluminum, especially if Section 232 and Section 301 tariffs are removed. In addition, we anticipate more petitions against products from countries and regions such as India, Vietnam, Southeast Asia and Eastern Europe---places where importers switched sourcing because of Section 301 tariffs or existing AD/CVD orders on China.

We also expect an increased number of allegations that products should be subject to countervailing duties due to currency manipulation by the government of the exporting country. On November 4, 2020, the U.S. Department of Commerce announced that it was preliminarily imposing countervailing duties on imports of passenger vehicles and light truck tires from Vietnam and on twist ties from China due to alleged currency manipulation by those countries.

Trade Litigation

As more companies prioritize the protection of their intellectual property—and with increasing awareness of how International Trade Commission (ITC) remedies provide enormous competitive leverage—Section 337 filings may increase again.

Relatedly, the trend of more non-patent cases is expected to continue.  While approximately 90% of Section 337 cases used to involve assertion of a patent, there is increasing diversity in the caseload, with more complaints alleging misappropriation of trade secrets, trademark infringement, or other “unfair acts” related to the importation of products. The ITC will remain a crucial venue for high-stakes litigation at the intersection of trade and intellectual property.

Export Controls and Trade Sanctions

President Trump will leave office with several export controls and trade sanctions initiatives in flux, and it is unclear whether the Biden Administration will continue those initiatives, modify them, or reverse course completely. Even though President Biden will generally enjoy authority to repeal many of Trump’s export regulation policies, those legacy policies will likely still complicate the early stages of Biden’s presidency.

China

The Trump Administration is leaving President Biden with a convoluted collection of China-focused export regulatory policies.  In 2020, President Trump imposed enhanced export controls on Chinese “military end users,” issued an executive order to prohibit U.S. persons from transacting in publicly traded securities issued by Chinese companies owned or controlled by the Chinese military; imposed an expanded new “foreign-produced direct product rule” related to Huawei; and added China’s largest semiconductor manufacturer, Semiconductor Manufacturing International Corporation (SMIC), to the Entity List. We expect the Biden Administration to continue these policies in some fashion because many of them are tied to national security. However, Biden could soften some of these restrictions by establishing alternative licensing programs for low-technology items or by otherwise limiting or better defining the specific types of transactions that are subject to these export restrictions.

Iran

On the campaign trail, President-Elect Biden voiced support for a United States reentry into the Joint Comprehensive Plan of Action (JCPOA)—a.k.a. the “Iran nuclear deal”—if Iran would recommit to its terms. Since then, the remaining JCPOA member countries have alleged that Iran has exceeded the JCPOA’s enriched uranium limits and the Iranian government’s leading nuclear scientist was killed in an apparent assassination on November 27, 2020, thereby complicating potential U.S. efforts to reenter the JCPOA, likely to be very difficult.   

Russia

Russia will present a host of sanctions challenges to the Biden Administration, which will likely take early action to impose additional sanctions on Russia in response to its cyberattacks against various U.S. government agencies. Additionally, in enacting the National Defense Authorization Act for Fiscal Year 2021 (2021 NDAA), Congress has required the president to impose additional sanctions to continue blocking Russia’s completion of the Nord Stream 2 and TurkStream pipelines.  We should receive an early indication of the Biden Administration’s Russian sanctions strategy based on how it responds to the aforementioned cyberattacks and how it balances competing interests in enforcing the 2021 NDAA sanctions against the Nord Stream 2 and TurkStream pipelines.

Cuba

The Trump Administration moved to severely restrict preexisting Cuba travel authorizations under the Cuban Assets Control Regulations (CACR) and generally adopted a negative view towards U.S.-Cuba relations, but did not go so far as to entirely eliminate the CACR’s various licensing programs. Because those licensing programs remain in place, it would be possible for the Biden Administration to use those existing authorizations to more actively issue licenses to allow United States persons to transact with Cuba, thereby establishing friendlier U.S.-Cuba relations without directly repealing any current policies.

Emerging and Foundational Technologies

The Export Control Reform Act of 2018 (ECRA) authorized the Commerce Department to adopt new regulations to restrict exports of certain “emerging and foundational technologies.”  This process is still underway, and the incoming Biden Administration will enjoy a fairly wide latitude in determining if or how to regulate exports of “emerging and foundational technologies” as required under ECRA.

Cortney Morgan, Beau JacksonGrant LeachNithya Nagarajan, Jeffrey Neeley, Carlos Rodriguez and Robert Stang are partners and Julia Banegas and Stephen Brophy are attorneys with the law firm Husch Blackwell LLP. They practice in the International Trade & Supply Chain group of the firm’s Technology, Manufacturing & Transportation industry team.

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