Trump Executive Orders Target Trade Deficits and Duty Collection
Kelley Drye Client Advisory
April 4, 2017

On March 31, 2017, President Trump issued two executive orders aimed at enhancing trade enforcement and drilling down on the causes of significant deficits with U.S. trading partners. These orders require: (1) development of a specific agency enforcement plan; and (2) publication of an omnibus trade deficit report, with potential opportunity for public comment and hearing.  The deadlines for both the enforcement plan and report are within 90 days of issuance, or no later than June 29, 2017. 
While these orders largely build on existing Congressional mandates and longstanding administrative efforts, they also – perhaps most importantly – bring attention to the often overlooked area of trade enforcement and its relationship to deficits.
 
Establishing Enhanced Collection and Enforcement of Antidumping and Countervailing (AD/CV) Duties and Violations of Trade and Customs Laws

The trade enforcement executive order, entitled Establishing Enhanced Collection and Enforcement of Antidumping and Countervailing (AD/CV) Duties and Violations of Trade and Customs Laws, seeks to better enforce and collect duties on illegally-traded imports as determined by the U.S. Department of Commerce.  Specifically, the order targets uncollected AD/CV duties imposed on imports that are either dumped in the U.S. at below-market prices or whose production was subsidized by their home government.  Because these duties are determined and assessed retroactively, it is often difficult to identify and collect from importers seeking to evade U.S. trade laws.  At the end of Fiscal Year 2016, the U.S. government reported approximately $2.8 billion in uncollected duties for imports over the previous 15 years.

The order directs the Secretary of Homeland Security – which houses U.S. Customs and Border Protection (CBP), the agency charged with collecting AD/CV duties – to develop a risk-based plan requiring covered importers to provide security for AD/CV duty liability through bonds and other legal measures.  The report, to be developed in consultation with the Departments of Treasury and Commerce, as well as the United States Trade Representative (USTR), is due within 90 days.
Additionally, within 90 days, CBP is directed to develop and implement a strategy to better address imported goods found in violation of U.S. trade and customs laws, including the prohibition and disposal of such imports, through methods other than seizure.  Finally, the order directs the Departments of Treasury and Homeland Security to take additional measures to protect intellectual property rights (IPR) holders from counterfeit imports.

The order was warmly received by Ways and Means Chairman Kevin Brady (R-TX), who noted in a press statement that the action “operationalizes the new tools Congress put in place in the Customs enforcement bill that we enacted last year.” The Trade Facilitation and Trade Enforcement Act of 2015 (TFTEA), enacted in early 2016, provides Congressional mandates that are very similar to measures included in the President’s enforcement executive order.  For example, TFTEA required CBP to provide specific reports on the effectiveness of trade enforcement activities and oversight of revenue protection, including an examination of inadequate bonding and the potential use of continuous and single transaction bonds.  The legislation also directed CBP to create an importer risk assessment program that provided for additional bonding to protect U.S. revenue based on the level of importer risk.  Furthermore, TFTEA included provisions directing CBP to exchange certain information with and allow testing by right-holders to assist with IPR enforcement.
 
Also on March 31, the President announced his CBP Commissioner nominee, Kevin K. McAleenan, who has been serving as Acting Commissioner since January 20, 2017.  The agency also has jurisdiction over immigration and border issues, so the timing of both actions brings into sharp focus CBP’s customs revenue and enforcement functions, indicating that the Administration is aware of and focused on CBP’s important trade responsibilities.
 
Omnibus Report on Significant Trade Deficits

The other executive order, entitled Omnibus Report on Significant Trade Deficits, instructs USTR and the Department of Commerce, in consultation with other key administrative agencies, to issue within 90 days a report on the country’s imbalances with trading partners.  The goal of the order is to provide policymakers with “current and comprehensive information regarding unfair trade practices and the causes of United States trade deficits.”  While the Administration has said the order is not targeted at China, last year Chinese imports made up close to half of the U.S.’s trade deficit in goods, which topped $700 billion.
 
In preparing the report, Commerce and USTR may hold public meetings and seek comment from a variety of governmental and non-governmental stakeholders, including but not limited to manufacturers, farmers and ranchers, workers and consumers.  The order requires the report to identify trading partners with which the U.S. had a significant trade deficit in goods in 2016, though it does not define “significant.” For each identified foreign trading partner, the report must:

  • Assess the major causes of the trade deficit, including tariff and non-tariff barriers, dumping and subsidization, intellectual property theft, forced technology transfer, and poor worker rights and labor standards.

  • Assess whether the trading partner is hindering commerce in the United States as a result of unequal burdens in the form of law, regulation, or practice.

  • Assess the effects of the trade relationship on the production capacity and strength of the manufacturing and defense industrial bases of the United States.

  • Assess the effects of the relationship on employment and wage growth in the United States.

  • Identify trade practices and imports that may be impairing the national security of the United States.

This order also coincided with the release of the National Trade Estimate (NTE), an annual report prepared by USTR as required by law that surveys significant barriers to American exports, including tariffs and other non-tariff barriers.  According to a USTR Press Release, “{t}he findings of the 2017 National Trade Estimate underscore the Administration’s trade priority for enforcing U.S. trade laws to defend American workers and job-creators from harmful trade barriers and to promote free and fair trade that benefits all Americans.”  It is unclear how the Omibus Report on Significant Deficits required by the executive order will differ from the content provided in the NTE, which is also prepared by USTR in coordination with the Departments of Commerce and Agriculture and other government agencies, as well as with Federal Register-noticed public input.

Next Steps

We will continue to monitor developments related to CBP’s action plan, including any potential requests for public input, as well any relevant comment or hearing notices related to the report on trade deficits.  If you have any questions about the executive orders, please feel free to contact: WHO?