Trade Compliance

GHY discusses changes to international trade regulations and explores cutting-edge compliance strategies.

Recent Trade Developments: Dec. 2019

Posted January 06, 2020

Amid the hectic year-end holiday season, overshadowed by the passage of a modernized North American trade pact in the U.S. House of Representatives and promising reports of a “potential deal” which could bring an eventual halt to the damaging trade war between the U.S. and China, briefly recapped here are a number of other noteworthy international trade and compliance developments that occurred in recent weeks.

U.S. Lawmakers Endorse Push for WTO Reform

In a rare show of bipartisan cooperation, a majority of Democrats and Republicans on the House Ways and Means Committee united in expressing support for the World Trade Organization and urging the Trump administration to work with other countries to improve the speed and predictability of dispute settlement and address long-standing concerns with the WTO appeals court.

Washington been trying for years to force change at the multilateral body by blocking the nominations of appellate court judges over concerns about the WTO straying from its mandate and overreaching in some of its decisions. The result of these efforts culminated on December 10 with the effective shuttering of WTO appeals cases when the number of judges dropped to just one (a quorum of three is needed).

The U.S lawmakers’ non-binding resolution is viewed by some as an endorsement of the administration’s hardball tactics, which have brought it into conflict with just about every other WTO member. While a number of countries share Washington’s complaints about the way the Appellate Body had evolved, none have supported the Trump administration’s stance to block the appointment of judges to the court.

A coalition of Canadian business groups has warned that “in the absence of a fully functioning dispute-settlement system, the WTO simply cannot do its job of protecting the rights of Canadian exporters and importers.”

EU Considering Carbon Border Tax on Emission-Heavy Imports

The European Commission says is working to develop the world’s first carbon border tariffs to penalize carbon-intensive imports and protect European businesses subjected to EU carbon pricing.

In its European Green Deal roadmap released last month, the commission states that it will “propose a carbon border adjustment mechanism, for selected sectors, to reduce the risk of carbon leakage. This would ensure that the price of imports reflect more accurately their carbon content.”

However, this may be a challenge to implement for three reasons: 1) It will be extremely hard to calculate the “carbon content” of products made overseas; 2) it will lead to increased prices for imported products, which would be unpopular among voters; and 3) import tariffs tend to lead to trade wars that destabilize the global economy.

To avoid the possibility of “carbon leakage” (e.g., the transfer of production from the EU to other countries less committed to emission reduction) the commission says it will propose a carbon border adjustment mechanism for selected sectors to ensure the price of imports reflect more accurately their carbon content.

Trump Administration Moves to Allow Drug Imports From Canada

The Food and Drug Administration has issued a proposed rule that would allow for commercial imports of certain prescription drugs from Canada.

The effort is the administration’s latest to lower drug prices, which President Trump has made a top priority ahead of the 2020 presidential election.

Under the plan state governments, pharmacies and drug manufacturers would be allowed to come up with proposals for safe importation and submit them for federal approval.

The proposal though is likely to face legal challenges from the U.S. pharmaceutical industry and the Trudeau government along with Canadian medical, pharmacy and patient groups have warned of potential drug shortages should the program gain traction, as the country’s medicine supply is insufficient to support both Canadian and American consumers.

Ex-Im Bank Gets Seven-Year Extension

The Export-Import Bank saw its charter extended for seven years as part of the $1.37 trillion omnibus bill, which funds the U.S. government through Sept. 30, 2020.

Created to help U.S. companies compete overseas and bolster exports by providing cheap government-backed loans, the embattled agency has been criticized for providing “corporate welfare” to special interests and for years its operations had been severely restrained by conservative lawmakers seeking to pull the plug on the 85-year-old bank.

The new legislation enables the bank to keep lending in the absence of a full board of directors by allowing other government officials to temporarily fill vacancies in order to maintain a quorum.

Commerce Agencies and USTR to Get Additional Funding

Also included in the massive year-end appropriations bill passed last month was additional funding for the Commerce Department’s trade agencies.

The International Trade Administration is slated to get a $26 million increase from the previous fiscal year boosting its budget to $521 million, while the Bureau of Industry and Security will receive $128 million, representing a $10 million boost from fiscal 2019 levels.

According to lawmakers, the extra monies are intended to allow the ITA to fund stepped up efforts to investigate the evasion and circumvention of anti-dumping and countervailing duties. The increased funding for BIS is supposed to enable the bureau to facilitate the implementation of new export controls on emerging technologies.

The Office of the U.S. Trade Representative will receive a modest bump of $1 million from its fiscal 2019 budget of $69 million. The Senate Appropriations Committee said the increase will provide funding for the resources needed to support the exclusion process for imports subject to the administration’s Section 301 tariffs.

Sign Up for Trade News, Compliance Updates and More