Former Trump Era Deputy USTR Calls for AD/CVD Reform, EAPA Changes, More China Tariffs

Gerrish, whose biography at Schagrin Associates says he was the lead negotiator for the phase one agreement with China that stopped the escalation of the trade war, said that while it's difficult to make a full assessment of how China complied with its promises to make structural reforms in intellectual property protections, technology transfer requirements, financial services access, sanitary and phytosanitary reviews of agricultural exports and currency policy, the country failed to fulfill at least some of these promises. He said the Office of the U.S. Trade Representative should recommend additional tariffs as a result.

"The problems we face with China and the threats they pose to national security and the long-range competitiveness of the United States cannot be overstated," he said, but also said that the first Trump administration made important progress by imposing Section 301 tariffs. The trade deficit with China declined by 21% as a result, he said.

During the hearing on trade enforcement, Rep. Greg Murphy, R-N.C., who has led the push in his party to curtail de minimis for Chinese goods, told the panel that customs fraud has grown, and he said Charlotte Pipe and Foundry has had to file 14 Enforce and Protect Act petitions to sustain the protections it was awarded through antidumping duty and countervailing duty orders.

Murphy said he just reintroduced the Fighting Trade Cheats Act, which would increase the penalties for customs fraud and evasion.

Gerrish replied that the bill would be an important addition to the government's ability to tackle transshipment, and said that he also wants Level the Playing Field Act 2.0 to pass (see 2502260001).

Greta Piesch, the general counsel for USTR in the Biden administration, and the Democrats' witness at the hearing, also endorsed Level the Playing Field 2.0, which has bipartisan sponsorship from two trade subcommittee members, Rep. Beth Van Duyne, R-Texas, and Rep. Terri Sewell, D-Ala.

"This bill represents the next front in combatting China’s attempts to get around U.S. trade remedy laws by moving production from one country to another and subsidizing production in third countries. I urge this Subcommittee to advance this legislation to better enable U.S. industries to defend themselves against China’s ever-changing tactics," she wrote in her opening statement.

Gerrish also told Murphy the government should be able to impose requirements on companies that try to appeal CBP decisions on misclassification, undervaluation and transshipment.

He said he'd like Congress to allow Customs to self-initiate EAPA complaints. In an interview after the hearing, Gerrish explained that in EAPA cases initiated by domestic companies, "Even though you might get relief against the one company you brought it against, they're just continuing through the other shell companies." He said CBP has better insight into evasion than a private company can, particularly when serial shell company tactics are being used.

He acknowledged that CBP can enforce penalties against customs fraud without using EAPA, but said EAPA's reasonable suspicion standard would be helpful for the agency. He also said that EAPA is preferable to CBP authorities because EAPA has time frames to require action, and it's easier to see what action is being taken by CBP.

"What was happening before is, we had these e-allegations ... it was a complete black box, we never even knew whether there was action being taken," he said.

In the same impromptu interview, Gerrish said the International Trade Administration needs to change numerous policies to make AD/CVD more favorable to domestic interests.

"Bring back zeroing is certainly one of those I would include. To me, the zeroing issue is critical. They need to go back to their prior practice of using zeroing across the board.

"I think they can take more action against particular market situations than they are currently." He said ITA needs to make greater use of adverse facts when foreign companies are less than cooperative, "not give respondents repeated chances to provide information, and provide it very late in the proceeding, because they end up gaming the proceeding, to get a better result. I think there needs to be a greater crackdown on that."

He said he doesn't think there needs to be rulemaking to make these changes.

Both Murphy and Ways and Means Committee Chairman Rep. Jason Smith, R-Mo., asked Gerrish about de minimis, with Smith noting the committee passed a bill that would have made Section 301 goods ineligible.

Smith said there's evidence that de minimis shipments from China accelerated after Section 301 tariffs were imposed, and that without reform, de minimis will undermine new tariffs.

Gerrish agreed, and said, "We should eliminate de minimis eligibility for any products under [sections] 301, 232 and our other trade enforcement measures."

The Biden administration proposed a rule that would accomplish that; the Trump administration decreed that no Chinese goods were eligible for de minimis, but then put an indefinite pause on that policy when it immediately became clear it wasn't administrable.

Rep. Linda Sanchez of California, the top Democrat on the subcommittee, criticized that reversal in her opening statement. She also said, "The President’s first trade action -- the America First Trade Policy Memo -- proposed reviews due April 1 that may guide new enforcement actions. However, the President’s reckless approach meant he couldn’t even stick to his own plan and wait for the review."

In an interview after the hearing, she said the committee hasn't been briefed on when CBP could be ready to collect duties on low-value packages containing Chinese goods, and said she doesn't think the president even knows which of his edicts are in effect and which aren't.

"Just chaos," she said, no collaboration -- which she said is a pity, because there is common ground between the parties on de minimis.

Subcommittee Chairman Rep. Adrian Smith, R-Neb., focused on trading partners' non-tariff barriers and other trade irritants in the ag space, both in his comments and in questions to witnesses. Like many members on the panel, he complained that Canada is not honoring its offer to grant more access for U.S. dairy products by making tariff rate quotas more generous -- and said that the USTR's efforts under Biden to get compliance were not effective.

Smith asked witness National Milk Producers Federation CEO Gregg Doud about a countervailing duty case in Colombia against U.S. milk exports, and said he's concerned that other markets will undertake politically motivated CVD cases against U.S. exports.

"I completely agree with you, this is 100% political," Doud said. He said the USTR needs to be very aggressive with Western Hemisphere trading partners. "For goodness sakes, we have a free trade agreement with Colombia," he said.

Smith also complained that the USTR did not do enough to stop Canada from passing a digital services tax, which he says discriminates against American firms.

"This challenge, like so much under the administration’s passive trade posture, languished in consultations," he said.

Witness Jonathan McHale, vice president at the Computer and Communications Industry Association, said DSTs cost U.S. firms more than $2 billion a year, and it will climb when Canada's collection starts at the end of June.

Rep. Vern Buchanan, R-Fla., complained that the tomato suspension agreement and what he called "illegal seasonal dumping of fruits and vegetables" has cost Florida 30,000 jobs. There have been no antidumping cases against seasonal fruits and vegetables, because of how price windows are evaluated, and because a majority of produce growers in the categories that Southeastern growers are concerned about have never agreed to bring a case.

Gerrish said he expects import competition for seasonal and perishable goods will be under review.

"I think we need to make changes to the antidumping and countervailing duty laws that address the problems with the dumping and subsidizing seasonable and perishable goods," he said.

Buchanan also suggested that reaching free trade agreements with Switzerland and the U.K. would be positive, but there was very little talk of liberalizing trade during the more-than-two-hour discussion.

Rep. Suzan DelBene, D-Wash., was one of the few defenders of free trade on the panel. "Trade can bring down prices for families and create local good-paying jobs by opening new markets to sell our goods overseas," she said. She called Trump's tariffs "the largest tax increase in a generation," and complained that the Ways and Means Committee should make the decision on raising taxes, but "it appears my Republican colleagues are just standing by."

She quoted both Jason Smith's and Adrian Smith's complaints during the Biden administration that he was making trade policy without consulting Congress.

"Yet, if the president's 25% tariffs on Canada and Mexico go through, the president would be, in effect, withdrawing the United States from the bipartisan USMCA trade agreement that Congress overwhelmingly approved of," she said. "There has been absolutely zero coordination with Congress on trade under the Trump administration."

"Where is the outrage now?"