Although the auto industry appears to have lost the fight to delay a switchover from NAFTA to the U.S.-Mexico-Canada Agreement, an executive at the organization that represents parts suppliers said they now hope that with give-and-take on the implementing rules and perhaps some flexibility, the industry will be able to make a July 1 entry into force date work.
Aluminum producers are telling the Commerce Department that imports are rising, not falling, as the scope of Section 232 exclusions is so large, it dwarfs traditional import volumes. They said this trend “is a threat to U.S. aluminum producers.” In a letter sent April 22, The Aluminum Association said that during the first few months of 2020, the Commerce Department granted exclusions for aluminum can sheet that is more “than the entire U.S. market consumes in a year and dwarfs historical import trends for that segment.”
U.S. Trade Representative Robert Lighthizer notified Congress April 24 that the United States–Mexico–Canada Agreement will enter into force on July 1, 2020. Following that notification to Congress, the U.S. certified to Mexico and Canada that it's ready for the NAFTA replacement to take effect.
Industry is finding it can move components out of China, and it's still affordable to produce those components closer to final assembly plants, especially with more automation, said Peter Anderson, vice president of global supply chain at Cummins, an Indiana-based Fortune 500 company that makes engines for heavy equipment and heavy-duty trucks. The sections 301 and 232 tariffs made Cummins start “to think about what we could do differently,” and he said many Cummins suppliers have “started to take things out of China to mitigate those tariffs.” Anderson was one of several voices on a webinar on how manufacturing will change after the COVID-19 pandemic response, hosted by the Hudson Institute on April 22.
Panelists tasked with envisioning how trade will change post-COVID-19 pandemic disagreed on what's most useful to avoid another shortage of critical supplies in an emergency, but said they expect that things will change. Nicole Bivens Collinson, a lobbyist at Sandler Travis, said clients are already planning how to reshape supply chains, after the painful experience of not receiving shipments as the pandemic hit China, then South Korea, then the rest of the world.
Although the hearing scheduled for input on a Kenya Free Trade deal was canceled, comments continue to come in for what the U.S. trade representative's priorities should be.
The evaluation of exclusion requests related to COVID-19 is too slow, two senators say, and they're asking that the Office of the U.S. Trade Representative eliminate duties on all imports covered by Section 301 that are needed to fight the pandemic. Sen. Pat Toomey, R-Pa., and Sen. Tom Carper, D-Del., sent a letter to USTR Robert Lighthizer April 20, asking him to “work with [Health and Human Services (HHS)], the Federal Emergency Management Agency (FEMA), the Department of Commerce, industry, and other relevant experts to develop a list of inputs, substitutes, machinery, and other products that U.S. companies need to meet the current demand for medical supplies, that will be subject to 301 tariff exemptions. U.S. companies must be able to access the materials needed to manufacture critical medical supplies without the added cost of 301 tariffs for the duration of the COVID-19 emergency, and they should not be subjected to the lengthy process of submitting tariff exemption requests for each individual input required to make products essential for addressing the ongoing pandemic. Time is of the essence, and these exclusions should be issued as soon as possible.”
Importers hailed the temporary duty deferral announced April 19 (see 2004200024), even as many said applying it to Section 301 is also needed. Apparel faces some of the highest Most Favored Nation tariffs, which are the only category the duty deferral applies to. American Apparel and Footwear Association CEO Steve Lamar said: “Deferring duty payments and import fees in a time of limited liquidity is a welcome move. As revenue has receded due to closed stores and less commerce, American companies have been faced with the difficult decision to pay their tariff bill to the U.S. government or keep American workers on payroll. The deferral of these payments will provide some of the liquidity needed to keep more Americans employed and more American companies operational during this crisis,” He said, however, that Section 301 duties should be included.
The Office of the U.S. Trade Representative issued a pre-publication notice April 20 that carmakers must submit draft staging plans under the U.S.-Mexico-Canada Agreement no later than July 1. Their final plans are due by Aug. 31, the notice said. If USTR approves the plans, companies would have five years instead of three to increase regional content and adjust to other changes in the auto rules of origin. In order to be approved, the companies must show how every model can meet the stricter standards, even if that can't be done within the five-year time frame. Many cars imported from Mexico do not meet the current standards and pay the 2.5% duty. “The petitioner also should identify any North American investments and sourcing, preferably by calendar year and location, which will allow such vehicles to meet the standard USMCA rules,” USTR said.
Trade groups that represent importers are asking that restrictions to the products eligible for the Generalized System of Preferences benefits program from Thailand be delayed. The groups said in a letter to President Donald Trump that the changes, scheduled for April 25, “would increase costs for American employers [that] already are struggling to maintain employment levels in response to shutdowns and falling demand around the world” brought on by COVID-19 pandemic response measures. They asked for at least a six-month delay.