I. Section 301 and 232 Year in Review Update (2023)
A. Section 301 Litigation
In March 2023, a three-judge panel for the Court of International Trade reached a final decision In re Section 301 Cases (HMTX Industries LLC v. United States) upholding the actions of the Office of the United States Trade Representative (USTR) in issuing List 3 and Final List 4. Lead plaintiffs in the case HMTX Industries LLC., filed an appeal with the Court of Appeals for the Federal Circuit on May 12, 2023.
1. USTR Actions on Section 301 Duties
All previously valid Section 301 exclusions were extended through December 31, 2023. The Section 301 exclusions are currently valid until December 31, 2023, and become null as of January 1, 2024. It is still unknown whether any exclusions will be renewed in 2024 or even perhaps only partially renewed; importers whose imported merchandise qualifies for a Section 301 exclusion have been able to resume declaring these for applicable imports. There are no signs that renewal of these exclusions will become effective prior to expiration, although it remains a possibility.
2. Four Year Cycle Review
In mid-2022, the USTR initiated the statutory four-year review process of the Section 301 tariffs. Section 307(c) of the Trade Act of 1974 requires USTR to review the effectiveness and economic impact of Section 301 actions every four years to keep the action in force. The first step in the four-year review process was to notify those interested parties benefitting from the trade actions of the possible termination of the actions, and provide an opportunity for the representatives of such to request continuation of the Section 301 actions. The second phase of the review provided opportunities for public comments from all interested parties. In early 2023, the timeframe for submitting comments expired and the continuation of the Section 301 tariffs is now under review by USTR. The final determination from USTR is now pending as a result of the four-year review and it is anticipated the review outcome will be released in the second half of 2024.
B. Section 232 Tariffs
There were a couple of noteworthy developments in 2023 regarding President Trump’s Section 232 tariffs on steel and aluminum products. One key update is Proclamation 10522 which was issued on February 24, 2023, and raised the Section 232 tariff rate on aluminum articles and derivative aluminum articles that are the product of Russia. Such articles are now subject to a 200 percent ad valorem rate of duty with respect to goods entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. Eastern Standard Time on March 10, 2023.
Of specific note is the expanded application of this increased tariff rate to imports of aluminum or derivative aluminum articles where any amount of primary aluminum used in the manufacturing of the articles is smelted in Russia, or the articles are cast in Russia (often termed “trace” articles), will be subject to a 200 percent ad valorem rate of duty. This broadened application took effect on April 10, 2023. Furthermore, imports of aluminum articles, derivative aluminum articles, and trace articles that are the product of Russia are not eligible for any General Approved Exclusions as set forth in supplement number three to part 705 of 15 C.F.R. Therefore, such aluminum imports are restricted from the otherwise available methods to alleviate the burden of Section 232 tariffs. Although imports of aluminum from Russia are not widespread, they could impact certain importing companies. In conjunction with this Proclamation and implementing guidance from customs in the form of a CSMS message, customs is also requiring additional data elements be reported for imports of aluminum products, which include declaring the country of smelting of the raw aluminum.
In addition to the Section 232 updates as they relate to Russia, the Department of Commerce’s Bureau of Industry and Security (BIS) issued a proposed rule on August 28, 2023, for requesting Section 232 exclusions from duties on imports of aluminum or steel. Essentially, these proposed modifications would result in a more efficient and fair process, and allow for a more streamlined approval process with higher approval rates for exclusion requests. Below are some of the key changes that would take affect if the rule were implemented:
Create a more efficient process for general approved Section 232 exclusions;
Create a general denied exclusion process (similar to an objection);
Updated certification language for exclusion requests (i.e., requestors need to certify that they have made reasonable efforts to source the product domestically); and
Updated certification language for objections (i.e., require evidence that the objector has sold the product domestically).
The comment period for this proposed rule closed October 12, 2023. BIS is expected to provide a final rule in approximately early 2024. Until then, the current Section 232 exclusion submission protocol remains in effect.
II. UFLPA Developments
The Uyghur Forced Labor Prevention Act (UFLPA) entered into effect on June 21, 2022. Now in its first full year of enforcement, the UFLPA establishes a rebuttable presumption that imports of all goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part in Xinjiang, or mined, produced, or manufactured by entities on the UFLPA Entity List, are made with forced labor and are thus prohibited from entry into the United States. The UFLPA presumption applies unless U.S. Customs and Border Protection (CBP) determines that it has been rebutted—i.e., that the importer has complied with specified conditions and, by clear and convincing evidence, has demonstrated that the items were not mined, produced, or manufactured wholly or in part by forced labor. The presumption also applies to goods made in, or shipped through other countries that include inputs made in Xinjiang.
A. Increased Enforcement
In fiscal year (FY) 2023, Congress allocated $101 million to UFLPA implementation, which represented a 108 percent increase from FY 2022. CBP used this forced labor prevention budget to detain 4,033 shipments in FY 2023, valuing $1,429 million. Of these, 1,687 shipments were denied entry, 1,802 shipments were released, and 544 shipments remain pending. By value, most detained shipments originated in Malaysia, with Vietnam in second place. The electronics industry had the highest number of detained shipments in FY 2023, followed by industrial and manufacturing materials in second place, and apparel, footwear, and textiles in third.
B. Expanded Entity List
In addition to increased numbers of detentions, the Forced Labor Enforcement Task Force (FLETF) expanded the UFLPA Entity List in 2023. On June 12, 2023, the FLETF added two new entities to the UFLPA Entity List: Xinjiang Zhongtai Chemical Co., Ltd., and Ninestar Corporation, including eight of its subsidiaries. On August 2, 2023, the FLETF added two more entities to the UFLPA Entity List: Camel Group Co., Ltd., and Chenguang Biotech Group Co., Ltd., including its subsidiary Chenguang Biotechnology Group Yanqi Co. Ltd. Finally, on September 27, 2023, the FLETF added three additional entities to the UFLPA Entity List: Xinjiang Tianmian Foundation Textile Co., Ltd.; Xinjiang Tianshan Wool Textile Co. Ltd.; and Xinjiang Zhongtai Group Co. Ltd.
Ninestar Corporation filed suit at the U.S. Court of International Trade in August 2023 challenging its inclusion on the UFLPA Entity List.
C. Shifting Targeting Priorities
On July 26, 2023, the FLETF issued its annual strategy update, which noted its shifting enforcement priorities. Specifically, in addition to the initial “high-priority sectors” set forth in the UFLPA of cotton, tomatoes and polysilicon, the updated UFLPA strategy notes that, “FLETF will emphasize the importance of monitoring all sectors identified by NGOs . . . as potential risk areas, including red dates and other agricultural products, vinyl products and downstream products, aluminum and downstream products, steel and downstream products, lead-acid and lithium-ion batteries, copper and downstream products, electronics, and tires and other automobile components.”
Regarding the listed high-priority sectors, CBP employs a dynamic risk-based approach that prioritizes the highest-risk goods within a sector based on current data and information.
III. Russian Sanctions: A 2023 Reflection of U.S. Customs Enforcement of U.S. Sanctions on the Russian Federation
On February 24, 2022, the Russian Federation (Russia) invaded Ukraine. The resulting impact of that invasion was followed by a significant U.S. economic sanctions on Russia, disrupting global trade flow. In the ABA Section of International Law Year in Review 2022, a number of economic sanctions were outlined that were focused on import restrictions of trade in goods from Russian. Those import restrictive measures included the following:
Restrictions on Import from the Donetsk People’s Republic (DNR) and Luhansk People’s Republic (LNR) regions of Ukraine.
Import Restrictions on Russian Federation Origin or Goods from the Russian Federation and Gold.
Suspension of Normal Trade Relations with Russia and Belarus Act and raising of certain imports of Russian goods to 35 percent.
U.S. Commerce Department Downgrades of Russia to Nonmarket Economy Status.
It has been a year since the publication of the 2022 Year in Review, providing an opportunity to reflect on the impact and success of those import related economic sanctions. Based on data provided by U.S. Census Bureau, U.S. imports of commodities from Russia have steadily decreased since the sanctions were first imposed in February 2022, although U.S. imports from Russia were still relative strong in the first three months following the initial imposition of sanctions. This may be attributable to a series of general license provided to U.S. companies to wind down existing deals.
Though the U.S. Census Bureau data suggest that U.S. sanctions on Russia are having a desired effect of curbing commodity imports from Russia, the data is silent on what kind of goods the U.S. has continued to import from Russia. That information would be helpful to the trade community in determining what U.S. priorities are and where they are headed from a trade and foreign policy perspective.
IV. U.S. Judicial Review of Customs-Related Determinations
The United States Court of International Trade (CIT) and its predecessor bodies have been designed to provide “a comprehensive system for judicial review of civil actions arising out of import transactions and federal transactions affecting international trade.” The court has exclusive jurisdiction over civil actions commenced pursuant to 28 U.S.C. § 1581 and 28 U.S.C. §1582. In the context of customs litigation, the two subparagraphs of Section 1581 most frequently invoked by litigants are subparagraphs (a) and (i).
A. Selected Decisions by U.S. Court of Appeals for the Federal Circuit
1. Royal Brush Manufacturing, Inc. v. United States
On July 27, 2023, in Royal Brush Manufacturing, Inc. v. United States, the Court of Appeals for the Federal Circuit (CAFC) ruled that Customs and Border Patrol (CBP) violated U.S. importer Royal Brush Manufacturing, Inc.’s (Royal Brush’s) due process rights by failing to share “business confidential information” (BCI) in an AD/CVD proceeding.
The case involved entries of pencils that Royal Brush imported to the U.S. from the Philippines between 2017 and 2018. CBP initiated an EAPA investigation after Dixon Ticonderoga Company (Dixon), a competitor pencil importer, filed a complaint with CBP alleging AD/CVD evasion by Royal Brush under the Enforce and Protest Act of 2015 (EAPA). CBP accused Royal Brush of transshipping pencils from China through the Philippines to avoid antidumping duties. However, when making this determination of evasion, CBP only provided Royal Brush with redacted public summary versions of its evidence (redacting photographs as well as numbers and calculations), claiming it was barred from providing access to certain BCI, and, in addition, denied Royal Brush the opportunity to submit rebuttal evidence. The CIT held that CBP did not violate Royal Brush’s due process rights since it provided public summaries of the confidential information. Royal Brush appealed.
On appeal, the CAFC ruled that the “relatively immutable” principle of due process, where the government must provide access to the evidence used as the basis for an action that seriously injures an individual, extends to administrative proceedings: “In sum, CBP relied on factual information that was not provided to Royal Brush to determine that Royal Brush had evaded duties. This, in and of itself, is a clear violation of due process.” The court also held that CBP relied on “new” information when it concluded that the pencil manufacturer did not have the capacity to produce the exported pencils including those shipped to Royal Brush and imposed dumping duties on its shipments. CBP argued that they could avoid compliance with due process requirements by simply failing to provide for a protective order in a statute or regulation. The CAFC rejected that contention outright: “We are aware of no case supporting any such extraordinary theory, and it is untenable on its face.” Instead, the court ruled that CBP “has inherent authority to provide protective orders in EAPA proceedings before the agency.”
The CAFC remanded the case back to the CIT with instructions that CBP must provide Royal Brush with the redacted information and calculations (BCI) that CBP relied on to determine evasion and be given an opportunity to rebut the information with its own evidence. This decision establishes that CBP must establish administrative protective orders in EAPA cases.
2. PrimeSource Building Products, Inc. v. United States
On February 7, 2023, the CAFC reversed the decision of the CIT in PrimeSource Building Products, Inc. v. United States and upheld Proclamation 9980 and its steel and aluminum tariffs for derivative products under Section 232 of the Trade Expansion Act of 1962. The CAFC decided that Section 232’s deadlines did not prevent the President from modifying his initial timely adopted plan of action by issuing Proclamation 9980.
In 2018, the President issued Proclamation 9705 to adopt a plan of action to address the national security threat posed by steel imports which contributed to unsustainably low levels of use of domestic steel-producing capacity, starting with the imposition of higher tariffs on steel imports from certain countries. Then, in 2020, the President issued Proclamation 9980, which established Section 232 tariffs on imports of steel derivatives, such as nails and fasteners. That proclamation was challenged in two cases filed in the CIT, one by PrimeSource Building Products, Inc. and the other by Oman Fasteners, LLC, Huttig Building Products, Inc., and Huttig, Inc. (collectively, Oman Fasteners). The CIT decided that Proclamation 9980 was unauthorized by Section 232 because the new derivatives tariffs were imposed after the passing of certain deadlines for presidential action set forth in Section 232, and the government appealed.
After the CIT decision, the CAFC decided Transpacific Steel LLC v. United States (2022), which led the CIT to issue stays of its judgments in the two cases. In Transpacific, the CAFC upheld the presidential proclamation that increased tariffs on steel beyond Proclamation 9705’s rate, concluding that “when the President, within the § 232 time limits at issue, adopts a plan of action that contemplates future contingency-dependent modifications, those time limits do not preclude the President from later adding to the initial import impositions in order to carry out the plan to help achieve the originally stated national-security objective where the underlying findings and objective have not grown stale.”
In rejecting efforts by PrimeSource and Oman Fasteners to distinguish Transpacific, the CAFC pointed out that there is no textual basis for reading Section 232 as empowering the President to act only at the initial plan-adoption stage, and not at later modification stages, and also no textual basis for a specific time limit on adjustments under a timely adopted plan. In upholding Proclamation 9980, the CAFC recognized that the new proclamation’s addition of steel derivative tariffs was well within Section 232’s authorization of presidential action, and that there is no persuasive reason for overriding the President’s judgment.
B. Selected Decisions by U.S. Court of International Trade
1. Meyer Corp. v. United States
Plaintiff Meyer Corp. commenced an action seeking first-sale treatment for its imported cookware from China, and duty-free treatment under the GSP for certain cookware imported from Thailand, a beneficiary developing country (BDC). In the original litigation, the CIT rejected Meyer’s assertion that it met the first sale conditions specified in Nissho-Iwai that the manufacturer and the middleman deal with each other at arm’s length, and in the absence of any non-market influences that affect the legitimacy of the sales price, because the United States does not recognized that the PRC has a “market economy” status under Article 15(a)(ii) and (d) of the PRC’s agreement to the World Trade Organization, and “thus it presumptively remains a non-market economy in this and other proceedings.” On appeal, the CAFC rejected the CIT’s reasoning, stating that “there is no basis in the statute for Customs or the court to consider the effects of a nonmarket economy on the transaction value and require a party to show the absence of all “distortive nonmarket influences.’” The CAFC decision further states that 19 U.S.C. § 1401a(b)(2)(B) “concerns effects of the relationship between the buyer and seller, not effects of government intervention, and especially not with government intervention that affects the industry as a whole.” The CAFC then vacated and remanded Meyer’s first-sale claim case back to the CIT to reconsider whether Meyer may rely on the first-sale price.
On remand, the CIT affirmed its original determination that Meyer’s failed to support its assertion that the basis of its first sale was not warranted because the prior analysis showed that Plaintiff’s failure to provide the financial information requested by it during discovery provided an independent reason as to why Plaintiff could not demonstrate a true first-sale value absent of influence⎯not from a nonmarket-economy country per se⎯but from the relationships of the related parties. Further, Plaintiff had more-than-adequate opportunity to make its case for first-sale treatment, and any suggestion now for a retrial was inconsistent with the first CIT ruling to secure the just, speedy, and inexpensive determination of every action and proceeding.
2. Cyber Power Systems (USA) Inc. v. United States
This case involves the question of substantial transformation for purposes of determining country of origin marking (19 U.S.C. § 1304(a)) of uninterruptible power supplies (UPS) and a surge voltage protector (SVP). At the time of entry, the merchandise had been marked as “Made in the Philippines.” CBP, however, determined that the country of origin for the five UPS and one SVP was China, and excluded their entry into the United States when Cyber Power refused to change the product markings. Cyber Power contended that the assembly operations in the Philippines resulted in a “substantial transformation” of the merchandise into Philippine origin, having a name, character, and use different from each device’s Chinese components. The court agreed with Plaintiff as to the origin of one model of subject merchandise because there was sufficient information supplied to support a substantial transformation but found for Defendant as to the remaining five products. For these five products, the court concluded that Cyber failed to carry its burden of proof to overcome the presumption of correctness that attaches to Customs’ original determination that the devices were products of China, and to show, by a preponderance of the evidence that these devices were substantially transformed into products of the Philippines.
Despite siding with CBP with respect to the five products found not to have been transformed, the court reiterated its rejection of two potential alternatives offered by the government to the substantial transformation test of name, character, or use: first, an “essence-based” approach that would look only to whether the essential or critical component of a product had been transformed; and second, an approach that would per se decide whether substantial transformation had occurred on a component-by-component basis. Rather, the court confirmed that a change in name, character, or use turns on the nature of the potentially transformative processing, considered in the context of the particular kind of merchandise being manufactured.
3. In Re Section 301 Cases
The CIT ruled that Office of the U.S. Trade Representative (USTR) complied with Administrative Procedure Act (APA) requirements when it set Lists 3 and 4A Section 301 tariffs on China. USTR imposed the contested duties, referred to as “List 3” and “List 4A,” in September 2018 and August 2019. Plaintiffs alleged that USTR exceeded its statutory authority and violated the APA when it promulgated List 3 and List 4A. Here, the Court found that USTR’s remand results were not illegally post hoc simply because USTR addressed the comments on remand. USTR’s responses were simply a fuller explanation of its analysis at the time of agency action, and the USTR was not “required to provide additional explanation regarding its reasons for agreeing with the President that the chosen actions were ‘appropriate.’” Ultimately, the court noted that a disagreement with the conclusions USTR reached is not a basis for the court to overturn its actions.
4. Royal Brush Mfg., Inc. v. United States
The CIT dismissed a challenge by Royal Brush to CBP’s antidumping evasion finding under the EAPA against the company’s pencil imports from the Philippines. The case returned to the CIT following the earlier decision of the CAFC, vacating and remanding the case with specific instructions to remand to CBP for further proceedings consistent with the Federal Circuit’s decision.
Essentially, CIT ruled that Royal Brush had to file a protest with CBP to allow the court to order reliquidation for its entries (which the agency illegally liquidated), which Royal Brush failed to do. Therefore, CIT did not have jurisdiction to hear the case. The company imported five entries, two of which were assessed the AD duties and three of which were not. Regarding the duty free entries, the court stated: “because there is no basis upon which the Government may pursue reliquidation of, or penalties for, the duty-free entries, and there being no other apparent form of relief available to Royal Brush, this case is moot.”
As for the dutiable entries, the court noted Royal Brush was precluded from obtaining refunds because Royal Brush failed to protest the liquidations. In conjunction with the passing of the deadline for the government to seek penalties, the case was also moot with respect to these entries. The court emphasized that the limits of Section 1514 applied, quoting the appellate court, and stating “all liquidations, whether legal or not, are subject to the timely protest requirement. Without a timely protest, all liquidations become final and conclusive under 19 U.S.C. § 1514. [emphasis added].”
5. Otter Prods., LLC v. United States
On March 29, 2023, the CIT dismissed a lawsuit from cellphone-case-maker Otter Products (Otter) seeking interest on customs duty overpayments because it lacked jurisdiction. Seeking the interest on the duty overpayments linked to three prior disclosures on cellphone cases entered between 2006 and 2014, Otter Products argued it was entitled to the interest since the payments were made pursuant to CBP’s erroneous classification of its merchandise.
Upon the discovery in 2010 that it had failed to declare the value of certain assists related to certain imported cellphone cases and inconsistently classified those products, Otter filed prior disclosures. After prevailing in litigation related to the proper classification of the cases, the imports were reclassified under the proper subheading and Otter was afforded a refund, but it was not reimbursed for any interest on the overpayments. The CIT held that, while the law “requires an importer to submit interest for loss of duties,” the company “does not receive interest on its overpayments in connection with prior disclosures because the statute does not provide for interest on duty overpayments.” Since there is no stated waiver of sovereign immunity under the APA for interest paid on overpayments related to prior disclosures, the court lacked jurisdiction.
V. Canada’s New Forced Labor Reporting Requirements
On May 3, 2023, the Canadian Parliament passed a supply chain transparency law, the Fighting Against Forced Labor and Child Labor in Supply Chains Act (the Act). Among other amendments to Canada’s import laws, notably, the Act introduces a forced labor diligence public reporting requirement that will apply to both private sector entities and government institutions. It enters into force on January 1, 2024, and the first report deadline for reporting entities is May 31, 2024.
Reporting entities include all Canadian federal government institutions, Crown corporations and their wholly owned subsidiaries, as well as any private sector “entity” that is:
producing, selling or distributing goods in Canada or elsewhere;
importing into Canada goods produced outside Canada; or
controlling an entity engaged in any activity described in paragraph (a) or (b), with control defined broadly as any direct or indirect control or common control “in any manner.”
Policy guidance released by Public Safety Canada in December 2023 elaborates that “importing” for these purposes is understood to mean declaring and accounting for goods under the Customs Act with the Canada Border Services Agency; an entity that purchases imported goods from a third party that declared and accounted for them does not qualify as “importing.” The reporting requirement does not apply to “entities” that solely provide services that support the production, sale, distribution, or importation of goods without itself actually engaging in these activities.
An “entity” is defined as a corporation or a trust, partnership or other unincorporated organization that meets at least one of the following criteria:
is listed on a stock exchange in Canada;
has a place of business in Canada, does business in Canada, or has assets in Canada and that, based on its consolidated financial statements, meets at least two of the following conditions for at least one of its two most recent financial years:
o it has at least C$20 million in assets;
o it has generated at least C$40 million in revenue; and
o it employs an average of at least 250 employees; or
is otherwise prescribed by regulations (none of which has yet been enacted).
For purposes of the second criterion in the “entity” definition, the “Canadian nexus” element (i.e., having a “place of business in Canada, doing business in Canada or having assets in Canada”) should be interpreted using the ordinary sense of these words and with reference to the criteria applied by the Canada Revenue Agency for income tax purposes.
The annual reports filed by private sector entities must include the steps the organization took during the previous financial year to prevent and reduce the risk that forced labor or child labor is used or in the entity’s supply chains. The report must include the following information in respect of each applicable reporting entity:
the entity’s structure, activities and supply chains;
its policies and due diligence processes in relation to forced labor and child labor;
the parts of its business and supply chains that carry a risk of forced labor or child labor being used and the steps taken to assess and manage that risk;
any measures taken to remediate any forced labor or child labor;
any measures taken to remediate the loss of income to the most vulnerable families that results from any measure taken to eliminate the use of forced labor or child labor in its activities and supply chains;
the training provided to employees on forced labor and child labor; and
how the entity assesses its effectiveness in ensuring that forced labor and child labor are not being used in its business and supply chains.
The reports require approval by the reporting entity’s governing body (board of directors or similar) and an attestation. They must be posted publicly on the reporting entity’s website and will also be available in a government registry. Corporations formed under the Canada Business Corporation Act or other federal statutes must provide a copy of the report to its shareholders along with its annual financial statements.
Entities or individuals who fail to comply with the obligations under Act or make false or misleading statements, or provides false or misleading information to the Minister (e.g., in an annual report) will be subject to summary conviction with fines up to C$250,000. Importantly, the Act also creates personal liability for directors and officers, among others, who direct, authorize, assent to acquiesce in or participate in an offence under the Act.
VI. A Year in Review in the Australian Customs and Trade Agenda for 2023
A. Background
2023 was the first full year after the restraints on trade imposed by the COVID-19 pandemic and the first full year in power for Australia’s new Federal Government. Many things moved yet many issues remain unresolved. Some of the highlights are summarized below.
B. The Australian Free Trade Agenda
Australia has actively pursued several bilateral, plurilateral, and regional Free Trade Agreements (FTA) with its major trading partners. An FTA with India (the Australia–India Economic and Trade Agreement known as ECTA) commenced on December 29, 2022. An FTA with the United Kingdom (UK) (known as the A–UKFTA) commenced on May, 31, 2023. Negotiations continue with India for a wider Australia—India Comprehensive Economic Cooperation Agreement (to be known as CECA). The trade initiatives in ECTA would then be folded into the broader CECA.
Negotiations have also been concluded by Australia and the other parties to the ASEAN–Australia—New Zealand Free Trade Agreement (AANZFTA) for a “Second Protocol” to the agreement establishing AANZFTA. The “Second Protocol” operates as a significant “upgrade” to the terms of AANZFA and was signed on August 23, 2023. The provisions of the “Second Protocol” will enter into force when Australia, New Zealand, and at least four ASEAN Member States conclude their ratification and implementation steps.
Australia joined thirteen other countries negotiating the Indo—Pacific Economic Framework Agreement (IPEF) comprised by “Four Pillars.” Subsequent negotiations have led to the conclusion and signing of the “Supply Chain Agreement” (Pillar II of IPEF) on May 27, 2023, but that Agreement has yet to be implemented by the contracting parties. IPEF does not address tariffs or market access as found in traditional FTAs and can better be seen as seeking to establish rules to enhance trade and social outcomes.
The FTA process has not all been positive. Australia had been negotiating an FTA with the European Union (the Australia—EU FTA) since June 18, 2018, with a break following Australia cancelling its order of submarines from France. While much of the Australia—EU FTA seemed to have been settled, the parties could not reach consensus on some fundamental issues including Australia’s proposed access to the EU’s agricultural markets and on the EU’s demands for protection on a significant number of “Geographical Indicators” which would have jeopardized current Australian use of those indicators. While public statements indicate that discussions will continue, the inability to reach agreement on fundamental issues after five years of negotiations does not suggest that a positive outcome will take place soon.
C. The Trade Relationship with China
One of the most significant trade issues for Australia has been its relationship with China. Even though Australia has an FTA with China (ChAFTA), as the political relationship between Australia and China deteriorated, the trade relationship also fractured. This included restrictions and significant additional duties on Australian exports of seafood, coal, barley, and wine. Australia had resorted to proceedings against China at the World Trade Organization (WTO) regarding the measures on barley and wine. Simultaneously, China has also acted against Australian trade measures imposed on Chinese steel products.
Following a change in the Australian Federal Government in 2022, the political relationship seems to have improved. Bans on imports of Australian coal and timber were lifted during 2023. Dumping and countervailing measures imposed on Australian barley were removed in August 2023 after China reviewed the need for the measures. Australian action at the WTO regarding those measures has been withdrawn. The countries have recently announced that China will undertake a review into the dumping duties imposed on Australian wine exports and it can only be hoped that China resolves that ongoing measures will not be required. Australia could then withdraw its action against China at the WTO.
D. Dumping and Countervailing Measures
Australia continues to maintain an active trade remedies regime with twenty-seven measures in place and twenty investigations in progress. There are also several applications which have yet to led to investigations being commenced. Determinations were reached that measures do not apply to aluminum extrusions forming part of certain residential solar panel kits and do not apply to certain steel items forming part of a large solar farm.
E. Sanctions and Trade Restrictions
Australia has three categories of sanctions regimes including one based on sanctions imposed by the United Nations (UN), one allowing for autonomous sanctions outside of those imposed by the UN and one allowing for the imposition of “Thematic” sanctions. Australia imposed significant autonomous sanctions in 2022 and 2023 on Russia and Belarus following the initiation of conflict with Ukraine. Those sanctions extended and expanded previous autonomous sanctions imposed on Russia in 2014 and 2015.
Those autonomous sanctions include restrictions on the export or supply of certain goods, restrictions on the import, purchase or transport of certain goods, restrictions on certain commercial activities, restrictions on the provision of certain services, restrictions on providing assets to designated persons or entities, restrictions on dealing with the assets of designated persons or entities and travel bans on designated persons.
In addition to sanctions, Australia has also taken other measures including removing “Most Favored Nation” status for Belarus and Russia and recently extending the additional 35 percent customs duty payable on goods imported into Australia from those countries until October 24, 2025.
F. Trade Facilitation and Modernization
Many countries and international agencies are pursuing versions of the “Trade Facilitation and Modernization” agenda.
Australia’s journey has been somewhat fragmented. Recent research determined that there are twenty-nine agencies which have an interest in goods at the border and 200 pieces of legislation in operation. This makes a “Trade Single Window” quite an ambitious outcome. Many of the agencies are undertaking their own work. By way of example, legislation has recently been passed which will allow the Australian Border Force (ABF) to conduct a “regulatory sandbox” for “controlled trials” of new processes to facilitate trade which are not allowed by the provisions of the Customs Act 1901.
Importantly, the Federal Government established the Simplified Trade Implementation Taskforce (Taskforce) in 2021 as a temporary “whole of government” body to review the trade reform work of the border agencies and recommend trade simplification initiatives to the Federal Government. There have also been significant contributions by the private sector to the work of the border agencies and the Taskforce. The recommendations of the Taskforce are currently before the Federal Government along with associated funding proposals. Many of those in the private sector are hoping that the recommendations are adopted as well as making the Taskforce a permanent agency overseeing the implementation of the trade modernization and facilitation reform being conducted across the border agencies.
VII. Conclusory Remarks
Although 2023 has been a tumultuous year for global trade, there continued to be significant developments on the trade front. And despite the disruptive effects of the Russian-Ukrainian conflict and increasing enforcement actions by the US government, many trade practitioners continually found ways to adapt to unexpected changes to their business environment. These trends will likely continue in 2024.
