Washington Insider -- Tuesday

Challenges to Trade Policy Authorities

Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.

Report Indicates China's Liu to Arrive in US Saturday for Signing of Phase One Deal

Chinese Vice Premier Lui He will lead a delegation to Washington to sign the phase one trade agreement between the U.S. and China, with the South China Morning Post reporting the delegation will arrive in Washington Saturday and be in the U.S. a "few days." President Donald Trump on Dec. 24 said he and Chinese President Xi Jinping would meet to sign the phase one deal, "but China has yet to confirm this."

U.S. Trade Representative Bob Lighthizer said earlier this month that representatives from both the countries would sign the phase one trade deal agreement in the first week of January.

Meanwhile, China's Ambassador to the U.S. Cui Tiankai told China state television CGTN that there is no problem for the country to live up to the commitments it has made in the phase one trade deal. "We will always implement what we promised. There is no problem with that," Cui said. "The U.S. has made commitments to the one-China policy. I just hope they will honor their commitment."

USDA Approves First State, Tribal Hemp Plans

Hemp production plans submitted by three states and four Indian tribes have been approved by USDA, the Agricultural Marketing Service (AMS) announced Dec. 27.

Louisiana, New Jersey, and Ohio are the first set of state hemp production plans approved under the U.S. Domestic Hemp Production Program, AMS said, while those submitted by the Flandreau Santee Sioux, Santa Rosa Cahuilla, and La Jolla Band of Luiseno Indian tribes were also given the green light.

Under the 2018 farm bill USDA was directed to develop a regulatory oversight program for hemp, including approval of hemp production plans submitted by states and Indian tribes.

Currently, 17 states have submitted plans to USDA that are under review, while another eight are working on plans to submit for review.

Washington Insider: Challenges to Trade Policy Authorities

Bloomberg is reporting this week that a number of international trade cases are expected to be decided next year and could change the president's "unlimited authority" to force U.S. importers to pay steep tariffs on steel and other goods that the administration says threaten national security.

While courts are largely deferential to the executive on national security, a recent case involving steel tariffs on Turkey is sending a message that the president doesn't have "carte blanche" when he uses a Cold War era law to impose tariffs, according to Clark Packard, trade policy counsel at the R Street Institute, a research organization promoting free markets.

The case, brought by Transpacific Steel LLC, could have wide-ranging impacts, including undermining the administration's threats to impose auto tariffs, R. Will Planert, a partner in Morris Manning and Martin LLP's international trade practice, told Bloomberg.

In addition, Ford Motor Co. is expected to make a bid for a U.S. Supreme Court review of steep tariffs on imports of Transit Connect vans in 2020, while a solar firm will fight to preserve a tariff exclusion the administration is trying to nix.

Transpacific Steel's challenge focuses on so-called "double tariffs" and could shed light on how courts may limit the president's use of a basic law, Section 232 of the Trade Expansion Act, Devin Sikes, an international trade attorney at Akin Gump Strauss Hauer & Feld, said. The U.S. Court of International Trade, in denying the government's bid to toss the case last November, rejected its argument that the president can modify tariffs without following the statute's procedures.

Transpacific would get a hefty tariff refund if it wins this challenge, which is expected to proceed with the steel importer's brief due Jan. 21, 2020. The company, which bought steel from Turkey for rebuilding after major hurricanes, alleges the administration flouted the law by singling out Turkey for 50% tariffs five months after the original 25% tariff was imposed.

A constitutional challenge to the tariff law is set for a Jan. 10 oral argument at the U.S. Court of Appeals for the Federal Circuit, Bloomberg notes and a decision in American Institute for International Steel v. United States could follow between 90 and 120 days later.

If the appeals court strikes the law down, current steel and aluminum tariffs would be eliminated -- however, a ruling upholding the law could embolden the administration to seek more tariffs.

The American Institute for International Steel argues the current law violates the non-delegation doctrine by ceding lawmaking authority to the president. In Gundy v. United States, which involved a non-delegation challenge to a sex offender law, four justices in June signaled an interest in revisiting the doctrine. Justice Brett Kavanaugh, who didn't participate in Gundy, said Nov. 25 in a matter unrelated to the steel case that the court may want to reconsider the doctrine.

Trade law firms are telling industry clients there could be an "avalanche" of claims if the Court of International Trade backs JSW Steel in a separate challenge to a Commerce Department tariff exclusion decision according to Adams Lee a trade lawyer with Harris Bricken. The court in JSW Steel (USA) Inc. v. United States could order Commerce to revisit its decisions and give importers who want to escape steel tariffs "new clarity," Lee said.

In addition, industry challenges are appearing from several other directions, Bloomberg said. For example, the newest steel tariff challenge in Universal Steel Products Inc. v. United States questions whether the Commerce report forming the basis for the levies met the law's standards.

Universal Steel and other importers joining the challenge say Commerce didn't explain the likely impact of the recommended remedies on downstream industries that manufacture products critical to national defense readiness. If the Court of International Trade agrees, it could force Commerce to re-evaluate.

So, we will see. While many observers indicate hopes for a diminution in trade tensions following the expected phase one deal with China, there are indications the administration intends to continue to push forward with its "managed trade" initiatives in China and in numerous other countries.

Growing industry pushbacks on this policy indicate a "political pause" during the coming election could be undertaken, but it is clear that not all administration policy advisers agree on such a policy decision -- so a significant policy fight can be expected to continue, possibly even after the approaching 2020 elections shift the government into "all politics, all the time." As always, the trade debate should be watched closely by producers as it intensifies, Washington Insider believes.

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