As the (Customs and Trade) World Turns: December 2024

This edition offers crucial insights for sectors such as Automotive, E-Commerce, Energy and Cleantech, Fashion and Retail, Manufacturing, and Technology, as well as for in-house counsel, compliance processionals, and importers.

In this December 2024 edition, we cover:

1. Trump’s trade team appointments signal a return to tariffs and protectionism.

2. Forced labor enforcement expands with new UFLPA additions and global legislative efforts.

3. Anticipated changes to the de minimis program could reshape import strategies.

4. US steel industry lobbies for increased tariffs and trade protections.

5. Upcoming USMCA review under Trump may alter North American trade dynamics.

1. What We Know About Trump’s Trade Team so Far

What impact will President-elect Trump’s nominees and appointees have on his trade agenda? Will tariffs be used as a negotiating tactic to achieve policy goals? For those in the business community, US Department of the Treasury Secretary pick Scott Bessent, a hedge fund manager who views tariffs as a tool to “escalate to de-escalate,” has provided some reassurance of a moderate voice on trade policy.

However, Trump has also named protectionist figures to key positions, including trade attorney Jamieson Greer to the United States Trade Representative (USTR) and economist Peter Navarro as Senior Counselor for Trade and Manufacturing, a position that does not require US Senate confirmation. Both Greer and Navarro are known quantities on trade from their roles in Trump’s first term. Greer, who served as Robert Lighthizer’s chief of staff during the first Trump Administration and is seen as Lighthizer’s protégé, was instrumental in the “phase one” trade deal with China and is expected to maintain a tough stance on “unfair” trade.

Howard Lutnick, chairman and CEO of Cantor Fitzgerald and nominee for Secretary of Commerce, has expressed views that tariffs are a negotiating tool, while also suggesting that universal tariffs be imposed to help reshore manufacturing. Trump stated that he wants USTR to report to the US Department of Commerce, a reorganization requiring US Congressional action, however Greer has said he will report directly to the president.

Finally, Trump nominated retired Border Patrol Officer Rodney Scott to lead the US Customs and Border Protection (CBP), a position held by Scott in 2020-2021, suggesting a continued focus on customs enforcement, especially as Trump campaigned with the promise to reduce illicit drugs entering the United States.

And the Fox Says…: With a Republican majority in the Senate, these nominees are likely to be confirmed, setting the stage for potential shifts in the international trade landscape back to 2017-2019. AFS can assist businesses in staying informed on navigating the evolving trade landscape, understanding the perspectives of new government officials, and developing mitigation strategies for the likely tariff increases.

Contributors: Joy Marie Virga, James Kim, Kelsey Griswold-Berger, Angela M. Santos

2. Lots of Forced Labor Enforcement Updates: Additions to the DHS UFLPA Entity List, New Findings, Nicaragua Section 301 Investigation, EU Forced Labor Ban, and the DHS Investigation

Additions to the UFLPA Entity List and New Finding

In late November, the US Department of Homeland Security (DHS) added 29 entities to the Uyghur Forced Labor Prevention Act (UFLPA) Entity List, which now includes 107 entities.

CBP also announced a finding against Kingtom Aluminio S.R.L., a Chinese-owned, Dominican Republic-based company that produces aluminum extrusions and profiles used in industries like transportation, construction, furniture, electronics, and more.

These actions prevent the importation of goods supplied by these companies into the United States.

First Forced Labor Section 301 Investigation: Nicaragua

USTR announced the first ever Section 301 of the Trade Act of 1974 investigation against Nicaragua based on concerns that the country is engaging in repressive and persistent attacks on labor rights, human rights, and the rule of law. Section 301 could authorize USTR to impose additional duties (think China tariffs) or other import restrictions or withdraw or suspend trade agreement concessions under the Dominican Republic-Central America Free Trade Agreement.

EU Forced Labor Ban

On November 19, the European Union (EU) adopted a regulation prohibiting products made using forced labor from being imported into, sold within, or exported from the EU. The regulation will enter into force in approximately 36 months and additional guidance, including due diligence processes to detect and prevent forced labor in supply chains, will be issued within 18 months.

DHS Investigates Chinese Online Retailer for Forced Labor

Reports indicate DHS is investigating Temu for potential forced labor violations. The DHS investigation comes on the heels of increased scrutiny on Temu and other Chinese e-commerce companies’ use of the Section 321 de minimis program to import allegedly noncompliant goods.

And the Fox Says…: The UFLPA Entity List continues to expand, covering many industries, but CBP is also continuing to issue withhold release orders and findings. While the UFLPA has been a central focus, importers must take a holistic approach to supply chain due diligence. The USTR’s Section 301 investigation into Nicaragua’s labor practices also demonstrates that forced labor continues to be a priority issue for the United States, and we should expect the incoming Trump Administration to continue using all legal mechanisms to address imports of forced labor into the United States. Importantly, the Temu investigation could indicate that the government will begin using its penalty and possibly criminal authority for forced labor violators.

The EU’s forced labor ban illustrates that multinational companies must take a global approach to their forced labor programs, as we expect that other countries will also implement similar laws. Entities with complex supply chains should begin to prepare for the EU’s forced labor enforcement by conducting supply chain mapping and risk assessments.

Contributors: Lucas A. Rock, Mario A. Torrico, Angela M. Santos

3. De Minimis Dilemma: Are Changes Coming to the De Minimis Program?

In September, the Biden Administration announced plans to issue a notice of proposed rulemaking aimed to prevent circumvention of tariffs and import compliance requirements. However, this notice has not yet been published in the Federal Register, leading to uncertainty about its release before President Biden’s term ends in January. There is also the possibility of it being withdrawn or revised by the Trump Administration.

Changes Are Coming

Changes to the Section 321 de minimis program are anticipated during President-elect Trump’s tenure, although the specifics and timing remain unclear. The program has faced criticism from both political parties, prompting several lawmakers to propose bills to restructure the program. Notably, Senators Marsha Blackburn and Jon Ossoff introduced the Detection and Exclusion of Negligent, Illicit, and Extralegal Deliveries Act. This bill would require CBP to maintain a “Denied Parties List,” prohibiting companies that import forced-labor products, counterfeit goods, or illegal drugs from using de minimis. It would also impose fines on violators.

Additionally, Representative Ron Wyden formally introduced a bill to ban goods subject to trade remedies or Section 201, 301, and 232 tariffs, as well as “import-sensitive” goods, from benefiting from de minimis. The US-China Economic and Security Review Commission’s 2024 Annual Report to Congress also recommended blocking online retailers from using the de minimis program.

And the Fox Says….: It is unlikely that any de minimis legislation will pass during the lame duck session. However, calls to overhaul the de minimis program are expected to persist during President-elect Trump’s Administration, especially with cabinet appointees Marco Rubio and Mike Waltz, who maintain a firm stance on China.

Companies that take advantage of the Section 321 de minimis program should continue to closely monitor these developments and be prepared if the program is restricted. For e-commerce retailers, these changes could mean a shift in how they manage their imports and could significantly impact the tariffs that are applied to their goods.

Contributors: Lucas A. Rock, Angela M. Santos

4. US Steel Industry Lobbies the Incoming Trump Administration and Congress for Changes to the Section 232 Tariffs on Steel and Additional Duties Under Section 301

With the incoming Trump Administration and a newly established Congress now under Republican control, the Steel Manufacturers Association (SMA), a major steel industry group in the United States, has introduced a “5-Point Action Plan.” The plan, found here, calls for various changes to the Section 232 tariffs on steel imports and calls for increases on duties on steel imports from China under Section 301. The main points are outlined below.

• Reimpose a 25% tariff on surging steel imports from Mexico and reimpose tariffs on steel from Canada if necessary.
• Terminate Section 232 tariff rate quota programs with the EU, Japan, and United Kingdom.
• Reduce the current Section 232 tariff rate quota levels with South Korea.
• Expand the list of steel articles covered by Section 232 to include downstream products made of steel, such as fabricated structure steel and prestressed concrete strands.
• Terminate all General Approved Exclusions.
• Limit exclusion requests to a single 60-day window per year (currently, exclusion requests can be submitted at any time with no limits on submission frequency).
• Increase stringent requester certification requirements.
• Increase the Section 301 tariffs to 60% on steel products covered by Section 232 and steel-intensive downstream products (presumably this would include fabricated structure steel products).
• Apply Section 301 on any Chinese-origin products that are further processed or incorporated into downstream products in third countries (presumably, regardless of the country of origin of the final products the steel goes into that are imported from the third countries).

And the Fox Says: President-elect Trump has been extremely vocal about his desire to protect the US steel industry using tariffs and other trade remedy laws. While the SMA’s plan above is only a proposal, it provides a blueprint as to the priority issues of the US steel industry. During the second Trump Administration, importers should expect changes to the Section 232 duties, as well as increased duties targeting China, and be prepared to adapt to any changes quickly to minimize the duty impact.

Contributors: Robert E. Shervette, IV, Mario A. Torrico, Antonio J. Rivera

5. USMCA Review Under a Second Trump Presidency

Before this year’s presidential election, we speculated on how a presidency under either Vice President Kamala Harris or former President Donald Trump might approach the upcoming 2026 review of the United States-Mexico-Canada Agreement (USMCA) (see here). Now that President-elect Trump is set to officially take office in January, his administration will significantly influence the US strategy for the joint review of the USMCA. This review, mandated by the agreement, involves the United States, Mexico, and Canada and provides an opportunity for these parties to propose revisions to the agreement. As this marks the first time that this novel USMCA review provision will be used, many specifics are still unclear.

What is certain, however, is that the review process will commence in earnest in 2025. President-elect Trump has expressed a strong desire to renegotiate the agreement to better safeguard US interests, particularly in the automotive sector. He has even recently threatened to impose 25% tariffs on goods imported from Mexico. Despite this aggressive stance, US law requires his administration to conduct public consultations and hearings to gather input for the USMCA review.

And the Fox Says…: Businesses operating in the United States, Mexico, and Canada that procure from or sell to a North American supply chain should be vigilant in 2025 for opportunities to express concerns or suggest changes to the agreement, as such changes can significantly impact business transaction costs. Potential areas for revision include tightening rules of origin, enhancing enforcement against imports of goods made by forced labor, and establishing specific rules of origin for electric vehicles. Additionally, we can anticipate revisions aimed at addressing Chinese manufacturing investments in Mexico that benefit from the agreement. With firsthand experience in trade agreement implementation, ArentFox Schiff’s Customs team equips businesses with strategic insights and tailored solutions to effectively manage costs and risks under the evolving USMCA framework.

Contributors: Mario A. Torrico, Antonio J. Rivera