Update on Border Adjustment Tax
Saud Aldawsari & Ahsin Azim
On June 13, 2017, House Ways and Means Committee Chairman Kevin Brady (R-TX) suggested a five-year phase-in for the border-adjustment tax (BAT). The BAT proposal, a key part of Republican comprehensive tax reform efforts, would tax imports and exempt exports. The phase-in would provide businesses time to determine if any of their existing offshore assets could return to the U.S. under the proposed new tax system.
The five-year phase-in seeks to calm concerns that BAT will disrupt companies, supply chains, and consumers. Critics believe the phase-in still negatively impacts U.S. consumers, however, because consumers will have to pay more for imports. The Retail Industry Leaders Association stated, “The result will be the same – higher prices on food, gas … and thousands of items American families need every day.” In contrast, supporters of the BAT and phase-in believe the dollar will eventually appreciate enough to offset import price increases.
Update on Section 232 Steel and Aluminum Investigations
Hinh Tran and Benjamin J. Bay
As previously reported, the Department of Commerce (Commerce) is conducting two investigations to determine the effects of imported steel and aluminum on national security pursuant to Section 232(b)(1)(A) of the Trade Expansion Act of 1962. Since our last report, the submission period for written comments in both the steel and the aluminum investigations expired and Commerce held a hearing in the aluminum investigation on June 22, 2017. This concludes the public, fact-finding phases of both investigations.
Commerce Secretary Wilbur Ross previously stated his intention to transmit findings for both Section 232 investigations to President Trump by the end of June. News articles suggest, however, that the report on the steel investigation may not be released until after the G-20 Summit, scheduled for July 7-8, 2017. If the steel report is released after the summit, it is expected that the aluminum report will be released at a later date.
Once Commerce submits a report (including any potential recommendations for a remedy) to the President, the President will then have 90 days to decide whether or not to take action, although he is expected to make a decision quickly.
We will provide additional information as developments warrant.
WTO Appellate Body Issues Report in Boeing Aircraft Case
Manuel Sánchez Miranda
The compliance panel in US – Large Civil Aircraft (2nd complaint) rendered its decision on June 9, 2017. The panel concluded that, by continuing to be in violation of Articles 5(c) and 6.3(a), (b), and (c) of the World Trade Organization (WTO) Agreement on Subsides and Countervailing Measures (SCM), the United States had failed to comply with the recommendations and rulings of the Dispute Settlement Body; particularly with the obligation under Article 7.8 of the SCM Agreement to “take appropriate steps to remove the adverse effects or … withdraw the subsidy.”
While the United States successfully demonstrated compliance with its WTO obligations in respect of several of the subsidies in dispute, the panel concluded that, for a number of other measures, the United States remained in violation of its WTO obligations. Among others, the United States has yet to eliminate a $325 million Washington State tax cut.
Following this ruling, the European Union may request authorization to retaliate against the United States, unless any of the parties in dispute appeals the ruling by August 9, 2017.
