US International Trade Commission Institutes Global Safeguard Investigation Concerning Fresh, Chilled and Frozen Blueberries

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White & Case LLPThe US International Trade Commission (ITC) instituted a global safeguard investigation concerning imports of fresh, chilled or frozen blueberries, pursuant to Section 201 of the Trade Act of 1974, on October 6, 2020. In its investigation, the ITC will determine whether fresh, chilled or frozen blueberries are being imported into the United States in such increased quantities as to be "a substantial cause of serious injury, or the threat thereof" to the domestic industry producing like or directly competitive products. If the ITC makes an affirmative finding, it may recommend, and the President may impose, tariffs or other restrictions on imports of the subject merchandise for up to four years, with a possible extension to eight years. The initiation of a global safeguard investigation is therefore an important development for the industry.

This alert provides an overview of Section 201, the next steps in the investigation, and the process by which interested parties can participate in the investigation. 

Background

Section 201 permits the United States to impose import relief measures when increased imports are found to cause or threaten to cause serious injury to a domestic industry. Based on a petition by members of a domestic industry, a request by the President or US Trade Representative, a resolution by either the House Committee on Ways and Means or the Senate Finance Committee, or on its own motion, the ITC investigates whether increased imports cause or threaten to cause serious injury to a domestic industry. If the ITC makes an affirmative injury determination, the ITC then makes a recommendation to the President as to what kind of import relief is appropriate. The President may then implement the recommendation, take a different action, or take no action. 

This is the third global safeguard investigation the ITC has instituted since the beginning of the Trump administration. Unlike the two most recent safeguard investigations, which the ITC instituted in response to petitions from domestic producers, the ITC instituted the investigation of blueberries in response to a request from the Office of the US Trade Representative (USTR). USTR announced its intention to request the investigation in September as part of a broader report detailing the Trump administration’s plans to address alleged "threats that increased imports pose to American producers of seasonal and perishable fruits and vegetables."1  

USTR formally requested the initiation of the global safeguard investigation on September 29. In its letter, USTR stated it was requesting the investigation because "U.S. import statistics indicate that blueberry imports have greatly increased in recent years and are sourced in major quantities from multiple countries." USTR also referenced recent hearing testimony by "interested persons" claiming that "increased blueberry imports are driving down prices for domestically grown blueberries and leading to a drastic reduction in market share for domestic growers." USTR also discussed these claims in its September report, which identified Peru, Chile, Mexico, Canada and Argentina as the largest sources of US imports of blueberries in 2019, based on US Census data.

Investigation Scope and Process

The imported articles covered by the ITC's investigation are fresh, chilled or frozen blueberries. For Customs purposes, the blueberries covered by the investigation are provided for under the Harmonized Tariff Schedule of the United States ("HTSUS") statistical reporting numbers 0810.40.0024; 0810.40.0026; 0810.40.0029; 0811.90.2010; 0811.90.2024; and 0811.90.2030. Unlike antidumping (AD) and countervailing duty (CVD) investigations, which target imports of the covered merchandise from select countries, safeguard investigations under Section 201 are global, covering imports of the subject merchandise from all countries.

Persons wishing to participate in the ITC's investigation as parties must file an entry of appearance within 21 days after the ITC's notice of institution is published in the Federal Register (i.e., by October 30, 2020). The investigation process will be as follows:  

Injury Phase

Normally, the ITC is required to make its injury determination within 120 days after the petition was filed. However, the law permits the ITC to take up to 30 additional days to make its injury determination where it determines that the investigation is "extraordinarily complicated." In this instance, the ITC has determined the investigation is "extraordinarily complicated" in light of "the need to collect data and other information from a large number of firms involved in the domestic production, processing and/or marketing of blueberries." Accordingly, the ITC intends to take 15 extra days and make its injury determination by February 11, 2021. 

The ITC's hearing on injury will be held on January 12, 2021. Requests to appear at the hearing must be filed on or before December 30, 2020. The deadline for filing prehearing briefs on injury is December 29, 2020.

The ITC's injury analysis in safeguard investigations is similar to the injury analysis it applies in AD/CVD investigations. However, safeguard investigations differ from AD/CVD investigations in that (1) they require a finding of "serious injury" to the domestic industry (as opposed to the lower "material injury" standard in AD/CVD cases); and (2) they do not require findings of dumping or subsidization. If the ITC determines the subject blueberries are being imported "in such increased quantities as to be a substantial cause of serious injury, or the threat thereof, to the domestic industry," the investigation will proceed to the remedy phase.  

Remedy Phase

During the remedy phase, the ITC must develop recommendations for action "that would address the serious injury, or threat thereof, to the domestic industry and be most effective in facilitating the efforts of the domestic industry to make a positive adjustment to import competition." The law authorizes the ITC to recommend tariff increases, quantitative import restrictions (quotas), tariff-rate quotas, trade adjustment assistance for workers displaced as a result of imports, or a combination of these measures. The ITC must submit its report and recommendation to the President within 180 days of the filing of the petition (i.e., by ‎April‎ ‎5‎, ‎2021, in the current case). 

In the event the ITC makes an affirmative injury determination or is equally divided on the question of injury, a hearing on the question of remedy will be held on February 25, 2021. Requests to appear at the hearing must be filed on or before February 19, 2021. The deadline for filing prehearing briefs on remedy is February 18, 2021.

Presidential Determination 

If the ITC makes an affirmative finding of "serious injury," the President must determine, within 60 days after receiving the ITC's report, whether to implement the ITC's recommendations, take alternative action or take no action. If the President determines to impose a tariff, tariff-rate quota or quantitative restriction, such action will take effect within 15 days after the date on which the President proclaims the action, unless the President announces on the decision date an intention to negotiate an agreement with foreign countries limiting the export of the relevant articles to the United States (in which case the implementation of the action can be delayed by up to 90 days). Any safeguard measures imposed by the President may not remain in effect for more than four years, unless subsequently extended by the President up to a maximum of eight years.

If the action taken by the President differs from the ITC's recommendation, or if the President takes no action with respect to the domestic industry, the action recommended by the ITC will nonetheless take effect if Congress enacts a joint resolution of disapproval within 90 days after the President's report is transmitted to Congress. In such circumstances, the President must proclaim the action recommended by the ITC within 30 days after the enactment of the joint resolution.

Special Treatment of Canada and Mexico

Notably, the United States-Mexico-Canada Agreement (USMCA) affords special rights to Canada and Mexico with respect to safeguard actions taken by the United States, and vice-versa. Specifically, Article 10.2.1 of the USMCA provides that a Party taking a safeguard action must exclude the goods of each other USMCA Party from that action unless: (1) "imports from a Party, considered individually, constitute a substantial share of total imports;" and (2) "imports from a Party considered individually, or in exceptional circumstances imports from Parties considered collectively, contribute importantly to the serious injury, or threat thereof, caused by imports." The USMCA also limits the degree to which a Party's safeguard action can restrict imports of another Party's goods, if such goods are not excluded from the action. Article 10.2.5(b) prohibits a USMCA Party from imposing restrictions on a good in a safeguard action that would have the effect of reducing imports of that good from another Party "below the trend of imports of the good from that Party over a recent representative base period with allowance for reasonable growth."

Additionally, Article 10.2.6 of the USMCA affords a Party the right to compensation for safeguard measures taken against it by another USMCA Party. In the event that the Parties cannot mutually agree upon "trade liberalizing compensation," a USMCA Party whose goods are subject to a safeguard measure is afforded the right to immediately take action "having trade effects substantially equivalent" to the safeguard measure.  Article 8 of the WTO Agreement on Safeguards similarly affords WTO Members the right to respond to global safeguard actions by suspending substantially equivalent concessions or other obligations under the General Agreement on Tariffs and Trade (GATT), but this remedy is only available after a safeguard measure has been in place for three years.

Outlook

The institution of a global safeguard investigation of blueberry imports is an important development with potential long-term implications for producers, exporters and importers of blueberries, and other market participants. However, the outcome of the investigation is far from guaranteed, and the ITC has found the existence of "serious injury" in less than half of the Section 201 investigations it has conducted. Interested parties in the United States and abroad may therefore wish to assess the risks arising from the ITC's investigation to their supply chains and trade flows, and consider participating in the investigation. 

As noted above, Canada and Mexico will have certain special rights in this safeguard proceeding due to their participation in the USMCA, and these rights will have to be considered at the injury, and, if affirmative, the remedy stage of the proceeding. Should the United States ultimately impose safeguard measures on imports from Canada or Mexico as a result of this proceeding, discussions will likely ensue regarding the "trade liberalizing compensation" envisioned in the USMCA, which could take the form of tariff concessions on other products. As the first US safeguard proceeding since the USMCA's entry into force in July, the investigation of blueberries represents the first opportunity to test the USMCA's new provisions on safeguards. As a result, both current and future FTA partners of the United States will likely have a high level of interest in the manner in which the United States implements its obligations under the USMCA's safeguards provisions, and the manner in which Canada and Mexico seek to exercise their rights under those provisions.

Importantly, the USTR's request for a safeguard investigation of blueberries might presage similar actions targeting other "seasonal and perishable" goods identified in the agency's September report. In that report, USTR stated it intends to work with domestic producers to request the ITC commence an investigation under Section 332(g) of the Tariff Act of 1930 to monitor US imports of strawberries and bell peppers. According to USTR, such actions "could enable an expedited Section 201 global safeguard investigation later this year." 

The administration's plans involving Section 201, while significant, fall short of what some US lawmakers and producers of seasonal and perishable goods had requested in public hearings conducted by USTR earlier this year. In those proceedings, several Members of Congress and US agricultural producers asked USTR to consider taking action against imports of seasonal and perishable goods under Section 301 of the Trade Act. Unlike the safeguard actions contemplated by Section 201, which are permissible under WTO rules and require an affirmative injury finding by the ITC prior to any import restrictions, Section 301 permits USTR to impose trade restrictions unilaterally where it determines a foreign trade practice is "unreasonable or discriminatory" and burdens US commerce. The Trump administration's recent use of Section 301 as a unilateral enforcement mechanism has significantly heightened trade tensions with China, leading to retaliatory tariffs on US exports, and was recently found by a WTO panel to violate WTO rules. The use of Section 301 against imports of seasonal and perishable goods from Mexico, Canada and other close trading partners would likely have had similar results. Viewed in this context, the administration's decision to pursue Section 201 actions on seasonal produce appears to reflect a reluctance to further exacerbate trade tensions with close US allies and trading partners, rather than a newfound confidence in the effectiveness of Section 201 as a trade remedy.2

The ITC's notice of institution can be viewed here.

1 USTR’s report is available here
2 Section 201 fell into disuse for nearly two decades following the imposition of safeguard measures on steel products in 2001, and the United States’ subsequent termination of those measures after the WTO Appellate Body found them to be inconsistent with WTO rules. Prior safeguard actions taken by the United States had similarly been found to be inconsistent with the United States’ WTO obligations, and only about one-third of the Section 201 investigations initiated between 1974 and 2016 resulted in import relief for the domestic industry. As a result, many US industries began to view Section 201 as an ineffective trade remedy. This began to change at the outset of the Trump administration, when US producers of solar panels and residential washers successfully used Section 201 to obtain import relief. However, Section 201 petitions remain a rare occurrence.  

 

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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