Phase One Trade Deal
On Wednesday, Jan. 15 negotiators for the US and China came together to sign the Phase One trade agreement. The deal, seven chapters in length, covers intellectual property, technology transfer, agriculture, financial services, currency, expanding trade, and dispute resolution. The full text of the agreement can be found here and fact sheets found here.
Though the agreement did not include tariff relief, the President did reaffirm the commitment to cutting the List 4A tariff rate to 7.5% from 15% on Feb. 14. As a reminder, List 4A is primarily clothing. According to Bloomberg, unnamed officials have indicated that no additional tariff relief is to be expected until after the 2020 election.
Notably, China has posted its weakest economic growth in 29 years according to Reuters.
US-Mexico-Canada Agreement (USMCA)
While many believed USMCA passage might not occur in the Senate until after the impeachment trial by the Senate, on Jan. 16 the Senate passed USMCA 89-10. Next, the bill headed to the President’s desk where he is expected to sign by the end of January.
However, the President’s signature does not yet mean the agreement is in force. Mexico and Canada must take the necessary measures to comply with the agreement. A slight delay can be expected as the Canadian parliament doesn’t resume until Jan. 27. When both countries have taken the appropriate steps, the President must notify Congress in writing 30 days prior to entry into force of the agreement of such action. Still the agreement enters into force after the President and government of Mexico and Canada follow-through with all specified implementing procedures. This is expected in 2020, though the exact timeline remains uncertain.
Last week, the Trump Administration met with China at the White House to continue negotiations on a trade deal. The meeting, spanning two days, has laid the groundwork for a Phase One deal. While specifics are still murky, optimism for next steps helped to de-escalate the rising tariffs, delaying the October 15th scheduled increase. At the same time, USTR announced that exclusions requests for List 4A could be filed beginning October 31.
President Trump met with Chine Vice Premier Liu late the week of October 13th at the White House. While speculations varied widely about the possible results, reports from both the Administration and most recently the Vice Premier indicate the groundwork for a Phase One deal is well underway. While the text of the deal is still being nailed down, according to Treasure Secretary Mnuchin the deal will include intellectual property, currency, and agriculture. While House economic advisory Larry Kudlow expanded on the agriculture component noting that China’s commitment to the purchase of $40-50 billion of agricultural products “would depend in part on private companies and market conditions.” Bloomberg reported that Chinese Vice Premier Liu confirmed a Phase One deal, commenting “China and the U.S. have made substantial progress in many aspects, and laid an important foundation for a phase one agreement,” though he did not confirm any specifics of the deal. Trump is optimistic that that the trade deal will be signed by mid-November. While the deal is not yet complete and is only a part of a larger, more comprehensive agreement, the talks did prevent the escalation of the Section 301 List 1-3 tariffs planned for October 15th.
Meanwhile, the United States Trade Representative (USTR) announced on Friday October 18th that the Office would begin accepting tariff exclusion requests for important subject to 15% tariff on List 4A products that went into effect on September 1, 2019. Exclusion requests can be submitted beginning October 31, 2019 via the new exclusion portal.
On August 22, 2019 the Federal Motor Carrier Safety Administration (FMCSA) published a notice of proposed rulemaking (NPRM) seeking comments on proposed changes to the Hours of Service regulations. The proposed changes are intended to provide flexibility in several areas following concerns raised by industries and commercial drivers. These include:
The entire notice can be found here including additional discussion about comments received and Agency reasonings.
Originally, the NPRM noted a due date for comments of October 7th, however, that deadline has been extended to October 21. FMCSA is seeking comments from the industries and drivers impacted by these potential changes. More information on the topic can be found here and comments may be submitted to FMCSA here.
As NATM previously reported, on May 10 Section 301 List 3 tariffs escalated from 10% to 25%. On May 21st the US Trade Representative announced in a Federal Register notice that the exclusion process for List 3 was to be implemented on or around June 30, 2019. The notice includes the form to be used for making an exclusion request. It is important to note that for List 1 and List 2, requests received early in the process have been decided on more quickly.
As a result of the List 3 escalation, on Monday, May 13 China announced retaliatory tariffs ranging from 5% to 25% on $60 billion of U.S. exports to take effect beginning June 1. The announcement from China noted that the increase of List 3 tariffs was an “an escalation of Sino-US economic and trade frictions, contrary to the consensus between China and the United States on resolving trade differences through consultations, jeopardizing the interests of both sides and not meeting the general expectations of the international community.”
As anticipated, the United States Trade Representative released a List 4 late in the day on May 13. List 4 includes a vast array of $300 billion worth of goods, from books to housewares, shoes, and sporting goods and much more. The proposed tariff rate is 25%. Along with the release of List 4 comes a timeline for hearings and comments from the public. Although no firm date has yet been set, implementation of List 4 is currently not expected before late June.
NATM will keep members apprised as the List 3 exclusion process is released and as List 4 moves forward.
With the Trump Administration announced rolling back Section 232 aluminum and steel tariffs on Canada and Mexico, and media sources are reporting that no quotas will be placed on either country. However, it is likely there will be additional requirements regarding transshipment of steel and aluminum products that will remain subject to the action. There is additional opportunity for re-imposition of these tariffs should imports begin to surge. As of this writing, there have been no indications of retroactive relief. As more details become available, NATM will notify its members.
On March 25th the U.S. Court of International Trade released its opinion rejecting the challenge of the American Institute for International Steel Inc. (AIIS) vs. United States that alleged the enforcement of the President’s tariffs on certain steel imports under Section 232 was an improper delegation of legislative authority in violation of the Constitution. The US Court of International Trade found it was bound by precedent and as such, found in favor of the United States in the delegation of such authority.
AIIS not only immediately filed a notice of appeal with the Court of Appeal for the Federal Circuit, but also filed papers requesting that the U.S. Supreme Court allow them to bypass the Appeals Court. AIIS notes in their request it would be a waste of resources to go through the year-long process knowing the Appeals Court is bound by the same precedent. They also argued that the matter is urgent as the President is considering launching another round of Section 232 tariffs on imported automobiles.
It is rare for the Supreme Court to honor such a request and it will take four out of nine Justices to agree to hear the case for it to proceed.
On March 7th, the Department of Labor (DOL) announced a proposal to the salary-level threshold for the overtime pay regulation. On March 21st the DOL published the notice in the federal register, opening a 60 day public comment period which will close on May 21st.
In May 2016, the DOL released the Final Rule on the overtime pay regulation raising the threshold from $23,660 to $47,476 for full-time exempt employees, but that effort was blocked by a U.S. District Court Judge and the appeal was denied. Since that time, employers have been expecting a new proposal to be released.
The new proposal raises the salary-level threshold to $35,308 ($679 per week), meaning individuals who make under $35,308 must be paid overtime if they work more than 40 hours per week. The proposal does not call for automatic adjustments to the salary or create salary levels based on the region of the country.
NATM's HR consultants released the following information in regard to this potential change:
What does this mean for employers? To prepare for the implementation of a potential Final Rule, employers should begin reviewing and analyzing the positions held by exempt employees who are paid less than $679 per week.
First, the employer should review each exempt employee’s job description. In order for an exemption to apply, an employee’s specific job duties and earnings must meet all applicable FLSA requirements. Job titles never determine exempt status under the FLSA.
Second, a salary analysis should be completed to determine how many hours on average an employee works in a year or within a pay period. As a business owner or senior level manager, you should make this analysis: Is it more cost effective to pay the overtime amount of 1½ times the employee’s regular rate of pay for any time worked over forty (40) hours or to increase the employee’s wage to meet the new salary threshold of $35,308?
Finally, once the position description review and salary analysis have been completed, an employer has several options to remedy the situation and ensure compliance with the proposed regulation changes.
Wait or act now? While a Final Rule has not been released, it may be in the best interest of employers to start reviewing options to ensure compliance with the proposed regulation changes. The proposed regulation changes are subject to a public comment period, which allows time for the public to express its views and concerns regarding the actions of an administrative agency. These new proposed regulations are anticipated to take effect in the latter part of 2019.
More information about the proposed rule is available here. NATM will keep its members apprised of development as the proposal is currently in a 60 day public comment period (which began March 7th). Should you have any questions, please reach out to NATM Executive Director, Kendra Ansley at Kendra.Ansley@natm.com or at 785-272-4433.
After a slow start and the complications of a several week partial government shutdown, the 116th Congress has taken shape. Committee assignments have been established and the new Congress includes 30 incoming members to the key committees of jurisdiction over transportation and infrastructure issues. If your Representative or Senator is featured on these lists and you are interested in inviting them to tour your facility, please contact Meghan Ryan at NATM headquarters.
A wave of retirements, electoral defeats, and a shifting majority brings 16 new Democratic members to the House Committee on Transportation & Infrastructure (T&I), as well as eight new members on the Republican side of the aisle. Below are the newest faces to the House T&I committee rosters.
The Senate Committee on Commerce, Science & Transportation welcomes both a new Chair and Ranking Member, with Senator Roger Wicker (R-MS) taking the gavel from newly elevated Majority Whip John Thune, and Senator Maria Cantwell replacing the recently defeated Senator Bill Nelson. In addition, the committee welcomes three new members:
Darrell Conner is a Government Affairs Counselor, Dennis Potter is a Government Affairs Advisor, and Brody Garland is a Government Affairs Specialist at the law and lobbying firm of K&L Gates, where they represent NATM and other clients on legislative, regulatory, policy and political matters. Conner can be reached at Darrell.Conner@klgates.com, Potter can be reached at Dennis.Potter@klgates.com, and Garland can be reached at Brody.Garland@klgates.com.
The Annual Regulatory Roundup and Capitol Hill Visits will be in Washington, D.C., Tuesday, Oct. 2, 2018. Along with the Convention & Trade Show, this is one of NATM’s most important events of the year. The event brings in speakers from industry groups and agencies such as the National Association of Manufacturers and the National Highway Traffic Safety Administration to provide updates on current policy and regulatory happenings. Topics are geared toward current events and industry needs, with attendees being given the opportunity to engage with experts. Following morning speakers, attendees will be prepared for afternoon visits on Capitol Hills with the staff of their legislators. For those who might be unsure about this event, all attendees are paired into teams with more experienced attendees helping to navigate the Hill and lead meetings. The event is structured to be as easy as possible for attendees while providing the important function of raising awareness of the industry and the issues being faced with legislators.
With the impact of tariffs and proposed tariffs on the industry businesses and the general volatility of the government affairs arena in recent months which is likely to increase in this important midterm election year, messaging for the visits has not yet been confirmed. The Government Affairs committee continues to monitor and adapt possible messaging to ensure our visits on the Hill are relevant and reflect the needs of the industry in the moment.
While messaging is in the works, the next step to ensure a successful event is to encourage more participation from members. NATM Members attending the Capitol Hill Visit serve as crucial constituent voices and are the most important in these one-on-one meetings. Members who have attended in the past have found the experience very rewarding and provided the following comments:
John Kerr, Executive Producer, Manufacturing Practice Group, Marsh & McLennan Agency, says, “I have attended every Regulatory Roundup since I have been a member of NATM. The Roundup has allowed me to have a real and meaningful impact on the trailer manufacturing industry…Without a doubt, this event has been the most important and impactful contribution I have made to the industry. The benefits of this work are real and I would challenge every NATM member to up their commitment to the industry by joining us in Washington,” said Kerr.
NATM’s long-term approach to and investments in government relations continue to pay dividends to the Association and its members. Legislative and regulatory enactments are important and beneficial to NATM, but preventative activities—stopping bad things from happening—are perhaps more important from NATM’s perspective. The Association has been successful on both counts. The current government relations program in place for NATM is strong, and maintaining a steady course will continue to provide tremendous value to NATM members. Expanding the participation at the Regulatory Roundup and Capitol Hill visits will help build on that success and help NATM educate members of Congress about the trailer manufacturing industry.
If you would like more information about the Regulatory Roundup or how you can get involved in the NATM Government Affairs program, contact NATM Assistant Director Meghan Ryan at Meghan.Ryan@natm.com or call (785) 272-4433.