On October 2, 2020, the Office of the United States Trade Representative (USTR) issued a statement announcing the initiation of new investigations under Section 301 of the Trade Act of 1974 to determine whether Vietnam has been undervaluing its currency and to investigate Vietnam’s policies and practices as related to importing illegally harvested timber subsequently used to manufacture wood products exported to the United States. These investigations were initiated under the same authority that USTR previously used to impose sweeping tariffs on more than approximately $350 billion worth of imports from China.
In both investigations, USTR will be seeking public comment. Additionally, in the currency undervaluation investigation USTR will consult with the U.S. Department of Treasury (“Treasury”) on how to address the matter. This week, the USTR plans to publish two separate Federal Register notices that will outline the details of the new investigations and how interested parties may submit comments.
Significantly, under Section 701 of The Trade Facilitation and Trade Enforcement Act of 2015, the U.S. utilizes three key criteria to determine whether a major trading partner has committed currency manipulation or unfair trade practices:
- A significant bilateral trade surplus with the United States;
- A material current account surplus;
- Engage in persistent one-sided intervention in the foreign exchange market.
Treasury has issued two reports to Congress on the foreign exchange policies of the major trading partners of the United States. In the May 2019 report, Vietnam met 2 of the 3 criteria (bilateral trade surplus and current account surplus), while the January 2020 report found that Vietnam met only 1 of the 3 criteria (bilateral trade surplus).
Husch Blackwell continues to monitor the situation closely and will provide further updates as more information becomes available. Should your company have any concerns or questions, or would like to submit comments, please contact our International Trade and Supply Chain team.