By Alex Lawson

Law360 (July 2, 2020, 6:03 PM EDT ) A pandemic, a bitter feud with China and the enactment of a new North American trade agreement were among the many factors keeping companies and their trade attorneys busy in the first half of the year.

Here, Law360 breaks down the most essential international trade developments of 2020 so far.

An Outbreak and a Trade Mess

The public health crisis spurred by the outbreak of COVID-19 quickly sent shock waves through international trade circles. The shuttering of manufacturing hubs in China and elsewhere snarled global supply chains, and governments were forced to grapple with the challenges of acquiring the materials needed to combat the spread of the coronavirus.

Overall trade has begun to bounce back after initial projections forecast a downturn on par with the Great Depression, but businesses across a number of industries are still wrestling with how best to adjust to the new commercial climate.

"Even after the virus curve is finally flattened, we will likely be living in the 'post-COVID' regulatory environment for the foreseeable future, as in years," said Venable LLP partner Ashley Craig. "That's why it is so important to be following what is happening in the industry right now."

In the U.S., a number of observers noted that the disruptions caused by the outbreak were made more difficult by the Trump administration's litany of tariffs on Chinese goods. The administration did extend tariff cuts to medical and safety equipment, and is considering more, but as cases spike around the nation again, the White House is expecting to take a different long-term policy approach.

U.S. Trade Representative Robert Lighthizer told the House Ways and Means Committee in June that he believes more protection is needed for domestic producers to ensure that supplies are well-stocked in the event of another pandemic, bristling at the notion of relying on imports.

"I am a firm believer that the things we need to fight the pandemic should be made in America," he said. "I'm not in favor of reducing tariffs on the things we need. I would be far more in favor of increasing tariffs on the things we need."

NAFTA Is Dead, Long Live USMCA

The first half of the year also saw the cementing of President Donald Trump's signature trade negotiating achievement: the replacement of the North American Free Trade Agreement with the new U.S.-Mexico-Canada Agreement.

The new accord took effect Wednesday, bringing with it a massive overhaul of the rules that have governed North American automotive trade for the last 26 years. The deal also includes a new chapter covering digital trade, and tougher labor and environmental rules that helped the pact secure support from unions and congressional Democrats.

"Despite questions about how USMCA will ultimately play out and the issuance of late labor rules, there is general relief among the business sector that Wednesday's [implementation] of USMCA is finally here," McGuireWoods LLP counsel Ryan Bernstein said. "Questions still remain about how countries will carry out the hotly debated provisions, but at least sectors spanning from agriculture to manufacturing, and labor, have more trade certainty than they did at the end of 2019."

For a deeper look at the USMCA, read Law360's full breakdown of the new agreement.

Another Blow for the WTO

The World Trade Organization ended 2019 reeling as the Trump administration choked off the final resources of the Appellate Body, shuttering Geneva's top legal authority after refusing to allow the filling of vacant seats for two years.

As the trade body looked to chart a new course forward, it received another curveball when Director-General Roberto Azevêdo announced he would step down at the end of August, a full year before his second term expires. The announcement kicked off a scramble for new candidates to lead the WTO as it stares down an existential crisis.

"There is little doubt that the path forward is cloudy at best," veteran trade attorney Terence Stewart said.

Leadership candidates from Mexico, Egypt, Nigeria, South Korea and Moldova have already thrown their hats into the ring, and the nomination window will remain open through July 8.

The WTO has struggled to reach consensus on a number of fronts over the last 20 years, and there is no reason to expect a struggle over its leadership will be any different. The abruptness of Azevêdo's announcement coupled with restrictions on in-person meetings will make the process even more fraught, according to Stewart.

"With the truncated time period before there is a DG vacancy, the need/desire to truncate the period to consider a replacement, and the sharp differences between the United States, European Union and China on many issues, it is unclear how 'smooth' the process will be this time," he said.

Walking the Huawei Tightrope

At the center of the Trump administration's volatile relationship with Beijing is the Chinese telecommunications giant Huawei. The company has been targeted by policymakers for years, but the White House has kicked the effort into high gear, blacklisting the company and a number of its subsidiaries in 2019.

But even as the administration has looked to toughen up on Huawei, it has simultaneously worked to cushion the blow for U.S. businesses that rely on the company. The first half of the year illustrated the dynamic perfectly, as the administration moved to cut the company off from chip suppliers around the globe in May, then loosened restrictions to allow U.S. companies to work with Huawei on 5G standards technology just a month later.

"The Trump administration's focus on Huawei has been unprecedented," Jacobson Burton Kelley PLLC partner Doug Jacobson told Law360.

The U.S. Department of Commerce's blacklisting of Huawei was supplemented with a general license that would allow certain categories of transactions to continue, mostly those relating to the maintenance of current networks. That license was supposed to be temporary, but it has been extended several times and is now set to expire in August, which Commerce has said will be final.

In all, the administration's patchwork of Huawei moves has kept the telecommunications supply chain on its toes.

"Companies should carefully review these rules to ensure their existing business and supply chains are in compliance with the new rules and regulations, and may wish to consider the regulatory and other risks of doing business with a company under such intense scrutiny by the United States and certain other Western countries," law firm Paul Hastings LLP wrote in a May alert.

Courts Eyeing Security Tariffs

The first half of the year also saw a number of noteworthy cases stemming from Trump's use of Section 232 of the Trade Expansion Act of 1962, the Cold War-era law that permits trade restrictions on national security grounds.

Trump's use of the law to set duties on steel and aluminum in 2018 prompted a flurry of lawsuits, including one from the American Institute for International Steel, an importers group that was looking to strike down Section 232 as unconstitutional. The Federal Circuit dealt the importers a loss in February, and the U.S. Supreme Court declined to take a closer look.

Akin Gump Strauss Hauer & Feld LLP attorney Devin Sikes said that the high court's denial was not a surprise, noting that the constitutional bid against Section 232 was always a long shot.

"Section 232 covers a sensitive area: the intersection of national security and Executive Branch power," Sikes told Law360. "Although the Supreme Court has addressed issues arising in this area here and there — think, for example, President Trump's travel ban — it mostly has shied away from them in recent decades."

But a number of other suits relating to Trump's use of Section 232 continue to course through the courts. In a case brought by importer Transpacific Steel LLC, a U.S. Court of International Trade panel cast a skeptical eye toward the administration's decision to double the steel tariff on Turkish products, noting that the law contains strict timelines on presidential action that Trump appears to have exceeded.

Another CIT panel is hearing a batch of 10 cases challenging the administration's decision to extend duties on raw steel and aluminum to cover finished goods like nails and wiring.

"Similar to the Transpacific appeal, these appeals will test the limits of the president's authority under Section 232," Sikes said.

As the court battles over Section 232 heat up, the administration has shown no sign of backing down from its use of the law, opening new probes into imports of mobile cranes, electrical transformers and the metal vanadium in the first half of this year.

--Editing by Jill Coffey and Kelly Duncan.

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