There is hope that at some point before the year’s end, the US should have new trade and competitiveness legislation on the books. Last year, the Senate passed the U.S. Innovation and Competition Act of 2021 (USICA) and earlier this year the House passed the America COMPETES Act of 2022 (COMPETES). Both bills aim to bolster the country’s competitiveness, especially regarding China. With neither bill having cleared both houses of Congress, they have been moved to reconciliation. The final reconciled bill will then need to be passed by the House and Senate before being sent to the White House to be signed into law.
Each of the bills would retroactively reinstate the Generalized System of Preferences (GSP), which offers reduced or duty-free treatment of many goods from developing countries, though there are some differences in the language. This trade agreement was allowed to expire December 31, 2020, and can only be restored by Congress. GSP is a popular agreement which usually has bipartisan support. It is well past time for the agreement to be renewed.
Also present in both bills, again with some differences, is the renewal of the Miscellaneous Trade Bill (MTB). The MTB provides for duty-free treatment of a variety of products which are not easily obtained in the US. Most of the goods covered by the MTB are goods used in the manufacturing of other US products. The MTB also includes several chemical compounds. The bills require the President to develop strategies to counter Chinese assistance, and financing to foreign governments deemed to be strategically important to the US.
Each bill contains some contentious provisions that make the reconciliation process complicated. COMPETES contains the CHIPS Act, which provides incentives for domestic semiconductor manufacturers (the provision is opposed by some Democrats). COMPETES also provides similar initiatives for critical components used on many automobiles, consumer products, and defense systems. COMPETES contains language from the pending Import Security Fairness Act, which would remove the $800 de minimis for countries which have a non-market economy, and which are included on the USTR priority watch list. Currently, that would only apply to China. Climate change issues and an initiative to co-finance projects that advance US objectives, which might otherwise be financed by China, also appear in COMPETES but not in USICA. A requirement to revive the exclusion program for the Section 301 tariffs can be found in USICA. It also would require reinstatement of all Section 301 exclusions previously granted and would provide for 301 tariff refunds on imports made after Dec 31,2020 if not covered by an exclusion. The bill establishes better oversight and more transparency in the exclusion process. The House Bill did not contain any provisions that affect the Section 301 tariffs. These tariffs are a very controversial subject, balancing the need to confront Chinese trade policies with the competitive disadvantage caused by the collection of the additional tariffs.
Anti-dumping (ADD) and countervailing (CVD) investigations would expand to cover cross border subsidies under the Leveling the Playing Field Act 2.0 which is included in the COMPETES Act. Currently, the Department of Commerce (DOC) does not investigate subsidies provided by a foreign government to one of its own companies operating offshore. This directly applies Chinese companies in China’s “Belt and Road Initiative”. Also under this expansion would be the creation of concurrent or successive investigations. A concurrent investigation would allow the DOC to extend an existing affirmative ADD determination to new investigations of the same products. Successive investigations would allow the DOC to extend an affirmative determination to a new investigation of the same product, even if they are imported from a different country. The impetus behind successive investigations is to deter foreign suppliers from shifting manufacturing to another country, to avoid the ADD tariffs. This would be a major expansion of the ADD/CVD investigative process and would be certain to make it easier to affirm new ADD/CVD cases. Anyone who has to contend with ADD/CVD tariffs knows how disruptive they can be to a supply chain.
There are many other provisions contained in these bills but those mentioned above are most likely to have an immediate effect on importers. There are indications that work on some of the trade issues has been contentious and those issues could be removed from the bill to be taken up later. Hopefully, those issues will not affect the reinstatement of GSP and the MTB.
Sam McClure, LCB
Director of Compliance & Customs Services
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Meet one of CVI’s Customs Brokerage & Compliance experts, Sam McClure:
Sam serves as Director, Compliance and Customs Services for CVI. He serves as CVI’s corporate compliance officer and is responsible for overseeing all aspects of our Customs related services, including growth.
Sam started his career in 1977 with Waters Shipping Company in Charlotte, NC. He began as a document runner, soon becoming a leader in operations and customer service for the branch. Sam, along with Linda Masten, founded Central Carolina Shipping Inc. in 1983 as an independent Customs Brokerage firm where he served as Vice President for 26 years. Sam and Linda grew Central Carolina into a successful and highly respected member of the Carolinas trade community. When Charlotte opened their local chapter of the IFFCBA Sam was part of the organizing group and he headed the Customs committee for several years. Sam obtained his Customs Brokers License in 1984 and remained with Central Carolina until the company was acquired by CVI in 2009.
At CVI, Sam has held several positions in both the operations and sales departments. As an expert in U.S. Customs regulations, Sam is often called upon on to provide guidance to importers on Customs compliance issues. He makes regular presentations on matters related to importation and broader regulatory compliance.
– Sam McClure, LCB, Director of Compliance & Customs Services, CVI
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