U.S. and Virginia Trade Policy Updates
January 5, 2024
U.S. Trade Negotiations
The U.S. has made little progress in finalizing trade deals over the past three months. However, U.S. trade negotiators have continued discussions in a number of countries that could make it easier for Virginia companies to do business abroad, including in many smaller markets, such as Bangladesh, Kenya, Paraguay, and more. Among unilateral tariff preference programs, the U.S. continues to have an internal debate over the reauthorization of the Generalized System of Preferences, which is currently expired, and the potential reauthorization of the African Growth and Opportunity Act, and the Haiti HOPE/HELP program, both which expire in two years.
Americas Trade Partnership Still Moving Ahead Slowly
A November meeting of countries participating in a new Western Hemisphere trade and economic cooperation initiative offered few details about what it will include and when it might be implemented. A White House fact sheet said the leaders – representing Barbados, Canada, Chile, Colombia, Costa Rica, the Dominican Republic, Ecuador, Mexico, Panama, Peru, Uruguay, and the U.S. – directed their ministers to develop and implement a focused set of initiatives and actions in three areas: trade, foreign affairs, and finance.
On trade, leaders urged “inclusive and sustainable approaches to trade and investment that will support regional sustainable development and resilient supply chains for goods and services, enhance a predictable and transparent regulatory environment that can boost trade flows, and remove barriers to greater economic integration among our countries.” Efforts will focus first on regional implementation of the World Trade Organization Agreement on Trade Facilitation as well as digitization of customs mechanisms. For more information, click here.
Expanding Trade in the Caribbean
At the ninth meeting of the trade and investment council under the CARICOM-U.S. trade and investment framework agreement held on Oct. 13, negotiators discussed a number of topics to increase trade between the U.S. and Caribbean islands, including ways to increase utilization of Caribbean Basin Initiative programs and thereby expand regional trade. Participants also discussed the possibility of designating additional countries as beneficiaries of CBI trade preferences and establishing a joint work program on trade in services. These discussions could lead to lower tariffs for Virginia companies importing goods from CARICOM countries. For more information, click here.
Efforts to Streamline Supply Chains in Mexico
At the third meeting of the U.S.-Mexico High-Level Economic Dialogue, the two sides noted ongoing efforts to support the reinforcement and expansion of supply chains in the semiconductor, information and communications technology, medical devices, and pharmaceuticals sectors and to boost the efficiency and digitization of trade procedures along their shared border.
Negotiators also pointed to their continuing work to advance projects related to border infrastructure, facilitating lawful cross-border trade and travel, and border security (including piloting a model port for cutting-edge inspection technologies), and reduce or eliminate counterfeit goods and pirated content from supply chains. For more information, click here.
U.S. Exploring More Trade with Paraguay
At the second meeting of the bilateral trade and investment framework agreement council on September 26 and 27, Paraguay highlighted its progress in fulfilling its commitments under the WTO’s Trade Facilitate Agreement, including establishing a mechanism for advance publication and consultations on international trade issues. It also noted the renewal of its T-Fast program until 2025 and implementation of an electronic phytosanitary certification system.
Paraguay emphasized its interest in exporting raw beef products to the U.S. (which could happen soon given that the USDA’s regulatory approval process is underway), as well as sugar and non-traditional products, and in receiving GSP benefits. U.S. priorities included addressing corruption risks and intellectual property protection in Paraguay. Although these discussions will not affect tariffs rates, they could make it easier for Virginia companies to do business in Paraguay. For more information, click here.
No Longer the Threat of Renewed Tariffs on U.S.-EU Trade
In early December, the U.S. and the European Union agreed to push back a deadline for concluding negotiations on a steel trade agreement. In the meantime, the EU stated it would continue its suspension of the retaliatory tariffs on U.S. goods until March 31, 2025. In turn, the U.S. published a Presidential Proclamation December 28 extending the tariff rate quotas on imports of EU steel and aluminum until December 31, 2025. The aggregate access to the U.S. market will remain at 3.3 million metric tons, thus the limits per product and country will be the same as they were in 2023.
By way of background, the U.S. lifted its Section 232 tariffs on steel and aluminum products imported from the EU on October 2021 after establishing a tariff-rate quota designed to limit such imports to “a sustainable historic level” (i.e., the volume shipped prior to the 2018 imposition of the tariffs). As a result, the EU suspended its related retaliatory tariffs on U.S. goods and determined not to implement a further tariff increase that had been scheduled to take effect later that year.
For more information, click here.
No Agreement on Trade Pillar as IPEF Countries Conclude Other Talks
Work on three of the four pillars of the Indo-Pacific Economic Framework is now all but done but participants have yet to reach agreement on trade issues. On Nov. 16 the IPEF participants issued a joint statement announcing that negotiations on clean economy and fair economy have been substantially concluded, and a supply chain agreement was concluded earlier this year and signed in November. Next steps include preparing final texts, concluding domestic processes for signature, and ratifying, accepting, or approving the agreements, which the participants said they hope to do “as soon as practicable.”
There was no word from the Biden administration on the status of the negotiations on trade, though they are expected to continue despite some recent vocal opposition. When the IPEF was first announced the U.S. indicated that goals in this area included establishing enforceable, high-standard commitments with respect to digital economy and e-commerce, supply chain resiliency, trade facilitation, agricultural trade, and corporate accountability. As with the other trade initiatives being pursued by the Biden administration, tariff liberalization is not among the objectives. For more information, click here.
U.S. and Indonesia Exploring a Critical Minerals Agreement
The U.S. and Indonesia announced Nov. 13 that they have elevated bilateral relations to a comprehensive strategic partnership, under which they will further expand cooperation on “all issues of common concern.” This will include increasing trade and deepening cooperation on economic policy, including through the U.S.-Indonesia trade and investment framework agreement, which will feature cooperation on trade in services, intellectual property, labor, investment, and agricultural and industrial goods.
The two sides also committed to (1) developing a critical minerals action plan that includes collaboration on reducing supply chain dependencies and vulnerabilities, promoting supply chain transparency, and expanding access to secure and sustainable critical minerals sources, and (2) supporting the development of Indonesia’s domestic semiconductor ecosystem with a view to enhancing local value creation, diversifying global supply chains, and supporting U.S. industry. Virginia companies importing goods with critical mineral inputs from Indonesia could be impacted by these discussions. For more information, click here.
Bilateral Talks Focus on Bangladesh Labor Issues
Labor issues were a dominant theme at the seventh meeting of the bilateral trade and investment cooperation forum agreement council in late September. The U.S. emphasized combatting violence against workers and union organizers and ensuring a simplified and impartial trade union registration process. U.S. negotiators also encouraged Bangladesh to extend freedom of association and collective bargaining to the country’s special economic zones and export processing zones and to dedicate more resources to labor inspections and enforcement.
On a separate issue, the U.S. discussed actions needed to address concerns with Bangladesh’s ranking as one of the top source economies for counterfeit clothing. The U.S. noted progress in several areas, including (1) improvements in the draft version of Bangladesh’s Data Protection Act that remove criminal penalties, restrict the scope of the law to personal data, and limit its application to firms that process personal data within the country, and (2) the removal of Bangladesh’s longstanding fumigation requirement for U.S. cotton exports. For more information, click here.
U.S. and Sri Lanka Look to Improve Trade Relations
At the 14th meeting of the bilateral trade and investment framework agreement council in late September, the U.S. encouraged Sri Lanka to improve transparency and efficiency in approving foreign direct investment, implement more robust anti-corruption measures, consult with relevant stakeholders in drafting labor law reforms, provide greater market access for U.S. exports of agricultural products, and advance the use of biotechnology.
Sri Lanka urged better access to the U.S. market for its high-value and value-added agricultural products, such as organic spices and concentrates, and the extension of GSP eligibility to apparel, textiles, and leather products. Other topics of discussion included how the U.S. can assist in the development of Sri Lanka’s digital economy, gem and jewelry industry, floriculture, and boat-building sector. These talks do not include market access for Virginia exports, but they could lead to increased and improved bilateral trade relations. For more information, click here.
U.S. and Japan Discuss Trade and Critical Minerals
USTR reports that the U.S. and Japan held the fourth round of meetings under the U.S.-Japan Partnership on Trade Dec. 14-15. Discussions focused on (1) coordinated efforts to respond to third-party regulations affecting the digital economy and digital trade, (2) meeting commitments under the critical minerals agreement and each side's capacities to extract and process critical minerals, (3) the non-market and trade-distorting practices of third countries, (4) engagements under the Task Force on the Promotion of Human Rights and International Labor Standards in Supply Chains, and (5) bilateral trade issues including regulatory transparency, ensuring a level playing field for certain products and services, and technical barriers to trade.
Support for GSP Highlighted in Hearing but Prospects for Renewal Still Uncertain
A congressional hearing earlier this year focused on the benefits of reauthorizing the Generalized System of Preferences, although there appears to be little momentum at present for such a move. Over the past twelve months, dozens of GSP beneficiary countries urged the leaders of the Senate Finance and House Ways and Means committees to renew the program in light of its benefits to both their own economies and U.S. producers.
In May, Senate Majority Leader Chuck Schumer, D-N.Y., announced plans to develop a legislative package aimed at further boosting U.S. competitiveness with China that he said could include a renewal of GSP and a number of other trade-related provisions that lawmakers approved before they were ultimately dropped from the CHIPS and Science bill signed into law in 2022. In July, a bipartisan group of lawmakers urged the majority and minority leaders of the Ways and Means Committee to reauthorize GSP because it could facilitate supply chain shifts out of China and into GSP beneficiary countries. Members of the Ways and Means Committee have stated that they intend to make GSP renewal a top priority for 2024. A reauthorized GSP could reduce tariffs for Virginia companies importing select goods from GSP-eligible countries. For more information, click here.
Debate Over Future of AGOA Continues
The future of AGOA remains unclear less than two years before its scheduled expiration as some urge a straight reauthorization of the trade preference program while others push for it to be modernized. An annual AGOA forum was held earlier in November in South Africa, prompting a number of actions and reactions regarding the program’s future. In a statement issued at the outset of the forum, President Biden said AGOA “has formed a bedrock for U.S. trade with sub-Saharan Africa for more than two decades” and called on Congress “to reauthorize AGOA in a timely fashion and to modernize this important Act for the economic opportunities of the coming decade.”
In addition, the Office of the U.S. Trade Representative recently stated that Mauritania will be reinstated to the program effective Jan. 1, 2024, based on progress it has made in the area of worker rights concerns. Also, effective Jan. 1, 2024, the U.S. will terminate AGOA benefits for Gabon, Niger, the Central African Republic, and Uganda, citing various reasons. For now, AGOA remains authorized, allowing Virginia companies to import select goods from AGOA beneficiaries duty free. For more information on the debate of AGOA’s future, click here. For more information on country eligibility in regards to AGOA, click here.
Increasing Opportunity in Kenya
An in-person negotiating round under the U.S.-Kenya Strategic Trade and Investment Partnership was held Oct. 4-7 in Washington, D.C. According to USTR, the two sides exchanged views on proposed texts covering agriculture, anticorruption, and services domestic regulation and continued their conceptual discussions on the subject of inclusivity in trade.
The STIP was announced in July 2022 and aims to negotiate high-standard commitments on issues such as trade facilitation, customs procedures, digital trade, good regulatory practices, agriculture, environment, labor, and standards. The STIP replaced negotiations on a bilateral free trade agreement launched under the Trump administration, and USTR Katherine Tai has said she hopes it “can serve as a model for trade policy engagement in Africa.” Although a small market for Virginia companies, the developments of these discussions could make it easier to do business in Kenya. For more information, click here.
U.S. Trade Activity
Over the past three months, the U.S. government has taken several measures that could impact Virginia companies, including a final rule by the Environmental Protection Agency on per- and polyfluoroalkyl substances (PFAS), which can be found in a variety of consumer goods, and a suspension of the issuance of new licenses involving the exports of firearms and related components by the Bureau of Industry Security. In addition, the U.S. is currently considering other matters that could eventually lead to direct impacts on Virginia companies, such as the International Trade Commission’s investigation into the automotive rules of origin under the U.S.-Mexico-Canada Agreement or the proposed restrictions of advanced chips by BIS. It is important for Virginia companies to monitor these developments and reach out to the Virginia Economic Development Partnership if they have any questions.
USMCA Auto Rules of Origin are Focus of ITC Probe
The ITC has instituted another investigation into the automotive rules of origin under the U.S.-Mexico-Canada Agreement. In this investigation, the ITC will examine many areas of the trade agreement, including the economic impact of the USMCA automotive ROOs on U.S. gross domestic product; U.S. exports and imports; U.S. aggregate employment and employment opportunities; production, investment, use of productive facilities, and profit levels in the U.S. automotive industries and other pertinent industries; wages and employment of workers in the U.S. automotive sector; and the interests of U.S. consumers.
The ITC will hold a public hearing in connection with this investigation and accept written submissions for the record, but no dates have yet been provided. Virginia companies exporting or importing autos or auto parts to/from Canada and/or Mexico may want to provide comments to the ITC as they continue their investigation. For more information, click here.
Increased Export Restrictions on Advanced Chips
BIS announced in October a package of rules designed to broaden and strengthen controls on exports of advanced computing semiconductors and semiconductor manufacturing equipment and items that support supercomputing applications and end-uses. BIS said these rules reinforce regulations issued a year ago that limited exports to China by closing loopholes and restricting Beijing’s ability to both purchase and manufacture certain high-end chips critical for military advantage. According to press sources, additional updates are expected at least annually.
In addition, effective Oct. 17, a BIS final rule adds to the Entity List two Chinese entities and their subsidiaries (a total of 13 entities) involved in the development of advanced computing chips. These entities are also subject to restrictions on foreign-produced items made with U.S. technology. BIS states that foundries producing chips for these listed parties will need a BIS license before they may send such chips to these entities or parties acting on their behalf as a result of applying the “footnote 4” Entity List foreign direct product rule designation. It is very important for Virginia companies exporting these products to ensure they are compliant with the ever-changing U.S. export restriction, sanctions and prohibited entities. For more information, click here.
Import Restrictions Possible for Unregistered Medical Device Facilities
Foreign and domestic medical device facilities that do not properly renew their registrations with the Food and Drug Administration can be locked out of the U.S. market. Renewals for such facilities are due each year. Owners or operators of establishments involved in the production and distribution of medical devices intended for commercial distribution in the U.S., including those that are imported for export only, must register annually with the FDA.
These facilities include foreign and domestic contract manufacturers, specification developers, relabelers/repackers, and initial importers and foreign exporters. Most such establishments must also list the devices they make and the activities performed on those devices at that establishment. Virginia medical device facilities may be subject to these requirements and may need to register with the FDA. For more information, click here.
Imports of “Forever Chemicals” Subject to New Retroactive Reporting Requirements
The EPA has issued a final rule that finalizes reporting and recordkeeping requirements for PFAS under the Toxic Substances Control Act. The EPA states that this rule only applies to manufacturers of PFAS but that importers of PFAS in articles are considered PFAS manufacturers.
PFAS are a group of synthetic chemicals that have been in use since the 1940s and can be found in a wide array of industrial and consumer products. They are synthesized for many different uses, from firefighting foams, to coatings for clothes and furniture, to food contact substances, to the manufacture of other chemicals and products. They are used in a wide variety of products, including textiles, electronics, wires and cables, pipes, cooking and bakeware, sport articles, automotive products, toys, transportation equipment, and musical instruments, that may be imported into the U.S. as finished articles. Virginia companies importing PFAS in articles may be subject to this final rule, and those companies should consult with experts to ensure continued import compliance. For more information, click here.
Imports, Exports of Some Products Prohibited Under New EPA Rule
The EPA has issued a final rule that, effective Dec. 26, prohibits certain import and export as part of a new restriction on the use of hydrofluorocarbons in specific sectors and subsectors. The new final rule implements additional measures by restricting the use of HFCs, whether neat or used in a blend, with high global warming potentials within the refrigeration, air conditioning, and heat pump; foam; and aerosol sectors.
Among other things this rule prohibits the importation, manufacture, or installation of certain equipment across approximately 40 subsectors, based on either overall GWP limits or restrictions on use of specific HFCs. The compliance dates for these restrictions vary from Jan. 1, 2025, to Jan. 1, 2028, depending on the subsector. Virginia companies exporting or importing HFCs may be subject to this new EPA rule and should consult with experts to ensure continued compliance. For more information, click here.
U.S. Suspends Exports of Guns and Ammunition
BIS has announced that, effective Oct. 27, it has suspended exports of guns and ammunition and related export assistance activities for approximately 90 days. Additional steps could be taken after BIS completes a review of current firearms export control review policies to “more effectively assess and mitigate the risk of firearms being diverted to entities or activities that promote regional instability, violate human rights, or fuel criminal activities.”
BIS states that this pause applies to its issuance of new licenses involving exports of firearms, related components, and ammunition controlled under export control classification numbers 0A501, 0A502, 0A504, and 0A505 that are destined for non-governmental end-users worldwide. Shipments to Ukraine, Israel, or countries in Country Group A:1 (Wassenaar Arrangement participants) are exempt from this suspension. Virginia companies involved in these exports need to watch closely for changes to export rules. For more information, click here.
New Tariffs, Export Control Reform Among Recommendations in China Report
A U.S. government commission known for its generally hardline stance on U.S.-China relations appears to have softened its calls for action in its annual report but is still recommending a number of measures that could have an effect on two-way trade. In its 2023 report, the U.S.-China Economic and Security Review Commission does continue to assert that China’s ruling regime “gives no sign of altering its policies” despite U.S. engagement and that “the new normal” in the U.S.-China relationship “is one of continuing, long-term strategic and systemic competition.”
However, the report also highlights that China “may now be on the verge of its most serious economic crisis in 40 years” at the same time that it is facing “an increasingly inhospitable international environment as the United States and other advanced industrial countries attempt to shift supply chains out of China and ‘de-risk’ their economic relations with it.” The commission asserts that Beijing has done little of substance to respond to these and other challenges, possibly suggesting (despite its traditional bellicosity) that this inaction will be sufficient to constrain China’s ambitions and that the U.S. thus does not need to be overly aggressive in its own efforts. For more information, click here.
As China Tariff Costs Pile Up, Importers Can Still Join Litigation Seeking Refunds
Litigation seeking to overturn Section 301 tariffs on hundreds of billions of dollars’ worth of imports from China is expected to continue into 2024, meaning importers of subject goods can still join this effort, which could ultimately yield refunds of duties imposed. A case first filed in 2020 and since joined by thousands of importers argues that the Section 301 tariffs on List 3 and List 4A goods from China were wrongly imposed.
If this case is ultimately successful, refunds of all Section 301 tariffs paid on List 3 and List 4A goods will potentially become available. Importers can still preserve their rights to possible refunds of these tariffs by joining the litigation. For more information, click here.
Feds Intensify Warnings on Forced Labor in Supply Chains
The federal government is reiterating the urgency for businesses to undertake due diligence measures to make sure their supply chains do not involve the use of forced labor in China’s Xinjiang Uyghur Autonomous Region. In July 2021, a multi-agency advisory warned businesses, individuals, and others that do not exit supply chains, ventures, and/or investments connected to the XUAR that they could run a high risk of violating U.S. law and triggering criminal or civil enforcement actions.
The agencies involved have now issued an addendum to that advisory asserting that since it was issued Chinese authorities have not taken any steps to change policies in response to mounting public concern over the contamination of international supply chains with goods produced by state-sponsored forced labor there. To the contrary, the addendum states, the Chinese government and affiliated commercial entities have continued to engage in a concerted campaign to dispel these accusations through vehement denial in public messaging; state-ordered, politically-motivated academic research; falsified cotton production and harvest mechanization data; localized propaganda campaigns targeting consumers in trade partner countries; the establishment of false supply chain policy initiatives as alternatives to preexisting international monitoring and compliance programs; new sanctions on foreign government officials critical of Chinese abuses; and pressure on international companies. Virginia companies importing goods from China need to closely monitor their supply chains and ensure they have taken due diligence and reasonable care in getting visibility into their sources. For more information, click here.
Special Topic: House Committee Calls for Substantially Higher Import Duties and Other Restrictions on China
The House Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party on Dec. 12 unveiled a bipartisan report that outlines a strategy to “fundamentally reset the United States’ economic and technological competition” with China. Among other actions, the report proposes substantially higher tariffs on U.S. imports of Chinese products that, if adopted, could very well escalate into an all-out trade war between the two economic giants.
The committee contends that since its accession to the WTO China has pursued a multidecade strategy of economic aggression against the U.S. and its allies in order to decouple the Chinese economy from the global economy and reduce its dependence on the U.S. in critical sectors, while making the U.S. more dependent on China. In response, the committee believes the U.S. should adopt a new three-pillar strategy that puts its national security, economic security, and values at the core of the Sino-U.S. relationship.
The first pillar calls for a reset in the Sino-U.S. economic relationship because, according to the committee, (1) China’s economic system is incompatible with the WTO and undermines U.S. economic security; (2) despite the heightened risks associated with U.S. investment in Chinese companies, the full extent and distribution of that risk and the implications for U.S. national security and financial stability remain unknown; (3) the U.S. lacks a contingency plan for the economic and financial impacts of conflict with China; (4) China uses an intricate web of industrial policies, including subsidies, forced technology transfer, and market access restrictions, to distort market behavior, achieve dominance in global markets, and increase U.S. dependence on imports of Chinese products; and (5) the widespread adoption of certain Chinese technologies in the U.S. poses a significant risk to U.S. national security and data protection concerns and threatens long-term U.S. technological competitiveness.
The second pillar calls for stemming the flow of U.S. capital and technology fueling China’s military modernization and human rights abuses, with the committee alleging that (1) U.S. investors wittingly and unwittingly support China’s defense industry, emerging technology companies, and human rights abuses; (2) U.S. export controls have been slow to adapt both to rapid changes in technology and to attempts by adversaries to blur the lines between private and public sector entities, particularly China’s strategy of military-civil fusion; (3) the committee needs additional authorities and tools to effectively evaluate inbound investments from China; and (4) China exploits the openness of the U.S. research environment to steal U.S. intellectual property and transfer technology to advance its economic and security interests to the detriment of the U.S.
The third pillar, meanwhile, calls for investment in technological leadership and the development of collective economic resilience in concert with U.S. allies. In this regard, the committee argues that (1) the U.S. is falling behind in the race for leadership in certain critical technologies; (2) China is gaining on the U.S. in the race for global talent; (3) by working with allies the U.S. can increase U.S. exports, reduce supply chain reliance on China and counter China’s economic and technology mercantilism; (4) the U.S. is dangerously dependent on China for critical mineral imports; (5) U.S. dependence on China for pharmaceutical and medical device supply chains poses a distinct national security risk; and (6) through its Belt and Road Initiative the Chinese Community Party has expanded its influence around the world and gained significant positions in key supply chains and strategic infrastructure, such as ports and space facilities.
The committee’s report contains 150 policy recommendations covering a range of areas and topics, including the following.
- Higher Import Tariffs. Congress should move China to a new tariff column that restores U.S. economic leverage to ensure that China abides by its trade commitments and does not engage in coercive or other unfair trade practices and decreases U.S. reliance on Chinese products in sectors important for national and economic security. This shift should be phased in over a relatively short period of time to give the U.S. economy the necessary time to adjust without avoidable disruptions.
- Tariffs on Semiconductors. The Department of Commerce should be directed to impose import duties on foundational (i.e., legacy) semiconductors from China.
- Special Safeguard Mechanism. Congress should reinstate the special safeguard mechanism on China under Section 421 that expired in 2013. Meant as a transitional mechanism for all WTO members as China transitioned to a market economy after joining the WTO, this safeguard mechanism allowed the U.S. to impose tariffs or other restrictions if the ITC determined that Chinese products were being imported into the U.S. in a way that caused or threatened to cause market disruptions. Unlike other U.S. trade remedies, this mechanism did not require a showing of an unfair trade practice.
- Section 232 Remedies. Congress should direct the administration to implement Section 232 of the Trade Expansion Act to impose remedies on products or components from a country of concern while limiting applicability to U.S. allies and partners. Under congressional guidance, the DOC should act on the importation of an article when a country of concern threatens to impair U.S. national security.
- Section 337 Update. Section 337 of the Tariff Act of 1930 should be updated to better address the threat from unfair Chinese trade practices, making clear that this statute may be used to address unfair trade practices and unfair methods of competition from a wide array of market-distorting unfair trade practices.
- Prepare for Retaliation by Beijing. In anticipation of retaliation by Beijing, the Department of Agriculture and USTR should collaborate to determine alternative markets for U.S. agricultural exports that predominately rely on the Chinese market. Congress should also consider additional appropriations to offset any such retaliation as well as a broader strategy to support workers to prepare for a period of increased trade tensions and uncertainty.
- WTO Action. USTR should be directed to bring a comprehensive WTO dispute against China’s subsidization, support for state-owned enterprises, and non-market economy policies and practices with a broad coalition of countries.
- Compliance with “Phase One” Agreement. USTR should publish a full assessment of China’s compliance with the “Phase One” agreement as well as remedies necessary to address any areas of non-compliance.
- Lower Threshold for Low-Value Shipments. Congress should pass legislation to reduce the de minimis threshold for duty-free, low-value shipments into the U.S., with a particular focus on China and other foreign adversaries. Congress should also direct U.S. Customs and Border Protection to strengthen its enforcement against transshipments from China into the U.S. market using the de minimis rule.
- Enhanced Forced Labor Safeguards. Congress should approve the Strengthening the Uyghur Forced Labor Prevention Act (H.R. 4567) to strengthen safeguards against products made with forced labor in China entering the U.S. In addition, the UFLPA “rebuttable presumption” should be expanded to include certain Chinese products.
- Tighter U.S. Sanctions and Related Actions. The report contains a number of recommendations to tighten the U.S. sanctions regime. For example, it favors the enactment of the Chinese Military and Surveillance Sanctions Act of 2023 (H.R. 760), which would authorize the Treasury Department to make a determination of sanctions on Chinese companies identified as being directly tied to the Chinese military industrial complex. Additionally, Huawei, ZTE, and other high-risk foreign adversary-controlled telecom vendors should be placed on the Specially Designated Nationals and Blocked Persons List.
- Critical Technology Ban. Congress should authorize the president to ban technology products and services critical to national security from the U.S. market if they are owned, controlled, or developed by a foreign adversary, including quantum computing, biotechnology, artificial intelligence, autonomous systems, and surveillance technology. The report also favors bans or forced divestitures of foreign adversary-controlled social media platforms such as TikTok, as well as a ban on the federal procurement of Chinese drones.
- Risks Posed by LiDAR Technologies. The DOC should determine whether LiDAR technologies made by foreign adversary countries pose a risk to U.S. national security and whether U.S. technology flowing to Chinese LiDAR firms should be subject to U.S. export controls.
- Tighter U.S. Export Controls. Recommendations in this area include allocating more resources to BIS, updating the End User Review Committee deliberation process, expanding BIS’s authorities to adjudicate the risk posed by dual-use open-source technology, require BIS to adopt country-wide controls for specific technologies going to foreign adversaries, quickly establish general controls on critical and emerging technologies to foreign adversaries (including on AI, quantum technologies, biotechnology, advanced materials, optics and sensing, advanced energy research, and space-based technologies), expand export licensing requirements to subsidiaries of foreign adversary entities on the Entity List, require the ERC to conduct a full top-to-bottom review of all items classified as commercial items (EAR99) to determine if they should be subject to export controls, and adopt a policy of denial for all U.S. technology exports to Chinese firms involved in espionage campaigns against the U.S., including Huawei and ZTE.
- U.S. Outbound Investment Restrictions. Congress should pass legislation to generally prohibit investment in Chinese companies included on key U.S. government sanctions and red-flag lists and codify restrictions on U.S. investment in areas related to China’s critical and emerging technologies, military capabilities, and human rights abuses.
- U.S. Inbound Investment Restrictions. Legislation should be enacted to expand the definition of critical technology in the Foreign Investment Risk Review Modernization Act (FIRRMA) to include technologies that directly or indirectly enable technologies listed as critical and emerging technologies as well as any technologies that are deemed critical technologies by either a majority of CFIUS member agencies or a single member agency of CFIUS with concurrence by the chair. The list of sensitive sites over which CFIUS has jurisdiction should also be expanded to cover all military facilities, acknowledged intelligence sites, national labs, defense-funded university-affiliated research centers, and critical infrastructure sites. Furthermore, CFIUS should be granted jurisdiction over greenfield investments from foreign adversary entities involving critical technologies or infrastructure or sensitive personal data.
- IPR Protection and Enforcement. Congress should determine and establish the necessary guardrails to address the possibility of foreign adversary entities obtaining sensitive intellectual property by funding third-party litigation in the U.S. and it should make Chinese court antisuit injunctions unenforceable in U.S. courts. Congress should also authorize the DOC to place a foreign adversary entity on the Entity List if it determines that the entity or an individual affiliated with the entity was responsible for the theft of U.S. intellectual property rights or refused to compensate U.S. firms for the unlicensed use of their intellectual property.
- U.S. Trade Law Update. Congress should enact the Leveling the Playing Field 2.0 (H.R. 3882) to update U.S. trade laws by addressing issues such as cross-border subsidies, simplifying investigations into circumvention and repeated product-related inquiries, and strengthening remedies to minimize Chinese predatory economic practices. Bipartisan legislation should also empower the U.S. to deter Chinese economic coercion against U.S. companies, private individuals, and public officials, as well as U.S. partners and allies. Particular action should be taken to respond to companies acting in furtherance or support of a boycott maintained by a foreign adversary against a country or company friendly to the U.S.
- Country of Origin Labelling for Goods Purchased Online. Congress should enact legislation like the COOL Online Act mandating country of origin labelling for goods purchased online to ensure transparency, consumer understanding, and clear trade practices in the digital marketplace.
- Enhanced Transparency Regarding U.S. Investments in China. Congress should enact legislation, such as the Reveal Risky Business in China Act (H.R. 4451), requiring large U.S. public companies to disclose key risks related to China and the expected effects of a sudden change in market access. Congress should also mandate that the Financial Stability Oversight Council submit regular reports on the aggregate quantities of all China-associated assets held by Americans and any relevant risks to the U.S. financial system.
- Requirements for U.S.-Listed Chinese Firms. Congress should oversee the implementation of the Holding Foreign Companies Accountable Act to ensure that Chinese firms listed in the U.S. come into compliance with U.S. law immediately. The Holding Chinese Listed Companies Accountable Act (H.R. 4879) should be approved to heighten accountability for Chinese companies. Additionally, Chinese companies that wish to register on U.S. exchanges should certify that they do not work with foreign adversary militaries, facilitate the development of dual-use technologies, or use Uyghur forced labor in their supply chains. Moreover, further U.S. capitalization of Chinese companies under U.S. human rights sanctions or implicated in Uyghur forced labor should be prevented.
- Assistance to Petitioners in Trade Remedy Proceedings. Financial assistance or other substantive support should be considered for small- and medium- sized businesses or first-time petitioners who are pursuing an unfair trade case.
- International Initiatives. U.S. trade agreements should have robust rules of origin to prevent non-market economies from benefiting from preferential duty treatment. In addition, a consensus should be built on China’s distortive trade and economic practices and U.S. commitments to its international partners should be reinforced by working with like-minded countries to propose new plurilateral disciplines on NMEs, which could be modelled on the U.S.-EU-Japan Trilateral initiative.
- Research Activities. The committee also favors a range of actions to address what it refers to as China’s exploitation of the openness of the U.S. research environment.
Many of these issues have previously been raised in Congress, and some legislation has already been introduced. Congress is expected to consider a bill that may combine several of these recommendations into a single bill or considering many bills that will all be defensively aimed at China. Congress is also expected to pass legislation that is offensively designed to support U.S. entities/manufacturers to be more competitive. Virginia companies need to be aware from both an offensive and defensive position to legislation that may pass in an election year. The tightly divided Chambers have not agreed on many issues, but China as a potential threat to the U.S. national security and global competitiveness is one area on which both parties and both chambers can agree.