On June 17, 2021, a federal grand jury in Los Angeles from the U.S. District Court for the Central District of California unsealed an indictment that accuses five defendants of having conspired to unlawfully export thermal imaging riflescopes and night-visions goggles to Russia. All five defendants are charged with conspiring to violate the Arms Export Control Act, which carries a maximum sentence of 20 years in federal prison. The defendants could face an additional five years in prison for allegedly conspiring to smuggle thermal imaging devices from the U.S. and conspiring to file false export information in order to conceal their activities.

The five defendants allegedly participated in a nearly four-year scheme purchasing dozens of thermal imaging devices – which cost between $5,000 and $10,000 and are controlled by the International Traffic in Arms Regulations (ITAR) – from a variety of sellers across the United States. The indictment states that the individuals used aliases to obtain the devices, hid the thermal imaging devices among other non-export-controlled items when exporting them to Russia, and falsely declared that the contents of their exports were non-export-controlled items valued at less than $2,500. In no case did any of the defendants obtain a required export license to export defense articles to Russia.

The Press Release is available here.

For more information on actions related to Russia and ITAR, contact our team and see previous posts below.

UPDATE: Export Control Agencies Coordinated Response Target Russia for Prohibited Chemical Weapon Activities | International Trade Law (cmtradelaw.com)

DDTC Issues 2nd Extension to Certain Temporary Suspensions, Modifications, and Exceptions to ITAR Due to COVID-19 | International Trade Law (cmtradelaw.com)

In ruling NY N319384 (June 4, 2021), Customs and Border Protection (CBP) discussed the classification of a point-of-sale (POS) self-service checkout (SCO) machine from China. The machine contained an embedded computer, touchscreen monitor, metal and plastic cabinetry, trim, and molding. The machine allows customers to complete purchase transactions by either scanning the item barcodes or selecting the item from the touchscreen display. Customers may pay via a credit or bank card or with an attendant once all the items have been entered.

CBP determined that the applicable subheading for the self-service checkout machine is 8470.50.0020, Harmonized Tariff Schedule of the United States (HTSUS), which provides for “Calculating machines…ticket-issuing machines and similar machines…cash registers:  Cash registers: Point-of-sale terminals.” The rate of duty for such items is free. Additionally, CBP also determined that pursuant to U.S. Note 20 to Subchapter III, Chapter 99, HTSUS, Chinese products under subheading 8470.50.0020, HTSUS, unless excluded, are subject to an additional 7.5% ad valorem rate of duty. As such, at the time of the product’s importation, the chapter subheading 9903.88.15 must be reported in addition to subheading 8470.50.0020, HTSUS.

On June 17, 2021, the House Ways and Means Committee advanced the Generalized System of Preferences and Miscellaneous Tariff Bill Modernization Act of 2021. The announced legislation follows Senate passage of similar GSP and MTB provisions, as well as Section 301 provisions in the Trade Act of 2021 as part of the omnibus U.S. Innovation and Competition Act. Notably, GSP and MTB renewal are considered revenue measures and therefore must originate in the House. The procedural faux pas was described as “inconsistent with the idea that the Ways and Means Committee would go first” by Ways and Means Committee Chairman Richard Neal (D-MA). While the renewal of GSP, MTB, and Section 301 Exclusions have received broad bipartisan support, procedural hurdles relating to revenue legislation and differing bill text will need to be resolved in conference before a vote can be expected.

Key differences exist between the House and Senate text. A comparison of notable provisions is provided below as outlined in congressional summaries and the legislative text:

GENERALIZED SYSTEM OF PREFERENCES

Renewal Timeline

House

Senate
  • Extends GSP through 2024
  • Extends GSP through 2027

Retroactive Benefits

House

Senate
  • GSP is retroactive to the date of the previous GSP expiration allowing entries can be reliquidated.
  • GSP includes a retroactivity provision allowing importers to get refunds on duties paid since the previous GSP expired on December 31, 2020.

New Requirements and Eligibility Criteria

House

Senate
  • Updates the GSP labor criteria to effectively enforce internationally recognized worker rights and expands the definition to include elimination of discrimination in occupation and employment, and the elimination of violence against workers, including gender-based violence and harassment.
  • Adds new GSP criteria on human rights, rule of law, political pluralism, anti-corruption, and economic development.
  • Adds new annual country eligibility reviews and transparency requirements for administrative decisions made under the program.
  • Enhances public access and participation in the program by creating a new process to receive petitions at any time and setting maximum timelines for reviews to be completed.
  • Requires a study on the rules of origin, women’s economic empowerment, and GSP utilization rates to help the least developed countries receive more of the benefits.
  • Establishes a mechanism to review beneficiary country’s laws related to worker and gender rights. Encourages the adoption of gender-based data collection measures to help create greater equitable economic development outcomes.
  • Adds new mandatory eligibility criteria, which countries must meet to be eligible for GSP, on human rights and the environment.
  • Adds new discretionary criteria, which the President takes into account when designating a country as a GSP beneficiary, on the environment, women’s economic empowerment, rule of law, and digital trade.
  • Updates the definition of “internationally recognized worker rights” to include the elimination of discrimination in occupation and employment, which aligns that definition with USMCA and other trade agreements.
  • Provides a new requirement for regular country reviews and includes additional transparency requirements for administrative decisions made under the program.
  • Provides new reporting requirements on how GSP promotes worker rights and women’s economic empowerment.
  • Requires the USITC to study GSP utilization rates, rules of origin, and article eligibility rules.

 

MISCELLANEOUS TARIFF BILL

Renewal Timeline

House

Senate
  • Extends MTB through 2023 and reauthorizes  the AMCA for two MTB cycles-through 2027.
  • Extends MTB through 2023 and reauthorizes  the AMCA for two MTB cycles-through 2027.

Retroactive Benefits

House

Senate
  • MTB is retroactive for four months (~ 120 days) before the enactment of the bill.
  • MTB, Section 21701(b) gives retroactive effect for 120 days before enactment of the bill.

Substantive Changes

House

Senate
  • Aims to support domestic manufacturers and limit benefits for imports from China by excluding finished products from future MTB cycles.
  • The text includes 1363 products.
  • N/A

 

  • The text includes 1423 products.

 

SECTION 301

Renewal Timeline

House Senate
  • No legislation introduced
  • Not later than 120 days after the date of the enactment of the Act, The Trade Representative, in consultation with such other Federal agencies as the Trade Representative considers appropriate, shall prescribe regulations regarding the criteria that the Trade Representative will apply and the evidence the Trade Representative will evaluate in deciding exclusion requests.

Retroactive Benefits

House

Senate
  • No legislation introduced
  • USTR will reinstate all exclusions for entries filed on or before December 31, 2022, with retroactivity for certain liquidations and reliquidations.
  • Any entry of a covered article on which duties were paid under section 301(b) of the Trade Act of 1974 (19 U.S.C. 2411(b)) and to which a covered duty exclusion would have applied if the entry were made on December 31, 2020, that was made—(i) after December 31, 2020, and (ii) before the date of the enactment of this Act, shall be liquidated or liquidated as though such entry occurred on such date of enactment.

Substantive Changes

House

Senate
  • No legislation introduced
  • Criteria for consideration in implementing the exclusion process include:
    • (A) Whether the failure to grant the exclusion would result in severe economic harm to the requester.
    • (B) Whether the article or a reasonable substitute is not commercially available to the requester.
    • (C) Whether the imposition of the duty with respect to the article would unreasonably increase consumer prices for day-to-day items consumed by low- or middle-income families in the United States.
    • (D) Whether the imposition of the duty would have an unreasonable impact on the manufacturing output of the United States.
    • (E) Whether the imposition of the duty would have an unreasonable impact on the ability of an entity to fulfill contracts or to build critical infrastructure.
    • (F) Whether the failure to grant the exclusion is likely to result in a particular entity or entities having the ability to abuse a dominant market position.
  • Not later than 90 days after imposing any duty under section 301(b), the Trade Representative, in consultation with such other Federal agencies as the Trade Representative considers appropriate, shall publish a notice in the Federal Register regarding the criteria that the Trade Representative will apply and the evidence it will evaluate in determining whether a request for exclusion from such duty satisfies the requirements of the exclusion process under subsection

 

The full text of the Generalized System of Preferences and Miscellaneous Tariff Bill Modernization Act of 2021 is available here.

The full text of the Trade Act of 2021 is available here.

For more information on the Generalized System of Preferences, Miscellaneous Tariff Bill, or Section 301 please contact our team and see previous posts below.

Generalized System of Preferences (GSP) Archives | International Trade Law (cmtradelaw.com)

Miscellaneous Tariff Bill Archives | International Trade Law (cmtradelaw.com)

Section 301 Exclusion Process Archives | International Trade Law (cmtradelaw.com)

Section 301 Tariffs Archives | International Trade Law (cmtradelaw.com)

On June 9, the President issued an Executive Order on Protecting Americans’ Sensitive Data from Foreign Adversaries (EO 14034), rescinding three executive orders issued in the previous administration that prohibited transactions with the mobile applications TikTok and WeChat and eight other Chinese-developed and -controlled applications.  At the same time, the EO makes clear that the current administration remains focused on protecting the information and communications technology and services (ICTS) supply chain against threats from foreign adversaries, defined to include China, as set forth in the May 2019 Executive Order 13873 (Securing the Information and Communications Technology and Services Supply Chain) and its implementing regulations.  The EO also identifies criteria for the Department of Commerce to use in evaluating the risks of a connected software application.

Click here to continue reading the full version of this alert.

On June 15, 2021, the U.S. and EU announced a commitment to address steel and aluminum excess capacity issues including section 232 tariffs and retaliatory measures by the end of the year. This announcement follows the May 17th, 2021 statement from the European Commission Executive Vice President’s  outlining the EU’s decision to temporarily suspend the increase of its rebalancing measures related to the Unites States’ Section 232 steel and aluminum tariffs.

The commitment, as outlined by the U.S.-EU Summit Statement and European Commission President, explains that the U.S. and EU:

  • Will engage in discussions to allow the resolution of existing differences on measures regarding steel and aluminum before the end of the year.
  • Will work together to resolve tensions arising from the U.S. application of tariffs on imports from the EU under U.S. Section 232, and will work towards allowing trade to recover from its 2020 lows and ending the WTO disputes.
  • They are committed to ensuring the long-term viability of their steel and aluminum industries, and to addressing excess capacity.
  •  Will create a working group to discuss the overcapacity issue and the Section 232 tariffs.

The full text of the U.S.-Eu Summit Statement is available here.

For more information on Section 232, U.S.-EU Trade, and WTO developments please contact our team and see previous posts below.

Section 232 Posts

WTO Posts

EU Retaliatory Tariff Posts

In ruling NY N319727 (June 8, 2021), Customs and Border Protection (CBP) discussed the classification of the “Solar Powered Phone Charging Pole” (Charging Pole) from China. This item is a stainless-steel pole measuring 106 inches in height. It has a 45 W photovoltaic (PV) panel incorporated at its top. Because it is solar powered, the Charging Pole does not connect to the electrical grid and functions as a stand-alone charger. The pole comes with a small steel table for users to place their electronic devices while they charge as well as a charge controller, a 30 Ah lithium-ion battery, three USB outlets, and one Qi charging pad. The item includes additional optional components—such as an advertising display, a Wi-Fi router, and LED spotlights. However, because these features are not explicitly included with the Charging Pole, CBP did not consider these optional features in its ruling.

CBP determined that the applicable subheading for the Solar Powered Charging Pole is 8504.40.9580, HTSUS, which provides for “Electrical transformers, static converters…: Static converters: Other: Other.” The general duty rate is free.

Additionally, CBP determined that pursuant to U.S. Note 20 to subchapter III, Chapter 99, HTSUS, Chinese products under the 8504.40.9580, HTSUS—unless excluded—are subject to an additional 25% ad valorem rate of duty. As such, the chapter subheading 9903.88.03 must be reported in addition to subheading 8504.40.9580.

On June 15, 2021, Unites States Trade Representative Katherine Tai and European Commission Executive Vice President Valdis Dombrovskis announced an outline to resolve the 20 year old large civil aircraft dispute and suspend tariffs on $115 billion in related products for a period of five years. The announcement follows President Biden’s first in person meetings with European Commission President Ursula von der Leyen and European Council President Charles Michel and in the context of warming trade relations with the EU.  Additionally, Ways & Means Committee Chairman Richard Neal (D-MA) and Ranking Member Kevin Brady (R-TX) have issued positive statement on the agreement.

The below general principles, which is outlined by USTR’s press release, will be the general guide for cooperation between the United States and the European Union:

  1. The two sides will establish a Working Group on large civil aircraft, to be led by each side’s respective Minister responsible for trade.  The Trade Ministers will consult at least yearly.  The Working Group will meet on request or at least every 6 months.

 

  1. The Working Group will seek to analyze and overcome any disagreements that may arise between the sides.  The Working Group will collaborate on and continue discussing and developing these principles and appropriate actions.

 

  1. Each side intends to provide any financing to its LCA producer for the production or development of large civil aircraft on market terms.

 

  1. Each side intends to provide any funding for research and development (R&D) for large civil aircraft to its LCA producer through an open and transparent process and intends to make the results of fully government funded R&D widely available, to the extent permitted by law.  Each side intends not to provide R&D funding or other support that is specific, to its LCA producer in a way that would cause negative effects to the other side.

 

  1. The two sides will continue discussions to further operationalize paragraphs 3 and 4, which apply to all levels of government.

 

  1. Each side intends to collaborate on jointly analyzing and addressing non-market practices of third parties that may harm their respective large civil aircraft industries.  The two sides will implement the annexed understanding on cooperation on non-market economies through the Working Group.

 

  1. Each side intends to suspend application of its countermeasures for a period of 5 years, in the expectation that the other side will contribute to establishing a level playing field and to addressing shared challenges from non-market economies.

 

  1. The two sides will continue to confer on addressing outstanding support measures.

The full press release is available here.

The full framework text is available here.

On June 13, 2021, leaders from the U.S., U.K., Canada, Japan, France, Germany, and Italy (the G7) —announced their joint actions to support and strengthen free and fair trade. The joint actions emphasized efforts to combat forced labor in global supply chains as well as other initiatives to review trade policies to further women’s economic empowerment, increase sustainability by aligning trade practices with the Paris agreement, and modernize the World Trade Organization (WTO).

The G7 included the removal of forced labor from global supply chains as a major concern in their communiqué. The group specifically referred to state-sponsored forced labor of vulnerable and minority groups in the agriculture, solar, and garment sector supply chains. Notably, these are the same sectors that have drawn international scrutiny and government action in Xinjiang, China.

The United States has already taken steps to exclude goods suspected of utilizing forced labor in their supply chains. On January 13, 2021, Customs and Border Protection (CBP) issued a Withhold Release Order on cotton and tomato products from Xinjiang, and on May 4, 2021, CBP seized nearly 4 million disposable gloves following the receipt of information that led to a forced labor finding. On May 28, 2021, CBP also issued a WRO against Dalian Ocean Fishing Co., Ltd. based on information that reasonably indicated the use of forced labor in that entity’s fishing operations. CBP has begun detaining tuna, swordfish, and other seafood harvested by vessels owned or operated by the Dalian Ocean Fishing Co., Ltd.

As next steps, the G7 Trade Ministers intend to collectively identify cooperative efforts towards eradicating all forms of forced labor in global supply chains ahead of the G7 Trade Ministers’ meeting in October 2021.

Alongside efforts to remove forced labor from global supply chains, the G7 emphasized other initiatives to strengthen free and fair trade, which include:

• Reviewing trade policies to ensure the economic empowerment of women, which comes via developing a strong evidence base of gender-disaggregated data and analysis;

• Transitioning to more sustainable supply chains by acknowledging the risk of carbon leakage and aligning trading practices with commitments under the Paris agreement; and

• Modernizing the WTO to promote fair competition and shared prosperity. The modernization effort involves updating the global trade rulebook to reflect the new global economy and protect against unfair practices as well as supporting the interests of the least-developed and low-income countries.

A copy of the press release is available here.

For more information on actions regarding forced labor abuses and global supply chain policies, contact our team and see previous posts below.

CBP Issues Withhold Release Order on Cotton and Tomato Products Produced in Xinjiang | International Trade Law (cmtradelaw.com)

CBP Seizes Millions of Disposable Gloves Following Forced Labor Finding Against Top Glove Corporation | International Trade Law (cmtradelaw.com)

On June 8, 2021, the Senate voted 68 to 32 to approve The American Innovation and Competition Act. Among other pieces of legislation, the omnibus package includes The Trade Act of 2021 which contains provisions to reestablish a Section 301 tariff exclusion and renewal process. Specifically, Division G (The Trade Act of 2021), Title III, Section 73001, creates a process and procedures for USTR to follow when imposing tariffs related to Section 301 investigations. Notably, the provisions within Section 73001 would not apply to investigations under Section 301 pursuant to a WTO dispute settlement case.

These changes are achieved by amending the Trade Act of 1974 to include a new section entitled Section 305A. The new section requires USTR to gauge the impact of proposed actions on consumers, establishes and outlines an exclusion process, sets specific criteria for implementation of the exclusion process, establishes a renewal process, and provides retroactive tariff relief.

 

Outline of Section 301 Provisions

Analysis and Alternative Action

  • Before taking action under section 301(b), the Trade Representative shall analyze the impact of the action on United States entities, particularly small entities, and consumers in the United States with a goal of mitigating the impact of duties on United States entities and consumers in the United States, including by evaluating alternatives or modifications to particular actions.

Process for Exclusion from Duties

  • The Trade Representative shall establish and maintain a process for exclusion requests from duties under section 301(b) unless the Trade Representative determines and certifies to the appropriate congressional committees that maintaining an exclusion process—
    • (A) Would impair the ability of the United States to maintain effective pressure to remove unreasonable or discriminatory practices burdening commerce in the United States; or
    • (B) Is impractical due to the low value of the duties imposed.

Criteria for Implementation of the Exclusion Process

  • Criteria for consideration in implementing the exclusion process include:
    • (A) Whether the failure to grant the exclusion would result in severe economic harm to the requester. 
    • (B) Whether the article or a reasonable substitute is not commercially available to the requester.
    • (C) Whether the imposition of the duty with respect to the article would unreasonably increase consumer prices for day-to-day items consumed by low- or middle-income families in the United States.
    • (D) Whether the imposition of the duty would have an unreasonable impact on the manufacturing output of the United States.
    • (E) Whether the imposition of the duty would have an unreasonable impact on the ability of an entity to fulfill contracts or to build critical infrastructure.
    • (F) Whether the failure to grant the exclusion is likely to result in a particular entity or entities having the ability to abuse a dominant market position.
  • Not later than 90 days after imposing any duty under section 301(b), the Trade Representative, in consultation with such other Federal agencies as the Trade Representative considers appropriate, shall publish a notice in the Federal Register regarding the criteria that the Trade Representative will apply and the evidence it will evaluate in determining whether a request for exclusion from such duty satisfies the requirements of the exclusion process under subsection

Timeframe of Exclusion and Renewal

  • Exclusion of an article requested under paragraph (1) from duties described in paragraph (2)—(i) shall be for a period of 18 months; and (ii) shall be decided—(I) not later than 90 days before the duty is due to be paid; or (II) if the Trade Representative determines that the request presents exceptionally complex issues or requires additional evidence, not later than 120 days before the duty is due to be paid.
  • The Trade Representative shall allow applications for renewal of an exclusion under paragraph (1) to be submitted not later than 90 days before the exclusion is set to expire.

Retroactive Tariff Relief

  • USTR will reinstate all exclusions for entries filed on or before December 31, 2022, with retroactivity for certain liquidations and reliquidations.
  • Any entry of a covered article on which duties were paid under section 301(b) of the Trade Act of 1974 (19 U.S.C. 2411(b)) and to which a covered duty exclusion would have applied if the entry were made on December 31, 2020, that was made—(i) after December 31, 2020, and (ii) before the date of the enactment of this Act, shall be liquidated or liquidated as though such entry occurred on such date of enactment.

The full text of Title III, Section 73001 is available here on pages 100 to 115.

A full analysis of American Innovation and Competition Act is available here.

For more information on the omnibus package of legislation or Section 301 please contact our team or review our previous posts below.

Section 301 Exclusion Process Archives | International Trade Law (cmtradelaw.com)

Section 301 Investigation Archives | International Trade Law (cmtradelaw.com)

Section 301 Tariffs Archives | International Trade Law (cmtradelaw.com)

On June 8, 2021, the Senate voted 68 to 32 to approve The American Innovation and Competition Act. The Act is an omnibus package of bills that took over a year to negotiate.

Major pieces of Legislation include:

  1. The Endless Frontier Act;
  2. the Strategic Competition Act;
  3. the Trade Act of 2021;
  4. the USA Telecommunications Act; and
  5. other supplemental appropriations bills

Next Steps and Procedural Hurdles

The legislation will now move to the House for consideration. Notably, The American Innovation and Competition Act, will be met in the House with a similar piece of legislation from the Subcommittee of the House Science, Space, and Technology Committee, The NSF for the Future Act. Both the American Innovation and Competition Act and the more narrowly focused NSF for the Future Act provide expanded funding for the National Science Foundation’s budget, however, the NSF for the Future Act does not include the additional pieces of legislation listed above. Both pieces of legislation are expected to advance this summer but the differing legislative texts will need to be resolved in conference.

Additionally, the Trade Act of 2021 renews the Generalized System of Preferences (GSP) and the Miscellaneous Tariff Bill (MTB). Since GSP and MTB are revenue measures, they are required to originate in the House. Due to this requirement, House Members could decide to adopt a privileged resolution sending the revenue legislation back to the Senate without taking action. Senators Wyden and Crapo have both stated that they intend to address the issue with their House counterparts.

While the American Innovation and Competition Act has received broad bipartisan support and provisions within the package have been endorsed by both chambers, procedural hurdles relating to revenue legislation and differing bill text will need to be resolved in conference before a vote can be expected.

The full text of the American Innovation and Competition Act is available here.

The full text of the NSF for the Future Act is available here.

Details as provided by the Senate Majority Leader and Senate Finance Committee are outlined below:

 

1. The Endless Frontier Act:

The Endless Frontier Act, as reported by the Senate Commerce Committee, seeks to maintain and build on U.S. science and technology leadership through investments in research and 5 development and strengthening regional economic development, manufacturing, and supply chains. The legislation would authorize roughly $120 billion over 5 years for activities at the National Science Foundation (“NSF”), Department of Commerce (“DOC”), the Department of Energy (“DOE”), and the National Aeronautics and Space Administration (“NASA”). The Endless Frontier Act advances priorities including to reduce undue geographic concentration of R&D funding, encourage broader participation of populations underrepresented in STEM, and increase collaboration across federal agencies and with non-governmental partners on innovation.

Notable Provisions:

  • Technology Directorate: The Endless Frontier Act would create a new Directorate of Technology and Innovation at the NSF to support research and technology development in key technology focus areas, such as artificial intelligence and quantum science, in order to strengthen the global leadership of the United States in innovation. Major activities would include funding research and development at collaborative institutes, supporting academic technology transfer and intellectual property protection, establishing technology testbeds, and awarding scholarships and fellowships to build the relevant workforce. The Directorate would be authorized at $29 billion over fiscal years 2022 to 2026, including a transfer of $2.9B to existing NSF divisions to support basic research collaboration.
  • NSF Research and Development Programs: The Endless Frontier Act would authorize $52 billion over fiscal years 2022 to 2026 for existing NSF activities, representing a seven percent increase each year. The legislation would also create a Chief Diversity Officer at NSF and increase STEM education to enhance the domestic STEM workforce. The legislation also incorporates a series of new programs, including programs for precision agriculture, rural STEM education, quantum information science, skilled technical education, critical minerals, and bioeconomy R&D.
  • Regional Technology Hubs: The Endless Frontier Act creates a regional technology hub program at DOC to support regional economic development in innovation. Technology hubs would carry out workforce development activities, business and entrepreneur development activities, technology maturation activities, and infrastructure activities related to the technology development. The technology hubs program would be authorized at $10 billion over fiscal years 2022 to 2026.
  • Manufacturing: The Endless Frontier Act would authorize close to a quadrupling of the DOC Manufacturing Extension Partnership and create a new track within the program for public benefit activities like workforce development and cybersecurity services. The Manufacturing Extension Partnership would be funded at $2.4B over fiscal years 2022 to 2026. The substitute would also authorize the Manufacturing USA program, at $1.2B over fiscal years 2022 to 2026, and add workforce and coordination provisions.
  • Supply Chain Resiliency: The Endless Frontier Act would establish a supply chain resiliency program at the Department of Commerce to work with the private sector, for the purpose of identifying and recommending opportunities to mitigate or address supply chain vulnerabilities in the United States and in allied and partner countries. It would also amend the recently-enacted CHIPS Act to provide $2 billion in incentives for domestic production of mature semiconductor technologies, such as for the automotive industry.

 

2. The Strategic Competition Act

The Strategic Competition Act is a bipartisan effort to enable the United States to effectively confront the challenges posed by the People’s Republic of China (PRC). The bill provides a unified, strategic response that:

Increases U.S. strategic focus on the Indo-Pacific and prioritizes alliances, partnerships, and U.S. global leadership by:

  • Advancing an Indo-Pacific strategy centered on strengthening U.S. alliances and partnerships and supporting regional cooperation that solves problems.
  • Expanding cooperation with Indo-Pacific allies and partners on technology, defense, and infrastructure, increasing security assistance to allies and partners, and fostering enhanced cooperation in the face of China’s growing military capabilities.
  • Promoting U.S. leadership within international organizations and other multilateral fora, including to counter malign PRC and Chinese Communist Party (CCP) influence in those organizations.

Confronts China’s malign political influence and predatory economic practices, and energizes U.S. diplomatic and economic statecraft by:

  • Countering PRC and CCP influence campaigns by requiring the Committee on Foreign Investment in the United States to review certain foreign gifts and contracts to universities.
  • Countering China’s predatory sovereign lending in the Western Hemisphere by authorizing the U.S. Governor to the Inter-American Development Bank to vote in favor of a 10th general capital increase.
  • Addressing China’s intellectual property theft and subsidies, and prioritizing technical assistance to countries working to counter foreign corrupt practices.
  • Bolstering U.S. economic statecraft by increasing the Development Finance Corporation’s maximum liability to $100 billion and investing in supply chain security, infrastructure development, and digital connectivity and cybersecurity partnerships.

Upholds U.S. values by:

  • Authorizing a broad range of human rights and civil society measures including sanctions for forced labor, forced abortion and sterilization, and other abuses in Xinjiang, and measures to stand with the people of Hong Kong, Tibet, and China’s civil society.
  • Including critical provisions to increase transparency for Congress and the American public related to international agreements and arrangements.

 

3. The Trade Act of 2021

The “Trade Act of 2021” provides a comprehensive approach to combat China’s manufacturing imbalances, threats to free and fair trade, and illicit activity which undermine America’s leadership in innovation. The Bill:

  • Bolsters efforts to prohibit goods made with forced labor from reaching the United States by strengthening Customs and Border Protection (CBP) enforcement efforts, and by expanding the Seafood Import Monitoring Program (SIMP).
  • Provides modernized trade enforcement tools to U.S. Trade Representative (USTR) to address anti-competitive digital trade and censorship practices like China’s Great Firewall, including by requiring USTR to identify trading partners that disrupt digital trade; allows for the investigation of unreasonable digital trade measures detrimental to Americans; and provides for an expedited review of discriminatory digital trade proposals.
  • Requires a review of trade in essential supplies, including the sources of imports and an analysis of any vulnerabilities, as well as additional tools for businesses in the United States seeking reliable suppliers.
  • Strengthens oversight over U.S. trade policy by providing an Inspector General to USTR and by ensuring the application of Section 301 tariffs related to China are calibrated to provide leverage, while ensuring U.S. competitiveness and manufacturing.
    • More information on Section 301 provisions is available here.
  • Reauthorizes the Miscellaneous Tariff Bill (MTB) and an improved Generalized System of Preferences (GSP) that will promote human rights, the environment, women’s economic empowerment, the rule of law and digital trade.
    • More information on MTB and GSP renewal is available here.

 

4. The USA Telecommunications Act

The Utilizing Strategic Allied (USA) Telecommunications Act was enacted in the FY2021 NDAA. It fosters U.S. innovation in the race for 5G and invests in Western-based alternatives to Chinese equipment providers Huawei and ZTE.

The USA Telecom Act plays to American strengths by capitalizing on U.S. software advantages, accelerating development of an open-architecture model (known as OpenRAN) that would allow for alternative vendors to enter the market for specific network components, rather than having to compete with Huawei end-to-end. OpenRAN not only has the support of US carriers, it has the support of US vendors of all sizes, along with a range of non-traditional vendors and technology firms. In order to further support the implementation, Senators Warner and Rubio are proposing an amendment which would provide $1.5 billion in emergency supplemental appropriations to implement the USA Telecom Act, including:

  • $1.5 billion for the Public Wireless Supply Chain Innovation Fund to spur movement towards open-architecture, software-based wireless technologies, funding innovative, ‘leap-ahead’ technologies in the U.S. mobile broadband market. The fund would be managed by the National Telecommunications and Information Administration (NTIA), with input from the NIST, DHS, and IARPA, among others.
  • The $500 million CHIPS for America International Technology Security and Innovation Fund will also support activities authorized in the USA Telecommunications Act, through the Fund’s support of international information and communications technology security and semiconductor supply chain activities, including supporting the development and adoption of secure and trusted telecommunications technologies, semiconductors, and other emerging technologies.

 

5. Supplemental Appropriations

Supplemental appropriations include:

  • $49.5 billion allocated over 5 years for a CHIPS for America Fund. Funding must be used to implement the Commerce Department semiconductor incentive and R&D programs authorized by the FY21 NDAA (Sec. 9902 & 9906). Within the fund, the following appropriations are available:
  • Incentive Program: $39 billion appropriated upfront and allocated over 5 years to implement the programs authorized in Sec. 9902. $2 billion is provided to solely focus on legacy chip production to advance the economic and national security interests of the United States.
    • $19 billion in FY22, including the $2 billion legacy chip production funding
    • $5 billion each year, FY23 through FY26
  • Commerce R&D programs: $10.5 billion appropriated upfront and allocated over 5 years to implement programs authorized in Sec. 9906, including the National Semiconductor Technology Center (NSTC), National Advanced Packaging Manufacturing Program, and other R&D programs authorized in Sec. 9906.
    • $5 billion in FY22
    • $2.5 billion for advanced packaging
    • $2 billion for NSTC
    • $500 million for other related R&D programs

For use across the advanced packaging, NSTC, and other related R&D programs, the following would be provided:

  • $2 billion in FY23
  • $1.3 billion in FY24
  • $1.1 for FY25 and FY26
  • $2 billion for a CHIPS for America Defense Fund: Funding is appropriated up front and $400 million is allocated each year, over 5 years for the purposes of implementing programs authorized in Sec. 9903(b), providing support for R&D, testing and evaluation, workforce development, and other related activities, in coordination with the private sector, universities, and other Federal agencies to support the needs of the Department of Defense and the intelligence community.
  • $500 million for a CHIPS for America International Technology Security and Innovation Fund: Funding is appropriated upfront and $100 million each year, allocated over 5 years to the Department of State, in coordination with the U.S. Agency for International Development, the Export-Import Bank, and the U.S. International Development Finance Corporation, for the purposes of coordinating with foreign government partners to support international information and communications technology security and semiconductor supply chain activities, including supporting the development and adoption of secure and trusted telecommunications technologies, semiconductors, and other emerging technologies.

An additional $1.5 billion is provided for implementation of implement the USA Telecommunications Act that was also passed as part of last year’s NDAA to foster U.S. innovation in the race for 5G.

For more information on the omnibus package of legislation please contact our team or review our posts on specific issue areas linked in the above text.