June 24, 2021

Bill to strengthen competition with China approved by Senate

The Senate  passed the U.S. Innovation and Competition Act, originally called the Endless Frontier Act. The $200 million legislative package is intended to fuel technology and economic competition with China. Included in the Act are more than $50 million in incentives to encourage semiconductor production, tariff reduction extensions, telecommunications funding to boost intellectual property and antitrust enforcement, and other trade provisions. The House of Representatives returns June 28 and is expected to discuss the Act then.

Before passage, Senator Mike Crapo (R-Idaho and ranking member of the Senate Finance Committee), secured the inclusion of the Trade Act of 2021 as an 870-page amendment to the U.S. Innovation and Competition Act. The amendment, among other things:

  • Installs an inspector general at the U.S. Trade Representative (USTR).
  • Extends expired exclusions to Section 301 tariffs on imported Chinese goods and restarts and reforms a tariff-exclusion process (see below).
  • Strengthens U.S. Customs and Border Protection (CBP) enforcement efforts to protect against the import of goods made with forced labor.
  • Gives USTR the tools to address anticompetitive digital trade and censorship practices.
  • Requires that USTR initiate talks with the Quad countries (Australia, India and Japan) to develop a strategy on critical minerals to counter China’s dominant share of the global supply.

Implementation of Section 301 exclusion process required

The Trade Act amendment to the U.S. Innovation and Competition Act also requires the USTR to implement an exclusion process for Section 301 tariffs on imports from China that is based on six factors, including whether the:

  1. Failure to grant exclusion would result in severe economic harm to the requester.
  2. Article or a reasonable substitute is not commercially available to the requester.
  3. Imposition of the duty would unreasonably increase consumer prices for day-to-day items consumed by low- to middle-income U.S. families.
  4. Imposition of the duty would have an unreasonable impact on U.S. manufacturing output.
  5. Imposition of the duty would have an unreasonable impact on the ability of an entity to fulfill contracts or to build critical infrastructure.
  6. 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.

Act to reinstate Misc. Tariff Bill

The U.S. Innovation and Competition Act also includes a provision to reinstate duty reductions under the Miscellaneous Tariff Bill (MTB) that expired Jan. 1. The MTB temporarily reduces or suspends the import tariffs paid on specific U.S. imports based on approved petitions submitted for each product by importing companies. The proposed legislation would approve the majority of the pending 2,500 MTB petitions recommended for the 2021 cycle; provide 120 days of retroactivity for the more than 1,600 products with expired MTB approval; and extend the process for two more MTB cycles in 2022 and 2025. “The MTB process had been helpful in reducing costs for imported components and parts,” said Christine Sohar Henter, NAFEM legal counsel, Barnes & Thornburg. “Given the harsh impact tariffs have had on some NAFEM members, I expect this would be a favorable development for current supply chain issues and import costs.”

“America must maintain its position as the most innovative and productive nation,” said President Biden. “We are in a competition to win the 21st century and the starting gun has gone off. I look forward to working with the House of Representatives on this important bipartisan legislation and to singing it into law.”

G7 Summit focuses on environment, commits to addressing steel/aluminum tariffs by year end

The environment was the key topic of discussion at the recent G7 Summit meeting of Australia, Canada, France, Germany, India, Italy, Japan, South Korea, South Africa, the United Kingdom, the United States and the European Union. According to a White House statement released following the three-day summit, participants agreed to, “Continue and strengthen cooperation to tackle climate change, environmental degradation and the loss of biodiversity, promote green growth, protect oceans, and urge ambitious action by all other major players.”

Trade also was addressed, with participants agreeing to, “Engage in discussions to allow the resolution of existing differences on measures regarding steel and aluminum before the end of the year.” The Coalition of American Metal Manufacturers and Users (CAMMU), of which NAFEM is a member, urged more immediate action. “CAMMU is disappointed that the parties did not come to an agreement on a timeline to end the Section 232 steel and aluminum tariffs. The tariffs should have never been applied to our allies. They have only served to increase the costs of goods manufactured in America compared to overseas competitors who can simply import the finished product to the U.S., and thus continue to erode the ability of the U.S. manufacturing sector to compete and survive in the global market. We urge the Biden Administration to reach a resolution with our trading partners and terminate the Section 232 tariffs as quickly as possible before more damage is done to the manufacturing sector and the economy.”

Talks cease on American Jobs Plan

Negotiations between President Biden and Republican senators over the American Jobs Plan infrastructure package stalled in early June. Republicans expressed disappointment that President Biden “ultimately chose not to accept the very robust and targeted infrastructure package and, instead, end our discussions.” The White House said, “The latest offer did not meet the essential needs of our country to restore our roads and bridges, prepare us for our clean energy future and create jobs.” President Biden offered to reduce the cost of his infrastructure proposal from $2.3 trillion to $1.7 trillion, while Republicans countered with a smaller $330 billion plan.

Democrats now have two options: Begin new talks with a group of senators from both parties and consider the reconciliation process that would allow passage of the legislation with a simple majority of both chambers of Congress. Democrats pursued this latter process to pass the $1.9 trillion COVID-relief package.

2022 budget conversations to begin

The Biden Administration sent its full fiscal year 2022 budget to Congress in early June, enabling leaders to begin drafting the 13 appropriations bills needed to fund the government starting Oct. 1. Portions of the $6 trillion proposal call for $11.2 billion to the Environmental Protection Agency (EPA), a 21.6 percent increase over 2021, and $46.2 billion for the Department of Energy (DOE), a 10.4 percent increase over 2021. The House may begin budget discussions when they return June 28; the Senate is likely to start in July. Both chambers of Congress need to authorize funding. The administration also issued an overview of the budget.