China Package Passes Senate With GSP, MTB Renewal, Anti-Counterfeiting Measures

The China package once known as the Endless Frontier Act passed the Senate with 68 votes. The U.S. Innovation and Competition Act includes a trade amendment that authorizes a new Miscellaneous Tariff Bill, restarts applications for Section 301 tariff exclusions, adds an inspector general to the Office of the U.S. Trade Representative, renews the Generalized System of Preferences benefits program for more than five years and directs the CBP to increase inspections of imports with the aim of finding counterfeits. The bill passed the evening of June 8.

The USTR has the ability to avoid reestablishing Section 301 tariff exclusions if it “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... or (B) is impractical due to the low value of the duties imposed.”

The House does not have a companion bill yet that mirrors the China package precisely, but House Ways and Means Committee leaders have expressed openness to the trade amendment's renewal of GSP and MTB, and have not shown concerns about the technicality that revenue bills are supposed to originate in the House (see 2105190043). The bill's core is to authorize funding for domestic semiconductor production, $52 billion over five years, and about $190 billion in research spending across a variety of sectors. The spending would need to be passed in the appropriations process.

The Coalition for GSP said said importers would welcome the retroactive renewal of GSP and the long-term extension, but it also expressed concern about all the additional eligibility requirements without any expansion of product coverage. It said the GSP should have both carrots and sticks. It quoted the USTR saying the same thing.

The coalition also noted the bill's requirement that USTR must hold public hearings before any country-specific actions can be taken, including partial suspensions, as with Thailand, and that there will be new reporting requirements on justifications for decisions.

The bill would require an annual CBP report on seizures of counterfeits, what country they were from, how they arrived, and in what categories. CBP then would be required to increase inspections of imports from the top source countries for counterfeit goods, as identified by the report. The bill also authorizes CBP to share information on suspected violations of intellectual property rights with “any other party with an interest in the merchandise.” Restrictions on sharing information about counterfeits with trademark holders have been a hurdle to stopping counterfeits, CBP has said (see 2104160033).

The bill would order CBP to issue regulations on the verification of seafood imports, to ensure none of that seafood is produced with forced labor, and to do so within a year. It also would require CBP's Forced Labor Division to brief the Senate Finance Committee and the House Ways and Means Committee at least every 90 days on investigations of forced labor, progress made toward issuing withhold release orders, and progress made toward closing those investigations.

Senate Finance Committee Chairman Ron Wyden, D-Ore., said, “I’m proud to have coauthored with Ranking Member [Mike] Crapo provisions going after seafood caught using forced labor, focusing on censorship of free speech online by China and other authoritarian governments, and empowering U.S. Customs to crack down on counterfeit goods.” Crapo is an Idaho Republican.

President Joe Biden lauded the bill's passage: “We are in a competition to win the 21st century, and the starting gun has gone off. As other countries continue to invest in their own research and development, we cannot risk falling behind. America must maintain its position as the most innovative and productive nation on Earth. I look forward to working with the House of Representatives on this important bipartisan legislation, and I look forward to signing it into law as soon as possible.”

The Semiconductor Industry Association was also pleased. “Senate passage of USICA is a pivotal step toward strengthening U.S. semiconductor production and innovation and an indication of the strong, bipartisan support in Washington for ensuring sustained American leadership in science and technology,” the trade group said.

The National Council of Textile Organizations welcomed the bill's passage, too. “As part of the bill’s effort to address overall manufacturing and technology competitiveness issues from the perspective of the U.S.-China relationship, the legislation will help reconstitute a domestic supply chain for personal protective equipment,” the group said.