Ways and Means China Hearing Touches on GSP/MTB, de Minimis, SIMP, Tariffs

Subcommittee Chairman Earl Blumenauer, D-Ore., said that the Trade Act provisions in the Senate's China package, the United States Innovation and Competitiveness Act, or USICA, "are inadequate and fail to rise to the current moment." He said he would not support the renewal of the Generalized System of Preferences benefits program or the Miscellaneous Tariff Bill without "reasonable reforms," like those his renewal proposals. He also complained that there are no "meaningful provisions on forced labor in Xinjiang" in the bill.

The witness who addressed the environment, the founder of the China Ocean Institute, said that illegal or unregulated fishing accounts for up to 20% of the global catch, and that China has the largest distant water fishing fleet. Tabitha Mallory, Ph.D., said that the Seafood Import Monitoring Program should be expanded past the 13 species it now covers, since three of the most common species -- pollock, salmon and squid -- are not covered.

Customs is of limited utility in tracing fish, she said, since Chinese and U.S. tariff codes are not even standardized at the eight-digit level, much less at the species level. Moreover, Customs does not distinguish between where the processing was done, the country of consignment, and the country of origin -- where the fish was grown or caught.

Blumenauer also invited Kim Glas, CEO of the National Council of Textile Organizations, which represents less than one-half of 1% of workers in America. He highlighted her testimony on e-commerce and de minimis, which he said is exploited so that imports don't have any oversight or duties, "all of which undercuts U.S. companies playing by the rules."

He said, "Lack of oversight at U.S. borders makes it even more difficult for CBP to intercept these shipments [made with Xinjiang cotton]. These issues with de minimis and forced labor are key areas of importance for me and ones that I intend to legislate on in the coming months."

Glas testified: "Congress can combat this in multiple ways, from reducing our de minimis level to be in line with international standards, designating the e-commerce shipper as the importer of record, barring utilization of de minimis for certain high impact/sensitive sectors and those sectors documented to use forced labor, denying 321 waiver eligibility for products that pose a consumer safety/health risk, denying 321 treatment for any products currently subjected to China 301 tariffs or other trade penalties, or barring e-commerce shipments from qualifying for de minimis waivers completely."

Clete Willems, a former Trump White House official who was the Republicans' witness on the panel, said changing the Section 301 action against China should be the top priority of the administration, though he also said that funding semiconductor and 5G equipment production and artificial intelligence and synthetic biology are crucial for the U.S. to compete successfully with China.

Willems said he was there when the China tariff policy was made, and it was designed as leverage to get the Chinese to the negotiating table. "They were not meant to be permanent," he said. He said the exclusion process should be brought back, and it should not be limited to expired exclusions or the medical products currently receiving exclusions. He called the current approach to exclusions "very very limited," and said the Office of the U.S. Trade Representative should allow businesses to apply so they can apply their own criteria, such as whether the inputs are central to U.S. supply chain goals, but in the meantime, they should reinstate all expired exclusions.

He said that reinstating the MTB and GSP and granting more Section 301 exclusions would fight inflation.

Rep. Stephanie Murphy, D-Fla., said, "Tariffs are the new normal in the U.S.-China relationship. I have yet to see a case made why this ineffective policy is continuing. Unfortunately, politicians are afraid to look weak or soft on China." She told Willems that she hears about inflation from her constituents all the time, and asked him how much Section 232, Section 301 tariffs and the expiration of GSP contribute to inflation.

Willems said it's very clear all are contributing to inflation, and said that MTB and GSP alone represent more than a billion dollars in added costs for importers. He said more deals on steel tariffs like the one with the EU "would be a good step."

Ranking member Rep. Vern Buchanan, R-Fla., said that retroactive relief with Section 301 exclusions is critical, and so he endorses the plank of USICA that requires retroactivity in an exclusion process. The exclusions currently under consideration would not be retroactive to their past expiration dates, but rather to the date that the comment period opened in October (see 2110120055).

Willems, a partner at Akin Gump, obliquely endorsed the Senate's Uyghur Forced Labor Prevention Act, by saying any solution should grant sufficient time to develop an enforcement strategy, and should include CBP guidance to importers. He said that "significant changes" to AD/CVD law, as praised by Blumenauer and the United Steelworkers witness, "should be honed through a hearing and a markup."