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Legislative Update: Customs Reauthorization, Chemical Safety Reform, Brazil

Thursday, June 06, 2013
Sandler, Travis & Rosenberg Trade Report

Congress has a substantial work schedule ahead of its annual August recess and action on trade-related issues is possible during that time. Measures that could see forward movement include a long-delayed customs reauthorization bill and an overhaul of chemical safety rules. In addition, hearings on Obama administration nominees overseeing trade policy, trade relations with Brazil, and other trade topics are expected.

Customs Reauthorization. The Senate Finance Committee held a hearing May 22 on the Trade Facilitation and Trade Enforcement Act of 2013 (S. 662), a customs reauthorization bill co-sponsored by committee leaders Max Baucus, D-Mont., and Orrin Hatch, R-Utah. Witnesses at the hearing were supportive of provisions aimed at fostering cooperation on trade facilitation among federal agencies, completing the development of the Automated Commercial Environment, sharing information concerning potential intellectual property rights violations with companies, testing 24-hour commercial ports of entry, ensuring commercially meaningful benefits for participants in trusted trader programs, and increasing the de minimis amount from $200 to $800.

Baucus reportedly said he hopes the committee will mark up the bill before August. Similar legislation could also be considered this year by the House, although progress there has been delayed by differences among key lawmakers on a handful of issues.

Chemical Safety. The Senate could finally act this year on the first major reform of the Toxic Substances Control Act since it was enacted in 1976. The Chemical Safety Improvement Act, introduced by Sens. Frank Lautenberg, D-N.J., who passed away this week, and David Vitter, R-La., would require a safety evaluation for all active chemicals already on the market, allow the Environmental Protection Agency to ban chemicals if necessary to protect public health, require new chemicals to be screened for safety before they go on the market, and require decisions on chemical safety to be based solely on risk rather than a cost/benefit analysis. This bill reportedly reflects a number of compromises from the Safe Chemicals Act approved by the Senate Environment and Public Works Committee in 2012 and has consequently seen support from both environmental and business groups. No companion legislation has been introduced in the House.

Brazil. The House Ways and Means Trade Subcommittee will hold a hearing June 12 on the growing trade and investment relationship between the U.S. and Brazil, the challenges facing U.S. companies in Brazil (e.g., industrial tariff rate increases, subsidized finance and forced local content requirements), and how to maximize constructive bilateral engagement regarding these opportunities and challenges. “Our trade and investment relationship with Brazil should be recognized as one of the United States’ most important,” Trade Subcommittee Chairman Devin Nunes, R-Calif., said. “Viewing Brazil simply as one of the BRICS underestimates its emerging leadership role in the developed world and the growing desire among its elected officials and Brazilian business for deeper integration into the global supply chain for goods and services.”

A subcommittee press release notes that Brazil has been the United States’ eighth-largest trading partner on average over the last five years, exceeding $59 billion in two-way trade in 2012 and generating a U.S. trade surplus of over $5.5 billion.  U.S. foreign direct investment flows into Brazil grew from over $5 billion in 2000 to over $12 billion in 2012, while Brazilian FDI flows into the U.S. grew from over $100 million in 2000 to over $1.8 billion in 2012.

Conflict Minerals. The House Financial Services Subcommittee on Monetary Policy and Trade held a hearing recently that was critical of the effects of a 2010 law requiring companies to publicly disclose their use of conflict minerals (tin, tantalum, tungsten and gold) that originate in the Democratic Republic of the Congo or an adjoining country if those minerals are necessary to the functionality or production of a product they manufacture or contract to manufacture. The minerals at issue are used in the manufacture of a wide range of goods such as cell phones, computers and video game systems, medical equipment, high-speed tools, machine parts, glass and lamps. The first reports under this law are due by May 31, 2014.

The House hearing highlighted some of the negative consequences of the law. For example, a subcommittee press release said, “most mineral procurement companies no longer purchase minerals from the DRC” and “efforts to ensure that these minerals do not enter supply chains have resulted in a de facto embargo against the DRC,” which many believe has “further impoverished the people it was intended to help.” In addition, estimates of the cost to U.S. companies and their suppliers of implementing the conflict mineral reporting requirements range from $8 billion to $16 billion.

Currency. A bipartisan group of senators introduced June 5 the Currency Exchange Rate Oversight Reform Act in the same version that passed the Senate in October 2011. This bill would require the Treasury Department to identify misaligned foreign currencies and require remedial action against countries that fail to correct such misalignments, require the Commerce Department to investigate whether currency undervaluation by a foreign government provides a countervailable subsidy if a U.S. industry requests investigation and provides proper documentation, preclude Commerce from refusing to find an export subsidy if the subsidy is not limited exclusively to circumstances of export, and limit the president’s ability to waive certain actions against currency misalignment.

Similar legislation was introduced in the House earlier this year. In addition, some lawmakers have been urging the Obama administration to work to include currency-related provisions in a final Trans-Pacific Partnership agreement.

Trade Officials. The Senate Finance Committee will meet June 6 to consider the nomination of Michael Froman to serve as U.S. trade representative. No such hearing for Commerce secretary nominee Penny Pritzker has yet been scheduled. In addition, President Obama has yet to name a new commissioner of U.S. Customs and Border Protection, which Sen. Hatch urged him to do during the committee’s recent customs authorization hearing.

Other. Following is a list of additional trade-related legislation that has been introduced recently. The texts of these bills are or will shortly be available on the Library of Congress Web site.

H.R. 2044 – to prohibit the use, production, sale, importation or exportation of any pesticide containing atrazine (introduced May 17 by Rep. Ellison, referred to the House committees on Agriculture, Energy and Commerce, Ways and Means, and Foreign Affairs)

H.R. 2052/S. 1023 – to direct the secretary of Commerce, in coordination with the heads of other relevant federal departments and agencies, to conduct an interagency review of and report to Congress on ways to increase the global competitiveness of the U.S. in attracting foreign direct investment (introduced May 20 by Rep. Terry, referred to the House Committee on Energy and Commerce, and Sen. Corker, referred to the Senate Committee on Commerce, Science and Transportation)

S. 1013 – to add procedural requirements for patent infringement suits (introduced May 22 by Sen. Cornyn, referred to the Senate Committee on the Judiciary)

S. 1051 – to ensure that footwear furnished or obtained by allowance for enlisted members of the armed forces upon their initial entry into the armed forces complies with domestic source requirements (introduced May 23 by Sen. Collins, referred to the Senate Committee on Armed Services)

H.R. 2139 – to make certain luggage and travel articles eligible for duty-free treatment under the Generalized System of Preferences (introduced May 23 by Rep. Crenshaw, referred to the House Committee on Ways and Means)

H.R. 2213 – to incorporate into the design and construction of reconfigured and new ports of entry certain concerns relating to border location-dependent businesses (introduced May 24 by Rep. McCaul, referred to the House committees on Homeland Security and Transportation and Infrastructure)

H.R. 2248 – to ban the use of bisphenol A in food containers (introduced June 4 by Rep. Markey, referred to the House Committee on Energy and Commerce)

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