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U.S. Chamber Newsletter-International Policy Update (6/30)

1 July 2022 Friday

U.S. Chamber of Commerce

International Policy Update

June 30, 2022

Conference Negotiations Grind toward Competitiveness Bill Deadline

U.S., G7 Unveil Further Sanctions on Russia

Chamber Hosts UFLPA Briefing as Enforcement Begins

Chamber Welcomes Partnership for Global Infrastructure and Investment

Chamber Supports Funding for Trade Agencies, International Affairs Budget

Commentary

International Trade Makes Economies Resilient

Conference Negotiations Grind toward Competitiveness Bill Deadline

Democratic Congressional leaders pressed conferees hard this week to finalize negotiations for the “Bipartisan Innovation Act,” the bill being negotiated by a conference committee drawing from the Senate-passed “U.S. Innovation and Competition Act (USICA)” and the House-passed “America COMPETES Act.” Legislators are working toward a self-imposed June 30 deadline in order to “pass this bill through Congress in July.”

Both the House and Senate are in recess and will only be in session for 12 days in July before the August recess. At this point, any provision that does not have support from all four corners of leadership is increasingly likely to be excluded from further consideration. The trade title remains a point of contention, with no final agreement made on what provisions will or will not be included; rumors suggest it could be jettisoned in toto.

Regarding the controversial outbound investment screening proposal, the U.S. Chamber led a coalition of 10 industry groups in sending a June 23 multi-association letter to Congress opposing inclusion of the most recent draft of the National Critical Capabilities Defense Act (NCCDA) in the Bipartisan Innovation Act. The revised outbound investment screening proposal was released on June 13 and would require U.S. firms operating in critical industries to report outbound investments to certain “countries of concern,” including China. The letter expresses concerns over the proposal’s broad scope and the ability of businesses of all sizes to comply, both of which the organizations urge should be addressed through regular order.

In the days since that letter was sent to Congress legislative efforts on the issue have continued on different and divergent approaches. A number of leading senators of both parties appear to be more interested in a notification provision relating to outbound investment (without a formal review), while a number of House Democrats have continued to discuss a CFIUS-like notification-and-review regime. The administration has provided technical assistance at some recent junctures, but it is not clear if White House officials have settled on a preferred approach, if any.

The Chamber continues to engage with key offices and conferees on a wide variety of elements of the pending legislation. For further information, please contact Director for International Policy Isabelle Icso (iicso@uschamber.com).

U.S., G7 Unveil Further Sanctions on Russia

On June 27, G7 leaders released a statement on support for Ukraine, which included a pledge to continue to provide “financial, humanitarian, military and diplomatic support and stand with Ukraine for as long as it takes.” The statement also included new sanctions commitments, including reducing Russia’s revenues from gold and energy, coordinating tariff measures, and restricting Russia’s access to critical goods and services.

Notably, G7 leaders agreed to pursue negotiations on a mechanism to institute a price cap on Russian oil with the goal of reducing Russian oil revenue and stabilizing global energy prices. The scheme “would create a buyers’ cartel of Western nations and their allies… to keep Russian oil available on global markets to buyers such as India and China, which could help stabilize prices already trending at roughly double pre-pandemic levels, while constructing a mechanism that Western countries could use to restrict Russian revenues from the sales,” according to the Wall Street Journal.

The U.S. also announced it will increase tariffs “on more than 570 groups of Russian products worth approximately $2.3 billion to Russia.” It will also ban the import of new gold into the U.S., though many analysts have suggested this move is largely symbolic because the U.S. imports relatively little Russian gold.

The Department of the Treasury’s Office of Foreign Assets Control (OFAC) on June 28 sanctioned 70 entities critical to Russia’s defense, industrial, technology, and manufacturing sectors, including State Corporation Rostec, as well as 29 Russian individuals. OFAC also issued several general licenses and updated the Specially Designated Nationals and the Sectoral Sanctions Identifications list.

For further information, please contact Senior Vice President for International Policy, John Murphy (jmurphy@uschamber.com) or Director for International Policy, Isabelle Icso (iicso@uschamber.com).

Chamber Hosts UFLPA Briefing as Enforcement Begins

One June 27, the Chamber hosted a group of expert attorneys on the implementation of the Uyghur Forced Labor Prevention Act (UFLPA). The panelists endeavored to unpack the administration’s enforcement strategy, related importer guidance, and implications for business.

Regarding the recently released enforcement strategy, U.S. Customs and Border Protection (CBP) will continue to leverage the Department of Labor’s List of Goods Produced by Child Labor or Forced LaborList of Products Produced by Forced or Indentured Child Labor, and Better Trade Tool, as well as the Department of State’s Trafficking in Person Report and Responsible Sourcing Tool, to help identify and target imported goods at risk of being made with forced labor. CBP will also continue to utilize DOL’s tools such as Comply Chain to educate importers on effective supply-chain tracing and transparency. CBP encourages importers to manage their global supply chains by developing comprehensive and transparent due diligence systems.

Other key takeaways from the event include:

·    Documentation: Documentation needed to prove that goods are not produced with forced labor is similar to what is necessary for the withhold release order process. This extensive list could be challenging for many companies, which may struggle to check all the boxes.

·    Exceptions: Standards for granting exceptions are demanding and companies should not expect frequent determinations.

·    Entity list: The entity list is narrow in scope and includes solely Chinese entities that have already been flagged by the administration in previous orders and cases. The focus seems to be on foreign suppliers and vendors, not on U.S. companies for now.

oThe guidance did not clarify methods that will be used to remove entities or modify list in any way despite making clear that the entities will be changed over time.

oThe “rebuttable presumption” can be applied by CBP on two bases: 1) if officials suspect the product to be produced wholly or in part in XUAR; or 2) if it is produced by entities on this list.

·    Dual supply chains: In addition to the “high priority” sectors identified in the UFLPA (cotton, apparel, silica-based products, and tomatoes), CBP might expand its enforcement purview to begin targeting companies that split manufacturing supply chains. In other words, there is a considerable likelihood that companies in China with segregated supply chains will be targeted as well.

Recommendations for business compliance include the following:

·    Audit supply chains: Companies should do a complete audit of their supply chains to ensure there is no nexus to forced labor. Separately, law firms can conduct risk-based audits that include the use of trade analytic tools to assess products for associated forced labor risks. Moreover, importers should consider an import compliance program to mitigate the risk of supply chain disruptions, describing in detail how a company assesses/manages their supply chain and import risk.

·    Assemble “rapid response” teams to respond to UFLPA detention notices: Companies should assemble “rapid response” teams to be ready to respond to UFLPA detention notices and put in place contractual provisions to ensure upstream suppliers are not involved in forced labor, as well as indemnification clauses that would shift affirmation to upstream entities.

·    Refer to CAATSA: While there is no precedent for submitting “clear and convincing” evidence to overcome the rebuttable presumption, several attorneys and CBP officials have pointed to the “Countering America’s Adversaries Through Sanctions Act” (CAATSA) as a reference point. The law contains a similar presumption for goods made by North Korean nationals and could provide clues as to how UFLPA’s presumption is enforced.

For further information, please contact Director for International Policy Isabelle Icso (iicso@uschamber.com) and China Center Director Don Giolzetti (dgiolzetti@uschamber.com).

Chamber Welcomes Partnership for Global Infrastructure and Investment

On June 27, U.S. Chamber of Commerce Executive Vice President and Head of International Affairs Myron Brilliant issued the following statement regarding the G7 leaders official launch of the Partnership for Global Infrastructure and Investment:

“We welcome the announcement by G7 leaders to officially launch a Partnership for Global Infrastructure and Investment to mobilize much needed support for critical infrastructure needs in developing countries, including up to $200 billion in U.S. financing.

“Creating attractive financing options for building resilient infrastructure and investing in healthcare systems, energy security, clean energy infrastructure, and digital connectivity, while strengthening gender inclusion, will help low and middle-income countries stand up to the economic headwinds they have been facing.

“The U.S. Chamber and our members believe that scaling up public financing and promoting investor friendly policies in emerging economies will increase investor confidence and leverage private financing to help bridge the infrastructure gap and fuel economic growth. We look forward to working with the Biden Administration and our G7 partners to advance this initiative.”

The U.S. Chamber and its B7 counterparts made several recommendations in the critical areas of trade, energy and climate, digital, health, and infrastructure ahead of the recent G7 summit. Chief among these is advancing pro-growth trade policies — including reforming the World Trade Organization to find ways to circumnavigate the roadblocks thrown up by a few members.

Additionally, G7 leaders on June 28 issued a communiqué commenting on many of the same issues. The document adopted a sharper tone toward China than evident in past G7 documents, including on China’s human rights record, its relations with Russia, coercive activities, and other longstanding concerns. “We will build a shared understanding of China's non-transparent and market-distorting interventions and other forms of economic and industrial directives,” the leaders commented. “We will then work together to develop coordinated action to ensure a level playing field for our businesses and workers, to foster diversification and resilience to economic coercion, and to reduce strategic dependencies.”

The White House also released a fact sheet on G7 efforts “to strengthen our cooperation on economic issues, cyberspace and quantum, and other 21st century challenges, including those posed by China to our workers, companies, and national security” and noted the communiqué included “collective, unprecedented language acknowledging the harms caused by the People’s Republic of China’s (PRC) non-transparent, market-distorting industrial directives.”

For further information on the G7 and B7, please contact Senior Vice President for Global Initiatives Gary Litman (glitman@uschamber.com).

Chamber Supports Funding for Trade Agencies, International Affairs Budget

On June 27, the U.S. Chamber sent a letter to the House Committee on Appropriations on the Fiscal Year 2023 Commerce, Justice, Science, and Related Agencies Appropriations bill. The letter urges the committee to fully fund the federal agencies that assist in trade negotiations and enforcement, specifically the Office of the U.S. Trade Representative (USTR) and the Department of Commerce’s International Trade Administration.

In a separate letter to the committee on the Fiscal Year 2023 State, Foreign Operations, and Related Programs Appropriations bill, the Chamber urged full funding for the U.S. International Affairs Budget, including support for the U.S. Export-Import Bank, the U.S. International Development Finance Corporation, the U.S. Trade and Development Agency, the National Endowment for Democracy, the multilateral development banks, and the newly organized Bureau of Cyberspace and Digital Policy (CBDP).

For further information, please contact Senior Vice President for International Policy John Murphy (jmurphy@uschamber.com).

Commentary

International Trade Makes Economies Resilient

U.S. Chamber (June 30) by Mary Kate Carter

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