The House of Representatives has unveiled proposed legislation that seeks to strengthen U.S. manufacturing and reduce its reliance on China.
House leadership debuted the America Competes in Manufacturing, Pre-Eminence in Technology, and Economic Strength Act, or the America COMPETES Act on Tuesday. The hefty new bill, nearly 3,000 pages in length, includes provisions designed to bolster the U.S. supply chain—to the tune of $45 billion in spending on American production—as well as fostering research into future-facing technologies. Crafted in response to the United States Innovation and Competition Act which passed in the Senate last summer, it includes proposals to support stringent labor standards and human rights, and addresses the issue of consumer awareness and counterfeiting.
It also poses revisions to existing tariff-reducing programs, like the The Generalized System of Preferences (GSP) and Miscellaneous Tariff Bill (MTB), and new rules for de minimis shipments valued under $800.
“Now is the time to recommit to boldly and strategically investing in our nation’s future,” Speaker of the House Nancy Pelosi said upon the bill’s release, “and to do so in a way that strengthens the supply chain, lowers costs and ensures that America can out-compete any nation, today and for decades to come.”
“Major components of this package have already passed the House with overwhelmingly bipartisan votes,” she added, noting that she hopes to conference the bill with the Senate and deliver it to President Joe Biden’s desk “as soon as possible.”
The proposed legislation is grabbing the attention of industry trade groups, which have mixed opinions on the innumerable and diverse provisions.
The American Apparel and Footwear Association on Wednesday expressed support for its passage and praised the inclusion of the SHOP SAFE Act and the INFORM Consumers Act. The measures aim to limit the availability of counterfeit products online by incentivizing e-commerce platforms to adopt practices for vetting third-party sellers, along with modernizing consumer protection laws and requiring marketplaces to collect and verify information from merchants.
According to AAFA president and CEO Steve Lamar, these initiatives have become “crucial” to protecting consumers and brands during a time where online shopping has become a critical lifeline. “AAFA will not relent in sounding the alarm around the tools we need to prevent the sale of dangerous counterfeit apparel, footwear, and accessories and protect America’s intellectual property,” he said.
Lamar noted that the sale of illicit goods can also inflict both physical and economic harm on consumers. Products are often manufactured using harmful chemicals, and buying them on the web can expose shoppers’ private financial information to criminals. The production and sale of counterfeits through unregulated channels also places garment workers at risk.
“We are pleased to see language in this bill that will increase marketplace transparency and accountability,” he said. The measures will hold online marketplaces accountable for selling or promoting counterfeit products, and remove seller anonymity by forcing merchants to provide their names and locations.
“With passage of this Act, Congress will make great strides in enabling consumers to shop safely online,” Lamar said. “Just as important, these measures will protect a variety of American brands and the millions of American jobs they create and make it harder for criminals to profit from illicit actions.”
The Footwear Distributors and Retailers of America (FDRA) also commended the support of the INFORM Consumers and SHOP SAFE Acts, as it said the measures would help strengthen IP protection for the country’s footwear brands. However, vice president of government affairs Thomas Crockett told Sourcing Journal that he is dubious that the bill will pass in its current form. The America COMPETES Act “will ultimately need changes to ensure that the final version receives bipartisan support in the Senate,” he added.
The FDRA has long lobbied for the renewal of the Miscellaneous Tariff Bill (MTB) and Generalized System of Preferences (GSP), “two key tariff savings tools” that were included in this week’s legislation. At the same time, Crockett said the trade group is “very concerned that the House version of the bill would prohibit entire sectors, including footwear, from even requesting MTB tariff relief in the future.”
Sec. 106002 of the bill proposes a new process for considering MTB petitions, which would limit duty suspensions or reductions for finished goods. The rule would mean that footwear—among many other products produced for American brands overseas—would not be subject to consideration for tariff relief in future MTB requests. Excluding finished goods from the MTB process would also create a new complexity, Crockett said, as many manufacturing inputs are characterized as such.
The footwear sector continues to be mired in “tremendous shipping costs, supply chain challenges, and inflationary pressures,” he added, and with the next round of the MTB process starting in October, the FDRA is actively working to push back against the new provision. Legislators “should be looking for every way possible to ease the burden on American consumers and companies right now—not adding more restrictions on them,” Crockett noted.
“There is still a long way to go before this bill becomes law,” he said, “and we look forward to working with Congress throughout the process.”
The GSP, MTB’s accompanying tariff legislation, will also be renewed and revised under the bill to include new, more stringent criteria for qualifying countries. Environmental stewardship, human rights, anti-corruption, rule of law and poverty reduction efforts will all be considered under the new GSP, and countries’ eligibility will be reviewed every three years. Studies will be commissioned on rules of origin, to determine how a product’s inputs are sourced, as well as women’s economic empowerment. GSP utilization rates will also be reviewed to ensure that program benefits are given to the countries where industry is underdeveloped.
Changes to de minimis also have the potential to greatly impact American brands, which often drop ship finished goods directly to consumers from factories abroad, or import small shipments of product worth less than $800 to avoid paying duties. Under the new legislation, goods from countries that are non-market economies and on the U.S. Trade Representative’s (USTR) watch list for IP violations would be barred from the de minimis import duty exception.