Trade Opportunities Emerge in House Ways and Means Committee

The House Ways and Means Committee will hold a mark-up this Wednesday on Republican trade legislation that will jump start a discussion on key trade issues that have been a focus of an array of industries, which have increasingly become frustrated around uncertainty and inaction in recent years.

Two of the bills being considered will particularly be in focus for industries – the Generalized System Preferences Reform Act and the End China’s De Minimis Abuse Act. Both seek to solve issues that have significant bottom-line impact to American companies.

Generalized System Preferences Reform Act (HR 7986): The Generalized System of Preferences (GSP) sought to help developing nations by providing duty-free imports to the United States. The program became a great option to diversify a manufacturing footprint beyond countries like China, while also helping the economies of developing countries. When the program expired in 2020, however, companies were faced with the reality that duty-free imports from these countries no longer existed and they were forced to pay tariffs – four years later, companies have amassed significant tariff costs in a program that they expected would be duty-free.

Most importantly, this legislation will retroactively reinstate GSP and extend it to 2030 – effectively refunding tariff payments to date and setting GSP to move forward again, at least for the next 6 years. Some reforms have been made to GSP in this bill, which includes details to be worked on as the bill moves through the legislative process.

Do not expect Democrats to jump on board this legislative effort without some additional concessions around their own priorities for GSP. 

End China’s De Minimis Abuse Act (HR 7979):  The de minimis threshold sets the value of products shipped to the United States that do not need to pay any tariff.  The current de minimis threshold is $800 – up from $200 when Congress changed it several years ago. The current threshold is significantly higher than our trading partners and close allies and poses a risk to retailers that are consistently undermined from products being shipped into the United States that are less the $800. This becomes a competitive disadvantage for U.S. retailers and creates a pathway for lower quality or unsafe products to enter the country without scrutiny. 

This legislation will eliminate the De Minimis threshold (bring it to $0) for products that are subject to Section 301 tariffs. Industry will likely call for a broader application beyond just 301 tariffs, but, again, this starts a needed discussion on the issue. 

Over the last few years, fatigue has set in around the trade policy space. Section 301 tariffs have brought significant uncertainty (and some level of inconsistency), and key trade programs (like GSP) have remained on the sidelines. While the Ways and Means Committee legislation may need some negotiations to get it to the President’s desk for signature, it re-energizes the trade debate and will be welcomed by many in industries who have been desperately waiting for a meaningful dialogue around solutions. 

Some may view this trade effort as unmovable in the Senate or even among Democrats in the House. It is important to remember the process of the tax bill led by Ways & Means Committee Chairman Jason Smith (R-MO), which had no bipartisan support but launched a discussion between the House and Senate that produced a bipartisan and bicameral bill. We will see if trade takes a similar path.