UFLPA, de Minimis, China's Minerals Dominance Emphasized During Ways and Means Trade Hearing

Turkel, chair of the U.S. Commission on International Religious Freedom, noted that Uyghur and other Turkic minorities in China are being sent to other parts of China to work in factories over a thousand miles away, and so he argues that without expanding UFLPA, it will only encourage internal trafficking of these workers.

He also told Smith during the May 9 hearing, held at Global Containers Terminal on Staten Island, that $70 million for UFLPA enforcement should be just the down payment. In his written testimony, he said, "A commensurate amount must be continued in FY2024 and future budgets."

The top Democrat on the committee's trade subcommittee, Rep. Earl Blumenauer, D-Ore., thanked Turkel for focusing on the problems of screening packages that enter under de minimis, something Turkel addressed at length in his written testimony. He reminded Smith that he would like Smith's support for a bill that would make Chinese packages ineligible for de minimis.

"It would be broadly supported on a bipartisan basis. And it’s not just clothing," he said. "We’re here in New York, home to electric bicycle batteries' fires," he said, and noted that electric bikes priced at $799, just under the $800 limit, are entering through what he calls a loophole.

Smith replied, "It appears that loophole is almost an $800 free trade agreement for China. That’s what it looks like to me."

When Blumenauer asked Turkel about de minimis, Turkel called it "a serious problem," and relayed facts he learned from a story in International Trade Today (see 2304170052) about violations discovered through Type 86 checks, and packages that were released before CBP could inspect them. There was a non-presentation rate of 25%, which may not always have been deliberate, since they could have been released before importers knew there was a hold. In his written testimony, Turkel called the non-presentation rate a "shocking revelation."

He also expressed concern about goods sent to Mexico or Canada to wait in warehouses for U.S. orders, and then those goods being sent under de minimis. Mexico and Canada have passed laws banning the importation of goods made with forced labor, and the Office of the U.S. Trade Representative has been pushing for more information about Mexico's implementation of the law.

Turkel's written testimony said that it's hard to believe that Congress intended for a higher de minimis threshold "to result in spotty or nonexistent policing of Congress’s black-letter prohibitions on the importation of fake, dangerous, and forced-labor goods. It is past time for Congress to re-examine the assumption behind raising the threshold from $200 to $800 in the Trade Facilitation and Trade Enforcement Act of 2015. The loophole for egregious corporate and consumer complicity in China’s genocidal forced labor, and other evasions of U.S. trade law (apart from tariffs), is simply too great."

In Smith's opening remarks, he said, "What should be now clear to everyone here today is that what our country needs is a smart and strategic decoupling from China.

"Workers and small businesses being harmed by China’s unfair trade practices have been overlooked and forgotten for too long. They expect us to go further and to use the tools at our disposal to level the playing field for workers, farmers, and job creators. We’re here to make sure the future of U.S. trade includes their voices."

One of those voices during the hearing was that of Tronox CEO John Romano. Tronox -- a global mining and mineral processing firm that specializes in titanium dioxide, also known as TiO2, a base pigment in all coatings and paint -- has nine mines around the world, and a processing plant in Hamilton, Mississippi. Mining titanium oxide produces a byproduct that is a rare earth mineral, and until recently, Tronox sold tailings from its mines to China, which refined the waste products into this critical mineral.

Romano said Tronox is considering processing that mineral in Mississippi, partly because there is the possibility of getting federal dollars to help underwrite the cost, and partly because of the breathing room that Section 301 tariffs on Chinese TiO2 have afforded them.

He said that the Section 301 tariffs have resulted in $135 million in capital investments in Mississippi, a 16% increase. He said that a state-owned firm from China was convicted in 2014 of commercial espionage in this sector, and that Chinese exports of one kind of TiO2 made it uneconomical for his company to continue operating a plant in Georgia about 15 years ago.

Romano said USTR should consider hiking the tariff on titanium oxide, because it may not be "sufficient to prevent damage to our industry." Romano testified that the current tariffs have resulted in a 50% drop in Chinese imports.

Rep. Mary Miller, R-Ill., told Romano that she thinks it's important that the administration keep strategic tariffs on the Section 301 list, "and possibly remove non-strategic" items.

The witness invited by the Democrats on the committee, Thomas O’Shei, president of the United Steelworkers local that represents 1,100 tire manufacturers in Buffalo, New York, argued that budget cuts to CBP and the Commerce Department that would be the result of House Republicans' proposed spending caps would reduce trade enforcement efforts by $60 million annually.

"Federal budget cuts will lead to lost manufacturing jobs," he said.

He also asked for Congress to pass the "Fighting Trade Cheats Act" (see 2303160067), which he said is needed because "duty evasion by importers is a constant," and he cited a criminal case where importers reported that tires were subject to different antidumping duties than was true.

He asked Congress to pass changes to antidumping and countervailing duty laws known as the Level the Playing Field Act 2.0., as well. He noted that USW won a trade remedy case on imported tires from China in 2015 that still covers those exports, and then won a successor case for tires from six countries.

He said a trade remedies case on truck and bus tires cost the union $3 million, more than the nationwide dues for one year. "When we go before the ITC, China has the best lawyers money can buy," he said. "We’d like to see a way where you don’t have to show three years of injury before you bring a case, because usually by that time you may be so damaged you never recover," he told Rep. Bill Pascrell, D-N.J.

O'Shei asked that tires be declared import sensitive, and thus not eligible for the Generalized System of Preferences benefits program, and complained that one of the Chinese firms found guilty of dumping had spent nearly $1 billion to build a tire factory in Serbia, a GSP-eligible country.

Turkel received questions from many Republicans on the panel, including Rep. David Kustoff, R-Tenn., who asked Turkel if it's only the government that should be increasing its enforcement. "Doesn't the private sector have some responsibility?"

Turkel told him that the private sector is trying to slow down the process of implementing UFLPA after opposing its passage. He criticized Apple for terminating a supplier that made iPhone screens without saying why. "When you ask them: 'Why can’t you just go out and tell that you terminated your relationship with a questionable supplier,' they say, 'No, there will be retaliation.'"

He also asked Smith to consider passing legislation modeled on the Foreign Corrupt Practices Act, making it a crime to facilitate forced labor, human trafficking and genocide.

Turkel criticized the Forced Labor Enforcement Task Force for not adding any new firms to the entity list mandated by the UFLPA. However, he commended detentions of red dates that were labeled with XPCC, the XInjiang Production and Construction Corps, a sanctioned company. He said ports at Newark, Los Angeles and Oakland all seized shipments of these dates, after the Uyghur-American Association, a non-partisan organization, documented the fact that the dates were still being imported (see 2209060033).

"To my knowledge, the Department of the Treasury, which is responsible for enforcing Magnitsky sanctions in consultation with the Secretary of State, has taken no action to impose penalties for the US persons -- that is, the importers who have aided and abetted the importation of XPCC goods in violation of the OFAC designation that should block all XPCC-related transactions on U.S. soil," he wrote in his testimony.

Turkel told the committee that the Commercial Customs Operations Advisory Committee is arrayed against forced labor enforcement, since it has no experts in forced labor or worker representatives.

"I submit that the COAC committee is heavily weighted toward importers’ interests and not the national interest. I urge the Ways and Means Committee to disband this Advisory Committee if it is not reformed to remedy this fatal flaw," he wrote in his submitted testimony.