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116th Congress } { Rept. 116-358
HOUSE OF REPRESENTATIVES
1st Session } { Part 1
======================================================================
UNITED STATES-MEXICO-CANADA AGREEMENT IMPLEMENTATION ACT
_______
December 19, 2019.--Committed to the Committee of the Whole House on
the State of the Union and ordered to be printed
_______
Mr. Neal, from the Committee on Ways and Means, submitted the following
R E P O R T
together with
MINORITY VIEWS
[To accompany H.R. 5430]
[Including cost estimate of the Congressional Budget Office]
The Committee on Ways and Means, to whom was referred the
bill (H.R. 5430) to implement the Agreement between the United
States of America, the United Mexican States, and Canada
attached as an Annex to the Protocol Replacing the North
American Free Trade Agreement, having considered the same,
report favorably thereon without amendment and recommend that
the bill do pass.
CONTENTS
Page
I. SUMMARY AND BACKGROUND...........................................2
A. Purpose and Summary................................... 2
B. Background............................................ 2
II. LEGISLATIVE HISTORY.............................................13
III. EXPLANATION OF THE BILL.........................................14
TITLE I--APPROVAL OF, AND GENERAL PROVISIONS RELATING TO,
THE USMCA............................................ 15
TITLE II--CUSTOMS PROVISIONS............................. 19
TITLE III--APPLICATION OF THE USMCA TO SECTORS AND
SERVICES............................................. 27
TITLE IV--ANTIDUMPING AND COUNTERVAILING DUTIES.......... 29
TITLE V--TRANSFER PROVISIONS AND OTHER AMENDMENTS........ 30
TITLE VI--TRANSITION TO AND EXTENSION OF THE USMCA....... 34
TITLE VII--LABOR MONITORING AND ENFORCEMENT.............. 36
TITLE VIII--MONITORING AND ENFORCEMENT RELATING TO THE
ENVIRONMENT.......................................... 42
TITLE IX--USMCA SUPPLEMENTAL APPROPRIATIONS ACT, 2019.... 50
IV. VOTES OF THE COMMITTEE..........................................50
V. BUDGET EFFECTS OF THE BILL......................................50
A. Committee Estimate of Budgetary Effects............... 50
VI. Statement Regarding New Budget Authority and Tax Expenditures
Budget Authority................................................50
VII. Cost Estimate Prepared by the Congressional Budget Office.......50
VIII.OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE......53
A. Committee Oversight Findings and Recommendations...... 53
B. Statement of General Performance Goals and Objectives. 53
C. Information Relating to Unfunded Mandates............. 53
D. Congressional Earmarks, Limited Tax Benefits, and
Limited Tariff Benefits.............................. 53
E. Duplication of Federal Programs....................... 53
F. Hearings.............................................. 53
IX. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED...........53
I. SUMMARY AND BACKGROUND
A. Purpose and Summary
H.R. 5430, the United States-Mexico-Canada Agreement
Implementation Act, as ordered reported by the Committee on
Ways and Means on December 17, 2019, implements the United
States-Mexico-Canada Agreement.
B. Background
The North American Free Trade Agreement (NAFTA) was signed
by the United States, Mexico, and Canada in 1992. The NAFTA
Implementation Act was enacted by Congress and signed by the
President in the following year. In the decades following its
implementation, Members of Congress raised numerous concerns
regarding the NAFTA's impact on the U.S. economy, particularly
its failure to raise labor and environmental standards in
Mexico. Many also noted that the NAFTA had become outdated.
In 2017, the Administration notified Congress of its intent
to renegotiate the NAFTA. After negotiations concluded, the
United States, Mexico, and Canada signed the United States-
Mexico-Canada Agreement (hereinafter ``USMCA'' or ``the
Agreement''), on November 30, 2018. Chairman Neal sent a letter
to the Administration on April 9, 2019, regarding his concerns
with the Agreement.\1\ Committee Democrats sent letters to the
Administration highlighting specific concerns in four key areas
of the Agreement: labor (April 11, 2019),\2\ environment (April
17, 2019),\3\ enforcement (April 25, 2019),\4\ and access to
medicines (May 3, 2019).\5\
---------------------------------------------------------------------------
\1\April 9, 2019 letter from Chairman Richard Neal to Ambassador
Robert Lighthizer. Available at: https://waysandmeans.house.gov/sites/
democrats.waysandmeans.house.gov/files/documents/
2019.04._Ltr_%20from_%20Chairman_%20Neal_%20to_%20Amb._%20Lighthizer_%20
re %20NAFTA_%20Replacemen....pdf.
\2\April 11, 2019 letter from Chairman Richard Neal to Ambassador
Robert Lighthizer. Available at: https://waysandmeans.house.gov/sites/
democrats._waysandmeans.house.gov/_files/docu- ments/
_2019.04.11_%20WM_%20Dem_%20Ltr_%20to_%20Amb_%20Lighthizer_%20re_%20NAF-
TA%20Labor.pdf.
\3\April 17, 2019 letter from Chairman Richard Neal to Ambassador
Robert Lighthizer. Available at https://waysandmeans.house.gov/sites/
_democrats.waysandmeans._house.gov/files/docu- ments/
_2019.04.17_%20WM_%20Dem_%20Ltr_%20to_%20Amb_%20Lighthizer_%20re_%20NAF-
TA_%20Environment.pdf.
\4\April 25, 2019 letter from Chairman Richard Neal to Ambassador
Robert Lighthizer. Available at: https://waysandmeans.house.gov/_sites/
democrats.waysandmeans._house.gov/_files/docu- ments/
_2019.04.25%20WM_%20Dem_%20Ltr%20to_%20Amb%20Lighthizer_%20re%20NAFTA-
_%20Enforcement.pdf.
\5\May 3, 2019 letter from Chairman Richard Neal to Ambassador
Robert Lighthizer. Available at https://waysandmeans.house.gov/sites/
democrats.waysandmeans.house.gov/_files/documents/
_2019.05.03_%20WM%20Dem_%20Ltr%20to_%20Amb%20Lighthizer_%20re%20NAFTA_%2
0Me- dicines.pdf.
---------------------------------------------------------------------------
In response to these concerns, Speaker Pelosi appointed a
Working Group of House Democrats, led by Chairman Neal, to lead
negotiations with the Administration on these issues. The
Working Group issued a progress report to Speaker Pelosi
regarding negotiations with the Administration on July 26,
2019.\6\
---------------------------------------------------------------------------
\6\July 26, 2019 Chairman Neal Letter to Speaker Pelosi. Available
at: https://waysandmeans.house.gov/sites/
_democrats.waysandmeans._house.gov/files/documents/_20190726
_Ltr_from_Working_Group_to_Speaker_Pelosi_re_NAFTA_Status_Report.pdf.
---------------------------------------------------------------------------
As a result of these negotiations, the USMCA was amended on
December 10, 2019 to incorporate changes to the Agreement
achieved through the Protocol of Amendment (``the Protocol'')
to the USMCA, which, together with an accord between House
Democrats and the Administration, comprise the ``December 10th
Agreement.''\7 8\ The December 10th Agreement achieves
transformative changes to the USMCA that bolster the U.S.
economy, strengthen enforcement and the enforceability of the
Agreement, protect workers and the environment, and improve
access to affordable prescription medicines.
---------------------------------------------------------------------------
\7\The December 10th Agreement is reflected in the Protocol, the
Environment Cooperation and Customs Verification Agreement between the
United States and Mexico, dated December 10, 2019, and the United
States-Mexico-Canada Agreement Implementation Act Title III, Subtitle
c--United States-Mexico Cross-border Long-haul Trucking Services; Title
VII--Labor Monitoring and Enforcement; Title VIII--Monitoring and
Enforcement Relating to Environment; and Title IX--USMCA Supplemental
Appropriations Act, 2019.
\8\See Protocol of Amendment to the United States-Mexico-Canada
Agreement, available at: https://ustr.gov/ sites/ default/ files/files/
agreements/FTA/USMCA/ Protocol-of- Amendments-to- the-United-States-
Mexico-Canada-Agreement.pdf.
---------------------------------------------------------------------------
The U.S. International Trade Commission (``USITC'') issued
a report on the likely impact of the USMCA on the U.S. economy
in April 2019.\9\ Based on two key assumptions, the USITC
estimated that the USMCA would have a positive economic effect.
First, the USITC assumed that the Agreement would be fully
enforced; and second, it assumed that some of the Agreement's
provisions would reduce uncertainty and spur economic activity.
The December 10th Agreement has made these theoretical
assumptions a reality for American workers and families. The
December 10th Agreement makes key changes to the USMCA in the
areas of (i) enforcement; (ii) labor; (iii) environment; and
(iv) access to medicines. The following are key aspects of the
USMCA, beginning with the improvements obtained under the
December 10th Agreement.
---------------------------------------------------------------------------
\9\USITC, ``U.S.-Mexico-Canada Trade Agreement: Likely Impact on
the U.S. Economy and Specific Industry Sectors,'' Publication No. 4889,
April 2019.
---------------------------------------------------------------------------
I. THE DECEMBER 10TH AGREEMENT
a. Enforcement
Without enforceability and enforcement, any agreement is
just words on a page. Given the lacking enforcement record in
the NAFTA, the December 10th Agreement fixed procedures in the
NAFTA's and original USMCA's state-to-state dispute settlement
mechanism that have allowed parties to block the formation of
an arbitral panel and frustrate formal enforcement of all
obligations. It also established enhanced enforcement
mechanisms to secure compliance with the new labor and
environmental rules. The December 10th Agreement includes the
following enforcement-related improvements:
1. Prevent panel blocking and improve the efficiency of the
state-to-state dispute settlement mechanism
The December 10th Agreement removes the requirement for the
Free Trade Commission to convene before a panel is established
and allows the complaining party to appoint the panelists if
the defending party refused to participate in or does not show
up to the choosing by lot procedure. The Agreement thus fixes
procedural loopholes to help ensure that the USMCA is fully
enforceable.
2. Create enhanced enforcement for labor and environment
provision
As detailed below, the December 10th Agreement creates
enhanced mechanisms to assist in the full enforcement of these
provisions.
3. Require the development of rules of evidence for use in
all enforcement mechanisms
The December 10th Agreement requires the development of
rules of evidence for use in all enforcement mechanisms. The
rules of evidence will allow disputing parties to submit
anonymous testimony, redacted evidence, testimony in person,
via declaration, affidavit, report, teleconference, or
videoconference. In addition, the Panel will be permitted to
accept evidentiary stipulations in advance of the hearing,
request the production of documents, and take an adverse
inference for non-responses. The revised USMCA will be the
first U.S. trade agreement to require the development of rules
of evidence for use in dispute settlement proceedings--an
important step in ensuring that trade agreements are fully
enforceable.
b. Labor
1. Strengthening Rules
The labor rules in U.S. trade agreements have proven
difficult, if not impossible, to enforce. Five key changes
strengthen the rules with a view to improving their
enforceability.
Create a presumption that violations occur
in ``a manner affecting trade or investment between the
Parties. As decisions under previous trade agreements
have demonstrated,\10\ the ``manner affecting trade . .
.'' language has created a hurdle to labor enforcement.
The December 10th Agreement includes a provision that
creates a presumption that violations affect trade and
requires that the other Party demonstrate otherwise:
---------------------------------------------------------------------------
\10\See In the Matter of Guatemala--Issues Relating to the
Obligations Under Article 16.2.1(a) of the CAFTA-DR, Final Report of
the Panel, June 14, 2017. Available at: https://www.trade.gov/industry/
tas/Guatemala%20%20%E2_%80%93%20Obligations_%20Under_%20Ar-
ticle%2016-2-1(a)%20of_%20the%20CAFTA-DR%20%20June%2014%202017.pdf.
---------------------------------------------------------------------------
Strengthen language in the Forced Labor
provision to make it effectively enforceable. The
December 10th Agreement removes the phrase ``through
measures it considers appropriate'' and the USMCA
footnote regarding potential inconsistencies with other
international obligations.
Remove ``sustained or recurring course of
action or inaction'' from the provision on violence.
Acts of violence and intimidation should not need to be
repeated in order to be actionable as a denial of
freedom of association or the right to collective
bargaining.
Strengthen steel rules of origin in the
automotive sector to support U.S. manufacturing. After
a transition period, the December 10th Agreement
ensures that steel used in the automotive sector will
only receive preferential treatment under the USMCA if
it is melted and poured in the region.
Create a new enforcement mechanism to
address unfair trade in trucking services. Building on
the exception negotiated in the Services chapter of the
USMCA, and consistent with the December 10th Agreement,
the implementing bill will establish a new process at
the USITC that will protect U.S. truckers and companies
from surges in trucking services from Mexico that cause
material harm to the U.S. industry.
2. Establishing a robust monitoring program
The United States has failed to effectively monitor the
labor provisions in trade agreements. Pursuant to the December
10th Agreement, the USMCA implementing bill will establish an
interagency committee with devoted funding that will be
responsible for actively monitoring Mexico's compliance with
the labor chapter, including the following activities:
Establish an Independent Review Body. The
implementing bill will establish an independent review
body that will make determinations regarding whether
Mexico is satisfactorily implementing its labor reform
and general labor laws based on objective benchmarks.
Negative determinations will lead to dispute settlement
actions.
Devote Robust Resources. The interagency
committee will receive funding for staff from USTR and
the U.S. Department of Labor (``DOL'') devoted to
monitoring and enforcement, including multiple labor
attaches based in Mexico.
Engage with Key Stakeholders. The
interagency committee will be required to consult
regularly with key stakeholders, including the Labor
Advisory Committee. The committee will also coordinate
with other key stakeholders, including the
International Labour Organization (``ILO''), the Inter-
American Development Bank (IDB), Mexico, and Canada.
Link Monitoring with Enforcement. The
interagency committee's monitoring work will be
directly related to enforcement actions taken by USTR,
including the establishment of priority sectors and
facilities. The committee will also review petitions
submitted by outside stakeholders.
3. Creating labor-specific enforcement tool
State-to-state dispute settlement by itself has not
provided sufficient leverage to ensure that U.S. trading
partners live up to their labor commitments. In recognition of
this concern, the December 10th Agreement establishes an
enforcement mechanism in the dispute settlement chapter that:
Takes immediate effect upon entry into force
of the Agreement;
Provides for facility-based enforcement of
labor standards with a rapid timeline;
Covers manufactured goods and services
traded between the United States and Mexico as
described in the Protocol;
Requires verification of compliance by
independent labor experts; and
Leads to the imposition of penalties on
goods and services--which includes suspension of
liquidation during the course of the verification--that
are not produced in compliance with the December 10th
Agreement's labor standards. In the case of repeat
offenders, the United States can block entry of those
goods.
The renegotiation of the NAFTA was premised on the
recognition that the original agreement failed to raise wages
and working conditions in Mexico, hurting American workers,
especially in our industrial manufacturing sector. The NAFTA
does not formally incorporate labor provisions. It addresses
labor commitments through the North American Agreement on Labor
Cooperation (``NAALC''), a separate cooperative agreement.\11\
Despite the fact that findings of non-compliance have been made
pursuant to the NAALC's mechanisms, sanctions or penalties have
never been authorized as a result of those cases.
---------------------------------------------------------------------------
\11\See North American Agreement on Labor Cooperation, available
at: https://www.dol.gov/agencies/ ilab/trade/agreements/naalcgd.
---------------------------------------------------------------------------
The USMCA as signed in November 2018 incorporated labor
commitments in the Agreement itself and subjected those
commitments to the Agreement's state-to-state dispute
settlement mechanism. However, some of those obligations
remained soft, and responding parties have been able to
frustrate the NAFTA's state-to-state mechanism, as noted above.
In the December 10th Agreement, Democrats obtained improvements
in the following areas: strengthening rules; new mechanisms and
resources to ensure that the U.S. government effectively
monitors compliance with the Agreement's labor obligations
specific to Mexico; and a new and enhanced labor-specific
enforcement mechanism.
4. Committing robust resources for implementing and
enforcing the labor provision
The obligations in trade agreements are valuable only if
they are actively monitored and enforced. Pursuant to the
December 10th Agreement, the implementing bill will provide
increased funding to monitor and enforce the USMCA, as well as
provide significant capacity building resources to support
Mexico's labor reform, including $240 million over four years,
including:
$30 million for USTR to monitor and enforce
the labor obligations in the USMCA;
$30 million for DOL to monitor and enforce
the USMCA, including funding for five labor attache
positions in Mexico; and
$180 million in capacity building for grants
issued by DOL to support the implementation of Mexico's
labor reform, which will go a long way toward ensuring
the potential of Mexico's labor reform. The Ways &
Means Committee expects at least $100 million of these
funds to support capacity building projects in Mexico
that are designed to train workers so that they can
realize their collective bargaining and freedom of
association rights in the workplace.
c. Environment
Twenty-five years under NAFTA have shown that a failure to
comply with and enforce environmental standards in Mexico has
had negative economic consequences and undermined American
competitiveness. The NAFTA does not formally incorporate
environmental provisions. It addresses environment commitments
through the North American Agreement on Environmental
Cooperation (``NAAEC''), a separate cooperative agreement. No
sanctions or penalties have ever been authorized as a result of
petitions filed pursuant to the NAAEC.\12\ The USMCA, as signed
in November 2018, incorporated environment commitments in the
Agreement itself and subjected those commitments to the
Agreement's state-to-state dispute settlement mechanism. In the
December 10th Agreement, House Democrats obtained improvements
in the following areas: strong and high-standard rules that are
clear and enforceable, new mechanisms and the allocation of
additional resources to monitor whether environmental
protections are being applied, and new mechanisms to hold
partners and actors accountable to the Agreement.
---------------------------------------------------------------------------
\12\See North American Agreement on Environmental Cooperation.
Available at: https://www.epa.gov/sites/production/files/2018-11/
documents/us-mxca_eca_-_final_english.2.pdf.
---------------------------------------------------------------------------
1. Strong and high-standard rules that are clear and
enforceable
Similar to the labor rules, the December 10th Agreement
creates a presumption that an environmental violation affects
trade and investment and requires the responding Party to prove
otherwise during dispute settlement. Further, House Democrats
restored key obligations achieved in the NAFTA and under the
May 10, 2007 Agreement (``the May 10th Agreement'') between
House Democrats and the Administration in connection with trade
agreements with Peru, Panama, and Colombia. The May 10th
Agreement required the Parties to ``adopt, maintain and
implement'' seven key multilateral environment agreements
(MEAs).\13\ House Democrats were able to secure a similar
commitment in the December 10th Agreement. The obligation also
includes additional language that allows the Parties to agree
to add additional environment or conservation agreements to the
listed MEAs. House Democrats had hoped to secure the addition
of an eighth MEA, the Paris Agreement under the United Nations
Framework Convention on Climate Change, to the list of covered
MEAs; however, House Democrats were unable to secure the
outcome from the Trump Administration. House Democrats intend
that a future Administration, which recognizes the global
climate change crisis, will immediately work with Canada and
Mexico to amend the obligation accordingly. The December 10th
Agreement also restored a provision that appears in the NAFTA
that allows a Party to prioritize their obligations under the
seven covered MEAs over the trade agreement obligations.
Lastly, the December 10th Agreement removed language to ensure
that trade in all substances controlled by the Montreal
Protocol can be covered by the USMCA, including all existing
and future amendments to the Montreal Protocol (such as the
Kigali amendment covering HFCs, which contribute to global
warming).
---------------------------------------------------------------------------
\13\See Art. 24.8(4) of the USMCA.
---------------------------------------------------------------------------
2. New mechanisms and the allocation of additional
resources to monitor environmental protections
Under the December 10th Agreement, House Democrats secured
the creation of the Interagency Environment Committee for
Monitoring and Enforcement (``Interagency Environment
Committee''). The Interagency Environment Committee will
include all federal agencies with the necessary expertise and
functions to fully enforce the USMCA environment obligations,
including the Department of Interior (``DOI'') (U.S. Fish and
Wildlife Services), the Department of Commerce (National
Oceanic and Atmospheric Administration (``NOAA''), and the
Environmental Protection Agency (``EPA''). First, the
Interagency Environment Committee will conduct a thorough
assessment of Canada and Mexico's current environment laws,
regulations and enforcement practices. The Interagency
Environment Committee will develop a report that will create a
roadmap for full compliance with the USMCA environment
obligations and will submit the report and assessment to
Congress.
The Interagency Environment Committee will continuously
monitor Canada's and Mexico's implementation of the USMCA
environment obligations. Monitoring will include reviewing and
recommending enforcement actions in response to factual records
and submissions of the Commission for Environmental Cooperation
(``CEC''), a U.S.-Mexico-Canada cooperation body set up under
the NAFTA. Since the NAFTA was implemented, the CEC has
developed factual records showing that the NAFTA Parties are
failing to effectively enforce their environment laws. No
action has been taken based on these findings. Under the
December 10th Agreement, the Interagency Environment Committee
will be required to review the factual records and their
underlying submissions to determine if an enforcement action
should be taken. The Interagency Environment Committee must
submit a written justification to Congress if it recommends
that no action be taken.
Further, with respect to Mexico, the Interagency
Environment Committee will implement, review public comments,
and fully utilize all enforcement tools under the Cooperation
and Customs Verification Agreement between the United States
and Mexico (``Customs Verification Agreement'') and will review
quarterly update reports from the three new environment
attaches in Mexico. The December 10th Agreement includes the
establishment of three new environment attaches who will be
detailed to USTR from NOAA, U.S. Fish and Wildlife Service, and
EPA and stationed in Mexico to assist the Interagency
Environment Committee with monitoring and enforcing Mexico's
efforts to live up to their USMCA environment obligations. The
Interagency Environment Committee will provide a platform for
better coordination, utilization and funding of U.S. Government
efforts to strengthen environment practices in North America.
House Democrats secured additional resources to fulfill
these functions. Pursuant to the December 10th Agreement, the
implementing legislation includes an additional appropriated
$20 million over four years for USTR to lead the Interagency
Environment Committee in monitoring and enforcing the
environment obligations in the USMCA, including funding for the
three environment attaches assigned to Mexico. Moreover, the
December 10th Agreement secured $40 million over four years for
the Trade Enforcement Trust Fund to be used for environment-
focused enforcement efforts. Further, the December 10th
Agreement included additional funds, beyond what is typically
appropriated for each program per year, to the EPA, NOAA, U.S.
Department of Agriculture--Animal and Plant Health Inspection
Service (``APHIS'') and U.S. Fish and Wildlife Services.
Specifically, $4 million over four years will be appropriated
to the EPA to assist in its work on the CEC; NOAA will receive
an additional $8 million over four years to combat illegal,
unreported, and unregulated fishing and to enhance
implementation of the Seafood Import Monitoring Program; and
U.S. Department of Agriculture (APHIS) and DOI (U.S. Fish and
Wildlife Services) will each receive an additional $4 million
over four years to implement the Lacey Act.
3. New mechanism to hold partners and actors accountable to
the agreement and resources to address pollution
In addition to fixing the state-to-state dispute settlement
mechanism, the December 10th Agreement includes a new
environment-specific enforcement mechanism. Additionally, the
Customs Verification Agreement is a binding agreement signed
between Mexico and the United States on December 10, 2019,
which allows for the United States to request customs
information from Mexico to verify the legality of a shipment of
fauna or flora. Mexico is a known source and transshipment hub
of illegally-taken wild fauna and flora. This new mechanism
will allow the United States to hold Mexico accountable and
will deter the shipment of these illegal goods in Mexico.
The December 10th Agreement also included significant funds
to address environment-focused infrastructure needs on the
U.S.-Mexico border and pollution in U.S.-Mexico shared waters.
The December 10th Agreement includes a capital increase
authorization for the North American Development Bank
(``NADBank'') and $215 million for NADBank over five years for
environment infrastructure projects. In addition, House
Democrats secured $300 million over four years of additional
appropriated funds for EPA grants under the Border Water
Infrastructure Program to address pollution needs connected
with high priority wastewater facilities on the U.S.-Mexico
border. Further, House Democrats secured $8 million for NOAA
over four years to address marine debris in North American
waters.
d. Access to medicines
U.S. patients are currently facing a crisis relating to
access to affordable health care and prescription drugs. The
NAFTA did not include provisions on biologics, secondary
patents, the protection of new clinical information, patent
linkage, or other provisions that limit patients' access to
medicines. The USMCA, as originally negotiated, would have
locked-in practices that lead to high drug prices, hindered the
generic competition that brings down prices, and ignored access
to medicines principles from the May 10th Agreement. The
December 10th Agreement now preserves Congress's power to pass
laws that bring down high prescription drug costs, ensures fair
terms of competition, and recognizes key access to medicine
standards. The December 10th Agreement creates a balance
between encouraging the competition that brings greater access
to medicines at lower costs to patients and supporting
pharmaceutical innovation. This balance was an important
requirement of the Bipartisan Congressional Trade Priorities
and Accountability Act of 2015.
1. Preserving Congressional power to bring down high
prescription drug costs
The December 10th Agreement removes the biologics
provision, and all references to it, from the intellectual
property chapter. This provision required that the United
States, Canada, and Mexico provide at least 10 years of market
exclusivity for biologics, which are some of the most expensive
drugs on the market. Some of these medicines now cost more than
$200,000 per year per patient. The removal of this provision
preserves the policy space needed to drive down the high price
of biologics.
The December 10th Agreement also removes the requirement
that the United States, Canada, and Mexico confirm the
availability of patents for new uses of known products. This
provision would have locked in the practice of ``patent
evergreening,'' in which pharmaceutical companies obtain
hundreds of patents related to a product to block generic
competition and price reductions. The December 10th Agreement
ensures that the United States does not lock-in patent
evergreening here or require its export to Mexico and Canada.
In addition, the December 10th Agreement removes the
requirement that the United States, Canada, and Mexico provide
at least three years of additional exclusivity for new clinical
information submitted to support new uses of previously-
approved pharmaceutical products.
2. Ensuring fair terms of competition
Congress passed the Drug Price Competition and Patent Term
Restoration Act of 1984, commonly known as ``Hatch-Waxman,'' to
balance incentives for the initial innovation of a
pharmaceutical with opportunities for follow-on competition
from less expensive generic drugs.\14\ The December 10th
Agreement also focuses on ensuring that the USMCA reflects the
balance in U.S. law to promote access to medicines.
---------------------------------------------------------------------------
\14\See Drug Price Competition and Patent Term Restoration Act of
1984, Pub. L. No. 98-417.
---------------------------------------------------------------------------
The December 10th Agreement adds new language to the
regulatory review provision to ensure that it is consistent
with U.S. law and fosters competition. A strong regulatory
review provision enables generic and biosimilar manufacturers
to use a patented invention during the patent term to develop
information needed to obtain regulatory approval the moment the
patent expires.
The December 10th Agreement also ensures that the USMCA's
data protection provisions are consistent with U.S. law. Under
U.S. law, branded pharmaceutical companies may obtain a form of
data protection known as new chemical entity (``NCE'')
exclusivity for a period of five years. A new footnote ensures
that a generic company can continue to seek approval in less
than five years when the branded company receives notice of the
generic's claim and does not bring legal action within 45 days.
Another footnote ensures that NCE exclusivity is limited to
those products with the same active moiety or molecule as the
branded product, consistent with U.S. law.
3. Reflecting key May 10th principles
The December 10th Agreement removes the concept of ``hard''
patent linkage--under which a regulatory agency cannot approve
the marketing of a generic version of a pharmaceutical until it
certifies that no patent would be violated--from the trade
agreement template. Under a new Annex, Mexico may continue its
current linkage system only if it ensures that directly
affected persons receive notice and a reasonable opportunity to
be heard. The December 10th Agreement also improves
transparency and incentives for generic competition. The patent
linkage provision applies only to chemically-synthesized drugs
as the United States does not apply patent linkage to
biologics.
The December 10th Agreement also aligns the provision on
patent term adjustments more closely with the May 10th
principles by providing non-exhaustive examples of limitations
and restrictions on when patent term adjustments for regulatory
delays may be permitted.
II. KEY USMCA PROVISIONS
The USMCA makes some notable changes to the NAFTA's market
access provisions for autos, agriculture products, and
services, as well as changes to rules and disciplines,
including in the areas of investment and intellectual property
rights. The USMCA also addresses new issues such as digital
trade and currency.
a. Autos
The NAFTA phased out U.S. tariffs on imports of automotive
goods from Canada and Mexico that met the rules of origin
requirements. The USMCA increases regional value content
requirements for passenger vehicles, light and heavy trucks,
and automotive parts. It also imposes a new requirement that 70
percent of steel and 70 percent of aluminum purchases by
vehicle producers must originate in USMCA countries. For the
first time in a trade agreement, the USMCA includes wage
requirements stipulating a minimum of 40 to 45 percent of
production of vehicles traded in the USMCA region be made by
workers earning on average at least $16 per hour.
b. Agriculture
The USMCA generally maintains the market access for
agriculture provided under the NAFTA, which allows tariff-free
trade of most agricultural goods in the region. The USMCA
provides additional market access for U.S. dairy, poultry, and
eggs to Canada. Canada also agreed to eliminate its pricing
schemes for skim milk products six months after the agreement
enters into force. New provisions address Canada's
discriminatory practices regarding the sale, distribution, and
labeling of wine and distilled spirits, and grading of U.S.
wheat. Additionally, the USMCA includes strengthened
disciplines for science-based sanitary and phytosanitary
measures and provisions that address novel agricultural bio
technologies such as gene editing.
The Committee is of the view that U.S. recognition of Sotol
as a distinctive product of Mexico would contravene the purpose
of 27 U.S.C. 205(e), under which the Secretary of the Treasury
is charged with developing regulations on packaging, marking,
branding, and labeling ``as will prohibit deception of
consumers with respect to'' distilled spirits products. In
fact, U.S. recognition of Sotol as a distinctive product of
Mexico through such a regulation would fundamentally deceive
U.S. consumers because Sotol is the generic name for 22 species
of a plant that grows naturally on both sides of the U.S.-
Mexico border. For the same reasons, the Committee is of the
view that the Alcohol and Tobacco Tax and Trade Bureau
(``TTB'') does not have authority under its regulations to
recognize Sotol as a distinctive product of Mexico, since 27
CFR 5.22 prohibits TTB from recognizing distilled spirits as
distinctive products if ``by usage and common knowledge [they]
have lost their geographical significance to such an extent
that the appropriate TTB officer finds they have become
generic.''
c. Currency
The USMCA includes new policy and transparency commitments
on currency issues. It requires commitments to refrain from
competitive devaluations and targeting exchange rates and
provides accountability mechanisms.
d. Digital trade
The USMCA includes new digital trade provisions, including
prohibiting customs duties on electronically transmitted
products and limits on source code disclosure requirements. The
USMCA also contains broad provisions on cross-border data
flows, and restrictions on data localization and the liability
of Internet platforms for third-party content. The USMCA is the
first trade agreement to include certain limitations on
liability of interactive computer service suppliers or users
for third-party content. The Committee understands that
inclusion of this obligation will not preclude Congress from
acting to amend U.S. law related to these principles in the
future.
e. Intellectual property
The USMCA creates a strong framework of standards for
protection and enforcement of intellectual property rights
including copyrights, trademarks, trade secrets, and patents.
It also includes robust criminal and civil enforcement
provisions.
f. Investment
The USMCA's investment provisions largely track those of
the NAFTA, except for changes to the investor-state dispute
settlement (``ISDS'') provisions. The Agreement generally ends
ISDS between Canada and the United States. With respect to
Mexico and the United States, the USMCA would limit ISDS to
claims involving government contracts in natural gas, power
generation, infrastructure, transportation, and
telecommunications sectors, or in other sectors provided
national remedies are exhausted first.
g. Services
The USMCA's services provisions require nondiscriminatory
treatment of partner-country providers in like circumstances,
including national treatment and MFN treatment; no limitations
on the number of service suppliers, the total value or volume
of services provided, the number of persons employed, or the
types of legal entities that a foreign service supplier may
employ; and include prohibitions on commercial presence
requirements. Mexico and Canada also agreed to increase their
customs de minimis thresholds.
II. LEGISLATIVE HISTORY
Background
On December 13, 2019, the President transmitted, in
accordance with Section 106(a) of the Bipartisan Congressional
Trade priorities and Accountability Act of 2015, documents
including a draft of the implementing bill, a copy of the final
legal text, and a statement of administrative action with
respect to such agreement. On the same day the implementing
bill, H.R. 5430, was introduced by Majority Leader Steny Hoyer
on behalf of himself and the Minority Leader. On December 17,
2019, H.R. 5430 was referred to the Committee on Ways and
Means.
Committee hearings
On June 25, 2019, the Subcommittee on Trade held a hearing
on ``Mexico's Labor Reform: Opportunities and Challenges for an
Improved NAFTA.'' Members heard testimony from experts in
Mexico's economy, including: 1) Dr. Joyce Sadka from the Center
for Economic Research at Instituto Tecnologico Autonomo de
Mexico, 2) Ms. Gladys Cisneros from the Solidarity Center, 3)
Dr. Harley Shaiken from the Center for Latin American Studies
at University of California, Berkeley, and 4) Ms. Cathy
Feingold, AFL-CIO. On June 19, 2019, the full Committee held a
hearing on ``The 2019 Trade Policy Agenda: Negotiations with
China, Japan, the EU, and UK; new NAFTA/USMCA; U.S.
Participation in the WTO; and other matters.'' Ambassador
Robert E. Lighthizer, the U.S. Trade Representative, was the
only witness at the hearing.
On May 22, 2019, the Subcommittee on Trade held a hearing
on ``Enforcement in the New NAFTA.'' Members heard from the
following witnesses: 1) Ms. Beth Baltzan, from the American
Phoenix Trade Advisory Services PLLC, 2) Mr. Owen Herrnstadt
from the International Association of Machinists and Aerospace
Workers, 3) Ms. Sandra Polaski, an Independent Expert, and 4)
Mr. Alexander von Bismark from the U.S. Environmental
Investigation Agency. The minority invited Ms. Devry Boughner
Vorwerk from Cargill, Inc. On March 26, 2019, the Subcommittee
on Trade held a hearing on ``Trade and Labor: Creating and
Enforcing Rules to Benefit American Workers.'' Members heard
from the following witnesses: 1) Ms. Celeste Drake from the
American Federation of Labor and Congress of Industrial
Organizations (AFL-CIO), 2) Mr. Shane Larson from Communication
Workers of America (CWA), 3) Mr. Josh Nassar, United Auto
Workers (UAW), 4) Ms. Holly Hart from United Steelworkers
(USW), 5) Mr. Steve Catanese from Local 668 Chapter, Services
Employees International Union (SEIU) and 6) Ms. Thea Lee,
Economic Policy Institute (EPI). The minority invited Ms. Susan
Montevideo from American Association of Port Authorities
(AAPA).
On March 21, 2018, the full Committee held a hearing on the
``U.S. Trade Policy Agenda.'' Ambassador Robert E. Lighthizer,
the U.S. Trade Representative, was the only witness at the
hearing.
On July 18, 2017, the Subcommittee on Trade held a hearing
on ``Modernization of the North American Trade Agreement
(NAFTA).'' Members heard from many witnesses, including: 1) Mr.
Tom Linebarger from Cummins, Inc., 2) Mr. Patrick J. Otensmeyer
from Kansas City Southern, 3) Mr. Dennis Arriola from Sempra
Energy, 4) Ms. Celeste Drake from American Federation of Labor
and Congress of Industrial Organizations (AFL-CIO), 5) Mr.
Jason Perdue from the Nebraska Farm Bureau, 6) Ms. Christine
Bliss from Coalition of Services Industries, 7) Mr. Stan Ryan
from Darigold, Inc., 8) Ms. Althea Erickson, Etsy, Inc., and 9)
Ms. Susan Helper from Case Western Reserve University.
On June 22, 2017, the full Committee held a hearing on the
``U.S. Trade Policy Agenda.'' Ambassador Robert E. Lighthizer,
the U.S. Trade Representative, was the only witness at the
hearing.
Committee action
The Committee on Ways and Means met in open session on
December 17, 2019 to consider H.R. 5430, the ``United States-
Mexico-Canada Agreement Implementation Act,'' on December 17,
2019, and ordered the bill favorably reported by voice vote
(with a quorum being present).
III. EXPLANATION OF THE BILL
Section 1. Short Title and Table of Contents
Section 1 of H.R. 5430 contains the short title of the Act,
which may be cited as the ``United States-Mexico-Canada
Agreement Implementation Act'', and sets forth the table of
contents of the bill.
Section 2. Definition
Section 2 of H.R. 5430 defines various terms used
throughout the bill, including the terms ``appropriate
congressional committees'', ``HTS'', ``identical goods'',
``NAFTA'', ``preferential tariff treatment'', ``USMCA'',
``USMCA Country'', ``International Trade Commission'', and
``Trade Representative''.
TITLE I--APPROVAL OF, AND GENERAL PROVISIONS RELATING TO, THE USMCA
Section 101: Approval and Entry Into Force of the USMCA
CURRENT LAW
Section 101 of the NAFTA Implementation Act approved the
NAFTA, and the accompanying exchange of letters and Statement
of Administrative Action.
EXPLANATION OF CHANGE
Section 101(a) of H.R. 5430 states that Congress approves
the Protocol Replacing the North American Free Trade Agreement
with the Agreement between the United States of America, the
United Mexican States, and Canada, the USMCA attached as an
Annex to the Protocol, as amended by the Protocol of Amendment
to the Agreement between the United States of America, the
United Mexican States, and Canada, and the Statement of
Administrative Action. Section 101(b) provides for the USMCA to
enter into force with respect to Canada and Mexico not earlier
than 30 days after the date on which the President submits to
Congress the written notice required by section 106(a)(1)(G) of
the Bipartisan Congressional Trade Priorities and
Accountability Act of 2015 (TPA 2015), which shall include the
date on which the USMCA will enter into force.
REASON FOR CHANGE
Approval of the USMCA and the Statement of Administrative
Action is required under the procedures of section 103(b)(3)(B)
of TPA 2015.\15\ Section 101 provides for such approval and for
entry into force of the USMCA.
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\15\See Bipartisan Congressional Trade Priorities and
Accountability Act of 2015, Pub. L. No. 114-26.
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Section 102: Relationship of the USMCA to United States and State Law
CURRENT LAW
Section 102 of the NAFTA Implementation Act contains
similar provisions as section 102 of H.R. 5430 described below
concerning the relationship of the NAFTA to U.S. and State laws
and private right of action.
EXPLANATION OF CHANGE
Section 102(a) of H.R. 5430 provides that U.S. law prevails
in the case of a conflict with the USMCA. Section 102(b)
provides that only the United States is entitled to bring a
court action challenging a state law as being invalid on
grounds of inconsistency with the USMCA. Section 102(c) of H.R.
5430 states that there is no private cause of action or defense
under the FTA and no person other than the United States may
challenge a federal or state law in court as being inconsistent
with the FTA.
REASON FOR CHANGE
The provision addresses the issue of the operation of the
agreement relative to federal and state law, as well as private
remedies. Section 102 of H.R. 5430 is necessary to make clear
that no provision of the USMCA will be given effect if it is
inconsistent with federal law and that entry into force of the
agreement creates no new private remedy.
Section 103: Implementing Actions in Anticipation of Entry Into Force;
Intial Regulations; Tariff Proclamation Authority
CURRENT LAW
Section 105 of the NAFTA Implementation Act contains
similar provisions as section 103 of H.R. 5430 described below
concerning the implementing actions in anticipation of entry
into force of the NAFTA.
EXPLANATION OF CHANGE
Section 103(a) of H.R. 5430 authorizes actions between the
date of enactment of H.R. 5430 and entry into force of the
USMCA necessary to implement the Agreement on that date.
Section 103(a) of H.R. 5430 provides that, after the date of
enactment, the President may proclaim such actions, and other
U.S. Government officers may issue such regulations, as are
necessary to ensure the appropriate implementation of any
provision of the legislation that is to take effect on the date
of entry into force of the Agreement. The effective date of
such actions and regulations may not be earlier than the date
of entry into force of the USMCA. Where proclaimed actions are
not subject to consultation and layover requirements under the
bill, proclamations generally may not take effect earlier than
15 days after their publication.
Section 103(b) of H.R. 5430 establishes that regulations
necessary or appropriate to carry out actions under the bill
and Statement of Administrative Action must, to the maximum
extent feasible, be issued within one year of entry into force
of the USMCA or, where a provision takes effect on a later
date, within one year of the effective date of the provision.
Section 103(c) of H.R. 5430 authorizes the President to
proclaim (i) modifications or continuations of any duty; (ii)
continuation of duty-free or excise treatment; or (iii)
additional duties that the President determines to be necessary
or appropriate to carry out or apply Article 2.4 (Treatment of
Customs Duties), Article 2.7 (Temporary Admission of Goods),
Article 2.8 (Goods Re-Entered After Repair or Alteration),
Article 2.9 (Duty-Free Entry of Commercial Samples of
Negligible Value and Printed Advertising Materials), Article
2.10 (Most-Favored Nation Rates of Duty on Certain Goods),
Article 6.2 (Handmade, Traditional Folkloric, or Indigenous
Handicraft Goods), Article 6.3 (Special Provisions), and the
Tariff Schedule of the United States to Annex 2-B (Tariff
Commitments), including the appendices to that Annex, Annex 2-C
(Provisions Between Mexico and the United States on Automotive
Goods), and Annex 6-A (Special Provisions).
Section 103(c) of H.R. 5430 also authorizes the President
to provide for the continuation, phase-out, and elimination,
according to the Tariff Schedule of the United States to Annex
2-B of the USMCA, of customs duties on imports from Canada and
Mexico that meet the Agreement's rules of origin.
REASON FOR CHANGE
These provisions of H.R. 5430 are necessary to ensure full
implementation of obligations under the USMCA upon its entry
into force and the issuance of all Federal regulations.
Section 104: Consultation and Layover Provisions for, and Effective
Date of, Proclaimed Actions
CURRENT LAW
Section 103 of the NAFTA Implementation Act established
consultation and layover requirements similar to the provisions
carried forward in section 104 of H.R. 5430.
EXPLANATION OF CHANGE
Section 104 of H.R. 5430 establishes requirements for the
proclamation of actions that are subject to consultation and
layover provisions under the Act. The President may proclaim
such action only after: (1) obtaining advice from the
appropriate private sector advisory committees and the USITC,
which shall hold a public hearing on the proposed action before
providing advice regarding the proposed action, (2) submitting
a report to the appropriate congressional committees concerning
the reasons for the action, and (3) providing for a 60-day
layover period (starting after the President has both obtained
the required advice and provided the required report). Section
104 of H.R. 5430 provides that the proposed action cannot take
effect until after the expiration of the 60-day period and
after the President has consulted with the appropriate
congressional committees regarding the proposed action.
The President may initiate the consultation and layover
process under section 104 of H.R. 5430 on enactment of the
bill. However, under section 103(a) of the bill, any modifying
proclamation cannot take effect until the Agreement enters into
force. In addition to modifications of customs duties, these
provisions apply to other Presidential proclamation authority
provided in the bill that is subject to consultation and
layover, such as authority to implement a proposal to modify
the Agreement's specific rules of origin in accordance with
Article 5.18 (Committee on Rules of Origin and Origin
Procedures) and Article 6.4 (Review and Revision of Rules of
Origin) of the USMCA.
Section 104 of H.R. 5430 gives the President certain
proclamation authority but requires extensive consultation with
Congress before such authority may be exercised. The Committee
believes that such consultation is an essential component of
the delegation of authority to the President and expects that
such consultations will be conducted in a thorough and timely
manner.
REASON FOR CHANGE
Section 104 of H.R. 5430 is necessary to provide the
statutory authority for the President to proclaim certain
actions that are subject to consultation and layover. Because
the proclamation authority is expressly subject to the
consultation and layover requirements, the Committee and
Congress will carefully review any changes in the rules that
would vary from those previously set out.
Section 105: Adminstration of Dispute Settlement Proceedings
CURRENT LAW
Section 105 of the NAFTA Implementation Act establishes and
authorizes funds for the United States Section of the NAFTA
Secretariat.
EXPLANATION OF CHANGE
Section 105(a) of H.R. 5430 authorizes the President to
establish or designate within the U.S. Department of Commerce a
United States Section of the Secretariat established under
Chapter 30 of the USMCA. Subsection (b) of H.R. 5430 authorizes
appropriations for each fiscal year after fiscal year 2020 to
the Department of Commerce $2 million for the establishment and
operations of the section and for payment of the U.S. share of
expenses of panels established under Chapter 31 of the USMCA
including under Annex 31-A relating to the Facility-Specific
Rapid Response Labor Mechanism, binational panels and
extraordinary challenge committees convened under NAFTA for
matters covered by Article 34.1 of the USMCA.
It also provides for the reimbursement of expenses incurred
in dispute settlement proceedings under Chapter 10 of the
USMCA, Chapter 31 of USMCA, or under Chapter 19 of NAFTA if the
Canadian or Mexican Section of the Secretariat provides funds
to the U.S. Section during any fiscal year as reimbursement for
their expenses in connection with dispute settlement
proceedings.
REASON FOR CHANGE
Dispute settlement procedures and panels are necessary to
ensure that disputes over compliance with FTA provisions can be
resolved effectively. The Committee believes that the Commerce
Department is the appropriate agency to provide administrative
assistance to such panels.
Section 106: Trade Representative Authority
CURRENT LAW
There is no provision under the NAFTA Implementation Act.
EXPLANATION OF CHANGE
Section 106 of H.R. 5430 provides that if a country (other
than the United States) that has signed the USMCA does not
enact implementing legislation, the Trade Representative is
authorized to enter into negotiations with the other country
that has signed the USMCA to consider how the applicable
provisions of the USMCA can come into force with respect to the
United States and that other country as promptly as possible.
REASON FOR CHANGE
This provision in H.R. 5430 is necessary to help ensure
that USTR is authorized to enter into negotiations to consider
how applicable provisions of the USMCA can come into force with
respect to the United States if either Mexico or Canada fails
to enact implementing legislation.
Section 107: Effective Date
CURRENT LAW
Section 109 of the NAFTA Implementation Act provides for
the effective date of the NAFTA Implementation Act.
EXPLANATION OF CHANGE
Section 107 of H.R. 5430 provides that sections 1 through 3
of Title 1 (other than section 103(c)) shall take effect on the
date of the enactment of USMCA Implementation Act and Section
103(c) shall take effect on the date on which the USMCA enters
into force.
REASON FOR CHANGE
Section 107 of H.R. 5430 is necessary to implement
provisions of the USMCA relating to the effective date of the
bill.
TITLE II--CUSTOMS PROVISIONS
Section 201: Exclusion of Originating Goods of USMCA Countries from
Special Agriculture Safeguard Authority
CURRENT LAW
There is no provision under the NAFTA Implementation Act.
EXPLANATION OF CHANGE
Section 201 of H.R. 5430 implements an exclusion of
originating goods of USMCA from special agricultural safeguard
authority. It exempts from any duty imposed under Section 202
any good that qualifies as an originating good under section
202 of the USMCA Implementation Act of a USMCA country with
respect to which preferential tariff treatment is provided
under the USMCA.
REASON FOR CHANGE
Section 201 of H.R. 5430 is necessary to implement
commitments made in the USMCA relating to agricultural
safeguards.
Section 202: Rules of Origin
CURRENT LAW
Section 202 of the NAFTA Implementation Act implements the
rules of origin for trade of goods between the United States,
Canada, and Mexico under NAFTA.
EXPLANATION OF CHANGE
Section 202 of H.R. 5430 implements the rules of origin set
out in Chapter 4 of the USMCA. Section 202(c) establishes four
basic ways for a good from Canada or Mexico to qualify as an
``originating good'' and therefore be eligible for preferential
tariff treatment when it is imported into the United States. A
good is an originating good if:
(1) it is wholly obtained or produced entirely in the
territory of one or more USMCA countries as established in
Article 4.3 of the Agreement;
(2) it is produced entirely in the territory of one or more
USMCA countries and any materials used to produce the good that
are not themselves originating goods are transformed in such a
way as to cause their tariff classification to change or the
good otherwise meets regional content and other requirements,
as specified in Annex 4-B of the USMCA;
(3) it is produced entirely in the territory of one or more
USMCA countries, exclusively from originating materials; or
(4) except for a good provided for in Chapter 61 to 63 of
the Harmonized System, the good is produced entirely in the
territory of one or more of the USMCA countries but one or more
of the non-originating materials provided for as parts under
the Harmonized System used in the production of the good cannot
satisfy the requirements set out in Annex 4-B of the USMCA
(because both the good and its materials are classified in the
same subheading or same heading that is not further subdivided
into subheadings or, the good was imported into the territory
of a USMCA country in an unassembled or a disassembled form but
was classified as an assembled good pursuant to rule 2(a) of
the General Rules of Interpretation of the Harmonized System),
but only if the regional value content of the good, determined
in accordance with Article 4.5 of the Agreement meets certain
thresholds (not less than 60 percent if the transaction value
method is used, or not less than 50 percent if the net cost
method is used).
Section 202(c)(2) of H.R. 5430 provides recovered material
qualifies as ``originating'' for the purposes of determining
whether a remanufactured good is originating if it is derived
in the territory of one or more USMCA countries.
The remainder of Section 202 of H.R. 5430 sets forth more
detailed rules for determining whether a good meets the
Agreement's requirements under the second and fourth method of
qualifying as an originating good. These include alternative
methods for calculating regional value content and valuation of
materials used in production.
Other provisions in Section 202 of H.R. 5430 address
accumulation of materials for production of goods; rules
pertaining to de minimis quantities of non-originating
materials that do not undergo a tariff transformation,
including for textiles; determination of the originating or
non-originating status of fungible goods and materials; and
treatment of accessories, spare parts and tools, packaging and
packing materials, indirect materials, and goods put up in
sets. Section 202(l) specifies goods that undergo further
production or other operations outside the territory of a USMCA
country (with certain exceptions) or do not remain under the
control of the customs authorities of such other countries do
not qualify as originating goods.
REASON FOR CHANGE
Section 202 of H.R. 5430 is necessary to implement the
rules of origin established under Chapter 4 of the USMCA to
ensure only products of the United States, Canada, and Mexico
receive USMCA preferential tariff treatment. As stated in the
Statement of Administrative Action submitted by the
Administration, the rules are intended to direct the benefits
of customs duty elimination under the Agreement principally to
firms producing or manufacturing goods in USMCA countries.
These rules also prevent importers from improperly claiming
benefits under the Agreement for third-country goods
transshipped through Canada and Mexico.
Section 202A: Special Rules for Automotive Goods
CURRENT LAW
Section 202(c) of the NAFTA Implementation Act implements
the rules of origin for trade in automotive goods between the
United States, Canada, and Mexico as established under Article
403 of the NAFTA.
EXPLANATION OF CHANGE
Section 202A of H.R. 5430 implements the specific
provisions related to the rules of origin for automotive goods
in the Appendix to Annex 4-B of the USMCA.
Section 202A(a) defines terms specific to the rules of
origin for automotive goods and consistent with the Appendix to
Annex 4-B of the USMCA.
Section 202A(b) directs the President to establish an
interagency committee led by the Trade Representative with
participation by other relevant agencies, including the United
States Department of Commerce, Customs and Border Protection,
the Department of Labor, the USITC, and any other members
determined to be necessary by the Trade Representative to
provide advice on the implementation, enforcement, and
modification of the automotive rules of origin. Additionally,
the interagency committee will review the operation of the
agreement with respect to trade in automotive goods, including
the economic effects of the rules on the U.S. economy, workers,
and consumers, and the impact of new technology on such rules
of origin.
Section 202A(c) lays out the certification requirements
relating to the new labor value content and steel and aluminum
purchase rules for producers of passenger vehicles, light
trucks, and heavy trucks. Article 6 of the Appendix to Annex 4-
B of the Agreement includes new requirements that at least 70
percent of a vehicle producer's purchases of steel by value and
at least 70 percent of a vehicle producer's purchases of
aluminum by value are of originating goods. Article 7 of the
Appendix requires that vehicle producers source a certain share
of content from North American plants or facilities that on
average pay direct production workers at least $16 per hour,
known as the labor value content requirement. The
Administration's stated objective of the labor value content
rule is to incentivize U.S. jobs and facilitate U.S.
development and manufacture of high-technology parts, such as
advanced batteries.
Section 202A(d) requires the Trade Representative, in
consultation with the interagency committee established in
section 202A(b), to publish the requirements for producers of
covered vehicles to request a transition to meet the USMCA
requirements under an alternative staging regime, as described
in Article 8 of the Appendix to Annex 4-B of the USMCA. The
Trade Representative will request a detailed and credible plan
which describes the actions the producer intends to take to
bring production of the passenger vehicles or light trucks into
compliance with the requirements set forth in Articles 2
through 7 of the Appendix to Annex 4-B of the USMCA from a
producer that seeks to use the alternative staging regime for
more than 10 percent of the producer's total production of
passenger vehicles or light trucks in USMCA countries.
Producers of passenger vehicles and light trucks may modify
their alternative staging plans at any point during the
alternative staging regime period. The Trade Representative, in
consultation with the interagency committee established in
section 202A(b) shall make a determination with respect to
whether to authorize the use of the alternative staging regime
and shall issue that determination to each producer in writing
not later than 120 days after receiving a request of a producer
for the alternative staging regime. The Trade Representative
shall maintain a public list of the producers whose covered
vehicles have been authorized to use the alternative staging
regime and provide the appropriate congressional committees
with a summary of requests for the alternative staging regime.
The remainder of the section addresses modification of
alternative staging plans and treatment of producers unable to
meet the requirements of the alternative staging regime.
Section 202A(e) permits the Secretary of the Treasury in
conjunction with the Secretary of Labor to conduct a
verification of whether a covered vehicle complies with the
labor value content requirements. Section 202(f) authorizes the
Secretary of Labor to establish or designate an office within
the Department of Labor to carry out the provisions of this
section for which the Department is responsible.
Section 202A(g) requires the Trade Representative, in
consultation with the interagency committee to conduct a
biennial review of the operation of the USMCA with respect to
trade in automotive goods to ensure the Agreement's provisions
remain relevant in light of new technology and changes in the
content, production processes, and character of automotive
goods. The USITC shall submit to Congress a report on the
economic effects of the automotive rules of origin on the U.S.
economy, including on the wages and employment of workers in
the automotive sector. Lastly, the Comptroller General of the
United States shall submit to the Committee a report assessing
the effectiveness of the United States Government interagency
coordination on the implementation, enforcement, and
verification of the automotive rules of origin.
REASON FOR CHANGE
The USMCA covers new requirements for passenger vehicles
and trucks to be eligible for preferential treatment, including
stronger product-specific rules for vehicles and vehicle parts
and a requirement that certain core parts used in the
production of a vehicle be originating. The Appendix to Annex
4-B of the USMCA eliminates the NAFTA's ``tracing'' provisions.
It includes new requirements that vehicle producers' purchases
of steel and aluminum have a minimum percentage of originating
steel and aluminum. The USMCA rules also require that vehicle
producers source a share of content from North American plants
or facilities that, on average, pay direct production workers
at least $16 per hour.
Section 202A of H.R. 5430 is necessary to implement the
commitments made in the Agreement with respect to rules of
origin applying to trade of automotive goods between USMCA
countries. The Committee has imposed additional reporting
requirements given the novelty of the automotive rules of
origin, particularly the labor value content rule and the steel
and aluminum purchase requirement.
The Committee expects the Trade Representative to keep the
Committee fully apprised of the operation of the automotive
rules of origin, including the operation of the alternative
staging regime, and any efforts to modify these provisions to
ensure the USMCA automotive rules of origin remain relevant and
promote U.S. and North American competitiveness, investment,
and jobs in light of new technology and the changing
composition and character of automobiles.
SECTION 203: Merchandise Processing Fee
CURRENT LAW
Section 204 of the NAFTA Implementation Act implements the
U.S. obligation under NAFTA Article 310 to provide for the
immediate elimination of the merchandise processing fee for
Canadian goods, consistent with U.S. commitments under the
U.S.-Canada FTA. The section also provides for the elimination
of the merchandise processing fee on imports of Mexican goods.
EXPLANATION OF CHANGE
Section 203 of H.R. 5430 amends section 13031(b)(10) of the
Consolidated Omnibus Budget Reconciliation Act of 1985 to
implement the U.S. commitments under Article 2.16.3 and Annex
6-A of the USMCA by eliminating the Merchandise Processing Fee
(``MPF'') on originating goods. In accordance with U.S.
obligations under the General Agreement on Tariffs and Trade
1994, the provision also prohibits use of funds in the Customs
User Fee Account to provide services related to entry of
originating goods.\16\
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\16\See General Agreement on Tariffs and Trade, available at:
https://www.wto.org/english/docs_e/legal_e/gatt47.pdf.
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REASON FOR CHANGE
The USMCA eliminates the MPF on qualifying goods from
Canada and Mexico. Other customs user fees remain in place.
Section 203 of H.R. 5430 is necessary to put the United States
in compliance with the user fee elimination provisions of the
USMCA.
The amendments take effect on the date on which the USMCA
enters into force and apply with respect to a good entered, or
exported from the United States, on or after that date. Section
203 also provides that goods entered or exported from the
United States before USMCA enters into force will be provided
NAFTA treatment.
Section 204: Disclosure oF Incorrect Information; False Certifications
of Origin; Denial of Preferential Treatment
CURRENT LAW
Section 205 of the NAFTA Implementation Act concerns the
disclosure of incorrect information, false certifications of
origin, and the denial of preferential treatment
EXPLANATION OF CHANGE
Section 204 of H.R. 5430 amends section 592 of the Tariff
Act of 1930 by prohibiting the imposition of a penalty upon
importers who make an invalid claim for preferential tariff
treatment under the agreement if the importer acts promptly and
voluntarily to correct the error and pays any duties owed on
the good in question.\17\ The amendment also makes it unlawful
for a person to certify falsely, by fraud, gross negligence, or
negligence that a good exported from the United States is an
originating good. The amendment also prohibits the imposition
of a penalty if the exporter or producer promptly and
voluntarily provides notice of the incorrect information to
every person to whom a certification was issued. Section 204(b)
of H.R. 5430 amends section 514 of the Tariff Act of 1930 and
provides that if an importer, exporter or producer has engaged
in a pattern of conduct in providing false or unsupported
representations, U.S. authorities may suspend preferential
treatment with respect to identical goods imported by that
importer, exporter or producer. The amendments take effect on
the date on which the USMCA enters into force and apply with
respect to a good entered, or exported from the United States,
on or after that date. Section 204 also provides that goods
entered or exported from the United States before the USMCA
enters into force will be provided NAFTA treatment.
---------------------------------------------------------------------------
\17\See Smoot-Hawley Tariff Act, Pub. L. 71-361.
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The amendments take effect on the date on which the USMCA
enters into force and apply with respect to a good entered, or
exported from the United States, on or after that date. Section
203 also provides that goods entered or exported from the
United States before USMCA enters into force will be provided
NAFTA treatment.
REASON FOR CHANGE
This provision is necessary to implement commitments in the
USMCA relating to application of penalties for submission of
false information or certifications by importers, exporters and
producers.
Section 205: Reliquidation of Entries
CURRENT LAW
Section 206 of the NAFTA Implementation Act authorizes the
Customs Service to reliquidate an entry to refund any excess
duties paid and provide NAFTA tariff treatment to the entry.
EXPLANATION OF CHANGE
Section 205 of H.R. 5430 amends section 520(d) of the
Tariff Act of 1930 to make conforming changes to ensure that
the Customs Service is authorized to reliquidate an entry to
refund any excess duties (including any merchandise processing
fees) paid on a good qualifying under the rules of origin for
which no claim for preferential tariff treatment was made at
the time of importation if the importer so requests, within one
year after the date of importation.
The amendments take effect on the date on which the USMCA
enters into force and apply with respect to a good entered, or
exported from the United States, on or after that date. Section
205 also provides that goods entered or exported from the
United States before USMCA enters into force will be provided
NAFTA treatment.
REASON FOR CHANGE
Section 205 of H.R. 5430 implements U.S. obligations under
Article 5.11 of the USMCA by amending section 520(d) of the
Tariff Act of 1930, as amended (19 U.S.C. 1520(d)) to allow an
importer to claim preferential tariff treatment for originating
goods within one year of their importation.
Section 206: Recordkeeping Requirements
CURRENT LAW
Section 614 of the NAFTA Implementation Act addresses the
recordkeeping requirements of the NAFTA.
EXPLANATION OF CHANGE
Section 206 of H.R. 5430 amends section 508 of the Tariff
Act of 1930 by defining the terms USMCA, USMCA country, USMCA
certification of origin. It also makes an amendment that
provides that a U.S. exporter or producer that issues a USMCA
certification of origin must make, keep, and, if requested
pursuant to rules and regulations promulgated by the Secretary
of the Treasury, render for examination and inspection a copy
of the certification and such records and supporting documents.
The amendment also requires that the exporter or producer keep
these records and supporting documents for five years from the
date it issues the certification. Further, it provides specific
amendments related to vehicle producers.
The amendments take effect on the date on which the USMCA
enters into force and apply with respect to a good entered, or
exported from the United States, on or after that date. Section
206 also provides that goods entered or exported from the
United States before the USMCA enters into force will be
provided NAFTA treatment.
REASON FOR CHANGE
Section 206 is necessary to implement the USMCA as it
relates to exporters and producers for the United States by
amending the customs record keeping statute (section 508 of the
Tariff Act of 1930).
Section 207: Actions Regarding Verification of Claims Under the USMCA
CURRENT LAW
There is no provision under the NAFTA Implementation Act.
EXPLANATION OF CHANGE
Section 207 of H.R. 5430 provides that the Secretary of
Treasury may conduct a verification of whether a good is an
originating good under Section 202 or 202A of the bill. It also
provides that if the Secretary of Treasury conducts a
verification, the President may direct the Secretary to release
the good only upon payment of duties of security and, deny or
withhold preferential tariff treatment in the case of certain
determinations.
REASON FOR CHANGE
Section 207 of H.R. 5430 implements U.S. obligations
related to Article 5.9 (Origin Verification) and 6.6
(Verification) of the USMCA.
Section 208: Drawback
This section has been transferred from section 203 of the
NAFTA Implementation Act to the USMCA Implementation Act by
operation of Section 501 of the USMCA Implementation Act.
Section 209: Other Amendments to the Tariff Act of 1930
CURRENT LAW
Subtitle C of the NAFTA Implementation Act implements
miscellaneous amendments to the Tariff Act of 1930.
EXPLANATION OF CHANGE
Section 209 of H.R. 5430 amends sections 304, 509, and 628
of the Tariff Act of 1930 by making conforming changes to the
Tariff Act of 1930 concerning the country of origin marking and
the examination of books and witnesses. It also amends section
628 of the Tariff Act of 1930 by authorizing Customs and Border
Protection to exchange information with any government agency
of a USMCA country.
The amendments take effect on the date on which the USMCA
enters into force and apply with respect to a good entered, or
exported from the United States, on or after that date. Section
209 also provides that goods entered or exported from the
United States before the USMCA enters into force will be
provided NAFTA treatment.
REASON FOR CHANGE
These amendments were necessary to implement U.S.
commitments under paragraph 7 of the General Note to the Tariff
Schedule of the United States, by amending section 304 of the
Tariff Act of 1930 (19 U.S.C. 1304). The amendment makes
conforming terminology changes.
Section 210: Regulations
CURRENT LAW
There is no provision under the NAFTA Implementation Act.
EXPLANATION OF CHANGE
Section 210 of H.R. 5430 directs the Secretary of Treasury
to prescribe regulations necessary to carry out the provisions
of Title II of the H.R. 5430, except for those regulations as
may be necessary to carry out the labor value content
determination under section 202A of H.R 5430. It also directs
the Secretary of Labor to prescribe regulations necessary to
carry out the labor value content determination under section
202A of H.R. 5430.
REASON FOR CHANGE
This provision gives the Secretary of Treasury and
Secretary of Labor necessary regulatory authority to carry out
the agreement.
TITLE III--APPLICATION OF THE USMCA TO SECTORS AND SERVICES
Subtitle A--Relief from Injury Caused by Import Competition
This subtitle has been transferred from section 311 of the
NAFTA Implementation Act to the USMCA Implementation Act by
operation of section 502 of the USMCA Implementation Act.
Subtitle B--Temporary Entry of Business Person
This subtitle has been transferred from section 341 of the
NAFTA Implementation Act to the USMCA Implementation Act by
operation of section 503 of the USMCA Implementation Act.
Subtitle C--United States-Mexico Cross-Border Long-Haul Trucking
Services
CURRENT LAW
There is no provision under the NAFTA Implementation Act.
EXPLANATION OF CHANGE
Section 321 of H.R. 5430 defines key terms for this
subtitle.
Section 322 provides that the USITC is required to conduct
an investigation regarding whether current or future grants of
authority to operate cross-border trucking services cause or
are threatening to cause material harm to the U.S. long-haul
trucking industry. Investigations may be started by the filing
of a petition from an interested party, a request from the
President or the Trade Representative, or a resolution from the
Committee on Ways and Means or the Senate Finance Committee.
This section also describes the factors that the USITC is
required to consider, which include, among other things, the
volume and tonnage of merchandise transported and the
employment, wages, hours or service, and working conditions in
the industry. Finally, section 322 provides that the USITC is
required to make a determination in an investigation within 120
days of it being initiated. If the USITC determines that the
investigation is extraordinarily complicated, the USITC is
required to make its determination within 150 days.
Section 323 requires the USITC to issue a report within 60
days of making its determination under section 322. The report
shall include an explanation of its determination and, if the
determination is affirmative, recommendations for action to
address the material harm. The report shall also include any
addition and dissenting views. The USITC is required to
promptly make the report public and to publish a summary in the
Federal Register.
If the President receives an affirmative determination,
section 324 requires the President to issue an order to the
Department of Transportation (DOT) directing the relief to be
carried out. The order must be issued within 30 days of the
date on which the President receives the USITC's report. The
President is not required to provide relief if the President
determines that it is not in the national economic interest of
the United States or it would cause serious harm to the
national security of the United States.
Section 324 also describes the type of relief that the
President is authorized to provide. The President is authorized
to deny new grants of authority to provide cross-border
trucking services, revoke, restrict, or limit existing grants
of authority, and place a cap on the number of grants of
authority issued on an annual basis. DOT is required to provide
this relief within 15 days of the President's determination.
The relief may not last longer than two years, but such
relief can be extended for an additional four years if the
USITC finds that an extension is necessary to remedy of prevent
material harm. If the President determines that an extension,
then the President may extend the relief for an additional four
years.
Section 325 ensures that the USITC protects confidential
business information that it receives during the course of any
investigation.
Section 326 provides that certain provisions in Title 49 do
not limit DOT's ability to carry out the actions authorized by
this subtitle.
Section 327 requires DOT to conduct a survey of all
existing and any pending grants of operating authority to
Mexican-domiciled motor carriers. DOT shall complete this
report within 180 days of the date on which USMCA enters into
force. The report shall be delivered to the Trade
Representative, USITC, the Committee on Ways and Means, the
Senate Finance Committee, the House Transportation and
Infrastructure Committee, and the Senate Committee on Commerce,
Science, and Transportation.
REASON FOR CHANGE
The United States included a non-conforming measure in its
Annex II schedule for investment and services regarding long-
haul truck services. The measure provides that the United
States may adopt certain limitations on grants of authority for
persons of Mexico to provide long-haul trucking services in
certain circumstances. This provision establishes the process
by which the United States may impose limitations on such
grants of authority.
TITLE IV--ANTIDUMPING AND COUNTERVAILING DUTIES
Subtitle A--Preventing Duty Evasion
(Section 401)
Current Law There is no provision under the NAFTA
Implementation Act.
EXPLANATION OF CHANGE
Section 401 of H.R. 5430 amends section 414(b) of the
Enforce and Protect Act of 2015 by inserting conforming changes
to ensure that section 414(b) of the Enforce and Protect Act of
2015 applies to the USMCA and USMCA Parties.\18\
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\18\See Enforce and Protect Act of 2015, Pub, L. No. 114-125.
---------------------------------------------------------------------------
REASON FOR CHANGE
Section 401 of H.R. 5430 is intended to ensure that section
414(b) of the Enforce and Protect Act of 2015 applies to the
USMCA and USMCA Parties.
Subtitle B--Dispute Settlement
This subtitle has been transferred from sections 401-408 of
the NAFTA Implementation Act to the USMCA Implementation Act by
operation of section 504 of the USMCA Implementation Act.
Subtitle C--Conforming Amendments
(Sections 421-432)
Current Law There is no provision under the NAFTA
Implementation Act.
EXPLANATION OF CHANGE
Sections 421-432 of H.R. 5430 amend the Tariff Act of 1930
to make conforming amendments related to judicial review in
antidumping and countervailing duty cases, disclosure of
proprietary information under protective orders, and the Court
of International Trade.
REASON FOR CHANGE
The amendments made in sections 421-432 of H.R. 5430 are
necessary to ensure that the treatment provided under the NAFTA
continue to apply to the USMCA.
Subtitle D--General Provisions
(Sections 431-432)
Current Law There is no provision under the NAFTA
Implementation Act.
EXPLANATION OF CHANGE
Section 431 of H.R. 5430 relates to the effect of
termination of USMCA country status as well proceedings
regarding protective orders and undertakings and binational
panel and extraordinary challenge committee reviews. The
section provides that, on the date on which a country ceases to
be a USMCA country, the provisions of Title IV of the USMCA
Implementing Bill will cease to have effect with respect to
that country. Section 431 of H.R. 5430 also provides that if on
the date on which a country ceases to be a USMCA country (1) an
investigation or enforcement proceeding concerning the
violation of a protective order issued under section 7777(f) of
the Tariff Act of 1930 or an undertaking of the government of
that country is pending, the investigation or proceeding shall
continue and sanctions may continue to imposed; or (2) a
binational panel or extraordinary review is pending or has been
requested with respect to a determination that involves a class
or kind of merchandise, such determination shall be reviewable
and the time limits for commencing an action shall not begin to
run until the date on which the USMCA cease to be in force with
respect to that country.
Section 431 of H.R. 5430 shall take effect on the date that
the USMCA enters into force but shall not apply to any final
determination or any binational panel review under the NAFTA,
or any extraordinary challenge arising out of any such review,
that was commenced before the date on which the USMCA enters
into force.
REASON FOR CHANGE
Sections 431-432 of the H.R. 5430 are necessary to describe
the effect of termination of USMCA country status.
TITLE V--TRANSFER PROVISIONS AND OTHER AMENDMENTS
Section 501: Drawback
CURRENT LAW
Section 203 of the NAFTA Implementation Act addresses
drawback for goods traded between the Parties to the NAFTA.
EXPLANATION OF CHANGE
Section 501 of H.R. 5430 transfers section 203 of the NAFTA
Implementation Act to section 208 of H.R. 5430 and amends
section 203 of the NAFTA Implementation Act to provide
exceptions to the limitation on drawback implemented in the
NAFTA for certain goods traded between the Parties to the
Agreement. This amendment includes conforming terminology
changes and references to provisions of the USMCA, as well as
changes to the exception for sugar to reflect new tariff
nomenclature and expansion to include sugar-containing
products. This section also amends sections 311, 312, 313, and
562 of the Tariff Act of 1930 (19 U.S.C. 1311, 1312, 1313, and
1562), which provide that drawback with respect to goods
imported into the United States and subsequently exported to
the territory of another Party, used in the production of a
good exported to another Party, or substituted by goods used in
the production of a good exported to another Party, be limited
to the lesser of the duties paid or owed upon importation into
the United States, or the duties paid on the good to another
Party. The amendments make conforming terminology changes with
respect to the limitation on drawback implemented in the NAFTA
relating to bonded manufacturing warehouses, bonded smelting
and refining warehouses, substitution drawback, and
manipulation in bonded warehouses. This section also amends
section 3(a) of the Act of June 18, 1934 (19 U.S.C. 81c), to
make conforming terminology changes regarding the limitation on
drawback as provided under the Foreign Trade Zones Act.
REASONS OF CHANGE
Section 501 of H.R. 5430 amends the NAFTA Implementation
Act and makes conforming changes to address drawback for goods
traded between the Parties of the USMCA.
Section 502: Relief From Injury Caused by Import Competition
CURRENT LAW
Section 311 of the NAFTA Implementation Act addresses
relief from injury caused by import competition.
EXPLANATION OF CHANGE
Section 502 of H.R. 5430 transfers section 311 of the NAFTA
Implementation Act to subtitle A, title III of H.R. 5430 and
redesignates it as section 301 of H.R. 5430 without substantive
change.
REASON FOR CHANGE
Section 502 of H.R. 5430 transfers section 311 of the NAFTA
Implementation Act to subtitle A, title III of H.R. 5430 and
redesignates it as section 301 of H.R. 5430 without substantive
change.
Section 503: Temporary Entry
CURRENT LAW
Section 341 of the NAFTA Implementation Act addresses
temporary entry of business persons.
EXPLANATION OF CHANGE
Section 503 of H.R. 5430 transfers section 341 of the NAFTA
Implementation Act to subtitle B, title III of H.R. 5430 and
redesignates it as section 311 of H.R. 5430 without substantive
change.
REASON FOR CHANGE
Section 503 of H.R. 5430 incorporates or otherwise
transfers section 341 of the NAFTA Implementation Act to H.R.
540.
Section 504: Dispute Settlement in Antidumping and Countervailing Duty
Cases
CURRENT LAW
The NAFTA Implementation Act establishes procedures in the
United States for implementing the dispute settlement
provisions related to antidumping and countervailing duty cases
in the NAFTA, including the processes for the selection dispute
settlement panelists and initiating a case, among other things.
EXPLANATION OF CHANGE
Section 504 of H.R. 5430 transfers sections 401, 402, 403,
404, 405, 406, 407, and 408 of the NAFTA Implementation Act to
subtitle B, title IV of H.R. 5430 and redesignates those
sections as sections 411, 412, 413, 414, 415, 416, 416, 417,
and 418 of H.R. 5430 without substantive change. Section 504 of
H.R. 5430 also provides for an effective date that is the date
on which the USMCA enters into force, and a transition period
for antidumping and countervailing duty cases decided before
USMCA enters into force and cases that are appealed to a
binational NAFTA panel before the USMCA enters into force. In
addition, Section 504 of H.R. 5430 provides that the relevant
provisions in the NAFTA Implementation Act will continue to
apply to such to cases.
REASON FOR CHANGE
Section D of Chapter 10 of the USMCA contains the same
substantive provisions as Chapter 19 of the NAFTA, which allows
for binational dispute settlement of antidumping and
countervailing duty cases. These changes ensure that the NAFTA
implementing bill provisions that are necessary to implement
these provisions are carried over in the USMCA implementing
bill. These changes also provide for a transition period for
antidumping and countervailing duty cases decided before USMCA
enters into force and cases that are appealed to a binational
NAFTA panel before USMCA enters into force.
Section 505: Government Procurement
CURRENT LAW
United States procurement law (such as the Buy American Act
of 1933 and the Buy American Act of 1988) limits procurement
from certain foreign suppliers of goods and services in favor
of U.S. providers of goods and services. Most discriminatory
purchasing provisions are waived if the United States is a
party to a bilateral or multilateral procurement agreement,
such as the WTO Agreement on Government Procurement, or a
bilateral or multilateral trade agreement that includes
provisions on procurement.\19\ Section 301(a) of the Trade
Agreements Act of 1979 (19 U.S.C. 2511(a)) (Trade Agreements
Act), as amended, authorizes the President to waive for
eligible products of foreign countries that the President
designates under section 301(b) of that Act the application of
certain federal laws, regulations, procedures, and practices
that ordinarily treat foreign goods and services and suppliers
of such goods and services less favorably than U.S. goods,
services, and suppliers. The term ``eligible product'' in
section 301(a) of the Trade Agreements Act is defined in
section 308(4)(A) of that Act.Under the NAFTA, the United
States has procurement obligations with respect to Mexico and
Canada.
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\19\See World Trade Organization Agreement on Government
Procurement, available at: https://www.wto.org/english/tratop_e/
gproc_e/gpa_1994_e.htm.
---------------------------------------------------------------------------
EXPLANATION OF CHANGE
Chapter 13 of the USMCA establishes rules that certain
government entities listed in Annex 13-A will apply whenever
these entities undertake procurements of covered goods and
services valued above thresholds specified in Annex 13-A.
Chapter 13 applies only as between the United States and
Mexico. Once the USMCA enters into force, the United States
will continue to have procurement obligations with respect to
Canada under the WTO Agreement on Government Procurement and
will also have national treatment and most-favored-nation
obligations with respect to the purchase or acquisition of
financial services by public entities in the United States
under the General Agreement on Trade in Services (GATS) at the
WTO, as set out in the U.S. Schedule of Commitments and the
Understanding on Commitments in Financial Services. Under the
USMCA, the United States has excluded uniforms and clothing
procurement by the Transportation Security Administration of
the Department of Homeland Security from coverage.
Section 505 of H.R. 5430 implements U.S. obligations under
Chapter 13 by amending the definition of ``eligible product''
in section 308(4)(A) of the Trade Agreements Act. As amended,
section 308(4)(A) will provide that ``eligible product'' means
a product or service of Mexico that is covered under the USMCA
for procurement by the United States. This amended definition,
coupled with the President's exercise of his waiver authority
under section 301(a) of the Trade Agreements Act, will allow
U.S. government entities covered by the USMCA to purchase, on
non-discriminatory terms, covered products and services from
Mexico for procurements that fall above the thresholds
established under the USMCA.
REASON FOR CHANGE
Section 505 of H.R. 5430 is necessary to implement U.S.
commitments under Chapter 13 of the USMCA (Government
Procurement).
Section 506: ActionS Affecting United States Cultural Industries
CURRENT LAW
Section 513 of the NAFTA Implementation Act addresses
actions affecting United States cultural industries.
EXPLANATION OF CHANGE
Section 506 of H.R. 5430 makes a conforming change to
maintain the treatment provided with respect to Canada
regarding cultural industries once the USMCA enters into force
by exempting certain measures adopted or maintained by Canada
with respect to a cultural industry from a number of
obligations under the USMCA. It also allows the United States
or Mexico to take a measure of equivalent commercial effect in
response.
REASON FOR CHANGE
The amendments in Section 506 of H.R. 5430 are necessary to
implement Article 32.6 of the USMCA.
Section 507: Regulatory Treatment oF Uranium Purchases
CURRENT LAW
There is no provision under the NAFTA Implementation Act.
EXPLANATION OF CHANGE
Section 508 of H.R. 5430 amends the Energy Policy Act of
1992 to strike the ``North American Free Trade Agreement'' and
insert the ``USMCA.''\20\
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\20\See Energy Policy Act of 1992, Pub. L. No. 102-486.
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REASON FOR CHANGE
The Annex on Energy Regulatory Measures and Regulatory
Transparency, attached to the exchange of letters executed on
November 30, 2018 between the United States and Canada, which
is integral to the USMCA, contains obligations with respect to
energy regulatory measures similar to obligations under Chapter
6 of the NAFTA (Energy and Basic Petrochemicals). Section
1017(c) of the Energy Policy Act of 1992 (42 U.S.C. 2296b-6)
contains a savings clause that references the NAFTA. Section
507 makes a conforming change to that section to maintain the
treatment provided with respect to Canada once the USMCA enters
into force.
Section 508: Report on Amendments to Existing Law
Current Law There is no provision under the NAFTA
Implementation Act.
EXPLANATION OF CHANGE
Not later than 180 days after the date of the enactment of
H.R. 5430, the Trade Representative shall submit to the Senate
Finance Committee and the Committee on Ways and Means a report
setting forth a proposal for technical and conforming
amendments to the laws under the jurisdiction of such
committees, and other laws, necessary to fully carry out the
provisions of, and amendments made by H.R. 5430.
REASON FOR CHANGE
Section 508 of H.R. 5430 is necessary to ensure that
Congress has a comprehensive list of all technical and
conforming amendments to laws necessary to carry out the
provisions of the USMCA.
TITLE VI--TRANSITION TO AND EXTENSION OF THE USMCA
Subtitle A--Transitional Provisions
(Sections 601-602)
CURRENT LAW
There is no provision in the NAFTA Implementation Act that
addresses a repeal of a trade agreement; however, section 107
addresses overlapping provisions of the NAFTA Implementation
Act and the U.S.-Canada FTA Implementation Act.
EXPLANATION OF CHANGE
Section 601 of H.R. 5430 repeals the NAFTA Implementation
Act effective on the date on which the USMCA enters into force.
Section 602 of H.R. 5430 continues to suspend the U.S.-Canada
Free Trade Agreement (``FTA'').
REASONS FOR CHANGE
The USMCA incorporates or otherwise carries forward many of
the provisions of the NAFTA. In some cases, USMCA provisions
supersede provisions of the NAFTA (for example, the USMCA
rather than the NAFTA rules of origin will apply to U.S.-
Canada-Mexico trade) or have been added on subject matters not
covered by the NAFTA. The United States and Canada will
continue to suspend the operation of the bilateral free trade
agreement upon the entry into force of the NAFTA between the
two countries, to stay in effect for such period as the two
governments remain parties to the NAFTA.
Accordingly, section 107 of H.R. 5430 suspends certain
provisions of the U.S.-Canada FTA Implementation Act that are
superseded by the NAFTA Implementation Act. Other provisions of
the U.S.-Canada FTA Implementation Act that implement
continuing U.S. obligations under the FTA will remain in effect
or are amended by the NAFTA Implementation Act.
Subtitle B--Joint Reviews Regarding Extension of the USMCA
(SECTION 611)
CURRENT LAW
There is no provision under the NAFTA Implementation Act.
EXPLANATION OF CHANGE
Article 34.7 of the USMCA provides a mechanism for the
Parties to conduct a joint review of the Agreement on the sixth
anniversary of its entry into force, and for annual reviews
thereafter, if a Party does not confirm it wishes to extend the
term of the Agreement at such joint review. Section 611 of H.R.
5430 provides that the Trade Representative will seek public
comment prior to participating in a joint review. In addition,
section 611 of H.R. 5430 provides for consultations between the
Trade Representative and the appropriate congressional
committees with respect to joint reviews or any annual review.
REASON FOR CHANGE
Section 611 of H.R. 5430 creates a process leading up to
the joint review for the sunset provisions provided in Article
34.7 of the USMCA by providing opportunity for significant
engagement between the Trade Representative and Congress. The
Committee intends to be heavily engaged in any decisions with
respect to sunset and expects consultation to be timely and
robust.
Subtitle C--Termination of the USMCA
(Section 621)
CURRENT LAW
Section 109 of the NAFTA Implementation Act addresses the
termination of the NAFTA.
EXPLANATION OF CHANGE
Section 621 of H.R. 5430 provides that during any period in
which a country ceases to be a USMCA country, H.R. 5430 and any
amendments shall cease to have effect with respect to that
country. It further provides that on the date on which the
USMCA ceases to be in force with respect to the United States,
H.R. 5430 and any amendments shall cease to have effect.
REASON FOR CHANGE
Section 621 of H.R. 5430 is necessary to implement
provisions of the USMCA relating to the date of termination of
the USMCA Implementation Act. The Committee intends to be
heavily engaged in any decisions with respect to withdrawal and
expects consultation to be timely and robust.
TITLE VII--LABOR MONITORING AND ENFORCEMENT
Section 701: Definitions
CURRENT LAW
There is no provision under the NAFTA Implementation Act.
EXPLANATION OF CHANGE
Section 701 of H.R. 5430 defines ``labor attache,'' ``labor
obligations,'' and ``Mexico's labor reform,'' which are key
terms for Title VII.
REASON FOR CHANGE
This provision clarifies the meanings of key terms in Title
VII.
Subtitle A--Interagency Labor Committee for Monitoring and Enforcement
(Sections 711-719)
CURRENT LAW
There is no provision under the NAFTA Implementation Act.
EXPLANATION OF CHANGE
Section 711 of H.R. 5430 requires the President to
establish the Interagency Labor Committee for Monitoring and
Enforcement (Interagency Labor Committee) within 90 days of the
enactment of the USMCA Implementation Act. The Interagency
Labor Committee will be co-chaired by the Trade Representative
and the Department of Labor (DOL) and other agencies with
relevant expertise. The Interagency Labor Committee will be
responsible for monitoring compliance with the USMCA labor
obligations and Mexico's labor reform and requesting that the
Trade Representative take enforcement actions.
Section 712 establishes the Interagency Labor Committee's
duties. These duties include, among other things, coordinating
the U.S. government's monitoring of the USMCA labor
obligations, consulting regularly with the Labor Advisory
Committee, visiting Mexico to assess implementation and
compliance, establishing an ongoing dialogue with the
Government of Mexico, coordinating with the ILO and the IDB,
identifying priority capacity building activities in Mexico,
meeting on at least a biannual basis, and recommending
enforcement actions.
Section 713 requires the Interagency Labor Committee to
establish enforcement priorities. The Interagency Labor
Committee is required to review the list of priority sectors
identified in Annex 31-A of the USMCA and make suggestions
regarding including additional sectors. The Interagency Labor
Committee is also required to establish and annually update a
list of priority subsectors for enforcement. This section
establishes the initial list of priority subsectors. The
Interagency Labor Committee is also required to review priority
facilities within the priority subsectors for monitoring and
enforcement.
Section 714 requires the Interagency Labor Committee to
complete assessments of Mexico's compliance with the USMCA
labor obligations. The Interagency Labor Committee is required
to complete these assessments on a biannual basis for the first
five years after the Act is enacted and requires the
Interagency Labor Committee to consult with the Committee on
Ways and Means and the Senate Finance Committee regarding
whether assessments could be completed on annual basis for the
following five years.
The assessments shall include a review regarding whether
Mexico has met certain benchmarks and satisfied commitments it
has made regarding funding and the federal and state-level
implementation timelines regarding its labor reform. The
assessment shall also review whether legal challenges to
Mexico's labor reform have succeeded in Mexican courts.
Section 715 requires the Interagency Labor Committee to
recommend enforcements actions to the Trade Representative when
it determines that a USMCA country has failed to meet its labor
obligations. Such recommendations will be informed by the
Interagency Labor Committee's monitoring activities, the
Interagency Labor Committee's assessments (described above),
and determinations made by the Independent Mexico Labor Expert
Board (described below). When the Trade Representative receives
an Interagency Labor Committee recommendation, this section
requires the Trade Representative to determine whether to
initiate an enforcement action within 60 days. If the Trade
Representative's determination is negative, the Trade
Representative is required to submit a report to the Committee
on Ways and Means and the Senate Finance Committee regarding
any negative determination.
Section 716 establishes procedures for petitions submitted
to the Interagency Labor Committee regarding a failure to
comply with the USMCA labor obligations. If the Interagency
Labor Committee receives a petition requesting an enforcement
action under Annex 31-A, the Interagency Labor Committee shall
determine whether there is sufficient, credible information to
request an enforcement action under Annex 31-A. If its
determination is negative, it shall certify this determination
to the Committee on Ways and Means, the Senate Finance
Committee, and the petitioner. If the Interagency Labor
Committee's determination is affirmative, the Trade
Representative is required to request a review at such facility
under Annex 31-A. Within 60 days of the Interagency Labor
Committee's affirmative determination, the Trade Representative
is required to make a determination regarding whether to
request the establishment of a rapid response labor panel under
Annex 31-A. If the Trade Representative's determination is
negative, the Trade Representative is required to certify its
determination and provide information regarding any remediation
plan to the Committee on Ways and Means and the Senate Finance
Committee.
Section 716 also establishes a petition process for
allegations of non-compliance with the USMCA labor obligations
not related to Annex 31-A. For such petitions, the Interagency
Labor Committee is required to review the petition and
determine whether it warrants further review within 20 days. If
its determination if affirmative, the Interagency Labor
Committee is required to determine whether there is credible,
sufficient information to pursue an enforcement action within
60 days of receiving the petition. If the Interagency Labor
Committee makes an affirmative determination, the Trade
Representative is required to make a determination within 60
days. If such determination is affirmative, the Trade
Representative is required to initiate an appropriate
enforcement action. If such determination is negative, the
Trade Representative is required to submit a notification to
the Committee on Ways and Means and the Senate Finance
Committee regarding its decision and rationale.
Section 717 requires the Interagency Labor Committee to
establish a web-based hotline to receive confidential
information regarding labor issues in USMCA countries from
interested parties. Such interested parties include Mexican
workers. The DOL will monitor this hotline.
Section 718 requires the Interagency Labor Committee to
submit a biannual report for the first five years after this
Act is enacted. The report shall include a description of the
Interagency Labor Committee's staffing and capacity building
activities, Mexico's compliance with its labor reform,
including budgetary commitments, a summary of petitions filed
under section 716, the results of the Interagency Labor
Committee's assessments under section 714, and any
determinations made by the Independent Mexico Labor Expert
Board. After five years, the Trade Representative and DOL shall
consult with the Committee on Ways and Means and the Senate
Finance Committee regarding whether the report could be
submitted on an annual, instead of biannual, basis.
Section 718 also requires the Interagency Labor Committee
to complete a five-year assessment that will include a
comprehensive assessment regarding Mexico's implementation of
its labor reform. The assessment shall include a strategic plan
and recommendations regarding areas of concern regarding
Mexico's labor reform for purposes of the joint review
conducted pursuant to Article 34.7 of the USMCA.
Section 719 requires the Interagency Labor Committee to
consult with the Labor Advisory Committee, the Committee on
Ways and Means, and the Senate Finance Committee regarding the
selection of rapid response labor panelists under Annex 31-A.
This section also requires the United States, in consultation
with Mexico, to provide adequate funding for such panelists.
REASON FOR CHANGE
U.S. trade agreements have required countries to comply
with labor obligations, but the United States has failed to
adequately monitor whether countries are in compliance with
those obligations. These provisions will establish a robust
monitoring system to ensure that the United States government
is actively monitoring whether USMCA countries are in
compliance with their labor obligations.
The section also requires the Interagency Labor Committee
to consult regularly with key stakeholders and regularly report
to Congress on specific issues, many of which relate to whether
Mexico is successfully implementing its labor reform. These
requirements will ensure that Congress is able to complete full
oversight of the Interagency Labor Committee's activities.
This section also establishes clear timelines when the
Interagency Labor Committee receives a petition alleging
noncompliance with the USMCA labor obligations. These
provisions will ensure that the Interagency Labor Committee
takes quick action when a USMCA country is out of compliance
with its labor obligations.
Subtitle B--Mexico Labor Attaches
(Sections 721-723)
CURRENT LAW THERE IS NO PROVISION UNDER THE NAFTA IMPLEMENTATION ACT.
EXPLANATION OF CHANGE
Section 721 of H.R. 5430 requires the Secretary of Labor to
hire five labor attaches that will be detailed or assigned to
work on behalf of the U.S. government in Mexico. Section 722
establishes the duties for Mexico labor attaches, which include
assisting the Interagency Labor Committee in its monitoring
efforts and submitting quarterly reports regarding Mexico's
compliance with its labor obligations. Section 723 provides
that Mexico labor attaches shall remain employees of the DOL
while they are detailed or assigned in Mexico.
REASON FOR CHANGE
One key aspect of monitoring compliance with labor
obligations is collecting information directly in the country
that is being monitored. The Mexico labor attaches established
under this subtitle will ensure that the U.S. government has
officials on the ground in Mexico to actively monitor and
assess Mexico's compliance. The Mexico labor attaches will
report the information they collect to Congress and to the
Interagency Labor Committee to support its monitoring efforts.
Subtitle C--Independent Mexico Labor Expert Board
CURRENT LAW
There is no provision under the NAFTA Implementation Act.
EXPLANATION OF CHANGE
Section 731 of H.R. 5430 establishes the Independent Mexico
Labor Expert Board (Board). It also establishes that the Board
is responsible for monitoring and evaluating Mexico's
compliance with its labor obligations and advising the
Interagency Labor Committee regarding capacity building
activities in Mexico.
Section 732 provides the membership of the Board and the
terms for its members. The Labor Advisory Committee will
appoint four members. The Speaker, House Minority Leader,
Senate Majority Leader, and Senate Minority Leader will each
appoint two members. The members will serve an initial term of
six years. After six years, the Board will determine whether to
extend its terms. If a majority of its members determine that
Mexico is not in full compliance with its labor obligation, the
Board's term will extend for four years.
Section 733 requires the United States to provide necessary
funding to support the work completed by the Board.
Section 734 requires the Board to submit an annual report
to the Interagency Labor Committee and the Committee on Ways
and Means and the Senate Finance Committee that will contain an
assessment of Mexico's labor reform implementation efforts and
general labor law enforcement. The Board's reports may contain
a determination that Mexico is not in compliance with its labor
obligations, which triggers a review by the Interagency Labor
Committee under subtitle A.
REASON FOR CHANGE
The Board will provide independent analysis regarding
Mexico's compliance with its labor reform and labor obligations
generally. This analysis will ensure that the Interagency Labor
Committee is receiving a full range of information and ensure
that the Interagency Labor Committee analysis is fulsome and
accurate.
Subtitle D--Forced Labor
CURRENT LAW
There is no provision under the NAFTA Implementation Act.
EXPLANATION OF CHANGE
Section 741 of H.R. 5430 requires the President to
establish a Forced Labor Enforcement Task Force (Task Force)
within 90 days of the enactment of this Act to monitor the
enforcement of the prohibition on importation of goods made by
or with forced labor under section 307 of the Tariff Act of
1930. The Task Force will be chaired by the Secretary of
Homeland Security and will be comprised of the Trade
Representative, DOL, and other agencies with relevant
expertise. The Task Force shall meet on a quarterly basis.
Section 742 requires the Task Force to establish timelines
for responding to petitions alleging that goods are being
imported by or with forced or child labor. The Task Force must
establish such timelines within 90 days of being constituted
and shall consult with the Committee on Ways and Means and the
Senate Finance Committee. The Task Force shall submit the
timelines in a report to the Committee on Ways and Means and
the Senate Finance Committee and make it publicly available.
Section 743 requires the Task Force to submit a biannual
report to the Committee on Ways and Means and the Senate
Finance Committee regarding enforcement of the prohibition on
importation of goods made by or with forced labor under section
307 of the Tariff Act of 1930. The report shall include a
description of actions taken and an enforcement plan regarding
goods included in the DOL's ``Finding on the Worst Forms of
Child Labor'' and ``List of Goods Produced by Child Labor or
Forced Labor'' reports, among other things.
Section 744 requires the Task Force to develop an
enforcement plan regarding goods made by or with forced labor
in Mexico. The Task Force is required to consult with the
Committee on Ways and Means and the Senate Finance Committee
regarding its enforcement plan. The Task Force is also required
to report to the Interagency Labor Committee regarding its
enforcement of child and forced labor in Mexico.
REASON FOR CHANGE
Section 307 of the Tariff Act of 1930 prohibits the
importation of goods made by or with forced labor. The USMCA
also includes a provision that requires parties to prohibit the
importation of goods made by or with forced labor. U.S.
government enforcement of this prohibition, however, has been
sporadic.
This subtitle requires the U.S. government to better
coordinate its enforcement efforts and report to Congress on a
regular basis regarding such efforts. Further, it requires the
Task Force to build upon the monitoring efforts currently being
completed by the Department of Labor regarding forced and child
labor.
Subtitle E--Enforcement Under Rapid Response Labor Mechanism
CURRENT LAW
There is no provision under the NAFTA Implementation Act.
EXPLANATION OF CHANGE
Section 751 of H.R. 5430 requires the Trade Representative
to immediately submit reports issued by a rapid labor response
labor panel under Annex 31-A of the USMCA to the Labor Advisory
Committee, the Committee on Ways and Means, the Senate Finance
Committee, and to the petitioner. The Trade Representative is
also required to make reports issued by a rapid response labor
panel to the public in a timely manner.
Section 752 provides the Trade Representative with the
authority to direct the Secretary of the Treasury to suspend
liquidation of entries of goods from a covered facility that is
subject to a review under Annex 31-A of the USMCA. Suspension
of liquidation shall continue until the Trade Representative
notifies the Secretary of the Treasury that a rapid response
labor panel has made a determination that there was not a
denial of rights at the facility, a course of remediation has
been completed at the facility, or the denial of rights at the
facility has been otherwise remedied.
Section 753 provides the Trade Representative with the
authority to direct the Secretary of the Treasury to impose a
remedy in accordance with Annex 31-A of the USMCA if a rapid
response labor panel has found a denial of rights at a
facility. The remedy may include requiring goods or services
from the facility to pay a tariff or penalty and can include
denying entry to goods from facilities if it is found to have
been in violation by a rapid response labor panel on three
occasions. The Trade Representative is required to consult with
the Committee on Ways and Means and the Senate Finance
Committee regarding the remedy it will impose.
REASON FOR CHANGE
Annex 31-A of the USMCA provides parties with the right to
impose certain remedies if a rapid response labor panel finds
that a denial of rights has occurred at a facility. This
subtitle is necessary to provide the U.S. government with the
ability to impose remedies in accordance with Annex 31-A.
TITLE VIII--MONITORING AND ENFORCEMENT RELATING TO THE ENVIRONMENT
Section 801: Definitions
CURRENT LAW
There is no provision under the NAFTA Implementation Act.
EXPLANATION OF CHANGE
Section 801 of H.R. 5430 defines ``environmental law'' and
``environmental obligations,'' which are key terms for Title
VIII of H.R. 5430.
REASON FOR CHANGE
This provision clarifies the scope of the provisions in
Title VIII of H.R. 5430.
Subtitle A--Interagency Environment
Committee for Monitoring and Enforcement
(Sections 811-817)
CURRENT LAW
There is no provision under the NAFTA Implementation Act.
EXPLANATION OF CHANGE
Section 811 of H.R. 5430 requires the President to
establish an Interagency Environment Committee for Monitoring
and Enforcement (Interagency Environment Committee) 30 days
after the enactment of H.R. 5430. The Interagency Environment
Committee will oversee the implementation, monitoring, and
enforcement of the USMCA environment commitments, which appear
in Chapters 1 and 24. Membership of the committee will include,
but is not limited to, the Trade Representative, the U.S.
Department of State, U.S. Department of Agriculture (USDA)
Animal and Plant Health Inspection Service (APHIS), USDA U.S.
Forest Service (USFS), the U.S. Department of the Interior
(DOI), the U.S. Department of Homeland Security (DHS) Customs
and Border Protection (CBP), the U.S. Department of Justice
(DOJ), the U.S. Agency for International Development (USAID),
the U.S. Environmental Protection Agency (EPA), and the U.S.
Department of Commerce (DOC) National Oceanic and Atmospheric
Administration (NOAA). The Interagency Environment Committee
will allow for better coordination amongst the U.S. government
in holding Canada and Mexico to their environment commitments.
Section 812 provides for the Interagency Environment
Committee, in coordination with Canada and Mexico, to carry out
an assessment of the environmental laws and policies of Canada
and Mexico to determine if such laws and policies are
sufficient to implement their environmental obligations and
identify any gaps and key priority areas for continued
assessment and monitoring, technical assistance and capacity
building, and enhanced cooperation. The assessment must be
conducted within 90 days of establishment of the committee and
before entry into force of the agreement. The assessment must
be shared with Congress and the Trade and Environment Policy
Advisory Committee. The assessment must be updated after five
years of the agreement being in force so that the Trade
Representative can use it while conducting the ``joint review''
under Article 34.7.2 in year six of the agreement.
Section 813 describes monitoring actions that the
Interagency Environment Committee will undertake related to
implementation of the USMCA environment obligations. Section
813 does not list all monitoring actions that the Interagency
Environment Committee will undertake. However, it does provide
for new monitoring requirements that have not been taken
pursuant to previous free trade agreement implementation.
Section 813 provides for the Interagency Environment Committee
to review public submissions filed pursuant to Article 24.27
(Submissions on Enforcement Matters) and factual records
prepared by the Secretariat of the Commission for Environmental
Cooperation and determine if the United States should pursue an
enforcement action in response to the findings. If the findings
show that a USMCA Party has failed to effectively enforce their
own environment laws or the USMCA environment obligations and
the Interagency Environment Committee decides not to recommend
an enforcement action, then the Interagency Environment
Committee must submit a written explanation and justification
to the Committee.
Section 813 provides for the Interagency Environment
Committee to review regular reports provided by U.S. government
environment experts assigned to Mexico (attaches). Section 813
also provides for the implementation of the Environment
Cooperation and Customs Verification Agreement between the
United States and Mexico (Customs Verification Agreement).
Section 813 provides for the Interagency Environment Committee
to request of Mexico information to verify a shipment either in
response to a public comment or by self-initiation. Further,
the Interagency Environment Committee must review all public
comments within 30 days and determine whether to pursue the
shipment highlighted in the public comment. Section 813
provides for the Interagency Environment Committee to review
all information received from Mexico in response to a customs
verification request and determine whether additional steps are
necessary to determine the legality of the shipment. Section
813 also provides that the Trade Representative, on behalf of
the Interagency Environment Committee, consult quarterly with
the Committee and the Trade and Environment Policy Advisory
Committee on all activity that takes place related to the
Customs Verification Agreement.
Section 814 provides for enforcement actions that the
Interagency Environment Committee may request. The list of
enforcement actions is illustrative. Section 814 provides for
the Interagency Environment Committee to request the Trade
Representative to pursue consultations under Article 24.29,
Article 31.4 or Article 31.6 of the USMCA. Further, Section 814
provides for Interagency Environment Committee to request the
head of a federal agency take action, provided for under
existing U.S. federal law, to enforce the USMCA environment
obligations.
Section 815 describes other existing U.S. government
authorities, predominantly under relevant U.S. environment and
conservation statutes, that will assist the Interagency
Environment Committee to monitor and enforce the USMCA
environment obligations. For example, Section 815 includes the
Magnuson-Stevens Fishery Conservation and Management Act, the
Pelly Amendment; the Agreement on Port State Measures to
Prevent, Deter and Eliminate Illegal, Unreported and
Unregulated Fishing; the Endangered Species Act; the Lacey Act;
the Migratory Bird Act; the Eliminate, Neutralize and Disrupt
Wildlife Trafficking Act; and the Wild Bird Conservation Act.
Section 816 provides that no later than one year after the
USMCA enters into force, and annually for each of the next four
years, and biennially thereafter, the Trade Representative will
report to the Committee on steps that the Parties have taken to
implement and enforce the USMCA environment commitments, and
additional actions that may need to be taken with respect to
USMCA countries that might be failing to implement their
environmental obligations. Additionally, Section 816 provides
for a comprehensive determination regarding the USMCA
countries' implementation efforts along with an updated
assessment to be submitted in the fifth-year report.
Section 817 provides for Federal agencies participating in
the Interagency Environment Committee to prescribe regulations
necessary to carry out the requirements to implement the
functions of the Interagency Environment Committee.
REASON FOR CHANGE
More than 25 years ago, when Congress considered the NAFTA,
there were serious concerns that the elimination of duties,
coupled with a lack of environmental protections in Mexico,
could lead to the deterioration of competitiveness and
opportunities for American workers, producers, and
manufacturers. In response to those concerns, environmental
cooperation provisions were negotiated in a side agreement,
subject to a separate enforcement mechanism. Not a single
arbitral panel has ever been convened under these provisions.
Meanwhile, environmental protections in Mexico continue to
lag significantly behind those in the United States and Canada.
The NAFTA resulted in environmental externalities,
infrastructural degradation, and health hazards that do not
recognize borders. In the 25 years since the NAFTA was passed,
some environmental concerns have evolved into existential
threats.
The Committee is committed to ensuring that there are
meaningful improvements to the environmental standards in
Mexico, coupled with transboundary collaboration between the
three nations. The lack of consistent environmental standards
in North America promotes the exportation of pollution between
nations. For example, U.S. companies have been exporting and
disposing of used lead batteries to Mexico to avoid U.S.
restrictions on lead pollution. This practice has led to an
increased risk of lead poisoning in Mexico and U.S. border
communities. Further, increased human and industrial
development in Mexico created by the NAFTA, coupled with weak
Mexican environmental standards, have led to toxic sewage
filled with feces, industrial chemicals and other raw waste
contaminating waterways like the New River, which flows from
Mexico's Mexicali Valley through Calexico, leaving neighboring
towns subject to polluted air and water. In addition, weak
rules and the lack of enforcement on fishing subsidies, fishing
management practices, and combatting illegal, unreported and
unregulated (IUU) fishing in Mexico has led to a significant
amount of illegally fished seafood to enter the United States
from Mexico.
The Committee understands that the establishment of an
Interagency Environment Committee is intended to ensure that
Canada and Mexico live up to their USMCA environment
commitments and that the Trade Representative will have the
correct tools to pursue an enforcement action if necessary. The
Committee intends for the Interagency Environment Committee to
work with Canada and Mexico to build a roadmap to full
implementation of the USMCA environment obligations. The
Committee understands that the goal of the USMCA environment
chapter is to have substantive provisions and enforcement
mechanisms that will support the sustainable management of
North American resources and their trade, and limit the
exacerbation of existing environmental problems. The work of
the Interagency Environment Committee will be important because
the failure of Mexico to comply with and enforce environmental
standards in Mexico has had negative economic consequences and
undermined American competitiveness. Strong enforcement of the
USMCA environment obligations will be critical in the fight to
protect U.S. small- and medium-sized businesses that are
consistently undercut by these environmental practices. Each
year, 15 percent of world fish catches occur illegally. This
black market is estimated to be worth as much as $23 billion
dollars, which translates to billions in economic losses for
those who play by the rules. Also, the American Forest & Paper
Association estimates that illegal logging costs U.S. timber
producers $1 billion annually, eroding sustainable forest
management practices and costing jobs in responsibly managed
forests. This reality cannot continue.
Under the Interagency Environment Committee, the U.S.
Government will be better coordinated in implementing and
utilizing existing authorities. For example, existing U.S. law
provides the tools to stop the trade of illegal wildlife at the
border. Some of the world's worst actors trade in illegal
rainforest timber, rhino horns, elephant ivory, and turtle
shells use their ill-gotten gains to fund vast criminal
syndicates and terrorist organizations. The al-Qaeda affiliate
al-Shabaab generates a significant portion of its funding from
illegal ivory. The Lord's Resistance Army also depends on a
portion of the $10 billion generated each year from wildlife
trafficking. Organized crime siphons off a piece of the $30 to
$100 billion in the annual illegal timber trade. Trade in
illegally taken fauna and flora continues to be a huge problem,
especially through Mexico. U.S. law prohibits trade in products
that were illegally harvested in their country of origin, and
in 2008, the Lacey Act was amended to prohibit trafficking in
illegally sourced wood products. Those amendments enjoyed broad
bipartisan support in Congress and support from industry,
labor, and environmental groups. Mexico does not have a similar
law. Coordination under the Interagency Environment Committee
will allow for the ban of these products to be better enforced
with our two closest trading partners. The Interagency
Environment Committee should work with Mexico to develop and
enforce stronger rules that govern trade in illegally taken
animals, animal products, plant, and plant products.
Further, the Committee understands that full utilization of
the Customs Verification Agreement will incentivize less trade
in illegally harvest fauna and flora in Mexico. The Customs
Verification Agreement is a binding agreement signed between
Mexico and the United States on December 10, 2019. The Customs
Verification Agreement allows for the United States to request
customs information from Mexico to verify the legality of a
shipment of fauna or flora. Not only does the Customs
Verification Agreement set out specific obligations that the
Parties must conduct during a customs verification, but also
provides for the requestor to request additional steps
necessarily to determine the legality of the shipment(s). Those
additional steps may include a jointly conducted site visit,
interviews, verification of point of source or harvest,
investigations, scientific testing of product, and inspections
by relevant authorities. The Customs Verification Agreement
also requires both Mexico and the United States to establish a
public comment process upon entry into force of the USMCA to
allow for the public to request that either Party seeks a
verification.
The Committee also understands that the standards set in
the USMCA are just a floor for North American collaboration to
improve the environment. The Committee believes that the USMCA
environment obligations could have been stronger. For example,
while the USMCA is silent, the Committee intends for the
Interagency Environment Committee to work with Canada and
Mexico to mitigate the damage of climate change. The Committee
intends that the Interagency Environment Committee recommend
and support the Trade Representative in working with Canada and
Mexico to add the Paris Agreement under the United Nations
Framework Convention on Climate Change to the list of covered
agreements under USMCA Articles 1.3 and 24.8(4) at the first
available opportunity. The Committee believes that the United
States, Canada and Mexico must work collectively to address the
global climate crisis.
Under H.R. 5430, additional resources are provided, both
funds and personnel, for the implementation, monitoring and
enforcement of the USMCA environment obligations. The Committee
understands that with those resources, the Interagency
Environment Committee will hold Mexico and Canada accountable
for their USMCA environment commitments and take appropriate
enforcement action if they fail to live up to their
commitments.
Subtitle B--Other Matters
Section 821: Border Water Infrastructure Improvement Authority
CURRENT LAW
There is no provision under the NAFTA Implementation Act.
EXPLANATION OF CHANGE
Section 821 of H.R. 5430 provides for the EPA, in
coordination with other relevant agencies, to carry out the
planning, design, construction, and operation and maintenance
of high priority treatment works, to treat wastewater, nonpoint
sources of pollution and related matters resulting from
international transboundary water flows originating in Mexico.
Section 821 also provides that the EPA report to Congress
yearly on their activities.
REASON FOR CHANGE
Due to the complexity of land ownership and federal agency
cross-jurisdictional issues in the Tijuana River Watershed, the
Committee recognizes the need for better coordination among
eligible public entities in addressing wastewater, stormwater,
non-point sources of pollution, and related matters resulting
from international transboundary flows originating in Mexico.
The Committee has determined that the EPA possesses the issue
expertise and experience necessary to lead and coordinate all
efforts associated with pollution reduction in the Tijuana
River's Watershed. EPA should prioritize collaboration with the
State of California and other eligible local public entities.
Section 822: Detail of Personnel to Office of the United States Trade
Representative
CURRENT LAW
There is no provision under the NAFTA Implementation Act.
EXPLANATION OF CHANGE
Section 822 of H.R. 5430 provides for additional monitoring
and implementation resources in the form of authorizing three
environmental experts from relevant U.S. government agencies to
be detailed to the Office of the Trade Representative and
assigned as environment attaches at the U.S. Embassy or a
consulate in Mexico in order to assist the Interagency
Environment Committee in carrying out its duties to monitor and
enforce the USMCA environment obligations. The experts will be
reimbursable details to the Office of the Trade Representative
from the EPA, NOAA, and USFWS. The attaches will prepare and
submit reports to the Interagency Environment Committee
quarterly for review.
REASON FOR CHANGE
The Committee understands that it has been very difficult
to monitor environmental standards in Mexico. Providing U.S.
government environment experts in Mexico will allow for better
information gathering and coordination on the status of
environmental laws and enforcement in Mexico. Further, the
Committee understands that environment-focused U.S. government
personnel have been or are currently based at the U.S. Embassy
in Mexico City or a consulate in Mexico. While the Committee
understands that those personnel have been conducting important
work, the positions provided for under Section 822 are for new
or additional personnel focused on the implementation of the
USMCA environment commitments and assisting the Interagency
Environment Committee. This may require that the personnel
conduct fact finding missions, capacity building or technical
assistance. The Committee understands that the EPA, NOAA, and
USFWS will detail one staff each, on a reimbursable basis, with
the respective relevant expertise to implement the USMCA
environment commitments.
Subtitle C: North American Development Bank
(Sections 831-834)
CURRENT LAW
Title V, Subtitle D, Part 2 of the NAFTA Implementation Act
concerns the North American Development Bank.
EXPLANATION OF CHANGE
Sections 831-834 of H.R. 5430 provide for a capital
increase for the North American Development Bank (NADBank) to
finance environmental infrastructure projects related to water
pollution, water and wastewater treatment, water conservation,
municipal solid waste, stormwater drainage, air quality, and
renewable energy. Section 831 authorizes a general capital
increase. Section 832 sets out the policy goals of the NADBank.
Section 832 provides for the Secretary of the Treasury to
direct the representatives of the United States to the Board of
Directors of the NADBank to give preference to the financing of
projects related to environmental infrastructure relating to
water pollution, wastewater treatment, water conservation,
municipal solid waste, stormwater drainage, non-point
pollution, and related matters. Section 833 provides for the
Secretary of the Treasury to direct the representatives of the
United States to the Board of Directors of the NADBank to
require the NADBank to develop and implement policies and
practices to streamline the project certification and financing
processes. Section 834 provides for the Secretary of the
Treasury to direct the representatives of the United States to
the Board of Directors of the NADBank to require the NADBank to
develop and annually update performance measures that align
with the NADBank's mission and to assess whether the projects
add value to the U.S.-Mexico border region.
REASON FOR CHANGE
On January 6, 2015, former President Barack Obama and
former President of Mexico Enrique Pena Nieto agreed to support
the capital increase of $3 billion for the NADBank.\21\ The
amount was to be collected by both governments over an
estimated period of five years, including $450 million in paid-
in capital. This subtitle will provide for the necessary
capital increase and review of NADBank priorities and functions
to allow for the development and financing of environmental
infrastructure on the U.S.-Mexico border.
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to- north-american-development-bank-capital-increase-of-us3-billion.
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In 1989, Congress enacted the International Development and
Finance Act of 1989 (Public Law 101-240), which included a
provision known as the ``Pelosi Amendment'' (22 U.S.C. 262m-7).
By prohibiting the U.S. from voting in favor of any World Bank
or regional development bank project unless an environmental
impact assessment is made available to the public 120 days
prior to a vote, the Pelosi Amendment provides affected
communities a direct voice in the Bank's decision-making and
ensures borrower accountability before Bank funds are
committed.
In the NADBank's case, the spirit of the Pelosi Amendment
is reflected in section 2(c) and (d), Article II, Chapter III
of the Bank's charter, which requires an environmental
assessment in the NADBank application process so that the Board
of Directors can ``examine potential environmental and public
health benefits, environmental risks, and costs, as well as
available alternatives and the environmental standards and
objectives of the affected area.'' In certifying projects
relating to water, wastewater, water conservation, and
municipal solid waste, the NADBank's Board of Directors is also
required to consult affected states and local governments.
The Committee believes that Congress intended the NADBank's
project certification process to be as robust as possible to
provide communities on both sides of the U.S.-Mexico border a
meaningful voice in the NADBank's decision-making. Going
forward, the Committee urges the NADBank Board to prioritize
robust public input so that project financing decisions can be
made in the best interests of project-affected border
communities.
The Committee further understands that the scope of
projects eligible for NADBank financing are those exclusively
provided for in the NADBank charter. The Committee expects that
the Secretary of the Treasury will direct the representatives
of the United States to the Board of Directors of the NADBank
to oppose the participation of the NADBank in financing for the
planning or construction of any wall infrastructure along the
U.S.-Mexico border, for any fossil fuel-fired electricity
generation project or fossil fuel extraction project, or the
planning or construction of any incarceration or detention
facility. Further, the Committee understands the Secretary of
the Treasury will direct the representatives of the United
States to the Board of Directors of the NADBank to oppose the
participation of the NADBank in financing for any project that
directly facilitates opioid trafficking across the U.S.-Mexico
border. The committee understands that opposition of the
aforementioned projects is appropriate because they are not
within the scope of the NADBank charter and thus, the NADBank
should not be financing those projects.
TITLE IX--USMCA SUPPLEMENTAL APPROPRIATIONS ACT, 2019
Title IX appropriates $843 million to implement and enforce
the labor and environment obligations of the USMCA.
From within the $210 million provided to the DOL's Bureau
of International Labor Affairs, the Committee expects not less
than $100,000,000 to be used for capacity building grants
focused on educating and training workers regarding rights in
the workplace, including worker-focused education and training
related to Mexico's labor reform enacted on May 1, 2019; and
not less than $20,000,000 to be used for efforts to reduce
workplace discrimination in Mexico.
IV. VOTES OF THE COMMITTEE
Pursuant to clause 3(b) of rule XIII of the Rules of the
House of Representatives, the following statement is made
concerning the vote of the Committee on Ways and Means during
the consideration of H.R. 5430, to implement the Agreement
between the United States of America, the United Mexican
States, and Canada attached as an Annex to the Protocol
Replacing the North American Free Trade Agreement on December
17, 2019.
H.R. 5430 was ordered favorably reported to the House of
Representatives by voice vote (with a quorum being present).
V. BUDGET EFFECTS OF THE BILL
A. Committee Estimate of Budgetary Effects
In compliance with clause 3(d) of rule XIII of the Rules of
the House of Representatives, the following statement is made
concerning the effects on the budget of the bill, H.R. 5430, as
reported. The Committee agrees with the estimate prepared by
the Congressional Budget Office (CBO), which is included below.
VI. STATEMENT REGARDING NEW BUDGET AUTHORITY AND TAX EXPENDITURES
BUDGET AUTHORITY
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee states that the
bill involves increased budget authority for appropriations to
several federal agencies for the implementation of the USMCA.
The Committee states further that the bill will increase
revenues by an estimated $2,970,000,000, resulting in an
estimated $3,044,000,000 net decrease in the deficit.
VII. COST ESTIMATE PREPARED BY THE CONGRESSIONAL BUDGET OFFICE
In compliance with clause 3(c)(3) of rule XIII of the Rules
of the House of Representatives, requiring a cost estimate
prepared by the CBO, the following estimate by CBO is provided.
Table 1 and 2 display CBO's estimates of the cost of
enacting H.R. 5430. Table 1 covers the costs of enacting title
I, which would approve the United States-Mexico-Canada
Agreement (USMCA).Table 2 includes CBO's estimate of
appropriation under Title IX of H.R. 5430, which would provide
appropriations to several federal agencies for the implementing
the USMCA. The bill would designate those amounts as emergency
requirements in accordance with section 251 of the Balenced
Budget and Emergency Deficit Control Act of 1985. The limits on
discretionary budget authority established by the Budget
Control Act of 2011 (Public Law 112-25), as amended, would be
adjusted to accommodate that funding.
TABLE 1.--DIRECT SPREADING AND REVENUE EFFECTS OF H.R. 5430, THE UNITED STATES-MEXICO-CANADA AGREEMENT IMPLEMENTATION ACT, AS INTRODUCED ON DECEMBER 13,
2019
[December 16, 2019]
--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, millions of dollars--
---------------------------------------------------------------------------------------------------------------
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2020-2024 2020-2029
--------------------------------------------------------------------------------------------------------------------------------------------------------
INCREASES OR DECREASES (-) IN DIRECT SPENDING
Department of Agriculture:
Estimated Budget Authority............ -19 -23 -17 -13 -7 -5 0 0 0 0 -79 -84
Estimated Outlaysa...................... -19 -23 -17 -13 -7 -5 0 0 0 0 -79 -84
North American Development Bank:
Estimated Budget Authority............ 0 0 0 0 0 0 0 0 0 0 0 0
Estimated Outlaysb...................... 10 0 0 0 0 0 0 0 0 0 10 10
Total Changes:
Estimated Budget Authority............ -19 -23 -17 -13 -7 -5 0 0 0 0 -79 -84
Estimated Outlays..................... -9 -23 -17 -13 -7 -5 0 0 0 0 -69 -74
INCREASES IN REVENUE
Estimated Revenuec.................... 10 40 70 230 360 450 460 450 450 450 710 2,970
NET INCREASE IN THE DEFICIT
Effect on the Deficit................... -19 -63 -87 -243 -367 -455 -460 -450 -450 -450 -779 -3,044
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Congressional Budget Office.
Estimates are relative to CBO's May 2019 baseline, assumed enactment by February 2020.
aCBO estimates that enacting the bill would result in greater U.S. exports of certain dairy products, leading to slightly higher dairy prices and thus a
small decrease in federal payments that support dairy producers.
bOn October 22, 2019, CBO transmitted a cost estimate for H.R. 132, the North American Development Bank Improvement and Pollution solution Act of 2019.
In 2016, the Congress appropriated $10 million for paid-in capital, but did not specifically authorize the Department of Treasury to obligate those
funds. By authorizing the United States to participate, H.R. 132 would allow the department to pay $10 million to the bank; CBO expects it would do so
in 2020. The fall cost estimate can be found here: https;//www.cbo.gov/ systemfiles2019-10hr132.pdf.
cThe estimated revenue effects of enacting H.R. 5430 mainly reflect higher expected revenue from tariffs on motor vehicles and parts. Because of
stricter rules of origin for motor vehicles and new labor value content requirements, CBO projects that certain imports of motor vehicles and parts
that currently benefit from favorable treatment under the North American Free Trade Agreement would not be eligible for favorable treatment under the
new agreement. Because of that change in eligibility, CBO projects that duty-free imports of vehicles and parts into the United States from the USMCA
parter countries would decline. A portion of that decline in duty-free imports would be replaced by domestic production while some of that decline
would increase duty-free imports from Canada, leading to a small reduction in tariff revenues collected on agricultural imports subect to tariffs.
dRevenue estimates are net of income and payroll taxes.
Estimated prepared By: Tiffany Arthur (Agriculture); Erin
Deal (Revenues), Sunita D'Monte (North American Development
Bank); Daniel Fried (Revenues).
Table 2 displays CBO's estimate of appropriations under
title IX of H.R. 5430, which would provide appropriations to
several federal agencies for the implementation of the United
States-Mexico-Canada Agreement. The bill would designate those
amounts as emergency requirements in accordance with section
251 of the Balanced Budget and Emergency Deficit Control act of
1985. The limits on discretionary budget authority established
by the Budget Control Act of 2011 (Public Law 112-25), as
amended, would be adjusted to accommodate that funding.
TABLE 2.--DISCRETIONARY APPROPRIATIONS OF TITLE IX, THE USMCA SUPPLEMENTAL APPROPRIATIONS ACT, 2019
[December 16, 2019]
--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, millions of dollars--
-------------------------------------------------------------------------------------------
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2020-2024 2020-2029
--------------------------------------------------------------------------------------------------------------------------------------------------------
Appropriations Subcommittee
Agriculture:
Budget Authority.......................................... 4 0 0 0 0 0 0 0 0 0 4 4
Estimated Outlays......................................... 3 1 0 0 0 0 0 0 0 0 4 4
Commerce, Justice, Science:
Budget Authority.......................................... 106 0 0 0 0 0 0 0 0 0 106 106
Estimated Outlays......................................... 68 22 16 0 0 0 0 0 0 0 106 106
Interior and Environment:
Budget Authority.......................................... 308 0 0 0 0 0 0 0 0 0 308 308
Estimated Outlays......................................... 37 121 120 30 0 0 0 0 0 0 308 308
Labor, Health and Human Services, Education:
Budget Authority.......................................... 210 0 0 0 0 0 0 0 0 0 210 210
Estimated Outlays......................................... 11 63 63 42 21 0 0 0 0 0 200 200
State and Foreign Operations:
Budget Authority.......................................... 215 0 0 0 0 0 0 0 0 0 215 215
Estimated Outlays......................................... 215 0 0 0 0 0 0 0 0 0 215 215
-------------------------------------------------------------------------------------------
Total:
Budget Authority........................................ 843 0 0 0 0 0 0 0 0 0 843 843
Estimated Outlays....................................... 334 207 199 72 21 0 0 0 0 0 833 833
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Congressional Budget Office.
Estimates are relative to CBO's May 2019 baseline, assumed enactment by February 2020.
Section 905 of H.R. 5430 specifies requirements for the budget treatment of title IX. Consistent with that section, and at the direction of the House
Committee on the Budget, title IX is considered to be appropriation legislation rather than authorization legislation.
Estimate prepared by Justin Riordan.
VIII. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE
A. Committee Oversight Findings and Recommendations
With respect to clause 3(c)(1) of rule XIII and clause
2(b)(1) of Rule X of the Rules of the House of Representatives,
the Committee made findings and recommendations that are
reflected in this report.
B. Statement of General Performance Goals and Objectives
With respect to clause 3(c)(4) of rule XIII of the Rules of
the House of Representatives, the Committee advises that the
bill contains no measure that authorizes funding, so no
statement of general performance goals and objectives for which
any measure authorizes funding is required.
C. Information Relating to Unfunded Mandates
This information is provided in accordance with section 423
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4).
The Committee has determined that the bill does not contain
Federal mandates on the private sector. The Committee has
determined that the bill does not impose a Federal
intergovernmental mandate on State, local, or tribal
governments.
D. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff
Benefits
With respect to clause 9 of rule XXI of the Rules of the
House of Representatives, the Committee has carefully reviewed
the provisions of the bill, and states that the provisions of
the bill do not contain any congressional earmarks, limited tax
benefits, or limited tariff benefits within the meaning of the
rule.
E. Duplication of Federal Programs
In compliance with clause 3(c)(5) of rule XIII of the Rules
of the House of Representatives, the Committee states that no
provision of the bill establishes or reauthorizes: (1) a
program of the Federal Government known to be duplicative of
another Federal program; (2) a program included in any report
to Congress pursuant to section 21 of Public Law111-139; or (3)
a program related to a program identified in the most recent
Catalog of Federal Domestic Assistance, published pursuant
section 6104 of title 31, United States Code.
F. Hearings
In compliance with Sec.103(i) of H. Res. 6 (116th Congress)
(1) the following hearings were used to develop or consider H.R
5430:
On June 25, 2019, the Subcommittee on Trade held a hearing
on ``Mexico's Labor Reform: Opportunities and Challenges for an
Improved NAFTA.''
On June 19, 2019, the full Committee held a hearing on
``The 2019 Trade Policy Agenda: Negotiations with China, Japan,
the EU, and UK; new NAFTA/USMCA; U.S. Participation in the WTO;
and other matters.''
On May 22, 2019, the Subcommittee on Trade held a hearing
on ``Enforcement in the New NAFTA.''
On March 26, 2019, the Subcommittee on Trade held a hearing
on ``Trade and Labor: Creating and Enforcing Rules to Benefit
American Workers.''
On March 21, 2018, the full Committee held a hearing on the
``U.S. Trade Policy Agenda.''
On July 18, 2017, the Subcommittee on Trade held a hearing
on ``Modernization of the North American Trade Agreement
(NAFTA).''
On June 22, 2017, the full Committee held a hearing on the
``U.S. Trade Policy Agenda.''
IX. `CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
In the opinion of the committee, in order to expedite the
business of the House of Representatives, it is necessary to
dispense with the requirements of clause 3(e) of rule XIII of
the Rules of the House of Representatives (relating to showing
changes in existing law made by the bill as reported).
MINORITY VIEWS ON THE USMCA IMPLEMENTATION ACT--DECEMBER 18, 2019
Committee Republicans agree that the United States-Mexico-
Canada Agreement (USMCA) fulfills President Trump's promise to
modernize and improve on the North American Free Trade
Agreement (NAFTA) in a way that grows our economy and benefits
American workers, farmers, manufacturers, innovators, high tech
workers, and service providers. According to conservative
estimates by the independent U.S. International Trade
Commission, USMCA will create 176,000 American jobs and
increase the size of the U.S. economy by $70 billion. Congress
should move forward and pass USMCA without further delay to
unlock the tremendous benefits of the agreement and continue
building on pro-growth Republican policies.
NAFTA entered into force more than 25 years ago and needed
many updates to reflect our 21st century economy and ensure it
works well for all Americans. USMCA effectively modernizes our
trading relationship with our North American allies with state-
of-the-art and enforceable disciplines on, among other things,
digital trade, agriculture, services, customs and trade
facilitation, and state-owned enterprises. These provisions
raise standards and allow American companies to compete and win
both regionally and globally. Republican Members of the
Committee anticipate that this successful outcome will create
considerable momentum for trade agreements with other trading
partners, to America's benefit. Congressional approval of USMCA
will send a signal to the rest of the world that the United
States will continue to lead in setting the standard for trade.
By maintaining duty-free market access on virtually all
North American trade, USMCA allows the continued and seamless
flow of goods and services across borders. This agreement
strengthens the North American economy in a way that will
create jobs at home and contribute to a thriving manufacturing
sector.
Our farmers and ranchers will maintain their market share
in Mexico and will have key new opportunities to compete in
Canada because the agreement opens up the Canadian market for
our dairy, wheat, poultry, and egg producers. Cutting-edge and
enforceable biotech and sanitary and phytosanitary disciplines
will prevent unjustified discrimination against our agriculture
sector and will signal to the rest of the world that the United
States expects all our trading partners to treat U.S. food and
agricultural exports fairly and transparently.
Tough standards are meaningful only if they are
enforceable, and the USMCA makes significant improvements over
NAFTA in the area of enforcement. NAFTA's rules for state-to-
state dispute settlement included gaps that allowed parties to
``block'' or otherwise avoid the formation of a panel to hear a
dispute. This is one reason that no NAFTA dispute settlement
panel has been formed since 2000. USMCA includes many
innovations to ensure that panel formation cannot be blocked
and disputes will be resolved promptly. The United States will
be able to hold Canada and Mexico accountable to implement all
USMCA commitments, a result that we strongly support.
USTR negotiated a fair, narrow, and transparent rapid
response mechanism to hold Mexico accountable for high labor
standards and prevent Mexican companies from giving themselves
an advantage by tolerating poor labor conditions. At the same
time, this labor enforcement mechanism preserves U.S.
sovereignty and the rights of U.S. companies. No labor union
meddling or harassment is permitted--the U.S. government is in
charge of the entire government-to-government process. While
holding Mexico accountable, USTR achieved important safeguards
for our companies. The agreement explicitly provides that no
U.S.-based facility can be subjected to the mechanism unless
that company is already in trouble under U.S. law because it is
the subject of an adverse National Labor Relations Board order.
Agriculture producers are not included.
While interested parties can petition for action, the
complaining government retains the final say in deciding
whether to bring a case. Before any process begins, the
responding government is to conduct its own review and
consultations. If the problem is not remediated, then a rapid
response labor panel is formed, made up of three labor experts
selected from lists put forward by the U.S. and Mexican
governments. There is no broad, surprise inspection conducted
by unions or the governments. Instead, the three panelists may
conduct announced site visits, and a facility may refuse a site
visit, although the panel will take that fact into account. If
a violation is found, there is ample opportunity to mitigate
before remedies are applied.
The remedy for the first violation is limited to fines on
the company for the goods produced in the facility and a loss
of the USMCA tariff elimination benefit. If there is a second
violation, then those same penalties can be assessed against
the company's parent and affiliates, but only if the entire
process is completed from start to finish. If there is a third
violation, the goods in question can be blocked at the border,
but only if the entire process is completed a third time. Any
remedy must be lifted immediately upon remediation by the
company.
On the environment, this agreement strikes the right
balance and is consistent with the Bipartisan Congressional
Trade Priorities and Accountability (TPA) Act of 2015 by
binding the United States only to Multilateral Environmental
Agreements to which the United States is a full party.
Consistent with TPA, the United States is not bound by the
terms of additional MEAs or new provisions of existing MEAs
unless the United States becomes a full party, requiring Senate
ratification. Also consistent with our expectations as set
forth in TPA, the USMCA does not impose any climate change-
related commitments on the United States.
USMCA fully complies with the prohibition in TPA against
making changes to U.S. immigration law. USMCA simply maintains
the NAFTA provisions on temporary entry visas that have been in
place for over 25 years, with no substantive changes.
As this agreement is implemented and monitored, we will
remain fully engaged in oversight and expect robust and
frequent consultations from this and future Administrations
regarding all aspects of the agreement. Article I, Section 8 of
the Constitution vests all authority over commerce with foreign
nations with the Congress. Congress has developed a partnership
with the Executive Branch on these issues by delegating aspects
of this authority over time, and legislation setting the terms
of this partnership, including the Trade Act of 1974 and
various iterations of Trade Promotion Authority legislation,
has been unequivocal that Congress expects robust consultations
before and after the United States enters into trade
agreements, whether or not a Congressional vote is required.
In particular, we expect robust consultation regarding the
use of proclamation authority to implement this agreement, both
on tariff and non-tariff issues. Likewise, we anticipate robust
consultation and consideration of Congressional views when
developing the U.S. position on any possible amendments to the
agreement (under Article 34.3) or possible withdrawal (under
Article 34.6).
The Joint Review (or ``sunset'') process, to take place at
least once every six years as set forth in Article 34.7, is a
new provision for U.S. trade agreements. For that reason,
Section 611 of the USMCA Implementation Act sets forth some
important steps for consultation with Congress in developing
the U.S. position for these Joint Review meetings and making
decisions on next steps after the meetings occur. The
consultations set forth in Section 611 are just some components
of the ongoing consultations we expect regarding the Joint
Review process.
Although we strongly support this agreement because it is a
great win for the United States for all the reasons stated
above as well as many others, in certain discrete areas our
view is that concessions were made to address Democratic
concerns, resulting in weaker provisions that should not be
replicated in future trade agreements. First, we view Investor
State Dispute Settlement (ISDS) as an important enforcement
mechanism that gives U.S. investors in foreign countries access
to a fair and neutral venue to enforce their rights when a
foreign country's domestic courts may not provide that due
process. This agreement preserves a more limited form of ISDS
for all sectors and NAFTA-like ISDS for investors in certain
sectors that have contracts with the Government of Mexico.
However, ISDS is eliminated with Canada after a grandfathering
period, and access to ISDS is very limited for investors in
many sectors in Mexico. We expect to see full ISDS rights in
all sectors in future trade agreements and do not see the need
for a government contract requirement.
Second, we strongly supported the USMCA as originally
negotiated in the area of pharmaceuticals, including 10 years
of data exclusivity for biologics. These original USMCA
provisions appropriately balanced strongly support for our
vital innovators with access to medicines. They would have
helped raise standards in other countries and prevented the
significant problem in which far too many countries take
advantage of the pro-innovation policies in the United States
without paying a fair share for developing new drugs.
Unfortunately, the biologics provision was removed from the
agreement at the insistence of Democrats, who incorrectly
suggested that this provision had the potential to increase
U.S. drug prices. We do not consider the removal of this
provision as establishing a precedent for future agreements.
At the same time, we note that the USMCA does not change
the full 12 years of data exclusivity protection for biologics
under U.S. law and cannot do so because only Congress can
change U.S. law. In addition, USMCA still maintains important
protections for American innovation and creativity. Rather than
create a precedent in a trade agreement for a level of
protection for biologics that is significantly below U.S. law,
USMCA is simply silent on what Mexico and Canada are required
to provide specifically for biologics, just as NAFTA was.
Moreover, biologics will receive the same protection as other
pharmaceuticals, including an automatic five years of data
exclusivity, as well as many other vital IP protections in this
important sector. We further note that USMCA does not prevent
Canada and Mexico from choosing to pursue pro-innovation
policies by raising their standards in this area to a level
closer to the United States level of 12 years, a result that we
would view as positive for patients and taxpayers in all three
countries.
This agreement is a strong win for Americans across our
economy. House Democrats dragged their feet for over a year
before allowing this agreement to come to a vote, which has
imposed unnecessary costs on the U.S. economy and created
considerable uncertainty. We are pleased to move forward now
with a strong bipartisan vote to implement the agreement and
begin benefiting from the improvements to NAFTA that President
Trump has won for all Americans.
Kevin Brady,
Republican Leader.
Vern Buchanan,
Republican Leader, Trade
Subcommittee.
[all]
