Free Trade Zones

Retail concerned about trade provisions

Americans know there are chips at stake – but Congress seems determined to disconnect trade provisions from pending legislation to focus just on semiconductor chips – instead of a larger package for the China that the retail and commerce communities need. Unless there’s a Congressional miracle, critical trade items like GSP and VTT renewals, China exclusions and de minimis — will creep into the DC swamp later this week — maybe to come back in the lame duck session or next year.

Media attention suddenly turned to our “national security” of the United States in an effort to gain additional support for ‘FRIES only’ legislation before Congress breaks for their August recess. Even the United States Secretary of Defense (Lloyd J. Austin III) said in a statement: “Weapon systems in use on the battlefields of today and the emerging technologies of tomorrow depend on our access to a supply stable and safe in microelectronics. The investments made through the flea law are essential to our national security and will directly support the maintenance of America’s technological and military advantage.

Clearly, what started as a bipartisan effort to invest in American technology has now turned into ‘FRIES only ‘because the Democrat-controlled Senate/House/White House can’t quite pull in the same direction at the same time. Senator Schumer’s (D-NY) original Endless Frontier Act now looks more like Davy Crockett’s last fight at the Alamo. The senator’s original bill was completely expanded and renamed to become the U.S. Innovation and Competition Act (USICA) when it passed the Senate more than a year ago. Parallel legislation passed the House about six months ago, and it was called America COMPETITION Law. The two invoices, (USICA & COMPETITIONS), have quite a large reach (and pages) because they target computer chip manufacturing in the United States and a host of other trade remedies in an attempt to create a strategic advantage over China – through domestic investment.

The merging of the Senate bill and the House bill took place in a process called reconciliation. The procedure is complex and (unfortunately) the negotiations get bogged down and bogged down. With the midterm elections fast approaching and Congress gearing up for its August recess, last-minute plans have been made to squeeze survivors out of the process, as failure is quickly becoming an option. Democrats remain nervous about pushing legislation through, and Republicans don’t necessarily want to give Democrats the win. However, both sides realize the importance of American-made semiconductors. The latest plan is to reduce the package and offer a ‘FRIES only” or a ‘CHIPS MORE‘ package. Unfortunately, without adding any of the commercial components demanded by retail, the end result is just there with the release of a fish & chips pub – and saying they’ve run out of fish (sorry – we only have fries).

The administration likely sent Commerce Secretary Gina Raimondo on media rounds last week — working to get any version of the original USICA Where COMPETITION Deed passed. The media push is directed at the need for “national security” and the fact that chipmakers are likely to go elsewhere with the growing demand for chips. The FRIES The bill itself contains an initial $52 billion for research and development of chip manufacturing in the United States. the original FRIES The law was part of the National Defense Bill passed in January 2021 and FRIES was sketched at the time but not funded. The Senate USICA and the house COMPETITION law would have created the funding (once past).

The problem with a ‘FRIES only’ for United States retail, United States commerce and United States inflation – is that the FULL bills of the United States Senate and the House of Representatives contain extremely interesting elements for the retailer community that may not be included. The USICA The Senate bill included a much-needed Chinese tariff exclusion process for additional Chinese taxes that were issued during former President Trump’s administration. The House COMPETITION The bill included the de minimis problem that allowed factories from China (and elsewhere) to ship directly to US consumers and circumvent duties and tariffs that create a competitive disadvantage for US companies and US-based free zones. United States. More important again, both invoices included renewals for the hugely important Generalized System of Preferences (GSP) program and the Miscellaneous Tariffs Bill (MTB) – which encourage U.S. business investment outside of China and help U.S. companies obtain components and other duty-free items if not readily available in the United States. These iconic commercial items are currently aggravating the inflation problem and their renewal would have a profound effect on the economy.

With respect to the Generalized System of Preferences program, according to the GSP Coalition since the GSP expired – companies have paid at least $1.59 billion in additional taxes through May of this year. Regarding Chinese tariff exclusions, the group Americans for Free Trade – has a tariff misery impact list indicating that it is costing American consumers $3.8 billion per month for China’s Section 301 tariffs – which were originally imposed by former President Trump and continued by President Biden.

As widely reported, Intel planned to launch two new US semiconductor facilities based in New Albany, Ohio on July 22. Intel plans to invest $20 billion in initial installations, and more than $100 billion over the next 10 years – if the CHIPS bill passes. Unfortunately, the inauguration has been postponed pending the passage of legislation.

This week, as we approach August recess, some members of Congress are talking about just spending the ‘FRIES‘ legislation (vs. reconciled USITA/Competees Act) and some talk about doing it ‘CHIPS MORE.’ The plus is the score on the FABS Act (Facilitating American-Built Semiconductors) – which would incentivize additional US chip manufacturing tax credits. From a retail perspective, the “demand” is that Congress and the administration have CHIPS PLUS-MORE with the supplement MORE being the trade items that retailers badly need.

While this information may be somewhat confusing, it is quite easy to see that chip investments would benefit America. The problem for members of Congress is that the original Endless Frontiers Actfollowed by USICAfollowed by competition law – are heavily laden with pork and other products that are difficult to agree on. Common sense says Congress will do something about semiconductors but, for reference, in May 2021 a frustrated Senator John Kennedy (R-La) went on FOX to clearly state that the original Endless Frontier Act was filled with overspending: “my mother didn’t raise a fool, and if she did, it was one of my brothers. This is not an anti-communism bill. If you look at this bill and study it, you will see that it is a “four feet and nose in the trough” spending bill with virtually no money for defense military.

Obviously, there are many ways to look at this bill. Using a different approach, Congress could remember that last Sunday was National Ice Cream Day, which remains a tribute to American ice cream that was established as a special day by President Ronald Reagan. Congress might observe that ice cream consumers usually order plain flavor and sometimes they order flavor with fries added. They almost never ask for the chips without the ice cream!

Hats off to the beloved Chocolate Chips, Coffee Chips, Espresso Chips, and Mint Chocolate Chips.

No hats off to Congress if they’re just passing through FRIES Where CHIPS MORE and do not include retail GSP/MTB renewals, changes to the de minimis program and the creation of a transparent tariff exclusion process for China.

For retail, chips are now online…..