Congress Overwhelmingly Approves Federal Civil Cause of Action for Trade Secret Misappropriation Backed By Broad Coalition of U.S. Interests

When the dust settles on 2016, and Congress is receiving year-end grades from political pundits, voters and even self-evaluations from the Members themselves, there will no doubt be a common refrain that election year politics, gridlock and a short legislative calendar have yet again left too many important issues unresolved. But one important piece of legislation has quietly made its way through both Chambers and now is headed to the President’s desk, that responds to a growing and costly problem robbing the U.S. economy of money, jobs and the very ideas that we depend upon to remain competitive in a global marketplace. It is a significant legislative accomplishment in an election year or any year. 

The bipartisan Defend Trade Secrets Act (S.1980), or DTSA, will bolster economic growth and job creation by ensuring that our most innovative companies have better tools to protect their trade secrets from theft. DTSA creates a federal civil cause of action for trade secret misappropriation that is modeled on the Uniform Trade Secrets Act. It allows a victim of trade secret theft to obtain a seizure order in federal court with a showing of extraordinary circumstances. The bill allows misappropriated property to be seized with careful safeguards, while preserving the freedom of employees to move from one job to another.  

Trade secrets include proprietary technologies and techniques, formulas and codes, customer lists, unique manufacturing processes, and other innovations that are invaluable to the companies that own them. Yet trade secrets only are afforded limited protection under federal law. And the patchwork of state laws that companies can call upon to attempt to address trade secrets theft are insufficient in our high-tech, globalized world. And while federal law protects trade secrets through criminal sanctions in the Economic Espionage Act of 1996, that statute offers no civil remedy to victims of trade secret theft, leaving trade secret owners unable to protect their property using the same tools available to owners of other forms of intellectual property, namely patents, trademarks, and copyrights. DTSA will create much-needed uniformity in trade secrets law nationwide, simplifying and streamlining the process by which companies can protect their most valuable assets.

The story of DTSA’s passage is one that can serve as an important model for other legislative issues. It’s about coalition-building, both on and off the Hill. It passed because Members of Congress with different philosophies joined together, deftly navigated a difficult political climate, improved their bill along the way, and worked hard to develop and maintain a durable consensus all the way to the finish line. The bill was introduced by the Senate’s senior Republican, Senator Orrin Hatch (R-UT), and enjoys the strong support of the Obama Administration. It emerged from the often contentious Senate and House Judiciary Committees without opposition, navigated by capable lead sponsors Senator Chris Coons (D-DE), Rep. Doug Collins (R-GA) and Rep. Jerrold Nadler (D-NY), along with Hatch. It passed the Senate 87-0, and then it then passed the House 410-2.

 Part of DTSA’s story is also the wide array of U.S. companies and trade associations across virtually all sectors of our economy, that joined together to help Congress address trade secret theft. The Protect Trade Secrets Coalition bolstered DTSA’s sponsors’ efforts to build support at every step along the way. Each Coalition member understands trade secrets theft from their own experiences, so we learned about different aspects of the problem and worked together to take steps towards solving it. We made our case that costly theft is occurring every single day from within the companies themselves and from competitors domestic and foreign. Congress listened, and acted decisively on this compelling story, as evidenced by the overwhelming support for the bill. A lesson of DTSA’s passage is that developing legislation can still be about education and problem solving, can still bring together Members of Congress and stakeholders that have different agendas and perspectives, producing a stronger work product, to the benefit of the American people. Even in an election year.   

Commercializing Africa’s Rapid Urbanization

In a recent interview, Executive Director of the Nairobi-based United Nations Human Settlements Programme (UN-Habitat) Dr. Joan Clos stated that “urbanization will be a big opportunity for Africa in the coming years.”  It comes as no surprise that harnessing the potential of Africa’s  urbanization will be a top agenda item at Habitat III, the major UN conference on housing and sustainable urban development that will be held in October of this year.  Already home to three of the world’s megacities, Africa is set to be more urban than rural by 2030 and two-thirds urban by 2050.  The private sector has a critical role to play in efforts to leverage the opportunities created by this rapid urbanization.  Across the region, the sector is transforming what some regard as the ills of urbanization — namely, limited space, traffic and waste — into innovative and profitable ventures. 

Coworking. In cities, space can be one of the most limited — and, as a result, one of the most expensive — commodities and therefore lends itself to collaborative consumption.  From Cape Town to Cairo, shared workspace has become all the rage on the continent particularly with the technology community.  With 40 hubs in 20 countries, Afrilabs is one of the region’s largest networks of shared workspaces.  It provides members with space but also with knowledge sharing and collaboration as well as developing capacity and financial sustainability. Energy harvesting.  Through piezoelectric technology, London-based Pavegen has figured out a way to harvest energy from one of the key characteristics of cities: foot traffic.  The technology works by harvesting the kinetic energy generated by footfall and converting it into electricity that can be deployed or stored.  It already has been used to generate energy from dance clubs, marathons, music festivals, public transportation stations, schools, shopping centers, and other areas where crowds gather.  At the end of last year, Pavegen launched its largest installation in Africa: a people-powered football pitch in Lagos.  The solar and kinetic energy generated by the pitch can power streetlights in the neighborhood for up to 24 hours.

Waste management. Some see waste as an urban plague whereas others recognize it as “money just lying in the streets.”  In Nigeria, WeCyclers uses a fleet of cargo bicycles to collect household recycling in densely populated low-income neighborhoods and sells the aggregated material onto local manufacturers and recycling processors.  In South Africa, Repurpose School bags repurposes plastic waste into school bags that have solar panel flaps which provide lighting for nighttime studying.  In Ethiopia, soleRebels repurposes a wide range of discarded materials from tires to clothes and transforms them into eco-friendly footwear (in fact, the world’s only World Fair Trade Organization fair trade footwear company).  In Kenya, EcoPost turns plastic waste into lumber for use in fencing, landscaping and other applications.  The list of profitable business opportunities in Africa’s waste market goes on.

These are just some of the innovators who are demonstrating that the private sector should be a leading voice in Habitat III’s discussions about realizing the opportunity presented by Africa’s  urbanization.

This post can also be found on CovAfrica, the firm’s blog on legal, regulatory, political and economic developments in Africa.

This Week in Congress – April 25, 2016

The Senate will continue working its way through Fiscal Year (FY) 2017 appropriations bills this week, with final consideration of the Energy & Water bill expected on Tuesday.  The House will work through a number of legislative items, including several related to trade and business practices.  Both chambers are scheduled to adjourn at the end of this week for a one-week district work period.

The Senate is scheduled to return to legislative business on Monday afternoon and resume consideration of the legislative vehicle (H.R. 2028) for the FY 2017 Energy and Water appropriations bill, a $37.5 billion funding measure.  A vote is expected Monday evening on an amendment offered by Senator Patty Murray (D-WA), and votes on at least three other amendments are expected on Tuesday before a vote on final passage.  Energy & Water Appropriations Subcommittee Chairman Lamar Alexander (R-TN) has indicated he expects to wrap up consideration of the bill on Tuesday.  Last week the White House issued a veto threat for the bill, citing “the inclusion of problematic ideological provisions that are beyond the scope of funding legislation,” a reference to policy riders.  One of the major concerns behind the veto threat was an amendment offered last week by Senator John Hoeven (R-ND) to prevent the Army Corps of Engineers from using any funds to implement its “Waters of the United States” (WOTUS) rule, which extends federal jurisdiction under the Clean Water Act over a wider range of domestic wetlands and waterways.  Senator Hoeven’s amendment failed, however, to receive the 60 votes that were needed for inclusion in the underlying bill.  It is unclear if the White House will maintain its opposition to the Energy & Water bill, but in the wake of the failure of the Hoeven amendment, conservative groups are encouraging senators to oppose the bill.  Notwithstanding this source of opposition, the legislation is expected to receive bipartisan support and pass the Senate.

Following the adoption of the Energy & Water bill, which is the first FY 2017 appropriations measure on the Senate floor, the chamber is expected to continue with consideration of one of the three other funding bills that have been reported out of the Senate Appropriations Committee over the past two weeks:  the Military Construction and Veterans Affairs appropriations bill, the Commerce, Justice and Science appropriations bill, or the Transportation- Housing and Urban Development appropriations bill.  The Military Construction and Veterans Affairs bill is likely next on the Senate agenda, because it was reported out of the Appropriations Committee earlier this month with the Energy and Water Development bill and is considered one of the less controversial of the 12 annual bills.

Press reports indicate that negotiations in the Senate to provide $1 billion in supplemental appropriations to combat the Zika virus in the United States are progressing.  Earlier this year the White House requested $1.8 billion in emergency funding to accelerate the federal response timeline, bolster mosquito control, and support training programs and laboratory capacity to test for the virus. Several congressional Republicans rebuffed this request, suggesting Congress should instead shift unused funds allocated to fight the Ebola virus after that 2014 outbreak in West Africa subsided.  Conservatives are also requesting that any allocated funds be offset with cuts elsewhere in the budget.  The warmer weather of spring and summer months and reports of the virus spreading within the U.S. appear to have softened the positions of some Senate Republicans and Appropriations Committee members who are now involved in the funding negotiations, and a bill on that may hit the floor as early as this week.  House Republicans are still resisting the request for emergency Zika funds, demanding that the Administration provide more specific details on how it plans to spend such funding, although House Appropriations Committee Chairman Hal Rogers (R-KY) has indicated he expects the House will eventually also pass a Zika-funding measure.

The House of Representatives will return to legislative business on Tuesday, with votes expected on 15 bills under suspension of the rules.  Fourteen of these bills cover a variety of topics and come to the floor from the Homeland Security, Oversight and Government Reform, Transportation and Infrastructure, and Financial Services Committees.  On the fifteenth, H.R. 1493, the Protect and Preserve Cultural Property Act, the House will vote to approve amendments made to the bill by the Senate; once approved, the bill will head to the President for signature.

On Wednesday, the House will consider an additional four bills under suspension of the rules.  Included among these are H.R. 4923, the American Manufacturing Competitiveness Act of 2016, sponsored by Ways & Means Committee Chairman Kevin Brady (R-TX).  The bill would update and reform the Miscellaneous Tariff Bill (MTB) process by which reductions or temporary suspensions of tariffs or duties on certain imports are considered. The last MTB expired in 2012, leaving many American manufacturing companies at a disadvantage in the global economy because of the costs related to the importation of covered foreign goods.  The bill enjoys broad support among businesses and is expected to pass.

The House will also consider S. 1890, the Defend Trade Secrets Act, under suspension of the rules.  This legislation will create a federal civil claim and remedy for trade secret misappropriation.  A wide-ranging coalition of companies and businesses supports the passage of this bill, which passed the Senate earlier this month by a vote of 87-0.  Once passed by the House, this bill will head to the President, who is expected to sign it.

The Wednesday suspension package also includes H.R. 699, the Email Privacy Act, legislation to update the 1986 Electronic Communications Privacy Act.  The bill enjoys more than 300 cosponsors, and a compromise version was favorably reported on a unanimous vote by the Judiciary Committee two weeks ago.  The bill is not expected to get Senate consideration this year, but its approval by the House will likely set the stage for a legislative enactment in 2017.

Finally on the Wednesday, the House will consider H.R. 4240, the No Fly for Foreign Fighters Act.  This bill would require an independent review by the Government Accountability Office (GAO) of the federal government’s terrorist watchlists to determine whether past weaknesses with them have been addressed or whether additional changes are needed.

Following its heavy schedule of suspension bills, the House will consider three more bills, all coming to the floor under rules.

The House will first tackle H.R. 4498, the Helping Angels Lead Our Startups (HALOS) Act, introduced by Small Business Committee Chairman Steve Chabot (R-OH).  This bill would require the Securities and Exchange Commission to revise its general solicitation regulations to provide carveouts for certain activities related to startup investment and financing pitches.

The House is expected to consider H.J. Res. 88, a disapproval resolution intended to block the Department of Labor’s controversial “fiduciary” rule.  The rule sets new standards for investment advisors with respect to retirement accounts, but Republicans believe the rule is too burdensome and that the costs will ultimately be borne by low- and middle-income Americans, who most need the advice but will be unable to get it.

The House will also vote on H.R. 4901, the Scholarships for Opportunity and Results (SOAR) Reauthorization Act.  This legislation provides scholarships to students from low-income families in the District of Columbia to attend the school of their choice, including private or charter schools, and provides money to D.C. charter and public schools to improve educational outcomes.

On the hearing front, both the House and Senate Appropriations Committees are expected to continue their consideration of FY 2017 funding bills this week.  Defense Secretary Ashton Carter is scheduled to appear before the Senate Appropriations Defense Subcommittee on Wednesday to discuss the FY 2017 budget request and Department of Defense funding.

Related to defense spending priorities, the full House Armed Services Committee will be holding a markup of its 2017 National Defense Authorization Act for 2017 on Wednesday morning, a $610 billion blueprint for the defense budget for FY 2017, following markups in the committee’s subcommittees last week.

House Energy and Commerce Committee Chairman Fred Upton (R-MI) announced that the committee will be marking up 12 bills, all reported favorably by the Health Subcommittee last week, related to the domestic opioid crisis.  The legislation includes measures that range from expanding access to Naloxone (medication that can reverse the effects of an opioid overdose) and providing an exemption from civil liability for trained and certified individuals who administer opioid overdose-reversing drugs, to increasing access to medication-assisted treatment.  Chairman Upton has said the full House will consider the legislation during the first or second week of May.  Likewise, the House Judiciary Committee is expected to mark up its portion of the opioid-response bill on Wednesday as well, though the committee will not formally notice its markup until Monday.  The Senate already passed its version of opioid abuse legislation, the Comprehensive Addiction and Recovery Act (CARA), in March.  There is wide support in Congress for advancing legislation to counter the opioid abuse epidemic, and if the bills can be conferenced following successful House passage, to resolve differences between them, it may be one of the few bipartisan measures that can pass both chambers during the remainder of this Congress.

The Senate Commerce, Science, and Transportation Committee will be marking up its Federal Communications Commission (FCC) reauthorization bill on Wednesday morning, along with seven other communications bills.  The legislation would provide a two-year reauthorization of FCC authority and appropriations and, among other things, reform the agency’s spectrum auction procedure, enhance agency transparency by requiring the FCC to submit various reports and budget estimates to Congress, and require the GAO to provide an analysis of whether the FCC’s current regulatory fee structure correlates to the actual workload of the FCC.  Also scheduled for markup is S. 421, the Federal Communications Commission Process Reform Act, to reform aspects of the FCC’s rule-making process.

Tax reform continues to be a matter of congressional focus.  The Senate Finance Committee is holding a hearing on Tuesday afternoon on navigating business tax reform, with Thomas Barthold, chief of staff for the Joint Committee On Taxation, scheduled to appear as a witness.

The Finance Committee is also holding a Thursday hearing on mental health issues.  Like the opioid abuse crisis, many members are eager to advance legislation to assist with mental health reform, but there remain partisan differences over how to pay for reforms and updates.  The Thursday hearing is expected to cover the Medicaid Institutions for Mental Diseases (IMD) Exclusion, which restricts Medicaid reimbursements for care at inpatient mental health treatment centers.

On Wednesday, the Senate Foreign Relations Committee will be reviewing U.S.-China relations, likely driven by China’s recent activities in the South China Sea.  Deputy Secretary of State Anthony J. Blinken is scheduled to provide testimony before the committee.

The House Oversight and Government Reform Committee meets Thursday to review the release of criminal aliens by the Department of Homeland Security and the impact on public safety.  This hearing follows one held two weeks ago by the House Judiciary Committee on the same topic at which families and survivors of violent attacks by criminal aliens testified.

The full schedule of events for the week ahead is detailed below:

 
Monday, April 25, 2016

Senate Committees

Pending Nominations
Senate Homeland Security and Governmental Affairs
Full Committee Markup
5:30 p.m., S-216

Tuesday, April 26, 2016

House Committees

Pending Legislation
House Energy and Commerce
Full Committee Markup
5 p.m., 2123 Rayburn Bldg.

Senate Committees

F-35 Joint Strike Fighter Program
Senate Armed Services
Full Committee Hearing
10 a.m., SD-G50

Challenges and Opportunities for Oil and Gas Development in Different Price Environments
Senate Energy and Natural Resources
Full Committee Hearing
10 a.m., SD-366

Navigating Business Tax Reform
Senate Finance
Full Committee Hearing
10 a.m., SD-215

FY 2017 State Department Budget
Senate Foreign Relations – Subcommittee on Western Hemisphere, Transnational Crime, Civilian Security, Democracy, Human Rights and Global Women’s Issues
Subcommittee Hearing
10 a.m., SD-419

Public Safety Officers’ Benefits Program
Senate Judiciary
Full Committee Hearing
10 a.m., SD-226

Wednesday, April 27, 2016

House Committees

Focus on the Farm Economy: Farm Production Costs
House Agriculture – Subcommittee on Biotechnology, Horticulture and Research
Subcommittee Hearing
10:30 a.m., 1300 Longworth Bldg.

H.R. 4909, the FY 2017 National Defense Authorization Act
House Armed Services
Full Committee Markup
10 a.m., 2118 Rayburn Bldg.

The Persuader Rule: The Administration’s Latest Attack on Employer Free Speech and Worker Free Choice
House Education and the Workforce – Subcommittee on Health, Employment, Labor and Pensions
Subcommittee Hearing
10 a.m.

Pending Legislation
House Energy and Commerce
Full Committee Markup
10 a.m.

How Can the U.S. Make Development Banks More Accountable?
House Financial Services – Subcommittee on Monetary Policy and Trade
Subcommittee Hearing
10 a.m.

Examining the President’s FY 2017 Afghan/Pakistan Budget Proposal
House Foreign Affairs – Subcommittee on the Middle East and North Africa
Subcommittee Hearing
10 a.m., 2172 Rayburn Bldg.

ISIS in the Pacific: Assessing Terrorism in Southeast Asia and the Threat to the Homeland
House Homeland Security – Subcommittee on Counterterrorism and Intelligence
Subcommittee Hearing
10 a.m., 311 Cannon, Bldg.

BLM’s Regulatory Overreach into Methane Emissions Regulation
House Natural Resources – Subcommittee on Energy and Mineral Resources
Subcommittee Hearing
10 a.m., 1324 Longworth Bldg.

Examining TSA Management and Misconduct (Part I)
House Oversight and Government Reform
Full Committee Hearing
10 a.m., 2154 Rayburn Bldg.

NSF Research Facility Reform
House Science, Space and Technology
Full Committee Markup
10 a.m.

S is for Savings: Pro-Growth Benefits of Employee-Owned S Corporations
House Small Business
Full Committee Hearing
11 a.m., 2360 Rayburn Bldg.

South Sudan Prospects for Peace and Security
House Foreign Affairs – Subcommittee on Africa, Global Health, Global Human Rights and International Organizations
Subcommittee Hearing
2 p.m., 2200 Rayburn Bldg.

Funding FY 2017 Western Hemisphere Priorities
House Foreign Affairs – Subcommittee on the Western Hemisphere
Subcommittee Hearing
2 p.m., 2172 Rayburn Bldg.

Potential of Hydropower as a Clean, Renewable and Domestic Energy Source
House Natural Resources – Subcommittee on Water, Power and Oceans
Subcommittee Hearing
2 p.m., 1324 Longworth Bldg.

The Best and Worst Places to Work in the Federal Government
House Oversight and Government Reform
Full Committee Hearing
2 p.m., 2154 Rayburn Bldg.

Senate Committees

Defense Budget
Senate Appropriations – Subcommittee on Defense
Subcommittee Hearing
10:30 a.m., SD-192

Examining Better Budgets and Better Results
Senate Budget
Full Committee Hearing
10:30 a.m., SD-608

Pending Business
Senate Commerce, Science and Transportation
Full Committee Markup
10 a.m., SR-253

U.S. -China Relations: Strategic Challenges and Opportunities
Senate Foreign Relations
Full Committee Hearing
10:30 a.m., SD-419

Government Reform: Ending Government Duplication
Senate Homeland Security and Governmental Affairs
Full Committee Hearing
10 a.m., SD-342

Examining Counterfeit Products and Their Impact on Consumer Health and Safety
Senate Judiciary
Full Committee Hearing
10 a.m.SD-226

Drowning in Regulations: The Waters of the U.S. Rule and the Case for Reforming the RFA
Senate Small Business and Entrepreneurship
Full Committee Hearing
10 a.m., SR-428A

High-Speed Internet Access Programs on Tribal Lands
Senate Indian Affairs
Full Committee Hearing
2:15 p.m., SD-628

Valeant Pharmaceuticals’ Business Model: the Repercussions for Patients and the Health Care System
Senate Special Aging
Full Committee Hearing
3:30 p.m., SH-216

Thursday, April 28, 2016

House Committees

Reviewing the Impact of Capital and Margin Requirements on End-Users
House Agriculture – Subcommittee on Commodity Exchanges, Energy, and Credit
Subcommittee Hearing
10 a.m.

U.S. Challenges and Opportunities in Asia
House Foreign Affairs
Full Committee Hearing
10 a.m.

Transferring Guantanamo Bay Detainees to the Homeland: Implications for States and Local Communities
House Homeland Security – Subcommittee on Oversight and Management Efficiency
Subcommittee Hearing
10 a.m., 311 Cannon Bldg.

Stop Settlement Slush Funds Act
House Judiciary – Subcommittee on Regulatory Reform, Commercial and Antitrust Law
Subcommittee Hearing
April 28, 10 a.m.

Criminal Aliens Released by DHS
House Oversight and Government Reform
Full Committee Hearing
9:30 a.m., 2154 Rayburn Bldg.

Improving the VA Appeals Process
House Veterans’ Affairs – Subcommittee on Disability Assistance and Memorial Affairs
Subcommittee Hearing
10 a.m., 334 Cannon Bldg.

Examining EPA’s Predetermined Efforts to Block Pebble Mine Action (Part II)
House Science, Space and Technology
Full Committee Hearing
10 a.m., 2318 Rayburn Bldg.

Food Prices and the Consumer
House Agriculture – Subcommittee on Nutrition
Subcommittee Hearing
2 p.m., 1300 Longworth Bldg.

U.S. Policy Toward Lebanon
House Foreign Affairs – Subcommittee on the Middle East and North Africa
Subcommittee Hearing
2 p.m.

Pending Legislation
House Homeland Security
Full Committee Markup
2 p.m.

Discussion Draft of Federal-Local Land Management Cooperation Act
House Natural Resources – Subcommittee on Federal Lands
Subcommittee Hearing
2 p.m., 1324 Longworth Bldg.

The Consequences of Federal Land Management Along the U.S. Border to Rural Communities and National Security
House Natural Resources – Subcommittee on Oversight & Investigations
Subcommittee Hearing
2:30 p.m., 1334 Longworth Bldg.

Oversight of the False Claims Act
House Judiciary – Subcommittee on the Constitution and Civil Justice
Subcommittee Hearing
4 p.m., 2141 Rayburn Bldg.

Senate Committees

Counter-ISIL Operations and Middle East Strategy
Senate Armed Services
Full Committee Hearing
9:30 a.m., SH-216

Pending Business
Senate Judiciary
Full Committee Markup
10 a.m., SD-226

Mental Health in America
Senate Finance
Full Committee Hearing
2 p.m., SD-215

Federal Invasive Species Control and Management
Senate Energy and Natural Resources – Subcommittee on Public Lands, Forests and Mining
Subcommittee Hearing
2:30 p.m., SD-366

Friday, April 29, 2016

House Committees

Nuclear Energy Legislation
House Energy and Commerce – Subcommittee on Energy and Power
Subcommittee Hearing
9:30 a.m.

Pet Medication Industry: Issues and Perspectives
House Energy and Commerce – Subcommittee on Commerce, Manufacturing and Trade
Subcommittee Hearing
9:45 a.m.

Pending Business
House Select Intelligence
Full Committee Markup (CLOSED)
9 a.m., HVC-304

Pending Legislation
House Veterans’ Affairs – Subcommittee on Health
Subcommittee Markup
9 a.m., 334 Cannon Bldg.

China Moves Forward with Negative List for (Domestic and Foreign) Market Access

In recent years, the business community in China has been abuzz with talk of various market access “negative lists” — lists of exceptions to what would otherwise be open market access. China has now introduced a new market access negative list for all forms of investment in the country, both domestic and foreign. Before describing the implications of this new list, we first note the existing and proposed negative lists that have drawn widespread attention over the past couple of years:

  • US-China BIT Negative List (Under Negotiation). There has been extensive discussion of the negative list for the US-China Bilateral Investment Treaty (“BIT”) currently under negotiation. Foreign investment activities included on the BIT’s negative list would not be eligible for the market access benefits and protections of the BIT — particularly, national treatment (that is, equal treatment with domestic investors), a core principle of standard US bilateral investment treaties with other countries.
  • Nationwide Foreign Investment Negative List (Announced). Among other reforms proposed in the draft Foreign Investment Law that was released in early 2015, Chinese authorities plan to issue a nationwide negative list for foreign investment market access. As with the US-China BIT, unlisted items would be given national treatment (with some procedural differences between the treatment of investments by foreign and domestic investors).
  • Pilot FTZ Foreign Investment Negative List (Issued). Following the issuance of a negative list for foreign investment activities in China’s first pilot free trade zone (“Pilot FTZ”) in Shanghai, Chinese authorities have now adopted one unified negative list that governs all Pilot FTZs established to date — specifically, the Pilot FTZs in Shanghai, Fujian Province, Guangdong Province, and Tianjin. 

In December 2015, the State Council announced its decision to introduce a market access negative list that applies to all investment activities in China, by both domestic and foreign investors. Swiftly acting on the State Council’s decision, the National Development and Reform Commission and the Ministry of Commerce issued a trial version of the list (“Trial Negative List”) in March to be piloted throughout the entirety of the four provinces and municipalities that currently host Pilot FTZs (not just in the FTZ zones themselves): Shanghai, Tianjin, Fujian Province, and Guangdong Province. The respective governments for these four regions are to propose their own methods for implementing the Trial Negative List and obtain the approval of the State Council. Central government authorities are seeking feedback from the implementation of the Trial Negative List to facilitate the roll-out of a nationwide market access negative list in 2018.

The Trial Negative List includes 96 prohibited items in 17 sectors and 232 restricted items in 22 sectors. These items have been compiled from several sources, and include (1) investment projects requiring administrative approvals as set out in the Consolidated List of Administrative Approval Items by Departments under the State Council (included in the list as restricted items ); (2) project categories designated for elimination or closed for new investment under the Catalogue for Guiding Industry Restructuring (2011 version), which make up 46 of the 96 prohibited items; (3) projects requiring approvals from the relevant development and reform departments under the Catalogue of Investment Projects Subject to Government Verification and Approval (2014 version) (included in the list as restricted items); and (4) projects restricted or prohibited under other national laws, administrative regulations, and State Council decisions. 12 of the 328 total items are (or include sub-items that are) entirely new and were not restricted or prohibited under previous laws and regulations. These new items include an approval requirement for collaborations between domestic media and foreign news agencies and censorship requirements for gaming and entertainment equipment.

Foreign investors, including those without interests in the four pilot regions, should pay close attention to these developments. Those investing in the four regions where the Trial Negative List is being piloted should note that they are to be subject to both the Trial Negative List and any other restrictions on foreign investment that may concurrently exist (whether written restrictions or de facto ones — for instance if no procedural pathway for approval of a particular type of investment in a regulated industry is provided under existing laws and regulations). Consequently, in the four Pilot FTZs, foreign investors will need to heed both the restrictions and prohibitions contained in the Trial Negative List as well as those on the foreign investment negative list for the Pilot FTZs.

In short, the Trial Negative List does not, itself, offer any improvements in market access for foreign investors in China. Rather, it represents an effort on the part of the Chinese government to consolidate in one place a list of all restrictions applicable to both domestic and foreign investors. The goal, hopefully, is to lay the groundwork for procedural reforms, as well as for revisions to the list in the future that would provide improved market access.

Shirleen Hong and Nick Francescon of Covington & Burling LLP assisted with the research and preparation of this article.

A call for 50 percent tariffs on U.S. imports of aluminum

The United Steelworkers union (USW) on April 18 filed a petition with the U.S. International Trade Commission (ITC) for the U.S. to invoke a global safeguard under Section 201 of U.S. trade law and impose tariffs of up to 50 percent on primary unwrought aluminum.

This proceeding could have significant impacts on global aluminum producers and U.S. importers and users of aluminum products.

The timetable is very brief: The ITC must decide within 60 days whether the conditions for “critical circumstances” are met and whether to recommend provisional relief.  Once the ITC has made its decision on the critical circumstances claim, regardless of whether or not it recommended provisional relief, it will begin its underlying investigation under Section 201. The underlying ITC investigation typically takes 120 days – although it is allowed to take 150 days for complicated cases – and the ITC then has another 60 days to develop relief recommendations for the President. The ITC’s recommendations are then sent to the United States Trade Representative (USTR) which formulates a recommendation to the President who then has 50-60 days to decide whether or not to grant final phase relief.

The ITC and USTR will hear from both sides: The question for the ITC is whether primary aluminum is being imported into the United States “in such increased quantities as to be a substantial cause of serious injury, or the threat thereof” to the U.S. aluminum industry. The ITC will seek input from all market participants: U.S. producers, foreign producers, U.S. importers, and U.S. users. The President, through USTR, has the final say on any remedy recommended by the ITC, after further input from affected parties.

Invoking Section 201 safeguard measures is very rare. The last time was in the early 2000’s when President Bush imposed import restrictions on certain steel products.  The process ahead is certain to be factually, legally and politically intense.

How Big a U.S. Export Market Could Cuba Be?

Since President Obama announced the normalization of U.S. relations with Cuba in December of 2014, U.S. businesses have begun to plan for the eventual lifting of U.S. economic sanctions against Cuba.  While the Obama Administration has taken a number of steps to jumpstart interactions between U.S. businesses and the Cuban private sector, including easing travel and trade restrictions, only Congress can lift the sanctions entirely.  And Congress will need some convincing.

A new study from the U.S. International Trade Commission (“ITC”), released April 18, 2016, was requested by Congress to inform discussions about the potential benefits to U.S. businesses and the U.S. economy from more open trade with Cuba.  Mindful of the limited size of the Cuban market — with a population of about 11 million — the ITC finds that eliminating trade barriers on U.S.-Cuba trade could yield measurable gains to U.S. exports of goods, with more limited prospects for U.S. services.

The ITC study was originally requested in December 2014 by then-Chairman of the Senate Finance Committee Senator Ron Wyden in order to “gain a better understanding of the economic effects on exports of U.S. goods and services, including digitally traded goods and services, of statutory and administrative restrictions related to trade with and travel to Cuba by U.S. citizens.”  The ITC’s study, he said, would “provide a foundation for re-evaluating the current U.S. economic relationship with Cuba.”  That request was later modified by current Senate Finance Committee Chairman Orrin Hatch, who asked the ITC to expand the study to address “Cuban non-tariff measures, Cuban institutional and infrastructural factors, and other Cuban barriers that inhibit or affect the ability of U.S. and non-U.S. firms to conduct business in and with Cuba.”

According to the ITC, the U.S. restriction most often mentioned by U.S. businesses as limiting their exports to Cuba is the requirement that Cuba pay for most U.S. exports in cash or via financing through third-country sources.  Also cited were restrictions on the use of promotional and marketing funds sourced from the U.S. Department of Agriculture or U.S. industry, restrictions on business travel to facilitate trade, the ban on U.S. tourist travel, and restrictions on U.S. investment in Cuba.

Cuban non-tariff measures that do or could restrict U.S.-Cuba trade stem principally from the Cuban government’s near-exclusive control of imports and distribution, as well as the government’s tendency to make decisions about trade and investment based on political factors.  While Cuba’s investment climate is expected to improve to meet government goals for foreign investment, the government has been unwilling to approve investments by wholly foreign entities and potential investors are concerned about the lack of rights to own land and some physical goods.  The Cuban legal system, particularly as it affects resolution of commercial disputes, lacks transparency, and enforcement of IP rights is inconsistent.  Other challenges to increased trade include poor infrastructure and telecommunications connections, as well as generous credit terms offered to the Cuban government by third countries that U.S. exporters may not be willing or able to match.

Using an economic model, the ITC predicts that, within 5 years of eliminating U.S. restrictions on trade with Cuba, U.S. exports could increase by nearly 350 percent from their 2010-2013 average to approximately $1.8 billion.  Since it is already legal to sell some U.S. agricultural products to Cuba, the majority of the gains would be in manufactured goods.  If U.S. restrictions were eliminated and Cuban import barriers were reduced to the average level for developing countries, the ITC predicts that U.S. exports could increase by an additional $442 million to $2.2 billion, an overall increase of over 450 percent.

Cuba imports nearly 80% of its food needs.  The ITC’s model shows that the U.S. share of Cuba’s market for agricultural products would more than double, from 16 percent with restrictions to 34 percent without restrictions, while the shares of other suppliers to the Cuban agricultural market would decline.  The largest gainers would be wheat and rice.  For manufactured products, the U.S. share of the Cuban market would increase from less than 2 percent to 12 percent, with the largest gains in processed food and beverages and chemicals and chemical products (such as fertilizers).

Because Cuba is not currently a significant importer of services, prospects for U.S. export growth under either scenario are more modest.  In essence, the ITC finds that tight government control on Cuba’s growing tourism sector will limit short-term prospects for services exports to that sector and that gains in other sectors could occur in the longer term as the Cuban economy grows.

Overall, the report concludes that “while U.S. exports to Cuba would increase further if Cuban tariff and nontariff measures were decreased, the largest share of the effects on U.S. exports would come from the removal of U.S. restrictions on trade.”  By cataloging the barriers on both sides and putting numbers to the trade gains that eliminating those barriers could bring, the ITC’s report will likely inform further policy discussions regarding U.S.-Cuba economic relations.

The need for reciprocity is also likely to feature prominently in policy discussions.  Covington was instrumental in promoting a study by the Peterson Institute for International Economics which called U.S. policymakers to insist on reciprocal treatment by Cuba of U.S. companies looking to trade with or doing business in Cuba as part of any normalization process.

This Week in Congress – April 18, 2016

The Senate is aiming to wrap up consideration of the Federal Aviation Administration (FAA) reauthorization bill this week and conclude work on the long-stalled comprehensive energy reform bill, while the House of Representatives will be zeroing in on legislation to provide more oversight of the Internal Revenue Service (IRS).

The Senate returns on Monday with a vote scheduled on the substitute amendment to the FAA reauthorization vehicle, and a subsequent vote on the motion to invoke cloture on the underlying legislation (H.R. 636).  After adopting numerous amendments to the bipartisan bill last week, Senate Commerce, Science, Transportation Committee Chairman John Thune (R-SD)  indicated there are additional pending amendments the Senate will consider before a vote on final passage some time this week.  Last week, efforts to craft a package of tax breaks to add to the FAA bill fell apart, so the legislation will not carry unrelated tax provisions when the Senate passes it and sends to to the House for consideration.

Following the FAA reauthorization bill, the Senate is expected to resume work on S. 2012, the Energy Policy Modernization Act of 2015, after an agreement was finally reached for concluding its consideration, ending three months of negotiations over unrelated provisions.   The agreement reached between leadership and the bill managers, Energy and Natural Resources Committee Chairwoman Lisa Murkowski (R-AK) and Ranking Member Maria Cantwell (D-WA), will allow for consideration of a number of amendments, many of which will be considered by a voice vote, before a vote on final passage. Should the Senate pass the bipartisan legislation, as it is expected to do, it will be a significant step forward for national energy policy, which has not been updated since 2007. The five titles of S. 2012 provide updates and improvements to national energy efficiency, grid infrastructure, energy supply, government accountability, and land conservation.

The House of Representatives passed its own version of energy modernization legislation (H.R. 8) in December, by a largely partisan vote of 249-174.  Energy and Natural Resources Committee Chairwoman Murkowski has indicated she would like to take S. 2012 to a conference committee with the House bill in order to reconcile differences between the two versions and send a compromise bill to the President’s desk before the end of this year.

The first of the Fiscal Year (FY) 2017 appropriations bills may also see Senate action this week.  Senate Majority Leader Mitch McConnell has filed a motion to proceed to the $37.5 billion FY 2017 Energy & Water Appropriations measure, marked up by the full Senate Appropriations Committee last week.  Majority Leader McConnell has indicated that the Senate will spend 12 weeks of floor time on appropriations bills in order to try to pass all 12 bills by the end of the current fiscal year, September 30.

The House is also scheduled to return on Monday, with votes expected on eight bills, including several name designations for federal buildings and U.S. Postal Service locations, under suspension of the rules.

On Tuesday, the House is expected to vote on an additional seven bills, five of which have been reported out of the House Small Business Committee, under suspension of the rules.  The first of the other two suspensions on Tuesday requires that the IRS provide printed copies of official IRS tax instructions to taxpayers when requested, free of charge, and the second prohibits the use of IRS funds to target U.S. citizens for exercising their First Amendment rights.

The legislative business on Wednesday and the remainder of the week will also be focused on IRS oversight.  Due to the observance of Emancipation Day in the District of Columbia on April 15, the annual income tax filing deadline for 2016 has been pushed to Monday, April 18.  Leadership in the House of Representatives is marking the “Tax Day” occasion by dedicating this week’s floor activity to consideration of legislation aimed at making the IRS more accountable and transparent.  Four bills subject to a rule will be considered on Wednesday and Thursday.  H.R. 1206 would impose a hiring freeze at the IRS until the Treasury Secretary can certify that it does not employ any individual who is seriously delinquent on federal tax obligations; H.R. 3724 would prevent the IRS from rehiring any former employee fired from the IRS for misconduct, including poor performance or unauthorized access to personal taxpayer information; H.R. 4890 would prevent any IRS employees from receiving a bonus until the Secretary of the Treasury develops and implements a comprehensive customer-service strategy; and H.R. 4885 would prevent the IRS from keeping user fees it imposes and instead require such fees to be deposited into the general fund of the Treasury subject to expenditure only as appropriated by Congress. Continue Reading

Africa, TPP and TTIP: Integration or Isolation?

With the demise of the Doha Development Round at the WTO Ministerial in Nairobi this past December, the multilateral approach to global trade negotiations has largely ended. Given that the number of regional trade agreements has increased from 70 in 1990 to more than 270 today, it appears that it is every region for itself when it comes to global trade.

TFTA and CFT

In certain respects, Africa is well positioned in this new era regional trade relations.

The Tripartite Free Trade Agreement (TFTA), signed in Sharm-el-Sheikh, Egypt in June 2015, brings the Common Market of Eastern and South Africa (COMESA), the East African Community (EAC) and the Southern Africa development Community (SADC) into the continent’s largest free-trade zone covering 26 countries and stretching from Cape Town to Cairo.

Already, it is estimated that the volume of intra-regional trade among these three blocks has increased from $2.3 billion in 1994 to $36 billion in 2014, a more than 12 fold increase from 7 percent to 25 percent of trade over 20 years. While low compared to the EU (70%) or Asia (50%), it is a positive trend line.

The TFTA is an important boost for regional integration in Africa and is seen as a stepping stone for Africa to realize its ambition of creating a Continental Free Trade Agreement (CFTA). Implementation is behind schedule, however, and efforts are being made to complete the negotiations within the 36 months set out in the roadmap.  Other challenges include poor infrastructure, high transaction costs and low levels of industrialization.

Africa and TPP

While Africa moves internally to increase trade among the 54 nations on the continent, a large portion of the global economy is moving toward more integrated trade across regions, as exemplified by the Trans Pacific Partnership (TPP).

The 10 countries in the Asia-Pacific region in addition to the U.S. and Canada who make up the TPP countries collectively account for 40 percent of the world’s GDP and 26 percent of the world’s trade. Moreover, TPP is likely to expand to include South Korea, Indonesia and other Asian nations.

While TPP does not appear to work against Africa’s global trade interests in the short term, it bears watching closely. Vietnam, for example, exported $7.7 billion worth of textiles and apparel to the U.S. last year even though there was a 17 percent tariff in place. In 2014, African countries, such as Ethiopia, Kenya, Lesotho and Tanzania exported nearly $1 billion worth of clothes to the U.S. under the African Growth and Opportunity Act (AGOA) with no tariffs.

Under TPP, Vietnam’s tariff on apparel exports to the U.S. will be cut significantly and baseline growth in apparel exports to the U.S. could increase by 50 percent by 2025, according to the Eurasia Group.  This growth is expected to displace a share of China’s apparel exports to the U.S. but it could be detrimental to some African countries, such as Ethiopia and Kenya, who are seeking to ramp up their AGOA apparel export.

Africa and TTIP

The negotiation of TTIP is a more complex and immediate challenge to the U.S.-Africa trade relationship. Over the last decade the EU has put in place reciprocal Economic Partnership Agreements (EPAs) with most African nations. Last year, the U.S. last year renewed the non-reciprocal AGOA through 2025. If the U.S. does not address this asymmetry in the context of the TTIP negotiations, it will be ceding a long-term commercial advantage to European firms investing in Africa and exporting to that market.

For example, under the terms of its free trade agreement with the EU, South Africa allows imports from Europe at a 4.5 percent general tariff rate. In contrast, U.S. exports to South Africa face an average general tariff of 19.5 percent. According to USTR, the competitiveness of U.S. exports to South Africa “will further erode” once the EU-SADC EPA comes into force. The disadvantage to U.S. products and companies will increase across Africa in coming years as the EPAs enter into effect unless the U.S. takes steps now to address the imbalance.

Transitioning From AGOA

In his January 28 remarks at a hearing on the post-AGOA relationship, the U.S. Trade Representative, Ambassador Michael Froman, noted that the US has free trade agreements with 20 countries today, compared with 3 in 2000. However, none of these are in Sub-Saharan Africa, and Ambassador Froman did not propose one. He did say that he would make recommendations in June on advancing the U.S.-Africa trade and investment agenda.

Given the amount of time required to negotiate and ratify trade agreements, it is not too soon to begin laying the groundwork for the post-AGOA relationship. Clearly, reciprocity will have to be a key element of this new relationship.

In practice, the emerging trade relations with the East African Community (EAC) could serve as a precursor to a new relationship. In February 2015, the U.S. and the EAC signed a cooperation agreement that focuses on implementation of the WTO’s Trade Facilitation Agreement, enhancing food safety, plant and animal health and building capacity to meet Global Trade Standards. In fact, over the next several years, it would be beneficial to start negotiating agreements in areas such as services, intellectual property and investment, that could provide the foundation for an FTA. Indeed, if the U.S. can be successful in creating a free trade agreement with the EAC, it is conceivable that other countries, such as Ethiopia, Mozambique and Mauritius could become part of, or “plug into,” an increasingly regional FTA with the U.S.

As for TPP, an informal mechanism should be established so that African governments can be informed about the implementation of this agreement and how it might impact Africa’s trade relations with the U.S. and Asian partners. One recommendation would be to establish a working group or advisory committee of the TPP Commission and the African Union that might meet every two years.

TTIP presents a more immediate issue. At minimum, there should be some type of advisory mechanism so that the AU can stay informed of the progress of the TTIP negotiations, given that the EU is Africa’s largest trading partner, the growing importance of U.S.-African trade relations and a need to balance the asymmetry of the EPAs and AGOA. In the spirit of reciprocity, it would also be helpful if the U.S. was invited as an observer to Africa ministerial meetings related to the TFTA and CFTA.

The global trading system may be becoming more regionalized but Africa needs to be active in this process if it is to transcend its marginalized position of 3.3% of global exports. Having a place at the table, however informal, while TPP is being implemented and TTIP is negotiated, would help to ensure that Africa does not become more isolated as it works to integrate regionally.

Note: This piece originally appeared on the Brookings Africa Growth Initiative’s blog Africa in Focus and can also be found on CovAfrica, the firm’s blog on legal, regulatory, political and economic developments in Africa.

 

EU Policy Update

1. Brussels Attacks set the tone for the Council JHA priorities

The Brussels terrorist attacks of March 22 have shaped the EU policy narrative on Justice and Home Affairs, notably at the Council of Ministers and in key Member States.  On March 24, the EU Ministers for Justice and Home affairs issued a Joint Statement on the attacks.  The statement sets out 10 priorities to enhance EU Member States’ collective ability to combat terrorism, including, among others: adopting the Passenger Name Record Directive in April 2016; completing a legislative package to combat terrorism (including Schengen controls); and enhancing cooperation with third countries with regard to digital evidence.  Meanwhile, Belgium has moved swiftly to introduce new data retention laws and proposals to grant intelligence agencies greater freedoms to hack extremist groups online and eavesdrop on cross-border communications.

2.  Digital Single Market Policy

On March 4, 2016, the Commission met with civil society and IT companies from Member States to discuss ways to combat online hate speech (see meeting summary here).  The Commission wants to create a code of conduct for IT firms to improve the way they respond to hate speech online.  At the meeting, they discussed finding a common understanding on the type of material that is a public incitement to hatred or violence, and target benchmarks for the time to review and take down the offensive material.  The Commission seeks to finalize this code of conduct by June.

On March 17, 2016, the European Parliament’s Committee on Civil Liberties, Justice and Home Affairs (“LIBE Committee”) held a public hearing on the “EU-U.S. Privacy Shield”, a new framework for transatlantic data flows that was announced in early February – see the framework text here, and our blog on the hearing here.  Compliance remains voluntary for U.S. companies, and the precise nature of the framework and obligations are still largely unknown.  The Privacy Shield must now be approved in the EU under the “comitology” procedure, likely in early summer 2016.  Under this procedure, the Article 29 Working Group will provide a non-binding opinion on the proposal, which is expected by April 13.  The procedure also calls for a binding opinion by a qualified majority of the Article 31 Committee, and the formal adoption of the adequacy decision by the EU College of Commissioners.  Once the Framework is approved, the U.S. Department of Commerce has stated that it will be delivered to the Federal Register for publication within 30 days.

For an agenda of the LIBE public hearing, see here; for the video, see here.  For a full analysis, and more information on the latest developments, we gladly refer you to our InsidePrivacy blog.

On March 18, 2016, the Competition Commissioner, Margrethe Vestager, published her initial findings on geo-blocking, as part of the ongoing e-commerce sector inquiry (see press release here and full report here).  Geo-blocking refers to restrictions placed on access to online services and content on a geographic basis.  The Commission concluded that there may be legitimate reasons to geo-block, but geo-blocking might not be systematically required to the same extent by all rights holders.  There appear to be large differences in both the extent to which geo-blocking takes place in different Member States, and the extent to which different types of operators implement geo-blocking in relation to different categories of digital content.  According to the Commission, the Preliminary Report in the e-commerce sector inquiry is due to be published in mid-2016.  This will be followed by a public consultation.  The Final Report is scheduled for publication in early 2017.

3.  Energy and Climate Change Policy

On March 17, 2016, the Commission presented a proposal for a Regulation laying down rules on the making available on the market of CE marked fertilizing products, amending Regulations (EC) 1069/2009 and 1107/2009.  The proposal provides rules for free movement of all CE-marked fertilizer products across the EU; updates the current requirements for inorganic fertilizers; and introduces new harmonized requirements regarding quality, safety and labelling.

The proposal has two objectives.  First, in line with the Commission’s Circular Economy Package, the proposal’s main objective is to incentivise large scale EU production of innovative fertilizers from domestic organic or secondary raw materials.  It proposes a regulatory framework radically easing access to the internal market for such fertilisers, thereby levelling their playing field with that of mined or chemical fertilisers. Second, the proposal aims at introducing harmonised cadmium limits for phosphate fertilisers.  It proposes specific cadmium limits for different phosphate fertilizers. The draft Regulation has been sent to the European Parliament and Council for adoption.  For the press release, see here.  For the proposal, see here.  Interested parties may submit comments on the proposal through the following link until May 12, 2016.

4.  Internal Market and Financial Services Policies

On March 8, 2016, the European Commission announced a targeted revision of the 1996 Posting of Workers Directive.  The Commission has proposed several changes, including: placing posted and local workers under the same (national or local) rules on rates of pay; applying mandatory universal collective agreements for posted workers in all economic sectors; and allowing Member States to apply the revised Directive to sub-contracting claims in addition to contracting claims.  Additionally, the revision applies the principle of equal treatment on temporary posted agency workers, as well as local temporary agency workers, thus filling a gap in the current Directive.  The proposed revision also places long-term postings (greater than two years) under mandatory rules of protection under labor law in the host Member State.  For the press release, see here.  For the Commission’s explanation, see here.  For the proposal, see here.

On March 16, 2016, the Commission published a Communication laying out policy measures to support the European steel sector in the scope of short- and long-term challenges.  The Communication sets out various measures, including, among others: adopting additional anti-dumping measures against unfair trade practices; cooperating on a bilateral and multilateral level to tackle the causes of global overcapacity (as to which, see further Section 7, below); investing at both a private and public level, including the European Fund for Strategic Investments, EU Structural and Investment Funds, and Horizon 2020 (the EU research funding program).  For the press release, see here.  For the Communication, see here.

5.  Life Sciences and Healthcare Policies

On March 2, 2016, the European Medicines Agency (“EMA”) published guidance on the Agency’s proactive disclosure policy for clinical reports, known as Policy 0070 (see here).  The EMA adopted Policy 0070 in October 2014; this stated that the EMA will proactively publish clinical reports on its website following the approval of medicines.  In line with this Policy, the EMA expects to publish the first wave of clinical reports in September 2016.  This guidance focuses on: the overall procedural aspects of submitting clinical reports; anonymization of clinical reports to ensure no personal data of trial participants is published; and the identification and redaction of commercially confidential information (CCI) in clinical reports.  For the latest Proactive Disclosure Guidance, see here.  See also Covington’s Inside EU Life Sciences post on the subject, here.

On March 17, 2016, the European Commission published its Report on the Sustainable Use of Biocides, in light of the Commission’s obligation in the Biocidal Products Regulation of 2012 (available here) to present a Report on how the Regulation contributes to the sustainable use of biocidal products.  The Report underscores the important contributions of the Regulation, and outlines how the text, for the most part, adequately addresses the main objectives.  The Commission further urges Member States to concentrate their efforts and resources on substance approval and product authorization, as well as to invest additional resources on enforcement activities to ensure that no product is illegally placed on the market without proper labeling.  For the press release, see here.  For the Report, see here.

6.  Trade Policy and Sanctions

On March 10, 2016, the EU-China “Steel Contact Group” met in Beijing to discuss causes and potential solutions to the crisis facing the steel sector.  The goal was to find solutions to the problem of overcapacity of steel on the market, focusing on the state of play of capacity reduction, the newly adopted capacity reduction targets, subsidization policies, and the behavior and financing of state owned steel enterprises.  However, the Commission admits that “significant work remains to be done”, and both parties have agreed to “intensify the dialogue”.  For the Commission press release, see here.

On March 21, 2016, the Commission adopted a proposal to relocate people in need of international protection between Turkey and the EU.  The proposal amends the Council Decision of September 2015 (see here) to make the 54,000 previously agreed places for asylum-seekers available for the purpose of resettling Syrians from Turkey to the EU.  This is designed to serve as part of a scheme to offset “irregular” flows of migrants from Turkey into Greece with Syrian asylum-seekers who have not crossed from Turkey into Greece in an “irregular” manner.  Since April 4, some “irregular” migrants that have crossed from Turkey into Greece since March 20 have been sent back to Turkey.  This proposal was adopted in the context of the Commission’s publication on March 16 of the first report on relocation and resettlement (see here) and a Communication setting out six principles for further developing EU-Turkey cooperation in tackling the migration crisis, with a focus on Italy and Greece (see here).  For the press release, see here.  For the proposal, see here.  For further background and analysis on the EU-Turkey relationship, see Covington’s blog post here.

On March 29, 2016, the World Trade Organization issued a panel report regarding EU duties on biodiesel from Argentina.  As part of the dispute, Argentina challenged certain aspects of the anti-dumping measures imposed by the European Union on imports of biodiesel from Argentina.  The panel report recommended that the EU bring the relevant measures into conformity with its obligations under the Anti-Dumping Agreement and the GATT 1994.  The panel stopped shy of placing an obligation, as such, on the EU to withdraw the measures in dispute.  For a press release, see here.  For the full panel report, see here.

 

This Week in Congress – April 11, 2016

This week both chambers will be in session, kicking off three busy weeks of legislative activity before the next scheduled recess.  The Senate will resume consideration of its proposal to reauthorize the Federal Aviation Administration (FAA), while the House will be taking up legislation related to the Federal Communications Commission’s (FCC) net neutrality rules and two bills related to domestic finance reforms.

The Senate is scheduled to return on Monday and resume consideration of H.R. 636, the vehicle for the FAA reauthorization bill authored by Commerce, Science, Transportation Committee Chairman John Thune (R-SD) and Ranking Member Bill Nelson (D-FL).  Consideration of the bipartisan bill will be interrupted briefly on Monday with a vote expected on the nomination of a federal district judge.  The Senate is expected to spend the entire week on the FAA reauthorization bill and consider several amendments.

Final passage of the legislation may be held up over unrelated tax provisions that Senate Democrats are attempting to attach to the bill.  Passage of the Fiscal Year (FY) 2016 omnibus spending measure last year included a package of tax credit renewals, including credits for solar and wind power, but the package left out other renewable energy sources, such as biomass, fuel cell, and geothermal energy.  Clean energy advocates claim the provisions were omitted from the omnibus inadvertently and would like to attach the extension of these tax credits to the must-pass FAA reauthorization bill.  While the clean-energy tax credits do have the support of some congressional Republicans, more than two dozen conservative organizations oppose the inclusion of the tax-credit extensions in the FAA bill.  In addition, Finance Committee Ranking Member Ron Wyden (D-OR), who is leading the effort to renew the clean-energy credits, is also reportedly seeking to add his bill to reform the federal taxes on beer and hard cider.  The timeline to resolve these issue is constrained because the bill will still need consideration in the House, where many members are likely to oppose the tax provisions.  The FAA bill itself must be enacted by July 15, when the current authority for the agency expires.

On the other side of the Capitol, the House of Representatives is scheduled to return following its recent two-week recess.  The big news is not what will be on the floor, but what will not.  Under the Budget Act, a budget is due by April 15.  As we have reported previously, sharp disagreements among Republicans over a proposed budget appear to remain unresolved, and the House, whose leaders had hoped to tackle the budget resolution this week, will be considering other matters.

The House returns on Tuesday, with votes expected on four bills under suspension of the rules.  Among these is H.R. 2947, a bill sponsored by Rep. Dave Trott (R-MI) to undo the orderly liquidation authority for large banks enacted as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.  In place of that authority, which Republicans have believed since Dodd-Frank was being debated, makes the process too political, the bill would allow banks to pursue resolution under judicial supervision through a new provision of the Bankruptcy Code.

On Wednesday, members will vote on six additional bills under suspension of the rules, all reported out of the Foreign Affairs and Homeland Security Committees.

On Thursday, the House plans to take up H.R. 3791, legislation that would raise the consolidated assets threshold under the Federal Reserve’s Small Bank Holding Company Policy Statement. The bill would expand the threshold under which banks can fall under the less onerous requirements of the Fed’s policy statement from the current $1 billion to institutions with assets of less than $5 billion.  Consideration of H.R. 3791 will be subject to a rule.

Following consideration of H.R. 3791, the House will take up H.R. 3340, the Financial Stability Oversight Council (FSOC) Reform Act, subject to a rule.  The FSOC was established under the Dodd-Frank Act to identify and respond to risks to U.S. financial stability.  By statute, the FSOC is authorized to designate non-bank financial companies that could pose a risk to U.S. financial stability (known as “systemically important financial institutions”, or SIFIs) for heightened regulation and supervision by the Federal Reserve Board and to recommend new or heightened standards and safeguards for systemically significant financial activities or practices.  Republicans have been critical of the powers granted to this new entity and the lack of transparency in its evaluation and designation processes.  H.R. 3340 would give Congress the power to approve the budget for FSOC and the Office of Financial Research (OFR), create quarterly reporting requirements for OFR, and require OFR to provide at least a 90 day public notice and comment period before issuing any report, rule, or regulation.  Consideration of this bill comes on the heels of a ruling issued March 30 overturning the FSOC’s designation of insurance company MetLife as a SIFI.  The FSOC has already filed an appeal of this ruling.

On Friday the House will meet to consider H.R. 2666, the No Rate Regulation Broadband Internet Act, subject to a rule.  This controversial legislation, reported out of the Energy & Commerce Committee by a 29-19 vote, would prohibit the FCC from regulating the rates charged for broadband Internet access service.  Following the FCCs issuance of newly formulated net neutrality rules last year, Chairman Tom Wheeler promised members of Congress that the agency would not regulate broadband rates in the same manner as other public utilities.  Republican sponsors of the bill argue the legislation is necessary to reinforce this promise, but opponents, including Chairman Wheeler and the White House, argue that the bill is too vague and could be interpreted broadly enough to have a negative impact on FCC authority in enforcing the net neutrality rules.

Related to the FCC, on Wednesday the Energy & Commerce Committee will be marking up several pieces of non-controversial legislation, but one item related to FCC subsidies for phone and internet services is likely to have heated debate.  H.R. 4884 would place an annual cap of $1.5 billion on support provided through the Lifeline program, which offers a discount on phone and internet service for qualifying low-income consumers.  However, the program is fraught with waste, fraud, and abuse and members of congress have been negotiating with the FCC to make meaningful reforms and provide better oversight.  Democrats on the Energy and Commerce have voiced their opposition to the bill, calling the $1.5 billion cap too low.

Also on the hearing schedule this week are several events related to cybersecurity and technology.  The House Judiciary Committee is holding a Wednesday markup of H.R. 699, the E-Mail Privacy Act, legislation that would reform a 1986 statute that was enacted before e-mail became a daily necessity for communication.  The legislation, intended to boost privacy and revise the current statute to conform to recent court decisions, would require law enforcement to obtain a warrant based on probable cause before accessing the content of email messages stored for longer than 180 days.  Current law only requires a warrant for the content of e-mails less than six months old; those older than six months are deemed business records under the current statute and may be accessed with a subpoena rather than a judicially issued warrant. The bill has more than 300 bipartisan co-sponsors.  Committee Chairman Bob Goodlatte (R-VA) circulated a substitute amendment on Friday in an effort to address the concerns of law enforcement responsible for the committee’s delay in moving the bill forward.

On Thursday the House Transportation and Infrastructure Subcommittee on Economic Development, Public Buildings, and Emergency Management will hold a hearing regarding the U.S. electric grid’s ability to withstand cyber-attacks.

Also on Thursday the House Judiciary Subcommittee on Courts, Intellectual Property, and the Internet meets to review patent litigation at the International Trade Commission.  There has been a substantial rise in the number of infringement claims brought before the ITC in recent years, many of the cases brought by patent-assertion (or non-practicing) entities.

With the filing deadline for income tax returns approaching this Friday, several tax-related hearings will be occurring throughout the week on both sides of the Capitol.  The Senate Finance Committee and House Science, Space, and Technology Committee are hosting hearings regarding cybersecurity and protecting taxpayer information.  IRS Commissioner John Koskinen and IRS Chief Technology Officer Terence Milholland will be appearing before the Senate Finance Committee on Tuesday morning alongside other officials from the U.S. Treasury and Government Accountability Office to discuss tools and technologies in place to safeguard American taxpayers and their personal information from getting into the wrong hands.  Several of these witnesses will also be appearing before the House Science Committee on Thursday morning to discuss the same topic.  On Wednesday the House Ways and Means Subcommittee on Tax Policy is hosting the second in a series of hearings on Member proposals relating to tax reform proposals. This hearing will focus in particular on income tax reform proposals.

The House Natural Resources Committee will meet on Wednesday to review a discussion draft of the Puerto Rico Oversight, Management, and Economic Stability Act, a debt relief package for the island territory.  The committee released a draft last week that was subject to sharp criticism from the left and the right; a revised proposal is expected to be circulated by the committee on Monday.  The current draft proposes a restructuring of the $72 billion debt and places Puerto Rico’s finances under the oversight of a federally appointed oversight board and authorizes the board to restructure the Commonwealth’s debt, including allowing for bankruptcy-like filings by both municipal corporations (similar to Chapter 9 of the Bankruptcy Code) and by Puerto Rico itself (authority no state enjoys).

The Senate Judiciary Committee continues its review of the Investor Visa, or EB-5 Visa Program, and current abuses, during a scheduled Wednesday hearing. The program, designed to allow foreign investors to gain permanent residence in the United States, is currently set to expire on September 30.  This hearing is the second the committee has held since an effort to reform the program to eliminate abuses was stopped at the end of last year during closed-door negotiations.  The House Judiciary Committee has also held a hearing this year on the subject.

The threat of the Islamic State to homeland security remains the subject of congressional discussion and concern.  The Senate Foreign Relations Committee meets Tuesday to discuss the spread of ISIS.  The House Foreign Affairs Subcommittee on Asia and the Pacific will pursue a similar topic on Wednesday with a hearing on the threat of the Islamic State in Southeast Asia.

With the current stalemate over the FY 2017 budget resolution and spending caps, the House Rules Subcommittee on Rules and Organization of the House is scheduled to hold a Thursday hearing to examine “proposed reforms to Rule XXI and the modern authorization and appropriations process.”  House leadership does not seem to have made any headway over the recess in negotiating an agreement over a topline funding number for FY 2017 and it remains highly likely the chamber will miss the April 15 target date for completion of a budget resolution.

As we have previously reported, the Senate Appropriations Committee is not waiting for the House to take action on a budget resolution and is moving forward with with drafting appropriations bills using the $1.07 trillion top-line spending number set by last year’s Bipartisan Budget Act.  The full committee meets Thursday to publicly release the 302(b) allocations for individual subcommittees and to mark up the Energy and Water Development Appropriations Act and Military Construction, Veterans Affairs, and Related Agencies Appropriations Act.

A detailed hearing schedule for the week ahead is included below:

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