The Week Ahead in the European Parliament – January 18, 2019

Summary

Next week will be a committee week in the European Parliament.

Interesting votes are expected to take place.

On Tuesday, the Committee on Environment, Public Health and Food Safety (“ENVI”) is expected (subject to confirmation) to vote on the compromise agreement reached between the Parliament and the Council of the EU on December 19, 2018, on the proposal for a Single-Use Plastics Directive.  The compromise agreement was adopted officially by the Council of the EU today, January 18.  The purpose of the proposal is to prevent and reduce the impact of certain plastic products on the environment.  More specifically, the new rules target the ten single-use plastic products most often found on Europe’s beaches and seas.  Also, the new rules include obligations for producers to help cover the costs of waste management, collection targets and short timeline for achieving reductions in the consumption of some single-use plastic products, including plastic tobacco filter.  See the draft compromise text here.

On the same day, ENVI will also vote on its non-legally binding own-initiative report on the Implementation of the Cross-Border Healthcare Directive.  The report seeks to analyze possible shortcomings in the implementation of the Cross-Border Healthcare Directive (Directive 2011/24) and make recommendations to improve the Directive.  The draft report assesses various aspects of cross-border healthcare, including funding for cross-border healthcare, patient mobility, patient information and access to cross-border healthcare, e-Health and interoperable healthcare applications.  See the draft report here, and the amendments tabled to the draft report here.

Also on Tuesday, ENVI is expected to vote on the compromise agreement reached between the Parliament and the Council of the EU on November 27, 2018, on the proposal for a Regulation on the Definition, Presentation and Labelling of Spirit Drinks.  The proposal intends to replace current Regulation 110/2008. Among other things, it replaces the existing procedures for the protection of geographical indications (“GIs”) that apply to spirit drinks with new ones based on updated procedures for quality schemes applied to agricultural products.  In addition, the Commission would adopt a “publicly accessible updated electronic register” of recognised GIs for spirit drinks.  The proposal also includes provisions regarding joint applications and oppositions.  See the draft comprise agreement reached on the proposal here. Continue Reading

Domestic Sourcing Requirement Doesn’t Fit DOD’s Gloves

This article was originally published in Law360 and has been modified for this blog.

The Government Accountability Office (GAO) recently issued a bid protest decision regarding the application of the Berry Amendment’s domestic sourcing requirement to a U.S. Department of Defense (DOD) solicitation for leather combat gloves with touchscreen capability.  In that decision, the GAO found that the nonavailability exception to the Berry Amendment applied to the glove’s kidskin leather even though the agency determined, through market research, that this type of leather was available domestically.  Importantly, this decision provides an opportunity for stakeholders to consider the nuances associated with the Berry Amendment’s nonavailability exception and to reflect upon the complex regulatory landscape of domestic sourcing requirements.

Federal Government Domestic Sourcing Regimes and the Nonavailability Exception

Over the last 100 years, the U.S. government has enacted myriad domestic sourcing laws.  For example, during the Great Depression, Congress enacted the Buy American Act (BAA) to “create jobs for American workers and protect American industry”[1] by requiring the U.S. government, under certain circumstances, to procure items that have been mined, produced or manufactured in the United States.[2]  As implemented through the Federal Acquisition Regulation (FAR) and agency supplemental regulations, like the Defense Federal Acquisition Regulation Supplement (DFARS), the BAA generally requires executive agencies to purchase “domestic end products” unless an exception or waiver applies.[3]

One common exception to the BAA is known as the nonavailability exception.[4]  This exception applies when an end product is “not mined, produced, or manufactured in the United States in sufficient and reasonably available commercial quantities and of a satisfactory quality.”[5]  In addition to individual determinations of nonavailability made by a contracting officer, FAR 25.104 identifies certain items — like bananas, lavender oil, chromite, swords, and goat and kidskins — that are subject to a nonavailability class determination because “domestic sources can only meet 50 percent or less of total U.S. government and nongovernment demand” for those items.  However, before a procuring agency can rely on the nonavailability class determination exception to the BAA, it must conduct market research to confirm that the item is, in fact, not available domestically in sufficient quantities to meet the requirements of the procurement at issue.[6]

Another example of a domestic sourcing law is the Berry Amendment, which applies just to DOD procurements.  The Berry Amendment originates from legislation enacted in 1941 on the eve of World War II to ensure that U.S. troops would be supplied with food and uniforms produced in the United States.[7]  The 1941 legislation was fueled by concerns that, despite the existence of the BAA, federal agencies had reportedly purchased large quantities of wool and food from foreign sources.[8]  Congress modified the DOD domestic sourcing restrictions — in what generally became known as the Berry Amendment — over the next several decades through annual appropriations legislation.  And the Berry Amendment was permanently codified with the passage of the FY 2002 National Defense Authorization Act (NDAA).[9]

Today, the Berry Amendment mandates that “funds appropriated or otherwise available to” the DOD cannot be used to procure certain items — like food, clothing, tents, textiles, and hand tools — as either end products or components unless those items are “grown, reprocessed, reused, or produced in the United States.”[10]

Like the BAA, there are several exceptions to the Berry Amendment.  Pertinently, the Berry Amendment does not apply when the head of a military department determines than a domestic item “cannot be acquired as and when needed in a satisfactory quality and sufficient quantity at U.S. market prices,” or when an item is subject to a nonavailablity class determination under FAR 25.104.[11]  Accordingly, a determination of what items are, and are not, available plays a significant role in applying domestic sourcing regimes like the BAA and the Berry Amendment.

The GAO’s Mechanix Wear Decision

In Mechanix Wear,[12] the Defense Logistics Agency (DLA) issued a solicitation to procure over one million pairs of combat gloves and required that “goat/kidskin” leather be used.  The solicitation included DFARS clause 252.225-7012, which implements the Berry Amendment’s domestic sourcing requirements and provides for an exception for items subject to the FAR 25.104 nonavailability class determination.  Although DLA initially permitted offerers to use foreign goat/kidskin leather, after conducting additional market research and determining that domestically produced goat/kidskin was available, DLA amended the solicitation to require that all goat/kidskin leather be 100% domestic.

Soon after the amended solicitation was issued, Mechanix Wear filed a pre-award protest, arguing that DLA’s decision to prohibit the use of foreign goat/kidskin was unduly restrictive and contrary to the Berry Amendment’s nonavailability exception.  Mechanix Wear maintained that the Berry Amendment’s domestic sourcing restriction, as implemented at DFARS 225.7002-2(c) and 252.225-7012(c)(1), did not apply to goat/kidskins because that item was subject to the FAR 25.104 nonavailability class determination.  Accordingly, Mechanix Wear contended DLA’s decision to add a restriction for domestic goat/kidskin simply was unreasonable and contrary to the applicable DFARS provisions.

In response, DLA argued, in part, that it needed to conduct market research to determine whether the goat/kidskin was, in fact, not available domestically.  DLA pointed-out that the Berry Amendment’s nonavailability exception was intertwined with the FAR 25.104 nonavailability class determination, which requires a contracting officer to perform market research before relying on the class determination.  DLA also asserted that the Berry Amendment’s objective of protecting domestic sources of supply and agency policy demand the need to conduct market research.  Thus, after determining that sufficient goat/kidskin was available domestically, DLA believed that it was permitted to amend the solicitation to require that all goat/kidskin be 100% domestic.

The GAO disagreed, finding that the requirement for market research applied only to BAA restrictions and not to Berry Amendment restrictions.  Because the agency lacked authority when it relied on market research to support its domestic sourcing restriction, the GAO recommended that the agency either provide further reasonable support for its requirement that all goat/kidskin be 100 percent domestic or amend the solicitation to remove the domestic sourcing restriction.

The Big Picture

On the one hand, the holding in Mechanix Wear simply is an exercise in regulatory interpretation.  Based on a plain meaning analysis of the DFARS and FAR, GAO determined that the Berry Amendment does not apply to those items specifically identified in the nonavailability class determination at FAR 25.104.

On the other hand, Mechanix Wear provides an opportunity to consider the nuances related to the Berry Amendment’s nonavailability exception, and to observe the complex regulatory landscape of domestic sourcing requirements applicable to federal government procurements.

At its core, the Berry Amendment created a framework that restricts the DOD from acquiring certain items unless they are grown or produced domestically.  As discussed above, the Berry Amendment’s nonavailability exception applies to any item listed in the nonavailability class determination at FAR 25.104.  Although this particular exception is rather unavoidable — i.e., how can a domestic item be procured or used if it is not available domestically — query whether its implementation may be too rigid.

As reflected in Mechanix Wear, the nonavailability exception to the Berry Amendment applies to any item listed at FAR 25.104, even if a DOD agency performs market research and finds that a listed item is produced domestically in sufficient quantities.  This sets up a rather inflexible framework that seems at odds with the underlying purpose of the Berry Amendment — especially when compared to nonavailability class determination assessments under the BAA.[13]  At the same time, this framework should result in more efficient and predictable DOD procurements, which would appear to be in sync with the directive of the Section 809 Panel — a Congressionally-directed independent advisory panel focused on streamlining DOD acquisition regulations.

Regardless of one’s view, it will be interesting to see whether the nonavailability class determination for goat/kidskin may be changed as a result of DLA’s market research as described in Mechanix Wear.  At the very least, FAR 25.104 requires that the list of nonavailable articles be reviewed at least every five years to determine whether items should be removed based on domestic availability.[14]

It also would not be surprising if the Mechanix Wear decision grabs the attention of those in Congress interested in strengthening domestic sourcing restrictions.  For example, the FY 2017 NDAA extended the Berry Amendment’s domestic sourcing restrictions to the acquisition of certain athletic footwear for members of the Armed Forces[15] because of a bipartisan effort led by Sen. Angus King (I-ME), Sen. Susan Collins (R-ME), Rep. Bruce Poliquin (R-ME-02), and Rep. Niki Tsongas (D-MA-03) to protect American jobs and manufacturers located in Maine and Massachusetts.  It is possible that the facts in Mechanix Wear may spur additional bipartisan action to protect American industry.

Finally, the Mechanix Wear decision presents another example of how various domestic sourcing rules often intersect, and demonstrates why contractors need to closely consider whether any waivers or exceptions apply to such rules.  Understanding this complex web of rules allows government contractors to create business development strategies, identify appropriate suppliers and, if necessary, make a compelling argument for why a solicitation should — or should not — include a domestic sourcing requirement.

 

* * *

[1] United States v. Rule Industries, Inc., 878 F.2d 535, 538 (1st Cir. 1989) (citation omitted).

[2] See 41 U.S.C. § 8302(a).  The BAA also requires contractors to incorporate materials that have been manufactured in the United States into certain construction projects.  See id. § 8303(a).

[3] See FAR Subpart 25.1; DFARS Subpart 225.1.  With regard to end products, the BAA is implemented through an evaluation preference based on the unreasonable cost exception.  See FAR 25.101(c), 25.105.

[4] See FAR 25.103(b).  Other BAA exceptions apply when a domestic preference would be inconsistent with the public interest, when the cost of a domestic end product would be unreasonable, for commissary resales, and for information technology that is a commercial item.  See FAR 25.103(a), (c)–(e).  Additionally, the Trade Agreements Act waives the BAA restrictions for certain procurements that meet specified dollar thresholds.  See 19 U.S.C. §§ 2501–2581; FAR 25.402.

[5] FAR 25.103(b).

[6] FAR 25.103(b)(1) (specifying that a class determination “does not apply if the contracting officer learns . . . that an article on the list is available domestically in sufficient and reasonably available commercial quantities of a satisfactory quality to meet the requirements of the solicitation”).

[7] FY 1941 Fifth Supplemental National Defense Appropriations Act, Pub. L. No. 77-29 (now codified at 10 U.S.C. § 2533a).

[8] See Valerie Grasso, Cong. Research Serv., RL31236, The Berry Amendment: Requiring Defense Procurement to Come from Domestic Sources 11–15 (2014).

[9] See FY 2002 NDAA, Pub. L. No. 107-107.

[10] See 10 U.S.C. § 2533a(a).  See also DFARS 225.7002 (implementing the Berry Amendment).

[11] DFARS 225.7002-1 & -2; see also DFARS 252.225-7012(c)(1).

[12] B-416704.2, Nov. 19, 2018, 2018 CPD ¶ 395.

[13] The oddity is further compounded by the acknowledgement in FAR 25.103(b)(1)(i) that the determination that an item should be listed at FAR 25.104 “does not necessarily mean that there is no domestic source for the listed items, but that domestic sources can only meet 50 percent or less of total U.S. government and nongovernment demand.”

[14] Although the civilian and defense acquisition councils issue a notice every five years seeking input on whether the nonavailability list should be revised, the FAR 25.104 list was last amended in 2010 and has barely changed since the FAR Part 25 rewrite in 1999.  See 64 Fed. Reg. 72,416 (Dec. 27, 1999); 69 Fed. Reg. 34,241 (June 18, 2004) (adding five items to the list); 75 Fed. Reg. 34,283 (June 16, 2010) (modifying one item and adding two items).

[15] See Section 817 of the FY 2017 NDAA, Pub. L. No. 114-328.

 

 

The Week Ahead in the European Parliament – January 11, 2019

Summary

Next week, Members of the European Parliament (“MEPs”) will gather in Strasbourg for the plenary session.

Interesting votes, debates and committee debates will take place.

On Monday, January 14, MEPs will debate the non-legally binding Report on the Union’s authorization procedure for pesticides prepared by the Special Committee on the Union’s authorization procedure for pesticides (“PEST”).  This report seeks to address perceived shortcomings in the authorization system for pesticides.  The co-rapporteurs stress the importance of a science-based system and call for greater transparency.  See the draft parliamentary report here.

On Tuesday, January 15, MEPs will discuss several important Council-related developments.  Firstly, the Austrian Chancellor Sebastian Kurz will present the achieved objectives of the Austrian Council presidency over the second half of 2018 to the MEPs.  The MEPs will also debate the presentation of the program of activities and the priorities of the Romanian Council presidency which started on January 1, 2019.  MEPs share expectations that the presidency will have the difficult tasks to manage Brexit and the negotiations on the EU’s long term budget for 2021-2027 which will both shape the future of the EU.  See the priorities of the Romanian Council presidency here. Continue Reading

Investment Adviser Hit With $100K SEC Fine, a Reminder that Public Universities are Covered by Pay-to-Play Rule

In December, the Securities and Exchange Commission (“SEC”) fined an investment adviser $100,000 for violating the SEC’s pay-to-play rule.  The SEC’s rule effectively prohibits investment adviser executives and other “covered associates” of an investment adviser from making political contributions in excess of de minimis amounts ($350 per election if the contributor is eligible to vote for the candidate; $150 if not) to officials of a government entity with which the investment adviser does or may seek to do business.  In this case, two of an investment adviser’s covered associates made political contributions to Ohio gubernatorial candidates and a candidate for Ohio Treasurer well in excess of the SEC rule’s de minimis thresholds: $46,908 in total, spread between several candidates and across several years.

This is not the first big fine the SEC has issued for a pay-to-play rule.  Indeed, the SEC’s enforcement of the SEC rule has increased significantly since the first case in 2014.  Nor does this case involve the largest fine; last summer, for example, a different firm was fined $500,000.

The lesson here for investment advisers relates to the nature of the governmental entities involved.  One was a state pension fund, which most investment advisers will recognize is likely to be covered by the SEC’s pay-to-play rule.

But the other was a public university.  Many forget that public universities, though academic in nature and often largely independent from other government agencies, may invest public assets.  And governing officials at the university may be subject to appointment by an elected official; in this recent case, the Governor of Ohio appoints the members of the university’s board of trustees.  This fine serves as a reminder that it is important for investment advisers to carefully evaluate all potential investors for government entity status, and not only investors of public pension fund assets.

“Four-to-three” mergers no longer taboo? The Commission unconditionally approves the acquisition of Tele2 NL by T-Mobile NL

In November 2018, following an in-depth Phase 2 investigation, the European Commission (“Commission”) unconditionally approved the acquisition of Tele2 NL by T-Mobile NL, respectively the fourth and third largest players in the Dutch retail mobile telecoms market. The merged entity remains the third largest player in this market after KPN and VodafoneZiggo. This transaction is the first “four-to-three” telecom merger approved without remedies under Commissioner Vestager’s term, following earlier Commission decisions on four-to-three mergers in (i) H3G/Wind, where approval of a joint venture was conditional on the divestment of sufficient assets to allow a new MNO to enter the market; and (ii) Three/O2, an acquisition that was blocked by the Commission. It shows that there is no “magic number” for players in the telecoms market and that much will depend on the specifics of the merger.

Background

T-Mobile NL and Tele2 NL are both mobile network operators (“MNOs”) active in the Netherlands. T-Mobile owns a mobile network with nationwide coverage over which it provides 2G, 3G, 4G and NarrowBand-Internet of Things mobile communication services. It also provides fixed broadband, TV and telephony services based on wholesale access to other operators’ fixed network. Tele2 NL has operated a 4G-only mobile network since 2015, and also offers fixed broadband services. In December 2017, the parties announced that T-Mobile would acquire 75% of Tele2’s shares for EUR 190 million.

In June 2018 the Commission launched an in-depth investigation “to ensure that the proposed transaction between T-Mobile NL and Tele2 NL will not lead to higher prices or less choice in mobile services for Dutch consumers“. The Commission outlined the following preliminary concerns:

  1. The reduction in the number of MNOs and the limited incentives of the merged entity to compete with KPN and VodafoneZiggo, could lead to higher prices and less investment in mobile telecommunications networks.
  2. The lessening of competitive pressure in the Dutch retail mobile market, could increase the potential for the coordination of competitive behaviour between the three remaining MNOs.
  3. Prospective and existing mobile virtual network operators (“MVNOs”), who rely on wholesale access to MNOs’ networks to offer their retail mobile services, could potentially face greater difficulties in obtaining favourable wholesale access terms from MNOs.

Continue Reading

Signs of Progress with the Limitations on Subcontracting, but Outstanding Questions Remain

A recently proposed rule would update the Federal Acquisition Regulation (“FAR”) to incorporate statutory changes to limitations on subcontracting that have been in effect since 2013. The U.S. Small Business Administration (“SBA”) has long since revised its own regulations to implement these changes, but some contracting officers have been reluctant to follow these changes in the SBA regulations because the FAR contains contradictory provisions.

The proposed rule is a sign of progress. In particular, it should add significant clarity to the current disconnect between the FAR and SBA regulations. However, the proposed rule is not perfect, and a number of recent developments highlight that outstanding questions remain.

FAR Changes to Limitations on Subcontracting

For the majority of contractors, the proposed rule is most relevant for its change to the way that limitations on subcontracting are calculated.

Specifically, the proposed rule would amend the FAR to recognize a simplified regime for contractor compliance and to expressly permit set aside recipients to subcontract any amount of performance to one or more “similarly situated” small businesses. These changes would significantly benefit small businesses that engage in teaming with other small businesses. In addition, these changes are important for contractors that do not qualify as small businesses—such as large businesses, nonprofit organizations, and certain non-U.S. entities—in that more subcontract spending under set asides can be made available to these types of entities when subcontracts to similarly situated small businesses do not count against limitations on subcontracting.

The FAR currently contains an outdated limitations on subcontracting framework, under which a small business that received a set aside was expected to track performance costs for either personnel or manufacturing, depending on whether a set aside was for services or supplies. A recipient was required to ensure that it performed work amounting to at least 50 percent of such costs, with an exclusion for materials under set asides for supplies. Similar frameworks with different percentages also applied to construction contracts.

Now, under the updated framework that has been in effect by statute since 2013 (and in SBA regulations since 2016), a small business that receives a set aside is only expected to ensure that no more than 50 percent of the amount paid under its prime award is paid to subcontractors that are not similarly situated. Corresponding updates have been made for construction contracts, and material costs continue to be excluded from limitations on subcontracting under set asides for supplies.

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The Week Ahead in the European Parliament – December 14, 2018

Summary

This week, the last plenary session of the year took place before the European Parliament’s Christmas break.

The next Week Ahead in the European Parliament will therefore be sent to you on January 7, 2019.

On Wednesday, December 12, the European Parliament approved the EU’s budget for 2019 by 451 votes to 142, with 78 abstentions.  The budget will provide additional funds to, among others, research, climate protection, and the fight against youth unemployment.  The adopted text can be found here.

On the same day, Members of the European Parliament (“MEPs”) approved the final report, entitled “Findings and recommendations” of the Special Committee on Terrorism (“TERR”), detailing how best to combat terror in the EU.  The report calls for increased cooperation and information-sharing between Member States when the terrorist threat level rises.  The adopted text can be found here.

Also on Wednesday, MEPs agreed the European Parliament’s position at first reading on the proposal for a Regulation complementing EU type-approval legislation with regard to the withdrawal of the United Kingdom from the Union (Brexit preparedness).  The Regulation calls for business continuity and compliance with EU type-approval legislation for manufacturers of vehicles and of non-road mobile machinery.  The adopted text can be found here and the proposal for a Regulation here.

Meetings and Agenda

  • No meetings of note in the European Parliament before January 7, 2019.

 

The Week Ahead in the European Parliament – December 7, 2018

Summary

Next week, there will be a plenary sitting of the European Parliament in Strasbourg, France. This will be the final plenary session of the year. Several significant debates, votes and committee meetings will take place.

On Tuesday, MEPs will debate the Future of Europe together with Cyprus’ President, Nicos Anastasiades, and European Commission President Jean-Claude Juncker.  This is the fourteenth discussion in a series between MEPs and EU leaders on the future of the EU.

On the same day, MEPs will discuss their priorities ahead of the European Council, scheduled for December 13-14, 2018. Their discussions will include the EU’s single market, migration, the Eurogroup, and the EU’s long-term budget.

On Wednesday, the plenary session of the European Parliament is expected to vote in favor of the EU’s budget for 2019, which will provide additional funds to, among others, research, the protection of the climate, or fighting youth unemployment.

On the same day, one day after the expected vote on the Brexit agreement in the UK House of Commons, MEPs will meet with Michel Barnier to discuss the result of the vote and its consequences.

Also on Wednesday, the plenary session of the European Parliament will vote on the final report, entitled “Findings and recommendations” of the Special Committee on Terrorism (“TERR”), detailing how best to combat terror in the EU. The report calls for increased cooperation andinformation-sharing between Member States when the terrorist threat level rises. Read the report here. Continue Reading

Reprieve in U.S.-China Trade Tensions: U.S. tariffs on $200 billion in Chinese imports to stay at 10 percent for 90 days; China to purchase U.S. goods

On December 1, during a working dinner meeting in Buenos Aires following the G20 Summit, U.S. President Donald J. Trump and Chinese President Xi Jinping agreed to temporarily ease trade tensions as both sides continue negotiating over longer-term solutions to U.S. concerns about bilateral economic relations.

According to a White House press release, for a 90-day period, the U.S. will maintain the 10 percent tariffs on its list of $200 billion in Chinese imports, postponing an anticipated January 1, 2019, increase in duty levels. In September, the Trump Administration had imposed the 10 percent duties on imports from a wide range of sectors and announced that the tariffs would increase to 25 percent on January 1. The latest Trump-Xi agreement does not reduce or eliminate the current 10 percent duty, and the White House press release states that the increase to 25 percent “will” take place absent an agreement within the 90-day period. Nor does the latest announcement affect the 25 percent duties on separate lists of Chinese imports covering $34 billion and $16 billion in Chinese imports, respectively.

All three sets of tariffs have been imposed pursuant to the U.S. Administration’s determination in March under Section 301 of the Trade Act of 1974 (“Section 301”) that China’s technology transfer and intellectual property (“IP”) policies are harming U.S. companies. Notably, according to the White House, the negotiations that will take place in the coming 90 days will be broader in scope than IP policies, covering “forced technology transfer, intellectual property protection, non-tariff barriers, cyber intrusions and cyber theft, services and agriculture.”  Chinese official statements to date have not referenced the 90-day deadline or the specific issues cited by the White House, instead emphasizing that the talks would be aimed at negotiating a removal of each side’s additional tariffs and suggesting that “reasonable U.S. concerns” could be gradually resolved as China undertakes a new round of economic reforms.

China agreed to purchase a “very substantial” amount of U.S. products across the agricultural, energy, and industrial sectors, with the agricultural purchases commencing “immediately.” In subsequent remarks, President Trump stated that China “will be getting rid of tariffs,” possibly referencing removal of some of China’s retaliatory tariffs to enable increased purchases of U.S. products. Additionally, in what the White House termed a “humanitarian gesture” in aid of the U.S. battle against opioid addiction, President Xi agreed to designate Fentanyl as a controlled substance, subjecting those exporting the drug to the U.S. to the “maximum penalty” under Chinese law.

The next 90 days could provide a welcome opportunity to address longstanding bilateral trade issues. However, resolution of the structural issues cited by the White House would be extremely challenging in such a short timeframe, which may introduce greater short-term uncertainty into the environment. As such, companies with interests in U.S.-China trade relations should take appropriate steps to try to shape outcomes of these negotiations and monitor developments affecting supply and market access. Meanwhile, affected companies should also consider submitting tariff exclusion requests for products on the $16 billion list, which are due by December 18, 2018.

House Moves to Get “SMART” on the IoT Industry   

Congress is working to better understand the growing Internet of Things (“IoT”) industry—and soon may be asking industry stakeholders for input.  On Wednesday, November 28, the U.S. House of Representatives unanimously passed legislation designed to provide Congress with greater insights into the inner workings of the IoT industry and to promote collaboration between IoT industry participants and the federal government.

The bill (H.R. 6032 (115)), known as the State of Modern Application, Research and Trends of IoT Act, or the “SMART IoT” Act, directs the U.S. Department of Commerce to conduct a study on the state of the “internet-connected device industry” in the United States.  Among other items, the bill requires the Commerce Department to undertake a survey of the IoT industry, and specifically calls on the Department to conduct outreach to IoT industry participants.  The results of the study would be compiled into a report to Congress that includes recommendations for growing the U.S. economy “through the secure advancement of internet-connected devices.”

The lead co-sponsors of the bipartisan bill—Representative Bob Latta (R-OH), Chairman of the House Energy and Commerce Subcommittee on Digital Commerce and Consumer Protection, and Representative Peter Welch (D-VT)—launched an IoT Working Group in 2016 to focus on the policy implications of IoT.  Now, House lawmakers are moving to obtain a better understanding of how federal policy towards IoT can encourage innovation and help avoid potential obstacles to its implementation.  Speaking in support of the bill, Rep. Latta emphasized the enormous potential economic impact of IoT applications—estimated at $11.1 trillion worldwide by the year 2025, according to one study—and noted that Congress needs additional information on “the landscape for federal, public-private, and self-regulatory efforts” in the IoT space in order to develop appropriate policy in the IoT industry.

Members of the wireless communications industry praised the House’s swift action on the SMART IoT Act, with CTIA, a major trade association representing the industry, applauding the bill for “leverag[ing] industry efforts to develop innovative, secure IoT applications and ensur[ing] continued U.S. leadership in IoT development.”

The SMART IoT Act now moves for consideration in the Senate.  In light of the bill’s unanimous support in the House, the Senate may use fast track procedures to pass the bill and send it to the President’s desk, where it likely would be signed into law.

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