Potential legislation could significantly affect U.S. business operations in China.
China’s rapid growth as a major world economic power has been paralleled by growth in U.S. congressional activity potentially affecting U.S.-China business relationships. Recent scandals involving potentially dangerous products imported from China have heightened this congressional interest. Companies doing business in and with China must be increasingly aware of congressional oversight, and be prepared to take advantage of potential governmental action or to ameliorate the harm it could cause. Outlined below are some of the recent areas of major congressional interest in China.
Consumer Product Safety
Recent revelations of the use of lead paint on children’s toys manufactured in China have spurred congressional action. The House Energy and Commerce Committee held two hearings on the subject. At the hearings, the Committee’s Chairman, Rep. John Dingell (D-MI), stated his intention to introduce legislation. Unlike the U.S. Food and Drug Administration, the U.S. Consumer Product Safety Commission (CPSC) does not perform overseas inspections of goods bound for the United States. The CPSC has entered into an agreement with Chinese authorities to prevent the export of lead-tainted toys to the United States. However, committee members have been skeptical of relying on Chinese inspectors, and overseas inspections may be one subject of the legislation. The scope of the legislation remains to be seen; it could range from affecting only toys to addressing all consumer products. CPSC Chair Nancy Nord has proposed a program of self-certification by the seller, which could serve as an alternative to legislation. Widespread legislation or self-certification will have a significant effect on business. Devising an effective legal strategy to prepare for the outcomes will promote smooth, uninterrupted business operations..
Congress is responding to the numerous instances of safety problems with food imported from China. Chairman Dingell has introduced the Food and Drug Import Safety Act, a substantial expansion of food import regulation, including user fees, country of origin labeling, increased penalties and limitation on ports of entry. Sen. Richard Durbin (D-IL), the second ranking democratic leader, has introduced a similar, but narrower, bill. Proper representation can help U.S. importers understand, react to and influence these new proposed measures appropriately.
Chinese Currency Value
Critics have long charged that China undervalues its currency, the yuan, to artificially boost its trade value. Two Senate committees recently passed competing bills to try to increase the yuan’s value. The Senate Banking, Housing and Urban Affairs Committee passed legislation to restrict the Treasury Department’s discretion in labeling countries as currency manipulators. The Senate Finance Committee passed legislation providing for a variety of enhanced sanctions in response to “fundamentally misaligned” currencies. The Bush administration has criticized these bills as undermining the effort to move China to a market-based currency. Senate floor action on one or both of the bills could occur before Congress adjourns for the year. The House Ways and Means Committee has addressed the subject in hearings and could also take action.
There is great anticipation of the upcoming U.S. Department of Transportation (DOT) award of airline routes to China, which are expected to be highly lucrative. Members of Congress and other political leaders, such as state governors, have been weighing in with DOT on behalf of various airlines.
None of these congressional actions is complete. They all likely will be changed substantially as they advance—or don’t—through the legislative process.