S-172-119
Read twice and referred to the Committee on Finance.
Sponsored by Rick Scott (R-FL)
What it does
This bill would amend three existing trade laws — Section 301 of the Trade Act of 1974, Section 203 of the Trade Act of 1974, and Section 232 of the Trade Expansion Act of 1962 — to close a country-of-origin loophole. Specifically, it would require that any goods produced, manufactured, or finally assembled by a company owned or controlled at least 25% by a "foreign adversary party" (linked to China, Russia, Iran, North Korea, Cuba, or Maduro-led Venezuela) be treated as if they originated in that adversary country for purposes of trade enforcement actions, regardless of where the goods were physically made or shipped from.
Who benefits
U.S. domestic manufacturers competing against adversary-linked companies that currently route goods through third countries to avoid tariffs. U.S. workers in industries such as steel, aluminum, semiconductors, and electronics that have been subject to tariff protections. The U.S. Trade Representative and the President, who would gain clearer statutory authority to apply trade enforcement actions more broadly. National security agencies concerned about adversary-linked supply chains. Third-country manufacturers with no adversary-country ownership who would face less unfair competition.
Who is hurt
Multinational companies with joint ventures or partial ownership stakes involving Chinese, Russian, Iranian, North Korean, Cuban, or Venezuelan entities, even if those companies operate primarily in third countries. Importers and retailers who source goods through supply chains that may unknowingly include adversary-linked ownership. Consumers who may face higher prices if the supply of lower-cost goods is reduced. Third-country manufacturers (e.g., in Vietnam, Mexico, or Malaysia) that have any adversary-country investment above the 25% threshold and could lose U.S. market access. U.S. Customs and Border Protection, which would bear significant new compliance and enforcement burdens.
Supporters argue
Supporters argue that adversary countries — particularly China — have systematically routed goods through third countries to evade existing tariffs, undermining the intent of U.S. trade enforcement law. They contend that without a clear ownership-based origin rule, companies with 25% or more adversary-country ownership can simply relocate final assembly to Vietnam, Mexico, or another country and ship goods tariff-free, nullifying billions of dollars in congressionally authorized trade protections. By anchoring origin to ownership and control rather than geography alone, the bill would close this evasion pathway and restore the effectiveness of existing law.
Opponents argue
Opponents argue that the bill's broad definitions — particularly the 25% equity threshold and the sweeping "military-civil fusion" category for Chinese-linked entities — could ensnare large numbers of legitimate multinational businesses that have only minor or passive adversary-country investment. They contend that applying adversary-country tariff treatment to goods made entirely outside those countries, by companies that may be majority-owned by non-adversary investors, stretches the concept of "country of origin" beyond its legal and practical meaning, creating significant compliance uncertainty and potential disruption to global supply chains that U.S. businesses and consumers depend on.
Constitutional context
Congress has broad authority over foreign commerce under the Foreign Commerce Clause (Art. I, §8, cl. 3), and the bill amends existing statutory delegations of trade enforcement authority to the President and the U.S. Trade Representative. No active Supreme Court constitutional tension is directly implicated, though post-Loper Bright (2024), courts will independently assess whether agency implementation of the bill's broad definitions — particularly "military-civil fusion" — falls within the statutory authority granted.
Checks and balances
Congress gains authority by codifying new origin rules that constrain how the executive branch applies trade enforcement; the President and USTR retain discretion in initiating enforcement actions, but must apply the new origin standard; courts may review agency determinations under the new definitions.
Historical precedent
The U.S. has previously used ownership-based criteria in national security contexts — for example, CFIUS reviews under the Foreign Investment Risk Review Modernization Act (FIRRMA, 2018) use a similar 25% equity threshold — but applying an ownership test to country-of-origin determinations for tariff purposes is a novel statutory approach.