S-4038-119
Read twice and referred to the Committee on Finance.
Sponsored by Edward Markey (D-MA)
What it does
This bill would exempt small business concerns from import duties imposed by the President under Section 122 of the Trade Act of 1974 (balance-of-payments authority) and would require the President to refund any such duties already paid by small businesses within 90 days of enactment. It would also prohibit larger businesses from raising prices on tariff-affected goods beyond the direct cost increase caused by those duties for a five-year period, with enforcement by the Federal Trade Commission and state attorneys general. The FTC would be required to establish a consumer reporting mechanism for potential violations and to issue annual enforcement reports to Congress.
Who benefits
Small business importers who would no longer pay Section 122 tariffs and would receive refunds on duties already paid. Consumers who buy goods affected by covered tariffs, who would be protected from price increases beyond actual duty costs. State attorneys general, who gain new civil enforcement authority. The FTC, which gains expanded jurisdiction and rulemaking power. Domestic manufacturers who compete with importers, since the price-gouging rules could limit the ability of large importers to pass costs to consumers while domestic producers adjust pricing freely.
Who is hurt
Large importers and retailers who would face new price-gouging liability and compliance costs. Businesses throughout supply chains — including wholesalers, distributors, and assemblers — who would need to document that any price increases are strictly tied to duty costs. Companies that use tariff periods to broadly reprice product lines would face FTC enforcement risk. The FTC itself would bear significant new administrative burdens. Businesses operating near the small business size threshold may face competitive disadvantages relative to exempt smaller competitors. Foreign exporters are indirectly affected if U.S. importers cannot pass through duty costs.
Supporters argue
Supporters argue that Section 122 tariffs — imposed unilaterally by the President without congressional approval of specific rates — fall disproportionately on small businesses that lack the scale to absorb sudden cost shocks or renegotiate supplier contracts. They contend that large corporations have historically used tariff periods as cover for broader price increases unrelated to actual duty costs, citing FTC research on supply-chain pricing behavior during the COVID-19 era. By exempting small businesses and capping pass-through pricing for large firms, supporters argue the bill protects both Main Street importers and everyday consumers from the compounding effects of executive trade actions.
Opponents argue
Opponents argue that the bill's price-gouging provisions impose a government-administered price control regime on private commerce, requiring businesses to prove their pricing decisions to federal regulators — a standard that may be unworkable given the complexity of modern supply chains. They contend that the small business exemption from tariffs creates a two-tiered import system that distorts competition, incentivizes firms to artificially restructure to qualify as small businesses, and undermines the uniform application of trade law. Critics also argue that restricting the President's ability to impose duties uniformly under Section 122 encroaches on executive foreign commerce authority recognized under the Foreign Commerce Clause and longstanding trade statutes.
Constitutional context
The Foreign Commerce Clause (Art. I, §8, cl. 3) grants Congress authority over foreign trade, including the power to set tariffs — authority Congress has partially delegated to the President via the Trade Act of 1974. This bill would partially reclaim that delegated authority by carving out a class of importers from presidential tariff actions. Post-Loper Bright (2024), courts independently assess whether agency actions fall within statutory delegations, which could affect how courts evaluate both the President's Section 122 authority and the FTC's new rulemaking powers under this bill.
Checks and balances
Congress would reclaim a portion of tariff authority it previously delegated to the President, limiting executive power over Section 122 duties; the FTC gains new enforcement and rulemaking authority subject to judicial review, and state attorneys general gain concurrent civil enforcement power as an additional check on large-business pricing.
Historical precedent
Congress has previously enacted targeted exemptions from trade remedies for specific industries or firm sizes, and federal price-gouging statutes have been enacted during declared emergencies (e.g., post-Katrina), but a standing, peacetime federal price-gouging prohibition tied to executive tariff actions has no direct statutory precedent.