Over the last several weeks, two bills targeting Chinese supply chains were reintroduced in Congress. Although different in their approach, the COBALT Supply Chain Act and TASK Act both seek to address goods from China alleged to be made with forced labor. In this post, we provide an overview of these bills.
COBALT Supply Chain Act
On March 24, the “China’s Odious and Brutally Atrocious Labor Trafficking Supply Chain Act” or, for short, the COBALT Supply Chain Act (H.R. 2310), was reintroduced in the House by Representative Chris Smith (Republican - NJ). The bill is focused on Chinese influence in the mining and processing of cobalt from the Democratic Republic of the Congo. The bill is focused on cobalt because of its use in lithium-ion batteries for electric vehicles, smartphones and other electronic devices.
According to the bill, the DRC supplied approximately 70% of global cobalt mine production in 2021 and 15 of the DRC’s 19 cobalt mines are owned or financed by Chinese companies and a significant percentage of artisanal cobalt production is exported to China or processed within the DRC by Chinese firms. The bill indicates that approximately 15% to 30% of DRC cobalt production comes from artisanal and small-scale mining and that the DRC mining industry is beset with child and forced labor, with an estimated 40,000 of the 255,000 miners being children.
The COBALT Supply Chain Act would introduce a rebuttable presumption for purposes of Section 307 of the US Tariff Act that goods, wares, articles or merchandise that contain cobalt refined in China are made using forced or child labor. Under Section 307 of the Tariff Act, goods produced using forced labor may not be imported into the United States. The bill is similar in approach to the Uyghur Forced Labor Prevention Act (Xinjiang labor; see Ropes & Gray Alerts here and here) and the Countering America’s Adversaries Through Sanctions Act (North Korean labor; see Ropes & Gray Alerts here and here).
The COBALT Act would also require the Forced Labor Enforcement Task Force, as part of its Section 307 enforcement strategy, to among other things create a list (similar to the UFLPA Entity List) of:
- Covered goods, which are defined as goods that contain cobalt refined in China;
- Entities that refine cobalt in China;
- Entities that mine cobalt in China and whether any of these entities operate in China’s Xinjiang Uyghur Autonomous Region;
- Entities that import covered goods into the United States;
- Entities in the DRC owned or controlled by Chinese entities, or financed by Chinese state-owned banks or institutions, that mine or process cobalt; and
- Priority sectors for enforcement of imports made with covered Chinese goods, with a sector-specific enforcement plan for each priority sector.
H.R. 2310 is almost identical to H.R. 6909 introduced by Representative Smith during the last Congress. Last term’s bill did not see much movement. This time could potentially be different due to the Trump Administration’s focus on the resilience of mineral supply chains, its initiative to enter into a critical minerals partnership with the DRC and dramatic shifts in US trade policy more generally.
TASK Act
The Transaction and Sourcing Knowledge Act, or TASK Act (S. 1358), was reintroduced by Senator Rick Scott (Republican - FL) on April 8. S. 1358 is nearly identical to former iterations of the bill that were introduced during the last two Congresses.
The TASK Act is disclosure legislation, in contrast to the trade-based COBALT Supply Chain Act. The TASK Act would require the US Securities and Exchange Commission to mandate reporting of the following by publicly traded companies:
- Their sourcing and due diligence activities involving supply chains of products imported into the United States that are directly linked to products utilizing forced labor from Xinjiang, China.
- Transactions with companies that have been (1) placed on the Entity List by the Department of Commerce or (2) designated by the Department of the Treasury as Chinese Military-Industrial Complex Companies.
- If the company has facilities in China, (1) whether there is a Chinese Communist Party committee in the operations of the company and (2) if so, a summary of the actions and corporate decisions in which the committee may have participated. This disclosure would be required annually.
The Entity List of the Department of Commerce’s Bureau of Industry and Security contains the names of foreign persons – including businesses, research institutions, government and private organizations, individuals and other types of legal persons – that are subject to specific license requirements for the export, reexport and/or transfer (in-country) of specified items. BIS first published the Entity List in 1997 as part of its efforts to inform the public of entities who have engaged in activities that could result in an increased risk of the diversion of exported, reexported and transferred items to weapons of mass destruction programs. Since its initial publication, grounds for inclusion on the Entity List have expanded to include activities sanctioned by the State Department and activities contrary to US national security and/or foreign policy interests.
“Chinese Military-Industrial Complex Companies” are included on a list published by the Department of the Treasury’s Office of Foreign Assets Control.
Next Steps
There has not been meaningful movement on either bill since their reintroduction. Both bills will need to go through the usual, laborious Congressional legislative process to become law. At this time, there are no signs that either bill will achieve traction. However, the bills should be on potentially affected companies’ trackers given geopolitical developments over the last several months, which continue to be fluid.
Rebecca Schulga, a Visiting Foreign Lawyer, contributed to the preparation of this post.
