II 115th CONGRESS 2d Session S. 3470 IN THE SENATE OF THE UNITED STATES September 18, 2018 Mr. Cardin (for himself and Mr. Sullivan ) introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To promote United States-Mongolia trade by authorizing duty-free treatment for certain imports from Mongolia, and for other purposes.

1. Short title This Act may be cited as the Mongolia Third Neighbor Trade Act . 2. Findings Congress finds the following: (1) In 1992, Mongolia adopted a constitution establishing a parliamentary democracy, becoming the only nation in Asia to transition from communism to democracy. (2) Mongolia shares land borders with only the Russian Federation and the People’s Republic of China, nations that the United States national security strategy states want to shape a world antithetical to U.S. values and interests. With a large land area and a population of only 3,000,000, Mongolia is the most sparsely populated country in the world, and the sovereignty of Mongolia is thought to be at risk from the overwhelming influence of its much larger and more populous neighbors. (3) Mongolia has shown its commitment to a third neighbor relationship with the United States by sending troops to support United States combat operations in Iraq and Afghanistan, and has a strong record of troop contributions to international peacekeeping missions. (4) The success of Mongolia as a democracy, the strategic location, sovereignty, and territorial integrity of Mongolia, and the ability of Mongolia to pursue an independent foreign policy are highly relevant to the national security of the United States. (5) Mongolia describes the United States as its most important third neighbor , but United States-Mongolia trade is substantially lower than many other bilateral trading relationships and trade has declined in recent years. Total trade in 2012 measured $707,000,000, but in 2017 the United States exported only $82,200,000 in goods to Mongolia and imported only $9,400,000 in goods from Mongolia. (6) The cashmere trade is particularly important to the economy of Mongolia, but although Mongolia produces more than a third of raw cashmere in the world, it produces few finished cashmere products. Most Mongolian raw cashmere is exported to China, and the United States buys nearly all of its cashmere products from China. Preferential treatment for United States imports of certain Mongolian products, including cashmere products, would benefit the United States by facilitating increased trade with Mongolia and reducing United States imports of Chinese cashmere products. (7) Preferential treatment for United States imports of such Mongolian products would benefit Mongolia by reducing the economic dependence of Mongolia on China and promoting the development of the garment industry of Mongolia. Experts have expressed concern that Mongolia is unduly economically reliant on China, with more than 80 percent of exports from Mongolia flowing to China annually, largely from extractive industries. Industry leaders believe that the trade practices of China hinder the diversification of the economy of Mongolia and the emergence of a domestic Mongolian garment industry, because Chinese buyers only purchase raw Mongolian cashmere, not finished garments. (8) The development of the garment industry in Mongolia would also promote employment and empowerment of women in Mongolia. Women have historically participated in the garment industry in Mongolia at high rates, and the garment industry has historically provided safe and stable employment for women in Mongolia. 3. Duty-free treatment for certain imports from Mongolia (a) In general The President may provide duty-free treatment for any article described in subsection (b) that is imported directly from Mongolia into the customs territory of the United States. (b) Article described (1) In general An article is described in this subsection if— (A) the article is the growth, product, or manufacture of Mongolia; (B) the article is classified under chapter 51, 57, 60, 61, 62, 63, or 94 of the Harmonized Tariff Schedule of the United States; (C) (i) the article is an apparel or textile article made of fabrics or fibers containing not less than 23 percent by weight of cashmere; or (ii) the sum of the cost or value of cashmere components of the article is not less than 51 percent of the appraised value of the article at the time it is entered; (D) in the case of an article that is a textile or apparel article, the yarn and fabric used to manufacture the article are produced in Mongolia; (E) the sum of the cost or value of the materials produced in, and the direct costs of processing operations performed in, Mongolia or the customs territory of the United States is not less than 35 percent of the appraised value of the article at the time it is entered; and (F) the President determines that the article is not import-sensitive, after receiving the advice of the United States International Trade Commission in accordance with section 503(e) of the Trade Act of 1974 ( 19 U.S.C. 2463(e) ). (2) Exclusions An article shall not be treated as the growth, product, or manufacture of Mongolia for purposes of paragraph (1)(A) by virtue of having merely undergone— (A) simple combining or packaging operations; or (B) mere dilution with water or mere dilution with another substance that does not materially alter the characteristics of the article. (c) Verification with respect to transshipment for textile and apparel articles (1) In general Not later than April 1, July 1, October 1, and January 1 of each year, the Commissioner of U.S. Customs and Border Protection shall verify that textile and apparel articles imported from Mongolia to which duty-free treatment is extended under this Act are not being unlawfully transshipped into the United States. (2) Report to President If the Commissioner determines pursuant to paragraph (1) that textile and apparel articles imported from Mongolia to which duty-free treatment is extended under this Act are being unlawfully transshipped into the United States, the Commissioner shall report that determination to the President. (d) Eligibility requirements Duty-free treatment may be provided under this Act only if the President determines and certifies to Congress that— (1) Mongolia meets the requirements set forth in paragraphs (1), (2), and (3) of section 104 of the African Growth and Opportunity Act ( 19 U.S.C. 3703 ); and (2) after taking into account the factors set forth in paragraphs (1) through (7) of subsection (c) of section 502 of the Trade Act of 1974 ( 19 U.S.C. 2462 ), Mongolia meets the eligibility requirements of such section 502. (e) Withdrawal, suspension, or limitation of preferential treatment; mandatory graduation The provisions of subsections (d) and (e) of section 502 of the Trade Act of 1974 ( 19 U.S.C. 2462 ) shall apply with respect to Mongolia to the same extent and in the same manner as such provisions apply with respect to beneficiary developing countries under title V of that Act ( 19 U.S.C. 2461 et seq.). (f) Termination of duty-Free treatment No duty-free treatment extended under this Act shall remain in effect after December 31, 2025. (g) Definitions In this section: (1) Customs territory of the United States The term customs territory of the United States has the meaning given the term in General Note 2 of the Harmonized Tariff Schedule of the United States. (2) Cashmere The term cashmere means fine hair obtained from a cashmere goat (capra hircus laniger). 4. Briefing requirement (a) In general Not later than one year after the date of the enactment of this Act, and periodically thereafter, the President shall monitor, review, and provide a briefing to the appropriate congressional committees on— (1) the implementation of this Act; (2) compliance of Mongolia with the eligibility requirements described in section 3(d); and (3) the trade and investment policy of the United States with respect to Mongolia. (b) Appropriate congressional committees defined In this section, the term appropriate congressional committees means— (1) the Committee on Finance and the Committee on Foreign Relations of the Senate; and (2) the Committee on Ways and Means and the Committee on Foreign Affairs of the House of Representatives.