II 118th CONGRESS 1st Session S. 3368 IN THE SENATE OF THE UNITED STATES November 30, 2023 Mr. Sullivan (for himself and Mr. Cardin ) 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 country in Asia to transition from communism to democracy. Mongolia shares land borders with only the Russian Federation and the People’s Republic of China. With a large land area and a population of only 3,255,000, Mongolia is the world’s most sparsely populated country, and its economy is highly dependent on its much larger and more populous neighbors. (2) Mongolia’s success as a democracy, strategic location, sovereignty, territorial integrity, and ability to pursue an independent foreign policy are highly relevant to the national security of the United States. (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, including nearly 900 personnel serving in the United Nations mission in South Sudan and other missions. (4) Mongolia describes the United States as its most important third neighbor , but trade between the United States and Mongolia is substantially lower than in many of Mongolia's other bilateral trading relationships, and has declined in recent years. Total trade between the United States and Mongolia in 2012 was valued at approximately $707,000,000, but in 2022 the United States exported only $149,000,000 in goods to Mongolia and imported only $26,000,000 in goods from Mongolia. (5) While the mining industry accounts for more than 80 percent of Mongolia’s exports by value and more than 20 percent of gross domestic product, agriculture, which accounts for 13.25 percent of gross domestic product, is a much larger source of jobs, employing around a quarter of the working population. The livestock sector accounts for more than 80 percent of agricultural production in Mongolia. (6) Since the 1940s, the annual mean air temperature in Mongolia has risen at 3 times the average global rate. Average precipitation is declining and extreme weather disasters are more frequent, posing acute challenges for livestock herding in the country. In 2017, an estimated 700,000 animals of the country’s livestock population perished due to the post-drought extreme winter phenomenon known as dzud . This phenomenon has increased in frequency and severity in recent years, causing a rise in livestock mortality and diminishing livelihoods for herders, which has led to widespread rural poverty and a contraction in the national economy. (7) Mongolia would greatly benefit from preferential treatment for imports into the United States of certain Mongolian products. Such preferential treatment would help address some of the economic impacts of the dzuds. (8) The cashmere trade is particularly important to the economy of Mongolia. While Mongolia produces approximately 40 percent of the world’s raw cashmere, it produces few finished cashmere products. Mongolian raw cashmere is exported to the People’s Republic of China, where it is diluted with other fibers and labeled as Mongolian. The United States buys nearly all of its cashmere products from the People’s Republic of China. Preferential treatment for imports into the United States of certain Mongolian products, including cashmere products, would benefit the United States by facilitating increased direct trade with Mongolia for cashmere products while also supporting the development of value-added cashmere processing in Mongolia. (9) The development of the garment industry in Mongolia would also promote women’s employment and empowerment. Women have historically participated in the garment industry in Mongolia at high rates, and that industry has historically provided safe and stable employment for women in Mongolia. The United Nations has recognized the high numbers of women deployed as part of Mongolia’s contribution to peacekeeping operations. (10) In developing and expanding the cashmere industry in Mongolia, it is critical for Mongolia to take steps to ensure the protection of its grasslands and prevent overgrazing of cashmere goats. Since 2018, Mongolia has been working with the United Nations Development Programme to implement the Mongolian Sustainable Cashmere Platform. The Platform's objectives aim to improve cashmere traceability and Mongolia’s sustainable cashmere value chain. (11) Preferential treatment for imports into the United States of Mongolian products would benefit Mongolia at this critical time. 3. Duty-free treatment for certain imports from Mongolia (a) In general Subject to subsection (c), 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— (i) the yarn and fabric used to manufacture the article are wholly produced in Mongolia; and (ii) the article is wholly formed and cut, or its components are wholly knit-to-shape, 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 50 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 as described in 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) Eligibility requirements Duty-free treatment may not be provided under this section unless the President determines and certifies to Congress that— (1) Mongolia meets each of the requirements set forth in— (A) paragraphs (1), (2), and (3) of section 104(a) of the African Growth and Opportunity Act ( 19 U.S.C. 3703(a) ); and (B) subparagraphs (A) through (F) of section 113(a)(1) of such Act ( 19 U.S.C. 3722(a)(1) ); (2) Mongolia has effectively enforced environmental laws, regulations, or other measures and fulfilled its obligations under international agreements relating to the environment, including as such obligations relate to public health; and (3) 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 described in such section 502. (d) Verification with respect to transshipment for textile and apparel articles (1) In general Not later than 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 section are not being unlawfully transshipped into the United States. (2) Report to President and Congress If the Commissioner determines pursuant to paragraph (1) that textile and apparel articles described in that paragraph are being unlawfully transshipped into the United States, the Commissioner shall report that determination to the President and the appropriate congressional committees. (e) Withdrawal, suspension, or limitation of preferential treatment and 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, without regard to whether title V of that Act ( 19 U.S.C. 2461 et seq. ) is in effect pursuant to section 505 of that Act ( 19 U.S.C. 2465 ). (f) Termination of duty-Free treatment No duty-free treatment extended under this section shall remain in effect after December 31, 2029. (g) Definitions In this section: (1) Cashmere The term cashmere means fine hair obtained from a cashmere goat (capra hircus laniger). (2) 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. 4. Briefing requirement Not later than one year after the date of the enactment of this Act, and annually thereafter, the President shall monitor, review, and provide a briefing to the appropriate congressional committees on— (1) the implementation of section 3; (2) compliance of Mongolia with the eligibility requirements described in section 3(c); and (3) the trade and investment policy of the United States with respect to Mongolia. 5. Appropriate congressional committees defined In this Act, the term appropriate congressional committees means— (1) the Committee on Ways and Means and the Committee on Foreign Affairs of the House of Representatives; and (2) the Committee on Finance and the Committee on Foreign Relations of the Senate.