China Select Committee Urges Sanctions, Trade Law Changes to Fight Fentanyl

Many of the new measures would be aimed at China, whose chemical companies supply most of the world’s fentanyl precursors and whose government subsidizes the manufacture and export of those materials, the committee said. Precursors are often a "side hustle" for Chinese chemical companies with significant legitimate business, making them "uniquely vulnerable" to U.S. sanctions.

The U.S. "must impose strong punitive measures that create economic, trade and legal incentives so that the [Chinese] companies end their involvement in the global illicit fentanyl trade," the 64-page report asserts. "The United States must make clear that they can be part of global commerce or they can continue aiding the global illicit fentanyl trade, not both."

The report recommends that Congress codify executive order 14059, which clarified the president’s power to sanction those involved in drug trafficking (see 2212190019). The report calls for using those and other authorities to impose financial sanctions on entities and people that enable China’s illegal drug activity, including financial institutions that launder drug proceeds, leaders of chemical companies that make fentanyl precursors, e-commerce platforms that host drug trafficking, cargo companies that transship drugs, and “relevant” government entities, the report says.

The Select Committee urged the House to approve the Senate-passed Fentanyl Eradication and Narcotics Deterrence (Fend) Off Fentanyl Act, which would require the president to sanction transnational criminal organizations and key cartel members engaged in international fentanyl trafficking (see 2401110042 and 2401110042). The bill also would make the proceeds of traffickers’ forfeited, sanctioned property available for law enforcement operations, and it would require the Treasury Department to prioritize identifying fentanyl-related financial transactions.

The report also proposes several changes to U.S. trade laws, including reducing the de minimis threshold of $800 for duty-free imports. Fentanyl precursors currently enter the U.S. through de minimis packages, which receive minimal inspection.

“During the course of its investigation, the Select Committee heard from California state law enforcement that the current form of the de minimis exception leaves America so vulnerable to drug smuggling that cartels increasingly have [China]-sourced fentanyl precursors shipped first into the United States before smuggling them to Mexico,” where the chemicals are used to make fentanyl, the report says. “In other words, the current form of the de minimis exception makes the United States the most vulnerable nation in North America to this form of drug trafficking.”

The House committee encourages Congress to pass legislation directing CBP and the Drug Enforcement Administration to levy escalating fines and remedies on entities that transship improperly labeled items on the DEA’s special surveillance list.

Liu Pengyu, spokesperson for the Chinese Embassy in Washington, said in a statement that China has taken a series of steps to curb precursor exports, including launching “a comprehensive investigation of key enterprises, personnel and equipment; continuing to clean up and regulate the online sales information related to fentanyl; and strictly preventing the smuggling and trafficking of related chemical substances abroad.”