“Stage One” U.S.-Japan Trade Agreements

Summary: On October 7, 2019, after six months of formal negotiations, the United States and Japan signed two agreements intended to liberalize bilateral trade. One, the U.S.-Japan Trade Agreement (USJTA), provides for limited tariff reductions and quota expansions to improve market access. The other, the U.S.-Japan Digital Trade Agreement, includes commitments pertaining to digital aspects of international commerce, such as cross-border data flows. These agreements constitute what the Trump and Abe Administrations envision as "stage one" of a broader trade liberalization negotiation, which the two leaders first announced in September 2018. The two sides have stated their intent to continue negotiations on a more comprehensive deal after these agreements enter into force. Congress has an interest in U.S.-Japan trade agreement negotiations given congressional authority to regulate foreign commerce and the agreements' potential effects on the U.S. economy and constituents.

Summary: USJTA is to reduce or eliminate tariffs on agriculture and some industrial goods, covering approximately $14.4 billion ($7.2 billion each of U.S. imports and exports) or 5% of bilateral trade. The United States is to reduce or eliminate tariffs on a small number (241) of mostly industrial goods, while Japan is to reduce or eliminate tariffs on roughly 600 agricultural tariff lines and expand preferential tariff-rate quotas for a limited number of U.S. products. The United States framed the digital trade commitments as "gold standard," with commitments on nondiscriminatory treatment of digital products, and prohibition of data localization barriers and restrictions on cross-border data flows, among other provisions. The stage one agreement excludes most other goods from tariff liberalization and does not cover market access for services, rules beyond digital trade, or nontariff barriers. Notably, the agreement does not cover trade in autos, an industry accounting for one-third of U.S. imports from Japan. Japan's decision to participate in bilateral talks came after President Donald Trump threatened to impose additional auto tariffs on Japan, based on national security concerns.

Summary: Prior to the Trump Administration, the United States negotiated free trade agreements (FTAs) that removed virtually all tariffs between the parties and covered a broad range of trade-related rules and disciplines in one comprehensive negotiation, driven in significant part by congressionally mandated U.S. negotiating objectives. Nontariff issues often require implementing legislation by Congress to take effect, and Congress has typically considered implementing legislation for past U.S. FTAs through expedited procedures under Trade Promotion Authority (TPA). The Trump Administration, however, plans to put the stage one agreements with Japan into effect without action by Congress. The Administration plans to use delegated tariff authorities in TPA to proclaim the USJTA market access provisions, while the U.S.-Japan Digital Trade Agreement does not appear to require changes to U.S. law and is being treated as an Executive Agreement. Japan's Diet (the national legislature) ratified the pact in December 2019. The Administration expects the agreements to take effect in early 2020, with negotiations on the second stage of commitments to begin within four months.

Summary: The Trump Administration's interest in bilateral trade negotiations is tied to its withdrawal from the Trans-Pacific Partnership (TPP) agreement in 2017, which included the United States and Japan, along with 10 other Asia-Pacific countries. In general, TPP was far more comprehensive than the stage one U.S.-Japan agreements, as it would have eliminated most tariffs among the parties and created rules and disciplines on a number of trade-related issues, such as intellectual property rights and services. Japan's FTAs with other countries, including the TPP-11, which entered into force among the remaining TPP members in 2018, and an FTA with the European Union (EU), which took effect in 2019, have led to growing concerns among U.S. industry and many in Congress that U.S. exporters face certain disadvantages in the Japanese market. The USJTA will largely place U.S. agricultural exporters on par with Japan's other FTA partners with regard to tariffs, but unlike the TPP and its successor, the agreement excludes some agricultural products, such as rice and barley. It also does not include rules, such as on technical barriers to trade (TBT) and sanitary and phytosanitary measures, and therefore will not address various nontariff barriers U.S. agriculture and other industries face in Japan. Thus, U.S. agricultural exporters may continue to be at some disadvantage in the Japanese market compared to those from TPP countries or the EU.

Summary: In general, Congress and U.S. stakeholders support the agreements due to the expected benefits to U.S. agriculture and cross-border digital trade. At the same time, the overall economic effects of the agreement are likely to be modest due to the limited scope of the agreement. Many observers contend the deal should not be a substitute for a comprehensive trade agreement and view the second stage of talks as critical to U.S. interests. If more comprehensive negotiations begin in 2020, they may become intertwined with other bilateral issues, such as concerns among many Japanese officials that the United States has a waning interest in maintaining its current influence in East Asia, and upcoming negotiations over the renewal of the U.S.-Japan agreement on how to share the costs of basing U.S. military troops in Japan. Some Members of Congress have also raised questions over whether the staged approach to the U.S.-Japan negotiations is in the best interest of the United States, and what it may mean for future U.S. trade agreement negotiations. There are also questions about whether the agreements adhere to multilateral trade rules under the World Trade Organization (WTO), given their limited scope, and whether the Administration has adequately consulted with Congress in its negotiation and implementation of the new agreements.

On October 7, 2019, after six months of formal negotiations, the United States and Japan signed two agreements intended to liberalize bilateral trade. One, the U.S.-Japan Trade Agreement (USJTA), provides for limited tariff reductions and quota expansions to improve market access. The other, the U.S.-Japan Digital Trade Agreement, includes commitments pertaining to digital aspects of international commerce, such as on data flows. These agreements constitute what President Donald Trump and Prime Minister Shinzo Abe envision as "stage one" of a broader trade liberalization negotiation, which the two leaders first announced in September 2018. The two sides have stated their intent to begin second stage negotiations on a more comprehensive deal after these agreements enter into force.

Congress will not have a role in approving the two agreements. The Trump Administration intends to use delegated tariff proclamation authorities in Trade Promotion Authority (TPA) to enact the tariff changes and quota modifications, while the digital trade commitments, which would not require changes to U.S. law, are in the form of an Executive Agreement. Japan's Diet (the national legislature), however, had to ratify the pact, and did so on December 5, 2019, paving the way for entry into force on January 1, 2020. The two Japan deals raise a number of issues for Congress, including their limited coverage and staged approach, as compared to past U.S. free trade agreement (FTA) negotiations, the trade authorities used to bring them into effect in the United States, questions over their compliance with World Trade Organization (WTO) rules, and questions over how they compare with the trade agreement the United States previously negotiated with Japan in the former Trans-Pacific Partnership (TPP) and current TPP-11.

Given the narrow scope of the agreements, particularly the USJTA tariff commitments, their commercial and strategic impact is likely to be determined by whether a more comprehensive bilateral agreement can be achieved. Many Members of Congress and other stakeholders support the agreements, but view the prospective second stage of trade talks as critical for U.S. interests. At the same time, some observers have raised questions about the potential coverage of issues in future talks and whether there will be sufficient political support in both countries to make progress, especially during an election year in the United States.

Background and Motivation for Negotiations

In October 2018, in line with TPA requirements under the Bipartisan Congressional Trade Priorities and Accountability Act of 2015 ( P.L. 114-26 ; TPA-2015), the Administration provided Congress 90 days advance notification of its intent to begin negotiations. The Administration released its negotiating objectives, which included a number of issues beyond tariffs and digital trade, in December of the same year.

The Trump Administration's interest in a trade agreement with Japan is closely tied to its decision to withdraw the United States from the TPP in 2017, and to pursue bilateral agreements, as opposed to the more regional approach taken under TPP. It also reflects the Administration's strategy of focusing on reaching agreements with major U.S. trade partners, especially those with which the United States runs a trade deficit (the U.S. goods trade deficit with Japan was $67.2 billion in 2018, the fourth-largest bilateral U.S. deficit). Although TPP included 10 countries in addition to the United States and Japan, the U.S.-Japan component of the agreement was the most economically consequential given existing U.S. trade agreements with 6 of the 10 other participants, and the relatively small economies of the remaining four (Brunei, Malaysia, New Zealand, and Vietnam).

In these limited, stage one agreements with Japan, the Administration has attempted to address concerns raised by TPP proponents, especially agricultural groups, that the U.S. withdrawal placed U.S. exporters at a disadvantage in the Japanese market, in particular given Japan's recently enacted trade agreements with other trade partners. Following U.S. withdrawal from the TPP, Japan led efforts among the remaining 11 TPP countries to conclude the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP or TPP-11), which took effect in December 2018 for the first six signatories who ratified, including Japan, and for Vietnam in early 2019. The TPP-11 includes the comprehensive tariff liberalization commitments of TPP (near complete elimination among the parties), and the majority of TPP rules and disciplines on numerous trade-related issues, though the parties agreed to suspend a small number of nontariff commitments sought largely by the United States, following the U.S. withdrawal.

Japan's FTA with the European Union (EU), which is to eventually remove nearly all tariffs and establish trade rules between the parties, went into effect in February 2019. It provides for elimination of the EU's 10% auto tariff, and elimination or reduction of most Japanese agricultural tariffs. Additional trade agreements involving Japan could take effect in coming years, compounding U.S. exporter concerns, including the possible 2020 conclusion of the Regional Comprehensive Economic Partnership (RCEP), which includes Japan, China, and 13 other Asian countries.

Given Japan's commitment to TPP, Prime Minister Abe was initially hesitant to agree to bilateral U.S. trade negotiations, instead urging the Trump Administration to reconsider its withdrawal. Japan's decision to participate in bilateral talks came after President Trump raised the possibility, based on national security concerns, of imposing unilateral motor vehicle tariffs on Japan, an industry of national significance and accounting for one-third of U.S. goods imports from Japan (see " Motor Vehicles and Threat of U.S. Section 232 Tariffs "). The importance of the U.S.-Japan security relationship may also have factored into Japan's decisionmaking. Japan relies heavily on the United States for its military defense. The two countries' agreement on how to share the costs of the roughly 50,000 U.S. troops stationed in Japan is due to be renegotiated in 2020 as the current agreement expires at the end of March 2021. President Trump has called for Japan to significantly increase its contributions, perhaps by as much as fourfold. Japan, some analysts suggest, may see a bilateral trade agreement as way to reduce tension in the bilateral relationship, in light of other pressing security issues. Additionally, the Trump Administration may try to use the cost-sharing negotiations to extract concessions from Japan in proposed stage-two trade negotiations, or vice versa.

As the United States' fourth-largest trading partner and the world's third-largest economy, Japan routinely features prominently in U.S. trade policy. In 2018, Japan accounted for 5% of total U.S. exports ($121 billion) and 6% of total U.S. imports ($179 billion). The United States is arguably even more important to Japan, representing its second-largest trading partner after China in 2018, and accounting for nearly 20% of Japan's goods exports. The two countries are also major investment partners, with Japanese foreign direct investment (FDI) in the United States valued at $484 billion in 2018 on a historical cost basis, largely in manufacturing, and U.S. FDI in Japan valued at $125 billion, concentrated in finance and insurance. Major areas of U.S. focus in the trade relationship include market access for U.S. agricultural goods, given Japan's relatively high tariffs in this sector, and the elimination of various nontariff barriers, such as in the motor vehicles and services sectors.

Agriculture and Japan's Other Trade Agreements

Japan is an important market for U.S. farmers and ranchers, accounting for about 9% of total U.S. agricultural exports to all destinations since 2014. In 2018, Japan was the third-largest export market for the United States, after Canada and Mexico, with $12.9 billion in U.S. agricultural exportsâout of a total of $140 billionâshipped to Japan. Corn, beef, pork, soybeans, and wheat make up more than 60% of total U.S. agricultural exports to Japan ( Figure 1 ).

With TPP-11 and the EU-Japan FTA entering into force in late 2018 and early 2019, exports from EU and TPP-11 member countries became more competitive for Japanese importers. U.S. agricultural exports to Japan meanwhile declined 7% ($8.3 billion) from January through August 2019, compared with the same period in 2018 ($9 billion). According to Japanese Customs data, notable product-specific declines during the first nine months of 2019, compared to the same period in 2018, include non-durum wheat (down 13%), pork (down 7%), and beef (down 4%). Over the same period, Japanese imports of these commodities from several EU and TPP-11 countries have increased. With the stage one U.S.-Japan agreement resulting in lower tariff rates on most U.S. agricultural products in the near term, it could improve the outlook for U.S. agricultural exporters.

Motor vehicles and parts are the largest U.S. import category from Japan ($56.0 billion in 2018), while Japan imports few U.S.-made autos ($2.4 billion in 2018), despite having no auto tariffs ( Figure 2 ). U.S. industry argues the latter stems from nontariff barriers, including discriminatory regulatory treatment, while Japan argues that U.S. producers' inability to cater to the Japanese market is to blame. Although Japan buys few U.S. cars, Japanese-owned production facilities in the United States (valued at $51 billion in 2018) employ more than 170,000 workers, according to the Bureau of Economic Analysis (BEA). President Trump has repeatedly flagged the U.S. automotive trade deficit and noted that U.S. goals in broader trade talks include market access outcomes that will increase U.S. auto production and employment, but no provisions on motor vehicles were included in the stage one agreement.

In May 2019, one year after the start of an investigation by the U.S. Department of Commerce under Section 232 of the Trade Expansion Act of 1962 (19 U.S.C. Â§1862), President Trump proclaimed motor vehicle and parts imports, particularly from Japan and the EU, a threat to U.S. national security. This determination asserted that the imports affect "American-owned" producers' global competitiveness and research and development on which U.S. military superiority depends. Under affirmative Section 232 determinations, the President is granted authority to impose import restrictions, including tariffs. Toyota and other Japanese-owned auto firms took particular issue with the President's emphasis on U.S. ownership in his determination, noting their significant U.S. investments in automotive manufacturing and research facilities. The President directed the U.S. Trade Representative (USTR) to negotiate with Japan (and the EU) to address this threat and report back within 180 days. Speaking immediately after the signing of the USJTA, USTR Lighthizer stated that in light of the new trade agreement, the Administration has no intent, "at this point," to pursue additional Section 232 U.S. auto import restrictions. Japan also remains subject to Section 232 tariffs on U.S. steel and aluminum imports, which the Administration implemented in March 2018.

Congress sets objectives for U.S. trade negotiations and establishes certain authorities to enact agreements that make progress toward achieving those objectives in Trade Promotion Authority (TPA) legislation under the Bipartisan Congressional Trade Priorities and Accountability Act of 2015 ( P.L. 114-26 ; TPA-2015). TPA allows for expedited consideration of implementing legislation to enact trade agreements covering tariff and nontariff barriers, provided the Administration meets certain notification and consultation requirements. It also provides the President, under Section 103(a) (19 U.S.C. Â§4202(a)), delegated authority to proclaim limited tariff reductions without further congressional action. The limits on Section 103(a) authority primarily relate to the amount and staging of the reduction in duty rates (see " U.S. Tariff and Quota Commitments ").

Prior to the Trump Administration, the United States negotiated FTAs that removed virtually all tariffs between the parties and covered a broad range of trade-related rules and disciplines in one comprehensive negotiation. Nontariff issues often require implementing legislation by Congress to take effect, and Congress has typically considered implementing legislation for past U.S. FTAs under TPA's expedited procedures. The Trump Administration, however, plans to put the limited, stage one agreements with Japan into effect without congressional approval. The Administration intends to use delegated authorities pursuant to Section 103(a) of TPA to proclaim the tariff changes included in the USJTA, while the U.S.-Japan Digital Trade Agreement does not appear to require changes to U.S. law and is being treated as an Executive Agreement. Some observers and Members of Congress have questioned whether Section 103(a) authorizes the President to also establish rules of origin and modify import quotas, which are components of the U.S. market access tariff commitments in the USJTA.

The language of Section 103(a) proclamation authority originated in the Reciprocal Trade Agreements Act of 1934, when tariff barriers were the primary focus of trade agreement negotiations. Similar language has been included in subsequent iterations of the TPA statue, including the current TPA-2015, which is effective through July 1, 2021. Past U.S. Administrations have invoked Section 103(a) and its past iterations to modify U.S. tariffs and implement agreements addressing tariff barriers. Most recently, in 2015 President Barack Obama invoked this authority to implement an agreement among members of the Asia-Pacific Economic Cooperation (APEC) forum to reduce duties on environmental goods.

The two agreements included in the "stage one" U.S.-Japan trade deal cover tariff and quota commitments on industrial and agricultural goods and commitments on digital trade. The limited coverage and composition represents a significant departure from recent U.S. trade agreements, which typically are comprehensive and cover additional issues such as customs procedures, government procurement, labor and environment protections, intellectual property rights (IPR), services, and investment.

Notably, neither agreement includes a formal dispute settlement mechanism to enforce commitments should either side take fault with the other's implementation. The Trump Administration points to Article 6 of the USJTA, which lays out a 60-day consultation process for resolving issues relating to "the operation or interpretation" of the agreement as a means to resolve disputes relating to tariffs and quota commitments. A future comprehensive deal could include a formal dispute settlement mechanism, but it is unclear how this would affect the initial agreements.

U.S.-Japan Trade Agreement (Tariff and Quota Commitments)

The USJTA, which covers tariff and quota commitments, is four pages in length and includes eleven articles governing the operation of the agreement. Two separate annexes include the specific tariff reduction schedules for the United States and Japan. The annexes also include staging categories, which lay out the timeline for tariff reductions, and rules of origin, which specify the conditions under which imports are considered to originate from each country and therefore are eligible for the preferential tariff treatment. In total, the agreement is to reduce or eliminate tariffs on approximately $14.4 billion or 5% of bilateral trade ($7.2 billion each of U.S. imports and exports, Figure 3 ). The agreement also includes provisions providing for amendment and termination procedures (Article 8 and Article 10, respectively).

While the Trump Administration has stated that the USJTA should "enable American [agricultural] producers to compete more effectively with countries that currently have preferential tariffs in the Japanese market," the U.S.-Japan agreement is narrower in scope than either TPP-11 or the EU-Japan FTA. In particular, because of the legal authority under which the United States negotiated the USJTA, the agricultural provisions address only tariffs and quotas, while TPP-11 and the EU-Japan FTA also address many other policies that may interfere with trade in agricultural products. As a result, U.S. agricultural exporters may continue to be at some disadvantage in the Japanese market against those from the TPP-11 countries or the EU. Lack of legal text on non-market-access provisions, such as agricultural biotechnology, geographical indications, sanitary and phytosanitary measures, and technical barriers to trade (TBT) in the USJTA may limit the United States' ability to challenge potential future trade barriers in Japan (and vice versa) related to these issues, for example, if Japan were to align its requirements for agricultural imports more closely with those of the EU or of TPP-11 countries.

The USJTA tariff schedule commits the United States to reduce or eliminate tariffs on 241 tariff lines that accounted for $7.2 billion of U.S. imports from Japan in 2018 (about 5% of total U.S. goods imports from Japan). Per requirements under TPA's tariff proclamation authorities, which as discussed, the Administration intends to use to implement the agreement, U.S. products slated for tariff elimination must have less than a 5% current U.S. most-favored nation (MFN) tariff rate. The authority allows for the Administration to reduce tariffs by 50% for products with current MFN tariff rates above 5%. According to the USJTA tariff schedule, the United States is to eliminate tariffs on 169 of covered U.S. tariff lines, while the remaining 72 are to be reduced to 50% of their current MFN rate.

Unlike the former TPP, which committed the United States to eliminate tariffs on 99% of U.S. tariff lines, the USJTA agreement is to affect a relatively small share of U.S. imports from Japan, both because it covers fewer products and does not include autos and auto parts, the largest single U.S. import category. The U.S. tariff schedule of the USJTA states that auto and auto parts "will be subject to further negotiations with respect to the elimination of customs duties." Under TPP, by contrast, the United States committed to eliminate its 2.5% car tariff over 25 years and its 25% light truck tariff over 30 years.

Most of the U.S. products covered in the agreement are industrial goods. Select tariff lines from 30 different U.S. Harmonized Schedule (HS) chapters or categories are included. However, roughly half of the covered products, both in terms of the number of tariff lines and U.S. import value, are from three chapters: machinery (U.S. imports of $3.3 billion in 2018), electrical machinery ($771 million), and tools ($683 million). Other product categories include optical/medical equipment ($534 million), iron and steel articles ($305 million), rubber ($302 million), organic chemicals ($182 million), inorganic chemicals ($182 million), musical instruments ($133 million), copper and articles ($125 million), photographic and cinematographic goods ($118 million), railway ($105 million), and toys ($79 million). The top 10 tariff lines covered by the agreement accounted for $3 billion of U.S. imports in 2018 or 42% of all imports covered ( Table 1 ). U.S. tariffs on these 10 products are to be eliminated either upon entry into force (EIF) of the agreement or at the start of year two.

The United States also agreed to reduce or eliminate tariffs on 42 agricultural tariff lines on imports from Japan, which include certain perennial plants and cut flowers, persimmons, green tea, chewing gum, certain confectionary products, and soy sauce. In a side letter, the United States agreed to modify its tariff-rate quota (TRQ) for imports of Japanese beef. TRQs involve a two-tiered tariff scheme in which imports within an established quota face lower tariff rates, and imports beyond the quota face higher tariff rates. The United States has agreed to eliminate the 200 metric tons (MT) country-specific beef quota for Japan and increase its quota for "other countries or areas" to 65,005 MT. This would enable Japan to ship additional amounts of beef to the United States at low tariff rates under the increased "other countries or areas" quota.

Under the USJTA, Japan agreed to eliminate or reduce tariffs for certain U.S. agricultural products and to provide preferential quotas for other U.S. agricultural products. Japan's commitments cover approximately 600 tariff lines, accounting for $7.2 billion of U.S. exports in 2018, according to the USTR. Essentially, Japan is providing the same level of market access to the products included in the USJTA as provided to exports from countries that are members of TPP-11. Some products included in TPP-11 such as rice and certain dairy products, however, are not included in the USJTA. According to the USTR, once this agreement is implemented, over 90% of U.S. food and agricultural products exported to Japan will either enter duty-free or receive preferential tariff access.

When TPP-11 went into effect in December 2018, Japan implemented its first set of tariff cuts and TRQ expansions for TPP-11 countries, and followed these with a second round of tariff cuts and TRQ expansions on April 1, 2019, the start of its new fiscal year. In the USJTA, Japan agreed to accelerate and adjust its TRQ expansion and tariff reduction schedule so that Japan's imports of affected U.S. agricultural products are to receive the same level of market access as imports from TPP-11 countries. This means that tariff rates under the USJTA are to fall slightly faster than those under the TPP-11. For example, under TPP-11, tariffs on beef imports into Japan, previously 38.5%, were reduced to 27.5% in Year 1, to 26.6% in Year 2, and are to reach 9% in Year 16. Under the USJTA, tariffs on Japanese imports of U.S. beef would be reduced to 26.6% in Year 1 and would reach 9% in Year 15.

Japan is to reduce tariffs on meat products that collectively accounted for $2.9 billion of U.S. exports to Japan in 2018. Tariffs on processed beef products, including beef jerky and meat extracts, are to be eliminated in 5 to 15 years. Japan's right to raise tariffs if imports of U.S. beef exceed a specified level are to be restricted, and would be eliminated if the specified level is not exceeded for four consecutive fiscal years after Year 14. Tariffs on pork muscle cuts are to be eliminated over 9 years, and tariffs on processed pork products are to go to zero in Year 5. Certain fresh and frozen pork products would continue to be subject to Japan's variable levies when import prices are low, but the maximum variable rate is to be reduced by almost 90% by Year 9. As with beef, Japan's right to raise tariffs if imports of U.S. pork exceed a specified level is to be restricted. Japan is to gradually increase the amount of U.S. fresh, chilled, and frozen pork that could be imported annually without triggering additional tariffs, and such tariffs are to be terminated at the end of Year 10. Japan is to eliminate tariffs immediately upon entry into force of the agreement on selected products, including almonds, walnuts, blueberries, cranberries, sweet corn, grain sorghum, and broccoli, that collectively accounted for $1.3 billion of U.S. exports to Japan in 2018. Tariffs on corn used for feed, the largest U.S. agricultural export to Japan ($2.8 billion or 22% of total U.S. agricultural exports to Japan in 2018), are also to be eliminated upon entry into force of the agreement. Japan is to phase out tariffs in stages for products accounting for $3 billion of U.S. exports in 2018, such as cheeses, processed pork, poultry, beef offal, ethanol, wine, frozen potatoes, oranges, fresh cherries, egg products, and tomato paste. Japan agreed to provide country-specific quotas (CSQ) for some products, which provide access to a specified quantity of imports from the United States at a preferential tariff rate, generally zero. The CSQs would provide these products the same access into Japan as would have been accorded if the United States had joined the TPP-11. Products covered by CSQs include wheat, wheat products, malt, processed cheese, glucose, fructose, corn starch, potato starch and inulin. Additionally, Japan agreed to create a single whey CSQ for the United States that would begin at 5,400 MT and grow to 9,000 MT in Year 10. This CSQ combines the provisions of three separate CSQs for whey under the TPP provisions: whey used in infant formula (3,000 MT); whey mineral concentrate (4,000 MT); and whey permeate (2,000 MT). Japan agreed to improve access for U.S. skim milk powder by introducing an annual global (WTO) tender for 750 MT of skim milk powder, which would be accessible to the U.S. as well as other WTO-member exporters. This is viewed to represent a minor concession, given that the United States exported 713,000 MT of skim milk powder in 2018. Japan agreed to reduce the government-mandated mark-up on imported U.S. wheat and barley, which are controlled by state trading enterprises. Japan agreed to limit the use of safeguard measures to control surges in imports of U.S. whey, oranges, and race horses.

According to the USTR, Japan has stated a commitment to "match the [agricultural] tariffs" provided to TPP-11 member countries in USJTA. While Japan's tariff schedule under the USJTA attempts to match the TPP-11 schedule, the TRQ schedule falls short of the TPP-11 schedule, potentially disadvantaging market access for some U.S. agricultural products. Under the TPP provisions, Japan had agreed to provide a rice CSQ for the United States, which was to start at 50,000 MT in Year 1 and reach 70,000 MT in Year 13. The U.S.-Japan Trade Agreement does not make provisions for a CSQ for U.S. rice, but Japan has made provisions for a CSQ for Australian rice under the TPP-11. TPP-11 additionally includes provisions for global TRQs for barley and barley products other than malt; butter; skim and other milk powder; cocoa products; evaporated and condensed milk; edible fats and oils; vegetable preparations; coffee, tea and other preparations; chocolate, candies and confectionary; and sugar. No corresponding TRQs are included in the U.S.-Japan agreement.

Japan's simple average MFN tariff on all agricultural imports was 15.7% in 2018, although almost 22% of the Japanese agricultural tariff lines had MFN tariff rates greater than 15%. Many of the agricultural products subject to in-quota tariffs are subject to additional mark-ups through the state trading system, making the products more expensive to Japanese consumers. This may tend to suppress imports. For example, 29% of the amount of whey for infant formula that could have been imported under the TRQ was actually imported into Japan in 2017, and the corresponding fill rates for skim-milk powder ranged between 25% and 34%. Given that many TRQ quotas go unfilled and that over-quota tariff rates are extremely high, there is little trade beyond the set quota levels.

Digital trade, a growing part of the U.S. and global economy, is an area in which the United States and Japan have had largely similar goals on addressing the lack of common trade rules and disciplines. Digital trade entails not only digital products and services delivered over the internet, but is also a means to facilitate economic activity and innovation, as companies across sectors increasingly rely on digital technologies to reach new markets, track global supply chains, and analyze big data. The USTR has referred to the U.S.-Japan Digital Trade Agreement, which parallels the proposed U.S.-Mexico-Canada Agreement (USMCA), as the "most comprehensive and high-standard trade agreement" negotiated on digital trade barriers. Provisions of the U.S.-Japan Digital Trade Agreement largely reflect the proposed USMCA, as well as related U.S. negotiating objectives that Congress established under TPA, suggesting the agreement is likely to serve as a template for future U.S. FTAs. The agreement has also been cast by the USTR as demonstrating the "continued leading role" of both nations in global rulemaking on digital trade. In this view, U.S.-Japan approaches on rules and standards could set precedents for other ongoing talks, including at the WTO on a potential e-commerce agreement, where conflicting approaches to digital and data issues by other participating members (such as China) have been raised as joint concerns.

Key commitments of the U.S.-Japan Digital Trade Agreement are highlighted below, with some comparisons to the latest U.S. and Japanese commitments in USMCA and TPP-11, respectively. In USMCA and TPP-11, given the crosscutting nature of digital trade and cross-border data flows, related provisions are covered in multiple FTA chapters beyond digital trade or e-commerce, including financial services, IPR, technical barriers to trade, and telecommunications. Like the USJTA, the U.S.-Japan Digital Trade Agreement includes provisions allowing for potential amendments and possible termination (Article 22).

Customs duties and nondiscrimination . Commitments prohibit customs duties on products transmitted electronically and discrimination against digital products, including coverage of tax measures. Cross-border data flows and data localization . Commitments prohibit restrictions on cross-border data flows, except as necessary for "legitimate public policy objectives." It also prohibits requirements for "localization of computing facilities" (i.e., data localization) as a condition for conducting business. Financial service providers are covered under the rules on data localization, as long as financial regulators have access to information for regulatory and supervisory purposes. This approach is distinct from Japan's commitments under TPP-11, which excludes financial services, but is similar to U.S. commitments under USMCA. Consumer protection and privacy . Commitments require parties to adopt or maintain online consumer protection laws, as well as a legal framework on privacy to protect personal information of users of digital trade. The content and enforcement of these laws are left to each government's discretion, while encouraging development of mechanisms to promote interoperability between different regimes. Unlike USMCA, there is no explicit reference to take into account guidelines of relevant international bodies' privacy frameworks, such as the Asia-Pacific Economic Cooperation (APEC) forum or the Organization for Economic Co-operation and Development (OECD). However, both the United States and Japan have endorsed and participate in the APEC Cross-Border Privacy Rules (CBPR) system. Source code and technology transfer . Commitments prohibit requiring the transfer or disclosure of software source code or algorithms expressed in source code as a condition for market access, with some exceptions. By comparison, under TPP-11 algorithms are not covered. Liability for interactive computer services . Commitments limit imposing civil liability with respect to third-party content for internet platforms that depend on interaction with users, with some exclusions such as for intellectual property rights infringement. This rule reflects provisions of the U.S. Communications Decency Act, which has raised concerns for some Members of Congress and civil society organizations about inclusion in U.S. FTAs, amid ongoing debate about the provisions' merits and possible revision to the law in the future. Cybersecurity . Commitments promote collaboration on cybersecurity and use of risk-based strategies and consensus-based standards over prescriptive regulation in dealing with cybersecurity risks and events. Open government data . Commitments promote publication of and access to government data in machine-readable and open format for public usage. Cryptography . Commitments prohibit requiring the transfer or access to proprietary information, including a particular technology or production process, by manufacturers or suppliers of information and communication technology (ICT) goods that use cryptography, as a condition for market access, with some exceptions, such as for networks and devices owned, controlled, or used by government.

In general, the stage one agreements have been well received by several Members of Congress and U.S. stakeholders for the expected benefits to agriculture and cross-border digital trade. At the same time, many observers also contend the deals should not be a substitute for a comprehensive agreement and view the second stage of talks as critical to U.S. interests. The U.S. Trade Advisory Committee Report to the USTR and Congress reflects a range of views from among the various committees represented. The private sector Advisory Committee for Trade Policy and Negotiations (ACTPN) expressed support for the initial deals and the "significant boost to the U.S. economy that will result from implementation," while urging immediate negotiation of a comprehensive agreement and recommending several priorities for the talks. The Intergovernmental Policy Advisory Committee (IGPAC), which is composed of representatives from state and local governments, however, argued that the agreement did not meet most negotiating objectives under TPA, due to its "narrow nature." In the view of the Labor Advisory Committee, the deal is a "lopsided agreement designed to address short-term political objectives." Various industry committees issued reports outlining priorities for future talks. Some cited what they viewed as the USTR's lack of consultation and the lack of dispute settlement provisions in the agreements as concerns.

Overall, many observers agree that the USJTA is important for U.S. agriculture to regain competitiveness in the Japanese market. At the same time, some raise concerns about product exclusions and the lack of provisions on nontariff barriers that were generally covered in past U.S. FTAs. One trade policy expert cautioned against the tariff-only approach as a model for future U.S. agreements. Given this concern, U.S. businesses have strongly advocated for continued progress toward a more comprehensive agreement. Other stakeholders question whether there will be sufficient political support in both countries to make progress in future talks, especially during an election year in the United States. In particular, since the agriculture sectorâamong countries' most sensitive markets and thus typically relegated to final stage negotiationsâhas already secured access, some view the United States as having limited leverage to secure further concessions. Other trade experts view the agreement as failing to maximize the potential of the U.S.-Japan economic relationship, both in terms of the market access gains, which essentially had already been agreed to in TPP, but also in terms of advancing U.S.-Japan leadership on rulemaking. More broadly, some view successful next-stage talks as also being critical to "engineer an American return to the regional economic architecture." Under this outlook, reaching a second-stage comprehensive agreement with Japan could help ease the perception among many East Asian policymakers and scholars that the Trump Administration's Indo-Pacific strategy has an insufficient economic component.

While Prime Minister Abe framed the agreement as a "win-win outcome" that benefits both countries, some Japanese observers have criticized the agreement as a one-sided deal benefiting the political and economic interests of the United States. In particular, critics cite the lack of U.S. market access commitments in the auto sector in exchange for Japanese agricultural concessions, as well as the lack of concrete commitment by the United States not to impose Section 232 auto tariffs, despite verbal assurances from the Trump Administration. Instead, in a joint statement, both sides indirectly alluded to the issue, committing to "refrain from taking measures against the spirit of these agreements â¦ and make efforts for an early solution to other tariff-related issues." An estimate by the Japanese government of the economic benefits of a bilateral trade deal assumes the removal of U.S. auto tariffsâan approach criticized by some members of the Japanese Diet, who remain skeptical of achieving this future concession. More broadly, some analysts point to Japan conceding to bilateral talks as dimming any prospect for a possible U.S. return to TPP, a long-held Japanese goal. In others' view, the deal was favorable to Japan in achieving the primary goals of avoiding potential auto tariffs and sealing an expeditious conclusion of an agreement limited to goodsâPrime Minister Abe's initial characterization of the deal. Further, while Japan made concessions in agriculture, they remain limited to commitments in past Japanese trade agreements (TPP-minus in some cases). Japanese industry broadly welcomes the agreement, in particular the sectors that gain from reduced U.S. tariffs, but like U.S. industry, urge further progress.

Japan ratified the agreements on December 5, 2019, while the Trump Administration previously signed an executive agreement on the digital trade commitments, and is expected to issue a proclamation implementing the agreed tariff changes in December, paving the way for entry into force in January 2020. In its notification to Congress of the U.S. intent to enter into the agreements, the Administration stated that it "looks forward to continued collaboration with Congress on further negotiations with Japan to achieve a more comprehensive trade agreement." The Administration did not specify a timeline, however. The United States and Japan stated their intent to "conclude consultations within four months after the date of entry into force of the United States-Japan Trade Agreement and enter into negotiations thereafter in the areas of customs duties and other restrictions on trade, barriers to trade in services and investment, and other issues in order to promote mutually beneficial, fair, and reciprocal trade." While USTR trade negotiating objectives released at the outset of the talks in December 2018 suggested a broad range of issues beyond tariffs and digital trade are to be covered, it remains unclear what specific issues would be the subject of the next-stage talks.

The stage one agreements with Japan on agriculture, industrial goods, and digital trade, as well as the approach the Trump Administration has taken to negotiate them represent a significant shift in U.S. trade agreement policy. Given its constitutional authority to regulate foreign commerce, Congress may reflect on whether this shift aligns with congressional objectives. Congress may also consider the impact of the agreements on the U.S. economy, including the implications of completing (or not completing) a broader second-stage deal with Japan, and how a staged approach affects the countries' ability to achieve additional agreements.

Congressional Role in Limited Scope and Staged Agreements

The Administration's plan to implement the stage one U.S.-Japan agreements without the approval of Congress, an unprecedented move for U.S. FTA negotiations, has prompted debate among some Members over the appropriate congressional role. In a November 26, 2019, letter to the USTR some Members sought clarification from the Administration regarding its intent to implement the agreements and how Section 103(a) trade authorities under TPA allow the Administration to enter into a tariff agreement with Japan. Some analysts and Members cite uncertainties as to whether the delegated authorities also permit implementation of changes in rules of origin and quota modifications under the agreements. Some Members further suggest that future debate over potential reauthorization of TPA should consider congressional intent behind these delegated tariff authorities. At the same time, other Members have indicated that they would not object to the Administration's plan to implement the agreements with Japan without congressional approval. On procedure, questions have been raised by some as to whether the Administration has fulfilled the consultation requirements of TPA throughout the negotiationsâSection 103(a) includes fewer requirements with respect to tariff-only agreements. The digital trade commitments do not appear to require changes to U.S. law, but the inclusion of certain provisions has prompted some congressional debate. In the case of past U.S. FTAs, such debate would typically play out during congressional debate and formal consideration of legislation to implement the respective agreement under TPA. Key questions for Congress may include

What role should Congress play in limited trade agreements, given the authorities and requirements established in TPA? Should Congress consider changes to delegated authorities in future consideration of potential TPA reauthorization?

Staged Negotiation or Comprehensive Deal

Congress set negotiating objectives for U.S. trade agreements in statute in its 2015 grant of TPA (19 U.S.C. Â§3802). Based on these guidelines and as required by TPA, the Trump Administration laid out 22 specific areas of focus for its bilateral negotiations with Japan. The stage one U.S.-Japan trade agreements, however, include provisions related to two of these areas: a limited reduction of tariffs on trade in goods and digital trade. The Administration has stated its intent to address the remaining issues in future negotiations, but its ability to conclude and implement such negotiations depend on the political landscape and will in both countries, making a second-phase deal an uncertain prospect. While the U.S. trade advisory committees generally support the initial-stage agreements, some, such as the services sector advisory committee, also argue that the two-stage or perhaps a multi-stage approach could make it more challenging for the United States to achieve the strongest possible overall outcomes in certain sectors.

The staged approach also raises questions over the potential economic impact of the agreement. Due to the Administration's intended use of Section 103(a) proclamation authorities to enact the agreed tariff changes with Japan, an economic assessment by the U.S. International Trade Commission (USITC) will not be required for this stage one deal. The agreement may have a modest overall effect on the U.S. economy, given that it covers a small share of bilateral trade, but it could be significant for the U.S. agricultural exporters that will enjoy improved access to Japan's highly protected market. Key questions for Congress may include

How do these stage one agreements with Japan affect the ability of the United States to negotiate a more comprehensive agreement in the future? Do staged trade negotiations adhere to Congress's negotiating objectives in TPA, and should Congress support this staged approach in future U.S. trade negotiations?

Congress delegated authority to the President to enact tariffs under Section 232 specifically to address possible threats to U.S. national security. President Trump, however, has stated that his use of tariff authorities have been a critical tool in getting U.S. trade partners to the negotiating table, and Japan's Foreign Minister, Toshimitsu Motegi, who negotiated the phase-one deal for Japan, highlighted the importance of avoiding Section 232 auto tariffs as a key outcome of the U.S.-Japan negotiations. The Administration has yet to publish the Commerce Department's report outlining the national security threat posed by auto imports, despite direct requests from Congress and legal requirement to do so. Some trade analysts caution that U.S. use or threat of trade barriers as negotiating leverage undermines existing global trade rules and could set a precedent used by other countries against the United States in the future. Many Members of Congress have questioned the security rationale behind the President's proposed and implemented tariff actions, and some support legislation revising Section 232 authorities. Key questions for Congress may include

Does the use of Section 232 tariff authorities as leverage in broader trade and tariff negotiations represent an appropriate use of the delegated authorities? What are the potential long-term implications to U.S. and global trade policy of using the threat of tariff increases as leverage in trade liberalization negotiations?

The limited scope of the USJTA commitments (in particular, the exclusion of auto trade), has led several analysts and some Members of Congress to question the extent to which the agreement adheres to Article XXIV of the General Agreement on Tariffs and Trade (GATT) under the WTO. This provision requires regional trade agreements outside the WTO to eliminate duties and other restrictive regulations of commerce on "substantially all trade" between the parties. As discussed, U.S. market access commitments in the initial deal cover a limited share of U.S. goods imports from Japan. Congress has historically taken issue with other countries' partial scope agreements, advocating for better adherence to Article XXIV, including within TPA and other trade statutes. Some analysts suggest this concern could be mitigated if the stage one U.S.-Japan agreement were to qualify as an "interim agreement" under Article XXIV; but these agreements must include a "plan and schedule" for the formation of the free trade area within a "reasonable length of time." In practice, however, WTO members have rarely challenged other trading partners' agreements for consistency with these requirements under formal dispute settlement proceedings. Whether or not the agreement ultimately is inconsistent with the letter or spirit of WTO rules likely depends on the timeline and scope of the next-stage U.S.-Japan talks, which both sides have indicated aim to be comprehensive in scope. Key questions for Congress may include

Are the stage one agreements consistent with U.S. obligations under the WTO? Does the limited scope of the agreements set precedents for other countries to negotiate other partial trade agreements that liberalize trade on a limited set of products or sectors that could potentially discriminate against the United States, as well as potentially undermine respect and adherence to the letter and spirit of WTO rules?

Comparison to TPP (and TPP-11) and Strategic Considerations

The Trump Administration's bilateral trade agreement negotiations with Japan represent an alternative to the U.S.-Japan trade agreement negotiated as part of TPP. Given the Trump Administration's decision to conclude a limited, stage one agreement, the most significant distinction with TPP (and TPP-11) at this point is that TPP covered a much broader range of commitments. For example, USJTA commits the countries to reduce or eliminate tariffs on small share of each country's overall tariff lines, whereas TPP committed both countries to eliminate tariffs on all but a limited number of agricultural products. In addition, this phase-one agreement with Japan includes one nontariff issue, digital trade, whereas TPP covered issues such as rules on technical barriers to trade, sanitary and phytosanitary measures, state-owned enterprises, labor and environmental standards, investment and intellectual property rights protections, and market access for services, among others. As discussed, whether the Administration will include such commitments in future negotiations with Japanâand in what formâremains to be seen.

The Trump Administration's bilateral approach to negotiations with Japan also differs from the Obama Administration's and the George W. Bush Administration's multiparty approach to TPP, which may be tied to differing strategic priorities by the Administrations. For example, the Obama Administration saw the TPP as the economic component of its rebalance to Asia and a vehicle to establish rules that reflect U.S. interests and values as the regional framework for commerce, rather than allowing other countries, such as China, to set regional norms. The broad membership of TPP, arguably, was an important component of this strategy, creating an opportunity to harmonize rules across multiple trading partners, and creating a greater likelihood of attracting additional future participants. The Trump Administration, alternatively, has prioritized achieving fair and reciprocal trade, both in its objectives for the U.S.-Japan trade agreement and its broader Indo-Pacific strategy. The Administration argues that a bilateral approach to negotiations allows the United States to take full advantage of its economic heft to secure the most advantageous terms and allows for better enforceability. Key questions for Congress may include

How has the U.S. withdrawal from TPP affected U.S. economic and strategic interests in Japan and the Asia-Pacific region and what is the best approach to advancing those interests moving forward in the next stage of talks with Japan? What are the costs and benefits of bilateral versus regional or multiparty approaches to U.S. trade agreement negotiations? Should the United States consider joining TPP-11?


Poverty in the United States in 2018: In Brief

Summary: In 2018, approximately 38.1 million people, or 11.8% of the population, had incomes below the official definition of poverty in the United States. Poverty statistics provide a measure of economic hardship. The official definition of poverty for the United States uses dollar amounts called poverty thresholds that vary by family size and the members' ages. Families with incomes below their respective thresholds are considered to be in poverty. The poverty rate (the percentage that was in poverty) fell from 12.3% in 2017. This was the fourth consecutive year since the most recent recession that the poverty rate has fallen.

Summary: The poverty rate for female-householder families in 2018 (24.9%, down 1.3 percentage points from the previous year) was higher than that for male-householder families (12.7%) or married-couple families (4.7%), neither of which registered a decline from 2017. Of the three age groupsâchildren under 18, the working-age population, and those age 65 and olderâthe 65-and-older population used to have the highest poverty rates, but now has the lowest: 28.5% of the aged population was poor in 1966, but 9.7% was poor in 2018. People under 18, in contrast, had the highest poverty rate of the three age groups: 16.2% of this population was poor in 2018. From 2017 to 2018, poverty rates fell among children (from 17.4% to 16.2%) and the working-age population (from 11.1% to 10.7%), but not among the aged population (9.7% in 2018). Poverty was not equally prevalent in all parts of the country. The poverty rate for Mississippi (19.7%) appeared highest but was in a statistical tie with New Mexico (19.5%). New Hampshire's poverty rate (7.6%) was lowest in 2018.

Summary: Criticisms of the official poverty measure have inspired poverty measurement research and eventually led to the development of the Supplemental Poverty Measure (SPM). The SPM uses different definitions of needs and resources than the official measure.

Summary: The SPM includes the effects of taxes and in-kind benefits (such as housing, energy, and food assistance) on poverty, while the official measure does not. Because some types of tax credits are used to assist the poor (as are other forms of assistance), the SPM may be of interest to policymakers. The poverty rate under the SPM (12.8%) was about 1 percentage point higher in 2018 than the official poverty rate (11.8%). Under the SPM, the profile of the poverty population is slightly different than under the official measure. Compared with the official measure, poverty rates under the SPM were lower for children (13.7% compared with 16.2%) and higher for working-age adults (12.2% compared with 10.7%) and the 65-and-older population (13.6% compared with 9.7%). While the SPM reflects more current measurement methods, the official measure provides a comparison of the poor population over a longer time period, including some years before many current antipoverty assistance programs had been developed. In developing poverty-related legislation and conducting oversight on programs that aid the low-income population, policymakers may be interested in these historical trends.

In 2018, approximately 38.1 million people, or 11.8% of the population, had incomes below the official definition of poverty in the United States. The poverty rate (the percentage that were in poverty) fell from 12.3% in 2017, while the number of persons in poverty declined from 39.6 million.

In this report, the numbers and percentages of those in poverty are based on the Census Bureau's estimates. While this official measure is often regarded as a statistical yardstick rather than a complete description of what people and families need to live, it does offer a measure of economic hardship faced by the low-income population: the poverty measure compares family income against a dollar amount called a poverty threshold , a level below which the family is considered to be poor. The Census Bureau releases these poverty estimates every September for the prior calendar year. Most of the comparisons discussed in this report are year-to-year comparisons. This report only considers a number or percentage to have changed from the previous year, or to be different from another number or percentage, if the difference has been tested to be statistically significant at the 90% confidence level.

However, in addition to the most recent year's data, this report presents a historical perspective as well as information on poverty for demographic groups (by family structure, age, race and Hispanic origin, and work status) and by state.

Over the past several decades, criticisms of the official poverty measure have led to the development of an alternative research measure called the Supplemental Poverty Measure (SPM), which the Census Bureau also computes and releases. Statistics comparing the official measure with the SPM are provided at the conclusion of this brief.

The SPM includes the effects of taxes and in-kind benefits (such as housing, energy, and food assistance) on poverty, while the official measure does not. Because some types of tax credits are used to assist the poor, as are other forms of assistance, the SPM may be of interest to policymakers. However, the official measure provides a comparison of the poor population over a longer time period, including some years before many current antipoverty assistance programs had been developed. In developing poverty-related legislation and conducting oversight on programs that aid the low-income population, policymakers may be interested in these historical trends.

How the Official Poverty Measure Is Computed

The Census Bureau determines a person's poverty status by comparing his or her resources against a measure of need. For the official measure, resources is defined as total family income before taxes, and the measure of "need" is a dollar amount called a poverty threshold. There are 48 poverty thresholds that vary by family size and composition. If a person lives with other people to whom he or she is related by birth, marriage, or adoption, the money income from all family members is used to determine his or her poverty status. If a person does not live with any family members, his or her own income is used. Only money income before taxes is used in calculating the official poverty measure, meaning this measure does not treat in-kind benefits such as the Supplemental Nutritional Assistance Program (SNAP, formerly known as food stamps), housing subsidies, or employer-provided benefits as income.

The poverty threshold dollar amounts vary by the size of the family (from one person not living in a family, to nine or more family members living together) and the ages of the family members (how many of the members are children under 18 and whether or not the family head is 65 years of age or older). Collectively, these poverty thresholds are often referred to as the poverty line . As a rough guide, the poverty line in 2018 can be thought of as $25,701 for a family of four, $19,985 for a family of three, $16,247 for a family of two, or $12,784 for an individual not living in a family, though the official measure is actually much more detailed.

The threshold dollar amounts are updated annually for inflation using the Consumer Price Index. Notably, the same thresholds are applied throughout the country: no adjustment is made for geographic variations in living expenses.

The official poverty measure used in this report is the federal government's definition of poverty for statistical purposes, such as comparing the number or percentage of people in poverty over time. A related definition of poverty, the poverty guidelines published by the Department of Health and Human Services (HHS), is used for administrative purposes such as eligibility criteria for assistance programs and will not be discussed in this report.

Figure 1 shows a historical perspective of the number and percentage of the population below the poverty line. The number in poverty and the poverty rates are shown from the earliest year available (1959), through the most recent year available (2018). Because the total U.S. population has grown over time, poverty rates are useful for historical comparisons because they control for population growth.

Poverty rates fell through the 1960s. Since then, they have generally risen and fallen according to the economic cycle, though during the most recent two expansions poverty rates did not fall measurably until four to six years into the expansion. Historically notable lows occurred in 1973 (11.1%) and 2000 (11.3) . Poverty rate peaks occurred in 1983 (15.2%), 1993 (15.1%), and 2010 (15.1%).

Poverty rates tend to rise during and after recessions, as opposed to leading economic indicators such as new housing construction, whose changes often precede changes in the performance of the overall economy. The poverty rate's lag is explainable in part by the way it is measured: it uses income from the entire calendar year.

Notably, the poverty rate in 2018 registered a fourth consecutive annual decrease since the most recent recession, though it remained higher than the rate in 2000, the most recent low point.

The drop in the U.S. poverty rate (from 12.3% in 2017 to 11.8% in 2018) affected some demographic groups more than others, notably people in female-householder families, children and the population aged 18 to 64, and the non-Hispanic white population. Details for selected demographic groups are described below.

Because poverty status is determined at the family level by comparing resources against a measure of need, vulnerability to poverty may differ among families of different compositions. In this section, poverty data by family structure are presented using the official poverty measure, with "families" defined as persons related by birth, marriage, or adoption to the householder (the person in whose name the home is owned or rented). In the " Supplemental Poverty Measure " section of this report, a different definition will be used.

Families with a female householder and no spouse present (female-householder families) have historically had higher poverty rates than both married-couple families and families with a male householder and no spouse present (male-householder families). This remained true in 2018: female-householder families experienced a poverty rate of 24.9%, compared with 4.7% for married-couple families and 12.7% for male-householder families. Unlike the other two family types, however, female-householder families experienced a decline in their poverty rate of 1.3%. Their 2018 rate of 24.9%, down from 26.2% in 2017, appeared to be among the lowest poverty rates for female-householder families on record.

Among individuals not living in families, the poverty rate was 20.2% in 2018, not distinguishable from the previous year.

When examining poverty by age, three main groups are noteworthy for distinct reasons: under 18, 18 to 64, and 65 and older. People under age 18 are typically dependent on other family members for income, particularly young children below their state's legal working age. People aged 18 to 64 are generally thought of as the working-age population and typically have wages and salaries as their greatest source of income. People age 65 and older, referred to as the aged population, are often eligible for retirement, and those who do retire typically experience a change in their primary source of income.

Children and the working-age population experienced decreases in poverty. Among children, 11.9 million, or 16.2%, were poor, down from 12.8 million or 17.4% in 2017. Among the working-age population, 21.1 million, or 10.7%, were in poverty, down from 21.9 million or 11.1% in 2017. The aged population did not register any significant changes in its number in poverty or its poverty rate from 2017 to 2018: 5.1 million, or 9.7%, were poor.

From a historical standpoint, the poverty rate for those age 65 and over used to be the highest of the three groups. In 1966, people age 65 and over had a poverty rate of 28.5%, compared with 17.6% for those under 18 and 10.5% for working-age adults. By 1974, the poverty rate for people age 65 and over had fallen to 14.6%, compared with 15.4% for people under 18 and 8.3% for working-age adults. Since then, people under 18 have had the highest poverty rate of the three age groups, as shown in Figure 3 .

Poverty rates vary by race and Hispanic origin, as shown in Figure 4 . In surveys, Hispanic origin is asked separately from race; accordingly, people identifying as Hispanic may be of any race. The poverty rate fell for non-Hispanic whites (from 8.5% in 2017 to 8.1% in 2018). Among blacks (20.8%), Asians (10.1%), and Hispanics (17.6%), the poverty rate did not register any statistically significant change from 2017.

While having a job reduced the likelihood of being in poverty, it did not guarantee that a person or his or her family would avoid poverty. Among the 18 to 64-year-old population living in poverty, 77.2% had jobs in 2018. Poverty rates among workers in this age group were 5.1% for all workers, 2.3% for full-time year-round workers, and 12.7% for part-time or part-year workers, none of which were measurably changed from the previous year. Similarly, no significant change was detected among those who did not work at least one week in 2018 (29.7% were poor).

Because poverty is a family-based measure, the change in one member's work status can affect the poverty status of his or her entire family. Among all 18 to 64-year-olds who did not have jobs in 2018, 58.9% lived in families in which someone else did have a job. Among poor 18 to 64-year-olds without jobs, 18.5% lived in families where someone else worked.

Poverty is not equally prevalent in all parts of the country. The map in Figure 5 shows states with relatively high poverty rates across parts of the Appalachians, the Deep South, and the Southwest, with the poverty rate in Mississippi (19.7%) among the highest in the nation, not statistically different from the rate in New Mexico (19.5%). The poverty rate in New Hampshire (7.6%) was lowest. When comparing poverty rates geographically, it is important to remember that the official poverty thresholds are not adjusted for geographic variations in the cost of livingâthe same thresholds are used nationwide. As such, an area with a lower cost of living accompanied by lower wages will appear to have a higher poverty rate than an area with a higher cost of living and higher wages, even if individuals' purchasing power were exactly the same in both areas.

Puerto Rico and 14 states experienced poverty rate declines from 2017 to 2018: one in the Midwest (Illinois), three in the Northeast (Massachusetts, New Jersey, and New York); five in the South (Florida, Georgia, Louisiana, North Carolina, and West Virginia); and five in the West (Arizona, California, Colorado, Oregon, and Washington). Connecticut was the only state to experience an increase, and 35 states, as well as the District of Columbia, did not register a statistically significant change.

Criticisms of the official measure have led to the development of the Supplemental Poverty Measure (SPM). Described below are the development of the official measure, its limitations, attempts to remedy those limitations, the research efforts that eventually led to the SPM's first release in November 2011, and a comparison of poverty rates in 2018 based on the SPM and the official measure.

How the Official Poverty Measure Was Developed

The poverty thresholds were originally developed in the early 1960s by Mollie Orshansky of the Social Security Administration. Rather than attempt to compute a family budget by using prices for all essential items that low-income families need to live, Orshansky focused on food costs. Unlike other goods and services such as housing or transportation, which did not have a generally agreed-upon level of adequacy, minimum standards for nutrition were known and widely accepted. According to a 1955 U.S. Department of Agriculture (USDA) food consumption survey, the average amount of their income that families spent on food was roughly one-third. Therefore, using the cost of a minimum food budget and multiplying that figure by three yielded a figure for total family income. That computation was possible because USDA had already published recommended food budgets as a way to address the nutritional needs of families experiencing economic stress. Some additional adjustments were made to derive poverty thresholds for two-person families and individuals not living in families to reflect the relatively higher fixed costs of smaller households.

While the official poverty measure has been used for over 50 years as the source of official statistics on poverty in the United States, it has received criticism over the years for several reasons. First, it does not take into account benefits from most of the largest programs that aid the low-income population. For instance, it uses money income before taxesâmeaning that it does not necessarily measure the income available for individuals to spend, which for most people is after-tax income. Therefore, any effects of tax credits designed to assist persons with low income are not captured by the official measure. The focus on money income also does not account for in-kind benefit programs designed to help the poor, such as SNAP or housing assistance.

The official measure has also been criticized for the way it characterizes families' and individuals' needs in the poverty thresholds. That is, the method used to compute the dollar amounts used in the thresholds, which were originally based on food expenditures in the 1950s and food costs in the 1960s, does not accurately reflect current needs and available goods and services. Moreover, the official measure does not take account of the sharing of expenses and income among household members not related by birth, marriage, or adoption. And, as mentioned earlier, the official thresholds do not take account of geographic variations in the cost of living.

In 1995, a panel from the National Academy of Sciences issued a report, Measuring Poverty: A New Approach, which recommended improvements to the poverty measure. Among the suggested improvements were to have the poverty thresholds reflect the costs of food, clothing, shelter, utilities, and a little bit extra to allow for miscellaneous needs; to broaden the definition of "family;" to include geographic adjustments as part of the measure's computation; to include the out-of-pocket costs of medical expenses in the measure's computation; and to subtract work-related expenses from income. An overarching goal of the recommendations was to make the poverty measure more closely aligned with the real-life needs and available resources of the low-income population, as well as the changes that have taken place over time in their circumstances, owing to changes in the nation's economy, society, and public policies (see Table 1 ).

After over a decade and a half of research to implement and refine the methodology suggested by the panel, conducted both from within the Census Bureau as well as from other federal agencies and the academic community, the Census Bureau issued the first report using the Supplemental Poverty Measure (SPM) in November 2011.

Official and Supplemental Poverty Findings for 201827

Compared with the official measure, the SPM takes into account greater detail of individuals' and families' living arrangements and provides a more up-to-date accounting of the costs and resources available to them. Because the SPM recognizes greater detail in relationships among household members and geographically adjusts housing costs, it provides an updated rendering, compared with the official measure, of the circumstances in which the poor live. In that context, some point out that the SPM's measurement of taxes, transfers, and expenses may offer policymakers a clearer view of how government policies affect the poor population today. However, the SPM was developed as a research measure, and the Office of Management and Budget set the expectation that it would be revised periodically to incorporate improved measurement methods and newer sources of data as they became available; it was not developed for administrative purposes. Conversely, the official measure's consistency over a longer time span makes it easier for policymakers and researchers to make historical comparisons.

Under the SPM, the profile of the poverty population is slightly different than under the official measure. The SPM was 1 percentage point higher in 2018 than the official poverty rate (12.8% compared with 11.8%; see Figure 6 ). More people aged 18 to 64 are in poverty under the SPM (12.2% compared with 10.7% under the 2018 official measure), as are people age 65 and over (13.6%, compared with 9.7% under the official measure). The poverty rate for people under age 18 was lower under the SPM (13.7% in 2018) than under the official measure (16.2%, with foster children included). Again, the SPM uses a different definition of resources than the official measure: the SPM includes in-kind benefits which generally help families with children; subtracts out work-related expenses, which are often incurred by the working-age population; and subtracts medical out-of-pocket expenses, which are incurred frequently by people age 65 and older.

With the geographically adjusted thresholds, the poverty rate in 2018 was lower under the SPM than under the official measure for the Midwest (9.2% compared with 10.4%), while it was higher than the official measure for the Northeast (12.2% compared with 10.3%), the West (14.4% compared with 11.2%), and the South (13.9% compared with 13.6%).


The September 11th Victim Compensation Fund (VCF)

Summary: The September 11 th Victim Compensation Fund (VCF) provides cash benefits to certain persons whose health may have been affected by exposure to debris or toxic substances in the aftermath of the September 11, 2001 terrorist attacks on the Pentagon, the World Trade Center, and the terrorist-related aircraft crash at Shanksville, PA. Congress created the original VCF shortly after the 2001 terrorist attacks to provide compensation to persons injured and the families of persons killed in the attacks and their immediate aftermath. The original VCF closed in 2003.

Summary: In 2011, Congress reopened the VCF to provide benefits to persons who responded to the terrorist attack sites, were involved in the cleanup of these sites, or lived in lower Manhattan during the attacks. The reopened VCF was authorized through October 3, 2016. However, the VCF was reauthorized in December 2015 ( P.L. 114-113 ) and July 2019 ( P.L. 116-34 ). All VCF claims must be filed by October 1, 2090.

Summary: Since its reopening, the VCF has awarded more than $5.5 billion to more than 23,000 claimants. There is no cap on the total VCF award amount, but there are limits on the amounts of individual awards for economic and noneconomic losses claimants suffered. The 2019 reauthorization legislation provides all necessary appropriations for VCF awards and administrative expenses through the end of FY2092.

T he September 11 th Victim Compensation Fund (VCF) provides cash benefits to certain persons whose health may have been affected by the aftermath of the September 11, 2001 terrorist attacks on the Pentagon, the World Trade Center, and the terrorist-related aircraft crash at Shanksville, PA. The VCF was most recently reauthorized on July 29, 2019, with the enactment of the Never Forget the Heroes: James Zadroga, Ray Pfeifer, and Luis Alvarez Permanent Authorization of the September 11 th Victim Compensation Fund Act ( P.L. 116-34 ). All VCF claims must be filed by October 1, 2090. There is no cap on total benefits that may be paid.

This report provides an overview of the VCF, including its history, current law, and appropriations. It also provides an Appendix of current VCF program statistics.

On September 22, 2001, the Air Transportation Safety and System Stabilization Act (ATSSA; P.L. 107-42 ) was enacted into law. Quickly passed by Congress in the wake of the September 11, 2001 terrorist attacks, this legislation provided various forms of relief to the American airline industry and affirmed Congress's commitment to improving airline safety. Title IV of the ATSSA also established the VCF to compensate persons injured or the representatives of persons killed in the attacks or their immediate aftermath.

The VCF originally closed in 2003 but was reopened and expanded in 2011 to provide compensation to the 2001 terrorist attacks' responders and others, such as certain New York City residents, who may have suffered health effects in the aftermath of the attacks. The VCF was reauthorized in December 2015 and July 2019 and is currently authorized through the end of FY2092 with an October 1, 2090 deadline for VCF claims.

The original VCF, created by Title IV of the ATSSA, provided cash benefits to two groups of persons who suffered physical injury or death as a result of the terrorist attacks of September 11, 2001:

persons who were present at the World Trade Center, Pentagon, or aircraft crash site in Shanksville, PA, at the time of or in the immediate aftermath of the aircraft crashes at those sites on September 11, 2001; and passengers and crew of any aircraft that crashed on September 11, 2001, as a result of terrorist activity.

The Attorney General appointed a special master to determine the benefit amount for each claimant. The benefit amount payable to each claimant was based on the individual's economic losses (such as loss of future earnings) and noneconomic losses (such as pain and suffering). The VCF statute specifically prohibited any payments for punitive damages. Benefits were reduced by certain collateral source payments, such as life insurance benefits, available to the claimant. There was no cap on the amount of benefits that any one person could receive or on total benefits paid.

By filing a VCF claim, a person waived his or her right to file a civil action or be a party to such an action in any federal or state court for damages related to the September 11, 2001 terrorist-related aircraft crashes. This provision established the VCF as an alternate and expedited route to compensation for victims while providing some protection against lawsuits for damages that may have been brought by victims against the air carriers; airframe manufacturers; the Port Authority of New York and New Jersey, who owned the World Trade Center; or any other entity.

Congress provided funding for the VCF through an appropriation of "such sums as may be necessary" for benefit payment and administration. The VCF's special master was required to promulgate regulations to govern the program within 90 days of the law's enactment, and all claims had to be filed within two years of the regulations' promulgation, at which time the VCF would close. The original VCF received 7,403 claims and made awards totaling $7.049 billion to 5,560 claimants.

The original VCF closed to new claims in December 2003. However, concerns about injuries and illnesses incurred by persons involved in emergency response, recovery, and debris removal operations at the September 11 th aircraft crash sites led Congress to reopen the VCF with the enactment of Title II of the James Zadroga 9/11 Health and Compensation Act of 2010 (Zadroga Act; P.L. 111-347 ). The reopened VCF extended eligibility for cash benefits to persons who suffered physical injuries or illnesses as a result of rescue, recovery, or debris removal work at or near the September 11 th aircraft crash sites during the from September 11, 2001 to May 30, 2002, as well as for certain persons who lived, worked, or were near the World Trade Center on September 11, 2001.

The VCF was initially reopened for new claims through October 3, 2016. Total benefits and administrative costs were limited to $2.775 billion, unlike in the original VCF, which had no cap on total funding for benefits, allowing the special master to award benefits without considering the benefits' total cost. Under the reopened VCF, attorney fees were limited to 10% of the VCF award.

The VCF was first reauthorized on December 18, 2015, which extended the claim period for five years, with the enactment of Title IV of Division O of the Consolidated Appropriations Act, 2016 (Zadroga Reauthorization Act of 2015; P.L. 114-113 ). Under this reauthorization, claims approved before the reauthorization date were considered Group A claims, which were subject to the same rules as claims under the reopened VCF and to the $2.775 billion cap on total benefit payments. All other claims filed before the December 18, 2020 deadline were considered Group B claims subject to additional rules and funding caps established by the reauthorization legislation including a $4.6 billion cap on benefits. The 2015 reauthorization created a total funding cap of $7.375 billion for Groups A and B benefits.

The VCF was reauthorized again in 2019 with the enactment of the Never Forget the Heroes: James Zadroga, Ray Pfeifer, and Luis Alvarez Permanent Authorization of the September 11 th Victim Compensation Fund Act ( P.L. 116-34 ). Under this legislation, the VCF is authorized through the end of FY2092, with an October 1, 2090 deadline for all VCF claim filings. The 2019 reauthorization appropriates "such sums as may be necessary" for VCF benefit payments and administrative expenses for each fiscal year through the end of FY2092.

To be eligible for VCF benefits, a person must have

died as a passenger or crew member on one of the aircraft hijacked on September 11, 2001; died as a direct result of the terrorist-related aircraft crashes or rescue, recovery, or debris removal in the immediate aftermath of the September 11, 2001 terrorist attacks; or been present at a September 11 th crash site in the immediate aftermath of the September 11, 2001 terrorist attacks and suffered physical harm as a direct result of the crashes or the rescue, recovery, and debris removal efforts.

To be eligible for the VCF, survivors (individuals who did not die as passengers or crew members of the hijacked aircraft or as a direct result of the September 11 th terrorist attacks, including rescue, recovery, and debris removal), must have suffered physical harm as a result of the attacks. Physical harm is demonstrated by the presence of a World Trade Center (WTC)-related physical health condition as defined for the purposes of the World Trade Center Health Program (WTCHP).

A WTC-related physical health condition is a physical health condition covered by the WTCHP. These conditions are those provided in statute at Sections 3312(a) and 3322(b) of the Public Health Service Act (PHSA) and those added through rulemaking by the WTCHP administrator. Per Section 3312(a) of the PHSA, to be covered by the WTCHP and thus compensable under the VCF, a condition must be on the list of WTCHP-covered conditions and it must be determined that exposure in the aftermath of the September 11, 2001 terrorist attacks "is substantially likely to be a significant factor in aggravating, contributing to, or causing the illness or health condition." In most cases, the VCF requires that a person's condition be WTCHP certified for that condition to be compensable.

The WTCHP provides standardized guidance to determine whether a person's condition was caused by exposure in the aftermath of the September 11, 2001 terrorist attacks. This determination is based on a combination of the amount of time a person was physically present at a site and the specific activitiesâsuch as search and rescue, sleeping in a home in Lower Manhattan, or just passing through a siteâin which the person engaged. For example, a person who was engaged in search and rescue activities at the WTC site between September 11 and September 14, 2001, must have been present for at least 4 hours for the WTCHP to certify his or her condition and thus compensable by the VCF, whereas a person whose only activity was passing through Lower Manhattan during the same period, and who was not caught in the actual dust cloud resulting from the buildings' collapse, would have to have been in the area for at least 20 hours to be eligible for compensation. The WTCHP evaluates conditions that do not meet the minimum exposure criteria on a case-by-case basis using "professional judgement" and "any relevant medical and/or scientific information."

WTCHP-covered mental health conditions may not be used to establish VCF eligibility, as the VCF does not include any provisions for benefit payments for mental health conditions.

Cancer as a WTC-Related Physical Health Condition

The WTCHP statute does not include any type of cancer in the list of WTC-related health conditions. However, the statute does require the WTCHP administrator to periodically review the available scientific evidence to determine if any type of cancer should be covered by the WTCHP and, by extension, the VCF. If the WTCHP administrator is petitioned to add conditions to the WTC-related health conditions' list, the administrator is required, within 90 days, to either request a recommendation on action from the WTC Scientific/Technical Advisory Committee (STAC) or make a determination on adding the health condition. If the administrator requests a recommendation from the STAC, that recommendation must be made within 90 days of its receipt and the WTCHP administrator must act on that request within an additional 90 days.

On September 7, 2011, Representatives Carolyn B. Maloney, Jerrold Nadler, Peter King, Charles B. Rangel, Nydia M. Velazquez, Michael G. Grimm, and Yvette Clarke and Senators Charles E. Schumer and Kirsten E. Gillibrand filed a petition, in the form of a letter to the WTCHP administrator, requesting that the administrator "conduct an immediate review of new medical evidence showing increased cancer rates among firefighters who served at ground zero" and that the administrator "consider adding coverage for cancer under the Zadroga Act." In response to this petition, the WTC administrator requested that the STAC "review the available information on cancer outcomes associated with the exposures resulting from the September 11, 2001 terrorist attacks, and provide advice on whether to add cancer, or a certain type of cancer, to the List specified in the Zadroga Act."

On September 12, 2012, based on the STAC's recommendations, the WTCHP administrator added more than 60 types of cancer, covering nearly every body system and including any cancers in persons less than 20 years of age and any rare cancers, to the list of WTC-related health conditions, thus making these conditions compensable under the VCF.

In a review of the decision to add cancers to the list of WTC-related health conditions, the Government Accountability Office (GAO) found that the WTCHP administrator used a hazards-based approach to evaluate cancers. This approach evaluated whether exposures in the aftermath of the September 11, 2001 terrorist attacks were associated with types of cancer but did not evaluate the probability of developing cancer based on a given exposure. A GAO-convened scientific panel indicated that the hazards-based approach the WTCHP administrator used was reasonable given data constraints and the fact that there is a certification process to determine if a cancer or other condition on the WTC-related health list meets the statutory requirement of being "substantially likely to be a significant factor in aggravating, contributing to, or causing the illness or health condition." The panel also indicated that this approach could have benefited from an independent peer review process. The WTCHP administrator stated that peer review was not possible given the statutory time constraints to act on the petition and the STAC's recommendation.

One year later, the WTCHP administrator added prostate cancer to the list of WTC-related health conditions. In addition, the WTCHP administrator established minimum latency periods for certain types of cancer and maximum onset periods for certain types of aerodigestive disorders.

The Civil Division of the Department of Justice administers the VCF. The Attorney General appoints the VCF special master and up to two deputies, who serve at the pleasure of the Attorney General. The VCF special master, currently Rupa Bhattacharyya, decides VCF eligibility and benefits. A claimant dissatisfied with the special master's decision on his or her claim may file an appeal and request a hearing before a VCF-appointed hearing officer. There is no further right of appeal or judicial review of VCF decisions. However, a claimant may amend his or her claim after a decision has been made if the claimant has new material relevant to the claim.

All claims for VCF benefits must be filed by October 1, 2090. Before filing a claim, a potential claimant must have registered with the VCF by one of the following applicable deadlines:

October 3, 2013, if the claimant knew, or reasonably should have known, that he or she suffered a physical harm or died as a result of the September 11 th attacks or rescue, recovery, or debris removal efforts, and that he or she was eligible for the VCF on or before October 3, 2011; or within two years of the date the claimant knew, or reasonably should have known, that he or she has a WTC-related physical health condition or died as a result of the September 11 th attacks and is eligible for the VCF.

If a claimant has a condition that is later added to the list of WTCHP-covered conditions, then the two-year period begins on the later of the dates when a government entity, such as the WTCHP or a state workers' compensation agency, determines that the condition is related to the September 11 th attacks, or when a claimant's condition is added to the WTCHP-covered list of conditions.

Under current law, there is no cap on the total VCF benefit amount that may be paid, but there are limits on individual benefit amounts. The special master determines VCF benefits based on the claimant's economic and noneconomic losses. For noneconomic losses, there is a cap of $250,000 for cancer claims and $90,000 for all other claims. For cases in which a WTC-related health condition causes death, the presumed award provided in the VCF regulations for noneconomic loss is $250,000 plus an additional $100,000 for the person's spouse and each dependent. In addition, the special master may exceed the noneconomic loss limits if the Special Master determines that the claim presents "special circumstances."

When calculating economic losses, the special master is permitted to consider only the first $200,000 in annual income when determining losses to past earnings and future earning capacity, which limits the amount of economic losses that can be paid. The special master is required to periodically adjust this amount to account for inflation. VCF benefits are reduced by certain collateral source payments available to claimants, such as life insurance benefits, workers' compensation payments, and government benefits related to the person's injury or death, including Social Security Disability Insurance and the Public Safety Officers' Benefits program.

The 2019 reauthorization provides that any benefit award that the special master had previously reduced due to insufficient funding to pay all VCF awards is to be paid in full.

Congress established the VCF to be an "administrative alternative to litigation for the victims of the [September 11, 2001] terrorist attacks." As such, to receive a VCF award, a person must forfeit his or her right to bring any lawsuit in any state or federal court against any entity, such as the airlines, airframe manufacturers, or building owners, for damages related to the attacks or their aftermath and must withdraw any pending legal claims. However, a person may maintain his or her eligibility for the VCF and bring a lawsuit against "any person who is a knowing participant in any conspiracy to hijack any aircraft or commit any terrorist act," or bring a lawsuit to recover collateral source obligations such as life insurance benefits owed to the victim.

In addition, the VCF statute grants the United States District Court for the Southern District of New York exclusive jurisdiction over any lawsuits related to the September 11, 2001 terrorist attacks and establishes liability limits for the airlines, airframe manufacturers, airports, City of New York, and any person with property interest in the World Trade Center such as the Port Authority of New York and New Jersey.

The VCF statute caps attorney fees for claimant assistance at 10% of the VCF award amount. The special master has the authority to reduce any attorney fees it deems excessive for services rendered.

Under provisions of the Justice for United States Victims of State Sponsored Terrorism Act, a person who receives a VCF award is barred from receiving any additional compensation from the United States Victims of State Sponsored Terrorism Fund.

The 2019 VCF reauthorization appropriates "such sums as may be necessary" for FY2019 and each fiscal year through FY2092 for the payment of VCF awards, with all funds to remain available until expended. Thus, funding for the VCF will not require annual appropriations or be subject to the annual appropriations process.