Little Understood Government Process Could—if Congress Acts—Provide Tax Cuts for Individuals and Manufacturers

Though many don’t know it, Americans pay both directly or indirectly about $1 million a day in government-imposed import taxes on products not made or available in the United States, including everyday items like swim goggles, smartphone cases and pepperoncini. Why? It’s a long story, but it essentially comes down to the fact that the United States has a very old tariff code, and it has been nearly a decade since Congress has gotten around to addressing these unfair, out-of-date, distortive and anticompetitive taxes by passing the so-called Miscellaneous Tariff Bill (MTB). Thankfully, the U.S. House of Representatives passed an MTB bill, the Miscellaneous Tariff Bill Act of 2018, on January 16 by a margin of 402 to 0. Now, it is the Senate’s turn to approve the legislation. It must do so without delay.

Here’s some important background on the issue.

Back in 2016, Congress took a major step toward modernizing the way products are considered under the MTB with its near unanimous passage of the American Manufacturing Competitiveness Act of 2016 (AMCA). The AMCA established a regularized process for Congress to consider the elimination of individual import taxes for products not made or available in the United States—and a few key elements from that rigorous and thorough process follow below:

  • Detailed petition. Each request for tariff suspension required a detailed petition, identifying the product and providing information that it is not produced or available in sufficient quantities in the United States. A total of 2,524 petitions were filed and reviewed in this process. (An additional 638 petitions were filed but later withdrawn.)
  • Public review, with comments. All petitions were posted online and comments were requested from the public, at the start of the process, on whether the petition met statutory requirements under the AMCA, including that there were no objections from domestic manufacturers of similar products. More than 800 comments were submitted on the petitions filed in 2017.
  • Review of all petitions for eligibility. Each of the petitions was reviewed by the U.S. International Trade Commission (ITC) with input from the U.S. Department of Commerce, U.S. Customs Bureau Protection and other executive branch agencies to determine if each petition met all the eligibility criteria. Several reports were released to the public summarizing these findings. Overall, more than 27 percent (or 697 petitions) were rejected as not eligible, including for reasons of domestic availability, as discussed below.
  • Broad U.S. government review of domestic production and availability. As required by the statute, the U.S. government review did not just look at identical products, but also products that were “directly competitive” with the product to ensure that no domestic industry was producing a similar product that might prefer to keep the tariff in place. U.S. government officials reviewed not only the comments received but proactively reached out to industry sectoral groups and individual businesses to ask if the same or competing product was available domestically. Nearly 500 petitions, or nearly 20 percent of the total, were not recommended by the ITC for inclusion in MTB legislation due to objections by domestic producers.

After all that work and more than nine months of engagement with stakeholders, a final package of eligible products was sent in August to the House and Senate, which also reviewed the products (with the ability only to strike products, not add them to the package). That rigorous process has produced a final MTB with nearly 1,700 products eligible for tariff elimination or reductions. Notably, such tariff relief is not permanent, as it only lasts for three years in case there are domestic manufacturers that want to produce any of these products and might prefer the application of the tariff. These products include both inputs used by many manufacturers throughout the United States (more than 75 percent of the products are inputs, according to National Association of Manufacturers (NAM) analysis), and some final goods that will directly benefit consumers and purchasers, in a manner that is fully consistent with the AMCA.

  • As one example, certain U.S. imports of performance footwear face tariffs ranging from 20 to 37.5 percent, which add unnecessary costs to U.S. consumers and harm our manufacturers and workers. Such imported performance footwear products incorporate made-in-America components, such as the GORE-TEX® laminate that is manufactured in Cecil County, Maryland. GORE-TEX® laminate is exported, incorporated into performance footwear and ultimately returns to the United States. Tariff relief for such footwear products, which are included in the MTB package, would support American jobs and incentivize continued investments in technology such as GORE-TEX.®
  • As another example, Lasko Products LLC is the only U.S. manufacturer of electric pedestal and desktop fans sold at retailers across the United States, but Lasko pays import taxes on fan motors not manufactured in the United States, making it more difficult for the company to compete with fans imported from China. These fan motors are also included in the current MTB package.

As required by international trade rules, these tariff suspensions also apply to all goods entering the United States from all countries. To do otherwise would invite retaliation and higher costs or barriers for U.S. manufacturers exporting overseas.

So, a lot of hard work has gone into addressing this issue, but we are not yet past the finish line. The NAM and manufacturers and other businesses across the United States are doubling-down to urge final congressional passage of the Miscellaneous Tariff Bill Act of 2018 as soon as possible so we can eliminate unnecessary taxes on families and manufacturers. Based on NAM analyses, the Miscellaneous Tariff Bill Act of 2018 would eliminate unnecessary import tariffs of more than $1.1 billion over three years, helping both consumers and manufacturers, with an estimated boost to U.S. manufacturing output of $3.1 billion.

The House already acted last month, and it passed this bill without a single vote in opposition. We are now urging the Senate to demonstrate its strong bipartisan support for the MTB by moving quickly to approve this important legislation.

Ken Monahan

Ken Monahan

Director for International Trade Policy at National Association of Manufacturers
Ken Monahan is the Director for International Trade Policy at the National Association of Manufacturers (NAM), where he works with NAM member companies to develop and advocate the association’s positions and priorities on trade agreement negotiations, ensure enforcement of existing trade agreement commitments, and other issues including the World Trade Organization (WTO), miscellaneous tariff bills, data flows and privacy, conflict minerals, forced localization, and other bilateral country trade matters (e.g., Colombia, South Korea, and the European Union and its member states). Mr. Monahan has on-the-ground experience negotiating trade agreements, having worked at the U.S. Department of Commerce on the WTO Doha Round negotiations, the U.S.-Korea free trade agreement and other international trade matters.
Ken Monahan

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