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Importers Press Congress to Renew Tariff Program
Monday, 20 July 2009 00:00

Time is running out on program that reduces duties on products not available in U.S.

In an economy measured in trillions of dollars, saving $500,000 in taxes might seem like small change, but for Church and Dwight, the maker of Arm & Hammer baking soda, it’s enough to keep factories open in Ohio and California, and workers on the payroll, said Curt Siverling, vice president of animal nutrition products.

Church and Dwight imports palm fatty acid distillate, or PFAD, a byproduct of palm oil refining, used to make a feed supplement for dairy cows. Siverling recently told a group the company got a temporary reduction from 2.3 percent to 1 percent in the duty it pays on PFAD thanks to the Miscellaneous Trade and Technical Corrections Act of 2006.

The so-called Miscellaneous Tariff Bill gives companies up to a $500,000 break on customs duties for goods they import that are not manufactured in the United States.

Church and Dwight import its PFAD from Malaysia and Indonesia. According to PIERS Global Intelligence Solutions, in 2007, the company imported some 69,380 tons of PFAD valued at $76.4 million. At 2.3 percent, the company would have paid nearly $1.8 million in duties, but with the MTB reduction, the company paid about $260,000.

The MTB is usually about as exciting as oatmeal and as noncontroversial as a bill naming a post office in honor of a deserving public servant. It’s a congressional evergreen, so it’s unusual to have importers form a coalition to nudge Congress to pass the bill. Time is running out, they worry. If Congress doesn’t approve a new bill, the duty breaks for Church and Dwight and other MTB beneficiaries will expire on Dec. 31.

Doug Goudie, director of international trade policy at the National Association of Manufacturers, said the House has largely completed its MTB list. The holdup is the Senate.

“The real issue is that it’s July. If we don’t get the Senate process started, we’re going to run out of time,” Goudie said. “These bills are usually passed by unanimous consent. It’s very collegial, very bipartisan, and extremely transparent. No one is trying to hide anything, but it takes time to get all the things done that make this a non-controversial bill.”

Congress has been passing tariff exemptions almost since the founding of the republic. Some 30 years ago, Congress began consolidating individual tariff bills into a single easy-to-manage bill. The process starts when manufacturers ask their members of Congress to sponsor a bill to exempt or reduce tariffs on goods, usually ingredients or components used in producing the finished product.

The main requirement: There can be no U.S. source for the same item. The U.S. International Trade Commission and the Congressional Budget Office review the requests to verify that no U.S. manufacturer will be put at a competitive disadvantage. Once individual items have been screened, they are rolled up into the Miscellaneous Tariff Bill, and passed on a voice vote.

Chemicals comprise a large part of the list, so the MTB coalition has strong support in the chemical industry.

The MTB has grown in popularity as more manufacturers have discovered it, Goudie said. In 2006, Congress exempted or reduced the duty rate on some 700 items in two bills. This year, the House list alone covers more than 800 items; no one has tallied the Senate’s list yet.

The ITC and CBO reviews can take months. Not only could the clock run out, but getting Congress’s attention also may be a challenge, given its focus on health care, climate change and the state of the economy.

The MTB coalition wants the public to know the economic benefits of tariff exemptions and reductions: They can raise gross domestic product by $3.5 billion and create 90,000 jobs, said Andrew Szamosszegi, an economist with Capital Trade Inc., who analyzed the MTB for the coalition.

“U.S. manufacturers become more competitive and they sell $3.3 billion more in the domestic market, and some $1.3 billion in exports,” he said. The economic gains “would certainly not spell the end of the recession, but these are not insignificant figures either.

“At a time when the economy is weak, an MTB would give a meaningful boost to manufacturers who benefit from the program, and the gains would ripple beyond manufacturing,” Szamosszegi said.

Goudie said the U.S. is by far not the only country providing breaks on duties. The European Union, he said, lets companies apply for duty suspensions twice a year.

“If you’re importing a volume of something, a saving of a few cents on the dollar adds up. If you can save yourself some tariff revenue, that’s jobs you can create,” he said. “People don’t know the benefits of this. The issue today is we don’t want time to run out and have these things expire.”

Journal of Commerce, 7/20/2009