Compliance 360: Path set for new miscellaneous tariff bill

   Many U.S. manufacturers were relieved on May 20 when President Obama signed into law the American Manufacturing Competitiveness Act, which restores the ability of Congress to consider Miscellaneous Tariff Bill (MTB) legislation after a three-year hiatus.
   MTBs eliminate or reduce duties on imported articles not otherwise available in the United States.
   Since the last MTB expired at the end of 2012, American companies have faced an annual $748 million tax hike, resulting in a $1.8 billion loss to the U.S. economy, according to the House Ways and Means Committee.
   The MTB is a catch-all for manufacturers seeking duty suspension on imports when they can’t find a certain material, part or component that is produced in the United States and are forced to source it from overseas. In the past, firms approached their member of Congress to include the product in an MTB. Other lawmakers usually went along as long as the product was non-controversial and had a minimal impact on revenue for the U.S. Treasury. If a domestic manufacturer said it sells the product in question, the duty stayed in place.  
   The threshold for revenue impact has typically been about $500,000. The duty would normally be set at zero if total tax collections for a product didn’t exceed that amount or would be reduced to a low level, say 1.5 percent, if the product brings in more tax revenue.
   Once approved, the product would be classified in the Harmonized Tariff Schedule as duty-free or with a duty reduction.
   The policy intent of the MTB program is to prevent harm to manufacturers by charging duties on raw materials they can’t obtain in the United States.
   But concerns were raised within the new Republican-controlled Congress in 2012 that the MTB might be interpreted as an earmark, Michael Taylor, an attorney at the international law firm King & Spalding, explained to American Shipper. 
   The House in 2010 under then-Speaker John Boehner first adopted a ban on earmarks amid public outcry over perceived wasteful spending. Earmarks are requests by individual lawmakers for funds to be directed to their districts for projects or companies rather than leaving distribution decisions up to the executive branch.
   The American Manufacturing Competitiveness Act isn’t an MTB, but sets up a process for future passage of an MTB that is more transparent than in the past.
   Instead of companies applying to their individual legislators for what is essentially a favor, they must now petition the non-partisan International Trade Commission, which is expected this summer to post a Federal Register notice about what should be included in those petitions.
   Petitions and related information will need to be filed within 60 days of publication in the Federal Register. Each petition must include details on the article for which duty relief is being sought, the industry in the United States that uses the article, historical import data, and whether domestic production of the article occurs in the United States. The ITC subsequently will solicit public comments on the petitions for duty suspensions and reductions.
   The ITC, which has broad investigative responsibilities on matters of trade, will review the requests and make a list of recommendations of all products that it deems non-controversial. Lawmakers will be able to pull any product out of the bill that they object to, but won’t be able to add any products to the list.
   In addition, the Act requires the Congressional Budget Office to provide Congress with an assessment of whether the amount of a duty suspension or reduction in an MTB exceeds $500,000 in a calendar year. In such cases, Congress is required to adjust the amount so that the estimated loss in revenue to the United States does not exceed the $500,000 threshold.
   “I’m not sure many people would say the process was abused, but many just didn’t want the earmark system,” Taylor said. “Now people have to petition an independent organization that will make the determination.”
   He predicted that an MTB will finally get voted on in Congress in the summer of 2017.
   Any relief granted under the MTB would remain in effect for no more than three years, unless renewed.
   The new MTB presents some similarities with the European Union’s autonomous tariff suspension and quota system, King & Spalding said in a client alert.
   Under the EU system, industrial users operating in the European Union can request a tariff suspension if an imported input is not produced in the European Union. If an input is EU-produced, but not in sufficient quantity to fully satisfy EU demand, an autonomous tariff quota may be opened. For both tariff suspensions and quotas, tariffs may be waived wholly (resulting in zero duties) or partially (resulting in a reduced tariff rate), but always on a temporary basis.  
   Tariff suspensions are valid for up to five years, while tariff quotas are opened and renewed on a yearly basis. Requests for tariff suspensions or quotas must be filed by processing or manufacturing companies with the competent national authorities of the EU member states. Requests then are reviewed at the EU level, because the member states apply a common external tariff. During the review, EU producers of a product covered by a tariff waiver request may file objections. If approved, tariff suspensions and quotas enter into force biannually on either Jan. 1 or July.