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Industries push against U.S. tariffs on Chinese goods

While companies presented arguments both for and against the proposed tariffs against China after the country was found to maintain unfair commercial practices, most witnesses testifying during the hearing came out against the proposed measures.

   Testifying in front of executive branch officials on Wednesday, a succession of industry representatives pushed against U.S. tariffs proposed against $50 billion to $60 billion worth of Chinese products in annual import value to counter China’s unfair commercial practices.
   “Retailers do not source these same goods [on the proposed tariff list] in the same quantities from other suppliers because other suppliers do not offer the combination of quality, quantity and reliability that can be found in China,” National Retail Federation Vice President for Government Relations David French said during the interagency hearing in Washington. “Beyond manufacturing capabilities, logistics are also an important consideration. Not every country has the combination of port facilities, road and rail, electrical grid and workforce that is available in China.”
   The Office of the U.S. Trade Representative (USTR) on April 3 released a list of proposed duties of 25 percent for about 1,300 tariff lines of goods imported from China totaling more than $50 billion in yearly import value.
   China, a day later, threatened retaliatory tariffs of 25 percent on 106 items exported from the United States to China worth about $50 billion in 2017.
   The USTR-proposed tariffs, announced after the agency on March 22 released the results of an investigation it conducted under Section 301 of the Trade Act of 1974, coupled with March-announced global tariffs on steel and aluminum, have sparked a national debate over the utility of tariffs and their significance in both economic and national security contexts.
   While most of the testimony on Wednesday, the second day of a three-day Section 301 hearing hosted by USTR at the International Trade Commission, was focused in opposition to the proposed tariffs, at least two trade associations during the hearing’s final day testified in support of the proposed tariffs, according to their written testimony.
   Tile Council of North America (TCNA) laboratory engineer Ryan Marino pushed for imports of Chinese floor and wall tile classifiable under Harmonized Tariff Schedule No. 6907 on the list of products to be subject to Section 301 tariffs.
   Marino argued that such products should be added to the list because Chinese tile labeled as porcelain and imported into the United States is often undersold, doesn’t meet U.S. or international standards for porcelain and depresses prices of U.S.-origin porcelain tile, and TCNA members frequently report Chinese manufacturers copying designs of ceramic tile finishes.
   National Council of Textile Organizations (NCTO) CEO Auggie Tantillo went a step further in his testimony, saying the U.S. textile industry is “deeply disappointed” that the U.S. tariff list doesn’t contain “a single” textile or apparel product.
   China has used several predatory trade practices, including “brazen theft” of U.S. textile materials, technology and innovation, to “dominate” global markets, and the country holds nearly 40 percent of total global trade in the textile sector, Tantillo stated.
   American Apparel and Footwear Association (AAFA) CEO Rick Helfenbein said his association was pleased that the list doesn’t include any textile or apparel products, but expressed concern about tariffs proposed on machinery used to manufacture textiles, apparel and footwear in the United States.
   The proposed tariffs include circular knitting machines for hosiery, loom-weaving machines, embroidering machines, sewing machines and textile spinning machines, Helfenbein said.
China is the main supplier of the basic tools used to make textile and apparel in the United States, he said.
   Helfenbein added that AAFA supports the Trump administration’s overarching goal of eliminating unfair technology transfers to China, but said efforts to drive a fairer bilateral trade relationship should be targeted.
   National Association of Foreign Trade Zones (NAFTZ) President Erik Autor expressed concern about the impacts that any Section 301 tariffs could have on foreign-trade zones, and called on USTR to establish an effective ongoing product exclusion request process, including for finished products manufactured in U.S. FTZs.
   Finished goods approved by the U.S. Foreign-Trade Zones Board for zone production must not be “incorrectly considered foreign origin” for U.S. Customs entry purposes and must be explicitly exempted from additional tariffs in presidential tariff proclamations, Autor added.
If tariffs are finalized, the official presidential proclamations should provide for articles admitted into an FTZ under “privileged foreign status” prior to the effective date of the duties to not be subject to the duties.
   March proclamations by President Donald Trump setting forth global steel and aluminum tariffs stated that any steel or aluminum articles admitted into FTZs under privileged foreign status before the duties’ effective date would be subject upon entry into U.S. commerce for consumption to any “ad valorem rates of duty … imposed by … [this] proclamation,” NAFTZ’s written testimony noted.
   This means that the proclamation had directed tariffs to take effect at the time steel and aluminum products were taken out of FTZs and entered into U.S. commerce for consumption, even if those products were admitted into FTZs before the Section 232 tariffs took effect.
   Another testifier who voiced opposition to the tariffs was Charles Gray, general counsel for Teradyne, most of whose suppliers’ and customers’ manufacturing facilities are located in Asia, he said.
   Teradyne, an automated test equipment supplier for products including semiconductors and circuit boards that conducts design and engineering in the United States, has not transferred any of its intellectual property (IP) to China, Gray noted.
   The Trump administration has cited Chinese IP transfer policies imposed on U.S. firms investing in China as a central reason for the proposed punitive tariffs.
   Teradyne uses a global contract manufacturer that manufactures its Flex and J750 test systems in China, Gray said.
   As for the possibility of shifting manufacturing operations from China to another country, Gray said it could be accomplished, but it would take significant time and money — and the Chinese facility is “state-of-the-art.”
   “Our product is also wildly complex,” he said. “There’s only two companies in the world that build this product, so it’s not as if we’re making a toaster oven that we can simply pick up and move the manufacturing somewhere else. It’s a very complicated system.”