ITC told U.S., Japan should discuss drawback, CTPAT

Robust customs provisions as part of any agreement would play a crucial role in bilateral trade, industry members said during an International Trade Commission hearing.    Any U.S.-Japan trade deal should include simple drawback rules, recognize Customs-Trade Partnership Against Terrorism (CTPAT) participants and adopt customs provisions based on six-digit Harmonized Tariff Schedule (HTS) codes, Nate Herman, senior vice president for supply chain at the American Apparel and Footwear Association (AAFA), told the International Trade Commission (ITC) Thursday.
   The ITC hosted a hearing to solicit input on the probable economic effect of providing duty-free treatment for currently dutiable imports from Japan, and the commission expects to submit a report on the topic to the Office of the U.S. Trade Representative by the end of Jan. 24.
   The U.S. has similar HTS codes with Japan at the six-digit level, as opposed to the 10-digit level, Herman said. Most countries’ tariff schedules don’t include codes beyond eight digits.
   “When you have specifics and the rules are different at each level at the eight- and 10-digit level, it makes the agreement very complicated to comply with,” he said. “So the idea is let’s just take the broad category, the six-digit category, and use the same provisions for anything in those six-digit categories.”
   Herman also called for any trade deal to not require direct exports between Japan and the U.S. Because many supply chains traverse several locations before goods reach final destinations, any trade deal should allow for interim cargo facilities, he said.
   Moreover, drawback rules should allow substitution drawback claims and consumer returns, Herman said.
   American Chemistry Council (ACC) International Trade Director Ed Brzytwa also said his group would support a pact that facilitates duty drawback, adding that the countries should negotiate robust trade facilitation provisions that address things like digital signatures, electronic filing, infrastructure projects to remove bottlenecks, transport security requirement modernization and harmonized clearance procedures.
   Herman added that it would help reduce costs for U.S. exports if Japan created a fully electronic single window system similar to the United States’.
   Further, many AAFA members are part of U.S. Customs and Border Protection’s importer self-assessment and CTPAT trusted trader programs, but even the highest-level (Tier III) CTPAT members are treated the same way “as some fly-by-night importer who has never imported apparel before,” Herman said.
   Industry made a similar CTPAT proposal during U.S. Trans-Pacific Partnership negotiations, but that was ultimately not included in the agreement.
   A common problem with free trade agreements in general is that, because imports are duty-free, they are often scrutinized heavily, he said.
   A bilateral trade deal also should recognize the Berry Amendment, which requires the U.S. military to buy only U.S.-made clothes and shoes, Herman said, noting the World Trade Organization Government Procurement Agreement recognizes the statute.
   A U.S.-Japan trade deal could benefit the U.S. dairy industry, according to Jaime Castaneda, senior vice president for policy strategy and international trade at the National Milk Producers Federation and senior vice president for trade policy at the U.S. Dairy Export Council.
   The United States’ stake in the Japanese dairy market is at risk as the U.S. is behind countries that have entered with Japan into trade agreements, including the TPP, the EU-Japan Economic Partnership Agreement and the Japan-Australia FTA, Castaneda said.
   The Trump administration should be “unencumbered” by TPP market ceilings during talks and preferably, should negotiate an agreement that doesn’t include a predetermined ceiling, contrary to the indications of a recent U.S.-Japan joint statement, he said.
   A reciprocal opening of Japan’s dairy market would increase U.S. dairy exports to Japan by 450 percent, Castaneda said.
   The U.S. should also work to protect commonly used food names and to create a process and tools for geographic indications, he said, after U.S.-Mexico-Canada Agreement created a common food names list.
   As for automobiles, a “main principle” should be that the U.S. shouldn’t reduce its tariffs on cars and trucks from Japan until it reopens its market to more U.S. automobiles, said United Automobile Workers Legislative Director Josh Nassar.
   “Simply having promises and having pledges to do business differently, that’s been tried for decades,” Nassar said. “That’s been tried by Republican and Democratic administrations time and time again, and it’s been an unambiguous failure to U.S. auto workers. It simply hasn’t worked.”
   The U.S. currently maintains a 2.5 percent tariff for cars, a 25 percent tariff for light trucks and tariffs for car parts in the range of 2 percent to 7 percent, he said. Further, Japan exports 100 cars to the U.S. for every one car that’s built in the U.S. and shipped to Japan, Nassar said.
   The interagency Trade Policy Staff Committee will hold a hearing in Washington, D.C., on Jan. 24 to inform USTR’s negotiating approach.