March 21, 2019
Office of the Secretary
U.S. International Trade Commission
500 E Street SW
Washington, D.C. 20436
Investigation No. 332-565
RE: SOCMA Pre-hearing Brief for Hearing on the American Manufacturing Competitiveness Act: Effects of Temporary Duty Suspensions and Reductions on the U.S. Economy
Dear U.S. International Trade Commission:
Thank you for the opportunity to testify at the upcoming hearing on the American Manufacturing Competitiveness Act: Effects of Temporary Duty Suspensions and Reductions on the U.S. Economy. The purpose of this pre-hearing brief is to (1) emphasize the benefits of temporary duty suspensions and reductions to the specialty chemical industry and (2) facilitate permanent duty suspensions and reductions via a “Duty-Free Chemicals Appendix”.
SOCMA is the only U.S.-based trade association solely dedicated to the specialty and fine chemical industry. SOCMA members play an indispensable role in the global chemical supply chain, providing specialty chemicals to companies in markets ranging from aerospace and electronics to pharmaceuticals and agriculture.
1. Benefits of Temporary Duty Suspension and Reductions to the Specialty Chemical Industry
SOCMA supports the American Manufacturing Competitiveness Act (AMCA) and Miscellaneous Tariff Bills (MTB), which allow manufacturers to petition for the removal of tariffs on essential goods not domestically available. U.S. specialty chemical manufacturing is a value-added industry in which domestic manufacturers must import chemicals they then use to manufacture and innovate new chemicals. In fact, chemicals made up roughly 58% of petitions in the last MTB cycle. Quite often, these sources also offer similar finished products into the market and SOCMA members are forced to compete with their intermediate suppliers in the domestic market as well as export markets, especially NAFTA where neither it nor the USMCA allows for duty drawback. Any level of tariff collected in such an instance places U.S.-based production at a sever disadvantage. Elimination of such duties, therefore, is critical for the specialty chemical industry.
The existing temporary duty suspension process, while helpful, is not predictable and more importantly, caps the maximum level of savings for an individual product at $500,000/year. The process suggested below seeks to eliminate both of these issues.
2. Enable permanent duty suspensions and reductions by modifying the name of the “Intermediate Chemicals for Dyes Appendix” to the “Duty-Free Chemicals Appendix”.
The duty suspension process presents great opportunities for enhanced competitiveness. The key to permanent relief, is targeting products that the U.S. economy needs to prosper, while at the same time not diluting the U.S. Trade Representative’s (USTR) leverage in the international forum.
Since most 6- and 8-digit tariff lines are basket categories, permanent duty suspension cannot be made through the tariff schedules themselves as doing so would adversely affect too many other U.S. interests contained in the tariff lines. Thus, the below language seeks to enable permanent reductions and suspensions for appropriate products through vehicles that already exist.
When the Uruguay Round Trade Agreement was finalized, President Clinton sent a message to Congress dated September 27, 1994 that contained the details of the Agreement. Included in this document were two major new annexes to the U.S. tariff schedules – the Pharmaceutical Appendix and the Dyes Intermediate Appendix. The Pharmaceutical Appendix for example, has been vitally important for the health of the Pharmaceutical industry, which includes an international process to update the appendix every three years.
By modifying name of the “Intermediate Chemicals for Dyes Appendix” to the “Duty-Free Chemicals Appendix” (and allowing for regular updates), the goal of qualifying specific and significant amounts of MTB-eligible products for permanent duty suspensions is in sight. Competitors in the European Union, for example, have had a similar program in place for decades and so such upgrades would put U.S. producers on a level playing field.
Thank you for your consideration, and thank you for your underlying analysis of the MTB process throughout past decades.
In addition to testimony on Monday, April 8, 2019, further information will be provided in a post-hearing submission.
Kind Regards,
/S/ Matthew Moedritzer, Esq.
Manager, Legal and Government Relations
Society of Chemical Manufacturers & Affiliates (SOCMA)
1400 Crystal Drive, Suite 630
Arlington, VA 22202
Categorized in: Policy