United States: Legislation In US Congress Would Revise The Process For Miscellaneous Tariff Bills

Provides Opportunity for Companies to Substantially Reduce Tariff Duties on Imported Products

The US House and Senate have introduced bipartisan legislation, dubbed the American Manufacturing Competitiveness Act of 2016, that would launch a new process by which companies could request temporary reductions or suspensions for tariffs on imported products. Through bills commonly known as miscellaneous tariff bills (MTB), ported products would receive tariff reductions or suspensions for up to three years. Following an approach similar to past MTB efforts, temporary duty reductions or suspensions would be approved, provided there was no opposition from a US producer or member of Congress and provided the total estimated revenue loss for each reduction or suspension was estimated at less than $500,000.

The legislation before Congress does not specify the method by which the amount of a duty reduction would be calculated. Historically, the anticipated revenue loss was calculated in a two-step process that involved the International Trade Commission (ITC) and the Congressional Budget Office. Under the new legislation, it is possible that the ITC's calculation would yield larger estimates of the revenue loss than under the previous approach.

The legislation also introduces significant changes to the tariff reduction process. In the past, the process started and ended in Congress, with input and analysis from the ITC and other agencies. The new process is more structured and would begin with a formal petition to the ITC that would include extensive documentation. This Legislative Update summarizes and analyzes the proposed process. Note that the process described in the current draft of the bill is likely to be revised before the final bill is voted on or signed into law.

Timeline

  • By October 15, 2016, the ITC must publish a notice requesting submissions by the public for duty reductions or suspensions.
  • No later than 30 days after the conclusion of the 60-day notice period, the ITC must publish a list of the petitions submitted and the Commission disclosure statements.
  • After the publication of the list of petitions, the ITC shall hold a 45-day public comment period. The ITC will publish all comments submitted.
  • Within 90 days of the publication of the list of the petitions, the Department of Commerce, US Customs and Border Protection (CBP), and other appropriate federal agencies shall submit a report on each petition to the ITC and Congress.
  • Between 120 and 150 days after the publication of the list of petitions, the ITC shall publish a preliminary report.
  • No later than 60 days after the publication of the preliminary report, the ITC will publish a final report.
  • After publication of the final report, the House Ways and Means and Senate Finance Committees write the MTB legislation for consideration by Congress. The Committees have the discretion to exclude any petition from the legislation.
  • The legislation provides for an identical process to be undertaken beginning on October 15, 2019.

Process Requirements

Unlike past MTB processes, the proposed process would begin at the ITC. As an initial hurdle, companies would be required respond to the ITC with a submission that demonstrates that the company is a likely beneficiary, with the filing of a formal petition and a completed disclosure form. The petition requirements can be found here.

In addition to the ITC process, the Department of Commerce would have a separate process that would not require explicit participation by the company. For each petition, the Department of Commerce report would include a determination as to whether there is domestic production of each article in the petition, whether domestic production exists, whether a domestic producer objects to the duty reduction or suspension, and any technical changes necessary to the article description.

The ITC's preliminary report would contain data and analysis laying the foundation for determining whether a petition can be included in the MTB legislation. The required analysis and data for the preliminary report is summarized here. The required information and analysis for the ITC's final report is summarized here.

Publication of the final ITC report would begin the legislative process in the House and Senate with the preparation of the MTB legislation. This process includes publication and reporting requirements necessary to meet anti-earmark requirements under House and Senate rules. The legislation does not mandate that the House and Senate introduce identical MTB bills, although companies should expect significant coordination between the House and Senate when preparing the MTB legislation.

Petition Requirements

Petitioners would be required to provide the following information:

  • Name and address of the petitioner,
  • Whether the petition extends an existing duty reduction or suspension or is for a new duty reduction or suspension,
  • Certification that the petitioner is a likely beneficiary of the duty reduction or suspension,
  • Description of the article for the proposed duty reduction or suspension that would be included in subchapter II of chapter 99 of the Harmonized Tariff Schedule (HTS).
  • A general description of the article,
  • A description of the industry in the United States that uses the article,
  • An estimate of the total value of imports of the article for each of the subsequent five years, and
  • Any other information the ITC requires.

To the extent possible, petitions would also be expected to provide:

  • A classification of the article for the proposed duty reduction or suspensions that would be included in subchapter II of chapter 99 of the HTS,
  • A classification ruling of CBP with respect to the article,
  • A copy of a CBP entry summary indicating where the article is ordinarily classified in the HTS,
  • The name of each person that imports the article, and
  • A description of any domestic production of the article.

ITC Preliminary Report

For each article in a petition, the ITC's preliminary report would include:

  • HTS classification,
  • A determination as to whether or not there is any domestic production of the article and, if so, whether a domestic producer objects to the duty reduction or suspension,
  • Any necessary technical changes to the article description,
  • An estimate of the loss in revenue that would result from the duty reduction or suspension,
  • Identification of any likely beneficiaries of the duty reduction or suspension and a determination as to whether the petitioner is a likely beneficiary,
  • The following lists:

    • A list of petitions for which the ITC recommends technical corrections,
    • A list of petitions for which the ITC recommends modifications or reductions in the amount of the duty reduction or suspension, in order to stay below the $500,000 revenue loss limit,
    • A list of petitions for which the ITC recommends modifications to the scope of the articles in the petition to address objections by domestic producers,
    • A list of petitions the ITC determines do not contain the required information,
    • A list of petitions in which the ITC has determined the petitioner is not a likely beneficiary, and
    • A list of petitions the ITC otherwise does not recommend for inclusion in the MTB.

ITC Final Report

The ITC's final report would include the following:

  • Information required in the preliminary report and any updated information published in the preliminary report,
  • A determination by the ITC, for each article, that:

    • The duty reduction or suspension can be administered by CBP,
    • The estimated revenue loss does not exceed $500,000 per calendar year, and
    • The duty reduction or suspension is available to any person importing the article.

Originally published 18 April 2016

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