by | Jul 24, 2014 | Trade Policy

by Bill Armbruster, blog anchor

By definition, the Miscellaneous Tariff Bill is “noncontroversial.” Once enacted, the MTB suspends import duties for two to three years on a mixed bag of chemicals and components that aren’t made in the USA but are inputs for US manufacturing. The intent is to help US manufacturers trim production costs and price their output competitively.

To make the MTB list, an import must raise no controversy – that is, there should be no objections from a domestic producer to its inclusion, the benefit of the tariff break must apply to all importers, and the foregone tariff revenues must not exceed $500,000.

MTB legislation has been routinely passed by Congress for decades. The last time it passed, in 2010, the House approved it by a 378–43 vote and the Senate by unanimous consent.

But Congress failed to pass the 2012 MTB, allowing the tariff suspensions to expire. Nor has it since acted on the bill, resubmitted as US Job Creation and Manufacturing Competitiveness Act of 2013 (H.R. 2708) July 17, 2013, by Rep. Dave Camp, a Michigan Republican who chairs the House Ways and Means Committee.

Opposition centers not on tariff relief but on the process of obtaining it: Companies must ask their Congressmen to submit a separate bill for each duty suspension; each bill is vetted by the US International Trade Commission before being swept into an MTB. (You can see the hundreds of bills, comments and final reports that went into the pending MTB here.)

Critics say the process looks like earmarking. Indeed, targeted tariff relief was included in the earmark moratorium adopted by Congress in 2011 to curb spending. A bill introduced in the Senate would work around the earmark ban by “taking the politics” out of the process and having companies apply directly to the USITC  (latest iteration: 2013’s S.790). But there’s been no action on this fix either.

US manufacturers have been paying the price for the legislative impasse. The National Association of Manufacturers, which has been running the clock since the old MTB expired on December 31, 2012, calculates this “tax” will amount to $748 million and  result in economic losses of $1.857 billion over the 2013-2015 period.

Companies taking the hit include Lasko Products, maker of electric fans and other home products. Ed McAssey, Lasko’s chief operating officer, said higher costs resulting from the loss of the MTB has led to the elimination of 30 jobs at Lasko’s Tennessee plant and temporary suspension of an assembly line in Texas. Together, the two plants employ about 630 people.

Lasko is the last American producer of portable oscillating fans.  The company pays tariffs on motor assemblies and power cords produced in China specifically for electric fans. Lasko supplies the plastic injection molding, steel welding and painting, while it relies on US companies for other inputs.

The tariffs can add 25 to 30 cents to the cost of a product. “In the overall scheme of things, that can be significant. It’s made us less competitive. We’re in a business of pennies,” McAssey told me, noting that some of the fans sell for $17 or $18. “Retailers operate on very low margins. There’s a limit as to how much they can pay.”

Exxel Outdoors  manufactures approximately two million sleeping bags per year at its plant in Haleyville, Alabama. No company in the US produces the fabric that Exxel uses to make the bags, so it imports the material from China. Exxel’s president, Harry Kazazian, said the tariffs are costing it over $300,000 annually.

“We are having difficulty passing on the higher costs because we would lose business to importers,” Kazazian said. That’s because “opening price point” bags – affordable, low-cost, basic sleeping bags, are a major part of Exxel’s business.

Jessica Lemos, the NAM’s director of trade policy, insists the tariff benefits covered by the MTB are not earmarks. “They are available to any company importing these products. They’re not directed spending. They’re tax cuts,” she told me.

“We’re working with all the key parties so this bill can move forward. This is a bill that enjoys broad bipartisan effort,” Lemos said.  “We think they will be able to figure out a way to address the remaining concerns and move it to the president’s desk.”

Maybe so, but I’m skeptical about the ability of this Congress to get anything done. Meanwhile, the clock is ticking, and time is running out if Congress is going to pass it this year.

About Bill Armbruster

Bill Armbruster, Datamyne blog anchorThe anchor for the Datamyne Blog has covered shipping and trade for 30 years as a reporter and editor with The Journal of Commerce and Shipping Digest. “I’ll be blogging on headline news and current issues in oceangoing commerce, trying to shed some light on the backstories and, wherever I can, supply some sound advice for shippers.” Write Bill care of [email protected]

The opinions expressed in this article are those of its author and do not purport to reflect the opinions or views or Descartes Datamyne. In addition, this article is for general information purposes only and it’s not intended to provide legal advice or opinions of any kind and my not be used for professional or commercial purposes. No one should act, or refrain from acting, based solely on this article without first seeking appropriate legal or other professional advice.

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