When a crate of goods lands on U.S. soil, Customs is all over it with duties—unless Congress grants a specific import a pass.
Members of Congress have the discretion to propose temporary tariff exemptions and it’s not something they use in moderation. In 2008, the U.S. International Trade Commission—which analyzes and approves each of these bills—parsed through more than 900 of them. Typically, once approved, the bills are bundled up into a single omnibus package for Congress to vote on, but the tariff legislation was put on hold in 2008 and eventually died.
This year Congress is giving it another go. Members have filed approximately 800 tariff-suspension requests—each of which must be worth less than $500,000 and must not impact domestic manufacturers.
“It’s an extremely huge load considering the Hill wants them by December,” ITC Office of Tariff Affairs director David Beck said.
Rep. Darrell Issa has signed on to the “United States Optimal Use of Trade to Develop Outerwear and Outdoor Recreation Act” (cleverly, “The U.S. OUTDOOR Act”) to lift the duties on waterproof ski and snowboard apparel, including pants, jackets and windbreakers. Meanwhile, Sen. Barbara Boxer has requested tariff exemptions for açaí (that foofy antioxidant stuff) and hand-blown-glass crafts.
Sen. Dianne Feinstein—the most prolific tariff-introducer in California—has proposed duty suspensions for oysters, sardines, flashlights and workman’s gloves. More than anything, she has put in requests for tariff exemptions for water hydration systems and more than 20 pesticides—which is one reason why ITC employs more than a dozen chemists to figure out exactly what they are.
That may be more research than Feinstein’s office conducted before proposing an exemption for Clothianidin, an insecticide banned in Germany because it may be linked to colony collapse disorder (i.e. the disappearance of bees). However, following questions from CityBeat about Clothianidin, a Feinstein spokesperson said she would “no longer be pursuing that particular bill.”
Feinstein was the only lawmaker to respond to inquiries, both over the phone and via e-mail. Although members of Congress are required to provide the ITC with fact sheets, including cost estimates and the names of the companies seeking the exemptions, none provided CityBeat with this information.
Feinstein stands by the rest of her legislation.
“Senator Feinstein has introduced a select number of bills to temporarily suspend import duties on behalf of certain California companies to help them compete in the global economy,” Feinstein spokesperson Laura Wilkinson said in an e-mail.
Centuries ago, when the nation was young, the U.S. government had a hard time collecting taxes from pastoral citizens, and so tariffs on imported goods were used to prop up the budget, said Gordon Hanson, director of the Center on Pacific Economies at UCSD.
Those days are gone.
Tariffs “exist now just to keep imports out of the U.S. economy,” Hanson said. “Most economists will tell you tariffs are, on net, bad for U.S. consumers, but they do help producers in the U.S. compete with imports.”
In essence, these tariff exemptions allow members of Congress to tinker with economic policy—or garner favor from business interests.
“I don’t think most members of Congress wake up in the middle of night thinking about some chemical compound with 22 syllables and unpronounceable monoxides that needs a tariff suspension,” said Bill Allison, editorial director for the Sunlight Foundation, a nonprofit based in Washington, D.C., that promotes transparency in government. “Clearly, companies or lobbyists are coming in and giving them their wish lists, and Congress puts it through.”
In Feinstein’s case, the numbers are there: According to OpenSecrets.org’s campaign-finance database, the senator has received $718,000 since 2000 from agricultural interests. These contributors include the California Citrus Mutual Political Action Committee, Western Pistachio Association Political Action Committee and California Grape—each of which are recipients of money from corporations like Bayer CropScience, United Phosphorus and Valent USA, three pesticide companies that were listed as the chief proponents of many of the chemical tariff exemptions in ITC memoranda.
Allison, who set up an online database to track tariff exemptions through 2008, sees this practice in the same category as the earmark—when Congress members set aside money for local projects, colloquially called “pork.”
Rep. Brian Bilbray, a North County Republican, is a prime example. As far back as 2000, he was asking for an average of $275,000 per year in tariff exemptions on imported blades for ceramic cutlery manufactured by Kyocera International, which maintains headquarters in San Diego. More recently, Bilbray filed a bill in 2008 to lift the duty on computer monitors used by aircraft controllers. The bill would have benefited Sony Corp. exclusively to the tune of $240,000 per year. According to the San Diego Business Journal’s archives, Sony re-opened its plant in Rancho Bernardo (in Bilbray’s district) in 1998.
As with earmarks, sometimes there’s the issue of quid pro quo.
In 2006, the golf industry—including the Sporting Goods Manufacturers Association—cried foul when Acushnet Company, which markets the Titleist and Cobra golf brands, persuaded Sen. John Kerry to sponsor the bills that would apply exclusively to its products. The bills included strict definitions for eligible products, including “golf club driver heads of titanium, each with an aluminum hosel insert and a plasma welded face plate, and with 10.5 degree loft.”
Acushnet argued that while it did not manufacturer golf club heads in the U.S., it was the only company that assembles them domestically and therefore deserved a tariff incentive.
The same groups that opposed the bill went on to support Bilbray’s 2008 bill, which aimed to halve the duty on golf-club components across the board. This would have cost the U.S. $27 million in revenue over five years.
Acushnet, which happens to have an assembly plant in Carlsbad (again, in Bilbray’s district), still would have been the primary beneficiary.
The bill never made it out of committee, but Bilbray benefited anyway: On May 5, 2008, the same day the ITC stamped its approval, Bilbray received a $1,000 contribution from Acushnet’s lobbyist firm, Kelley, Drye & Warren.
Two other San Diego representatives also filed tariff exemptions in 2008. Rep. Bob Filner’s three bills would have lifted duties on video equipment imported by Hitachi America, which operates a manufacturing division in Chula Vista, in the Democrat’s district. The bill would have taken effect in 2010 and cost $1.1 million in the first year.
On behalf of the Outdoor Industry Association, Rep. Darrell Issa sponsored 2008 tariff exemptions for two kinds of luggage, one for bags with removable day packs and another for bags without them. The bill would have saved the luggage industry $310,000 in the first year alone.
This year, the Outdoor Industry Association is supporting the OUTDOOR Act. The organization’s lobbyists, Sorini, Samet & Associates, also represent more than a dozen other apparel organizations, as well as one of the top manufacturing nations, the Philippines. According to ProPublica’s Foreign Lobbying Influence Tracker database, Issa’s staff met with the firm to discuss “trade issues” at around the same time he was dealing with another one of the Philippines’ lobbying firms to discuss legislation to recognize Filipino veterans.
Typically, the legislation is written in arcane language with no explanation of the need for tariff relief. Instead, the ITC is responsible for investigating whether domestic companies manufacture the same products, which could disqualify a tariff exemption. Even then, the research is hardly conclusive—to the detriment of domestic companies.
“Because it’s so ill-publicized, there may be a lot of companies that don’t know that someone is going to lower the tariff on an import,” Allison says. “Then, in the next year or two, they’re out of business.”
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