H.R. 5436 Page Two The rise in imports of pipe organs is attributable, in part, to increased demand for less-expensive pipe organs than are customarily produced domestically. Such cost-savings programs by churches, the principal purchasers of the organs, are, to a degree, believed to be a result of the economic recession during this period. U.S. exports of pipe organs have traditionally been negligible. Estimated apparent U.S. consumption of pipe organs increased from 316 units valued at $41.5 million in 1979, to 340 units valued at $42.8 million in 1983. The ratio of imports to consumption increased from 21 percent to 26 percent, in terms of quantity, and from 10 percent to 12 percent in terms of value. Apparent consumption peaked at 357 units valued at $49.6 million in 1981. Note that data on consumption (i.e., delivery) of pipe organs may reflect sales made 18 months to 2 years earlier. Comparison with Present Law Pipe organs imported from the Netherlands are classified under item 725.10. As a result of the Multilateral Trade Negotiations in Geneva (Tokyo round), the column 1 rate of duty was reduced to free, effective January 1, 1981. LDDC imports also receive the column 1 rate of duty. The current column 2 rate of duty for item 725.10 is 35 percent ad valorem. Since the most-favored-nation (MFN) rate is free on a permanent basis, there is no occasion for GSP or CBI preferential treatment. Effect on Revenue The loss of customs revenue, based on the entries described to the ITC by the proponents, totals $19,300.74. The first organ was imported in August 1973; duty paid was $821.60. The second organ was imported in September 1976; duty paid was $4,769.64. The third organ was imported in October 1977; duty paid was $13,709.50. Subcommittee Action The Department of Commerce opposes enactment of H.R. 5436 because the legislation could create an unwise precedent for retroactive duty reduction. The International Trade Commission submitted an informative report. Markup On June 27, 1984, the Subcommittee on Trade ordered H.R. 5436 favorably reported to the full Committee on Ways and Means by voice vote, with a technical amendment. H.R. 5436 Page Three SUMMARY OF TESTIMONY ON H.R. 5436 Administration Department of Commerce: Opposes enactment of H.R. 5436. This legislation could create an unwise precedent for retroactive duty reduction many years after actual importation of organs and similar articles imported for the benefit of nonprofit organizations. Enactment of the legislation would retroactively affect duties imposed at least seven years ago. To provide duty-free treatment of articles previously imported, with respect to which duty was previously paid. Summary of the Provision H.R. 5448, if enacted, would facilitate the entry into this country of reimported goods if the product has not been enhanced in value while abroad. Section-by-Section Analysis Section 1 of H.R. 5448, if enacted, would extend the duty-free treatment of item 801.00 of the Tariff Schedules of the United States (TSUS) to the reimportation of articles which were imported into the United States and then exported under lease or similar use agreement to an entity other than a foreign manufacturer. The intent of item 801.00 is to facilitate the entry into this country of reimported goods if the product has not been enhanced in value while abroad. The intent of this legislation is to extend the coverage of that provision to the reimportation of goods which were exported under lease to someone other than a foreign manufacturer; of particular concern are exportations under lease to a government or service industry. Section 2 provides for the effective date to be on or after the 15th day after the date of enactment of this Act. Background and Justification Item 801.00 provides for free entry of the following: Articles, previously imported, with respect to which the duty was paid upon such previous importation, if (1) reimported, without having been advanced in value or improved in condition by any process of manufacture or other means while abroad, after having been exported under lease to a foreign manufacturer, and (2) reimported by or for the account of the person who imported it into, and exported it from, the United States . . . This language, with minor alterations for clarity, was taken from paragraph 1615 (a) of the Tariff Act of 1930, as amended, August 16, 1954. H.R. 5448 Page Two According to the Congressional Record, the legislative intent of the 1954 amendment was to avoid requiring a person to pay duty a second time on the same goods. However, Item 801.00 may be applied to any type of article. it appears to be primarily applied to the reimportation of injection molds for plastic or rubber products, such as combs, plastic houseware items, toys, or tires. The molds are manufactured of steel and generally range in price from $8,000 to $80,000. Other reimported articles entered under item 801.00 include dies of all kinds and general tooling equipment such as jigs, fixtures, and CNC machine lathes. The value of U.S. imports entering under item 801.00 increased from $21.5 million in 1979 to approximately $33.5 million in 1983, or by 61 percent. There had been a continual increase in value up to 1982, then a slight decline in 1983. However, the first quarter of 1984 indicates a 22 percent increase ($8,997,000) over the corresponding quarter of 1983. Based on 1983 data, Australia accounted for the largest share of imports in this provision, followed by West Germany and Canada. Imports from Australia accounted for 25 percent of total 801.00 imports, West Germany accounted for about 24 percent, and Canada approximately 20 percent. Comparison with Present Law The duty rate applicable to the original importation depends upon the particular item imported and U.S. Customs' classification determination. Effect on Revenue Since the volume and type of articles covered by the bill cannot be specified, the precise effect on customs revenues cannot be stated. However, it is estimated that the total amount of customs revenues lost would be negligible, especially considering the fact that most companies lease for a period longer than 5 years and would depreciate the value of the asset to almost zero before reimporting it. Subcommittee Action Agency Reports The International Trade Commission submitted an informative report. On June 27, 1984, the Subcommittee on Trade ordered H.R. 5448 favorably reported to the full Committee on Ways and Means by voice vote, with an amendment to expand the term lease in item 801.00 to include "lease or similar use agreements". SUMMARY OF TESTIMONY ON H.R. 5448 Administration We have heard of no objection from the Administration. Supports Mr. Martimer Fuller, III: This bill should be enacted because (1) the current law is unfair, since a company is required to pay duty on the same equipment because the equipment crosses the border; (2) the current law reduces the opportunity for U.S. companies to do business; and (3) it is a simple way for Congress to assist in alleviating the railcar surplus problem by expanding the available marke for U.S.-owned equipment. |