Independent Gasoline Marketers Council (supports with amendment): This bill does not appear to resolve the classification problem for low octane gasoline such as that imported from the PRL and Mexico. Favors amending bill in the manner suggested by the Administration.

Wickland Oil Company (supports with amendment): An anomaly exists in the tariff schedules with respect to the treatment of petroleum products used to manufacture motor gasoline. This anomaly imposes a substantial burden on trade. As a result, this inequitable burden on trade generates anticompetitive consequences in the domestic gasoline market by rendering firms dependent on foreign components effectively incapable of participating in the market. Favors enacting H.R. 4232 and the Administration's proposal modified to exclude from its coverage straight-run naphtha.

Opposes

American Independent Refiners Association: The AIRA position is summarized as follows:

A broad cross-section of the U.S. independent petroleum refining industry strongly opposes H. R. 5455 or any similar proposal to relax the tariff treatment of imported gasoline which is below U.S. specifications for use in internal combustion engines. Sub-specification materials appear to be contributing substantially to the growing problem of gasoline imports.

In recent years a sharp increase in gasoline imports has occurred while the U.S. refining industry has been operating at well below 75 percent of capacity and petroleum demand is down substantially from historic levels.

These mounting imports are resulting in the exportation of domestic refining capacity and could impair the ability of the Nation to meet its own product demand. If this trend continues, we could find ourselves as dependent on imported products as we have become dependent on imported crude oil, a condition which would give the Nation even less flexibility to deal with crude oil shortages.

H.R. 5455
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The ability of foreign refiners to undercut the U.S. industry is not a function of superior plants or greater operating efficiencies. In fact, the U.S. industry has invested in modern facilities and technology in order to meet the domestic demand for premium light products and in order to comply with stringent U.S. environmental standards. Foreign export refineries typically reflect a lower investment in facilities to make heavier fuel oil products for local markets, allowing surplus by-product gasoline to be imported to the United States at whatever price will assure a market.

H.R. 5455 and the related proposals inadequately address critical U.S. trade policy issues. The issues are what level of U.S. dependency on imported petroleum product is acceptable and to what extent the U.S. is willing to support and encourage the importation of undervalued products produced by substantially less efficient foreign refiners at the expense of highly efficient, sophisticated U.S. refiners which must obtain a realistic return on petroleum products produced.

Statements for the Record

Supports

Koch Industries Inc.: Enactment of this bill would clarify the Tariff Schedules and bring them in line with generally accepted industry practices. The classification of gasoline based on the Anti-Knock index is arbitrary and not in line with foreign or domestic oil and gas industry practices.

Petroleos Mexicanos: Enactment of this bill would clarify the Tariff Schedules. On August 17, 1982, the U.S. Customs Service in Treasury Decision T.D. 83-173 promulgated new standards to be applied by the Customs Service in determining whether or not a particular imported product could be classified as "motor fuel." As a result, it is not clear what alternative classifications will be applied by Customs.

Southland Corporation and CITGO Petroleum: Enactment of this bill would provide greater certainty respecting the classification of refined petroleum products as motor fuel. Customs Service administrative action to change a long-standing practice under which 83 octane leaded gasoline could be imported as "motor fuel" subject to a 1.25 cents per gallon duty produces inconsistent results in particular cases. The uncertainty generated by the Customs Service's actions make commercial planning impossible.

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Opposes

Tosco: Enactment of this bill would work to the detriment of the domestic refining industry.

USA Petroleum Company: Enactment would (1) increase the competition to the small independent refiner who must refine at a higher cost, (2) result in the closing of more small independent refineries because of increasing imports and less demand and (3) increased imports would only increase the U.S. dependence on foreign countries in the future.

Amber Refining: Foreign refiners have a cost advantage over domestic refiners and any reduction in duty treatment to foreign imports of unfinished gasoline would be detrimental to the domestic refining industry.

H.R. 5182

Introduced by: Mr. Bonker (Wash.)

Date: March 20, 1984

To amend the Tariff Schedules of the United States to clarify the duty treatment of certain types of plywood.

Summary of the Provision

H.R. 5182, if enacted, would revise the Tariff Schedules of the United States (TSUS) to ensure that imports of cellular panels and tongued, grooved, lapped, or otherwise edge-worked plywood and wood-veneer panels are classified under the tariff provisions for those three products, rather than as building boards.

Section-by-Section Analysis

Section 1 of H.R. 5182, if enacted, would amend headnote 1 of part 3 of schedule 2 of the Tariff Schedules of the United States to modify the definitions of plywood, wood-veneer panels and building boards to clarify, that imports of cellular panels and tongued, grooved, lapped, or otherwise worked plywood and wood-veneer panels are properly classified under the tariff provisions for those three products, rather than as building boards.

Section 2 makes the provision effective on or after the 15th day after the date of enactment of this Act.

Background and Justification

This legislation is intended to correct a tariff anomaly illustrated by an existing interpretation by the Customs Service on plywood panels being imported from Canada. Canadian cedar plywood, which has been shiplapped on the long sides, is being brought into this country classified by Customs as "building boards." This imported edge-worked plywood is marketed, advertised, sold, and used as plywood--the same purposes as domestically produced plywood whether or not it has been edge-worked. The process of creating tongue-and-groove or shiplapped edges on the imported plywood is not a manufacturing process which results in a new and different article. However, the category "building boards" carries a tariff calculated in 1983 at 8.4%, whereas the duty rate for "plywood" is 20%. The Customs Service classified the import on the basis of end use, which in this case is exterior siding, rather than on its physical description as a "rigid wood veneer assembly" which applies to plywood.

The products involved in this legislation, plywood, woodveneer panels, cellular panels, and building boards, are described in the head notes to part 3 of schedule 2 of the Tariff Schedules of the United States Annotated (TSUSA). Whether or not they have been edge worked, plywood, wood-veneer, and cellular panels are used for many purposes, including siding, flooring, wall paneling, and roofing. We note that cellular panels are generally not edge worked.

It is estimated that in 1983 about 400 companies, employing 68,500 people, produced plywood, wood-veneer panels, cellular panels, and building boards. Of these companies, approximately 18 (41 plants) employing 2,000 people, produced softwood plywood siding, which is the major product which would be affected by enactment of this legislation.

Consumption of plywood, wood-veneer panels, cellular panels, and building boards fell from 24.5 billion square feet, valued at about $4.5 billion, in 1979 to 20.2 billion square feet, valued at $4.0 billion, in 1982, reflecting a general slump in construction activities. In 1983, approximately 28 billion square feet, valued at about $5 billion was consumed in the United States. The increase reflects a rebound in U.S. imports of plywood, woodveneer panels, cellular panels, and building boards, amounted to about 1 percent of total U.S. consumption of such products in 1983.

It is estimated that, in 1983, 1.5 billion square feet, or about 5 percent of total U.S. consumption of plywood, wood-veneer panels, cellular panels, and building boards, was edge worked.

U.S. imports of plywood, wood-veneer panels, cellular panels, and building boards are estimated to have fallen from $620 million in 1979 to $400 million in 1982 as construction activities fell. Imports then rose to $580 million in 1983 as such activities rebounded.

U.S. exports of plywood, wood-veneer panels, cellular panels, and building boards are estimated to have risen from $115 million in 1979 to $253 million in 1983 as U.S. producers continued to seek new market exports to edge worked panels are believed to have totaled $50 million in 1983.

Comparison with Present Law

Currently, Customs classifies plywood and wood-veneer panels which have been edge worked as building boards under item 245.80 at a column 1 rate of duty of 1.7 cents per pound plus 3.1 percent ad valorem (ad valorem equivalent (AVE) equals 10 percent), and