To suspend the duty on iron dextran for a three year period. Summary of the Provision H.R. 4225, if enacted, would suspend until September 30, 1987 the duty on an iron dextran complex. Section-by-Section Analysis Section 1 of H.R. 4225, if enacted, would amend subpart B of part 1 of the Appendix to the Tariff Schedules of the United States (19 U.S.C. 1202) by inserting in numerical sequence a new item to suspend the column 1, MFN, duty until September 30, 1987 on iron dextran complex, provided for in item 440.00, part 3C, schedule 4. Section 2 makes the provision effective on or after the 15th day after the date of the enactment of this Act. Background and Justification According to an importer, Merrill Dow Pharmaceuticals Inc., Cincinnati, Ohio, the product is unique, with only one manufacturer in the world. It is a liquid product imported in 10-ml. vials and 2-ml. ampoules. Iron dextran complex is used in the treatment of iron deficiency anemia. Comparison with Present Law Iron dextran is classifiable under TSUS item 440.00 as a drug imported in ampoules, capsules, lozenges, pills or other forms in medicinal doses. The current column 1 rate of duty is 4.4 percent ad valorem. The column 2 rate of duty is 25 percent ad valorem. This item is eligible for staged rate reductions under the Tokyo round of the MTN and the column 1, MFN, rate of duty will be reduced to 3.7 percent by January 1, 1987. Imports from designated beneficiary developing countries under TSUS item number 440.00 are eligible for duty-free treatment under the Generalized System of Preferences (GSP). The LDDC rate of duty is 3.7 percent ad valorem. H.R. 4225 Effect on Revenue Imports over the 5-year period from 1983-1987 will be an estimated $5 million, or an average of $1 million per year. The potential loss of revenue due to this legislation is estimatead to be $43,000 in 1984, $40,000 in 1985, and $39,000 in 1986. The lower loss figure in 1986 is due to staged reductions in the rates of duty. Subcommittee Action Agency Reports The Department of Commerce has no objection to enactment of H.R. 4225. The International Trade Commission submitted an informative report. Markup On June 27, 1984, the Subcommitee on Trade ordered H.R. 4225 favorably reported to the full Committee on Ways and Means by voice vote, with technical amendments, including changes in the article description and in the effective date to make the new provision effective 15 days after date of enactment and to have the provision expire on a date certain. Senate Action A companion bill (S. 2333) was introduced by Senator Bentsen. Administration Department of Commerce: No objection to enactment. H.R. 4232 Introduced by: Mr. Brooks (TX) Date: October 27, 1983 To amend the Tariff Schedules of the United States to clarify the classification of any naphtha described as both a petroleum product and a benzenoid chemical. Summary of the Provision H.R. 4232, if enacted, would amend the Tariff Schedules of the United States (TSUS) to equalize the tariff treatment of naphthas described as petroleum products and those currently classified as benzenoid chemicals. Currently, naphthas derived from petroleum, shale oil, natural gas, or combinations thereof (except motor fuel) are classified under item 475.35 at a column 1 duty rate of 0.25 cents per gallon and a column 2 rate of 0.5 cents per gallon. Naphthas containing more than five percent dutiable benzenoid, however, are currently classified as other mixtures of organic chemicals containing benzenoid chemicals in item 407.16 at a column 1 rate of 1.7 cents per pound plus 13.6 percent ad valorem, but not less than the highest rate applicable to any component materials, and a column 2 rate of 7 cents per pound plus 43.5 percent ad valorem, but not less than the highest rate applicable to any component material. This legislation would amend headnote 1 to part 10 of schedule 4 of the TSUS so that all naphthas containing less than 25 percent of any product contained in part 1 of schedule 4, whether or not catalytic naphthas, would be classified in item 475.35 with a column 1 rate of duty of 0.25 cents per gallon. Section-by-Section Analysis Section 1 of H.R. 4232, if enacted, would amend headnote 1 to part 10 of schedule 4 of the Tariff Schedules of the United States (19 U.S.C. 1202) by inserting "naphthas (whether or not catalylic naphthas) provided for in item 475.35", immediately after "except". The effect would be to apply the tariff rate currently applicable to naphthas derived from the distillation of petroleum to naphthas containing less than 25 percent benzenoids. Section 2 makes the provision effective on or after the 15th day after the date of the enactment of this Act. Background and Justification The duty assessed on the benzenoid mixture under the currently applicable tariff provision, item 407.16, has effectively stopped imports. This has resulted in an increase in idle H.R. 4232 production facilities for the importers. The proposed legislation would make the duty rate for naphthas which are benzenoid mixtures the same as those for naphthas described as petroleum products (classified in item 475.35). Such tariff treatment is needed to maintain a constant supply of the product to the importers' plants. The naphtha described in this bill is a mixture of aliphatic (acyclic) and aromatic (benzenoid) compounds produced by catalytic reforming of crude petroleum. As a result of this reforming process, the final naphtha mixture usually contains between 30 and 40 percent benzenoid compounds of which 5 to 10 percent are dutiable under the TSUS. This highly flammable product is used entirely in the blending of finished gasoline. It is not used for chemical conversions and is not an economical sources of aromatic compounds. At the present time, the product is produced in the United States by the major domestic petroleum firms. Since virtually all of it is used in the blending of finished gasoline, the level of production may vary greatly depending upon demand and inventory. Most of the producers are also importers of the product and would also benefit from the new duty rate. Data regarding domestic production of the product is not readily available as the domestic producers captively consume the product in the blending of finished gasoline. The imported product may also be used in this process, depending upon demand for gasoline. In 1982, U.S. imports of this naphtha mixture amounted to 190 million pounds from Venezuela and Argentina. The Commission did not find any imports from column 2 sources. There were no imports of the product in 1978 and 1979 under item 407.16 (formerly item 403.90). Imports during 1980-82 were From January 1981 through March 1983, the majority of the imports were duty-free as Venezuela and Argentina were GSPdesignated countries during that time period. In 1980 and 1981, most imports were from Argentina. In 1982 the product was H.R. 4232 Page Three imported primarily from Venezuela, with small amounts coming from Argentina. During January-March 1983, imports amounted to 925 million pounds, primarily from Venezuela. From April through September 1983 there were virtually no imports of the product as GSP eligibility for products imported from Venezuela under item 407.16 was withdrawn. The major importers of the product during this period were probably the domestic gasoline producers, including Beaumont Oil Co. and Sun Refining and Marketing Co. According to industry sources, the product is not exported in significant quantities because nearly all of it is consumed domestically in the blending of finished gasoline. Data for domestic consumption of this product is not readily available because most of it is directly consumed in gasoline production. Comparison with Present Law As a result of the Trade Agreements Act of 1979, the subject product is presently classified in TSUS item 407.16 as other mixtures of organic chemicals containing benzenoid chemicals. Item 407.16 has a column 1 duty rate and an LDDC duty rate of 1.7 cents per pound plus 13.6 percent ad valorem, but not less than the highest rate applicable to any component materials. The column 2 duty rate is 7 cents per pound plus 43.5 percent ad valorem, but not less than the hightest rate applicable to any component material. The column 1 rate of duty is not scheduled for annual staged reductions within the framework of the Tokyo round. Imports of the product from beneficiary developing countries other than Venezuela are eligible for duty-free entry under the Generalized Systems of Preferences (GSP). Effect on Revenue According to industry sources, the product is no longer being imported because Venezuela is no longer eligible for preferential treatment under the GSP with respect to imports under item 407.16. If, however, imports of the product were to continue in 1984 at the same rate as in the first three months of 1983 and a duty were assessed, the potential annual loss of revenue would be approximately $36 million. |