H.R. 4329

Introduced by: Mr. Philip Crane (IL)

Date: November 8, 1983

To extend until July 1, 1987, the existing suspension of duty on 4-chloro-3-methylphenol.

Summary of the Provision

H.R. 4329, if enacted, would extend the current suspension of duty on 4-chlors-3-methylphenol until July 1, 1987.

Section-by-Section Analysis

Section 1 of H.R. 4329, if enacted, would amend item 907.08 of the Appendix of the Tariff Schedules of the United States (19 U.S.C. 1202) to provide for the continued temporary suspension of duty on 4-chloro-3-methylphenol provided for in item 403.56 by striking out "6/30/84" and inserting in lieu thereof "6/30/87". Thus providing an additional 3-year extension of the temporary suspension.

Section 2 would provide that the continued temporary duty suspension will apply to articles entered or withdrawn from warehouse on or after the 15th day after the date of the enactment of this Act. Provision is also made for the retroactive application of this legislation to June 30, 1984 under prescribed procedures.

Background and Justification

The synthetic organic chemical, 4-chloro-3-methylphenol, is derived from m-cresol. It is used primarily as a biocide and an antioxidant in the manufacture of machine cutting oils, in certain specialty products such as antidandruff shampoos and hand lotions, and is sensitive films such as x-ray and microfilms to protect these products during prolonged storage. It is also used as a chemical intermediate in the manufacture of more complex chemical products.

Imports into the United States of 4-chloro-3-methylphenol for 1980 and 1981 were 106,293 pounds and 274,472 pounds respectively. Comparison with Present Law

The duty on 4-chloro-3-methylphenol was temporarily suspended under Section 230 of Public Law 97-446, enacted on January 12, 1983. The law suspended the duty until June 30, 1984. This legislation would extend the suspension for an additional three years until June 30, 1987.

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Prior to the temporary suspension of duty, 4-chloro-3-methylphenol entered the United States under item 403.56 of the Tariff Schedules of the United States (TSUS). This item is a residual category of phenol derivatives which are listed in the Chemical Appendix of the Tariff Schedules.

With the suspension of duty, 4-chloro-3-methylphenol was removed from TSUS item 403.56. The new TSUS item, number 907.08, was created for it under subpart B of part 1 of the Appendix to the Tariff Schedules.

If the suspension is not extended, 4-chloro-3-methylphenol would again be dutiable at the rate applicable to TSUS item 403.56. In 1984, the column 1 rate for item 403.56 (the rate paid by countries with Most-Favored-Nation status) will be 1.1 cents per pound plus 19.4% ad valorem. This rate is scheduled to decline annually under staged rate reductions until it reaches 0.7 cents per pound plus 19.4% ad valorem in 1987.

Other rates of duty applicable to TSUS item 403.56 are an LDDC rate of 0.7 cents per pound plus 19.4% ad valorem with a column 2 rate of duty of 0.7 cents per pound plus 62% ad valorem.

Effect on Revenue

Based on Commission data and information provided by the major domestic importer of this chemical, the following are estimated revenue losses for a three-year period from 1984 through 1986:

The Department of Commerce has no objection to enactment of H.R. 4329.

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Markup

On June 27, 1984, the Subcommittee on Trade ordered H.R. 4329 favorably reported to the full Committee on Ways and Means by voice vote, with an amendment to provide for the retroactive application of this provision to June 30, 1984, the date that the existing provision expires.

SUMMARY OF TESTIMONY ON H.R. 4329

Administration

Department of Commerce: No objection to enactment of H.R. 4329.

Statements for the Record

Supports

The Honorable Philip M. Crane, M.C. (Ill.): Supports bill.

To amend the Tariff Schedules of the United States regarding the classification of certain articles of wearing apparel.

Summary of the Provision

H.R. 4339, if enacted, would change the tariff classification of most wearing apparel imported as part of sets except for suits, pajamas and other nightwear; playsuits, worksuits, and similar apparel; judo, karate and other oriental martial arts uniforms; swimwear; and infants' sets up to and including 24 months of age.

Section-by-Section Analysis

Section 1 of H.R. 4339, if enacted, would amend part 6, schedule 3 of the Tariff Schedules of the United States (TSUS) by changing the tariff classification of most wearing apparel imported as parts of sets except for suits; pajamas and other nightwear; playsuits, washsuits and similar apparel; judo, karate and other oriental martial arts uniforms; swimwear; and infants' sets up to and including 24 months of age. Apparel sets, which are now, in general, classified as entireties, would instead be classified according to their separate components. This would result in higher duties on garments imported as parts of sets, because most of the individual components (such as blouses or jackets) would be classified in tariff provisions having significantly higher rates of duty than those now applicable to articles classified as entireties.

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

Background and Justification

Eo nomine provisions were first established for a large number of apparel articles on January 1, 1982, to implement tariff concessions granted by the United States during the Tokyo round of the Multilateral Trade Negotations (MTN). Before 1982, most apparel was described in terms of its composition (e.g., "of cotton") and fabric construction (i.e., "knit" or "not knit"), so that apparel articles of the same fiber and construction were dutiable under the same tariff provision at the same rate. However, during the Tokyo round of negotiations, consideration was given to the import sensitivity of apparel on a product-by-product basis, resulting in small or no duty reductions as to more sensitive articles and more significant tariff cuts as to less sensitive ones. Consequently, eo nomine provisions were created to cover the sensitive articles, while the remainder of the articles were classified under residual or "basket" tariff provisions which have lower rates of duty.

Such sets,

Importers soon began entering apparel sets containing one or more articles provided for eo nomine and one or more covered by basket tariff items. in which not all components are provided for eo nomine, are classified as entireties usually in basket tariff items at the lower duty rates.

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Apparel sets classified as entireties during January-November 1983 were assessed an average rate of duty of 27 percent ad valorem. It this legislation had then been in effect, the average duty rate on these sets would have been 31 percent ad valorem. This tariff differential will widen considerably during 1984-90, as the staged tariff reductions on apparel negotiated in the Tokyo round are implemented and the duty rates of eo nomine provisions are reduced less than those of the basket items.

The articles most significantly affected by the bill are shirts, sweaters, trousers, coats, and dresses made of textile fibers. Approximately 94 percent of the value of all apparel articles imported as parts of sets in 1983 was accounted for by women's, girls' and infants' garments; shirts and blouses accounted for about 59 percent of the total value of imported sets. Sets are often packaged, put on hangers, shipped, or otherwise marketed together to promote unit purchases at retail.

There are approximately 20,000 establishments producing wearing apparel in the United States. These establishments are located mainly in the Northeast-particularly in New York, New Jersey, and Pennsylvania--and in California. Employment in 1982 totaled 1.16 million people, down 13 percent from 1978.

Imports for consumption of shirts, trousers, sweaters, dresses, coats, and robes, according to official statistics of the U.S. Department of Commerce, are shown in the following tabulation:

Estimated from January-November 1983 imports of 129 thousand dozens valued at $6,563 million.

Imports of these articles increased 75 percent by value during 1979-83 to $7 billion. Quantities increased during the same period by 43 percent to 141 million dozen in 1983. These articles together accounted for about 74 percent of the total apparel import value in 1983.

Articles imported specifically as parts of sets accounted for less than 1 percent of the total imports in each garment category, although the total value of these parts rose to $35 million in 1983--up 37 percent from the previous year. The number of such parts increased 29 percent in 1983 to 862 thousand dozen. Official U.S. Commerce Department statistics on wearing apparel imported as parts of sets are as follows: