We have every encoragement to increase capital expansion in the fishing industry and believe with the continued progress indicated, hopefully by passage of HR2048, that more processors and fishermen alike will have this same encouragement. Sincerely yours,

C. L. STINSON, Jr., Treasurer.

H.R. 2267

To increase for a five-year period the duty on certain hand tools, and for

other purposes

U.S. INTERNATIONAL TRADE COMMISSION

PURPOSE OF THE BILL

H.R. 2267, if enacted, would add to subpart B of part 1 of the appendix to the Tariff Schedules of the United States (TSUS) temporary provisions increasing, during the 5-year period ending July 1, 1982, the import duties applicable to a variety of hand tools provided for under 23 separate items in schedule 6, part 3E of the TSUS. The higher rates of duty would be reduced in three stages; the first reduction would become effective on July 1, 1980, the second on July 1, 1981, and the third, which would return all rates to their current levels, on July 1, 1982.

Section 2 of H.R. 2267 would require the U.S. International Trade Commission to (1) keep under review developments in the industry concerned and be prepared to report such developments upon request of the House Ways and Means Committee or the Senate Finance Committee, and (2) upon its own motion or upon the request of either of the aforementioned committees, advise such committees of its judgment as to the probable economic effect of the termination of the effective period of the amendment on the industry concerned.

BACKGROUND INFORMATION

The U.S. International Trade Commission, after having been advised by the Department of the Treasury that certain hand tools from Japan were being or were likely to be, sold in the United States at less than fair value, conducted two investigations under the provisions of section 201 (a) of the Antidumping Act, 1921, as amended, to determine whether an industry in the United States was being or was likely to be injured by reason of the importation of such merchandise into the United States. The first investigation (No. AA1921–141) covered wrenches, pliers, screwdrivers, and metal-cutting snips and shears and was completed on October 21, 1974. The second investigation (No. AA1921–149) covered chisels, punches, hammers and sledges, vises, c-clamps, and battery terminal lifters and was completed on December 2, 1975. In each investigation the Commission unanimously determined that an industry in the United States was not being or was not likely to be injured by reason of the importation at less than fair value of the subject hand tools from Japan.

Apparently H.R. 2267, as was its predecessor H.R. 13331, is now being introduced because it is believed by the domestic producers of hand tools that the established procedures for obtaining relief from import competition have been exhausted and that legislative relief is the only remaining avenue available. If this is indeed the purpose of H.R. 2267, several matters should be noted. The domestic hand tool industry has not, as of this time, sought judicial review of the Commission's negative determinations in either of the aforementioned dumping cases in the appropriate court.

Further, H.R. 2267 is substantially broader in scope than the two dumping investigations referred to above since it would increase the duty rates on numerous hand tools which were not included in either of the two dumping cases. As indicated in table 1, imports valued at about $54 million, or about 36 percent of the total U.S. imports in 1976 of the hand tools covered by the bill, were not subject of either investigation.

1 See testimony of Eugene Stewart, Special Counsel for the Hand Tools Institute, before the Subcommittee on Trade of the Committee on Ways and Means, at its hearing of February 19, 1976, on the Authorization of Appropriations for and on Oversight of the Interna. tional Trade Commission, at pp. 78, 81, 96.

Further, the increased duty rates provided for in H.R. 2267 would apply to importations from all most-favored nations rather than just Japan, the sole country to which any dumping duties would have applied had the Commission's determinations been in the affirmative. In 1976, imports valued at about $80 million, or about 53 percent of the total U.S. imports of the hand tools covered by H.R. 2267, originated in countries other than Japan.

DESCRIPTION AND USES

The hand tools affected by the proposed legislation are, for the most part, made of iron or steel which has been forged, cast, or stamped to shape. They are used by mechanics, carpenters, construction workers, craftsmen, and occasional users, except for scissors and shears and certain other hand tools of the character of table, kitchen, and household implements, which are used in other trades and in households.

TARIFF TREATMENT

Table 2 shows the current rates of duty applicable to the hand tools that are the subject of H.R. 2267, together with the duties proposed to be effective from July 1, 1977, through June 30, 1980. It should be noted that, with the exception of the articles provided for under TSUS items 648.81 (slip-joint pliers) and 650.91 (scissors and shears valued over $1.75 per dozen), all of the affected articles are currently listed as “eligible” articles for the purpose of the Generalized System of Preferences (GSP) and are thus permitted free entry into the United States when imported from designated beneficiary developing countries.

STRUCTURE OF THE DOMESTIC INDUSTRY

It is believed that several hundred firms are engaged in the production of one or more of the tools subject to the proposed legislation. Production facilities are located throughout the United States with some concentration in the Midwest and Northeast. According to the Census of Manufactures, there were 613 establishments, employing about 39,000 persons, engaged in the production of hand and edge tools in 1972. Five establishments belonging to the Hand Tool Institute account for an average of approximately 50 percent of the majority of the domestically produced products covered by H.R. 2267. Among the largest domestic producers of such tools are: Crescent Tool Division of Cooper Industries; S-K of Dresser Industries; Pendleton Tool Industries of Ingersoll-Rand; Diamond Tool & Horsehoe Co.; and H. K. Porter, Inc.

3

U.S. SHIPMENTS

U.S. shipments of the hand tools subject to the two dumping investigations were estimated to have totaled about $554 million in 1976, or about 18 percent more than in 1975 (table 3).

Recent data on the value of producers' shipments of a major share of the tools that were subject to the dumping investigations indicated an average increase of about 15 percent in 1976 over 1975 (table 3).

Recent shipment data for the remainder of the hand tools (except scissors and shears) covered by H.R. 2267 that were not subject to either dumping investigation are not presently available. However, the value of shipments of such other hand tools of iron or steel of the types provided for in item 651.47 of the TSUS is believed to be large, since it includes such articles as table, kitchen, and household implements.

U.S. shipments of scissors and shears of the five major domestic producers, regardless of value bracket, were reported at about $26 million in 1975, down 19 percent from 1974 (table 4).

U.S. IMPORTS

U.S. imports from all countries of the hand tools covered by H.R. 2267 totaled about $151 million in 1976, an increase of about 45 percent from the 1975 total. U.S. imports from all countries of the hand tools that were subject to the two

2 For 1976, U.S. imports of "eligible" hand tools from designated beneficiary developing countries under the Generalized System of Preferences (GSP) totaled $29 million, or approximately 19 percent of total U.S. imports of hand tools.

3 As per Geo. Weiss ITC 4-7-77.

dumping investigations totaled about $97 million in 1976, an increase of about 64 percent from the 1975 total. In comparison, U.S. imports from all countries of the additional hand tools covered by H.R. 2267 that were not subject to the dumping investigations totaled about $54 million in 1976, an increase of about 20 percent from the 1975 total. These imports amounted to about 36 percent of the total U.S. imports of hand tools covered by H.R. 2267 (tables 5 and 6).

U.S. imports from Japan of the hand tools covered by H.R. 2267 totaled about $72 million in 1976, an increase of about 80 percent from the 1975 total (tables 7 and 8).

In 1976, U.S. imports from Japan amounted to about 47 percent of the total U.S. imports of hand tools covered by the bill. Conversely, imports valued at $80 million, or 53 percent of this total, originated in countries other than Japan (table 1).

In 1976, Japan was the largest source of U.S. imports of each of these hand tools, except for (1) scissors and shears, of which the Federal Republic of Germany was the largest supplier, (2) files and rasps, of which Switzerland, Sweden, and the Federal Republic of Germany were the largest suppliers, and (3) drilling, threading and tapping tools, of which Belgium was the largest supplier.

U.S. imports under the GSP are shown in tables 9 and 10.

IMPORT MARKET PENETRATION

U.S. imports from all countries of the hand tools that were subject to the two dumping investigations accounted for about 17 percent of apparent domestic consumption in 1976 (table 3); imports from Japan of these hand tools accounted for about 12 percent of domestic consumption.

With respect to the hand tools covered by H.R. 2267 which were not subject to either dumping investigation, recent data on import market penetration are only available for scissors and shears; such data reveal a market penetration of about 42 percent in 1975 for imports from all countries (table 4), and a market penetration of about 4 percent for imports from Japan.

POTENTIAL IMPACT OF THE BILL

As indicated in table 2, the enactment of H.R. 2267 would substantially increase the column 1 rates of duty for the hand tools covered by the 23 TSUS items which are included in the bill. Fifteen of these items would be increased from the present rates—ranging from 0.3 cent per pound to 20 percent ad valorem—to a uniform rate of 25 percent ad valorem for the first 3-year period covered by the bill. The proposed rates range from about 20 percent higher (for item 650.91) to about 2,500 percent higher (for item 651.25) than the present rates on the basis of the weighted ad valorem equivalents of the present rates. The weighted ad valorem equivalents (based on 1976 imports) for all the proposed rates would average about 45 percent, compared with an average of 10.6 percent for the current rates.

It would also appear that the enactment of H.R. 2267 would suspend the GSP duty-free treatment of the “eligible” hand tools imported from beneficiary developing countries, thus making such tools temporarily dutiable at the higher rates provided for in the bill.

The bill would make the affected domestic products more competitive vis-a-vis imported products, and probably would result in an overall decline in imports of the specified tools. It is likely that, in most product areas, domestic producers would be able to meet such additional domestic demand as might be generated by the probable decline in imports, in most cases with existing production capacity. Domestic consumer prices would probably increase from current levels.

REGULATORY IMPACT OF THE BILL

H.R. 2267 provides for temporary increase in the rates of duty on imported hand tools and, therefore, should not have a significant regulatory impact or result in additional paperwork regarding the importation of such products.

It is noted however that the United States International Trade Commission in complying with section 2 of the proposed bill, may from time to time require members of the domestic hand tool industry to respond to questionnaires and provide the Commission with data which would be of assistance in (1) its review of developments in the industry, and (2) in its determination of the probable economic effect on the industry of the termination of the effective period of the amendments made by H.R. 2267.

POTENTIAL INCREASES IN DUTY COLLECTIONS

On the basis of U.S. imports of hand tools in 1976, under the proposed legislation, the U.S. customs duties would have been in excess of $32 million, more twice the actual amount ($16 million) collected under the rates of duty applicable during 1976. However, under the proposed legislation, such imports would probably decline, yielding a correspondingly smaller amount in customs duties.

TECHNICAL COMMENT

Whereas the bill would not change any of the column 2 (statutory) rates of duties for the 23 TSUS items covered by the bill, it would increase the column 1 rates of duties on articles provided for under seven of such TSUS items (items 649.01, 649.03, 649.05, 649.07, 649.41, 651.23, and 651.25) so that they would be higher than the corresponding column 2 rates of duties. This would violate our most-favored-nation obligations under article I of the General Agreement on Tariffs and Trade. This result, of course, could be avoided by amending the

umn 2 rates so that they would not at any time be less than the rates in column 1.

The appropriate appendix item numbers have inadvertently been omitted for the last 3 rate lines on page 5 of the bill. Items 911.66, 911.68, and 911.70 would appear to be appropriate numbers for these rate lines.

TABLE 1.-HAND TOOLS COVERED BY H.R. 2267: U.S. IMPORTS FROM ALL COUNTRIES, IMPORTS FROM JAPAN, AND IMPORTS FROM JAPAN AS A PERCENT OF U.S. IMPORTS FROM ALL COUNTRIES, BY TSUSA ITEMS, 1976