TABLE 9.-HAND TOOLS SUBJECT TO INVESTIGATION NO. AA1921-141 OR NO. AA1921-149 (U.S. imports from all countries, imports from designated beneficiary countries under the GSP, and the latter as a percent

of imports from all countries, by TSUSA items, 1976)

1 Imports under TSUSA item 648.8100 are not included because they are excluded from the list of eligible articles. Source: Compiled from official statistics of the U.S. Department of Commerce,

TABLE 10.--HAND TOOLS COVERED BY H.R. 2267 BUT NOT SUBJECT TO INVESTIGATION NO. AA1921-141 OR NO.

AA1921-149

(U.S. imports from all countries, imports from designated beneficiary countries under the GSP, and the latter as a percent

of imports from all countries, by TSUSA item, 1976) 1

1 Imports under TSUSA item 650.9100 are not included because they are excluded from the list of eligible articles. Source: Compiled from official statistics of the U.S. Department of Commerce,

DEPARTMENT OF COMMERCE

This is in reply to your request for the views of this Department on H.R. 2267, and similar bills "To increase for a five-year period the duty on certain hand tools, and for other purposes.”

This bill would increase the column-1 rate of duty on imports of certain hand tools entered under items 648.53 through 651.47 of the Tariff Schedules of the United States (TSUS) for the five-year period July 1, 1977 through June 30, 1982, with provision for staged reductions in 1980 and 1982. Imports of hand tools under the 23 specified TSUS items are currently assessed various duties, the ad valorem rates and equivalents of which range from approximately 1.5 percent to 34 percent, based on 1976 imports.

The Department does not have available to it evidence that increased protection from import competition for the domestic industry producing hand tools covered in this bill is needed. Data necessary to determine whether the domestic industry is being seriously injured or threatened with serious injury by increased imports would, the Department believes, require a thorough investigation of competitive conditions in the industry.

With respect to situations in which a domestic industry believes it is experiencing serious import injury or threat thereof, Congress has provided liberalized administrative remedies in the Trade Act of 1974. Under this statute domestic industries, firms, or groups of workers may petition for relief from imports and assistance to help them adjust to imports. We believe this procedure, which involves a thorough investigation by the U.S. International Trade Commission, is the appropriate recourse for the domestic hand tool industry if it feels it is faced with injurious import competition. We note further that only through this process can proper attention be given to the competitive situation with respect to each of the numerous separate products included in the coverage of the bill.

The Department notes, moreover, that the tariffs on the TSUS items in this bill are subject to concessions made by the United States under the General Agreement on Tariffs and Trade and are bound against increase. Hence, any increase in the duties on these items would render this country subject to claims for compensation or to retaliation by affected countries, thus disadvantaging other U.S. industries. The Department believes it is inappropriate to jeopardize our trading interests in a case in which injury has not been demonstrated.

For the reasons outlined above, the Department of Commerce would oppose enactment of H.R. 2267 and similar bills at this time.

In the event this legislation were enacted, it would have no impact on the revenues to, or the administrative costs of, this Department.

We have been advised by the Office of Management and Budget that there would be no objection to the submission of this report to the Congress from the standpoint of the Administration's program.

DEPARTMENT OF STATE

The Secretary has asked me to reply to your request for the views of the Department of State on H.R. 2267, a bill to increase the tariffs applying to certain hand tools.

The Department of State recommends against enactment of the proposed legislation. Our foreign trade policy reflects a basic conviction that the removal of unnecessary restrictions on the international exchange of goods fosters the growth of the United States economy and promotes United States international economic relations. In order that we may achieve the maximum benefits from our program of trade liberalization, we believe that tariffs should be increased only after a determination has been made under existing statutory procedures that restrictive action is the appropriate means of assisting domestic producers concerned that increased imports are causing or threatening serious injury to their industry. We believe that the existing procedures, which were carefully worked out in close consultation with the Congress, provide a fair and equitable way for United States producers to seek relief and that legislative action is, therefore, unnecessary.

The statutory procedures of interest are those set forth in the second title of the Trade Act of 1974, relating to relief from injury caused by import competition, which is administered by the International Trade Commission. Pursuant to the provisions of Title II, the Commission, upon application by an interested party conducts an investigation to determine the effect of imports and holds a public hearing to afford interested parties an opportunity to submit evidence and be heard. If the Commission finds increased imports are a substantial cause of threatened or serious injury to the industry, it submit a proposal for remedial action to the President. He is empowered to increase tariffs, impose quotas, or undertake to negotiate orderly marketing agreements with exporting countries.

The President may also authorize, either separately or in conjunction with import relief measures, the provision of such assistance as loans to firms and special allowances to workers.

The Office of Management and Budget advises that, from the standpoint of the Administration's program, there is no objection to the submission of this report. DEPARTMENT OF THE TREASURY

.

Reference is made to your request for the views of this Department on H.R. 2267, “To increase for a five-year period the duty on certain hand tools, and for other purposes.”

The duty rates of all of the items covered by this bill have been bound under the General Agreements on Tariffs and Trade (GATT). In many cases, the bill would raise the duty several times the bound rate.

The bill would violate the international obligations of the United States, and the Department is opposed to its enactment.

The Office of Management and Budget has advised that there is no objection from the standpoint of the Administration's program to the submission of this report to your Committee.

SPECIAL REPRESENTATIVE FOR TRADE NEGOTIATIONS This is in response to your request of March 14, 1977 for the views and recommendations of this Office on H.R. 2267, a bill “To increase for a five-year period the duty on certain hand tools, and for other purposes."

As a matter of trade policy, this Office considers that increased tariff protection should be granted pursuant to the procedures of the Trade Act of 1974. Congress included in that Act specific provision for granting relief in cases of injury from increased import competition. Under those provisions, the case is investigated by the U.S. International Trade Commission to determine whether the criteria established by the Congress are satisfied. The results of this investigation are reported to the President and if injury was found, recommendations as to the necessary remedy are included. Such recommendations are reviewed by the President, who acts in the matter after taking into consideration all relevant elements of the national interest. In cases where the Commission recommends import relief and the President provides a different remedy than that recommended, his decision is subject to Congressional override.

This Office considers that the provisions already made available by the Congress to deal with injurious import competition should not be bypassed. To do so would probably generate a number of requests to Congress for higher tariffs on other products and could jeopardize the achievement of basic trade policy goals.

The tariff increases in H.R. 2267 would violate our trade agreement obligations on imports valued at about $95 million. Important foreign suppliers could thus be expected to claim compensatory duty reductions by the United States on other products. If compensation were not given, such foreign suppliers would have the right to impose retaliatory tariff increases on U.S. exports.

In addition to the direct effects on particular industries, enactment of this bill would be widely interpreted abroad as a significant shift away from the policies represented by the Trade Act of 1974. This would not only weaken the position of the United States in the multilateral trade negotiations but would make it more difficult for other governments to resist the strong pressures they face for unilateral increases in protection, which would have an adverse impact on U.S. exports.

For the reasons noted above, this Office opposes the enactment of H.R. 2267. The Office of Management and Budget advises that there is no objection to the presentation of these views from the standpoint of the Administration's program,

DEPARTMENT OF LABOR

This letter is in response to your Committee's request for views of the Department of Labor on H.R. 2267, a bill “To increase for a five-year period the duty on certain hand tools, and for other purposes."

This legislation would amend the Appendix to the Tariff Schedules of the United States by increasing, for a five-year period, the column 1 duties on 23 types of hand tools currently categorized in Part 3E, Schedule 6 of the TSUS (Metal Products). The proposed legislation would initially raise the tariffs on these articles by an average of 340 percent, ranging from a 20 percent increase to an over 1000 percent increase on certain articles. The new rates, which would be effective on or after July 1, 1977, would subsequently be reduced in two stages during the five-year period. The column 1 duties on hand tools currently range from 2.5 percent ad valorem for hammers and sledges categorized in TSUS item 651.23 to 20 percent ad valorem for slip-joint pliers categorized in TSUS item 648.81. Under the proposed legislation, the column 1 duty for 15 of the 23 articles covered would initially be 25 percent ad valorem.

Section 2 of H.R. 2267 provides that while the increased rates of duty are in effect, the International Trade Commission shall keep developments in the hand tool industry under review, including the progress and specific efforts made by firms to adjust to import competition. Upon the request of the Committee on Ways and Means of the House or the Committee on Finance of the Senate, the ITC shall make reports concerning such developments. In addition, upon the request of either of those Committees or on its own motion, the ITC shall advise the Committees of its judgment as to the probable economic effect on the industry of the termination of the five-year period for the increase of duties.

The Department of Labor is opposed to the enactment of this legislation.

Hand tools are sold in the United States in three differentiated markets: the market for high priced, professional quality tools, serviced primarily by hardware stores; the market for medium priced, medium quality tools, serviced predominantly by department stores; and the market for low priced, low quality tools, serviced primarily by discount stores, drug stores, and supermarkets. The bulk of the domestically produced tools are sold in the market for professional tools, while most of the remainder are produced for the market in medium quality tools. Since most imported tools are sold in the low quality market, they are not directly competitive with the bulk of the domestically produced tools. Imports of hand tools were valued at approximately $104 million in 1975 and $150 million in 1976.

It is the opinion of the Department of Labor that the tariff increases proposed in H.R. 2267 are substantial and do not appear to be justified at this time. Although the recent recession had some adverse effect on the economic growth of the hand tool industry, over the long run, domestic production and employment have been growing. For example, from 1971 to 1974, employment in the cutlery, hand tool, and saw industries increased 24 percent. In 1975, employment in the industry decreased by 11 percent and in 1976 employment increased 4 percent. It is expected that this upward trend will continue following the current recovery from the 1974 and 1975 recession.

Pursuant to Title II of the Trade Act of 1974, any industry suffering the effects of import competition may petition the International Trade Commission for import relief. It is the view of the Department of Labor that the remedies provided by the Trade Act are to be preferred to relief through individual legislation in this case.

Pursuant to Article XXVIII of the GATT, the United States would be obligated to make compensatory adjustments to its trading partners for any increases in the rates of duties on hand tools. The amount of trade involved, approximately $100 million, is considerable.

In addition, it is the opinion of the Department of Labor the increased duties proposed by H.R. 2267 are inconsistent with the spirit of the multilateral trade negotiations.

The Office of Management and Budget advises that there is no objection to the submission of this report from the standpoint of the Administration's program.

CONGRESS OF THE UNITED STATES,

HOUSE OF REPRESENTATIVES,

Washington, D.C., April 22, 1977. Hon. CHARLES A. VANIK, Chairman, Subcommittee on Trade, House Committee on Ways and Means.

DEAR MR. CHAIRMAN: I am enclosing herewith a statement with reference to the bills I have sponsored, H.R. 139, H.R. 208, H.R. 2267, and H.R. 5233 relating to duties for the hand tool industry. I would appreciate very much your including my statement in the official record of the hearings that will be conducted on April 26, 27, and 28 on this subject. Thank you for your cooperation. Sincerely,

FRANK ANNUNZIO,

Member of Congress. Enclosure.

STATEMENT OF Hox. FRANK ANNUNZIO, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF ILLINOIS

As a co-sponsor of the bill H.R. 2267, introduced in the present Congress on January 20, 1977 for the purpose of increasing the duty on certain hand tools for a five-year period, I am honored to appear before this Committee in the hearing on the subject in question.

Among the co-sponsors are colleagues of mine from states like New York, Pennsylvania, Ohio, Wisconsin, Massachusetts and Illinois. These states have great industrial centers where most of the hand tools, noted in the U.S. tariff schedules, as appended in the bill, are made. We combined in introducing H.R. 2267 because we represent not only the citizens in our States, but also their industries. Of greatest concern to us is the economic welfare of four constituents. Many of them work in the 100 U.S. firms currently manufacturing hand tools. Yet in many instances workweeks have been shortened, and retrenchments and lay-offs caused by a lack of orders to continue producing. Firms have been forced to cut back because there has been a continuously increasing share of the domestic market for hand tools being pre-empted by competitive or like products from Japan at lower prices than domestically-produced hand tools.

Our hand tool industry has complained bitterly in the past about this progressive take-over of its domestic retail markets by cheaper products dumped here by Japanese exporters at “less than fair value" and whose prices of the merchandise in question, as sold for exportation, are less than the prices charged for home consumption.

Ten representative hand tool manufacturers filed an antidumping action with the U.S. Treasury. Four of them were from my State of Illinois, which is why I am here today. As they are diminished and injuriously affected by excessive imports, so are their workers hurt, and I have to speak up for them.

The items in question are chisels, punches, hammers, sledges, vises, c-clamps and battery terminal clamp lifters. These tools are used by house-holders as well as professional craftsmen such as carpenters, furniture makers, garage mechanics, masons and others. The broad spectrum of users covers all aspects of industry and agriculture. A hand tool is as necessary to the average American as bread and milk. As a people we know how to work with our hands. Our ingenuity with tools is known worldwide. Yet our own manufacturers of hand tools are being driven to the wall by cheaper tools being dumped on us.

Twice in the last four years has the U.S. Treasury advised the International Trade Commission that foreign hand tools are being dumped here. Yet no countervailing duty recommendation for Presidential action has been forthcoming.

Under the adjustment provisions of the Trade Act of 1974, certain amounts of assistance are made available to companies, unions and communities, but only after injury has been proven. Who wants such minimal assistance after one's source of work and earnings has been shut down? No wonder hand tool makers in our districts have disdained using the channels of adjustment assistance for redress against injurious imports. It is always a question of too little and too late.

The ITC in its latest publication on the hand tool complaint has said that Japanese efforts are directed at 90 percent of the household market for cheaper tools. I say that every hammer and chisel sold here reduces the number made in our own factories and the hours of work for which an American workman is paid. But there are also ripple effects-money leaves our shores, less taxes are paid here by the laid-off workers, and welfare payments are paid from tax monies. The most injurious effect, however, is psychological. A hand tool worker is not gainfully employed. This is inexcusable when we can take steps to equalize the inequity.

Make the hand tool goods competitive in price. That is what our bill H.R. 2267 asks for. Have a new sliding scale of duties over the next five years so that we are not being ruthlessly undercut in our markets.

Mr. Chairman, our remedy is simple. Since the Treasury recommendation for anti-dumping duties has been ignored; since the International Trade Commission rejects the petition on the basis of scarcely 30 percent penetration of the domestic market by Japanese hand tools, just not enough to kill off the industry; and, since the President has not received any recommendation either for increased duties, quotas or voluntary restrictions, it is up to us in Congress to take the initiative to help our constituents obtain the relief they need. The sliding scale of duties in H.R. 2267 on imported hand tools is very fair and efforts can be made by the