available), 10.7 million pounds of palm oil were used in the manufacture of inedible products, including iron and steel products, tinplate and terneplate. There are no statistics available on the amount of palm oil used by these industries, but it is estimated that the amount does not exceed 8 million pounds annually. Thus, in 1975, of the 960.4 million pounds of palm oil imported into the United States, about 952.4 million pounds would have been dutiable had H.R. 3674 been enacted and would have generated about $28.6 million in import duties. However, a 3-cent-per-pound duty could possibly reduce the level of U.S. palm oil imports, and thereby reduce total revenues collected.

DEPARTMENT OF COMMERCE

This is in reply to your request for the views of this Department concerning H.R. 3674, a bill "To amend the Tariff Schedules of the United States with respect to the rates of duty for palm oil."

This bill would amend the Tariff Schedules of the United States by redefining item 176.34 to include only "palm oil imported for use in the manufacture of iron or steel products, or of tinplate or terneplate" and adding a new item 176.35 to include all other palm oil. Duty-free tariff treatment would continue to apply to item 176.34 both for imports from countries accorded column-1 most-favorednation tariff treatment and from communist countries, except Romania, Poland, and Yugoslavia, accorded column-2 statutory tariff treatment. The rate of duty on the new item 176.35 would be set at 3 cents per pound for both column-1 and column-2 imports.

The Department opposses the enactment of H.R. 3674.

While imported palm oil can be used as a substitute for domestically produced vegetable oils, the Department does not have evidence that increased protection from import competition for domestic producers of edible oils is necessary. 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 edible oils industry if it believes that it is faced with injurious import competition from palm oil.

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. 3674, a bill transferring palm oil from the free to the dutiable list.

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 imposed on duty free items 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 submits 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. 3674, "To amend the Tariff Schedules of the United States with respect to the rates of duty for palm oil."

H.R. 3674 would add a second TSUS number for palm oil and would impose a 3 cents per pound duty on palm oil not imported for use in the manufacture of iron or steel products, or of tinplate or terneplate. Thus, most palm oil imports would have to pay a 3 cents duty instead of entering duty free as it does under the present classification.

The bill would be contrary to the policy of the United States for the liberalization of trade, and the Department is opposed to it for this reason.

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 for this Office's views on H.R. 3674, “To amend the Tariff Schedules of the United States with respect to the rates of duty for palm oil."

This Office opposes the enactment of this bill, which would raise the duty on palm oil from its present duty-free status to its legislative limit of 3¢ per pound. We are presently engaged in a major effort to liberalize world trade in the Multilateral Trade Negotiations (MTN) now underway in Geneva. Improvement of market access for U.S. agricultural goods is one of our primary aims in these negotiations. To raise the duty on palm oil at this time would be inconsistent with our efforts to encourage freer world trade in agricultural products and to induce other nations to reduce their agricultural trade barriers.

The U.S. is also the world's largest producer and exporter of oilseeds and products which compete directly with palm oil in world markets. Export sales of these products amount to more than $4 billion annually compared to 1975 imports of oilseeds and products valued at about $550 million, of which palm oil imports accounted for $200 million. In light of our overwhelming export position in oilseeds any action to restrict imports of competitive products would only be counterproductive and could result in retaliatory actions by our trading partners. Finally, since there is in effect one "world" market for vegetable oils, discouraging palm oil imports into this country through an increase in the tariff would merely result in diversion of that palm oil to third country markets, where it would compete with our soybean oil.

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 the views of the Department of Labor on H.R. 3674, a bill "To amend the Tariff Schedules of the United States with respect to the rates of duty for palm oil."

This legislation, as proposed, would amend the Tariff Schedules of the United States by making edible palm oil subject to import duties. All palm oil currently enters duty-free under TSUS item 176.34. Under the proposed amendment, palm oil, other than that imported for use in the manufacture of iron or steel products, or of tinplate or terneplate, would be subject to a duty of 3 cents per pound. In effect, this bill would return the tariff on edible palm oil to the level existing before Congress reduced it in 1966.

The Department of Labor opposes enactment of this legislation.

There is no domestic production of palm oil. Approximately 90 percent of palm oil used domestically is imported from Malaysia; virtually all of the remainder comes from Indonesia. Imports of palm oil increased in value from $38 million in 1972 to $200 million in 1975 and decreased to $127.8 million in 1976. Edible grades of palm oil are used as substitutes for domestically produced oils in the manufacture of margarine, shortening and, to a limited extent, soap and candles.

This legislation would not appear to have any benefits for domestic employment. Although increased imports of palm oil have displaced domestically produced cottonseed and soybean oils to some extent, there has been no significant change in the level of the agricultural work force. In addition, there may have been some slight gains in the employment levels of workers engaged in processing such oils.

The imposition of this tariff as a means of forestalling the possibility of import injury to the domestic industry is unwarranted. We feel that the remedies provided under the Trade Act of 1974 are adequate to protect the domestic oilseed industry from import injury. Furthermore, it is our view that the imposition of duties on palm oil would be inconsistent with the spirit of the multilateral trade negotiations and could jeopardize the U.S. position.

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.

DEPARTMENT OF AGRICULTURE

The Department of Agriculture wishes to comment on H.R. 1856, a bill "To amend the Tariff Schedules of the United States with respect to the rates of duty for palm oil."

This Department does not favor enactment of this bill.

The bill would amend the Tariff Schedules of the United States to impose a duty of 3 cents per pound on the importation of all palm oil except palm oil imported for use in the manufacture of iron or steel products or tinplate or terneplate.

The United States is the world's largest producer and exporter of oilseeds and oilseed products. The importance of exports of other agricultural products to the well-being of American farmers is well known. The United States, over the years, has been a strong advocate of freer international trade. Passage of H.R. 1856 could be viewed as protectionist with the result our trading partners may seek to restrict imports of U.S. oilseeds and products into their markets.

U.S. imports of palm oil which reached a record level in 1975 declined sharply in 1976. In our view, 1977 palm oil imports should approximate the lower 1976 level. In view of the recent price strength in soybean and cottonseed oils current palm oil imports do not appear disruptive and have had only a minimum impact on soybean and cottonseed prices received by farmers.

U.S. palm oil imports are directly related to the spread between palm oil and soybean oil in our domestic markets. When the spread remains under 2 cents per pound, palm oil is attractive to shortening and margarine manufacturers on the West Coast and to a limited number of processors in the East and South. As the spread increases to 3 cents per pound or greater, processors in the mid-West, East, and South increase their use of palm oil, and imports rise. In most of 1976 and early 1977, the palm/soy oil spread remained narrow, discouraging palm oil imports.

U.S. imports of palm oil originate in such developing countries as Malaysia and Indonesia. Developing countries are particularly sensitive to any import restrictions on their exports. Further, Malaysia has already expressed concern over the level of U.S. soybean oil exports under concessional programs to India and Pakistan. The Office of Management and Budget advises that there is no obiection to the presentation of this report from the standpoint of the Administration's program.