H.R. 4018

To suspend until the close of June 30, 1979, the duty on certain doxorubicin hydrochloride antibiotics, and for other purposes

DEPARTMENT OF COMMERCE

This is in response to your request for the views of this Department on H.R. 4018, a bill To suspend until the close of June 30, 1979, the duty on certain doxorubicin hydrochloride antibiotics, and for other purposes."

If enacted H.R. 4018 would amend the Tariff Schedules of the United States (TSUS) to provide duty-free entry, until the close of June 30, 1979, for certain doxorubicin hydrochloride antibiotics imported from countries afforded columnone, most-favored-nation tariff treatment by creating a temporary TSUS item, 907.40, which would be duty-free. Imports of doxorubicin hydrochloride antibiotics currently enter the United States under either TSUS item 407.85, dutiable at 1.7 cents per pound plus 12.5 percent ad valorem, or items 437.32 or 438.02, each dutiable at 5 percent ad valorem. The column-two rates of duty would remain unchanged.

The Department of Commerce favors a temporary duty suspension of the column-one rate of duty for imports of doxorubicin hydrochloride antibiotics, as provided for in H.R. 4018. It believes that the proposed temporary duty suspension would result in a net benefit to all domestic interests involved, including researchers and cancer patients.

Doxorubicin hydrochloride antibiotics currently enter the United States under the brand name Adriamycin, which is used in conjunction with other anti-cancer preparations in the chemo-therapy treatment of cancer patients. According to the National Cancer Institute, Adriamycin is one of the leading anti-cancer agents and fulfills an important role in the treatment of cancer patients. In 1976 imports of Adriamycin were valued at $20 million and came solely from Italy. A temporary duty suspension as proposed by this bill would remove the burden of duty from imports of this pharmaceutical during a period in which no domestic production exists, without discouraging the development of domestic manufacture. In this regard, we understand that two domestically manufactured products which will eventually compete with Adriamycin are currently being developed, but are not yet commercially available.

Furthermore, a spokesman for the U.S. distributor of Adriamycin has informed the Department that cost savings resulting from the temporary duty suspension called for in H.R. 4018 will be passed directly through to U.S. consumers in the form of an equivalent price reduction.

Although the Department generally prefers that the reduction or elimination of duties on any particular article be accomplished as a result of a trade agreement in which reciprocal benefits can be obtained for U.S. exports, it believes that in this case the economic benefits of an immediate unilateral reduction outweigh the potential concessions that might be negotiated. It notes furthermore that suspending the rate temporarily would retain some negotiating value since the President could negotiate a permanent reduction during the Multilateral Trade Negotiations.

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. 4018, a bill providing duty free entry for doxorubicin hydrochloride.

The Department of State has no objection to the enactment of the proposed legislation. We understand that doxorubicin hydrochloride is an antibiotic prescribed in the treatment of certain forms of cancer and that there is no United States production.

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. 4018, "To suspend until the close of June 30, 1979, the duty on certain doxorubicin hydrochloride antibiotics, and for other purposes."

The proposed legislation would amend the Appendix to the Tariff Schedules of the United States (TSUS) by adding a new item, 907.40. This item would suspend the column 1 duty on doxorubincin hydrochloride until the close of June 30, 1979. The column 2 rates of duty would remain unchanged.

The Department supports enactment of the proposed legislation. This product, which is used in the treatment of cancer, is not currently produced in the United States. Moreover, the Italian firm which markets it has a patent on both the compound and its production process.

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 the Committee's request for the views of this Office concerning H.R. 4018, a bill "to suspend until the close of June 30, 1979, the duty on certain doxorubicin hydrochloride antibiotics and for other purposes."

As the Committee is aware, we would prefer that duty suspensions and/or eliminations be effected as part of tariff negotiations in which reciprocal concessions can be obtained from other nations. However, in this case we find that the product involved is a patented drug for which there is no substitute for the imports. We understand that the agencies of the U.S. Government have found this drug to be of considerable utility in the treatment of cancer. Under the circumstances we would not object to the enactment of this bill.

The Office of Management and Budget advises that it has no objection to the submission of this report.

DEPARTMENT OF LABOR

This letter is in response to your Committee's request for the views of the Department of Labor on H.R. 4018, a bill "To suspend until the close of June 30, 1979, the duty on certain doxorubicin hydrochloride antibiotics, and for other purposes."

This legislation would amend the Tariff Schedules of the United States by suspending the column 1 duties on certain doxorubicin hydrochloride antibiotics (hereinafter referred to as Adriamycin) until June 30, 1979. Adriamycin, depending on its source, currently enters under TSUS items 407.85, 437.32 and 438.02. Articles entering under TSUS item 407.85 are subject to a column 1 duty of 1.7 cents per pound plus 12.5 percent ad valorem and a column 2 duty of 7 cents per pound plus 45 percent ad valorem. Those entering under TSUS items 437.32 and 438.02 are subject to a column 1 duty of 5 percent ad valorem and a column 2 duty of 25 percent ad valorem. Subsection (b) of the bill provides that the duty suspension shall be considered to have been proclaimed by the President as being required or appropriate to carry out trade agreements to which the United States is a party, and not as a statutory provision enacted by Congress.

Adriamycin is an anthracycline antibiotic which has proved to be very effective in treating various forms of cancer. It was developed and is produced by the Farmitalia Pharmaceutical Company of Milan, Italy which holds exclusive patent rights on the drug. Farmitalia's Wilmington, Delaware subsidiary, IMS,

Inc., is the exclusive importer-distributor of Adriamycin in the United States and Canada.

Adriamycin is more expensive than other agents used in chemotherapy. Added to the costs are the United States import duties. At the present time a full Adriamycin treatment ranges from $300 to $2000, depending on height and weight of the patient. The National Cancer Institute, which has an indefinite delivery contract for purchasing Adriamycin not to exceed $2 million a year, spends approximately 30 to 40 percent of its entire drug budget on purchases of Adriamycin.

The Department of Labor supports the enactment of this legislation.

A duty suspension in this case would not have any adverse effects on domestic employment or on any domestic industry. There is no domestic production of Adriamycin nor are there any close substitutes for the drug.

This legislation could have beneficial effects for consumers. Since Adriamycin is extremely expensive, a duty suspension could result in significant savings to both individual cancer patients and to the National Cancer Institute.

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

This is in reply to your request of March 14, 1977, for this Department's views on H.R. 4018, a bill, "To suspend until the close of June 30, 1979, the duty on certain doxorubicin hydrochloride antibiotics, and for other purposes." This bill would permit the duty-free entry of doxorubicin hydrochloride, a compound used in the treatment of cancer and patented in the U.S. by an Italian firm. The Department defers to the Department of Commerce, the agency most directly involved with this bill.

While we are generally opposed to unilateral duty reductions, the special nature of this product seems to warrant duty-free treatment.

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

H.R. 4654

To reduce the rate of duty on unmounted underwater lenses

DEPARTMENT OF COMMERCE

This is in response to your request for the views of this Department on H.R. 4654, a bill "To reduce the rate of duty on unmounted underwater lenses."

H.R. 4654 would amend the Tariff Schedules of the United States (19 U.S.C. 1202) to reduce from 14 to 7 percent ad valorem the column-1 rate of duty applicable to imports of unmounted underwater lenses if from countries accorded mostfavored-nationed tariff treatment. The column-2 duty of 45 percent ad valorem applicable to imports from other countries would remain unchanged.

The Department of Commerce does not favor enactment of H.R. 4654. We do not feel that present circumstances warrant the unilateral reduction of the duty on unmounted underwater lenses as proposed by this bill prior to consideration of such a reduction in the current Multilateral Trade Negotiations (MTN) in which the President can seek to obtain reciprocal benefits for U.S. exports.

We understand that the bill was introduced on behalf of a U.S. firm which is a manufacturer of an underwater viewer used in underwater photography. The manufacturer imports a special Japanese underwater lens which is mounted in combination with other lenses in underwater photographic apparatus. The special lens is not currently available from U.S. lens manufacturers at a cost sufficiently low to permit economic use of a domestic source. The manufacturer believes that, with the cost savings from lower duties, he can reduce his prices and thereby become more competitive with respect to the product manufactured in Japan and increase his sales.

U.S. lens manufacturers do not object to the proposed duty reduction. However, they prefer that the reduction be accomplished in the MTN where reciprocal benefits for U.S. optical exports can be sought. We note that under the provisions of the Trade Act of 1974, the President has the authority to reduce the present 14 percent ad valorem duty to 5.6 percent. Since Japan accounted for 81 percent by value of unmounted lenses imported in 1976 in the category which includes imports of the special unmounted underwater lenses, it appears reasonable that reciprocal benefits for U.S. exports can be obtained. Therefore, we recommend that consideration of the reduction of duties on underwater lenses be reserved for the MTN.

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In the event this legislation were enacted, it would have no impact on the revenues to, or 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. 4654, a bill to reduce the duty on unmounted underwater lenses.

The Department of State recommends against enactment of the proposed legislation. We are not in possession of information indicating a need for a special measure, such as H.R. 4654, to stimulate importations of unmounted underwater lenses. Moreover, we note that the President, pursuant to the authority vested in him by separate titles of the Trade Act of 1974, has taken two actions relating to the duty applying to lenses, including unmounted underwater lenses. He has ordered the elimination of the duty on such lenses imported from eligible beneficiary developing countries and initiated administrative proceedings which

involve consideration of the possible reduction or elimination of tariffs to implement international trade agreements. Such agreements are designed to foster the growth of the United States economy and advance our international economic interests. In the absence of overriding considerations, we prefer that pending proposals for reductions in tariffs be considered in the context of the exercise of the authority vested in the President by the Trade Act.

The Trade Act contains two general authorities empowering the President to make modifications of United States import duties. On November 24, 1975, acting pursuant to that embodied in the fifth title of the Act, the President issued Executive Order 11888 establishing a generalized system of preferences providing special customs treatment for eligible articles from beneficiary developing countries and, in so doing, designated lenses as eligible articles. As a result, unmounted underwater lenses originating in any eligible participating developing country may be imported into the United States free of duty.

The President has also declared his intention to exercise the other general authority to modify duties, that embodied in the first title of the Act, in the context of the new round of trade negotiations which are under way in Geneva, Switzerland, under the auspices of the General Agreement on Tariffs and Trade. Title I of the Trade Act empowers the President to proclaim such modifications of import duties as he determines required or appropriate to implement international agreements.

To assist the President in the conduct of the negotiations, the International Trade Commission has, following an investigation which included public hearings, submitted an advisory report on the probable economic effect on domestic industries and consumers of granting tariff concessions in trade agreement negotiations on a list of United States import products. The list includes the item of tariff nomenclature applying to lenses in a group of articles which are dutiable at rates in excess of 5 percent ad valorem (or ad valorem equivalent). Under the authority of the Trade Act, the President could reduce the duty on such articles by as much as 60 percent, or to 5.6 percent ad valorem in the case of unmounted underwater lenses, a rate below that specified in the proposed legislation.

The inclusion of articles, such as lenses, on the list of products dutiable in excess of 5 percent ad valorem (or ad valorem equivalent) does not necessarily mean, however, that the United States would grant the maximum tariff concession authorized by the Trade Act in the Geneva multilateral trade negotiations. The President may decide, after considering advice from the International Trade Commission, the executive agencies, the private sector and other interested parties, based in part on information and views presented in public hearings, that only a partial reduction should be granted, or that tariff treatment applying to a particular product should be reserved from the negotiations.

United States imports of unmounted underwater lenses are classified for customs purposes as "other lenses" under Item 708.03 of the Tariff Schedules of the United States and dutiable at 14 percent ad valorem.

Information on domestic consumption, production and foreign trade in unmounted underwater lenses is not readily available. In 1976 United States imports of unmounted lenses classified for customs purposes under Item 708.03, which would include any underwater lenses, were valued at $7.9 million. Japan, which supplied articles valued at $6.4 million, was the principal source of imports. West Germany ($452,000), Hong Kong ($286,000). and Switzerland ($268,000) were important secondary suppliers of unmounted lenses.

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.

SPECIAL REPRESENTATIVE FOR TRADE NEGOTIATIONS

This is in response to your request for the views of this Office on H.R. 4654, a bill to reduce the rate of duty on unmounted underwater lenses.

These lenses are currently dutiable at 14 percent under item 708.03 (Unmounted lenses, other than ophthalmic) of the Tariff Schedules of the United States (TSUS). The proposed legislation would amend the U.S. Tariff Schedules to include a new item, 708.02 (Underwater lenses), dutiable at seven percent. This Office is not aware of any reasons why the existing rate of duty on unmounted underwater lenses should not be reduced. At the same time, however.