IMPORTS AND APPARENT U.S. CONSUMPTION Chlorendic acid was imported only in 1974. In that year, 420,562 pounds were imported. The value of these imports is unkown. A spokesman for Ashland stated that they are currently consuming about 3.5 million pounds annually and are projecting needs of 10 million pounds annually within the next two years. The current selling price for chlorendic acid is about 80 cents per pound. At this rate, proposed imports of 3.5 million pounds would be valued at $2.8 million. TRADE NEGOTIATIONS H.R. 5231 proposes a unilateral reduction in duty on chlorendic acid for which no compensation is anticipated. It is noted that the Trade Act of 1974 authorizes the President to enter into trade negotiations with foreign countries during whch time he may reduce the 6 percent column 1 rate of duty currently applicable to chlorendic acid by as much as 60 percent. In this situation the United States could be expected to be appropriately compensated by concessions on the part of the other participants in the negotiations. TECHNICAL COMMENTS If H.R. 5231 is intended to provide for the duty-free entry of all chlorendic acid, irrespective of derivation, it does not serve that purpose. H.R. 5231 only provides for the duty-free entry of chlorendic acid derived from non-benzenoid sources. Since headnote 1 to part 1 of schedule 4 of the TSUS specifies that "all products described in this part shall be classified hereunder even if more specifically described elsewhere in this schedule", chlorendic acid of benzenoid derivation would continue to be classified under item 403.80 at a column 1 rate of duty of 1.7¢ per pound plus 12.5 percent ad valorem if H.R. 5321 were enacted as presently drafted. If it is desired that H.R. 5231 provide for the duty-free entry of all chlorendic acid, it is suggested that section 1 of the bill be changed to provide for the amendment of headnote 1 of part 1 of schedule 4 of the Tariff Schedules of the United States (19 U.S.C. 1202) to read as follows (new language underscored): "1. Except as specifically set forth in this headnote or in the headnotes to other parts of this schedule, all products described in this part shall be classified hereunder even if more specifically described elsewhere in this schedule. Any product described in both subparts B and C of this part shall be classified in subpart C. This part does not include (i) chlorendic acid, regardless of source or derivation." Present section 1 of the bill would then become section 2 and should read as follows: SEC. 2. Subpart D of the part 2 of schedule 4 of the Tariff Schedules is amended by inserting in numerical sequence the following new item: 425.71-Chlorendic Free Free Further, since H.R. 5231 proposes a permanent amendment to the TSUS, it is suggested that the following new section 3 be inserted in the bill and that present section 2 be renumbered section 4- SEC. 3. The rates of duty in rate of duty column numbered 1 of the Tariff Schedules of the United States as provided for in section 2 shall be treated— (1) as not having the status of statutory provisions enacted by the Congress, but (2) as having been proclaimed by the President as being required or appropriate to carry out foreign trade agreements to which the United States is a party." REGULATORY IMPACT OF PROPOSED LEGISLATION The enactment of H.R. 5231 would not have an impact on the personal privacy of the individuals affected, nor would it require additional paperwork. The bill would not alter the regulatory impact of the current tariff provisions except by changes in the applicable rates of duty. 2 "Imports of Benzenoid Chemicals and Products," USITC Publication 762 (1974) released March 1976. POTENTIAL LOSS OF REVENUE Estimated loss of revenue is $409,500 per year based on intended imports for 1977. DEPARTMENT OF COMMERCE This is in response to your request for the views of this Department of H.R. 4231, a bill "To provide for the duty-free entry of chlorendic acid." H.R. 5231 amends the Tariff Schedules of the United States (TSUS) (19 U.S.C. 1202) to create a new tarifff item number, 425.71 to provide duty-free entry under both column 1 and 2 for chlorendic acid. Imports of chlorendic acid are presently classified under TSUS item 403.80, a basket category, and are dutiable at 1.7 cents per pound plus 12.5 percent ad valorem under the column 1 rate, accorded countries receiving most-favored-nation treatment. Imports from Communist countries, except Poland, Yugoslavia and Romaina. enter under the column 2 rate of duty of 7 cents per pound plus 40 percent ad valorem. Total U.S. imports in 1976 under tariff item 403.80 had an ad valorem equivalent duty of approximately 16.9 percent. The Department of Commerce does not favor enactment of H.R. 5231. The Department prefers, in the absence of overriding economic reasons to the conrtrary, that reduction of duties be accomplished in the context of trade agreements in order that the President may have the opportunity to seek reciprocal benefits for U.S. exports. In this case, U.S. imports of chlorendic acid, all of which enter from Belgium, one of our major trading partners, are used by the sole U.S. producer of a flameresistant resin. While there are no U.S. producers of chlorendic acid and only one domestic producer of the particular flame-resistant resin made from this acid, there are suitable substitute resins produced in this country. We believe, therefore, that the economic justification for a unilateral reduction of the duty is not compelling enough to outweigh the advantages which could accrue to U.S. commerce by reserving removal of the duties for use in trade negotiations. Thus, the Department does not favor enactment of the proposed legislation. 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. 5231, a bill transferring chlorendic acid from the dutiable to the free list. 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. 5231, to stimulate importations of chlorendic acid. Moreover, we note that the President, acting pursuant to the authority vested in him by the Trade Act of 1974, has initiated administrative proceedings which involve consideration of the possible reduction or elimination of tariffs, including that applying to chlorendic acid, 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. Title I of the Trade Act empowers the President to proclaim such modifications of United States duties as he determines required or appropriate to implement international trade agreements. The President has declared his intention to exercise such authority in the context of the new round of multilateral trade agreement negotiations which are now under way in Geneva, Switzerland, under the auspices of the General Agreement on Tariffs and Trade. To assist the President in the conduct of the negotiations, the International Trade Commission has, following an investigation which included public hear ings, 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 chlorendic acid 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. The inclusion of articles, such as chlorendic acid, 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 chlorendic acid are classified for customs purposes as an organic chemical having a benzenoid structure under Item 403.80 of the Tariff Schedules of the United States (TSUS) and dutiable at 1.7 cents per pound plus 12.5 percent ad valorem. Generally speaking, United States duties, when applicable, are assessed on the basis of the export value of foreign merchandise. In the case of organic chemicals having a benzenoid structure, however, special provisions of the TSUS govern the determination of value for the purposes of the assessment of duty. The provisions are set forth in Headnote four, Part one of Schedule four, of the TSUS. They provide that the ad valorem rates applying to organic chemicals having a benzenoid structure shall be assessed on the basis of the American selling price if any similar competitive article is manufactured or produced in the United States. They further provide that, if there is no similar competitive article manufactured or produced in the United States, then the ad valorem rate shall be assessed on the basis of United States value. As a result, the incidence of a tariff assessed on the basis of the American selling price is usually higher than the incidence of the same tariff levied on the basis of export value. We understand that chlorendic acid is an industrial material used in the manufacture of polyester resins having fire retardant properties and that, in recent years, there has been only one United States producer of such acid. We further understand that, late last year, the sole domestic producer decided to discontinue production of chlorendic acid and import its requirements from a Belgian subsidiary. Estimates of potential imports from the subsidiary range from 3 million pounds the first year to 10 million the second or third year. Resins having the same properties as those made from chlorendic acid are produced by other United States firms and supplies of such resins are believed adequate to meet United States requirements. 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. 5231, "To provide for the duty-free entry of chlorendic acid." The bill would amend the TSUS by inserting a new item, 425.71, to provide for the permanent duty-free entry of chlorendic acid from column 1 and 2 countries. This legislation constitutes a permanent duty reduction which the Department believes should be negotiated in the MTN. Moreover, the legislation provides for duty-free entry for column 2 countries. Title IV of the Trade Act of 1974 provides that such trade concessions to column 2 countries should be granted only through the negotiation of a bilateral trade agreement under which the United States must obtain certain commercial concessions. Consequently, in view of the foregoing, the Department opposes enactment of H.R. 5231. The Office of Management and Budget advises that there is no objection from the standpoint of the Administration's program to the submission of this report to your Committee. H.R. 5263 To suspend until the close of June 30, 1979, the duty on certain bicycle parts U.S. INTERNATIONAL TRADE COMMISSION PURPOSE OF THE BILL H.R. 5263, if enacted, would amend the article description for items 912.05 and 912.10 of the Appendix to the Tariff Schedules of the United States (TSUS) to read as follows (italicized words are added and the struck words are placed in brackets): 912.05 912.10 Generator lighting sets for bicycles and parts thereof (pro- This would have the effect of (1) removing "derailleurs" from the temporary duty suspension provisions, (2) adding to such provisions the articles described in the underscored language, and (3) providing temporary suspensions of duty to 6/30/79 for the articles provided for in items 912.05 and 912.10. DESCRIPTION AND USES Parts of generator lighting sets for bicycles include a number of items, such as headlamps with mounting brackets, taillights, lens and reflector units, and set screws. Except for coaster brakes, which are used principally on less expensive bicycles, the other products covered by H.R. 5263 are used on high-priced multispeed bicycles. TARIFF TREATMENT Imported parts of generator lighting sets for bicycles are currently provided for under TSUS item 653.39 at a column 1 rate of duty of 19 percent ad valorem and a column 2 rate of 45 percent ad valorem. This item is included on the list of eligible articles for purposes of the Generalized System of Preferences (GSP),1 and imports thereunder are duty free from those countries which are designated beneficiary developing countries. Coaster brakes, alloy butted tubing used in the manufacture of bicycles frames, alloy cotterless crank sets, alloy rims, and most parts of all the foregoing, are currently classified under TSUS item 732.36 at a column 1 rate of 15 percent ad valorem and a column 2 rate of 30 percent ad valorem. Imports under item 732.36 are not included on the list of eligible articles for purposes of the GSP. STRUCTURE OF THE DOMESTIC INDUSTRY With the exception of caliper brakes, there are no U.S. firms producing any of the articles which would be affected by H.R. 5263. With respect to caliper brakes, one firm, Dia-Compe, Inc., Fletcher, N.C., a wholly owned subsidiary of Yoshigai-Kikai Kinzoker Co., Ltd., Osaka, Japan, produced about 333,000 of such brakes in 1975, and made approximately one million units in 1976. However, all the caliper brakes produced by Dia-Compe are assembled from parts imported in complete sets free of duty from its parent company. These parts comprise 1 See Executive Order 11888. November 24, 1975, effective date January 1, 1976 and general headnote 3 (c) to the TSUS. about 60 percent of Dia-Compe's production costs. The only product which the firm produces is caliper brakes and it employs approximately 40 workers in the United States. U.S. PRODUCTION Trade sources indicate that there is currently no domestic production of parts of generator lighting sets for bicycles, or of coaster brakes, alloy butted tubing used in making bicycle frames, alloy cotterless crank sets, alloy rims, and parts of all the foregoing. As to those products currently included under TSUS items 912.05 and 912.10, the rates of duty for which have been suspended since January 13, 1971, there continues to be no domestic production, except for derailleurs, which have been removed from coverage under this bill, and caliper brakes. U.S. IMPORTS Imports of parts of generator lighting sets for bicycles, coaster brakes, alloy butted frame tubing, alloy cotterless crank sets, alloy rims, and parts of all the foregoing are not separately reported in the official statistics of the United States. Imports of generator lighting sets for bicycles are provided for under a "basket" provision (653.3950) covering parts of illuminating articles of base metal, other than brass. Similarly, imports of the other articles which are the subject of the bill are provided for under a "basket" provision (732.3670) covering certain parts of bicycles, not provided for elsewhere in the Tariff Schedules. The following tabulation shows the value of imports entered under TSUS items 653.3950 and 732.3670 for 1971-76. Sweden, Yugoslavia, and Canada, which in the aggregate accounted for about one-half of the total imports under item 653.3950 in 1976, are the principal suppliers of parts for generator lighting sets for bicycles; however, probably only a small part of the total imports from these countries consisted of such parts. Japan, Mexico, West Germany, France, and Taiwan have been the principal sources of imports under item 732.3670, accounting for about 90 percent of the total value imported in 1976. Imports under this classification consist of a wide range of bicycle parts, including those parts listed in H.R. 5263. It is believed that imports of coaster brakes, alloy butted frame tubing, alloy cotterless crank sets, alloy, rims, and parts of all the foregoing, accounted for an appreciable portion of the total value of imports under item 732.3670. The following tabulation shows the value of duty-free imports from 1971 through 1976 under item 912.0500, generator lighting sets for bicycles; 912.1010, three-speed hubs whether or not incorporating coaster brakes; and 912.1020, derailleurs, caliper brakes, drum brakes, click twist grips, click stick levers, and multiple free wheel sprockets. |