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The United States Trade Representative has no objection to enactment provided a loophole is closed that would permit importers to bring in high value benzenoid chemicals in a naphtha mixture thereby avoiding the high tariffs applicable to these chemicals.
The International Trade Commission submitted an informative report.
On June 27, 1984, the Subcommittee on Trade ordered H.R. 4232 favorable reported to the full Committee on Ways and Means by voice vote, with an amendment providing for an amendment to headnote 1, part 10, of schedule 4 of the TSUS, which would have the effect of classifying all napthas (including catelytic napthas) containing not over 25 percent of benzenoid products, under TSUS item 407.35, thus obviating the need for new item 407.17, which has been dropped from the bill. The effective date has also been amended to conform to the other bills providing for an effective date 15 days after date of enactment.
SUMMARY OF TESTIMONY OF H.R. 4332
United States Trade Representative: No objection to enactment provided a loophole is closed that would permit importers to bring a high value benezenoid chemicals in a naphtha mixture.
Statements for the Record
The Honorable Jack Brooks, M.C. (Tex.): Strongly supports enactment of H.R. 4232.
The Louisiana Land and Exploration Company: High duty levels resulting from the U.S. Customs classification of important gasoline components as benzenoid products now effectively precludes the importation of products necessary for upgrading the nation's refinery output.
Beaumont Oil, Inc.: The U.S. Customs classifies certain imported hydrocarbon mixtures, commonly utilized as gasoline blendstocks by the domestic petroleum industry, as benzenoid compounds, rather than as petroleum products.
Introduced by: Mr. MacKay (Fla.)
Date: November 3, 1983
To amend the Tariff Schedules of the United States to establish equal and equitable classification and duty rates for certain imported citrus products.
Summary of the Provision
H.R. 4296, if enacted, would delineate between concentrated and nonconcentrated orange juice by inserting two new items in the Tariff Schedules of the United States (TSUS).
H.R. 4296, if enacted, would amend subpart A of part 12 of schedule 1 of the Tariff Schedules of the United States (12 U.S.C. 1202) by inserting two new items after item 165.25. New item 165.27 with a column 1 MFN duty rate of $.20 per gallon would apply to natural unconcentrated orange juice and juice which has not been made from a juice having a degree of concentration of 1.5 or more (approximately 17.3` Brix). Juices with a degree of concentration less than 1.5 are considered to be natural unconcentrated juice for tariff purposes. New item 165.29 would have a column 1 MFN duty rate of $.35 per gallon and would apply to all other juice including concentrated and reconstituted juices. The column 2 rate of duty for both items would remain at the current applicable level of $.70 per gallon.
The provision would be made effective the 15th day after the date of enactment of this Act.
Background and Justification
This legislation was introduced in an attempt to clearly deliniate the intended duties on concentrated and reconstituted orange juice and natural unconcentrated orange juice. The legislation was prompted by the increasing amount of imports of concentrated and reconstituted orange juice which are penetrating the domestic markets, some of which is being reconstituted for import.
Under current law, the tariff applicable to imported orange juice varies as to whether the juice is defined as being concentrated or not concentrated. Concentrated juice is subject to a column 1, MFN, duty of $.35 per gallon and unconcentrated juice is subject to a column 1, MFN, duty of $.20 per gallon. To avoid the higher duty, concentrated orange juice is being
brought into U.S. foreign trade zones and bonded warehouses for processing. Water is added and the resultant product is imported into the United States as a reconstituted orange juice subject to the lower tariff of $.20 per gallon.
Similar operations are occuring along the Canadian and Mexican borders where concentrated orange juice is being reconstituted for import and lower applicable duty.
In some instances, domestic concentrated orange juice is exported to one of the blending operations across the border and is blended with imported concentrate and the blend is packaged into retail size packages of concentrated orange juice for import into the U.S. These packages, therefore, are not required to bear any identification as to the country from which they were imported.
The operations defined above are designed to avoid the higher duty rate resulting in circumvention of the intended duties prescribed by Congress and to pose a serious threat to the domestic citrus industry. The legislation would establish two separate item numbers for imported orange juice. The lower duty of $.20 per gallon would apply to imports of natural strength unconcentrated orange juice and orange juice made with a degree of concentration less than 1.5 or about 17.3' Brix. The higher duty of $.35 per gallon would apply to concentrated juice and reconstituted juices made from juice with a Brix value of greater than 17.3`.
For purposes of determining the proper duty, the rate is applied to the number of gallons of natural unconcentrated juice or gallons of reconstituted juice as defined in head notes 3(a) and (b) of schedule 1, part 12, subpart A of the Tariff Schedules of the U.S.
During 1978-82, Florida's production of all orange juice products (not concentrated and concentrated) rose from 867 million gallons (single-strength equivalent) to a high of 1,179 million gallons in 1980. Production declined to 649 million gallons in 1982 following back-to-back winter freezes in 1981 and 1982. It is believed that Flordia accounts for over 90 percent of the U.S. production of orange juice.
Frozen concentrated orange juice accounts for nearly 85 percent of Florida production of orange juice, with the remainder consisting of canned and chilled single-strength orange juice products. Production of not concentrated orange juice (canned and chilled single-strength juice) declined irregularly from 161 million gallons in 1978 to 111 million gallons in 1982.
During 1978-82, U.S. imports of orange juice (not concentrated and concentrated) ranged from a low of 101 million gallons, valued at $69 million, in 1980 to a high of 399 million gallons, valued at $326 million, in 1982. Brazil, Mexico, and West Germany were the leading suppliers of U.S. imports of orange juice in 1982.
U.S. imports of not concentrated citrus juice (the bulk of which is believed to be orange juice in 1981 and 1982) increased substantially from 148,000 gallons, valued at $547,000, in 1978 to 10 million gallons, valued at $15 million, in 1981. Imports then declined to 3 million gallons, valued at $6 million, in 1982. Mexico and Canada were the principal U.S. suppliers.
The principal U.S. importers of orange juice are U.S. processors of such juice.
U.S. imports of orange juice from column 2 sources have been negligible. Such imports totaled 189,000 gallons, valued at $96,000, in 1982.
U.S. exports of orange juice (not concentrated and concentrated) increased from 50 million gallons, valued at $99 million, in 1978 to 91 million gallons, valued at $140 million, in 1981 before declining to 76 million gallons, valued at $127 million, in 1982. Canada was the principal export market. West Germany, Netherlands, and France were also significant markets.
Exports of not concentrated orange juice declined irregularly from 9 million gallons, valued at $17 million, in 1978 to 8 million gallons, valued at $16 million, in 1982.
The major U.S. processing firms are believed to be the principal U.S. exporters of orange juice.
Apparent U.S. consumption of orange juice increased from 968 million gallons in 1978 to 1.2 billion gallons in 1980 before declining to 972 million gallons in 1982 following the successive winter freezes in Florida. The share of U.S. consumption supplied by imports ranged from 8 percent in 1980 to 41 percent in 1982.
During 1978-82, apparent U.S. consumption of not concentrated orange juice declined irregularly from 152 million gallons in 1978 to 106 million gallons in 1982. The share of consumption supplied by imports ranged from less than 0.5 percent in 1978 and 1979 to 8 percent in 1981.
Comparison With Present Law
Orange juice is classified in TSUS items 165.30 and 165.35 of the Tariff Schedules of the United States (TSUS). Orange juice is classified under fruit juices, including sweetened or unsweetened, mixed fruit juices, concentrated or not concentrated. It cannot contain over 1 percent of ethyl alcohol by volume. If concentrated, the juice may be in liquid, powder, or solid form. Item 165.30 covers not concentrated juices and the column 1, MFN, duty is $.20 per gallon. The column 1 rate reflects concessions granted on not concentrated citrus juice in 1939 and 1948. Reconstituted juices are covered under item 165.30 because they are "not concentrated." Item 165.35 covers concentrated juices and the column 1, MFN, duty is $.35 per gallon. The column 2 duty is $.70 per gallon for both items. Imported orange juice classified in these tariff items is not eligible for duty-free treatment under the Generalized System of Preferences (GSP) and no least developed developing country (LDDC) rates of duty are provided. For purposes of determining the item under which a given entry may be classified, any juice having a degree of concentration of less than 1.5 (as determined before correction to the nearest 0.5 degree) shall be regarded as a natural unconcentrated juice. The 1.5 degree of concentration is normally interpreted as 17.3' Brix for orange juice.
Juice containing over 1.0 percent of ethyl alcohol by volume is classified in item 165.70, dutiable at a column 1 rate of 26 cents per gallon plus $1.85 per proof gallon on the alcohol content, and at a column 2 rate of 70 cents per gallon plus $5 per proof gallon on the alcohol content. This juice would not be affected by the proposed legislation; nor would mixed fruit juices.
Drawback.--Processors which import and export orange juice products may be eligible to obtain a drawback of 99 percent of duties, fees, or taxes when, within five years of importation, products are exported (19 U.S.C. 1313). The exported products may have been made from imported orange juice (such as juice concentrate) or may be made from domestic articles of the same kind or quality.
In investigation No. 701-TA-184 (Final), the International Trade Commission determined that an industry in the United States was threatened with material injury by reason of imports of frozen concentrated orange juice which have been found by the Department of Commerce to be subsidized by the Government of Brazil.