by Melissa Proctor, Polsinelli, P.C.
On May 20, 2016, President Obama signed into law The American Manufacturing Competitiveness Act of 2016 (H.R. 4923), which fundamentally reforms the Miscellaneous Tariff Bill ("MTB") process and provides significant duty savings opportunities for U.S. companies. The MTB process temporarily suspends or reduces the duties that are assessed on imports of certain goods into the United States for a three-year period. U.S. importers and manufacturers favor MTBs because they allow finished goods to be produced in the United States at significantly lower costs, resulting in savings that can be passed along to their customers and U.S. goods that have an increased competitive edge in international markets.
As reported in last month's RVCF Link, the MTB process has been around for decades. Under the previous rules, members of Congress introduced duty suspension bills on specific goods at the request of their constituents. The bills were then reviewed by the International Trade Commission ("ITC") and the executive branch to ensure that: (1) the imported items were non-controversial (i.e. not readily available from U.S. sources); (2) the estimated revenue loss to the U.S. government as a result of the proposed duty suspension or reduction was less than $500,000 per year; and, (3) the duty suspension could have been administered by U.S. Customs and Border Protection. If all three conditions were satisfied the individual bills were then inserted into larger miscellaneous tariff bills by the House Ways and Means and Senate Finance Committees.
The new law establishes an enhanced process whereby individual importers and manufacturers may submit written petitions directly to the ITC requesting that certain products be afforded MTB treatment. Later this year, the ITC will publish a Federal Register notice requesting petitions from the public on items that warrant duty suspensions or reductions. Petitions should provide the following information:
Identification of the petitioner;
Certification that the products will likely satisfy the three (3) conditions noted above;
Detailed description of the product and its tariff classification;
The U.S. industry or industries utilizing the product;
Whether the petition requests a new duty suspension or reduction, or merely requests extensions of existing preferential tariff treatment;
Estimated total import value of the product (by all importers) over the following five-year period; and,
Information regarding any domestic production of the item, if known.
Companies that may be interested in submitting petitions should first review their import data obtained through ITRAC or ACE to identify imported merchandise that is currently subject to duties and the amount of duties paid on those items on a yearly basis. For items that are currently subject to high rates of duty, companies should then assess: (a) the extent to which the items in question are currently manufactured domestically; (b) the extent to which the items are available from foreign suppliers; and, (c) whether the total duties paid on imports of the product into the United States likely exceed $500,000 annually. Petitions should describe the products as narrowly as possible in order to distinguish them from others in the market and increase the likelihood of success. Compiling this data will generally require input from various sources both within and outside the company (i.e., sourcing/purchasing departments, accounting and finance, legal, compliance, logistics and transportation, suppliers and vendors, national trade associations, etc.).
The ITC will then publish in the Federal Register all of the petitions that are received, and solicit comments from the public and input from U.S. Customs and Border Protection ("CBP"), the Commerce Department and other agencies. The ITC will then confirm whether the three above-referenced conditions are satisfied, and issue its recommendations to Congress. At that point, the House Ways and Means Committees will review the ITC's findings, draft proposed MTB legislation that will amend Chapter 99 of the Harmonized Tariff Schedule of the United States, and certify that there are no associated spending earmarks and publish a list of limited tariff benefits. The proposal would then move on to the House for consideration.
The new MTB process is intended to provide U.S. companies with greater transparency and ability to participate more directly in the process of securing temporary duty suspensions and reductions. The ITC is expected to publish instructions for participating in the new MTB process in the Federal Register in October; however, manufacturers and importers are advised to start exploring this potential duty-saving opportunity now.
Melissa Proctor is a Shareholder with Polsinelli, P.C. With significant experience in the customs laws and regulations, export controls, economic sanctions, and international trade, Melissa is committed to understanding companies' operations and providing assistance geared toward helping them reach their specific business and operational goals. She may be reached at (602) 650-2002 or via e-mail at firstname.lastname@example.org.
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