End of Year Politics Sidetracks Trade Initiatives
The President signed the year-end omnibus budget and COVID relief package at the end of the year, but unfortunately it did not include the Miscellaneous Tariff Bill (MTB) or renew the Generalized System of Preferences program (GSP), nor did the USTR take action to extend the expiring product exclusions from China tariffs. The USTR follows the president’s directives and he has been largely silent on China tariffs since the election. The MTB and GSP were not included in year-end legislation as the clock ran out before congress could finalize details due to a contested election and COVID relief post-election. All of the tariff relief programs are expected to be renewed/extended and will reduce tariff exposure for SFIA members.
Miscellaneous Tariff Bill
The current Miscellaneous Tariff Bill (MTB) provides duty relief for imports no longer made in the U.S. and it expired on December 31, 2020. Congress did not finish reviewing the new list of products proposed by the U.S. International Trade Commission for tariff relief via the MTB. There are members of congress looking to remove certain products; this was corroborated by Congressman Earl Blumenauer who suggested the MTB would not pass because it is a “long bill” and members of congress are still trying to get items struck. To our knowledge, no sports or fitness products are being targeted. In 2018, the MTB program passed through congress without any opposition. The MTB is currently being circulated internally in the House and according to Senate Finance Chairman Grassley, the Senate has not had the chance to examine the current bill closely. In 2018, many of the complaints from congress were about finished products included in the final legislation, but this time there is reportedly significant opposition to several inputs as well. According to Chris Benscher, a director of the MTB coalition, several U.S. manufacturers missed the official commenting period and are now opposing the inclusion of competitor products included on the MTB list. Benscher believes that even if the current opposition prevents passage in 2020, the bill maintains strong bipartisan support in the long run. While the MTB was not be passed in 2020, it is expected to move early in 2021 due to the strong bipartisan support. It is unknown if congress will make tariff reductions retroactive this time, like they did the last time MTB lapsed before being passed. SFIA will keep the industry posted on developments on MTB as it moves through Congress in 2021.
Generalized System of Preferences
The GSP program, which grants duty-free treatment on more than 5,000 products imported from 119 beneficiary countries, expired on December 31, 2020. Previously the GSP has been renewed with bipartisan support; but this time around, Democrats are pushing for reform, while Republicans want to push it through without changes. Some of the demanded reforms are highly technical and may take a while to sort out. Earlier this month, House Ways & Means trade subcommittee Chairman Earl Blumenauer (D-OR) introduced legislation to extend the GSP program by six months and add several new eligibility criteria. The U.S. Chamber of Commerce has recommended extending the program as is for six months while negotiating future changes during that time. Senate Finance Committee Chairman Chuck Grassley (D-IA) has proposed a 16-month GSP reauthorization without changes, but admitted that “six months would be better than none.” With the two sides at an impasse on key concerns, the GSP lapsed at the end of the year. The best case scenario for immediate GSP would be the Ways & Means Democrats agreeing to a six-month extension with no changes while negotiations continue. There has not been an agreement on short term extension to date. It is also possible, and maybe even likely, that the Democrats let GSP lapse in order to increase their bargaining power. Even if GSP lapses, in the past, Congress has approved retroactive application of GSP when it is renewed and it may do so again next year if GSP is renewed. To prepare for retroactive relief, U.S. Customs and Border Protection advises importers to flag GSP-eligible importations with special program indicator “A” to facilitate the retroactive duty refund process should GSP be renewed again with a retroactive refund clause.
China Section 301 Exclusions
Over the course of his campaign, President-Elect Biden has bashed President Trump’s trade policies towards China, and has been critical over the Section 301 tariffs. However, due to political pressure to stay tough on China and promote “Made in America” policies, Biden has stated he will not remove the tariffs immediately when he comes into office, but will review the China tariff policy for six months before deciding on the future course of the tariffs. This means it is unlikely the tariffs will be removed at any time early in the Biden administration. Biden will likely look to use the leverage created by the Section 301 tariffs, which will take time in negotiations. With the exception of some medical supplies that had exclusions extended, all current exclusions expired at the end of 2020. The Trump administration has not given any indication they will initiate new exclusion or extension proceedings before turning the U.S. trade agenda over to the incoming president. Based on this reality of continued tariffs, companies and trade associations have asked the Biden transition team to institute a new Section 301 exclusion process. Due to this pressure, it is likely that the Biden Administration, through its USTR-nominee Katherine Tai, would initiate a new exclusion process. Her confirmation hearing in the Senate presents an opportunity for senators to raise this issue and put additional pressure on the Biden administration and USTR to take action. However, the timing and connection to the previous exclusion process is difficult to predict. Based on the uncertainty of the timing, this could make refunds for products that will receive exclusions more complicated. SFIA is part of a coalition of companies and trade associations urging Capitol Hill to include language in a future legislation that would allow CBP to refund entries, even on post-180-day liquidated entries. The situation with Section 301 exclusions is quite different than MTB or GSP. There is no known effort by the Biden transition team to set up a new exclusion process, which means potential relief could be much farther in the future. However, since such an executive action would not need to go through Congress it is much less likely to be sidetracked by partisan fighting, which could speed up efforts.
This report includes input from Crowell Mooring, SFIA counsel on MTB and China Exclusions. Please contact Bill Sells, at bsells@sfia.org, with any question regarding tariff relief initiatives.
