Miscellaneous Tariff Bill Signed Into Law
Kelley Drye Client Advisory
H.R. 4318 - the latest iteration of the Miscellaneous Tariff Bill (MTB) - was signed into law by President Trump on September 13, 2018. The signing is the culmination of a nearly two year process to identify “nuisance” tariffs on nearly 1,700 imported products not produced in the United States. The legislation will result in hundreds of millions of annual tariff savings on these products and provide a major boost to U.S. manufacturers that use these imports to produce final goods and to other consumers.
HR 4318The MTB suspends tariffs on imported products that are not produced in the United States to ease the economic burden on companies that utilize imported components and consumers of other end-use products. H.R. 4318 suspends tariffs on close to 1,700 of qualifying imported products until the end of 2020. The process that created this MTB was laid out by the “American Manufacturing Act of 2016”. That legislation provided standardized criteria for identifying tariff suspensions and shifted the MTB process from relying on hundreds of individual bills that previously were introduced separately by Members of Congress to a more administrative, petition-driven process administered by the U.S. International Trade Commission (ITC). The ITC transmitted its final results of this vetting process to Congress in August of 2017; those recommendations are the basis of H.R. 4318.
Originally, tariff suspensions under the MTB process were envisioned to be in place for three years. But because of legislative delays and concerns about the White House position on the legislation, the suspensions under H.R. 4318 will be in place for approximately two and one quarter years.
MTB TARIFF SUSPENSIONS AND CHINA TARIFF RETALIATIONThe tariff suspensions under H.R. 4318 suspend tariffs on imports of the selected products from any country on what is known as a Most Favored Nation (MFN) basis. Any U.S. importer can take advantage of the suspension, not just the petitioning company or individual.
Since it is the largest source of U.S. imports, a number of the tariff suspensions in H.R. 4318 will be applied to imported products from China. Given that the United States is at the same time applying 10 to 25 percent retaliatory tariffs on many Chinese goods, there has been some confusion and political debate about the MTB in this context.
With the passage of the MTB and the Administration’s possible decision to impose retaliatory tariffs, it is entirely possible that for some Chinese imports the MFN tariff rate will be suspended at roughly the same time retaliatory tariffs are imposed. So, for a category of the MTB suspensions, the benefits will be at least temporarily blunted. But many of the tariff suspensions apply entirely or mainly to imports from other countries, including those that are not subject to retaliatory tariffs. The retaliatory tariffs that are in effect are also envisioned as a temporary measure pending a negotiated solution between the U.S. and China. The MTB suspensions run through the end of 2020 with the possibility of extension, which means they may be longer-term tariff changes.
2019 ROUND OF MTB SUSPENSIONSNotably, the process for considering the next round of MTB suspensions will begin with official submission of petitions on October 15, 2019. All of the suspensions in this MTB will require review again in the next round. Additionally, many new petitions for suspension of tariffs on additional products are likely to be submitted. A number of petitions failed to be included in this MTB, or missed the cut, because they failed to, for example, meet deadlines or other reasons that could be resolved by redrafting the petition. For these reasons, the round that officially begins in 2019 is likely to have a significantly higher number of petitions filed for consideration than the first round, which culminated in H.R. 4318.
But much – perhaps most – of the work involved in pursuing an MTB is the research, political problem solving, and drafting that occurs before the petition is actually submitted. Potential petitioners are advised to begin that process in the next few months or, at least, in early 2019 – well in advance of the October submission deadline.
Kelley Drye & Warren worked with a number of clients on dozens of MTB petitions considered in the process of producing H.R. 4318, and has already begun working with some clients on submissions for 2019. We stand ready to work with all other interested clients in preparation for the second round of MTB suspensions in 2019.