The vast majority of companies and associations argued against a proposed $200 billion worth of tariffs in 2017 import value on products from China during testimony before an interagency government panel late Tuesday afternoon and Wednesday morning.
But a handful of manufacturers, including several in the metals sector, advocated for the Trump administration to either maintain or expand the proposed Section 301 tariffs list, which would be the third tranche of Section 301 tariffs on Chinese origin goods.
The U.S. rolled out a first round of 25 percent tariffs, across $16 billion worth of goods in 2017 import value, on July 6, and launched a second round Thursday across roughly $34 billion worth of goods in 2017 import value.
China has retaliated against the first tranche of U.S. Section 301 tariffs and has announced plans to retaliate against the second round as well.
The notice-and-comment period for the proposed $200 billion tranche concludes Aug. 30. The federal government’s Regulations.gov online comment portal showed 2,039 comments had been submitted as of 2:50 p.m. Wednesday.
In the case of “power inverters and jump-starters that are native to places and technology areas in China that build them, we can’t find alternate sources that have that skill, those parts, the ecosystem to build it and to build it at price points at which we can sell it into the … professional trucking market,” Mark Karnes, vice president for product marketing and business development at Cedar Electronics, which makes driver technology products, said Tuesday during the interagency Section 301 Committee hearing at the International Trade Commission in Washington, D.C.
While there are Taiwanese and South Korean companies that compete in the dashcam technology space, China provides the type of environment that allows those products to be built to scale and serve a trucking market that involves drivers working 24/7.
For MasterBrand Cabinets Inc., the world’s largest cabinet manufacturer, Section 301 tariffs would add to the existing burdens of regulatory compliance and an antidumping duty order of 183.36 percent on hardwood plywood from China, issued by the Commerce Department Jan. 4, according to Leigh Avsec, division general counsel for MasterBrand.
In addition to being subject to the AD duty order, the company uses wooden components subject to requirements for compliance with the Lacey Act, state legislation on formaldehyde emissions and new federal standards under the Toxic Substances Control Act, she said.
“We have longstanding relationships with suppliers we trust, but more importantly, that we have appropriately audited and even sometimes visited, to ensure that they comply with these regulations and standards,” Avsec said.
But Mark Proffitt, president of MECO Corporation, a metal stamping, outdoor grill and patio furniture manufacturer, requested that the Office of the U.S. Trade Representative add to the tariff list Harmonized Tariff Schedule (HTS) Subheading 7321.19.00, which includes iron or steel parts for stoves and other appliances and covers the grills that MECO produces in its Greeneville, Tenn., facility.
Proffitt’s company currently operates at less than 25 percent manufacturing capacity, and without 25 percent tariffs, MECO would be forced to further reduce employment and exit the charcoal grill business entirely. A continuing zero tariff could even translate to the company’s demise, Proffitt said during Wednesday testimony.
“We recently quoted one of our grill products to a major U.S. retailer,” he said. “The price of that product was $13 that we quoted. They told us they could buy that same product from China for $10 delivery, and our cost did not include delivery, nearly 24 percent less.”
Proffitt added that a Chinese company is selling a “knockoff” product of MECO’s below cost, taking opportunities from U.S. manufacturers.
Billy Milligan, director of marketing for Commercial Metals Company, commended USTR’s inclusion of steel fence post under HTS Subheading 7326.90.86 on the tariff list, adding that shouldn’t cause much commercial disruption in the U.S. because there are several domestic and non-Chinese sources of the product.
He also voiced his support for a 25 percent rate for the proposed third tranche of Section 301 tariffs, noting that rate would promote a more level playing field for U.S. steel manufacturers as they compete with subsidized Chinese manufacturers.
The Trump administration originally proposed a 10 percent tariff rate for the third tranche of Section 301 tariffs, but more recently, USTR has considered implementing a 25 percent rate.
Testifying Monday, the first day of the hearing to explore $200 billion worth of tariffs, National Association of Foreign Trade Zones (NAFTZ) President Erik Autor called for the exclusion from tariffs of finished products manufactured and substantially transformed into new products in U.S. FTZs, according to an NAFTZ press release.
Guidance from the Census Bureau and U.S. Customs and Border Protection directs FTZ manufacturers to identify on entry documentation the country of origin of their highest-value foreign-status components, Autor said during the hearing, according to his written testimony.
“This requirement, combined with the lack of clear guidance from USTR on the treatment of FTZ-produced goods under trade-remedies actions it administers, has inadvertently resulted in products manufactured and substantially transformed in U.S. FTZs being erroneously treated as imports from China if the highest-value component, even by a small margin, happens to be Chinese origin,” he said. “As a result, some FTZ manufacturers are facing hundreds of thousands of dollars in additional and unexpected duty liability.”