The House Ways & Means Trade Subcommittee held a hearing on April 14, to consider a new process for the Miscellaneous Tariff Bill (MTB), which temporarily reduces or eliminates tariffs on qualifying imported products. The hearing considered a procedure set forth in the American Manufacturing Competitiveness Act of 2016, a bipartisan bill introduced the day before by Chairman Kevin Brady (R-TX), Ranking Member Sander Levin (D-MI), Trade Subcommittee Chairman Dave Reichert (R-WA), Trade Subcommittee Ranking Member Charles B. Rangel (D-NY) and 15 other members. Notably, a bipartisan counterpart was also introduced the same day by Senate Finance Committee Chairman Orrin Hatch (R-UT) and Ranking Member Ron Wyden (D-OR), along with U.S. Senators Rob Portman (R-OH), Claire McCaskill (D-MO), Richard Burr (R-NC), Bob Casey (D-PA), Pat Toomey (R-PA) and Sherrod Brown (D-OH).

For decades, the MTB process was used by importers of goods to reduce duties on imports –usually those for which there was not a domestically competitive source. For the last several years, Congress has struggled to find a way to move the miscellaneous tariff legislation consistent with the House Republican Conference ban on earmarks, which also prohibits members from introducing any bill that contains a limited tariff benefit. The process in the House has become ensnarled because the vast majority of tariff suspension or reduction provisions typically included in an MTB are, in fact, limited tariff benefits. The broader House rules do not preclude consideration of limited tariff benefits, but rather subjects them to specific disclosure requirements before the chamber can act on such a measure.

Building bi-cameral support on a path forward has been a challenge since the last duty bill expired in 2012. The last attempt to consider action on expired provisions, new additions and process reform was dropped from the recently enacted Trade Facilitation and Enforcement Act of 2015 (also known as “Customs Reauthorization”), because the House and Senate could not reach an agreement. The main areas of contention included striking the right balance between creating a transparent and consistent process without ceding Congressional authority to introduce legislation. All signs indicate that the impasse has been broken. Given the MTB’s history, the hearing and coordinated introduction of strongly supported bicameral, bipartisan bills is good news for a process that, in the past, has been non-controversial.

Under the existing MTB process, Members introduce bills that are then vetted through an interagency process to confirm compliance with specific criteria – including the lack of domestic production and opposition, and a revenue loss of less than $500,000 per provision. Once cleared, committee staff from the House Ways and Means and Senate Finance Committee compile all cleared duty reduction measures into one package, which became known as the MTB. The policy objective of the bill has always been to lower the cost of imported manufacturing inputs, or final products, that are not available in the United States. The measure helps U.S. manufacturers and U.S. workers, by reducing the cost of inputs that must be imported because there is no domestic supply.

The proposal set forth in the American Manufacturing Competiveness Act of 2016 largely codifies the existing process, with one notable difference. Instead of a requiring the introduction of an individual bill by Members of Congress, the process would begin with a petition to the United States International Trade Commission (ITC). The new process also provides for public comments and review by administrative agencies with traditional MTB roles, including the Department of Commerce and U.S. Customs and Border Protection. Under the new process, the ITC would issue a report to Congress recommending action on certain tariff that takes into account information gathered throughout the process. Congressional staff would then draft a MTB proposal from this process for members to consider. If enacted, the measure would direct the ITC to begin a new MTB no later than October 15, 2016, and October 15, 2019, thereby ensuring a process for the next six years.

To date, the proposal has been favorably received, and it appears to be on a track for consideration in the House. A House Ways and Means full committee markup of the bill has been scheduled for April 20, 2016. Reading the House action along with the strong bipartisan Senate interest, MTB reform appears to be a serious candidate for legislative action, which means a new process could be in place by the fall. KDW government relations advisors and trade attorneys will stay on top of this issue and continue to relay developments. In the meantime, please do not hesitate to contact us if you have any questions.