Weighted average U.S. tariff on all dutiable imports in 1967. "Statistical Abstract of the United States," 1971, p. 781. The average duty reduction by the United States was 35 percent. Before Jan. 1, 1968, the normal German border tax was 4 percent of the duty paid landed value, with a higher rate permitted for some products. Effective Jan. 1, 1968, the German border tax was raised to 10 percent of the duty paid landed value and a 11 percent rate became effective July 1, 1968. This rate is scheduled to rise by 1 percent on Jan. 1, 1974. No adjustment has been made in the border taxes to reflect the fact that they are based upon the duty paid landed value rather than the c.i.f. value. In each case it would result in a border tax about 1 percent higher than shown on this table. ⚫ Tariff plus border tax equals total barrier. Since the conclusion of the Kennedy Round negotiations, the number of countries which have adopted or are considering adopting the VAT is increasing. In some cases, turnover taxes are being switched to a VAT resulting in further increases in border taxes and export rebates. As this development continues and as the three additional countries which have joined the Common Market adopt the value added tax, the U.S. competitive disadvantage will be further accentuated. The Time has Come to Take Some Action It was apparent during the Kennedy Round that the theory on which the GATT interpretation was based was outmoded and our negotiators were concerned about the coming VAT increases which would exacerbate the border taxexport rebate problems. All we did, however, was to file a note reserving the right to initiate action if changes in taxes nullified the Kennedy Round cuts. Section 121(a)(5) of the bill directs the President to seek "the revision of GATT articles with respect to the treatment of border adjustments for internal taxes to redress the disadvantage to countries relying primarily on direct rather than indirect taxes for revenue needs." There are several courses of action which should be explored. (1) GATT could be amended to permit countries which primarily rely upon direct taxes to adjust for such taxes in the same manner as countries which primarily rely upon indirect taxes are now permitted to do. (2) GATT could be amended to permit all countries to adjust for both direct and indirect taxes at the border. (Both of these two alternatives would involve the use of complicated formulae to determine the appropriate adjustments for each country.) (3) The simplest solution would be for the GATT to be neutral on indirect taxes as it now is on direct taxes. Thus, neither direct nor indirect taxes would be assessed at the border or rebated on exports. If value is added to the U.S. import after it enters the European market, the VAT will be paid on the value added within the country-not on the price at the border. In countries such as the U.S. which do not have a VAT, but do have sales taxes, some adjustment in the form of exemption or rebate would have to be made if strict neutrality is to be obtained. While the present bill takes a step in the right direction we do not believe that it will overcome the combination of inertia and foreign resistance that have so far stalled all progress on this issue. However, if our negotiators and their foreign counterparts know that future trade agreements depend on this problem being resolved we are convinced that it will be. We therefore urge that the bill require all trade agreements to be conditioned upon a revision of GATT along the lines we have suggested within the five year period for trade negotiation provided in the bill. Alternatively, we should receive direct compensation from our trading partners through lower tariffs, import rebates and a freeze on border taxes. The border tax problem is urgent and the bill should require the Administration to do something about it. The VAT is becoming more and more widespread. Unless something is done, its harmful effect on our trade will grow and future concessions will be cancelled or offset by increases in VAT and increased use of VAT. SOCMA MEMBERSHIP Aceto Industrial Chemical Corporation. American Color & Chemical Corporation. Ciba-Geigy Corporation, Dyestuffs & Chemicals Division. Crompton & Knowles Corporation. The Dow Chemical Company. Dow Corning Corporation. Drake Chemicals, Inc. E. I. du Pont de Nemours & Company. Dye Specialties, Inc. Emery Industries, Inc. Evans Chemetics, Inc. Fairmount Chemical Company, Inc. First Chemical Corporation. FMC Corporation. GAF Corporation. Gane's Chemical Works, Inc. The Harshaw Chemical Company, Div. of Kewanee Oil Company. Hatco Chemical Division, W. R. Grace & Company. Hercules, Inc. The Hilton-Davis Chemical Company, Div. Sterling Drug Inc. ICI America, Inc. Synalloy Corporation, Blackman Uhler Chemical Division. Section 14.5 of Title 19 of the Code of Federal Regulations to include the following new provisions : (a) (1) Any manufacturer or producer of any article dutiable under Schedule 4, part 1, Tariff Schedules of the United States may at any time certify to the Bureau of Customs that it manufactures or produces such article in commercial quantities in the United States. The term "commercial quantities" shall mean normal sized industrial lots and container sizes as distinct from specialty situations such as laboratory reagent or sample quantities. (2) The Bureau of Customs shall publish a List of Benzenoid Chemicals or Products Manufactured or Produced in the United States which shall include each article for which the Bureau has received the certification provided for in paragraph (a) (1) of this section. Thereafter, the Bureau of Customs shall each month publish a Supplement to the List of Benzenoid Chemicals or Products Manufactured or Produced in the United States, which shall : (i) add to such List each article not previously contained therein, for which the Bureau has received the certification provided for in paragraph (a) (1) of this section; and (ii) delete from such List any article for which no certification provided for in paragraph (a)(1) of this section has been received in the preceding 12 month period. (3) For purposes of Headnote 5, Part 1 of Schedule 4 of the Tariff Schedules of the United States, no article manufactured or produced in the United States shall be considered similar to, or competitive with, any imported article until a reasonable period (60-90 days) after the inclusion of such domestic article in the List of Benzenoid Chemicals or Products Manufactured or produced in the United States, or any Supplement thereto. (b) (1) The Bureau of Customs shall publish a List of Non-Competitive Imports which shall contain any article provided for in this part that has been entered, or withdrawn from warehouse, for consumption in the two year period prior to enactment for which it has been determined that the most recent entry of such article was not similar to, or competitive with, an article manufactured or produced in the United States. (2) Upon receipt of a claim and supporting evidence providing reasonable cause to believe that any article contained in the List of Non-Competitive Imports is similar to, or competitive with, an article manufactured or produced in the United States, the Bureau of Customs shall promptly publish a notice removing such article from the List of Non-Competitive Import effective within a reasonable period (60-90 days) after publication of such notice. (3) The Bureau of Customs shall each month publish a supplement to the List of Non-Competitive Products which shall: (1) add to the List of Non-Competitive Imports any article that has been entered, or withdrawn from warehouse, for consumption since the publication of such List or the most recent Supplement thereto for which it has been determined that such article was not similar to, or competitive with, an article manufactured or produced in the United States; (2) add to the List of Non-Competitive Imports any article which the Commissioner of Customs has ruled to be non-competitive pursuant to the provisions of Section 16.10a of Title 19 of the Code of Federal Regulations; and (3) list any article to be removed from the List of Non-Competitive Imports and the date such action shall become effective. (4) For purposes of Headnote 5 to Part 1 of Schedule 4 of the Tariff Schedules of the United States, no article contained in the List of Non-Competitive Imports published by the Bureau of Customs pursuant to paragraph (b)(1) of this section shall be considered similar to, or competitive with, an article manufactured or produced in the United States. (c) Advance Rulings-Section 16.10a of Title 19 of the Code of Federal Regulations relating to "Tariff Classification of Prospective Imports" is hereby amended to insert the words "(including, where applicable, its competitive status)" after the words "tariff classification" each time that they appear in such section. Tentative rulings as to the competitive status of an article shall be issued within 60 days after the application is filed and a final ruling shall be issued within 120 days after the application is filed. (d) Effective Date-These regulations shall become effective 30 days after their publication in the Federal Register, except that: (1) The List of Benzenoid Chemicals or Products Manufactured or Produced in the United States provided for in paragraph (a) (2) shall be published 90 days after the effective date of these regulations and shall be based upon the certification received by the Bureau in the first 60 days after the effective date. Section (a) (3) shall become effective 30 days after publication of the List of Benzenoid Chemicals or Products Manufactured or Produced in the United States; and (2) The List of Non-Competitive Imports shall be published within 30 days after the effective date and Section (b) (4) shall become effective 90 days after the publication of the List of Non-Competitive Imports. PREPARED STATEMENT OF THE MANUFACTURING CHEMISTS ASSOCIATION PRESENTED BY RICHARD M. BRENNAN INTRODUCTION The Manufacturing Chemists Association is a nonprofit trade association having 176 United States members representing more than 90 percent of the production capacity of basic industrial chemicals within this country. The United States chemical industry has a substantial interest in international trade as is clearly indicated by the 1973 U.S. exports of chemical products of $5.785 billion, and imports of $2.437 billion. TRADE SURPLUS 3 2 '64 65 '66 '67 '68 '69 '70 '71 '72 173 SOURCE: DEPT. OF COMMERCE The graph above demonstrates the strength as well as the stake of the chemical industry in U.S. foreign trade. SHARE OF WORLD TRADE IN CHEMICALS 30 25 20 15 10 S O U.S.A. W. GERMANY - JAPAN PER CENT *IST 6 MOS. 1962 63 64 '65 '66 '67 '68 '69 '70 '71 '72 73 SOURCE: DEPT. OF COMMERCE |