Understanding and Maximizing the MTB Process: Bottom Line ...MTBs, the estimated revenue loss also...

Understanding and Maximizing the MTB Process: Bottom Line

Matt Priest: Footwear Distributors & Retailers of America

Opportunities for Your Companyatt est oot ea st buto s & eta e s o e ca

Alex Boian: Outdoor Industry AssociationRon Sorini: Sorini, Samet & AssociatesKeith Jenkins: Sorini, Samet & Associates

Overview of the MTB.

• What is the MTB?• How does it work?• What is eligible for inclusion?• What is eligible for inclusion?• What is at stake in 2012?• How can benefits be maximized?How can benefits be maximized?• What are the next steps?

What is the MTB?

Th i ll t iff bill (MTB) i• The miscellaneous tariff bill (MTB) is a collection of hundreds of individual pieces of legislation that temporarily suspend or reduce duties on imported products and make technical p pcorrections to the U.S. Harmonized Tariff Schedule (HTS)

• The MTB duty suspensions and reductions are• The MTB duty suspensions and reductions are typically in effect for a period of three years

• The individual duty suspensions themselves are l ft ll d MTBalso often called MTBs

What is the MTB?

Th MTB i t l th t ll M b f• The MTB process is a tool that allows Members of Congress to help constituent companies in a transparent manner

• A Member of Congress is required to file a disclosure agreement with the Ways & Means or Finance Committees to indicate the anticipated beneficiaries of the duty suspensionbeneficiaries of the duty suspension

• The MTB is traditionally bipartisan - even Members of Congress who oppose most trade

t ft t th MTBagreements often support the MTB

How does it work?

1 The Ho se Wa s & Means and/or the Senate Finance1. The House Ways & Means and/or the Senate Finance Committee announce the start of an MTB process and outline the specific deadlines and requirements

2 Legislation can be filed by any Member of Congress to2. Legislation can be filed by any Member of Congress to suspend duties on a particular product

3. Each MTB bill is then sent through an executive branch interagency investigation to assess twobranch interagency investigation to assess two mandatory criteria of the MTB process:

• Bill must be non-controversialBill must have limited revenue impact• Bill must have limited revenue impact

How does it work?

1 E h bill t b t i l1. Each bill must be non-controversial

• The U.S. ITC and the U.S. Department of Commerce investigate the extent of domestic gproduction that could be undercut by duty-free imports

• The Congress publishes the bills and requests• The Congress publishes the bills and requests public comment

• USTR reviews for possible effects on trade ti ti d i ti t d tnegotiations and existing trade agreements

How does it work?

2 Each bill m st not cost the U S Treas r more than2. Each bill must not cost the U.S. Treasury more than $500,000, annually, in foregone customs revenue

• The U.S. ITC will assess probable import volumes over a 5 year period under the duty suspensionover a 5-year period under the duty suspension, and also calculate the duties not collected

• Normally the ITC calculates $660,000 in actual duties foregone to equal $500 000 in lost revenueduties foregone to equal $500,000 in lost revenue

• If necessary, the ITC will adjust the temporary MTB rate to a level that would not exceed the threshold (reduction instead of suspension)(reduction instead of suspension)

What is eligible for inclusion?

A tt f li th MTB t d t• As a matter of policy, the MTB was created to help U.S. manufacturers acquire imported components used in domestic production

• The last MTB legislative package was called the “U.S. Manufacturing Enhancement Act”

• For example, chemicals and dyes used in the production of textiles, or machine parts needed for engine manufacturing


H th i d t f fi i h d• However, there is precedent for finished goods under the MTB

• In 2006 several footwear duty suspensionIn 2006, several footwear duty suspension bills were enacted for the first time (in effect 2007-2009), breaking new ground in the MTB process for finished consumer goodsp g

• Many of the of the original 2006 footwear MTBs were extended for the three-year period 2010 2012period 2010-2012


E th h th t MTB f t• Even though there are current MTBs on footwear, the policy remains sensitive

• Current duty suspensions on footwear are a result y pof careful negotiations with representatives of the remaining U.S. footwear industry

• The remaining domestic industry seeks to protect• The remaining domestic industry seeks to protect a number of lines of footwear that are still made in the United States, and efforts to suspend duties within the “protected” lines could generate

iti th Hillopposition on the Hill


H th d ti i d t h d d• However, the domestic industry has conceded that certain items within the “protected” lines are non-controversial, and some footwear products have achieved duty suspensions through y p gnegotiation

• FDRA and OIA can work with representatives of the remaining domestic industry to negotiatethe remaining domestic industry to negotiate compromises on proposals for new duty suspensions that fall within the “protected” lines


MTB fi i h d d t li it d t• MTBs on finished goods are not limited to footwear – start reviewing your product lines

• Other current duty suspensions include:y p

• Reusable shopping bags• Basketballs/volleyballs• Music boxes• Music boxes• Telescopes• Golf bags• Camcorders

What is at stake in 2012?

All current duty suspensions and reductions enacted under theAll current duty suspensions and reductions enacted under the last MTB, including 15 footwear products, expire Dec. 31, 2012, returning to the MFN rates, unless Congress enacts extensions:

• Sen. Cantwell (WA) led eight bills for waterproof hikers,Sen. Cantwell (WA) led eight bills for waterproof hikers, priced above $20/pair

• Sen. Brownback (KS) led five bills for children’s and value footwear

• Sen. Baucus (MT) led one bill for lug-bottom boots

• Sen. Leahy (VT) led one bill for ski/snowboard boots, cross country ski footwearcross country ski footwear


As import ol mes rise hen companies tili e the• As import volumes rise when companies utilize the MTBs, the estimated revenue loss also rises, resulting in less significant reductions

Unfortunately the official duty suspension data is not• Unfortunately, the official duty suspension data is not available to the public in the same manner as general HTS Ch. 64 data, so there is no way to accurately anticipate the current volumes or estimates of new ratesrates

• Companies that utilize current MTBs should prepare for the possibility of a rise in the temporary duty rate beginning in 2013beginning in 2013


Waterproof Hikers (37.5% MFN) 2007‐2009 2009‐2012 2013‐2015

6402.91.5020 9902.23.76 Free 24.7% ?

6402.91.5050 9902.23.75 Free 25% ?

6402.99.3320 9902.23.77 Free 27.6% ?

6402.99.3350 9902.23.78 Free 13.6% ?

6404 19 2030 9902 25 60 12 8% 16 5% ?6404.19.2030 9902.25.60 12.8% 16.5% ?

6404.19.2030 9902.25.61 15.2% 17.5% ?

6404.19.2060 9902.23.82 Free Free ?

6404.19.2060 9902.23.83 Free Free ?


Value, Family Footwear MFNRate

2007‐2009

2009‐2012

2013‐2015

6402.99.3155 9902.22.47 6% Free free ?

6403.59.1561 9902.22.48 2.5% Free Free ?

6405.10.0090 9902.22.46 10% Free 9.5% ?

6405 20 3030 9902 13 91 7 5% 4 5% 6 4% ?6405.20.3030 9902.13.91 7.5% 4.5% 6.4% ?

6405.20.3090 9902.13.92 7.5% Free 7.1% ?

How can benefits be maximized?

MTB legislation does NOT ha e to be ritten to co er• MTB legislation does NOT have to be written to cover an entire Ch. 64 HTS line

• As with the current waterproof hikers, the description of the product is narrowed by construction (waterproof)the product is narrowed by construction (waterproof) and by price point (only $20/pair and above)

• To further narrow the scope of the product and thus maximize the potential benefits OIA is evaluatingmaximize the potential benefits, OIA is evaluating whether to increase the price point (e.g., $23?)

• Similar tactics could be used to narrow the current value/ family footwear MTBsvalue/ family footwear MTBs

How can benefits be maximized?

Pl t t FDRA OIA t di• Please contact FDRA or OIA to discuss proposals for modifying/narrowing current duty suspensions, and also to discuss options for drafting language for newoptions for drafting language for new products under the MTB

• Consider your company’s full product line• Consider your company s full product line, rates of duty you are paying, and contact us to discuss whether pursuing new MTB duty suspensions make senseduty suspensions make sense

What are the next steps?

We anticipate the Ho se of Reps ill anno nce the• We anticipate the House of Reps will announce the start of the MTB process in the coming weeks

• The Ways & Means Committee guidelines will indicate the specific requirements for each billthe specific requirements for each bill

• We do not anticipate any significant changes in criteria for inclusions – still must be non-controversial and not exceeding $500 000 in revenue lossexceeding $500,000 in revenue loss

• However, we do anticipate an abbreviated timeline for legislation to be introduced


The potentiall abbre iated deadline co ld be as short• The potentially abbreviated deadline could be as short as 15-30 days

• We recommend that interested companies immediately begin communicating (either directly orimmediately begin communicating (either directly or through FDRA/OIA) with their Members of Congress to make the requests to introduce MTBs

The Members of Congress must then send the• The Members of Congress must then send the language to House legislative counsel, and some offices also prefer to have draft bill language pre-vetted for nomenclature by U.S. ITC – this takes time


If companies ait to think abo t MTBs ntil the process• If companies wait to think about MTBs until the process is announced, then ultimately their bills could be left out if there is a bottleneck of legislation waiting to be drafted when the time period expires

• There are literally hundreds of extension bills that must be drafted and introduced, and that does not include any new MTB proposals

• We strongly recommend doing as much preparatory work as possible to prepare for this process


Wh t i l i h th d h th• What remains unclear is whether and how the U.S. Senate will initiate a parallel process

• In the past companies have been able toIn the past, companies have been able to work through one chamber or the other to enact MTBs; however, it is always possible that the current political climate could scuttle pthe process in one chamber or the other, so we highly recommend pursuing the SAME duty suspensions in both chambers


Once the MTB deadline has closed the congressional• Once the MTB deadline has closed, the congressional committees will compile the hundreds of individual bills and then publish the list for public comment

• At this point the U.S. ITC, Commerce, and USTR will beginAt this point the U.S. ITC, Commerce, and USTR will begin their reviews and analysis

• Proponent companies likely will be contacted by the U.S. government during the review process for the purpose of b tt d t di th h t i ti f th bj tbetter understanding the characteristics of the subject product and the import trends

• The feedback given to the agencies could directly affect the ultimate benefits of the MTB (i e new temporary rates)ultimate benefits of the MTB (i.e., new temporary rates)


The entire process can take months to complete and• The entire process can take months to complete, and we would not anticipate seeing a vote on the final package until September at the earliest, and possibly in a lame duck session after the November elections

• It is also possible that delays in reconciling the House and Senate processes could result in the short-term expiration of all duty suspensions

• This happened in last process – all MTBs expired 12/31/2009 before the process was complete, and then bills were renewed retroactively in July 2010

Conclusion

• Be involved

• Be proactive• Be proactive

• Be creativeBe creative

Thank You.

Questions?

Matt Priest, FDRA: [email protected] Boian, OIA: [email protected] Ron Sorini, SS&A: rsorini@ssa‐dc.comKeith Jenkins, SS&A: kjenkins@ssa‐dc.com

Understanding and Maximizing the MTB Process: Bottom Line ...MTBs, the estimated revenue loss also...

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