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New Legislation: MTB Reform, Cargo Residue, Outerwear Tariffs, Foreign Corporations

Tuesday, April 21, 2015
Sandler, Travis & Rosenberg Trade Report

MTB Reform. S. 998, introduced April 16 by Sen. Portman, R-Ohio, would revise the miscellaneous trade bill process by which Congress considers temporary suspensions and reductions of duties on imported goods. Under this measure the first step in securing such a provision would be to submit it to the International Trade Commission rather than as a bill in Congress. Sources expect the bill’s supporters to attempt to add it to the trade promotion authority legislation that will be taken up by the Senate Finance and House Ways and Means committees this week.

Bulk Cargo Residue in Containers. The Residue Entries and Streamlining Trade Act (H.R. 1773, introduced April 14 by Rep. Marchant, R-Texas, and S. 989, introduced April 16 by Sen. Coats, R-Ind.) would exempt from import duties the residue of bulk cargo contained in instruments of international traffic previously exported from the United States. Specifically, a press release from Marchant’s office states, this bill would remove a U.S. Customs and Border Protection ruling that requires inbound cargo entries holding trace residue from any liquid or dry bulk commodity (e.g., wood chips or corn syrup) to be classified and processed before the truck, rail car or ship can be considered empty and released. Prior to this ruling trace residue was considered part of the shipping container itself and was therefore exempted from entry requirements. In November 2013 CBP delayed indefinitely a phased-in enforcement of this ruling, but Marchant said “a short-term delay is not enough – the ruling needs to be stopped altogether.”

Performance Outerwear. The U.S. Optimal Use of Trade to Develop Outerwear and Outdoor Recreation Act (S. 952, introduced April 15 by Sens. Ayotte, R-N.H., and Cantwell, D-Wash.) would provide for duty-free treatment of imports of certain recreational performance outerwear. Specifically, a joint press release states, this bill would create a unique classification specific to recreation performance outerwear in the Harmonized Tariff Schedule of the U.S. and eliminate or reduce the duties on this new classification. It would also create a Sustainable Textile and Apparel Research Fund to help the U.S. textile and apparel industry maintain a leading edge in the research and development of environmentally sustainable technologies by establishing a 10-year assessment of 1.5 percent on the value of imports of recreational performance outerwear. A board of directors composed of importing and domestic industry representatives would oversee distribution of STAR funds to entities that, among other qualifications, have more than 10 years of experience in operating programs that align with sustainable business philosophies of U.S. outdoor recreation companies. Finally, the bill would support U.S. jobs and technologies focused on research programs and services towards sustainable, eco-friendly supply chains.

Foreign Corporations. S. 922 (introduced April 14 by Sen. Sanders, I-Vt.) and H.R. 1790 (introduced April 14 by Rep. Schakowsky, D-Ohio) would, according to Sanders, “stop profitable corporations from sheltering income overseas … to avoid paying U.S. taxes” and would also “end tax breaks for companies that ship jobs and factories overseas.” A press release from Sanders’ office states that 83 of the Fortune 100 companies in the U.S. were recently found to have used offshore tax havens to lower their taxes.

According to the press release, current law allows U.S. corporations to defer or delay U.S. income taxes on overseas profits until the money is brought back into the United States. U.S. corporations are also provided foreign tax credits to offset the amount of taxes paid to other countries. Under this legislation, corporations would pay U.S. taxes on their offshore profits as they are earned and profits would be taxed no matter where they are generated. The Joint Committee on Taxation estimates that these changes “would yield more than $590 billion in revenue over the next decade.”

Separate legislation – the No Federal Contracts for Corporate Deserters Act (H.R. 1809, introduced April 15 by Rep. DeLauro, D-Conn.) and the American Business for American Companies Act (S. 975, introduced April 15 by Sen. Durbin, D-Ill.) – would ban federal contracts for companies that move their headquarters overseas, but only on paper, to avoid paying U.S. taxes – a process known as inversion. This legislation would also allow federal agencies to ban businesses from holding federal contracts if they subcontract with inverted corporations. According to a press release from DeLauro’s office, current law defines a company as being inverted if more than 80 percent of shareholders are the same before and after the acquisition, while the new legislation would lower that threshold to 50 percent.

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