ITC Reports on Miscellaneous Tariff Suspensions in Effect

On October 18, 2019, the U.S. International Trade Commission released Report 4987 American Manufacturing Competiveness Act: Effects of Temporary Duty Suspensions and Reductions on the U.S. Economy

Main Findings:

• As of March 2019, over 90 percent of firms responding to the Commission's questionnaire imported or planned to import goods under the Harmonized Tariff Schedule 9902 headings (provisions) that provide temporary duty suspensions and reductions; about one-third of these firms have increased or planned to increase imports. Between November 2018 and May 2019, importers saved $179 million in duties on imports of $5.4 billion.
• As of March 2019, many responding firms stated they had not had enough time to take full advantage of the duty suspensions and reductions. Some respondents also reported that section 301 tariffs on products of China have lessened the positive impacts of the duty relief.
• As a result of the duty relief, nearly a quarter of responding manufacturers reported a decrease in production costs. Among all respondents, many expected future increases in sales volumes, number of customers, and investment in new product development. Compared with larger firms, more responding small and medium-sized enterprises (SMEs) reported that the duty relief has had positive effects on virtually all business operations.
• Chemicals firms account for the largest share of 9902 headings and imports. Thus, the largest number of responding firms reporting benefits from the duty relief are in the Chemicals group.
• The results of the Commission’s economic modeling suggest that the temporary duty relief will lead to a small increase in output, welfare, and gross domestic product (GDP) in the United States. Moreover, the average price of goods imported under the 9902 provisions will likely decline, although not by the full amount of the duty reduction.

Case Study: Textiles

• During the period November 2018–May 2019, importers saved $5 million in duties on imports of $109 million entered under the 9902 headings for the Textiles subgroup, equivalent to an average duty reduction of 4.7 percentage points.
• Nearly 90 percent of firms responding to the Commission's questionnaire reported that they import or plan to import textile products eligible for duty suspensions or reductions under the 9902 provisions, and over a quarter have increased or plan to increase these imports.
• Responding firms in this subgroup reported increases in investment in new product development and employment. Nearly 35 percent of respondents anticipate increases in sales volume, and almost one-third expect increases in their customer base.
• Two of 6 responding retailers and distributors/wholesalers lowered the prices of their imported products sold to customers because of the temporary duty relief, and 4 of 6 anticipate decreases in the future.
• Nearly half of responding manufacturers reported that their production costs declined as a direct result of the 9902 provisions, and half anticipate this cost reduction will decrease in the future. Additionally, 27 percent anticipate increases in production volume as a direct result of the tariff relief.