POLITICS

MTB process favors big corporations

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Politics,Beltway Confidential

Second of a three-post series

There is not a single bill this year to exempt shoes from import tariff duties.

There are at least four dozen.

The waivers being pushed by members of Congress parse shoes by whether they are designed for men or women; have soles or uppers made of leather, cloth, rubber or plastic; how much they cost and whether they cover the ankle.

There is even a bill to exempt “sports footwear for persons other than men or women” from normal tariff charges.

There are reasons for the detailed, often technical, descriptions of seemingly ordinary products, according to both critics and advocates of the tariff bills that flooded into Congress within the last month.

The narrow language ensures the domestic company pushing the tariff waiver will be the primary beneficiary. Typically, it is the only one.

That is important because the companies seeking to import the products often spend millions of dollars on lobbyists, and millions more in campaign contributions, according to federal disclosure reports.

Other reasons are rooted in how the measures– called Miscellaneous Tariff Bills (MTB) – are passed.

An MTB waives or substantially reduces the tariff on foreign-made goods that are not made in the U.S. The total value of each exemption cannot exceed $500,000 per year.

Complicating matters is a moratorium on earmarks, the spending designations by members of Congress that typically benefit special interests.

Congressional Republican adopted an earmark moratorium after regaining control of the lower chamber in the 2010 election. Senate Democrats followed suit not long after.

To get an MTB, a company must convince a member of Congress to introduce the waiver in a bill. The deadline for introducing those bills passed earlier this month.

The House Ways and Means Committee and Senate Finance Committee, which process the bills, have not posted them yet. They also have not released disclosure statements identifying the companies that will benefit from each proposal.

A review of all tariff bills by The Washington Examiner, however, identified more than 1,200 waivers that have been introduced this year, nearly all of them within the last month.

Those are just the obvious ones, and the tally may increase substantially when the committees release their lists.

The bills will then go to the U.S. International Trade Commission (ITC) to ensure there is no domestic manufacturer of the same product, and the Congressional Budget Office (CBO) for scoring.

The proposals will then be lumped into a single bill for an up-or-down vote in Congress.

The earmark moratorium specifies that no tariff waiver can be tailored to benefit 10 or fewer firms. Passing a bill for a single importer would not be allowed.

However, by writing the specifications so narrowly, sponsors can ensure the exemption applies to a single product that only one or two American companies are likely to use, even though in theory it can be imported by anyone, said Bill Allison of the Sunlight Foundation, a non-partisan group that tracks special interest influence in Congress.

That is particularly true of the complex chemical compounds that make up the bulk of the products that would receive tariff waivers under the bills that have been proposed. It also applies to more ordinary items as well.

One example is a bill sponsored by Sen. Charles Schumer, D-N.Y., which includes a supposedly generic description of a lighting fixture that goes on for more than 100 words.

The bill specifies, among other things, that the light have a “parabolic or ellipsoidal reflector” that can be focused with a color-media holder, and have a mounting yoke that can be rotated 360 degrees.

That degree of specificity ensures the bill will apply to only one product, benefit just one company, and will not displace an identical product made by a domestic manufacturer, according to Allison.

It also keeps the value of each waiver under the half-million dollar cap.

So, for instance, when Rep. Steve Israel, D-N.Y., sought to exempt certain lamp housings from tariff duties, he did not simply say that in an MTB.

He sponsored separate bills exempting the charges on lamp holders made of porcelain, aluminum, brass and plastic, according to bills reviewed by the Examiner.

“There is no rhyme or reason,” Allison said. “If you want a fair system, you are not going to get it by having each member of Congress slicing out a few things for their lobbyists and contributors and companies in their districts rather than something that is above-board and one size fits all.”

Big companies that can afford to hire lobbyists and give campaign contributions tend to get tariff waivers on the products they use, Allison said. For smaller companies, it is cheaper to simply pay the higher charges than it is to try to get an exemption, he said.

Corporations that report lobbying on tariff bills this year have spent $443 million trying to influence Congress and federal agencies since 2009, according to disclosure statements.

Since the lobbyists do not have to list specific bills they are working on, there is no way to determine how much of that was spent seeking MTBs.

Rep. Tom Reed, R-N.Y., said crafting bills targeting a single product or benefitting a single importer at the expense of domestic competitors is not a proper use of the MTB process.

Last month, Reed circulated a letter signed by 65 Republican freshmen urging House leaders to allow unfettered passage of the MTBs that meet the requirements.

Reed sees the tariff waivers as a means to reduce costs for domestic manufacturers that cannot get products they need from U.S. suppliers.

For the most part, that should be things like certain precursor chemicals or components that are needed to manufacture other products, which are not available from domestic producers, he said.

If the tariffs are not waived when they expire at the end of the year, American manufacturers who rely on those products face what amounts to a job-killing tax increase, he said.

“We want to protect those local jobs,” said Reed, who has sponsored 18 tariff waivers identified by the Examiner. “If we do nothing, our local manufacturers are going to be directly hurt and that means local jobs.”

About half of the waivers Reed sponsored are for light emitting diodes (LEDs) used by Philips Electronics Corp., based in New York City, which has a manufacturing facility in his district, he said.

Philips has spent $4.9 million on federal lobbying since 2009. Its political action committee has given $76,404 to federal candidates this election cycle, including $1,750 to Reed.

Next in Part Three: Demands for MTB reform are growing in Congress.

Mark Flatten is a member of The Washington Examiner’s special reporting team. He can be reached at mflatten@washingtonexaminer.com or 202-459-4929. Jennifer Peebles, the Examiner's data editor, contributed - mightily - to this series.

Part I - Is 'MTB' the new name for earmarks?

Part II - MTB process favors big corporations

Part III - Bipartisan Senate duo seeks MTB reform

 

 

 

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