Lawmakers Apply Pressure To Withdraw ‘First-Sale’ Rule

Thu. Apr. 24, 2008


Pressure mounted on the Bush administration Wednesday to withdraw a rule that could raise tariffs on apparel and other imports, with a flurry of last-minute lobbying as the deadline for public comment ended.

A group of House lawmakers, 51 in all, sent a letter to Homeland Secretary Chertoff urging him to convince Customs and Border Protection to revoke the rule.

The Senate’s top Democratic fundraiser, Democratic Conference Vice Chairman Charles Schumer of New York, also sent a letter addressed to both Chertoff and Treasury Secretary Paulson opposing the rule.

The rule would change the way tariffs are assessed by valuing them based on the “last sale” price of a product — just before it enters the United States — after it has been marked up in a series of transactions involving intermediate brokers. For the last two decades, U.S. importers have been paying tariffs based on the lower “first sale” price of a product when it first enters the supply chain at the point of production.

“If CBP’s proposal were to take effect, many U.S. companies would be forced not only to pay increased import duties, fees, and taxes but also to restructure and possibly eliminate business units that have been built around this long-standing law,” wrote Rep. Kendrick Meek, D-Fla., a Ways and Means member; House Homeland Security Chairman Bennie Thompson and others. “For some of our constituents, the extra costs could reach into the millions of dollars, which, ultimately, may be passed on to consumers.”

Meek’s letter has 15 members of the Ways and Means panel, with jurisdiction over trade policy, in all as signatories, including Budget ranking member Paul Ryan.

Other influential members signing it include Minority Whip Blunt; Judiciary Chairman John Conyers; Homeland Security Appropriations Subcommittee Chairman David Price, D-N.C.; Rules ranking member David Dreier, and State-Foreign Operations Appropriations Subcommittee Chairwoman Nita Lowey, D-N.Y.

The letter follows a similar one sent last week from 17 senators to Chertoff, spearheaded by Sen. Gordon Smith, R-Ore.

Upon proposing the rule in January, Customs said it would comply with a World Customs Organization opinion issued last year, and put U.S. policy in line with several other countries that already have higher tariffs associated with a “last sale”-type policy.

A coalition of industries led by the American Apparel and Footwear Association quickly sprang into action to fight the rulemaking.

Public comments to CBP — for which the deadline was Wednesday — have been mostly negative, although the AFL-CIO wrote in support of the change, arguing it would help level the playing field with countries like China by erecting higher import barriers.

In a final flurry of comments this week, three major clothing and footwear companies wrote in opposition to the new rule, arguing the higher duties would eat into their business operations and ultimately affect the larger economy.

“In this economy, our company cannot easily absorb these [costs] without adversely affecting payroll or personnel,” wrote George Feldenkreis, chairman and CEO of Perry Ellis International.

Mark Martin, president of Jarden Apparel and Footwear, which markets brands such as Marmot tents, sleeping bags and other outdoor gear, as well as Marker ski wear, wrote that his products’ prices could rise.

“With the increase in the price of gas and food in our country, there could not be a worse time to add to this inflationary trend,” Martin wrote.

Phillips-Van Heusen Corp., which markets brands such as Kenneth Cole, Bass, and Donald Trump’s Signature Collection, also wrote opposing the rulemaking.

“New York consumers, workers and businesses would be hit hard by this change,” Schumer wrote to Chertoff and Paulson. “CBP has offered no viable justification for such a significant tax increase on families and businesses and I request that you withdraw this ill-advised proposal immediately.”

by Peter Cohn

Thu. Apr. 24, 2008