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Manufacturers' import costs would be cut under US house bill

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US manufacturers could seek lower tariffs on some imported materials they use in their products under legislation the House is expected to approve on Wednesday - a boost at a time when much of the congressional trade agenda is on hold.

[WASHINGTON] US manufacturers could seek lower tariffs on some imported materials they use in their products under legislation the House is expected to approve on Wednesday - a boost at a time when much of the congressional trade agenda is on hold.

The measure would let companies ask the International Trade Commission to reduce or suspend tariffs on chemicals or other items that generally aren't available in the US. It would replace an earlier system of tax relief that expired at the end of 2012. Since then, companies have paid about US$2.5 billion in higher taxes on such imports, according to the National Association of Manufacturers.

The bipartisan bill is expected to pass the House on Wednesday under expedited debate rules. Senate Finance Committee Chairman Orrin Hatch, a Utah Republican, said in an interview he hopes the Senate will advance its version soon.

The House bill is broadly backed by business. More than 200 trade groups and manufacturers including Nike Inc, Xerox Corp and Merck & Co signed an April 20 letter to lawmakers calling the proposed new tariff-petitioning process "long overdue."

Enactment of the plan would be "an important victory for manufacturers of all sizes in the US," said Linda Dempsey, the vice president of international economic affairs at the manufacturers' group.

The vote comes amid delays in a much bigger debate over the 12-nation Trans-Pacific Partnership trade deal that is a top priority for President Barack Obama. The deal faces opposition from a number of Democrats and also would be a tough vote for Republicans from manufacturing and tobacco states who are vulnerable in this year's election. Senate Republican leader Mitch McConnell of Kentucky has said that while he supports free trade, he has problems with the Pacific-rim deal and doesn't want Congress to vote on whether to approve it until after the November election.

The House tariff bill, HR 4923, was approved by the Ways and Means Committee this month on a unanimous vote, with panel chairman Kevin Brady, a Texas Republican, calling it a win for companies and consumers.

It would allow a tariff to be reduced or suspended for up to three years as long as the lost revenue wouldn't exceed US$500,000 in a calendar year. The ITC would review businesses' requests for tariff relief and recommend a list for Congress for a vote. Lawmakers could remove some items from the list but wouldn't be allowed to add any. 

The previous system, which let members of Congress submit proposals for tariff relief to the ITC, was abolished because it violated a ban on home-district "earmarked" favors. The last package of tariff reductions under that system was approved in 2010.

The prior system created tariff adjustments for about 80 products, including reusable shopping bags, over-the-range microwaves, camel-hair yarn and various chemicals.

Conservative groups that pushed for the earmark ban are backing the House bill, including the National Taxpayers Union, Americans for Tax Reform, and Citizens Against Government Waste. Two other conservative groups - Club for Growth and Heritage Action - instead want to eliminate all tariffs that generate less than US$500,000 a year in revenue for the federal government, though they aren't pressuring lawmakers to defeat the House plan.

The bill would require the ITC to create a searchable database of the petitions. The applications also would be subject to vetting by the Commerce Department and US Customs and Border Protection, as was the case under the earlier process.

BLOOMBERG