[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]
MISCELLANEOUS TARIFF BILL: PROVIDING
TARIFF RELIEF TO U.S. MANUFACTURERS
THROUGH THE NEW MTB PROCESS
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON TRADE
OF THE
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTEENTH CONGRESS
FIRST SESSION
__________
OCTOBER 25, 2017
__________
Serial No. 115-TR03
__________
Printed for the use of the Committee on Ways and Means
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
__________
U.S. GOVERNMENT PUBLISHING OFFICE
33-657 WASHINGTON : 2019
COMMITTEE ON WAYS AND MEANS
KEVIN BRADY, Texas, Chairman
SAM JOHNSON, Texas RICHARD E. NEAL, Massachusetts
DEVIN NUNES, California SANDER M. LEVIN, Michigan
PATRICK J. TIBERI, Ohio JOHN LEWIS, Georgia
DAVID G. REICHERT, Washington LLOYD DOGGETT, Texas
PETER J. ROSKAM, Illinois MIKE THOMPSON, California
VERN BUCHANAN, Florida JOHN B. LARSON, Connecticut
ADRIAN SMITH, Nebraska EARL BLUMENAUER, Oregon
LYNN JENKINS, Kansas RON KIND, Wisconsin
ERIK PAULSEN, Minnesota BILL PASCRELL, JR., New Jersey
KENNY MARCHANT, Texas JOSEPH CROWLEY, New York
DIANE BLACK, Tennessee DANNY DAVIS, Illinois
TOM REED, New York LINDA SANCHEZ, California
MIKE KELLY, Pennsylvania BRIAN HIGGINS, New York
JIM RENACCI, Ohio TERRI SEWELL, Alabama
PAT MEEHAN, Pennsylvania SUZAN DELBENE, Washington
KRISTI NOEM, South Dakota JUDY CHU, California
GEORGE HOLDING, North Carolina
JASON SMITH, Missouri
TOM RICE, South Carolina
DAVID SCHWEIKERT, Arizona
JACKIE WALORSKI, Indiana
CARLOS CURBELO, Florida
MIKE BISHOP, Michigan
David Stewart, Staff Director
Brandon Casey, Minority Chief Counsel
______
SUBCOMMITTEE ON TRADE
DAVID G. REICHERT, Washington, Chairman
DEVIN NUNES, California BILL PASCRELL, JR., New Jersey
LYNN JENKINS, Kansas RON KIND, Wisconsin
ERIK PAULSEN, Minnesota LLOYD DOGGETT, Texas
MIKE KELLY, Pennsylvania SANDER M. LEVIN, Michigan
PAT MEEHAN, Pennsylvania DANNY DAVIS, Illinois
TOM REED, New York BRIAN HIGGINS, New York
KRISTI NOEM, South Dakota
GEORGE HOLDING, North Carolina
TOM RICE, South Carolina
C O N T E N T S
__________
Page
Advisory of October 25, 2017, announcing the hearing............. 2
WITNESSES
Cindy Smith, Agricultural Relations Director, Gowan USA.......... 5
Edward V. McAssey, Chief Operating Officer, Lasko Products LLC... 10
Michael Ratchford, Government Relations Associate, W.L. Gore &
Associates..................................................... 14
SUBMISSIONS FOR THE RECORD
Footwear Distributors and Retailers of America (FDRA)............ 37
Stephen Lamar, Executive Vice President, American Apparel &
Footwear Association (AAFA).................................... 39
John Shelton, International Trade Compliance Manager, North
America, Evonik Corporation.................................... 41
MTB Carpet Group................................................. 43
MISCELLANEOUS TARIFF BILL: PROVIDING
TARIFF RELIEF TO U.S. MANUFACTURERS
THROUGH THE NEW MTB PROCESS
----------
WEDNESDAY, OCTOBER 25, 2017
U.S. House of Representatives,
Committee on Ways and Means,
Subcommittee on Trade,
Washington, DC.
The Subcommittee met, pursuant to call, at 2:17 p.m., in
Room 1100, Longworth House Office Building, Hon. David G.
Reichert [Chairman of the Subcommittee] presiding.
[The advisory announcing the hearing follows:]
ADVISORY
FROM THE COMMITTEE ON WAYS AND MEANS
SUBCOMMITTEE ON TRADE
CONTACT: (202) 225-1721
FOR IMMEDIATE RELEASE
Wednesday, October 25, 2017
TR-03
Chairman Reichert Announces Hearing on the
Miscellaneous Tariff Bill: Providing Tariff
Relief to U.S. Manufacturers Through
the New MTB Process
House Ways and Means Trade Subcommittee Chairman David G. Reichert
(R-WA), announced today that the Subcommittee will hold a hearing
entitled ``Miscellaneous Tariff Bill: Providing Tariff Relief to U.S.
Manufacturers Through the New MTB Process.'' The hearing will focus on
the potential economic benefits to U.S. manufacturers and consumers of
providing temporary tariff relief through the new MTB process on
imported products not produced in the United States. The Committee is
preparing legislation to implement recommendations made by the U.S.
International Trade Commission (ITC) in its final report. The hearing
will take place on Wednesday, October 25, 2017 in room 1100 of the
Longworth House Office Building, beginning at 2:00 p.m.
The ITC's final report, submitted to Congress consistent with the
new MTB process established by the American Manufacturing
Competitiveness Act of 2016, is publicly available and can be accessed
here: https://mtbps.usitc.gov/external/. The Act provides that the
legislation to be considered by Congress may not include any provision
unless it was the subject of a petition submitted to the ITC and was
deemed by the ITC to meet the MTB tests established in the Act,
including that there is no domestic producer of a like product who
objects to the provision.
In view of the limited time to hear witnesses, oral testimony at
this hearing will be from invited witnesses only. However, any
individual or organization may submit a written statement for
consideration by the Committee and for inclusion in the printed record
of the hearing.
DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:
Please Note: Any person(s) and/or organization(s) wishing to submit
written comments for the hearing record must follow the appropriate
link on the hearing page of the Committee website and complete the
informational forms. From the Committee homepage, http://
waysandmeans.house.gov, select ``Hearings.'' Select the hearing for
which you would like to make a submission, and click on the link
entitled, ``Click here to provide a submission for the record.'' Once
you have followed the online instructions, submit all requested
information. ATTACH your submission as a Word document, in compliance
with the formatting requirements listed below, by the close of business
on Wednesday, November 8, 2017. For questions, or if you encounter
technical problems, please call (202) 225-3625.
FORMATTING REQUIREMENTS:
The Committee relies on electronic submissions for printing the
official hearing record. As always, submissions will be included in the
record according to the discretion of the Committee. The Committee will
not alter the content of your submission, but we reserve the right to
format it according to our guidelines. Any submission provided to the
Committee by a witness, any materials submitted for the printed record,
and any written comments in response to a request for written comments
must conform to the guidelines listed below. Any submission not in
compliance with these guidelines will not be printed, but will be
maintained in the Committee files for review and use by the Committee.
All submissions and supplementary materials must be submitted in a
single document via email, provided in Word format and must not exceed
a total of 10 pages. Witnesses and submitters are advised that the
Committee relies on electronic submissions for printing the official
hearing record.
All submissions must include a list of all clients, persons and/or
organizations on whose behalf the witness appears. The name, company,
address, telephone, and fax numbers of each witness must be included in
the body of the email. Please exclude any personal identifiable
information in the attached submission.
Failure to follow the formatting requirements may result in the
exclusion of a submission. All submissions for the record are final.
The Committee seeks to make its facilities accessible to persons
with disabilities. If you are in need of special accommodations, please
call 202-225-1721 or 202-226-3411 TDD/TTY in advance of the event (four
business days' notice is requested). Questions with regard to special
accommodation needs in general (including availability of Committee
materials in alternative formats) may be directed to the Committee as
noted above.
Note: All Committee advisories and news releases are available at
http://www.waysandmeans.house.gov/
Chairman REICHERT. The hearing will come to order. Good
afternoon. The Subcommittee will come to order. Welcome to the
Ways and Means Subcommittee hearing on the Miscellaneous Tariff
Bill.
Before hearing from our witnesses, I would like to make a
few comments. For decades, Congress has considered bipartisan
legislation to temporarily suspend or reduce tariffs on certain
imported products not made in the United States through
legislation that has become known as the Miscellaneous Tariff
Bill, or MTB. The MTB is designed to boost the competitiveness
of American manufacturers by lowering the cost of imported
inputs and, in some cases, finished goods without harming
domestic firms that produce competing products.
Many companies in my home State of Washington have relied
on the MTB, and I know that many of my colleagues have similar
stories from their home districts. Our manufacturers have used
the savings from past MTBs to strengthen their competitive
edge, support the creation of domestic manufacturing jobs,
increase U.S. production, and contribute to the economic growth
of the United States.
But the last MTB expired in 2012, and left American
manufacturers without a process to help them cut costs. This
undermined the ability of our manufacturers to provide more
domestic jobs and damaged their global competitiveness. Last
year, Congress took action and passed overwhelmingly bipartisan
legislation to create a new and transparent process for
providing tariff relief to U.S. businesses and companies.
Under the new MTB process, companies petition the
independent, nonpartisan International Trade Commission, not
individual Members of Congress, for tariff relief. The new
process is open and transparent and establishes an opportunity
for public comment. It provides predictability for our
businesses while also complying with the House rules.
The ITC kicked off the new MTB process last October,
launching a new public accessible portal for the filing of
petitions and public documents and comments. This August, after
lengthy analysis, the ITC provided its final recommendations to
Congress on more than 2,500 petitions. Of those, the ITC has
recommended that more than 1,800 of these petitions be included
in the MTB legislation. I commend the ITC for its tremendous
effort and dedication in successfully bringing the new MTB
process to life; and I thank the Commerce Department and
Customs and Border Protection as well for its work.
Now, Congress must act to consider an MTB and deliver long-
awaited tariff relief to our manufacturers. The Committee is
doing its part by reviewing the ITC's final report and
preparing legislation to implement ITC's recommendations.
So I am eager to move forward and hear from our witnesses
today about how tariff relief, provided through the new
process, will benefit their businesses, make them more
competitive, create jobs, and grow our economy.
I now yield to Mr. Pascrell for his opening statement.
Mr. PASCRELL. Thank you to our witnesses here today.
Welcome. And I want to say thank you to my friend, Chairman
Reichert, for calling this hearing.
In my home State of New Jersey, a diverse array of
different companies will be in a better position to compete as
a result of this legislation. We have ICF Mercantile in Fort
Lee, New Jersey, which will obtain duty relief on high-tenacity
rayon yarn, an input for a material used for Naval defense
systems. Unfortunately, this specialty yarn has not been
produced domestically in 20 years, but that means there is no
harm from removing a tariff here.
New Jersey has a robust presence of chemical companies. In
fact, it is the largest industry in the State of New Jersey,
employing close to 100,000 people. Several of the firms will
receive tariff relief on numerous imported chemicals that I
dare not try to pronounce.
And all those folks who like their anti-pasta and their
Italian subs and salad or pizza with extra mild spice will be
pleased to enjoy a break on the cost of pepperoncini, either
packed in oil or not.
I agree with the Chairman that the miscellaneous trade bill
would provide some much-needed relief to United States
manufacturers and the workers across the country. These
companies, as well as those represented by our witnesses here
today, will receive a competitive boost, be able to use their
resources in a more productive manner, whether by raising wages
or investing in research and development.
One key reason that this bill stands to enjoy broad
bipartisan support is the underlying analysis completed by the
International Trade Commission and the Department of Commerce,
to ensure that products that are currently produced in the
United States are not included in the final bill. In this way,
the MTB is designed to prevent domestic companies from being
harmed.
I look forward to working with other Members of Congress to
pass a noncontroversial MTB in the coming weeks for the first
time in 7 years. Seven years is too long to go between MTBs,
and blame can be placed on the Majority's short-sighted and far
too blunt earmark policy.
I also want to note that what we accomplish with the MTB in
terms of boosting U.S. manufacturing competitiveness is small
compared to the challenges our manufacturers are facing
globally. For example, China has announced an ambitious
industrial policy called Made in China 2025. I think it is
something we need to pay attention to. A plan to transform
China into a leader in advanced manufacturing, including in key
sectors like aviation, rail, new energy vehicles and
agriculture machinery.
As a champion of U.S. manufacturing, I want to emphasize
that we, as a country, need to be thinking big picture about
our future. We, as a Committee, should be taking the lead here.
Unfortunately, I don't see that we are right now.
Before closing, I would also like to say that while I am
glad that we are having this hearing today, I am still
disappointed that this Subcommittee has not held a hearing on
NAFTA renegotiations with the Administration witnesses. The
need for a public hearing is highlighted by this
Administration's lacking record on transparency.
In August, I led a letter calling for the Administration to
appoint a chief transparency officer, as required by the
statute, but the Administration has still not done so. No one
can say this is partisan, because I whacked the last
Administration for a lot of the same things. I have yet to
receive a response to my letter sent August 16. There were only
three or four words in there that were more than two syllables.
I don't understand it.
My transparency concerns go beyond process. Press reports
have now suggested that NAFTA parties are negotiating on
currency manipulation. The Administration has given no
indication to any of us of its plans or intentions on the
issue. While we are here today to discuss MTB, there are other
issues with significant consequences for America's economic
well-being that we need to discuss openly. I look forward to a
response from the Chairman on this matter very soon.
Thank you, Mr. Chairman. I yield.
Chairman REICHERT. Thank you, Mr. Pascrell.
Today we are joined by three witnesses. The first witness
is Ms. Cindy Smith, the Agricultural Relations Director for
Gowan USA.
Our second witness is Mr. Ed McAssey, the Chief Operating
Officer of Lasko Products LLC.
Our third witness is Michael Ratchford, the Government
Relations Associate for W.L. Gore & Associates.
Before recognizing our first witness, let me note that our
time is limited, so please limit your testimony to 5 minutes.
Members should keep their questions to 5 minutes.
Ms. Smith, your written statement will be made a part of
the record, and you are recognized for 5 minutes.
STATEMENT OF CINDY SMITH,
AGRICULTURAL RELATIONS DIRECTOR, GOWAN USA
Ms. SMITH. Thank you, Chairman Reichert, and Ranking Member
Pascrell, and Members of the Committee, for the opportunity to
come before you today to speak to you regarding the
Miscellaneous Tariff Bill, or MTB, on behalf of the Gowan
Company. I am Cindy Smith, the Ag Relations Director of Gowan
USA. I have worked with the Gowan companies for about 18 years
in a variety of commercial and regulatory roles. And it is my
honor to be able to speak with you today about Gowan, and why
we believe passage of the MTB is critical for our business, for
agriculture and manufacturing in the United States to remain
competitive and successful.
Gowan Company is part of a group of companies headquartered
in the agricultural community of Yuma, Arizona. As you might
know, Yuma is the source of nearly all the lettuce grown in the
United States during the winter months. So pretty soon when you
start eating salad, know that lettuce is coming from our town
in Yuma, Arizona.
Gowan is the only basic manufacturer and distributor of
crop protection products in the United States that remains
owned by a single family, the Jessen family.
The Gowan companies include:
Gowan USA, which is sales and product development and
marketing of our products here in the United States; Gowan
Milling, which is a state-of-the-art manufacturing facility in
Yuma that formulates many crop protection products. Gowan
products only make up about 10 percent of Gowan Milling's
business. The vast majority of their business is toll
manufacturing for other companies like BASF and DuPont.
The Dune companies, which are based in Yuma, Imperial
Valley, and Salinas, California, retail operations that sell
crop inputs directly to growers. So they are certified pest
control advisers that actually walk fields and make
recommendations to growers.
And then Gowan Seed, which is sales and product development
and marketing personnel that focus primarily on vegetable seed
production.
Jon Jessen started the family of companies over 55 years
ago after returning from military service in Korea. The
business started with Jon himself walking fields, making pest
control recommendations to growers, and now has grown into
several businesses that provide a variety of inputs to U.S.
growers. Through our marketing companies, we develop, register,
and sell crop protection products around the world.
The Gowan companies now employ more than 700 people in the
United States, with a payroll that exceeds $50 million.
Approximately half of those 700 jobs are in Yuma, Arizona, at
our plant. Gowan Milling itself employs 300 of the 700 jobs and
has become a major employer in Yuma.
The MTB will help us be competitive and keep all these
wonderful people employed and successful. Jon remains active in
the business today as the Chairman of the Board; and his
daughter, Juli Jessen, is the Chief Executive Officer; and
other members of the family also remain very active in the
business.
Gowan develops, registers, and supplies crop protection
products to farmers across the United States. Our business
model is to acquire, develop, and maintain those products
critical to agricultural production. We invest most of our
profits right back into the business to improve the existing
products or to bring new ones to the market. We primarily serve
specialty crop markets, so fruits, nuts, and vegetables. U.S.
specialty crop growers typically do not have access to many
crop protection products that growers of large row crops
benefit from.
So the specialty crop markets are smaller and, therefore,
the tools that they have are critical to their success and to
preserve and to be competitive. The MTB process is extremely
helpful in allowing us to remain cost-competitive and provide
those products to specialty crop growers.
Gowan is clearly not the largest crop protection company in
the United States, but is a small, family-owned business.
Access to cost-competitive materials is critical to our ability
to compete and to be successful. To serve our customers, we buy
active ingredients, have products manufactured by contract
manufacturers in the United States, and source some of our
products from outside of the United States.
To be competitive, we have developed strategic
relationships with suppliers and vendors who are able to supply
our needs in a timely and cost-effective manner. Because not
all of the raw materials needed are produced here in the United
States, we have found the MTB process is extremely helpful in
reducing our overall cost and improving our global
competitiveness. Gowan is very pleased that the new MTB process
will regularly and predictably update the Harmonized Tariff
Schedule to suspend or reduce duties on active ingredients and
other products that we import because they are not available in
the United States. This new process will bring enhanced
certainty to our long-range planning and product development
process.
For our business and that of our customers, international
trade is an essential component of our livelihoods. For this
reason, we have a keen interest in efforts to remove tariffs on
active ingredients and other products that we import. We can't
use those active ingredients as we import them. We have to do
manufacturing on them to make them available to growers.
So I appreciate the opportunity to provide input to you
today, and I look forward to working with you on passing this
bill as quickly as possible. Thank you.
[The prepared statement of Ms. Smith follows:]
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Chairman REICHERT. Thank you. Mr. McAssey.
STATEMENT OF EDWARD V. MCASSEY,
CHIEF OPERATING OFFICER, LASKO PRODUCTS LLC
Mr. MCASSEY. Good afternoon. My name is Ed McAssey. I am
the Chief Operating Officer of Lasko Products LLC,
headquartered in West Chester, Pennsylvania. Lasko is a 111-
year-old company, a privately-owned company that was owned----
Chairman REICHERT. Mr. McAssey, could you pull the
microphone a little closer to you.
Mr. MCASSEY. Lasko is a 111-year-old privately held company
that was owned by the Lasko family since inception. In 2016, we
were sold to Comvest Partners, a private investment firm.
Lasko employs 942 people in the United States at facilities
located in Pennsylvania, Tennessee, and Texas. Many of those
employees have been part of the Lasko team for over a decade.
I, myself, have been with the company for 33 years. We
manufacture fans, heaters, humidifiers, and range hoods.
Portable electric fans make up about 72 percent of our sales.
The Lasko story is a textbook example of what the United
States Congress intended to provide with the Miscellaneous
Tariff Bill, or MTB. Our factories in Franklin, Tennessee, and
Fort Worth, Texas, manufacture the portable electric fans and
employ 638 workers, roughly 68 percent of Lasko's workforce.
These are the two sites that will benefit from swift passage of
the MTB. We are the only manufacturer in the United States of
electric pedestal and desktop fans sold to the big box
retailers. Our competition is exclusively from China.
As a result of having to compete with low-cost Chinese
manufacturers, our operating margins are razor thin. In order
for our business to be viable against low-cost portable fans
imported from China, we have invested heavily in automation for
assembly, welding, and painting machinery. On any given day, we
operate over 60 injection molding machines, most of which were
manufactured in the United States.
Despite stiff competition from China, we are committed to
maintaining our United States manufacturing facilities. In the
past 3 years, we have invested $7.4 million in plants,
property, and equipment in Franklin, Tennessee, and Fort Worth,
Texas.
We make the injection molded parts in our fans with plastic
resin from the United States. Much of the steel we use to
manufacture our products is produced in the United States. We
use cardboard made in the United States. I point this out to
show the multiplying effect from our operations that benefit
our suppliers as well. There would be a substantial negative
effect on our suppliers if the MTB was to fail to pass.
We are in a business of pennies. We can lose a sale to
overseas competitors for a cost difference of 20 to 30 cents.
The duty relief provided by the MTB on motor assemblies and
related parts enables us to compete with suppliers in China who
do not incur the costs of livable wages, health insurance, and
retirement contributions that we provide our employees. Our
average wage rate is over $16. Unfortunately, the 638 jobs that
would benefit from the MTB are down 4 percent compared to this
time last year. We have lowered our price to try to compete
with the volume to protect our employees' jobs.
The swift passage of the MTB is very important to Lasko and
our workers. Our business benefits our steel, paint, and
packaging suppliers. The tariff savings from the MTB in 2018
would be an estimated $1.5 million, and $4.8 million over a 3-
year term. These savings will not only allow us to maintain our
workforce, but to continue to source other parts from American
suppliers.
As you can see, the MTB is very important to American
business as a whole. Passage of the bill would make Lasko and
other manufacturers in the United States more competitive with
low-cost manufacturing around the globe. That is why we are
working with the National Association of Manufacturers and
broader business community to explain the importance of this
legislation for our workers.
In the last year, there was a bipartisan showing which
created the new process. While the process is not perfect, we
look forward to working with all the stakeholders to suggest
refinements and make the process work better in the future.
Thank you.
[The prepared statement of Mr. McAssey follows:]
Chairman REICHERT. Thank you.
Mr. Ratchford.
STATEMENT OF MICHAEL RATCHFORD, GOVERNMENT RELATIONS ASSOCIATE,
W.L. GORE & ASSOCIATES
Mr. RATCHFORD. Good afternoon, Mr. Chairman, Ranking Member
Pascrell, Members of the Committee. Thank you for giving me the
opportunity to speak with you this afternoon on this important
topic for American manufacturers.
My name is Michael Ratchford. I am the Government Relations
Associate for W.L. Gore & Associates. Founded in 1958 in the
basement of Bill and Vieve Gore's house in Newark, Delaware,
Gore is a privately-held American manufacturer. Today, Gore has
approximately 9,000 associates globally, with 6,000 of my
colleagues here in the United States. Our plants are located in
Delaware, Maryland, Arizona, Pennsylvania, California, and
Montana.
Gore has more than 2,000 patents worldwide on electronics,
military and consumer apparel, medical devices, and polymer
processing. We are also recognized for our unique culture. We
are consistently listed on Fortune Magazine's best places to
work.
We are a strong supporter of the MTB process, and we have
utilized the process since 2006. We appreciate the renewal of
this important program. The new process builds on decades of
work by Congress, and creates a more transparent, objective,
and predictable process. The new process is rigorous, is
rightly focused on ensuring that current and imminent U.S.
manufacturing is not harmed. The new MTB process is
significantly more transparent. Stakeholders have ample
opportunities to become involved in the process. The number of
petitions submitted alone demonstrates the demand for this type
of duty relief. Of the 1,800 total petitions recommended for
inclusion, they will save approximately $350 million in duties
in 2018 and over $1 billion over the next 3 years.
On Gore's part, we submitted 46 petitions. We are pleased
that 22 were recommended for inclusion. In submitting our
petitions, we worked with a number of trade associations,
communicated with trade associations of which we are a member,
including the National Association of Manufacturers; the
Outdoor Industry Association, where I used to serve as Chair of
the Trade Advisory Council; American Apparel and Footwear
Association; National Council of Textile Organizations;
Footwear Distributors and Retailers Association; and AdvaMed,
which represents the U.S. medical device industry.
MTBs are extremely important to the members of all these
organizations. Virtually all of Gore's thousands of products
are based on one material: A versatile polymer called expanded
polytetrafluoroethylene, or ePTFE. This material is best known
in apparel and footwear as our signature product, GORE-TEX. It
also, though, has broad applications in the medical field. Our
medical products include synthetic vascular grafts, meshes, and
sutures for vascular, cardiac, and general surgical procedures.
Over the past 40 years, more than 40 million Gore medical
devices have been implanted, improving patient outcomes
worldwide. We create high-value products through our design,
research and development, process engineering, testing,
patenting, and market research, all conducted here in the
United States.
When in effect, the MTB alleviates duties that act as
barriers. The savings on these duties translate into various
benefits for Gore, our customers, and end users. For our
medical products, we can invest in our ongoing U.S.-based
research and development for our technically advanced products.
For high-performance outdoor footwear, which face duties as
high as 37\1/2\ percent, we have observed that MTB allows our
customers to add our technology more broadly at better price-
points. For our North American companies, a majority of
membranes and films for these footwear products originate in
the United States. This means the highest value portion of the
manufacturing remains American.
In sum, I believe the new MTB process is meeting the goals
of the American Manufacturing Competitiveness Act of 2016, and
the petitions have been carefully and thoughtfully vetted to
ensure there is no domestic availability of goods. Suspending
duties on specific goods enhances American manufacturing
competitiveness and helps to eliminate artificial economic
distortions that negatively impact American manufacturers and
consumers. The new process has been rigorous, open, and
transparent, and should build confidence that it has been fair,
open, and free from abuse.
Mr. Chairman, thank you for the opportunity to appear here
today. I look forward to answering any questions.
[The prepared statement of Mr. Ratchford follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman REICHERT. I thank all of you for your presence
here and for accepting our invitation. Thank you for your
testimony. And your testimony today makes it clear that the
temporary duty relief provided by the MTB is essential in
helping our American companies stay competitive, especially
with increasing pressure from China.
Mr. McAssey, you highlighted this important point in your
testimony. Can you explain a bit more about the increasing
competition you face from China and how the MTB allows you to
stay competitive, manufacture here in the United States, and
continue to employ American workers?
Mr. MCASSEY. Yes. Thank you, Mr. Chairman.
Yes. So we import the motor from China. The motors, you
know, no one has contested the fact that the motor is not
available in the United States. And what it allows us to do is
do the rest of the manufacturing, and, you know, that is the
steel, the bodies, the injection molding. So we add a lot of
value to doing that here in the United States. This is not
just, you know, a screwdriver operation. With $7.4 million of
PP&E, it is a substantial investment to the manufacturing
process. And, you know, we have done it largely with
automation. And all the competition right now does come from
the PRC.
Chairman REICHERT. So how does MTB allow you to be more
competitive?
Mr. MCASSEY. You know, because we get down into just razor-
thin margins. So sometimes, you know, the difference of a sale
is 20 to 30 cents, and, you know, we have worked with low, low
margins. And this would allow us to go in and try to, you
know--and continue to try to generate more volume to help drive
down our unit cost.
Chairman REICHERT. So the elimination of that tariff would
allow you to sell more products, then may lead to more jobs?
Mr. MCASSEY. Yes, sir.
Chairman REICHERT. Ms. Smith, you mentioned in your
testimony that the new MTB process provides better certainty
and predictability, which will help long-range planning and
product development. Can you talk a little bit more about how
the new process helps you better plan and make investment
choices in a small family-owned business like yours?
Ms. SMITH. Sure. So, not unlike my other panel members
here, as a small family business, margins are key, right? So as
we were just discussing with you, the cost of goods is a key
driver of that.
And so, as we look at opportunities to either invest in
existing products that we have today, or in developing new
products to bring to the market, or partnering with others to
bring products into specialty crops, what we can project in our
business plans about what our potential margin will be is
critical to us being able to spend the dollars up front to
develop those products and get them registered, and then sell
them.
So our investment happens before we can ever sell a
product. So having a predictable process that lets us better
estimate what the cost of goods is for our products is critical
to that whole process.
Chairman REICHERT. It provides certainty for you?
Ms. SMITH. Absolutely, yes.
Chairman REICHERT. Thank you. Mr. Pascrell.
Mr. PASCRELL. Thank you, Mr. Chairman.
Mr. Ratchford, you said in your testimony that your
company, Gore, appreciates the renewal of this important
program, the MTB. The process creates an avenue for substantial
duty savings. We believe the new rigorous process is rightly
focused on ensuring that the current and imminent U.S.
manufacturing is not harmed. That was your testimony.
So let me ask you this: How does your company plan to use
the saved revenue that would result from the passage of this
MTB?
Mr. RATCHFORD. Mr. Pascrell, for our company, I think the
investments would be in continued research and development in a
variety of products. You know, the more competitively priced
those products are, the more revenue we have. That, one, helps
secure American jobs. As I said, we have 6,000 associates here
in the United States. Our employment footprint has been very
constant over the past decade in that regard. But our real
lifeblood is innovation, and continuing to invest in research
and development is where some of the profits, one of the gains
of the MTB would be made.
Mr. PASCRELL. Thank you. To any of the witnesses, how
important is tariff relief on manufacturing inputs to your
competitiveness with imports of finished goods? Ms. Smith.
Ms. SMITH. Sure, I will start. So it is very important,
because agriculture is a global economy, right? And there is no
one product that everybody uses. They have to use multiple
products. So all of our products are competing with everything
else that comes in. So having that competitive advantage, both
in the manufacturing and in the ability as we sell our
products, is critical to our success.
Mr. PASCRELL. Mr. McAssey, any thoughts about that?
Mr. MCASSEY. Yes. With us, you know, getting back to, you
know, we are in this business of pennies. And allowing us to,
as Ms. Smith indicated, have known certainty, we can continue
to invest and invest in the R&D to make the product so that it
is--you know, we would like to change the rules of the game
where it is not just cost-based. And this gives us the
certainty to know that if we do make this investment, that we
can be competitive.
Mr. PASCRELL. Mr. Ratchford.
Mr. RATCHFORD. Yes. I mean, I agree with my colleagues and
what they said here. I mean, it makes us all more competitive.
It secures those American jobs. As I said before, for our
company, we invest in research and development.
Mr. PASCRELL. Go ahead, Ms. Smith.
Ms. SMITH. I would just like to add one thing to your
question, which is that, you know, you asked what do we do with
the savings that we get from these. One, for sure, is what we
have all talked about, which is reinvestment into our companies
and products and research and development and bringing products
to the market.
But we also have a profit-sharing program with our
employees. So when we have 700 employees, anything I can do to
reduce my cost benefits my employees. It allows me to continue
to provide healthcare coverage; it allows me to pay bonuses; it
allows us to give raises. So I think that, you know, for sure,
one is in the products that we bring and the manufacturing, but
also in the benefits to the employees and the rest of the
people in our community.
We have a program where we invest in our schools, to help
bring science to the classroom there, so people understand
science and the importance of agriculture. And any savings that
we have allows us to continue to do those things.
Mr. PASCRELL. And the reason why I asked the question in
the first place is I think that we need a barometer in terms of
when we use that term ``savings'' and making yourself more
competitive. I want to see where wages are in the company
before and after. There is no law that we can pass to do that,
but it would certainly lead to the solvency of the program. We
have, you know, 3 years; every 3 years we vote on this.
So the point of the matter is the results need to be
somewhere that we can measure, and we are not just talking
about feelings here. I know you are not. We need to talk about
what is measurable in terms of helps the stagnant wages in the
United States of America, besides providing you with the
ability to be a little bit more competitive. Thank you.
Thank you, Mr. Chairman.
Chairman REICHERT. Thank you.
Ms. Jenkins.
Ms. JENKINS. Thank you, Mr. Chairman, for holding the
hearing. And I thank the panel for your testimony this
afternoon.
Mr. Chairman, this new MTB process has yielded a workable
and transparent report with more than 1,800 recommendations of
tax cuts for American consumers and manufacturers, increasing
our competitiveness abroad, while creating and saving jobs here
at home.
For example, the ITC's final report contains two specific
provisions that directly affect my district with positive
impacts. Both of these provisions would benefit Goodyear's
manufacturing plant in Topeka, where the company manufactures
truck as well as off-the-road tires used for earth-moving and
mining equipment.
With more than 1,700 employees, Goodyear is one of the
largest private manufacturing employers in eastern Kansas, and
its Topeka manufacturing facility has been in operation in the
State since 1945. Additionally, the plant covers 69 acres under
one roof, making it easily one of the largest tire
manufacturing plants in the world.
One of Goodyear's petitions is for segmented compression
tire molds greater than 25 inches. Goodyear's workers use these
molds for curing the type of off-road earth-moving tires made
right there in Topeka. These molds are used in the curing
process to apply both heat and pressure to give a tire its
final shape. And as the ITC report reflects, molds of this size
are simply not produced in the United States and must,
therefore, be imported.
The second petition is for a certain chemical input that is
one of the key raw materials in Goodyear's production of an
antioxidant used in tire manufacturing by all of Goodyear's
tire plants throughout the United States, including the Topeka
plant. Again, this input is so specific and domestically
unavailable that the ITC has recommended it for swift tariff
relief.
As I mentioned before, relief for these products and the
hundreds of other products included in the report will help
companies like Goodyear, in my district, better compete
globally and create jobs across the country.
Mr. Chairman, I was pleased to support the American
Manufacturing Competitiveness Act back in 2016, and today, I am
pleased to see this MTB process moving forward, to provide
benefits for Kansans and for the rest of the Nation.
And with that, Mr. Chairman, I will yield back.
Chairman REICHERT. Thank you, Ms. Jenkins.
Mr. Kind.
Mr. KIND. Thank you, Mr. Chairman. Thanks for holding this
hearing. And I appreciate the witnesses' testimony here today.
Mr. Ratchford, when you were mentioning the various States
that W.L. Gore has a presence in, I couldn't help but wince,
because you had a great facility in the heart of my
congressional district in Eau Claire, Wisconsin, for a while
that was sold. But that was when I got to meet now-Senator
Chris Coons, when he was working for Gore at the time, and got
to know him really well. But we appreciate hearing your
feedback.
And with all due respect to the witnesses, this is kind of
a boring hearing because it is not that controversial. It has
been 7 years since we have been able to move an MTB, and it is
long overdue. And I think we have a nice process put in place
now with the ITC petition process and the vetting that takes
place as well as the standards that will clear. And hopefully,
we will be able to move forward on this, just realizing the
economic impact that it could bring. But it is another
indication of why working on a proactive trade agenda, that
tears down barriers, that provides for a freer flow of goods
and products and services, is so important for the
revitalization of our economy right here at home.
And, Mr. Chairman, I know this is a Trade Subcommittee
hearing, but given the amount of time that we have in committee
apparently these days, I think it would be wonderful if we at
least try to tee up a few hearings on the comprehensive tax
reform that we are working on these days, because this stuff
gets complicated real fast, and I have a feeling that each one
of you as witnesses could probably come and offer some insight
on the tax provisions that are being discussed, or at least
thought about.
I mean, Ms. Smith, you mentioned that your company is still
family-owned. I presume you are an S corp right now, so a pass-
through entity when it comes to tax liability purposes?
Ms. SMITH. [No verbal response.]
Mr. KIND. Yes, that is right. Well, one of the challenges
we are facing is how not to leave the pass-throughs behind in
reform and so it is not just corporate tax relief at the end of
the day. And how do we do that and politically justify it with
people back home without providing a huge windfall to the
private equity or the hedge fund dudes on Wall Street who are
billionaires?
And these are things that we are wrestling with. And I
think it would be very helpful, that getting feedback and some
vetting from all of you too before we make a terrible mistake
by trying to rush something to the floor without proper
vetting, without proper hearing, and then suffer the
consequences a little bit later on.
So it doesn't sound, Mr. Chairman, as if that is in the
cards. It sounds like this is all going to be done behind
closed doors and then we are going to have a two- or three-
night markup on it before it comes to the floor. But I think
without the proper vetting, it is going to be difficult to
produce good policy with that process.
My question, though, for you on this measure is, how hard
do each of your respective companies look for a domestic source
for the product that you need rather than just worrying about
the MTB tariffs and trying to reduce those?
And, Mr. McAssey, you said you guys import molders from
China. I mean, are you approaching domestic manufacturers of
molders and saying, hey, this is what we need. Can you supply
us and what would the cost be?
Mr. MCASSEY. Yes. We continually do that. We are, you know,
concerned about even the stability of supply in China. Up until
2000, we made a motor. It wasn't as energy-efficient as what we
are able to get in China. We weren't competitive with it. But
we made it ourselves. We were the last people to make this. In
the 33 years that I have been with the company, I would venture
to say that I haven't seen anyone able to do this in over 25
years other than ourselves.
Mr. KIND. Really. The type of quality, efficiency that you
are getting from China and what they are making?
Mr. MCASSEY. Yes, yes.
Mr. KIND. So there are some economies of scale, certain
comparative advantages that they enjoy there for some reason
that we can't duplicate here domestically.
Mr. MCASSEY. I mean, you know, before I came with the
company, we always had, you know, a good livable wage. We had
healthcare; we had a pension; now we have a 401(k). But, you
know, with that, you know, we are competing against people that
a lot of times don't have these benefits and the regulation,
the safety.
You know, I have traveled to China. I have seen the plants.
Granted, it has gotten better. But, you know, the environment,
the safety, you know, the ability to select workers and that
process, you know, all things that we enjoy as Americans that
they don't have there, and, you know, we compete against that.
Mr. KIND. Are you confident that the company you are doing
business with in China has certain respectable standards that
live up to our principles?
Mr. MCASSEY. Yes, yes. We definitely--we have a process
where we vet that. We audit that. And we have accountability to
our customers, to their standards.
Mr. KIND. Okay. Thank you.
Thank you, Mr. Chairman.
Chairman REICHERT. Mr. Kelly.
Mr. KELLY. Thank you, Mr. Chairman, and thank you all for
being here.
I am going to go a little different direction, because I
know you all compete globally and you rely on a global supply
chain, because you don't have access to everything you need for
your finished product being made right here in the States.
But where I want to come from is a question that we all
worry about, and that is revenue. And I am not talking just
about what the company pays. I am talking about what you also
pay in wage taxes, you and your associates, how that helps out
when it comes to Social Security, your real estate taxes that
you pay, your economic impact, because all the people that
supply you in addition to the folks overseas are also part of
this whole economic picture.
So I know that you can't do it right now, but if we don't
start looking at the economic impact, when we start to lose
American jobs and we have American companies leaving because
they just no longer can stay in America and compete globally,
then I think we are missing the entire boat. We are always
looking for revenue. And we can't cut our costs, so we have to
go after you to supply the revenue. And we know where the
revenue comes from, okay, it comes from companies that are
profitable and people who are working. That is the only place
it comes from.
So if you can, if you can get back to us with each of your
companies, to let me know the economic impact not only on the
communities that you are in, but also with your global
suppliers, because you have other people right now in the
States that are helping you also.
So I think it is incredibly important that we recognize
that. And I know, listen, I don't know of anybody who is in
business anymore that can say, you know what, we are in a
pretty good spot because we don't have to compete against
anybody and we have a product that everybody has to own and
they have to buy it at our price. There is nobody else on the
shelf but us.
So I think, again, the economic impact, total economic
impact of what you are able to do is incredibly important, not
only to this Committee, but to the communities you are in, the
States that you are in, and the country that we all are trying
to keep going. So if you can get back to us with that, I would
really appreciate it.
Other than that, I want to thank you for taking time out of
your lives to come here and to sit before us, to let us know
where it is right now that you are sitting and the competition
that you face. I am also from the private sector. Listen, it is
hard. And I don't know anybody that doesn't have anything but
razor-thin margins. It is just that close. When you said 20 to
30 cents, the difference between somebody picking your product
or somebody else's product, I think most people would say, oh,
no, that is impossible. The business I am in--I am in the
automobile business--is $5 a month that can make the difference
between us being able to sell a car to somebody and somebody
else being able to sell a car to somebody.
So I am really concerned about where you sit and what it is
you are trying to do. So I know you can't answer my question
right now, but if you get back to us, I think it is really
critical that everybody sitting on this panel understands the
total economic impact of what it is that you do.
Also, if you wouldn't mind, how about including some of the
contributions you make to the communities you are in that help
out. Things like the United Fund and other fundraising things
and charities that you all compete in or produce. I would
really appreciate that.
So, Mr. Chairman, thank you. And thank you all for being
here. Listen, it is tough. It is tough out there. We are all
trying to get to the same place. So thank you so much for being
here. I yield back.
Chairman REICHERT. Mr. Levin.
Mr. LEVIN. Thank you. Thank you, Mr. Chairman.
You know, as we sit here, I think it is perhaps useful to
just think back a bit as to how miscellaneous tariff issues
were handled in the past, because some of those who worked on
this aren't here now. But there was a real effort on a
bipartisan basis, going back many years, to provide
transparency, to make sure that everything was aboveboard, to
make sure that any impact on domestic producers was clearly
known. Those were the days when we very much tried to work
together.
And what happened was that there was some conflict with
rules within the Republican Conference, and essentially all the
work that was done in previous years--and I think at least one
of you benefited from the miscellaneous tariff, all of you did
before. So what happened was that we changed it so that instead
of Members filing bills, essentially, people would file on
their own, it would go to the ITC.
And I have mixed feelings about that. There was some
feeling that perhaps some Members were making political points,
but I don't think that was true, basically. I think they were
motivated by knowledge of what was going on within their own
districts, in most cases. And so this has become part of kind
of the separation of Members of this House from activities in
their districts. And I think when it was abused, it needed to
be addressed, but the end of this process, I think, also tended
to disconnect Members of Congress from what was going on within
their own districts.
So I think we just need to take a look at that as we
proceed. And just remember how hard this Committee worked to
try to change a process that was not transparent and where
there, perhaps, wasn't abuse, to make sure that everything was
aboveboard.
And let's remember if any single person disagreed on this
Committee with proceeding with a bill, it was automatically
discarded. It took just a single person, I think, among those
who were either ranking or on the Subcommittee entirely.
So I also want to say it is useful to have this hearing,
but I want to reiterate what Mr. Kind said. There is an irony
in our coming together and spending an hour, an hour and a half
on this important issue that I think is essentially in good
shape, and not having a single hearing on what is today the
main mystery of Washington, the tax bill.
And I would urge Republicans on this Subcommittee to try to
help the leadership. I finish with this: The Miscellaneous
Tariff Bill has always been--not always, but in recent years,
has been hallmarked by transparency. And essentially, we are
going to take up a tax bill that to date has no transparency
whatsoever.
I yield back, and again thank the witnesses for being here.
And continue to tell us how it is working, because we wanted to
be sure that industrial efforts continued as long as it
benefited the workers of this country and its companies. I
yield back.
Chairman REICHERT. Mr. Paulsen.
Mr. PAULSEN. Thanks for holding this hearing today, Mr.
Chairman. This is an issue that is essential to the success of
manufacturing in my home State of Minnesota, as well as the
rest of the country. Just take a look at both the past and the
future. First, in the past, since the last MTB expired at the
end of 2012, we have seen $748 million in additional taxes for
American manufacturers every year, and an almost $2 billion hit
to the economy. And the MTB package in 2010 supported 90,000
U.S. manufacturing jobs, increased production by $4.6 billion,
and expanded U.S. GDP by $3.5 billion.
And now the future. The ITC's report contains more than
$350 million in much-needed tariff relief for our American
manufacturers this next year, and $1 billion over the next 3
years. As far as government programs go, this one has a pretty
good return on investment: Thousands of jobs, billions of
dollars in economic gains for what boils down to a few million
dollars in tax relief for American manufacturers every year.
It is important to note that this tax relief does not come
at the expense of other American producers. The International
Trade Commission must determine that the materials that are
receiving tariff reduction or elimination through the MTB
process are not produced domestically. So in the end, this is a
win-win situation. Our manufacturers get well-deserved tariff
relief on materials that aren't produced here in America, and
American consumers get the lower prices when they go to the
store. So I am excited that this process is now up and running
once again. I look forward to getting this MTB legislation
across the finish line later this year.
Let me ask a question: We do know that, according to the
International Trade Administration, every $1 billion in
exports, American exports, supports about 5,000 domestic jobs.
Your testimony today, from all of you, highlights the
importance of the MTB to American businesses and American
consumers and the wide-ranging benefits that process offers.
Now, the other way to help boost American competitiveness,
including reduced tariffs on inputs not available in the United
States and better market access for American-made products, is
through more trade agreements, free trade agreements.
Do you believe, do you agree--and I will start with you,
Ms. Smith--that it is important for the United States to
maintain its existing trade agreements, and to also work on
negotiating additional agreements?
Ms. SMITH. Thank you. I do believe existing trade
agreements are important. I think the position of agriculture
is pretty well-known about their belief about trade agreements.
As you talked about, we export a lot of agricultural products
from the United States. Our business is a supportive one of
U.S. agriculture, so we are fully supportive of anything that
helps U.S. growers sell their products overseas.
So I would say yes, the trade agreements that we have in
place are very critical for agriculture. Any work we do on
trade agreements, we should first look at, you know, what is
the impact to U.S. business, right, and make sure we do no harm
to U.S. business.
Mr. PAULSEN. Mr. McAssey.
Mr. MCASSEY. Yes, Mr. Paulsen. In our case, the existing
trade agreements have been a net positive for us, mainly the
NAFTA. At this point, the global exports to the rest of the
world with the thin margins, it is just not there for us. But
in our own case, you know, we have had a substantial increase
in our shipments into Mexico and to Canada from the existing
trade agreement.
Mr. PAULSEN. Selling American to Mexico?
Mr. MCASSEY. Selling from America into Mexico and into
Canada.
Mr. PAULSEN. Mr. Ratchford.
Mr. RATCHFORD. Mr. Paulsen, I agree with my colleagues. I
mean, FTAs are very important. I mean, they provide certainty
for the business community out there. They open up markets for
us and it provides a level playing field. As long as those free
trade agreements are, you know, fairly negotiated and
adequately enforced, we would continue to be supportive of
that.
Mr. PAULSEN. Would you say in this modernization of NAFTA,
which is going on right now, that it is important for stability
and confidence as a part of your expert knowledge, or
continuing that track down the road, that you are counting on
that, it is important?
Ms. SMITH. Yes. I think it is--I talked about it a little
bit in my testimony. Certainty is critical, right? And
understanding what those trade agreements say today and what
they may or may not say in the future is critical. I think
getting input from those who are impacted is essential so that
you have a firsthand understanding of what those impacts are.
I mean, we do crop protection products, but we also grow
dates. We export our dates to Canada, Mexico primarily. We have
an impact on a number of different levels from those
agreements. So I think it is essential, yes.
Mr. PAULSEN. Thank you very much, Mr. Chairman.
Chairman REICHERT. Mr. Holding.
Mr. HOLDING. Mr. Chairman, thank you very much for holding
this hearing on the Miscellaneous Tariff Bill. I am sure none
of you will be surprised to learn that North Carolina has more
MTBs recommended by the ITC than any other State. Of the 1,800
petitions from the ITC, over 330 of those were submitted by
North Carolina businesses. Those petitions represent an
estimated duty savings of over $70 million in 2018 alone.
MTB legislation would benefit a wide variety of
manufacturers in North Carolina, such as textile manufacturers
like Glen Raven, or crop science companies around the Research
Triangle Park, or appliance manufacturers in Charlotte. All of
these benefit underneath the plan. This represents a tax cut
that not only benefits the individual importing the product,
but, of course, it also benefits downstream producers,
distribution service providers, but, most of all, it benefits
consumers.
So I think this is an incredible opportunity to cut those
duties, which are taxes, and have the opportunity to reinvest
them in our communities. As we all know, it has been nearly 5
years since the last MTB has expired, and this caused U.S.
businesses and consumers to face hundreds of millions of
dollars in higher tariffs with no domestic relief resource.
So I appreciate the witnesses taking the time to share
their stories with the Committee, and I am sure their thoughts
will be echoed across the Nation, especially in North Carolina,
as we examine the potential impact of MTB legislation. So I
look forward to working with you, Mr. Chairman, and continuing
this process, and I appreciate the opportunity to have this
hearing.
With that, I yield back.
Chairman REICHERT. Thank you. Mr. Doggett.
Mr. DOGGETT. Thank you, Mr. Chairman. This hearing, like
the last hearing we had in the Subcommittee, is really an
alternative to bringing anyone from the Trump administration
here to explain the totally confusing Trump trade policy on
NAFTA, and on other trading arrangements with the rest of the
world.
We will meet privately with the trade ambassador later this
afternoon, but it has to be in a private session so secret that
for any staff member to attend, they need to have a top secret
security classification. And I can understand, given the total
contradictions in the Trump trading policy, why they would be
reluctant to come to this Committee.
As my colleagues have noted, it is also peculiar that we
are considering a tax cut bill today in a public hearing, a tax
cut bill, the total amount of which is hardly a footnote to the
monstrosity that we were told will be dropped on America next
Wednesday, with a 1,000-plus page bill, where, again, all
efforts to secure hearings on that tax bill have been thwarted.
We have been here in September, in October. We will get to
November 1 without having a single hearing, with a total
unwillingness to have anyone from the Trump administration come
and be held accountable, to answer any questions, to explain
their tax bill, because the idea is, having learned nothing
from the failed healthcare repeal, to force this bill through
with as little opportunity for comment from affected businesses
like yours that have to decide are we better off expensing or
losing our deduction for interest in the process?
What happens to our retirement plans? How are some
different industry sectors affected from others? So it is
really unfortunate that the only tax bill we get a hearing on
is this modest one.
Now, the Miscellaneous Tariff Bill, when it is reviewed,
when these tariff concessions are reviewed by the International
Trade Commission, the Commission is not charged with
determining the impact on the public interest with reference to
each of these matters.
And let me ask you. I appreciate your testimony. You sound
like all-American companies, each of whom will benefit in a
constructive way from the reductions that are proposed. Are any
of your companies affiliated with a foreign enterprise? Are you
a subsidiary of any foreign business?
Ms. SMITH. No.
Mr. MCASSEY. No.
Mr. RATCHFORD. No.
Mr. DOGGETT. Well, we don't apparently then have a
representative here of companies that are. And there are a
number of companies that are scheduled to get benefits. The
pharmaceutical industry gets about $12 million to $13 million a
year in proposed benefits if the bill is approved as it has
been filed.
And it looks like kind of a mini United Nations there. I
see a company from Japan, a couple from Germany, from Sweden,
from Korea, from Switzerland, from the United Kingdom,
certainly not the kind of small businesses that your companies
represent, that are scheduled to get benefits.
One of the more curious ones in here is the proposed
reduction of a tariff on aspirin, and why it is that that will
lead to any benefit for the American consumer is hard to
understand. Indeed, the report language on the original
Miscellaneous Tariff Bill talks about the advantages to
consumers of avoiding higher prices.
But we have no explanation of how pharmaceutical
manufacturers who are engaged in some of the most outrageous
price gouging in the country, in interfering with consumers
who--I talked to one woman recently who said she had to choose
between breathing and eating because of the cost of her asthma
medication, how any of those consumers will see a dime of
benefit from this reduction, and why it is that a bill and a
process that is designed to help small businesses in America
targets so many of its benefits on companies that are really
just foreign affiliates of manufacturers from abroad.
So this may grow jobs for these companies in Germany or
Sweden or Korea, but it is not clear how it will grow jobs
here, or how it will save American consumers a penny on these
pharmaceuticals.
And I yield back.
Chairman REICHERT. Mr. Meehan.
Mr. MEEHAN. Thank you, Mr. Chairman.
And I am very grateful for the presence of these companies
who have made such a commitment to our Nation with the work
that you are doing. And I am grateful for my good friend from
New Jersey, Mr. Pascrell, and his participation in this
process. He got me a little hungry. I want to know what
restaurant we are going to go to to take advantage of all of
those things you were protecting from that Italian sandwich you
were describing.
But I am aware, as you said, that your companies that are
really competing, you are competing in a margin, in a very,
very tight margin.
Mr. McAssey, I appreciate the presence that you have right
there in my district and the great work that you do preserving
those jobs there.
When you are taking advantage of a program like this, I
know you are working on very, not just tight margins, but tight
timeframes. How important is it to you that this MTB is
expeditiously done? What impact does it have if you have delays
and things of that nature in the process?
Mr. MCASSEY. Thank you, Mr. Meehan. Yes, I lost track of
the time and I wanted to cover that in my testimony. But we are
a seasonal business. You know, fans are sold, you know, in the
spring and summer. We just got done quoting our customers for
the upcoming year in 2018. And the certainty, you know, of
getting back to--if we had known, you know, where we stood on
this issue, we feel pretty good, but we have been, you know,
very close to the finish line before and haven't been able to
get it done. So, you know, timing is very important in our
case.
Mr. MEEHAN. So it is not just timing as well, but one of
the things that I have noted is, you identified that you have
issues with competition from China.
Mr. MCASSEY. Yes.
Mr. MEEHAN. And this enables you to be able to beat that
competition currently. Can you speak a little bit to your
relationship with China? If, in fact, you believe that in
addition to this benefit that you are getting from the MTB, are
you seeing any other kinds of trade practices that are being
conducted in the industry in a predatory way or otherwise
coming out of China?
Mr. MCASSEY. Well, you know, I want to only speak to what I
can prove, but we have seen, in the last couple of years, a
concentration. Instead of a very fragmented Chinese supplier
base, it has become much more consolidated and driven toward
our products. You know, we make a lot of fans, and we are
always, you know, looking. You know, we feel like we have a
bull's eye on our back.
Mr. MEEHAN. When you say consolidated supplier base, can
you help educate me on what you are referring to? A supplier
base that you are competing with China for access to or----
Mr. MCASSEY. Competing with in China.
Mr. MEEHAN. And are they doing anything in a predatory way
to shut down competition in those suppliers that makes it
harder for you to get components?
Mr. MCASSEY. No. I mean, we have been able to go to
suppliers that are not part of that finished good, you know,
basis. We have been able to work with suppliers that primarily
will make the motors and motor assemblies. But I am not aware
of any specific predatory practices other than very, very low
prices.
Mr. MEEHAN. Right. Well, thank you for what you are doing,
keeping the jobs here in the United States with the great
workforce that you have and the great product that you produce.
Mr. MCASSEY. Thank you.
Mr. MEEHAN. And, Mr. Ratchford, thank you as well with your
presence very close and around my district, and I think in a
number of others districts here in the United States. You have
also identified, in your comments, this process, but you also
talked about--some of it is working, maybe some improvements.
Can you give me some insights into how this is working for you?
If you have some suggestions now that we have been down this
road for just a very short window, what your experience has
been, and how you think it might be able to be improved?
Mr. RATCHFORD. Sure, Mr. Meehan. So with any new process,
there is going to be kinks in the process. And we appreciated
the opportunity to work with the agencies involved, and the
folks involved were great. So if I had a couple of suggestions
right off the bat, it would be, first, that the initial portal
was somewhat rigid. That if you had to amend a petition, you
had to start from scratch and put in a new one, you couldn't,
like, edit it, so that made it a little bit difficult.
Mr. MEEHAN. Did it have any kind of impact on you in terms
of time and things of that nature?
Mr. RATCHFORD. Sure. Sure. You would have to reenter the
whole thing, and the folks who do that, it was sort of a
frustrating experience. Again, I am not blaming anyone, it was
just the way it was constructed. It is sort of remarkable they
got it up and running as fast as they did.
And then, second, the ITC was great and it was an
opportunity to have a dialogue. So you got down the line--there
were issues raised by Customs and Border Patrol about the
ability to administer provisions of it. And it would have been
more helpful to have had that dialogue--a similar dialogue with
CBP that had been had with the ITC.
Again, the definitions that are provided are highly
technical, and they are worried about, can they enforce this,
can they administer it. So as we go forward, it is increasing
that level of transparency, increasing that level of dialogue,
would be two things that I would suggest.
Mr. MEEHAN. Thank you. Well, thank you for your very, very
good suggestions. I know they will be taken into consideration
by the Committee. Thank you for your testimony here today.
Chairman REICHERT. Thank you. Mr. Davis.
Mr. DAVIS. Thank you very much, Mr. Chairman. And I, too,
thank the witnesses for being here. I am proud to know that
AkzoNobel is a global Fortune 500 company that is listed on the
EuroNext Amsterdam and NASDAQ stock exchanges. The company is
also listed on the Dow Jones sustainability indexes. AkzoNobel
is a multinational organization that serves customers
throughout the world with human and animal healthcare products,
coding, and chemicals.
An employer of more than 61,000, it is divided into 13
business units, and maintains operating subsidiaries in more
than 80 countries. It is one of the world's leading chemical
producers. Its chemical division specializes in pulp and paper,
polymers, functional and base chemicals. AkzoNobel has a
portfolio of more than 2,000 different chemical products that
are used as raw material, and intermediate materials for the
manufacture of everyday items. Of course, it is an American-
based company that is located in my district. And I know that
they have five petitions approved by the International Trade
Commission.
Mr. McAssey, you mentioned that you do joint manufacturing
with interest in China. Could you tell me, if you know, how
many of those kind of joint manufacturing items that you might
produce--that your company produces?
Mr. MCASSEY. Yes, sir. So we use the motors on the fans
that we sell in the United States--that we manufacture in the
United States, which is, I think, roughly 60, 65 percent. So
every one of them does have a motor that is coming from the PRC
right now.
Mr. DAVIS. And do you have that kind of manufacturing
activity with other countries, or in other countries as well?
Mr. MCASSEY. No, sir. We don't own any factories in the
United States. We have explored other countries, but, you know,
we have not been able to find one that can provide what we
need. I think long-term the next step for us would be, you
know, if we can establish the volume base and--I have long-
termed the--the next step for us is to look at making them in
the United States, going back to it.
Mr. DAVIS. If I could ask each one of you quickly, what
kind of trade policy do you think helps your company the most?
Ms. SMITH. What kind of trading policy? Is that what you
said?
Mr. DAVIS. Yes.
Ms. SMITH. Clearly, a fair trading policy, right, that
considers what the impacts are for us, but I think, as Mr.
Kelly was suggesting, that all of us are in a business that has
impacts beyond what we do, right? So who we sell to, who we buy
from, and what we do in our communities must all be considered.
So I think it has to be a broad consideration of what the
impacts are to make sure that we can remain competitive as
American companies, family-owned businesses, in small
communities competing on a global scale, I think all of us
globally.
Mr. DAVIS. Thank you.
Mr. RATCHFORD. To those comments, I would add protection of
intellectual property in trade agreements, and counterfeiting
is another issue there. But respect for that rule of law and
intellectual property protection would be things that I would
add to what Cindy said.
Mr. DAVIS. Yes.
Mr. MCASSEY. And protection of our jobs, you know, in terms
of a level playing field. You know, the trade policies we have
can certainly be tweaked, but they are helping us right now, at
least in North America.
Mr. DAVIS. Thank you all very much.
Mr. Chairman, I have about half a minute left and I would
like to yield that to Mr. Pascrell.
Chairman REICHERT. Mr. Pascrell.
Mr. PASCRELL. Thank you, Mr. Davis. And thank you, Mr.
Chairman. I would like to comment in response to my friend, Mr.
Doggett's concerns, regarding the inclusion of pharmaceutical
products in the MTB. We all agree that we support the aim of
supporting low cost for medicines, but is keeping tariffs on
products the way to do that? If anything, removing tariffs
provides an incentive for lower costs.
On the issue of aspirin, there was a thorough public
comment process for stakeholders to weigh-in on their views on
that particular subject, legitimate subject, but not a single
objection was filed, not from a public interest group or a
domestic manufacturer.
So, Mr. Chairman, the tariff relief provided by this bill
will only last 3 years anyway. The bill lasts 3 years. So any
impact this bill might have on domestic manufacturing would
only be temporary, if any. Moreover, aspirin was included in
the MTB that we voted on back in 2010. You voted for it, Mr.
Doggett, and I voted for it. My friend voted for it and I voted
for it in favor of both of the bills.
So I hope that we can avoid--it is an easy target when we
get into the area of trade. It is such a sensitive issue.
Needless to say, pharmaceuticals is a very sensitive issue, one
of the primary reasons for the increase in health costs. But I
don't think this is the avenue to deal with that.
Thank you and I will yield back.
Chairman REICHERT. Thank you, Mr. Pascrell, for your
comments.
Mr. Rice is recognized.
Mr. RICE. Thank you, Mr. Chairman, for holding this
hearing. MTBs have certainly come to the aid of a number of the
businesses in my district. They are very important. My
district, Mr. Ratchford, was--I am in northeastern South
Carolina, and there was a fair number of textile companies in
my district before--up until the 1980s, and now all those
buildings are sitting there empty, but a few of them have
survived and continue to thrive. One in particular in Cheraw,
South Carolina, called Highland, makes fairly advanced and
technical textile materials, even things that go into rocket
engines and such. So I am very proud and happy to have them.
But I am curious, in your capacity as Chairman, or as a
member of the National Textile Council.
Mr. RATCHFORD. So we are a member of the National Council
of Textile Organizations. We are a member of a couple different
associations.
Mr. RICE. Can you give me some more specific examples of
how MTBs help our remaining textile companies in America to
compete globally?
Mr. RATCHFORD. So let me talk a little bit about Gore's
participation in NCTO. We are members of that for purposes of
our military fabrics business. And so certainly protecting the
Berry amendment is very----
Mr. RICE. Could you pull that microphone a little closer,
please. Thank you.
Mr. RATCHFORD. Sorry about that. As I was saying, we are a
member of NCTO. We are in NCTO because of our military fabrics
business, and so we are protective of the American textile
industry there.
Mr. Rice, I don't have the specifics on it. I can get those
to you. But I do know at the time this due process was
launched, I believe that NCTO did make a comment in support of
the process going forward.
Mr. RICE. Okay. Mr. Chairman, with that, I will yield back.
Chairman REICHERT. Thank you. Thank you again for your
presence here and taking time out of your busy schedule and for
your testimony, and then also for your answers to the questions
that we posed to you. As you can tell, this is one of those few
moments where there is a sense of bipartisanship, that you have
created this opportunity for us, provided us with good news,
even to the point where there are two Members probably headed
to New Jersey later this week for an Italian sandwich. So, you
can leave Washington D.C. feeling good about that positive
outcome. But more than that, you can feel good about your
testimony because you have represented many, many companies
across this country that benefit from MTBs that, as you have
described, provide so much for, not only your companies, but
then, proceeding through the revenue that you generate that
goes back into your company to your employees. And then even
out into the community, as Mr. Kelly spoke to so eloquently;
and then also, finally, to the benefit of U.S. consumers for
less expensive products.
So this is a priority for us to complete this year. And its
timely renewal is critical, as well as the generalized system
of preferences, the GSP. So, again, I appreciate your testimony
and your time here with us today.
Please be advised that Members will have 2 weeks to submit
written questions to be answered later in writing, if you
would, please. Those questions and your answers will be made a
part of the formal hearing record. Our record will remain open
until November 8th, and I urge interested parties to submit
statements to inform the Committee's consideration of the
issues discussed today.
The Committee is adjourned. Thank you.
[Whereupon, at 3:30 p.m., the Subcommittee was adjourned.]
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