Some countries sneak products past U.S. Immigration and Customs Enforcement officers to evade tariffs, U.S. Sen. Olympia Snowe says.
One trick, transshipment, occurs when a penalized product is shipped through a third party — another country, company or shipper — that isn’t taxed. Invoice-shopping is another. That’s when coated paper, say, is deliberately mislabeled as cardboard.
That’s why Senate Finance Committee members Snowe and Ron Wyden, D-Ore., co-authored the Enforcing Orders and Reducing Circumvention and Evasion, or ENFORCE, Act of 2010, which is under committee review. It could be voted into law next year.
ENFORCE, Snowe said, would improve enforcement of tariffs like those imposed Friday by the U.S. International Trade Commission on Chinese and Indonesian coated paper imports, which Maine papermakers hope will improve sales and create jobs.
The bill “is aimed at ensuring we then have the structure in place to effectively enforce these duties at our ports of entry and investigate allegations of fraud,” Snowe said in a statement Monday.
The ITC found that over the last decade, the governments of China and Indonesia have illegally subsidized their paper industries and dumped coated paper products on the market to depress prices and increase their market share.
The subsidies resulted in some imported papers being sold at as much as 135 percent under their fair-market value and were a key element in the dramatic rise in Chinese and Indonesian paper production and the massive downsizing of U.S. papermakers, the decision’s supporters said.
The ruling affects only the individual Chinese and Indonesian coated-paper products and companies cited within the petition submitted to the ITC by the United Steelworkers Union and several papermakers, including Sappi and Newpage, which have mills in Maine. An exact determination of the market share of those companies was not available on Monday.
Spotty enforcement of tariffs has left $91 million in uncollected duties for some steel products sold in 2009. In the wooden furniture market, once dear to Maine’s economy, $72 million in duties is uncollected, said Jim Catella, Snowe’s legislative assistant for trade and foreign policy.
“There is obviously a huge lack of enforcement of trade agreements and tariffs in this country,” said Sarah Bigney, an organizer with the Maine Fair Trade Campaign, a coalition of 61 labor, environmental and industrial groups seeking trade policy that better assists Maine workers.
Yet the ITC ruling itself is good news for Maine, said Keith Van Scotter, co-owner of Lincoln Paper & Tissue LLC, which manufactures tissue for party and dental products and uncoated paper.
“They are very effective,” Van Scotter said of the tariff rulings.
Though enforcement of Friday’s ruling will begin in mid-November and will continue with possible annual review for five years, “just the fact that they [the petitioners] made the case is important,” Van Scotter said.
The Chinese and Indonesian companies “actually proved their own guilt when they stopped selling at their low prices. That changed the market already,” Van Scotter said.
Snowe’s bill would help solidify gains created by the ruling, Catella said.
Under her bill, the U.S. Department of Commerce would begin investigating the evasion of trade remedy laws and tariffs. Commerce officials help rule on unfair-trade practice complaints, but only customs authorities can investigate and enforce tariffs. The bill would force agency cooperation and increase tariff enforcement, Catella said.
The act also sets for the first time a deadline — 60 days — in which the federal government must rule on complaints of violations, and if a preliminary ruling cites one, tariffs would be collected from the violator until the ruling is completed or overturned. The act also would help improve product safety, Catella said.
Several trade and industry groups, including the American Honey Producers Association, the Coalition for Enforcement of Anti-dumping and Countervailing Duty Orders, and the Committee to Support U.S. Trade Law, endorse the act, Snowe said.
The federal government is tasked with enforcing more than 300 tariffs on companies or countries that profit from illegal subsidies or that commit market-dumping, Catella said — a vast job that cuts through many bureaucracies and agencies.
Bigney said Snowe’s bill is “a good step in the right direction,” but that rewrites of the individual trade agreements that govern international commerce involving the U.S., such as NAFTA, would work better.
Her organization supports the Trade Reform, Accountability, Development and Employment or TRADE Act of 2009 introduced by 2nd District U.S. Rep. Mike Michaud and U.S. Sen. Sherrod Brown, D-Ohio, she said.