Connecticut lawmakers suspend millions of dollars in import duties for local companies
Connecticut lawmakers suspend millions of dollars in import duties for local companies
Wednesday, May 23, 2012
Washington -- There may be a ban on earmarks -- those special measures lawmakers in Congress pass to help specific constituents -- but Connecticut lawmakers are helping local companies in another, little known way: tariffs.
Companies in Connecticut that are poised to benefit this year include the maker of luxury cashmere fabrics in Stafford Springs, the manufacturer of beauty products and small kitchen appliances in Stamford, and the worldwide makers of wristwatches -- Middlebury-based Timex.
Reps. John Larson, D-1st District, and Chris Murphy, D-5th District, introduced a bill earlier in May that would help Timex with the import duties on certain watches the company manufactures overseas.
"This bill would make technical corrections to U.S. trade law by simplifying the current rates of duty on certain wristwatches. That includes Timex, a great Connecticut company that I'm proud to support," Murphy said.
Larson, a member of the Ways and Means Committee, said he introduced the bill to help streamline the tariff process for Timex and Invicta, a south Florida-based watch company located in the district of Rep. Ted Deutch, D-Fla., the third sponsor of the bill.
Timex did not return repeated requests for comment.
Tariffs are placed on imported goods to raise the price of imports from foreign competitors to U.S. companies. They also provide billions of dollars to the U.S. Treasury.
But eliminating or reducing tariffs allows U.S. companies to reduce the cost of importing foreign materials they need or products they manufacture overseas, saving these companies hundreds of thousands and often millions of dollars.
Critics of the practice say it robs the U.S. Treasury of billions of dollars and opens the door to possible corruption of members of Congress who often receive campaign donations from the executives and PACs of the businesses they help. Reducing tariffs also strengthens the manufacturing base of competitors like China, which produces many of the duty-free goods, opponents say.
Steve Ellis of Taxpayers for Common Sense, which criticizes earmark spendings, and two senators who were at the front lines of the battle to end earmarks, Democrat Claire McCaskill of Missouri and Republican Jim DeMint of South Carolina, want the International Trade Commission to decide which imports deserve a break on duties.
"We have long been concerned with (the tariff bills) because of the potential pay-to-play and special interest giveaways that it perpetuates," said Ellis, whose group tracks and criticizes earmark spending.
There's no evidence that any of the Connecticut companies that received help on tariff issues contributed much -- or at all -- to the campaigns of the lawmakers who helped them.
From cashmere to chemicals
Rep. Joe Courtney, D-2nd District, introduced more than a dozen bills last month to extend a ban on import duties on several types of cashmere and vicuna and camel hair yarns.
That is meant to benefit the Warren Corp. in Stafford Springs, which produces luxury woolen fabrics. Much of the imported yarns mentioned for relief in the bills come from China.
In an interview this week, Courtney said he wanted to do anything he could to help a local textile manufacturer, which he considers "an endangered species" in the United States.
"I think at a time when people like to talk about 'making it in America,' this is a company that really does it," Courtney said. "I'm trying to keep these guys alive."
The elimination of tariffs for the Warren Corp. saves the company more than $275,000 a year.
Rep. Jim Himes, D-4th District, has introduced 10 bills to eliminate duties on several imported chemicals, compounds, metals and fiber optic materials that are used by five companies in his district. Those are Vanchem, LLC, a specialty chemical company in Wilton; Amsyn a Stamford-based chemical company; 5N Plus, a specialty metal and chemical company with a facility in Fairfield; Engineered Fibers Technology in Shelton; and Charkit Chemical Corp. in Norwalk.
Rep. Rosa DeLauro, D-3rd District, has sponsored bills that would temporarily end tariffs on magnetic snaps and certain rooftop auto bags. That legislation aims to help Romag Fasteners Inc. of Milford and Thule Inc. of Seymour.
Howard Reiter, president of Romag Fasteners, said he asked for help from DeLauro to lower the cost of magnetic fasteners that are made by a factory the company owns in China.
"We want to help our customers any way we can," Reiter said.
Because many of their constituents viewed earmarks as a waste of taxpayers' money and a corrupting influence on politics, Congress was pressured to place a two-year moratorium on those special projects in 2011.
But the earmark ban hasn't stopped scores of lawmakers, from both parties, from continuing to introduce tariff bills.
Since 1982, lawmakers, with no fanfare, have sponsored thousands of bills to cut tariffs -- also known as duties -- on certain imported products, usually for three years. Each tariff bill usually aims to help one company, but it may benefit others. But the legislation does not reveal the names of the companies the bill would help.
By a certain date on the congressional calendar, all of these tariff bills are wrapped into one called the miscellaneous tariff bill.
To be included in the miscellaneous tariff bill, each request must cost the Treasury less than $500,000 a year and do no harm to any U.S. company.
The tariff modifications are reviewed by the U.S. International Trade Commission and other federal agencies to determine impact and cost. But these agencies have no power to prevent Congress from reducing or eliminating any duty.
The bills are also subject to public comment.
"It's one of the most transparent processes there is," said Ways and Means Committee staffer Jason Kearns, who works for Democrats on the panel.
He said the committee hopes to make this year's requests available to the public in the next few days.
Another name for an earmark
Proponents of the practice say tariff relief helps keep U.S. industries competitive, and it creates jobs.
Lisa Cornish, vice president of finance at the Warren Corp., says no U.S. company is harmed by the elimination of duties on the yarns her company imports.
"There's no reason to keep tariffs on cashmere because no one in the United States produces cashmere," she said. "It's not hurting anybody."
She also pointed out that the suspension of duties is only temporary. If a U.S. company is created that would be harmed by it, duties can be reinstated, she said.
But some smaller companies who don't have lobbyists looking out for them may never hear about the proposals.
Courtney first sponsored legislation in 2008 to remove duties opposed by the Warren Corp. But those bills expire at the end of this year, so new legislation was needed.
"People don't understand how duties affect the price of things," Cornish said. "Some of them are very small, but every little bit helps."
Connecticut's House members aren't the only ones to have gone to bat for state companies that want to eliminate duties on imported goods.
In 2010, former Sen. Chris Dodd, D-Conn., and Sen. Joe Lieberman, I-Conn., sponsored tariff bills that suspended duties for two very specific types of electric coffeemakers imported from China by the Conair Corp., which has a major facility in Stamford. The cost to the Treasury of suspending the duties for both coffeemakes is estimated at $800,000 to more than $1 million each year.
Meanwhile, the company said it hoped to earn as much as $25 million a year from the sale of these imports.
The Connecticut senators also went to bat for Conair by seeking a temporary end of import duties on ionic steam hair straighteners, certain types of ice cream makers, food processors and food choppers. Like the coffeemakers, all of these items are imported by the Stamford-based company from China.
Sen. Richard Blumenthal, D-Conn., last month sponsored in the Senate some of the same tariff bills that Himes sponsored in the House to help Connecticut high-tech and chemical companies.
So did Lieberman, who also sponsored Senate tariff suspension bills for Thule and the Warren Corp. While the Ways and Means Committee handles requests in the House, the Finance Committee handles them in the Senate.
The House Ways and Means Committee said that in this year alone, more than 1,200 bills have been introduced by 80 Republican and 67 Democratic House members.
"The miscellaneous tariff bill has never been so popular," said Ellis of Taxpayers for Common Sense.
To Ellis, and other government spending opponents, bills seeking reduced import duties are really earmark bills that violate the moratorium. That moratorium specifically prohibits a lawmaker from seeking to modify the tariff in a way that would benefit 10 or fewer companies.
"So call them earmarks, call them limited tariff benefits, call them whatever you like, we are still concerned with this legislation," Ellis said. "Either way, we're going to be digging into who the sponsor is and any relationship with the benefitting companies."
Yet, in a bitterly divided Congress, the popular miscellaneous tariff bill is one of the few pieces of legislation almost certain to win approval, quickly and unanimously.