What’s essential in a pandemic? Pretty much everything, if you read the tariff appeals of companies that import goods from China.
Canned tuna, which an importer argues is a perfect food to stock up on during infrequent grocery trips. Dietary supplements like ginkgo biloba, needed to bolster immune systems. Fitness machines, now essential equipment for home workouts.
More than 900 businesses, trade associations and individuals have filed comments with the Office of the U.S. Trade Representative seeking relief from steep tariffs now in place for imports from China. The special comment period has been running throughout the coronavirus crisis and ends Thursday.
Plenty of the filers made their appeals based on medical reasons — hand sanitizers, surgical gloves and syringes that are critical to the public health crisis — but others took a more expansive view to convince the agency that their products are essential to the country’s well-being.
Skechers USA asked for an exemption for its Wascana-Athas tactical boots, describing them as ideal for first responders and law enforcement personnel. The Fragrance Creators Association requested exemptions for essential oils and other aromatic compounds, making the case that some are used in disinfectants (although they are also widely used in cosmetics and perfumes).
The duties are known as Section 301 tariffs, after the provision of the 1974 Trade Act that justifies them in retaliation for unfair trade practices. At the outset of the COVID-19 outbreak in late February, levies of 7.5% to 25% remained in place on about $330 billion worth of Chinese imports, including critically needed personal protective equipment.
A signature effort of the Trump administration designed to push businesses to reduce their dependence on Chinese imports, the tariffs have largely been absorbed by U.S. retailers and consumers in the form of lower margins and higher prices. Along with duties on steel and aluminum, they now cost consumers approximately $57 billion annually, according to one estimate.
Some companies have responded to the tariffs by moving production back to the U.S., but far more have simply found suppliers outside of China, in countries such as Vietnam and Mexico.
Over the past few years, USTR has undertaken an extensive and laborious process to evaluate individual requests for relief, assessing factors such as the difficulty of obtaining products from other countries. Through four rounds of tariffs, the agency has received nearly 53,000 submissions, of which about 6,400 were approved, with 8,600 still pending as of early June.
In early March, USTR issued narrow exclusions for items such as face masks and single-use stethoscope covers. But according to an analysis by the Peterson Institute for International Economics, tariffs remained on about $5 billion worth of medical goods needed to fight the pandemic. So, under pressure from the business community, USTR also put out a call for companies to make their case for items needed at a time when infection is everywhere, offices are virtual and America’s children are stuck at home indefinitely.
A flooring company called Cali Bamboo, for example, asked for exclusions on types of artificial wood planks that have been used in hospitals, but that it also markets on its website for general use. A chemical company called Lubrizol requested relief for a highly toxic compound called glutaraldehyde that it says could help disinfect potentially coronavirus-infected facilities, but which is also sold as an ingredient in fracking fluids.
In what could be one of the most lucrative exclusions, Pfizer asked for tariffs to go away on Phthalimidopropionaldehyde, an ingredient in its blockbuster blood pressure drug Lipitor. Pfizer said that it was needed to help Americans maintain their cardiovascular health since heart conditions complicate COVID-19 cases — but Lipitor also happens to generate hundreds of millions of dollars a year even without a pandemic.
Some companies interpreted the request for COVID-19-related exclusions even more liberally.
City of Industry, California-based Crown Prince Oysters, for example, asked for an exemption for its smoked oysters from China. The sanitary and shelf-stable shellfish has been in high demand, Chief Financial Officer Chris Bruno wrote in an impassioned letter, but tariffs have sucked away profits and the 28-person company may fold by the end of the year.
“lf Crown Prince goes out of business, Americans will be losing a food source high in protein and undeniably safe to eat during the pandemic,” wrote Bruno, who declined to comment further.
Bumble Bee Foods — the same company that pled guilty to federal price fixing charges in 2017 and has since been acquired by a Taiwanese conglomerate — made a pitch for tuna loins to be considered a “necessary commodity.”
“In the current climate, where Americans are increasingly homebound and concerned with regular access to healthy, affordable food, a reliable and plentiful supply of canned tuna is crucial to the health of American communities,” wrote CEO Jan Tharp, who didn’t reply to a request for further comment.
Requests for goods needed during stay-at-home orders included Nautilus exercise machines, kitchen appliances such as air fryers, coloring books to keep fractious kids occupied and laptop stands to set up home-based workstations.
Carson Optical, based on Long Island, asked for an exemption for optical aids. “Our magnifying products are a lifeline for many people, especially in times like this when they are quarantined from people who may assist them with their daily needs,” wrote Sharon Barnhart, an employee.
The RV Industry Association also appealed for help, saying that more people are taking vacations on the road instead of renting hotel rooms, and that trailers are also needed for first responders.
The trade association for the elevator and escalator industry reasoned that money not spent on elevator tariffs could be spent instead on COVID-19 response. “If USTR removes these tariffs, the decrease in the cost to install and repair elevators and escalators and their associated parts encourages hospitals and other medical facilities to make investments into critical equipment and apply savings directly towards combatting COVID-19,” wrote Dylan Isenberg, director of government affairs for National Elevator Industry Inc.
Some companies didn’t attempt to make much of a COVID-19 connection, using the docket as a chance to make a more general case for clemency during an economic downturn. “China is not stealing our go-kart technology or doing anything wrong except supplying affordable parts as part of a globalized economy,” wrote a commenter using the name Carlie Laves, advocating for the tariff reduction on go-kart parts. “For an AMERICAN small business to pay 25% in tariffs to help kids enjoy everyday outdoor play is absolutely ridiculous.”
Sydney Mintzer, an attorney with Mayer Brown who handles tariff exclusion cases, said he doubts the Trump administration will look favorably upon the nonmedical, more tangentially COVID-19-related products.
“I think they probably will be less sensitive to those, and more sensitive to the more health related issues,” he said.
But for some importers, the comment period was also just a chance to make their case publicly and perhaps bolster their chances with still-pending exclusion requests.
A coalition of bicycle manufacturers and retailers has already won exemptions for children’s bikes, long made almost exclusively in China. Now it’s asking for broader relief for lower-end adult-sized bikes that are flying off shelves as commuters seek an alternative to public transportation, and because tariffs depressed bicycle imports last year, draining inventories.
“It’s an opportunity for our industry to explain what we think the effects of COVID-19 are going to be on our members,” Alex Logemann, PeopleForBikes’ policy counsel, told ProPublica. “That’s not a thing that’s underlined in the exclusion process very well, there’s not a lot of space to explain those factors.”
Many of the products had already been denied for exclusions earlier, such as truck chassis, which a company called CIE Manufacturing argued are necessary during the pandemic to move essential goods. (Federal statistics show that highway freight transportation has been sagging for months.)
“Every container that sits idle as a result of a shortage of chassis products could delay lifesaving equipment, pharmaceuticals or other life necessities from reaching communities, first responders, medical professionals and other individuals who desperately need those shipments to be made,” wrote CIE’s attorney Ronnie Miller, who did not respond to an email seeking further explanation.
Some companies expressed renewed frustration with the exclusion process, which typically requires hiring expensive lawyers and often has arbitrary, unpredictable results.
Danaher, a holding company for medically focused businesses — such as IDT, which made the original COVID-19 test commissioned by the Centers for Disease Control and Prevention — complained that asking staff to beg for tariff relief drained precious time. Industry associations have advocated for blanket tariff relief on medical products, rather than forcing each company to formulate complex justifications.
“The vast majority of Danaher’s original petitions for diagnostic, medical and other life sciences equipment were denied in 2018 and 2019, which is particularly discouraging given products such as iPhones and salad spinners received approval,” the company wrote. “Danaher is concerned about the potentially unnecessary expenditure of additional resources on a petition process with such an uncertain outcome.”
But the comments weren’t all from importers. The docket also includes vehement objections from some domestic producers, such as manufacturers of cotton swabs and washing machines, which argue that USTR shouldn’t let COVID-19 be used as an excuse to abandon its stated goal of pushing companies to restore supply chains in the U.S.
Scott Paul, who as head of the Alliance for American Manufacturing has supported some tariffs, hopes that USTR will stick to the plan and send consistent signals that critical products should be American-made — especially with so many people still out of work.
“I don’t believe that enough businesses have made good faith efforts to try to realign their supply chains,” Paul said. “There’s a lot of capacity in the U.S. to make products. If these importers wanted to help spur an economic recovery, they should take a look domestically.”
