Senate pushes for looser rules on China tariffs

WASHINGTON—The U.S. Senate has endorsed more relaxed rules for granting exclusions from China tariffs, giving a boost to a political priority of the American Chemistry Council and the plastics resin sector.

The May 4 vote instructs Senate negotiators to try to include an exclusion process for the China tariffs in a large domestic and China manufacturing bill they are working out with counterparts in the House.

The Senate action is not binding but increases the likelihood that more relaxed exclusions, which have been a priority of ACC, could emerge in a new version of the Senate-passed United States Innovation and Competition Act and the House-passed America Creating Opportunities for Manufacturing, Preeminence in Technology, and Economic Strength Act.

The two plans, which include a range of measures to help U.S. semiconductor manufacturing and other industries, have enjoyed fairly broad support in Congress. But there's no guarantee that the narrower tariff provision will be part of any final bill.

ACC argued in a December study that China tariffs are worsening inflation and supply chain problems by making it more difficult to secure manufacturing inputs.

It said that only about 20 percent of the 1,300 requests for relief from China tariffs on plastic products were granted between mid-2018, when the tariffs began, and mid-2021. Only about 10 percent of requests in the broader chemicals industry were granted.

While the China tariffs have at times split the industry—mold makers, for example, mounted an aggressive campaign in favor of tariffs while some plastics processors sought exclusions from mold tariffs—ACC and its large chemical and resin company members have consistently opposed the tariffs, partly because they worried U.S. resin exports could face retaliation.

In a statement, ACC said the Senate's motion to instruct, a process known as MTI, was a step forward.

"By reopening and extending the exclusions process for Section 301 tariffs, the proposed MTI would be an important first step toward alleviating the economic burden tariffs have caused to American businesses and consumers," ACC said.

ACC said the tariffs, which were put in place by the administration of President Donald Trump under what's widely referred to as Section 301 of U.S. trade laws, did not reduce U.S. chemical imports but did hurt domestic manufacturing.

"The tariffs largely disrupted the U.S. chemical industry's supply chains and business operations," ACC said. "It's time to bring an end to these burdensome tariffs."

The sponsor of the Senate exclusion amendment, Sen. Pat Toomey, R-Penn., said in a May 4 statement that the Trump administration created an exclusion process for its tariffs but said President Joe Biden's government has "thus far failed to fully reinstate this exclusion process."

"American manufacturing must be able to effectively compete with everyone, including China," Toomey said. "With a Section 301 tariff exclusion process, American manufacturers will be better positioned to obtain the materials they need for production."

The Senate voted 53-43 in favor of the exclusion process, but the House version of the domestic manufacturing bill does not contain similar exclusion language.

In a speech on the Senate floor, Sen. Sherrod Brown, D-Ohio, urged the body to reject Toomey's plan, saying it would weaken incentives to invest in U.S. manufacturing.

"These tariffs are in place because of Chinese unfair trade practices that target our industrial base and jobs in Pennsylvania and Ohio and New Jersey," Brown said. "Creating an overly broad exclusion process that ties our hands would take away leverage we need to pressure China to change its behavior."

Brown said unions, some manufacturers and U.S. Trade Representative Katherine Tai oppose Toomey's amendment.

Toomey, however, said in the Senate chamber that his plan would only seek to reestablish an exclusion process that has lapsed and would not repeal existing China tariffs or prevent new ones from being put in place.

The exclusion language also gives "considerable flexibility" to Tai's office, Toomey said. A similar plan passed the Senate last year on a 91-4 vote, he said.

"The bipartisan language simply helps ensure that American manufacturers remain competitive," Toomey said. "Nearly every one of us submitted letters of request from constituent companies asking for exclusions."

ACC is part of a broader manufacturing coalition that submitted a letter May 2 to congressional leaders, urging support for an exclusion process and saying that an alternative plan put forward by Tai's office was too limited. That letter was also signed by the Vinyl Institute and the Window and Door Manufacturers Association.