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possessions on local businesses and from Federal excise taxes rebated by the United States to the possessions.
The current limit of 200 cigarettes was imposed by the Customs Procedure Reform Act of 1978 to prevent abuses in the cigarette trade with Canada. We believe these abuses would not recur because there would be no economic incentive in traveling to the territories merely to purchase 1,000 cigarettes. We believe any potential adverse reaction from this bill on domestic cigarette manufacturers would be insignificant.
Enactment of the bill would result in some loss of revenue to the United States due to increased duty-free treatment for these cigarettes. However, there is no way of precisely calculating the revenue loss since it is impossible to predict the exact number of cigarettes which will enter the United States as a result of the enactment of the bill. Since statistics are not currently kept on duty-free imports of these products from the insular possessions, it is not possible to extrapolate future imports based on current trade. However, in spite of these difficulties the U.S. ITC estimates that the revenue loss to the United States would be minimal.
On the fourth and final bill the administration has no objection to the enactment of H.R. 7802. This bill would lower the tariff on ephedrine, racephedrine and their salts to 4.8 percent ad valorem immediately upon passage of the bill into law and would further gradually reduce the tariff to 3.7 percent ad valorem over the next 6 years. These products are benzenoid alkaloids and are used by pharmaceutical companies to manufacture products designed to relieve respiratory problems. These products currently enter under TSUS item 411.32 at a tariff rate of 15.5 percent ad valorem. In the absence of this bill the duty on this item is scheduled to be reduced in six equal stages to 7.6 percent ad valorem by 1987 as a result of the Multilateral Trade Negotiations. This bill would equalize the tariffs on benzenoid alkaloid and nonbenzenoid alkaloid-or socalled natural-ephedrine. Nonbenzenoid ephedrine currently enters under TSUS item 737.20 at a rate of duty of 4.8 percent ad valorem.
We understand that benzenoid and nonbenzenoid ephedrine can be used interchangeably as an ingredient in pharmaceutical products. We further understand that ephedrine and racephedrine—the latter a raw material chemically similar to ephedrine-are produced captively but not commercially in the United States.
Domestic pharmaceutical companies who do not produce these products in-house have had to source their needs abroad. With the granting of the most-favored-nation treatment to the People's Republic of China, significant quantities of nonbenzenoid ephedrine, formerly uneconomical to import because of the high column 2 tariff of 25 percent ad valorem have begun to be imported. This bill, by equalizing the duties on benzenoid and nonbenzenoid ephedrine, would allow domestic pharmaceutical companies to use either form of ephredrine to meet their raw material needs. By reducing raw material cost these companies could better compete with imports of finished pharmaceutical goods. For these reasons the administration has no objection to enactment of H.R. 7802. Mr. VANIK. On 7709 the ITC report on the bill suggests an effective date of 30 days after enactment to give lead time for the Customs and for the public at large. Do you have a problem with that?
Mr. CAVITT. No, Mr. Chairman.
Mr. VANIK. With respect to 7770, what was the annual amount of duties collected on used containers last year?
Mr. Cavitt. Mr. Chairman, this is a complex situation. These boxes that are imported, as well as those used from domestic production, are so-called instruments of international trade. As such, when initially imported and as long as they enter in that category, they are not subject to the duty. A bond is to be posted either guaranteeing export or against payment of the duty should the boxes eventually be retained in this country. But at the time of their importation, duties are not collected.
So the data we do have available, therefore, covers boxes which have been domesticated during recent years and, therefore, have found their way into trade statistics. I am not sure, however, that that is satisfactory for your purposes.
Mr. VANIK. All right. Do you have any questions, Mr. Jenkins? Mr. JENKINS. Yes, sir, I do.
Mr. VANIK. Go ahead. You may proceed on all three bills. I assume your questions will deal with 7660.
Mr. JENKINS. Yes, sir, it will.
Mr. Cavitt, let me follow up for a moment. What figures do you have on revenue? I am not concerned with the bond requirements. I am talking about actual revenues from the duties imposed on containers.
Mr. CAVITT. Mr. Jenkins, some figures have been run calculating the duty on the basis of the imports themselves. For example, in 1978 there were imports of $63.7 million, which would work out to a calculated duty of $3.1 million.
Mr. JENKINS. Now of that $63 million, how many of those--do you have that broken down as to how many of those were placed back into international trade and therefore excluded from duty?
Mr. Cavitt. No, sir, I do not.
Mr. JENKINS. Do you have any breakdown that would delineate the narrow restrictions that I have in this particular bill, the 20 and 40 foot, as opposed to the refrigerated containers or as opposed to the tanker-type containers?
Mr. ARMSTRONG. Mr. Jenkins, Armour Armstrong, I am with the Maritime Administration in the Department of Commerce.
The type of sizes that are covered by the bill as drafted are for various types in those sizes. So that the distinction that you are making between refrigerated boxes or tank containers as opposed to the straight dry van container would all be in that bill.
Mr. JENKINS. Let me move along just for a couple of moments so that the record can be correct, if a foreign manufacturer produces containers that are subject to the present 4.2 percent, is it 4.2—
Mr. CAVITT. 4.4 percent.
Mr. JENKINS [continuing]. To the 4.4 percent tariff and sells them on the American market for use in trade, you do not collect any tariffs, do you?
Mr. CAVITT. That is correct.
over $2,000, we assume that there would be a large increase in the number of containers entered for consumption. Each container would require separate appraisal by the U.S. Customs Service. Therefore, costs of administering this tariff would increase accordingly.
Should the bill be amended to apply to intermodal freight containers, each having a minimum rated gross weight capacity of 40,000 pounds
and a date of manufacture that precedes January 1 of the calendar year in which entered by not less than 5 years, the additional costs of administering this tariff provision would be minimal since those containers would not have to be appraised individually.
Mr. JENKINS. Thank you.
Now we will proceed to the other witnesses. We will start off with the witnesses on H.R. 6750. First we have our distinguished colleague, Mr. Bob Edgar of Pennsylvania, and Mr. Longaker of Hover Systems Inc.
Mr. Edgar, we are pleased to have your testimony. We have always appreciated your counsel and advice. We appreciate your testimony on this issue. STATEMENT OF HON. ROBERT W. EDGAR, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF PENNSYLVANIA Mr. EDGAR. Thank you, Mr. Chairman. With me this afternoon, Mr. Chairman, is Mr. R. J. Longaker, who is vice president and general manager of Hover Systems, Inc. Together we would like to speak on H.R. 6750.
Mr. Chairman, and members of the subcommittee, I am pleased to be able to appear before the subcommittee today to introduce representatives of Hover Systems, Inc., and to speak in behalf of H.R. 6750, which is very important to their continued success as an employer in my district.
Hover Systems, Inc. purchases a special rubberized fabric from which it manufactures the skirts which encircle the bottoms of Hovercraft, Hoverbarges, and other unique vehicles which ride on a cushion of air. There is only one company in the world which makes a fabric tough enough to withstand the wear and tear to which a Hovercraft skirt is subjected, and that company is located in England. HSI has not been able to locate a U.S. company which has the capability and the interest to produce a fabric to meet their unique needs.
HŠI has until now both purchased its supply of fabric and done the manufacturing of skirts into a finished product in England. The skirts are then imported with a modest tariff and installed on craft manufacturered here in the United States.
HSI would now like to begin manufacturing the skirts in its plant here in Eddystone, Pa., in effect importing approximately 10 jobs. The obstacle to this desirable import of jobs is that the raw fabric, under its present textile designation, carries an enormous tariff which makes its import for manufacturing into finished products too costly.
As there are no U.S. manufacturers interested in making this fabric, such a high tariff protects no American firm. I introduced H.R. 6750 in order to remove this essentially useless tariff because it is blocking the import of jobs as well as the import of the fabric.
I leave it to the officials of HSI to discuss the technical aspects of the fabric and their manufacturing plans. They testified that H.R. 6750 is acceptable to them with some minor modifications and