MTB, GSP Retroactivity Likely Despite Budgetary Concerns, Say Industry Officials

The most likely route to passage of such legislation continues to rest in an omnibus trade package that includes Trade Promotion Authority (TPA) as its flagship item with GSP renewal and MTB fundamental components, officials say (see 13081212). That combination will make GSP renewal, MTB legislation and, particularly, retroactivity provisions negligible financially, said David Olave, Director of International Trade and Government Relations at Sandler Travis & Rosenberg. “The whole bill is going to be so expensive, and so much offset will be required to get the bill passed, they won’t get technical in the retroactivity discussion…Compared to the whole bill, it would be so minimal,” said Olave. “If GSP and MTB are passed within a larger trade vehicle, retroactivity is likely. If they are passed independently, retroactivity is less likely.”

Retroactivity would account for a very small piece of the overall budget, agreed Joseph Spraragen, a federal regulatory compliance associate at Grunfeld, Desiderio and former attorney in the Office of the Chief Counsel of the US Customs Service, which was rolled into the present-day CBP.“There is no requirement that Congress includes retroactivity. But in the scheme of budgetary concerns, retroactivity is not very important," he said. "And importers are assuming they will receive these products duty free. There is significant interest on behalf of domestic parties to see that status quo maintained…It has a disproportionate impact on those in these fields…importers, manufactures and consumers. But it’s not a significant revenue source.” The House Ways and Means Committee and the Senate Finance Committee did not respond for comment.

The House Ways and Means Committee leadership introduced a GSP renewal bill (here) and MTB bill, entitled the U.S. Job Creation and Manufacturing Competitiveness Act of 2013 (here), on July 17. The Senate led a last ditch effort to pass GSP renewal legislation prior to its July 31 expiration (see 13071914) but Sen. Tom Coburn, R-Okla., prevented passage due to opposition to a funding mechanism included in the bill (see 13073016). The Senator would be unable to prevent an omnibus bill that would require Senate floor time, said a number of officials.

Similar trade law renewals have nearly invariably passed with retroactivity in the past, according to the officials. House Ways and Means sponsors, however, did not include retroactivity in the 2013 MTB bill (see 13071816). Moreover, the Senate has yet to adopt the legislation or introduce separate legislation due to a Republican moratorium on earmarks. “The House chose not to put the retroactive language in its bill,” said Olave. “How is the Senate going to incorporate retroactivity if they’re already having problems with Senate Republicans? The Senate will have to add it.” The House leaders chose not to include MTB retroactivity in order to maintain a sense of urgency, said one industry executive.

Another consideration will be the length of time between expiration of MTB and a potential renewal, said one observer. “MTB expired a year ago so it’s harder to make an argument for retroactivity because it would be expensive…Every day that elapses, it’s less likely to include retroactivity. All the folks involved would want that and they’d try to find a way to get it in,” said an industry executive. “There are coalitions pushing very hard for retroactivity. The more time there is from the expiration to when the bills pass…that’s money. The longer the lapse period is, the more expensive it will be to be retroactive.” Retroactivity for a GSP renewal would likely be less expensive because it expired more recently. The last MTB bill, however, expired on Dec. 31.

Should an MTB bill pass with retroactivity, the legislation will not be an elixir, said Spraragen. The process for recouping funds is burdensome and many importers won't be able to regain all the lost benefits, he added. The focus, however, remains on passing MTB and GSP renewal legislation in a political environment of gridlock, said Spraragen. “The impasse’s greatest effect is pushing the issue of renewal of GSP off the radar screen. There are other issues that need to be addressed first,” said Spraragen. “The impasse has created an environment in which all legislative progress is impeded, because of the political stalemate we’re in.”

Senate Finance Committee members Rob Portman, R-Ohio, and Claire McCaskill, D-Mo., reintroduced a bill in April that revamps the MTB submission process to the International Trade Commission (see 13042404). That legislation aims to circumvent the earmarks moratorium, said Jessica Lemos, director- International Trade Policy at the National Association of Manufacturers (NAM). “The attempt is to address the concerns that the benefits are earmarks. That’s what Senator McCaskill attempted to do with her legislation. She and Senator Portman were trying to change that process and take ‘pay for play’ out of the process,” said Lemos. Failure to act on a MTB bill will hike $748 million in taxes on manufacturers over the next three years alone, resulting in economic losses of $1.857 billion over three years, according to NAM findings (here).

The Congressional Budget Office (CBO) has yet to release a rating on the House-introduced MTB and GSP renewal bills. Lawmakers last passed an omnibus trade package in 2002. The CBO estimated (here) that bill, entitled the Trade Act of 2002, increased net direct spending by roughly $6.4 billion and reduced government revenues by $5.9 billion over a projected ten-year period. The bill included TPA, TAA, GSP renewal and certain MTB provisions, among other trade measures. The TAA component constituted the bulk of the CBO-estimated increased spending and lost revenue, according to the CBO breakdown. Sen. Finance Committee Chairman Max Baucus, D-Mont., has insisted TAA accompany TPA in a 2013 package (see 13073106). -- Brian Dabbs