MTB Section 301 Restriction Could Significantly Reduce Refunds, Attorney Says

The restriction that products that owe Section 301 tariffs will not be able to avoid Column 1 tariffs through the Miscellaneous Tariff Bill could greatly reduce how much money is saved by importers.

According to a statement from the Society of Chemical Manufacturers and Affiliates in 2019, chemical imports received 56% of the savings from the previous MTB. And, according to the American Chemistry Council, 76% of the chemicals and plastics covered by the MTB in 2018 were also on Section 301 lists.

While the MTB introduced by the House Ways and Means Trade Subcommittee chairman May 14 would allow importers who were ever granted a Section 301 exclusion to receive the MTB benefits, this restriction is likely to be "a big hit" for beneficiaries, according to Sandler Travis Associate David Olave.

"I have clients who are using MTB for imports from Brazil and Europe and a few others, but a big chunk of the MTB requests are going to be for products made in China," he said. "It's a significant reduction in the potential scope of benefit for importers."

When asked how much the restriction would affect the chemical industry, ACC downplayed the significance of the restriction, saying it "wouldn’t reduce the usefulness of these tariff reductions to the U.S. chemical industry despite the removal of certain products covered by Section 301. Many chemicals made in the United States don't rely on inputs covered under Section 301, including many highly innovative, organic, and bio-based chemical products used for key domestic supply chains, including for public health, agriculture and food production, energy, and automotive goods. The targeted nature of the MTB Reform Act would still result in considerable tariff savings and lower prices for the U.S. chemical industry and make the U.S. chemical products more competitive, including with respect to China."

If the bill passes, it would entail far more red tape than in the past. While there was a six-year period without an MTB in the 2010s, the next MTB was not retroactive. This one is retroactive from the beginning of 2021 until enactment.

Olave noted that for the Generalized System of Preferences, filers put an "A" special program indicator on GSP-eligible entries while that program is lapsed, so refunds are straightforward if a retroactive bill passes. For the MTB, there is no such marker. "The reconciliation process is difficult," he said.

When a Harmonized Tariff Schedule code covers numerous products, it's possible a company imported some products that were covered by MTB and others that weren't in the same shipment under the same HTS code.

Adding to the complexity is the fact that supply chains have shifted over the years as a result of the 301 tariffs. So a client that imported a product from China in 2021 wouldn't be able to get a most-favored-nation tariff refund on those entries, but when the company started buying the product from Vietnam or Europe in 2022 or 2023, those entries are eligible.

Olave said even with this burden, he expects many companies will go through the trouble. Many small firms may only import one or two items covered by MTB, so putting together the documentation will be simpler.

The next round of petitions for MTB wouldn't allow any products from China, even those not covered by Section 301 tariffs. Those petitions would open in October 2025. Olave noted that the International Trade Commission usually takes about nine months to make its determinations on whether the requests have domestic competition -- they can't -- and how large the tariff savings would be at historical import levels. No one item can save more than $500,000 in a year across all importers. So, depending on the volume of imports at the time of analysis, the tariff can be eliminated, or reduced.

This MTB only goes through the end of 2025, so Olave said that for most of 2026, importers would be paying those tariffs again -- "and then that's even assuming Congress passes something shortly after ITC review."

The bill had 17 co-sponsors, including the House deputy whip, but no Democrats. Trade Subcommittee Chairman Adrian Smith, R-Mo., told International Trade Today in a hallway interview May 15 that he hadn't approached any Democrats to co-sponsor the bill, but now that it has been introduced, he'll invite Democrats to co-sponsor it.

Olave said, "I'm discouraged by the lack of Democratic support for this bill," since all bills need members from both parties to become law with such an evenly divided Congress. He said he understood why Democrats were not supporting it for now, since some of the leaders of Democrats' trade policy had a different approach to MTB. When Rep. Earl Blumenauer, D-Ore., led the trade subcommittee, his MTB said that, on the next round of petitions, no finished goods would be eligible for the break.

The need for savings among manufacturers, to improve their cost competitiveness, is the primary talking point for the bill. Smith said, "It all boils down to domestic manufacturing. That's why I'm working on this, it's so we can reduce the input costs for our domestic manufacturers."

However, the MTB covers more than manufacturing inputs, with items such as mirrors, microfiber cleaning cloths, shoes, aluminum shower caddies, curtain rods and other consumer goods on the list.

Olave said the MTB has always included consumer goods, and gave an example: one of his clients brings in peperoncini from Greece. They're not produced in the U.S., and the tariffs are small enough that it comes in under the $500,000 cap.

Olave said, "It is a very, very complex and difficult Congress to navigate, particularly on issues of trade, where you get attacked both on the right and the left." He said he hopes there will be a trade package in the lame duck session in December, including MTB and GSP, and perhaps an early renewal of the Haitian trade preferences and African Growth and Opportunity Act. But, he acknowledged, he'd give it lower than 50% odds right now.