What's in a name? Low tariffs
When a large, New England-based seafood company tried to import crab legs from Canada, United States Customs Service officials clamped on the 7.5 percent duty usually assigned to crab meat.Skip to next paragraph
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But the importer balked, claiming the legs ought to be labeled ''other,'' which comes across the docks duty free.
''It took us two months to do it, but we won,'' says Mary Wright, the Boston lawyer who convinced Customs that Canadian crab legs - since they're encased in shells - are not meat. The new designation saved her client an estimated $750, 000 in duties over two years.
This is one example of the legitimate tactics increasingly used by importers to steer clear of US trade barriers - in this case, by redefining the item.
''The more restrictive the barriers are, the more incentive there is to figure out ways around them,'' says Robert Baldwin, an international trade specialist at the University of Wisconsin.
Pressure to protect domestic industries from imports is always strongest during economic hard times, he says.
Says Edward Kittredge, a spokesman for the Customs Service in Washington: ''People alter goods to get the best treatment under the system. It's a natural response to our tax laws.''
An array of import specialists - including one in New York who deals only in lamps - spend their days negotiating with importers over classifications and definitions. ''There's a constant back-and-forth between the importers and us,'' Mr. Kittredge says.
Congress, meanwhile, is considering a number of measures that would hoist higher barriers against some foreign goods. The most highly publicized is the so-called domestic content bill, which would require that a certain percentage of components in foreign cars sold in the US be made in this country.
Although not expected to pass the Senate, the bill is considered a warning shot over the heads of Japanese, who are threatening to drop voluntary auto-export quotas at the end of next March.
Other protectionist measures would do everything from making it easier for US manufacturers to prove they've been damaged by imports to increasing penalties on foreign companies that dump underpriced goods on the American market.
The Reagan administration officially favors free trade, but it has made some significant concessions to protectionist forces.
The most recent example came last week, when President Reagan ordered four years of protection for the specialty steel industry. A few months ago it was motorcycles - specifically, Harley-Davidson - which won a tenfold hike in the duty on imported heavyweight bikes.
''We're not seeing that many broad-based attacks on free trade,'' says Ken Baaden, director of member services for the American Importers Association. ''Instead, individual companies are figuring out how to use existing trade laws to protect themselves.''
It's estimated that more than 10,000 tariff classifications govern imports to this country. The system is scheduled to be revamped by 1985, streamlining and updating what has become a quagmire of complex regulations.
In the meantime, importers have developed sophisticated ways to use existing rules to their advantage.
When it comes to certain manufactured products, for example, the level of assembly makes a difference. Several years ago, the US put a whopping 25 percent duty on small trucks from Japan.
''But we didn't raise the level on unassembled 'knocked-down' trucks,'' says Dr. Baldwin. ''So they just started funneling them in that way.''
He says the most popular form of trade protection is the nontariff barrier, such as a quota. These barriers are also the easiest to steer around.
Consider, for example, the quota on sugar imposed last May. American-grown sugar costs as much as three times the world price. But only the pure thing, defined as 100 percent sucrose, is subject to restrictions. Inventive importers now simply blend a good portion of their sugar products, creating such combinations as 92 percent sucrose with 8 percent dextrose.
Quotas are usually aimed at specific countries. But even this is less than effective, since production can quickly shift among developing nations.
After an influx of shoes from South Korea and Taiwan in the late 1970s, for example, the US slapped on import restrictions aimed at those two nations. Just a year later, however, imports from Brazil, Hong Kong, and Italy had more than filled the gap.
''You can go after the source of the immediate problem,'' says the University of Wisconsin's Baldwin. ''But you can't do anything about the countries that step in to substitute, even when you know exactly what's going to happen.''
Rather than shift production, manufacturers often ''structure'' goods to take advantage of loopholes in the import regulations.
Imported jogging shoes, for instance, were supposed to be made less competitive in the US market through a higher duty on footgear made mostly of rubber and plastic. But if more than 50 percent of the value for the uppers is deemed to be leather, the shoes trot in at a dramatically lower duty.
Today there's an ongoing dispute over exactly how much leather it takes to make the difference. Meanwhile, most imported running shoes have spiffy leather stripes and trim, largely in an effort to qualify for the lower rate.
Structured goods include everything from cotton sweaters blended with linen to avoid restrictive quotas on cotton textiles to women's shoes made with thin layers of leather covering the rubber soles. (Pure rubber soles pay a higher duty.)
Many trade experts say that besides being easy to circumvent, import restrictions hinder the long-term competitiveness of US industry.
Japanese cars, for instance, have become larger and more loaded with expensive gadgets during the recent years of voluntary quotas. So while the raw number of cars from Japan has held steady, they've edged their way into the luxury market once dominated by Detroit.