LETTER OF TRANSMITTAL To the Congress of the United States: I am transmitting herewith, in accordance with section 2 of Public Law 89-229, a report concerning the feasibility and desirability of separate classification in the Tariff Schedules of the United States for those articles of manmade fibers commonly referred to as textured or texturized yarns. The report concludes that such separate tariff classification for textured yarns is feasible but not desirable in view of the current situation. Textured yarn production in the United States has been rising steadily in recent years, from 74 million pounds in 1960 to over 250 million pounds in 1965. During this period, the independent throwster industry, which processes a major portion of textured yarn, has had rising employment. At the same time, imports have been declining. The Tariff Commission has estimated that the annual imports of textured yarns declined from more than 2 million pounds in 1962 to less than 1 million pounds in 1965, representing less than one-half of 1 percent of the domestic market. However, the representatives of the domestic industry have argued that a serious threat of injury looms in the future. In part because of this concern, the report recommends that more accurate import data for textured yarns be provided in the future, so that Congress, the executive branch, and the industry can keep close watch on import levels and consider additional measures should they be warranted. I am therefore directing that steps be taken to obtain more accurate data on imports of textured yarns. I am also transmitting for the information of the Congress the report of the Tariff Commission on textured yarns which I requested. THE WHITE HOUSE, February 1, 1966. LYNDON B. JOHNSON. MANMADE FI Under the leadership of Christian Her 2. The President shall promptly caus The results of the discussions amon There are at present reasonably The basic technical and economic d Tariff Commission concluded JANA ention was therefore focused Belar emphasis on the argument Sd inequities in the tariff treat with other types of yarns with ication. The representatives resentatives of the domestic duty at each higher stage of PRESIDENTIAL REPORT ON TEXTURED YARNS OF Background MANMADE FIBERS Under the leadership of Christian Herter, my special representative for trade negotiations, interested agencies of the executive branch have reviewed the report of the Tariff Commission on textured yarn published on December 10, 1965, which was requested by the President, pursuant to Public Law 89-229, section 2, which reads as follows: SEC. 2. The President shall promptly cause a study to be made of the feasibility and desirability of separate classification in the Tariff Schedules of the United States for those yarns of man-made fibers commonly referred to as textured or texturized yarns. He shall report the results of such study, including any recommendations as to the appropriate rate or rates of duty for such yarns, to the House of Representatives and to the Senate not later than February 1, 1966. These agencies have also had before them briefs submitted to the Tariff Commission by representatives of the domestic industry and of the importers. In addition, informal meetings were arranged with representatives of the domestic producers and of importers in order to offer further opportunity to interested parties to express their views and assist the work of the agencies. Conclusions The results of the discussions among the agencies have led to the following conclusions. 1. There are at present reasonably reliable estimates of imports of textured yarns, but precise statistical data on volume and value of such imports are not available. Therefore, the President is requesting, subject to the criteria for statistical annotation of the Tariff Schedules of the United States under section 484(e), Tariff Act of 1930, that additional statistical classes be provided in the Tariff Schedules of the United States, Annotated, in order to obtain accurate import data for textured yarns of manmade fibers in the future. 2. New tariff rates for textured yarns would not be desirable, and therefore it is recommended that no action be taken to reclassify textured yarns in the Tariff Schedules of the United States. Supporting report The basic technical and economic data are contained in the report of the Tariff Commission. The Tariff Commission concluded that it was technically feasible to provide separate tariff classification in the Tariff Schedules of the United States (hereafter referred to as the TSUS) for textured yarns of manmade fibers. Attention was therefore focused on the desirability of separate classification. The representatives of the domestic producers placed particular emphasis on the argument that there are at present anomalies and inequities in the tariff treatment of textured yarns, as compared with other types of yarns with similar characteristics. Representatives of the domestic producers argued that a higher rate of duty at each higher stage of manufacture was the pattern of duties established in the Tariff Act of 1930, and continued in the TSUS, and that the development of textured yarns provides an example of a new product line for which rates ought to be adjusted upward in accord with this pattern or theory. The Tariff Commission report paid particular attention to this argument, and concluded that no one theory or concept of tariff ratemaking is embodied in the TSUS, and that the existing concepts are often conflicting. The Tariff Commission further stated that The adoption of one principle over another in any given case is rarely based purely upon economic considerations alone. More often the selection of principle is based upon a combination of both political and economic considerations. To single out any one theory for predominant status would be to invite requests for substantial revisions of other provisions in the TSUS. In this connection there are many other examples of duty treatment in yarns, fabrics, and other textiles which are not in accord with any single theory. Moreover, rigid adherence to the theory of rate progression with higher value added is itself almost impossible to achieve without a nearly infinite number of rate classes in the TSUS. In practice, however, further value added is at least partially taken into account by the application of ad valorem duties. Thus, as a product in any particular rate class is further processed, and the sales price rises, the actual duty paid rises with the price when ad valorem rates are applied. In the present instance, textured yarns are protected by the same ad valorem rates as raw feed yarns, but of course the duty paid on an equivalent amount of textured yarn is higher. The definition of what constitutes an anomaly or inequity in the tariff schedules could depend in practice upon many considerations, including the particular theory of ratemaking one wished to apply. Numerous examples of inconsistencies by one or another standard can of course be found in the TSUS. With regard to textured yarns, in some cases anomalies were said to exist between products entirely dissimilar in method of production, and similar only in the fact that there was some competition in use. There is no evidence of significant trade diversion or loophole trade as a result of whatever anomalies exist. In the absence of significant trade diversion or any other argument that the anomalies or inequities provided for undesirable access to the domestic economy, it is concluded that anomalies or inequities, even where they might conceivably exist, are inconsequential in trade impact. The question was raised as to whether technological developments had overtaken the tariff schedules. To revise the TSUS in accord with each and every change in technology in each and every product is neither feasible nor desirable. The TSUS is designed to be comprehensive. As new products come along they are placed in one or another class. That a technological change has taken place which was not anticipated in previous years does not provide a reason per se for changing duty treatment. One possible consideration in favor of higher duties for textured yarns would be whether there was any economic justification for a change from present practice. The 1965 level of imports of textured yarns, as estimated by the Tariff Commission, would be under 1 million pounds, as against an estimated domestic production of more than 250 |