WORLD TRADE By E A R L A N D E R S O N Senior Editor
The case for drawback
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Just as the woman in the television commercial got more than she bargained for when she bought a particular detergent, the Tariff Commission got more than it bargained for when it started casting doubts about the value of drawback as an export promotion tool. Under the drawback system, U.S. companies can claim a 99% rebate on customs duties collected on imports, if those imports are used to make a product for the export market. Drawback certainly isn't new. It has been around, in one form or another, since Congress passed the first tariff act in 1789. Present drawback provisions are housed in section 313 of the Tariff Act of 1930, as amended. Nor is drawback die most rewarding export incentive that can be devised. Nevertheless, American businessmen feel that, despite its limitations, it is better than no incentive at all. Throughout the past year, companies and industry groups—the Manufacturing Chemists Association (MCA) among them—have bombarded the Tariff Commission with protests against the commission's tentative recommendations that drawback be abolished. They have repeated their case during the past two weeks at public hearings held by the commission. The Tariff Commission's complaint against drawback has nothing to do with legality or morality. It simply feels that the benefits of drawback as an export incentive aren't worth the effort and cost of administering the program. In 1967, for instance, total U.S. exports were $31.5 billion; exports under drawback were $3.4 billion, and the Government refunded only $51 million in customs duties. This $51 million, goes the Tariff Commission argument, represents only 1.5% of drawback exports and a mere 0.16% of total exports. To the Tariff Commission, these small percentages mean that drawback is insignificant as an export promotion device and its loss would be inconsequential to exporters. The business community, however, disagrees. The Commerce and Industry Association of New York, for instance, contends that the amount of drawback refunds, however small, shouldn't be compared to total export values. Instead, it should be considered as an absolute amount of money that helps exporters to consummate foreign salessales that otherwise might have been lost. In that light, says C&IA, drawback payments are not insignificant but vital. Drawback payments are not insignificant, either, to many companies that rely on them, even if the number of such companies is smaller than the Government would like. In some companies, drawback refunds amount to 5%, even 10%, of the export value of their products. Without drawback, these companies couldn't remain competitive in foreign markets. If the Customs Bureau complains about the administrative expense of handling drawback, so does industry. Some companies say that t'hey don't bother filing for drawback refunds because 1:hey can't afford the time and expense involved in the paper work. The solution, however, is not to abolish the system. Instead, more emphasis should be placed upon simplifying administrative procedures. Nobody knows yet what will come out of the Tariff Commission hearings. The commission, of course, can't abolish drawback; Congress must do that. Industrial defenders of drawback, naturally, don't even want such a recommendation to reach the Ways and Means Committee. But even if it does, the committee should turn thumbs down on it. With our trade balance what it is today, any export incentive is better than none.
