Fighting a tax on tea, again
Tea and instant/extracts of tea have become the latest product victims in the United States’ tariff war with China.
To summarize the latest proposed government tariff, “In accordance with the direction of the President, the US Trade Representative (Trade Representative) proposes a modification of the action being taken in this Section 301 investigation of the acts, policies, and practices of the Government of China related to technology transfer, intellectual property, and innovation. The proposed modification is to take further action in the form of an additional ad valorem duty of up to 25 percent on products of China with an annual trade value of approximately [USD] $300 billion.”
Tea (0902 series) and instant/extracts of tea (2101.20 series) are now included. USTR’s communication includes an appendix listing all the HTIS codes under consideration (essentially all products imported from China). [See: https://www.regulations.gov/document?D=USTR-2019-0004-0001]
This is the first time that tea has been under consideration. Coffee, mate, herbs and spices are also included for the first time. The Office of the US Trade Representative (USTR) is permitting public comment and will hold a public hearing regarding this proposed modification. Peter Goggi, president of the Tea Association of the USA sent a written request to the USTR office to appear and provide oral testimony on behalf of the New York-based association. He also urged members/member companies of the Tea Association of the USA to provide comments in opposition to the imposition of tariffs on Chinese Tea.
In response to the proposed modification of action pursuant to section 301 (China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation), the Tea Association of the USA recommends removing black and green teas and instant/extracts of tea from the proposed product list. In his request to present testimony to the Section 301 Committee, Goggi outlined the importance of the tea industry in the United States and the disproportionate economic harm these tariffs would have on US tea business and US consumers. In his explanation, Goggi noted the following:
- The Tax and Duty Free import of tea was one of the founding tenets of the American Revolution. The free and unencumbered import of pure tea from its origin is a centuries old tradition.
- The purpose of the tariffs is to change China’s practices relating to technology transfers, intellectual property and innovation. Imposing punitive tariffs on tea would not be effective in changing these practices because tea exports are a very small part of China’s overall tea sector. Most tea that China produces is consumed domestically. Moreover, the tea trade does not suffer from unfair technology transfers, theft of intellectual property or stifled innovation. Further, punitive tariffs would have a disproportionate economic impact on small and medium-sized enterprises because most of the US importers (those that pay the tariffs) are small businesses.
- The United States is not a tea-producing nation. There is virtually no commercial tea grown that needs to be protected by tariffs, nor are there any farm-based jobs that would be protected.
- Like wine, tea varies dramatically due to local terroir (geography, climate and local manufacturing techniques). China has many unique teas that are unavailable elsewhere, due to their unique cultivars, terroirs and processing methods. In the area of specialty tea, many teas are unable to be sourced anywhere else in the world.
- Tea production long predates China’s rise as a manufacturing powerhouse – it is a rural-based, long-term crop that was not designed to capture foreign business. Its primary market is domestic, which will benefit from a rise in supply due to smaller exports. Further, the percentage of tea exported from China is minimal and China would not be impacted.
[Referencing the International Tea Committee (ITC) 2017 Annual Bulletin of Statistics, Goggi pointed out that China produces ~5.2 billion pounds of tea and retains ~4.5 billion pounds for domestic consumption – China exports 0.042 billion pounds (42,744,989 pounds) to the US (less than 1% of total production). He stressed that this quantity is not a meaningful amount of tea, considering their huge production.]
- The imposition of tariffs on Chinese tea will not impact the Chinese producer, exporter or government. However, it will negatively impact the US consumer.
In closing his letter to the Office of the USTR, Goggi wrote, “We strongly urge you to forego a tax (tariff) on tea as it will negatively impact American businesses and citizens and have no effect on the trade issues with China.”
Key dates for submitting comments to the US Trade Representative office are:
- 10 June 2019 – due date for filing requests to appear and a summary of expected testimony at the public hearing.
- 17 June 2019 – due date for submission of written comments.
- 17 June 2019 – public hearing convened in Washington D.C.
- Seven Days Post Hearing – due date for submission of post-hearing rebuttal statements.
I am certain the proposed tariff on tea and instant/extract of tea will be a primary topic of conversation during the upcoming World Tea Expo in Las Vegas (10-13 June), where China (as well as several other Asian countries) has a significant presence.
For more information, visit: www.teausa.org.