osition to say. The Commission merely notes that, even with the adoption of the roposed amendments, there would still remain the question in each case whether "bounty or grant" has been paid or bestowed within the meaning of section 303. or example, at present there may be circumstances under which the incidence multiple rates of exchange in a particular situation might be the basis of a etermination by the Secretary of the Treasury that a “bounty or grant” is being aid or bestowed within the meaning of section 303. The present statute does ot exclude any method by which a 'bounty or grant" may be paid or bestowed. SECTION 12-PROPOSED AMENDMENTS TO THE ANTIDUMPING ACT OF 1921 Section 12 of H. R. 4294 would amend section 201 (a) of the Antidumping Act f 1921. The principal effect of the amendment would be to eliminate the provion in the Antidumping Act which makes the imposition of dumping duties conngent upon a finding that “an industry in the United States is being or is likely › be injured, or is prevented from being established" by reason of the importaon of the merchandise in question. The Antidumping Act of 1921 at present is aimed at only such dumping which injurious to a domestic industry or which prevents the establishment of a omestic industry. The proposed amendment would eliminate this concept and ondemn dumping per se. The inclusion in the present law of the language eferred to above was intended to confine the antidumping measures provided for herein to those instances where the dumping was injurious to the industrial onomy of the United States and to tolerate "dumping" when it had no such ffect. Whether consuming interests in the United States should be deprived of bargain" foreign merchandise when no harm results to the domestic industrial conomy is a question of policy for the Congress to decide. The Commission has no information regarding the experience of the Treasury epartment in administering the “injury" provision of the Antidumping Act, but : knows from its own experience that the question of determining injury to the omestic industry by reason of imports is not always an easy one. It is assumed hat the committee in charge of the proposed legislation will obtain the Treasury Department's views on the proposed amendment. The attention of the committee is called to the provisions of article VI of the General Agreement on Tariffs and Trade. Paragraph 1 reads in part as follows: "The contracting parties recognize that dumping, by which products of one country are introduced into the commerce of another country at less than he normal value of such products, is to be condemned if it causes or threatens naterial injury to an established industry in the territory of a contracting arty or materially retards the establishment of a domestic industry." l'aragraph 6 of article VI reads as follows: "No contracting party shall levy any antidumping or countervailing duty on the importation of any product of the territory of another contracting party unless it determines that the effect of the dumping or subsidization, as the ase may be, is such as to cause or threaten material injury to an established lomestic industry, or is such as to retard materially the establishment of a omestic industry. The contracting parties may waive the requirements of this paragraph so as to permit a contracting party to levy an antidumping or Countervailing duty on the importation of any product for the purpose of offsetting dumping or subsidization which causes or threatens material injury to an industry in the territory of another contracting party exporting the product Concerned to the territory of the importing contracting party." The general agreement is being applied by the contracting parties thereto pursuant to the "Protocol of Provisional Application of the General Agreement on Tariffs and Trade, dated October 30, 1947," under which the United States has undertaken to apply provisionally, on and after January 1, 1948, "Part II of [the general agreement] to the fullest extent not inconsistent with existing legislation." Since article VI of the general agreement is in part II of that agreement, the United States by the aforementioned protocol has undertaken to apply article VI of the general agreement to the fullest extent not inconsistent with legislation existing on October 30, 1947. Accordingly, it would appear that the elimination from the Antidumping Act of 1921 of the "injury” criterion, as proposed by H. R. 4294, might lead to the imposition of antidumping duties contrary to paragraph 6 of article VI of the General Agreement on Tariffs and Trade. SECTION 13-PROPOSED IMPORT QUOTAS FOR CRUDE PETROLEUM AND RESIDUAL FUEL NOTE. Reference to tables herein are to tables in appendix A Introduction Section 13 of H. R. 4294 would amend part I of title III of the Tariff Act of 1930, as amended, by inserting after section 321 four new sections (322, 323, 32and 325). Subsection (a) of the proposed section 322 of the tariff act woul impose an overall import quota on "crude petroleum and all products derive. therefrom (including residual fuel oil and oil for supplies of vessels at Unite States ports but excluding oil for manufacture and reexport)." The total quar tity of these products (in the aggregate) which could be "imported into the United States from all countries in any calendar quarter of any year” could n "exceed 10 percent of the domestic demand for all petroleum oils in the Unite States (as reported by the United States Bureau of Mines) for the corresponding quarter of the previous year." However, within the overall 10 percent imper limitation on these products, one of the products, viz., residual fuel oil, would be singled out for separate treatment. The total quantity of residual fuel oil which could be "imported *** in any calendar quarter" could not "exceed 5 perces: of the domestic demand for residual fuel oil in the United States (as reporte by the United States Bureau of Mines) for the corresponding quarter of the pre vious year." Subsection (b) of section 322 would permit the President to modify or suspend either one, or both, of the quotas under certain conditions. Crude petroleum is one of the basic raw materials of modern industry and transportation, comparable in essentiality with iron ore and coal.' The mo important products made from crude petroleum are gasoline, kerosene, distilla fi eo.l, residual fuel oil, lubricating oil, and asphalt.* Production of crude oil in the United States is widespread, from nearly 475.000 wells in several thousand fields scattered throughout 27 States. Nearly 45 per cent of total production comes from fields in Texas, more than 25 percent from other States in the midcontinent-gulf region (principally Louisiana, Oklahoma Kansas, and New Mexico), and about 16 percent from California. The rate of production is determined to a considerable extent by the action ef regulatory authorities in Kansas, Louisiana, Oklahoma, and Texas. Each a thority decides monthly the maximum allowable statewide production, ap allocates the total quantity among the individual producing fields. When de mand is strong, "allowables" are increased; when demand weakens, and above ground stocks are becoming burdensome, "allowables" are decreased. However, the various authorities by no means act in concert. For example, in 1949 pre duction in Texas was 17 percent, and in Kansas 8 percent, less than in 1948, bet in Oklahoma the decrease was less than 2 percent and in Louisiana outper actually increased more than 5 percent. Statistics with respect to imports of crude petroleum and its products, by principal countries, for 1952, are shown in table 4. Products to which proposed quota limitations would apply The overall 10-percent quota would apply to "crude petroleum and all produc derived therefrom (including residual fuel oil and oil for supplies for vesses at United States ports but excluding oil for manufacture and reexport)." The 5-percent quota within the overall 10-percent quota would apply to residual fuel oil. The key words defining the overall quota "crude petroleum and all products derived therefrom" have no exact counterpart in existing tariff legislation and their precise scope is not easily defined. In the absence of definite informati as to their intended scope, the Commission, in preparing import statistics and in commenting on the proposed quota provisions, has assumed that the products which would be subject to the quota are those presently classified for tarif purposes under paragraph 1733 of the free list of the Tariff Act of 1930 the so-called petroleum paragraph) and, in addition, petroleum asphaltum (soli 6 Table 1 shows statistics with respect to domestic production, exports, and imports for consumption of crude petroleum for the years 1946 through 1952. 5 Tables 2 and 3 show statistics with respect to domestic production, exports, and imports for consumption of petroleum products for the years 1939 and 1949 through 1952 6 Par. 1733 provides for the free entry of "Oils, mineral: Petroleum, crude, fuel, f refined, and all distil'ates obtained from petroleum, including kerosene, benzine, naphtha gasoline, paraffin, and paraffin oil, not specially provided for." nd liquid) presently classified under paragraph 1710 of the tariff act free list.' hether or not this assumption as to the intended scope of the language is rrect, attention is invited to the desirability, if not necessity, of wording rerictive legislation of the type here involved so as to leave no doubt as to the roducts which would be subject to the restrictions imposed. “Oil for manufacture and reexport" is excluded from both quotas. If this nguage were enacted into law, it is believed that serious administrative probms would ensue. It manifestly would be extremely difficult for the Customs ervice, in administering an absolute quota, to follow imported oils into conumption in the United States for the purpose of insuring that they were used ly to manufacture products for export. It is understood, however, that the anguage is actually intended only to permit the continued importation of petrolum oils, without quota restriction, for entry into customs bonded manufacturing arehouses established under authority of section 311 of the tariff act, as mended, there to be used exclusively in the manufacture of products for export. this is the intent, and the language is redrafted to express such intent clearly, e serious administrative problems would be avoided. resent customs treatment of crude petroleum and of the other products to which the proposed quotas would apply As indicated above, the imported petroleum products which the Commission as assumed would be subject to the proposed quotas are admitted free of uty under paragraphs 1710 and 1733 of the Tariff Act of 1930. The duty-free atus of petroleum asphaltum under paragraph 1710 and of the other petroleum roducts in question under paragraph 1733 has been bound pursuant to conessions granted by the United States in the bilateral trade agreement with enezuela (as supplemented) and/or in the General Agreement on Tariffs and rade (GATT). Nearly all of the petroleum products, although free of duty under the tariff ct, have been subject to import taxes at various rates since the enactment of ection 601 (c) (4) of the Revenue Act of 1932. The import taxes were made ermanent by section 501 of the Revenue Act of 1941 and are now provided for section 3422 of the Internal Revenue Code. The import-tax rates are shown in he following tabulation: The reduced rates shown apply to products of non-Communist countries and vere made effective pursuant to concessions granted by the United States in he trade agreement with Venezuela (as supplemented) and in the GATT. Residual fuel oil and other oil for supplies for vessels at United States ports xempt from the import taxes under section 3451 of the Internal Revenue Code. Under the above-mentioned trade agreements, the United States has underaken, among other things, (1) not to impose on any of the petroleum products described in paragraphs 1710 and 1733 customs duties in excess of the abovementioned import taxes (if any) for such products, (2) to continue to exempt from imports taxes, under conditions specified in section 3451 of the Internal Petroleum asphaltum is one of the products included in the Bureau of Mines report of the domestic demand of all petroleum oils. 32604-53- -125 Revenue Code, any of such products for supplies for vessels at United States ports, and (3) to permit the importation of any such products into the United States without quantitative limitations. Thus, so long as these trade agreement undertakings remain in effect, the enactment of legislation imposing impor quotas on the products in question would be inconsistent with such undertaking Analysis of proposed quota provisions The 10-percent quota.-The overall 10-percent quota would have reduced the total imports of petroleum products under paragraphs 1710 and 1733 of the Tariff Act of 1930 by 94.2 million barrels or 26.8 percent in 1952 if such quota ba? been in effect that year. The attached table 5 shows a comparison of actual imports of such products for each calendar quarter of 1952 with the amounts which would have been permitted under the proposed 10-percent quota. Of all the products which would be subject to the proposed quota limitations. only crude petroleum and residual fuel oil have been imported in significa quantities. Thus, in 1952 (see table 6), these two products accounted for 968 percent of the total imports of 351.9 million barrels, imports of crude amounting to 59 percent (207.5 million barrels) and of residual fuel oil to 37.8 perceĽ: (133.1 million barrels). With respect to the other petroleum products, imports of which have been insignificant, the United States not only produces sufficient quantities for its own requirements but also exports substantial quantities to foreign countries. It seems likely, therefore, that, if the proposed 10-perer quota were made effective, crude petroleum and residual fuel oil would continge to be the only products which, within the prescribed quota limitations, would be imported in significant quantities. What proportion of the overall 10-percent quota would be supplied by imports of crude and what proportion by imports of residual fuel oil is difficult to forese If the 5-percent quota for the latter product were an exclusive quota, there is little doubt that such quota would be filled for each calendar quarter. Su however, would not necessarily be the case since the 5-percent quota would be merely a maximum permissable quantity within an overall quota for crui petroleum and products derived therefrom. Moreover, the proposed legislati makes no provision for equitable allocation of the quotas among foreign suppliers or domestic importers and such quotas would be filled on a first-come first-serve basis. Thus, while imports of residual fuel oil could never exceed the 5-percet quota provided for such product, imports of other petroleum products could by reason of prior importation, reduce the quota quantity available for imports of residual fuel oil below the 5-percent maximum. It will be noted from table 7 that during the period from 1947 to the present (including estimated figures for the first calendar quarter of 1953) the ratio imports for 1 year to domestic demands for the preceding year has increased from 9.0 percent to 14.1 percent. In view of this decided trend toward an everincreasing ratio of imports as compared to domestic demand, there seems little doubt that the 10-percent quota sooner or later would restrict imports of cr petroleum. However, it will be noted that, by reason of the inclusion in the 10-percent quota of 10 percent of the domestic demand for residual fuel oil whie the maximum import quota for such product would be limited to 5 percent of such demand, the actual import quota allowable for other petroleum prodrets (which, as previously indicated, would probably consist almost wholly of crude would exceed 10 percent of the domestic demand for all petroleum oils exclusive of residual fuel oil. Thus, assuming the quotas were in effect during the entire calendar year 1953, the overall 10-percent quota would be 266.5 million barre's the maximum quota for residual fuel oil would be 27.8 million barrels or 5 per cent of the 1952 domestic demand for such product; and the minimum quota for all other petroleum products would be 238.7 million barrels or 11.3 percent of the 1952 domestic demand for all petroleum oils than residual fuel oil. Assuming, in the following example, that the proposed quotas were in effect during the entire year of 1953, that the 5-percent residual fuel oil quota was filled. and that the remainder of the 10-percent quota was filled by imports of crude petroleum, it will be seen from the following illustration that imports of crude petroleum during 1953 would exceed imports of crude during 1952 by 15 percent: Million barrels Domestic demand of all petroleum oils, 1952_- Overall quota (10 percent) for 1953. Quota for petroleum products other than residual fuel oil.. mports of crude petroluem, 1952-- Excess of 1953 quota over 1952 crude imports____ percent__ 2, 665.0 266.5 27.8 238.7 207.5. 31.2 15 The 5-percent quota.-The proposed legislation would, if enacted, reduce rastically the quantity of residual fuel oil imported into the United States. The ttached table 8 compares the actual imports of residual fuel oil for each calenar quarter of 1951 and 1952 with the maximum amounts which could have been dmitted under the proposed quota. It will be noted that the maximum imports hich could have been permitted under the proposed quota during the calendar uarters of 1951 and 1952 would have been from approximately one-fifth to me-third of the quantities which were actually imported. Residual fuel oil is a byproduct of the refining of crude petroleum. It is sed mainly to generate steam for both heat and power. Historically, it has sold . o. b. refinery for lower prices per barrel than the price of crude at the wells. ince World War II, United States refiners have installed equipment which has nabled them to recover higher proportions of the more valuable products--otably gasoline and distillate fuel oil-at the expense of recovery of residual uel oil. The extent of this decline in the proportionate yield of residual fuel il is indicated by the following data covering all domestic refineries (quantities n thousands of barrels): It will be seen from these figures that the yield of residual fuel oil decreased teadily from 24.9 percent of crude run to stills in 1946 to 18.6 percent in 1952. Tables 9, 10, and 11, attached hereto, contain additional data concerning mports and supplies during the period 1946-52, and consumption by uses, 1950 und 1951. Data on supplies and consumption (tables 10 and 11) are shown or the country as a whole and for PAW districts 1 and 3 of the 5 districts nto which the Petroleum Administration for War divided the country in connection with the administration of wartime controls over the distribution of etroleum products. District 1, the Atlantic coast area, accounts for practically all of the imports and nearly 60 percent of domestic consumption of residual fuel Dil. District 3, the gulf coast area, is the source of a large part of the domestic residual fuel oil consumed in district 1. The New England and Middle Atlantic portions of district 1 constitute the area in which residual fuel oil, both domestic ind imported, comes into competition on the largest scale with domestic bituminous coal. If the volume of imports of residual fuel oil were drastically reduced as proposed in the bill under consideration, therefore, the effect of the reduction would be felt mainly in New England and the Middle Atlantic areas. While it would be physically possible for domestic refiners to increase the production of residual fuel oil to offset the curtailment of imports proposed by PAW (Petroleum Administration for War), district 1, comprises the Atlantic Coast. States plus West Virginia; PAW district 3 comprises the Gulf Coast States plus Arkansas and New Mexico. |