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The American Herbal Products Association has submitted comments to the U.S. Trade Representative, urging the agency to remove herbal product ingredients from the latest list of Chinese goods that would be subject to a 25% ad valorem duty.
The American Herbal Products Association (AHPA; Silver Springs, MD) has submitted comments to the U.S. Trade Representative (USTR), urging the agency to remove herbal product ingredients from the latest list of Chinese goods that would be subject to a 25% ad valorem duty. The USTR proposal published on May 17, 2019 increases tariffs on an estimated $300 billion worth of Chinese imports.
In the comments, Michael McGuffin, AHPA president, makes the case that the proposed tariffs on herbal product ingredients contradict the Congressional Statement of Purpose that accompanies the Trade Act of 1974, and states that the purpose of the Act is “to foster the economic growth of and full employment in the United States...” and “...to assist industries, firm[s], workers, and communities to adjust to changes in international trade flows.”
On the contrary, says McGuffin, the tariffs will negatively impact U.S. businesses and consumers, because the vast majority of U.S. dietary supplement companies are small businesses, and the estimated costs of the tariffs these companies will bear can range as high as millions of dollars annually for an individual company. Faced with these costs, manufacturers and marketers will likely need to increase prices, absorb additional costs, or discontinue products; all of which, says McGuffin will risk economic harm to the companies and job losses to their employees.
“Accurate determination of price elasticity is complex, but a meta-analysis of 81 published studies determined an average price elasticity of -2.62 for sales to consumers; on this basis, a 25 percent price increase corresponds to a 66 percent decrease in the quantity of product sold,” writes McGuffin.
In the comments, McGuffin also points out that a significant number of Americans use herbal products to promote their health, and these customers will be facing increased prices as well as a reduced selection. “In light of dietary supplements’ important role in promoting the health of the U.S. population, USTR should exclude from any final version of the Proposed Product List ingredients used in these products,” he writes. “This would appear consistent with USTR’s justified decision, as stated in the May 17 Notice, to exclude ‘pharmaceuticals, certain pharmaceutical inputs, [and] select medical goods’ from the scope of the proposed action.”
The industry continues to fight a previous list of 301 China tariffs. On May 8, 2019, USTR increased the duty rate on these tariffs to 25%, a 15% increase. Nutritional Outlook recently reported that an exclusion process was opened for these tariffs, beginning on June 30.