Heavy Testimony in Turkish DST Case, Few Witnesses for European DSTs

A British scented bath bomb company, Lush, explained that it has a 10-year license with its supplier in the U.K., so its goods cannot be made elsewhere. It has 214 stores in 44 states, and 1,200 workers. The company said 80% of the product's cost is the raw materials, so the tariff cannot be absorbed without hiking the price. It expects a higher price will lower demand.

Everlane, a U.S. apparel startup based on transparency around its costs for duties, transportation, material and labor, asked USTR to remove Italian women's footwear, under Harmonized Tariff Schedule subheading 6403.91.90, from the list. It sells a $108 flat made in Italy. "Everlane now directly employs 287 people in the U.S. The company also indirectly employs another 120 people in the U.S. through a contracted warehouse facility," the company wrote. "Everlane is disappointed to learn that the current administration plans to continue with the prior administration’s thinking that tariffs are the primary tool to solve complex trade problems. Prior [Section] 301 tariff actions failed to solve the underlying issues in those investigations and resulted not only in increased costs for businesses and consumers, but escalation and increased suspicion among the countries involved."

The Cheese Importers Association of America, too, argued that the tariffs would not get results. "We do not believe that focusing on imported U.K. cheese is likely to result in the U.K. removing the digital service tax. Tariffs focused on unrelated sectors will harm U.S. consumers and businesses, not U.K. suppliers or the U.K. government."

Stuart Weitzman, a division of Tapestry Inc., sent Peter Charles, Tapestry's global head of supply chain, to argue against the tariffs on women's shoes from Spain for the hearing. Charles said the division employs about 790 people, and that it has sourced shoes from Spain for 35 years. Charles said raising the tariff on these shoes from 10% to 35% could threaten the closure of some retail stores.

USTR Assistant General Counsel Benjamin Allen asked Charles if the brand's suppliers are lobbying the Spanish government to drop its DST. "The entire footwear industry in Spain has mobilized pretty significantly in the last few weeks and months," Charles said.

Some parties asked that items be added, as they would like the protection from competition. The Graphite Electrodes Coalition asked that graphite electrodes from India and Italy, entering under HTS subheading 8545.11.00,2, be added. An anonymous party asked that British malt barley be added.

The Wind Tower Trade Coalition, Arcosa Wind Towers and Broadwind asked that utility-scale wind towers form Turkey, the U.K. and Spain be targeted. The companies and trade group said that a South Korean company that has been hit with countervailing duties for products made in China and Vietnam, and may face them for its towers made in Malaysia, as there has been a preliminary determination in that case.

The coalition, which also made the complaints for those cases, said CS Wind has subsidiaries in Turkey and the U.K., and it expects product will shift to those countries to avoid the duties. It also said that Spain exports $100 million annually in wind towers, so it would be good leverage to target that sector.

In contrast, there was enough interest in the proposed Turkish actions that the interagency committee heard on May 7 from four panels of witnesses, talking about carpets, natural stone, ceramic tiles and gold jewelry.

Andrew Peykar, from the Oriental Rug Importers Association, which represents 40 importers, said that many retailers hiked prices 10% to 12% to cover the new shipping costs, and that the threat of a 25% duty is a crisis. Peykar's own rug design and distribution company employs 400 in New Jersey. He said that before Section 301 tariffs were imposed on Chinese rugs, they accounted for 50% to 60% of sales, but now they're at 25%, and Turkey has taken up the slack.

Recep Coskun Bozanli, from the Turkish Mineral Exporters Association, said he represents companies that employ 300,000 people in Turkey, across quarries and factories, and that one-third of the $900 million worth of processed stone exported annually goes to the U.S.

Dragos Marble President Fatih Citoglu told the panel that if the tariff is hiked, it will hurt his small company, because they have already made price commitments to an ongoing commercial project, and cannot hike it now.

Two witnesses asked USTR to keep Turkish ceramic tile on the tariff list. Eric Astrachan, executive director of the Tile Council of North America, said his member companies' 5,700 workers are under stress because their tile costs on average $1.51 a square foot, and Turkish tile is 74 cents a square foot, and is of similar quality. He argued that Turkey supports its producers through energy subsidies and support for capital investments and that those subsidies indicate the sector is well-connected, and thus targeting it would be an "effective means to pressure the government of Turkey to amend or end the DST."

He also argued that the surge in Turkish imports after Chinese ceramic tile was hit by AD/CV duties shows importers can respond quickly to tariff changes.

An employee of a domestic tile maker also argued for the tariffs to stay.

Funda Gurgoze, owner of California stone and tile wholesaler Pera Tile, disagreed that Turkish tile producers have leverage, even though they are trying to convince the government to satisfy the U.S. on the DST. "These products as a proportion of total Turkish exports, it’s not going to move the needle when you compare it to the digital tax," she said.

Ceramic Tile Distributors Association Executive Director Rick Church told the panel that his 300 member companies aren't just worried about the difficulty of switching sourcing to Mexico, Brazil or other lower cost producers if Turkish tile's tariff increases from 8.5% or 10% to 33.5% or 35%. He said that overall, imported tile's value fell by 6% in 2020, even as remodeling boomed, as luxury vinyl tile encroaches on ceramic tile's market share. He said that China makes 85% of luxury vinyl tile, and that the volume of imported ceramic tile from all countries is less than half the $3.7 billion of luxury vinyl tile coming into the U.S.