A Quiet Break for Corporations
Wednesday, September 20, 2006
For three generations, the Dungey family of Auburn, N.Y., has produced handmade dog collars and leashes for pet stores around the country. The family's six-person shop has staved off competition from cheaper foreign labor by offering a range of products, from affordable "Sparky's Choice" leashes to a $100 beveled-brass collar known as the "Gatsby."
One day this spring, the company president, Anita Dungey, happened across a few words on a Web site, leading her to a startling discovery: One of her small advantages over imports was about to disappear, thanks to a little-noticed proposal in the Senate. The plan, it turned out, had been promoted by Wal-Mart Stores Inc.
In Connecticut, chemical company executive Kenneth Kelly got a similar jolt when a business associate called to warn that a bill tailored to benefit a German-owned competitor was working its way through Congress.
Dungey and Kelly had stumbled upon a largely unknown congressional apparatus that allows companies to erase tariffs -- taxes levied on products and materials shipped to the United States from overseas -- for years at a time.
Each legislative season, corporate executives and lobbyists quietly draft hundreds of bills to suspend tariffs. Over time, the changes cost taxpayers hundreds of millions of dollars in lost revenue, a Washington Post analysis of U.S. trade data found.
Most of the tariff suspensions involve obscure chemicals and dyes, but many other products show up, including boilers for nuclear reactors, green peanuts, child potty seats, unicycles -- even chocolate coatings for laxatives.
"It's become sort of a lobbyists' dream," said Jim Schollaert, a former State Department trade specialist who now represents domestic manufacturers. "It's a gravy train, and there's little work to it."
The bills in Congress generally give no hint of whom the suspensions have been designed to benefit and sometimes refer to the products only by strings of numbers linked to phone-book-size tariff tables. But many corporate names can be found in reports on the legislation produced for Congress by the U.S. International Trade Commission.
Lawmakers usually introduce the provisions at the behest of companies in their districts. Many of those companies and their executives have given federal campaign contributions totaling millions of dollars.
The dog-collar proposal was introduced by Sen. Blanche Lincoln (D), who represents Wal-Mart's home state of Arkansas. Rep. Henry E. Brown Jr. (R-S.C.) sponsored the suspension of tariffs on a chemical virtually identical to one produced by Kelly's firm, R.T. Vanderbilt Co. The request came from Lanxess Corp., which has two plants in South Carolina.
Since 2003, Wal-Mart's political committee has contributed $9,000 to Lincoln's campaigns. Lanxess is a 2004 spinoff of Bayer AG, a German company whose U.S. political committee has donated $3,500 to Brown's campaigns since 2000.
Congressional sponsors of such bills said they are trying to lower consumer prices and create jobs by cutting costs for U.S. manufacturers and retailers. They said they do not want to hurt domestic businesses and they generally drop legislation if trade officials find a U.S. company that objects.