Planet Money
3:27 am
Fri December 6, 2013

The Giant Book That Creates And Destroys Entire Industries

Originally published on Fri December 6, 2013 10:49 am

"There's our ship!" says Officer Lisa Sacco.

We're standing at the Port of Miami, where Sacco works for U.S. Customs and Border Protection. Our ship, the Hansa Kirkenes, left Cartagena, Colombia, about a week earlier carrying all 6,078 of the Planet Money women's T-shirts.

A crane lifts the container carrying our shirts off of the ship and drops it at our feet. Boom: The shirts have arrived. And yet, in a sense, the shirts aren't quite here yet. It's like that moment when you get off an international flight and you have to wait to go through customs. That's where our T-shirt is now: in legal limbo.

Our shirts have just traveled from Colombia to Miami. Yet it's not drugs or even terrorism that's most likely to get our shirts stuck in customs. "The only thing I can think of is a trade violation," Sacco says. "Trade is a huge issue."

Protecting U.S. trade means following an incredibly elaborate set of rules spelled out in a giant book that's more than 3,000 pages long. Michael Cone, a customs and international trade attorney in New York, calls it "the book of everything." Its official name is the Harmonized Tariff Schedule of the United States.

The book lists the tax that importers have to pay on approximately every single thing in the universe — including, of course, T-shirts. They're right there under heading 6109: T-shirts, singlets, tank tops and similar garments, knitted or crocheted.

The average tax rate on stuff coming into the U.S. is around 2 percent. The tax on T-shirts is much higher: 16.5 percent. That's what we'll be paying on the Planet Money men's shirts, which were made in Bangladesh. But the Planet Money women's shirts were made in Colombia — and those, according to the book of everything, come in duty-free, with no tariff at all.

So why are we paying a 16.5 percent tax on our shirts coming from Bangladesh, and zero on our shirts from Colombia?

Start with this: The United States has had a tax on textile imports since 1789 — the year the Constitution took effect. Douglas Irwin, an economist at Dartmouth, says the tariff really got going after the War of 1812.

"Imports began flooding into the United States, hurting all of these small new producers of textiles," he says. "They clamored and went to Washington and said, 'Our industry is going to be wiped out; we're going to throw out of work thousands of people. We need protection to save our mills.' "

Congress raised the tariff, making textiles more expensive and protecting U.S. mills. The U.S. has had a tariff on textiles ever since.

But recently, another side of the tariff debate has gotten louder and more powerful: the companies that import clothes into the U.S., and the retail stores that sell those clothes. They point out that the tariff is passed on to consumers in the form of higher prices. Most economists say tariffs distort the economy and make it less efficient.

In the past few decades, the tariff on textiles and apparel has started to go away one country at a time. Mexico, Honduras, Israel and several other countries have all signed free-trade deals with the U.S. And, a few years ago, the U.S. made a free-trade deal with Colombia.

The CEO of the Colombian company that made our T-shirts says that if there were a tariff on Colombian shirts, his company couldn't export to the U.S. In other words, without the free-trade deal, the Planet Money women's T-shirts that were arriving in Miami wouldn't have been made in Colombia. This is how a tiny tweak in U.S. tariff rules — in the book of everything — can create or destroy whole industries in other countries.

Back at the port, I head over to the shipping company office, to find out one last thing: Have our shirts been released by customs? Or is customs going to hold us up while it makes sure we followed all of the trade rules?

To me, this is a big moment. It's the first time I've ever cleared 6,078 T-shirts through customs. To the woman helping me, it's the most routine thing in the world. She taps on her keyboard and gives me the news: "Everything is fully released."

In other words, customs cleared all 6,078 Planet Money women's T-shirts to enter the country, no tariff required.

Copyright 2013 NPR. To see more, visit http://www.npr.org/.

Transcript

STEVE INSKEEP, HOST:

We're also following some other news and features. Our Planet Money team has been making a t-shirt, and all this week, we've been following its journey around the world, including to Colombia, where they were made. This is an exploration that tells you a lot about the global economy. And today, Jacob Goldstein meets those shirts as they arrive in Miami and encounters a 3,000-page book that shapes economies around the world.

JACOB GOLDSTEIN, BYLINE: I'm walking around the port of Miami with Officer Lisa Sacco. She's with U.S. Customs and Border Protection. We are literally waiting for our ship to come in.

LISA SACCO: There's our ship.

GOLDSTEIN: The ship is called the Hansa Kirkenes. It left Cartagena, Colombia about a week ago, carrying all 6,078 of Planet Money women's t-shirts. A giant crane lifts the container carrying all those shirts off the ship and drops it at my feet. Boom.

(SOUNDBITE OF BANGING)

GOLDSTEIN: They made it. The Planet Money women's t-shirts are here.

The t-shirts are here, and yet they're not quite here yet. If you've ever waited at an airport to clear Customs, that's where our t-shirts are now, waiting for permission to enter the country. I ask Office Sacco: What could Customs be worried about, with a container coming from Colombia to Miami? Drugs? Guns?

SACCO: The only thing I could think of is maybe a trade violation. Trade is a huge issue. I mean, that's what we do, is we protect our trade.

GOLDSTEIN: Protecting U.S. trade means following an incredibly elaborate set of rules that are part of U.S. law. And they're all spelled out in a giant book more than 3,000 pages long.

MICHAEL CONE: It is the book of everything - at least for the importer.

GOLDSTEIN: This is Michael Cone, a customs and international trade attorney in New York. The book is called the Harmonized Tariff Schedule of the United States. And Cone says it lists the tax importers have to pay on approximately every single thing in the universe - including, of course, t-shirts.

CONE: And chapter 6109 covers, generally, t-shirts, singlets, tank tops and similar garments knitted or crocheted.

GOLDSTEIN: That's us.

CONE: That's us.

GOLDSTEIN: That's the Planet Money t-shirt - 6109.

CONE: That's where we're going to be.

GOLDSTEIN: Now, the average tax rate on stuff coming into this country is about 2 percent. In the book of everything, Cone points to the rate we're going to have to pay for the Planet Money t-shirt.

CONE: The tariff is 16.5 percent.

GOLDSTEIN: So, 16-and-a-half percent is a lot.

CONE: It's a lot.

GOLDSTEIN: The Planet Money men's t-shirt was made in Bangladesh, and we're going to pay the full 16-and-a-half percent on the men's shirts. But the women's shirts, the ones that just arrived in Miami, came from Colombia, and the book of everything says we get a special deal on those.

CONE: It says free. Now, when you see free...

GOLDSTEIN: Free? I like free.

(LAUGHTER)

CONE: We all like free, and if you jump through the right hoops and you follow the direction that Uncle Sam has provided, you can come in duty-free.

GOLDSTEIN: So, why are we paying a 16-and-a-half percent tax on our shirts coming from Bangladesh, and zero on the shirts coming from Colombia? Start with this: the United States has had a tax on textile imports since 1789, the year the Constitution took effect. Douglas Irwin, an economist at Dartmouth, says it really got going after the War of 1812.

DOUGLAS IRWIN: Imports began flooding into the United States, hurting all of these small new producers of textiles. And they clamored and went to Washington and said our industry's going to be wiped out. We're going to throw out of work thousands of people. We need protection to save our mills.

GOLDSTEIN: So, Congress raised the tariff, which made textile imports more expensive, and that protected U.S. mills. We've had a tariff on textiles ever since. But recently, another side of the debate has gotten louder, more powerful. The companies that import clothes into the U.S. and the retail stores that sell those clothes, they say this tariff gets passed on to consumers. It makes clothes more expensive for everybody in this country.

Economists agree with this, and they say tariffs distort the economy, make it less efficient. So that tariff on clothes and fabric that's been in place for hundreds of years is going away one country at a time. In the past few decades, Mexico, Honduras, Israel, they've all signed free trade deals with the U.S. And a few years ago, the U.S. made a free trade deal with Colombia. Luis Restrepo is the CEO of the Colombia company that made our t-shirts. He says that if there were a tariff on Colombia shirts, his company couldn't export to the U.S. at all.

LUIS RESTREPO: No. To export into the United States, no, will make our garments very expensive.

GOLDSTEIN: In other words, without this free trade deal, the Planet Money women's t-shirts that are arriving in Miami today would not have been made at Colombia at all. They would have been made somewhere else, somewhere cheaper. This is how a tiny tweak in U.S. tariff rules in the book of everything can create or destroy whole industries in other countries. Back at the port, I head over to the shipping company office to find out one last thing: Have our shirts been released by Customs, or is Customs going to hold us up to make sure we followed all those trade rules?

UNIDENTIFIED WOMAN: What's the container number?

GOLDSTEIN: 782939.

To me, this is a big moment. It's the first time I've ever cleared 6,078 t-shirts through Customs. For the woman helping me, it's the most routine thing in the world.

UNIDENTIFIED WOMAN: Everything's fully released.

GOLDSTEIN: So, basically, we're good to go.

UNIDENTIFIED WOMAN: Yes.

GOLDSTEIN: Good to go, duty-free and bound, eventually, for you. Jacob Goldstein, NPR News.

INSKEEP: This is NPR News. Transcript provided by NPR, Copyright NPR.

Related program: