Connect with us

Business

Trump Pitches External Revenue Service to Collect Tariffs: What to Know

Published

on

Trump Pitches External Revenue Service to Collect Tariffs: What to Know

President Trump has promised to generate a “massive” amount of revenue with tariffs on foreign products, an amount so big that the president said he would create a new agency — the External Revenue Service — to handle collecting the money.

“Instead of taxing our citizens to enrich other countries, we will tariff and tax foreign countries to enrich our citizens,” Mr. Trump said on Monday in his inaugural address, where he reiterated a promise to create the agency. “It will be massive amounts of money pouring into our Treasury coming from foreign sources.”

Much about the new agency remains unclear, including how it would differ from the government’s current operations. Trade experts said that, despite the name “external,” the bulk of tariff revenue would continue to be collected from U.S. businesses that import products.

Here’s what you need to know about what Mr. Trump has proposed.

Tariff revenue is currently collected by U.S. Customs and Border Protection, which monitors the goods and the people that come into the United States through hundreds of airports and land crossings.

Advertisement

This has been the case nearly since the country’s inception. Congress established the Customs Service in 1789 as part of the Treasury Department, and for roughly a century tariffs were the primary source of government revenue, counted in stately customs houses that still stand in most major cities throughout the United States, said John Foote, a customs lawyer at Kelley, Drye and Warren.

With the creation of the income tax in 1913, tariffs became a minor source of government revenue, and after the Sept. 11 attacks, the customs bureau was moved from the Treasury Department to the Department of Homeland Security.

Customs officials today collect tariff revenue, but also monitor food safety, enforce intellectual property rights, inspect crops for pests and screen imports for goods made with forced labor, Mr. Foote said.

Creating a new agency is the provenance of Congress, not of the president, so it is not clear how the administration might go about establishing the new unit.

In an executive order issued on Monday evening, the president directed the leaders of Treasury, Commerce and Homeland Security to “investigate the feasibility of establishing and recommend the best methods for designing, building, and implementing an External Revenue Service (ERS) to collect tariffs, duties, and other foreign trade-related revenues.”

Advertisement

The money that the United States collected from tariffs grew significantly as Mr. Trump imposed levies on foreign metals, solar panels and thousands of goods from China in 2018 and 2019. The government collected $111.8 billion in trade duties, taxes and fees in 2022, up from $41.6 billion in 2018, according to Customs data.

That number could increase by multiples if Mr. Trump follows through on his promises to tax all American imports, and impose even higher levies on products from China. On Monday evening, Mr. Trump said that he planned to move forward with a 25 percent tariff on Canada and Mexico on Feb. 1, and was considering a universal tariff on all foreign products.

Mr. Trump and other Republicans are eagerly looking to tariff revenue to help to finance tax cuts. Still, tariffs are likely to earn just a tiny slice of what the United States takes in through income taxes. Economists say revenue from even very substantial tariffs would likely max out in the hundreds of billions of dollars, while the United States took in $4.2 trillion in income and payroll taxes last fiscal year. Tariffs would also decrease U.S. deficits, lower growth and raise consumer prices, the Congressional Budget Office calculated last month.

Mr. Trump insists that foreign countries pay the tariffs but it’s actually so-called importers of record — the companies responsible for bringing products into the United States — who pay tariffs to the government. Most importers sign up for a government electronic payment system, and the tariff fees are automatically deducted from their bank accounts as they bring products into the country.

Importers of record can be of any nationality: U.S. companies, U.S.-based divisions or branches of foreign companies, or foreign companies directly importing, without a business presence within the United States, Mr. Foote said.

Advertisement

But Richard Mojica, a customs lawyer at Miller & Chevalier, said U.S. importers “are usually U.S. companies.” He said that Mr. Trump had created confusion by saying that the External Revenue Service “would collect duties and tariffs ‘that come from foreign sources’ — a term that nobody understands.”

“I don’t see how the E.R.S. could collect tariff payments from a foreign manufacturer who is not also the U.S. importer of record,” Mr. Mojica added.

The question of who pays the tariff to the government is somewhat distinct from the issue of who ultimately bears the tariff’s costs. The importer can pass the cost of the tariff on to American consumers in the form of higher prices, or it could try to force its foreign factories to sell its goods more cheaply.

Every case is different, but several economic studies have found that American consumers mostly bore the brunt of Mr. Trump’s previous tariffs on China.

Some trade analysts say that the name “External Revenue Service” is an effort to disguise who really pays for tariffs.

Advertisement

Scott Lincicome, the vice president of economics and trade at the Cato Institute, which supports free trade, called the agency’s name “more branding than substance — and misleading branding at that.”

“Trump could call it the ‘Foreigners Pay the Tariffs Agency,’ and it still wouldn’t change the fact that Americans really are,” he said.

Continue Reading
Advertisement
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Business

Commentary: H-1B visas have always been a scam. Trump's changes won't fix the problem

Published

on

Commentary: H-1B visas have always been a scam. Trump's changes won't fix the problem

Among the government programs that produce more confusion than benefits, H-1B visas are right up there.

If you’ve been hearing about H-1B visas, it’s probably because President Trump abruptly changed its rules with a proclamation on Sept. 19.

As is typical of Trump’s shoot-from-the-hip policy-making, the proclamation produced an outbreak of fear and chaos, in this case among holders of the visas. That’s because it seemed at first that the administration was imposing a $100,000 fee not only on applicants for the visas, but on current holders reentering the U.S. from abroad, say from home leave or a business trip.

This is a de facto ban, as few organizations will be able to afford it.

— Robert D. Atkinson, Information Technology and Innovation Foundation

Advertisement

Until the White House clarified that the charge would be a one-time fee for new H-1B applications, not charged annually or for renewals or reentry, holders were advised by some employers not to leave the U.S. for the present; those who were caught off-guard overseas scurried to get home by Sunday, when the fee began.

A Sept. 19 Emirates flight from San Francisco to Dubai had to abort its departure to allow several panicky passengers to debark, according to Bloomberg.

The administration’s subsequent assurances have quelled the panic. But the proclamation has created new befuddlements, including over whether it opens the door to illicit dealings between Trump and companies bidding for the visas, and whether it’s even legal.

As my colleagues Queenie Wong and Nilesh Christopher reported, there are concerns that “a selective application of the fee could be a way the White House can reward its friends and punish its detractors.”

Advertisement

Importantly, there’s room to question whether the proclamation will solve long-standing problems with H-1B visas. So let’s take a look at the program’s malodorous history.

H-1B visas were created in 1990, under President George H.W. Bush, to relieve what high-tech companies asserted was a chronic shortage of U.S.-born workers in the STEM fields (science, technology, engineering and math).

The idea was to give highly-skilled foreign workers in “specialty occupations” the right to three years of U.S. residence renewable for a further three years — an opportunity to obtain permanent residency or even citizenship.

After a few rounds of tweaking, the annual cap on new applications was set at 85,000, including 20,000 holders of advanced degrees from U.S. universities. Higher education and nonprofit research institutions are exempt from the cap.

Things didn’t work out as anticipated. U.S. employers came to see the H-1B visas as tools to replace native-born technicians with cheaper foreign workers. Scandalously, some of the American workers were required as conditions of their severance to train the newcomers to do their jobs.

Advertisement

I documented that practice at Southern California Edison in 2015. The giant utility acknowledged that the outsourcing of workers would cost the jobs of 500 technicians who did the work of installing, maintaining and managing Edison’s computer hardware and software for payroll and billing, dispatching and electrical load management.

Essentially, Edison was replacing domestic IT specialists earning $80,000 to $160,000 with workers provided by two India-based outsourcing firms, Tata Consultancy Services and Infosys, which were paying their recruits $65,000 to $71,000. By the time the outsourcing process was complete, Edison said, its IT expenses would fall by about 20%.

“They told us they could replace one of us with three, four, or five Indian personnel and still save money,” one laid-off Edison worker told me at the time, recounting a group meeting with supervisors. “They said, ‘We can get four Indian guys for cheaper than the price of you.’ You could hear a pin drop in the room.”

Then there’s the University of California, which announced in 2016 that it would lay off 49 career IT staffers and eliminate 48 other IT jobs that were vacant or filled by contract employees. The American workers were ordered to train their own replacements, who were employees of the Indian outsourcing firm HCL Technologies.

Although the visa law specified that hiring foreign workers would not harm American workers, “the H-1B program is most definitely harming American workers, harming them badly, and on a large scale,” Ronil Hira of Howard University, an expert in the visa program, told the Senate Judiciary Committee in 2015. “Most of the H-1B program is now being used to import cheaper foreign guestworkers, replacing American workers, and undercutting their wages.”

Advertisement

The high-tech industry’s dirty little secret, I reported, was that the STEM shortage was a myth. The same companies wringing their hands over the supposed dearth of STEM-qualified workers were simultaneously laying them off by the tens of thousands. Indeed, experts in technology employment consistently found that “the supply of graduates is substantially larger than the demand for them in industry,” one told me. Anyway, a significant portion of H-1B recruits weren’t in jobs demanding unique skills, but workaday technicians.

Since 2020, the top employer of H-1B visa holders has been Amazon, with a total of 43,375 workers over that period — followed closely by the Indian outsource companies Infosys and Tata. In the current fiscal year, Amazon reigns, with more than 14,000 H-1B holders, followed by Tata, Microsoft, Meta Platforms, Apple and Google. I asked Amazon why it needs so many foreign workers and what work they do, but didn’t receive a reply.

The Indian outsourcing firms have dominated the H-1B system since at least 2009. For years their role has stoked controversy, in part because their employment practices have come under question.

In court, government prosecutors and civil plaintiffs have alleged that Infosys and Tata were exploiting the guest workers they brought to the U.S. Infosys settled federal fraud charges with a $34-million payment in 2013, the largest penalty in an immigration case at that time. The company denied the allegations.

That same year, Tata settled a class action lawsuit with a $29.8-million payment. The plaintiffs alleged that workers imported by Tata were forced to sign over their federal and state tax refunds to Tata, among other claims. The company didn’t admit wrongdoing.

Advertisement

Over the years, the H-1B program has made for political controversy, though Congress hasn’t taken a firm hand in correcting its issues. Conservatives and progressives alike have found reason to complain that it undermines domestic employment. Near the end of his first term, Trump shut down H-1B issuance entirely, along with some other specialty visa programs, but his initiative was blocked in federal court.

But the program remains enormously popular in the high-tech world, which has long agitated for an expansion. Its fans include Elon Musk, who tweeted in December that “the reason I’m in America along with so many critical people who built SpaceX, Tesla and hundreds of other companies that made America strong is because of H-1B.” He underscored his position with a burst of profanity, but he did promise to “go to war on this issue,” although he acknowledged that some fixing is in order.

That brings us to the issues with Trump’s proclamation. Its shortcomings resemble those that prompted federal Judge Jeffrey S. White of Oakland to overturn Trump’s ban in 2020 in a case brought by the National Assn. of Manufacturers and the U.S. Chamber of Commerce, among others.

White ruled that the authority to change the terms of the visas belonged to Congress, not the president, and that the administration hadn’t evaluated the effect of the ban on the domestic economy, as federal law required. The case was rendered moot when Trump’s ban was reversed by President Biden. I asked the White House if it was concerned that this proclamation could also be blocked in court, but got no reply.

A bigger question concerns the ramifications of the $100,000 fee. “H-1B visa fees of this magnitude will strongly discourage the hiring of the most talented members of the global labor force,” says University of Chicago economist Steven Durlauf. Instead, the policy will create incentives to move high-tech and scientific activity to other countries, effectively offshoring economic activity that should occur in the U.S., he says.

Advertisement

The fee is so high that only the biggest and richest employers will be able to pay it, locking out small start-ups that have tried to use H-1B visas to build their professional teams. The proclamation doesn’t make clear whether universities and research institutions will be exempt from the fee. Even financially well-endowed universities would find it hard to justify paying $100,000 to import a faculty member from abroad.

“This is a de facto ban, as few organizations will be able to afford it,” says Robert Atkinson, president of the Information Technology and Innovation Foundation, a high-tech think tank.

The White House says it intends to replace the current system, a random lottery apportioning available H-1B slots among all applicants, with one favoring applications to fill the highest-paid slots.

The proclamation states that H-1B abuses “present a national security threat by discouraging Americans from pursuing careers in science and technology, risking American leadership in these fields.” Never mind that students considering careers in scientific and technical fields are being profoundly discouraged by Trump’s freezes on research funding across the scientific landscape.

So the bottom line is that, as is usual, Trump’s H-1B policy works at cross-purposes with his other initiatives. For decades, the H-1B program has been ripe for fixing. If only the Trump White House took the time to craft a sensible repair.

Advertisement
Continue Reading

Business

How Nexstar’s Proposed TV Merger Is Tied to Jimmy Kimmel’s Suspension

Published

on

How Nexstar’s Proposed TV Merger Is Tied to Jimmy Kimmel’s Suspension

ABC pulled Jimmy Kimmel’s late night show on Wednesday after conservatives expressed outrage over a monologue the host had given two days earlier.

Here’s an excerpt from Mr. Kimmel’s monologue:

Advertisement
Advertisement

“We hit some new lows over the weekend with the MAGA gang desperately trying to characterize this kid who murdered Charlie Kirk as anything other than one of them, and doing everything they can to score political points from it. In between the finger-pointing, there was grieving.

The suspension was the latest demonstration of how members of the Trump administration have been able to influence the operations of media companies without imposing new policies. In this case, a broadcaster that is pursuing a $6 billion merger, which must be approved by the Federal Communications Commission, put pressure on ABC before the network’s parent company, Disney, announced its decision to suspend Mr. Kimmel’s show.

Advertisement

1:00 p.m. E.T. on Wednesday, Aug. 5

Podcast video circulates of the F.C.C. chairman threatening ABC and calling on local affiliates to pull Mr. Kimmel’s program.

Advertisement

Hours before ABC made the announcement, the F.C.C. chairman, Brendan Carr, said on a right-wing podcast that local ABC stations should “push back” and “pre-empt” coverage that does not serve “their local communities.” (Pre-empting, in broadcast terms, refers to replacing programming with another show in advance of its airing.)

Mr. Carr also told the podcast’s host, Benny Johnson, that the F.C.C. might take action against ABC.

Advertisement
Advertisement

“When you see stuff like this, I mean, look, we can do this the easy way or the hard way. These companies can find ways to change conduct and take action frankly on Kimmel or you know there’s going to be additional work for the F.C.C. ahead. …”

“I think that it’s really sort of past time that a lot of these licensed broadcasters themselves push back on Comcast and Disney and say, ‘Listen, we are going to pre-empt.’”

Advertisement

6:11 p.m.

Nexstar, which owns ABC affiliate stations, announces it will not air Mr. Kimmel’s program.

Advertisement

After the podcast interview, Nexstar, which owns 32 ABC affiliate stations, announced that it would “pre-empt ‘Jimmy Kimmel Live!’ for the foreseeable future,” and added: “Nexstar strongly objects to recent comments made by Mr. Kimmel concerning the killing of Charlie Kirk.”

Nexstar has good reason to try to appease the F.C.C. at the moment: In August, the company announced that it intended to buy one of its competitors, Tegna, which owns 13 ABC affiliate stations. But in order for the deal to go through, Mr. Carr and the F.C.C. would have to not only approve it, but also potentially raise the nationwide cap on the percentage of households a single entity’s television stations are allowed to reach.

Broadcasters have pushed the government for decades to raise or repeal the cap, which is currently set at 39 percent. If the Nexstar-Tegna deal goes through, Nexstar’s reach is likely to exceed the limit.

Advertisement

Shortly after Nexstar’s announcement, Sinclair, a company that owns 31 ABC affiliate stations, said it would also suspend Mr. Kimmel’s program.

Of ABC’s 205 affiliate stations, 63 are owned by Nexstar and Sinclair, and another 13 are owned by Tegna.

Advertisement

Sources: The Federal Communications Commission, ABC, Nexstar, Sinclair and Tegna.

Advertisement

Note: Stations were cross-referenced between ABC’s and affiliates’ lists, and checked against F.C.C. records.

By The New York Times

Together, they make up about 37 percent of all of ABC’s local affiliates.

Advertisement

Advertisement

Approximately 6:30 p.m.

ABC says it will suspend Mr. Kimmel’s program “indefinitely.”

Minutes after Nexstar’s announcement, and just hours after Mr. Carr’s podcast appearance, ABC announced that it was suspending Mr. Kimmel’s program “indefinitely.”

Advertisement

It was unclear how big a role, if any, the plans for pre-empting by Nexstar played in Disney’s decision. (Sinclair did not publicly announce that it would also pre-empt the program until after Disney’s decision was made public.)

Advertisement

7:00 p.m.

F.C.C. chairman thanks Nexstar on social media, shortly after the company announced it would pre-empt Mr. Kimmel.

Advertisement

“I want to thank Nexstar for doing the right thing.”

Advertisement

As the outrage over Mr. Kimmel’s comments grew, Robert A. Iger, Disney’s chief executive, along with a close lieutenant, had been hearing from worried advertisers, people familiar with the decision told The New York Times this week.

Last year, Mr. Trump sued ABC’s news division for defamation. ABC settled with the president in December, a rare and significant concession by a major news organization as the president grew increasingly antagonistic to media companies he viewed as critical of him and his allies.

Advertisement

Before Mr. Kimmel’s show was set to begin taping Wednesday, the people familiar with Disney’s decision said, executives had grown concerned that another opening monologue could further inflame the situation. So they made the call for the show to go dark — at least temporarily.

Continue Reading

Business

Disney, Universal and Warner Bros. Discovery sue Chinese AI firm as Hollywood's copyright battles spread

Published

on

Disney, Universal and Warner Bros. Discovery sue Chinese AI firm as Hollywood's copyright battles spread

Walt Disney Co., Universal Pictures and Warner Bros. Discovery on Tuesday sued a Chinese artificial intelligence firm called MiniMax for copyright infringement, alleging its AI service generates famous characters including Darth Vader, the Minions and Wonder Woman without the studios’ permission.

“MiniMax’s bootlegging business model and defiance of U.S. copyright law are not only an attack on Plaintiffs and the hard-working creative community that brings the magic of movies to life, but are also a broader threat to the American motion picture industry,” the companies state in their complaint, filed in U.S. District Court in Los Angeles.

The entertainment companies requested that MiniMax be restrained from further infringement. They are seeking damages of up to $150,000 per infringed work, as well as attorney fees and costs.

This is the latest round of copyright lawsuits that major studios have brought against AI companies over intellectual property concerns. In June, Disney and Universal Pictures sued AI firm Midjourney for copyright infringement. This month, Warner Bros. Discovery also sued Midjourney.

Shanghai-based MiniMax has a service called Hailuo AI, which is marketed as a “Hollywood studio in your pocket” and used characters including the Joker and Groot in its ads without the studios’ permission, the studios’ lawsuit says. Users can type in a text prompt requesting characters such as Yoda from “Star Wars” or DC Comics’ Superman, and Hailuo AI can pull up high quality and downloadable images or video of the character, according to the document.

Advertisement

“MiniMax completely disregards U.S. copyright law and treats Plaintiffs’ valuable copyrighted characters like its own,” the lawsuit states. “MiniMax’s copyright infringement is willful and brazen.”

“Given the rapid advancement in technology in the AI video generation field … it is only a matter of time until Hailuo AI can generate unauthorized, infringing videos featuring Plaintiffs’ copyrighted characters that are substantially longer, and even eventually the same duration as a movie or television program,” the lawsuit states.

MiniMax did not immediately return a request for comment.

Hollywood is grappling with significant challenges, including the threat of AI, as companies consolidate and reduce their expenses amid rising production costs. Many actors and writers, still recovering from strikes that took place in 2023, are scrambling to find jobs. Some believe the growth of AI has threatened their livelihoods as tech tools can replicate copyrighted characters with text prompts.

Although some studios have sued AI companies, others are looking for ways to partner with them. For example, Lionsgate has partnered with AI startup Runway to help with behind the scenes processes such as storyboarding.

Advertisement
Continue Reading
Advertisement

Trending