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GSP Could Soon Save Footwear From Millions of Dollars in Duties

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A bill that would designate certain footwear for duty-free savings under the Generalized System of Preferences program has been introduced in the Senate, and if passed, it could mean sweeping cost savings for shoes.

It could also mean an ability to diversify sourcing as GSP provides duty-free access for goods made in more than 120 countries—most of them on the least developed list.

“Expanding the Generalized System of Preferences program to cover shoes will support and grow well-paying American jobs, from design and marketing to logistics and retail,” Rick Helfenbein, president and CEO of the American Apparel & Footwear Association, said. “Duty reduction means U.S. footwear companies can reduce costs that can instead be invested in American workers, product innovation, and savings that can be passed on to consumers.”

As part of the proposed GSP Footwear Act of 2017, three major categories of shoes could potentially be considered for duty free savings: outdoor footwear, low-cost rubber sole shoes with textile uppers and slippers.

More specifically, imports of protective active footwear, like certain hiking shoes, trekking shoes and running shoes currently subject to 20 percent duties, could see those duties disappear.

Certain house slippers and tennis shoes that fall under tariff line 6402.99.31 and face 6 percent duties, could also realize savings under GSP.

“Though it has a relatively low duty rate, 6402.99.31 generates the most footwear trade from GSP countries of any of the tariff lines included in [the GSP footwear bill],” the Footwear Distributors and Retailers of America said in a note.

Last year, the U.S. imported 22,196,751 pairs of shoes from GSP countries under that tariff line, including Indonesia, Cambodia, Brazil, Thailand and India, according to FDRA. That’s 4.5% of all footwear imports that come from GSP countries. The duties paid on those imports from GSP countries last year were $8.19 million on footwear valued at $137.6 billion, or 16.8% on average in duties—and that’s just on shoes within one tariff classification.

In total, the U.S. imported $449 billion worth of footwear (based on customs value) from GSP countries in 2016.

“If the bill is approved and we are successful with the legislation, the industry would stand to save about $57 million a year in duty savings,” Nate Herman, AAFA SVP of supply chain, said.

As FDRA president Matt Priest said, including footwear in GSP is “long overdue.”

“It’s a great start,” he said. “Any opportunity we can find to eliminate footwear duties is a great move in our mind.”

What happens next

Congress is currently considering renewal of the overall GSP program, which has to be renewed by the end of this year, and Herman said the industry is working to get the footwear inclusions on deck to go forward in line with the GSP renewal.

“We feel we’re in a good position to get this included in any sort of trade program that would involve footwear GSP,” Herman said.

As with any bill, the GSP Footwear Act now faces administrative and political approval. The task will be to prove there’s little domestic production of these categories of footwear and that the U.S. industry won’t be harmed by the move—though trade experts don’t think it will be a hard case to make.

Even companies like Keen Footwear, which does some domestic footwear production in categories that could be considered under GSP, also imports footwear for its line and is reportedly on board with the proposed legislation.

From there, the uncertain trade climate will play its own role, which will make things—like the timeline of this bill, if passed, taking effect.

“With this administration it’s just hard to know where they’re going to come out,” Priest said.

Provided things go according to general plan and footwear gets included in this year’s renewal of GSP, and that GSP does in fact get renewed, the industry would still be a little way out from realizing any of these savings.

“The earliest to get these duty savings realized would be early 2019,” Herman said.

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