The future of footwear trade policy is staring us in the face.
U.S. footwear companies want to invest in 21st century footwear innovation—emerging technologies, 3D printing, advanced manufacturing, U.S. job creation—in order to propel our industry forward, but they are burdened by a costly, restrictive, and outdated tariff system from 1930. Congress has an opportunity to ease this burden on the industry with the passage of the Trans-Pacific Partnership (TPP), a 12-nation free trade agreement that will provide $6 billion in savings to footwear companies over ten years and serve as a blueprint for the future of footwear trade policy.
I cannot overstate the importance of passing TPP for the U.S. footwear industry. This is a once-in-a-generation opportunity to dramatically reduce tariffs and make major progress in an area of trade policy that has long stifled creativity and job creation.
Tariff reduction is vital to U.S. footwear companies, since today 99 percent of shoes are imported and hundreds of thousands of Americans employed in the footwear industry depend on global supply chains. While duties average just 1.4% for all U.S. consumer goods, they average 11 percent for footwear and can reach up to 67.5%. As a result, the industry paid almost $2.9 billion in duties in 2015 alone.
Moreover, Chapter 64 of the Harmonized Tariff Schedule of the United States (USHTS), the footwear chapter, is 46 pages in length, covering an astronomical 436 individual tariff lines. This complex and frustrating classification construct only serves to burden footwear companies and U.S. Customs with confusing classification codes, inaccurate rulings, and out-of-date product descriptions. For example, the Code classifies classic Converse All-Star sneakers and basic white Keds as athletic shoes. Try to classify 21st century footwear manufactured with new and emerging materials against a code from the 1930s on hundreds, if not thousands, of SKUs in a given season. This is not an easy task and clearly should be simplified.
Our industry sees the value of TPP not only in terms of the countries currently in the agreement—which includes Vietnam, the second largest producer of footwear for the U.S. market—but also as an opportunity for additional TPP member countries in the future. TPP has the highest standards of any trade agreement in history and will drive other countries to raise their regulatory standards in order to join the agreement. It has been reported that 11 other nations not currently party to TPP have officially expressed interest in signing on to the landmark deal. This includes countries like Indonesia, the third largest supplier of shoes to the U.S. Expanding TPP to include additional countries would allow companies to source footwear in a variety of locales and import those products duty free, which would grow American footwear jobs as well as deliver significant value for American families.
The passage of TPP will also serve as a model for how members of Congress can work together to achieve further duty reduction for the industry. Despite anti-trade rhetoric from the 2016 presidential candidates, trade policy has been one area where there has been strong, bipartisan support and collaboration between Congress and the White House. Over the past year, the President has signed legislation that modernizes U.S. Customs & Border Protection (CBP); authorizes the negotiation of new free trade deals, including a major agreement between the U.S. and Europe; renews the African Growth & Opportunity Act (AGOA), allowing duty relief for footwear companies sourcing in Africa; and establishes a new Miscellaneous Tariff Bill (MTB) process that will streamline the temporary suspension of duties on certain footwear.
Building upon this momentum and bipartisan support for trade, Congress should also add footwear to the Generalized System of Preferences (GSP), a duty relief program designed to help lesser-developed countries with critical market access to the United States. Since the start of the GSP program in the 1970s, footwear has not been included on the list of eligible products even though many GSP beneficiaries such as Brazil, India, Indonesia, and Cambodia produce some footwear for the U.S. marketplace.
FDRA has long advocated and led the charge for expanding GSP to cover footwear and will continue to do so. This is a logical expansion of the program for American consumers, footwear companies, and emerging footwear producers alike. Amending GSP to include footwear would help facilitate the possibility of more sourcing options for companies already diversifying their supply chains.
Initiatives such as MTBs, GSP reform, and other trade preference programs are important tools for reducing tariffs, and they demonstrate a recognition by members of Congress that tariff reduction drives U.S. job growth and enhances economic development in other countries. However, each of these initiatives offers only temporary and short term sourcing opportunities as they cover less than 7 percent of the volume of U.S. footwear imports in any given year. The real future of footwear policy is the passage of TPP.
This trade agreement will be a game changer, providing permanent duty reduction and the necessary policy tools to enhance global footwear sourcing for our American footwear companies. It is the highest priority for the U.S. footwear industry and critical to U.S. job creation and consumer value, with an estimated $500 million in footwear duty savings the first year of implementation alone and $6 billion over the first decade. As an industry, we must continue to dictate the future of footwear trade policy and not allow others to chart the best path forward for our industry. Now is the time to take action and get involved. Now is the time to pass TPP.
Lace up and join us! Go to FDRA.org to take action and send a letter to your Member of Congress in support of TPP passage.
This is an op-ed from the FDRA. FDRA is the footwear industry’s voice in Washington. In all, it supports over 130 companies and 250 brands, or over 80 percent of total U.S. footwear sales, making it America’s largest and most respected footwear trade association.