Whether goods are imported or manufactured domestically, the outdoor industry faces a number of legal challenges and opportunities in bringing products to market. At the Outdoor Retailer (OR) Winter Market, held last week in Salt Lake City, Utah, a number of seminars and forums provided attendees opportunities to learn about and discuss pending legislation with experts in the field.
A labyrinth of duties, tariffs and standards impedes the flow of imported goods–and while protecting domestic manufacturing, the end result stifles exports as well as imports, and raises prices to the consumer. On the other hand, while Made in America is a growing movement in the outdoor space, a conflict between Federal Trade Commission (FTC) standards and the state of California’s labeling laws is creating confusion and in some cases generating lawsuits against domestic manufacturers.
Fast-tracking trade legislation
“The Obama administration is vigorously pursuing trade agreements,” Josh Teitlelbaum, assistant secretary for textiles, consumer goods and materials for the Department of Commerce, said at a seminar sponsored by the Outdoor Industry Association (OIA), which advocates the passage of the Trans-Pacific Partnership (TPP) and other pending trade legislation on behalf of the industry.
The Obama administration is asking Congress to approve the Trade Promotion Authority (TPA) Legislation, which expired in 2007, allowing the president to “fast-track” trade legislation by sending proposed trade agreements to Congress for a yes or no vote, without amendments.
A 21st century trade agreement
The proposed TPP trade agreement includes 11 Pacific-rim countries, including important American trade partner Vietnam. A major hurdle in negotiations has been the “yarn-forward” rule, requiring member nations to use only components of TPP origin, from the yarn forward, in any textiles or apparel for export; preventing the duty-free inclusion of yarns or textiles from China or other non-members.
While many domestic manufacturers are against passage of the TPP, proponents believe it will promote the export of U.S.-made products, benefitting U.S. manufacturing.
Teitelbaum called the TPP “A 21st century trade agreement,” featuring enforceable environmental, labor and intellectual property standards. He went on to explain that duties on outdoor goods within the TPP supply chain currently range from 12 to 32 percent, and that the TPP agreement offered “incredible potential in harmonizing tariffs.”
“If we don’t write these rules, China will,” Teitelbaum insisted. He expects that the agreement’s outstanding issues should be resolved “early this year.”
Teitelbaum also spoke about the proposed Transatlantic Trade & Investment Partnership (T-TIP). The current partnership between the U.S. and the E.U. accounts for about one third of all international trade, but both partners rely on separate and incredibly complex systems of tariffs, duties and regulations. The T-TIP agreement will focus on eliminating customs duties and harmonizing regulations, eliminating redundant agencies and forms, and converting to a simplified electronic system, according to Teitelbaum.
The U.S. is the world’s fourth largest textile exporter, growing by 11 percent over the last five years. Automating and consolidating regulations in a partnership with the E.U. would enhance risk management and facilitate the flow of goods, Teitelbaum believes. “The President has issued an executive order to complete the international trade data window by his term end,” he said.
All, or virtually all?
The OR show and OIA are also strong proponents of American-based manufacturing. Hosted by OIA, a panel discussion about “The Absolute Standard” explored confusion around Made-in-America labeling requirements, and the hot topic of California-based lawsuits accusing manufacturers such as Lifetime, Red Wing and Citizens of Humanity of false-labeling claims.
The FTC’s standards mandate that goods labeled as made in America, made in the USA, or sporting an American flag must be assembled domestically using “all or virtually all” American components.
This gives rise to the question: what is “virtually all?” According to Portland attorney David Rocker of Davis, Wright, Tremaine LLP, the accepted interpretation of the FTC standard includes “only negligible foreign processing or content.” In a 1996 suit against shoe manufacturer New Balance, the FTC accepted 70 – 75 percent as a reasonable standard.
According to Rocker, the state of California’s stricter law, which mandates that products so labelled must be 100 percent domestically sourced and manufactured, “has become a tool for predatory lawyers who win more than the plaintiffs.”
Hadley Moss, assistant general counsel for Utah-based sport equipment manufacturer Lifetime Products, explained that the company had always complied with the FTC regulations, and was 70 – 75 percent made in Utah. Two class-action suits based on the California law cost Lifetime $1.3m.
While bills were introduced in the California legislature in 2011 and again in 2013 to harmonize with FTC labelling regulations, neither made it out of committee. The opposition to changing California law is being led by trial lawyers, according to Joel D. Joseph, counsel for the Made in the USA Foundation.
The current lawsuit against Citizens of Humanity and Macy’s is being defended on the basis that federal law should supercede state law. The Made in the USA Foundation, along with Lifetime and Red Wing, is working to develop a bipartisan Congressional group to pass legislation which will preempt all state laws regarding Made in the USA labeling. A bill should be introduced by the end of February, according to Joseph.
Meanwhile, the panel recommended that domestic brands take a “safe” approach to labeling by using words such as “Made in the USA with U.S. and imported components.”
“The words ‘Made in the USA’ have greater impact today than ever,” Rocker said.