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Industry Up in Arms Over Tipped 25% Tariffs

Trade groups across apparel and retail spoke out Monday against new proposed tariffs that could bring further blowback on an already struggling sector and hit American consumers in the wallet.

Testifying at Monday’s United States Trade Representative’s (USTR) hearing on proposed actions on Section 301 investigations concerning digital services taxes (DSTs), retail and apparel groups urged the Biden administration to abandon the plan to impose tariffs of up to 25 percent on certain products from Austria, India, Italy, Spain, Turkey and the U.K.

At the hearing, Blake Harden, vice president of international trade at the Retail Industry Leaders Association (RILA), stressed that the imposition of any additional tariffs on imported goods will further punish American companies, consumers, workers and American families without obtaining the elimination of Austria, India, Italy, Spain, Turkey, or the U.K.s digital services taxes.

“Simply put, adding additional financial strain during an ongoing pandemic and economic recession will slow our recovery, harm American businesses’ ability to compete, limit American consumers’ access to key products and put Americans out of work,” she said.

Beth Hughes, vice president of trade and customs policy at the American Apparel & Footwear Association (AAFA), also said the group “strongly supports the trade principle that U.S. trading partners must abide by global trade rules. Further, we support this administration’s efforts to address unfair trading practices.”

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“However, we have serious concerns that the imposition of new punitive duties on U.S. imports from Austria, India, Italy, Spain, Turkey and the U.K. would result in great harm to our industry and exacerbate supply chain disruption issues during the COVID-19 pandemic,” Hughes said.

On June 2, 2020, USTR under President Trump initiated Section 301 investigations of DSTs adopted or under consideration in 10 jurisdictions. In January, USTR determined that the DSTs in six of these jurisdictions–Austria, India, Italy, Spain, Turkey, and the U.K.–are unreasonable or discriminatory and burden or restrict U.S. commerce, and are actionable under Section 301.

On March 31, USTR issued notices requesting public comments and announcing public hearings on proposed trade actions in the form of additional tariffs of up to 25 percent on specific products of Austria, India, Italy, Spain, Turkey, and the U.K. The other four DST investigations of Brazil, the Czech Republic, the European Union and Indonesia were terminated because these jurisdictions had not adopted or implemented the DSTs under consideration, according to USTR.

Harden also stressed that RILA is supportive of the administration’s goal of addressing digital services taxes that unfairly target or discriminate against U.S. companies and the federal government’s right to address such discriminatory measures, Harden said.

“Our point is this–tariffs on the proposed products will not be effective in obtaining the elimination of our trading partners’ discriminatory tax policies or prevent the proliferation of additional digital services taxes around the globe,” she said.

From USTR’s proposed product lists, RILA’s members, including such major chains as Walmart and Target, import goods such as cosmetics, perfumes and shampoos from the U.K.; carpets, bed linens, curtains, tiles, kitchen fixtures and bathroom ceramics from Turkey; glassware and footwear from Spain, and jewelry and furniture from India.

“We fail to see how the imposition of an additional import tax on these products, which will be paid by Americans, will convince our trading partners to withdraw or reform their digital services taxes,” Harden said. “At the same time, imposing these tariffs will severely harm the ability of U.S. retailers to compete globally.”

“RILA believes the proliferation of digital services taxes requires a multilateral tax solution, not a unilateral tariff response,” she added. “To that end, we appreciate the Administration’s demonstrated willingness to address the digital services taxes through multilateral negotiations at the OECD (Organization for Economic Cooperation & Development). We believe the OECD is the appropriate forum for achieving a negotiated solution and strongly support the Administration in these efforts.”

Hughes of AAFA told the hearing that many of its member companies have sought out new suppliers due to the Section 301 action against China several years ago.

“U.S. imports from China have declined and our trading partners are filling the resulting gap,” she said. “For instance, India is our fifth largest supplier of accessories to the U.S., Italy is our sixth largest supplier of footwear and ninth for accessories. U.S. imports from Spain of accessories have tripled and footwear has nearly doubled since 2010. U.S. apparel imports from Turkey have doubled in the past decade. U.S. apparel imports from the U.K. and U.S. footwear imports from Austria have experienced steady growth.”

She said the growth in each of these categories in the countries in question furthers the national interest of diversifying supply chains away from China.

“However, the proposed set of actions would seek to punish the U.S. companies who have made much needed progress in this area to find supply chain partners,” Hughes said. “Lastly, apparel, footwear and accessories have nothing to do with digital services. Because of this lack of connection, imposing punitive tariffs on U.S. imports for apparel, footwear and accessories from these countries will do nothing to change their behavior in this dispute. Yet, retaliation against these products, if implemented, will have a significant impact on our industry, and our American workers.”

Hughes said AAFA strongly opposes the imposition of any tariffs on U.S. imports and agreed that “an attractive alternative remains and offers a viable path forward for meaningful trade policy reform–the administration should double down on the multilateral process that has already begun at the OECD toward a negotiated agreement.”