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USTR: Outtakes from Clarks, JCP’s Tariff Commentary Submissions

The Office of the U.S. Trade Representative held a comment period that began on Monday, with the hearings extended through Tuesday, on whether it should proceed with its planned 25 percent tariffs on $300 billion of imports–the Tranche 4 goods–from China.

The final tranche has been hotly debated, and impacts apparel, footwear and some textiles, as well as other sectors. Below are some outtakes from commentary submissions that are publicly available at regulations.gov. The submissions were filed as requests for time to speak at the USTR hearings, and therefore are essentially preliminary statements from companies across different industries on how the proposed tariffs will impact them and the U.S. economy.

Here are some excerpts:

Gary Champion, president of footwear firm Clarks Americas Inc.

“While most consumer goods are taxed at a rate of 1.9 percent, current footwear tariffs average 12 percent and can reach rates up to 67 percent. Adding another 25 percent on top of these already high duties would be a staggering cost that would be impossible for our company to absorb. Such a substantial tariff increase would result in higher costs for consumers, impacting their ability to purchase and select footwear of their choice. It would also have a major negative impact on our business, likely resulting in Clarks store closures in the U.S., as one example.”

Jean Kolloff, chief executive officer and founder of Quinn Apparel and QI Cashmere

“Cashmere is farmed exclusively in Inner Mongolia from the Alashan breed of goat. They ONLY thrive in this region and are considered the ‘GOLD OF CHINA’…Throughout our 15-year history, we researched importing the raw material to the U.S. to then spin yarn and make garments here.

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However, the sweater industry in the U.S. has long ago departed to Asia. Both the machinery and workforce are no longer available in our country. If possible, it would still be prohibitively expensive and would take years to restart production in the U.S. Chinese firms are still the most adept and cost-effective suppliers of cashmere apparel.

The additional tariff  would precipitate major loss of revenue and profit for our company and our retail customers. The lifecycle of our business dictates that we contract production as early as 8 months prior to shipping; this means that we have locked in prices from our customers and our vendors–we are unable to pass this along to the consumer.

Most retailers are experiencing a downturn in traffic and are not in a position to absorb price increases. As we enter the third and fourth quarter, the period all retailers achieve profitability, they will see a lack of consumer enthusiasm for higher prices. Many retailers are already closing stores and price increases will surely hasten their demise.”

Steven R. Jacaruso, chief operating officer of footwear firm Jack Rogers

“The mere threat of these tariffs has already caused us to  scramble to find other factories out of China who could possible (sic) produce our product. Unfortunately, this process takes a significant amount of time and is further challenging due to our high penetration in excess of 50 percent of our total production. This proposed change would have a significant impact on Jack Rogers’s (sic) financial condition…we have begun to diversify away from China in recent years, and will continue to do so in the future. From our experience, it can take over a year before being able to fully execute a transition to factories in other countries. The increase in tariffs will impact us all and unfortunately, Jack Roger’s (sic) will have to pass this increase on to our customers. In our opinion, the short term effect of this will be detrimental to the economy.”

Philippe C.M. Manteau, partner at Loeb & Loeb, attorneys for Arteast, LLC (Zadig & Voltaire)

“Zadig & Voltaire is a clothing retailer with 50 locations and approximately 250 employees in the United States….Zadig & Voltaire’s products are not strategically important or related to ‘Made in China 2025’ or other Chinese industrial programs….Products impacted by these tariff subheadings, such as silk, cashmere, viscose, and other synthetic fibers, are best constructed and most cheaply sourced in China in comparison to other existing markets, all of which are foreign.

With 25 years’ experience, Zadig & Voltaire believes many of these products have not been manufactured in large quantities in the United States, if ever, and silk, for example, is unlikely to be manufactured in the United States in any scenario. Punishing Chinese manufacturers for these products cannot have a positive competitive effect on the U.S. economy. Instead, it will likely only benefit other foreign manufacturers, at the expense of the U.S. consumer and their customer.”

Jeff Price, president, performance & protective fabrics division, Milliken & Co.

Seeking to exclude certain textiles from the final group that were previously removed from Tranche 3: “The negative effects of the tariff increase on List 3 products, important to Milliken, have already been felt by all three business units. We have experienced the loss of market share because our Canadian and Mexican competitors are able to source the very same Chinese inputs at the lower duty rate. More expensive imported inputs, due to increased tariffs, hurts U.S. manufacturers, makes them less competitive with other foreign producers and puts U.S. jobs at risk.”

David M. Spooner, Barnes & Thornburg, attorneys to J.C. Penney Corp. Inc.

Requesting the removal of apparel and footwear: “Tariffs on the clothing, footwear, and home goods…would constitute a massive regressive tax increase on hardworking American families…JCPenney cannot quickly or easily shift to non-Chinese sources for these items, a situation that would regrettable lead to price increases for our hard-working, cost-conscious American customers.

Because there are no realistic sourcing options outside of China…American consumers will pay for the Administration’s new taxes…. The apparel, footwear, and home goods…on USTR’s latest tariff list are not high-tech items and applying tariffs to such non-tech consumer products will not affect China’s practices with regard to hi-tech intellectual property and the ‘Made in China 2025’ plan….

Though surely inadvertent, the disproportionate impact of the proposed List 4 tariffs on women is striking. JCPenney, of course, is one of the nation’s largest retailers. Of the 19 apparel items…13 are women’s and girl’s apparel (an an additional two are unisex footwear).

Yes, the Administration’s proposed tax increase disproportionately hits women’s and girls’ apparel, but this understates the impact on women. Women often do the shopping for their families, and so feel it acutely when the government increases taxes on basic household items.”

Leo Meeks, attorney at Meeks, Sheppard, Leo & Pillsbury, on behalf of Jeffrey Kaufman, president of the Home Fashion Products Association:

“The textile industry has historically been a low margin business and remains so today….Higher prices would result in lower sales and fewer jobs. The proposed level of additional tariffs has the potential to increase costs of imported products by 25 percent. A best-case scenario would probably force some companies out of business entirely, and cause many of our member companies to lay off a quarter of their employees.”

Nate Herman, Travel Goods Association

A group including retailers and manufacturers as members: “Travel goods…are defined as luggage, handbags, totes, backpacks, briefcases, wallets, smart phone cases, and related fashion accessories. Our members also sell many other items related to travel. As such, we [strongly] oppose the inclusion of items on Tranche 4 related to travel, including…clothes…shoes…These tariffs are an unavoidable tax as today 82 percent of all U.S. travel goods imports come from China. Moreover, many of the potential alternative suppliers to China are being removed from programs that made them competitive…”

Christopher Norris, global logistics coordinator, Scosche Industries Inc.

A consumer technology accessories firm: “…we ask that you take measured actions consistent with international obligations that do not penalize the American consumer and jeopardize recent gains in American competitiveness, and instead benefit U.S. exporters, importers and investors….Imposing sweeping tariffs would trigger a chain reaction of negative consequences for the U.S. economy, provoking retaliation; stifling U.S. goods and services exports; and raising costs for business and consumers.”