Footwear importers are mounting an all-out effort to convince Congress and the Obama administration that disproportionately large duties on their products are punishing both retailers and American consumers.
Footwear last year racked up import duties of $2.4 billion, and over the past 10 years the industry paid duties totaling $34 billion, Matt Priest, president of Footwear Distributors and Retailers of America, told the group’s annual traffic and customs conference on Oct. 22 in Long Beach.
In this era of free trade agreements, import duties are normally associated with legacy attempts to protect domestic manufacturers. Duties on footwear are therefore an anomaly because only 1 percent of the footwear purchased in the U.S. is actually manufactured here.
Furthermore, import duties on footwear are higher than on some products that are manufactured or grown in the U.S. The average duty on footwear imports is about 10 percent, compared to automobiles at 2.5 percent and tobacco at 2.4 percent. The duty on imported cell phones is zero, Priest said.
In total, footwear accounts for about 1 percent of U.S. imports, but it generates 8 percent of the total import duties collected by the government, he added.
So far, U.S. free trade agreements have not helped footwear importers very much. China is the source of about 82 percent of footwear imports, but the U.S. does not have an FTA with China. The U.S. has FTAs with Mexico and the Dominican Republic, but those countries account for about 1.3 percent of U.S. footwear imports.
In that respect, the Trans-Pacific Partnership negotiations underway between the U.S. and a dozen nations on the Pacific Rim could be effective in reducing and eventually eliminating import duties from Southeast Asia, where some footwear production is migrating. Vietnam, for example, accounts for about 8 percent of U.S. footwear imports, and passage of the TPP would encourage more footwear production there.
Priest said it is possible that TPP negotiations could be wrapped up by the end of the year, but allowing time for Congress to approve an agreement would add a year or more before it could be implemented. Also, China is indicating that it may want to join the TPP negotiations. It would be a game-changer if import duties on footwear imports from China would come down under a TPP agreement.
FDRA studies show that footwear is quite price sensitive, with U.S. sales increasing or decreasing each year in line with fluctuations in the price that consumers must pay. Generally, though, the price of footwear has been going up because wages in China are increasing, and inflation in footwear is higher than in many industries. Inflation in the footwear industry, affected in part by tariffs, is 2.5 percent, compared to 1.5 percent for all products.
Priest said FDRA will lead a delegation of footwear industry leaders to Washington next week to meet with congressional and administration staff members in an attempt to convince them that the burden of import duties falls heavier on footwear than on most other industries.
“We have to get Washington to listen,” Priest said.