Footwear Importers Want Tariff Changes Included in Trade Bill Package
Footwear importers hope changes to the tariff schedule for athletic shoes get included in the package of trade legislation brewing on Capitol Hill, say trade association leadership. A recently requested modification to Chapter 64 of the HTS would result in substantial duty savings for importers of athletic shoes that include internal plastic membranes, such as trail runners and hiking shoes with Gore-Tex, they said. The changes require legislative action because they lack congressional authorization to affect duty rates, according to a government official. Recent movement on trade in Congress is the best opportunity in a decade for minor initiatives like tariff changes to make it into law, said Matt Priest, FDRA president.
The modifications, requested in a letter to congressional trade committees from industry groups including the American Apparel & Footwear Association and Footwear Distributors and Retailers of America (see 1504140015), would reclassify footwear with an internal plastic membrane as athletic shoes, dutiable at 20%, instead of its current classification as protective footwear with a 37.5% duty. The change would involve a modification to the definition of athletic footwear at Additional U.S. Note 2 of Chapter 64 so it includes footwear that protects against the elements, said Nate Herman, AAFA vice president-international trade. It would also require adding two new eight-digit HTS numbers as breakouts for such footwear under heading 6402.
The trade package being considered Congress is a rare opportunity to streamline trade that footwear importers “have to take,” said Priest. It has been nearly “11 years since there has been an amenable trade bill on the Senate floor,” he said. “We’ve gone through so many years of not moving on trade items outside a handful of small FTAs or an extension of AGOA or GSP,” he said. With the introduction on April 16 of Trade Promotion Authority legislation and bills renewing Generalized System of Preferences and the African Growth and Opportunity Act (see 1504170024), footwear importer associations hope tariff changes for athletic shoes are part of the deal. “We would like to see this change included in any trade package that moves forward,” said Herman.
A law passed by Congress is necessary because new changes to duty rates are involved. Although any changes to the tariff schedule require congressional authorization, Congress has passed laws that authorize the executive branch to make changes through presidential proclamations that are then implemented by the International Trade Commission, said James Holbein, director of the ITC’s Office of Tariff Affairs and Trade Agreements, which maintains and publishes the U.S. tariff schedule. For example, Congress passes trade agreements that provide for reductions in duties, including staged reductions set to take place years after the law is passed, which the president then proclaims and the ITC implements.
Other laws provide the ITC and other executive branch agencies with a continuing authority to make changes to the tariff schedule without having to go through Congress every time, said Holbein. Under section 484(f) of the Tariff Act of 1930, a committee comprising the ITC, CBP and the Census Bureau can make changes to statistical suffixes at the ten-digit level provided certain requirements are met, he said. Likewise, section 1205 of the Omnibus Trade and Competitiveness Act of 1988 authorizes the ITC to implement changes at the six-digit level, usually based on changes to the international Harmonized System agreed at the World Customs Organization, as long as they are duty rate neutral, said Holbein. One such investigation is underway to implement WCO changes that take effect in 2017 (see 1502190018).
However, changes at the eight-digit level of the HTS aren’t so simple. Unlike statistical suffixes at the ten digit level and WCO changes that only affect the descriptions of goods at the six-digit level, changes at the eight-digit level generally involve duties. Those duty rates have been negotiated internationally, including through free trade agreements and World Trade Organization commitments, said Holbein.
In the case of the changes requested by footwear importers, duties would fall by 17.5% for covered athletic shoes. According to Priest, the duty reduction would apply to products that look like an athletic shoe and behave like an athletic shoe, but are dutiable at the higher rate because, many years ago when the tariff schedule was established, protective footwear was not envisioned to be athletic. The change “would require legislation by Congress,” said the AAFA’s Herman.
A group representing domestic footwear manufacturers might accept the change, but only if it can work with importers to make sure the change doesn’t undermine domestic manufacturing. “We could accept this for footwear that is truly athletic,” said Marc Fleischaker of Arent Fox, who represents the Rubber and Plastic Footwear Manufacturers Association. “However, any legislation would need to carefully constrain its application regarding hiking or trekking footwear so that it would not include footwear that is competitive with sensitive products manufactured domestically,” he said in an emailed statement. “We are prepared to work with the importing industry to develop appropriate language which does not undermine domestic manufacturing,” said Fleischaker. “But we have not yet had an opportunity to do this, and we cannot support any legislation unless and until that were to happen.”