Footwear manufacturers brace for higher duties as tariff exemption legislation expires

Thanks to Congress not renewing tariff exemptions that have been in place since 2006 on footwear, 2010 could ring in a 40-percent increase in production costs for some companies. SNEWS has more details.
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While Congress started to take up the discussion of renewing miscellaneous tariff legislation for footwear (click here to read the legislation introduced in September), little things like the contentious health care debate apparently got in the way. Which means since Congress is now on holiday, and is not due back in session until mid-January 2010, tariff exemption legislation that passed in 2006 to reduce or eliminate footwear duties will expire on Dec. 31, 2009.

“We are extremely disappointed that Congress was unable to pass a miscellaneous tariff bill (MTB) this year and that tariff suspensions on performance footwear and other outdoor products will expire at the end of the year,” said Frank Hugelmeyer, president of OIA, in a statement. “These MTBs have saved outdoor footwear manufacturers more than $13 million since 2007, resulted in new job creation, spurred industry growth and have contributed to a substantial increase in exports of American made inputs that account for as much as a quarter of the value of these footwear products.

“The delay in passage of the MTB puts an extraordinary financial burden on outdoor businesses as many are struggling to recover from the recession, and may ultimately mean the demise of some companies,” added Hugelmeyer. “We strongly encourage Congress to pass an MTB with retroactive duty suspensions as soon as they return in January.”

Alex Boian of OIA told SNEWS® that since OIA began discussing this issue with its member companies as early as September 2009, a number of outdoor manufacturers hedged their bets and have already brought in a significant amount of 2010 inventory. What that means is price increases as a result of increased duties will be delayed for some, though not for all manufacturers.

OIA estimated that some companies will experience an additional 40 percent or more added to production costs on Jan. 1, 2010, as a result of the MTB expiration. Insiders tell SNEWS that some footwear manufacturers will be presenting workbooks to retailers that have two prices listed -- one with duties in place and one without.

The footwear covered under the expired MTB includes shoes and boots with coated or laminated textile uppers or a coated or laminated plastic or rubber upper -- durable water repellent on the fabric counts as a coating. Shoes and boots with leather uppers are not affected. Plastic ski boots are also not affected, according to David Ingemie, president of Snowsports Industries Association (SIA).

It is, at this point, unclear if the MTB expiration issue will be dealt with promptly when Congress reconvenes in mid-January, and it is equally unclear whether new legislation will include a provision to refund duties that have been paid. Ingemie said that while it is likely the MTB will be renewed at some point in 2010, history indicates manufacturers should not count on MTB renewal being retroactive. It is expected an MTB renewal would grant duty exemptions through Dec. 31, 2012.

--Michael Hodgson

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