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Published: Sunday, 7/1/2012

Shoe importers push to cut long-standing tariff

Congress weighs overhaul to Depression-era act

LOS ANGELES TIMES
Sylvia Rivas, left, shops for shoes with her 1-year-old daughter Gabriella at a Payless store in Los Angeles. Virtually all the shoes sold at Payless are made overseas and subject to an import tax of as much as 67.5 percent. Shoe tariffs vary widely based on the type of shoe. Sylvia Rivas, left, shops for shoes with her 1-year-old daughter Gabriella at a Payless store in Los Angeles. Virtually all the shoes sold at Payless are made overseas and subject to an import tax of as much as 67.5 percent. Shoe tariffs vary widely based on the type of shoe.
LOS ANGELES TIMES Enlarge

LOS ANGELES -- Elizabeth Eronobi was busy scouting out bargains recently at a half-price sale at the Payless ShoeSource store on Third Street in the Koreatown section of Los Angeles.

"They have a good variety of kids' shoes here too, which are also cheap," the 30-year-old said while carrying her 5-month-old son, Muna.

What she didn't realize was that virtually all the shoes sold at Payless in the United States are made overseas and subject to an import tax, or tariff, of as much as 67.5 percent.

Paid at the U.S. border, added to prices, and mostly hidden from customers, shoe tariffs vary widely. The $60 suggested retail price for a pair of brown leather loafers, for instance, includes an 8 percent tariff, Payless said.

Much higher are the tariffs for rubber athletic shoes.

Nike said the suggested retail price for a pair of Air Jordan cushioned track shoes -- $150 -- includes a 20 percent tariff.

Shoe tariffs date to the Great Depression, when Congress approved the Smoot-Hawley Tariff Act of 1930. At the time, there was a large footwear industry in the United States that made rubber and canvas shoes at a low cost. The tariffs were imposed to protect these U.S. companies from cheaper imports.

Today more than 90 percent of shoes are imported, yet these shoe tariffs remain in effect.

Sylvia Rivas, 25, a mother from East Los Angeles, often shops at Payless stores for herself and her 1-year-old daughter, Gabriella. She said she spends an average of $25 to $30 every two months on shoes.

"I had no idea. I hope they can find a way to reduce the taxes," Ms. Rivas said.

As the shoe-import business has grown, so has the push to reduce these shoe taxes, and there are battles brewing in Washington.

Opponents of the tariffs are pushing for legislation in Congress known as the Affordable Footwear Act. At the same time, they are pushing U.S. trade negotiators to reach an international agreement to lower the tariffs.

But importers are up against a smaller but potent group, the domestic shoemakers with their own lobbyists and supporters in Washington.

They say that Congress and trade officials must protect U.S. jobs and keep the tariffs in place. Lowering the tariffs, they say, may drive overseas the few shoe-manufacturing jobs still in the United States.

The proposed Affordable Footwear Act seeks to eliminate about $800 million in duties on children's and low-cost shoes out of the $2 billion in total duties collected on imported shoes in 2010.

The move could reduce prices of these shoes as much as 40 percent, supporters said.

U.S. Sen. Maria Cantwell (D., Wash.), a sponsor of the Senate bill, said it could help cut costs for hardworking families at a time when they most need it.

"Working families are already facing tough economic times and high prices for gasoline, groceries, and other necessities," Ms. Cantwell said. "It's time to end this outdated tariff on shoes."

Michael Massey, chief executive of Collective Brands Inc., which owns and operates Payless ShoeSource (which has stores across the globe), Stride Rite, and Sperry Top-Sider, said he would like to see the bill passed to reduce the cost of imported low-cost shoes.

"Middle to low-income families need a break from the high tariffs. The taxes are highest on shoes which are the least expensive that are made of canvas, rubber, and plastic," Mr. Massey said.

Companies such as Boston athletic footwear maker New Balance disagree.

New Balance is the last athletic footwear manufacturer in the U.S. About 25 percent of the shoes it sells in North America are either manufactured or assembled at one of the five New England factories, and the company doesn't have to pay any tariffs.

Matthew LeBretton, New Balance director of public affairs, explained that the company favors keeping a climate that allows what is left of the domestic footwear industry to be competitive. The U.S. government has the ability to sustain and help create jobs in this sector by keeping the status quo, he said, or it can risk losing thousands of jobs by making decisions to help overseas manufacturers maximize their profits.

"Our position is that we will support changes so long as it is not harmful to what is left of the domestic footwear industry," he said.

About 7 million pairs of shoes that New Balance produces each year in the country make up a quarter of U.S. sales. The rest are made in Britain, China, Indonesia, and Vietnam.

Other shoe companies are also asking for footwear tariffs to remain in place for a host of reasons. Okabashi Brands Inc., which is based near Atlanta, remains committed to keeping all its manufacturing and distribution functions in the United States. It also produces 100 percent recyclable shoes.

"On paper, outsourcing overseas would cost less and increase profits, but the quality would be questionable," Chief Executive Bahman Irvani said. "We are quality conscious, and this is core to our existence."

At the forefront of the campaign for an overhaul of shoe tariffs is Matt Priest, the president of the Footwear Distributors and Retailers of America. He said the group wants to repeal what it considers an outdated, regressive, and hidden shoe tax.

"Like the clothes on our backs, shoes are a necessity in our everyday lives," Mr. Priest said. "People are paying taxes for something that is a necessity."

"It is a different story [than] if we were talking about a flat-screen TV or a luxury handbag," he said. "Ironically, these tariff rates are higher on lower-cost shoes, highly affecting lower-income families across America."

No action on tariffs is expected in Washington before the November presidential election, Mr. Priest said.

Congress may consider footwear tariffs alone or as part of a broader legislation on internal trade.



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