House Passes Measure to Reinstate Tariff Suspensions

The House passed a bill Wednesday that would reinstate expired duty breaks on millions of dollars worth of imported footwear and textiles, finally giving a portion of the fashion industry a little financial relief.

The Senate must also pass the bill before President Obama can enact it, and its prospects are uncertain in that chamber.

Footwear brands and retailers have been paying tens of thousands of dollars in duties on imported components since Jan. 1 because Congress let legislation expire that had suspended duties on hundreds of imported products.

“Without imports, jobs cannot be created or sustained and prices inevitably go up on products that are no longer made in the U.S.,” said Kevin Burke, president and CEO of the American Apparel & Footwear Association, who applauded passage of the bill. “In fact, this bill provides U.S. manufacturers access to critical inputs needed to keep them competitive in today’s economy.”

The bill, commonly known as the Miscellaneous Tariff Bill, must be renewed by Congress periodically and is meant to help domestic manufacturers compete by giving them tariff breaks on components such as yarns and fibers that are no longer made in the U.S. and must be imported. The 2006 duty suspension bill expired at the end of 2009.

Over the past seven months, companies have had to drop product lines, increase prices and find substitutes, all at a cost to the bottom line.

While textile executives were broadly satisfied with the new bill, footwear executives had a mixed reaction.

On the plus side, the bill includes a retroactive provision, which will provide full or partial refunds to companies on duties paid on all covered products since January.

On the downside, the bill would increase duties on several hiking boot and shoe imports, because trade has grown significantly. According to the law, duty breaks in each category cannot amount to a total loss in tariff revenue to the U.S. government of more than $500,000 per year. If trade grows in a given category, lawmakers increase the duties to bring the overall tariff revenue loss back under the cap.

Alex Boian, director of trade policy for the Outdoor Industry Association, which includes such members as Columbia Sportswear, The North Face and Patagonia, said, “We’re definitely happy to see the House begin the process and move forward with the MTB, but we are disappointed with the reduction in the duty suspensions that were achieved in 2006. We think the threshold is outdated and does not keep up with inflation and needs some level of reform.”

However, the uncertainty of congressional passage is still an issue for companies.

“They moved from leather into textiles because under the MTB they get reduced duties and it made it worthwhile,” said Nate Herman, VP for international trade at the AAFA. “So now, they have two options—they can go back to the same old styles and figure out ways to improve them because they can’t afford the higher duties, if the bill does pass [in the Senate], or they have to pass on increased costs to their customers.”

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