FDRA Addresses High Tax Rate Plaguing Footwear Industry

Executives from the footwear industry kicked off FN Platform early Monday morning with an overview of the mounting tariffs dogging manufacturers and the exhaustive rulings on how certain materials get classified by U.S. Customs.

As Matt Priest, president of the Footwear Distributors and Retailers of America, put it, “This is the dirty underbelly of the footwear industry.”

The laws in place are old, complex and, in many cases, inconsistent, said the experts.
Still, they are important to understand.

Priest said that more than 2.3 billion pairs of shoes were imported into the U.S. last year, amounting to 7.32 pairs per person. Of that total, $2.5 billion in duties were paid to the U.S. government.

According to fellow panelist Greg Tunney, president and CEO of RG Barry as well as current FDRA chairman, the footwear industry, at $60 billion, is taxed 10 times more than the cellphone sector.

“We are highly taxed and highly tariffed,” he said.

To illustrate his point, Tunney said RG Barry registered about $20 million in net operating profits last year. For that period, it also paid out $8 million in tariffs.

“We spend about half our profits on tariffs,” he said. “That’s a big, big deal.”

Priest said “tools of the trade” exist to lower tax rates. Among them is tariff engineering, in which manufacturers adjust the materials used in shoes. Legislation and free trade agreements can also help, Priest explained, but they are lengthy, drawn-out processes.

“The goal is to one day get to a zero tax level,” Priest said.

John Pellegrini, the FDRA customs counsel from McGuire Woods LLC, also served as a panelist.

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