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Industry groups back new bill adding footwear to US trade preference program

House lawmakers have introduced a bipartisan bill that would add certain types of footwear imports to the Generalized System of Preferences, or GSP, program, a move that industry groups say could benefit consumers and retailers.

The measure, introduced by Rep. Adrian Smith, R-Neb., on May 25, could add certain types of hiking boots, sandals and athletic footwear imports to the trade program, which for more than 40 years has provided duty-free treatment to products imported from certain beneficiary countries. Established under the Trade Act of 1974, it allows for 120 beneficiary, or developing, countries and territories to trade duty-free with the U.S. A spokeswoman for Smith could not be reached for comment.

Industry groups are hopeful that the May 25 legislation could have a better chance of succeeding than a previous bill, which stalled most recently in 2015, because it covers a smaller scope of footwear imports and includes a new regulatory step requiring the industry to petition the government when it wants to add footwear products to GSP beyond those products designated in the bill.

Under the new legislation, the industry would petition the U.S. trade representative for certain categories of footwear to be added to the GSP program, which marks a significant change from previous legislation that would have covered a larger group of footwear items within the GSP program without requiring the industry to petition the government. In that light, industry groups argue that the bill is less impactful than previous legislation, but officials also note that the new petition process could give the bill the traction it needs to move through Congress.

The previous legislation, known as the Affordable Footwear Act, would have eliminated approximately $617 million in duties on children's and low-cost footwear, according to industry groups. But the lost revenue to the government in the form of duties was an issue, and the bill, first introduced in the House in 2007, was never approved by Congress.

American Apparel & Footwear Association, or AAFA, spokesman Alex Gibson told S&P Global Market Intelligence that the new bill would cover 44 million pairs of imported footwear, with a value of $450 million. It would also save U.S. companies $57 million in duties, he added, compared to the estimated $617 million in potential duty savings that the previous bill would have provided.

Gibson said the new measure covers several lines of synthetic uppers, including both hiking and low-top hiking boots, as well as synthetic upper sandals and flip-flops. It also includes two categories of protective athletic, one of which covers the ankle. Both categories include a waterproof barrier element, Gibson added.

AAFA President and CEO Rick Helfenbein said in a May 26 statement that the legislation makes "small but critical changes" to products that are eligible for duty-free treatment.

"This approach carefully avoids impacting products that are made in the United States," Helfenbein said. "If these footwear items are ultimately designated as GSP-eligible, companies will be able to use duty savings to support U.S. workers, to invest in product innovation, and have the ability to pass along savings to consumers."

Per GSP program requirements, the measure does not provide duty-free benefits for domestic-produced footwear.

Matt Priest, president and CEO of the Footwear Distributors and Retailers of America, or FDRA, told S&P Global Market Intelligence that his organization supports the bill — its members have long called for footwear to be added to GSP — but hopes that either it or future legislation will include more footwear products.

"We think it's a little limited in approach," Priest said. "But we're hopeful we can get to grow the scope of it. We're glad we've got our foot in the door."

Priest noted that the bill does not cover much in the way of leather footwear and excludes children's footwear from several tariff categories. One particular section of the bill, he said, covers categories of footwear that have high production in GSP countries, but it would apply only to a narrow field of products often limited to high-value footwear. Moreover, Priest said the footwear included in the current legislation is already a small subset, because FDRA members do not import heavily from these countries.

"This is quite modest," Priest said. "It's less impactful, and there is another regulatory step in order to reap benefits after."

FDRA has argued that tariffs on children's shoes can be as high as 67% per import, while the average U.S. tariff for imported products is just 1.4%.

AAFA's Helfenbein urged Congress to "quickly move forward" with underlying GSP renewal legislation, which expires at the end of the year. The program expires periodically and requires a congressional renewal.

The GSP footwear bill, which is co-sponsored by Rep. Earl Blumenauer, D-Ore., was referred to the House Ways and Means Committee, which must approve it before it can advance to the full House for a vote.