Retailers fighting imports’ ‘shoe tax’

When Congress passed the Smoot-Hawley Act in 1930, the powerful domestic rubber lobby made sure it got some protection for what was then a vibrant shoe market.

The anti-trade legislation included tariffs on imported shoes with rubber soles and fabric tops.

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Eighty years later, the domestic manufacturing base the tariff was intended to protect no longer exists. But the tariff still does. Now a group of retailers is asking Congress to repeal the tariff on the grounds that it is an unnecessary tax burden that falls particularly hard on lower-income families.

In a weird quirk of the law that has to do with its origins and the fashions at the time, the import duties are actually higher on low-end shoes like Air Jordan knock-offs than they are on actual Air Jordans. The duties are as high as 67 percent in some instances.

Nate Herman, senior director of international trade at the American Apparel and Footwear Association , said the duty accounts for as much as $5 of the cost of a $15 pair of rubber-soled shoes with fabric tops.

A House bill to repeal the tariff has attracted 158 co-sponsors, while the Senate measure has 14, including main authors Sen. Gordon Smith (R-Ore.) and Maria Cantwell (D-Wash.). The measures repeal tariffs on rubber-soled shoes with fabric tops and on all children’s shoes.

But the lobbying push isn’t a slam-dunk because of pay-go rules and worries about how to fill the budget hole left by repealing the tariff. All told, tariffs on shoe imports generate about $1.9 billion to the federal treasury each year. The Affordable Shoe Act targets tariffs that equal around $800 million a year, Herman said.

Lobbyists for shoe importers are now racing to get the measure attached to some legislative vehicle that could pass without triggering pay-as-you-go rules, like a second stimulus package or a fix for the Alternative Minimum Tax.

Matthew Beck, a spokesman for the House Ways and Means Committee, which has jurisdiction on the issue, said committee staffers were reviewing the tariff repeal as part of the miscellaneous tariff bill, which temporarily repeals non-controversial tariffs.

The so-called shoe tax was designed to protect the domestic shoe manufacturing industry, but that industry has long since disappeared, largely to China. As much as 95 percent of the shoes Americans wear are manufactured overseas.

Several years ago, shoe importers reached a deal with domestic shoe manufacturers not to target the tariffs on footwear that is still produced in the United States.

The shoe importers and retailers had hoped the global Doha deal in the World Trade Organization would fix the problem. A Doha deal would have affected China and other Asian countries where most shoes are produced, but those talks faltered over the summer and are now stalled.

Meanwhile, the weaker dollar has made it more expensive to import shoes. Shoe prices could go up as much as 20 percent this year, adding new urgency to the lobbying campaign, said Ron Sorini, a trade lobbyist who is working with the retail groups.

“The costs just keep going up and up,” he said.

“Because taxes are subject to the same distribution mark-ups as any cost, that expense is passed on to hardworking American families,” said Rep. Nancy Boyda (D-Kan.), one of the principal backers of the tariff repeal. Payless ShoeSource, a discount chain, is based in Boyda’s district.

Critics say the shoe tariffs costs American consumers as much as $5 billion a year.

Supporters say only one company, E.S. Originals, has lobbied against the repeal. The company has a patent that adds fabric to the rubber in the soles, and thereby avoids the tariff trigger. The company has hired Miller & Chevalier to lobby on tariff issues, but a spokesman was not available by press time.