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Possible New Tariff Dilemma Faces Industry

The legal justification that allowed the Trump administration to impose tariffs on approximately $370 billion worth of Chinese imports into the U.S. in Aug. 2017, under Section 301 of the Trade Act of 1974, could be utilized to levy new tariffs on Vietnamese imports that include footwear.

The possibility of these new duties arose late last week when the Office of the U.S. Trade Representative confirmed it will pursue an investigation into the Asian country’s trade practices, including possible currency manipulation. Vietnam is the second largest supplier of footwear to the U.S. market. For the fiscal year ended May 31, contract factories in Vietnam produced 50 percent of all Nike branded footwear. Vietnam produced 43 percent of Adidas’ 2019 global footwear volume of 448 million pairs with the largest contracted factory in the country exporting an estimated 36 million pairs of Three-Striped footwear.

There remains much uncertainty about what tariff action, if any, will occur in the coming months and how prepared footwear companies of all sizes are prepared to again make supply chain changes to avoid any new tariff impacts. There is also ambiguity currently over when any new duties on Vietnam footwear would take effect and how much they would raise the average retail cost of footwear imported from that country. The China tariffs that became effective in Aug. 2017 did not commence on footwear coming into the U.S. until Sept. 2019.

Also, if Democratic presidential nominee Joseph Biden wins control of the White House on Nov. 3, his administration could decide to continue the investigation into Vietnam’s trade practices or drop it altogether.

Footwear Retailers and Distributors of America (FDRA) president and CEO Matt Priest, while vowing his trade group will vigorously fight any attempt to implement new Vietnam tariffs after “getting burned” by Section 301 in China three years ago, further suggested the USTR’s latest investigation announcement may be part of a negotiating ploy for an eventual bilateral trade agreement with Vietnam. Regardless, the FDRA and its members intend to file comments on the matter through a Nov. 12 deadline.