Trump, Trade and How Companies are Reorganizing Their Footwear Supply Chains Strategies to Suit

Uncertainty, it seems, is the mother of all supply chain revamps.

With trade in the chancy state it’s in, brands are doing their best to sure up in the face of it rather than trying to anticipate what’s up next.

That was the message at a panel titled, “Prepare to Reorganize Your Supply Chains: Trump, Trade and Footwear,” at the Footwear Distributors and Retailers of America’s Footwear Sourcing Intelligence Summit last week.

In some cases, the up-in-the-air state of trade affairs appears to be having the America First focus President Trump’s been after.

“I think we’re starting to see more defense,” said Quinn O’Rourke, director of compliance and logistics for Lacrosse Footwear Inc., which includes the company’s namesake brand, Danner and White’s Boots. “We’re seeing a more emboldened domestic industry on certain fronts.”

Brands and retailers may themselves be putting America first more than they may have planned to, as they at least know that they’d be dealing with duty free goods, and many are looking into ways to make U.S. footwear manufacturing more viable.

For O’Rourke, moves under the new administration could prove to open up opportunities beyond U.S. shores, too.
With the North American Free Trade Agreement, for one—which will see renegotiation talks start up on Aug. 16—potential changes to the rules of origin may be more positive than what’s in the current deal if the Administration can bend to allow for more options on inputs.

The U.S.’s northern NAFTA partner, Canada, wants those rules of origin adjusted too—and they want to see more Made in USA.

“I think we would all like to see the rules of origin rewritten for textiles and apparel for a lot more manufacturing to be done in the U.S. so we can import the product duty free,” said Kerry Rasmussen, manager of key accounts for Canadian customs and trade compliance broker Farrow.

The U.S. has already outlined its renegotiation objectives for NAFTA, which including curbing trade deficits and removing barriers to U.S. exports, but little has yet been addressed about what, if anything, will happen to the agreement’s rules of origin.

Greater flexibility in the rules of origin under NAFTA, according to FDRA president and CEO Matt Priest, could help drive investment to create footwear production in places like Mexico.

But whether that’s the way things move forward or not, the goal is for NAFTA to remain in place—even if that means the agreement stays as is—considering Trump’s threats to throw it out if he can’t settle on a deal he feels suits the country.

“We say ‘do no harm,’” Priest said, adding, however, “We’re not even sure they’ll open the footwear rules of origin.”
Whatever’s to become of NAFTA, companies, like Lacrosse, are looking outside of the North American trade deal for other rules and programs that could spell business opportunities.

“There’s some uncertainty out there right now in terms of what’s going to happen, but there are a lot of rules out there that companies can take advantage of,” O’Rourke said. Things like foreign trade zones and first sale (which stipulates that the entered value for qualifying transactions can be based on the purchase price between the middleman and the factory, rather than the between the middleman and the importer) are two to start with. “It does take a lot of energy and research to comply and do it the right way, but there’s still a lot of opportunity.”

Another, as Rasmussen added, is filing for duty drawbacks, which many companies aren’t bothering to do, and they’re leaving money on the table.

Under NAFTA, duty drawbacks are monetary rebates on goods being imported into the United States, so that duties collected upon import of a good that’s slated for export can be refunded, reduced or waived.

Footwear could even find its way into the U.S. Generalized System of Preferences Program, which provides duty-free treatment to goods coming from certain beneficiary countries. That is if the U.S. renews the GSP to keep it in effect beyond the slated Dec. 31, 2017 expiration date.

“I think at the end of the day, it will be extended,” Priest said. “We are hearing rumblings that the industry may want to explore revoking GSP or reviewing why certain countries like Brazil have it…Our hope is that some sort of footwear will be added. We’re pushing for that but we just have to wait and see.”

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