Quarterly Newsletter – August 2023
With the COVID pandemic behind us, Congress has moved on to recovery. The economy remains sluggish and consumer prices continue to rise. SFIA advocacy has targeted policies to lower consumer costs, create more resilient supply chains, protect IPR, and increase participation in sports and fitness.
The Administration is pursuing two multilateral trade agreements, the Indo-Pacific Economic Framework (IPEF) and the America’s Partnership for Economic Prosperity (APEP). These are not trade agreements and the U.S. Trade Representative has publicly stated these agreements are: “Not traditional trade deals… we are not trying to maximize efficiencies and liberalization… we are trying to promote sustainability, resilience, and inclusiveness.” SFIA has remained neutral on these multilateral agreements with 13 Indo-Pacific and 11 Western Hemisphere trading partners, due to the absence of Market Access and Tariff Reduction provisions in the agreements.
Indo-Pacific Economic Framework (IPEF)
The IPEF has three main pillars: Trade, Climate Transition, and Labor & Inclusiveness. Fourteen trading partners in the Asia-Pacific region are involved in the IPEF talks to secure more stable supply chains and improve communications and coordination when disruptions occur. China is not part of the IPEF.
America’s Partnership for Economic Prosperity (APEP)
APEP is an agreement between twelve Western Hemisphere trading partners. Like the IPEF, the APEP’s goal is regional competitiveness, reliable supply chains, shared prosperity, and a sustainable environment. To improve efficiency, the agreement includes digitization of customs procedures and binding trade facilitation provisions. The APEP emphasizes worker wages and environmental preservation.
Neither trade agreement includes “market access” or “tariff relief” to liberalize trade between participating countries. SFIA supports efforts to improve supply chains but believes the lack of trade liberalization to facilitate the movement of goods, especially U.S. exports, limits the benefit of these agreements for U.S. companies.
Indian Footwear Quality Control Requirements
India has proposed new testing and labeling requirements for footwear. The new regulations mandate the use of the Bureau of Indian Standards (BIS) for testing and measuring hard labels on performance footwear. The testing must be performed on-site with specific equipment not readily available.
ASTM International, the International Standards Organization (IS0), and the Shoe & Allied Trades Research Associations (SATRA) testing and measurement standards are widely used across the globe and are compatible with BIS. SFIA requested assistance from the U.S. Trade Representative on getting India to use common testing & measuring standards and removing the hard label requirement for performance footwear sold in the Indian market.
China Section 301 Tariffs
SFIA requested the elimination of Section 301 Tariffs or the re-opening of the exclusion process at a minimum. USTR Tai has publicly stated she believes the tariffs serve a purpose and should not be dropped.
China’s behavior on several fronts helps justify the USTR position as China:
- Failed to Meet Terms of Phase 1 of the China Trade Deal
- Sent Spy Balloon Across U.S.
- Built an Eavesdropping Station in Cuba
- Performed Military Exercises Off Taiwan
- Conducted Aggressive Naval and Air encounters in the South China Sea
In the current environment, expect tariffs of up to 25 percent on Chinese products to continue to be collected by Customs & Border Patrol (CBP).
The Section 301 Tariffs were implemented to punish China for repeated violations of international trade laws. China is doing more to enforce IPR laws, but fake products made in China continue to flow into the stream of commerce. Additional steps are being taken to disrupt imports of counterfeits.
On a related matter, the U.S. Court of International Trade ruled that the Section 301 Tariffs are legal, but that USTR failed to follow proper protocols in collecting public comments. USTR has since convinced the court that its comment process complies with requirements. The decision is under appeal.
Generalized System of Preferences (GSP)
SFIA has urged Congress to pass GSP to incentivize production outside China and lower consumer prices in an inflationary economy. SFIA identified roughly two dozen industry products manufactured in GSP-eligible countries that now have duties of up to 17 percent upon entry into the U.S.
The GSP is a long-established trade program that offers duty-free treatment on imports of products made in more than 110 countries with developing economies. SFIA has identified a number of products made in GSP-eligible countries to avoid duties of up to 17 percent upon entry into the U.S.
The GSP expired on January 1, 2021, and Congress has failed to pass legislation to renew it. The lack of tariff incentives has slowed the movement of production operations out of China, despite Section 301 tariffs, and contributed to higher consumer prices. SFIA has pressed Congress to reauthorize the GSP program immediately.
Miscellaneous Tariff Bill (MTB)
SFIA has pressed Congress to renew the Miscellaneous Tariff Bill (MTB) to eliminate out-of-date tariffs. The U.S. International Trade Commission vetted 82 SFIA petitions requesting tariff relief on industry products and recommended them for inclusion in the MTB. Each petition is capped at $500,000 in tariff relief for a potential of $41 million in tariff relief on SFIA member products.
When overseas production became a threat to U.S. manufacturers, tariffs were applied to foreign-made products to protect domestic manufacturers. Over time, production of many consumer goods moved overseas, and domestic production vanished but the tariffs on foreign-made goods remained in place.
The Miscellaneous Tariff Bill (MTB) offers companies the opportunity to petition for the removal of outdated tariffs on imports of products no longer made in the U.S. SFIA will continue to push Congress to pass the MTB and bring down consumer prices in an inflationary economy.
De Minimis Exemption
It is estimated that more than two million packages a day enter the U.S. under de minimis rules, effectively avoiding inspection, duties, taxes, and fees. To bypass CBP oversight, products must have a value of less than $800 to qualify as a De Minimis shipment. Since the implementation of Section 301 Tariffs, Chinese manufacturers have increased the use of the De Minimis Exception to avoid tariffs. The use of De Minimis also offers counterfeits an avenue for entry into the U.S. without CBP scrutiny, putting consumers at greater risk of harm from counterfeits.
Congress is exploring ways to reign in the use of the De Minimis exception to circumvent tariffs and inspections. The “Import Security and Fairness Act” (H.R.4148) is bi-partisan legislation to ban companies in non-market economies like China from using the $800 De Minimis threshold to import products into the U.S. CBP would be required to collect additional information on all De Minimis packages and could bar bad actors from using the De Minimis rule to deter abuse of the exceptions offered on low-value shipments.
West Coast Port Labor
SFIA asked for the Administration’s help in finalizing a new labor contract to avoid unnecessary delays at 29 west coast ports. Labor Secretary Su engaged in the contract talks leading to the Pacific Maritime Association (PMA) and International Longshoreman & Warehouse Union (ILWU), reaching a tentative deal on a new labor contract on June 15th.
In response to pressure from the business community, manufacturers, and shippers, the Administration intervened in the labor talks to avoid disruptions or a strike.
The Unions will vote to ratify the new labor contract followed by the PMA. If all parties ratify the new contract, an artificial disruption in supply chains will be avoided.
The United Parcel Service (UPS) moves an estimated 20 million packages a day, worth an estimated $3.8 billion or almost 6% of US GDP. The current UPS labor agreement expired on July 31 and negotiations between the International Brotherhood of Teamsters and UPS resolved most of the issues, but stalled over starting wage for part-time workers. SFIA pressed President Biden to intervene in the labor talks to ensure there was not an unnecessary disruption in supply chains. On July 25, The Teamsters and UPS reached a tentative agreement on a new labor contract. The Teamsters will remain on the job through the ratification process, avoiding a potential strike.
The Teamsters viewed the UPS labor talks as an opportunity to highlight their ability to represent workers and get better labor deals as they look to expand into companies like Amazon. Teamsters President Sean O’Brien stated the UPS labor talks are “… the largest collective bargaining agreement in any private sector union,” and the contract could “set the tone and set the standard high for labor — not just the Teamsters but the entire labor movement.”
Labor unrest is an area where government involvement has avoided domestic disruptions in supply chains. The President and Labor Secretary were instrumental in resolving rail and west coast port strikes. SFIA appreciates the Administration’s engagement in UPS negotiations to secure the new labor agreement and avoid unnecessary disruptions in supply chains.
Rail Detention & Demurrage Charges
SFIA is working to reduce excessive fees collected on containers stored in rail yards by pushing for clarification on oversight of rail storage fees and having fees billed through ocean carriers put rail under the Ocean Shipping Reform Act (OSRA) umbrella to give the Federal Maritime Commission (FMC) jurisdiction over rail storage fees.
Railyards are charging excessive D&D fees that must be paid directly to railroads to release cargo. Railroad cargo is unregulated, falling outside the scope of the Ocean Shipping Reform Act (OSRA) and the rail cargo is not under the jurisdiction of the Surface Transportation Board.
INTELLECTUAL PROPERTY RIGHTS
The INFORM Consumer Act
SFIA applauds the implementation of the INFORM Act to deter online sales of counterfeit products to preserve brand equity and protect consumers from sub-standard, unsafe products. The Integrity, Notification, Fairness in Online Retail Marketplace (INFORM) Consumers Act went into effect on June 27, 2023.
The new law provides greater oversight of the online marketplace and better protects intellectual property rights to help shield consumers from risks posed by counterfeit products. The INFORM Act requires online retailers like Amazon, eBay, and Etsy, to collect tax ID numbers, government-issued IDs, and bank account information of sellers. Consumers will have access to the business names and addresses, the contact info of the seller, and the country of origin of the products sold. Failure to comply with the INFORMS Act could result in fines of up to $50,000 for each violation.
REGULATION AND ENVIRONMENTAL STEWARDSHIP
Digital Labels offer the flexibility to provide information on care, content, importer requirements, the origin of the product, and its content to meet reporting requirements across the globe. SFIA joined 130 organizations representing global sportswear, performance apparel, footwear, and fashion interests on a letter requesting a move to digital labels.
Information provided through labels is critical to consumer education for informed purchasing decisions. Hard labels require 5.7 million miles of label tape annually, generating an estimated 343,000 metric tons of CO2. SFIA fully supports supplying consumers with information on care, content, country of origin, and other importer requirements to meet the web of labeling laws in a global marketplace, but believes there is a better platform to deliver this information.
Digital labels deliver information to consumers in a more environmentally responsible way. Digital labels are not limited by label size — information could be more easily read online and modified to meet any country’s product information requirements.
In short, digital labels are more efficient, offer greater flexibility, and provide an environmental benefit by eliminating hard labels many consumers remove anyway.
Prior to the pandemic, Congress had a great appreciation for physical activity’s role in reducing obesity, diabetes, cardiovascular disease, respiratory illness, arthritis, certain cancers, and other chronic conditions. The pandemic highlighted the critical role activity plays in good mental health. There is a mental health crisis in America, especially for our young people. The rise in teen substance abuse and suicides was fueled by isolation. Now, cost and access barriers to youth sports are sidelining kids. SFIA supports policies to lower costs and invest in youth sports infrastructure to increase participation.
Personal Health Investment Today Act (PHIT)
Mental health remains a priority in Congress, and both sides agree on the need to do more to prevent and treat mental illness. The connection between activity and mental health was emphasized during the pandemic, but the participation costs barrier has gotten higher. SFIA is pressing for the inclusion of the PHIT Act in Health Savings Account reform legislation under consideration in Congress.
PHIT would allow Americans to use funds held in HSAs, FSAs, and other pre-tax medical accounts to pay for physical activity expenses as a form of prevention. The use of pre-tax money would effectively reduce consumer costs of activity by 25-37 percent to lower the financial barrier to participation.
Expenses incurred to play youth sports, engage in adult fitness, participate in outdoor recreation, and other activities would be eligible for PHIT. Registration and tournament fees, membership dues, camps, clinics, and personal trainers are all covered expenses. Equipment, including home fitness equipment, is PHIT-eligible, but apparel and footwear that can be worn casually are not.
PHIT (H.R. 1582) is off to a great start in 2023 with 47 bipartisan co-sponsors in the House, including a dozen from the Ways & Means Committee which has jurisdiction over PHIT due to the tax incentive. In the Senate, PHIT (S.786) enjoys support from 16 Senators, including the #2 Republican, John Thune, who is the lead sponsor, and #2 Democrat Dick Durbin, who is a co-sponsor.
Youth Sports Infrastructure
SFIA is leading the effort to build more youth sports facilities. SFIA worked with Senator Jon Ossoff (D-GA) in drafting the “Youth Sports Facilities Act of 2023” to create more places for children to participate in sports, physical education, and other physical activities. The bill would dedicate funds for the construction of new sports facilities in underserved rural and urban areas with high levels of substance abuse or violence.
Local governments, non-profit organizations, and schools would be eligible for grants through a competitive grant process managed by the Secretary of Education. Low-income communities with limited-to-no access to sports facilities would receive grant priority. Projects include gyms, athletic fields or courts, swimming pools, fitness centers, rock climbing walls, ice arenas, pools, and other recreation spaces. Grants can also be used to upgrade existing facilities and purchase sports equipment.
SFIA is currently seeking a Republican to Join Senator Ossoff on the Youth Sports Facilities Act.
Youth Sports Economic Impact Study
Youth sports generate revenue and create jobs in every community across the U.S. SFIA is leading the effort to capture the economic impact of this large industry to help promote investments in youth sports, participation incentives, and other policies leading to a more vibrant youth sports culture in America. SFIA has secured the help of top Appropriations Committee Member Chuck Fleischmann (R-TN) to lead the effort to fund a Bureau of Economic Analysis Youth Sports Economic Impact Study to capture the economic contributions of youth sports across America.
The Bureau of Economic Analysis estimates the total economic output of the outdoor recreation industry to be $862 billion annually… more than mining, utilities, and farming and ranching. $862 billion puts outdoor recreation at 1.9 percent of the U.S. GDP. Outdoor recreation is not in every community in America, but youth sports are.
Youth sports facilities employ administrative, maintenance, and concessions staff to serve players and their families. The facilities are home to leagues that hire administrative staff, referees, and coaches. Youth sports facilities host clinics and tournaments which fill local hotel rooms and restaurants, further contributing to local economies. Leagues using facilities pay for their use and purchase uniforms and equipment for teams. And it’s not just the economic impact inside the youth sports complex — these facilities are a magnet for additional investment in communities as fueling stations, fast food and convenience stores, grocery stores, and chain drug stores are often developed around a facility, adding more jobs and contributions to local economies.
Name, Image, Likeness (NIL)
Bipartisan NIL legislation was introduced in the Senate by Joe Manchin (D-WV) and Tommy Tuberville (R-AL) on July 25th. The Protecting Athletes, Schools and Sports Act (PASS) would protect student-athletes, preserve college sports, increase NIL transparency, moderate the Transfer Portal, promote the health and safety of student-athletes, and give NCAA greater oversight.
In the House, the Committee on Energy & Commerce held a March hearing on NIL. All committee members and every witness, except the ‘unionize athletes’ advocate, agreed on the need for a national NIL law to level the playing field and provide transparency in the recruiting process.
Currently, 30 states have NIL laws and 20 do not. Witnesses and committee members agreed that the inconsistent laws are bad for college sports and are confusing to student-athletes. ‘Collectives’ that allow boosters to combine their resources to pursue potential players are a major problem. Laws regulating ‘Collectives’ vary widely from state to state, further tilting the NIL playing field. Small school sports programs, non-revenue, and Title IX sports are all threatened by NIL.
To date, the “Student Athlete Level Playing Field Act” (HR3630) is the only NIL bill introduced in the House. The bill would prohibit universities from blocking student-athlete NIL deals, and prohibit boosters from offering incentives to recruits and athletes in the Transfer Portal. An oversight body would be created to make recommendations on NIL and establish a dispute resolution process.
With the NIL playing field slanted heavily in favor of schools in states with NIL laws that allow boosters to have a role in the recruitment of high school players and the transfer of players from other schools, additional NIL bills have been teed up by Senator Ted Cruz (R-TX), Congressman Gus Bilarakis (R-FL) and jointly by Senators Richard Blumenthal (D-CT), Corey Booker (D-NJ) and Jerry Moran (R-KS) but none have been introduced.
Earlier this year, the NCAA announced that its NIL rules take precedence over state laws, further muddying the waters. ‘Collectives’ from USC (CA), UGA, UTENN, Ole Miss, University of Washington, and Clemson formed The Collective Association (TCA) to help clarify the current rules for student-athletes and universities and recommend new policies to improve the current system. It is unclear if the TCA is just playing defense or will work with Congress on a national NIL law.