LOS ANGELES — Elizabeth Eronobi was busy scouting out bargains recently at a half-price sale at the Payless ShoeSource store on Third Street in the Koreatown section of Los Angeles.
“They have a good variety of kids’ shoes here too, which are also cheap,” the 30-year-old said while carrying her 5-month-old son, Muna. What she didn’t realize was that virtually all the shoes sold at Payless in the U.S. are made overseas and subject to an import tax, or tariff, of as much as 67.5 percent.
Paid at the U.S. border, added to prices and mostly hidden from customers, shoe tariffs vary widely. The $60 suggested retail price for a pair of brown leather loafers, for instance, includes an 8 percent tariff, Payless said. Much higher are the tariffs for rubber gym shoes. Nike said the suggested retail price for a pair of Air Jordan cushioned track shoes — $150 — includes a 20 percent tariff.
Shoe tariffs date to the Great Depression, when Congress approved the Smoot-Hawley Tariff Act of 1930. At the time, there was a large footwear industry in the U.S. that made rubber and canvas shoes at a low cost. The tariffs were imposed to protect these U.S. companies from cheaper imports.
Today more than 90 percent of shoes are imported, yet these shoe tariffs remain in effect.
Sylvia Rivas, 25, a mother from East Los Angeles, often shops at Payless stores for herself and her 1-year-old daughter, Gabriella. She said she spends an average of $25 to $30 every two months on shoes.
“I had no idea. I hope they can find a way to reduce the taxes,” Rivas said.
As the shoe import business has grown, so has the push to reduce these shoe taxes, and there are battles brewing in Washington.
Opponents of the tariffs are pushing for legislation in Congress known as the Affordable Footwear Act. At the same time, they are pushing U.S. trade negotiators to reach an international agreement to lower the tariffs.
But importers are up against a smaller but potent group, the domestic shoemakers with their own lobbyists and supporters in Washington. They say that Congress and trade officials must protect U.S. jobs and keep the tariffs in place. Lowering the tariffs, they say, may drive overseas the few remaining shoe-manufacturing jobs still in the U.S.
The proposed Affordable Footwear Act seeks to eliminate about $800 million in duties on children’s and low-cost shoes out of the $2 billion in total duties collected on imported shoes in 2010. The move could reduce prices of these shoes as much as 40 percent, supporters said.
U.S. Sen. Maria Cantwell, D-Wash., a sponsor of the Senate bill, said it could help cut costs for hardworking families at a time when they most need it.
“Working families are already facing tough economic times and high prices for gasoline, groceries and other necessities,” Cantwell said. “It’s time to end this outdated tariff on shoes.”
Michael Massey, chief executive of Collective Brands Inc., which owns and operates Payless ShoeSource (which has stores across the globe), Stride Rite and Sperry Top-Sider, said he would like to see the bill passed to reduce the cost of imported low-cost shoes. “Middle- to low-income families need a break from the high tariffs. The taxes are highest on shoes which are the least expensive that are made of canvas, rubber and plastic.”
Companies such as Boston athletic footwear maker New Balance disagree.
New Balance is the last athletic footwear manufacturer in the U.S. About 25 percent of the shoes it sells in North America are either manufactured or assembled at one of the five New England factories, and the company doesn’t have to pay any tariffs.
Matthew LeBretton, New Balance director of public affairs, explained that the company favors keeping a climate that allows what is left of the domestic footwear industry to be competitive. The U.S. government has the ability to sustain and help create jobs in this sector by keeping the status quo, he said, or it can risk losing thousands of jobs by making decisions to help overseas manufacturers maximize their profits.
“Our position is that we will support changes so long as it is not harmful to what is left of the domestic footwear industry,” he said. About 7 million pairs of shoes that New Balance produces each year in the U.S. make up a quarter of U.S. sales. The rest are made in Britain, China, Indonesia, and Vietnam.