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Politics Say no to the dress tariffs

21:40  09 may  2021
21:40  09 may  2021 Source:   thehill.com

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I admit it, I'm a fan of the TV show"Say Yes to the Dress." I started watching with my three daughters, but soon found that I have strong opinions of my own. I get it now. I like the princess cuts. I like Pnina Tornai gowns. And I am anxious about the price of the dresses to which each of my daughters will say "yes." Importantly, U.S. tariffs add a lot to the price of gowns, especially right now, given the U.S.-China trade war. So as a dad eager to avoid paying big import duties on three gowns, let me propose a strategy for the industry.

a man wearing a costume: Say no to the dress tariffs © iStockphoto/The Hill illustration Say no to the dress tariffs

Wedding dresses are a $2 billion industry. Some 80 percent of gowns are imported from China, making the industry highly sensitive to trade tensions. A dress can take over a hundred hours to sew, and China has a lot of skilled embroiders, 200,000 of whom work in one city in Guangdong province. Dresses are made of silk and various synthetics, and these materials determine which tariff applies to the gown. That's where my strategy kicks in.

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There are two main tariff codes in play: 6204.49 for silk dresses, and 6204.43 for dresses with synthetic fibers. The U.S.'s Most-Favored Nation (MFN) applied (and bound) tariff is 6.9 percent on the former, and 12.3 percent on the latter. This means that both of these tariffs are maxed out at their legal ceiling under the World Trade Organization (WTO). In normal times, these tariffs could not be raised. But these aren't normal times.

President Trump included wedding dresses in List 4A of his Section 301 tariffs on China, adding an import duty of 25 percent on top of the usual MFN rates. President Biden has yet to walk back these extra tariffs. The industry can't be "re-shored," and the supply chains are not going to be moved out of China. Aside from creating government revenue, the only thing these tariffs are doing is incentivizing a flood of fake wedding dresses into the U.S. market.

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So, what can be done? Biden could negotiate a deal with China on the Section 301 tariffs, but that's going to take more time than many hoped. The U.S. could also unilaterally cut its MFN applied rates, but don't hold your breath.

What if importers of high-end gowns could take matters into their own hands? If there's one thing I've learned from "Say Yes to the Dress," it's that wedding dresses are different. They're not really dresses. They're art. Wearable art.

Specifically, let me suggest that wedding dresses are sculptures, falling under tariff code 9703, defined as "original sculptures and statuary, in any material." Could a wedding dress be a sculpture? A sculpture is a one-of-a-kind, three-dimensional piece of art. It's unique, but copies are permissible. Best of all, 9703 is not on any Section 301 list, and U.S. MFN tariffs are bound at zero.

Crazy? Wait a minute. One footnote states that 9703 "does not apply to mass-produced reproductions or works of conventional craftsmanship." Certain high-end wedding dresses may clear this bar with respect to being a "true work of art," shipped with the bio of the artist. Once the gown is worn, moreover, it can also be displayed. You get where this is going.

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A 1990 U.S. customs ruling found that two bridal garments from South Africa were not art for the sake of tariff classification. Yet this case didn't compare the garments to a sculpture, and didn't benefit from recent trends in the burgeoning market for wearable art.

Would this tariff reclassification work? Customs experts at Flexport say that it would be "a stretch." Yes, but the bigger picture is that business needs to be creative in dealing with the new normal in U.S. trade. McKinsey reports that the fashion industry accounts for only 6 percent of U.S. imports but pays 51 percent of the country's tariff bill.

What's Plan B? Perhaps Pnina Tornai can add a few gizmos to qualify her gowns for zero tariffs under the WTO's Information Technology Agreement.

Marc L. Busch is the Karl F. Landegger Professor of International Business Diplomacy at the Walsh School of Foreign Service at Georgetown University, a nonresident senior fellow at the Atlantic Council and host of the podcast TradeCraft.

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usr: 1
This is interesting!