DAINTY MAID FOOTWEAR, INC. GETTYSBURG, PA. Report
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UNITED STATES TARIFF COMMISSION WOMEN'S DRESS AND CASUAL SHOES: DAINTY MAID FOOTWEAR, INC. GETTYSBURG, PA. Report to the President on Firm Investigation No. TEA-F-47 and Worker Investigation No. TEA-W-169 Under Sections 301(0(1) and 301(c) . (2) of the Trade Expansion Act of 1962 TC Publication 543 Washington, D.C. January 1973 UNITED STATES TARIFF COMMISSION Catherine Bedell, Chairman Joseph 0. Parker, Vice Chairman . Will E. Leonard, Jr. George M. Moore J. Banks Young Itaio H Abiondi Kenneth R. Mason, Secretary Address all communications to United States Tariff Commission Washington, D. C . 70436 CONTENTS Page Report to the President 1 Finding of the Commission 3 Views of Chairman Bedell, Vice Chairman Parker, Commissioners Moore and Ablondi 4 Views of Commissioners Leonard and Young 7 Information obtained in the investigation: Description of articles under investigation A-1 U.S. tariff treatment A-6 U.S. consumption, production, and imports A-8 U.S. and foreign wage rates A-12 Data relating to Dainty Maid Footwear, Inc.: * * * * * * * * * * * * Appendix A: Statistical tables A-24 Appendix Tables 1. U.S. rates of duty applicable to women's and misses' footwear of types provided for in specified TSUS items, July 1, 1934, and GATT concessions to Jan. 1, 1972 A-25 2. Leather, footwear for women and misses made by the turn or turned process (item 700.20): U.S. rates of duty and imports for consumption, 1939, 1946, 1955-71, January-October 1971 and January-October 1972 A-26 3. Leather footwear for women and misses made principally by the cement process (items 700.43 and 700.45): U.S. rates of duty and imports for consumption, 1939, 1946, 1955-71, and January-October 1971 and January-October 1972 A-27 4 Footwear having supported vinyl uppers for women and misses (item 700.55): U.S. rates of duty and imports for con- sumption, 1934, 1964-71, and January-October 1971 and January-October 1972 A-28 5. U.S. rates of duty applicable to women's footwear entered under certain TSUS items and duty collected based on specified values, June 18, 1930, Aug. 31, 1963, and GATT concessions A-29 6. Nonrubber footwear for women: U.S. imports, by specified TSUSA items, 1969-71 A-30 Appendix Tables (continued) 7. Dainty Maid Footwear, Inc., and Jelep Sales Corp.: Profit-and-loss statements for the fiscal years 1968 to 1972 8. Dainty Maid Footwear, Inc., and Jelep Sales Corp.: Profit-and-loss statements for the fiscal years 1968 to 1972 -- 9. Compensation (salaries) to executives of Dainty Maid Footwear, Inc., and Jelep Sales Corp. for the fiscal years 1967 to 1971 10. Dainty Maid Footwear, Inc.: Statement of financial position as of June 30, 1968 to 1972 11. Dainty Maid Footwear, Inc., and Jelep Sales Corp.: Ratios of financial data, 1968-72 Note.--The whole of the Commission's report to the President may not be made public since it contains certain information the publication of which would result in the disclosure of the operation of an individual firm. This published report is the same as the report to the President, except that the above-mentioned information has been omitted. Such omissions are indicated by asterisks. REPORT TO THE PRESIDENT U.S. Tariff Commission, January 30, 1973. To the President: In accordance with section 301(f)(1) of the Trade Expansion Act of 1962 (TEA) (76 Stat. 885), the U.S. Tariff Commission herein reports the results of investigations made under sections 301(c)(1) and 301(c)(2) of that act, relating to women's dress and casual shoes. On December 1, 1972, the Commission received a petition filed on behalf of Dainty Maid Footwear, Inc., Gettysburg, Pa., and on December 27, 1972, a petition filed on behalf of the former workers of that firm, for determinations of eligibility to apply for adjustment assistance under the said act. Accordingly, on December 18, 1972, the Commission instituted investigation TEA-F-47 and on January 5, 1973, investigation TEA-W-169 to determine whether, as a result in major part of concessions granted under trade agreements, articles like or directly competitive with the women's footwear produced by the afore- mentioned firm are being imported into the United States in such in- creased quantities as to cause, or threaten to cause, serious injury to such firm and/or the unemployment or under employment of a signifi- cant number or proportion of the workers of the firm, or an appropriate subdivision thereof. Public notices of investigations were published in the Federal Register (37 F.R. 28327) on December 22, 1972 and (38 F.R. 1240) on January 10, 1973. No public hearings were requested and none were held. 1 2 The information in this report was obtained principally from officials of Dainty Maid Footwear, Inc., and from the Commission's files. 3 Findings of the Commission On the basis of its investigations, the Commission unanimously finds that articles like or directly competitive with footwear for women (of the types provided for in items 700.43, 700.45 ) and 700.55 of the Tariff Schedules of the United States) produced by Dainty Maid Footwear, Inc., Gettysburg, Pennsylvania, are not, as a result in major part of concessions granted under trade agreements, being imported into the United States in such increased quantities as to cause, or threaten to cause, serious injury to such firm, or unem- ployment or underemployment of a significant number or proportion of the workers of such firm, or an appropriate subdivision thereof. 4 Views of Chairman Bedell, Vice Chairman Parker, Commissioners Moore and Ablondi Our determinations in these investigations are in the negative because the criteria established by sections 301(c)(1) and 301(c)(2) of the Trade Expansion Act of 1962 (TEA) have not been met. Before an affirmative determination can be made, the Commission must find that each of the following conditions have been satisfied: (1) Articles like or directly competitive with those produced by the firm are being imported in increased quantities; (2) The increased imports are in major part the result of con- concessions granted under trade agreements; (3) The firm is being seriously injured, or threatened with serious injury; and a significant number or proportion of its workers are unemployed or underemployed, or threatened therewith; and (4) The increased imports resulting from trade-agreement con- cessions are the major factor in causing or threatening to cause the serious injury to the firm and the unem- ployment or underemployment of the workers. In the instant cases, we find that condition (4) hashas>not been satisfied; namely increased imports of articles like or directly competitive with the dress and casual footwear produced at Dainty Maid 'Footwear, Inc., have not been the major factor causing, or threatening to cause, serious injury to the firm and the unemployment or uderem- ployment of its workers. Under the circumstances, we are not required to reach a conclusion respecting the first three conditions, and we have not done so. In arriving at our determination, we were persuaded chiefly by the following considerations. Dainty Maid Footwear, Inc. began producing women's dress and casual footwear in March 1968, when imports of such footwear were already supply- ing more than a fourth of the U.S. market and were increasing rapidly. 5 Moreover, it was a matter of public knowledge by mid-1967 that the rates of duty for women's footwear would be further reduced in annual stages beginning in January 1968. In spite of the rapidly increasing share of the market obtained by imports, Dainty Maid operated at full capacity in both 1970 and 1971 and the sales increased each year through 1971. From the beginning and through 1971, the bulk of Dainty Maid's production consisted of one basic style of footwear, ;pump with various types and heights of heels. In 1972, the firm drastically altered its product mix and also increased its prices. About half of the output in 1972 consisted of vinyl boots; about a fourth, clogs and walking shoes; and about a fourth, dress boots. In 1972, as the prices were increased and changes in styling were made, sales declined. Some of the firm's customers turned increasingly to imports as Dainty Maid's prices were increased and its product line changed. However, the major factors that caused the loss of sales and the cessation of operations were increased costs (and prices) and the inability of the firm to find a suitable market for its new product line. According to the firm's records, Dainty Maid lost money in three of the five years of its operation. In 1971, a year during which the plant was operating at full capacity and in which peak sales were achieved, the company still operated at a loss. The financial condition of the firm was precarious from the very beginning. In four of the five years of its operation, the corporate owners had to lend it money and the accounts receivable were factored for all five years. The ratio of current assets to current liabilities was never better than 1.4 to 1-- 6 substantially below a generally acceptable rate. In July 1972, the indebtedness was further extended when * * * * was borrowed from a finance company. In September 1972, the company suspended payments on that loan and in October 1972 was forced to cease operations when a judgment was obtained and the equipment was sold at public auction. The precarious financial condition of the company and other operating and management decisions, including the change in product line, were the major factors that caused the company to cease operations.