June 17, 2019 FILED VIA REGULATIONS.GOV the Honorable
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June 17, 2019 FILED VIA REGULATIONS.GOV The Honorable Robert E. Lighthizer U.S. Trade Representative Office of the United States Trade Representative 600 17th Street, N.W. Washington, D.C. 20508 RE: Comments in Opposition to Inclusion of Sports Equipment and Gear in USTR Section 301 Annex Docket No. USTR-2019-0004 Dear Ambassador Lighthizer: Rawlings Sporting Goods Company, Inc. (hereinafter “Rawlings”) respectfully submits these written comments in response to Docket No. USTR-2019-0004, Request for Comments Concerning Proposed Modification of Action Pursuant to Section 301: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation. On the Annex accompanying this notice, the Office of the U.S. Trade Representative (“USTR”) targeted products imported by our company under the following provisions of the Harmonized Tariff Schedule of the United States (“HTSUS”): Safety headgear of reinforced or laminated plastics, whether or not lined or 6506.10.30 trimmed Safety headgear, other than of reinforced or laminated plastics, whether or not 6506.10.60 lined or trimmed 9506.62.40 Footballs and soccer balls 9506.69.20 Baseballs and Softballs 9506.99.15 Baseball articles and equipment, except balls, and parts and accessories thereof It is our position that imposing increased duties on these low-technology items will only serve to harm U.S. interests and will not be practicable or effective in obtaining the elimination of China’s acts, policies or practices. For that reason, we request that the USTR remove them from its list of targeted tariff provisions. Our comments establish the following: 2 • The safety headgear described below was previously considered for Section 301 tariffs in the preliminary List 3 (Docket No. USTR-2018-0026). Apparently in response to comments about public safety concerns, the USTR wisely removed them from the final List 3. However, those same tariff numbers appeared on this latest preliminary list. We request the USTR to again consider the public health and safety benefits our helmets provide and how additional duties may disincentive consumers from purchasing new helmets or replacing broken ones. • Imposing the proposed up to 25% additional duties on this sports equipment and gear will cause disproportionate economic harm to American interests, including our company, our retail customers, and American sports enthusiasts. This Section 301 action threatens a potential estimated [ ] in additional duties for our annual imports. • To the best of our knowledge, these items are not economically and commercially available outside of China in sufficient quantity and shifting our current suppliers’ production out of China would be a prohibitively costly endeavor that we estimate could take 12-18 months. • This sports equipment and gear do not require “cutting-edge” technology that is being sought by China and we have never experienced any efforts by the Chinese government to unfairly acquire or steal our technology. • The Chinese government has never restricted our company in its business dealings in China and has not employed any tactics, such as opaque and discretionary administrative approval processes, joint venture requirements, foreign equity limitations, procurements or other mechanisms to regulate or intervene in our operations in China. Accordingly, we respectfully request that this sports equipment and gear classifiable in the 8-digit tariff provisions noted above be removed from the above-referenced USTR action. 3 I. Company Overview Rawlings Sporting Goods Company, Inc., is a leading manufacturer and marketer of sporting goods in the United States. It was founded in 1887 and for its entire 132-year history, its Headquarters has always been St. Louis, Missouri. Rawlings’ mission has always centered on enabling participation by developing and producing innovative, high-performance equipment and protective apparel for the professional, amateur, and entry-level player. Recently, Major League Baseball became a part-owner of Rawlings. By continuously developing technologically-enhanced products, Rawlings dominates the industry with innovative new products, enabling serious athletes to reach their full potential and achieve peak performance. With revolutionary industry and product innovations such as football shoulder pads (in 1901), lightweight protective apparel, and the S100 batting helmet line, Rawlings is the authentic and global authority on protecting athletes’ bodies from head-to-toe. Rawlings’ advisory players – from yesterday’s heroes such as Roberto Clemente, Mickey Mantle, Stan Musial and Sadaharu Oh to today’s stars of Bryce Harper, Giancarlo Stanton, Yadier Molina and Kris Bryant – embody these five core values through their play and dominance in all aspects of the game and their character and integrity off-the-field as well. With an assortment of baseball, basketball and football game-related product lines, Rawlings is present everywhere team sports are played. Leagues and conferences of all skill levels integrate Rawlings’ unparalleled product portfolio into their sports: as the Official Baseball Supplier and Official Helmet of Major League Baseball®, the official baseball of Minor League Baseball, the official baseball and softball for the NCAA®, and the approved baseball, basketball, football and softball of the National High School Federation®. Rawlings currently employs approximately 670 people in the United States. All our research and development as well as information technology capabilities takes place here in the United States. Our U.S. locations include: 4 RAWLINGS CORPORATE 510 Maryville University Drive Suite 110 St Louis MO 63141 RAWLINGS - TECH CENTER 6707 Keaton Corporate Pky 0”Fallon, MO 63368 RAWLINGS FACTORY STORE Reading 35 South Willowdale Drive Suite 118 Lancaster, PA 17602 RAWLINGS FACTORY STORE AZ 4976 Premium Outlets Way Suite 830 Chandler, AZ 85226 RAWLINGS FACTORY STORE FL 15681 State Road 535 Orlando, FL 32821-6316 RAWLINGS FACTORY STORE SC 4619 Factory Stores Blvd. Suite M130 Myrtle Beach, SC 29579 RAWLINGS FACTORY STORE FL 1791 Palm Beach Lakes Blvd. Space #w111 West Palm Beach, FL 33401 TENNESSEE TANNING 915 North Atlantic Tullahoma, TN 37388 RAWLINGS ADIRONDACK 52 McKinley Avenue Dolgeville, NY 13329 MIKEN SPORTS 131 Bissen Street Caledonia, MN 55921 5 RAWLINGS WASHINGTON WAREHOUSE 200 West Link Drive Washington, MO 63090 II. Rawlings’s Sports Equipment and Gear Representative photos of the sports equipment and gear targeted for additional up to 25% duties are included at the end of this submission. They include: Baseballs and softballs; Safety helmets; Bats; Catcher’s Gear; and Footballs. III. Financial Harm to American Interests The imposition of up to 25% tariff on this sports equipment and gear would cause serious economic harm to a broad spectrum of American interests, including our company, our retail customers, and American sports enthusiasts. We have made significant investments in molds, tools, and dies in China and have invested in a trained staff. Moving production out of China would be too great a cost for our company to bear. Yet if we remain in China, a 25% duty increase would be unsustainable as well. We strive to deliver quality goods at a competitive price while also paying our employees competitive wages. You can see the potential harm on a few of the product category at issue here: Retail Price Including Current Retail Potential 25% Section Rawlings Item Price (US$) 301 Tariff Increase Rawlings Intermediate Velo Catcher Set 297.92 372.40 Rawlings Coolflo Single Flap Baseball Batting Helmet 33.59 41.99 Rawlings SB1050 Soccer Ball, Size 5 86.14 107.68 Rawlings R2 PIAA Approved Leather Football 29.75 37.19 The resultant economic harm can be summarized as follows: 6 • A 25% increase on this sports equipment and gear will have to be passed onto those consumers, which means those Americans will buy fewer items or go without them. • Suppressed demand will erode profitability and potentially eliminate entire product lines. • Revenue will decrease for Rawlings and its retail customers. • Direct investment on items such as U.S. research and development will decrease. • Job losses would be inevitable. This is an unfair consequence given that targeting our sports equipment and gear will in no way assist the USTR in its policy goals against China. Unless the USTR removes them from its list of targeted products, the additional duty burden will be a hefty if not impossible price for our company, our retail customers, and consumers to bear. Even more harm can come due to insufficient time in which to prepare for a 25% duty rate increase. It takes time from ordering the manufacture of our goods to receiving them here in the United States. Moreover, we receive most of our imports in the first half of the year, so we have no time to react for our 2020 import surge. IV. Imposing Additional Duties Would Clash with Congressional Efforts to Lower Costs of Sports Equipment A 25% increase in duties is in direct contravention of Congressional efforts to lower the costs of sports equipment. Currently, pre-tax medical accounts are primarily used for reimbursement of medical expenses once you become sick. A pending Congressional bill entitled “Personal Health Investment Today Act” (“PHIT Act”)1 would allow taxpayers to place up to $2,000 a year in existing Pre-Tax medical accounts for reimbursement of physical activity expenses. The rationale is simple: Lower costs will promote active lifestyles and improve the health of Americans. Specifically, this bill would amend the Internal Revenue Code to allow a medical care tax deduction for qualified sports and fitness expenses. The deduction applies to amounts paid for: (1) fitness facility memberships, (2) physical exercise or activity programs, and (3) safety equipment for use in a physical exercise or activity program. What the USTR 1 S.680, 116th Cong. (2019). 7 proposes would drive the costs of sports equipment significantly higher and consequently, this can discourage many Americans from participating in sports. V. Not Commercially or Economically Available Outside of China To the best of our knowledge, the sports equipment and gear we sell are not made in the United States.