Youth products industry weighs in with USTR on tariff issue

Kids Today Staff //News & Commentary//September 17, 2018

Furniture Today and sister publication Kids Today have been following the issue of potential tariffs on Chinese made products proposed by the Trump administration.

As the list of $200 billion in proposed tariffs affects the juvenile products industry, Kids Today excerpted some of the comments from key industry officials during Aug. 20-27 hearings held by the U.S. Trade Representative’s office in Washington, D.C.

Kelly Marriotti
Executive Director
Juvenile Products Manufacturers Assn.
Promoting baby safety is a key mission of our association. Products specifically identified in the Federal Register notice could negatively impact baby products unless such schedules are qualified to exempt child care and protective child safety products. The imposition of tariffs on juvenile products specifically is especially unlikely to advance the administration’s objectives. The tariffs would cause disproportionate harm to U.S. juvenile products manufacturers, particularly small businesses which represent 90 percent of our members. These are entrepreneurial moms and dads with sales of less than $10 million per year. President Trump has made it clear that he wishes to protect U.S. jobs particularly those in small business manufacturing. A broad tariff imposition will negatively impact this goal since it forces U.S. manufacturers to pay more for sub component inputs which are not generally available in the United States. The products I’m speaking about are designed in the U.S.A. exclusively for the United States market, however, since many juvenile products have traditionally been sourced overseas for decades there does not exist a comparable U.S. manufacturing base for products such as strollers, play yards, cribs, changing tables, feeding and hygiene products. With other product categories such as child restraint seats, or car seats, which are molded and tested in the U.S., component parts and pads are generally foreign sourced. For a variety of reasons including unique safety and testing requirements alternate domestic sourcing is generally not available in the supply chain. Juvenile products are uniquely required under U.S. law to be pre-market tested and certified as meeting an extensive array of mandatory U.S. safety requirements. According to the National Traffic Safety Administration car seats and boosters provide the best protection for infants and children in automobile crashes, and for that reason they are required by law in all 50 states. Preventing accidental deaths related to the care of infants, SIDS and sleep-related causes of infant death will not be enhanced by increasing costs to the American consumer of lifesaving products such as cribs and play yards. Increasing the cost through this 25 percent tariff will only prevent the average American family from obtaining safe certified juvenile products that are necessary for the care and protection of their children. The use of tariffs does not adequately account for the role of required testing and certified materials, components and global supply chains in product production and assembly. These complex supply chains can take years to establish and it cannot be shifted to different countries or facilities without compromising contracts, legal compliance, quality, value to the consumer and safety for infants and children. Based on the foregoing we estimate that the net effect of imposition of such tariffs without adjustment or exclusion would result in a significant increase in retail prices for the impacted juvenile products. JPMA submits that any tariff imposition that increases the cost of products which provide for the care and safety of our most vulnerable populations must be avoided. The vast majority of baby products are distributed via mass retail channels and imposition of tariffs will significantly impact the affordability of such products.

Joe Calabrese
Vice President, Operations
Evenflo Company
Evenflo is a nearly 100-year-old U.S. company that is a leading producer of car seats, strollers, and other durable children’s products. Evenflo manufactures many of its products in Piqua, Ohio, and has additional offices in Ohio, North Carolina, and Boston, Massachusetts, where hundreds of U.S. employees are focused on research and development, design, marketing, and sales. Evenflo is concerned that imposing an additional duty of 10 to 25 percent on products that are essentially — are essential to the health and safety of our children, and in some cases are required by law, would not effectively motivate China to eliminate the unfair acts, policies, and practices identified in the Section 301 report, and would cause a disproportionate economic harm to U.S. interests, namely, the health and safety of our children. Evenflo has a unique perspective on this issue, as we are not only an importer of child products that would be impacted if the proposed duty is enacted, we are also one of the few companies in the industry with U.S. manufacturing operations producing these products. While Evenflo is concerned about the number of products that would be affected, and we’ll provide a comprehensive list of products in our post-hearing brief, my testimony today will primarily focus on children’s car seats and travel systems, classified as HTS Code 9401.80.60; car seat parts, classified as 9401.90.50; and ExerSaucers, classified as 9401.80.20. Car seats are required by law in all 50 states and the District of Columbia. In fact, parents cannot even bring a newborn home from the hospital unless they have a car seat installed. Travel systems, which consist of both the car seat and the stroller, allow parents to easily and safely transport babies both in the car and at the destination. A large percentage of parents prefer to purchase their child infant seat along with the matching stroller, so this product is very popular, particularly with first time parents. ExerSaucers are stationary activity centers with a variety of age-appropriate toys that help babies achieve important development milestones, and provide exercise to strengthen leg, back, and neck muscles. Evenflo developed ExerSaucers as a safer alternative to wheeled walkers. Evenflo manufactures these products at our Piqua, Ohio facility, were we employ 320 people. In addition to manufacturing these products, Evenflo also imports them from China as part of our globally integrated supply chain. China accounts for more than 80 to 90 percent of the global production capacity of these products. This capacity simply cannot be replicated elsewhere. For the foreseeable future, there is no country that we can turn to for sourcing imports of these products, which means consumers will bear the financial burden of the increased duties. Imposition of tariffs on durable children’s products like car seats and ExerSaucers is unlikely to advance the administration’s objectives with respect to China. First and foremost, these products are not a priority for the Made in China 2025 Program which has focused on transforming China into an advanced manufacturing economy. None of the 10 sectors targeted in the Made in China 2025 Plan includes children’s play or car seats. In addition, we are not aware of any of these products where the subject of China’s concerned efforts to obtain foreign technology, nor has China prioritized developing its child product industry. What additional tariffs on children development health and safety products will achieve is to impose a disproportionate burden on U.S. consumers, mainly our parents. According to the National Center of Children in Poverty, 41 percent of U.S. children live in low income families. If pricing on these products were to rise potentially by as much as 25 percent, some families will struggle to afford to purchase these products. Even at the low end of the price spectrum, a family could spend over $1,000 just on child restraint products over the course of a childhood. If families are not able to afford new products, they might seek out older, used equipment which may not comply with today’s safety standards. We do not believe that imposing tariffs on these products will provide meaningful leverage in motivating China to end the policy and practices identified in the 301 Report, while the cost of these duties would be borne by U.S. consumers. For these reasons, we strongly oppose adding additional tariffs, whether it is 10 percent or 25, on these and other products that parents need for the safety of our children.

Anthony Ciepiel
CEO
Step2 Discovery LLC
Step2 Discovery is an Ohio-based company, and our subsidiary Leisure Time Products, LLC, is based in Kansas. Leisure Time Products produces quality wood swingsets, playhouses, pergolas, lounge swings, as well as affordable gazebos. The company sells its products through major retailers in the United States, including Home Depot, Sam’s Club, and Walmart, as well as direct to consumer through our website. Leisure Time Products has roughly 130 full-time employees, and distribution centers located throughout the United States. In addition, we support hundreds of independent contractors who install our products for the U.S. consumers. We sell between 65,000 and 75,000 of these structures annually that are installed by these contractors. On the proposed list of HTS subheadings, three HT subheadings cover items that Leisure Time Products must import from China. In our written submission we will provide more detail on these HTS subheadings. But, in general, they relate to articles of wood seats, and wooden furniture, and wooden sheds. If these three HTS subheadings remain on the tariff list, Leisure Time Products would suffer significant damage, estimated at over $8.5 million in the first two years alone if the duty is at the rate of 10 percent, and damages of over $21.5 million if duties — if the duty of 25 percent is levied. As a medium-sized U.S. company, the proposed tariffs would likely cause a domino effect down the entire value chain, ultimately impacting our entire family of companies. Increased costs of supplies leads to a greater increase in the price to the retailer, which leads to an even greater increase in price to the ultimate consumer, which leads to decreased demand for our products, lower sales, and finally resulting in the loss of jobs. The consumers will have to pay a higher price and the company will lose jobs. Obviously the effect of Leisure Time — the effect of these tariffs on Leisure Time products at the 10 or 25 percent duties is severe. We have to source wood from China due to a lack of natural resources in this country. Most of our outdoor wooden products are made from a unique species of cypress, Cupressaceae cunninghamia lanceolata, which is – in harvestable quantities is only available in China. We have tried to source comparable supply in the United States, but there is simply nothing that compares to the wood’s strength, and rot and insect resistance. Leisure Time Products must import from China in order to maintain quality production and satisfy the U.S. demand. China is the only place in the world with ample and sustainable supply of this unique form of cypress wood. And the manufacturing resources to process and convert it into a highly — high quality product for U.S. consumers. Furthermore, we have searched for over a year to find non-U.S. sources that can match China’s availability, but to no avail. Tariffs or no tariffs, we will have to source this wood from China. Our business model is built upon having a lightweight, high quality wood source to provide for lightweight engineering that makes it possible for us to afford shipping the product, and then shipping it once again to the consumer. Comparable product sourced in the U.S. would result in larger size and larger weight, resulting in further price increases to the consumer for shipping and freight. Another concern is the limited ability of the U.S. wood processing and manufacturing plants that can convert the supply of raw wood into usable material and finished product. The scale of the production demands of our company and our competitors overwhelms the current U.S. capacity.

Reed Feist
Chief Financial Officer
Educational Equipment Inc.
I appreciate the opportunity to explain why imposing tariffs of 10 or 25 percent on imports of portable cutting machines would severely harm our U.S. business. Ellison Educational is an American success story. The company was founded in 1977 in a small 2-bedroom apartment when an educator sought to solve the need to laboriously rely on scissors to cut out shapes, numbers, and letters for school projects. Beginning with a first ever consumer hand-operated die-cutting machine invented by a husband and wife team, the Ellison Letter Machine, this small, privately held company based in Lake Forest, California, expanded its product line to include almost three dozen patents. All of these products were designed and developed in the United States. Ellison Educational is widely recognized as a market pioneer and leader of portable cutting machines for use by educators in the classroom, as well as arts and crafters. Portable cutting machines are designed to cut material such as paper, card stock, foil, felt, or fabric in small non-commercial quantities. Our portable cutting machines and related parts and accessories provide the tools for K through 12 educators to make memorable bulletin boards, as well as games and flashcards to reinforce lesson plans. These products also help arts and crafters create a wide range of DIY projects such as custom cards, scrapbooks, quilts, and home decor. Our products have been popular in U.S. schools for more than 40 years. And the Sizzix brand is found in major and independent retailers in over 100 countries. Our full line of cutting and rolling products have received numerous accolades for quality and product innovation. Our products are not strategically important, nor in any way related to the Made in China 2025 Program, so imposing duties on these products is inconsistent with a policy objective of the Section 301 action. Indeed, imposing 10 or 25 percent duties on non-commercial portable cutting machines disproportionately causes severe economic harm to small businesses like Ellison Educational. Ellison Educational’s portable cutting machines are available only from China. And existing contractual agreements and sunk investments render it infeasible to manufacture our proprietary products elsewhere, at least in the medium term. We are not aware of any company in the United States or other third countries that produce these portable cutting machines, making the proposed 10 or 25 percent additional duties on these products an unavoidable cost for Ellison Educational. If this cost cannot be passed on to consumers, our company will suffer unsustainable operating losses. This portends job insecurity for our employees, including more than 100 workers in Lake Forest, California who are involved in product design, engineering, sales, marketing, and customer service. The duties also will adversely impact our retail customers, including teachers and hobbyists. Our consumers can ill afford to absorb a 25 percent price increase. Austere educational budgets mean that America’s educators already reach into their own pockets to purchase supplies for their classrooms. Such a large price increase could significantly alter their ability to extend personal funds for such a discretionary purchase. Also, arts and crafters are less likely to purchase these products, given demand elasticities in their markets. The record is clear that portable cutting machines are a non-commercial product that was not the intended target of the Section 301 action but, rather, unintended collateral damage. Consistent with the administration’s desire to avoid causing disproportionate harm to small or medium-sized businesses and consumers, Ellison Educational respectfully requests the exclusion of portable cutting machines from the list of products facing possible Section 301 duties because 1) there is no feasible alternate source in the medium term; 2) educators and arts and crafters cannot easily absorb the tax, and; 3) these products are neither strategically important nor related to the Made in China 2025 Program. The Trade Representative can most easily effectuate this request for relief by determining not to impose Section 301 duties on any imports under this subheading. The total value of imports from China under this subheading is minimal, less than $140 million per year, and such exclusion would not favor any particular company over another. Thank you for your consideration.

Steve Marton
Partner
BreathableBaby LLC
We’re a small company with 10 employees based on Minnesota. At BreathableBaby we design, market, manufacture, and import infant safety products. Our key product, mesh crib liners, is classified under subheading 9403.90.60 of the Harmonized Tariff Schedule as other furniture parts of textile material except cotton. Subjecting our mesh crib liners to a 10 to 25 percent additional import duty runs counter to infant safety concerns expressed by the Consumer Product Safety Commission, health policy experts, at least six states, and several of the largest retailers in the United States. At the same time, a tariff on our mesh crib liners will not change China’s intellectual property practices. BreathableBaby manufactures mesh crib liners in China that are a safer alternative to traditional padded crib bumpers. Mesh crib liners prevent infants’ arms and legs from becoming trapped in crib slats, as well as the injuries that may result from such incidents. A 2015 analysis by Washington, D.C. based Econometrica established that about half of all crib-related injuries involve entrapment of arms and legs in crib slats. The two largest categories of injuries were fractures and dislocations. A 2011 report by the American Academy of Pediatrics estimated there were about 9,900 incidences of children caught or wedged in a crib over the period 1990 to 2008, and urged that “great efforts are needed to ensure safety in the design, manufacture, and use of such products.” Additional studies confirm that about 300 crib-related injuries per year involve infant’s arms or legs trapped in crib slats. Our mesh crib liners prevent such injuries. Critically, our mesh crib liners are safer than padded crib bumpers because they do not pose a suffocation risk to infants, who may become positioned with their head or face pressed against the liner. Unlike padded crib bumpers, our mesh liners are made from mesh materials that have an air permeability ranging upward from more than 530 cubic feet per minute, as measured by Bureau Veritas, using the ASTM Air Permeability Standard D737. In 2016, the Consumer Product Safety Commission recommended that a mesh or mesh-like product attribute be added as part of a revised ASTM crib bumper standard. A November 2015 article in the Journal of Pediatrics called for the regulation of traditional crib bumpers, and observed that “non traditional bumper design seemed to mitigate some of the problems found with traditional bumpers.” State legislators see mesh liners as a safer alternative to traditional crib bumpers. Maryland has banned the sale of traditional crib bumpers, and expressly excluded mesh crib liners from that ban. Ohio has also banned traditional padded bumpers, but included a 3-year exemption for mesh crib liners pending the completion of an updated ASTM standard or federal regulation. Legislators in Missouri and New York are considering similar bans on padded crib bumpers, while expressly allowing mesh crib liners. Vermont has considered similar legislation. The proposed tariff threatens to leave babies and their parents in those, and all other states, unprotected. Reflecting the safety advantages of our mesh crib liners, Target Stores, Walmart, and Buybuy Baby have all discontinued sales of padded crib bumpers, and sole source our mesh products. Once their existing padded crib bumper inventories are sold out through online sales, these retailers will not be selling padded crib bumpers. Our products are also popular at online retailers such as Amazon. More than one out of every seven new mothers in the United States purchases one of our mesh crib liners. A 10 or 25 percent tariff on our mesh crib liners would do lasting damage to our country, and likely drive an important improvement in infant safety from the market. That would be bad economics and worse social policy. Our product is patented. We are its only source. We have no alternative to China for manufacture. We have looked in the United States and other Asian countries, and no other country can currently provide mesh textiles with the air permeability they require and the assembly skills needed to cut and sew these textiles to meet our quality standard. At the same time, neither our margins nor the market for our products will bear the burden of a 10 or 25 percent tariff. If we cannot make mesh crib liners in China, we cannot bring them to market. The damage to our company and the babies and parents that comprise our market will do nothing to change China’s intellectual property practices. Our total imports over the past five years were under $16 million, or an annual average of less than $4 million. While a tariff would be devastating to our company, China would not even notice losing less than $4 million in annual exports. Imposing a tariff would be particularly ironic, because BreathableBaby has encountered no problems at all in protecting its intellectual property in China.

Joseph Shamie
President
Delta Enterprise
I appear before the Committee today to urge the administration not to impose retaliatory tariffs on infant and children’s products from the People’s Republic of China, including specifically: cribs, bassinets, play yards, high chairs, infant safety seats, and parts of these products. The reason for this request is straightforward and important. Raising the price on these products through tariff increases is likely, if not positively, to lead to an increase in infant and children’s deaths and injuries. Founded as a juvenile furniture retailer by my parents in Brooklyn, New York, in 1968, Delta has grown over the past half century to become one of the U.S.’s largest marketers and manufacturers of safe and affordable infant and children’s furniture, and we are a family company. Truly, a great American Dream story. Our products are sold in major retailers such as Target, Walmart, Costco, and many others, and Amazon, of course, today, primarily to working class Americans. Delta is actively involved in standard setting activities with the ASTM, American Society of Testing and Materials, as well as the CPSC, Consumer Product Safety Commission, industry groups such as the JPMA and private standard setting bodies, to develop and create and implement safety standards for juvenile products. Our company also engages in community outreach to educate new parents to the importance of keeping their infants in safe sleeping environments. We have donated over $4.5 million of safe products to our military families in need and our Delta Safe Sleep Campaign goal is for every child should have a safe place to sleep. With higher rates and higher costs, children will not have a safe place to sleep, many children. You can see in this brochure in your packet, my Safe Sleep Campaign, I have been at bases, like Scott Air Force Base, Fort Bragg, Fort Dix four times, giving out millions of dollars of cribs, again, to our military families, as well as — and they have a higher rate of SIDS deaths — as well as poor families around the country. Safety standards for juvenile products have evolved and improved over the years. Recently, the CPSC implemented new standards for cribs, prohibiting the sale of traditional drop side cribs, requiring that wood used in the crib construction be stronger, mandating anti loosening features for crib hardware, specifying stronger mattress supports and imposing stricter testing requirements. At the same time, the CPSC banned the sale of cribs not meeting these standards, which you can find on Craigslist, eBay, and other used stores…Delta has worked extensively with its vendors, including those in China, to ensure that they can manufacture infant and children’s furniture to meet the exact standards we have imposed and enforced in the United States. If you look on my website one day, you’ll see how we test a crib and what we do to make sure that it is safe for your children, grandchildren, and mine. Experience teaches that when the price of juvenile products increases, parents turn to the used crib market. Again, eBay, Craigslist, and just the local furniture sale place. Unsafe hand-me-downs, this increases death and injuries, hazards to infants and toddlers. Used furniture does not meet the current standards and is less safe. It’s components may have deteriorated with age, from use, or while in storage. Assembly instructions and the original assembly hardware may be missing or misplaced, so that the furniture is reassembled in a jury-rigged and unsafe manner. And we’ve seen this numerous times, you can look at the CPSC reports. Worse yet, parents may put their infants in an unsafe sleeping environment, such as their parents’ bed or a sibling or another toddler’s bed, co-sleeping or bed-sharing. The results is an increase in infant deaths from strangulation, suffocation, SIDS, and other causes. Again, if you look in here, you’ll see tons of articles on the dangers of co sleeping, which keeps increasing with that. Delta — imposing tariffs on juvenile products would make these more difficult. Thousands of babies have suffocated due to sleeping in unsafe conditions. China has, for decades, been an important supplier of safe, affordable juvenile furniture for the United States market. It is generally the leading supplier of these goods by volume and its output cannot quickly or easily be replaced, if at all. A 25 percent tariff will increase prices on these goods and bring it out of reach of many American consumers, parents, families, family values. Surely, we can resolve our trade and intellectual property disputes with China in a way that does not risk the lives of our precious children. I urge the Committee to recommend against inclusion of affordable juvenile products in these tariff increases. Sourcing safe juvenile products is a global experience.