UNITED STATES TARIFF COMMISSION

MEN'S FOOTWEAR: WISCONSIN SHOE CO. MILWAUKEE, WIS.

Report to the President Firm Investigation No. TEA-F-33

Under Section 301(c) (1) of the Trade Expansion Act of 1962

TC Publication 427 Washington, D. C.

October 1971

UNITED STATES TARIFF COMMISSION

Catherine Bedell, Chairman

Joseph 0. Parker, Vice Chairman

Glenn W. Sutton

Will E. Leonard, Jr.

George M. Moore

J. Banks Young

Kenneth R. Mason, Secretary

Address all communications to United States Tariff Commission

Washington, D.C. 20436

CONTENTS

Page

'Report 'to the President 1 Finding of the Commission 2 Views of Commissioners Moore and Young 3 View of Commissioner Leonard 5

Information obtained in the investigation:

Description of articles under investigation. A-1 U.S. tariff treatment A-4 U.S. consumption, production, and imports:

Men's work shoes A-5 Men's dress shoes A-6 Bowling shoes and hunting boots A-7

Data relating to Wisconsin Shoe Co.: it. * * -1E- * * *

Statistical appendix A-19

Appendix Tables

1. U.S. rates of duty applicable to leather footwear of the types provided for in specified TSUS items, 1930 and GATT concessions to Jan. 1, 1972 A-20

2. Wisconsin Shoe Co.: Comparative statement of profit

or loss, 1966-70 *** 3. Wisconsin Shoe Co.: Ratios of financial data, 196670 *3(-

4. Wisconsin Shoe Co.: Comparative statement of cost of goods manufactured and sold, 1966-70 -**

5. Wisconsin Shoe Co.: Comparative statement of

financial condition, 1966-70 *** 6. Wisconsin Shoe Co.: Comparative statement of

retained earinings, 1966-70

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 indivi-dual 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, October 22, 1971.

To the President:

In accordance with section 301(f)(1) of the Trade Expansion Act of

1962 (76 Stat. 885), the U.S. Tariff Commission herein reports the re-

sults of an investigation, made under section 301(c)(1) of that act, in

response to a petition filed by a firm.

On August 27, 1971, Mr. Douglas L. Reeder, Jr., president , filed

a petition on behalf of Wisconsin Shoe Co., Milwaukee, Wis., for a

determination of the firm's eligibility to apply for adjustment assist-

ance. Accordingly, on September 7, 1971, the Commission instituted. an

investigation (TEA-F-33) to determine whether, as a result in major

part of concessions granted under trade agreements, articles like or

directly competitive with the men's footwear produced by the aforemen-

tioned firm are being imported into the United States in such increased

quantities as to cause, or threaten to cause, serious injury to such

firm.

Public notice of the receipt of the petition and of the institu-

tion of the investigation was given by publication in the Federal

Register on September 14, 1971 (36F.R. 18443). No public hearing was

requested and none was held.

The information in this report was obtained principallY from

officials •of the Wisconsin Shoe Co. and from the Commission's files.

1

2

Finding of the Commission

Based on its investigation, the Commission 21 unanimously finds

that articles like or directly competitive with ments footwear of the

types produced by the Wisconsin Shoe Co., Milwaukee, Wis.,.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.

1/ Chairman Bedell and Vice Chairman Parker did not participate in the decision. Commissioner Sutton was absent.

3

Views of Commissioners Moore and Young

Out determination in this investigation is in the negative be-

cause in our view the Wisconsin Shoe Co. is not suffering, or threat-

ened with, serious injury.

The output of the Wisconsin Shoe Co., which is still in operation,

consists principally of men's leather footwear of welt construction.

During 1970, work shoes (in terms of quantity) accounted for about 70

percent of sales; dress shoes, 15 percent; bowling shoes; 10 percent;

and hunting boots, 5 percent.

The company's total sales of shoes, in terms of both quantity' and

value, were greater in 1970 than in 1967. The company's output of

work shoes, by far its leading product line, has trended upward in

recent years, while the U.S. production of such shoes has remained

fairly constant. Although sales of men's dress shoes by the Wisconsin

Shoe Co. declined during the period 1968-70, sales of all other shoes

were on an upward trend.

Moreover, there was no appreciable decline in the number of pro-

duction workers employed at the Wisconsin Shoe plant through June 1971.

The average number of production workers increased by 15 percent from

1968 to 1970. In addition, the number of such workers employed was

greater in 1970 than in both 1966 and 1967.

After 3 profitable years, the company suffered a small net

loss in fiscal year 1970. Stockholders' equity increased, however,

from 1966 to 1970.

In light of the evidence available to the Commission, we have con-

cluded that the Wisconsin Shoe Co., which is primarily a. work-shoe

4

producers has been doing better than work,shoe industry as

whole and, therefore, is not. suffering, or threatened with, :serious

injury. Accordingly, we -have:made. .a: -negative determination.

5

Views of Commissioner Leonard

My determination in the instant case is negative because the in-.

crease in imports of! any footwear like or directly competitive with

that produced by the Wisconsin Shoe Co. Milwaukee, Wis., is not the

result in major part of concessions granted under trade agreements.

My reasoning in support of this determination is set forth in the Com-

mission's report on nonrubber footwear submitted to the President on

January 15, 1971. 1

1/ Nonrubber Footwear: Report to the President on.Investigation• No. TEA-I-18 . . TC Publication 359, 1971, pp. 31-47.

A-1

INFORMATION OBTAINED IN THE INVESTIGATION

Description of Articles Under Investigation

The Wisconsin Shoe Co., which is still in operation, produces men's

footwear. In 1970,work shoes, retailing at about $15 to $18 a pair,l

accounted for about 70 percent of sales; dress shoes, retailing at

about $16 to $20 a pair, 15 percent; bowling shoes, retailing at

about $12 to $15 a pair, 10 percent; and hunting boots ) retailing at

about $22 to $25 a pair, 5 percent. Virtually all of the shoes were

constructed with uppers of leather and by the welt process.

Leather work shoes are sturdy footwear with heavy uppers, durable

stitching, and special soles (often made from neoprene rubber

to make them oil resistant). Work shoes, which are not only worn by

blue-collar workers, but also by hikers, hunters, and others 1 may

be either of the oxfordtype (less than 6 inches in height), or of

the above-the-ankle type (generally 6 inches or 8 inches in height).

Work shoes are generally either of the so-called tyrolean-type or of

the basic work type. Tyrolean-type shoes are usually made with uppers

of glove leather with no lining and of welt construction; they gener-

ally have a cushion innersole, and, perhaps most important in terms of

appearance, a moccasin toe. Tyrolean-type shoes, which were first

designed about 15 years ago , provide a dressier appearance and are

more comfortable than the harsher looking work shoes of the previous

decade. In recent years, tyrolean-type work shoes, which are available

in a wide assortment of colors and variations, have accounted for the

bulk of U.S. consumption of work shoes. The basic work shoes may

A-2

have many of the features of the tyrolean-type shoes, but they have

plain toes and may also have uppers of other than glove leather. Most

of the work shoes produced by Wisconsin Shoe were of the basic work

type.

A key construction feature of all shoes is the method by which the

sole.is attached to the upper. Various methods are employed in making

work shoes. The higher quality shoes are generally of welt construction;

most,work shoes produced in the United StateS are of such construction.

Other methods include vulcanizing or injection-molding the soles t o

uppers, cementing soles to uppers, and various other processes.

As stated above, dress shoes accounted for about 15 percent of

the sales of Wisconsin Shoe in 1970. The term "dress shoes" refers

to the types of footwear intended principally for business and social

activities. In 1969 about 50 percent of U.S. ,production of

men's dress shoes was made by the welt process; about 25 percent, by

the cement process; and most of the remainder,by the injection-

molded process. With respect to imported men's dress shoes, it is es-

timated -Plat about 20 percent were made by the welt process; about 75

percent, by the cement process; and the remainder, by the injection-

molded and miscellaneous processes.

Bowling shoes, which accounted for about: 10 percent of the sales

made by Wisconsin Shoe in 1970, are classified as athletic shoes when

imported into the United States, Hunting bobts are similar to work

shoes in that they are substantially made footlwear with heavy uppers,

durable stitching, and special soles.

A- 3

In the welt process (virtually all of the shoes produced at

Wisconsin Shoe wereiconstructed by this process), a narrow strip of

supple leather or manmade material, called the welt, is sewed to the

shoe upper and to a lip on the surface of the insole; the outsole is

then sewed and/or demented to the welt. Welt shoes are generally

considered heavier in weight and appearance than those made by other

processes. In the cement process, the outsole (or midsole, if any)

is affixed to the upper by an adhesive without sewing. This process

permits narrow edges on the outsole to give a trim appearance and

produces a lighter and more flexible shoe than other processes used

for men's footwear. In the vulcanizing process, the assembled rubber

outsole and heel are molded in place and vulcanized to an assembled

leather upper. In the injection-molded process, the sole and heel of

polyvinyl chloride or an elastomer resin compound are simultaneously

molded and attached to the shoe upper, thus reducing production time

and labor costs by eliminating a number of the steps required to at-

tach the sole to the upper.

U.S. Tariff Treatment

Since August 31, 1963, the effective date of the Tariff Schedules

of the United States (TSUS), imported leather footwear of the type

(welt construction) produced at Wisconsin Shoe is classified for duty

purposes under TSUS items 700.25, 700.26, 700.27, and 700.29, depending

on the value per pair. Imported men's leather shoes of cement construc-

tion and of miscellaneous construction (particularly the injection-

molded and,stitchdown processes), which do not differ significantly from

welt shoes in styling and appearance, are admitted under item 700.35.

Footwear in chief value of leather (except that with uppers in

chief value,of fibers) was originally dutiable in the Tariff Act of 1930

at 20 percent ad valorem under paragraph 1530(e). From 1930 until

January 1, 1948, the effective date of the earliest concessions

granted by the United States under the General Agreement on Tariffs

and Trade (GATT), the tariff rates on the footwear here discussed

were effected by the following two pre-GATT concessions: (1) Effec-

tive January 1, 1939, the rate on welt footwear with a dutiable value

of over $2.50 a pair (now TSUS items 700.26, 700.27, and 700.29) was

reduced to 50 cents a pair, but not less than 10 ,percent ad valorem;

and (2) effective January 30, 1943, the rate pn footwear made by the

cement and miscellaneous processes (now TSUS item 700.35) was reduced

to 10 percent ad valorem.

A-5

Table 1 in the appendix shows the 1930 rates of duty and the

concession rates granted under the GATT (including all stages of the

Kennedy Round reductions) for items 700.25, 700.26, 700.27, 700.29,

and 700.35, the five TSUS items under which most men's leather shoes

have been admitted in recent years.

U.S. Consumption, Production, and Imports

Men's work shoes

As noted earlier in this report, work shoes accounted for about

70 percent of the sales of Wisconsin Shoe in 1970. Apparent annual

U.S. consumption, production, and imports of work shoes have remained

fairly constant in recent years, as shown in the following table.

Men's work shoes: U.S. production, imports for consumption; and apparent ,consumption, 1965-70

: Produc-

• tion 1/ : • : Imports 2/ _

: Apparent : consump- : tion 3/

: Ratio of imports : to apparent : consumption

: Million : Million : Million : : pairs : pairs : pairs : Percent

1965 : 32 : 1 : 33 : 3 1966 : 38 : 1 : 39 : 3 1967 : 39 : 1 : 40 : 3 1968 : 36 : 2 : 38 : 5 1969 : 36 : 2 : 38 : 5 1970 : 36 : 2 : 38 : 5

1/ Covers footwear of oxford height and also footwear that extends above the ankle.

2/ The term work footwear, as described in statistical headnote 1(b) of pt. 1A, schedule 7 of the Tariff Schedules of the United States Annotated,.covers footwear having outsoles 1/4 inch or over in thickness (measured at the ball of the foot) and having uppers of grain leather ex-tending above the ankle. Data are not available on work footwear of ox-ford height. Therefore the ratio of imports to apparent consumption as shower above is probably understated. 3/ Production plus imports. Data are not available on exports.

Source: Compiled from official statistics of the U.S. Department of Commerce.

A-6

In 1970 about half of the imports were of welt construction with

an average dutiable value of about $4.80 a pair; the remainder were of

cement construction with an average dutiable value of about $3.60 a

pair. As stated previously, most domestically-produced work shoes are

of welt construction.

Men's dress shoes

Data on U.S. consumption, production, and imports of men's dress

shoes are not separately reported in official statistics. However,

estimates of U.S. consumption (production plus imports) of such shoes

are down in the following table.

Men's dress shoes: Estimated U.S. production, imports for consumption, and apparent consumption, 1965-70

Year Produc- : tion 1/ :

— : Imports

: Apparent : consump- : tion 2/

: Ratio of imports : to apparent

consumption : Million : Million : Million :

pairs : pairs : pairs : Percent . : . .

1965 : 62 : 6 : 68 : 9 1966 : 64 : 8 : 72 : 11 1967 : 58 : 10 : 68 : 15 1968 : 65 : 13 : 78 : 17 1969. : 60 : 18 : 78 : 23 1970 : 66 : 19 : 85 : 22

1/ Includes footwear other than athletic or work reported in indus-try

-

No. 3141 as men's shoes except handsewns and footwear with uppers of soft tannage (desert boots and sandals).

2/ Represents estimated production plus estimated imports without an a

-

llowance for exports, which in 1970 amounted to less than 0.5 million pairs.

Source: Estimates of the U.S. Tariff Commission based on official statistics of the U.S. Department of Commerce.

A-7

Welt shoes accounted for about half of the total output in 1970;

shoes produced by the cement process accounted for about a fourth and

injection-molded shoes, a tenth.

As noted in the preceding table, estimated annual imports of men's

dress shoes, which increased from 6 million pairs in 1965 to 19 million

in 1970, supplied 9 percent of apparent consumption in 1965 and 22 per-

cent in 1970. In 1970, men's dress shoes entered under TSUS item 700.35,

made principally by the cement process, accounted for approximately 85

percent of total imports; shoes made by the welt process, entered under

TSUS items 700.26, 700.27, and 700.29, accounted for the remainder.

Bowling shoes and hunting boots

About 15 percent of the sales of Wisconsin Shoe in 1970'consisted

of bowling shoes and hunting boots. Data on U.S. production and imports

of such footwear are not separately reported in official statistics.

A-8 through A-18

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