Sewing Tips

“Made in America Tax”??

Big news in the sewing world this past week is “the Jo-Ann’s petition” against tariffs on imported fabrics and yarns from China.  Have you received it? Have you signed it? Are you going to, or not?  I have mixed emotions about it and I’ll explain why. (Please click on blue underlined sections for references).

(Caveat: this is NOT a political discussion, this is about economics.  As Jo-Ann CEO Jill Soltau explained: “This is not a political statement on behalf of Jo-Ann. This is very nonpartisan.”

I was thinking about the tariffs petition yesterday while reading a  Wall  Street Journal  book review:  “What Adam Smith Knew About Trade Wars(entitled https://www.wsj.com/articles/what-adam-smith-knew-about-trade-wars-1535036195). You may remember learning in high school civics class  about Smith’s “The Wealth of Nations” (free trade plus division of labor creates a better standard of living for all). Turns out  Smith also believed that competition creates economic value and keeps markets honest, and that governments sometimes have to level the playing field….hence the need for tariffs. And the U.S. imposed a quite comprehensive import tariff on Chinese goods this summer….including fabrics and yarn.

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Now, I love Jo-Ann Fabric stores.  For those of you outside the U.S., Jo-Ann’s is a chain of 850 fabric (and craft supply) stores, all across America in every state except Hawaii.  Even though the Jo-Ann’s within driving distance of my home is tiny and has an extremely limited selection, the sales staff and managers  are sweet. I’m there every week and spend a somewhat ridiculous amount of money. Obviously a 25% price increase will affect me personally.

But I’m undecided about signing their petition against Section 301 of the Trade Act. Jo-Ann’s wants several fabric-and-craft-supply categories removed from the thousands of imports affected by the new tariffs against imports from China.

(I have nothing against China: I worked in China for years and loved it. Other than the air pollution. Funny that a clue in last week’s Wall Street Journal crossword was “blanket over Beijing” (answer: SMOG).)

In case you’ve been on vacation this week, news of the Jo-Ann’s petition has been printed in virtually every newspaper across the U.S.. If you are on Facebook in any sewing or pattern groups, you’ve probably read posts about it, and/or seen pop-ups sponsored by Jo-Anns:

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And then there’s the  email from  CEO Jill Soltau, asking you to sign the petition and notify your elected representatives. Basically the petition argues that proposed tariffs on fabric and craft commodities will unintentionally create a tax on goods “Made in America”.

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She has dubbed the proposal the “Made in America” tax, because in her reasoning, adding costs to materials purchased for hand-making in the U.S. will force makers to pass along the price increase, which is equivalent to taxing American-made crafts.

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(Note: this is not to be confused with the House Ways and Means Committee “Made in America” tax lingo of 2017, which refers to the unbalanced corporate tax rates between the U.S. and other countries:

  S.1407 – Made in America Deduction Enhancement (MADE) Act:  https://www.congress.gov/bill/115th-congress/senate-bill/1407/text.

The bill I’m referring to is H.R. 4318- Miscellaneous Tariff Bill Act of 2018: https://www.congress.gov/bill/115th-congress/house-bill/4318/text )

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At this moment over 20,000 people have signed her petition.  Should I be one of them?  I much refer trade AGREEMENTS over trade TARIFFS…who doesn’t? I hesitate because I fell Ms. Soltau is being a bit disingenuous, and I’ll give you 10 reasons why:

  1. The name she coined…the “Made in America” tax…is misleading. This is not a tax, it’s a tariff….an import duty.  Big difference. And it’s not a tariff on American goods, it’s a tariff on NON-American goods. Some Facebook members have been asking how this tax will work, is this a new sales tax we have to collect from our customers, etc. That’s not surprising to me, coming off of the recent Supreme Court decision (South Dakota versus Wayfair) which portends to make sales tax collection from the over 10,000 different state sales tax venues across the country a nightmare…unless exclusions are made for small makers, or unless venues such as Etsy integrate sales tax collection as they have for certain states already. Otherwise the paperwork compliance will be a killer.

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2. You cannot legally label something “Made in America” or “Made in USA” unless it is made of all, or mostly all, American-made components.  The Federal Trade Commission allows you to have at most a negligible amount of foreign-made parts.  I once read about a manufacturer of basketball hoops who made every effort to source components in the US, but was stuck importing a single bolt from overseas.  They were stopped from labeling their product “Made in USA”. A competitor  turned them in to the FTC.

The Textile Fiber Product Identification Act explains labeling as follows:

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So if you are in the U.S., sewing or knitting items using fabric or yarn from overseas, you cannot legally label it “Made in America”.  You CAN label it “Made in USA of Imported Fabric” but I guess that doesn’t sound as catchy….the “Made in USA of Imported Fabric Tax?

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3. Naturally the CEO is focused on her own retail operation, however she doesn’t mention that the categories sold at Jo-Ann stores that would be affected are a tiny fraction of the complete list of import items subject to new tariffs.

Note: To see a list of the categories of merchanidse involved you can open this link: https://ustr.gov/sites/default/files/301/2018-0026%20China%20FRN%207-10-2018_0.pdf

It would be nice to see her concern over other businesses who import materials….not just the relatively small number of crafters (as compared to the general population).   She is asking to eliminate a dozen categories out of thousands.  It smacks a bit of “I only care about my business and my clients, not about the big picture.” And I understand, she doesn’t want to get into politics and offend anyone yet I’d like to see a balanced argument of the pros and cons for this legislation, and how it concerns the overall American economy.  Specifically:

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4. I would have liked to see an explanation of WHY these tariffs are being implemented.  The reason for the tariffs is in response to business practices in China. This goes unmentioned in the petition.

Personally I think it is just as important that tariffs be set on Chinese goods that are made without the pollution controls used in the U.S.  The fabric industry is a huge problem in this regard. Dyes and printing inks from fabric mills routinely get poured into the water system. Smoke and ashes from cheap coal waft out of factory chimneys.

I would also prefer a tariff on finished apparel, rather than on materials. The enormous volume of garments that are mass-produced-in-overseas-factories and get passed off as “handmade” in online shops (Etsy, Shopify, Big Cartel sites) is irritating. I see the exact same items over and over again, in shop after shop.

What would really make me happy would be an end to the preferential treatment China gets in U.S. shipping.  I have to spend around $7.00 to send a small package across the U.S.; a seller from China gets a huge discount from the USPS, paid for by American taxpayers.  Talk about unfair!

But those are issues for another day. The current discussion is about material imports, and a bit of explanation would have been welcome.

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5. While I agree  that it’s unfair to placing a tariff finished materials but not on finished product, I think she may be pushing the argument when she says  that the proposed tariff could make handmade items so much higher in price that customers will buy (non-tariffed) imported mass-manufactured items instead:

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Heather and Diane sell Kitchen-Aid mixer covers for $25.00 in dozens of cute prints and a whole variety of solids to coordinate with any decor.  Let’s say they require 1 yard of fabric at $8.00. (As with any handmade, the value is in the design and labor more than in the materials). With a 25% tariff the cost will be $10.00.  Now Heather and Diane have a choice: increase their mixer cover by the $2.00 amount of the fabric increase, and charge $27.00? Take the $2.00 hit and sell at their regular retail of $25.00? Put the $2.00 into their standard markup calculation and maybe raise the price to $29.00?

Yes of course there is always a “tipping point” at which the customer says “I can’t afford that” but the customer who buys Heather and Diane’s handmade cover on Etsy is probably not the same as the person who buys the basic Kitchen-Aid cover at Walmart.

Other handmade items have a much larger price “spread”. Handmade children’s dresses are regularly priced at around $50, compared to factory-made at $19.99.  Handmade quilts command $200 – $300, compared to factory-made imports at $29.99.  Adding a couple of dollars to the price of handmade is not going to make all that much of a difference, considering that the value of handmade is in the workmanship, not the materials. Just as cutting the price by a few dollars is not going to get the budget customer interested.

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6. Truth is that the U.S. has a very low tariff rate, as compared to other industrial nations:

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It’s not as if we are the only ones protecting our own interests.

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7. Considering the way Jo-Ann Stores manipulates prices, complaining about a wholesale price increase seems a bit silly. If Ms. Soltau really cared about giving customers the best price,   she would stop the “mark it up to mark it down” game. The money spent on manipulating prices every two weeks, sending out daily   promo emails, printing and paying postage for bi-monthly full-color-on-heavy-stock flyers…I just wish it was put towards giving the best everyday price instead of sort of “tricking” customers into a sense of urgency to get a deal before it expires.

I understand that it would be tough to get rid of the coupon game now…it’s too late.  JCPenney tried to do that several years ago and it nearly killed them; their clientele was addicted to coupons. But personally it makes me nuts. Whenever there’s a “good” coupon (40%, 50%, 60%)….you run right over to Jo-Ann’s and there’s nothing to use the coupon for, because everything has been marked down by 20% or 30%.

And what is the real price of products at Jo-Ann anyway? The “Keepsake” quality of cotton wovens has jumped from $5.99 up to $9.99 in the past few years. The “Quilter’s” simple two-color prints have jumped from $3.99 to $5.99 (then last week it was 70% off for a couple of days). Basic poly-cotton gingham almost doubled this year, from $4.99 to $8.99.  What is the real, best-we-can-negotiate-for-you price of these simple fabrics?

Craft basics like Rit fabric dyes and brand-name glues are double the price at Jo-Ann stores compared to everyday low prices at Walmart.

Then there are the paper sewing patterns. Manufacturer’s pre-printed retail price is anywhere from $10 to $20, but every 6 weeks or so the price goes down to $2. What is the “real” price? Dont you hate it when you need a particular pattern and can’t wait for the next two-buck promotion?

Bottom line: if the CEO combined the petition with a move to simplify prices and stop playing all the games, I’d take her message more seriously.

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8. Is it really impossible to source fabric in the US? Or is it just easier to go overseas, and maintain a higher gross margin? Fabrics made in China are not subject to the same pollution controls, and the fabric dyeing/printing business is a huge contaminant to the water system. So of course they cost less to produce overseas, but what is the cost to the environment?

Yes the labor cost is lower in China than in the U.S..  The minimum wage regulations and benefits in the U.S. at are a totally different level. However, the increase in robotic production is closing that gap in many industries, and soon the difference in final cost, when you add in transportation, will be minimal. Again consider the pollutant effect of transporting product across the Pacific.

Is it true that the fabric mills are gone in America? Jo-Ann’s already stocks some American cottons, could they have done more (with their 2.4 billion dollar valuation) to promote American fabrics?

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I live an hour away from Malden Mills, the original producer of Polarfleece brand. The mills were kept going throughout the economic downturn of the eighties and nineties, despite pressure to move to cheaper-labor countries.  The factory burnt to the ground (due to an accidental explosion) in 1995, and everyone thought that was the end, but they rebuilt the factory and kept the jobs in the U.S.   Sadly the firm eventually went into bankruptcy and stopped selling fleece in 2007.  Would a 25% tariff on China produced fleece have changed the equation, and made it profitable to keep the jobs here in Massachusetts? After all, Jo-Anns sells “40,000,000 yards of fleece every single year“, that could mean a whole lot of jobs.

The fact that the vast majority of our fabrics and apparel are made overseas is frankly a bit frightening to me. Food/clothing/shelter are basics, yet we’ve allowed our clothing to be controlled by other countries.  In the case of China, the financing and subsidy of fabric mills is controlled by the government, through public capital investment in building factories. As Larry Hulighan, VP  of Copland Mills put it A company like Copland does not compete against individual companies. We compete against China, Incorporated — against the government.”    Not only does that make it hard to complete financially, but a bit scary to think that we are so dependent on other countries.

(Full disclosure: I was in the apparel industry for decades, beginning during the time when apparel really was all made in America by members of the ILGWU, and walking to work meant dodging the guys pushing rolling racks of clothing across the streets in the garment district shouting “Watch your back!”. I remember the  shift from American manufacturing to imports, starting with the off-shore production in the Caribbean, then Central America, Asia, and going up to the opening of trade with China. I had no clue how extensive it would end up being.)

Again, if she had combined her petition to cancel the proposed tariff, along with some sort of proposal to support American-made materials, I’d be more impressed.

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9. What about sourcing from other countries? China isn’t the only place with fabric mills. When I worked in the garment industry, we were careful to spread out production between a multitude of countries…because “putting all of your eggs in one basket” can be a devastating in manufacturing. There’s always a possibility of natural disaster, worker strikes, currency manipulation, shift in duty rates, quantity quota overload, transportation error (boats do sink).

I’ve worked with mills and factories in India, Sri Lanka, Malaysia, Philippines, South Korea, Taiwan, Indonesia.  Sure, working in China has benefits (volume, government incentives, infrastructure) but with some effort there are other places to source weaving/dyeing/printing.

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10. Lastly, I am skeptical whenever people try to persuade using emotional tactics. Although I do lots of sewing and volunteering for charities, I don’t like “bleeding heart” tugs. This may sound picayune, but when I read these words in the petition, I was a bit turned off: “The Made in America Tax will hurt churches and charitable organizations who rely on craft supplies to create blankets and quilts for veterans, the hospitalized and the homeless.”  It’s similar to  a debate: when you can’t argue with facts, you resort to emotion. Who wants to be thought of as not supporting our vets, not caring about our homeless?

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What do you think?  Sign or not? I welcome your input.

Happy Sewing,
Janet

10/4/2018 Update: Jill Soltau is leaving Jo-Ann fabrics to go to J.C. Penney. It will be interesting to see what changes the new CEO will bring!

11/1/2018 Update: Textiles were removed from the proposed list of tariffs:

22 Comments

  • Jean pickens

    Totally agree. At some point we have to stop selling our soul to China. We need to put our middle class back to work. Joann’s real concern for customers would understand that the better paying jobs created by bringing industry back here would more than make up for the increase in price.

  • ann guest

    I think you make some very valid points. I question the ability to source products in America any more. For some time stores participated in the “buy low sell high” philosophy. While quality American companies went under, lower quality goods were bought in other countries at lower prices but sold at the same price as American goods. Profits were large, savings to customers were negligible. I do understand the alarm felt by crafters, but will quickly admit the only time I buy from JoAnns is when it is on sale or I have a coupon. Maybe if everyone planned a little more and did the same thing, it might send a message to corporate. This whole petition of theirs just seems to be a fear tactic.

  • [email protected]

    Thank you. From what I can tell by reading Facebook posts (in groups for sewists and sellers) it appears that very few crafters are making a living with their makes. Most people create as a hobby or for supplementary income. That’s fine, but it’s quite different from the regular employment that would be provided by a fabric mill.

  • [email protected]

    Yes, it does have the feeling of capitalizing on people’s fears, which is a bit of a cheap tactic. That big, bold red “Made in America Tax” is quite in-your-face. One thing is for sure, they have a brilliant marketing crew. Meanwhile they have “trained” their clientele to only buy with coupons, and it will be nearly impossible to break that habit. I can’t remember the last time I bought anything there at regular price. But I don’t look at the receipt and go “Oh wow, look how much I saved!” because I don’t believe their stated “regular” price is regular at all. It’s just a game.

  • barbara

    shoes anyone? they come from mexico and asia. fabric? too bad. don’t sew. ttps://abcnews.go.com/Business/MadeInAmerica/made-america-american-made-textiles-business-owners-struggle/story?id=12971618 . workers in mexico and asia are eating because of those jobs. we should be selling something to them to make jobs here. steel? corn? what? have a tarrif instead? no thanks. i must be a rotten american to want to lower the cost living for everyone here and not have a surplus of corn. i want jobs.
    this is a global economy. when one country suffers, we all suffer. the problem is not smog. the problem is a (excuse the expression) pissing contest. low wages in other countries? are factory workers getting rich here? all i see is that my paycheck doesn’t match inflation even though it’s gone up. everyone has a job for low pay. ceo’s fight against raising the minimum wage so they and their investors can bring home a bigger paycheck. hey – i want their job.

    by the way, jo-ann’s has a ‘made in america’ line of fabric at a ‘made in america’ price point.

  • Karen

    I really appreciate the detail you put into this. I didn’t sign the petition for pretty much the reasons you stated but I didn’t take time to do any research. I would prefer to buy Made in USA fabrics and supplies so if the tariffs help make them more available in the long run, then I guess I’m in favor. (I’d also prefer to know what country my fabric comes from so I can make an educated guess at its environmental impact – the generic “imported fabric” drives me crazy! But that’s off-topic, sorry.)

  • [email protected]

    Very good point, if the fabric bolt just says “Imported” then how do we know how far it has traveled? And maybe there are countries with issues (pollution controls, human rights violations) that we’d prefer not to patronize. I’m going to pay more attention to this in the future. (PS: I do know that SnapSource snaps are Made in USA, as are Offray ribbons)

  • [email protected]

    The US does export steel ($8.7 billion in 2016, $10.1 billion in 2017) but not to China as they are a huge steel exporter themselves and have a trade surplus at the moment. Corn, soybeans, wheat: we export more to China than to any other country. Hopefully you’ll see a rise in your paycheck very soon, as the US economy is getting stronger, unemployment is at an all-time low so employers will have to compete for the best workers. Meanwhile in China the standard of living is absolutely booming, with salaries quadrupling over the past decade.

  • [email protected]

    And I totally understand that it’s their job towards their stockholders to care about the bottom line….oh wait they’re not a public company they are privately held! If they really cared that much they could absorb the cost increase due to tariffs…and take less markup while the tariff is in place (tariffs aren’t generally permanent). Their prices are constantly up, down, all over the place anyway.

  • Patricia Pachta

    Thank you for taking the time to explain all the points.
    Now I’m going over to Etsy and buying. Kitchen Aid cover!! SO cute!!

  • Keri

    Thanks Barbara, I think most of us already knew that there was a line of fabric ‘Made in America’ at Joanns(at least if you have shopped there and pay attention, they advertized it well). I am for raising the standard of living for everyone as well but we don’t do that by allowing China to walk all over us. And in the last few days the President has been working with Mexico on a new trade agreement that will benefit both countries people.

  • Diane S

    I’ve been sewing long enough that I remember American textiles, like Cone corduroy and denim, ‘Dan River runs deep’ apparel fabric and I worked for a fabric wholesaler that sold lots of Malden Mills. Hopefully there will me more USA fabric choices again.

  • [email protected]

    Do you remember Burlington Mills, Concord Fabrics, J.P.Stevens? When I was little my mom would take me fabric shopping (all the department stores had fabric departments then)…I remember getting sateens, pinwale corduroy, pique, dotted swiss. I would love to see more USA fabric choices again.

  • Leslie christian

    I commend you on your research. I haven’t been paying attention to the news recently, so I missed the statement by Joann’s. It would be nice to see more genuine “Made in America” products, but those industries are long gone, and we (consumers) have gotten used to cheap goods, buying without thought to those who make them. I mean, clothes are so cheaply made now, it’s ridiculous. We are now doing the same thing to physical stores, as we buy online , or are paid by those stores to shop online. I don’t know the ins and outs of our trade agreements, but it seems that the manufacture of a single item involves so many other countries that imposing tariffs on imports from other countries doesn’t make any sense. The components in a BMW, made in North Carolina involves parts from at least 10 countries. Iron and aluminium are in so many products that these changes are going to impact us negatively. We already owe China a lot of money, and now the cost has gone up. They are expanding rapidly all over the world: school children in some African countries learn Mandarin in school because of this presence. As we have seen with the farmers, we are the ones who will suffer as other countries can provide these products, and we can be paid less or don’t sell. How much will be needed to prop up the aviation, automotive, and construction industries which need steel and aluminium? Or will Russia become our new trading partner, as we are already using Russian steel to build pipelines we don’t need. The Mexicans have already made agreements with South American countries: that market is gone. It is a nice idea, but the start-up involves time and money, and we are not patient. I remember when news anchors encouraged buying products from overseas because Made in America meant poorly made, just as cocaine was marketed as not being addictive, and I wondered what happened to poor Sherlock Holmes. I think it’s a bad idea

  • Yvonne

    I appreciate you very well researched and articulated post. I agree with almost all your comments. No, I won’t be signing the petition. Trade agreements must be fair for both countries concerned. America has become accustomed to cheap goods, including clothing. As a child, my mother didn’t have closets full of clothing. She had beautiful clothing, appropriate for any occasion and it was well made and lasted. Now, even appliances are purposely made to be disposable. My grandmother had one in her lifetime. That’s the kind of American made quality I hope to life to see again, and also fabric made in America of high quality so sewists can make lasting, quality garments.

  • Debra Rae Steinman

    I read the full text of the bill (S 1407) on congress.gov. And the fact is, Trump’s tariffs aren’t the problem. This bill is. I thank you however for being a voice of reason, and fully explaining your position.

  • [email protected]

    Yes I was shocked to hear from my plumber that kitchen appliances are now made to last only about 5 years. Think of the landfill! And clothing: also practically disposable. My house was built in the 1940’s with a single closet on the main floor for coats. The bedrooms had only door hooks, because in this fishing village people had two sets of clothes: one for work and one for church. Those cloths were made to last for years. I appreciate having more choices today, but I’d love to see quality get more appreciation over quantity.

  • [email protected]

    Hi Leslie, I realize that it’s a complicated issue with many repercussions, most of which are hard to predict. Ideally there would be zero tariffs anywhere, however China has long ago imposed a 25% tariff on American goods, making it difficult for US manufacturers and farmers to sell in China….whereas our import duty on goods from China has ranged from zero to 2.5%. So the playing field is not level and hasn’t been for a long time. Hopefully the new bill will be temporary, but we’ll have to see what the response is from China (not only about intellectual property, pollution, but also fair trade practices). The reason that it was imposed at this time, is because our economy is currently strong and on the upswing (so a tariff won’t be as painful as it would have been 4 or 5 years ago)…also because since the trade is so imbalanced ($130 billion US goods going to China annually, but $506 billion Chinese goods coming into the US) this means a larger share of Chinese goods will be hit with tariffs than the other way around. As far as the future of domestic manufacturing in areas like textiles: it could come back, but will be so very different, due to technology and robotics. The question is where the tipping point will be, that would make it profitable again. Meanwhile, Jill Soltau is leaving Jo-Ann fabrics and going to J.C. Penney (at a lovely salary of $1.4 million plus a $6 million sign-on bonus!)…I for one will be watching carefully what direction the new CEO takes as far as product sourcing.

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