The Coleman Company
FTZ Docket B-53-2015
Under the FTZ Board’s regulations (15 CFR part 400), applications requesting
production authority (15 CFR 400.23) are approved if the application is not inconsistent
with the threshold factors of 15 CFR 400.27(a) and the application demonstrates that
approval of the requested authority would result in a net positive economic effect (15
CFR 400.27(b)) and a significant public benefit(s) (15 CFR 400.27(c)). The burden of
proof is on the applicant (15 CFR 400.28(a)). If the examiner recommends not to
approve authority requested in the application, that “preliminary” recommendation of the
examiner is presented to the applicant, which may present additional evidence in
response (15 CFR 400.34(a)(5)(iv)(A)). The same provision states that public comment
may be invited on a preliminary recommendation.
Delineated below are the factors considered for the preliminary recommendation of the
examiner regarding the application requesting unrestricted FTZ authority on the use of
certain foreign-status inputs for production activity of The Coleman Company (Coleman)
at Coleman’s facility located within Subzone 119I, in Sauk Rapids, Minnesota.
The pending application requests authority for Coleman to choose the duty rates during
customs entry procedures that apply to personal flotation devices (e.g., life vests, life
belts, flotation jackets) (duty rates are 4.5% or 7.0%) and flotation cushions (6.0%)
(collectively, “PFDs”) – i.e., enable an “inverted tariff” benefit – for the following foreign status
inputs: certain nylon and polyester woven fabrics; webbing of man-made fibers;
neoprene fabrics; knit polyester fleece fabrics; and, water soluble sensing elements
(duty rates range from 5% to 17.2%). The application estimates resulting FTZ savings
of up to $255,000 per year.
The current application follows the applicant’s 2014 submission of a notification for
production authority (FTZ Board Docket B-31-2014). In that case, the FTZ Board
approved unrestricted FTZ authority for the use of imported plastic buckles, plastic
carrying bags, and PVC cellular foam but, based on concerns regarding the potential for
adverse economic impact on domestic industry, determined that further review would be
needed before the Board could potentially authorize inverted tariff benefits on foreignstatus
textile inputs (fabrics, webbing, and carry bags) used in production of PFDs for
the U.S. market (see 79 FR 43390, 7/25/2014).
OUTLINE OF ANALYSIS
After review of the primary evidence and arguments presented by Coleman and other
parties regarding the threshold factors, it does not appear that approval of the Coleman
application would be inconsistent with the threshold factors. Therefore, the examiner
assessed the evidence and arguments on the record as they pertain to whether the
applicant has demonstrated that the proposed activity would result in a net positive
economic effect and a significant public benefit(s).
Coleman produces PFDs for three separate market segments: recreational, industrial
and military. Coleman is not requesting to use unrestricted FTZ procedures on its
production for the military market segment because PFDs sold to the U.S. military are
subject to the Berry Amendment which requires the use of domestically-produced textile
materials. Coleman’s primary economic argument has been that without unrestricted
FTZ authority (inverted tariff savings on imported textiles and water soluble sensing
elements – duty rates range from 5% to 17.2%), the company would be unable to
competitively produce the PFDs (duty rates range from 4.5%-7%) for the recreational
and industrial markets in the United States. Coleman’s arguments focused primarily on
the need to lower the duty costs of imported UL certified nylon and polyester fabric,
which it indicated were not available at a competitive price from any domestic producer.
With unrestricted FTZ procedures, Coleman argued that employment and production
would increase significantly at the Sauk Rapids plant. Without unrestricted FTZ
procedures, Coleman argued that it would need to import more finished PFDs rather
than produce them domestically, and consequently cut production and employment at
the Minnesota facility. Coleman also asserted that its competitors would not likely
pursue FTZ authority – and, therefore, that there likely would be no additional industry
impact from potential approval of FTZ authority for those competitors – because its
competitors’ PFD production for the recreational market is mainly located abroad.
Coleman’s application is supported by certain elected officials, certain suppliers (Tape
Craft Corporation (webbing); ACR Electronics, Inc. (water activated rescue strobe
lights); RR Donnelley (brochures and catalogs); SPSI, Inc. (ink supplies);
Pregis, LLC (low density polyethylene foam); American Cord & Webbing Co., Inc.
(plastic hardware and webbing)) and the Outdoor Industry Association. The application
is opposed by certain elected officials, certain domestic manufacturers that indicate that
they produce the type of fabric that Coleman proposes to import (Highland Industries,
Inc., Milliken & Co.); and, the American Fiber Manufacturers Association, the National
Council of Textile Organizations, and the U.S. Industrial Fabrics Institute. The parties
opposing the application expressed concerns that the effective reduction in duty rates
applicable to foreign-sourced textile inputs used to produce PFDs for the U.S. market
would place domestic producers of like textile materials at a disadvantage, leading to
increased imports of foreign textiles and subsequent losses of U.S. employment and
production at U.S. textile plants.
The Office of Textiles and Apparel (OTEXA), as the Department of Commerce’s
industry specialists for matters pertaining to the textile industry, provided assistance to
the FTZ Staff in the review of the Coleman proposal. After conducting its analysis of the
application and information on the record, OTEXA does not support approval of the
unrestricted authority requested for Coleman based on potential negative economic
impact on other domestic manufacturers. The rationale and details that underlie the
office’s findings are discussed in the attached memorandum from the Deputy Assistant
Secretary for Textiles, Consumer Goods and Materials, which has provided key input for
the examiner’s preliminary analysis.
Pursuant to the FTZ Board’s criteria for evaluation of production applications, the main
findings taken into account for the examiner’s analysis and recommendation – including
the findings presented in OTEXA’s memo – were:
• FTZ benefits do not appear to be a determinative consideration in Coleman’s global
investment decisions for PFD production.
• Potential negative effects with respect to domestic textile producers including
Highland Industries, Inc., and Milliken & Co.
• No demonstrated causal link between proposed FTZ-related cost savings and a net
positive (national) economic effect and significant public benefit(s).
Key supporting elements considered for the recommendation include:
• Domestic supply is available for the basic types of textile inputs for which Coleman
requests FTZ authority – nylon, polyester, neoprene, and polyester fleece fabrics
• Approving the FTZ (inverted tariff) authority requested by Coleman would reduce the
cost of the imported textile materials, which already have advantages due to factors
such as lower labor costs.
• Coleman has already made significant investments to produce PFDs (including for
mass market retailers ) at its Minnesota plant even in the absence of – and no
guarantee of future approval for – FTZ savings on the textile inputs. Coleman
specifically claims, “Originally manufactured offshore, Coleman made the decision to
re-shore a large portion of the Puddle Jumper [Note: a low-priced recreational life
vest for children] PFD manufacturing to the U.S. in the Sauk Rapids facility. In
addition, 2011 saw the commencement of a long-term re-shoring commitment by
Coleman of not only Puddle Jumper PFDs but also boat cushions, and other types of
PFDs, resulting in an increase of manufacturing at the Sauk Rapids facility of more
than 235%.” Industry articles on Coleman’s re-shoring efforts note, “Coleman has
been able to grow our annual output to about 3.5 million pieces… By taking so
much time out of the production process, we’ve been able to bring a large volume of
products back” [quoting Coleman Senior Vice President for Operations Jeff
Schmitt]. “As a result of the reshoring efforts that Schmitt is leading, Coleman has
expanded the Sauk Rapids factory from about 60 people in 2011 to 270 people to
date, and expects it to grow by another 100 to 150 people in the near future as it
continues to bring more business back to the plant.”
• Coleman has argued that inverted tariff savings (up to $255,000 per year over the
entire range of requested inputs, an average of 1.6% of finished product value)
would be the sole reason for future investment and production expansion. “What is
at stake here is not only whether we can continue to expand the factory and create
more U.S. manufacturing jobs, but whether this factory can survive given decreasing
labor costs in Asia, increasing costs in the U.S. and now TPP.”
In its arguments to date, Coleman has not addressed the whole range of considerations that have impacted and may continue to impact the cost of U.S. production and which could influence Coleman’s decisions to maintain or increase production and employment
in the U.S. without the use of unrestricted FTZ procedures. A number of these
considerations are listed below:
investment in automation and production efficiencies increasing the productivity
at the plant and, at the same time, increasing employment (thereby making the
Sauk Rapids plant more competitive with offshore alternatives regardless of
whether the requested FTZ authority is approved). The “Back to Shore” article
cited above includes the following: “‘The way we were able to bring product back
to the U.S. is by maximizing the benefit of reduced lead time, which results in
increased flexibility to respond to customer demand. You have to be able to have
competitive landed cost, and the way we were able to do that was by taking labor
content out of the process.’ Taking labor content out of the process does not,
Jarden Corporation, SEC 10K, for the fiscal year ended December 31, 2015
however, mean eliminating jobs. ‘We’ve actually grown jobs in the U.S.,’ Schmitt
says. ’And we’ve done that through the use of automated equipment.’”
in order to maintain and expand its U.S. production focus on meeting demands
from mass retailers to reduce prices on low cost and low margin PFDs, such as
PuddleJumpers. However, there are programs by mass retailers that encourage
a broader view of cost reduction in their supply chains such as the “Made in
America” program of Walmart, one of Coleman’s key customers. “Walmart has
specifically cited Coleman’s U.S.-made PFDs as one of its “Made in America”
manufacturing flexibility to shift its U.S. production easily between types of PFDs,
which could include FTZ production of higher value PFDs, including those sold to
the specialty retail and industrial markets. Such an approach may support a
global supply strategy that would in any case (with or without FTZ procedures)
involve at least some imports of low-cost PFDs while focusing U.S. production on
higher-value PFDs. “The company also recently made a sizeable investment in
direct printing on fabric, allowing it to print fabrics ‘on the fly’ right onto a cutter
and automated sewing machines. ‘That’s going to be the future – highly flexible,
highly customizable manufacturing that is direct to consumer,’ says Schmitt.”
The Newell Group, which recently purchased Coleman, has indicated that Coleman will be "going upscale.”
• Approving the FTZ (inverted tariff) authority requested by Coleman would present a
real potential for greater imports of textiles since other PFD producers could want to
follow Coleman’s “FTZ model”. There are PFD producers which manufacture at
least a portion of their supply needs in the U.S.11 In fact, it would appear that U.S.-
manufactured PFDs comprise most of the U.S. market (85% in 2014), based on
Coleman’s estimates of imports.
SUMMARY AND CONCLUSIONS
Although the record contains some evidence supporting a positive impact for Coleman
from its requested unrestricted authority on the use of the foreign-status inputs in
question, the record also, in particular, contains evidence of clear reasons for Coleman
to conduct PFD production at the Sauk Rapids plant (regardless of whether the
requested FTZ authority is approved). In that context, the effective duty reduction on
imported textiles that would result from approval of Coleman’s requested authority could
create an additional incentive for the company to purchase such materials from foreign
sources to use in production at the Sauk Rapids plant – rather than from U.S. producers
that have the ability to supply such materials (thereby potentially having a negative
effect on production and employment at those producers’ U.S. plants). As such, the
case record indicates that there are potential negative effects and does not demonstrate
that such potential negative effects would be outweighed by potential positive effects
claimed by Coleman. In total, at this time, the case record does not indicate that the
applicant has met its burden of proof to demonstrate that that approval of unrestricted
FTZ authority for use of the foreign-status inputs in question would result in a net
positive economic effect and a significant public benefit(s). Therefore, the examiner
cannot recommend approval of the unrestricted authority requested by Coleman.
Attachment: Memorandum from Deputy Assistant Secretary for Textiles, Consumer
Goods and Materials
 Coleman Application, p. 17.
 “The Age of Automation”, Barb Ernster, December 1, 2015, http://specialtyfabricsreview.com/
 “Back to Shore”, Sigrid Tornquist, January 1, 2016, http://specialtyfabricsreview.com/2016/01/01/backto-shore/
 Coleman Hearing Transcript, p. 10-11.
 Jarden Corporation, SEC 10K, for the fiscal year ended December 31, 2016
 “Back to Shore”, Sigrid Tornquist, January 1, 2016, http://specialtyfabricsreview.com/2016/01/01/backto-shore/
 See e.g., “How Walmart Plans to Bring Back ‘Made in America’ ”, Bill Saporito,
 “Walmart U.S. Manufacturing FAQs”,
 The Age of Automation”, Barb Ernster, December 1, 2015,
 Highland noted that it was supplying the same fabrics to Coleman’s competitors which were producing in both the U.S. and abroad and these customers would seek similar cost advantages with FTZ status, Coleman Hearing Transcript, p. 17, and The U.S. Coast Guard cites 66 U.S. PFD producers, Final Rule, “PFD Labeling and Standards”, U.S. Coast Guard, 79 FR 56491-56500, 9/22/2014, and Mustang Survival (now owned by The Safariland Group), named by Coleman as a main competitor, has a plant in Jacksonville, Florida, “U.S. firm buys Mustang Survival, Burnaby-based company that pioneered marine safety gear”, Tracy Sherlock, Vancouver Sun, 03/26/2013, and Kent Sporting Goods, which apparently is another major competitor to Coleman, reportedly manufactures over 1 million life vests a year in Tyler, Texas, “Kent Sporting Goods adds warehouse and distribution space, more brands”, Tyler Morning Telegraph, November 17, 2016
 Coleman Application, pp. 16-17
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Steve Warner, Publisher
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Industry Market Report Available. What impact has the sale of decline of military products purchases have on government shelter fabricators? What is the outlook on textiles going into the automotive industry? What are three issues that can negatively impact the growth of the protective clothing market segment?
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Click here to go to the report on the Textile World website.
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