‘If you permit countries to implement rates of duty purely based on gender, you create the opportunity for mischief.’ Michael Cone is fighting for equality in the U.S. tariff system.
Looking to go into the shoe-importing business? Be prepared to pay more for women’s shoes. Or maybe you have an itch for selling cotton shirts? Be prepared to pony up more for the men’s variety. Unfair, you say? Take it up with whoever regulates tariffs.
Oh … that might be tricky.
Recall the gender product price gap: manufacturers or services that charge extra for goods targeted for a particular gender. (e.g. women’s shampoo being more expensive than men’s shampoo yet having the same active ingredients; women’s haircuts being more expensive than men’s haircuts regardless of the haircut’s length). Fortunately, many states already have laws against such discriminating practices—which makes any such perpetrator (an individual or corporation) subject to facing the law.
What happens, then, when the government tries to exploit gender for its own financial gain? In 1999, Michael Cone, a lawyer based in New York City, received a request from U.S. Customs for information about goods imported by one of his clients, a footwear importer. Business as usual, he opened the U.S. tariff schedule and noted something that made his jaw drop. Footwear, described as “leather soles and leather uppers” was divided into two sections: men and boys: 8.5% tax; women and girls: 10% tax.
Cone didn’t even have to think about what to do next. Going from law firm to law firm to get the case off the ground, it took him until 2007 before he was able to make his first filing. Though it was ultimately dismissed on reasoning that even multiple judges couldn’t find consensus, he has remained adamant in seeing the case’s return to court. “I’m interested in gender issues,” says Cone, “I’m interested in discrimination—that’s something I’ve always been sensitized to. I immediately recognized that this is wrong. Of course the federal judiciary hasn’t agreed with me, but I still believe it’s wrong.”
He describes the case like a monkey on his back, one he says has origins dating all the way back to the 1840s (note: the first Act of Congress signed into law by George Washington was the Tariff Act of 1789). With a history that runs so deep, two questions surface on the notion of these customs duties. Why do they exist, and how have they managed to exist for so long without contention? The first one is an easy answer—tariffs bring in money for the government and help protect domestic industries from foreign competition. After punching his calculator, Cone estimates the discriminatory duties generated a whopping $300 million per year—half of which are collected on women’s shoes alone (other items affected included men’s cotton shirts, women’s silk shirts, and men’s Speedos). Cone shows no surprise at the way these goods are being targeted: “Like they say in the playground, they kick you where it counts.”
How then did such clear discrimination go unchallenged for nearly two centuries? Cone says the answer is a bit more complicated. “Part of the reason is because there was no protection for gender until about 1970. The equal protection clause in the U.S. did not recognize gender as a protected class until Justice Ginsburg, while working as a lawyer in private practice before she ascended to the bench, firmly established gender as a protected class under the equal protection clause and got the Supreme Court to create a new level of scrutiny—mid-level scrutiny for gender. So our idea of what constitutes equal protection has changed over time.” With the law moving as slowly as it does, the remaining 40 years it took to face a courtroom seem much more like a flash to Cone.
Since 2007, Cone has initiated Round Two in the battle against the discrimination. Initially, the Court of International Trade (CIT) told him that the case wasn’t “discriminatory on its face”—meaning he hadn’t been able to prove who the affected parties were and how they had been hurt. Of course, Cone appealed the measure and took it up to the United States Court of Appeals for the Federal Circuit. He recalls, not fondly, “They said, ‘In taxing areas, Congress had very wide discretion. And men’s goods are different from women’s goods, they move in different channels and trades, and it’s not facially discriminatory—we’re not going to presume that Congress tried to hurt anybody.’” The CIT eventually allowed the importers to amend their claims, which has been done now (the new test case includes Forever 21, Rack Room, and his own fully operational company Skiz Imports).
So, that’s what on the agenda right now. On Wednesday June 29, 2011, the government filed papers asking the U.S. Court of International Trade to dismiss the new and amended complaints in Round Two of this litigation. Cone’s team will respond in September, and a decision from the trial court is expected in early 2012.
And what about beyond the U.S.? For starters, their northerly neighbors somewhat quietly replaced gender-specific descriptions for tariffs with gender-neutral descriptions back in 2006. However, a read through the 2011 Customs Tariff Schedule shows that there are still plenty of gender-specific descriptions that result in sex-based import taxes on clothes and shoes.
Looking to Europe and Asia’s policies, Cone thinks their discrimination policies could very well be as bad or worse as the ones stateside. He calls for action from the World Trade Organization banning tariff rates based on gender and offers a warning if this remains unresolved: “if you permit countries to implement rates of duty purely based on gender, you create the opportunity for mischief.”
With $300 million at stake for over 100 importers and the essence of the equal protection act under fire, it is evident why so much rests on this case. Though Cone’s efforts have largely fallen off the media map since the New York Times provided front page coverage of his progress in 2007, the time seems right to, as Cone put it, kick Congress where it counts.
Michael Cone is a partner in the New York office of McCullough, Ginsberg, Montano & Partners LLP.
Image by Kyle Bachan “Watching From Afar” Comic Series.