Tariffs and Counterfeits Headlined a Tumultuous 2019

Happy New Year!

Early each year, I recap The Toy Association’s major accomplishments and offer a look forward to opportunities and challenges for the toy and play community. Having just journeyed together through a rough 2019, I’ll take a different tactic and start with a first installment primarily focused on the two big and still unresolved issues – China tariffs and threats posed by counterfeit toys. 

As I write this, the year 2019 is still not fully settled with overall toy sales through Week 51 by some accounts trending down anywhere from two to seven percent. Week 52 ought to be strong, but with final data coming in the next few days and weeks it will be a sincere challenge to make up ground on an annual basis. There remains much to be said and analyzed as we launch into the hope and promise of a new year. 

It is clear our broad community is still adapting to the loss of Toys“R”Us and learning how to respond to the rapidly shifting retail environment. Adding to the wave of disruption, new rounds of Section 301 China tariffs and constant talks of additional tariffs drove a level of unpredictability throughout 2019 that made it extremely difficult for manufacturers and retailers to effectively plan their businesses. While a Phase I tariff deal has been announced and the threatened December 15 fourth round of tariffs was cancelled, a trade agreement with China is not yet signed. There has also yet to be the promised reductions in earlier rounds of tariffs that have hit many toymakers, let alone a complete rollback. 

The struggle and progress seen in the tariff fight represents the power of our member companies, key company executives, and so many others coming together, united in a common cause. The Toy Association’s leadership role in Americans for Free Trade and the Tariffs Hurt the Heartland Coalition added further weight to these efforts and joined our energies to a range of other industries and sectors for greater impact. We went further by securing the services of the DC office of the renowned firm Hogan Lovells and launching the Don’t Tax Toys initiative, fueling videos and an extensive consumer and social media marketing campaign targeting key influencers. A DC Fly-In for members and daily work on Capitol Hill securing supporters and messengers willing to reach out to the Administration are among many other key actions in 2019.

While both the U.S. and China appear ready to move forward, there is no guarantee tensions won’t again boil over. The question also remains: will tariffs be used in the future against other countries important to our members? What’s more, the U.S. manufacturing sector showed weakness in Q4 with the Institute for Supply Management reporting that manufacturing activity contracted for the fifth straight month, falling to the lowest level since June 2009. From the threatened Border Adjustment Tax to China tariffs to a response to weakening manufacturing, whatever comes next, we must remain vigilant.

On the intellectual property front, I continue to tell anyone who will listen that unsafe and illegal counterfeit toys are wrought with the potential of undermining the foundation of our industry. Even during the throes of the tariff fight, The Toy Association team led by our External Affairs staff maintained a significantly high level of focus and activity on counterfeits. The children and families we all exist to serve continue to be put at risk by rogue third-party sellers deceiving consumers through an array of e-commerce sites and marketplaces. 

While the work of our team and the Association’s IP Committees on the SANTA Act, announced on December 17, is a partial step forward, we must all commit to being loud, aggressive, and relentless in eliminating these sellers and illicit products. 

In early 2019, we released the first major product of our new Intellectual Property Protection Committee in the form of an industry White Paper, “The Real Threat of Fake Toys,” that detailed the safety risks of counterfeit toys while clearly and strongly calling for online marketplaces to seek Certificates of Compliance. While the document received wide publicity and recognition, its key findings became the priority messages in our formal comments and discussions with Congress, the White House, and directly with the leading e-commerce sites. 

The year ended with a two-day IP meeting held in Los Angeles at the offices of law firm Venable with representatives of Amazon, eBay, and Walmart and a wide range of our brand members. That productive meeting included a members-only session outlining our second IP White Paper, that among other essential points will again stress the need for e-commerce sites to require Certificates of Compliance. We are working in coalitions, with our member companies, with Congress, with the administration’s key players, and with the leading e-commerce sites to address this nagging problem and very real threat to children’s safety. The Toy Association team, led by Ed Desmond and Rebecca Mond, has our industry very well positioned heading into 2020 to positively impact the debate. Anything less than success is unacceptable.

With counterfeits so high on everyone’s agenda, I will close this installment with a few recent related developments:

U.S. Senate legislation:

The Toy Association had the opportunity to work with Senator Cassidy’s office (R-LA) on the aforementioned bill introduced just before Christmas. The Stop All Nefarious Toys in America Act (SANTA Act) would require online marketplaces to verify third-party seller information and disclose to consumers the following:

1. The seller’s full name, full business address, working phone number, and working email address.
2. Whether the seller is the manufacturer, importer, retailer, or reseller of the children’s product.
3. All required warning labels.

The SANTA Act would also require marketplaces to notify buyers if the product is fulfilled or shipped from a seller or warehouse that is different from the original seller.

As the bill tracks some of the recommendations in The Toy Association’s white paper, taking into consideration feedback from members at the IP Committee meeting in LA and members from the IP Steering Committee, The Toy Association issued a public statement of support for the bill and Senator Cassidy’s press release introduction mentioned our support. While much more needs to be done, this bill is a step in the right direction and further raises the profile of the issue.

U.S. House legislation:

The Association has been actively engaged in discussion on proposed best practices and needed diligence.

In next week’s segment I will update a range of impactful market events, membership achievements, research, communications programs, and more that are working to help our members innovate, find new opportunities, grow, and prosper. I’ll also have more on the government affairs, legislative, and regulatory side about how we help ensure the continued ability of our members to do business in the U.S. and global markets.

Here’s to all for a healthy and successful 2020!

Steve