U.S. Textile, Apparel, and Footwear Industry Assessment. Preliminary Results

Textile, Apparel, and Footwear Industry Assessments 1 U.S. Department of Commerce Bureau of Industry and Security Office of Technology Evaluation U.S. Textile, Apparel, and Footwear Industry Assessment Preliminary Results 2017 JAPBI DLA Troop Support Conference November 15, 2017 Cherry Hill, NJ Stamen Borisson Trade and Industry Analyst Elizabeth Oakes Trade and Industry Analyst

Textile, Apparel, and Footwear Industry Assessments 2 Who We Are: Bureau of Industry and Security (BIS) Mission: Advance U.S. national security, foreign policy, and economic objectives by ensuring an effective export control and treaty compliance system and promoting continued U.S. strategic technology leadership. Develops export control policies Issues export licenses Prosecutes violators to heighten national security Develops and implements programs that ensure a technologically superior defense industrial base Office of Technology Evaluation (OTE) Mission: OTE is the focal point within BIS for assessing the capabilities of the U.S. industrial base to support the national defense and the effectiveness of export controls.

Textile, Apparel, and Footwear Industry Assessments 3 OTE Industry Surveys & Assessments Background: Under Section 705 of the Defense Production Act of 1950 and Executive Order 13603, ability to survey and assess: Economic health and competitiveness Defense capabilities and readiness Data is exempt from Freedom of Information Act (FOIA) Requests. Enable industry and government agencies to: Share data and collaborate in order to ensure a healthy and competitive industrial base Monitor trends, benchmark industry performance, and raise awareness of diminishing manufacturing and technological capabilities

Textile, Apparel, and Footwear Industry Assessments 4 U.S. Textile, Apparel and Footwear Industry Assessments Background At the request of the U.S. Congress, BIS/OTE is updating a 2003 assessment of the U.S. Textile, Apparel and Footwear Industry. The updated assessment will focus on the health, competitiveness, and contribution of the industry to the U.S. economy. Other topics to be reviewed include: Identify dependencies on foreign sources for critical materials Evaluate potential threats to security due to foreign sourcing and dependency Locate points of weakness within the domestic supply chain Measure the industry s capacity to increase production in a national emergency Examine Berry Amendment and other Buy-American provisions Explore concerns and issues faced by domestic producers Project divided into two parts: Footwear survey deployed in November 2016 Textiles and Apparel survey deployed in February 2017

Textile, Apparel, and Footwear Industry Assessments Methodology Textiles and Apparel 5 Scope of survey and assessment was limited to U.S. manufacturers of textiles, textile products, and apparel, as defined and classified by the North American Industry Classification System (NAICS). Excluded from the scope of the survey were organizations such as distributors/importers, service providers, suppliers, designers, etc. BIS decided to provide exemption from the survey requirement, if requested, for organizations with less than 10 employees. The primary product line reported (some respondents reported more than one capability) was used to categorize the respondent into the following: Textile Mills Fiber, Yarn, Thread Broadwoven Fabric Narrow Fabric Mill / Schiffli Machine Embroidery Non-Woven Fabric Knit Fabric Textile and Fabric Finishing Fabric Coating Textile Product Mills Carpet and Rug Curtain and Linen Textile Bag and Canvas Rope, Cordage, Twine, Tire Cord, or Tire Fabric Other Textile Products Apparel Manufacturers Hosiery and Socks Other Apparel Knitting Cut and Sew Apparel Contractor Men's and Boys' Cut and Sew Apparel Women's and Girls' Cut and Sew Apparel Other Cut and Sew Apparel Apparel Accessories and Other Apparel Textile, Apparel, and Footwear Industry Assessments Preliminary, 2017

Textile, Apparel, and Footwear Industry Assessments Methodology - Textiles and Apparel (continued) 6 Organization size was established based on sales from products manufactured in the U.S. Small: Under $10M in annual sales Medium: $10M-$50M in annual sales Large: Over $50M in annual sales U.S. Government suppliers and U.S. Berry Amendment manufacturers were categorized based on survey responses. Today s presentation s data set consists of completed survey responses from 499 organizations; the final assessment data set will include additional organizations. Textile, Apparel, and Footwear Industry Assessments Preliminary, 2017

Textile, Apparel, and Footwear Industry Assessments Methodology - Footwear 7 Scope of survey and assessment was limited to U.S. manufacturers of footwear, as defined and classified by the North American Industry Classification System (NAICS). Excluded from the scope of the survey were organizations such as distributors/importers, service providers, suppliers, designers, etc. BIS decided to provide exemption from the survey requirement, if requested, for organizations with less than 10 employees. Organization size was established based on sales from products manufactured in the U.S. Small: Under $10M in annual sales Medium: $10M-$50M in annual sales Large: Over $50M in annual sales U.S. Government suppliers and U.S. Berry Amendment manufacturers were categorized based on survey responses. Assessment data set consists of completed survey responses from 44 organizations. Textile, Apparel, and Footwear Industry Assessments Preliminary, 2017

Textile, Apparel, and Footwear Industry Assessments Respondent Profile U.S. Textile and Apparel 8 499 companies operating 764 Textile and/or Apparel manufacturing facilities in the U.S. Total 2016 Sales of $39 Billion 2016 Sales of $19 Billion from products manufactured in the U.S. # of Companies 200 180 160 140 120 100 80 60 40 20 0 Number of Companies Segmented by Type 198 Textile Mill 107 Textile Products 194 Apparel Manufacturer # of Companies 300 250 200 150 100 50 0 Number of Companies Segmented by U.S.-made Textile and Apparel Sales 288 144 67 Small Medium Large Small: Under $10M in annual sales Medium: $10M-$50M in annual sales Large: Over $50M in annual sales RP/1b/7 Textile, Apparel, and Footwear Industry Assessments Preliminary, 2017 499 respondents

Textile, Apparel, and Footwear Industry Assessments 9 U.S. Textile and Apparel Manufacturing Organizations - Location Textile Mills Textile Product Mills Apparel Manufacturers North Carolina 55 North Carolina 12 North Carolina 41 South Carolina 20 Minnesota 7 New York 12 Pennsylvania 18 Ohio 6 Texas 9 Georgia 14 New York 6 California 8 California 8 Georgia 6 Alabama 8 Rhode Island 7 California 6 Tennessee 7 Tennessee 6 South Carolina 5 Ohio 7 New Jersey 6 Pennsylvania 5 Georgia 7 Others 64 Others 54 Others 93 # of Responses # of Responses # of Responses Q1a, A 499 respondents

Textile, Apparel, and Footwear Industry Assessments 10 U.S. Textile and Apparel Manufacturing Facilities 900 800 700 How many total textile and/or apparel manufacturing facilities does your organization currently operate? 764 U.S. Facilities by Primary Product Line Fiber, Yarn, Thread 108 Broadwoven Fabric 54 Narrow Fabric / Schiffli Machine Embroidery 28 Non-Woven Fabric 30 Knit Fabric Mill 43 Textile and Fabric Finishing 63 Fabric Coating 16 600 Carpet and Rug 32 500 Curtain and Linen Textile Bag and Canvas 6 33 400 Rope, Cordage, Twine, Tire Cord, or Tire Fabric Other Textile Products 5 88 300 200 100 167 Hosiery and Socks Cut and Sew apparel Contractor Men's and Boys' Cut and Sew Apparel Women's and Girls' Cut and Sew Apparel 4 41 38 90 0 U.S. Non-U.S Other Cut and Sew Apparel Apparel Accessories and Other Apparel 31 54 Q1b, A 499 respondents

Textile, Apparel, and Footwear Industry Assessments 11 U.S. Textile and Apparel Manufacturing Facilities Location Number of Facilities Facility Employees North Carolina 169 North Carolina 20,807 Georgia 86 Georgia 20,342 South Carolina 68 South Carolina 9,384 Alabama 30 Alabama 4,543 Tennessee 29 Puerto Rico 3,493 Pennsylvania 29 Pennsylvania 3,203 California 25 Tennessee 2,736 Virginia 23 Virginia 2,161 New York 22 Texas 2,005 Texas 21 California 1,833 Kentucky 17 Florida 1,748 Wisconsin 16 Illinois 1,626 Puerto Rico 15 New York 1,625 Ohio 15 Massachusetts 1,603 Massachusetts 15 New Hampshire 1,599 New Jersey 15 Kentucky 1,554 Rhode Island 14 New Jersey 1,299 Minnesota 13 Rhode Island 1,261 Maryland 13 Wisconsin 1,042 Indiana 12 Ohio 881 Michigan 11 Kansas 861 Illinois 10 Washington 847 Florida 10 Maryland 628 New Hampshire 10 Utah 620 Other 80 Other 5,853 Q1b, B 499 respondents

Textile, Apparel, and Footwear Industry Assessments Respondent Profile U.S. Footwear 12 44 companies operating 65 Footwear manufacturing facilities in the U.S. Total 2016 Footwear Sales of $8.5 Billion # of Organizations 30 25 20 15 10 5 0 Number of Organizations Segmented by Sales of U.S.-manufactured Footwear 24 12 Small Medium Large 8 Small: Under $10M in annual sales Medium: $10M-$50M in annual sales Large: Over $50M in annual sales RP/1b/7 Textile, Apparel, and Footwear Industry Assessments Preliminary, 2017 44 respondents

Textile, Apparel, and Footwear Industry Assessments Footwear Manufacturing Facilities - Location 13 Total Footwear Manufacturing Facilities Top 10 U.S.-based Footwear Manufacturing Facilities by State Maine 10 Texas 9 U.S. 65 Arkansas Massachusetts 5 6 Wisconsin 4 Pennsylvania 4 California 4 New York 3 Non- U.S* 13 Washington Oregon 3 3 * Includes China, Dominican Republic, etc. Missouri Others 3 11 0 50 100 0 5 10 15 # of Facilities Q1b, A Textile, Apparel, and Footwear Industry Assessments Preliminary, 2017 44 respondents

Textile, Apparel, and Footwear Industry Assessments 14 U.S. Footwear Top 10 U.S. States- Full Time Equivalent (FTE) Employees Texas Maine Minnesota Missouri Puerto Rico Arkansas Wisconsin Massachusetts Oregon North Carolina 413 516 1,320 1,188 1,064 995 896 887 767 12,142 Total U.S. 2,234 0 500 1000 1500 2000 2500 # of Employees Q1b, B 44 respondents

Textile, Apparel, and Footwear Industry Assessments U.S. Textile and Apparel Sales (2012-2016) U.S. Textile and Apparel Manufacturers Total Textile and Apparel-Related Sales Total Sales from Products Manufactured in the U.S. 15 $45,000 $ Millions $40,000 $35,000 $30,000 $25,000 $36,550 $37,387 $40,523 $40,542 $39,453 $20,000 $15,000 $19,348 $19,146 $20,704 $20,038 $18,716 $10,000 $5,000 $- 2012 2013 2014 2015 2016 Q7 Textile, Apparel, and Footwear Industry Assessments Preliminary, 2017 499 respondents

Textile, Apparel, and Footwear Industry Assessments U.S. Textile and Apparel Sales (2012-2016) 16 $25 U.S. Textile Mills Total Textile and Apparel-Related Sales Total Sales from Products Manufactured in the U.S. (81% five-year average) $25 U.S. Textile Products Total Textile and Apparel-Related Sales Total Sales from Products Manufactured in the U.S. (92% five-year average) U.S. Apparel Manufacturers $25 Total Textile and Apparel-Related Sales Total Sales from Products Manufactured in the U.S. (18% five-year average) Billions $20 $15 $13.4 $13.0 $13.5 $13.5 $12.6 Billions $20 $15 Billions $20 $15 $17.6 $18.5 $21.4 $21.0 $21.2 $10 $10.9 $10.5 $11.0 $11.1 $10.2 $10 $10 $5 $5 $5.5 $5.0 $5.8 $5.6 $5.4 $5.2 $6.0 $5.5 $5.6 $5.1 $5 $3.4 $3.2 $4.5 $3.4 $3.3 $- 2012 2013 2014 2015 2016 $- 2012 2013 2014 2015 2016 $- 2012 2013 2014 2015 2016 Q7 Textile, Apparel, and Footwear Industry Assessments Preliminary, 2017 499 respondents

Textile, Apparel, and Footwear Industry Assessments U.S. Textile and Apparel Sales (2012-2016) U.S. Textile and Apparel Manufacturers Total Sales From Products Manufactured in the U.S. Total Berry Amendment-Related Sales to DoD and Armed Services 17 $25,000 $ Millions $20,000 $15,000 $19,348 $19,146 $20,704 $20,038 $18,716 $10,000 $5,000 $- $2,473 $1,994 $2,002 $2,251 $2,131 2012 2013 2014 2015 2016 Q7 Textile, Apparel, and Footwear Industry Assessments Preliminary, 2017 499 respondents

Textile, Apparel, and Footwear Industry Assessments 18 U.S. Footwear Sales (2012-2016) Total Footwear-Related Sales Total Sales from Footwear Manufactured in the U.S. Footwear-Related Government Sales $10,000 $9,000 $8,000 $7,000 $7,216 $8,355 $8,664 $8,701 $8,523 $ Millions $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $- $1,361 $1,396 $1,358 $1,443 $1,511 $168 $198 $164 $215 $292 2012 2013 2014 2015 2016 Q7 42 respondents

Textile, Apparel, and Footwear Industry Assessments 19 U.S. Textile and Apparel - Manufacturing Utilization Rate Estimate your organization's average annual manufacturing utilization rate for 2012-2016, as a percentage of maximum production possible under a 7-day-a-week, 24-hour-per-day operation Utilization Rate % 65% 60% 55% 50% 45% 40% 35% Overall Textile Mill Textile Products Apparel Manufacturer 58% 58% 59% 59% 59% 48% 48% 48% 49% 49% 43% 43% 43% 44% 44% 41% 40% 39% 39% 39% 30% 2012 2013 2014 2015 2016 Average manufacturing utilization rate for each of the years 2012-2015, as a percentage of production possible under a 7 day-per-week, 24- hour-per-day operation. Note: a 100% utilization rate equals full operation with no downtime beyond that necessary for maintenance. Assuming little maintenance downtime, one 8-hour shift, 5 days per week is approximately 25% capacity utilization; two 8-hour shifts, 7 days per week is approximately 65% capacity utilization. Q6, B 499 respondents

Textile, Apparel, and Footwear Industry Assessments 20 U.S. Textile and Apparel Manufacturing Utilization Rate Identify which of the factors below would limit your organization's ability to raise its manufacturing utilization rate to 100% (maximum current capacity) to meet a surge in demand. Availability of workforce Availability of input materials Cost of workforce Availability of additional equipment Equipment capacity Manufacturing space Quality control Other 19 66 97 120 118 172 # of Responses 200 331 Limiting Factors to Ramping Production to Maximum Manufacturing Capacity: Availability of Workforce Textile Mills Textile Products Apparel Manufacturers Yes No Not Sure N/A Yes No Not Sure N/A Yes No Not Sure N/A 6% 7% 10% 22% 61% 14% 8% 10% 68% 9% 13% 72% Q6, D 499 respondents

Textile, Apparel, and Footwear Industry Assessments 21 U.S. Textile and Apparel Surge Production Capabilities 250 How confident are you that your organization could obtain the material necessary to rapidly ramp up production in the event of a national emergency? # of Respondents 200 150 100 50 126 200 79 57 0 Very Confident Somewhat Confident Not Confident Unsure Q6, C.2 462 respondents

Textile, Apparel, and Footwear Industry Assessments 22 U.S. Textile and Apparel Surge Production Capabilities How confident are you that your organization could obtain the material necessary to rapidly ramp up production in the event of a national emergency? Very Confident Somewhat Confident Textile Mills 56 81 USG Suppliers Very Confident 77 Not Confident 25 Somewhat Confident 126 Unsure 20 Textile Products Very Confident 20 Not Confident Unsure 23 37 Somewhat Confident Not Confident 16 48 Others Unsure 16 Very Confident 49 Apparel Manufacturers Somewhat Confident 74 Very Confident Somewhat Confident 50 70 Not Confident 42 Not Confident 38 Unsure 34 Unsure 21 Q6, C.2 462 respondents

Textile, Apparel, and Footwear Industry Assessments 23 Average Annual U.S. Footwear Capacity Utilization Rate (2012-2016) Average Utilization Rate Large >$50M Medium $10M-$50M Small <$10M 45% 43% 44% Utilization Rate % 41% 39% 37% 35% 33% 31% 29% 27% 40% 36% 33% 32% 31% 32% 31% 30% 39% 38% 34% 33% 34% 34% 34% 33% 29% 28% 28% 25% 2012 2013 2014 2015 2016 Q6,B 44 respondents

Textile, Apparel, and Footwear Industry Assessments 24 U.S. Footwear - Manufacturing Utilization Rate Identify which of the factors below would limit your organization's ability to raise its manufacturing utilization rate to 100% (maximum current capacity) to meet a surge in demand. Berry Amendment Manufacturers Other Manufacturers Availability of workforce 11 24 Cost of workforce 3 16 Availability of input materials 5 13 Availability of additional equipment 3 14 Equipment capacity 3 9 Quality control Manufacturing space Other 0 1 1 2 9 9 0 5 10 15 20 25 30 35 40 # of Responses Q6,D 44 respondents

Textile, Apparel, and Footwear Industry Assessments 25 U.S. Footwear Surge Production Capabilities How confident are you that your organization could obtain the material necessary to rapidly ramp up production in the event of a national emergency? 20 Berry Amendment Manufacturers Other Manufactuers # of Respondents 18 16 14 12 10 8 6 4 2 0 11 5 9 7 7 4 1 Very Confident Somewhat Confident Not Confident Unsure 0 Q6,D 44 respondents

Textile, Apparel, and Footwear Industry Assessments 26 160,000 U.S. Textiles and Apparel - Workforce Total number of full-time equivalent (FTE) textile and/or apparelrelated employees for all your U.S.-based operations (2012-2016) # of Employees 140,000 120,000 100,000 80,000 60,000 40,000 20,000 Other Testing Operators, Quality Control, and Support Technicians Production Line Workers - Machine Technicians Marketing & Sales Information Technology Professionals Designers Facility & Maintenance Staff Engineers, Scientists, and R&D Staff Administrative, Management, & Legal Staff Production Line Workers - Operators Q11a, A 0 2012 2013 2014 2015 2016 499 respondents

Textile, Apparel, and Footwear Industry Assessments 27 U.S. Textiles and Apparel - Workforce Does your organization have difficulty hiring and/or retaining any type of employees for your textile and/or apparel-related operations? No, 166, 35% Yes, 309, 65% Q11a, B 475 respondents

Textile, Apparel, and Footwear Industry Assessments 28 U.S. Textiles and Apparel - Workforce Does your organization have difficulty hiring and/or retaining any type of employees for your textile and/or apparel-related operations? Both Hiring Retaining Neither Not Applicable Production Line - Operators Production Line - Machine Technicians Facility and Maintenance Testing Operator, Quality Control, and Support Engineers, Scientists, and R&D Administrative, Management, & Legal Marketing & Sales Design Information Technology Professionals Other Q11a, B 0 50 100 150 200 250 300 350 400 #of Responses 499 respondents

Textile, Apparel, and Footwear Industry Assessments 29 U.S. Textiles and Apparel - Workforce How concerned is your organization about your current textile and/or apparel-related workforce retiring in the near future? Not Worried 22% Very Concerned 23% Neutral 18% Somewhat Concerned 37% Q11b, B 499 respondents

Textile, Apparel, and Footwear Industry Assessments 30 U.S. Textiles and Apparel - Workforce Select and explain the key workforce issues you anticipate between 2017-2021 Finding skilled/qualified workers 337 Finding experienced workers 315 Quality of workforce 271 Transfer of knowledge Attracting workers to location Employee turnover 188 185 198 Significant portion of workforce retiring 154 0 50 100 150 200 250 300 350 400 # of Responses Q11b, C 499 respondents

Textile, Apparel, and Footwear Industry Assessments 31 U.S. Footwear - Workforce 25,000 Other # of Employees 20,000 15,000 10,000 5,000 Testing Operators, Quality Control, and Support Technicians Marketing & Sales Information Technology Professionals Facility and Maintenance Staff Engineers, Scientists, and R&D Staff Designers Admin 0 2012 2013 2014 2015 2016 Production Line Workers Q11a,A 44 respondents

Textile, Apparel, and Footwear Industry Assessments 32 U.S. Footwear - Workforce Does your organization have difficulty hiring and/or retaining any type of employees for your footwear-related operations? Production Line Engineers, Scientists, and R&D Marketing & Sales Design Information Technology Facility and Maintenance Administrative, Management, & Legal Testing Operator, Quality Control, and Support Both Hiring Retaining Neither N/A 0 5 10 15 20 25 30 35 # of Responses Q11a,B 44 respondents

Textile, Apparel, and Footwear Industry Assessments 33 U.S. Footwear - Workforce Select and explain the key workforce issues you anticipate between 2017-2021 Quality of workforce 27 Finding skilled/qualified workers Attracting workers to location 23 24 Finding experienced workers 21 Transfer of knowledge Employee turnover 18 18 Significant portion of workforce retiring 12 0 5 10 15 20 25 30 # of Responses Q11b,C 44 respondents

Textile, Apparel, and Footwear Industry Assessments 34 U.S. Textiles and Apparel - Competitive Attributes Primary competitive attributes of leading U.S. competitors Primary competitive attributes of leading non-u.s. competitors Price 492 Price 312 Range of capabilities 316 Range of capabilities 80 Other 186 Other 60 Delivery time 47 Quality 20 Innovation 45 Receipt of government subsidies 19 Quality 43 Innovation 18 Productivity 31 Delivery time 11 Other 61 0 100 200 300 400 500 600 # of Responses 0 100 200 300 400 # of Responses Q12b, A 499 respondents

Textile, Apparel, and Footwear Industry Assessments 35 U.S. Footwear - Competitive Attributes Primary competitive attributes of leading U.S. competitors Primary competitive attributes of leading non-u.s. competitors Price 41 Price 30 *Other 30 Other 8 Range of Capabilities 21 Quality 8 Quality 5 Range of capabilities 3 Delivery time 4 Innovation 2 Innovation 3 Reliability 1 Productivity Reliability Financing 1 2 2 Government subsidies 1 * Offshore manufacturing, economies of scale, others. Financing Delivery time 1 1 0 10 20 30 40 50 # of Responses 0 10 20 30 40 # of Responses Q12b, A 44 respondents

Textile, Apparel, and Footwear Industry Assessments 36 U.S. Textiles and Apparel Top Competitive Advantages Identify the top five competitive advantages your organization's U.S.-based manufacturing operations possess as they relate to foreign competition Quality 259 Lead time 200 Innovation Performance 172 168 Other 126 Overall finished products Design 102 101 Productivity 70 Reduced process variability Supply of skilled workers 34 33 0 50 100 150 200 250 300 # of Times Listed Q12b, B 499 respondents

Textile, Apparel, and Footwear Industry Assessments 37 U.S. Textiles and Apparel Top Competitive Disadvantages Identify the top five competitive disadvantages your organization's U.S.-based manufacturing operations possess as they relate to foreign competition Labor costs 232 Material costs Supply of skilled workers 129 139 Other 94 Energy costs Environmental compliance costs 73 73 Building space costs Equipment costs Reduced cost Trade barriers 63 60 59 51 Q12b, B 0 50 100 150 200 250 # of Times Listed 499 respondents

Textile, Apparel, and Footwear Industry Assessments 38 U.S. Footwear - Top Competitive Advantages Identify the top five competitive advantages your organization's U.S.-based footwear manufacturing operations possess as they relate to foreign competition. Quality 24 Other 20 Performance Lead time Design Overall finished products 17 17 16 15 Innovation 13 Supply of skilled workers Productivity 5 5 0 5 10 15 20 25 30 # of Responses Q12b,B 44 respondents

Textile, Apparel, and Footwear Industry Assessments 39 U.S. Footwear - Top Competitive Disadvantages Identify the top five competitive disadvantages your organization's U.S.- based footwear manufacturing operations possess as they relate to foreign competition. Labor costs 29 Other 20 Material costs 18 Supply of skilled workers 9 Building space costs Lead time Equipment costs 7 7 7 Reduced cost 6 0 5 10 15 20 25 30 35 # of Responses Q12b,B 44 respondents

Textile, Apparel, and Footwear Industry Assessments 40 U.S. Textiles and Apparel: Competitive Outlook (Defense-related and Commercial) Anticipated changes in competitive prospects for U.S. textile and/or apparel operations (both defense-related and commercial) from 2017 through 2021? Defense-related: 457 respondents Commercial: 455 respondents Not Applicable, 162, 36% Improve, 147, 32% Remain the Same, 142, 31% Not Applicable, 47, 10% Improve, 241, 53% Remain the Same, 125, 27% Decline, 23, 5% Decline, 25, 6% Q13a, B2 499 respondents

Textile, Apparel, and Footwear Industry Assessments 41 U.S. Footwear - Competitive Outlook (2017-2021) (Defense-Related and Commercial) Defense-Related Commercial Decline, 3, 17% Decline, 3, 7% Remain the Same, 6, 33% Improve, 9, 50% Remain the Same, 15, 37% Improve, 23, 56% * 26 of 44 respondents selected Not Applicable *3 of 44 respondents selected Not Applicable Q13a,B 44 respondents

Textile, Apparel, and Footwear Industry Assessments 42 U.S. Textiles and Apparel Challenges Top 10 Challenges Labor Availability Healthcare Costs 339 336 Foreign Competition Aging Workforce Worker/skills Retention 266 259 270 Aging Equipment 215 Domestic Competition U.S. Trade Policy Taxes 192 190 189 Commercial Demand 144 0 50 100 150 200 250 300 350 400 # of Respondents Q15, A 499 respondents

Textile, Apparel, and Footwear Industry Assessments 43 U.S. Textiles and Apparel Challenges Percentage of Respondents Selecting Adversely Affecting Issues Textile Mills Textile Product Mills Apparel Manufacturers Labor Availability 67% 64% 71% Healthcare Costs 72% 61% 67% Worker/Skills Retention 53% 43% 56% Aging Workforce 59% 39% 55% Foreign Competition 66% 42% 48% Aging Equipment 49% 34% 47% Domestic Competition 37% 32% 43% Taxes 42% 28% 39% Government Purchasing Volatility 25% 24% 33% U.S. Trade Policy 47% 32% 32% Access to Capital Government Acquisition Process 19% 16% 0% 20% 40% 60% 80% 25% 21% 0% 20% 40% 60% 80% 31% 28% 0% 20% 40% 60% 80% Q15, A 499 respondents

Textile, Apparel, and Footwear Industry Assessments 44 U.S. Footwear - Challenges Top 10 Challenges Healthcare Costs 31 Labor Availability 29 Foreign Competition Domestic Competition Worker/Skills Retention 24 25 25 Aging Equipment Aging Workforce 20 21 Taxes 15 Reduction in USG Demand Environmental Regs - Domestic 12 12 Q15, A 0 5 10 15 20 25 30 35 # of Responses 44 respondents

Textile, Apparel, and Footwear Industry Assessments U.S. Textile and Apparel - Participation in U.S. Government Programs (2012-2016) 45 Has your organization manufactured textiles and/or apparel for the U.S. Government (defense and/or non-defense) during 2012 through 2016? 300 250 282 185 organizations reported having interest in manufacturing for the USG. Apparel Manufacturers Textile Mills Textile Product Mills # of Respondents 200 150 100 50 217 140 120 100 80 60 40 20 122 105 72 93 55 52 0 Yes No 0 Yes No Q3a, A 499 respondents

Textile, Apparel, and Footwear Industry Assessments U.S. Textile and Apparel - USG Sales (2012-2016) 46 U.S. Textile and Apparel Manufacturers $3,000 Total Berry Amendment-Related Sales to DoD and Armed Services Textile Mills Textile Products Apparel Manufacturers $ Millions $2,500 $2,000 $1,500 $1,000 $500 $2,473 $1,396 $860 $1,994 $2,002 $1,052 $1,098 $756 $753 $2,251 $2,131 $1,259 $1,227 $808 $720 $- $207 $176 $142 $169 $166 2012 2013 2014 2015 2016 Q7 Textile, Apparel, and Footwear Industry Assessments Preliminary, 2017 499 respondents

Textile, Apparel, and Footwear Industry Assessments 47 U.S. Footwear - Participation in USG Programs (2012-2016) 35 Has your organization manufactured footwear for the U.S. Government (defense and/or non-defense) during 2012 through 2016? ) 10 organizations reported having interest in manufacturing footwear for the U.S. Government # of Respondents 30 25 20 15 10 5 0 13 Yes 31 No Types of footwear products interested in supplying: Boots Custom shoes and boots Direct Attach Ice Skates & Roller Skates injection molded PVC boots Men's and Women's Boots, Oxfords, Athletic Shoes Men's and Women's boots/shoes Men's dress shoes; non-skid work shoes Military boots Outsoles, Shoe Lasts, Insoles, Foot beds Wildland Firefighting boots or derivative Q3a,A 44 respondents

Textile, Apparel, and Footwear Industry Assessments 48 U.S. Footwear - USG Sales (2012-2016) Total Sales from Finished Pairs Manufactured in the U.S. Total Berry Amendment-Related Sales to DoD Footwear-Related Government Sales Total footwear-related Foreign Military Sales (FMS) $1,600 $1,400 $1,361 $1,396 $1,358 $1,443 $1,511 $ Millions $1,200 $1,000 $800 $600 $400 $200 $0 $292 $168 $198 $164 $215 $253 $141 $159 $126 $179 $7 $8 $17 $13 $21 2012 2013 2014 2015 2016 Q7 42 respondents

Textile, Apparel, and Footwear Industry Assessments 49 U.S. Textiles and Apparel USG Contracting Select the contract type your organization most frequently uses to do business with the U.S. Government. COMMENTS: Fixed Price Other (explain below) Best Value Lowest Price Technically Acceptable (LPTA) 41 40 44 98 Best Value Best Value, Fixed Price, IDIQ While the method of competing/evaluation/selection may be "best value" the type of contracts are fixed price contracts. Fixed Price Fixed price contracts are the norm in our industry. Fixed Price Indefinite Quantity Contracts, specifically Not Applicable Indefinity Delivery Time and Materials Cost Reimbursement 2 4 10 33 Lowest Price Technically Acceptable (LPTA) LPTA- open bidding response to DLA Other Mandatory source from prime Source America set aside Sub Contract We don't have contracts with the U.S. Government, we are subcontracted. 0 20 40 60 80 100 120 # of Responses Q3b, A.2 272 respondents

Textile, Apparel, and Footwear Industry Assessments 50 U.S. Textiles and Apparel - USG Contracting 70 60 50 40 30 20 10 0 32 Does your organization have any recommendations to improve the overall U.S. Government acquisition process for textiles and apparel? 19 37 47 26 Yes No Not Applicable 59 11 5 5 Textiles Textile Products Apparel RECOMMENDATIONS (sample): Contracting officers need to have a working knowledge and understanding of the industry they are soliciting in before soliciting. Fixed pricing for multiple years does not work in the uniform industry. Due to volatility of raw materials and of government purchasing, a guess is all that a contractor can do. This results in higher prices to the government and volatile profitability to the contractor, so that neither party truly receives the best value. Cost adjustments for raw materials during contract, like the apparels have Delivery orders in 3 month increments do not give agencies volume buying power thereby increasing costs to the government. Nor do the short term orders allow for long term business planning/staffing/equipment for the agency. Deviations for product improvements should be allowed; obsolete specifications need to be updated. Q3b, A.4 241 respondents

Textile, Apparel, and Footwear Industry Assessments 51 60 50 40 30 20 10 0 U.S. Textiles and Apparel - USG Mandatory Sourcing 8 Would your organization suggest any changes in the mandatory source regulations or contracting practices? 9 31 48 22 57 Yes No Not Sure Not Applicable 17 8 21 28 16 11 Textiles Textile Products Apparel Comments: Change the ranking of priorities. Source America, then NIB, and then FPI. Do not allow FPI/UNICOR to bid on small business set asides. Eliminate FPI from offering on any type of Small Business Set-Aside Eliminate Mandatory Sourcing. In many cases suppliers are no longer in business. Federal Prison Industries has to go. Federal gov't is subsidizing the cost of sewn products by using prison labor. Why are we training prisoners for the very few sewing jobs that are still around? Q3b, B.4 276 respondents

Textile, Apparel, and Footwear Industry Assessments 52 U.S. Footwear USG Contracting Select the contract type your organization most frequently uses to do business with the U.S. Government. Best Value Not Applicable Fixed Price Time and Materials 1 2 2 7 COMMENTS: Best Value Best value in military boots defaults primarily to cost. Most contractors are deemed equivalent so best value tradeoffs default to cost. Small Businesses are poorly represented in solicitations. Best Value via TLS We prefer best value procurements as it includes past performance (i.e. delivery and quality record) as an evaluation factor. The majority of our contracts are firm-fixed price. Other (specify below) Lowest Price Technically Acceptable (LPTA) 1 1 0 2 4 6 8 # of Responses Fixed Price IDIQ has also been a factor in all previous contracts. Lowest Price Technically Acceptable (LPTA) Always been this way Q3a, E.2 14 respondents

Textile, Apparel, and Footwear Industry Assessments 53 U.S. Footwear USG Contracting # of Respondents 8 7 6 5 4 3 2 1 Does your organization have any recommendations to improve the overall U.S. Government acquisition process for footwear? 7 5 RECOMMENDATIONS: Expand Small Business utilization in solicitations and stop removing Small Business Lots during negotiations for price. This defeats the purpose of protecting Small Businesses. Quicker turn-around times from market survey to pre-solicitation to solicitation to contract award. Longer lead times are needed from award to the initial delivery of product. Need government to rely in a more faithful manner on expert footwear manufacturers as it relates to product specifications and the amount of time needed to manufacture product with the highest possible quality. We would recommend the elimination of small business set-asides and HUB Zone pricing advantages. Shorten the time from solicitation to award Shorting the amount of time from bid closings to award 0 Yes No Q3a, E.4 12 respondents

Textile, Apparel, and Footwear Industry Assessments 54 U.S. Textiles and Apparel Military Specifications (MILSPECs) Fabric manufacturers have a difficult time meeting the shade and physical spec on some product lines. Inconsistencies and errors noted in Purchase Description (PD's) It is sometimes difficult to obtain MILSPEC documents It is sometimes difficult to source materials, costs are high due to military procurement of textiles we need for other applications. Maintaining Berry compliance in relation to raw materials Majority of these specs are out of date! Many specifications are extremely outdated and non-applicable to current products Has your organization experienced difficulties working with textile and apparel-related military specifications (MILSPECs)? Yes No Not Applicable 26 85 169 0 50 100 150 200 # of Respondents Q3b, C1 280 respondents

Textile, Apparel, and Footwear Industry Assessments 55 U.S. Footwear Military Specifications (MILSPECs) Military specifications are very outdated and need to be updated to include any amendments/modifications the DoD has made prior to procurement issuance. A single, updated and finalized document needs to be issued to industry prior to the procurement to allow adequate time for response at time of procurement release. We would recommend the USG provide finalized specifications to be utilized in upcoming procurements at a minimum of 30 days in advance of the procurement. Only as it related to construction method. No other issues have been noticed. Has your organization experienced difficulties working with footwear-related military specifications (MILSPECs)? Yes No 3 8 Not Applicable 3 0 2 4 6 8 10 # of Respondents Q3a, F1 14 respondents

Textile, Apparel, and Footwear Industry Assessments 56 U.S. Textile and Apparel - Berry Amendment Impact Does the Berry Amendment have a positive impact on your organization's business? Not Applicable, 16, 5% Not Sure, 40, 14% Yes, 202, 68% No, 37, 13% Q3c, A.2 295 respondents

Textile, Apparel, and Footwear Industry Assessments 57 U.S. Textile and Apparel - Berry Amendment For the following actions, indicate the impacts on your organization as they relate to the Berry Amendment Positive Somewhat Positive No Impact Somewhat Negative Negative Too Difficult to Determine Leaving the provisions of the Berry Amendment unchanged 127 26 96 137 20 Expanding the number of USG agencies subject to the Berry Amendment 145 42 55 7 9 28 Expanding the number of product groups subject to the Berry Amendment (e.g., Athletic Shoes) 115 38 91 37 31 Reducing the number of product groups subject to the Berry Amendment 11 14 51 45 139 26 Allowing for more Berry Amendment exemptions 26 32 43 34 116 35 Reducing the percentage of the 100% U.S.-origin requirement 35 40 36 34 117 25 Repealing the Berry Amendment in its entirety 811 33 14 187 34 Increasing the acquisition threshold (currently $150,000) 24 16 84 19 82 61 Decreasing the acquisition threshold (currently $150,000) 69 30 80 16 25 64 Q3d, A # of Responses 289 respondents

Textile, Apparel, and Footwear Industry Assessments 58 U.S. Footwear - Berry Amendment Impact Does the Berry Amendment have a positive impact on your organization's business? Yes, 11, 85% No, 2, 15% Q3b,A.2 13 respondents

Textile, Apparel, and Footwear Industry Assessments 59 U.S. Footwear - Berry Amendment Positive Somewhat Positive No Impact Somewhat Negative Negative Too Difficult to Determine Decreasing the acquisition threshold (currently $150,000) 4 3 2 2 1 Increasing the acquisition threshold (currently $150,000) 2 2 7 1 Repealing the Berry Amendment in its entirety 1 1 11 Reducing the percentage of the 100% U.S.-origin requirement 2 2 8 1 Allowing for more Berry Amendment exemptions 2 1 9 1 Reducing the number of product groups subject to the Berry Amendment 1 1 2 8 1 Expanding the number of product groups subject to the Berry Amendment (e.g., Athletic Shoes) 6 2 3 1 1 Expanding the number of USG agencies subject to the Berry Amendment 9 1 2 1 Leaving the provisions of the Berry Amendment unchanged 7 1 1 3 1 0 2 4 6 8 10 12 14 # of Responses Q3c,A 13 respondents

Textile, Apparel, and Footwear Industry Assessments 60 U.S. Textile and Apparel - Kissell Amendment Impact Does the Kissell Amendment have a positive impact on your organization's business? 44 respondents reported having used or worked under the provisions of the Kissell Amendment N/A, 72, 25% Yes, 74, 26% Not Sure, 94, 32% No, 49, 17% Q3d, B2 289 respondents

Textile, Apparel, and Footwear Industry Assessments 61 U.S. Footwear - Kissell Amendment Impact Does the Kissell Amendment have a positive impact on your organization's business? N/A, 2, 15% 6 respondents reported having used or worked under the provisions of the Kissell Amendment Yes, 5, 39% Not Sure, 5, 38% No, 1, 8% Q3c,B.2 13 respondents

Textile, Apparel, and Footwear Industry Assessments BIS/OTE Contact Information 62 Brad Botwin Director, Industrial Studies (202) 482-4060 brad.botwin@bis.doc.gov Erika Maynard Special Projects Director (202) 482-5572 erika.maynard@bis.doc.gov Stamen Borisson Trade and Industry Analyst (202) 482-3893 stamen.borisson@bis.doc.gov Elizabeth Oakes Trade and Industry Analyst (202) 482-4615 elizabeth.oakes@bis.doc.gov U.S. Department of Commerce Bureau of Industry and Security 1401 Constitution Avenue, NW HCHB 1093 Washington, DC 20230 Industrial Base Reports: www.bis.doc.gov/dib Section 232 Investigations: www.bis.doc.gov/232 UNCLASSIFIED