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New Balance nears big win in athletic-shoe campaign

ASSOCIATED PRESS/FILEMaria Contrero removes a running shoe from a sole press during the assembly process at the New Balance factory in Boston in 2012.
ASSOCIATED PRESS/FILEMaria Contrero removes a running shoe from a sole press during the assembly process at the New Balance factory in Boston in 2012. AP

For decades, the military services avoided paying millions of dollars extra every year to subsidize American-made athletic shoes for new recruits. They had adopted a voucher system that simply helped recruits buy popular foreign-made brands sold in base exchanges.

In this way, the Department of Defense avoided triggering the 1941 Berry Amendment, which requires all uniform items be wholly manufactured in the United States. Shoe manufacturers didn't complain too loudly about this Berry law exemption because they hadn't invested in stateside manufacturing of a durable athletic shoe.

Two years ago, however, as a few companies signaled they could produce Berry-compliant shoes, the department made a policy change. It would apply the Berry Amendment to recruits' running shoes, and so award the business exclusively to companies that made them in the U.S, if testing showed them to be durable and the prices were competitive with foreign-made brands.

Cornering the market

New Balance Athletic Shoe of Boston is the company now near to cornering the market for up to 200,000 pairs of recruit shoes a year. But getting there is taking an act of Congress, because the Obama administration, for reasons not yet clear, no longer welcomes the idea.

At the urging of members of Congress from Massachusetts and Maine, where New Balance shoes are made, the House-passed 2017 defense authorization bill, and also the Senate version cleared by its armed services committee, would force the DoD services to issue athletic shoes to new recruits, ending their Berry workaround of cash vouchers.

For now, the only company able to produce Berry-compliant shoes is New Balance. That has upset the administration.

White House unhappy

"Mandating that a specific article of clothing be provided to new recruits is unprecedented and, in the case of athletic shoes, runs counter to research that indicates a strong correlation between the variety of athletic shoes available, fit and comfort, and reduced injury rates," complained the White House's Office of Management and Budget in separate heartburn letters to the armed services committees listing bill items it opposes.

"Forcing DoD into a 'one size fits all' approach to athletic footwear may contribute to a higher incidence of injury to new recruits during one of the most critical times in a member's military training," OMB warned.

New Balance and its champions in Congress are angry to see DoD abandon the policy shift announced in April 2014 by then-Deputy Defense Secretary Christine Fox. That decision spurred New Balance to invest in new equipment and to adjust its supply chain to produce a 100-percent USA-made shoe. But to reap its rewards, Congress must force Berry compliance over recruit athletic shoes by ending the cash vouchers.

Three general foot types

New Balance and its supporters dismiss as bogus administration arguments that the move will raise the risk of recruit injury. Indeed service studies cited caution only that recruits should be offered three styles of shoes -- motion control, cushioned and stability -- to accommodate three general foot types based on arch height and foot strike pattern.

New Balance is manufacturing all three types, but DoD approved only two before it ended durability testing, claiming it had run out of money, said Matt LeBretton, vice president of public affairs at New Balance.

New Balance also challenges an estimate from the Congressional Budget Office that applying Berry protection to recruit shoes will add $50 million a year to department costs. That ignores the company's written promise to sell Berry-compliant shoes at cost, LeBretton said, and the cost will not exceed current voucher amounts of up to $90.

Estimated inventory

CBO also estimated the services would need to keep an inventory of 500,000 shoes to be able to issue the right size and fit to every recruit. That's perhaps ten times the number they actually will need, LeBretton said.

Rep. Niki Tsongas, D-Mass., whose congressional district includes New Balance headquarters, said exempting recruit shoes from the buy-American mandate made sense when no U.S. manufacturer was able to make high-quality shoes at a competitive price.

"That has changed with the resurgence of American shoe manufacturing, and we have an example of that in New Balance," said Tsongas. Saucony, an athletic shoemaker owned by Michigan-based Wolverine Worldwide, also plans to compete for the recruit market, she said.

Quality is another critical factor, Tsongas said. One style of New Balance shoe cleared by the department "scored higher overall than any other like running shoe" DoD had tested in the last 20 years, she said.

"They are producing shoes that are as good as any that's being made out there, wherever they come from," Tsongas said, "because the bottomline is really the well being of our service members."

Buy their own shoes now

Army, Navy and Air Force have been giving recruits vouchers to buy athletic shoes for years. The Marine Corps' more frugal approach has been to allow recruits to buy shoes in the exchange and to deduct the cost from their pay.

Only the Navy has required recruits to use vouchers exclusively on one brand, New Balance, even though the shoes aren't wholly manufactured in the U.S. yet. But Navy has issued these shoes on the first day of training since 2005. The Navy's 2016 cost per pair is $92.

Navy recruits are fitted using a computerized biometric machine to determine proper fit and style. Injury rates haven't been a problem, a Navy official said. In 2009, the Navy evaluated the effectiveness of its Recruit Training Command's standardized physical training program, "including injury prevention initiatives such as the use of New Balance shoes. It showed that over a four-year period, stress fractures had been reduced by 69.7 percent."

Not making friends

LeBretton offered a few possible reasons why the administration appears to have backed away from its 2014 policy change. Given that New Balance isn't a defense contractor, the company has complained publicly and often about DoD non-compliance with the 1941 law.

"That ticked off a lot of people," he said.

Also, the voucher system has allowed exchanges to pocket profits on every pair of athletic shoes sold. Those profits would disappear when shoes are procured by the services like other uniform items.

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