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New Balance's sneaker fight with Pentagon hits Congress

Airline profits soar -- as do complaints, and... 01:05

New Balance has taken its nearly decade-long fight with the Pentagon over the sale of athletic shoes to the halls of Congress, which is currently debating the annual appropriations bill that funds the Pentagon.

According to the Massachusetts-based company, defense officials are ignoring a little-known 1941 federal law called the Berry Amendment that requires the Pentagon to outfit members of the military in uniforms and other equipment that are "100 percent made in the U.S." The Pentagon has argued that it should be exempt from the law because it says New Balance shoes are too expensive and not durable enough. New Balance rejects those claims.

For the Massachusetts-based company, which has spent millions to comply with the Pentagon's requirements, the fight is a matter of principle over profit since it plans to sell the military 200,000 to 250,000 pairs of athletic shoes at cost, according to Matthew LeBretton, New Balance's vice president of public affairs.

"We went after this seven years ago because we found out what the Berry Amendment was," he said in an interview. "We had no idea what it was before that .... Doing the program at cost isn't necessarily what we are looking to do but what we want to see, though is for the Pentagon to follow the law."

A spokesman for the Pentagon didn't return phone calls seeking comment.

New Balance has found bipartisan support for its fight with the Pentagon even in the sharply partisan atmosphere in Washington, D.C. An amendment that would require the Pentagon to apply the Berry Amendment to sneaker purchases is part of the 2017 National Defense Authorization Act (NDAA). That bill recently cleared the powerful House Armed Services Committee and is expected to be voted on by the full House in the coming weeks. Members of the Senate are due to consider their version of the NDAA soon.

"The benefits are widespread as closing this loophole would simultaneously provide our service members with high-quality training shoes, keep business here on American soil, boost job growth and provide a better value to American taxpayers by ensuring that U.S. taxpayer money is spent on U.S.-made goods," U.S. Rep Niki Tsongas (D-Mass.), whose district includes a New Balance plant and is a sponsor of the amendment, said in a statement.

About 2 percent of athletic footwear sold in the U.S. is made here as manufacturers flocked to low-wage countries such as China and Vietnam decades ago. New Balance and rival Wolverine Worldwide (WWW), maker of Saucony sneakers, which would also benefit from the Tsongas legislation, are the exceptions. Wolverine also makes combat boots and dress shoes for the military.

In addition to manufacturing shoes in the U.S., privately held New Balance and Wolverine also make shoes in Asia, as do many of their rivals including Nike (NKE). Under the Trans-Pacific Partnership (TPP) trade deal that the Obama administration backs and New Balance opposes, shoe and sneaker tariffs would be phased out in TPP participant countries like Vietnam.

"As a company, we could potentially make more money (under TPP) because we do make shoes in Vietnam," LeBretton said. "It's our goal to make more shoes here not less. To employ more Americans not fewer."

According to LeBretton, the company began voicing its concerns about TPP after the Obama administration reneged on a promise to help it win the Pentagon sneaker contract. The Office of the U.S. Trade Representative (USTR), which overseas trade deals, not surprisingly, has a different view.

"It is unfortunate that, despite a strong outcome in TPP that advances the interest of U.S. footwear workers, New Balance now appears to be changing its position on TPP in response to the Pentagon's separate procurement process," wrote Matthew. W. McAlvanah, a USTR spokesman, in an email.

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