Change Afoot for U.S. Jewelry Manufacturers

The number of U.S. jewelry manufacturers has declined 25% over the past 10 years, according to Jewelers Board of Trade statistics. “These numbers are simply a reflection of the impact of consolidation at the retail level and increased competition, especially in low-value goods such as costume jewelry, where much of the production has moved offshore,” says Dione Kenyon, JBT president.

Manufacturing Jewelers and Suppliers of America (MJSA) cites U.S. trade policy as a major cause of the decline of U.S. jewelry manufacturing jobs and market share, according to its report titled Fair Trade and the U.S. Jewelry Industry: A Strategy for Manufacturers to Compete Globally in the 21st Century, published in 2004.

MJSA findings show that fine and costume jewelry imports rose sharply between 1977 and 2001. In 1977, imports amounted to just 6% of the American market for precious jewelry and 10% for costume jewelry. By 2001, imports accounted for nearly half of the market for both categories. This dramatic rise stems from “the passage of the Trade Expansion Act in 1974, which established U.S. participation in the international General System of Preferences (GSP) [established to help foster growth in non-industrial countries] and allowed 140 developing nations to export several thousand different types of durable goods to the U.S. duty free,” according to MJSA’s white paper.

Jim Marquart, MJSA president, claims some countries have “unfair” competitive advantages in the U.S. market. “In some countries, manufacturing operations receive government subsidies and incentives, and many countries continue to enjoy tariff-free status,” says Marquart.

In addition, U.S. manufacturers face numerous hurdles if they want to export goods: “We can’t sell in some countries because they have excessive tariffs and non-tariff trade barriers [restrictions to imports not in the usual form of a tariff], such as currency manipulation, high value-added taxes [consumption taxes levied on the sale of goods and services], and a lack of patent protection,” Marquart says.

“The European Union imposed sanctions on the U.S. jewelry industry in March of this year and major exports almost dried up,” says Marquart. The reason: $4 billion in retaliatory tariffs levied against 1,600 industries, including jewelry, in response to the U.S. Foreign Sales Corporation and Extraterritorial Income Tax (FSC/ETI) subsidy—a tax benefit for U.S. exporters. At press time, however, Congress had passed a tax bill—called the “American Jobs Creation Act of 2004″—that gives “new breaks to manufacturers,” according to a Wall Street Journal report. The president was expected to sign the bill. Afterward, the European Union must give its approval, according to international trade law requirements.

To remain competitive, some U.S. manufacturers have set up overseas operations. “It’s almost an imperative to have some offshore presence,” says Joe Oliver III, director, Mergers & Acquisitions Group, Davenport & Co., Richmond, Va.

But not all owners are able to adapt to global operations, and the result is more mergers and sales. “It’s a big psychological and economic commitment that some just aren’t ready to make,” says Oliver. “So, they look at alternatives including selling their business or getting out of manufacturing and becoming solely an importer or distributor.”

Kenyon, formerly with Fleet Bank, has seen clients from other industries face challenges similar to those jewelry manufacturers are experiencing: “Either you grew large … to produce and distribute economically, or you had a niche product or service not easily replicated,” she says. She speculates that jewelry manufacturers may have opportunities “to move toward goods that are less commodity oriented,” and notes that several firms in Rhode Island have formed training alliances with MJSA and a local community college to hone skills.

To download a free PDF version of the MJSA report, visit www.mjsa.org.

Jewelry Imports and Exports by Country 2003

Country Imports to U.S. Exports from U.S. Trade Deficit (Surplus)
Source: Government data cited in the Manufacturing Jewelers and Suppliers of America’s Fair Trade and the U.S. Jewelry Industry, A Strategy for Manufacturers to Compete Globally in the 21st Century. Includes imports and exports of both fine and costume jewelry for all countries except India and Turkey, which includes fine jewelry statistics only.
China $1,314,001,000 $1,543,000 $1,312,458,000
Italy $1,220,194,00 $43,835,000 $1,176,359,000
India $1,190,790,000 $39,932,000 $1,150,858,000
Thailand $796,566,000 $31,962,000 $764,604,000
Hong Kong $474,462,000 $115,178,000 $359,284,000
Turkey $248,500,000 $11,156,000 $237,344,000
Korea $154,646,000 $12,789,000 $141,857,000
France $155,461,000 $40,594,000 $114,867,000
Spain $49,129,000 $1,102,000 $48,027,000
Canada $197,097,000 $155,173,000 $41,924,000
Mexico $166,340,000 $209,447,000 $43,107,000
Switzerland $80,114,000 $123,593,000 $43,479,000
UK $43,669,000 $95,394,000 $51,725,000
Japan $3,878,000 $302,389,000 $298,511,000