California Apparel News

If you thought customs officials have been tough on apparel and textile imports, just wait. They’re only going to get tougher in 2004.

Los Angeles customs personnel are under the gun to scrutinize goods from Asian countries suspected of helping Chinese factories smuggle goods into the United States to avoid tariffs and quotas.

The crackdown comes at a time when apparel and textile quotas for Chinese manufacturers are scarce because those manufacturers will not be able to borrow on 2005 quotas; there will be no quotas on most Chinese-made apparel and textile goods in 2005 to borrow against.

“I am officially calling it the ’Year of the Shenanigans,’” said Janet Labuda, head of the Textiles Enforcement and Operations Division, part of U.S. Customs and Border Protection in Washington, D.C. “Our antenna will be up, without a doubt.”

That raised antenna means some manufacturers may never get their goods. Others may find their goods delayed so long that retailers could cancel their orders.

Tracking high-risk trade

Labuda was in Los Angeles in early December to talk to members of the Los Angeles Customs Brokers and Freight Forwarders Association Inc. about customs’ new apparel and textile import policies. She told members the number of counterfeit import documents discovered with merchandise coming through the ports of Los Angeles and Long Beach as well as Los Angeles International Airport have reached epidemic proportions in the last six months. “The highrisk trade is coming in through [John F. Kennedy International Airport in New York] and Los Angeles,” Labuda said.

About 90 percent of all illegal transshipments come from China, Labuda told the more than 75 members who packed the boardroom of the Port of Long Beach headquarters.

Consequently, customs officials have issued a list of countries and regions whose apparel imports will be scrutinized if import documents are not in order or look suspicious. Those countries and regions include Vietnam, Macau, Taiwan, South Korea, Sri Lanka, Pakistan, India, the Maldives, Hong Kong, Russia, Uzbekistan, Kazakhstan, and any of the sub-Sahara African countries included in the African Growth and Opportunity Act.

Customs issued this list because in the last six months, government inspectors have discovered at least $52.4 million worth of apparel and textiles coming through the Los Angeles area with counterfeit documents. The country topping the counterfeit document list was Vietnam, which had $14.5 million in goods apprehended. Russia followed with $13 million in goods, the Maldives with $10 million and South Africa with $7 million.

Thailand may also be added. “There are several large Thai apparel companies that went ahead and changed the markings ’Made in China’ and sewed in labels that said ’Made in Thailand’ and got caught,” said John Salvo, president of Carmichael International Service, a Los Angeles customs broker. “This is unfortunate because they have been a good clean country.”

“Blitz reviews”

The revved-up reviews of imported clothing mean manufacturers may be waiting days or weeks to get orders that otherwise would have cleared in hours.

Customs brokers have been notifying their clients about the new policy and advising them to have all their documents in order. One broker, in a letter to his clients, wrote: “Customs will be playing hardball in 2004 with textile/apparel imports.... Be prepared for a 30-day delay while customs reviews your records.”

Enrico Salvo, chief executive of Carmichael International, noted customs will be conducting a “blitz review” of import documents in the next several months, as the agency did last June.

“Instead of giving a cursory review, they go in, read the documents very carefully and if they have any questions, they reject entries, or they say, ’Explain this and this and this,’” Salvo said. “Instead of an entry coming through in a couple of hours, it could be a couple of days or a couple of weeks.”

Customs is looking extra hard at landed duty-paid goods—which include the cost of shipping, insurance and import duties—because officials have found most of the counterfeit documents in this category.

For customs attorneys, this could mean a windfall in legal fees. Many are reading up on the policy to help their clients extract goods from customs.

“By and large, customs will continue to examine cargo and question origins and require importers to give sewing tickets and other tickets to confirm the goods were made in that country,” said Richard Shostak, a partner in Stein Shostak Shostak & O’Hara in downtown Los Angeles. “If in 30 days they can’t prove it, customs detains the goods, seizes [them], and then that takes it to a whole new level where it can take 30 to 60 days more to get [the goods] loose.”

More inspectors, more visits

Attorneys and customs brokers are advising importers to know the factories where their goods are made and make sure those factories are capable of manufacturing the goods.

“Janet cited one example of examining some South African documents that seemed false,” recalled Robert Krieger, president of Norman Krieger Inc., a Los Angeles freight forwarder and customs broker who heard Labuda speak in New York in November and in Los Angeles in December. “Customs called the South African manufacturer, and he said he couldn’t have made those goods because they were woven goods and he did only knits.”

This year, customs’ jump teams will be increasing their visits to overseas factories to verify production capacities. In November, a textile-production verification team went to Hong Kong to visit 207 factories. More than half of the factories were either closed or refused to let customs officials enter. Six showed evidence of illegal transshipment, and 23 showed a high potential for illegal transshipment. That left only 40 showing little or no evidence of illegal activity.

In its fiscal 2004 budget, customs has been given $4.75 million to step up enforcement and add 48 people nationwide to its enforcement detail. In the Los Angeles area, customs will hire 11 more import specialists, one laboratory analyst and two auditors to take inspections to a new level.

“It’s going to be an interesting year, to say the least,” said Salvo of Carmichael International.