Apparel Quotas Could Return by Mid-Year
California manufacturers were not terribly surprised that the Bush administration announced it might restrict imports of three types of apparel coming from China or that industry groups filed an additional seven petitions to restrict imports on 14 clothing categories coming from China.
“We aren’t keen on this, but we always expected safeguards to happen,” said John Clark, vice president of imports for Paul Davril Inc., a decades-old Los Angeles manufacturer that imports about 68 percent of its clothing from China. Another 12 percent comes from other areas, including Peru, Canada and Central America.
The company, which makes apparel under the Ecko Red and Kenneth Cole sportswear labels as well as private-label brands, will shift some of its production from China to other countries if the safeguard measures go through.
The safeguard measures issue is confusing to manufacturers who are not sure when the measures might take effect or how much quota might be filled by the time the measures are implemented.
Los Angeles customs attorney Richard Wortman said that the three safeguard petitions self-initiated by the Bush administration could realistically take effect in early June to early July. The other seven petitions could take effect in late July to early August.
“I think it leaves us very vulnerable,” said Richard Hirsh, co-chief executive officer of womenswear manufacturer John Paul Richard Inc., a $110 million company based in Calabasas, Calif. “It is very hard to figure the timing out about when safeguards will be implemented. We believe they will be, but we don’t know when and to what extent.”
With 50 percent to 60 percent of the company’s production done in China, Hirsh and Co-Chief Executive Officer John Paul Beltran are weighing whether to shift production to other companies or even import fabric from overseas and do more production domestically.
On April 4, the Bush administration announced it will consider imposing safeguard measures, or temporary quota restrictions, on cotton trousers, cotton-knit shirts and blouses, and cotton and manmade fiber underwear because imports from China showed an enormous jump in those areas during the first quarter of 2005. The spike occurred after apparel and textile quotas disappeared for the 148 World Trade Organization members on Jan. 1.
According to preliminary data from the U.S. Department of Commerce, imports of Chinese-made cotton trousers and cotton-knit shirts and trousers were up elevenfold during the first three months of 2005, compared with the same period in 2004. Imports of Chinese-made underwear were up more than threefold.
Because of the enormous increases, the Committee for the Implementation of Textile Agreements (CITA), an interagency group chaired by the Commerce Department, announced it will self-initiate safeguard petitions instead of waiting for U.S. manufacturers to petition CITA to take action. This is the first time in history that CITA, which supervises the implementation of all textile trade agreements, has self-initiated safeguard petitions.
Safeguard measures are part of the provisions that allowed China to join the WTO in 2001. Until the end of 2008, the United States is allowed to impose safeguard measures that would restrict imports to no more than 7.5 percent more than the previous year’s level if the imports cause market disruption in the United States.
The head of CITA, Jim Leonard, who is also the assistant deputy secretary for textiles at the Commerce Department, attended a March 16 seminar in Los Angeles organized by the California Fashion Association. At that time, he hinted that CITA would self-initiate safeguard measures to restrict apparel imports from China.
On April 6, soon after the Bush administration announced it will consider three safeguard measures, a coalition of industry groups filed seven more safeguard petitions, covering everything from brassieres and dressing gowns to cotton and manmade-fiber sweaters and manmade-fiber trousers. Those groups included the National Council of Textile Organizations, the National Textile Association, the National Cotton Council of America and the American Manufacturing Trade Action Coalition.
Currently, there is only one safeguard measure in effect. That measure, for socks, expires at the end of October. Safeguard measures that had been in effect in 2004 for nightgowns, knit fabrics and brassieres expired last December.
Industry groups promised they will be filing more petitions later this month or in early May.
“There are three categories we are monitoring closely,” said Lloyd Wood, a spokesperson for the American Manufacturing Trade Action Coalition, a Washington, D.C., organization formed to preserve U.S. manufacturing jobs. “They are: knit fabric, combed-cotton yarn and wool trousers.”
The safeguard measures would also create a problem for retailers who enjoy wider profit margins or attract more customers when they can import cheaper apparel from overseas. “This makes it very challenging to plan our business,” said Joseph Harris, vice president of sourcing for Pacific Sunwear of California Inc., a $1.2 billion Anaheim, Calif.–based company whose stores sell trendy casualwear for young men and women. The company also manufactures its own private-label merchandise.
Harris said the company will start diversifying its mix of sourcing countries and go forward as if the safeguard measures were going into effect.