California Apparel News

If last year was the “Year of Shenanigans,” 2005 is likely to be the “Year of a Little Instability.”

That’s the word from customs official Janet Labuda, who dubbed 2004 the “Year of Shenanigans” because some overseas manufacturers smuggled goods into the United States once the year’s allotment of apparel and textile quotas had been depleted.

Now that apparel and textile quotas for World Trade Organization members no longer exist, Labuda, director of the textiles enforcement division of U.S. Customs & Border Protection, has named 2005 the “Year of a Little Instability.”

That pretty much sums up the beginning of 2005, as apparel and textile importers try to figure out the state of the new world order now that China is poised to become the dominant apparel and textile manufacturer in the world.

With the new year come new questions for importers: Will more safeguard measures restricting Chinese apparel and textile imports be implemented in the next few months? Will a flood of goods overrun the United States and put U.S. manufacturers out of business? Will Los Angeles’ port complex be able to handle the influx of goods? Will a program to keep the ports open at night and weekends really work?

The uncertainties mean that operating in the apparel industry is more like playing a game of chess than running a straightforward business.

“We are trying to watch things very closely,” noted John Clark, vice president of importing for Paul Davril Inc., a longtime Los Angeles manufacturer and importer of branded and private-label apparel and footwear. Its labels include Ecko Red and Kenneth Cole.

For example, customs officials have changed their priorities. Instead of scrutinizing apparel and textile goods coming from the 148 countries that make up the WTO, officials will be taking a closer look at clothing imported under the various free-trade agreements and trade preference pacts, including the African Growth and Opportunity Act and the Caribbean Basin Trade Partnership Act, that have been negotiated by U.S. trade officials.

“Basically, goods are going to come through with no problem if they are classified correctly,” Labuda said. “Because the quota took up so much of our time, we were not able to focus on these free-trade agreements. We are going to verify the claims for eligibility, whether it is NAFTA [the North American Free Trade Agreement] or the Singapore Free Trade Agreement.”

On Jan. 1, the U.S.–Australia Free Trade Agreement went into effect.

Safe from safeguards

The end of 2004 was awash with requests to consider safeguard measures on 12 apparel and textile categories that would restrict Chinese-made imports on everything from wool pants to cotton-knit tops.

In late December, the U.S. Court of International Trade in New York decided to block the Bush administration from immediately considering or imposing China safeguard measures in those classifications.

That means that only one safeguard measure is in effect right now, limiting the number of socks imported from China. That measure expires in October.

Three other safeguard measures on brassieres, knit fabrics and dressing gowns expired on Dec. 23. In late December, the Bush administration said it would consider extending those safeguards after a 90-day comment and consideration period.

However, on Dec. 13, the Committee for the Implementation of Textile Agreements (CITA), the government agency responsible for approving safeguard measures, issued a directive to customs that any apparel and textile items shipped in late 2004 whose quotas were already used up would not be allowed to enter the United States until Feb. 1. Starting on that date, customs will allow a limited quantity of those goods in, equal to 5 percent more than the 2004 quota. Anything shipped after Jan. 1 is not affected.

The ruling took many apparel importers by surprise.

“I have clients who don’t know what to do with their goods,” said Richard Wortman, a Los Angeles customs attorney. “They have containers with multiple sets of goods. Some are embargoed [having exceeded their 2004 apparel quota], and some are not. They are having to send the containers to a bonded warehouse, strip out the stuff not subject to embargo, and the other stuff is in a warehouse until it can come in.”

That means that in December, importers such as John Clark of Paul Davril Inc. had to comb through each apparel category and determine what had gone beyond quota. “If it looked close, we held off importing items until 2005,” Clark said.

While Clark avoided one problem, he encountered a glitch in late December when sending three containers of goods from southern China into Hong Kong. Government bank accounts had not been set up for Chinese manufacturers to pay the newly imposed export tax that went into effect this year.

Clark’s company had to hold up its containers until Jan. 1, when the export tax could be paid into a bank account. Consequently, the three containers missed their boat and were held for another week.

Port perils

One of the biggest questions for importers this year is how the ports will handle the influx of goods expected to flood the West Coast in upcoming months.

In early January, the ports of Los Angeles and Long Beach were relatively quiet, with 52 ships at berth and another five at anchor waiting to dock, said Dick McKenna, deputy executive director of the Marine Exchange of Southern California, which tracks the comings and goings of vessels at the two ports.

This is a drastic change from late October, when as many as 40 vessels were anchored off the coast waiting for a parking spot and another 57 ships were docked.

“The first couple of weeks will be tame, and then we will see an increase,” said Ernie Stein, vice president of operations for Norman Krieger Inc., a Los Angeles freight forwarder and customs broker. “We really don’t know what to prepare for. It is the same old hurry up and wait.”

It typically takes a ship 11 to 14 days to sail from Hong Kong to Los Angeles. So ships departing on Jan. 1 will not arrive before Jan. 11.

Because several big-box retailers had soft Holiday sales and weak first-quarter orders, some people are predicting that the ports will not be as overrun with cargo as was previously predicted.

The local longshore union is prepared. The International Longshore and Warehouse Union, Local 13, whose laborers work at the ports of Long Beach and Los Angeles, has trained 5,000 casual workers. They will be on call when ships start to back up. Another 500 full-time longshore workers were admitted to the local this year, meaning there are now 2,000 registered longshoremen who can work at the ports.

“We’re okay. The labor question is not an issue,” said Dave Arian, president of the ILWU, Local 13. “The issues are your infrastructure problems. The yards are so jampacked, you can’t get the cargo out of the yards. It depends on how each manager runs their terminal. Things have changed. Before, each terminal was dedicated to moving its cargo through the port as rapidly as possible. Now they have value customers who get their cargo out first.”

He said the result is a hopscotch pattern of parked containers that makes it difficult for truckers to maneuver through the yards.

But terminal operators are trying to get cargo out faster this year with a new program called PierPass Inc.,which allows truckers to pick up cargo during night-time and weekend hours.

The program, which was to have gone into effect in early March, may not be operational until early April, said Bruce Wargo, PierPass’ general manager.

Those importers who have their containers picked up during daytime hours will have to pay a surcharge of $20 for a 20-foot container and $40 for a 40-foot container. The price is expected to double after the program has been in effect for one month, Wargo said.

The PierPass idea has met with mixed reviews by local trucking and transportation companies that will have to add more security guards at night to protect cargo containers from theft, increase the number of dispatchers, and make sure warehouses and gates are open 24 hours.

It is questionable how many truckers will want to work in the middle of the night, especially if they will not be making any additional money, said Patty Senecal, vice president of Transport Express Inc., a trucking and warehouse company in Rancho Dominguez, Calif., that handles port cargo.

“How do you incentivize drivers who are paid by the load to give up their family time at night, when they do homework with their kids or go to school basketball games?” Senecal asked. “We are waiting to see how it works out.”