California Apparel News

U.S. apparel manufacturers and importers have high expectations that 2009 will be the year of free trade with China.

That’s when safeguard measures, those pesky temporary quotas now placed on 34 categories of Chinese-made apparel and textiles, expire and cannot be renewed.

But a host of apparel executives and trade experts are warning that 2009 may not see barriers to free trade being dismantled so quickly.

One of those executives is Gary Ross, corporate vice president of global manufacturing and sourcing at Liz Claiborne Inc., the $4.85 billion apparel company whose labels include Ellen Tracy, Dana Buchman, Lucky Brand Jeans, Laundry by Shelli Segal and Juicy Couture. Ross is charting his sourcing decisions as if apparel and textile quotas were going to stick around well after 2009.

“We believe there will be some safeguards after 2009,” Ross said.

They may not look exactly like today’s safeguards, but they could come in the form of anti-dumping duties, higher tariffs or product- specific safeguards that can be imposed until the end of 2013.

“Quotas are a hard habit to break,” said Brian Murphy, a Los Angeles customs attorney who has lived in Hong Kong and is well acquainted with the Chinese apparel industry.

Richard Wortman, another Los Angeles customs attorney who works with the apparel industry, said, “The domestic industry will do whatever it takes to tighten a noose on the import market.”

Indeed, textile industry lobbyists already are studying their alternatives for maintaining barriers against an onslaught of Chinese- made clothing and fabric that could flood the domestic market in 2009, when safeguards expire.

“We have been thinking of 2009 for a very long time,” said Lloyd Wood, spokesman for the American Manufacturing Trade Action Coalition in Washington, D.C., one of the organizations that pressed the U.S. government last year to implement the most recent round of textile and apparel safeguard measures. “We are looking at all the options on the table on what we may or may not do for 2009.”

Joining the club

Safeguard measures have been the most common formof curbing apparel and textiles from China since quotas expired in 2005 for World Trade Organization members. China agreed to the post-quota safeguard measures in order to join the WTO in late 2001.

To impose safeguard measures, U.S. apparel and textile companies and organizations must petition the Committee for the Implementation of Textile Agreements (CITA) in Washington, D.C., and show there has been some market disruption to local industry.

Late last year, CITA decided that safeguard measures would be imposed on 34 categories of goods—from cotton trousers to sweaters—until Dec. 31, 2008.

The European Union invoked similar safeguards on 10 Chinese-made apparel and textile categories that are scheduled to expire at the end of 2007.

Safeguard petitions to CITA cannot be made after 2008. But something known as product-specific safeguards can be invoked until the end of 2013. Those safeguards are more difficult to get approved and can only be implemented by the U.S. International Trade Commission (ITC), a group made up of three Democrats and three Republicans, appointed by the U.S. president and confirmed by the U.S. Senate. If a product-specific safeguard measure is approved, it is passed on to the president, who makes the ultimate decision whether to approve or decline the recommendation.

“Everything about this safeguard is a different animal,” said Stephen Lamar, senior vice president of the American Apparel & Footwear Association, an Arlington, Va., group that advocates free trade for its more than 1,000 apparel and retail members, ranging from Jones Apparel Group to Levi Strauss & Co. “The threshold for finding [economic] injury is harder, and the process is different. Also, the textile industry can’t file to have safeguards imposed for apparel like they could with CITA. If they are filing to restrict the import of sheets or fabric, that is one thing. But if they are filing for blue jeans, they can’t because they don’t make blue jeans.

“Before, to get a safeguard, all the textile industry had to do was file an application with CITA and spell the words correctly to get it passed. Now, it’s more complicated.”

The last time the ITC approved a productspecific safeguard measure was in 2002 for steel. That was lifted in 2003.

Anti-dumping duties are another way to curb Chinese imports. Again, the ITC determines whether anti-dumping duties should be imposed on imported goods that are being sold overseas for less than it costs to manufacture them domestically. For example, it may cost a Chinese manufacturer $15 to make a pair of blue jeans. It is considered dumping if that manufacturer sells those jeans to a U.S. retailer for $12.

In March, the European Union imposed anti-dumping duties on leather shoes imported from China and Vietnam. The provisional anti-dumping duties that have been implemented range from 16.8 percent for the Vietnamese- made shoes to 19.4 percent for the Chinese-made shoes.

Anti-dumping duties can cause a number of headaches for apparel importers, Murphy said. “As bad as quotas are, antidumping duties are worse,” he said. “At least quotas have some predictability to them.”

Importers can receive an additional bill for anti-dumping duties long after the goods have been delivered to the customer because anti-dumping duties may not have been fully determined when the goods were shipped to the United States.

Tariffs are another way to impede the flow of goods. Most recently, U.S. Sen. Charles Schumer (D-N.Y.) and Sen. Lindsey Graham (R-S.C.) introduced legislation that would impose a 27.5 percent tariff on Chinese imports into the United States unless China allows its currency, the yuan, to float freely against the world currency market.

Schumer and other lawmakers believe China is keeping the value of its currency artificially low to make its goods cheaper in the United States and other countries.

Even if Schumer decides to drop his legislation this year, trade observers believe similar tariff legislation could be introduced to prevent apparel and textile goods from China swamping the U.S. market after 2008.

“I believe there is going to be some sort of barrier, whether it is economic or procedural,” Wortman said. “When it comes to textiles, we are the most protectionist country in the world.”