Imported Sweaters Tangled in Customs

First it was socks. Now it’s knit sweaters.

Starting in April, U.S. customs inspectors will begin scrutinizing imported knit sweaters. The closer inspection of sweaters may last only one month but could extend beyond that.

Often the panels for knit sweaters are made in one country, such as Hong Kong or Vietnam, and then linked and looped in China to reduce the cost of the garment. The knit panels determine the country of origin listed on the label.

But government officials suspect that some sweaters imported into the United States have had their linking, looping and panel knitting done in China but do not show China as the country of origin on their labels. This would mean China is bypassing its quotas on sweaters.

Customs officials raised their antenna on knit sweaters after recent free-trade agreement negotiations between the United States and Australia highlighted a discrepancy between Australia’s capacity to produce sweaters and the number of sweaters the country was exporting to the United States, confirmed Janet Labuda, head of the Textile Enforcement and Operations Division of the U.S. Customs and Border Protection agency in Washington, D.C. Australia did not have the capacity to knit as many sweaters as it was exporting, Labuda said. “This started with an analysis that came out of my office and by working with some foreign governments that validated our concerns,” she explained.

Last month, the two countries signed a free-trade accord, which now must be ratified by the U.S. Congress and Australian lawmakers.

Sock it to me

Knit sweaters are not the only imported apparel items keeping customs officials busy this year, the last year that apparel and textile quotas are expected to remain in place for the 146 countries that are members of the World Trade Organization.

On Feb. 2, customs officials began analyzing imported socks, particularly cotton and man-made-fiber socks, being imported in the United States from 18 countries. The inspection program is scheduled to run through April 30, Labuda said, although she added that could change.

So far, about $10 million in hosiery has been detained.

Socks came under close scrutiny after U.S. Rep. Cass Ballenger (R–North Carolina) and U.S. Rep. Robert B. Aderholt (R-Alabama) wrote Labuda in October, noting that some countries were mislabeling the country of origin on socks in order to avoid quotas or pay lower duties.

About half of all socks sold in the United States are imported.

“We are doing lab testing on socks from China, South Korea, India and Pakistan,” Labuda said. “We are looking at cotton and man-made-fiber socks but not at woolen socks.”

While there are a few sock importers in Southern California, there are many importers of lightweight sweaters in the region.

One of those is Karen Kane Inc., a Vernon, Calif.–based company that imports almost all its sweaters from Asia. “Right now everything with a Hong Kong label is being scrutinized,” said Lonnie Kane, president of the apparel company, which he and his wife, Karen, founded more than 20 years ago out of their house in Studio City, Calif.

Customs is also holding up any apparel from Taiwan, Vietnam and South Korea, said Kane, noting that his company is trying to avoid having sweaters made in any country under suspicion by customs officials. “That means going to China for sweaters because China means China,” he said.

Another Southern California company that imports a fair amount of sweaters is John Paul Richard Inc., based in Calabasas, Calif. Ed Redding, the executive vice president of importing and sourcing at John Paul Richard, said his company started avoiding sweater imports from Hong Kong after he heard customs had begun taking a closer look at knitted sweaters from the region. “Any time we hear a potential investigation is going to take place, we try to avoid the area they are inspecting,” he said.

Big exporter

Asia is the top supplier of cotton, wool, man-made-fiber and other types of sweaters to the United States, said Natalie Hanson, vice president of trade policy at International Development Systems, a company in Washington, D.C., that monitors quotas and resolves quota problems for its textile and apparel clients.

In 2003, the United States imported more than 300 million sweaters from other countries, according to IDS statistics. Bangladesh was the top supplier of cotton sweaters and Hong Kong was the top supplier of wool sweaters to the United States.

Last year, the United States manufactured 24 million sweaters, according to IDS.

The intense scrutiny of goods comes as no surprise to importers. Customs officials warned last year that they would crack down on apparel and textile imports in 2004. Labuda labeled 2004 the “Year of the Shenanigans” because Chinese manufacturers, faced with the evaporation of quotas in 2005, would not be able to borrow against the following year’s quotas as they had done in the past. Customs officials suspected that China would get around the quota situation by transshipping items to countries such as Vietnam or Russia, to put a “Made in Vietnam” or “Made in Russia” label on them, or by simply sewing in false labels.

Slow going

Several entities have urged customs officials to take a closer look at apparel and textile imports. One of those groups is the American Textile Manufacturers Institute in Washington, D.C.

“We have been urging customs to be incredibly vigilant in all categories,” said Robert DuPree, the vice president of government affairs for the institute. “There are a huge number of sweaters being imported to the U.S. every year, and they have nowhere to go but up.”

Southern California apparel manufacturers said customs officials became more vigilant in January, causing a major slowdown in the clearance of goods.

“We have stuff that has been held up six weeks, and that puts it past the completion and delivery date,” said Kane, noting that goods normally clear in three to seven days if paperwork is in order.

Now Kane is trying to place orders earlier and look at the country of origin more carefully.

“It used to be if your goods were stuck for two weeks on the outside, you knew you had an issue,” he said. “Now you don’t have a clue to how long they’ll be stuck.”