California Apparel News

Importers get updated at USA-ITA conference in Los Angeles

The United States may be pushing for more free trade around the world, but certain regions will be hitting a stumbling block soon.

Already, the Bush administration is considering whether to put an import tax on duty-free socks made in Honduras. Last year, Honduras exported 27 million dozen pairs of socks to the United States, up dramatically from 10 million dozen pairs in 2005.

A final decision is expected April 18. The tax would last until the end of the year.

Next on the list is the Andean Trade Promotion and Drug Eradication Act, which allows apparel and textiles made in Peru, Colombia, Bolivia and Ecuador from U.S. yarn or fabric or regional inputs to return to the United States quota and duty free. The act expires at the end of February, and Congress still hasn’t renewed it. The result is that for the time being, many U.S. apparel importers bringing goods in from that region may have to pay duties on their merchandise.

And Costa Rica’s deadline to join the Dominican Republic–Central American Free Trade Agreement is March 1. But Costa Rica, the last country to join the trade pact, is unlikely to have everything done by that date, trade experts said. Costa Rican President Oacute;scar Arias has asked for a threemonth extension.

If that wasn’t complicated enough, consider this. The Bush administration is still monitoring apparel and textile imports from Vietnam to make sure these manufacturers aren’t dumping cheap goods into the United States. The U.S. government’s second report on the issue comes out in April, with the third being published in October, right before the presidential election. If dumping is found, the United States could add more duties to Vietnamese-made apparel and textiles.

Furthermore, quotas set to expire on Chinese-made apparel and textiles at the end of this year could be replaced with antidumping measures or countervailing duties, creating uncertainty for businesses and raising the price of goods.

“Just because quotas went away doesn’t mean there won’t be something done on China,” said Julie Hughes, senior vice president of the United States Association of Importers of Textiles and Apparel, a New York trade association representing the interests of apparel and textile importers before Congress and other groups.

On Feb. 15, the USA-ITA held a one-day conference in Los Angeles with a panel of East Coast trade experts discussing the various challenges for U.S. companies importing apparel and textiles.

China was on everybody’s mind, but there were other areas of the world that could also prove difficult.

The U.S.-Peru Free Trade Agreement was passed by the U.S. Congress and the Peruvian Congress at the end of 2007. But the accord probably won’t go into effect until July, at the earliest, Hughes said.

With the ATPDEA scheduled to expire at the end of February, U.S. companies producing clothing in Peru could see a gap where goods will be subject to import duties.

But relief may be on the way. “There appears to be bipartisan support to extend [ATPDEA] benefits,” said Scott Quesenberry, special textile negotiator for the U.S. Trade Representative, who is responsible for supervising trade negotiations involving apparel and textiles. “But whether it gets done without a gap is a big question. However, the gap shouldn’t be more than a couple of months.”

Eyes on Asia

Latin America is one concern. But more people are waiting to see what will happen with China at the end of this year when safeguard measures, or temporary quotas, are lifted on 34 categories of apparel and textiles. Those categories include everything from pants and shirts to sweaters and swimsuits. The quotas were imposed after U.S. manufacturers complained that many Chinese clothing imports were hurting their business.

“At least we knew what we were dealing with, with quotas,” said Brenda Jacobs, an international trade policy expert and attorney with the Sidley Austin law firm in Washington, D.C. “Now we are finding out that a lot more uncertainty can be thrown at us, and we have to think more carefully [about] how we are planning our business.”

Trade barriers with China and other Asian countries can take a lot of different forms, such as antidumping duties, countervailing duties, and safeguard measures on specific categories. “We have also seen how non-tariff barriers in the forms of complicated rules of origins are creating new chapters for your business,” Jacobs said.

With Chinese apparel and textile quotas disappearing soon, the U.S. textile industry is ramping up its efforts to find new ways to protect local manufacturers from an onslaught of Chinese goods.

The National Council of Textile Organizations, a Washington, D.C., group dedicated to the survival of U.S. textile companies, and the American ManufacturingTrade Action Coalition, a Washington, D.C., organization working to preserve and create manufacturing jobs, were instrumental in getting the Bush administration to monitor Vietnamese apparel imports and consider antidumping measures. This is a rather rare move to take with a non-market, or government-controlled, economy. In the past, it was deemed too difficult to measure government subsidies in a non-market economy. Now with more foreign investment in places such as Vietnam and China, U.S. government officials feel they can more accurately determine what is happening.

“This is really a major change in policy,” Jacobs said. “The textile industry has done a calculated strategy to increase the prospect of action being taken against China once quotas do expire by starting with Vietnam.”

The Bush administration is watching the price of five categories of Vietnamese apparel to make sure they are not being sold in the United States for less than in Vietnam.

The monitoring of shirts, trousers, sweaters, swimwear and underwear will take place until President Bush leaves office in early 2009. So far, no Vietnamese dumping has been found. If there is dumping, then the United States could impose an antidumping duty on Vietnamese apparel.

The next monitoring report, for August 2007 to January 2008, should be released in late April. A third monitoring report, for February to July 2008, probably will be released in October.

Meantime, the whole process provides an air of uncertainty for U.S. businesses that don’t know if they will be subject to duties on their orders.

Border crossings

With 20 percent of the United States’ imported apparel and textiles coming from its free trade– agreement partners, customs officials now are scrutinizing goods made in those countries. Their goal is to make sure apparel is really manufactured in those areas and made of regional or U.S. materials, not Chinese inputs.

Janet Labuda, director of the textile enforcement and operations division of U.S. Customs and Border Protection, said her office has discovered several schemes for circumventing free-trade agreements. Fake documents and identity theft have been common practice.

Labuda has received calls from U.S. mills saying they have seen import documents that can’t possibly be from their company. In another instance, she discovered that a U.S. mill in North Carolina had its address used on a doctored import document with the name of a Brooklyn firm that didn’t exist. “Affidavits are being altered,” she said.

In addition, transshipment of goods from one country to a second country and then on to the United States to take advantage of trade pacts is frequently seen.

In 2007, customs inspection teams visited 671 factories in 15 countries to verify apparel production. Customs found that 188 factories had been closed permanently, 161 factories had a high potential for illegal transshipping and 41 factories refused to let customs inspectors in.

During the visits, illegal transshipping was found from factories in Jordan, which has a free-trade agreement with the United States, Indonesia, Macao and the Philippines.