Importers Weighing Their Options

Now that the day has come when WTO countries have dropped all quotas, importers aren't planning a headlong rush into China or any other country.


The Chinese government has not commented on its motivation to impose export tariffs, which were detailed last week, and consular officials in the U.S. did not respond to calls seeking comment.

Observers also speculated that the intent of the export tariffs could be to recapture some of the revenue that Beijing is losing as a result of the end of quotas. In China and in some other major exporting countries, quota rights have informally traded as commodities and could represent as much as half the cost of a garment late in the year.

Presuming that the end of quotas would lead to the extinction of these charges, many importers early in the year projected their costs would drop anywhere from 15 to 30 percent as a result. While importers said prices have dropped somewhat, the cuts seem to be more the result of competitive pressures than of the lifting of the charges.

“There have been reductions in prices,” but there are many reasons behind the cuts, said Ted Sattler, group executive vice president of Phillips-Van Heusen Corp., based in New York. “You’ve got a significant oversupply of textiles in the world….That oversupply has caused a reduction in the cost of fabric, which, in some cases, is more than half the cost of a garment.”

He declined to quantify the price reductions he’s seen, noting that changes in design and materials make it hard to provide a direct comparison with last year’s prices.

Some manufacturers assert they’re trying to raise their prices.

“I have been giving out prices slightly higher that last year,” said David Chan, director of Moregoal Industries Ltd., a maker of knitted garments with factories in Dongguan, China, adding that he was raising his average charges by 3 to 5 percent, which allows the firm to focus on slightly higher-end goods. “I’d rather do less quantity and handle those who are willing to accept my price.”

As a result of the questions surrounding China, Li & Fung has not increased the percentage of its orders it places in China for early 2005, Darling said. Chinese factories remain less than 20 percent of the firm’s supply, a number he described as “not particularly aggressive.”

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