Battling the China Surge: U.S. Stems Import Tide With Safeguard Quotas

The U.S. move to impose fresh quotas on Chinese imports was welcomed by the textile industry, while importers criticized the action.

"This isn't the end," Tantillo said. "The U.S. textile industry plans to file several more safeguard cases in the near future."

The industry already has two slates of overlapping petitions pending, including 12 filed last year that were based on the threat of market disruption and seven filed last month on $1.45 billion worth of goods based on post-quota import figures.

After the Court of International Trade issued a preliminary injunction halting the CITA review of those petitions representing $1.9 billion in Chinese exports to the U.S., the federal Court of Appeals lifted it last month, allowing the process to go forward. A final ruling from both courts is pending.

"The next thing we're all going to hold our breath about is what is the ultimate decision in the threat-based safeguard lawsuit," said Jonathan Fee, a partner at the Washington law firm Alston & Bird. "I'm sure what the industry wants to do is make petitions for 2006 sometime in October, November, so they'll go into effect immediately on Jan. 1. In order to justify that, they have to win the threat-based safeguard lawsuit."

Cass Johnson, president of the National Council of Textile Organizations, predicted CITA would move "as expeditiously as possible" on the other safeguard cases. Johnson said, "We'll know, up or down, very quickly whether the government believes these cases have merit or not."

As for possible disruption to vendors' and retailers' shipments, importers had always widely anticipated safeguards and have planned their sourcing with the restrictions in mind.

"We talked about this in August 2003," said Tom Haugen, president of Li & Fung USA. "We had our management meeting and tried to lay out what would happen. Even then, we knew that the safeguards would happen."

Accordingly, Li & Fung has a limited exposure to the quota categories in China.

"If you can save a dollar on a garment [by making it in China], what's it matter if it can't be delivered?" he said.

Beyond the domestic employment and sourcing issues linked to the decision, many see the administration's move to implement safeguards as an overture to textile-state lawmakers to gain their vote on CAFTA.

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