Importers Scramble to Avoid Safeguard Limits

U.S. importers have rushed to beat embargoes on Chinese goods by moving up production, taking to air freight and filling bonded warehouses.

WASHINGTON — Faced with new restrictions on Chinese imports, vendors and retailers rushed to get goods into the U.S. in the last 60 days — moving up production timetables, chartering planes to beat slow-moving boats and readying warehouse space.

The first leg of the race is almost over. Four of the seven categories under safeguard quotas since May already have filled up, barring any more of those goods, such as cotton trousers, from entering the U.S. Two other categories are likely to be cut off soon and other safeguard petitions are pending. (See charts, this page.)

Goods now under safeguards, which are restricted to 7.5 percent annual growth, represented $1.31 billion in imports last year.

"The caps filled quickly, and a little more quickly than anticipated, and some people, including Jockey, had some goods caught in embargo," said Mark Jaeger, senior vice president and general counsel at Jockey International, the underwear maker based in Kenosha, Wis.

Jaeger said the embargoed goods were put into a bonded warehouse and would be replaced by imports from other countries, such as Thailand. Goods put in bonded warehouses controlled by the U.S. Customs Service are not counted against quotas, but may be off-loaded from ships, trucks or planes.

That a company such as Jockey, which has a diversified sourcing strategy and is an experienced importer, had some goods shipped by air and others embargoed demonstrates how quickly and unpredictably the quotas filled.

"There's a cloud right now over Chinese production," Jaeger said.

Scores of other companies turned to the skies to get their goods in on time.

"We ended up having to air freight a ton of goods," said Michael Delaney, chief executive officer of Ralsey, a division of sourcing giant Li & Fung.

Ralsey specializes in fine-gauge knit sweaters, which are included under safeguard in the knit shirt classification.

"The immediate effect was a significant cost increase to air freight merchandise," he said.

That cost, which the company absorbed, ranged from 60 cents to $1.50 per item.

Expressing a widely held view among importers, Delaney said he would like to see a more cooperative and less confrontational stance toward China from the U.S.

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