Women’s Wear Daily
04.18.2014
textiles
textiles

Seeking Certainty Over Safeguards

Apparel importers find themselves chafed by new restrictions on goods from China.

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WASHINGTON — As apparel importers move into the second half of the year, they face new and uncertain restrictions on goods from China. It is a disappointment for many vendors that long viewed 2005 as a year synonymous with the easing of trade barriers.

A decade ago, the member nations of the World Trade Organization agreed to drop quotas on apparel and textiles at the beginning of this year. However, the heady days of quota-free trade were short-lived.

In order to protect the remaining U.S. textile firms, which primarily sell to regions that compete with China, such as Central America and Mexico, the Bush administration applied safeguard quotas in May to seven categories of goods representing $1.31 billion in imports. The safeguards, which China agreed to when it joined the WTO in 2001, restricted the goods to 7.5 percent growth and are renewable annually through 2008. A deal might be cut, though, that would offer more stability than safeguards.

Commerce Secretary Carlos Gutierrez said the Chinese would be looking to reach some arrangement at a July 11 meeting.

"Their big 'ask' is going to be a comprehensive agreement on textiles," he said last week.

In the short absence of quotas, market forces reshaped the sourcing scene, with U.S. imports of apparel and textiles from China expanding by 45 percent to 4.71 billion square meter equivalents through April. By contrast, the total of such imports to the U.S. rose 8.8 percent to 15.82 billion SME, indicating the scope of China's market share grab.

Faced with this dramatic growth, groups representing domestic textile firms petitioned the U.S. government to implement safeguards. However, the restrictions complicate business planning all around by creating a guessing game as to whether or not new categories will be added and when the quotas will fill, embargoing further shipments. It is also uncertain if the safeguards, which expire at the end of the year, would be renewed immediately or if a window of unrestricted imports would be briefly opened.

Safeguards have had an impact, as the mere threat of them has kept companies such as Liz Claiborne Inc. and Kellwood Co., from shifting their sourcing to China as fully as they would have otherwise.

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Additionally, of the seven categories of goods under restriction, three of them — cotton knit shirts, cotton trousers and cotton and man-made fiber underwear — are on track to come under embargo this week. (See full chart this page.)

Once the quotas, which are tracked by U.S. Customs and Border Protection, are filled, no more goods will be allowed into the country. This sets up a mad rush to the border, with some companies expected to fly in last-minute goods to beat sea-bound shipments.

A report on the Web site of the official Chinese news service last week warned manufacturers to stop shipping trousers to the U.S., citing statistics from the China Chamber of Commerce for the Import and Export of Textiles. The report said trouser exports had already exceeded 103 percent of this year's quota.

The European Union also moved to apply safeguards, but didn't quite get there. Instead it reached a deal with China keeping annual growth in 10 categories of goods in the range of 8 to 12.5 percent. The deal extends to 2007, ending a year earlier than safeguards theoretically would.

The administration is pressing China on a number of fronts, including its enforcement of intellectual property laws and its currency policies, and might use a deal on textiles as a way to further its overall China agenda.

If a deal is struck, it's possible that it will be met by at least some groans from either importers, domestic textile firms or both. There is support for some sort of a deal on both sides, though.

Missy Branson, senior vice president of the National Council of Textile Organizations, said her organization has encouraged dialogue with China, particularly because it would provide predictability.

Branson said an agreement that capped growth around 8 to 12.5 percent would bear consideration, though cutting a deal that opened up trade before safeguards are scheduled to end would be harder to swallow.

"We couldn't support anything that didn't cover through 2008," she said.

More than the specific terms of an agreement, Tom Haugen, president of sourcing giant Li & Fung USA, was interested in settling the matter. "We need clarity and predictability because uncertainty is our biggest enemy. Any deal would be positive."

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FILLING QUOTAS
(through June 30)

STYLE: Cotton knit shirts and blouses
CATEGORY: 338/339
ALLOWANCE: 4,704,115 dz.
PERCENT FILLED: 90.3

STYLE: Cotton, man-made fiber underwear
CATEGORY: 352/652
ALLOWANCE: 5,062,892 dz.
PERCENT FILLED: 90.3

STYLE: Cotton Trousers
CATEGORY: 347/348
ALLOWANCE: 4,340,638 dz.
PERCENT FILLED: 87.8

STYLE: Man-made knit shirts and blouses
CATEGORY: 638/639
ALLOWANCE: 2,844,383 dz.
PERCENT FILLED: 55.4

STYLE: Man-made fiber trousers
CATEGORY: 647/648
ALLOWANCE: 2,660,678 dz.
PERCENT FILLED: 38.6

STYLE: Men's and boy's cotton and man-made fiber shirts, not knit
CATEGORY: 340/640
ALLOWANCE: 2,213,126 dz.
PERCENT FILLED: 35.6

STYLE: Combed cotton yarn
CATEGORY: 301
ALLOWANCE: 1,450,777 kg.
PERCENT FILLED: 6.6

Source: U.S. Customs and Boarder Protection

*Quotas on cotton knit shirts, blouses and trousers and cotton and man-made fiber underwear went into effect May 23. The other quotas became effective May 27. Quantities in dozens, except for combed cotton, which is in kilograms.

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