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INTERNATIONAL TRADE UPDATEA Monthly AAFA Newsletter on Trade February 2005
• EU Imposes Footwear "Surveillance" Program To Track European Imports of Certain Chinese Footwear • DR-CAFTA Update: Cotton Council "Will Work With" Current DR-CAFTA As Report Urges Passage of Agreement • EU Provides Duty-Free Access for Apparel/Footwear from Tsunami-Ravaged Countries • AAFA Discusses Safeguards/Market Access/IPR in China Commission Testimony • World Customs Body Delays Decision on Footwear Textile Outsole Issue • Customs Leather/Plastic Coating Issue Resolved • Bush's Trade Team Undergoes Major Staffing Changes • Import Growth Indicates 2004 Was Good Year for U.S. Apparel/Footwear Markets • CITA Re-imposes Quotas on US Wool Apparel Imports from Ukraine • Battling Counterfeiting: An Update • Mauritius Now Eligible for Additional Apparel Benefits Under AGOA • United States Grants Laos Normal Trade Relations Status • New Resource Available to Address Barriers to Entering Israeli Market • Two AAFA Members Appointed to US Government's Premiere Trade Advisory Group • New Travel Advisories/Warnings CORPORATE SOCIAL RESPONSIBILITY • ILO Claims Sports Footwear Sector Outpaces the Retail & Apparel Sectors in Meeting Code of Conduct Obligations • ILO Expands Apparel Factory Monitoring Project in Cambodia • WRAP Training Seminar in San Pedro Sula, Honduras on March 3 CUSTOMS NEWS • Customs Moves to Tighten C-TPAT Requirements CUSTOMS RULINGS • Click here for information on how to obtain the latest Customs rulings. CITA NEWS/ANNOUNCEMENTS • CITA Approves CBTPA Short Supply Request on Certain Napped Fabrics NEW REPORTS ON TRADE • The Travels of a T-Shirt in the Global Economy: How the Apparel Industry Affects Countries & People • Chinese Currency Revaluation Might Not be a Cure-All • Report: Free Trade Essential for a Healthy US Economy AAFA'S NEW PUBLICATIONS/EVENTS/ANNOUNCEMENTS • AAFA Publishes New Apparel & Footwear Tariff & Trade Guides • New AAFA FAQs: We're Negotiating an FTA with Oman?: Choosing FTA Partners in Today's World US GOVERNMENT MARKET RESEARCH • Czech Republic: STYL 2005 – International Fashion Fair • Czech Republic: KABO 2005 - International Fair of Footwear and Leatherwear • European Union: Exporting Textiles and Textile Products to the European Union - Frequently Asked Questions
EU IMPOSES FOOTWEAR "SURVEILLANCE" PROGRAM TO TRACK EUROPEAN IMPORTS OF CERTAIN CHINESE FOOTWEAR Effective February 1, the European Union (EU) has imposed a mandatory "surveillance" program to track EU imports of certain Chinese footwear. With the recent elimination of EU quotas on Chinese footwear on January 1, the purpose of the program is to provide virtual real-time import data on European imports of certain Chinese footwear, including leather footwear, slippers, sandals and athletic footwear, in order to detect any potential surges in imports. As a result, the EU imports of Chinese footwear subject to the new "surveillance" scheme will require a relevant license issued by the EU importing country. Many speculate that the purpose of this new scheme is to provide detailed real-time data to the EU footwear industry so that they can initiate either a safeguard case or an anti-dumping case against China at the earliest opportunity. AAFA continues to lobby against any such action. The regulations also will impose a mandatory "surveillance" and import licensing scheme on ALL EU imports of virtually all types of footwear (no matter the source) no later than January 31, 2006.
The National Cotton Council of America issued a January 31 press release announcing that "We believe there are opportunities to work with the Administration to improve the competitive situation confronting the US cotton and textile industries without a re-negotiation of the current CAFTA. We look forward to working with the National Council of Textile Organizations and the Administration both in developing a sound implementation plan for (DR-)CAFTA and in taking other steps that will improve the competitive situation confronting the US cotton textile industry." In a related note, a report released February 8 by the Heritage Foundation, a leading conservative think tank, urges Congress to support quick passage of the US/Dominican Republic-Central America Free Trade Agreement (DR-CAFTA). Among other reasons to support passage, the report finds that numerous economic studies show that the single greatest cause of environmental degradation and low labor standards is poverty. Wealthier societies are more likely to demand and implement greater environmental and labor protections because they can better afford the costs of those policies. Those studies also show that the desire for such protection increases as income grows. Economic liberalization, therefore, is the most effective means of increasing environmental and labor standards because countries that embrace economic freedom — including free trade— experience stronger economic growth than those that seek to thwart the market through barriers to investment and trade. In the case of DR-CAFTA, the agreement actually contains provisions on labor and the environment that are virtually identical to those contained in the Jordan and Morocco free trade agreements, which essentially require America’s trade partners to enforce their existing labor and environmental laws. If anything, DR–CAFTA's provisions in these areas actually exceed those in previous agreements. Yet Congress approved the Jordan and Morocco agreements by large bipartisan margins, even though those countries had labor rights situations similar to Central America. As a result, if Congress rejected DR–CAFTA under the premise of rejecting these provisions as inadequate, it would instead signal a larger US rejection of closer ties with the region. To learn more about what you can do to support quick Congressional passage of DR-CAFTA as well as find information on how DR-CAFTA will benefit the US economy, primers on the benefits of DR-CAFTA state by state and sector by sector, and one-pagers on the true impact of DR-CAFTA on labor rights in Central America and sugar interests in the United States, please go to the Office of the US Trade Representative's (USTR) just released DR-CAFTA Briefing Book.
The European Union (EU) announced February 10 that it will implement revisions to its Generalized System of Preferences (GSP) program on April 1. Once implemented, the program will allow duty-free or reduced duty access for EU imports of all apparel (except from India) and footwear from the tsunami-ravaged Indian Ocean region (as well as from most other developing countries) under more flexible rules of origin. The GSP changes were originally slated for implementation on January 1, 2006 but were accelerated in order to help the tsunami-ravaged countries.
AAFA disputed claims that imposing safeguard quotas on US imports of Chinese apparel would actually help the US textile industry while taking China to task for its failures to live up its World Trade Organization (WTO) obligations regarding market access and intellectual property rights (IPR) protection and enforcement in written testimony submitted February 9 to the Congressionally-appointed bi-partisan US-China Economic and Security Review Commission.
At the request of the US Bureau of Customs & Border Protection (Customs), the World Customs Organization's Harmonized System Committee, the international body that governs international classification of products under the Harmonized Tariff System (HTS), issued a number of classification opinions at its October 2004 meeting that found that a thin layer of textile fabric attached to a rubber or plastic shoe does not reclassify a shoe as having a textile outsole, mainly because the textile fabric serves no purpose and wears off after only a few wearings. However, where textile fabric is embedded and/or woven into a rubber or plastic sole and where the external surface area of the sole is greater than 50 percent textile, the Committee classified the shoe as having a textile outsole. These classification opinions were to have gone into effect January 1, 2007. However, China placed a reservation on the classification opinions, delaying a final decision until the Committee's September 2005 meeting. US Customs requested the classification opinions because of the recent increase in US imports of house slippers and other shoes with rubber/plastic soles that have a thin layer of textile fabric attached to the sole. Some importers have classified the slippers and other shoes as having a textile outsole, which has a much lower duty-rate than house slippers and other shoes having rubber/plastic soles. AAFA will continue to follow this situation.
Thanks to the efforts of AAFA as well as the Travel Goods Association (TGA) and the Fashion Accessories Shippers Association (FASA), a US Bureau of Customs & Border Protection (Customs) official remarked on January 26 that Customs will no longer apply the "Sarnet" decision to US imports of leather goods. All orders previously issued by Customs regarding specific leather goods shipments that Customs had reclassified as having "an outer surface of plastic sheeting" and, therefore, subject to a higher duty-rate, have been rescinded and those shipments have been liquidated as entered. Customs will issue a directive to all ports as well as two new rulings by the end of March that will define how Customs will interpret finishes on leather goods for classification of leather goods imports. According to the official, Customs will not reverse any rulings already issued. However, Customs would welcome requests for reconsideration of previous rulings. If such requests are made, the Customs official urged the requestor to provide not only a sample of the finished product, but also a sample of the leather used in the finished product prior to the leather being treated or finished. AAFA will continue to track this important issue.
A recent flurry of announcements shows that while no major changes are planned for US trade policy, a number of new faces will be leading the charge for President George W. Bush. With the appointment of former US Trade Representative Robert B. Zoellick as the new Deputy Secretary of State, Bush announced February 18 that current Deputy US Trade Representative Peter Allgeier, a career civil servant, is now Acting US Trade Representative. While rumors continue to swirl over who will become the next US Trade Representative, one possible candidate is apparently no longer in the race. Another major face of Bush's trade policy, Undersecretary of Commerce for International Trade Grant Aldonas, announced his resignation earlier this month, effective March 31. Among other people reportedly being considered for US Trade Representative are Josette Shiner, Deputy US Trade Representative for Asia, White House international economics adviser Gary Edson and Robert Kimmitt, a former ambassador to Germany and current executive vice president at Time Warner Inc.
US apparel imports (actual data) increased 4.2 percent in 2004 versus 2003 to 19.7 billion SME worth $64.3 billion while U.S. footwear imports (actual data) rose significantly during the same period, growing 7.9 percent to 2.1 billion pairs worth $16.2 billion. For more information on the latest trade data, please go to AAFA's February 10 press release.
The U.S. government's Committee for the Implementation of Textile Agreements (CITA) announced February 17 that, effective January 1, 2005, that it has re-imposed quotas on US apparel imports of wool apparel from Ukraine.
While it remains to be seen if China will take the concrete steps necessary to improve its Intellectual Property Rights (IPR) enforcement, it recently took a very visible step by eliminating the most prominent symbol of counterfeiting in China. In January, the Chinese government razed the notorious Silk Alley, a place where knockoffs of practically every US apparel and footwear brands were available at a fraction of the price, to the ground. According to a number of reports, however, many of Silk Alley's merchants have continued to sell their wares from other locations, including one that is literally below Silk Alley itself. Meanwhile, the International AntiCounterfeiting Coalition (IACC), the largest US based organization that represents exclusively the interests of companies concerned with product piracy and counterfeiting, issued a January 2005 report that found that counterfeit goods fuel child labor, organized crime and terrorism worldwide. For terrorists and other unscrupulous people, profits are high from counterfeiting, and getting caught carries far fewer penalties than most criminal activities. In a related note, the European Union (EU) announced February 8 that it had seized more than 100 million counterfeit and pirated articles in 2003 (the most recent data available), a 9 percent increase over 2002. Surprisingly, the amount of seized clothing and shoes dropped significantly in 2003, amounting to only 4.2 percent of total seizures.
The US government announced that, retroactive to October 1, 2004, Mauritius can now use the lesser developed country provisions of the African Growth and Opportunity Act (AGOA). Under those provisions, US imports of apparel from Mauritius can enter the United States duty-free under AGOA even if the apparel is made from third-country fabric. The US government's Bureau of Customs and Border Protection issued a directive February 25 stating that companies that have already paid duties on qualifying US apparel imports from Mauritius since October 1 must request a refund by March 3.
The US government announced that, effective February 4, all products entering the United States from Laos shall now be granted Normal Trade Relations (NTR) treatment. US imports of apparel and footwear from Laos will now be subject to the same tariffs charged on US apparel and footwear imports from China and most other countries. Congress approved an agreement granting Laos NTR status last fall. Previously, US apparel and footwear imports from Laos were subject to steep tariff rates that were two to five times larger than tariffs normally charged because Laos did not have NTR status. The US government's Committee for the Implementation of Textile Agreements (CITA) had already announced earlier this year that US apparel imports from Laos were no longer subject to quotas.
The Commercial Section at the US Embassy in Israel has announced a new program to help US firms knockdown barriers to entering the Israeli market, including standards and other non-tariff barriers. To learn more, please go to the US Commercial Service Israel website.
President George W. Bush announced February 23 that he has re-appointed outgoing AAFA Chair Ed Emma (of Jockey International) to his Advisory Committee for Trade Policy and Negotiations (ACTPN) for a second two-year term. AAFA member Allen Gant of Glen Raven was also appointed to the ACTPN. The ACTPN is the US government's premiere trade advisory committee. ACTPN members advise President Bush and his staff on US trade policy matters. With this appointment, Emma and Gant will join many other notable members of the ACTPN, including other industry players Larry Liebenow of Quaker Fabric and Tracy Mullin, President of the National Retail Federation (NRF) as well as former members of Congress Jennifer Dunn (R-WA), Cal Dooley (D-CA) and Scott Klug (R-WI), former Michigan governor and current President of the National Association of Manufacturers (NAM) John Engler and US Chamber of Commerce President Tom Donohue.
The U.S. State Department has issued new travel advisories/warnings for Côte d'Ivoire, Ethiopia, Guyana, Nepal, the Philippines and Venezuela. Access all advisories on State's Web site.
ILO CLAIMS SPORTS FOOTWEAR SECTOR OUTPACES THE RETAIL & APPAREL SECTORS IN MEETING CODE OF CONDUCT OBLIGATIONS The sports footwear industry, often criticized for alleged violations of fundamental labor standards, has made greater progress in implementing worker-friendly codes of conduct than the apparel and retail sectors, according to a new study released February 4 by the International Labor Organization (ILO), the worldwide body that sets international labor standards. The study, Implementing Codes of Conduct: How Businesses Manage Social Performance in Global Supply Chains, says brand recognition and intense consumer scrutiny have led the sports footwear companies analyzed to develop more sophisticated approaches to code implementation. It attributes the success of the sports footwear industry to effectively applying financial and human resources to compliance efforts. The study is based on interviews with hundreds of managers, activists, government officials, factory workers and worker representatives and visits to over 90 enterprises and suppliers in Cambodia, China, Europe, Guatemala, Honduras, Sri Lanka, Thailand, Turkey, the United States and Vietnam. However, the study also reveals that simply focusing on the numbers does not reveal the entire picture. While a large compliance team can mean improved social performance of a firm's supply base it also depends on the role that compliance staff play with suppliers. The research indicates the need for multinational enterprises to move away from a "policing" model of compliance to a more consultative role with workers being empowered to oversee their own workplaces.
The International Labor Organization (ILO) announced February 9 that it will dramatically expand its monitoring of the workers' rights situation in Cambodia's apparel factories. The effort will include an unprecedented publicly-available web-based reporting system containing information on the working conditions in virtually every apparel factory in Cambodia. According to ILO Executive Director Sally Paxon, improved labor rights compliance through expanded monitoring and public reporting will "...give consumers and companies necessary confidence to choose Cambodia-made garments." Just before its announcement, the ILO released its ninth report on the working conditions in Cambodia's apparel factories. The report found that, while more must be done, the working conditions in Cambodia's factories continue to improve. With the worldwide end of apparel quotas on January 1, much of the world has been focused on how to help Cambodia as well as other least developed countries, like Bangladesh, effectively compete in a post-quota world. A bi-partisan group of Senators has proposed one solution that will allow apparel and footwear from Cambodia, Bangladesh and other least-developed countries to enter the US market duty-free. The TRADE Act (S.191) continues to gain support in Congress.
Worldwide Responsible Apparel Production (WRAP) will conduct an Awareness/ Technical training seminar on March 3, 2005 in San Pedro Sula, Honduras, for apparel and textile manufacturers and contractors. The objective of the WRAP Program is to promote and independently certify socially responsible facilities to assure that production of apparel and footwear is conducted under legal, ethical and humane conditions. A growing number of US manufacturers and retailers have identified the benefits of having their operations and production in WRAP Certified facilities. WRAP has over 1000 facilities registered and more than 800 certified in 81 countries. For more information on WRAP or to register for the training, please go to WRAP's website.
CUSTOMS MOVES TO TIGHTEN C-TPAT REQUIREMENTS In a series of recent speeches, Robert Bonner, Commissioner of the US Department of Homeland Security's Bureau of Customs & Border Protection (Customs) has announced that Customs will soon impose new requirements on participants in the agency's Customs-Trade Partnership Against Terrorism (C-TPAT) program. The new requirements vary, from converting current recommendations into requirements to requiring C-TPAT participants to use "smart" containers for their shipments. In return, Bonner promised that C-TPAT participants will "get the green lane - no inspections for security." C-TPAT requires participants, including importers, shippers, ports, customs brokers, foreign manufacturers and others, to implement plans to secure their supply chains in return for expedited clearance of their product through Customs. According to many published reports, however, while thousands have joined C-TPAT, few C-TPAT participants have realized the promised benefits of expedited clearance. Many of the new recommendations are described in Customs' just released C-TPAT Strategic Plan.
Advisory Note on Customs Rulings - Readers are cautioned against relying on a ruling issued to another importer. If Customs decides to change its position with regard to a ruling, only the party to whom the ruling was issued is insulated from financial loss. Also, a ruling may depend on very specific physical specifications of a product. Even the slightest deviation from those specifications may throw into question the applicability of the ruling. Rulings are useful tools, but must be handled with care. To see all Customs rulings for the past two months, please go to the US Department of Homeland Security's Bureau of Customs and Border Protection Customs Rulings Online Search System (CROSS).
CITA APPROVES CBTPA SHORT SUPPLY REQUEST ON CERTAIN NAPPED FABRICS The Committee for the Implementation of Textile Agreements (CITA) announced January 28 that it has determined that certain woven, 100 percent cotton, double-napped, flannel fabric, of the specification detailed below, classified in subheading 5209.31.6050 of the Harmonized Tariff Schedule of the United States (HTSUS), for use in products covered by textile categories 340, 341, 347, 348, 350, 351, and woven underwear in category 352, cannot be supplied by the domestic industry in commercial quantities in a timely manner under the Caribbean Basin Trade Partnership Act (CBTPA). CITA hereby designates such apparel articles, which are both cut and sewn or otherwise assembled in an eligible CBTPA beneficiary country, from this fabric as eligible to enter the United States duty-free.
THE TRAVELS OF A T-SHIRT IN A GLOBAL ECONOMY: HOW THE APPAREL INDUSTRY IMPACTS COUNTRIES & PEOPLE Through the making of a t-shirt, one can learn how the worldwide evolution of apparel manufacturing has the effect of bringing new people into the global workforce, creating jobs were there were none and giving workers a chance to rise out of poverty, according to new book authored by Georgetown University Economics Professor Pietra Rivoli. Rivoli's book outlines the history of an industry that has moved constantly for the past two centuries. While noting that the rapidly changing apparel trade, especially after the worldwide elimination of apparel quotas on January 1, will create winners and losers around the world, Rivoli notes in the book that the industry is not just a step in a country's economic development, but "...a step for individual autonomy, gender equity and skills development."
According to a number of experts, a revaluation of the Chinese currency might not reduce the United States' burgeoning trade deficit with China. On average, over half of the raw materials used by Chinese manufacturers are imported, including oil which is priced in US dollars. While any increase in the value of the Yuan, the Chinese currency, would make the cost of domestic inputs, including labor, higher, those additional expenses would likely be offset by the fact that the increasing value of the Yuan will make imported inputs cheaper.
Pursuing free trade through world trade negotiations and bilateral and regional free trade agreements open foreign markets to US products and services and, in turn, help to create a healthy US economy. Therefore, President George W. Bush will continue to pursue free trade agreements throughout his second term, according to Bush's annual economic report to Congress, released February 17.
AAFA PUBLISHES NEW APPAREL & FOOTWEAR TARIFF & TRADE GUIDES AAFA on February 18 announced the publication of its new Guides to Apparel & Footwear Tariff and Trade Regulations 2005, which contain information on the tariffs, taxes and other regulations that apply to apparel and footwear imports entering the 50 largest countries/markets worldwide. AAFA’s Guides to Apparel & Footwear Tariff and Trade Regulations 2005 are available for purchase in either print or CD/ROM formats. Each Guide costs $149 for AAFA members or $299 for non-members. You can purchase both the Apparel and Footwear Guides for the special package price of $199 for AAFA members and $399 for non-members. To order, call AAFA at 703-524-1864 or order online through the "Publications" section of AAFA's Website.
Did you every wonder why the United States is negotiating free trade agreements with Colombia, Thailand and Panama, but not with Brazil, Korea or Turkey? Or why the United States unilaterally grants trade preferences to Lesotho but not to Bangladesh or Cambodia? These decisions are not made in a policy vacuum, and you can help shape the outcome. Learn more in AAFA's latest Industry/Consumer FAQs column, brought to you by Ron Sorini, President of Trade Negotiations & Legislative Affairs, at Sandler, Travis & Rosenberg (ST&R), an international trade & customs law and consulting firm and an AAFA member.
• February 16 - Czech Republic: STYL 2005 - International Fashion Fair • February 16 - Czech Republic: KABO 2005 – International Fair of Footwear and Leatherwear • February 2 - European Union: Exporting Textiles and Textile Products to the European Union - Frequently Asked Questions For questions or for additional information, please contact Nate Herman, AAFA's International Trade Advisor, at 703-797-9062 or nherman@apparelandfootwear.org. American Apparel & Footwear Association |
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