Apparel Importers Prepare for a Post-2008 World

(Deborah Belgum — apparelnews.net)

The world of apparel importing will change drastically at the end of 2008.

But how it will change is the unanswered question.

Safeguard measures that curb imports on 34 categories of apparel and textiles from China will expire on Dec. 31, 2008.

No one is sure what will happen after 2008. More safeguard measures could be imposed. Anti-dumping measures could be requested or countervailing duties could be sought to stem Chinese apparel.

But Janet Labuda, the chief enforcer of apparel and textile quotas and duties for U.S. Customs and Border Protection, doesn’t believe her job will disappear overnight.

“I know our resources in border protection will be shifted to free-trade preferences and revenue protections,” she said. “And if China has to continue to pay high duty rates, I don’t know how that will affect our enforcement.”

Many Chinese manufacturers are renowned for finding clever ways of getting around paying duties. They have been known to classify apparel as toys, brooms, toilets and other non-duty or low-duty items. They have also been known to ship goods to another country and then the United States to fly below the quota radar.

Labuda wondered whether domestic manufacturers will file anti-dumping cases restricting Chinese apparel imports after 2008. “People think anti-dumping cases will occur. I have my doubts,” she said. “They have to prove material injury to a U.S. industry, and it is very expensive to pursue. Five years ago, it cost about $1 million in legal fees, and now it would be about $3.5 million.”

Because of foreign-trade subsidies on some apparel exports, she believes that importers will pressure the U.S. government to slap countervailing duties on clothing coming from Asia. That has already been discussed on items coming from Vietnam, which joined the World Trade Organization this year. The organization promotes free trade among the group’s 151 countries that are members. China joined in 2001.

Under WTO rules, a country can launch its own investigation into foreign subsidies and decide to charge extra duties. “The test here is not as difficult,” she noted. Labuda was in San Pedro, Calif., speaking on Sept. 12 at the sixth annual China Conference, a two-day event organized by Cargo Business News.

With China now the largest apparel supplier to the United States, its role after 2008 is keeping many people guessing.

But Robert Krieger, president of Krieger Worldwide, a Los Angeles customs brokerage and freight forwarder, suggested watching Europe and seeing how it handles its apparel and textile quotas on 10 categories that expire at the end of this year.

“If the EU [European Union] starts initiating anti-dumping measures against China, then it is time to panic,” he said.

Krieger suggested preparing Chinese factories for anti-dumping investigations by making sure business records are in order.

Profit margin With textiles accounting for 42 percent of the $25.1 billion in duties collected on goods coming into the United States last year, Labuda said she doubted the government would issue a green light on Chinese apparel after 2008.

“Chinese goods continue to pay a large portion of that 42 percent,” she said.

Customs will be scrutinizing goods coming from countries that are part of the various free-trade agreements and trade-preference pacts struck in recent years by the Bush administration.

“I think Chinese imports will continue to increase, and they may continue to transship [to a third country] to keep [apparel and textile] statistics down and stay off the radar,” she said.

One concern is that after 2008, the apparel and textile market will be flooded with Chinese goods, pushing lesser-developed countries such as Indonesia, Turkey and various African nations out of the business.

“AGOA [the African Growth Opportunity Act] is falling apart, I have heard,” Labuda said. “What the role of the WTO is will be very interesting from our perspective.”

Ilse Metchek, executive director of the California Fashion Association, noted that any time the market is flooded with goods, the price drops and it becomes less desirable. “When there is dumping in fashion, it kills,” she said.

Bruce Berton, director of international business consulting at Stonefield Josephson Inc., a Los Angeles accounting firm, believes that China could curtail its own apparel exports.

He recalled when silk first started being exported from China to the United States in 1991. “There was so much silk coming in from China that the Chinese asked our government to put a quota on silk to increase the price,” he said. “The U.S. could raise the duty ratios on Chinese goods.”

He also noted that the Chinese government is pushing its business community to establish more high-tech industries that deliver higher profit margins and revenues than the apparel industry. “I don’t see the apparel industry growing, especially if industries move inland, where transportation costs are higher,” he said.