On November 4, 2015, attendees at the 27th Annual Apparel Importers Trade & Transportation Conference in New York heard from a wide variety of government, legal, and industry speakers on current issues facing the industry. Hosted jointly by the U.S. Fashion Industry Association (USFIA) and the American Import Shippers Association (AISA), the one-day event highlighted lingering questions about the Trans-Pacific Partnership (TPP) as well as progress and growth through innovation and collaboration both in the supply chain around the globe and here in the United States.
The two keynote speakers discussed domestic issues with global implications from the perspective of transportation.
Ron Widdows, Principal for Widdows & Associations in Singapore and Former Group CEO of NOL/APL, spoke about the Changing Landscape of Container Shipping: Implications for the Shipper Community [DOWNLOAD PRESENTATION]. Widdows began by posing this question to shippers, carriers, and logistics agencies: “How do we do what we need to do without damaging our customers?” He continued, “Many of the steps that the carriers have taken in the chase to reduce cost have had a negative impact on service levels and consequently a direct impact on their customer’s supply chains.” Other factors, such as a capacity oversupply that is expected to continue for years, and a potential consolidation of “national carriers” in various countries will change the face of the industry. Implications for shippers include continued access to low rates due to competition with no end in sight, and carrier behavior that continues to focus on reducing costs to counter revenue and profitability.
Widdows challenged the audience to work together to resolve the overall complexity of transportation, particularly on the U.S. West Coast. Resolutions can happen, he said, through intermodal cooperation by bringing the railroads together with the ports. Widdows acknowledged that working together doesn’t always function in practice as it should. “There’s a visibility of information required” to work together that most of the participants don’t want to share, said Widdows, referring to “commercially sensitive” information. Added to potential pitfalls are the ongoing labor issues at the ports, and 11 carriers are still undergoing labor negotiations. Widdows advised brands, retailers and importers to “get engaged” in talking to ports and raising awareness of the situation with the government. “Reward those carriers who move in a helpful direction,” said Widdows, “and if you can’t get their attention, go do business with the next carrier.”
L to R: Gene Seroka, Ron Widdows, USFIA's Julia Hughes, AISA's Hubert Wiesenmaier and Fred Dela Pena (Credit: USFIA/Michael Levy Photography)
Gene Seroka, Executive Director of the Port of Los Angeles, Silver Sponsor, followed Widdows with the port’s perspective. His presentation, Driving Our Ports Toward Greater Efficiency [DOWNLOAD PRESENTATION], focused on the impact that the Port of Los Angeles has on global trade: 1 in 11 people in Los Angeles have a job related to the port, and more than $500 billion worth of goods moved through the ports of Los Angeles and Long Beach last year. Productivity at the port hit a low late last year, rebounding throughout the second and third quarters of 2015 to reach previous levels last month. “There is still more work to do,” acknowledged Seroka, adding, “the voice that needs to be heard is yours. If the industry does not step forward with solutions, legislation will happen.” Seroka also highlighted how some companies are beginning to bring new technology and innovation to help cargo move more swiftly and efficiently.
From Sourcing to Tax, Collaboration Works
Gary Barraco, Director of Global Product Marketing for Amber Road, Platinum Sponsor and USFIA Innovation Partner, moderated A Conversation on Ethical Sourcing. The panel featured Mara Burr, Senior Vice President at Albright Stonebridge Group and Former Deputy Assistant U.S. Trade Representative for South & Central Asian Affairs; Edward Hertzman, Founder of Hertzman Media & The Sourcing Journal; and Avedis Seferian, President & CEO of Worldwide Responsible Accredited Production (WRAP). The panelists tackled some difficult questions that have arisen in the wake of the Rana Plaza and Tazreen tragedies in Bangladesh. They came to a consensus on several points, including:
- The ideal would be a single global industry standard for factory compliance, particularly as new countries become feasible options through FTAs, but such a standard will probably never happen due to the competitive nature of sourcing. Seferian said, “While responsibility is shared, liability isn’t.”
- Consumers as a whole are more concerned with cost than ethics when it comes to clothing. While there are groups that make a lot of noise, aided by the media, it’s not enough to turn the tide towards completely ethical sourcing. Hertzman commented, “I don’t know if we’re incentivized enough to make the changes that need to happen.”
- Sourcing decisions should consider the full capability of each country, including infrastructure, government stability, and regulations. After tragedies such as those in Bangladesh, the lens of the media focuses almost entirely on the retailers and brands, while letting the responsible governments off lightly. Seferian said it is important to make sure that “the right responsibilities fall on the right shoulders. This is difficult because some of the shoulders don’t have the capacity to bear the burden.”
L to R: Gary Barraco of Amber Road, Mara Burr of Albright Stonebridge Group, Avedis Seferian of Worldwide Responsible Accredited Production (WRAP), and Eddie Hertzman of Sourcing Journal (Credit: USFIA/Michael Levy Photography)
The theme of collaboration continued during USFIA Premier Partner PwC’s panel discussion, Impress the C-Suite: Save Money When Trade & Tax Work Together [DOWNLOAD PRESENTATION]. Moderator Anthony Tennariello, Partner at PWC’s Customs & International Trade Practice, led Maytee Pereira, Director in PwC’s Customs & International Trade Practice, and Paige Hill, Principal in PwC’s Tax Practice, through a series of questions that highlighted how clients have increased efficiency and saved money through collaboration. Companies that have separate departments dealing with taxes and customs must come together from the beginning of the process, rather than waiting until taxes have classified a product in one way that potentially raises its customs duties. “You need to be able to bridge the gap of understanding,” said Tennariello.
USFIA's Premier Partner PwC. L to R: Tom Kukanza of PwC, Maytee Pereira of PwC, Julia Hughes of USFIA, and Anthony Tennariello of PwC (Credit: USFIA/Michael Levy Photography)
During lunch, attendees had the opportunity to hear from Dr. Noel Hacegaba, Managing Director of Commercial Operations & Chief Commercial Officer of the Port of Long Beach, the conference’s Lunch Sponsor & Gift Bag Sponsor, who shared his unique vision for the future of U.S. ports. The Port of Long Beach has benefitted from double-digit rebounds this year. Apparel is one of the top 10 commodities coming through the port, with 46 percent of all apparel imports coming into the U.S. through the ports of Los Angeles and Long Beach. Collectively, the two ports are investing $6 billion in infrastructure improvements, while at the same time working together towards improving efficiency. For the first time in history, they’ve brought all concerned parties to the table to discuss the future of the ports, including labor, the carriers, and the terminals. Hacegaba shared the ambitious vision of becoming the first zero-emissions port, along with becoming fully electric and off-the-grid. Thinking big will allow the ports to support continued growth in trade.
Dr. Noel Hacegaba of the Port of Long Beach (Credit: USFIA/Michael Levy Photography)
Update on Customs Issues
After lunch, conference attendees welcomed Eric Batt, the new Director of the U.S. Customs and Border Protection (CBP) Center of Excellence & Expertise (CEE) for Apparel, Footwear & Textiles [DOWNLOAD PRESENTATION]. Joined by John Pellegrini, USFIA’s Customs Counsel from McGuireWoods LLP [DOWNLOAD PRESENTATION], Batt spoke in length about the CEEs and the plans for the coming months. Currently, three centers are undergoing operation updates, with 10 nationwide that serve different industries. He announced that the AFT CEE would be the next to go 100 percent operational, scheduled for completion in early 2016. There are currently 33 participating accounts at the AFT CEE, with 15 waiting for approval. Batt outlined the benefits of AFT partnership, including outreach, helping onboard innovative new products, and helping with Cargo Hold Resolutions.
Referring to the CBP’s enforcement actions, Batt said, “While our mission is to facilitate trade, we still have to catch the bad guys.” The main areas of focus include:
- Intellectual Property Rights (IPR): In 2014, 38 percent of all IPR seizures were AFT-related. In the past year, the AFT CEE has seized over 1750 shipments totaling nearly $20 million in value. Batt stressed the importance of filing with CBP for the highest level of IPR protection. Product manuals with recorded trademarks can be submitted for inclusion in CBP’s Internal Product ID Guide, which stays within CBP.
- Free Trade Agreements (FTAs): Particularly, CBP looked into false claims related to FTAs for duty evasion.
- Revenue Evasion: Batt acknowledged that the high duties – averaging 16 percent - on textiles and apparel are an incentive to avoid paying them. Forty-five percent of all duties collected are on textiles and apparel. CBP uses Textile Production Verification Teams (TPVTs) to conduct on-site verifications of foreign textile and wearing apparel manufacturers.
Eric Batt of U.S. Customs & Border Protection's CEE for Apparel, Footwear, & Textiles (Credit: USFIA/Michael Levy Photography)
Penny Ricas, Vice President of Global Account Management for OHL, USFIA’s Customs Broker Partner, took conference attendees Inside the Broker’s Inbox: ACE, FTZs, and More [DOWNLOAD PRESENTATION]. “ACE will fundamentally change the way in which the industry and the government conduct business” said Ricas. She provided information on upcoming ACE deadlines, including the February 28, 2016, deadline for implementation. Ricas also spoke about the benefits available through Foreign Trade Zones (FTZs), such as faster supply chains, lower import processing costs, and enhanced security. On average, importers are able to reduce costs from $300,000 to $1 million through duty deferral, duty elimination, and duty reduction.
Of particular interest to many in attendance was Ricas’ description of the Broken Known Importer Program (BKIP), which allows a customs broker to certify that an importer is a known entity to them. This allows the broker to flag ACE entries for those particular clients, which CBP uses as part of their risk calculations. It should, said Ricas, lessen the chances of an examination or a hold at the point of entry. Finally, she spoke about President Obama’s renewal of the Generalized System of Preferences (GSP) over the summer, which allowed importers to seek refunds for duties paid on GSP-eligible goods retroactively from the time of its expiration. According to Ricas, CBP did not actually process all refunds, so the only option open is to file a formal protest.
The team from OHL, USFIA's Customs Broker Partner (Credit: USFIA/Michael Levy Photography)
Update on TPP & Other Trade Policy Issues
One week after being named Acting AUSTR for Textiles & Apparel, Bill Jackson spoke to attendees in length about the TPP, offering some general details from the chapter on textiles and apparel, which he helped negotiate. Joshua Teitelbaum, Deputy Assistant Secretary for Textiles, Consumer Goods, & Materials at the U.S. Department of Commerce, also spoke about TPP, noting potential savings on textile and apparel imports from Malaysia and Vietnam at $1.78 billion. He listed a number of apparel items that would go completely duty-free on day one of TPP implementation, including dresses, skirts, travel goods and bags, and anoraks. Those products currently have high import duties, said Teitelbaum, so the potential for cost-savings is great. [DOWNLOAD PRESENTATION]
USTR's Bill Jackson and Commerce's Joshua Teitelbaum (Credit: USFIA/Michael Levy Photography)
Jackson also spoke about the petitions asking for Generalized System of Preferences (GSP) benefits for travel goods, which are currently being reviewed by USTR. The next step will be to ask the U.S. International Trade Commission for a report on the potential effects, followed by an opportunity for public hearings and public comments. The process will conclude in the spring with a presidential proclamation in June, when the final determination will be announced. An audience member from the Ministry of Education in Bangladesh asked whether the United States would reinstate GSP benefits for Bangladesh. Jackson, who served as Deputy Assistant U.S. Trade Representative for GSP, said the United States would review Bangladesh’s eligibility in the appropriate channels.
After getting the regulators’ perspective, conference attendees heard What’s Happening in Washington from the experts with an “inside the Beltway” perspective. David Spooner, Partner & USFIA Washington Counsel with Barnes & Thornburg LLP [DOWNLOAD PRESENTATION], was joined by Jon Fee, Partner at Alston & Bird LLP [DOWNLOAD PRESENTATION], to shine some light on current legislation and the changes in Congress. Fee explained the Trade Facilitation & Trade Enforcement Act of 2015, which authorizes CBP and will create a “robust” importer of record program. The legislation will also allow for an easier return of goods exported from the U.S. for repair. Fee believed this legislation could pass Congress by the end of the year. Fee also spoke at length about the TPP, highlighting the current negative rhetoric from presidential candidates on both sides of the political spectrum. While much can change in a year, Fee said there was some potential for a late-2016 lame duck vote on TPP—but a good possibility the TPP vote would be pushed back into 2017.
Spooner also echoed Fee’s concerns over the prevailing negative attitudes towards TPP, this time highlighting opposition from several powerful industries, and a lukewarm reception from TPA’s biggest promoter, Senator Orrin Hatch (R-UT), who was upset over the U.S. giving some ground on protections for biologics. Spooner spoke about changes with the House, including Paul Ryan’s (R-WI) ascension to Speaker of the House and the leadership change in the Ways & Means Committee. Pro-trade leadership could make a difference there, said Spooner.
The last two sessions of the day were both panel discussions led by Gary Barraco, returning to his job as moderator. The first panel, Discussions on Textiles & Innovation, highlighted how retailers can collaborate with fiber producers to produce results for both parties. J. Berrye Worsham, President & CEO of Cotton Incorporated [DOWNLOAD PRESENTATION], and Sarah Herring, Director of Revenue, Partnerships, & Brand Development for Rue La La [DOWNLOAD PRESENTATION], shared their success story on the marketing campaign “Cotton, it’s your favorite for a reason,” that launched in May and continues through the end of November. This unique partnership brought together Cotton Incorporated’s innovation strategy with Rue La La’s multimedia approach to commerce. Worsham also spoke about the Cotton Leads program, which is committed to responsibly-produced cotton. In another unique partnership, Cotton Inc. is joining with Australia to sponsor a global lifecycle inventory and assessment for cotton. Worsham reported that there are currently over 340 Cotton Leads partners, compared to just two partners in 2013.
Gary Barraco of Amber Road moderates a panel with Berrye Worsham of Cotton Incorporated and Sarah Herring of Rue La La (Credit: USFIA/Michael Levy Photography)
The final panel, with Anthony Hardenburgh, Vice President of Global Trade Content for Amber Road and Maristella Iacobello, Vice President of Customs Compliance & Government Relations for PVH Corp, asked the question – Free trade: Now What or So What? With over 500 trade agreements on the books around the world, Barraco asked if these agreements truly make a difference in how companies conduct business. “We can’t just chase FTAs and preference programs,” said Iacobello, though she added that the 10-year renewal of the African Growth & Opportunity Act (AGOA) makes the continent a more attractive prospect than previously. In particular, with countries such as Kenya and Ethopia, she said, the goal is to go vertical. Hardenburgh recommended that companies make sure their trade and compliance staff have an adequate understanding of classification and rules of origin. “Automation has come a long way in the last ten to fifteen years,” he said. Iacobello agreed, adding that “partnerships are key,” particularly when it comes to taking advantage of FTAs and preference programs. She cautioned that future problems can be averted by “getting in the face” of your supply chain from the very beginning.