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Fashion Intel & Analysis

Fashion Intel & Analysis

Administration Delays China “Section 301” Tariffs

By David Spooner, USFIA Washington Counsel, Barnes & Thornburg LLP 

As many USFIA members know, the United States and China issued a brief statement Friday evening declaring that China would “meaningfully increase” its purchases of U.S. agriculture and energy exports. On Fox News yesterday, Treasury Secretary Steve Mnuchin said that, as a consequence of this joint statement, the Section 301 tariffs are “on hold.” U.S. Trade Representative Bob Lighthizer, though, quickly issued a statement to reporters, declaring that the 301 tariffs remain an “important tool.” This Wall Street Journal story seems to be the best summary of the state of play.

While it is a good bet that the tariffs will be somewhat delayed, it is unclear how long they will be delayed and/or unclear whether they will ever go into effect. Frankly, we do not think senior Administration officials have decided on the timing and use of the Section 301 tariffs–and internal Administration rivalries are playing out in public view. This uncertainty is only increased by the reaction to Friday’s joint statement: Many trade hawks and longtime China hands are saying that China’s commitments in Friday’s joint statement are “nothing new” and that China has regularly promised to increase purchases of U.S. goods at the close of U.S.-China meetings and trade missions in recent years.

We will continue to follow the situation closely. The likely delay is, at least, good news.

EU to Impose Retaliatory Tariffs, NAFTA Deadline Passes

In This Memo:

  • EU to Impose Retaliatory Tariffs Against United States as Temporary Exemption Expires
  • NAFTA Deadline Passes
  • USFIA: New Tariffs on China Won’t Bode Well for Skirting Trade War 

EU to Impose Retaliatory Tariffs Against United States as Temporary Exemption Expires

This week, the European Commission released an implementing regulation that will impose a 25 percent tariff on approximately $3.34 billion worth of U.S. goods on June 20, 2018, in response to the U.S. steel and aluminum tariffs under section 232. In addition, the EU will impose tariffs between 10 to 50 percent on $4.22 billion worth of U.S. goods beginning March 23, 2021. This second set includes products such as clothing, jewelry, and electronics. Th EU holds that the United States’ actions are safeguard measures, and the proposed retaliatory tariffs will be presented to the WTO Council for Trade in Goods for approval. The EU notes that consultations between the United States and European Union “did not reach any satisfactory solution.”

The EU list includes the following textile and apparel items subject to a 25% tariff as of June 20, 2018:

  • 6109 10 00: Knit Cotton T-shirts
  • 6109 90 20: T-shirts, singlets and other vests, knitted or crocheted of wool or fine animal hair or man-made fibres
  • 6109 90 90: T-shirts, singlets and other vests, knitted or crocheted of other textile materials
  • 6203 42 31 : Men's or boys' trousers and breeches of denim for women and girls
  • 6203 42 90 Men's or boys' shorts of cotton (excl. knitted or crocheted, swimwear and underpants)
  • 6203 43 11 Men's or boys' trousers and breeches of synthetic fibres, industrial and occupational (excl. knitted or crocheted and bib and brace overalls)
  • 6204 62 31 Women's or girls' cotton denim trousers and breeches (excl. industrial and occupational, bib and brace overalls and panties)
  • 6204 62 90 Women's or girls' cotton shorts (excl. knitted or crocheted, panties and swimwear)

NAFTA Deadline Passes

Yesterday, May 17th, was the deadline set by Congressional Republicans for a renegotiated North American Free Trade Agreement (NAFTA). The deadline passed without a new agreement. U.S. Trade Representative Robert Lighthizer said in a statement,

For many weeks now, the United States, Mexico and Canada have engaged in intensive, continuous discussions to renegotiate NAFTA, building on the seven rounds of rigorous negotiations that have taken place since August 2017. The negotiations have covered a large number of very complex issues, especially those objectives outlined by Congress as part of the bipartisan Trade Promotion Authority such as intellectual property, dairy and agriculture, de minimis levels, energy, labor and more.

The current NAFTA is a seriously flawed trade deal, and the Trump Administration is committed to getting the best possible trade agreement for all Americans. The United States is ready to continue working with Mexico and Canada to achieve needed breakthroughs on these objectives. Our teams will continue to be fully engaged.

House Ways & Means Committee Chair Kevin Brady (R-TX), said,

It important that the United States, Canada, and Mexico stay at the table to negotiate a new and modernized NAFTA that grows U.S. jobs and helps us sell more 'Made in America' products. 

Republicans in Congress continue to urge the Administration to bring back a modern agreement that is fully enforceable with binding dispute settlement procedures and which includes strong protections for American businesses and workers competing for customers in Canada and Mexico. We want an agreement that creates certainty for American workers and companies and high-standard rules that don’t automatically sunset after five years. This is the best way to protect American companies and workers as we search for new customers and grow our economy. I hope all countries continue working in good faith to get this done—whether that means a vote in Congress this year or next.

On Wednesday, May 23rd, USFIA and Akin Gump will host a free webinar with an update on the NAFTA negotiations and what we can expect to happen next. Click here to register.

USFIA: New Tariffs on China Won’t Bode Well for Skirting Trade War

Following our testimony at USTR’s Section 301 hearing on new tariffs on China, USFIA President Julia Hughes published an op-ed in Sourcing Journal, New Tariffs on China Won’t Bode Well for Skirting Trade War. She writes,

While no one knows what the next executive order, or tweet, will bring in terms of trade policy, those of us in the fashion industry do know a trade war with China—and specifically, new tariffs on fashion and apparel products manufactured in China—will raise prices for American families, harm jobs in the United States, and won’t do anything to solve concerns about China’s IP policies and practices. 

In 2017, U.S. apparel imports grew just over 3 percent in volume and about 1 percent in value. China remains the dominant supplier of these products, supplying 49 percent of total textile and apparel products, and just over 40 percent of apparel, without any clear contender to replace China should the much-hyped trade war become reality. (The No. 2 supplier of apparel, Vietnam, is far behind, shipping just 13 percent of our apparel products.)

Click here to read the op-ed on the Sourcing Journal website.

USFIA Prepares to Testify on 301 Tariffs; Sen. Rubio Introduces Fair Trade with China Enforcement Act

In This Memo:

  • USFIA Prepares to Testify on 301 Tariffs
  • USFIA Joins Multi-Industry Comments on 301 Tariffs
  • Sen. Rubio Introduces Fair Trade with China Enforcement Act
  • Uzbek Government Issues Decree to End Forced Labor

USFIA Prepares to Testify on 301 Tariffs

Next week, the Office of the U.S. Trade Representative (USTR) will hold a hearing on the Section 301 investigation of China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation. USFIA President Julia Hughes will testify on May 16th at approximately 9:00am; the three-day hearing will feature speakers from a variety of industries and both sides of the issue. We will provide an update on the hearing next week.

USFIA Joins Multi-Industry Comments on 301 Tariffs

In advance of next week’s hearing, United States Fashion Industry Association (USFIA) has joined two multi-industry comments filed with the Office of the U.S. Trade Representative. One led by a group of soft-goods industry trade associations expresses “very strong opposition to any tariff increases on U.S. imports of consumer products, such as clothing, shoes, home goods, fashion accessories, or travel goods from China.” Another includes dozens of apparel, retail, agriculture, electronics, automobile, tech, and other industries who say the tariffs “will not effectively advance our shared goal of changing these harmful Chinese practices in a durable, verifiable, and enforceable manner.” USFIA will be filing our own comments today, which we’ll share with members next week.

Sen. Rubio Introduces Fair Trade with China Enforcement Act

This week, U.S. Senator Marco Rubio (R-FL) introduced the Fair Trade with China Enforcement Act, which would “would safeguard American assets from Chinese influence and possession, and serve to blunt China’s tools of economic aggression,” according to his statement. The bill would specifically:

  • Prohibit the sale of national security sensitive technology and intellectual property to China.
  • Increase taxes on multinational corporations’ income earned in China at a rate similar to the lost value of stolen IP and technology.
  • Cancel an income tax treaty signed in the 1980s and tax China on their “investment” in the U.S., including their holdings of the national debt.
  • Prepare duties on and impose Chinese investor shareholding caps on U.S. companies producing, goods targeted by the Made in China 2025 plan.
  • Prohibit the federal government, or subsidiaries/contractors, from purchasing telecommunications equipment or services from Huawei and ZTE.

Rubio’s statement is available here, and his op-ed announcing the legislation is available in the Washington Post.

Uzbek Government Issues Decree to End Forced Labor

This week, the Uzbek Government has issued a decree to eliminate forced labor in the country, which is known for the use of forced and child labor in the cotton sector in particular. According to reports, the document contains instructions to government agencies to prevent and eradicate the practice, as well as “unconditionally apply strict disciplinary reactive measures to individuals, directly or indirectly, compelling citizens…to take part in forced labor,” according to a translation. Recommendations include increasing the supervision of compliance and inspections, and should cases of forced labor be documented, taking action to bring the guilty parties to justice. The original article is available here. Next week, the Embassy of Uzbekistan is hosting an event in Washington, D.C. to discuss the human rights progress, featuring a delegation of Uzbek officials as well as human rights organizations.

USFIA Testifies at 301 Hearings, Urges Administration to Leave Fashion Off List of Products Subject to New Tariffs; CBP Seized $4.75 Million in Textile Products; China’s Vice Premier Talks Trade in Washington, D.C.

In This Memo:

  • USFIA Testifies at 301 Hearings, Urges Administration to Leave Fashion Off List of Products Subject to New Tariffs
  • CBP Seized $4.75 Million in Textile Products
  • China’s Vice Premier Talks Trade in Washington, D.C. 

USFIA Testifies at 301 Hearings, Urges Administration to Leave Fashion Off List of Products Subject to New Tariffs

Today, USFIA President Julia K. Hughes testified during the Office of the U.S. Trade Representative’s hearing on Section 301 investigation of China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation. In her testimony, she emphasized the importance of global trade for our industry and explained how tariffs would harm jobs in our sector and the price of clothing for consumers. The testimony as distributed at the meeting is available here.

CBP Seized $4.75 Million in Textile Products

Today, U.S. Customs & Border Protection (CBP) published the textile enforcement statistics for Fiscal Years 2013-2017 on the CBP website at https://www.cbp.gov/document/fact-sheets/textile-enforcement-statistics. In 2017, CBP visited 145 factories in 10 countries, and tested more than 450 lab samples, finding nearly 50 percent to be discrepant for classification. In 2017, CBP also seized approximately $4.75 million in textile products.

China’s Vice Premier Talks Trade in Washington, D.C.

This week, Chinese Vice Premier Liu He, the top economic advisor in China, is in Washington, D.C. to discuss the ongoing trade issues with U.S. Treasury Secretary Steve Mnuchin and other policymakers. He also met with House Ways and Means Committee Chairman Kevin Brady (R-TX) and other committee members. In a statement following the meeting, Brady said, “It’s absolutely vital that we get our trading practices with China right—and that starts with China reversing its unfair trading practices. Today, we had a productive meeting in which our members urged Vice Premier Liu and his delegation to work with the Administration and Congress to reduce trade barriers, increase intellectual property rights protection, and create a level playing field for American companies and workers. I thank the Vice Premier for coming to Washington and hope we can continue this dialogue.”

301 Update: Administration Officials to China, USFIA Asks to Testify; USFIA Joins Industry Letter on U.S. Origin Materials Program; Menendez Criticizes Bangladesh Government and Factories on Rana Plaza Anniversary

In This Memo:

  • 301 Update: Administration Officials to China, USFIA Asks to Testify
  • USFIA Joins Industry Letter on U.S. Origin Materials Program
  • Sen. Menendez Criticizes Bangladesh Government and Factories on Rana Plaza Anniversary

301 Update: Administration Officials to China, USFIA Asks to Testify

White House National Economic Council Director Larry Kudlow will join U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steve Mnuchin in China next week for “serious negotiations” about trade, according to reports. While President Trump has said he is optimistic that the U.S. and China will “make a deal,” if the two parties cannot come to an agreement on the trade disputes, the proposed U.S. tariffs on Chinese products will take effect as planned. “I think China is very serious, and we’re very serious,” said President Trump. “We have no choice but to be very serious.” We will watch this meeting closely next week.

In the meantime, United States Fashion Industry Association (USFIA) requested to testify during USTR’s May 15th hearing on the Section 301 tariffs, and will urge the Administration to reject calls to add apparel and other fashion products to the list of products subject to tariff increases.

USFIA Joins Industry Letter on U.S. Origin Materials Program

Earlier this week, the United States Fashion Industry Association (USFIA) joined with other textile, apparel, and retail associations in sending a letter to the leadership and trade counsels of the U.S. House Ways & Means Committee and U.S. Senate Finance Committee urging “support for a program that would promote the use of U.S. origin materials incorporated into finished products abroad and returned to the U.S.” The letter continues, “Specifically, the program would only assess duties on the foreign value added abroad and not on the U.S. origin materials. This would deduct the value of U.S. origin materials from the dutiable value of a finished good when that good is imported into the United States.” The letter is available here.

Sen. Menendez Criticizes Bangladesh Government and Factories on Rana Plaza Anniversary

April 24th was the fifth anniversary of the Rana Plaza tragedy in Bangladesh. Senator Bob Menendez (D-NJ), Ranking Member of the Senate Foreign Relations Committee, submitted a statement marking the anniversary. While his statement was critical of the Bangladesh government, he did note the progress made by American brands participating in both the Accord on Fire and Building Safety and the Alliance for Bangladesh Worker Safety:

Meanwhile, major American retailers who produced apparel in Bangladesh – including Abercrombie & Fitch, American Eagle Outfitters, and Fruit of the Loom joined the effort alongside other global brands, governments, civil society, and labor unions to grapple with the acute challenges facing Bangladeshi workers who produced their goods. The risk of undermined consumer confidence and declines in brand quality helped spur some corporations to join the Accord on Fire and Building Safety in Bangladesh—a five-year, legally binding compact to improve safety in Bangladeshi ready-made garment factories through reasonable steps to prevent future disasters. Most importantly, the Accord signatories included labor unions, who were rightly regarded as equal and critical stakeholders in effecting needed change. Five years later, Accord brands have the opportunity to demonstrate a sustained commitment to worker rights by signing on to the 2018 Accord. This iteration strengthens and expands the Accord to cover freedom of association. Other groups, such as the Alliance for Bangladesh Worker Safety, have also helped to further galvanize American and multinational brands to take greater responsibility for ensuring worker safety in Bangladesh. In any such efforts, workers and their representatives must have a truly equal seat at the table, for without them we cannot make meaningful labor rights reforms.

He added, “Factories throughout the country have failed to meet their binding commitments on workplace safety in the Accord and the Alliance, risking the departure of some global retailers to other markets. Independent unions in Bangladesh remain constrained and subject to increasing harassment and attacks on labor rights activists, which often occur with impunity. And amidst a growing climate of political tensions in Bangladesh, the government too often views independent labor unions as opposition dissenters to punish, rather than key partners that are vital to the country’s growth and prosperity.”

The full written statement is available here.

The Alliance released a statement marking the anniversary, and said, “With Alliance factory remediation nearing completion, our factories have reached the starting line for safety, not the finish line. Brands, factory owners and the Bangladesh government now have a shared responsibility to sustain these gains. That is why the Alliance will join with credible, local partners in the weeks ahead to form a joint entity that will continue to oversee inspections, monitoring, worker training and helpline services over the long term.” The Accord released its quarterly aggregate report, as well.

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