Past USFIA Seminars
Past USFIA Seminars
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.
For more photos of the event, visit our Facebook page--and tag your friends! Thanks to Michael Levy Photography for capturing the day.
On November 5th, the United States Fashion Industry Association (USFIA) and the American Import Shippers Association (AISA) joined together for the 26th year to host the Textile & Apparel Importer Trade & Transportation Conference in New York, to provide an update on trade trends and the outlook for the next year.
Outlook for Transportation
The day began with a keynote by Joseph Bonney, Senior Editor of the Journal of Commerce. Bonney was the first of many speakers who talked about the impact of the West Coast labor negotiations as well as growing delays at the major ports. On July 1, 2014, the contract between the Pacific Maritime Association (PMA) and the International Longshore and Warehouse Union (ILWU) expired and negotiations continue. Delays are building on the west coast, exacerbated by the chassis shortages and infrastructure issue. This means that some retailers are beginning to shift cargo to East Coast ports. Bonney warned if East Coast ports do not take the appropriate steps to prepare for this increase in volume, this may cause further shipping delays.
Joe Bonney of the Journal of Commerce (Credit: 85Photo)
“The trend toward bigger ships is irreversible,” Bonney said. His presentation focused on the impact of megaships on shipping rates and the availability of shipping services. Bonney said shippers have an incentive to build larger ships due to a likely increase in trade volumes. Between 2008-2013, shipping volumes (by container) increased by 1.1 percent annually. However, he predicts that between 2014-2018, shipping volumes will increase by 6.7 percent per year. In addition, shipping rates have been stagnant, and larger ships provide shippers away to cut costs. These ships offer improved fuel efficiency, and other benefits of economy of scale.
Bonney also discussed the impact of larger ships on shipping delays. While these ships can ship a larger volume of goods, many ports have not adjusted schedules to reflect the longer unload times that are needed. This, combined with other factors such as high turnover of truck drivers, has fueled delays at ports. Therefore, Bonney warned, even if brands and retailers do not pay higher direct shipping costs, they may still face higher costs due to the subsequent port delays. “Those of you shipping are going to have to pay more, whether in rates or delays for goods,” he concluded.
The Sourcing Journal has more on Bonney’s presentation, too.
Shifts in Sourcing Trends
Next, John Cheh, Vice Chairman and CEO of Esquel Group, discussed shifts in sourcing trends in a fascinating presentation. Cheh said there is a shift in apparel demand for both “fast fashion” and online sales. Meanwhile, there is growing concern among consumers about adherence to corporate social responsibility standards and environmental sustainability.
J.C. Penney's Ken Mangone introduces John Cheh. (Credit: 85Photo)
One of the main shifts in sourcing is that apparel factories are using technological innovations to increase their productivity. Cheh said higher productivity will allow factory management to provide higher wages. Factories, including Esquel Group’s factories, are using robotics to increase productivity and reduce the number of human workers that are required to manufacture apparel. In addition, factory management uses smartphones and ATMs to electronically pay workers, which reduces paperwork for management while providing workers with more tools to control and track their wages.
By using technology to lower the workforce required to operate textile and apparel factories, Cheh said factory management has greater flexibility to increase wages and improve working conditions for workers. And management can make these improvements without increasing the cost of the final finished goods.
Cheh also highlighted the important role of China in the apparel sector. While China has long been recognized as the world’s dominant apparel exporter, Cheh expects the Chinese economy will continue to increase domestic demand. China is the major U.S. supplier of apparel imports, but Cheh says China’s market share has peaked. Instead of trying to expand market access to the U.S. market, Chinese apparel manufacturers are able to take advantage of surging consumer demand in China, so China is not as dependent on apparel exports as it was in the past.
Impact of Shipping Alliances and AGOA Shipping
Brian Moore, Director of Apparel Sales for Maerk Line, discussed the impact of new shipping alliances on trade, as well as providing an update about the opportunities to source from Africa. Moore explained that shipping alliances are not a new phenomenon. They began in the 1970s, and were primarily alliances between European shippers. These alliances give shippers an opportunity to split demand, and help ensure that ships are not underutilized. This is a win-win situation, since these arrangements provides consumers with lower costs.
Brian Moore (second from left) with the Maersk team and AISA's Hubert Wiesenmaier. (Credit: 85Photo)
Shippers have also “acted like a retailer,” which means that shippers have closed underperforming sectors. This has helped cut costs and lower shipping rates by 2 percent per year. However, there is a limit to the amount of services shippers can cut while still being able to provide an adequate service for clients, so shippers are looking to purchase larger ships. These ships hold more cargo and are more fuel efficient, which leads to even lower shipping costs.
Moore outlined the details the Maersk-MSC alliance, which will focus on “east-to-west” trade. They will expand trade from Europe to the United States, and from Asia to the United States. The alliance will allow both companies to increase the number of weekly sailings and increase the number of ports of call available to shippers.
Finally, Moore spoke about growing opportunities based on more shippers using the African Growth & Opportunity Act (AGOA). He reported that there has been a “sudden increase” in the number of importers, retailers, forwarders, and mills contacting Maersk regarding their options to ship products to and from AGOA countries.
To meet the growing demand for AGOA products, there are two major port projects underway. Tanzania will begin construction of a major seaport by the end of 2014 to help boost trade in the country. In addition, the Lamu Port in Manda Bay in Kenya is undergoing a transportation and infrastructure expansion project. Moore said both projects will support the growth in the manufacturing sector.
What’s Next for U.S. Customs and Border Protection?
Robert Perez, Director of Field Operations for the New York Field Office of U.S. Customs and Border Protection (CBP), outlined the top priorities for the agency: 1) partnership; 2) predictability; and 3) prosperity. These values will help reducing transaction costs for traders while allowing CBP to perform its job efficiently.
Robert Perez of U.S. Customs & Border Protection (Credit: 85Photo)
One of the steps taken by CBP to meet these priorities is the hiring of 2,000 new officers. Perez said these officers will help facilitate trade at the border, reducing costs for both traders and the U.S. government. He added that these hires are a key part of strengthening the economic security of the United States, estimating that each new hire will support 33 private sector jobs through more efficient borders.
Perez spoke about the Centers of Excellence and Expertise (CEE), which are part of the strategy improve collaboration between Customs and the private sector, and help Customs identify more efficient ways to deploy resources. In addition, he highlighted progress made under the Trusted Trader program. Nine companies have been selected for the test. Customs hopes to increase the number of small- and medium-sized enterprises that participate in these programs.
Finally, Perez discussed the impact of the Single Window, noting that many of the timelines established by President Obama’s Single Window Executive Order coincide with the ACE timelines. ACE will be the “backbone” of Customs future priorities. Upon implementation, Perez believes that ACE will “dramatically” reduce costs for traders, while increasing the responsiveness of CBP.
Trends in the Retail Industry
Irina Vaysfeld, Managing Director of Trade and Customs for KPMG, USFIA’s Premier Partner for 2014, discussed trends in the retail industry. In particular, Vaysfeld focused on trends related to First Sale, highlighted by KPMG’s First Sale for Export Benchmarking Study.
Irina Vaysfeld of KPMG (Credit: 85Photo)
First Sale allows importers to declare a shipment’s value as the cost when it was first shipped from the factory, as opposed to the generally higher price in subsequent transactions before reaching the final port. Vaysfeld said companies are achieving significant savings through First Sale.And now, companies are trying to automate their First Sale practices with project management tools, data collections, and having vendors send e-documents directly to the customs broker. They also want automation of post-entry testing.
She also discussed Foreign Trade Zones (FTZ), noting that the most obvious trend is the increasing number of FTZs as well as the increase in value of products that pass through them. These FTZs expedite and encourage international trade and promote domestic activity and investment, and can affect the competiveness of U.S. companies by allowing savings through:
- duty reduction on “inverted tariff structures” (where tariffs are higher on imported components than on finished products;
- customs and inventory efficiencies; and
- duty exemption on goods exported from, or consumed, scrapped, or destroyed in, a zone.
Finally, Vaysfeld discussed automation of customs and tax processes. Both the Customs and tax authorities, despite having different objectives, are beginning to align some of their operations. This collaboration is still in the early stages, but already has strong support by the business community.
Legal News to Know, Coast to Coast
During this session, John Pellegrini, USFIA’s Customs Counsel at McGuireWoods LLP, spoke about legal issues facing the textile and apparel industry.
Pellegrini began by discussing False Claim Act (FCA) trolls. The FCA establishes penalties on persons and companies who deliberately defraud the U.S. government. Under the FCA, private individuals, also known as relators (or informally known as whistleblowers), can file a suit on behalf of the government for FCA violations. Once filed, the government is required to investigate the allegations in the complaint. If the government declines to take action following the investigation, the relator may still proceed with a private suit. In addition, the relator filing suit under the Act will receive a portion of any recovered damages.
Pellegrini said that there are a growing number of unsubstantiated suits filed by private individuals. Relators, and often the law firms supporting them, are using the FCA as a way to make money—and even if the company who the suit is filed against has committed no wrongdoing, it can still face significant court costs.
Traceability in the Fashion Industry
Gary Barraco, Vice President of Industry Development for eVision, provided an update on conflict minerals compliance and ensuring traceability in the fashion industry. Since June 2, 2014, any publicly-owned company using conflict minerals (tin, tungsten, tantalum or gold) as a necessary component in at least one of its products is required to annually disclose whether any of the minerals originated in the Democratic Republic of Congo (DRC) or adjoining countries (Angola, Burundi, Central African Republic the Republic of the Congo, Rwanda, South Sudan, Tanzania, Uganda and Zambia). The purpose of the rule is to end the violent conflict in the DRC, which has been partially financed by the exploitation and trade in conflict minerals.
Gary Barraco (right) and the ecVision team (Credit: 85Photo)
Barraco noted that the U.S. Securities and Exchange Commission (SEC) grossly underestimated the cost in dollars and hours that companies would need to allocate to produce the reports to show whether or not they are in compliance with the rule. High costs—as well as the incorrect assumption that textile and apparel products do not use conflict minerals—has caused many apparel and footwear brands to be unsure about what to do.
Barraco argued that since buttons, zippers, and other accessories can use conflict minerals in their production, textile and apparel brands and retailers need to ensure they are compliant with the rule. In the first reports filed with the SEC, most textile and apparel brands said the supply chains for the materials used in the accessories are “indeterminable.” But after 2015, they can no longer say this in their reports.
He also addressed new conflict minerals rules issued by the European Union, which apply to all products imported into the EU from any “conflict-affected” area. The EU definition of what is a conflict-affected or conflict-prone area is very broad. However, Barraco noted, the EU regulations are voluntary.
Barraco concluded by providing an assessment of the effectiveness of rules. He said the rules appear to be working, because they have put a spotlight on the role of conflict minerals in everyday goods, increasing consumer awareness. Yet, higher consumer awareness increases potential costs for brands and retailers if they caught sourcing conflict minerals, so it is critical to comply.
What’s Next for the CPSC?
Commissioner Ann Marie Buerkle of the Consumer Product Safety Commission (CPSC) spoke to the audience off the record about her vision for the commission.
CPSC Commissioner Ann Marie Buerkle (Credit: 85Photo)
Investing in Socially Responsible Sourcing
Dr. James Gifford, Senior Strategic Advisor for Tau Investment Management, spoke about his firm’s efforts to invest in socially responsible supply chains. Tau Investment Management is a private equity firm whose mission is to upgrade global supply chains.
Gifford began by saying there are a lot of problems facing textile and apparel supply chains–dangerous factories, child labor, and lack of worker rights–but there are huge opportunities for improvement, such as improving the number of workers with management skills and technical skills, increasing the number of women in management positions, and reducing high worker turnover rates. Gifford argued that by investing in solutions to these problems, not only would supply chains be more socially responsible, but they would also be more productive. Lower output means that there is less revenue to invest in the workers through wages and training programs. The high worker turnover, which is a result of the poor working conditions, reduces the incentive of factory owners to invest in people. So instead, workers are trained to do one task, with no hope of moving up.
Dr. James Gifford of Tau Investment Management (Credit: 85Photo)
Gifford argued that relatively cheap factory upgrades can dramatically improve working conditions and retain workers. Improvements such as installing LED lighting or opening windows to allow more natural light into the factory create a better work environment and raise worker morale. In addition, increasing compensation for workers does not only have to be in the form of higher wages; employers can provide non-cash benefits, such as health care plans, maternity leave, life insurance, and child care.
Gifford added that wage increases should be merit based and tied to absenteeism. This will increase productivity, which allows for greater revenue, and greater work opportunities for workers. In addition, factory management should make sure they meet basic standards, such as making payments on time.
Gifford believes there is a chance to end this cyclical problem. As first generation factory owners in South Asia are retiring, their children are now running the factories with values that more closely reflect Western standards. And they want their factories to be viewed as “world-class” companies.
In addition, Gifford said there is also greater consumer awareness, with more consumers aware of labor challenges in the apparel industry. He expects the consumer side to become more important in helping shape the discourse of socially responsible sourcing. There is also a greater transparency within the supply chains, through tech and smartphones, which make it impossible for major tragedies and revelations of abuse and pollution to remain in the dark. This leads to more pressure by the public, and subsequently governments.
Investing in Cotton Sustainability
J. Berrye Worsham, President & CEO of Cotton Incorporated, spoke about Cotton Incorporated's efforts to improve cotton sustainability through the Cotton LEADS program and other initiatives. To learn more, register for our webinar on November 20th.
J. Berrye Worsham of Cotton Incorporated (Credit: 85Photo)
The Obama Administration’s Trade Policy Agenda
The audience heard from Josh Teitelbaum, Commerce’s new Deputy Assistant Secretary for Textiles, Consumer Goods, and Materials. This was his first public appearance in front of the industry since he took over the role in October, and he provided a high-level overview of the Obama Administration’s trade policy agenda moving forward.
Josh Teitelbaum of the U.S. Department of Commerce (Credit: 85Photo)
Completion of the Trans-Pacific Partnership (TPP) and the Transatlantic Trade & Investment Partnership (TTIP) remain key priorities for the Obama Administration. Teitelbaum said both agreements will expand U.S. exports and grow the U.S. economy.
Teitelbaum also spoke about the ongoing TPP negotiations. The U.S. is still seeking elimination of apparel duties under the TPP. He said this will not only save U.S. companies money, but will also help U.S. consumers.
The Obama Administration held bilateral discussions with TPP members during the TPP Ministerial in Australia last month. Teitelbaum said the Obama Administration “made forward progress” in the discussions involving textiles and apparel, adding that high-level talks between the U.S. and other TPP members will continue during the upcoming APEC Summit. Both President Obama and U.S. Trade Representative (USTR) Michael Froman will attend the summit.
After the Midterms: What’s Next for Trade Policy
The final topic of the day examined the impact of the November 4, 2014 midterm elections on U.S. trade policy. Jon Fee, Partner at Alston & Bird, and David Spooner, USFIA Washington Counsel and Partner at Barnes & Thornburg, got into a friendly debate.
Jon Fee & David Spooner (Credit: 85Photo)
Fee started the discussion with a recap of the elections. Republicans made significant gains in both the House of Representatives and the Senate. As of November 5th, Republicans held a 52-43 majority in the Senate, with three races still too close to call, and two races held by Independents. In addition, Republicans expanded their hold in the House to control 243 seats.
There are a few changes to Congressional trade leadership. With Republicans in control the Senate, current Senate Finance Committee Ranking Member Orrin Hatch (R-UT) will take over as chairman in January 2015. Senator Ron Wyden (D-OR) is the current chairman. House Ways & Means Committee Chairman David Camp (R-MI) is retiring, opening up the chairmanship of the committee Fee expects Paul Ryan (R-WI) to be the next chair.
Spooner then discussed the expected impact of the election on trade policy in the coming months. He said it will be interesting to see how the election of Dan Sullivan (R-AK) to the Senate, and the defeat of Senator Kay Hagan (D-NC), will play out in the Senate over the next Congress. Sullivan has a reputation of being “pro-free trade,” while Hagan has been very active in trade policy, especially policy involving textiles and apparel.
In addition, Spooner said that it was still too early to tell how the election would impact the timeframe for consideration of trade legislation such as Trade Promotion Authority (TPA), Generalized System of Preferences (GSP), the Miscellaneous Tariff Bill (MTB), or renewal of the Nicaragua TPL and renewal of AGOA. However, he said both the staffs of Wyden and Camp have been in contact to discuss passing TPA legislation during the lame duck session. Spooner added that some of the non-controversial trade legislation, such as GSP or MTB, could also be attached to the TPA bill.
Thanks to International Development Systems for providing the recap.
On June 19th, USA-ITA and over 80 attendees and special guests headed to the New York Athletic Club on a beautiful day for a full day of in-depth discussions on the hottest topics for our industry, including U.S. Customs & Border Protection’s Centers of Excellence & Expertise, the Trans-Pacific Partnership negotiations, compliance challenges and best practices, and more. Login to read the full summary and download the PowerPoint presentations.LOGIN OR CONTACT US FOR INFORMATION ON MEMBERSHIP.
On November 6th, the United States Fashion Industry Association (USFIA) hosted our 25th Annual Textile & Apparel Importer Trade & Transportation Conference in New York. This was not only our 25th conference, but also the start of the association’s 25th anniversary year—which we kicked off with a bang by launching our new name, logo, and brand. We’ve got a full recap featuring highlights and speakers’ presentations for members only.
LOGIN TO THE WEBSITE TO READ MORE.LOGIN OR CONTACT US FOR INFORMATION ON MEMBERSHIP.
From USA-ITA OFF THE CUFF for May 17, 2013
On May 14th, USA-ITA and Cotton Incorporated hosted a seminar in New York City to provide an update on the cotton market and some of Cotton Incorporated’s new initiatives in education and sustainability.
Teresa Zugay, Cotton Incorporated’s Senior Executive Account Manager for Global Supply Chain Marketing, kicked off the session with an overview of Cotton University, a free online resource for industry professionals, faculty, and students to learn more about working with cotton. In summary, the program allows you to learn, connect, and grow—and in particular, become an expert on the topics of most interest to you and your company. In addition to a wide variety of online, self-paced courses, Cotton University also offers a library of resources, forums to connect with other experts and students, and information on Cotton Incorporated’s in-person workshops. We encourage you to visit www.cottonuniversity.org to sign up—or send it along to the relevant sourcing people on your team.
Mark Messura, Cotton Incorporated’s Senior Vice President of Global Supply Chain Marketing, then provided an overview of the cotton market today. There are two things to know. First, there is stability in pricing right now. Second, there is uncertainty, especially about what’s going on in China with cotton prices.
In sharp contrast to the cotton market about a year and a half to two years ago, prices are relatively stable, with the 13-month average price hovering around 86.6 cents/pound, and prices are competitive relative to polyester.
Nonetheless, we have to keep an eye on China—as you’ll see in slide 21, the price of cotton in China is significantly higher than the price of cotton on other indices. With 70 percent of cotton consumed by China, India, the United States, and Pakistan, whatever happens in these countries can move the market significantly. In China, consumption is down 18.2 percent, which coincides with a decline in China’s competitive advantage due to labor costs and other factors. Yet, China has a huge supply of cotton reserves, which, as you can see in slide 34, have increased while mill use has decreased. The big question is how China will deal with these reserves. On January 14th, the Chinese government began a strategic reserves auction, with purchases limited to Chinese textile mills with no reselling allowed.
It’s not just China that has excess cotton. In fact, the 2013/2014 harvest will lead to the biggest inventory of cotton on the planet, ever. We could almost take a year off from growing cotton—though we won’t, because the cotton industry accounts for just too many jobs all over the world.
In conclusion, we’re seeing three trends in the cotton market:
- There is a supply-side risk, given China’s strategic cotton reserves. The reserves are increasing, yet domestic prices remain high.
- Planting is lower this year, with lower production forecasts.
- The variance in world production is dwarfed by China’s inventory.
What to do with all these cotton reserves? Consumers still love denim, and cotton products generally, but we’ve seen a huge shift in consumers’ attitudes about buying clothing. In 2008, 46% of consumers said they would rather spend their money on things other than clothes. In 2012, the number jumped to 54 percent. This number even increased among the key shopping demographic, women ages 18-34, which could be a problem.
Another issue to think about is sustainability, and how you balance people, the planet, and profit. Consumers are increasingly aware of environmental issues, especially among that aforementioned shopping demographic. Americans always lagged behind Europeans when it comes to environmental activism, but now they’re catching up, and brands should take note.
Nonetheless, while people care more about environmentally friendly clothing, it’s still not a main driver for purchasing decisions. Those drivers remain fit, comfort, quality, style, and price. In short, while you should pay attention to sustainability, you still need to pay attention to the other factors, particularly price.
People have very different attitudes about what they will eat than what they will wear or put in their home. This is especially clear when we look at “organic”—organic clothing is on the decline because people are not willing to pay two times the price for “organic” clothing, even though they are willing to pay for organic food. It’s a better marketing strategy for brands to find other ways to call out their environmental benefits—such as natural fibers, or a decrease in water or electrical use, or packaging improvements—rather than simply sell “organic” clothing.
This is where Cotton Incorporated can help you. After all, cotton is a “natural” fiber and can generally be marketed as such, which consumers like. There are many ways you can get credit for “sustainability” as there are many resources for responsible cotton, especially in the United States. For more information on this, visit http://www.cottoninc.com/sustainability/.
For more information on the fabric of our lives today, download the presentation or visit www.cottoninc.com.