Fashion Intel & Analysis

Just in time for Valentine’s Day, there is another reason to celebrate. The List 4A tariffs on imports from China will decrease from 15% to 7.5% at midnight EST January, 14th. As you probably remember, List 4A tariffs went into effect on September 1st of this year and affect approximately $120 billion of goods, especially apparel. The reduction is part of the Phase One China deal signed in January. The Federal Register notice is available here and CBP’s CSMS on the Tranche 4A tariffs is available here

Following a meeting with Ecuador President Moreno yesterday, President Trump told White House reporters that he is open to negotiating a trade deal with Ecuador. “They have incredible product. And they grow it and they make it, and we like it,” Trump said. “So, we will. Sure. And they need our product, too.” President Trump added that the USMCA is a “great model” to use for a trade deal with Ecuador, though it would be on a “much smaller scale.” 

Yesterday, the White House announced that the President and First Lady will visit India later this month. They will travel to New Delhi and Ahmedabad on February 24-25. According to the White House statement, the President will meet with Prime Minister Modi to “strengthen the United States-India strategic partnership and highlight the strong and enduring bonds between the American and Indian people.” It is expected that the U.S. and India will sign an agreement to open India’s market to U.S. exports which could also include the reinstatement of GSP duty-free benefits for India. 

One of the big concerns for brands and retailers is the impact of the coronavirus outbreak. Obviously there is great concern about the health of those who have already caught the virus as well as fear about the spread of coronavirus around the world. International travel is being delayed and our colleagues in China and Hong Kong are taking precautions. From a trade perspective, obviously there is an impact on business too.  

USFIA would like to share some insights that we received from contacts in China and from members. What is clear is that there are delays and disruptions to the supply chain – both for production in China and for production around the world that relies on Chinese inputs. The press is reporting on the potential for factory closures in Cambodia and we expect to feel the effects in other countries especially in Asia.  

In China, the restrictions on travel mean that many workers will not be able to return to the factories even if they want to. (Most years around 15% of workers never return from the Lunar New Year holiday, so there are concerns that the rate will be substantially higher this year.) Some factories are re-opening this week, and more are expected to reopen next week. But the estimate from industry groups in China is that the situation will only start to get better at the end of February. Logistics experts warn that there could be additional delays once everyone tries to get on schedule with shipments. We hope to have more information and some official updates to share soon.

As expected, on February 12th the EU announced that it will partially suspend Cambodia’s trade preference privileges over “serious and systematic violations of human rights principles.” The partial suspension under the Everything But Arms (EBA) program will target 20% (around $1.1 billion) of goods exported to the EU duty-free. Certain garments, footwear, travel goods, and sugar are included in the suspension. These goods will be subject to standard duty rates beginning August 12, 2020, when the suspension takes effect. EU standard duty rates for clothing are set at 12%. There is some concern that the U.S. Congress and the Trump Administration may take similar action against Cambodia.  

HS Codes affected by the change in policy are detailed in the regulations released by the EU and listed below:

Therefore, the Commission concludes that tariff preferences under the GSP Regulation
should be withdrawn in respect of certain products originating in Cambodia. These
products fall under the following Harmonized System ("HS") codes: 1212 93, 4201
00, 4202, 4203, 4205 00, 4206 00, 6103 41, 6103 43, 6103 49, 6105, 6107, 6109, 6115
10, 6115 21, 6115 22, 6115 29, 6115 95, 6115 96, 6115 99, 6203 41, 6203 43, 6203
49, 6205, 6207, 6211 32, 6211 33, 6211 39, 6211 42, 6211 43, 6211 49, 6212, 6403
19, 6403 20, 6403 40, 6403 51, 6403 59, 6403 91, 6403 99, 6405 and 6406