Fashion Intel & Analysis

            U.S. textile related groups, and Workers United, have posted a copy of the comments they filed last week with the Office of the Chief Procurement Officer at DHS pressing the agency to more broadly interpret the “Buy American” textiles provisions that were passed in the American Recovery and Reinvestment Act. 

 

            The signatories to the comments, who include the American Manufacturing Trade Action Coalition, National Council of Textile Organizations, National Textile Association, U.S. Industrial Fabrics Institute, American Fiber Manufacturers Association, Leather Industries of America, Narrow Fabrics Institute, Domestic Sock Makers Coalition, National Association for the Sewn Products Industry, and Workers United, assert that the textile and apparel-related amendment to the act was meant to require DHS to source dozens of items from U.S. manufacturers, and complain that the interim rule DHS has issued includes loopholes around these requirements.  They argue that DHS needs to more loosely define items as being “directly related to national security” in order to include more U.S.-made goods, and argues that DHS should mirror the Defense Department’s implementation of the Berry Amendment, which requires DOD to give sourcing preferences for clothing and fabric to U.S. sources.

            The Committee for the Implementation of Textile Agreements has published the new cap on duty-and quota-free imports of apparel made in lesser developed Sub-Saharan African countries from regional or third country fabric.  For the 12 months beginning October 1, benefits will be capped at 814.4 million square meter equivalents. Beyond that quantity, if it were to be reached, tariffs would apply.

 

            The preferential treatment for lesser developed SSA countries is granted under the Trade Development Act of 2000, and the AGOA Acceleration Act of 2004 provides that apparel imported under the special rule for lesser-developed countries will be capped at 3.5% of all apparel articles imported into the U.S. in the preceding 12-month period.

The African Growth and Opportunity Act Implementation Subcommittee of the Trade Policy Staff Committee is requesting public comments for its annual review of the eligibility of sub-Saharan African countries to receive the benefits of the African Growth and Opportunity Act (AGOA).  The request includes a note that comments received related to the child labor criteria may also be considered by the Secretary of Labor for the preparation of the Department of Labor’s report on child labor.  Comments are due by noon, Monday, October 19, 2009.

In what could be a very significant development with respect to antidumping and countervailing duty investigations against products of non-market economy countries (namely China and Vietnam), the U.S. Court of International Trade (CIT) on Friday issued a decision that instructs the U.S. Department of Commerce (DOC) to develop methodologies to prevent double-counting if it applies antidumping (AD) and countervailing duties (CVD) simultaneously on the same products.

 

The issue arises because of the decision by DOC, starting in 2007, to apply the CVD law to China, reversing an earlier (and long-held) position that it is not possible to measure subsidies in an economy in which state control is pervasive. That policy reversal has led to many combined AD/CVD petitions against products of China, and more recently also against products of Vietnam, which the U.S. similarly considers to be a non-market economy (NME). In a challenge by respondents to an AD and CVD order issued against off-road tires made in China, on September 18, 2009, the Chief Judge of the CIT ruled that while DOC may simultaneously apply CVD and AD measures against the same imported products from NME countries, that authority comes with some responsibility:  if DOC chooses to apply both, DOC bears the burden of proving that there is no double-counting as a consequence and DOC must develop methodologies to prevent double-counting from occurring.

 

In the decision, GPX International Tire Corporation v. United States, Slip Op. 09-103, the CIT also addressed two other issues that could have far-reaching implications.  The first was DOC’s refusal to even consider application of “market oriented enterprise” (MOE) treatment to the plaintiff, an NME respondent.  In 2008, DOC had solicited public comment on whether to recognize that particular manufacturers or exporters operate under market principles and should therefore have any dumping margins calculated based upon their actual costs rather than the surrogate methodology that normally applies to NME enterprises. USA-ITA was among the many companies and associations that submitted comments in favor of recognition of MOEs, noting in particular the many foreign investors operating in China and Vietnam.  However, no further action was taken by DOC on that rulemaking and here the agency had declined to consider whether any off-road tire manufacturers were MOEs, saying it had no policies, procedures or standards for evaluating MOE status.  The CIT ruled that DOC’s refusal was arbitrary and capricious and unsupported by substantial evidence. 

 

 

A third major holding of the case concerned DOC’s use of a single cut-off date for identifying and measuring all countervailable subsidies in an NME.  DOC selected the date of China’s accession to the World Trade Organization, December 11, 2001, as that date.  In this case, the original petitioners argued that DOC should analyze the existence of alleged subsidies on a program-by-program basis, just as DOC would for proceedings involving market economy countries, going back however many years are necessary.  The Court agreed, calling the use of a single cut-off date arbitrary and unsupported by substantial evidence. 

 

The CIT has remanded the case back to DOC, to address each of the identified errors, with the remand determination due in 90 days.  It is highly likely, however, that DOC will request an extension from the CIT to complete the required remand determination, especially in light of the absence of key political officials at the agency, pending completion of the nomination and confirmation process.  (No action has been taken on President Obama’s nominee for Under Secretary of International Trade, Frank Sanchez, and reportedly nominations for the Assistant Secretary positions that would report to the Under Secretary, including Assistant Secretary for Import Administration, which is responsible for conducting AD and CVD investigations, are on hold until the top position is filled.)

 

It also is a pretty sure bet that this case will eventually go to the Court of Appeals for the Federal Circuit (CAFC), which is often more deferential to DOC than the CIT.  It is also more likely than not that any other pending investigations will be unaffected by this decision, with the agency continuing its existing practices unless and until forced to do otherwise.

 

CITA has announced a tariff rate quota of 1.136 billion square meter equivalents for duty-free benefits for apparel made in beneficiary Andean countries from fabrics formed in participating countries from yarns formed in participating countries (including the United States). At this point, the TRQ quota will run from October 1 until December 31, 2009, which is when the duty-free benefit is scheduled to expire under the Andean Trade Preferences Act (ATPA). The participating beneficiary countries are currently Colombia, Peru and Ecuador. (Peru has the benefit of both ATPDEA and the U.S.-Peru free trade agreement, at least through the end of this year.)

 

            This provision has been extended several times, most recently in 2008, when it was extended until the end of this year. The TRQ represents five percent of aggregate square meter equivalents of all apparel entered into the U.S. in the year ending July 31, 2009. Apparel imports from the Andean have been declining, however, and as of the one year period ending July were down more than 27 percent by quantity over the corresponding prior one year period.