Fashion Intel & Analysis

The trade war intensifies as China warns that it will retaliate if the United States implements any new tariff measures. "If the United States, regardless of opposition, adopts any new tariff measures, China will be forced to roll out necessary retaliatory measures," said Gao Feng, spokesman for China’s Ministry of Commerce. The Trump Administration is currently considering a third list of tariffs totaling $200 billion, which include several consumer products as well as textiles, bags, and other fashion items. Following the recent U.S. Trade Representative hearing on the list, during which USFIA President Julia Hughes testified, the Administration is accepting public comments through the end of the day today. USFIA will share our final comments, as well as other industry-wide comments, tomorrow after the comment period has closed.

For the latest updates on trade policy and the trade war, we encourage you to join the USFIA State of the Industry Virtual Townhall next Thursday, September 13th. This free, one-hour webinar is open to members and affiliates only. Click here to register.

USFIA Urges Labor to Keep Uzbekistan on Child Labor List

Earlier this week, the United States Fashion Industry Association (USFIA) joined a letter organized by the Cotton Campaign to the U.S. Department of Labor opposing the recent decision to remove cotton from Uzbekistan on the list of products made with forced or child labor. (More information on the decision is available in the Federal Register.) The Cotton Campaign argues that, despite some progress in Uzbekistan, cases of forced child labor still occurred during the 2017 harvest and local school administrators and teachers remained under pressure to force children into the fields to meet their annual cotton quotas. As a result, it is premature to remove Uzbek cotton from the EO13126 list until it can be verified that the Uzbek government has fully enacted the reforms to eliminate the drivers of forced child labor, particularly subjecting school officials to production quotas. The letter is available here.

Levi’s Announces New Gun Violence Prevention Measures

Chip Bergh, CEO of Levi Strauss & Co., penned an op-ed this week announcing that the company is increasing support for gun violence prevention. “You may wonder why a company that doesn’t manufacture or sell guns is wading into this issue, but for us, it’s simple. Americans shouldn’t have to live in fear of gun violence. It’s an issue that affects all of us—all generations and all walks of life,” he writes in Fortune. In particular, Levi’s established the Safer Tomorrow Fund, providing more than $1 million in grants to nonprofits and youth activists who are working to end gun violence in America, as well as partnering with Everytown for Gun Safety, and increasing the employee donation match program and volunteer opportunities. The full op-ed is available here.

Today, August 27th, the United States and Mexico announced “preliminary agreement in principle” of a bilateral trade deal, which President Trump said will replace the North American Free Trade Agreement (NAFTA). During the announcement, President Trump said he plans to “terminate” NAFTA and support the new U.S.-Mexico Trade Agreement.

According to the Office of the U.S. Trade Representative (USTR), the deal has a new textile chapter to “incentivize greater United States and Mexican production in textiles and apparel trade, strengthen customs enforcement, and facilitate broader consultation and cooperation among the Parties on issues related to textiles and apparel trade.” In particular, the deal will “promote greater use of Made-in-the-USA fibers, yarns, and fabrics by limiting rules that allow for some use of non-NAFTA inputs in textile and apparel trade and requiring that sewing thread, pocketing fabric, narrow elastic bands, and coated fabric, when incorporated in apparel and other finished products, be made in the region for those finished products to qualify for trade benefits.” According to our sources at USTR, the agreement eliminates the visible linings rule, which was a priority for some USFIA members.

One of the most important elements in this re-negotiation of NAFTA is how the current Tariff Preference Levels (TPLs) will be treated. The USTR statement does not specifically answer that question, and we will send another update when we do have details. From conversations with USTR, we do not believe that there are major changes in the TPLs, but we cannot confirm that. The agreement also establishes a textile chapter for U.S.-Mexico trade, including textile-specific verification and customs cooperation provisions that provide new tools for strengthening customs enforcement and preventing fraud and circumvention in this important sector. “The new Textiles chapter provisions are stronger than those in NAFTA 1.0 with respect to both enforcement and incentivizing North American production of textiles,” says USTR. We will provide a link to the USTR fact sheet about the agreement when it’s available online.

U.S. Trade Representative Lighthizer said the Administration plans to formally notify Congress of the deal on Friday, so the parties can sign the deal at the end of November.

CBP to Hold CTPAT Conference in September in Orlando

U.S. Customs & Border Protection (CBP) will hold the Customs Trade Partnership Against Terrorism (CTPAT) 2018 Conference from September 12-13 in Orlando, Florida. Registration is now open at https://ctpatregistration.cbp.gov/index.asp?w=14

NRF Finds China Tariffs Would Disproportionately Affect Consumers of Furniture & Travel Goods

The National Retail Federation (NRF) has released a new study in conjunction with The Trade Partnership, Estimated Impacts of Proposed Tariffs on Imports from China: Furniture and Travel Goods. The study finds that the proposed tariffs would have a “substantial negative impact” on American consumers of furniture and travel goods; consumers would pay between $2.1 billion and $4.6 billion additional for furniture and between $578 million and $1.2 billion additional for travel goods. The full study is available here.

Following yesterday’s announcement that the Trump Administration will impose an additional 25% tariff on certain imports from China, today we have a statement from the Chinese Ministry of Commerce that they will take the same action on $16 billion worth of U.S. goods. This is not a surprise, but we are waiting to see what will be the next move. In the meantime, just a reminder that the Administration will hold three days of hearings on August 20 – 22 to hear from industry about the impact of the third group of products proposed for retaliatory tariffs. USFIA will testify at the hearing.

Industry Groups Ask Trump Administration to Update the Exclusion Process for Products Covered by the Section 301 Tariffs

USFIA joined with more than eighty industry groups to ask United States Trade Representative, Robert Lighthizer, for improvements to the exclusion process available for products that are affected by the penalty tariffs imposed under the 301 action against China. The letter contains proposals for product exclusion request procedures, and detailed recommendations regarding the criteria the Administration will use to evaluate product exclusion requests. Click here to read the full letter.

USDA Releases Report on China’s Proposed Supplemental Tariffs on U.S. Food and Agriculture Imports

The United States Department of Agriculture (USDA) released a report containing the unofficial translation of the announcement made on August 3rd by China’s State Council Tariff Committee (STCT) regarding China’s retaliatory tariffs. The complete translation and list of proposed supplemental tariffs on food and agriculture imports from the U.S. can be found here.

Today, USFIA President Julia Hughes is scheduled to testify during the Office of the U.S. Trade Representative’s hearing on the proposed tariffs on approximately $200 billion worth of Chinese products under Section 301 of the Trade Act of 1974. She will testify on a panel with the National Retail Federation (NRF), China Chamber of Commerce for Import and Export of Textiles, and Jo-Ann Stores, LLC, among others. Her testimony as prepared for delivery is available here. (As of this writing, the hearings was delayed due to a chemical leak at the hearing site, the U.S. International Trade Commission. It’s unclear whether Hughes' panel will continue today as planned or be delayed until another day; we will keep members informed. The hearing was originally scheduled for six days.)

Joann Stores has launched a campaign to stop the “Made in America Tax” (@made_tax), the proposed tariffs on fabrics and craft supplies. In addition, the Juvenile Products Manufacturers Association has started a #nobabytariffs campaign on social media and are using the following graphic. We encourage companies to engage on social media if possible.

Meanwhile, yesterday, Hughes spoke to National Public Radio’s Marketplace about the impact of tariffs on fashion products, particularly the impact on consumers. You can hear the entire interview at https://www.marketplace.org/2018/08/22/business/fate-fashion-trade-war

The Office of the US Trade Representative announced August 7th that the Administration will impose 25 percent tariffs on the second tranche of the 301 retaliation against China. This list covers $16 billion worth of Chinese imports and will go into effect on August 23. Click here to see the USTR press release.

ITC Analysis Finds Disappointing Results from the Dominican Republic Earned Import Allowance Program; OTEXA Sends Reminder that the Program Expires on December 1st

On August 7th, the Commerce Department Office of Textiles and Apparel sent a reminder for the industry that the Dominican Republic Earned Import Allowance Program (known as the DR 2-for-1) will expire on December 1, 2018. The program was created for ten years as part of the CAFTA agreement. While the DR 2-for-1 program (or EIAP) provides duty – free entry for some apparel made in the Dominican Republic, the complicated program has never been widely used. To prove that point, the US International Trade Commission (USITC) just released the ninth review of the program. The main findings: Of the 13 registered firms, only 4 firms are currently using the program. In 2017, US imports of woven cotton bottoms from the Dominican Republic fell 57 percent by value (from $3.5 million in 2016 to $1.5 million) and 80 percent by quantity (from 745,000 SMEs in 2016 to 154,000 SMEs). Click here to read the USITC’s full report.

USTR Announces New GSP Eligibility Review of Turkey

On August 3rd, the Office of the United States Trade Representative announced the initiation of a special review of Turkey to participate in the Generalized System of Preferences (GSP) program. The U.S. action is based on the fact that Turkey has taken action to retaliate against the U.S. 232 tariffs on imports of Turkish steel and aluminum.  Deputy U.S. Trade Representative, Jeffrey Gerrish, said in a statement that he hopes “Turkey will work with us to address the concerns that led to this new review of their duty – free access to the United States.”