Fashion Intel & Analysis

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should be withdrawn in respect of certain products originating in Cambodia.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

China has announced it would cut tariffs on $75 billion of U.S. goods in half, following the signing of a Phase One U.S.-China trade deal. Beginning February 14, China will cut tariffs on some U.S. goods to 5% from 10%, and other items will be reduced to 2.5% from 5%.  Further adjustments will depend on the development of the trade relationship, according to China’s finance ministry.

The International Labour Organization (ILO) has released the Third-party monitoring of child labour and forced labour during the 2019 cotton harvest in Uzbekistan, finding “major progress” on removing forced labor in its cotton harvest. “The 2019 report notes Uzbekistan continued to demonstrate major progress in the eradication of child labour and forced labour in the 2019 cotton harvest.  As in previous years, there were only isolated cases of minors below the legal working age picking cotton.  The number of people forced to pick cotton has further declined in 2019.  Despite this, a considerable number of forced labour cases were observed – about 102,000 people (5.9 per cent) were subject to some form of coercion.  The report recommends that the government should reinforce its efforts in 2020 to fully reach the target of eliminating forced labour and to promote fundamental principles and rights at work in cotton production and the emerging textiles and garment sector,” said Kevin Cassidy of ILO. 

President Trump has announced the intent to negotiate a trade agreement with Kenya after meeting with Kenyan President Uhuru Kenyatta on Thursday. “Kenya is a recognized leader across the continent, an important strategic partner of the United States, and there is enormous potential for us to deepen our economic and commercial ties,” United States Trade Representative Robert Lighthizer said in USTR’s press release. Ambassador Lighthizer will notify Congress of the Trump Administration’s intention to start negotiations under the Trade Promotion Authority (TPA) and USTR will publish notices in the Federal Register requesting public input on the negotiations, according to the press release.  

The USTR Fact Sheet on U.S.-Kenya Trade and Investment Relationship is available here. The top U.S. imports from Kenya in 2019 was apparel at $454 million, according to the fact sheet. The fact sheet states that “Africa is growing rapidly and presents enormous opportunities for U.S. commercial and economic interests.  It is undergoing a transformative change toward greater regional integration, has among the highest growth rates globally, and will account for nearly a fifth of the world’s consumers by 2030.”

Earlier today U.S. Customs & Border Protection (CBP) released a Cargo Systems Messaging Service (CSMS) on the decrease in List 4A tariffs on China from 15 percent to 7.5 percent, effective February 14. According to the message, the decrease in List 4A tariffs are “effective with respect to goods entered, or withdrawn from warehouse for consumption, on or after 12:01 AM eastern daylight time on February 14, 2020.” In addition to any regular chapter reporting requirements, the HTS number 9903.88.15 and duty rate 7.5 percent must be reported. Additionally, “merchandise covered by Tranche 4A that was admitted to a foreign trade zone under Privileged Foreign status will be subject to tariff classification at the rate of duty and tax in force on the date of filing the application for privileged foreign status,” according to the message. The full CSMS is available here.