Fashion Intel & Analysis

On March 19th, President Trump received two letters—including one signed by the United States Fashion Industry Association (USFIA)—expressing concerns about potential tariffs under Section 301 of the Trade Act of 1974. The Administration is investigating China’s intellectual property and technology policies and considering broad tariff remedies on imports from China. One letter, available here, was signed by more than two dozen fashion and retail CEOs, including USFIA members American Eagle Outfitters, JCPenney, Kohl’s, Levi Strauss & Co., and Macy’s, among others. The other letter, available here, was signed by more than 40 trade associations across fashion, retail, tech, autos, and food and beverages. The Wall Street Journal has more on the trade association letter.

Agencies to Host CAATSA Event on April 13

Several U.S. government agencies, including U.S. Customs & Border Protection (CBP), U.S. Immigration & Customs Enforcement (ICE), and the U.S. Department of State, will hold an event to discuss the Countering America’s Adversaries Through Sanctions Act (CAATSA), which imposed new sanctions on Iran, North Korea, and Russia in August 2017. As part of the law focuses on forced labor overseas from North Korea, it’s important for companies to understand the implications for their supply chains. The event will take place on April 13th in Arlington, Virginia. If you are planning to attend the U.S. Global Value Chain Coalition fly-in, or are particularly concerned about this issue, we encourage you to attend. Click here to register on the CBP website.

As members will recall, in August 2017, the U.S. Trade Representative (USTR) launched an investigation on China intellectual property policies under a never-used provision of the trade law. This provision, Section 301 of the Trade Act of 1974 (“Section 301”), gives USTR the authority to impose tariffs or quotas on any country that is not living up to the terms of a trade agreement or that is taking “unjustifiable” actions that restrict U.S. Commerce. Though USTR has one year to finish its investigation, our contacts within the Administration have informed us that the Trade Representative has already presented its findings to the President. The report will likely conclude that China’s IP policies and practices (e.g., requirements that investors transfer technology; a general failure to vigorously protect IP, etc.) have cost U.S. companies up to $1 trillion over the past 10 years. The report will also likely recommend several means of retaliation against China, including perhaps tariffs on Chinese imports, restrictions on Chinese visas, and restrictions on Chinese investments in the United States. This week, it was rumored that the report recommended tariffs of $30 billion annually on Chinese imports into the United States, but that the President, when presented with this figure, opined that $30 billion in tariffs was not enough. USFIA is working hard to ensure that trade policy decision-makers understand the big, negative impact that billions of dollars in new tariffs on Chinese imports, as well as the likely soon-to-follow Chinese retaliation, would have on our sector.

USFIA Washington Counsel David Spooner of Barnes & Thornburg LLP contributed to this report.

EU Proposes New Tariffs on Textiles & Other Products

In response to President Trump’s steel and aluminum tariff announcement, the European Union has proposed new tariffs on several products, including U.S. textiles. The European Commission released a list of potential products, including many politically sensitive products in the United States, that could be subject to new tariffs by HTS number for industry input. The list includes a number of textile, apparel, and footwear products, including men’s and women’s denim pants, t-shirts, leather footwear, cotton bedlinens, and more. The list is available here, and the message the EU sent to stakeholders is available here.

Ways & Means, Senate Finance to Hold Hearings on Trade

On Wednesday, March 21st, the U.S. House Ways & Means Committee will hold a hearing on President Trump’s trade policy agenda, featuring U.S. Trade Representative Ambassador Robert Lighthizer. The U.S. Senate Finance Committee will hold a similar hearing with Lighthizer the following day, March 22nd.

“We want to work together with the Administration to implement sound trade policies that help our American workers and job creators. This includes bringing important trade agreements–like NAFTA–into the 21st century, as well as ensuring that the President’s recently announced steel and aluminum tariffs are targeted to address national security and unfair trade while not harming other sectors of our economy. Furthermore, we must break down barriers abroad so that our businesses can continue to sell their goods and services anywhere around the world. We also need to ensure that America has the tools to hold our trading partners accountable, which means establishing effective binding dispute settlement provisions and investor-state dispute settlement (ISDS), consistent with the objectives Congress laid out under TPA,” said Committee Chairman Kevin Brady (R-TX).

The following day, Thursday, March 22nd, the committee will hold another hearing recent trade actions, particularly the section 232 determinations on steel and aluminum, featuring U.S. Secretary of Commerce Wilbur Ross as the sole witness.

We will report back to members on any important news from all three hearings.

Senate Confirms Kaplan for Undersecretary of International Trade

Earlier this week, the U.S. Senate confirmed Gilbert Kaplan to serve as Undersecretary of International Trade at the U.S. Department of Commerce. His hearing took place last September, but Senate Minority Leader Chuck Schumer (D-NY) put a hold on the nominee over “stalled action on steel and aluminum imports.” Schumer lifted his hold following the tariff announcement. Kaplan was previously a partner at King & Spalding’s International Trade Group, where he won several anti-subsidy cases against China. He previously served as Deputy Assistant Secretary and Acting Assistant Secretary of Commerce for Import Administration, supervising over 500 trade remedy cases.

Administration Launches WTO Challenge to Indian Export Subsidy Programs

Earlier this week, the Office of the U.S. Trade Representative announced that the United States has requested dispute settlement consultations with the Government of India at the World Trade Organization (WTO) challenging Indian export subsidy programs. The challenged programs include the Merchandise Exports from India Scheme; Export Oriented Units Scheme and sector specific schemes, including Electronics Hardware Technology Parks Scheme; Special Economic Zones; Export Promotion Capital Goods Scheme; and a duty free imports for exporters program. Through these programs, India provides exemptions from certain duties, taxes, and fees; reduces import duty liability; and benefits numerous Indian exporters, including producers of steel products, pharmaceuticals, chemicals, information technology products, textiles, and apparel. According to Indian Government documents, thousands of Indian companies are receiving benefits totaling over $7 billion annually from these programs. The announcement is available on the USTR website.

President Trump, in a televised meeting with steel executives this afternoon, vowed to impose next week a tariff of 25 percent on steel imports and a tariff of 10 percent on aluminum imports.

The announcement followed a frenetic 15 hours in the White House, sparked by calls by the Commerce Department to industry officials inviting them to an event at the White House this morning. Industry executives quickly ascertained that the White House event was for the President to sign a Proclamation imposing “232” tariffs on steel and aluminum. (Section 232 permits the President to impose tariffs or quotas to protect national security.) News of the event set off a scramble, with companies, trade associations, foreign governments, and in-the-dark Administration officials calling the White House to express concerns. Meanwhile, the Proclamation itself was not ready for signature. Indeed, policy officials had not yet even worked out the details of the tariffs (i.e., product coverage, timing, and country exclusions). The White House spent the morning, pondering whether or not to proceed.

As the invited steel executives gathered for the 11am event, the White House conveyed that there would be no announcement today–that, instead, the President would conduct a “listening session.” This brief session was televised, and the President told the assembled group that, next week, he would impose tariffs on steel and aluminum pursuant to his national security authority. 

The situation will undoubtedly remain fluid over the next week. USFIA will keep members informed.   

For more on Trump’s announcement, which some are calling his “trade war,” read this detailed report in Axios.

USFIA Washington Counsel David Spooner of Barnes & Thornburg LLP contributed to this report.

USTR Releases 2018 Trade Agenda

In advance of Trump’s big tariff announcement today, the Office of the U.S. Trade Representative (USTR) released the 2018 Trade Policy Agenda and 2017 Trade Policy Report. “In 2016, President Trump told Americans, ‘Ladies and Gentlemen, it’s time to declare our economic independence once again.’ Less than two years later, the Trump Administration has begun fulfilling that promise,” the report opens. The trade policy agenda focuses on five major pillars: supporting national security, strengthening the U.S. economy, negotiating “better trade deals,” aggressively enforcing U.S. trade laws, and “reforming the multilateral trading system.” The full report is available on the USTR website.

GAO: CBP Improve Efforts to Address Counterfeits

The U.S. Government Accountability Office (GAO) has released a new report to the Senate Finance Committee, Intellectual Property: Agencies Can Improve Efforts to Address Risks Posed by Changing Counterfeits Market. In reviewing U.S. Customs & Border Protection’s IPR enforcement efforts, GAO found that changes in the marketplace—particularly the growth in e-commerce—have led to more opportunities to purchase counterfeits in the United States, and new challenges for CBP and U.S. Immigration & Customs Enforcement (ICE). In the findings, GAO makes two recommendations to CBP: evaluate its efforts to enhance IPR enforcement, and assess potential additional information sharing with the private sector. CBP agreed with these recommendations. The full report is available on the GAO website.

Last week, the United States Fashion Industry Association (USFIA) joined a multi-industry letter to the International Longshoremen’s Association (ILA) and United States Maritime Alliance (USMX) urging them to resume master contract negotiations at the East and Gulf Coast ports. The current contract expires September 2018. More than 100 organizations signed the letter, which explains that failure to resume negotiations soon could result in disruptions and cargo diversions. The letter is available here.

Senate Confirms Several Deputy USTRs

On March 5th, the U.S. Senate confirmed Jeffrey Gerrish for Deputy U.S. Trade Representative covering Asia, Europe, the Middle East, and industrial competitiveness. He currently leads the international trade practice at Skadden, Arps, Slate, Meagher & Flom LLP, the same firm as U.S. Trade Representative Robert Lighthizer. Last week, the Senate confirmed former Senate Agricultural Committee staffer Gregg Doud for Chief Agricultural Negotiator, as well as Deputy U.S. Trade Representatives C.J. Mahoney (covering investment, services, labor, environment, Africa, China, and the Western Hemisphere) and Dennis Shea (Ambassador to the World Trade Organization).

Report Finds Proposed Steel & Aluminum Tariffs Would Cause Net Job Loss in United States

A new briefing paper by The Trade Partnership finds that President Trump’s proposed tariffs on steel and aluminum would have far-reaching detrimental effects on the U.S. economy and jobs. According to the report, the tariffs would result in a net loss of nearly 146,000 jobs in the United States, with more than five jobs lost economy-wide for every job gained in the iron, steel, and aluminum sector. The fabricated metals sector, motor vehicles and parts, and transportation equipment sectors would be particularly hard hit, with the greatest impact on workers in production and other low-skill jobs. These estimates do not include potential impacts from retaliation, just from applying the proposed tariffs on targeted imports. The full report is available on The Trade Partnership’s website.

FMC Votes to Investigate Carriers’ Detention, Demurrage, & Per Diem Charges

On March 5th, the Federal Maritime Commission (FMC) voted to investigate the carrier industry’s practice of assessing detention, demurrage, and per diem charges, following a petition filed in December 2016 by a coalition of shippers, associations, and trucking organizations, including the United States Fashion Industry Association (USFIA). The petition asked the FMC to adopt a policy to restrict carriers’ ability to assess what the coalition deemed unreasonable detention, demurrage, and per diem penalties, particularly when the cause of the infractions was beyond the control of cargo owners’ or their representatives. Carriers have said these fees combat excess free time and drive revenue, but this became a problem with the congestion in the West Coast ports in 2014-2015 and in the aftermath of the bankruptcy of Hanjin Shipping in 2016. American Shipper has more.

Today, U.S. Secretary of Commerce Wilbur Ross released reports on Commerce’s investigations into the impact on national security of imports of steel and aluminum. Commerce found that the quantities and circumstances of these imports “threaten to impair the national security,” as defined by Section 232 of the Trade Expansion Act of 1962. President Trump has several actions he can take, or no action, based on the analysis and recommendations provided in the reports; he is required to make a decision on steel by April 11th and aluminum by April 19th. More information on the key findings and recommendations is available on the Commerce website.

State Department Plans to Discuss Used Clothing Ban at EAC Meeting in Uganda

This week during a press briefing, Acting Director for Economic and Regional Affairs at the U.S. Department of State Harry Sullivan provided an update on next steps with regards to the ban on used clothing by Rwanda, Tanzania, and Uganda. The following is from the official State Department transcript of the press call.

QUESTION: Mr. Sullivan, I wondered if you can give an update on what’s happening regarding the out-of-cycle review under AGOA for Rwanda, Tanzania, and Uganda, regarding their phased-in bans on used clothing exports from the United States. Constance Hamilton, at USTR - U.S. Trade Representative - said in August that she expected there’d be a resolution, a decision, by year’s end. As far as I know that hasn’t happened. There’s a proposal that these countries should be punished under AGOA for violating AGOA’s terms by instituting this ban. So, can you say what’s happening with that, please?

SULLIVAN: Yes. Next week [at the East African Community Heads of State Summit in Kampala, Uganda] the leaders of Rwanda, Tanzania, and Uganda are going to meet on this issue, so I wish I was privy to what they might decide. They might not have come to consensus yet, I’m really not sure, but we are asking those three countries to do two things. One is to decrease their tariffs to their pre-2016 levels, and the second thing we’re asking is to commit that aside from health or sanitary reasons, not to phase out the export of used clothing.

So, we’ve communicated that, we believe very effectively, to all levels of the three governments. The trade ministers met last Friday; I don’t have a read-out on what their discussions were. The leaders will meet next week, and I believe the result of that meeting will determine how we proceed…

QUESTION: I have one question, which is Trump’s administration’s slogan has been “America First,” and this also includes trade and other things. Rwanda, Tanzania, and Uganda are saying that it’s important for them to boost their textile industries as well as shoe industries, and that’s why they’re putting a ban on the imported clothing from the U.S. and U.K. and Canada. This has raised concerns with the U.S., as you know, and I’m thinking, don’t you think this is a conflict of interest? Thank you.

SULLIVAN: Thank you very much for that question. While we understand the East African Community’s desire to build a domestic textile sector, we firmly believe that the EAC’s ban on imports of used clothing will not help achieve that. First, it’s job-destroying. The proposed ban will hurt an estimated 300 thousand men and women that work in the used clothing business all across the East African Community, and it will also negatively impact at least 40 thousand U.S. jobs in the used clothing sector in the United States.

Secondly, it limits consumer choice. So basically, what the leaders of the EAC are proposing is to say to consumers of used clothing, who are really the poorest consumers of East Africa, what they’re saying is we are going to take this choice away from you and you will not have access to this market anymore. So, I really question whether the consumers of used clothing will be able to afford the new apparel being made in the EAC market. So rather than banning imported used clothing, we believe the most effective domestic growth strategy for the local fashion and apparel industry would be to build its brands and markets for the growing middle class, which prefers to buy new apparel in shopping malls and other places anyway.

So, you noted “America First.” I don’t know that it really has too much application here, but the administration does believe - and trade enforcement is an administration priority - but within the AGOA legislation itself, it says that in order to continue to receive benefits under the AGOA program, countries must meet AGOA eligibility criteria, which include eliminating barriers to U.S. trade and investment. Thank you.

Luxury Knitwear Retailer Settles False Claim Act Allegations Concerning Improper Avoidance of Customs Duties

This week, the U.S. Department of Justice announced that a British luxury knitwear retailer and the company’s CEO have settled to resolve False Claims Act allegations that they avoided U.S. Customs duties on merchandise shipped from the United Kingdom to U.S. customers. The company, Pure Collection Ltd., settled for $908,1000 on charges of breaking up single shipments worth more than the de minimis ($200, and later $800), to avoid the applicable duties. More information is available on the DOJ website.