Fashion Intel & Analysis
Yesterday the House passed the Uyghur Human Rights Policy Act of 2020 (S.3744) with an almost unanimous vote of 413 to 1. Earlier this month the Senate approved the measure by Unanimous Consent. Now that the bill has passed the House it will move to the President's desk for signature.
As previously reported by USFIA, there are two sections of the legislation that are of particular interest to fashion brands and retailers. In the Sense of Congress part of the legislation one of the statements says: "United States companies and individuals selling goods or services or otherwise operating in Xinjiang Uyghur Autonomous Region should take steps, including in any public or financial filings, to ensure that (A) their commercial activities are not contributing to human rights violations in Xinjiang Uyghur Autonomous Region or elsewhere in China; and (B) their supply chains are not compromised by forced labor." The legislation also requires the Secretary of State to submit a report on human rights abuses in Xinjiang to the Committee on Foreign Relations of the Senate and the Committee on Foreign Affairs of the House of Representatives within 180 days. That report is required to contain "an assessment of the use and nature of forced labor in and related to the detention of Turkic Muslims in Xinjiang Uyghur Autonomous Region, including a description of foreign companies and industries directly benefitting from such labor." House lawmakers approved a similar bill in January, but there are differences between the Senate and House versions, so they will need to reconcile the bills before it can go to the President for signature.
In a message (CSMS #42790947), U.S. Customs and Border Protection announced that they will host a webinar on the implementation of the United States Mexico Canada Agreement (USMCA) Scheduled for 2:00 PM ET on June 1st, the webinar will focus on the technical, policy and operational aspects of USMCA in advance of the July 1st entry into force. Interested in more details? If you missed yesterday's USFIA webinar, "Are You Ready for USMCA?" it is available for members on our website.
On May 22nd, the Office of the United States Trade Representative (USTR) released the negotiating objectives for the United States-Kenya Free Trade Agreement (FTA). USTR's overarching objective is to create a mutually beneficial trade agreement that can serve as a model for agreements with other African countries. Perhaps not surprisingly, the Administration objectives for the textile and apparel sector focuses on opening the Kenyan market to U.S exports, and suggests that there will be a battle over the Rules of Origin for the imports from Kenya that currently qualify for duty-free treatment thanks to AGOA. The negotiating objective for our sector is "Secure duty-free access for U.S. textile and apparel products and seek to improve competitive opportunities for exports of U.S. textile and apparel products while taking into account U.S. import sensitivities."
USTR also lists the negotiating objectives for Rules of Origin under the agreement. They are:
Develop rules of origin that ensure that the benefits of the Agreement go to products genuinely made in the United States and Kenya.
Ensure that the rules of origin incentivize production in the territory of the Parties.
Establish origin procedures that streamline the certification and verification of rules of origin and that promote strong enforcement, including with respect to textiles.
Promote origin procedures that ensure that goods that meet the rules of origin receive the Agreement’s benefits.
Finally, there are substantial recommendations for provisions related to Enforcement and Trade Facilitation, including recommendations related to the de minimus shipments. Following with the release of the Administration's negotiating objectives, the International Trade Commission launched their review of the U.S.-Kenya Trade Agreement: Advice on the Probable Economic Effect of Providing Duty-free Treatment for Currently Dutiable Imports. The ITC will hold a virtual hearing on July 7th, and the final report is expected to be sent to USTR by September 16th.
Today, Secretary of State Mike Pompeo certified to Congress that the United States no longer considers Hong Kong to maintain its autonomy from China, and therefore Hong Kong no longer warrants special treatment under U.S. law. Pompeo said "this decision gives me no pleasure. But sound policy making requires a recognition of reality. While the United States once hoped that free and prosperous Hong Kong would provide a model for authoritarian China, it is now clear that China is modeling Hong Kong after itself."
Why does this matter? There are potentially serious repercussions for the U.S.-Hong Kong trading relationship going forward. Here is an update from USFIA's Washington Counsel, David Spooner, Partner at Barnes and Thornburg. He says: " The U.S. trade relationship with Hong Kong is generally governed by the Hong Kong Relations Act, which passed Congress in the wake of the UK’s handover of Hong Kong to Mainland China in 1997. The Act requires the United States to continue to treat Hong Kong – with respect to trade and other arenas – in the same way after the handover to China as before the handover “unless otherwise expressly provided by law or by Executive order.” The Act also requires the Secretary of State to certify to Congress annually that Hong Kong remains “sufficiently autonomous” to maintain its special status under U.S. law. So, while today’s statement by Secretary of State Pompeo has no immediate legal ramifications, it presages a likely executive order from the President, decreeing that, under the terms of the Act, Hong Kong no longer will receive special treatment under U.S. law. The President, of course, has discretion on how to word such an executive order, but it may mean that the trade remedy, export control, and other trade measures (e.g., the China Section 301 tariffs) would apply to Hong Kong as if Hong Kong were no different than mainland China."
Today the Uyghur Human Rights Project (UHRP) released a statement in support of the last week's move by the Department of Commerce to add nine Chinese entities to the Entity List with export sanctions. The Department of Commerce found the entities to be complicit in human rights violations and abuses against the Uyghur ethnic minority in Xinjiang province. Omar Kanat the director of UHRP said "the continued actions taken by the Executive Branch in response to human rights abuses in East Turkistan is highly encouraging to Uyghurs." As reported by USFIA last week, included on the list of entities is Aksu Huafu Textiles Co.