Fashion Intel & Analysis

Lenzing, the innovative Austrian-based cellulosic fiber company, announced this week that it plans to “temporarily mothball” its plans to expand Tencel production in Mobile, Alabama, citing the “rising likelihood of increasing trade tariffs, paired with the potential surge in construction costs due to the buoyant U.S. labor market” for increasing the risk profile of this project. Lenzing will put all its effort to readjust the execution of its growth plan to meet strong market demand of its lyocell fibers. This includes an increased focus on the lyocell expansion project in Prachinburi (Thailand). Lenzing will reassess this decision on a regular basis but no substantial additional lyocell volumes, over and above the successful 25.000 tons expansion in Heiligenkreuz (Austria), will be added to the market in 2019 and 2020 by Lenzing. The press release is available on the Lenzing website.

The United States Fashion Industry Association (USFIA) joined with Americans for Free Trade in sending a letter to U.S. Trade Representative Robert Lighthizer requesting an exclusion process for the most recent wave of tariffs on $200 billion in goods. While an exclusion process was provided to American businesses for the nearly $50 billion in previously announced tariffs (Lists 1 and 2), the administration has said that no similar process will be provided on the most recent tariffs on $200 billion (List 3) in goods that went into effect Monday. The letter is available here.

The U.S. International Trade Commission (USITC) has released a new working paper, Textiles and Apparel: Made In USA . . . Again?, which cites the USFIA Fashion Industry Benchmarking Study. The working paper examines recent trends to determine whether data on trade, production, employment, and investment reflect the narrative surrounding revitalization of the industry. For the textiles sector, such data show mixed evidence of an industry in recovery. In the apparel sector, evidence suggests that in recent years reshoring has taken place, albeit on a modest scale. The paper cites our studies between 2014-2017. Thanks to Dr. Sheng Lu of the University of Delaware for his work on this study, which continues to be cited around the world as one of the most important sources of this information.

The USITC released another relevant report this week, The Impact of Tariff Preference Levels on U.S. Textile and Apparel Trade. The paper discusses certain U.S. bilateral or multilateral free trade agreements containing tariff preference levels (TPLs) and discuss import and export trends after TPL implementation and in some cases, TPL expiration, in the context of an FTA partners’ industry structure and competitiveness as a U.S. textile and apparel supplier. The paper specifically examines U.S. textile and apparel imports and exports from certain FTA partners, including Bahrain, Nicaragua and Costa Rica (under CAFTA-DR), Morocco, Oman, and Singapore. The paper is available here.

During the United Nations General Assembly, President Trump and South Korean President Moon Jae-in announced that they have signed an updated U.S.-Korea (KORUS) free trade agreement, which President Trump called “a basic redoing of the agreement that was done before, which was a very unfair agreement for the United States,” adding that the new agreement is “great for South Korea. It’s great for the United States. It’s great for both.” President Moon added, “As for the revision of the free trade agreement between our two countries, I believe that it’s significant because it means that our alliance is being expanded to the economic realm as well.  And I’m very pleased that we have revised this agreement to achieve a freer, a fairer, and more mutually beneficial agreement.” The full transcript of the announcement is available on the White House website.

According to the Office of the U.S. Trade Representative’s fact sheet, “The United States achieved important steps to improve the large trade deficit in industrial goods and to address KORUS implementation concerns that have hindered U.S. export growth.” The agreement covers auto and truck tariffs, pharmaceutical reimbursements, and customs: “Korea will address long-standing concerns with onerous and costly verification procedures through agreement on principles for conducting verification of origin of exports under KORUS and establish a working group to monitor and address future issues that arise.” The fact sheet is available on the USTR website.

While not mentioned in the fact sheet, the updated KORUS agreement includes a commitment by the United States to expedite the addition of three products to the Commercial Availability list to allow the use of non-FTA inputs. The letter is available here

House Ways & Means Committee Chairman Kevin Brady (R-TX) praised the announcement for putting “our trade relationship on an even stronger and more durable foundation.”

USFIA to Help Companies Minimize Impact of the Tariffs

As a reminder, yesterday, September 24th, the United States officially imposed tariffs on an additional $200 billion in imports from China, including some products imported by the fashion industry like textiles and fabrics, hats, handbags and wallets, and leather goods. The full list of products is available on the USTR website. The United States Fashion Industry Association (USFIA) will host a webinar series in early October, Fighting on the Frontlines of the Trade War: Strategies for Minimizing the Impact of the New Tariffs on Your Business. These three webinars, which are free for USFIA members/affiliates, will feature experts discussing ways to minimize the impact through the exclusions process, through working with your customs brokers, and through other duty-savings initiatives. Click here for details and registration.

This evening, President Trump announced that he will move forward with tariffs on an additional $200 billion worth of goods from China, including several fashion and consumer products.

The tariffs will take effect on September 24, 2018, and be set at a level of 10 percent until the end of the year. On January 1, the tariffs will rise to 25 percent.  Further, if China takes retaliatory action, the Trump Administration says they will pursue tariffs on approximately $267 billion of additional imports. Click here to read the White House statement.

The list of products subject to tariffs is available here.

USFIA President Julia Hughes spoke to NPR’s Marketplace today about how concerned we are about the tariffs. Click here to listen to the interview.