Fashion Intel & Analysis

In This Memo:

  • New Legislation Gets Tough on Imports Made by North Korean Citizens
  • Hearing on MTB Announced 

New Legislation Gets Tough on Imports Made by North Korean Citizens

By John Pellegrini, USFIA Customs Counsel, McGuireWoods LLP

Recently enacted legislation creates what may be an intractable problem for importers. The legislation establishes a rebuttable presumption that goods said to be manufactured with the use of North Korean nationals or citizens is forced labor. U.S. Customs & Border Protection (CBP) will allow entry of the goods only when it determines by clear and convincing evidence that the goods were not produced with conflict, forced or indentured labor. At present, there is no exception for North Korean citizens who are seeking asylum but have not been granted that status.

If CBP has reason to believe that imported goods are made by a producer who employs North Korean nationals or citizens (and a mere allegation by a NGO could suffice), the producer’s goods will be excluded. At that point, the importer will have to establish that the North Korean citizens or nationals are not forced labor. At first blush, the likelihood of this occurring seems remote.

The new legislation also requires that the State Department create a list of producers who employ North Koreans.

According to the United Nations, North Korea relies on overseas workers to earn hard currency, especially since sanctions have choked off some other sources of export earnings. Much of their wages are remitted back to the state and help fund the country’s nuclear and missile programs.

Press reports indicate that a large number of countries allow North Korean labor. These countries including Mexico, Poland, Russia and, of course, China. There are reports of apparel production involving North Korea labor in China, Malta, Mongolia, and Myanmar.

We learned more about this topic and other forced labor issues during yesterday’s webinar with Ken Kennedy of U.S. Immigration & Customs Enforcement (ICE). If you missed it, you can access the recording here. 

Hearing on MTB Announced

The House Ways & Means Subcommittee on Trade will hold a hearing entitled “Miscellaneous Tariff Bill: Providing Tariff Relief to U.S. Manufacturers Through the New MTB Process,” on Wednesday, October 25th at 2:00 PM. The hearing will focus on the potential economic benefits to U.S. manufacturers and consumers of providing temporary tariff relief through the new MTB process on imported products not produced in the United States. More information on the hearing and the MTB process is available on the Ways & Means website.

In This Memo:

  • USTR Delays Fifth Round of NAFTA Talks
  • Treasury Declines to Name China a Currency Manipulator in New Report
  • Commerce Initiates Antidumping Duty Investigation of Imports of Certain Resin
  • Amber Road Webinar on Why Shippers Struggle to Link Sourcing and Global Trade

USTR Delays Fifth Round of NAFTA Talks

As the fourth round of North American Free Trade Agreement (NAFTA) talks conclude, the United States, Canada, and Mexico have announced a delay in the fifth round of talks; originally scheduled for the end of October/early November, the talks will now take place November 17-21 in Mexico City. In a statement, U.S. Trade Representative Robert Lighthizer criticized his counterparts:

Frankly, I am surprised and disappointed by the resistance to change from our negotiating partners on both fronts.  We have made some headway on the first objective, but even here we have sometimes seen a refusal to accept what is clearly the best text available in spite of the countries having agreed to it in the past. 

In certain cases, partners who agree to TPP have actually rejected its text here.  I would have thought by now we could have cleared chapters dealing with digital trade, telecommunications, anticorruption, and several sectoral annexes, for example.

As difficult as this has been, we have seen no indication that our partners are willing to make any changes that will result in a rebalancing and a reduction in these huge trade deficits.  Now I understand that after many years of one-sided benefits, their companies have become reliant on special preferences and not just comparative advantage.  Countries are reluctant to give up unfair advantage.

But the President has been clear that if we are going to have an agreement going forward, it must be fair to American workers and businesses that employ our people at home.

The full statement is available on the USTR website. USFIA remains concerned about the U.S. proposals to eliminate the NAFTA Tariff Preference Levels (TPLs) and make it more difficult to qualify for NAFTA duty-free treatment. For an update on the fourth round and what’s ahead, join our webinar on October 25th with USFIA Associate Member Akin Gump.

Treasury Declines to Name China a Currency Manipulator in New Report

On October 17th, the U.S. Department of Treasury released the annual Report to Congress on Foreign Exchange Policies of Major Trading Partners in the United States. Treasury found no major trading partner, including China, met the criteria for currency manipulation during the year ending June 2017. However, five countries (China, Japan, Korea, Germany, and Switzerland) were placed on the Monitoring List, noting China’s large bilateral trade surplus with the United States. The full report is available on the Treasury website.

Commerce Initiates Antidumping Duty Investigation of Imports of Certain Resin

The U.S. Department of Commerce has initiated an antidumping duty (AD) investigation to determine whether imports of polyethylene terephthalate resin from Brazil, Indonesia, the Republic of Korea, Pakistan, and Taiwan are being dumped into the United States. These AD investigations were initiated based on petitions filed by DAK Americas, LLC (Charlotte, N.C.), Indorama Ventures USA, Inc. (Decatur, Ala.), M&G Polymers USA, LLC (Houston, Texas), and Nan Ya Plastics Corporation, America (Lake City, S.C.) on September 26. According to the press release, the estimated dumping margins alleged by the petitioners range from 18.76 to 115.87 percent, 8.49 to 53.50 percent, 55.74 to 101.41 percent, 25.03 to 43.40 percent, and 14.67 to 45.00 percent for Brazil, Indonesia, Korea, Pakistan, and Taiwan, respectively. For more information, visit the Commerce Department website.

Amber Road Webinar on Why Shippers Struggle to Link Sourcing and Global Trade

Tomorrow, October 19th, USFIA Innovation Partner Amber Road will host a free webinar, Straight to the Source: Why Shippers Struggle to Link Sourcing and Global Trade. This webinar will dive deeper into a recent American Shipper white paper on where sourcing and global trade management tend to break down. Don’t miss this chance to get smarter about the undeniable links between sourcing and global trade. Visit http://bit.ly/StraighttotheSourceWebinar to register.

In This Memo:

  • False Claims Act Settlement Raises Questions
  • CBP to Host East Coast Trade Symposium in December

False Claims Act Settlement Raises Questions

By John Pellegrini, USFIA Customs Counsel, McGuireWoods LLP

A recent settlement in a False Claims Act case raises questions about the responsibilities of a DDP purchaser vis-à-vis the DDP seller’s compliance with the customs laws.

The settlement requires that a garment wholesaler pay $1 million in damages. In addition, the wholesaler agrees to undertake certain compliance efforts designed to ensure that the merchandise it purchases on DDP terms meets all customs requirements.

The settlement arose when a garment wholesaler, which had been purchasing on FOB terms, converted its purchases to DDP. However, at the same time, its import department monitored shipments from the Far East and dealt with the carriers and customs broker handling the shipments. In addition, the wholesaler paid the exporter rather than the importer. Most importantly, the complaint alleges that the wholesaler provided phony purchase orders and otherwise assisted the importer in evading duties by supporting the importer’s undervaluation.

The wholesaler’s conduct was egregious and certainly atypical of DDP purchasers.  Nevertheless, the case highlights the reality that DDP purchasers are not totally insulated from customs issues. The settlement agreement makes it clear that the government expects DDP purchasers will at least look at prices and question prices that are outside the normal range, going so far as to expect that they will review USITC data on average DDP prices. In addition, DDP purchasers whose primary contact is the foreign exporter rather than the importer have a higher degree of responsibility in determining whether the customs laws are respected.

Member companies who purchased on DDP terms should examine their processes in light of this settlement. Who is the addressee on the purchase order? Who is paid for the merchandise? Are you identified as the ultimate consignee on the CBP Form 7501?

CBP to Host East Coast Trade Symposium in December

U.S. Customs & Border Protection (CBP) will hold the East Coast Trade Symposium from December 5-6, 2017, in Atlanta, Georgia. We will inform members when registration is open; we encourage you to register as soon as possible because this event typically fills to capacity.

In This Memo:

  • USTR Highlights Progress in Fourth Round of NAFTA Talks, While Trump Discusses Possibility of Withdrawal
  • Reichert Calls for Trade Agreements in Asia-Pacific
  • CPSC Recommends Manufacturers Cease Use of OFRs in Certain Products
  • NYT: For Dignity and Development, East Africa Curbs Used Clothes Imports 

USTR Highlights Progress in Fourth Round of NAFTA Talks, While Trump Discusses Possibility of Withdrawal

The fourth round of North American Free Trade Agreement (NAFTA) talks are taking place this week in Arlington, Virginia. U.S. Trade Representative Robert Lighthizer said in a statement that the three parties have closed the chapter on Competition, which includes “increased procedural fairness in competition law enforcement so that parties are given a reasonable opportunity to defend their interests and ensured of certain rights and transparency under each nation's competition laws.” The USTR statement also said that the parties are making good progress on other issues. However, there is no sign of progress regarding textiles and apparel updates in NAFTA, and reports from yesterday’s discussions suggest that the U.S. continues to propose eliminating the NAFTA Tariff Preference Levels and replace them with a short supply option. USFIA joins with industry groups in the U.S., Canada and Mexico to oppose this proposal. The negotiations have also been extended to October 17th. As the trade talks began, however, President Trump said, “It’s possible we won’t be able to make a deal, and it’s possible that we will. We’ll see if we can do the kind of changes that we need. We have to protect our workers. And in all fairness, the Prime Minister wants to protect Canada and his people also. So, we’ll see what happens with NAFTA, but I’ve been opposed to NAFTA for a long time, in terms of the fairness of NAFTA.”

Reichert Calls for Trade Agreements in Asia-Pacific

On October 11th, the House Ways & Means Trade Subcommittee held a hearing on opportunities to expand U.S. trade relationships in the Asia-Pacific region and strengthen existing agreements like the U.S.-Korea Free Trade Agreement. In his opening remarks, Trade Subcommittee Chairman David Reichert (R-WA) said, “If we want to remain competitive, then we must focus on doing so in the Asia-Pacific region…I firmly believe we need to pursue new bilateral agreements in the Asia-Pacific region.” The testimony highlighted the need for improved U.S. access to these growing global markets. The full remarks and testimony are available on the Ways & Means Committee website.

CPSC Recommends Manufacturers Cease Use of OFRs in Certain Products

In a new guidance document, the Consumer Product Safety Commission (CPSC) recommends that manufacturers cease the use of organohalogen flame retardants (OFRs) in the production of children's products, furniture, mattresses, and electronics casings. Importers, distributors, and retailers also should obtain assurances from manufacturers that such products do not contain OFRs. See the CPSC Guidance Document on Hazardous Additive, Non-Polymeric Organohalogen Flame Retardants in Certain Consumer Products for more details.

NYT: For Dignity and Development, East Africa Curbs Used Clothes Imports

Today, the New York Times reports on the debate over used clothing in East Africa, stating that countries like Rwanda, Kenya, Uganda, and Tanzania are being punished by the United States for trying to phase-out the import of used clothing. The story is available here.

In This Memo:

U.S. Tables Proposal Limiting NAFTA Flexibilities, Including TPLs

During the recent North American Free Trade Agreement (NAFTA) negotiating round in Ottawa, the United States tabled some specific proposals affecting trade in textiles and apparel. Press reports confirm that the U.S. proposes to eliminate all NAFTA Tariff Preference Levels (TPLs) and would develop a short-supply process instead. There are currently 12 apparel, 6 yarn, and 6 fabric TPLs in the agreement, and the TPLs cover shipments between all three countries. Most of the TPLs are well-utilized and represent an essential trade flexibility for many USFIA members. Akin Gump provided a summary during today’s NAFTA webinar. While the original agreement does not include a textiles chapter, the U.S. proposal does include one similar to the TPP draft text, as well.

The “hot issues” in the negotiations right now include the proposed five-year sunset provision, the proposed changes to the trade remedy law, government procurement, intellectual property, and labor.

On September 22nd, the Administration notified the Congress that there also will be potential changes to trade remedy law. This means that the earliest Congress could consider a new agreement is March 21, 2018, as Trade Promotion Authority requires the Administration to give Congress 180 days’ notice before signing any agreement with changes to trade remedy law. In addition, TPA requires the Administration to notify Congress 90 days before signing the agreement, so the negotiations will need to conclude in December in order to see an agreement in March.

The next round is scheduled in Washington, D.C., from October 11-15, 2017.

We covered these issues and more during today’s NAFTA webinar with Akin Gump; if you did not register, contact us to get the recording and sign up for future webinars.

Administration & Congress Develop Tax Reform Framework

The Trump Administration, the House Committee on Ways and Means, and the Senate Committee on Finance have developed a unified tax reform framework. “This framework will deliver a 21st century tax code that is built for growth, supports middle-class families, defends our workers, protects our jobs, and puts America first. It will deliver fiscally responsible tax reform by broadening the tax base, closing loopholes and growing the economy,” said the Ways & Means Committee press release. Expect to hear more as the details are rolled out. The framework one-pager is available here, and the full framework is available here.

Withdrawal of Request to Add Certain Flannel Fabric to CAFTA-DR Short Supply List

On September 27th, the Committee for the Implementation of Textile Agreements (CITA) received notice that School Apparel, Inc. has withdrawn its request to add certain polyester/acrylic/rayon woven flannel fabric to the CAFTA-DR Short Supply List. The original request was filed on September 8th. International Trade Group/Burlington World Wide submitted a response to offer to supply the fabric.