Fashion Intel & Analysis

Now that the Administration is announcing more product exclusions to the China 301 tariffs, we also want to provide some context.  There were 30,329 product exclusions filed for List 3 -- 378 denied and 147 granted, including today’s announcement. Taking a deeper dive into products falling under Chapter 42 (articles of leather; travel goods; and handbags) and Chapter 65 (headwear), there were 1,304 exclusion requests made, 52 denied and 2 granted.  In case you wonder, the two Chapter 42 products that were granted product exclusions are pet articles. The remaining requests are under USTR’s Stage 2 “Initial Substantive Review.” If products pass stage 2 they will move to Stage 3 “Administrability Review” followed by Stage 4 “Publication in Process” and then a final decision will be made, granted or denied.

The following table outlines Chapter 42 and 65 individually. 

HTS 

Chapter 42  Chapter 65 Total
Granted Request 2 0 2
Denied Request 42 10 52
Total Exclusion Requests 1,112 192 1,304

The Office of the United States Trade Representative (USTR) has announced new product exclusions for List 3 and they will be published in Monday’s Federal Register. The product exclusions announced will apply retroactive to September 24, 2018, effective date of the $200 billion action,  and will remain in effect until August 7, 2020. Of note for fashion brands and retailers, the exclusions include: 

  • 5106.10.0090 Yarn of carded Merino sheep wool, not put up for retail sale, containing 85 percent by weight of wool, of which the average fiber diameter is not more than 25 microns
  • 5407.52.2060 Woven dyed fabrics of 100 percent textured polyester filament yarn, measuring 332.7 cm in width, weighing more than 170 g/m2
  • 5603.12.0090 Nonwoven fabrics of man-made fibers, weighing more than 25 g/m2 but not more than 70 g/m2 , with a smooth or embossed texture (not impregnated, coated or covered with material other than or in addition to rubber, plastics, wood pulp or glass fibers), in rolls that are pre-slitted in lengths of not less than 15 cm to not more than 107 cm, for use in the manufacture of personal care wipes
  • 5903.10.2090 Imitation leather fabrics, of man-made fibers impregnated, coated, covered or laminated with 75 percent polyvinyl chloride (PVC) by weight
  • 5903.20.2500 Fabrics of man-made micro-denier fibers impregnated, coated, covered, or laminated with polyurethane, of a width of at least 135 cm but no more than 150 cm, weighing at least 206 g/m2 but not more than 500 g/m2
  • 6001.10.2000 Long pile knit fabrics, of acrylic pile on polyester ground, valued not over $16 per m2
  • 9403.50.9080 Wooden jewelry armoires, each weighing over 13 kg but not over 28 kg, measuring 101 cm in height by 44 cm in width by 30 cm in depth, with 8 drawers
  • 9403.50.9080 Wooden jewelry armoires, each weighing over 13 kg but not over 28 kg, measuring 102 cm in height by 46 cm in width by 30 cm in depth, with 7 drawers

USFIA is pleased to share with you a new online publication, the Import Transportation Digest.  

This newsletter is prepared by the experts at AISA, the American Import Shippers Association, and provides insights about the supply chain and logistics for imports from Asia.  The Digest will cover issues ranging from regulatory actions by the Federal Maritime Commission (FMC), to developments on technology and labor, to insights about rate increases.  We encourage you to sign up for your own copy.

The first issue of the digest provides details on the new IMO regulations effective January 2020, what to expect with the general rate increases on Trans-Pacific carriers, the introduction to automated terminals, and FMC recommendations on demurrage.

Importance of Supply Chain Due Diligence: 
Some Examples of Potential Reputational Risks for Fashion Brands and Retailers   

Everyone knows that supply chain risk management is an important part of every companies’ compliance strategy. The importance of maintaining compliance throughout the supply chain is highlighted by several recent media reports.  In this case the criticism about compliance is aimed at international production in Bangladesh and in China. USFIA is sharing this information as a reminder of the many supply chain risks to fashion brands and retailers.  

Another Look at Compliance Problems in Bangladesh.  Today the Wall Street Journal posted an online story that takes a deep dive into allegations that Amazon marketplace and U.S. apparel companies are still sourcing from Bangladesh factories that do not meet labor and safety standards. The article looks at the positive impact of the Alliance, the Accord and Nirapon. But the headlines focus on the lapses in transparency and enforcement of supplier requirements.  

Apparel Production Alleged in Xinjiang Forced Labor Camps.  Last week the Congressional-Executive Commission on China (CECC) held a public hearing on forced labor in Xinjiang and how products made in Xinjiang’s forced labor camps have entered global supply chains.  Many witnesses at the hearing criticized the apparel industry. In addition to concerns from human rights groups, the hearing included the release of a study conducted by CSIS (the Center for Strategic & International Studies), a respected Washington D.C. think tank.  CSIS estimates that 12 percent or more of U.S. apparel imports from China could be touched by Xinjiang’s forced labor, since Xinjiang produces more than 80 percent of China’s cotton. 

If you are interested in seeing all the testimony, let us know.  We want to highlight six of the recommendations that directly mention cotton, textiles and apparel made in Xinjiang.  

In the report Connecting the Dots in Xinjiang CSIS recommends:

1) The apparel industry should consider instituting a ban on knowingly sourcing Xinjiang cotton, as they did for Uzbek cotton. This would acknowledge the severity of the problem, although given the dependence of the US apparel sector on China, it will be challenging.

2) Public reporting by companies on their sourcing relationship with Xinjiang until a collective industry ban is in place. Companies sourcing cotton and textile products from China should make all reasonable efforts to determine their chain of custody to the place of origin and identify forced labor red flags, including those specific to Xinjiang where relevant.

3) Evaluate the risk of legal complicity in forced labor and other potential crimes against humanity occurring in Xinjiang and considering the implications for their sourcing.

The Uyghur Human Rights Project recommends: 

1) Congress should ban the importation of cotton, textiles, and garments originating from Xinjiang, until the policies of mass internment and coerced labor recruitment are ended, and the conditions necessary for due diligence have been established, including a free press and unimpeded access for international observers and diplomats. 

2) Congress should pass legislation to mandate clearer transparency about suppliers and require companies publicly disclose to the Securities and Exchange Commission and elsewhere the risk of forced labor in their supply chain, and whether they have taken measures to identify and address forced labor from Xinjiang and China specifically. 

3) Companies must suspend all sourcing of cotton, textiles, and garments from Xinjiang, considering that due diligence in the supply chain is difficult, given the conditions of total control, mass internment, widespread government-subsided forced-labor recruitment, and large-scale government-sponsored prison/camp labor.

The Department of Agriculture’s Agricultural Marketing Service (AMS) has issued a ruling to increase the assessments on imported cotton and cotton-containing products by 2.64 percent, effective December 16. The increase reflects the increase in the average weighted price of Upland cotton received by U.S. farmers in 2018. The ruling also amends the Import Assessment Table, which indicates the total assessment rate due for each HTS number, to reflect the increases.

The current assessment on imported cotton is $0.011905 per kilogram of imported cotton. The revised assessment in this direct final rule is $0.012222, an increase of $0.000317 per kilogram. Comments on the proposed ruling are due by November 14, 2019.