WASHINGTON — Retailers and importers are facing the first pinch from the impending nonquota world.
The interagency Committee for the Implementation of Textile Agreements sent a shock wave through the retailing and importing community last week with a directive to U.S. Customs & Border Protection to deny entry in January to any apparel and textile products that were shipped over their quota limits this year.
U.S. retailers, apparel manufacturers and importers expressed outrage over CITA’s decision, which some deemed “punitive.”
In the past, if U.S. importers overshipped merchandise in a category that had been embargoed, executives would place the goods in a bonded warehouse until the end of the year and bring them into the U.S. in a new quota year after Jan. 1. Customs would then charge the amount of the goods against the country’s quota limits in the new year.
But CITA’s new directive for goods overshipped in 2004 is unprecedented, importers said, and caught many companies off guard.
“If an importer had waited until Jan.1 to have his order shipped from an exporting country, it would have arrived — most likely around Feb. 1 — depending on country, mode of shipment and other factors,” said a statement from CITA. “If an importer chose to have his product exported before Jan. 1 and the product is a quota product, there is a possibility the quota would have filled prior to the end of 2004. This situation would have been a violation of the agreement between the U.S. and the exporting country.”
Executives expected overshipped goods in 2004 to automatically be allowed entry on Jan. 1 because that is the date global quotas on apparel and textiles will be eliminated among World Trade Organization countries.
Further compounding the problem for U.S firms, CITA announced it will allow in only 5 percent of each category’s limits per month, beginning in February. CITA warned importers in June that it reserved the right to deny entry to goods that have been shipped in excess of quota limits. It did not issue its final directive, however, until Thursday.
There was a general concern that companies might be stockpiling products in warehouses at the end of the year, particularly those made in China, with the strategy of flooding the market in January once global quotas were removed. CITA’s action will prevent some import surges from happening in the short term.
Customs has placed embargoes on 12 categories, and another five categories are on hold. The apparel categories that could be locked out of the U.S. until Feb. 1 if U.S. companies overshipped this year include wool coats from Bulgaria, cotton and man-made fiber bras from China, cotton and man-made fiber dressing gowns and robes from China, men’s and boys’ woven shirts from India, wool coats from Malaysia, men’s and boys’ wool suit coats and wool sweaters from the Philippines. Cotton sheets, shop towels, man-made fiber pillowcases and sheets from Pakistan are also at risk.
“We asked CITA for one thing: predictability,” said Peter Gaabe, chief operating officer of Carole Hochman Designs. “But they waited 20 days before the end of the year to confirm how they would process goods through the conversion period. I think it’s a shame our own government is damaging the very industry they are responsible for protecting.”
One U.S. manufacturing executive, who requested anonymity, said CITA’s action will cost his company $250,000 this month alone. He said he had a shipment of cotton and man-made fiber underwear arrive from India 10 days ago. It took five days to clear Customs, and during that five days the category embargoed, he said.
Brenda Jacobs, counsel for the U.S. Association of Importers of Textiles & Apparel, said, “This accomplishes nothing. It’s just punitive. This is the first time CITA has denied entry on goods for a month.”
Jacobs said she represents one company that imported wool coats from Bulgaria but got caught in an embargo at the end of November. The company had to store the coats in a bonded warehouse and expected to obtain them on Jan. 1.
“What is he going to do with wool coats in February?” Jacobs asked rhetorically. “He’ll have to send them back to Bulgaria.”
Erik Autor, vice president and international trade counsel at the National Retail Federation, said, “CITA is dragging this out as long as it can. It is really just an extension of quotas for another month, if not longer.”