Strengthening cooperation between the fashion industry and U.S. Customs & Border Protection and staking out ground in negotiations of the Trans-Pacific Partnership were key focal points of the U.S. Association of Importers of Textiles and Apparel conference in San Francisco.
Executives from 50 apparel companies, including Pacific Sunwear of California Inc., The Gymboree Corp., Gap Inc., Quiksilver Inc. and Lululemon Athletica Inc., attended the seminar, held at Levi Strauss & Co. headquarters on Feb. 16.
Julia Hughes, president of USA-ITA, said improving coordination between the industry and Customs is a top priority for apparel retailers. One area where apparel brands and retailers would like to get involved is in a Customs pilot project, “Centers for Excellence and Expertise,” launched in October in conjunction with the pharmaceutical and electronics industries.
The goal of the centers is to increase uniformity of practices at all ports of entry, facilitate timely resolution of trade compliance issues and further strengthen the agency’s knowledge of key industry practices, according to Customs. Hughes said closer collaboration with the agency could help expedite and solve problems at the ports. One top priority of Customs is cutting down on textile fraud and circumvention of the rules in trade agreements and trade preference programs.
Julie Engelbertson, supervisory import specialist for wearing apparel and textiles with Customs at the Port of San Francisco, told the executives that the Customs Textile Production Verification teams visited 165 factories in nine countries, including Mauritius, Guatemala, Costa Rica, Dominican Republic, Honduras, Kenya, El Salvador, Lesotho and Nicaragua, in fiscal-year 2011. Authorities found 16 factories closed, 45 factories that were noncompliant for a trade preference and a 27 percent noncompliance rate for trade preference programs because of insufficient documents or violation of the rules.
The TPP negotiations between the U.S., Vietnam, Australia, Peru, Brunei, New Zealand, Chile, Malaysia and Singapore are also considered a top priority for the industry, as the Obama administration seeks to complete a deal by the end of the year. Three other countries — Japan, Mexico and Canada — have also entered into consultations to join the negotiations.
“Obviously, the initial U.S. offer in TPP [a yarn-forward rule] is disappointing to apparel retailers and brands who were at our meeting,” said Hughes, referring to the rule that requires that apparel be made of fabric and yarns from participant countries in a free trade agreement. “The fact is that it sounds as though there are efforts to make it a very restrictive agreement.”
Helga Ying, senior director of worldwide government affairs and public policy at Levi’s, explained to the audience why companies such as Levi Strauss, which sources in about 40 countries, with no more than 20 percent of product manufactured in any one country, need a flexible rule of origin in the TPP. Ying said the proposal of a yarn forward rule of origin does not work in today’s global supply chain because it drives up costs, does not consider supply chain realities, reduces speed to market and is administratively “burdensome.”
“Flexibility is critical, as we need to source from a variety of suppliers who supply various components of our products in line with demands for fashion, quality and speed to market,” Ying said.
David Spooner, Washington counsel for USA-ITA with Squire, Sanders & Dempsey, focused on the expected gridlock in Congress this year because of the presidential election in November.
On the trade front, Spooner said Congress will likely focus on China’s undervalued currency and President Obama’s proposal to merge six agencies, including Commerce and the U.S. Trade Representative’s office, into one supertrade agency, but shelve other issues important to the fashion industry.