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U.S. Targets Illegally Transshipped China Goods

The political climate surrounding imports from China intensified Thursday...

WASHINGTON — The political climate surrounding imports from China intensified Thursday when U.S. trade officials announced fines and seizures for illegally transshipped goods.

This story first appeared in the July 11, 2008 issue of WWD.  Subscribe Today.

U.S. officials said they will charge an additional $80 million, or four million dozens, of apparel to China’s 2006 and 2007 quota levels because of goods that were shipped to the U.S. from China, but were mislabeled with 11 different countries of origin. Transshipping usually occurs with the intention of sidestepping quotas and tariffs.

A joint announcement from U.S. Customs & Border Protection, the interagency Committee for the Implementation of Textile Agreements and the U.S. Trade Representative said investigators had identified more than 1,000 cargo containers of transshipped apparel from China that entered the U.S. in 2006 and 2007. Some of the goods were seized and fines were levied against importers for product that had been distributed.

The investigation began midway through last year when Customs officials found evidence of transshipping and was then extended to include 2006, said Brian Fennessy, branch chief for textile policy in the Office of International Trade, a division of Customs. The retroactive charges will not have an effect on 2008 quotas, trade officials said. But it adds to China’s record of export improprieties and reveals a more accurate record of China’s import growth. Ten apparel categories were involved, including cotton knit shirts and cotton trousers.

In the 12 months ended April 30, $8.6 billion in apparel and textiles under quota was shipped into the U.S. from China, which represents almost 30 percent of all apparel imports. The total value of apparel imports to the U.S. was $71.6 billion in 2006 and $73.9 billion in 2007, according to the Commerce Department.

“It is crucial that we continue to give [Customs] the resources and tools necessary to battle against massive amounts of transshipped textiles that enter our country,” said Rep. Robin Hayes (R., N.C.), whose state has been hit hard by textile industry job losses.

Hayes recently secured $9.5 million in funding in a fiscal 2009 spending bill pending in the House to help Customs agents curb illegal textile transshipments from countries such as China.

The textile industry has made its top policy initiative either securing a legislative solution or  getting help from the Bush administration to restrain imports from China and Vietnam, two of the biggest suppliers to the U.S. The three-year bilateral quota agreement with China that restricts 34 categories of apparel and textile imports is set to expire at the end of the year.

A Vietnam apparel monitoring program, administered by the Commerce Department to evaluate whether goods are being sold in the U.S. below market value or the cost of manufacturing, known as dumping, will expire in mid-January.

“This huge amount of illegal activity demonstrates the need for the U.S. government to tightly monitor imports from China when quotas are removed on Jan. 1,” said Cass Johnson, president, National Council of Textile Organizations.

A spokesman for the American Manufacturing Trade Action Coalition said, “After quotas from China expire, you still very much would want to keep the entire enforcement program in place.”

Importers, who oppose an extension of the Vietnam program and inclusion of Chinese imports, said they were concerned the textile industry would use the announcement of transshipments as leverage for another year of monitoring Chinese and Vietnamese imports.

“The domestic textile industry will use anything they can to support restrictive regimes on China,” said Stephen Lamar, executive vice president for the American Apparel & Footwear Association.

Laura Jones, executive director of the U.S. Association of Importers of Textiles and Apparel, said, “This is politics, pure and simple.”