DEAL SAID TO BE OK'D FOR INSPECTIONS BY CUSTOMS AGENTS IN HONG KONG

Byline: Jim Ostroff

WASHINGTON--The U.S. Customs Service reportedly has accepted a Hong Kong proposal that would permit Customs agents to monitor export control at the colony's apparel plants that voluntarily agree to such inspections.
Sources said Friday U.S. Customs teams would conduct their first inspections of Hong Kong's vast apparel-making complex on or about Sept. 2. The monitoring could last for 30 days.
This would diffuse a looming trade showdown with the U.S., which has insisted since spring that its Customs officials needed to conduct surprise inspections at apparel plants in several Far Eastern nations to stem transshipping of Chinese goods.
Macau agreed to such "jump-team" visits earlier this year. U.S. Customs officials did not return telephone calls seeking comment on the apparent compromise. An official with Hong Kong's office here declined to comment.
The first hint that the months-long trade standoff between the U.S. and the British colony was nearing resolution came Thursday when Hong Kong announced it would welcome joint inspection to prove that "the additional import [inspection] measures imposed on our 10 categories [of men's and women's apparel] are unnecessary and should be terminated," a spokesman said.
Hong Kong had warned it might file a complaint with the World Trade Organization. Such a move would challenge the legality of a new U.S. initiative to stem alleged transshipping by having Customs jump teams make surprise inspections at foreign nations' apparel plants. Several months ago, the U.S. demanded its Customs jump teams be allowed free access to Hong Kong's apparel firms to verify garments were not being transshipped from China. It also mandated on June 17 that U.S. importers provide detailed documentation and post a $5,000 bond for selected apparel shipments sourced from Hong Kong.
Ten categories covered by this directive include nightwear and sleepwear, women's dresses and shirts, and men's and boys' suits. About $450 million worth of apparel, or 9.6 percent of the U.S. apparel and textile imports from Hong Kong, are affected by this directive.
Hong Kong's business community, legislature and top elected officials took strong exception to the U.S. Customs directive. Christopher Patten, Hong Kong's governor general, wrote President Clinton in mid-July, saying the U.S. had refused to present evidence of transshipping, arguing such charges are grossly trumped up. Patten asked Clinton to intervene to help resolve the dispute, but warned Hong Kong would seek to overturn the directive at the WTO, if necessary.
The U.S. has not responded to Patten. A draft reply written by a member of the President's Council of Economic Advisers was shelved. The White House press office said the matter was then turned over to Commerce Secretary Mickey Kantor, but an agency spokesman said the actual reply was being drafted by Sandra Kristoff, a top National Security Council official.
Kristoff did not return telephone calls seeking comment.
Patten had warned that Hong Kong viewed forced on-site inspection as a violation of its sovereignty--an especially touchy issue, since the British colony reverts to China next July 1.
China has resolutely refused to permit foreign inspections at its plants, and in a recent dispute with the U.S. on intellectual property protections, it forced the U.S. to back off the on-site inspection demand. The U.S. agreed China could police its own computer software factories, and U.S. Customs officials, in essence, would monitor the monitors.

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