MAKERS HIT U.S. PLAN FOR CBI UNDERWEAR QUOTA

Byline: Jim Ostroff

WASHINGTON--The administration has ignited a storm of apparel industry criticism with its effort to limit underwear imports from the Caribbean, which currently are quota-free.
In late March, the Committee for the Implementation of Textile Agreements called for talks to set quota on imports of cotton and man-made fiber underwear, Category 352/652, from seven countries, charging the imports threaten to disrupt the domestic market.
Under regulation of the World Trade Organization, the governing body for trade established under the GATT Uruguay Round, the U.S. has until the end of May to start talks with five countries--the Dominican Republic, Costa Rica, Honduras, Thailand and Turkey. El Salvador and Colombia, not yet WTO members, come under U.S. agriculture law, which gives the U.S. the right to unilaterally set quota.
While countries in the Caribbean Basin Initiative are the main target of this action, under WTO rules, all nations supplying potentially disruptive imports in the category must be included in the call. But it's the action in the Caribbean that has riled domestic apparel companies, who do much of their own underwear assembly in the Caribbean under the U.S. government's 807 programs, which provide tariff breaks.
"We and other U.S. companies are the industry," said Steven Masket, senior vice president of Maidenform Inc. "We are operating under the 807 program, cutting almost entirely U.S. fabrics in our unionized U.S. facilities [for assembly in the Caribbean]. I am at an absolute loss to understand how this action helps any U.S. company and who it is protecting."
Retailers and importers have also expressed their unhappiness with the consultation calls, but sources say they are leaving official protests to the government up to the American Apparel Manufacturers Association, which they believe has more clout with CITA.
The AAMA is, in fact, "developing a detailed position on the call based on our members' input and we will let CITA know about it" in the hope it will revoke the action, said Larry K. Martin, president of the organization.
Michael Gale, AAMA's government relations director, added, "Nearly all the underwear manufactured in the CBI is made by our members, who cut U.S. fabric in the U.S. and assemble it in countries where they were encouraged to do this by the U.S. government."
One element supporting the CBI calls is the textile industry. Carlos Moore, the American Textile Manufacturers Institute's executive vice president, said, "This 807 trade may or may not contain U.S. fabric and can be disruptive."
While CITA routinely issues calls every year on imports not under quota, this one is different since it aims to limit imports largely made under the 807 program. Under 807, apparel made from U.S. or foreign fabric, cut in the U.S. and assembled offshore, is charged tariffs only at the value added in assembly when the product is imported into the U.S.
Up until the CITA call, there were no U.S. quotas on CBI underwear imports except for Jamaica. In that case, most of the underwear is imported under the 807(A) program, which provides the same duty breaks as regular 807 and, additionally, unlimited quotas, called Guaranteed Access Levels (GALS), but requires the use of fabric cut and also made in the U.S.
Explaining why the calls were made, Rita Hayes, CITA's chairman and the Commerce Department's deputy assistant secretary for textiles and consumer goods, said the CBI countries have become the largest foreign underwear supplier, "and so even considering they have favorable treatment under 807, it is an equity problem."
"The levels of CBI imports not eligible for 807(A) treatment have become higher than the levels of other suppliers under quota," she said. "It is hard for us to negotiate with other countries when the CBI is higher than they are and they contribute to overall import disruption."
Hayes said that from 1992 to 1994 CBI underwear imports rose 73 percent to 53 million dozen, while total U.S. imports of these apparel worldwide rose 49 percent to 97.4 million dozen. Meanwhile, she said U.S. underwear production fell from 175.5 million dozen in 1992 by 3.8 percent to 168.8 million dozen in 1993. For the first nine months of 1994, U.S. production fell 3.4 percent to 127 million dozen versus the same 1993 period.
Hayes indicated the goal of the calls on the Caribbean will be to convert a lot of the 807 production to 807(A), requiring the use of U.S. fabrics, by setting quota on non-807 and 807 underwear.
"We will be happy to give them all the GALS they want if they use U.S. cut and formed fabrics."
Maidenform's Masket, however, countered that while his firm uses mainly U.S.-made fabric for assembly in the Caribbean, Maidenform prefers--even in Jamaica where 807(A) is needed for unlimited quota--"to import under 807 because of the massive paperwork required with 807(A) to track the fabrics."
CITA's action, he said, could have an adverse effect. "Given the paperwork costs, there may be an incentive to bring in underwear from the Orient, where the profit margins will become just as good.
Martin Lewin, a Washington trade attorney and counsel to Bestform Inc., claimed CITA's action "will disrupt the U.S. underwear market by imposing quotas on U.S. manufacturers who have rationalized their business operations through sourcing in [the CBI] with the U.S.'s encouragement."
Lewin also said the mandate to use U.S. fabrics will drive up consumer prices since they will be free from foreign price competition. In addition, he said the CBI calls are unfair considering that Mexico's underwear exports jumped nearly 60 percent last year to 8.3 million dozen, and while these imports, under the North American Free Trade Agreement, are also subject to safeguard calls, none has been issued.--Fairchild News Service

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