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Caribbean Basin Bill Passed By Congress

WASHINGTON — The ubiquitous T-shirt, a staple in every closet across the U.S., is increasingly ending up there by way of the Caribbean and Central America.<br><br>Beginning on Oct. 1, labels in T-shirts and knit apparel stamped with Made in...

WASHINGTON — The ubiquitous T-shirt, a staple in every closet across the U.S., is increasingly ending up there by way of the Caribbean and Central America.

Beginning on Oct. 1, labels in T-shirts and knit apparel stamped with Made in Honduras or Made in El Salvador could become even more conspicuous. That’s because Congress cleared a trade bill Thursday that doubles the amount of T-shirts and knit apparel made of regional fabric using U.S. yarn that can be shipped from the Caribbean Basin, as provided under a 2000 trade bill.

Passed by the Senate last week, the bill will next make its way to President Bush’s desk for his signature. It also contains apparel-duty-dropping provisions for Andean countries and sub-Saharan Africa, in addition to renewing the President’s trade negotiating authority.

The T-shirt and knit apparel Caribbean limit increases will have an immediate impact on both the apparel and textile industries. For T-shirts, the 2002 cap starting Oct. 1 would almost double from 4.2 million dozen to 8 million dozen. The limit will then rise to 12 million dozen by 2008.

For knit apparel, the limit would increase on Oct. 1 from 250 million square meters to 500 million square meters. On Oct. 1, 2003 the limit soars to 850 million square meters and in 2008, it would increase to 970 million square meters.

The increases in the T-shirt caps couldn’t come at a better time for importers and U.S. yarn spinners. The current T-shirt limit on imports from the Caribbean is 97 percent filled and will close soon, according to Customs. By contrast, the knit apparel cap was highly underutilized last year and is currently not as important to U.S. importers. Importers can still ship apparel into the U.S. once the caps are reached, but they have to pay duties on the products.

T-shirt and knit apparel production began to shift to the Caribbean in the mid-1990s when companies like Russell Corp., Sara Lee Corp. and Fruit of the Loom moved sewing operations there to compete against cheap Asian production.

Gap Inc., which made T-shirts an essential component in casual wardrobes across the U.S., is following in their footsteps and is poised to take advantage of the trade benefits.

“For us, both the Caribbean and Andean countries are important in terms of high-quality products and speed to market,” said a Gap spokeswoman. “It’s difficult to get speed to market from Asia. When you are in the same hemisphere, it is easier to get things onto shelves and hangers.”

She said Gap has approved five countries for production in the regions: Costa Rica, Dominican Republic, Guatemala, Honduras and Peru.

“We can always argue the caps aren’t large enough, but it is certainly an improvement,” said Frank Kelly, vice president of international trade and government affairs at Liz Claiborne, which has some production in the region. “It allows for more flexibility and gives more of an incentive to companies trying to do production there.”

Peter McGrath, president of purchasing at J.C. Penney Co. and chairman of the U.S. Association of Importers of Textiles & Apparel, said: “Liberalization of regional fabric in any capacity is a positive move. It gives us the opportunity to develop business where fabric is produced regionally, cut and sewn and shipped back to the U.S., and that’s the ideal.”

The domestic textile industry, on the other hand, which lost 67,000 jobs last year, claims the cap increases couldn’t come at a worse time, since companies will now be able to use regional fabric and do not have to use U.S. fabric. Roger Milliken, owner of Milliken & Co., called the bill a “giveaway” that will cost the U.S. textile and apparel industry 150,000 jobs.

Auggie Tantillo, a Washington-based industry consultant, said: “Anybody in the U.S. making knit fabric is going to be directly and adversely impacted because the legislation exempts the need to use U.S. fabric in knit apparel made in the Caribbean, but still gives it duty-free treatment. It is going to be enormously damaging to knit fabric makers.”

But Mike Hubbard, executive vice president of the American Yarn Spinners Association, which favored the bill, claimed U.S. knit fabric makers benefit from production in the region. He cited International Trade Commission numbers that show U.S. knit fabric exports to the Caribbean increased from 7.3 million kilos in 1999 to 33 million kilos in 2001. Hubbard also noted that yarn exports to the Caribbean increased from 19.9 million kilos in 1999 to 62 million kilos in 2001.

“We are talking massive growth and we expect sales to be even better next year,” said Hubbard.