By  on September 27, 2007

WASHINGTON — Major U.S. retailers and manufacturers including Wal-Mart Stores Inc., Liz Claiborne Inc., Gap Inc. and J.C. Penney Co. Inc. are stepping up pressure on Congress to change legislation that could impose punitive duties on Chinese imports and lead to stricter product safety rules.

The U.S. businesses, which annually produce billions of dollars worth of apparel in China, are part of a coalition of 159 companies and trade associations that urged lawmakers in a letter sent Wednesday to abandon the legislative proposals targeting China's undervalued currency and defective and contaminated imports.

"Imposing unfair barriers to trade in the name of currency valuation or product safety is not a solution to the underlying concerns," the coalition said in the letter, which was also signed by Nike Inc., Deb Shops Inc., Reebok International Ltd., Target Corp. and AnnTaylor Stores Corp.

The group warned that enacting the proposals would hurt U.S. companies doing business in China and might spark retaliatory action against U.S. exports.

Democrats in Congress, who argue the undervalued currency gives Chinese exports an unfair advantage against the U.S., are moving forward on legislation that would penalize Chinese imports if that nation does not let its currency appreciate. Two Senate committees recently passed competing proposals. One bill would offset currency undervaluation for goods dumped in the U.S. at below cost and both measures would require World Trade Organization consultations with a country that is found to be manipulating its currency, which could lead to sanctions.

On a parallel track, lawmakers are advancing legislation to increase funding for the Consumer Product Safety Commission and strengthen product safety regulations and standards in wake of Chinese food and product recalls.

Apparel importers are concerned that the Congressional debate could lead to stricter product safety regulations and requirements for all apparel, more scrutiny of cargo containers at ports and the imposition of user fees on companies that import products from China. The exposure is significant for importers that brought in $31.3 billion worth of clothing and textiles from China for the year ended July 31.

"While there are a lot of problems to address in the U.S.-China economic relationship, Congress should not be passing legislation that sends a message to China that would damage U.S. interests," Frank Kelly, vice president for international trade compliance at Liz Claiborne, said in an interview. "That's what we're saying in this letter."Kelly said the solution on the product safety side is to overhaul the safety commission and provide more funding, but he cautioned that there could be significant delays if more money leads to additional Customs inspections at the ports and product testing.

The responsibility lies with importers and retailers for due diligence and testing their products to ensure they meet U.S. safety standards before they are put on store shelves, Kelly said, adding the business community would be willing to look at a certification mandate.

"If there is a certification process and it just confirms that you did your in-house testing, I don't think that is a bad issue, but we would have to see the actual proposal," Kelly said. "We don't need Congress looking over our shoulder saying, ‘You are not doing it right. We'll do it for you.'"

Retailers, aware of the intense pressure on politicians over China, would support certain legislative proposals, such as making subsidized imports from nonmarket economies like China subject to countervailing duties or making product recalls mandatory, said Stephanie Lester, vice president of international trade at the Retail Industry Leaders Association, whose members include Target and Wal-Mart.

"Politically, it makes sense to go after subsidies in China, a communist country, and you can do it in a responsible way," said Lester, adding that adjustments would have to be made on the antidumping side of the equation. "There are ways to change legislation without having outright opposition to it. That's what we are trying to do. We are trying to develop alternative language."

Lester added, "I'm not sure the currency proposals would do much for the trade deficit. Meanwhile, you enact bad policy and [it] could prompt a trade fight with China."

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