NEW YORK — Apparel and transportation executives are preparing for a different kind of New Year’s Eve hangover — the end of the worldwide quota system on Jan. 1 will bring a surge in shipments from Asia to the U.S. and create the potential for backups at ports on both sides of the Pacific Ocean.
Importers have been waiting a decade for the final quotas on apparel and textiles to be dropped by the 147 nations of the World Trade Organization. The move should lower the cost of buying foreign-made apparel because it will increase competition and end the quota charges that are a major cost factor in countries such as China, which supplies 16.6 percent of the U.S.’s imported apparel.
To avoid quota costs, importers said many firms might delay shipping early spring goods, that would normally move by mid-December, until early January.
“There will be pretty heavy demand early in the year,” said Brian Moore, director of apparel sales with ocean carrier Maersk Sealand. “The pressure from quota elimination is going to be pretty heavy.”
Moore said most Chinese ports, as well as Hong Kong’s, will close for the week before the Feb. 9 Chinese New Year holiday, meaning that the period from Jan. 1 to Feb. 2 will likely be a time of frenzied activity at the ports. January typically is not a heavy volume time for other industries, though, so there should be space available on ships making the run from Asia to the U.S., he said.
Robert Sappio, senior vice president of Transpacific trade for American President Lines, said, “January 2005 is expected to be busier than previous years.” However, overall, the shipping business is experiencing fewer seasonal ups and downs in demand over the course of a year.
“The off-peak season is only marginally less busy than the rest of the year,” Sappio said.
Peter McGrath, president of purchasing at Plano, Tex.-based J.C. Penney Co., said he anticipated seeing hiccups in the supply chain early in 2005.
“We are expecting a bottleneck to occur,” he said. “A lot of people are trying to save the price of quota.”
This story first appeared in the September 21, 2004 issue of WWD. Subscribe Today.
Still, he said it was likely to be a brief annoyance.
“That’s going to be a very short-term problem, a three-week problem,” he said.
Rick Darling, the New York-based president of Li & Fung USA, said it was more likely that the delays would occur at the unloading point — ports in the U.S. — rather than Chinese ports or in Hong Kong. That’s because the Asian ports in the past have taken flexible approaches to surges in demand, scheduling people to work extra hours or raising productivity expectations, he said.
January is typically not a peak month for the facility, said a spokeswoman for the Port of Los Angeles.
“We will just be working with the forecast figures from the steamship companies and expect we’ll be able to handle things,” the spokeswoman said.
The port handled 616,000 cargo containers in January and 627,000 last month. August is typically a heavy volume time.
Moore of Maersk Sealand said importers should let their carriers know in advance their plans for January to avoid backups.
“If we know about it early enough, in time to plan, we’ll ensure that our customers or our partners get whatever we need to do for them to satisfy their in-distribution center dates,” he said. “Sourcing and logistics have to work closely on this.”
Importers said they believed the problem would be short-lived.
“I don’t want it to sound traumatic because I don’t think it is,” said Li & Fung’s Darling.