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The rules of the import game — from the duty free benefits of free trade agreements to the expense management of free trade zones — exist in complicated piles of paperwork and numerous stipulations, but for those companies willing to lobby for their passage and tackle their intricacies, the effort could result in significant savings.
This story first appeared in the October 11, 2011 issue of WWD. Subscribe Today.
“If you don’t participate in the terms of trade now, than you’ll just have to live with whatever you end up with later on,” said Stephen Lamar, executive vice president of the American Apparel & Footwear Association. “People often come to me and they sort of complain, ‘How come trade policy does this or trade policy does that,’ and the answer often is, ‘Because you didn’t do anything to affect it.”
Still, Lamar conceded it is hard to shape trade policy and that even when companies try, they don’t always prevail.
One important trade front for importers today is the Trans-Pacific Partnership, which seeks to bring down trade barriers between the U.S., Vietnam, Singapore, Australia, Peru, Brunei, New Zealand, Chile and Malaysia. If the deal goes through, it might also provide a platform for other nations to join. Fashion brands are most interested in Vietnam, increasingly seen as an alternative to China for apparel production.
Helga Ying, senior director of worldwide government affairs and public policy at Levi Strauss & Co., said the White House was touting the deal as a “21st century” agreement, “but when it comes to market access, I think they are really discussing more of an archaic yarn-forward rule of origin and we’re hoping to find a way to get more flexibility. With more flexibility we can all, as an apparel industry, become competitive and with competitiveness we can drive more value to our customers.”
Vietnam produces little of its own cotton, so a yarn-forward requirement for duty free treatment would make TPP less beneficial for apparel producers. U.S. textile interests, however, prefer a yarn-forward treatment, in part because it would help their customers in Central America stay competitive.
Ying also argued that apparel and textile issues could be handled within the main negotiations.
“We don’t want a separate textile negotiation,” Ying said “They tend to separate us out, but we feel that we’re already integrated in world trade, there are no more quotas and we shouldn’t have separate textile negotiations within the TPP because it’s not happening in the Doha round [global trade talks], as well.”
But free trade agreements aren’t the only tool importers can use to gain an advantage.
David Cohen, an attorney at Sandler, Travis & Rosenberg who specializes in trade, pointed to free trade zones as “the next frontier” that allow companies to defer duties while holding goods in the U.S. as long as their facility has received special designation.
So a brand could go through the process and have a distribution center in the U.S. declared a free trade zone. The company could then ship goods to that facility and store them, paying duties only when the goods are sent to their customers. Goods exported to another country would never pay U.S. tariffs. Deferring duties helps boost cash flow, while also streamlining Customs’ requirements and fees.