WASHINGTON — The Senate Finance Committee passed a series of trade-related bills Wednesday that will have significant implications for the fashion industry, including granting permanent normal trade relations to Russia and extending the third-country fabric provision for eligible sub-Saharan African countries.
This story first appeared in the July 19, 2012 issue of WWD. Subscribe Today.
The committee’s markup and approval of the measures, with bipartisan support, was considered a major accomplishment, particularly in a polarizing presidential election year. The bills will now move to the full Senate for a vote. The House Ways & Means Committee has not yet scheduled its own markup of any of the legislation.
The Obama administration has been pressing Congress all year to pass the third-country fabric provision under the African Growth & Opportunity Act that expires at the end of September. The provision allows companies making apparel in 25 sub-Saharan African countries to use fabrics from outside the region and still receive duty-free benefits.
The uncertainty around whether Congress will act on it has already lead to a loss of business in the region. The U.S. Trade Representative’s office said Wednesday that U.S. orders for shipments of African exports after the expiration date of Sept. 30 are down 35 percent, while African textile exports have already dropped 27 percent in the last year.
The Senate bill will extend the third-country fabric provision through Sept. 30, 2015. That bill also contained provisions to make technical changes to apparel and textile rules of origin under the Central American Free Trade Agreement that was welcomed by the textile industry and apparel importers.
Another bill passed by the committee was PNTR for Russia, which will allow the U.S. to gain full benefits of Russia’s accession to the World Trade Organization next month.
“Today’s action by the Senate Finance Committee to advance these important provisions sends the loud and clear message that the United States will maintain its leadership position in the global market,” said Kevin Burke, president and chief executive officer of the American Apparel & Footwear Association. “By establishing permanent normal trade relations with Russia ahead of Russia’s upcoming accession to the World Trade Organization later this summer, U.S. companies and their workers will have greater access to new Russian customers and stronger protections offered by the rules based global trading system.”
The third bill that was approved would reauthorize through 2015 the Cotton Trust Fund, which expired in 2009, and make a technical fix to expand funding for the Wool Trust Fund, which expires Dec. 31, 2014.
The Cotton Trust Fund suspended duties on imported cotton shirt fabric and provided grants to cotton shirt manufacturers and yarn spinners in the U.S. It was created to offset an inverted tariff — the U.S. tariff on finished cotton shirts was lower than the tariff on cotton shirt fabrics, which impacted the competitiveness of U.S.-based cotton shirtmakers. The fund also created and maintained a pima cotton promotion program. It is funded through the revenue on tariffs on cotton textile imports, primarily yarn and fabric and capped at $16 million per fiscal year. With the expiration of the fund, U.S. companies were forced to pay higher duties and the pima cotton promotion program was put on hold.
Senators also agreed to make a technical fix to the Wool Trust Fund, which makes payments to U.S. wool fabric and yarn producers, as well as sheep growers, to encourage more production of wool fabrics. The tariff revenues collected on wool yarn and fabric imports fell sharply in 2009 and 2010, leaving the trust fund unable to make payments to U.S. textile mills and wool suit makers. The bill restores Wool Trust fund payment levels in 2010 through 2012 and expands the number of import categories on which the U.S. can place tariffs in order to help fund the program.