WASHINGTON — Apparel and textile imports entering the U.S. en route to another country aren’t being properly tracked by the federal government and run the risk of illegally entering into U.S. commerce, the General Accounting Office has concluded.

This story first appeared in the January 28, 2004 issue of WWD. Subscribe Today.

In a report to Congressional trade committees released Monday, the GAO also criticized the U.S. Customs & Border Patrol for being slow to publicize lists of foreign apparel and textile producers suspected of transshipping through other countries in order to avoid U.S. quota restrictions. The delay could lead to more transshipping, the GAO said.

The GAO report was requested by Congress in 2002 as lawmakers prepared to vote to eliminate tariffs on a host of goods from sub-Saharan Africa and the Caribbean Basin, including apparel. At the time, one of the arguments made by U.S. textile officials against liberalizing trade was fear of preferential trade areas being used by other countries to illegally funnel apparel to take advantage of the duty-free treatment. Such diversion, in addition to longstanding schemes circumventing quota restrictions, account for billions of dollars in illegal shipments annually, U.S. mills estimate.

The GAO report didn’t venture a guess at how much apparel and textile transshipment or in-bond diversions are suspected of occurring. However, the investigative arm of Congress underscored the difficulty in keeping tabs on apparel and textile shipments, which in 2002 were valued at $81 billion or roughly 7 percent of all U.S. imports.

“With textile transshipment, an illegal T-shirt will look no different than a legal one,” the 83-page report said. Investigations “can be a complex and lengthy effort, resulting in few criminal penalties. Investigators often must follow convoluted paper trails for the movement of goods and money.”

Like all imports, apparel and textile cargo is scrutinized by Customs for national security purposes according to country and manufacturer of origin, as well as recipient and port of embarkation. For apparel and textiles, separate risks assessments are undertaken, including foreign country factory visits, to target potential violators.

Such scrutiny allows Customs to limit the amount of cargo detained at ports and the U.S. border. In 2002, Customs identified 2,482 apparel and textile shipments deemed “high-risk” for being transshipped, or less than one-tenth of 1 percent of the more than three million textile and apparel shipments that year. Of the targeted shipments, about 1 percent, or 24 entries, were actually seized as illegal.

Janet Labuda, director of Customs’ Textile Enforcement Operations Division, said the GAO’s criticisms of targeting transshipments were “minute” and her office will try to be more prompt in providing reports of violators.

“There is a lot of quality control that goes into these documents.” Labuda said. “We want to ensure the information is as accurate as possible.”

Labuda also has more staff on the way. This year, Congress has added $4.75 million for Customs to hire 48 new textile and apparel import inspectors, to amplify the cadre of 255 already to the task.

With global quotas on textiles and apparel being eliminated Jan. 1 — and countries then being unable to borrow quota from next year to handle surges in orders — Labuda said, “I have declared this year the year of shenanigans” for increased attempts to circumvent quota restrictions.

“Lack of automation for tracking in-bond cargo, inconsistencies in targeting and examining cargo, in-bond practices that allow shipments’ destinations to be changed without notifying [Customs] and extensive time intervals to reach their final destinations,” were among GAO’s complaints. In-bond shipments, which involve goods that are shipped into the U.S. destined for other countries, are overseen by another branch of Customs, the Bureau of Immigration & Customs Enforcement.

In surveying 13 ports with the highest apparel and textile volume from January 2002 to May 2003, the GAO found a 69 percent increase on in-bond shipments.

“It’s a pretty scathing report. Customs doesn’t have the resources,” said Jock Nash, lobbyist for the textile giant Milliken & Co.

“Customs has been throwing its time and resources traversing the globe to look in foreign factories, when it should have been looking right here in its own backyard,” said Laura Jones, executive director of the U.S. Association of Importers of Textiles & Apparel.