Importers contend that the millions of dollars they pump into the Congressionally mandated program each year is a financial burden, particularly in the current recession and dicey retail climate. Last year, of the $63 million collected for the program, importers paid $22.3 million. The balance, or $40.7 million, was paid by U.S. cotton growers. The money goes to fund Cotton Incorporated’s advertising, marketing and research efforts.
“I’m questioning whether this is really where importers want to spend their money,” said Brenda Jacobs, general counsel for the U.S. Association of Importers of Textiles & Apparel, after the USDA’s decision last week against a referendum.
It’s a perennial lament among importers, who in 1991 were drawn into the cotton program by Congress. Until then, the program, founded in 1966 to boost U.S. cotton sales in the face of increased competition from man-made fibers, was voluntary and involved only producers. The cotton program is similar to that of other U.S. commodities like beef, milk and eggs.
The idea behind requiring importer participation in the program and making it mandatory was that they, along with nonpaying producers, were getting a free ride from cotton-promotion efforts.
Every five years, the program is reviewed by the USDA, which decides whether Cotton Inc.’s efforts on behalf of cotton are working and whether participants want to continue paying. If anything changes, then the agency can call for a referendum on continued participation.
As it did once before in 1996, the USDA this week announced that the cotton program is working to increase cotton consumption and the majority of participants want it to continue. Thus, the USDA concluded, there’s no need for a referendum.
“Those requesting a referendum were in the minority,” the USDA said. Eighty-three producers and two “importer organizations,” unnamed by the USDA, wrote the agency to oppose a referendum. In favor of a vote were five unnamed retailers and manufacturers, five cotton producers and two importer organizations.
“Data suggests that the program is achieving its statutory objective of increasing markets and uses of cotton,” the USDA further concluded.
The agency also noted that the dire conditions of the U.S. textile industry haven’t affected mill cotton consumption.
“Cotton’s share on the U.S. spinning system — a measure of cotton’s use relative to polyester use in mills — continues to be above 78 percent, indicating that although the overall level of mill production is lower, the share of cotton activity remains strong,” the USDA report said.
Regarding the benefits of the program to importers, the USDA report reflected on the results of an importer survey.”The most significant finding of this survey is that 82 percent of importers credit Cotton Incorporated marketing and research efforts as having contributed ‘greatly’ or ‘somewhat’ to the current all-time level of cotton retail market share,” the USDA report said, citing the 61.5 percent market share statistics for 2000.
Those opposing the cotton program can conduct a sign-up campaign to force a vote. However, according to importers, requirements governing the number of signatures and who’s allowed to participate make forcing a vote exceedingly difficult. There are also fewer importers in the program: 8,000, compared to the 30,000 producers.
“I call that a stacked deck,” said the USA-ITA’s Jacobs, underscoring another longstanding complaint that importers have less of a say over the cotton program even though, despite their smaller numbers, importers pay about one-third of the total cotton fees collected. Fees are assessed according to the cotton content of imports and per bale produced by importers.
Bill Crawford, chief executive officer of the Cotton Board, which oversees Cotton Inc., supports the USDA’s decision against a vote. In addition, he noted how importers are benefiting from the money they contribute.
For example, last year, Cotton Inc., along with the cotton industry trade association the Cotton Council, traveled to Africa with U.S. retailers and yarn companies to find ways to increase cotton apparel and textile import opportunities under the new Africa trade bill.
“The vast majority of comments we saw were supportive of the program and indicated a referendum wasn’t necessary at this time,” Crawford said.