CHARLESTON, S.C. — Pressure is building in the apparel pipeline that stretches from the factory floors of China, Bangladesh and India to the shelves of Macy’s, Wal-Mart and J.C. Penney.
As the end of quotas for all World Trade Organization members nears, at stake are billions of dollars worth of merchandise that could bottleneck at the end of the year.
Sourcing and logistics experts from several big apparel firms convened in Charleston, S.C., last week at an American Apparel & Footwear Association conference to address their concerns and get tips on how others in the industry plan to navigate through the land mines in the second half of the year, as quotas fill and categories start to embargo.
“We have a lot of questions right now,” said Wendy Wieland Martin, vice president of international trade for Kellwood Co. “We have to decide what to do with the pipeline and carriers have to decide what to do. They are not going to double the ships going into the port in one month and that could be a huge disruption that could bring the whole thing to a standstill.”
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China is expected to become even more dominant in textile and apparel trade after 2005, but in the meantime apparel importers are holding their breath as they take a gamble on which contractors and countries will remain competitive. The buzz about China hung in the humid Charleston air and the speculation was thick about whether the U.S. would further restrict Chinese imports. The Bush administration last year imposed safeguard quotas on three Chinese import categories, including bras, robes and dressing gowns and knit fabric, and importers are worried there will be a lot more.
Grant Aldonas, undersecretary for international trade at the Commerce Department, laid to rest some of their fears in the keynote address.
Seemingly softening his stance on a comprehensive quota agreement with China, Aldonas said, “I don’t think there is going to be a comprehensive agreement. We would continue to pursue it if the U.S. industry across the board thought that was a good idea, but the fact of the matter is the Chinese aren’t there on this.”
The Bush administration is walking a fine line between appeasing the beleaguered domestic textile industry and its intense lobbying effort about the threat China poses on one side, and the Chinese and U.S. importers on the other.
Aldonas raised apparel importers’ hopes on the issue of sticking to the schedule of quota elimination, but at the same time, he dampened the hopes of a large international textile and fiber coalition pushing for an extension of the global quotas on all WTO member countries, which will expire at the end of the year.
“The worst thing we could do for our industry, and I mean on the textile side as well as the import-apparel side, is to slow the process down,” Aldonas said. “What we have in a lot of ways is an industry that has become very fragmented behind a protected wall, and until they go through the same sorts of changes that every other industry has faced in the U.S over the past 40 years, they aren’t going to be competitive.”
However, he also squelched any hopes importers or foreign suppliers had in getting additional quotas this year to prevent early embargoes, which could wreak havoc on the supply chain.
“We are trying to strike a balance between what was promised to the textile industry during the Uruguay Round [which ended in 1994] and the needs of the rest of American industry,” said Aldonas. “We are coming to the end of the 10 years [of quota phaseout] and the most important thing is to keep our eye on that goal and to make sure the WTO agreement remains enforced and that people don’t chip away at that. The price of that may be there is no [quota carry forward].”
Global trade rules will take away the ability of countries to borrow quotas from the following year, which has been an industry safety net for years. Without that mechanism, known as “carry forward,” and the ability to pad the quotas this year, importers are sure that crucial quota categories will fill early, which could leave them holding huge amounts of merchandise in warehouses, and leave retailers with empty shelves.
John Windham, executive vice president of Kellwood’s Calvin Klein division, told the audience of 120 executives to prepare for an increase in spot inspections by the Bureau of Customs and Border Protection, which can slow down merchandise that enters ports by as much as 30 days.
“You need to evaluate your production methods that are at risk of increased customs exams,” warned Windham. “We have taken steps to put together an entire format of documents to satisfy Customs inquiries and made an overall document package for vendors involved in outward processing.”
Customs, which recently targeted imports of socks, said it would start scrutinizing shipments in April of knit-to-shape items, such as sweaters, to determine if they’re correctly identified for country of origin.