Fashion is top of mind for the nation’s customs watchdog.
Textiles and apparel “continue to be a priority trade issue for the agency,” AnnMarie Highsmith, executive assistant commissioner for the Office of Trade at U.S. Customs and Border Protection (CBP), said in a keynote addresses at the U.S. Fashion Industry Association (USFIA) and American Import Shippers Association Trade & Transportation Conference this week.
In fiscal year 2021, textile imports totaled more than $128.7 billion, which represents a 4 percent increase from the fiscal year 2020 value of $124 billion. Textiles accounted for approximately 15 percent or $13 billion of the $85.5 billion in duties that CBP collected and all of fiscal year 2021, Highsmith said.
China and tariffs
The top two supply countries have imports for textiles and apparel remain China at 38 percent and Vietnam, at 12 percent. Section 301 duties collected for textiles and apparel totaled approximately $3.08 billion, which was a slight decrease from the $3.4 billion collected in fiscal year 2020.
Discussing China in a separate session, USFIA Washington counsel David Spooner noted that the recently passed China legislation in the Senate contained an amendment that would require USTR to consider China Section 301 tariff exclusion requests. These would be valid for 18 months and would require USTR to dispose of the requests “not later than 90 days before the duty is due to be paid.”
“The amendment is not perfect,” Spooner said. “It would permit USTR to refrain from product exclusions if it declares that exclusions would undermine U.S. leverage in trade negotiations and establishes vague criteria for evaluation.”
Highsmith said some of the primary tools CBP relies on to facilitate trade in apparel and textiles are free trade agreements and preference programs.
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“The Generalized System of Preferences and the Miscellaneous Tariff Bill are both expired, since Dec. 31,” she said. “Congress is currently pursuing legislation to renew both GSP and MTB programs. The bill to renew both programs provide for the retroactive refund of duties without interest for eligible goods imported.”
Highsmith noted that in fiscal year 2021, approximately $23 billion of textile and apparel merchandise was imported into the United States and claimed preferential tariff treatment, which represent approximately $3.6 billion in duties. The most utilized preference programs for textiles and apparel are the U.S.-Mexico-Canada agreement and the Dominican Republic-Central American Free Trade Agreement (DR-CAFTA), which account for 31.8 percent and 31.5 percent of preference program utilization, respectively.
One of those programs is the African Growth and Opportunity Act (AGOA), from which President Biden has said he will eliminate Guinea and Mail for “unconstitutional change in governments,” and Ethiopia, for “gross violations of internationally recognized human rights being perpetrated by the government…and other parties amid the widening conflict in northern Ethiopia.”
The United States urged these governments to take necessary actions to meet the statutory criteria of AGOA “so we can resume our valued trading partnerships” or be removed from the trade preference program as of Jan. 1.
Spooner said he didn’t see a way for that to be avoided, particularly in the case of Ethiopia, once seen as apparel production up-and-comer, given continued military and civil action and unrest.
Asked if he thought Nicaragua’s recent highly criticized election would put the country in jeopardy of losing DR-CAFTA trade status, Spooner said he wasn’t aware of a mechanism in the FTA for that to happen and would more likely result in sanctions.
Biden called on Nicaragua’s Ortega-Murillo presidential regime to take immediate steps to restore democracy in the Central American nation, and to immediately and unconditionally release those unjustly imprisoned for speaking out against abuses and clamoring for the right of Nicaraguans to vote in free and fair elections.
“Until then, the United States, in close coordination with other members of the international community, will use all diplomatic and economic tools at our disposal to support the people of Nicaragua and hold accountable the Ortega-Murillo government and those that facilitate its abuses,” Biden said.
At the conference, Highsmith noted that CBPs’ textile production verification team visits were modified this year to account for the limited travel access because of the pandemic.
“We did conduct semi-virtual factory visits with…assistance from our HSI (Homeland Security Investigations) partners in country and our CBP employees in four countries,” she said. “As a result, we collected an additional $1.8 million in duties on noncompliant finding, Areas that we discovered with regard to noncompliance consisted of lack of documentation and use of foreign inputs.”
Forced labor
“I also understand that forced labor is a big topic for you; it’s a big topic for me here,” Highsmith continued. “It is the activity that we’re engaged in right now that probably getting the most coverage…In fiscal year 2021, we detained 1,469 shipments of merchandise and seized 57 shipments that combined contained approximately $485 million of goods suspected to be made by forced labor.”
She noted the most recent enforcement action last week involved detaining of disposable gloves produced in Malaysia by a group of companies collectively known as Smart Glove. CBP issued a Withhold Release Order (WRO) against disposable gloves produced by Smart Glove based on information that reasonably indicates that Smart Glove production facilities utilize forced labor.
“Our enforcement efforts have played a major role in improving working and living conditions for workers who were once victims of forced labor,” Highsmith said. “On Sept. 10, CBP modified the finding on Top Glove, which is a Malaysian producer of disposable gloves, after thoroughly reviewing evidence provided by the company that it no longer used forced labor condition in the production of its disposable gloves. In Malaysia, CBP engagements with Top Glove resulting in improved living conditions for thousands of migrant workers, including repayment by the company of more than $30 million to workers that has been charged recruitment fees resulting from the condition of debt bondage.”
Acknowledging USFIA’s concern that retailers and brands cannot effectively ensure that the cut-and-sew partners do not use forced labor, she said “it is more difficult to trace every bit of cotton or yarn included in the final product, but our trade partners but also take reasonable care to know their supply chains.”
“We are committed to improving our ability to peer deep into supply chains and we’ll continue to partner with the industry,” Highsmith said. “We will continue to meet with vendors to explore tracing technology to enhance transparency and streamline the force labor enforcement. We do look forward to working together with USFIA members to eliminate force labor. Together we can put an end to modern day slavery.”
In the area of counterfeiting and intellectual property rights enforcement, Highsmith noted that apparel and accessories and bags and wallets, watches and jewelry and footwear account for nearly 60 percent of the most commonly seized counterfeit products.
“CBP remains committed to leveling the playing field,” she said.
Shipping crisis
CBP is also closely monitoring the increases in cost of shipping, especially within the maritime environment. The costs have skyrocketed through the pandemic largely due to overseas manufacturing facility closures, container shortages, full container storage facilities and shortages in dock workers and qualified truck drivers.
“CBP is working with port facilities to expedite cargo clearance, examine high risk cargo as expeditiously as possible and to facilitate the movement of cargo as rapidly as possible,” Highsmith said. “Our industry partners have demonstrated extraordinary creativity and are the best in the business at overcoming challenges. but we welcome your input on how to address this temporary supply chain. Anything that you think that we can be doing or doing better doing differently, any changes, big or small. that may add up to an impact in this area, please let us know.”
On Tuesday, the White House announced new steps to accelerate investment in U.S. ports, waterways and freight networks. These goals and timelines will mobilize federal agencies and lay the foundation for successful implementation of the historic Bipartisan Infrastructure Deal, the White House said.
“This action plan will increase federal flexibilities for port grants, accelerate port infrastructure grant awards, announce new construction projects for coastal navigation, inland waterways, and land ports of entry, and launch the first round of expanded port infrastructure grants funded through the Bipartisan Infrastructure Deal,” the administration said.