California Apparel News

In the current climate of heightened national security, the U.S. Customs Department has created a new system requiring importers to ensure the security of the entire supply chain from point of origin to final destination.

The system has been recommended as part of the Customs Trade Partnership Against Terrorism [C-TPAT] initiative that began on April 17, 2002.

For manufacturers, the system recommends a variety of documentation for transporting goods, including recording the introduction or removal of all cargo between the point of departure and final destination, the proper marking, weighing, counting and documenting of cargo and equipment, reporting of shortages or overages and procedures for affixing, replacing, recording, tracking and verifying seals on containers, trailers and railcars. The recommendations also cover the physical security of all plants where goods are manufactured, including personnel screening, security education awareness and training, adequate lighting, separate parking for private vehicles from shipping and loading areas and the segregation of international from domestic goods, as well as marking of high-value and dangerous goods in the warehouse.

The new regulations will have disparate impact on manufacturers, according to Barry Sedlik, CEO of the World Trade Center Organization (WTCO).

“The big guys are going to be able to have the sophistication to assemble all of the documentation and systems for keeping track of things,” he said. “The smaller manufacturer will need outside consultants to help them pull this together.”

Sedlik said that the situation could create a schism of haves and have-nots, based on which manufacturers have the financial wherewithal to comply with the regulations. The result for the have-nots is a delay of shipments at the ports.

However, Greg Gardner, executive vice president of the California Safety Compliance Company (CSCC), disagrees.

“Some of the smaller manufacturers are still using the same freight brokers as the larger companies, so they are already covering their portion of the supply chain,” he said. “If you are a smaller importer, chances are you are touching someone else’s supply chain.”

Gardner also said that many of the larger companies already have security measures in place, but he also sees the potential for delays at the port for manufacturers who are not compliant.

“If you show that you have security in your supply chain and you can monitor it, then upon arrival, [the port] will be able to fast-track your shipment through the process,” he said. “If they do that, you’re able to better plan your shipments, because they will arrive at the port and won’t be held up.”

Sedlik called port delays the “ultimate penalty,” and said that any delay would have negative impact on apparel companies in the form of missed deliveries to the customer.

Another potential problem, according to Sedlik, is the random selection of importers for inspection, due to a need for more inspectors.

“Customs needs more inspectors,” he said. “The number of inspections will increase, but they will be focused on those who don’t have documentation in order. The likelihood of being picked out for inspection is going to rise dramatically.”

Another sticking point of the security system is actually getting the word out to importers that it exists—a task Sedlik said Customs fell short on.

“I’m sure it was posted in the federal register, but how many manufacturers check that every day?” he posed. “The fear [for manufacturers] is that they won’t know what hit them until their goods are held up at the port. There is urgency in companies learning about these rules and doing what is necessary to put a plan together to meet them.”

Based on that urgency, the WTCO will be holding a special workshop this October to provide information on the requirements and what manufacturers need to do to be compliant. The CSCC is already advising its clients.

On the other side, the ports are stepping in with new technology designed to make the security system function with less activity from the manufacturer.

According to Teresa Adams-Lopez, a spokeswoman for the Port of Los Angeles, the ports are experimenting with an electronic padlock that can track a container from the country of origin to the domestic shores.

“It’s a 6-inch device used to seal the container,” said Adams-Lopez. “Before it was a strip of metal with a closing device. If [any of] the container’s contents were tampered with, the device emits a signal indicating which container was tampered with.”

C-TPAT’s security system is currently recommended, but as it develops, it will be a requirement for all imported goods.

Customs Detains Saudi Arabian Imports

The U.S. Customs Department has begun targeting all imported textile and apparel items as of Aug. 1, 2002, detaining those shipments until local importers produce newly required documentation.

That documentation includes a Certificate of Origin, a Saudi Customs Certificate and production records, substantiating Saudi Arabia as the country of origin of the items.

The new regulations are a product of the Saudi government’s alleged lack of cooperation with Customs’ Textile Production Verification Team [Jump Team] visits to factories in Saudi Arabia, according to the U.S. Customs Department.

The regulations are specific to inspection of the production process, including processing the raw materials, cutting, employee work records, subcontracting relationships and proof of payment for the goods by a domestic buyer.

Customs has implemented these regulations without notifying importers and currently has no plans to issue any such notice. —Darryl James

Technology Could Help With New Regulations

As apparel importers weed through the red tape created by heightened security issues, a broader global supply network and other factors, many are turning to automation to pick up the slack.

President Bush, recently touring a trucking center in Texas, said technology will be a key ingredient in maintaining security going forward as well as enhancing global trade. Indeed, the move toward automation is coming, though slowly. As companies are finding, they are only going to save so much in labor and the cost of goods, so they’re looking to becoming more efficient in operations.

Companies such as Vernon, Calif.-based Karen Kane have invested in technology to accommodate the unseen obstacles that may occur in the supply chain. Kane enlisted Silicon Valleybased Fasturn Inc., which markets OPN operations management software that keeps the home office in touch with every nuance in the production process. This could be a delayed shipment at the port or when a component in one country is ready for shipment for assembly.

“It’s scenario-oriented,” explained Fasturn chief executive officer Bill Seagrave. “It’s not so much based on the transactional as it is the physical process, so if something goes wrong, it naturally allows for additional steps whether it be for security documentation or other tasks.”

Seagrave said the software provides a more immediate remedy to production.

Peter Nygard has also employed the latest in technology to quicken the logistics of getting product to the market. Nygard, a maker of high-end women’s fashions, is set to open a 280,000- square-foot shipping center in Gardena, Calif., on Aug. 15. The center, called Nygard 8U, has a holding capacity of 2 million units and features slick rail logistics able to provide flexibility of Garments On Hangers (GOH) and flat packs with realtime tracking of each process. The complex can scan over 300,000 garments on a weekly basis and guarantees to its customers total accuracy in every carton, same-day shipping on repeat and CR product.

The company has invested more than $50 million in technology and has a goal of becoming a totally paperless operation. Peter Nygard said since upgrading his warehouse systems three years ago, he has been able to reduce costs from 46 cents per unit to 8 cents per unit. The efficiency allows for taking new steps such as stricter documentation and security, he said, adding that the new Gardena facility should reduce the cost to 4 cents per unit. —Robert McAllister

Security Concerns Hinder Overseas Business Travel

Security issues have been making it more difficult for apparel and textile executives to travel to and from the United States and that’s trickling down to the global apparel trade, says Frank Yuan, chief executive officer of Cyber Merchants Exchange, a Pasadena, Calif.-based electronic trading company that produces the ASAP sourcing show in Las Vegas.

While Yuan says the extra security is well warranted, it’s also making it more difficult for foreign apparel executives to enter the United States and vice versa. That’s a chief reason why he launched ASAP. The show, which will be held at the Las Vegas Hilton during MAGIC International Aug. 25–28, brings together 250 manufacturers from 15 countries. Yuan wants to eliminate the travel rigors for North American buyers by bringing them the sourcing contacts.

“After Sept. 11, the constraints on travel have become tighter and tighter. It’s to the point that it’s hurting growth,” he said.

The U.S. Department of State is making it harder to get visas, especially for citizens of Muslim countries, many of which produce apparel and textiles. In November, the State Department identified 26 Arab and Muslim countries, including Pakistan and Indonesia, which now have stricter security measures imposed. Among the added regulations are extra forms, background checks and interviews with government officials. The big obstacle to business travel, however, has been the time factor. Under the new guidelines, there’s a minimum three-week waiting period on non-immigrant visa applications for men up to age 45. That’s intended to allow the State Department to cross-check applicants’ names with the FBI’s new terrorism databases.

Yuan has been advising all his exhibitors to make travel plans well in advance.

“We’re seeing clients making appointments to get visas but are running two weeks to a month late,” explained Yuan. “They have to prove that their trips to the U.S. are legitimate. The government has also been paying special attention to travelers from China since there have been several cases of people smuggling [Chinese nationals] into the U.S. —Robert McAllister