California Apparel News

Quotas on apparel and textiles will probably disappear at the end of 2008, but importers should be prepared for Congress to impose anti-dumping duties in 2009 if low-priced, Chinese-made clothing start flooding the market.

That was one of the messages delivered by Janet Labuda, the top cop at the Department of U.S. Customs and Border Protection (CBP), who makes sure that apparel and textile imports into the country are brought in legitimately.

Labuda, whose official title is director of textile enforcement and operations, was in Los Angeles on Feb. 8 to speak to members of the California Fashion Association who gathered at the California Club in downtown Los Angeles. The event was sponsored by FedEx and drew a crowd that included Moshe Tsabag, head of juniorwear apparel maker Hot Kiss; Steve Maiman, head of childrenswear company Great Escape; and Lonnie Kane, chief executive of womenswear manufacturer Karen Kane. Also in attendance were international trade attorneys, customs brokers, freight forwarders and bankers.

“It is going to be very interesting to see what happens after 2008,” Labuda said. “There is the Global Alliance for Fair Trade, a group of 90 countries that are hoping that quotas will not go away after 2008 and may petition the World Trade Organization to keep them. But right now, we anticipate the mechanism for safeguards and quotas will go away.”

Two years ago, Labuda was in Los Angeles addressing the same group of industry executives. At that time, she was talking about how apparel and textile quotas would probably disappear by 2005 for all 149 countries that belong to the World Trade Organization. Quotas did disappear, for a few months.

Then domestic manufacturers asked the Bush administration to impose safeguard measures, or temporary quotas, to limit imports of several clothing categories from China. In November, a comprehensive agreement established between China and the United States replaced the safeguard measures. Now 34 apparel and textile categories are restricted until the end of 2008.

With these quotas in place, Labuda said enforcing apparel and textile imports has become a top-priority trade issue for the government this year. That’s because apparel and textiles account for 43 percent of all tariff revenues collected, even though they represented only $90 million of the $1.3 trillion of imports that came into the United States in 2004. The average duty on textiles is 16 percent while other goods pay an average duty rate of only 2.5 percent.

Customs officials are looking for illegal transshipments, origin fraud and mislabeling of cargo shipments. Since October, CBP officials have seized more than $10 million in goods that were described incorrectly to get around import regulations.

In 2004, customs officials discovered that 28 percent of apparel items examined for duty-free status under free trade rules didn’t qualify. Items coming into the country under the North American Free Trade Agreement accounted for 79 percent of that number. Another 13 percent were coming in duty-free from Central American countries under the Caribbean Basin Trade Partnership Act.

Another problem has been importers misclassifying goods to get around quota restrictions or tariffs. Labuda pointed to apparel manufacturers bringing in pants labeled as made with quota-free ramie when in fact they were made with cotton, which is subject to quota. Ramie carries a zero to 2 percent duty rate, while cotton pants pay a 16 percent duty rate. Manmade fiber products pay a 32 percent tariff.

“This current situation has caused me great distress,” Labuda said. “We are going to have to be more vigilant in this area.”

When customs officials see a manufacturer has been importing cotton pants for some time and then switches to ramie, it raises red flags. Customs officials will pull the goods to be tested in a lab, which can detain freight for an extra three to four weeks.

Labuda warned that importers should make sure their customs brokers know what they are doing because when the government starts issuing fines, they are imposed on the broker as well as the importer.

“It is one chain of how we do business and we’re all in this together,” the customs official said. “But there has to be a lot of checks and balanceshellip;. Once in a while you may have to step out of the box and say let me look at these entries. If it said ’Made in China’ why did you put ’Made in Hong Kong’? There are things we can do to take extra care with these transactions and sometimes we just don’t.”