Filipino Imports Stopped at Port
Thousands of boxes of apparel and textiles imported from the Philippines are being detained at the airports and seaports around Southern California in a crackdown on transshipping goods from China.
For the last month, just about any apparel coming into the United States from the Southeast Asian country is being stopped by customs officials, who are spending up to one month verifying the goods’ origin.
The detentions are playing havoc with apparel importers trying to make end-of-September deliveries to retail stores without facing a fine or penalties known as chargebacks.
“The Philippines is a debacle right now,” said Los Angeles customs attorney Richard Wortman, who recently was at the New York office of his law firm, Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt, working full time to unravel the mess caused by the severe crackdown.
The detentions are affecting all clothing categories, from blue jeans to knit tops to skirts to childrenswear. In addition, no particular group of factories is being targeted, which differs from past apparel detentions where customs officials targeted either a certain category such as sweaters or certain factories that didn’t have the capability to produce what they said they made.
“We have the detentions across the board. It’s everything from childrenswear to high-end jeans and well-known brands,” Wortman said. “The stuff is just backing up right now.”
Janet Labuda, director of the Textile Enforcement and Operations Division of U.S. Customs and Border Protection in Washington, D.C., said the Philippines entered the agency’s radar screen about six months ago. But she wouldn’t say what triggered the blip. Nor would she say if customs was looking for any particular kind of clothing suspected of being sent from China to the Philippines and labeled as “Made in the Philippines.”
“Obviously, you start backing up through the process and looking at what kinds of commodities are under the China quota arrangement that ends Dec. 31, 2008. That is our area of concern,” Labuda said. “We have also seen an uptick in misdescriptions of product as well.”
Even though apparel and textile quotas disappeared for all 149 countries that belong to the World Trade Organization, China is an exception. When that country joined the WTO in late 2001, it agreed that if its apparel and textile exports disrupted the domestic industries of any WTO countries, temporary quotas, or safeguard measures, could be imposed until the end of 2008.
In November 2005, the United States and China agreed on quotas for 34 apparel and textile categories made in China. Under quota is everything from swimsuits and socks to cotton and synthetic knit shirts, cotton and synthetic pants, and bras.
With some quotas still in effect, the customs agency suspects that many Chinese manufacturers are undertaking elaborate schemes to avoid quota—which must be bought by factories in China—by shipping their goods to a second country and then rerouting them to the United States.
In the last year, Customs and Border Protection seized more than $100 million in wearing apparel and textile goods, making it a banner year for seizures, customs officials said. During the previous year, it seized only $17.6 million in apparel and textiles because of disappearing quotas at the beginning of 2005.
The government is particularly vigilant about finding illegal textile imports because they account for 43 percent of the $25 billion in tariffs collected at the borders.
Customs officials have been using several enforcement tools to deter and locate transshipments, which include visiting overseas factories and spotting unusual spikes in certain apparel being imported into the country. Last year, verification teams— also known as jump teams—visited 450 factories in 12 countries.
To help resolve the transshipment problem, the Philippines and the United States in late August signed a memorandum of understanding for both countries to crack down on illegal shipments of apparel and textiles.
The memo provides for customs cooperation, identification of apparel and textile factories, and joint verification visits to the factories. It was signed at about the same time as customs officials in the United States started detaining apparel and textiles coming from the Philippines.
The United States has similar memos of understanding with Hong Kong, Macau and most recently Indonesia. The United States Trade Representative’s office is working on other agreements with Taiwan, South Korea and Malaysia to uncover transshippers.
Apparel detentions are what keep customs brokers and attorneys in business, as importers are being asked to produce a host of documents giving absolute proof that garments were made in the countries stated on the documents. Customs officials are being particularly demanding this time around.
“They are asking for everything—sewing tickets, fabric records, cutting records and time sheets,” said John Salvo, president of Carmichael International Service, a Los Angeles customs broker and freight forwarder with a large number of apparel clients. “The detentions were spotty for a while, but then they became noticeable at the end of August.”
Los Angeles customs attorneys Elon Pollack and Brian Murphy of Stein Shostak Shostak Pollack & O’Hara LLP said they had been busy in recent weeks helping clients— many of whom are regular importers of Filipino apparel—maneuver their way through the paperwork maze set up by customs. “There’s no question they have beefed up scrutiny,” Murphy said. “They have really increased pressure to know where goods are being made.”
