California Apparel News

Los Angeles manufacturers, facing a new 38 percent European duty on women’s jeans made in the United States, are weighing their options and trying to avoid moving production outside the country.

“We haven’t shifted our manufacturing yet, but the high duty is certainly going to impact sales,” said Deborah Greaves, general counsel at True Religion, one of LA’s top blue-jeans manufacturers.

J Brand is also still manufacturing in Los Angeles. “Right now we are not doing anything related to the EU duties,” said Julie Rummel, who works with Jeff Rudes, the company’s founder.

At Joe’s Jeans, Chief Executive Marc Crossman said the majority of the company’s blue jeans have been made for some time in a factory in Puebla, Mexico. Styles that are more complicated or that are garment-dyed are made in Los Angeles.

The company hasn’t gotten any complaints by European retailers about the “Made in Mexico” label, he said, but it is in “teeny font.”

About 5 percent of the company’s revenues comes from European sales. “If we had a huge amount of business going to Europe, duties would be a problem,” he said.

Meanwhile, LA Mayor Antonio Villaraigosa’s office, the Los Angeles Regional Export Council and TradeGood, an online company that connects factories with buyers, are organizing a seminar at the Los Angeles Chamber of Commerce headquarters in downtown Los Angeles at 10 a.m. on June 27. They will discuss developing new export markets for LA–made premium blue jeans that sell anywhere from $150 to $300.

“LA denim manufacturers could be selling to Asia, Latin America, and even Southeast Asia,” said Minesh Pore, senior director of business development at Intertek Testing Services, the parent company of TradeGood.

The mayor’s office is concerned that manufacturing companies making denim pants and other goods in Los Angeles might transfer their production to Mexico or elsewhere. “When we read about the EU tariff issue, we knew this was really going to hit Los Angeles hard,” said Tracy Gray, the mayor’s senior adviser for international business and marketing. “The majority of premium denim is made in Los Angeles. We were starting to hear from companies that they might leave Los Angeles [for production]. We wanted to make sure they are informed about what this is about and what we can do to help them.”

According to the U.S. Department of Commerce, the value of women’s and girls’ blue jeans exported to Europe last year was $30 million a year, which is the second-largest category of U.S. apparel exports. Los Angeles denim makers account for 75 percent of the premium denim manufactured in this country. It has been an industry that has helped maintain LA as the top apparel-manufacturing hub in the United States, with 44,500 people working in apparel factories.

Caught in a trade war

On May 1, the European Union raised duties from 12 percent to 38 percent on all women’s blue jeans made in the United States. The “Made in USA” label has been particularly popular in Europe and has been a boost for LA manufacturers looking for new markets during slow economic times.

The higher duties are in response to the EU’s World Trade Organization dispute with the United States over the Continued Dumping and Subsidy Offset Act, also known as the Byrd Amendment.

The U.S. Congress approved legislation in 2006 ending the Byrd Amendment, which imposed antidumping duties on imported goods being sold in the United States for less than it cost to make them in their own country. Companies complaining that their business had been hurt by these undervalued imports could receive money from the antidumping duties collected.

Even though antidumping duties are no longer in effect, there is a pool of funds still out there being disbursed from the antidumping duties collected before the Byrd Amendment’s appeal. Last year, $120 million were distributed to U.S. companies. The EU is retaliating for this multi-million disbursement.

Fighting back

Ever since May 1, there has been a flurry of letter writing and lobbying in Washington, D.C., but no solution has appeared. Many manufacturers and trade officials are holding out hope that the start of free-trade negotiations early next month between the United States and the European Union will result in a quick fix to the problem.

Steve Lamar, executive vice president of the American Apparel & Footwear Association, said he talked about the problem during comments he made on May 10 before David Weiner, the deputy assistant U.S. trade representative for Europe, who was getting input for negotiations for a new EU-USA free-trade pact, whose formal name is the Transatlantic Trade and Investment Partnership (TTIP).

“We used the hearing to talk about the EU duties,” Lamar said from his office in Arlington, Va. “We asked that at the beginning of the negotiations this duty get removed. You shouldn’t have this kind of irritant at the beginning of free-trade talks. … They told me that they have brought this up with various EU government entities.”

At the end of May, U.S. Rep. Lucille Roybal-Allard and three other congressional delegates who also represent districts in California—Xavier Becerra, Linda Sanchez and Grace Napolitano—also urged that Acting U.S. Trade Representative Miriam Sapiro hit hard on this subject when free-trade negotiations start with Europe. “We strongly encourage you to seek a reduction in these duties and request that you make fair market access for American-made denim and other apparel products a priority in your upcoming trade negotiations with the EU,” the four wrote.

Sapiro wrote back that her office has expressed serious concerns about the new duties in several direct discussions with high-level European Commission officials. “We urged the commission to explore ways to reverse the imposition of this additional duty, particular in view of the fact that the triggering legislation has been repealed. We intend to follow up with these and other high-level officials, continuing to press them to find a constructive way forward in this matter.”

That could be why many LA denim manufacturers are waiting before they switch their production to Mexico or elsewhere. For premium blue jeans, the “Made in LA” is the gold standard.

That label is important for Selfridges, the high-end London department store that has a huge denim section that stocks several brands of LA-made premium denim blue jeans. When there was talk of LA manufacturers switching production to Mexico, several calls were made to LA blue jeans makers saying Selfridges didn’t want to sell the blue jeans unless they have that “Made in LA” label.