California Apparel News

The steep 38 percent tariff the European Union slapped on U.S.-made women’s jeans last year is set to expire on April 30, but no one is sure whether the tariff will disappear or be extended for another year.

Industry insiders are placing their bets the tariff stays in place for another year, but there is a slim chance the tariff—which is more than three times what it was in 2012—is reduced or shifted to another item.

“The rumor is the tariff will continue after May 1,” said Nate Herman, vice president of international trade at the American Apparel & Footwear Association, a trade group in Arlington, Va. “They seem to like this item for tariffs.”

The AAFA has been pushing U.S. and European trade officials to negotiate a reduction in the tariff, which was at 12 percent before being raised on May 1, 2013, or dropping it altogether. “I don’t think they will announce a decision before the middle of next month on this tariff,” said Steve Lamar, the AAFA’s executive vice president.

On top of the current tariff war, the two regions, ironically, are negotiating a free-trade agreement that would make the area the largest free-trade zone in the world, encompassing as many as 800 million residents.

The EU and the United States just wrapped up their fourth round of negotiations in Brussels, Belgium, for the Transatlantic Trade and Investment Partnership, or T-TIP. The five-day meeting, March 10–14, saw discussions on trade in services, public procurement, rules of origin, technical barriers to trade, agriculture, and customs and trade facilitation.

Letter-writing campaign

The American Apparel & Footwear Association as well as the European Apparel and Textile Confederation sent a letter on March 10 to U.S. Trade Representative Michael Froman and EU Commissioner for Trade Karel De Gucht expressing their strong support for immediate and reciprocal duty-free provisions for all apparel and textiles in the proposed free-trade accord.

The AAFA has also been pushing the EU to drop the steep tariff increase on U.S.-made women’s blue jeans. Most of those are premium-denim jeans made in Los Angeles and selling at high-end European department stores for more than $300. Selfridges in London has an entire section devoted to premium-denim jeans that includes Los Angeles labels Joe’s Jeans, True Religion, 7 For All Mankind, Current/Elliot and J Brand.

Lamar is optimistic there might be some reduction in the tariff because the duty calculated on the women’s jeans is based on the amount of money distributed to U.S. companies under the Byrd Amendment, also known as the Continued Dumping and Subsidy Offset Act.

Several years ago, the EU and other countries won a World Trade Organization trade dispute with the United States over this amendment, which, at the time, allowed the United States to collect anti-dumping duties on goods that were subsidized by European countries.

The U.S. Congress approved legislation in 2006 repealing the Byrd Amendment, which had been in effect since 2000. However, Congress added transitional provisions that allowed U.S. customs to continue collecting duties for distribution until Oct. 1, 2007. To this day, payments continue to be handed out on antidumping duties collected during the period the Byrd Amendment was in effect.

While those disbursements continue, the EU and other countries can impose tariffs equal to the amount distributed under the Byrd Amendment.

While those disbursements have shrunk in the past year, they are still being made. U.S. Customs and Border Protection’s annual report showed that a little more than $118.6 million was paid out to U.S. firms in the 2012 fiscal year. In 2013, the amount distributed dropped nearly 48 percent to $61.75 million.

With distribution down 48 percent, some believe the tariff on U.S.-made women’s jeans will be reduced by 48 percent. Or it could remain the same and tariffs could be reduced on other items whose tariffs went up drastically last year, such as duties paid on eyewear frames, sweet corn and crane trucks. Their tariffs shot up from 15 percent to 26 percent.

The AAFA’s Lamar was hoping the Brussels trade negotiations would provide an opportunity to discuss tariff reductions for women’s jeans and other items. But there has been no sign on which direction Europe’s tariff strategy will take.

Refunds in the mail

Meanwhile, six months after the tariff took effect, major Los Angeles blue-jeans makers banded together and hired a law firm to find a technical twist to get around the 38 percent tariff.

Attorney Elise Shibles, from the San Francisco office of customs and international law firm Sandler, Travis & Rosenberg, filed a legal challenge last October in the United Kingdom on behalf of Hudson Jeans, saying that denim pants whose dyes are not colorfast cannot be classified as denim but as women’s pants. In early December, the U.K. agreed. For classification purposes, denim is described as pants with a dye that won’t fade.

Already, Los Angeles denim companies are filing for reimbursements on the extra tariffs they were charged last year, Shibles said. One LA company, which she did not name and was not part of the original legal challenge, already has received its first refund.

Another Los Angeles denim-jeans manufacturer is going through the refund process right now to get back more than $275,000.

Shibles said the refunds are encouraging because no one was sure whether other European countries would honor the U.K. ruling—even though the U.K. is part of the European Union.

Also, the refunds are being extended to companies that were not part of the original U.K. tariff complaint. “I believe all five parties that were part of the ruling request [in the U.K.] are seeking refunds,” Shibles said. Only four of the five companies that were party to the legal complaint have been revealed. They were Hudson Jeans, Koral Los Angeles, Paige Denim and True Religion.