WASHINGTON UPDATE: NCTO Unites with 13 Trade Groups to Support USMCA

The National Council of Textile Organizations (NCTO), representing the full spectrum of U.S. textiles from fiber through finished sewn products, joined 13 trade associations in a letter to House lawmakers this week, urging members to vote in favor of the U.S.-Mexico-Canada Agreement (USMCA).

The House was expected to pass USMCA on December 19, 2019.

The USMCA updates and modifies the North American Free Trade Agreement (NAFTA) and makes significant improvements that textile and cotton producers believe will help bolster cotton exports to the region, as well as the $20 billion in annual trilateral textile and apparel trade between the U.S., Mexico and Canada.

Mexico and Canada are the two largest export markets for U.S. textiles, totaling nearly $12 billion in 2018.

For U.S. cotton producers, Mexico is the top export market for U.S. raw cotton and the second largest export market for U.S. cotton textile and apparel products. Canada is the fourth largest market for those products, according to the National Cotton Council.

NCTO will continue to push for passage of USMCA in the Senate, which is expected to hold a vote early next year on the trade pact.

 

NCTO Lauds Expected House Passage of USMCA

WASHINGTON, DC – The National Council of Textile Organizations (NCTO), representing the full spectrum of U.S. textiles from fiber though finished sewn products, issued the following statement regarding the expected passage today of the U.S.-Mexico-Canada Agreement (USMCA) by the U.S. House of Representatives.

“Passage of the USMCA in the House today will mark a significant step forward in advancing the trade deal through Congress and we urge the Senate to pass it swiftly,” said NCTO President and CEO Kim Glas. “Mexico and Canada are the two largest export markets for the U.S. textile industry, totaling nearly $12 billion last year, and several provisions in USMCA will help producers expand and build new business in the critical Western Hemisphere supply chain.”

NCTO worked with the administration during negotiations on USMCA and successfully lobbied for several provisions and improvements that were subsequently incorporated in the trade deal that will close loopholes and strengthen U.S. Customs enforcement.

“We expect U.S. textile companies to export more to the region and invest more in the U.S. when USMCA is implemented,” Glas said. “Textile executives from North Carolina to New York have said they will seek to take advantage of the modifications in the trade deal and build new business in areas such as pocketing and sewing thread, as a result of stronger rules of origin and Customs enforcement.”

The USMCA updates and modifies the North American Free Trade Agreement (NAFTA) and makes significant improvements, including:

  • Creation of a separate chapter for textiles and apparel rules of origin with strong customs enforcement language.
  • Stronger rules of origin for sewing thread, pocketing, narrow elastics and certain coated fabrics.  Under the current NAFTA, these items can be sourced from outside the region – USMCA fixes this loophole and ensures these secondary components are originating to the region.
  • Fixes the Kissell Amendment Buy American loophole, ensuring that a significant amount the Department of Homeland Security spends annually on clothing and textiles for the Transportation Security Administration is spent on domestically produced products.

This release follows NCTO’s previous endorsement of the deal reached between House Democrats and the administration last week.

NCTO is a Washington, DC-based trade association that represents domestic textile manufacturers, including artificial and synthetic filament and fiber producers.

  • U.S. employment in the textile supply chain was 594,147 in 2018.
  • The value of shipments for U.S. textiles and apparel was $76.8 billion in 2018.
  • U.S. exports of fiber, textiles and apparel were $30.1 billion in 2018.
  • Capital expenditures for textile and apparel production totaled $2.0 billion in 2017, the last year for which data is available.

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CONTACT: Kristi Ellis

(202) 684-3091

www.ncto.org

WASHINGTON UPDATE: U.S. and China Complete Phase 1 Deal

Just ahead of a new round of tariffs scheduled to take effect December 15, the Trump administration announced a “Phase One” deal on December 13 that will suspend indefinitely those tariffs and reduce the rate for the list that went into place on September 1 (List 4A).  The text of the agreement has not yet been released; the U.S. and China are expected to sign it in early January.

Based on the latest information available, the deal includes new commitments covered by specific chapters on Intellectual Property; Technology Transfer; Agriculture; Financial Services; Currency; Expanding Trade; and Dispute Settlement.  A fact sheet summarizing the agreement is available here As part of the Expanding Trade section, China has committed to purchasing over the next two years an additional $200 billion of U.S. manufactured goods, agricultural products, energy products, and services, compared to a 2017 baseline.

In addition to canceling the December 15 tariffs, the United States agreed not to move forward with a previously discussed 5% increase to the tariff rate for Tranches 1-3, meaning that the tariff rate on the $250 billion covered by the first three lists will remain at 25%.  For Tranche 4A, the grouping that went into effect on September 1 at a 15% rate, the U.S. will cut that rate in half to 7.5%.  As a reminder, most apparel and home furnishing products are on Tranche 4A, while textile fibers, yarns and fabrics are part of Tranche 3.   It is unclear precisely when the decreased rate for 4A will take effect, although press reports indicate it will be 30 days after the agreement is signed.  Further, no firm plans have been announced yet as to when the U.S. and China will launch the second phase of the talks or what the scope will be.

As we review this Phase One agreement, it is important that the administration strike the proper balance of maintaining its leverage with China by keeping duties on finished product until a final strong and enforceable deal with China is completed.  We look forward to reviewing and analyzing the deal in more detail. See NCTO’s official press release here.

Further, an exclusion process for the Tranche 4A list is currently underway and will extend through January 31.  The online portal is available here, with exclusion requests being posted on a rolling basis.  Included below are further details for engaging in this process should your company wish to submit an exclusion request and/or respond to requests submitted by others that may overlap with your production capabilities or that of your customers.

Submitting a Tranche 4A Exclusion Request 

To submit an exclusion request, Requestors must first create an account See the $300 Billion Trade Action (List 4) webpage for more information on filing a request for an exclusion, submitting a response to a request, or replying to a response.  Exclusion requests must be submitted by January 31, 2019.

Viewing and Responding to Tranche 4A Exclusion Requests

The list of Tranche 4A exclusion requests posted to the public portal is available here and can be sorted by HTS number to better identify products of interest.  Interested parties do not need to register for an account to view a request or file a response to a request.  Responses and replies will be publicly viewable and should not contain Business Confidential Information.

After a request for exclusion of a particular product is posted to the portal, interested persons have 14 days to respond to the request to express support or opposition.  To file a response, first click on the associated “Exclusion Request ID” to view the public details of the request, then click the “Submit a New Response” button.

Requestors then have 7 days after a response is posted to file a reply.  If a response is filed, USTR indicates that the original Requestor will receive a notification email.  Requestors may file a reply by following the link in the notification email or by logging into their account and viewing the relevant response.

We strongly encourage members to review and continually monthly the exclusion portal through January 31, noting the 14-day window for any responses.  Please let NCTO know if you file a response.

NCTO Comments on the Administration’s Announced Phase One Deal on 301 Tariffs

WASHINGTON, DC – The National Council of Textile Organizations (NCTO), representing the full spectrum of U.S. textiles from fiber though finished sewn products, provides initial comments on the Phase One deal on 301 tariffs reached between the United States and China today.

“We look forward to reviewing the details of the agreement as it becomes available, including the intellectual property enforcement mechanisms agreed to by both countries.  We have long supported the administration’s efforts to re-balance our trade relationship with China that has significantly eroded our U.S. manufacturing base for decades,” Kim Glas, President and CEO of the National Council of Textile Organizations said.

The proposed announcement means that 301 duties on textile inputs will remain at a 25 percent tariff. Meanwhile, penalty duties on finished apparel and textile products implemented on Sept. 1st will be reduced from 15 percent to 7.5 percent, and proposed duties on finished products set to be put in place on Dec. 15th will no longer go into effect.

“NCTO has strongly supported applying tariffs on finished products as key negotiating leverage since textile and apparel production is a key pillar of the Chinese manufacturing economy.  Finished apparel, home furnishings and other made-up textile goods equate to 93.5 percent of U.S imports from China in our sector, while fiber, yarn and fabric imports from China only represents 6.5 percent, according to government data.  Today’s announcement reduces tariffs on finished products at the same time it keeps tariffs in place on key inputs that aren’t made in the U.S. such as certain dyes, chemicals, and textile machinery. We believe a wiser approach would be to maintain penalty duties on finished Chinese products while reducing 301 duties on key inputs that are used by U.S. manufacturers. Doing so will maintain maximum leverage on China to reach a more comprehensive and enforceable intellectual property agreement, while reducing input costs for U.S. manufacturers.  As domestic textile companies fight to compete with China and their illegal trade practices, it is important that U.S. manufacturers should be the first to see penalty duties removed on inputs not made in the United States.

As we review this Phase One agreement, it is important that the administration strike the proper balance of maintaining its leverage with China by keeping duties on finished product until a final strong and enforceable deal with China is completed.  We look forward to reviewing and analyzing the deal in more detail.”

NCTO is a Washington, DC-based trade association that represents domestic textile manufacturers, including artificial and synthetic filament and fiber producers.

  • U.S. employment in the textile supply chain was 594,147 in 2018.
  • The value of shipments for U.S. textiles and apparel was $76.8 billion in 2018.
  • U.S. exports of fiber, textiles and apparel were $30.1 billion in 2018.
  • Capital expenditures for textile and apparel production totaled $2.0 billion in 2017, the last year for which data is available.

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CONTACT: Kristi Ellis | Rebecca Tantillo

(202) 684-3091 | (202) 822-8026

www.ncto.org

INDUSTRY SPOTLIGHT: U.S. Textile Executives Comment on Positive Impact of USMCA Deal

The National Council of Textile Organizations (NCTO), representing the full spectrum of U.S. textiles from fiber through finished sewn products, welcomed the deal on the United States-Mexico-Canada Agreement (USMCA) trade pact reached between the administration and House Democrats on Dec. 10.

 The deal paves the way for USMCA legislation to advance in Congress and NCTO will be fully engaged in helping move the trade deal across the finish line. The House and Senate must vote on USMCA and all three countries must ratify the trade deal before it can be implemented.

 In this blog post, NCTO interviewed four U.S. textile CEOs who outlined how the provisions and improvements in USMCA will benefit their companies. These companies represent a sampling of the larger U.S. textile base, which will see broad-based improvements if the trade deal is implemented.

 In 2018, the top 5 states representing textile employment were Georgia, North Carolina, South Carolina, California and Virginia.

 The new USMCA, which updates and modifies the North American Free Trade Agreement (NAFTA), would greatly benefit the U.S. textile industry and bolster the industry’s $20 billion in annual trilateral textile and apparel trade. U.S. textile exports to Canada and Mexico—the industry’s top two export markets—totaled nearly $12 billion in 2018, underscoring the importance of the trade deal to the industry’s Western Hemisphere supply chain as well as its growth and investment in the U.S.

 NCTO worked with the administration during negotiations on USMCA and successfully lobbied for several provisions that were incorporated in the trade deal that will close loopholes and strengthen U.S. Customs enforcement.

 The USMCA includes the following provisions aimed at helping strengthen and bolster business in the Western Hemisphere: 

  • Creation of a separate chapter for textiles and apparel rules of origin with strong customs enforcement language.
  • Stronger rules of origin for sewing thread, pocketing, narrow elastics and certain coated fabrics. Under the current NAFTA, these items can be sourced from outside the regionUSMCA fixes this loophole and ensures these secondary components are originating to the region.
  • Fixes the Kissell Amendment, Buy American loophole, ensuring that a significant amount the Department of Homeland Security spends annually on clothing and textiles for the Transportation Security Administration is spent on domestically produced products.

 The following textile executives provide insight into the implications of USMCA for their businesses and urge Congress to swiftly pass the trade deal.

 

COTSWOLD INDUSTRIES INC.:

The USMCA trade deal will provide benefits for the entire U.S. textile supply chain, which has built a strong and well-established industry over the past 25 years under NAFTA, and stands to gain even more under the modified trade pact.

For New York-based Cotswold Industries, a vertically integrated textile engineering and marketing company that manufactures and distributes technical barriers, knitted and woven industrial fabrics and non-woven substrates to the apparel, industrial, military commercial workwear and home sewing markets, the new provisions in the trade pact will not only help provide certainty and stability in the Western Hemisphere but will also secure new opportunities.

James W. McKinnon, CEO, Cotswold Industries Inc., said his company exports a wide variety of fabrics to Mexico that account for more than 30-40 percent of its total exports.

“For us, the NAFTA agreement itself⁠—and now the USMCA⁠—is absolutely critical to maintaining the jobs and the business that we currently have, and that runs the gamut from automotive to home furnishings to apparel,” McKinnon said. “All of those sectors are critically important to maintaining the free flow of goods over the border and it’s mutually beneficial for not just the U.S. textile industry but for workers in Mexico and ultimately the U.S. consumer.”

Over the past 25 years, NAFTA has provided a “tax free, duty-free environment” that encourages shorter lead times,” he said.

U.S. textile producers have also benefited from the close proximity of Mexico to the United States as brands and retailers invested in the model of Just-In-Time manufacturing. With the explosion of online shopping, quicker deliveries have become even more critical with a greater reliance on manufacturing hubs closer to the U.S.

“NAFTA has been a counterbalance to cheaper goods from China and Bangladesh, especially in the industries where quick turn-around times and quick response is important,” McKinnon said. “NAFTA and USCMA allow that process to continue and allow us to be competitive to lower cost Asian production.”

McKinnon said the Western Hemisphere supply chain began to stabilize between 2005-2010 after offshoring in the 1980s and 1990s, which lead to a significant exodus of apparel business to Asia.

“The infrastructure in Mexico has been the leading cause of business staying there,” McKinnon said. “There was a huge investment there and that production is now mature and that infrastructure established. It is a known commodity that U.S. brands will take advantage of.”

USMCA will help maintain that critical supply chain, while opening new business opportunities for U.S. textile manufacturers.

Cotswold will be a beneficiary of stronger customs enforcement in USMCA as well as the fix in the Kissell Amendment, Buy American loophole, which will require the Department of Homeland Security and the Transportation Security Administration to purchase a significant amount of domestically produced inputs for its uniforms.

 

HAMRICK MILLS INC.

Hamrick Mills, Inc., a 119-year-old textile company based in Gaffney S.C., employing 470 people, is well positioned to take advantage of several new provisions in USMCA.

The company is a producer of greige woven fabrics in both poly/cotton blends as well as 100% cotton for use in the home furnishings and apparel and support apparel markets.

Hamrick Mills has built a strong business around the current NAFTA and anticipates new and expanded business with USMCA, said Cameron Hamrick, president of the company.

“I think there is a big desire to have certainty in the North American region. It’s a new trade agreement, which the textile industry gave input on that was later incorporated into the agreement,” Hamrick said. “There is less of a geo-political risk of operating in North America for the US market. Without that certainty, it could easily drive more big end users to Asia.”

He said a portion of the company’s career uniform shirting fabric and hospital scrub material is exported to Mexico for cutting and sewing and shipped back to the U.S. for consumption. Hamrick also sells greige fabric to Mexico for the sheeting market.

“Right now, a significant portion of our total business in the supply chain goes through Mexico,” Hamrick said, adding that the company sells its fabrics to converters, which complete the manufacturing process in Mexico and returns to USA consumers.

The stronger rule of origin for pocketing is a significant component for Hamrick Mills.

“Of course the pocketing provision strengthens the overall demand for textiles in the region because it has a stronger rule of origin, which is a big deal for us,” Hamrick said. “It gives the U.S., Canada and Mexico an opportunity to fill that need that was getting filled by the Eastern Hemisphere because of the exclusions [in NAFTA] for the non-visible components.”

Hamrick said under NAFTA, a majority of pocketing fabric was fulfilled by non-signatory countries, primarily from Asia. USMCA’s strong rule of origin on pocketing and interlinings will allow only the signatory countries in the region to participate duty free.  The fix to the Kissell Amendment loophole will also help Hamrick Mills expand its shirting business.

“We do a lot of shirting that we sell for Berry Amendment requirements. We sell products to various [apparel] companies that participate in Berry Amendment uniforms, and we would in turn be able to expand that through the Kissell Amendment requirements, especially in the areas of Homeland Security and TSA.”

“In order to compete on a global level, we need to have USMCA for textiles. That’s for sure.”

Hamrick said the trade agreement is critical to maintaining a Western Hemisphere platform and will create more certainty for the textile industry in North America, which will help our industry grow.

 

GREENWOOD MILLS INC.

Greenwood Mills, Inc., a 130-year-old textile producer based in Greenwood, South Carolina, is well positioned to take advantage of provisions in the USMCA.

James C. Self III, president and CEO of Greenwood Mills, said the company has two distinct businesses—fabric and apparel.

Under NAFTA, Greenwood has built a significant workwear fabric export business to Mexico, and on the apparel side, the company makes finished blue jeans in Mexico.

Self said one updated provision in USMCA that could be a potential benefit is the strengthened rule of origin for pocketing, which will require pocketing fabric to be produced in the NAFTA region, as opposed to allowing the use of fabric from other countries such as China, which is the case under NAFTA.

“There is a lot of interest over pocketing,” Self said. Under NAFTA, companies can use foreign pocketing fabrics but USMCA closes that loophole and it is an area we are looking at in terms of potential new business,” Self said.

Self said Greenwood is not currently in the pocketing fabric business because NAFTA allowed foreign-made pocketing which undercut U.S. pricing.

During the first few years after NAFTA was implemented in 1994, Self said Greenwood’s denim apparel business in Mexico thrived, although it has since slowed over the past decade as some denim apparel production started to migrate to Asia from Mexico.

“It’s still a significant business for us and the new deal could help that business. Anything that makes NAFTA more competitive against Asia is going to help,” Self said.

“With the great growth in e-commerce, quick turn is going to be more critical to a lot of our retail partners. Mexico is the quickest of the quick turns in this industry,” Self added.

Stronger customs enforcement provisions in USMCA will also help address long-standing and rampant textile fraud, such as transshipments from other countries trying to take advantage of NAFTA’s duty benefits.

Self said the fix to the Kissell Amendment, Buy American loophole for TSA uniforms could also help boost the entire industry.

“If it comes back to the U.S. and is treated the same way as the military, obviously that would be a big boost for Made in USA,” he noted.

 

INMAN MILLS

Inman Mills, which is based in Inman, S.C., is a textile producer of a diverse range of products, from cotton yarn to highly technical fire retardant fabric, primarily exports bottom weight fabrics to the region, according to Norman Chapman, president and CEO of the company.

“From a pure capacity point of view, USMCA would lead to an increase in volume and I think that would make companies stronger,” he said.

Chapman said the textile industry is a lot smaller since NAFTA took effect 25 years ago, but he noted that it is important to have a better free trade deal for the region, because it creates more volume for the industry overall.

Strengthening the rule of origin for pocketing and linings is a key benefit for companies, he noted.

“These are very competitive products but when they are coming in from outside of the agreement, you don’t even get a chance at bidding on them,” he said. “USMCA will require that they come from the region and it will add volume to this region, which is a good thing.”

For Inman Mills, the revisions closing the Kissell Amendment loophole is an important component of the agreement.

“That would be a significant benefit to us. Those are the types of fabrics that we manufacture,” Chapman said. “With Homeland Security and TSA and the pocketing and lining [modifications] it would give us an opportunity for increased volume.”

Chapman said Inman currently does a limited amount of pocketing but he said “most looms don’t care what they weave,” noting that more volume for the region is good for everyone.

 

 

NCTO Applauds Deal Between Democrats and Administration on USMCA; Urges Swift Congressional Passage

WASHINGTON, DC –  The National Council of Textile Organizations (NCTO), representing the full spectrum of U.S. textiles from fiber though finished sewn products, welcomes the deal on the U.S.-Mexico-Canada Agreement (USMCA) between the administration and House Democrats and urges the administration and Congress to get the deal across the finish line.

“We are happy to hear a deal has been reached that should help pave the way for USMCA to move forward and we will continue to work for Congressional passage on a clean bill,” said NCTO President and CEO Kim Glas.

“The new USMCA makes several improvements that would greatly benefit the U.S. textile industry and bolster our $20 billion in annual trilateral textile and apparel trade,” Glas added. “U.S. textile exports alone to Canada and Mexico—the industry’s top two export markets—totaled $12 billion last year, underscoring the importance of the trade deal to the industry’s Western Hemisphere supply chain as well as its growth and investment in the U.S.”

The USMCA updates and modifies the North American Free Trade Agreement (NAFTA) and makes significant improvements, including:

  • Creation of a separate chapter for textiles and apparel rules of origin with strong customs enforcement language.
  • Stronger rules of origin for sewing thread, pocketing, narrow elastics and certain coated fabrics.  Under the current NAFTA, these items can be sourced from outside the region – USMCA fixes this loophole and ensures these secondary components are originating to the region.
  • Fixes the Kissell Amendment Buy American loophole, ensuring that a significant amount the Department of Homeland Security spends annually on clothing and textiles for the Transportation Security Administration is spent on domestically produced products.

NCTO is a Washington, DC-based trade association that represents domestic textile manufacturers, including artificial and synthetic filament and fiber producers.

  • U.S. employment in the textile supply chain was 594,147 in 2018.
  • The value of shipments for U.S. textiles and apparel was $76.8 billion in 2018.
  • U.S. exports of fiber, textiles and apparel were $30.1 billion in 2018.
  • Capital expenditures for textile and apparel production totaled $2.0 billion in 2017, the last year for which data is available.

# # #

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CONTACT: Kristi Ellis

(202) 684-3091

www.ncto.org

 

Trade Update: Apparel Imports from China post Big Double-Digit Decline in October on a Year-Over-Year Basis

Apparel imports from China fell even more sharply in October year over year than in September, as the Trump administration’s tariffs continued to propel a shift in sourcing.

Apparel imports from China to the U.S. fell 30.4 percent by quantity in October compared with October 2018, according to the Commerce Department’s Office of Textiles and Apparel (OTEXA) monthly report released on Dec.5.

The administration began imposing retaliatory tariffs on finished apparel and textile on Sept. 1, as part of its crackdown on China’s intellectual property abuses.

“The steep decline in apparel imports from China in October on a year-over- year basis, marks the second month of declines since the Trump administration imposed tariffs on finished apparel and textile products from China and is a strong indicator that there is a shift in sourcing,” said NCTO President and CEO Kim Glas. “As U.S. manufacturers that have suffered enormously from China’s illegal IPR activities and state-sponsored export subsidies, we have long supported the administration’s crackdown on intellectual property violations. The tariffs on finished products are the only way to maintain leverage and truly resolve China’s rampant IPR abuse.”

For the year-to-date, apparel imports from China fell 2.25%, while apparel imports declined 1.2% for the year ending Oct. 31, according to OTEXA.

Glas said the administration’s actions against China could ultimately help lead to sourcing shifts to the Western Hemisphere, which is the U.S. textile industry’s largest export market.

Textile mill product exports to the Western Hemisphere declined 2.5 percent for the year-to-date as well as for the year ending Oct. 31.

But textile exports to some individual countries in the region increased. Honduras, a partner in the Central American Free Trade Agreement or (CAFTA-DR), posted an 8.5 percent increase by quantity for the year-to-date through October

There were also other bright spots in the data, particularly in apparel imports from the Western Hemisphere, which largely incorporate U.S. textile inputs. Apparel imports to the U.S. from the region rose 0.88 percent for the year ending October.

“Early indications in the trade data show that sourcing is shifting. Apparel imports from the Western Hemisphere that largely incorporate U.S. textile inputs increased modestly and if it continues, this is a trend that will have positive implications for the U.S. textile industry,” Glas said.