NCTO Chairman Norman Chapman, who is president and CEO of Inman Mills, recently outlined a wide range of policy issues the organization is engaged in this year to maintain the domestic textile industry’s competitiveness, expand its investments and exports, and strengthen customs enforcement of illegal trade practices.
Speaking at a Southern Textile Association’s conference on Aug. 23 in Belmont, N.C., Chapman explained the important role NCTO plays in representing the industry’s voice in Washington.
“Good representation in Washington is critical for our long-term survival as an industry,” Chapman told the audience. “As I have heard [Parkdale Mills Chairman and CEO] Andy Warlick say many times, ‘If you’re not at the table, you’re on the menu.’ It’s important to not be on the menu. I’ve been in Washington quite a bit lately. I can assure you that we’re not on the menu. We’re absolutely at the table and we’re well represented on both sides of the aisle.”
Chapman said the industry “performed remarkably well during the pandemic and got a lot of people’s attention in Washington. So, we are in a position to play a little more offense, but we do spend a lot of our time defending the industry.”
Onshoring and Nearshoring Textile and Apparel Manufacturing—Maintaining Strong Textile Rules in CAFTA-DR
NCTO has engaged heavily in promoting the importance of the co-production chain with Central America and other Western Hemisphere trade partners.
Central to growth and investment in the region is maintaining strong rules of origin in the United States-Dominican Republic Central America Free Trade Agreement (CAFTA-DR), which has facilitated$15.1 billion in two-way trade and supports a co-production chain supporting more than 1 million workers in the U.S. and Central America.
As nearshoring and onshoring trends continue to gain momentum, some $2 billion of textile and apparel investment has gone into Central America and the U.S. over the past 18 months.
NCTO hosted or participated in numerous congressional and administration visits to CAFTA-DR and U.S. textile facilities over the last 18 months, and conducted over 30 joint congressional meetings in February with regional partners.
During his presentation at the STA conference, Chapman discussed the importance of this region and the strong rules of origin in free trade agreements that help facilitate trade and support U.S. and regional textile and apparel industries.
“The yarn-forward rule is at the heart of our free trade agreements and prevents non-signatory countries from being able to get a free ride,” he said.
A study conducted by Werner International found that it is “reasonable and achievable to double the trade out of CAFTA-DR to the U.S. in the coming years.” It would equate to additional investments totaling $6 billion, creating 180,000 jobs in the U.S. textile industry and 2.17 million jobs in the CAFTA-DR region creating even more resilient supply chains, according to the study.
But Chapman warned that some importers have been trying to “rewrite the rules” and dismantle CAFTA-DR, calling for expansion of the short supply provision in the agreement, which would ultimately give China a back door to a free trade deal it is not a party to and displace existing production and investment in the region and the U.S. Thanks to the work of NCTO, the administration and a significant bipartisan group of lawmakers have continued to voice support for maintaining strong textile rules.
“Fortunately, today, the Biden administration has acknowledged the value of the yarn-forward rule and indicated they do not intend to undermine the rule or change the process of short supply,” Chapman said. “And NCTO is also working on a win-win proposal exploring unique policy solutions around taxation.”
China 301 Tariffs
Chapman also outlined the importance of maintaining the Section 301 China penalty tariffs on finished apparel and textiles, outlining when they were first implemented by the Trump administration and subsequently continued by the Biden administration.
“Virtually everything from China has a 301penalty tariff on it,” Chapman noted, explaining that the tariffs are linked to intellectual property theft by the Chinese government.
NCTO’s objectives include supporting the continuance of the penalty tariffs on finished textile and apparel products, while allowing for exclusions on manufacturing inputs and machinery not available elsewhere. In addition, the organization supports letting the remaining exclusions for finished personal protective equipment (PPE) products expire, given the capacity of U.S. producers and that of our free trade agreement partners.
The U.S. Trade Representative’s office is currently undergoing a statutory 4-year review process.
Last summer, representatives of domestic industries benefitting from the trade actions requested a continuation of the tariffs, launching a next phase of review.
NCTO and the U.S. Industrial and Narrow Fabrics Institute (USINFI) filed a joint formal submission
to the U.S. Trade Representative’s office in January, outlining how the 301 tariffs on finished apparel and textiles counteract China’s unfair trade advantage and give U.S. manufacturers a chance to compete.
“Obviously, we would like to keep these tariffs in place,” Chapman said, while letting exceptions for PPE imports expire. “The textile industry made a tremendous amount of PPE during the pandemic that reverted back to China very quickly afterwards,” he added.
NCTO textile leaders also recently met with U.S. Trade Representative, Ambassador Katherine Tai, in Washington whom Chapman noted has been “very supportive of our industry.”
“She also toured some of our facilities down here and her support will be critical in our fight to keep the 301 tariffs,” Chapman said.
Enforcement of the UFLPA
Customs enforcement of the Uyghur Forced Labor Prevention Act (UFLPA), which bans the importation of products made with forced labor in Xinjiang, China, is also a major focus area for NCTO.
China has been illegally forcing Uyghur ethnic minority population in Xinjiang to harvest cotton and produce cotton apparel in China’s Xinjiang Uygur Autonomous Region (XUAR), according to countless news reports and investigations by human rights organizations. The Chinese government, according to numerous reports and investigative news reports, have detailed nearly 1 million Uyghurs, in Xinjiang, where they have been subjected to torture, forced labor, religious restrictions and even forced sterilization.
Chapman also noted that 20% of the world’s cotton is grown in Xinjiang while 85% of China’s cotton is grown in the region,
NCTO continues to engage with U.S. Customs and Border Protection (CBP) officials, other administration officials and key allies on Capitol Hill to press for more enforcement of this critical legislation.
Closing the De Minimis Loophole
Another major focus area for NCTO is closing a legal loophole in U.S. trade law, known as Section 321 de minimis waivers.
De minimis shipments, which have exploded in recent years with the growth of e-commerce, are undermining efforts to hold China accountable and the nation’s ability to enforce the Uyghur Forced Labor Prevention Act (UFLPA).
The de minimis trade loophole is being aggressively used by e-commerce companies and mass marketers. It allows goods valued at $800 or less per person to arrive at our doorsteps duty-free each day through e-commerce. U.S. officials estimate approximately 2.7 million de minimis packages enter the U.S. market each day that otherwise would be subject to tariffs, penalty tariffs, taxes and customs inspection. In addition, de minimis shipments are being utilized to facilitate Xinjiang forced labor apparel into our closets.
“All countries have different de minimis values. China’s de minimis value is $7. Unfortunately, [certain} Chinese companies have mined our trade laws and use this de minimis law to import their product from China into the U.S., completely duty free,” Chapman said.
“The unfortunate thing is we don’t know what’s in them. They completely bypass customs. They are self-declared on value and [inspected] through random sampling,” he added.
Further, over 50% of these shipments contain apparel products.
“So, this has literally become a free trade agreement for China. As I mentioned, there are 301 penalty tariffs. They don’t pay the penalty tariffs. They’re duties on textiles that come into the U.S. They don’t pay duty. This is widely recognized as a problem in Washington, but there’s a real fight on our hands,” Chapman said.
On the legislative front, Chapman outlined several other top areas of engagement, including efforts to push Congress to reauthorize the Miscellaneous Tariff Bill (MTB), which is legislation that temporarily suspends or reduces import tariffs on manufacturing inputs that are unavailable domestically. Textile manufacturers benefit from duty breaks on inputs such as acrylic and rayon fibers and various chemicals that are not produced in the U.S. The MTB bill lapsed at the end of 2020 and Congress has thus far not advanced legislation to reauthorize it.
NCTO is also engaged in working with Congress to pass the FY 2024 National Defense Authorization Act (NDAA), which includes an economic impact assessment and language to strengthen the Berry Amendment by covering additional purchases of home furnishing items.
Equally as important is passage of a new farm bill.
The farm bill is up for a 5-year renewal this year and Congress is currently considering the legislation.
Various cotton and textile programs are contained in the farm bill that are important to NCTO as well as to the National Cotton Council (NCC).
They include renewal of: the Economic Adjustment Assistance for Textile Manufacturers program (EAATM), Pima Cotton Trust Fund and Wool Manufacturers Trust Fund.
“This is very important legislation for us to get wrapped up,” Chapman said.