UFLPA Hearing Update

U.S. Textile Industry Figures Prominently in Congressional Hearing Exploring the Implications of the Lack of Enforcement of UFLPA

A bipartisan congressional panel questioned three administration officials Thursday over concerns related to their enforcement efforts to staunch the massive flow of products made with forced labor, which has adversely impacted the U.S. textile industry and other key sectors of the U.S. economy.

The House Homeland Security Subcommittee on Oversight, Investigations and Accountability held the hearing to evaluate the Department of Homeland Security’s (DHS) efforts to counter China’s predatory practices and abuse of the Uyghur people, particularly through forced labor.

At the hearing, titled “Exploitation and Enforcement: Part II Evaluating the Department of Homeland Security’s Efforts to Counter Uyghur Forced Labor,” several committee members discussed the U.S. textile industry and the implications of the lack of enforcement of forced labor goods, our free trade agreement origin rules, and millions of imports coming in through the de minimis loophole.

Lawmakers raised serious questions and concerns about DHS and U.S. Customs and Border Protection (CBP) activities to enforce the Uyghur Forced Labor Prevention Act (UFLPA), which effectively bans any products—including apparel containing forced labor cotton from Xinjiang, China—from entering the United States.

Notably, administration officials acknowledged the severe challenges their agencies face and identified areas where significant improvement is needed, including: the need for more isotopic testing of products suspected of being produced with forced labor; better data collection technologies related to de minimis shipments; and an expansion of the UFLPA Entities list, which bars companies and subsidiaries barred from exporting goods to the U.S. market due to use of forced labor.

They also outlined efforts they have undertaken to confront the massive influx of imports coming in through the de minimis loophole and targeting imports suspected of being produced with forced labor.

In his opening statement, Chairman Dan Bishop (R-NC), focused a large portion of his remarks on the threat China’s predatory trade practices and a lack of customs enforcement have on vital economic sectors.

“Unfortunately, China’s use of forced labor in global supply chains continues to pose a significant enforcement challenge across a wide range of economic sectors including textiles, minerals and seafood,” Bishop said. “For example, the overwhelming majority of cotton used in Chinese textile products is grown in Xinjiang province, which the ULFPA specifically singles out as a focal point of China’s state-sponsored forced labor regime.”

See Rep. Bishop’s remarks here:

“Any cotton grown in the province is presumptively linked to forced labor under the UFLPA, yet CBP’s isotopic testing of clothing samples still found items shipped to the U.S., made with cotton from Xinjiang. CBP detained $46 million worth of textile and clothing imports for suspected UFLPA violations since June 2022. Yet, CBP’s detention rate is just a sliver of the billions of dollars of textile products the U.S. imports annually from China, emphasizing the continuing challenge in effectively enforcing the UFLPA,” Bishop said.

“Furthermore, those who seek to profit off goods tainted with forced labor use a wide range of tactics to obscure forced labor in the supply chain, such as shipping products through other countries to disguise country of origin, mixing inputs produced with forced labor with clean inputs and misrepresenting the origin of products in question,” he added.

Bishop stressed the importance of isotopic testing, noting such testing can help identify inputs traced to a geographic area, such as cotton grown in Xinjiang. He said it is “not clear how widely or routinely such forensic testing technologies are being used.”

Ranking Member Glenn Ivey (D-MD) said in his opening remarks the task force charged with adding companies and other entities to the UFLPA Entity List of companies and subsidiaries barred from exporting goods to the U.S., should be reviewed, noting bureaucratic red tape may be slowing the process down because there are “too many cooks in the kitchen.”

Ivey also expressed concerns that customs seizures of goods suspected of being made with forced labor are being released back to the importer who then is able to sell them in other foreign markets and make a profit.

“I’m concerned about how that actually punishes entities. I call it a snafu. We don’t want to allow them to continue profiting” from forced labor products, he said. “I don’t think that is the right way to go.”

Administration officials later addressed questions from lawmakers around isotopic testing.

Bishop also noted that the first hearing in October featured several witnesses who “pointed to the rapid increase in de minimis shipments as an avenue for prohibited goods to enter the U.S.”

De minimis shipments have more than doubled over the last five years, due to the explosion of e-commerce, with more than 1 billion de minimis shipments entering the U.S. in FY 2023.

“As you would expect, an increase in shipments, increases the chance of contraband getting through,” Bishop said, noting the majority of de minimis shipments originate in China.

Exploring the Role the De Minimis Loophole Plays in Undermining Enforcement of UFLPA

 Bishop asked Acting Assistant Secretary of Homeland Security for Trade and Economic Security Policy Christa Brzozowski to comment on whether e-commerce platforms are a driver of “this massive expansion of the exploitation o the de minimis exemptions?

“Some suspect that it is a huge source of evasion of the interdiction of forced labor produced goods,” Bishop said.

Brzozowski acknowledged the challenging environment or agents targeting an exponential rise in de minimis shipments over the few years.

“We are enforcing our forced labor laws in this particular channel, but it is more challenging because of the limited amount of data we get, which drives our targeting capabilities and decision making,” she said.

See the exchange here:

Rep. Dale Strong (R-AL) also posed questions about the explosive growth of de minimis shipments and their impact on UFLPA enforcement.

Strong pointed to testimony  at the committee’s pervious hearing on UFLPA enforcement, which included testimony from NCTO President and CEO Kim Glas, at which some witnesses said increased de minimis shipments from China undermined the ability of CBP to detect forced labor products or contraband.

“How concerned are you that Chinese company can take advantage of de minimis shipments to ship goods potentially made with forced labor to the Unites States?” Strong asked the witnesses.

Brzozowski said she shared the congressman’s concern and acknowledged the challenge associated with data collection.

 “As my CBP colleagues mentioned, there is a difference in the data we get from these types of shipment and that can complicate enforcement,” she said. “Also given the volume of these shipments, it’s a complex environment. I do want to make clear that targeting and laws do apply in this environment. We do our best with the information that we do have.”

In the short term CBP is looking into enhancing the targeting of de minimis shipments “to do better,” using software and other technologies, she said.

See the full exchange here:

In another exchange with a witness, Strong asked Eric Choy, executive director of trade remedy law enforcement at CBP’s Office of Trade, how much visibility “we have regarding the scale of potential ULPA violations related to de minimis shipments.”

Choy acknowledged the challenges the agency faces due to the “lack of information we gather as compared to traditional shipments that come through the ports of entry.” He said the agency is facing a “record level” of de minimis shipments.

Choy cited two data-related pilot programs the agency launched to access more data that would allow it to review de minimis shipments more closely.

“We’ve come to the culmination of both of those data pilots and we’re working together with the department in a regulatory effort to introduce different ways to file entries for de minimis shipments and then also what data elements we would require for de minimis shipments,” he said. “We feel that with that kind of expanded information and data for each of the shipments that comes in would give us greater flexibility and greater access for our targeting systems to be able to identify risk factors and be able to stop specific shipments coming into our ports of entry.”

Expanding the ULPA Entity List

 Under UFLPA, Congress directed DHS to chair a task force to establish an “entity list” of companies and subsidiaries barred from exporting goods to the U.S. market due to the use of forced labor.

Lawmakers and industry groups, including NCTO, have called on the administration to robustly expand that list to help easily identify entities and block their goods from entering the U.S.

Concerns were raised about the list at the hearing.

“China is a massive economic actor, and a big market and I hear that 85% of cotton is sourced in Xinjiang. Why were so few people even on the initial entity list? Why wasn’t it hundreds or thousands of entities?” he asked.

Brzozowski agreed with lawmakers that the entity list should be expanded.

“The team has done very impressive work since a relatively short time of enactment of the law, setting up not only framework but robust methodology that is going to stand not only the test of time but legal scrutiny,” she said, adding that the task force will continue to leverage its resources to ultimately add more bad actors to the list.

Isotopic Testing

CBP’s implementation of isotopic testing was also a key issue addressed at the hearing.

At the previous hearing, NCTO’s Kim Glas pushed for more robust isotopic testing which the industry believes will help CBP better identify goods made with tainted Xinjiang cotton and slow the influx of de minimis packages arriving from China.

Choy said the agency has opened a lab testing facility in Savannah, GA, and has plans to open up two more, in New York and Los Angeles, in six to eight months. “That will increase our capacity and we anticipate that we’ll be doing more isotopic testing and we’ll leverage that isotopic testing to investigate where we see allegations of risk or use of forced labor,” he said.

Rep. Ivey noted he had met with representatives of the U.S. textile industry, who were pushing for an expansion of isotopic testing and said he was open to looking into it.

Bishop later asked Choy to quantify the testing these labs will do.

See their exchange here:

Forced Labor Leaking into Third-Country Imports and FTA Partner Countries

Strong said a significant percentage of U.S. textile and apparel imports come from Central and South American countries, with which the U.S. has free trade agreements. “I can think back just a matter of years ago and Alabama was home to Russell Athletic and Champion Apparel. We were known in one area of Alabama as the ‘sock capital of the world’ but that has gone away,” Strong said.

“These agreements require firms to show that the goods they are shipping to the U.S. were produced in the region to qualify for duty-free status. What actions has DHS and CBP taken to determine whether this system is being abused to allow goods made with Uyghur forced labor to enter the U.S.?” Strong asked.

Choy noted that textiles is a priority trade area mandated by statute that requires CBP to focus its resources in this area, including targeting candidates, audits, verification visits and inspections and cargo inspections at the port of entry and post-release.

Strong followed up, asking what action CBP takes if it detects specific products made with forced labor being diverted to third party countries.

“If there are illegal transshipments through third countries, that is something we would stop, detain shipments, then issue duty requirements to make the government whole or if there is recidivism, issue penalties,” he said.

To view the full hearing, please visit the link here.

De Minimis Reform in the Spotlight on Capitol Hill

House Ways & Means Democrats elevated congressional concerns over the Section 321 de minimis loophole—which has become a black market for illicit goods—at a roundtable Wednesday that highlighted the devastating implications of this gaping loophole for a diverse group of stakeholders spanning the domestic manufacturing supply chain, law enforcement, labor, and human rights organizations.

Rep. Earl Blumenauer (D-OR), Ways and Means Trade Subcommittee Ranking Member, led Democratic members in a roundtable, titled “Examining the Pernicious Impact of the De Minimis Loophole,” at which Democrats on the full committee voiced serious concerns about this legal loophole in U.S. trade law that is a gateway facilitating nearly 3 million imported shipments a day that may contain goods made with forced labor, counterfeits, toxic products, and illicit narcotics such as fentanyl.

“What was once intended to improve efficiency has morphed into a dangerous loophole that threatens American competitiveness, consumer safety, exploits forced labor, and contributes to the fentanyl crisis in our communities. My legislation is narrowly tailored to stop areas of abuse. It is past time for Congress to act,” Blumenauer said in his opening remarks.

Blumenauer has reintroduced the Import Security and Fairness Act, bipartisan, bicameral legislation to stop non-market economies—namely China—from exploiting the de minimis threshold and to require U.S. Customs and Border Protection (CBP) to collect more information on de minimis shipments.

Blumenauer was joined by Reps. Don Beyer (D-VA), Jimmy Panetta (D-CA), Judy Chu (D-CA), Brian Higgins (D-NY), and Suzan DelBene (D-Wash.)

The legislation previously passed in the House of Representatives in the 117th Congress as part of the America COMPETES Act but subsequently stalled.

With the explosion of e-commerce, the de minimis mechanism is now being aggressively used, allowing millions of products into the U.S. market duty free that otherwise would be subject to tariffs, penalty tariffs, taxes and customs inspection. Under the mechanism, a package of goods valued at $800 or less per person is allowed to come into the country duty free everyday through e-commerce.

CBP estimated 1 billion de minimis shipments entered the U.S. market in the fiscal year alone, which equates to approximately 2.7 million shipments a day. This is estimated to be the highest spike in de minimis imports—up from 2 million shipments per day in fiscal year 2021. To provide further context to the alarming nature of this exponential growth in de minimis shipments, CBP data estimates that these shipments totaled only 150 million in fiscal 2016—the year Congress increased the de minimis threshold from $200 to $800.

The impact of the loophole on the U.S. textile industry, coupled with other factors, has been devastating.

Andy Warlick, Chairman and CEO of Parkdale Mills, testified at the roundtable and painted an alarming picture of the state of the industry and the implications of U.S. trade policies that allow foreign suppliers to circumvent and undermine the domestic manufacturing base.

“I am here today because this issue is important to our company, our employees, our industry, and all U.S. manufacturers,” Warlick told the lawmakers. “Currently, our company is running at 60% capacity and we have shut down four factories and laid off 1,000 employees in 2023. Most companies in the textile industry are experiencing the same devastating demand destruction partly fueled by the explosion of 1 billion de minimis shipments—half of which CBP estimates to be textile and apparel goods.”

Warlick thanked Blumenauer and other members who support closing the de minimis loophole and mitigating its impact on domestic manufacturers.

“De minimis has become blatantly unfair, unjust, and a threat to our country’s economy and citizens,” he said. “American businesses and American workers pay taxes that build the roads and cities of our nation, and we are now fighting against those who don’t. We pay a price to be an American and we are being replaced by those who are astonishingly rewarded by U.S. government trade policies that are putting us out of business.”

“Our de minimis program has become the world’s largest, lawless Silk Road Black Market that has only benefited a few at the expense of many. The shippers and transporters of these packages have been gifted a windfall. However, this gift is actually a Trojan horse for our nation. If left unabated, it will hollow out our industrial and retail base, destroy jobs and the tax base, and endanger our citizens.”

Not only is the de minimis program undermining the U.S. Trade Representative by handing countries like China an unnegotiated free trade deal without reciprocity for the U.S., but it is also being aggressively used by Chinese e-commerce retailers who have built their empires around de minimis.

Countering the arguments by opponents of reforming de minimis, Warlick said ending de minimis for e-commerce shipments “will not spark inflation.”

“These are the same arguments made prior to the implementation of the China 301 penalty tariffs,” he added. “The U.S. International Trade Commission studied the effect of 301 tariffs on import prices of apparel and other consumer products and found either no or minimal increases for importers, adding that Section 301 boosted domestic manufacturing ‘without substantially increasing prices for final consumers.’”

He told the lawmakers the only real solution to fixing the de minimis problem is to decouple e-commerce shipments from this dangerous loophole.

“When our nation needed our industry to bail the country out of critical shortages of PPE during the pandemic, we answered that call by delivering millions of face masks, protective gowns and testing swabs,” Warlick said. “We now need Congress to answer our call and close this loophole right now because it’s a crisis. We need the Administration to review and exhaust all its authorities to address this superhighway of economic destruction.”

Michael Stumo, CEO of the Coalition for a Prosperous America, reiterated in his opening statement that de minimis should “ultimately be decoupled from e-commerce.”

“The fact that a few Chinese companies like Shein and Temu and a few U.S. companies have built businesses, or part of their businesses on the exploitation of this Amazon loophole is not in the national interest,” Stumo said. “The de minimis goods volume hit 1 billion packages this year. In future years, it will be 2 billion and 3 billion. This will not go away; it will be worse.”

“We have laws against the importation of narcotics, of forced labor goods, dangerous toys, exploding batteries. They are all a joke with de minimis. We might as well repeal them. U.S. companies that follow the law, pay taxes here, employ workers here, are suffering as national policy provides powerful de facto preference for duty avoidance and lawless goods from other countries,” Stumo said.

Andrea Edmiston, Director of Governmental Affairs at the National Association of Police Organizations, outlined the role de minimis shipments is playing in thwarting law enforcement efforts to crack down on fentanyl, which led to 83,000 deaths last year alone, and other illicit drugs.

Edmiston stressed that fentanyl traffickers are using these loopholes and the international mail system to “avoid detection by CBP.”

In FY 2023, CBP seized 27,000 pounds of fentanyl. “The de minimis provision has exploded in popularity, creating a supercharged black market for counterfeit products, goods produced with slave labor, hazardous materials and illicit drugs such as fentanyl,” Edmiston said.

“Law enforcement is battling the trafficking of illicit narcotics on multiple fronts, from our southern border to Asian supply chains selling via ecommerce and shipping drugs like fentanyl in small packages by air cargo and the international mail system,” she said. “Fentanyl traffickers seek to mimic normal e-commerce shipments to avoid detection by CBP [Customs and Border Protection], and they often declare these international shipments as relatively low-value consumer goods.”

“The de minimis loophole is severely exacerbating the opioid crisis by allowing fentanyl and the illicit drugs to enter our market duty free and largely uninspected,” Edmiston said. “The administration has the authority to close this loophole and we have written a letter and asked the administration to do so immediately. And Congress also has the authority to close the loophole. We stand ready to work with you all to remove all e-commerce shipments from de minimis treatment to help protect the health and safety of the American people.”

Roy Houseman, Legislative Director at the United Steelworkers, said de minimis has tipped the scale in favor of China in the U.S. trade relationship with the country.

“Our nation’s trade laws let billions of goods in from China into the U.S. market duty free… but American workers and businesses face significant market hurdles to nearly 900 million consumers in China,” he said. “We strongly believe that Congress should start with a view of de minimis with a simple eye toward reciprocity,” he added, noting that the U.S. has one of the highest de minimis thresholds of any country, at $800. By contrast, China’s de minimis threshold is much smaller, at approximately $8 a package.

“This has dangerous ramifications for American manufacturing,” he added.

Questions from the Democratic committee members ranged from whether Blumenauer’s bill aimed at fixing the problem by banning nonmarket economies like China from benefits would merely migrate it to other countries and allow them to exploit the loophole and $800 threshold, to requesting more data on the nature of de minimis shipments, to whether CBP needs more resources and tools to track fentanyl and de minimis shipments overall.

During the round of questions, Rep. Blumenauer inquired about his own legislation, saying: “There have been some concerns that if we go ahead and crack down on de minimis, the same shippers would simply go through other countries to avoid detection.

Stumo responded, “Certainly one country, China, is where most counterfeits and a lot of drugs come from. If you start there; it’s a good first step to take China out,” which is what Blumenauer’s bill would do.

Rep. Beyer followed up with a similar question: “As long as de minimis exists at the $800 level and keeps China out, what will keep it from migrating to other countries Cambodia, Vietnam?

Warlick said that has been the textile industry’s experience in terms of countries finding ways to transship products to avoid free trade deals such as USMCA and CAFTA-DR, and trade laws and duties.

“One thing we are looking at now, is this need for de minimis to be decoupled from e-commerce platforms,” he said.

Rep. Higgins was concerned about the lawlessness associated with de minimis but  also highlighted the benefits it allows through access to U.S. markets.

“Our economy is 70% consumption so it seems to me that we are going to be a magnet for trade and all of this business of getting cheap goods into the U.S., including illegal drugs as well,” he said. “Between 1990-2017, global poverty fell from 36% to 9% and a billion people came out of poverty because of trade,” he noted.

Reps. DelBene and Panetta focused their questions on data collection and tracking tools and asked what kind of tools could be developed to track fentanyl in particular and de minimis overall.

Former White House Drug Czar Testifies at Senate Committee on Aging: De Minimis is Fueling Importation of Illicit Narcotics

At a separate hearing Thursday on “Understanding A Growing Crisis: Substance Use Trends Among Older Adults, held by the Senate Committee on Aging, a former White House drug czar testified about the dangers of de minimis and fentanyl, while  and senators raised questions about de minimis facilitating the illicit importation of opioids and other narcotics, making it easy for seniors to gain access to them.

James Carroll, former Director, White House Office of National Drug Control Policy and currently a partner at Frost Brown Todd, LLP, painted a bleak picture of opioid deaths fueled by Chinese traffickers undoubtedly exploiting the international mail system and de minimis loophole.

“Overdose deaths are staggeringly high, with nearly 110,00 American lives lost driven almost entirely by synthetics, up almost 40,000 deaths from when I was in office. This equates to someone dying every five minutes. It is a major airliner going down every day. This is just not acceptable,” Carroll said in his opening remarks.

“I led a White House delegation to China to end the shipping of fentanyl through the U.S. postal system. The percentage at the point dropped to nearly zero. Sadly, bad actors have now resumed and shovel it into the U.S. by exploiting weaknesses at our border. And specifically in our import roles,” Carroll said.

He further noted de minimis has been a tool that allows 3 million packages in a day, “unchecked, unlabeled, with virtually no way to identify what is in there.”

Senator Rick Scott (R-FL) asked for an “everyday” example of how bad actors are using Section 321 to export deadly fentanyl directly to American consumers.

Carroll reiterated that a billion de minimis packages enter the U.S. every day but are largely unchecked by CBP due to lack of manpower and technologies to detect fentanyl.

“Right now the best technology we have are canines. That is a shame. There is wonderful technology to look for anomalies in packages but at 1 billion a year they are not being checked and we are not holding 60 percent of a billion incoming from China, he said.

 See the exchange here:

Asked by Scott what percentage of fentanyl is coming into the U.S. via de minimis versus the southern border, Carroll said there is no data tracking it.

We have no idea but when you look at the number of deaths that are happening, you have to believe it is because of the dramatic rise of 321. We don’t know how many drugs are coming across the southern border; all we know is what we are catching. The same is true [with de minimis]; all we know is what we are intercepting. It is less than 1 percent actually being checked.

Sen. JD Vance (R-OH) asked Carroll to state for the record why it is important to close the de minimis loophole, particularly as it relates to drug imports.

See the exchange here:

“What really concerns me on 321 [de minimis], is how it is being used and how it is being exploited, including for seniors who might not understand; they think they are buying a prescription online, but they are actually buying illegitimate pills that are being snuck into our country unchecked. They think it is a legitimate prescription and pill. They have no idea that in fact the prescription they think is being filled by an online pharmacy is [facilitated] by the loophole of 321 and they are losing their lives for it,” Carroll said.

See Carroll’s full written testimony here.

The Coalition For a Prosperous America joined two key associations representing law enforcement and national nonprofit and community-based organizations devoted to fighting against the fentanyl crisis, in sending a letter to congressional leaders calling for immediate action to close the de minimis loophole.

View their press releases and a link to the letter here:

Shatterproof

Families Against Fentanyl

Coalition for a Prosperous America

U.S.-China Commission Fields Questions on Growing Chinese Fentanyl Trade and a U.S. Loophole that Facilitates Importation of Illegal Products into the U.S. Market

The U.S.-China Economic and Security Review Commission released its annual report to Congress Tuesday, covering a wide range of topics and issuing key findings, policy recommendations and executive summaries.

Several questions were raised during the briefing on pressing issues, including the surge of fentanyl shipments from China, the de minimis loophole and the Uyghur Forced Labor Prevention Act (UFLPA).

During the meeting, Commissioners fielded questions on the upcoming Asia-Pacific Economic Cooperation (APEC) summit in San Francisco where fentanyl is on the agenda.

Commission Chairman Carolyn Bartholomew stressed that enforcement mechanisms are key in tracking and stopping the flow of fentanyl and other narcotics that are being shipped directly to U.S. consumers at alarming rates.

She said fentanyl precursors are measurable and quantifiable and pledged to continue scrutinizing whether progress is being made by the Chinese to enforce the law and reduce the tsunami of fentanyl reaching the U.S. market.

Vice Chairman Alex Wong said the commission’s research, which culminated in a 2021 Issue Brief titled “Illicit Fentanyl from China: An Evolving Global Operation,” highlighted the increase in fentanyl precursor movement in recent years from China through third countries and ultimately into the U.S.

“I want to highlight that that increase occurred in the post-pandemic period. Now, you will all remember that during this period we saw a number of supply chains across commodities and finished goods out of China being very strained and experiencing a lot of delays,” Wong said. “The only supply chain that was not only not strained but seemed to increase and increase its efficiency and speed was the movement of fentanyl precursors out of China.”

Wong also said the Chinese government often says it is unable to enforce the law and track producers and shippers of fentanyl precursors.

“They would say to me, ‘We don’t have as much power as you think.’ And I would always say well you have more power than you say, particularly when we are talking about a government that strives very hard to enhance its ability to surveil and track and exert precise pressure on individuals throughout its 1.3 billion population,” Wong added. “So, they can do more on fentanyl. My hope is that discussions tomorrow and our continued pressure on the Chinese results in action. It really is a major detriment to our society health-wise and our social fabric that needs more attention.”

Commissioners Kim Glas and Mike Wessel voiced alarm about the Section 321 de minimis mechanism, which is a legal provision in U.S. trade law that has unintentionally acted as a gateway to an explosion in e-commerce shipments that come in largely uninspected and duty free, endangering American consumers and undermining U.S. manufacturers.

Commissioner Mike Wessel raised the de minimis issue as it relates to fentanyl, facilitating packages into the U.S. with little to no inspection.

“Fentanyl is being transited that way as well. De minimis is a vector not only for products emanating from the Xinjiang region, whether it’s textile or other products; there have been a number of studies across a number of supply chains—solar, aluminum, car parts, but fentanyl is also coming in through the de minimis loophole,” Wessel said. The administration has the legal power to act. There needs to be something done.”

See Wessel’s remarks here:

Commissioner Jacob Helberg said it was “laughable” that the Chinese government has said it does not have the power to crack down on the illicit trade.

“Clearly, if they want to put an end to this fentanyl trade, they could probably do it overnight,” he added.

“Last year in 2022, 110,000 Americans died from fentanyl overdoses in this country. It has ravaged and completely hollowed entire communities across this country. You are seeing it rightfully become an incredibly salient political issue in this current presidential election cycle,” he said.

Commissioner Glas voiced concern about the lack of Customs enforcement of products made with slave labor, fentanyl and other dangerous products that enter the U.S. market through the de minimis loophole, largely uninspected and duty free.

“To put it into context, last year the U.S. imported $184 billion worth of textiles and apparel and only $35 million was detained for inspection (by U.S. Customs and Border Protection).

Glas stressed that with 20 percent of the world’s cotton grown in Xinjiang, China, where the use of forced labor has been widely documented, and 80 percent of cotton products made in China containing Xinjiang cotton, a large volume of the tainted apparel is making its way into the U.S. uninspected.

“One of the things our research paper did was look at Shein and Temu and the growing influence of these Chinese e-commerce websites, and the national security risk and consumer security risks these kinds of platforms [pose],” Glas said. “The fact is that the U.S. government under its current trade policy rewards these platforms when they directly ship these products to the U.S.”

See Glas’ remarks here:

Glas noted that de minimis was created 100 years ago for tourists who were bringing back sweaters or other souvenirs and not having to pay a tariff.

But e-commerce has changed the system and the rules of the game.

“In 2015, 150 million de minimis packages came in. Now, we are on track for 1 billion packages of individually wrapped boxes. You do not have to provide information on the country origin. What is in the box? Is it safe? Does it meet Consumer Product Safety Commission regulations? Is it an illegal product? Is it a forced labor product? None of that is ever labeled. No box says ‘fentanyl.’ No box says, ‘forced labor product.’”

She said if the administration closed the de minimis loophole today, the goods would be transported by freight through normal entry process and be part of a larger Customs inspection strategy.

See her remarks here:

To view the entire Commission briefing, please see the link here.

Videos created by: Rebecca Tantillo

VA’s Inaction in Implementing the Make PPE in America Act is Hurting American Textile and Apparel Manufacturers

It has been 19 long months since legislation designed to increase federal purchases of American-made PPE was enacted, but the inaction of at least one key federal agency in purchasing more domestically-produced items is posing a threat to the very U.S. supply chain that stepped up overnight to protect our nation during the COVID pandemic.

Fortunately, at least, one congressional oversight committee is taking notice.

The overarching question on the mind of many U.S. textile and apparel executives who retooled production lines to produce millions of facemasks, hospital gowns and other critical PPE items at the height of the pandemic is whether they will ever see a demand signal and contracts from the Department of Veterans Affairs (VA).

This leading agency which procures PPE for the government seems to be mired in bureaucratic red tape when it comes to fully implementing a strategic plan to purchase more American-made PPE, as mandated by law.

The legislation at the heart of the matter—the Make PPE in America Act, which took effect in February 2022—requires that all PPE purchased by the Departments of Health and Human Services (HHS), Homeland Security (DHS) and VA be made by manufacturers in the United States using domestic components.

Last week, a House congressional oversight committee held a hearing and finally started asking the right questions of VA officials.

On Thursday, the House Committee on Veterans’ Affairs’ (HVAC) Subcommittee on Oversight & Investigations held a hearing on “VA Procurement: Made in America,” to explore the agency’s action plan on several Made in America policies, including the Make PPE in America Act.

The chairwoman of the oversight subcommittee, Rep. Jen Kiggans (R-VA), raised concerns about the VA’s inaction and lack of a strategic plan.

“Congress and both this administration and the Trump administration made it a priority to ensure the federal government is buying American-made products,” Kiggans said in her opening statement.

However, she expressed serious concerns about the VA’s approach, noting that a year and a half after the law was enacted, “there appears to be very little that has changed.”

“I understand that new legislation takes time to implement, but issues at the VA don’t normally get better with time. A recent inspector general report highlighted significant issues with VA’s compliance with decades-old Made in America laws.”

She also noted it is concerning that she has heard from industry leaders that as recently as a few months ago the VA “didn’t even seem to have a plan to implement the law.”

See her remarks here:

https://youtu.be/ndzZawcJG6w | Video Credit: Rebecca Tantillo

“Many American companies have overhauled their production lines to meet the demand for world-class goods and supplies,” Kiggans said. “The VA must similarly change their procurement process to step up their outreach and market research to identify opportunities to work with American companies. I’m concerned many of these companies will be forced to close down their operations if the VA doesn’t immediately follow the law and take a more proactive approach to buying American.”

“Relying on foreign products in a time of crisis is a flawed strategy that unfortunately was felt directly by the VA employees and veterans,”said Rep. Frank Mrvan (D-IN) in his opening remarks. “This requires a concerted effort across VA to comply with the laws and the presidential directives in place to provide opportunities for American companies to provide personal protective equipment and other supplies.”

“Without a consistent demand for these products, we cannot ensure that American companies will be around for the next crisis,” he added.

In his written submission and opening remarks at the hearing, Michael Parrish, the VA’s Principal Executive Director of the Office of Acquisition, Logistics and Construction and Chief Acquisition Officer, stressed the agency is committed to full implementation of its statutory requirements but noted “achieving the goals espoused in these statutes, policies and executive orders takes time.”

He acknowledged that availability of 100% domestically-produced PPE “requires a clear and organized federal demand signal to support the existing and future industry investments, innovation as well as a long-term commitment. VA is committed to working with other Federal agencies to communicate to industry the importance of domestically-produced PPE.”

He claimed the VA has found in many instances that inputs of PPE are “not yet [manufactured] in the U.S. and raw materials are manufactured overseas.”

This statement will undoubtedly cause concern among NCTO member companies who have worked vigilantly to be certified over the past three years and repeatedly communicated to the VA and other agencies that there is an existing supply chain ready and able to meet their procurement needs. The root of the problem is not lack of capacity, but rather lack of planning, strategy and demand signal on the part of the VA.

Parrish said the VA has taken the following steps thus far: developing an executable acquisition strategy for each PPE item identified in the Make PPE in America Act that has been prioritized for action; developing common requirements and an acquisition strategy for all items on the consensus PPE list by the end of calendar year 2023; and reporting noteworthy accomplishments towards the development of a long-term PPE strategy under the President’s Management Agenda.

Following a multi-agency Make PPE in America Industry Day in April, at which NCTO President and CEO Kim Glas participated in a panel discussion, Parrish said the VA issued a request for information to Blanket Purchase Agreement holders participating in the VA’s MSVP program to “gauge how many are fully compliant with Made in America Act requirements.”

“To date, through vendor self-certification, VA has identified 129 items on its MSPV product list that are 100% Made in America compliant,” Parrish said in his written submission.

Among the PPE items that are not yet compliant are things like nitrile gloves, he noted.

“The journey requires support beyond the Federal health care space of VA (and DoD) to achieve the goal, maintain supply chain resiliency and reduce dependency on overseas markets for PPE requirements ranging from raw materials to finished products,” Parrish noted.

Rep. Aumua Amata Coleman Radewagen (R-AS), a non-voting delegate in the House of Representatives, asked a series of questions related specifically to the VA’s implementation efforts, noting that she has met with manufacturing associations representing American PPE producers that “feel they are being underutilized by the VA.”

Radewagen asked VA officials testifying at the hearing to explain the process for identifying domestic PPE sources, whether the VA has entered into any PPE procurement contracts since the law was enacted; and, if so, what percentage of these contracts are compliant with the Make PPE in America Act as well as how the VA ensures the PPE it purchases from its vendors is compliant with the Make PPE in America Act.

Andrew Centineo, Executive Director of Procurement and Logistics for the VA in conjunction with the U.S. Department of Veterans Affairs, said several agencies met with industry partners in April at the government-sponsored Industry Day and have since held medical surgical prime vendor industry opportunities, in addition to biweekly engagements with industry.

He said the feedback he has received from industry is that it will provide the products but it needs assurances the demand signal from the VA and other agencies is there.

See the full exchange with VA officials here:

https://youtu.be/B4Pc1L8Hp4c | Video Credit: Rebecca Tantillo

NCTO has been strongly advocating for full implementation of the legislation and pushing for a strong demand signal for American-made PPE.

See an op-ed by NCTO President and CEO Kim Glas here: Opinion: The Time to Act on American-Made PPE Is Now.

In addition, Glas participated in the multi-agency Make PPE in America Day in April.

See three clips from her remarks here:

This failure to date on the part of the VA and the lack of a demand signal from agencies and the private hospital sector is hurting U.S. textile and apparel manufacturers that retooled production chains overnight and are now left sitting with idled capacity and very few purchasing orders.

Three NCTO member companies outlined their concerns in a press release last week.

“The VA and all federal agencies need to fully implement this law immediately. It is critical to the viability of the domestic PPE supply chain and to our nation’s long-term health and national security,” Glas said in the statement. Without the commitment, our manufacturers will be forced to shutter operations and the PPE domestic supply chain will disappear, leaving our country overly reliant once again on unreliable imports from China and other foreign suppliers,” she added.

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NCTO Chairman Norman Chapman Outlines Priority Issues for U.S. Textile Industry

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.

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.

Legislative Priorities

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.

NCTO and Applied DNA Sciences Featured in Wall Street Journal Video on Banned Chinese Cotton Continuing to Flow into the U.S. Market

The Wall Street Journal posed a critical question in a new video out on “Why Banned Cotton From China is So Hard to Keep Out of the U.S.”

The video, which is posted on the Wall Street Journal’s website here, features NCTO President and CEO Kim Glas and NCTO member, Applied DNA Sciences President and CEO James Hayward.

It traces the Chinese cotton supply chain, which is under fire globally for utilizing illegal forced labor, and highlights how contradictory government policies and insufficient enforcement have failed to prevent cotton apparel made with forced labor in Xinjiang, China from entering the U.S. market.

There is no doubt that the cotton apparel made with forced labor in Xinjiang, China and imported to the U.S. is severely impacting the competitiveness of the U.S. textile industry. 

In fact, the low level of enforcement by Customs and Border Protection (CBP) is extremely concerning, given that legislation known as the Uyghur Forced Labor Prevention Act (UFLPA), which bans the importation of imported products made by forced labor, was implemented 14 months ago.

At the same time, nearly 3 million shipments per day come into this country under the Section 321 de minimis mechanism, largely uninspected and duty free, which gives China another backdoor to our market and rewards their predatory trade practices.

NCTO is calling for stepped up enforcement of the UFLPA and closure of the “de minimis” loophole, which facilitates this trade and gives China duty-free backdoor access to the U.S. market.

In the video, the Wall Street Journal “unpacks the complexity of the supply chain to explain why experts believe much of the cotton is still making its way to the U.S.”

NCTO Amplifying the Policy Issues Impacting the Industry

On the communications and press front, NCTO President and CEO Kim Glas penned two important and insightful op-eds, outlining how Section 301 tariffs and the U.S.-Dominic Republic (CAFTA-DR) agreement are helping the U.S. textile industry, a key American manufacturing sector, compete.

In the first piece, Kim wrote a joint op-ed with CECATEC-RD Executive Director Patricia Figueroa that showcases perspectives from both the U.S. and Central American textile and apparel industries on the state of nearshoring in Central America and focuses on the region and our co-production chain as a strong sourcing alternative to Asia, even in a down market.

Read the op-ed here: Why Central Ameria Makes Sense–Even in a Down Market

The second opinion piece, titled “Keep China in Check: Don’t let Section 301 Tariffs Expire,” published by The Hill, outlines how the Section 301 tariffs on finished apparel and textile products has created a more level playing field against unfair trade practices, such as forced labor in China.

It is a timely opinion piece, in light of the U.S. Trade Representative Office’s pending four-year review and decision that will weigh heavily on the U.S. textile industry.

Please see a link to the op-ed on The Hill’s website here: Keep China in check: Don’t let Section 301 tariffs expire.

 

Wilson College of Textiles Receives $2M in USAID Funding

North Carolina State University’s Wilson College of Textile has received $2 million in funding to establish a technical textile training program in Honduras, which comes at a pivotal time of onshoring and nearshoring for the textile and apparel industry.

The United States Agency for International Development (USAID) awarded the $2 million, two-year grant to Wilson College to develop the new program in partnership with Gaston College and Catawba Valley Community College—all nationally recognized for their leadership in textiles innovation, research and education—and the Universidad Tecnológica Centroamericana (UNITEC), a leader in providing technical and engineering education in Honduras.

As outlined in press release and post from Wilson College, the program is titled Hilando Oportunidades (Spinning Opportunities) in northern Honduras and aims to  deliver training to at least 1,500 Hondurans in yarn spinning, knitting, dyeing and finishing, and apparel production. The project will be led by Melissa Sharp, associate director of Zeis Textiles Extension (ZTE) in Wilson College, who says “a key aspect of the program is the development of trackable credentials that will empower workers in Honduras’ textile industry and expand the routes to advancement.”

In addition, education technology partner Shimmy, an industrial startup, will provide training through mobile applications while credentials will be issued through Credly and maintained by NC State, providing third-party evidence of skills and training attained through Hilando Oportunidades.

The announcement of funding and the universities’ partnership followed an MOU signing in August 2022, which brought together high-level U.S. and Honduran government officials, including: Jose W. Fernandez, Under Secretary of State for Economic Growth, Energy and the Envirnonent; Jennifer Knight, Deputy Assistant Secretary for Textiles, Consumer Goods and Materials at the U.S. Department of Commerce; and Hector Zelaya, private secretary to Honduran President Xiomara Castro.

The U.S. State Department issued a statement of public support for the MOU at the time and the unique collaboration between the U.S. and Honduran institutions.

The partnership comes at a defining moment for the U.S., Honduras and Central America, which are seeing significant levels of investment in textile and apparel production as part of a co-production chain under the U.S.-Dominican Republic-Central America (CAFTA-DR) agreement.

NCTO President and CEO Kim Glas and CECATEC-RD Executive Director Patricia Figueroa recently penned a joint op-ed that showcases perspectives from both the U.S. and Central American textile and apparel industries on the state of nearshoring in Central America and focuses on the region and our co-production chain as a strong sourcing alternative to Asia, even in a down market.

In the past 18 months alone, this vibrant partnership with the region has spawned $2 billion in investments in both the U.S. and Central America, as brands and retailers continue to look for ways to diversify their supply chains.

The U.S. and this region are inextricably linked through a textile and apparel co-production chain that generated $15 billion in annual two-way trade in the sector and supports 1 million workers in the U.S. and region.

That is why this partnership and the Hilando Oportunidades training and education program in Honduras is critical, to help prepare thousands of students for the next generation textile workforce.

It is intended to create an educational pathway to economic opportunity in Honduras and the region that not only creates a skilled and resilient workforce but can also help address the root causes of irregular migration.

Current growth projections indicate a need for more than 10,000 skilled new workers in the textile industry in Honduras alone over the next five years. In order to meet these needs, educational programming is needed at all levels.

North Carolina plays a central role in this co-production chain. It is the second-largest state for textile employment nationally with over 36,000 workers, and the state’s $2.7 billion in textile-related exports leads the nation. The Northern Triangle, including Honduras, is a major export destination for U.S. yarns and fabrics that come back as finished items under the CAFTA-DR trade agreement.

 

Textile Execs Discuss Nearshoring Trends, Policies to Bolster the U.S. Textile Industry’s Competitiveness

NCTO President and CEO Kim Glas joined David Smith, Executive Vice President of Milliken & Company’s Textile Division and Bob Antoshak, partner at Gherzi Textile Organization, in a timely panel discussion on the trends driving nearshoring and onshoring of textile and apparel production last month.

The panel discussion, titled the “ABC’s of Nearshoring,” was held at Texworld in New York City on July 19.

The dynamic discussion touched on several key trade issues impacting the industry, including the yarn forward rule of origin in CAFTA-DR and USMCA, Section 301 tariffs and the Section 321 de minimis loophole. It also highlighted the significant investment—$2 billion in the CAFTA region in the past 18 months—and how companies can capitalize on moving production close to home.

In her opening remarks, NCTO’s Kim Glas pointed to several trends showcasing that nearshoring continues to build momentum, though apparel and textile trade is currently in a slump globally.

“It’s here to stay and it’s going to grow in the future,” Glas said, pointing to the $2 billion in new investment in both the U.S. and Central America, “as brands and retailers continue to look at ways to diversify their supply chains.”

Glas also said 2022 was a banner year for two-way textile and apparel trade with Central America, which hit $15 billion. Notably, 81 percent of U.S. exports of spun yarns go to the CAFTA-DR countries.

That is why she said she is “bullish on the future,” despite the recent dip in trade. She said the co-production chain employing more than 1.1 million workers collectively is predicated on the yarn forward rule of origin in free trade agreements such as CAFTA-DR.

Rules of origin help drive investment in yarn and fabric production. COVID created a shift in many people’s minds and drove companies to recalibrate their supply chains to diversify out of China and move production closer to market, she added.

Milliken’s David Smith stressed that the region has the capacity and capability to meet brands’ and retailers’ needs.

“Chances are the U.S. and the regional textile industry has the capabilities and the capacity to meet your needs. And if there are any gaps, I think you’ll find a listening ear and a willingness to work with you to eliminate those voids,” as reported by Sourcing Journal. “The industry is investing and growing the perception that we have limited yarn capacity or weaving capacity in the region. And when I say in the region, I’m including in the U.S.”

And he noted that just doubling apparel and textile exports from Central America, which has a U.S. import market share below 10 percent, would translate into $6 billion in investment and generate 187,000 new textile and apparel jobs in the U.S. and 2.2 million jobs in Central America.

“All we are looking for is a willing partner,” Smith said.

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NCTO Executive Fly-In Highlights Critical Trade Issues & Industry’s Competitiveness

NCTO executives participated in an important Washington fly-in last month, and met with some of the most powerful members of Congress and the nation’s top trade chief to discuss issues and policies critical to the NCTO membership.

The group of U.S. textile leaders who attended the high-level meetings included: NCTO Chairman Norman Chapman, who is President and CEO of Inman Mills; Parkdale Mills Chairman and CEO Andy Warlick; Unifi CEO Eddie Ingle; Barnet President and CEO Chuck Hall; Greenwood Mills President and CEO Jay Self; Palmetto Synthetics President David Poston; Milliken Director of Government Relations JP Tyson; and associate Katherine Heilig.

NCTO President and CEO Kim Glas and Todd Ethington, Director of Government Affairs, joined this distinguished group of textile leaders in leading substantive discussions on a wide range of policy issues, including fixing the de minimis loophole, strengthening China enforcement, maintaining the yarn-forward textile rule in CAFTA-DR and other trade agreements, and passing the Miscellaneous Tariff Bill (MTB).

The fly-in came at a pivotal time as congressional and federal regulatory scrutiny of Chinese imports entering the U.S. through the Section 321 de minimis trade loophole has intensified over the past couple of months, and calls to address and potentially change this little-known legal trade mechanism continue to gain momentum.

Executives met with some of the most influential members of Congress as well as the nation’s top trade chief, Ambassador Katherine Tai, who is the U.S. Trade Representative.

In the House, the China Select Committee has begun to form policy recommendations on issues like de minimis and forced labor, and in the Senate, leaders have signaled interest in crafting a China competition package this year.

Two bills have been introduced this year to combat de minimis abuse.

The first was introduced by Reps. Earl Blumenauer (D-OR) and Neal Dunn (R-FL) in the House, in conjunction with a companion bill in the Senate led by Sens. Sherrod Brown (D-OH) and Marco Rubio (R-FL) titled the u>Import Security and Fairness Act, which would effectively prohibit China and Russia from exploiting the Section 321 de minimis mechanism in U.S. trade law.

The second bill, introduced by Sens. Bill Cassidy (R-LA) and Tammy Baldwin (D-WI) is titled the De Minimis Reciprocity Act of 2023.

Two lawmakers, with whom executives met during the fly-in, have been at the forefront of hearings and probes into the business practices and models of e-commerce companies and brands that aggressively use the de minimis loophole.

Rep. Mike Gallagher (R-WI), Chairman of the House Select Committee on the Chinese Communist Party, said in hearings recently the “de minimis exception wasn’t supposed to be a loophole for foreign businesses looking to skirt human rights legislation and taxes. “It was meant to minimize the burden on customs agents actually. Shein and Temu have built empires using this loophole to underprice American competitors. American companies can’t be expected to compete against foreign firms who turn a blind eye to forced labor and dodge our import taxes.”

Rep. Raja Krishnamoorthi (D-IL), Ranking Member of the committee, has also weighed in, noting: “Temu and Shein are, as you know, some of the fastest-growing companies in the world. In particular, they use something called the de minimis exception, which means that for shipments valued at less than $800 they are able to ship directly from China to people’s homes and they are not subject to duties and there is much less information about their place of origin.”

And, House Ways and Means Chairman House Ways and Means Chairman Jason Smith (R-MO), who also met with the executives, has said it appears the loophole is “almost an $800 free trade agreement for China for products underneath that. It’s what it looks like to me.”

In addition to de minimis, the executives discussed China trade enforcement and other trade issues with Ambassador Tai, urged support for reauthorization of the Miscellaneous Trade Bill (MTB) and reiterated the importance of maintaining the yarn-forward rule of origin in free trade agreements, such as CAFTA-DR.

Rep. Blumenauer introduced a bill in June to reauthorize the MTB, TAA and GSP measures. The MTB 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.

With momentum for these and related trade issues, it is vital for our industry to be active in the conversation and we sincerely thank each of the NCTO executives who took time out of their busy schedules to make the trip to Washington to highlight the industry’s manufacturing strength and importance to the U.S. economy.