Washington Update: 301 Tariffs – July 28, 2022

Watch the latest state of play on the China 301 tariffs from NCTO Senior Vice President Sara Beatty. NCTO has long supported tariffs on finished textile and apparel imports from China to hold the country accountable for illegal trade practices and help level the playing field for American companies and create good-paying jobs at home. The U.S. International Trade Commission is seeking written comments through August 24, 2022.

U.S. Textiles: American Made & Proud

The American textile and apparel industry has a history as old as our nation. From the crafting of the very first American flag, which is credited to American upholsterer Betsy Ross, to the development of endless high-tech and lifesaving technologies, U.S. textiles represent the spirit of resilience and innovation that is woven into the very fabric of what unites us all as Americans.

On the Fourth of July we are asked to remember that spirit. So, as we take pride in our past and work toward our future, it is also worth stopping to celebrate the things we’ve accomplished together. Specifically, let’s take pride in American ingenuity, and how domestically made products help us thrive as a nation. This Independence Day, let’s support the industries that have long supported us.

American textiles represent a manufacturing industry and supply chain that are inseparable from our everyday lives, from the clothes we wear to the 100% American-made textile technology that is used to develop protective gear for our frontline medical workers and troops in uniform. Each of these items is designed, developed, and built from an enormous domestic supply chain beginning with raw fibers that are converted into yarns and then fabrics and ultimately brought to life in the form of a finished product.

As a critical manufacturing base, supporting over 534,000 domestic jobs responsible for an annual output of over $65 billion, American textile production is bolstered by key legislation, such as the Kissell and Berry Amendments, which require domestic production of textiles procured by the Department of Defense, TSA and the Coast Guard, and critical trade relations strengthened by free trade agreements that spur the use of domestic content, such as CAFTA-DR. These mechanisms, combined with the industry’s history of research-based innovation, are the backbone of the more than 30,000 manufacturing facilities both big and small across the United States. Their combined efforts make the U.S. the second largest exporter of textile-related products globally.

It’s because we have a sophisticated, innovative industry that in 2020, when the Covid-19 pandemic hit and our nation found itself in desperate need of personal protective equipment (PPE) for both the individual consumer and frontline medical worker, the U.S. textile industry was able to step up to convert its supply chain, literally overnight, to provide these products. This heroic effort alone was significant enough to inspire the Make PPE in America Act to reshore and maintain a strategic PPE production chain in the United States.

It does not take much to see why U.S. textiles are a quintessential story of American spirit and industry. So, as we take this holiday to pause and celebrate the values that bring us together, let us also celebrate the spirit of determination that drives key domestic industries like U.S. textiles. Thanks to manufacturing efforts such as theirs, Americans can rely on stable, well-paying jobs that fuel the economic activity needed to sustain communities across the nation. And by keeping critical supply chains close to home, Americans are guaranteed more sustainable and reliable access to essential products when we need them most.

This Fourth of July, let’s dedicate ourselves to preserving our independence and access to critical American-made products. As consumers, let’s prioritize American-made and, by doing so, support the American economy and jobs.

Washington Update: UFLPA & 301 Tariffs – June 24, 2022

Don’t miss NCTO’s new Washington Update, offering a snapshot into our advocacy on critical issues impacting the U.S. textile industry. In today’s report, NCTO President and CEO Kim Glas outlines two priority issues: 1) Urging strong enforcement of the Uyghur Forced Labor Prevention Act and 2) Petitioning the administration to maintain the Section 301 China tariffs on finished apparel and textiles.

Visit NCTO.org and our Twitter, Facebook, Instagram and LinkedIn pages to learn more about these pressing issues.

U.S. Textile Executives Discuss Substantive Policy Priorities with U.S. Trade Representative Sarah Bianchi at New England Roundtable

U.S. Trade Representative Sarah Bianchi made an inaugural trip to meet with U.S. textile manufacturers in the New England area in late February, where she toured Shawmut Corp.’s state-of-the-art manufacturing facility in West Bridgewater, Mass. and participated in a substantive textile industry roundtable discussion with NCTO member executives.

During her tour of Shawmut Corp., a fourth-generation, family-run global advanced materials and textile manufacturer, Ambassador Bianchi learned first-hand about a company that has contributed greatly to U.S. PPE efforts, investing $20 million in a new facility, which can produce up to 180 million NIOSH-approved N95 respirators and other PPE annually, creating hundreds of new local jobs.

Ambassador Bianchi’s visit marked a rare opportunity for executives to highlight the critical need for policies supporting a domestic supply chain that is a major contributor to: the overall U.S. economy with $64.4 billion in textile and apparel shipments in 2020; high-tech innovation, such as heart valves and stents, aircraft bodies and advanced body armor; and our national defense, supplying over 8,000 products a year to warfighters.

The roundtable also facilitated a discussion on key policy priorities, including the importance of policies and incentives aimed at maintaining a domestic personal protective equipment (PPE) production base, the importance of the Berry Amendment, the commitment by the industry to sustainability, and the critical nature of the Western Hemisphere co-production relationship, which supports 1 million U.S. and regional textile and apparel workers.

“We look forward to working closely with Ambassador Bianchi and the U.S. Trade Representative’s [USTR] office to advance policies that bolster domestic production by expanding buy American policies and providing incentives for onshoring and nearshoring production, while addressing illegal trade practices that undermine our industry’s competitiveness head on,” said NCTO President and CEO Kim Glas, who led the roundtable discussion, in a news release.

Werner International Report Highlights Benefits of U.S.-CAFTA-DR Agreement and Devastating Impact of Weakening Agreement’s Rules

The National Council of Textile Organizations (NCTO) commissioned a critical report by Werner International examining the valuable economic and societal impact of the U.S.-Dominican Republic-Central America Free Trade Agreement (CAFTA-DR, which has spawned an integrated co-production chain in the apparel, textile and cotton industries supporting more than 1 million jobs and facilitating $12.5 billion in two-way trade.

The report was released as part of a public relations and Hill and administration advocacy campaign on January 26,  supported by the co-chairs of the House Textile Caucus—Congressmen Patrick McHenry (R-NC) and Bill Pascrell (D-NJ).

In addition to the Werner report’s highlights of the resilient supply chain between the U.S. and CAFTA-DR region, the study also provides data-driven evidence of the adverse impact of proposals aimed at weakening the agreement’s carefully negotiated and longstanding textile rules of origin. Proposals by certain retailers and apparel brands to dismantle CAFTA-DR’s rules would have a devastating effect on the collective industries in the region and U.S. and result in massive job, investment and export losses, the report finds.

The Werner report comes at a pivotal time, as Xinjiang’s illegal use of forced labor is tainting imported consumer products and the global shipping crisis is diverting supply chains away from China.

NCTO will continue to do substantial outreach to ensure key stakeholders understand the severe impacts this would have across the whole industry.  Staff will also engage with efforts on the Hill to create incentives to help onshore and nearshore more textile and apparel production.

Lastly, the study provides recommendations to the Biden administration, which is currently conducting a comprehensive review of root causes of migration issues associated with three Northern Triangle countries within the CAFTA-DR region.

Key Findings from Werner report:

Adverse consequences to adding flexibilities to/weakening the yarn forward rule:

  • Destroys U.S. and Western Hemisphere textile employment, with a total projected loss of more than 307,000 U.S. textile and cotton farming jobs and a loss of 250,000 jobs in Central America’s primary textile industry.
  • Devastates U.S. cotton farmers, currently employing 115,000 people in 18 states. Projected sales drop of 30% for U.S. and Western Hemisphere cotton growers.
  • Provides direct and indirect backdoor access to Chinese textile inputs, further perpetuating Xinjiang forced labor.
  • Chills future investment and destabilizes current investment in region. Over $1 billion in capital investments have been made in CAFTA-DR countries since 2005, which have helped create a vertical regional production chain. Weakened rules place major future and long-term U.S. investments at risk.
  • Severely undermines defense procurement under the Berry Amendment and the domestic warm industrial base supplying mission critical items to U.S. armed forces. More than two-thirds of the U.S. textile and apparel industry would be wiped out, destabilizing the domestic textile military industrial base and its ability to meet surge production in times of military mobilization.
  • Cripples efforts to construct a viable domestic/nearshoring supply chain for personal protective equipment (PPE).
  • Exacerbates the flow of immigration, undermining the administration’s intended goal of spurring economic development in the region to address the root causes of outward migration.
  • Exponentially increases greenhouse carbon emissions through transpacific shipping and Asian coal-fired energy.

Proactive steps to help improve the competitive position of CAFTA-DR region:

  • Better coordination among lending agencies of the federal government, such as the U.S. Agency for International Development, Inter-American Development Bank, and Export-Import Bank, to ensure targeted, strategic investment in this sector and competitive low or zero interest financing and loan guarantees.
  • Support for a comprehensive infrastructure plan with targeted, high-impact investments and competitive loans to upgrade regional power grids, roads, and local ports would pay immediate dividends.
  • Provide incentives to the Western Hemisphere co-production chain for carbon emission reductions and sustainable products.
  • Ensure trade stability in the region by maintaining maximum pressure on China, including enforcing the U.S. ban on cotton and cotton products made with forced labor in Xinjiang.
  • Refrain from changing cumulation and short supply process, which would lead to a surge of third-country yarns and fabrics and displace hundreds of thousands of jobs in the region and U.S.
  • Oppose granting duty-free access and other benefits through an expansion of the Generalized System of Preferences (GSP) program to apparel and textiles and negotiating free trade agreements with major Asian suppliers.
  • Close the de minimis loophole for imports from China that allow goods valued at $800 or less to enter duty free if imported by one person on one day.

Aurora Specialty Textiles Group in Expansion Mode in Industrial Textiles

Aurora Specialty Textiles Group, Inc., a global leader in coating, dyeing and finishing of woven, non-woven and knit fabrics, has proven that resilience and an innovative spirit can propel a company to new heights, even during one of the most challenging times in the industry’s history.

Aurora was originally founded as a cloth prep facility in Aurora, Illinois in 1883. The company has since evolved and flourished as a domestic manufacturer, transitioning first into textile dyeing and finishing in the 1920s, then into textile coating capabilities in the 1950s.

In 1977, Aurora was purchased by Meridian Industries, Inc., a privately owned manufacturing holding company comprised of five operating entities, including Majilite, Meridian Specialty Yarn Group, Inc., Kleen Test Products Corporation, and Kent Elastomer Products Inc.

The company continued to expand through the following decades and in 2015 invested in a new state-of-the-art, wide-width coating and finishing line and a new facility in Yorkville, Illinois that dramatically expanded their ability to serve customers and new markets.

Today, Aurora offers a complete portfolio of products, including digitally-printable textiles, specialty home products, tape-backing products and technical textiles for a wide variety of industries.

Aurora President Marcia Ayala, who joined Aurora in 2006 and was named president in 2019, is leading the company on a rebranding drive, while also navigating myriad challenges, from rising raw material prices and transportation costs to a global supply chain crisis.

“The company has rebranded itself and really expanded and grown from the point of view of its manufacturing capabilities,” Ayala said.

As part of the rebranding effort, Aurora has engaged heavily on social media channel LinkedIn, posting company news and updates weekly. In addition, Aurora is currently in the process of upgrading its website.

“It has made a difference,” Ayala noted.  “We do see that we are getting more inquiries as a result of our presence and engagement on LinkedIn.”

These initiatives have helped Aurora maintain and grow business in an uneven economy roiled by the COVID-19 pandemic that has impacted the entire U.S. manufacturing and retail sectors.

Aurora’s product offerings and services are extensive.

The company’s products cover a wide range of applications, from pressure sensitive tapes with a fabric backing, like gaffer’s and athletic tapes, to digitally printable textile applications such as canvases, banners and window displays and wall coverings. Other applications include power transmission belting, military, abrasives, healthcare and safety, and protective outdoor coverings.

In addition, Aurora has a range of textile finishing capabilities including fabric preparations such as bleaching, scouring, singeing and brushing/vacuuming; dyeing capabilities; pad applications to apply treatments such as fire retardant, water-repellent and anti-microbial; coating capabilities for a range of water-based coatings; and calendering, sanding and converting services.

 

Navigating the Pandemic, Rising Raw Material Costs and a Global Supply Chain Crisis

“Like many businesses, when the pandemic first hit, our business slowed considerably and was down in 2020,” Ayala said. “While we hunkered down, we continued to manufacture throughout the pandemic. We never shut down.”

Ayala said Aurora had some businesses that were resilient and remained consistent throughout the pandemic, though areas such as athletic tape and gaffer’s tape were impacted as sporting events and entertainment shut down at the height of the pandemic in 2020.

Demand and business rebounded in 2021, but with it came a whole new set of challenges triggered by a global supply chain crisis that has resulted in skyrocketing costs for freight, cargo, raw materials and chemicals.

“Transportation costs alone have doubled and tripled depending on where you are shipping it from,” Ayala said. “The challenge now is mitigating price increases as much as we can and meeting customer demand.”

“We have had to change the way we do business because of rising prices and longer lead times for raw materials. We implemented a longer time frame for forecasting and customer product demands, we are qualifying secondary suppliers, and we are requoting prices frequently due to the volatile and increasing prices of raw materials,” she added. “In some cases, we have been told from our suppliers that prices are only good for 24 hours. It has been going on for the past year and I don’t see any end in sight in the near future.”

But one challenge Aurora has managed to dodge is the labor shortage crisis that has plagued broad swaths of the manufacturing and retail sectors. Aurora employs 73 people and operates in a 120,000 square-foot facility.

“We have had very little turnover, across the board. Most of the turnover has been retirements.  I think people enjoy working here and we have a very good culture focused on employee engagement, continuous improvement and input on ideas,” Ayala noted.

 

Emerging Markets

Looking ahead, Aurora hopes to expand its offerings to the military market: “We are looking at how we can act as a subcontractor to companies that need fabric finishing or coatings, like durable water repellants or anti-microbial finishes. This is a business that we have already grown, and we are looking to expand it,” she said.

She said government procurement business under the Berry amendment is extremely important and is a topic that will be highlighted on Aurora’s newly designed website.

“Our sweet spot is Berry compliant business where we offer our coatings, bleaching, and finishing services to companies that already have fabric procured, and we can add value,” Ayala said.

“Another area Aurora is exploring, one that would fit well with its core competencies, is outdoor protective fabrics for end products like boat covers and canopies, where it can offer a wide range of polyurethane coatings or water resistance coatings,” she added.

 

Sustainability

Aurora, a Meridian Industries, Inc. company, is ISO 9001 and ISO 14001 certified, and an industry leader in sustainable manufacturing practices.

The company moved into its state-of-the-art facility in 2015 and has made a significant investment on sustainability upgrades at its plant in Yorkville.

Among the upgrades to Aurora’s new facility, the natural gas and electricity components were designed to significantly reduce its manufacturing carbon footprint.

The move from its original plant in Aurora to the new plant in Yorkville led to a reduction in natural gas and electricity consumption of 4,134 metric tons of CO2. That is the equivalent of 465,178 gallons of gasoline per year or 4,523,015 pounds of coal burned, according to the company.

Over $1 million was invested in new equipment alone, including Variable Speed Drives to adjust motor speed to match demand (to prevent operating equipment running at constant full speeds), new higher efficiency boilers powered by gas, and a Building Automation System (BAS) that allows the company to schedule equipment to turn on and off automatically through a central computer, which helps reduce energy consumption.

As members of the Valley Industrial Association (VIA), which serves manufacturers throughout Northern Illinois, Aurora said it has begun sharing its sustainability management ideas with other manufacturing operations in the region and is helping them to identify ways to save energy and water resources and also reduce waste.

Aurora is a finalist in all six VIA benchmark categories, including innovation, culture, operations, safety, social responsibility and workforce development. The VIA’s “Spark Awards” will be held on April 27.

 

Onshoring/Nearshoring

 Ayala said she is very supportive of onshoring more weaving and manufacturing.

“It has been an advantage for us to be a domestic manufacturer, because of the global supply chain crisis and the issues with imported products over the past two years,” she noted. “People are starting to see more value in having domestic suppliers because of reliability, a shorter supply chain and lower costs from a transportation perspective.”

Ayala said her customers also find value in promoting products that they can label as manufactured in the U.S.

She said free trade agreements, such as the U.S.-Mexico-Canada Agreement (USMCA) have been beneficial and led to new exports to Canada, though over 90 percent of Aurora’s products and services are consumed domestically.

“Free trade agreements spur more domestic production of fabrics and yarns,” Ayala said.

Aurora hosted U.S. Trade Representative Katherine Tai and Congresswoman Lauren Underwood (D-Ill.) on a tour of its facility and a roundtable discussion featuring women-led manufacturing firms and union representatives in late August last year. The event was hosted by Ayala and Bruce Pindyck, chairman and CEO of Meridian Industries, Aurora’s parent company.

The visit came at a critical time as Congress was debating the bipartisan Infrastructure Investment and Jobs Act. The bill, which Congress ultimately passed, includes support across Illinois communities for public transit, improvements to roads and bridges, and improved passenger and freight rail and programs.

“The fact that Ambassador Tai was willing to visit small manufacturing companies like ours and talk to us about what is important to us was impressive,” Ayala said.

“When we went on the plant tour, she was interested in our manufacturing capabilities and asked questions about what was impacting our business and how trade policy impacts our business.”

“I asked her if it was typical for a U.S. trade representative to come on a tour of a small company and talk trade policy and she said it was her own innovation and practice—to meet with manufacturers and workers around the country—instead of putting out trade policies without asking industry first how it would impact us,” Ayala said. “That made such an impression.”

 

Vice President Kamala Harris Shines Spotlight on Parkdale Mills Investment at White House Roundtable

Vice President Kamala Harris highlighted investments in northern Central America and the U.S. by Parkdale Mills and six other companies at a White House roundtable on December 13, part of the administration’s Call to Action to the private sector to promote economic opportunity in the region to address the root causes of migration.

Parkdale Mills, one of the largest manufacturers of spun yarn and cotton consumer products it he world, will make a multimillion-dollar investment in a new yarn spinning facility in Honduras, as well as an additional substantial investment to support existing operations in Hillsville, Virginia. This investment will help customers shift one million pounds of yarn per week away from supply chains in Asia and China and enhance U.S. and CAFTA-DR co-production resilience an dincrease regional product offerings. The new investment will create hundreds of jobs in Honduras and further support hundreds of employees in Parkdale’s Hillsville operations.

Parkdale Chairman and CEO Andy Warlick attended the Vice President’s roundtable and outlined the importance of onshoring and nearshoring, particularly in the midst of a global supply chain crisis that is forcing retailers and brands to recalibrate supply chain strategies to mitigate risk.

The co-production chain with Central America is vital to the employment and investment in the region and the U.S.

Here are some compelling facts:

  • There is $12.5 billion in two-way textile and apparel trade between the U.S. and CAFTA-DR countries, representing $3.5 billion in U.S. textile exports to the region, which resulted in $9 billion in CAFTA-DR textile and apparel exports to the United States, based on pre-pandemic trade flows in 2019.
  • The benefits of this important two-way trading structure help employ 500,000 textile and apparel workers in the CAFTA-DR region and 600,000 workers in the United States.
  • Eighty percent of all U.S. spun yarn exports go to the CAFTA-DR region, while 65 percent goes to the Northern Triangle, three CAFTA countries that Vice President Harris and the administration are examining closely.
  • Two-thirds of U.S. textile exports to the CAFTA-DR region go to the countries of the Northern Triangle. In return, 70 percent of CAFTA-DR textile and apparel exports to the U.S. come from the countries of the Northern Triangle.
  • For every $1 of U.S. textile exports, we receive approximately $2.70 in textile imports from the Northern Triangle.

This supply chain is predicated on the strong yarn forward rule of origin and other textile rules in the CAFTA-DR agreement.

Recently, administration officials from the U.S. Trade Representative’s office and the Vice President’s office met with the U.S. textile industry to reaffirm the importance of rules of origin in nearshoring production chains, helping address labor and environmental challengers and mitigating supply chain risk.

Remarkably, as supply chain issues out of Asia are on the front page, some importers are seeking so- called “relief,” and proposing to weaken the yarn forward rule of origin and other provisions in the agreement. Changing any aspect of the textile rules embedded in the CAFTA-DR agreement would give Chinese yarns and fabrics and those from other countries that are not signatories to the trade pact backdoor access to the CAFTA-DR market and jeopardize hundreds of thousands of jobs that in U.S., CAFTA-DR region and the entire Western Hemisphere.

Warlick highlighted to the vice president the critical co-production chain with the CAFTA-DR region and stressed that this supply chain is quicker, more transparent, more reliable, more sustainable, and free of the forced labor that has been widely documented in Xinjiang, China.

In terms of sustainability alone, a container coming from Central America versus China cuts greenhouse gas emissions by 80 percent. On average, apparel exported from China produces 51.8 kgs of C02 per ton, compared to 18.1 Kgs of CO2 from CAFTA-DR.

Warlick offered a vision for the future of the U.S. industry and this critical co-production chain with Central America and the Western Hemisphere as a whole.

The CAFTA-DR region represents about 7 percent of global apparel and textile imports to the U.S., while China and Asia represent the vast majority of the remaining 93 percent.

By merely doubling the productive capacity and exports from CAFTA-DR, an estimated 2.4 million jobs could be created and billions of dollars in new investment could be unlocked, according to an independent analysis on the economic impact of CAFTA-DR.

NCTO continues to urge retailers and apparel brands to make long-term investments in onshoring and nearshoring production to not only avoid the next breakdown in global supply chains but to invest in strong labor and environmental standards and employment in this hemisphere.

Parkdale’s investment and anticipated investments by other NCTO members underscore how critical and valuable the co-production chain is to the economies of the U.S. and Central America.

This is an exciting time for nearshoring and onshoring these critical production chains. There is a long history in this industry with Central America and the Western Hemisphere and we have never seen an opportunity that is so ripe for these investments and further strengthening our textile and apparel co-production chain.

China’s Predatory Trade Practices Hurting U.S. Textile Industry, Western Hemisphere Co-Production Chain

China’s Predatory Trade Practices Hurting U.S. Textile Industry, Western Hemisphere Co-Production Chain

By Kristi Ellis

China’s unfair trade practices, ranging from rampant intellectual property theft to state sanctioned export subsidies, to the egregious abuse of forced labor in the production of cotton and cotton apparel for well-known global apparel brands and retailers has had a chilling effect on the U.S. textile industry and U.S. trading partners, particularly those in the Western Hemisphere.

The far-reaching impact of China’s illegal practices and its race to dominance as a global supplier of consumer products came under scrutiny at a recent House Ways and Means Trade Subcommittee hearing on Dec. 2, titled “Supporting U.S. Workers, Businesses, and the Environment in the Face of Unfair Chinese Trade Practices.”

NCTO President and CEO Kim Glas, in testimony before the committee, outlined China’s rise to dominance of global textile and apparel production and its adverse impact on the U.S. textile industry, as well as ways to strengthen onshoring and nearshoring of supply chains, and recommendations on the critical policies needed to address these illegal trade practices and rectify inequities in the country’s trade policies.

“China continues to dominate the global textile and apparel market, including our U.S. market through illegal subsidies, rampant IPR theft and other predatory trade practices,” Glas told lawmakers in her opening remarks. “This has cost hundreds of thousands of domestic jobs here in the United States and undermined critical production chains like personal protective equipment (PPE).”

“If I were to offer one overarching recommendation today, we need to hold China accountable and ensure our trade policies are keeping pace to address the rapidly emerging predatory challenges we are facing from China and others,” she added.

Rep. Earl Blumenauer (D-Ore.), chairman of the powerful trade subcommittee, said in his opening remarks, “Instead of joining other market-based world economies, China has doubled down on its state-driven economic model.  Economists now describe this phenomenon as the ‘China shock,’ which has had devastating and sustained impacts on U.S. workers and businesses across our country,” Blumenauer said.

“More broadly, China continues to demonstrate that it refuses to play by the rules.  China will exploit loopholes wherever they exist.  We’ve given too much of a free pass to China over the years – it’s now time to take these issues seriously and take a more aggressive approach,” he stressed.

Glas said China’s “abusive environmental and labor record is on full display in our sector and has been well documented.”

Egregious & Illegal Use of Forced Labor in China

China makes up 44 percent of U.S. imports of textile and apparel products, she noted. One in five garments coming into the U.S. from China are made with forced labor from Xinjiang “with the worst human rights abuses imaginable,” she noted.

Between 2017-2019, the Chinese government has forcefully transferred an estimated 800,000 to 1.8 million Uyghur Muslims from their homes in Xinjiang to detention centers and factories throughout China forced to manufacture products for international sale under forced labor conditions, according to numerous reports and international and domestic news outlets, Glas said in written testimony submitted to the committee.

Given that 20 percent of global cotton production is sourced from Xinjiang, tainted apparel and textiles made with forced Uyghur labor is a serious problem for the U.S. and the world.

U.S. Customs and Border Protection (CBP) issued a Withhold Release Order (WRO), effectively a ban on cotton and cotton products coming from the Xinjiang region in China, but the agency lacks the resources to inspect and stop a majority of goods from Xinjiang from entering the U.S. market, Glas told the committee.

“These items are bleeding into our supply chains and making it to our store shelves and into our closets,” Glas noted in her opening remarks.

Section 321 De Minimis Loophole

“Some of these products are making their way with the press of a button to our doorstep using the Section 321 de minimis loophole that allows these goods to come in duty free—not just evading China 301 duties, but all duties—from China and elsewhere with little scrutiny by U.S. Customs on these products,” she continued.

The United States provides a duty exemption for goods valued at less than $800 in retail value if imported by one person on one day.

Of note, the de minimis exemption was raised from $200 in 2016 under the U.S. Customs reauthorization legislation.  The current application of de minimis provides exemptions on base MFN tariffs, as well as Section 301 tariffs, such as those currently in place against imports from mainland China. Use of this exemption has skyrocketed alongside the growth of direct‑to‑consumer e‑commerce, which has further accelerated due to the COVID‑19 pandemic.

De Minimis exemptions are a loophole that allows tainted goods to be imported into the U.S. market duty free virtually unchecked and undermines carefully constructed textile and apparel rules of origin in CAFTA-DR and other free trade agreement and trade preference partners.

Blumenauer took note of Glas’ remarks and called out her reference to the de minimis problem.

“Ms. Glas has noted the example of Shein [a Chinese e-commerce conglomerate that imports billions of dollars of apparel to the U.S.]. This Chinese company has developed a business model to exploit the de minimis provision in U.S. law to avoid paying any costs or go through oversight at the U.S. border, all of which undercuts U.S. companies playing by the rules,” Blumenauer said.

“Shein is also part of the Chinese textile industry that benefits from the deplorable treatment and forced labor of Uyghurs and other minorities in the Xinjiang region of China.  Lack of oversight at U.S. borders makes it even more difficult for CBP to intercept these shipments,” he noted.

Blumenauer pointed to a roundtable he attended on the issue, nothing that he was made aware of the fact that some 2 million packages are shipped into the U.S. each day under de minimis waivers. He also noted that one witness suggested as many as 6 million packages per day are coming into the U.S. market under the Section 321 waivers.

“These issues with de minimis and forced labor are key areas of importance for me and ones that I intend to legislate on in the coming months,” Blumenauer said.

Rep. Danny Davis (D-Ill.) asked the hearing witnesses what they considered would be the most practical end expeditious solution to addressing China’s illegal practices.

“In terms of things in our trajectory that we can get done very quickly, closing the de minimis loophole is one and effectively banning the cotton and cotton products coming from Xinjiang,” Glas said. I do not believe we have given CBP the resources to effectively administer the WRO. We should be holding daily press conferences on stopping shipments coming in because that will help recalibrate supply chains both here to the U.S. and to our Western Hemisphere partners.”

China’s Predatory Practices Hit CAFTA-DR Countries

“These predatory practices have not only harmed U.S. manufacturers and workers, but also drastically impacted our valued political and economic allies in the Western Hemisphere,” Glas said.

“For example, the CAFTA-DR-U.S. co-production chain for textile and apparel supports over 1 million jobs and has been a critically important and a deeply economically impactful agreement, despite the headwinds from China’s increased access to our markets during the agreement’s existence,” she said.

The main driver behind the stability in the face of the China juggernaut is the yarn forward rule of origin, Glas said.

“This unique investment-based rule ties lucrative duty-free access to the U.S. market and our consumers to ensure investment in yarn, fabric and cut and sew production. Simply put, it means the agreement requires the signatories of the agreement gain the job benefits of the agreement.”

“Onshoring and nearshoring are happening. Key CAFTA-DR countries have seen exports up anywhere from 33 to 56 percent, outpacing major Asian exporters, and more investment in yarn, fabrics and apparel production will be announced soon,” she added.

Glas told the committee that apparel brands and retailers importing product to the U.S. from China are seeking “so-called relief [such as weaking the rules of origin in CAFTA-DR] to give Chinese yarns and fabrics and other countries that are not signatories of the agreement, backdoor access to the CAFTA-DR market.”

“These Trojan Horse ideas must be rejected out of hand because they hurt U.S. jobs and those in the region and reward other countries,” she noted.

In one of the liveliest exchanges during the question-and-answer session with the committee, Rep. Tom Suozzi (D-NY) called on retailers and apparel brands, some of whom have complained that the ban on cotton and cotton products from China is raising prices on imported goods to the U.S. and said they should shift more production to the U.S. and Western Hemisphere.

“The [U.S.] textile industry is very concerned about what China is doing. We’ve gone to China for cheaper goods,” Suozzi said.

He said the U.S. should close the U.S. market to imported goods from the Xinjiang region, something that could be helped by passage of the Uyghur Forced Labor Prevent Act (which the House passed last week).

“We should say that any goods coming from the Xinjiang region are presumed to be made with forced labor,” Suozzi said.

“Concerns from industry and others that this will make the cost of T-shirts and pants go up and be passed on to the consumer, my initial reaction to that is: “It’s too damn bad.”

“We have to hold them accountable for the way they are treating human beings in their country,” Suozzi added.

Glas agreed with Suozzi’s recommendations, noting that she is a commissioner on the U.S. -China Economic and Security Review Commission, and pointing to a recommendation from the commission this year to ban all products coming from Xinjiang for importation to the U.S. market.

“Seventy percent of U.S. textile, fiber, yarn and fabrics go to our Western Hemisphere trading partners,” Glas said. “We have one of the best cotton growing industries in world. There is transparency in our supply chains here and in the hemisphere because we have a strong rule of origin under our free trade agreements.”

“We are already starting to see opportunities coming to our hemisphere. Trade is up from some of the Northern Triangle countries by 56 percent over the last two years because Asian supply chains are breaking down,” Glas added. I do think there are retailers who are trying to de-risk out of Asia given the pervasiveness of the Xinjiang cotton issues. Our market is open here in the United States and we’re open for business in the Western Hemisphere. This is a huge opportunity to onshore and nearshore these critical production chains.”

Glas outlined key policy recommendations to the committee, including:

  • Enact tax incentives and other targeted critical investments to strengthen Western Hemisphere trade relationships and re-shore manufacturing
  • Close the Section 321 De Minimis Tariff Loophole
  • Step up enforcement of forced labor of Uyghurs and others in the Xinjiang Uyghur Autonomous Region (XUAR)
  • Firmly maintain Section 301 penalty duties on China for finished textiles and apparel products
  • Immediately pass the MTB to help manufacturers with a limited list of critical inputs not made in the U.S. and review/close the mechanism in the MTB renewal which allows for finished products
  • Strengthen buy-American practices for PPE and other essential products
  • Block expansion of the Generalized System of Preferences (GSP) to include textile and apparel products
  • Use trade enforcement in free trade agreements to mitigate transshipment schemes by unscrupulous importers seeking to illegally circumvent duties

Contempora Fabrics: A North Carolina Circular Knitter Well Positioned for Rising Demand in Sustainable, American-Made Products

As brands and retailers, caught in a global supply chain squeeze, scrutinize their supply chains and explore new strategies based on onshoring and nearshoring, North Carolina textile companies like Contempora Fabrics are beginning to see rising demand for sustainable, American-made textiles.

Based in Lumberton, N.C., Contempora is a manufacturer of circular knits specializing in both coarse and fine gauge knits predominantly for the fashion apparel, performance sportswear and workwear markets.

Contempora was founded in 1972 by Lacy C. Nance to produce fine gauge interlock and single knit fabrics. In 1984, 40 percent of the company was purchased through an Employee Stock Ownership Plan (ESOP) and the company became 100 percent ESOP in 1988.

Today, Contempora Fabrics operates 175 machines in a 150,000 square foot facility on 29 acres and is known for a versatile product mix and capacity to manufacture approximately 2 million pounds of fabric each month.

On a weekly basis, Contempora produces 450,000 pounds of fabric, 80 percent of which is polyester and 20 percent of which is cotton blend.

Its knit fabric production is heavily concentrated in the team sports and performance markets and is used in a wide variety of products, ranging from jersey knit T-shirts to mesh fabrics in uniforms used in the MLB and NBA, to heavy weight fleeces.

Contempora works with several well-known performance gear, workwear and apparel companies.

Contempora President Ron Roach says apparel accounts for 90 percent of the company’s polyester knit fabric business, but he says the company is expanding its business into new markets, including industrial and automotive and potentially furniture.

As the company continues to deepen its product offerings, the demand for American-made, environmentally friendly fibers, yarns, fabrics and apparel continues to rise.

Sustainability is in Contempora’s DNA

Contempora has reached an impressive sustainable milestone. To date, the company has prevented 63 million plastic bottles from going to landfills by purchasing and using recycled fibers from Unifi Inc.’s REPREVE® brand, says Hannah Rich, product development engineer at Contempora.

She says that customers are seeking to switch more from virgin polyester yarns to recycled yarns though the cost differential is still a barrier.

Of the 450,000 pounds produced each week, 50,000 pounds contains recycled poly yarns and 200,000 pounds uses 100 percent virgin poly.

Recycled poly is 15-20 percent more expensive than virgin polyester, she notes.

In addition to rising customer demand for recycled products, Contempora has invested in reducing its own environmental footprint, says Contempora President Ron Roach.

“We’ve spent the last 10 years updating all of our lighting systems so that they use less wattage and we have spent a tremendous amount of money in the last five to six years on new equipment that uses less electricity,” stresses.

For the year to date, Contempora has recycled over 123,000 pounds of cardboard, more than 257,000 pounds of cardboard yarn cones and over 13,000 pounds of plastic, for a total of over 394,000 pounds, or 197,000 tons.

“The incredible advantage of using a sustainable product line is that it is all very traceable. We can verify everything. We can trace our product all the way back to the beginning to ensure that it was produced in the sustainable way we are claiming,” he says.

Roach says he hopes brands and retailers appreciate the investment in sustainable practices as well as the resiliency of the supply chain in the face of a major shock like that of the COVID-19 pandemic and shift more sourcing to the United States and the Western Hemisphere, the textile industry’s largest export market.

“We are definitely hoping that retailer and brands are coming to the conclusion that most of us have known for a long time—the cheapest price is not necessarily the best cost in the long run,” Roach notes.

“With the severe shortages of personal protective equipment (PPE) that we saw during the onset of the COVID pandemic, we learned how our dependence on Asia really hurt this country. The U.S. textile industry’s response was heart felt and really demonstrated our industry’s ability to come together and help solve the PPE shortages.”

Onshoring

Business for U.S. knit suppliers has been strong, Roach notes, despite the fact that most of the apparel manufacturing base moved offshore decades ago.

But there has been an upheaval in the global supply chain that companies are watching closely.

A confluence of events, including the supply chain crisis associated with the pandemic, Section 301 tariffs imposed on finished apparel and textile imports from China and a U.S. ban on cotton and cotton products from the Xinjiang region of China linked to the use of forced labor of Uyghur minorities, has led to a shift in global sourcing.

While Roach notes that he has not seen a rush to onshore on the part of retailers and brands, he says there have been numerous conversations “about putting up facilities in the U.S. and we are anxious to see where that goes.”

He pointed to a new program that Contempora is staring with a major apparel brand that will be made strictly in the U.S.

Additionally, Walmart, the nation’s largest retailer, continues to explore U.S. suppliers and recently participated in the Americas Apparel Producers’ Network (AAPN) Carolina Mill Tour in October. Contempora was one of the four stops, a reported by eTextileCommunications.

This year, Walmart announced a $350 billion Made in USA Lighthouse initiative aimed at strengthening its commitment to U.S. jobs and communities. The 10-year project aims to help identify and overcome top-down barriers to U.S. production.

“I am very encouraged by the Walmart Carolina tour It went well and we are anxious to see where it goes,” Roach notes. “I think it is a very good sign when you have the largest retailer in the country look at making a commitment and I hope that others will also take that same look.”

Nearshoring-Western Hemisphere

Roach says that he expects the Western hemisphere to be a “big, big play” in the coming months.

Central America is Contempora’s largest export market, accounting for 80 percent of the company’s exports.

According to recent trade data, the Western Hemisphere marked a dramatic rebound in the first half of 2021, driving a 50 percent surge in U.S. apparel imports, as global sourcing shifts and pressure on China forced retailers and brands to continue diversifying and consider nearshoring more production to take advantage of the benefits of our free trade agreements (FTAs) in the region.

For the year to date through September, apparel imports from the Western Hemisphere (largely comprised of U.S. textile components) jumped 43 percent to $10.3 billion compared with the year-ago period, according to new data from the Commerce Department’s Office of Textiles and Apparel (OTEXA).

Roach notes that he expects to see the Western Hemisphere gain the most from sourcing shifts by retailers and brands, a key reason why he says maintaining strong textile rules in the U.S. free trade agreement with Central America is critical.

“I know there is a lot of talk about reopening CAFTA-DR (the Dominican Republic-Central America Free Trade Agreement) but that would be a complete disaster,” he adds. “The yarn forward rule has helped maintain business and a strong coproduction chain with Central America, and the administration supports the status quo and is not looking to reopening it, based on reports from a recent roundtable.”

Labor Shortage Challenge

As is the case with all industry sectors across the U.S., the textile industry has been struggling with severe labor shortages that have idled some capacity and led to lost business opportunities.

But the business is there, Roach stresses.

“In today’s world, everyone is busy, whether on the yarn side, the fabric mill side or the apparel side,” Roach says. “The biggest problem we are all having up and down the supply chain are these labor shortages.”

He notes it affects the entire domestic supply chain from getting raw materials for production to shipping fabrics to dye houses.

“The key is trying to tap into what today’s workers are looking for,” Roach notes. “I don’t think we will ever go back to the days before pre-COVID. We have to work together to figure out what happened and then find ways to address this. The person who figures that out will be the winner.”

Roach is trying one new strategy. In addition to taking the usual steps to hire and retain workers, he says he has applied to the HB-2 Visa program and is trying to hire 20-30 workers from El Salvador on 10-month work visas, though the process has taken longer than he anticipated.

“There is enough business in the U.S. We just have to figure out how to get enough employees to run it,” Roach notes.

 

Two One Two New York Hosts State Senator Phil Boyle on plant tour and discussion

Two One Two New York, Inc. (212NY), a well-known and respected PPE, sweater, sweater-knit and apparel manufacturer based in Long Island, N.Y., hosted New York state Senator Phil Boyle at its state-of-the art manufacturing facility on September 9.

Senator Boyle visits 212 NY headquarters in Long Island, NY.

Principle Marisa Fumei-South and Controller Carole Schultz hosted the Senator on a tour of the company, one of the largest fully vertical, women-owned, family- operated textile manufacturers on the East Coast, which expanded its operations to produce PPE during the COVID-19 pandemic, despite shutdowns and an economic downturn that saw many in the industry pull back and idle production.

Fumei-South said she took the opportunity to demonstrate Two One Two New York’s capabilities and capacity housed in an 85,000-square-foot facility in Edgewood, Long Island that produces up to 48,000 dozen sweaters per month.

“They were able to see the production sweaters as well as masks in process for other government contracts. They were impressed with the organization as a whole, the substantial infrastructure and the fact that are positioned to turn quickly at any given time,” she said. “They were appreciative of our dedication to domestic manufacturing, to keeping our employees working and that we’ve remained in New York for over 30 years despite the challenges we face having to compete with imports.”

“We spoke about opportunities that could be generated for Long Island as well as New York and U.S. manufacturers and their respective supply chains as well as concerns we have in regards to policy,” Fumei-South said. “We also discussed the critical and urgent support we need to sustain the robust supply chain that we created during the pandemic before it disappears and how important it is that we keep Americans working.”

Fumei-South said she is looking forward to having follow-up conversations about mandated state procurement for PPE for New York state manufactures.