Fashion’s environmental governance begins with nearshoring and onshoring

If the US fashion industry shifts to onshoring and nearshoring it will reap the benefits from both a business and environmental point of view, writes National Council of Textile Organizations (NCTO)’s Kimberly Glas in https://www.just-style.com/.

Decisions made decades ago have come back to haunt the fashion industry when it comes to environmental governance. About 30 years ago, free trade dogma took hold in our industry and the halls of government. New trade agreements were negotiated. The World Trade Organisation was established, and China was rewarded with Permanent Normal Trade Relations with the United States. Consequently, business was globalised, while economies became evermore intertwined.

In the case of textiles and apparel, offshoring was all the rage. Many sourcing executives scoured developing countries looking for the lowest-cost producers to make their products with a fierce competition that was a race to the bottom for fast, disposable fashion. But lost in all of this were domestic manufacturers and labour and environmental standards necessary to ensure a sustainable supply chain.

However, globalisation brought unforeseen consequences such as well-documented environmental harm, lax overseas labour standards, and a hollowing-out of the middle class here at home and in developed economies — actual costs with real implications for people everywhere.

The fashion industry — from material sourcing, through supply chains to washing and waste — is estimated to be responsible for 8% to 10% of global carbon emissions according to the United Nations.

But what can the industry do? The entire sourcing system needs to be overhauled. Changing times like those in which we live demands no less.

To real the full piece, please click the link here.

 

 

Domestic Textile Groups Tell Biden Administration Penalty Tariffs Counteract China’s Unfair Trade Advantage & Give American Producers a Chance to Compete

WASHINGTON –The Biden administration’s Section 301 penalty tariffs on finished textiles and apparel counteract China’s unfair trade advantages and give U.S. manufactures a chance to compete, two key American textile manufacturing groups told the Biden administration today. Removing tariffs, the associations said, would reward China, put U.S. manufacturers at a competitive disadvantage and do nothing to reduce inflation.

In a formal submission to the U.S. Trade Representative’s (USTR) office, which is conducting a four-year statutory review of the tariffs, the associations, representing the entirety of the U.S. textile production chain, expressed strong support for the continuation of current Section 301 penalty tariffs on finished textiles and apparel imports from China and outlined the effectiveness of U.S. tariff actions.

“In some cases, such as on finished apparel, the tariffs have worked to partially offset and counteract China’s unfair trade advantages,” the groups said. “The tariffs on finished textile and apparel items are giving U.S. manufacturers the chance to compete, and we are seeing encouraging investment and growth in moving some production and souring from China back to the Western Hemisphere.”

“The CAFTA-DR [Dominican Republic-Central America Free Trade Agreement] region has seen more than $1 billion in new textile and apparel investment this year, for example, which is historic and due to the textile and apparel rules negotiated under the agreement and sourcing shifts from China,” they added. “This investment and growing U.S. imports from the Western Hemisphere is attributable in part to the 301 tariffs on finished apparel.  The tariffs on finished items in our sector are broadly supported by textile/apparel producers in the hemispheric co-production chain, and it is essential that they remain in place, absent China reforming its practices.”

The submission was filed by the National Council of Textile Organizations (NCTO) and the U.S. Industrial and Narrow Fabrics Institute (USINFI).

The groups have long advocated for a fair, transparent process to remove tariffs on textile machinery, certain chemicals and dyes and limited textile inputs that cannot be sourced domestically to help U.S. manufacturers compete against China.

They also stressed that lifting the tariffs on finished textiles and apparel products from China “will solidify their global dominance in this sector for generations to come and reward their abusive behaviors, exacerbate the migration crisis, hurt domestic manufacturers and workers, undermine our ability to recalibrate essential PPE supply chains, and blunt the positive supply chains shifts and investments in the Western Hemisphere that are happening.” They added it would “do nothing to solve the inflation crisis facing U.S. consumers and manufacturers right now.”

See the full submission here.

The National Council of Textile Organizations (NCTO) is a not-for-profit trade association established to represent the entire spectrum of the United States textile sector, from fibers to yarns to fabrics to finished products, as well as suppliers of numerous support services such as trucking, banking, chemicals, and other such sectors that have a stake in the prosperity and survival of the U.S. textile sector.  U.S. textile and apparel manufacturers produced $65.2 billion in output in 2021, and our sector’s supply chain employs 534,000 workers from fiber to finished sewn products.  NCTO’s headquarters are in Washington, DC.  www.ncto.org

The United States Industrial and Narrow Fabrics Institute (USINFI)  Member companies manufacture highly-specialized textile products, advanced materials, and components used to support a variety of high-value-added and sophisticated industries.  These include the aerospace, automotive, construction, marine, medical, military, and safety/protective gear sectors among others.  USINFI currently has over 90 member companies, and its headquarters are in Roseville, MN. https://usinfi.textiles.org/

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NCTO is a Washington, DC-based trade association that represents domestic textile manufacturers.

CONTACT:

Kristi Ellis

Vice President, Communications

National Council of Textile Organizations

kellis@ncto.org |  202.684.3091

NCTO Member Spotlight: Carolina Cotton Works

Carolina Cotton Works, Inc. President Bryan Ashby highlights his company’s important contribution to the U.S. textile supply chain. CCW is a family-owned textile dyeing and finishing company that serves industries from performance apparel to aerospace textiles.
http://www.carolinacotton.com/

Applied DNA Sciences: DNA Technology & Tagging Shines the Light on Trade Rule Evasion and Labor Abuse in Supply Chains

In this new era of heightened scrutiny around illegal trade practices such as the widespread use of forced labor in Xinjiang, China and the ongoing circumvention of U.S. trade laws, Applied DNA Sciences stands at the forefront of innovation with DNA technology solutions that offer supply chain authentication.

A publicly traded company listed on the NASDAQ, Applied DNA is a new NCTO member company that has developed forensic solutions for secure supply chain traceability and brand protection, says MeiLin Wan, Vice President of Textile Sales at Applied DNA.

To watch short video on Applied DNA Sciences, click here.

The company is headquartered in Stony Brook Long Island, New York, and works in many different U.S. industries including textiles such as cotton, recycled polyester, specialty coatings, thread, apparel and footwear, as well as nutritional and pharmaceuticals, personal care and printing.

Wan says the company’s supply chain traceability solutions and forensic testing support clients in relation to verifying and preventing circumvention of the yarn forward rule of origin in free trade agreements, around issues related to complying with the Uyghur Forced Labor Prevention Act, (UFLPA) and in issues pertaining to Made in America regulations.

Applied DNA’s forensic analysis and DNA tagging has become all the more critical in the wake of heightened government scrutiny of abhorrent conditions and forced labor practices in Xinjiang, China, and the abuse of Uyghur Muslim minorities in internment camps forced to make apparel, footwear and other consumer products for scores of global companies.

See a recent op-ed by Applied DNA Sciences CEO James Hayward, “Stopping Uyghur Forced Labor Imports: A Made-in-America Solution,” in Sourcing Journal here.

In addition to partnering with commercial brands and companies, Applied DNA is also a federal and New York state contractor. The company also provides COVID PCR testing for public universities such as the City University of New York (CUNY) and the State University of New York (SUNY) Stony Brook, and private industry.

 

NCTO sat down with MeiLin Wan for a Q&A to discuss the ever- growing importance of traceability in supply chains in light of stepped up enforcement of goods made with forced labor and ongoing scrutiny of trade rule circumvention.

NCTO: In a climate of heightened scrutiny of illegal trade practices and labor abuses in the global supply chain, how important are your services and what do you provide?

WAN: Applied DNA provides secure supply chain traceability solutions as well as forensic testing support for clients specifically in relation to the yarn forward rule of origin, as well issues relate to the Uyghur Forced Labor Prevention Act and other Made in America regulations.

Some of the material we work with and do testing for includes cotton, recycled polyester, leather, down and feather, and specialty coatings. We also provide advanced identification solutions for sew and embroidery thread.

You can see there is wide range of different security and authenticity applications related to the use of our platform technology, which we call “CertainT”. Because there is so much uncertainty in supply chains today, the platform was aptly named “CertainT” to provide traceability transparency and trust within supply chains at any point in the supply chain in any area of textiles.

Applied DNA is a U.S. federal contractor. We also are a contractor for New York state. We provide tens of thousands of PCR test that include DNA authentication services as well as provide COVID PCR diagnostic testing in large scale.

NCTO: Can you highlight one important aspect of NCTO that is critical to advance your interests and efforts, as well as that of the U.S. textile industry?

WAN: One important is to have a system to enable companies to differentiate themselves through the use of DNA, specifically DNA tagging. This is an area that we have been working on for over 20 years in terms of developing a way to be able say “It’s my DNA tag that is used for my brand, for my products and for my supply chain.”

We believe that by working with NCTO and its members we can provide a way for a. differentiation and b. to be able to secure the materials that are made and developed in the U.S. so that when they come back into the U.S. there’s a way to verify those products, and also enforce the trade rules that relate to the product coming back into the U.S.

NCTO: Our membership is largely comprised of U.S.-based companies employing U.S. workers. Why is it important for domestic manufacturers to trace their supply chains, as opposed to importers? Why are your services important to our members?

WAN: It is important for domestic suppliers and brands to use a system like ours. The number one reason is to protect brands and their good will. That can be in the form of intellectual property. So, for example you might have a specialty coating or fiber that you created and developed here in the U.S. If you are able to tag your materials, that provides you a way to verify that a. this is how it started and b. this is how it ends up in different materials and production.

 

It is the first line of defense, and it is also the best offense to be able to have a system that is based in DNA technology that is forensic.

The second biggest issue is portable testing. As we know, with COVID PCR tests, the time it takes to do a COVID test is now 5-10 minutes. It is really fast. It can be done at a doctor’s office.

With textiles, we believe that mills using our system can take accountability and do the testing themselves. We can train them on how to test materials they have tagged and also test them in the field.

That’s the power of technology to provide a. more intelligence and information and, b., put the accountability back on the supply chain. Yes, auditing is good, but it is better that you know what is going on in your supply chain.

NCTO: Is the biggest challenge addressing trade rule circumvention or labor abuses in terms of adoption of traceability systems in the supply chain?

WAN: I think the biggest challenge is that brands and manufacturers need to recognize is the importance of being able to prove the origin of their products and take the necessary steps to implement and adopt a platform like ours.

I think it is at very high level. It’s a strategic decision that has to be made by organizations to adopt the fact that that we need a system to provide due diligence, not just to prove it is a product made here in the U.S., but also to be able be sure it isn’t blended with, for example, cotton from Xinjiang. It’s not good if it starts off well in the U.S. and ends up being blended and defrauded somewhere else and comes back as not a very pure product.

I think that adoption is linked to the culture and goals of the organization and their decision to really support the claims that they are making.

NCTO: What are the top challenges your firm sees in traceability and in the application of DNA tagging for the U.S. textile industry this year?

WAN: There are a few key challenges for the industry this year, specifically related to the use of raw materials from countries that don’t qualify for rules of origin, with regards to yarn forward. Specifically, how do you prove that raw materials really did originate from the U.S. and did not contain material from a non-qualifying region like China?

The number one challenge is really yarn forward rule of origin compliance. How do we help U.S. yarn and fabric producers identify products that may not be qualifying from other regions. Secondly, the use of Xinjiang cotton and other materials from forced labor countries. Applied DNA has had a number of discussions with CBP about DNA traceability technology; how you prove that the cotton does not come from Xinjiang. We can also help NCTO members in assuring their supply chains are free from forced labor regions using cotton or viscose or other materials.

There are challenges but we also believe there are opportunities to set the record straight, to have good system in place for due diligence, and a good system in place to support your claims you are making about your product.

 

We always say: “If you claim it, you own it.”

This coming year in 2023, you should be seeing more companies coming out and explaining how they go about proving their claims and also protecting their brands.

NCTO: Are you finding that brands and retailer are more receptive to this with the enactment of UFLPA?

WAN: Yes, brands and manufacturers are more receptive to using DNA traceability technology more than they were maybe 10-year ago. I think UFLPA has accelerated the adoption and willingness to be more compliant,

But I also think that with new regulation there is opportunity to use technology such as ours to differentiate yourself in the market, and the companies that are ahead of the curve are thinking that. They are thinking much longer term.

How do I use technology like this to prove multiple things like sustainability without greenwashing or using cotton without forced labor?

I think there are a lot of companies trying to use blockchain as the basis for how they do their traceability and tracking. Blockchain is a tool like anything else but doesn’t necessarily provide you the raw data as to the actual product itself, so you could have a fraudulent blockchain just like the FTX of the cryptocurrency situation that blew up. The basis for that blowup is the fact there was no basis or infrastructure for the value of any of the assets of materials behind it.

So, if you don’t have data and you don’t have integrity on actual products in the supply chain then what do you have is another crypto system for blockchain. I know that it seems easy to say, “I have a traceable system,” but when something is too good to be true, it usually is.”

We have been doing traceability and authentication for 17 years and understand what is required to actually prove your claims of the source of your materials.

There is no substitute for actually being on the ground, going to a mill to see how cotton is produced and following that cotton or recycled polyester from beginning all the way to the end.

We hope that through working in collaboration with NCTO and its membership that there is way to communicate that message, of fiber to finished goods, in a very strong and cohesive way, because it affects policy and it affects the enforcement of trade rules and regulations.

NCTO: CBP issued a withhold release order (WRO) on cotton products and Congress followed by passing the UFLPA.  Is this the first time seen in 17 years or longer that this kind of attention is being paid to forced labor? Do you feel it is a new era in terms of how the U.S. Government polices this?

WAN: Yes, I Think it is a new era. It is a paradigm shift in the way you communicate and support your claims. Because it is so easy for anyone to do a search on the internet to fact check and see that what you are saying.

So, there’s so much more scrutiny in terms of if how you make a claim about a material. You can’t just say because I am this brand and so loved by children all over the world that I’m above the rules about safety and the use of forced labor in my supply chain.

 

There is no brand that is immune to scrutiny related to any number of human and environmental issues.

I think that this new era of closer scrutiny and information sharing also puts a higher standard of care and fiduciary responsibility on companies. It is so different now.

It comes back to: “If you claim it, you own it.” Every day now some company is being brought out by an NGO or consumer to prove a claim for a 100 percent sustainable jean, for example. As a company or brand, you can’t say, “I had a great marketing campaign,” or “I’m well-known brand and you should believe what I say is true. “Those days are over.”

NCTO: Circumvention of rules of origin have been a big issue. Do you expect more attention to be paid to forced labor in light of the UFLPA legislation than to circumvention of rules of origin?

WAN: I actually think circumvention of rules of origin is somewhat related to forced labor issues. Because if you are already circumventing rules of origin in a different country like China, then there is a high likelihood you will be circumventing UFLPA and using Xinjiang cotton.

Even though legislatively, they may be independent, in practice I actually think they’re not. If you are going to cheat, you are going to cheat. It doesn’t matter what legislation you are trying to get around.

Cheating has no boundaries. That is the whole idea behind it. This is where technology could be helpful. Because not only can you know where it comes from but you can also find out if, for example, you tag something and it ends up in a location where it should not be. That also gives you intelligence about what is happening in the supply chain. We are trying to help provide more intelligence and take out the guesswork in terms of what is going on in the supply chain.

NCTO Member Spotlight: American Giant

NCTO member American Giant celebrates its 10-year anniversary as a 100% #Made-in-USA #apparel #manufacturer! Their 100% #domestic supply chain features leading US yarn and textile manufacturers, such as Parkdale Mills Clover Knits and Carolina Cotton Works.

www.american-giant.com

 

NCTO New Member: Applied DNA Sciences

NCTO welcomes its newest member Applied DNA Sciences. Applied DNA provides secure supply chain traceability solutions and forensic testing support that allows companies to verify and differentiate the authenticity of their products. https://adnas.com/

US nearshoring vision closer than ever on global supply chain snafu

A recent documentary has explored US nearshoring, and Kristi Ellis, VP of communications at the National Council of Textile Organisations (NCTO) believes it is closer than ever to becoming a reality, but policy is needed to secure its long term sustainability. (Read the column on Just Style here.)

By Guest Author

Nearshoring, probably a pipe dream for many US brands just a short while ago, is now closer than ever.

The Financial Times and its global business columnist, Rana Foroohar, have produced one of the most honest and accurate portrayals of the adverse effects of globalisation on US textile manufacturing over the past two decades, while capturing the industry’s current renaissance in the wake of the Covid pandemic.

In this documentary film entitled “Manufacturing in America, postglobalisation,” Foroohar looks at why the US should bring manufacturing jobs back home and highlights the existing textile industry which has played an instrumental role in supplying thousands of products for all industrial segments, the military, consumer market, and personal protective equipment (PPE) to the public and private sector.

In the second of three films, based on her new book, “Homecoming: The Path to Prosperity in a Post-Global World,” Foroohar follows the all-American supply chain of clothing company American Giant to see how it impacts jobs, businesses and communities.

American Giant CEO and founder Bayard Winthrop, Parkdale chairman and CEO Anderson Warlick, Carolina Cotton Works president Bryan Ashby, and National Council of Textile Organizations (NCTO) president and CEO Kim Glas, among others are all featured in the newly release film.

“I wanted to make this film about US manufacturing, because I believe that we are at a turning point. Since the 1980s manufacturing jobs have plummeted. In the constant drive to make things cheap, factories and jobs were moved overseas. Textiles were hit especially hard,” Foroohar says in the opening of the film. “But I want to show you how post pandemic there is a new regionalisation of industry taking place. And jobs are starting to move back. It’s about being focused not on what is cheapest but about creating better jobs for local communities.”

Globalisation’s impact and the China Effect

 The film opens in a cotton field in North Carolina and takes us on a US manufacturing journey stretching from the field to all points in the production chain and finally to a store shelf in New York.

It is a narrative within a broader narrative about how “prioritising efficiency over resilience, and profits over local prosperity, has produced massive inequality, persistent economic insecurity and distrust in our institutions,” which was expertly outlined in Foroohar’s new book.

Foroohar provides new arguments on why a post-global industrial strategy is needed and the “rise of local, regional and homegrown business is now at hand.”

Thirty years ago, the US was leading the textile sector, Foroohar explains in the film, but globalisation advocates and forces coupled with other seismic international trade actions, such as China’s accession to the World Trade Organization (WTO), exacted a heavy toll on the US manufacturing sector.

“What we were told was that we needed to normalise our relationship with China so that they would play by the rules,” says Glas in the film. “So their accession to the WTO, granting them Permanent Normal Trade Relations (PNTR) status — there’s nothing normal about it. We have suffered greatly.”

On globalisation and China’s accession to the WTO former US trade representative ambassador Robert Lighthizer notes: “There was this kind of hubris that the world had changed and that market forces forever now were going to move us in the direction of economic growth and freedom throughout the world and all these notions, which were lovely except they just don’t exist.”

Foroohar notes that many in the US manufacturing sector “feel that free trade was never really free, because it didn’t account for the lower labour and environmental standards that allowed a lot of countries overseas to make things more cheaply.”

“Free trade is about price optimisation and consumption,” Lighthizer says. “I think the important thing is production. Production leads to good jobs, good wages and solid fundamental American communities.”

Lighthizer believes the drive to globalisation saw the US effectively giving away its prosperity, Foroohar notes.

“If there is a sacrifice of a price of a T-shirt or your third television set, in order to have strong communities in America, that’s the sacrifice that I’m willing to make,” Lighthizer adds.

On globalisation and access to US markets, Parkdale chairman and CEO Anderson Warlick notes: “This is the largest economy in the world and the price of admission is not that high and it should be. They should pay their share just like every American taxpayer.”

It’s like letting other athletes start a 100-metre race closer to the finish line, she says citing Warlick.

“Competition is good and Americans thrive on competition. Now free trade? That’s a unicorn I’ve been chasing for 30 years, trying to find anybody in the world that practiced it,” Warlick says. My best way of describing it is, it’s economic treason.”

Resurgence of resilient nearshoring US textile supply chain

 Yet, even as companies rushed to offshore production, gutting the US manufacturing sector’s workforce, a core industry remained here and thrived.

The film focuses on one US company’s perseverance and success, under the leadership of American Giant’s CEO Winthrop.

“The original idea behind the company was to reclaim the very high quality American-made stuff. I had felt that… the care and the passion and skill and craft and work that goes into making a product was not just important from an understanding about how you build quality product but emotionally important and societally important,” Winthrop says.

“The idea that there isn’t a good textile capability in the United States anymore is nonsense.”

Foroohar observes that American Giant’s supply chain encompasses cotton gins, mills, knitting and sewing factories all within a 120-mile radius.

“That not only cuts down on shipping costs. It also means he knows his clothing is in line with American environmental and labour standards.

For Bayard, it’s about keeping relationships and expertise close to home.”

Winthrop embraces that proximity to the entire supply chain, noting that standing in a cotton field talking to farmers about varietals and crop production is critical. “It’s creating that connection to the men and women involved in highly complicated processes of making the things we consume today.”

For Parkdale Mills, a major cotton yarn spinner and supplier to American Giant, “it’s all about being able to compete in a global marketplace, leveraging efficient production in the US to go up against the cheap cost of labour overseas,” Foroohar explains.

“We invest heavily in technology to create better efficiencies, to create better quality, roughly US$500m in the last 10 years to create more automation to have the latest, greatest equipment to prepare the fibre and to spin the yarn,” says Davis Warlick, executive vice president of Parkdale.

Warlick adds, “We are constantly striving to make things more automated in order to compete, I think that’s been one of the reasons we are still here.”

Cautious optimism prevails in the US textile industry. The pandemic and ensuing global supply chain crisis has turned the long-standing global sourcing paradigm on its head, forcing retailers and brands to diversify out of China and move production closer to home. And that is driving a renewed sense of optimism.

But Bryan Ashby, president of Carolina Cotton Works, stresses that policymakers must provide a long-term commitment to building the domestic supply chain.

“It’s great for a politician to stand in front of a microphone and say: ‘Let’s bring jobs back to America,’ but show us the commitment by giving us some sort of reason to believe that 18 months from now the narrative doesn’t flip and we all of a sudden want to sell industries out.”

One need look no further than the latest US government trade data as evidence that onshoring and nearshoring is ticking upward.

“We have seen historic investment in the US textile production chain as well as in our Central America free trade agreement partners, including Honduras, Guatemala, and El Salvador,” Glas said. “We expect over $1bn of new investment to go into Central America this year alone for textiles. That’s an indication the world’s changed.”

About the author: Kristi Ellis is vice president of communications at the National Council of Textile Organizations (NCTO). The NCTO is an association that is the voice of the entire spectrum of the textile industry. There are four separate councils that comprise the NCTO leadership structure, and each council represents a segment of the textile industry and elects its own officers who make up NCTO’s board of directors.

NCTO New Member: Richloom

NCTO welcomes its newest member, Richloom. Richloom is a global, multi-faceted textile and finished goods company supplying customers from upholstery, decorative jobbers, hospitality, over-the-counter retail to finished product. 

Talk Textiles: NCTO & WPRC Discuss the HOPR Act

This video on the Homeland Procurement Reform Act (HOPR Act), which was produced by NCTO in collaboration with the Warrior Protection & Readiness Coalition (WPRC), provides an overview of the HOPR Act as it relates to the domestic textile and apparel industry.

The Homeland Procurement Reform Act (HOPR Act, H.R. 2915), encourages domestic sourcing and “aims to support U.S. small businesses by increasing the ability of the Department of Homeland Security (DHS) to purchase high-quality, American-made uniforms and personal protective equipment for frontline personnel.” Specifically, HOPR would require domestic procurement of the following items:

  • Uniforms and footwear provided as part of a uniform
  • Holsters and tactical pouches
  • Patches, insignia, and embellishments
  • Chemical, biological, radiological, and nuclear protective gear
  • Body armor components intended to provide ballistic protection for an individual, consisting of 1 or more of the following:
    • Soft ballistic panels
    • Hard ballistic plates
    • Concealed armor carriers worn under a uniform
    • External armor carriers worn over a uniform
  • Any other item of clothing or protective equipment as determined appropriate by the Secretary

Further, these new requirements extend to each of the following agencies at the Department of Homeland Security:

  • U.S. Customs and Border Protection.
  • U.S. Immigration and Customs Enforcement
  • The United States Secret Service
  • The Transportation Security Administration
  • The Coast Guard
  • The Federal Protective Service
  • The Federal Emergency Management Agency
  • The Federal Law Enforcement Training Centers
  • The Cybersecurity and Infrastructure Security Agency

For complete details, please see a link to the HOPR Act fact sheet from the House Committee on Homeland Security.

NCTO is actively working with Congress to ensure that HOPR will be included in the 2023 NDAA (see attached joint letter to Senate and House leaders). The 2023 NDAA is expected to gain approval at the end of the year and go into effect 180 days after its approval.

Bloomberg Exposé on Shein Reveals Clothing Contains Banned Forced-Labor Cotton, Underscores Urgency to Close a U.S. Loophole

Bloomberg News has published a hard-hitting investigative story this week that released findings of lab testing results that confirms certain clothing sold by e-commerce juggernaut Shein has been found to contain banned cotton produced with forced labor from the Xinjiang region of China.  Furthermore, the story details how Shein is utilizing a trade loophole called “de minimis” that is facilitating the entry of these banned products into the U.S. market with minimal scrutiny.

The Bloomberg feature story by reporter Sheridan Prasso titled, “Shein’s Cotton Tied to Chinese Region Accused of Forced Labor,” outlines how “laboratory testing conducted for Bloomberg News on two occasions this year found that garments shipped to the U.S. by Shein were made with cotton from China’s Xinjiang region.”

The exposé chronicles how cotton grown and harvested by Xinjiang forced labor continues to bleed into global textile and apparel supply chains and is further facilitated by a little-known trade loophole called the “Section 321 de minimis exception”. This exception, which is routinely utilized by Shein and certain other e-commerce companies, allows imports valued under $800 to come into the United States with minimal review and without paying duties, taxes, and fees.

Through this massive and rapidly growing loophole, approximately 2.7 million individual shipments falling below an $800 value enter the U.S. market each day, according to the latest data. In fact, the U.S. is on record pace for 1 billion de minimis shipments this year alone.

The explosion in e-commerce shipments using the Section 321 tariff waivers spawned new companies, like Shein, to create a multi-billion-dollar empire built on the foundation of a legal, but severely damaging tariff loophole.

We don’t know who is making these products, if they are safe, or if they use forced labor. In fact, unbelievably, these products get rewarded duty-free status. What’s the point of a free trade agreement with high labor and environmental standards, if there is a “click here” workaround that facilitates a race to the bottom?

According to the report, Agroisolab GmbH in Jülich, Germany, tested the garments using stable isotope analysis, “which measures variations in the isotopes of carbon, oxygen and hydrogen present in the cotton’s fibers to indicate the altitude and other climate characteristics of the region where it was grown.”

The lab compared Shein’s cotton fabric with fabric from Xinjiang that Bloomberg obtained from a U.S. apparel company with operations in China. A second test compared the Shein item with another sample the lab had previously obtained from Xinjiang, according to the Bloomberg report.

“We have to conclude it is a typical sample from Xinjiang, China,” Agroisolab’s CEO Markus Boner told Bloomberg.

The test results also ruled out “with more than 95% probability” several other cotton-growing regions, including India, Egypt, Australia, the U.S. and China’s Shandong province, according to the story.

Congress overwhelmingly supported and passed the Uyghur Forced Labor Prevention Act (UFLPA) banning products made of forced labor, including Xinjiang cotton. This law took effect in January 2021. Yet, this loophole in our tariff structure, has created an enormous workaround that is allowing these banned forced labor products to  make their way to our doorsteps and into our closets on a daily basis.

House Ways and Means Trade Subcommittee Chairman Earl Blumenauer (D-OR), who has authored and continues to push for key legislation to help close this loophole, has noted: “This loophole also makes it easier for people to import illegal goods and harmful products, because there is virtually no way to tell whether these packages contain products made through forced labor, intellectual property theft, or are otherwise dangerous.”

Until Congress and/or the administration acts to close the de minimis loophole, Chinese companies like Shein will continue to run a speeding train right through this loophole tunnel.

The National Council of Textile Organizations (NCTO) has been very active over the past several years working in a broad coalition to amplify the urgent need for the administration and Congress to use their authorities to close this enormous trade gap.

In congressional testimony before the House Ways and Means Trade Subcommittee last December, I outlined recommendations for Congress aimed at confronting unfair Chinese trade practices, including closing the de minimis loophole.

We must ensure this loophole is addressed immediately to combat the use of forced labor in China and in other areas of the world. Failure to address the de minimis loophole will continue an “open door” policy that invites China and others to ship duty free to the United States illegal and unsafe products that undermine American businesses and jobs, while also diluting any efforts to rein in its abhorrent human rights abuses.

What cannot be ignored is that these practices and this loophole continue to hurt domestic manufacturers, undermine our forced labor laws, and weaken our carefully negotiated free agreement trade structure.

This is why we need Congress and the administration to urgently act and make the policy changes we need to close this damaging loophole once and for all.