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NCTO President & CEO Testifies before the Senate Homeland Security and Governmental Affairs Committee

The Senate Homeland Security and Governmental Affairs Committee examined key issues related to U.S. medical supply chain vulnerabilities during the COVID-19 crisis, the nation’s overreliance on foreign sources for critical medical supplies, “gaps” in the federal government’s response and policy recommendations, at a hearing Wednesday. NCTO President and CEO Kim Glas participated as an industry representative and expert on a panel of medical and supply chain witnesses.

NCTO President & CEO Kim Glas on the expert witness panel

Senate Homeland Security Chairman Gary Peters (D-MI) and Ranking Member Senator Rob Portman (R-OH) opened the hearing. Both senators raised concern about the country’s lack of preparedness in the face of a once-in-a-generation a health crisis that sent the U.S. economy into a tailspin.

The full text of their opening statements can be accessed here: Senator Peters’ Opening Statement and Senator Portman’s Opening Statement.

“Despite years of warnings about the dangers of our nation’s overreliance on foreign sources and manufacturers for critical medical supplies, our nation was still unprepared to acquire the masks, gloves, gowns and ventilators needed to treat the significant number of COVID patients, stop the spread, and save lives,” said Senator Peters in his opening statement. “…The federal government should have taken early action to ramp up production of personal protective equipment, and other critical medical supplies, by issuing emergency contracts or fully invoking the Defense Production Act.”

Senator Portman said in his opening statement: “It became apparent that by the time the virus reached our shores, there was little we could do to prevent the shortages of critical supplies. The spike in demand for medical supplies was too high, the production of those supplies too far away, and too centralized in places hit hard by the virus. At the same time, the Strategic National Stockpile was underprepared.”

Portman outlined three broad questions for witnesses: “First, what steps should the United States take to reduce overreliance on foreign countries for critical medical supplies? We need to understand how to diversify supply chains away from China, reshoring manufacturing to the United States, and incentivizing production in the Western Hemisphere.”

NCTO President & CEO Kim Glas prepares to give her testimony before HSGAC

In her opening remarks, NCTO President & CEO Kim Glas said:

“The U.S. textile industry stepped in to fill an enormous void, producing over a billion critical PPE items such as face masks, isolation gowns and testing kit swabs for frontline healthcare workers.”

But a “strong overreliance on Chinese raw materials and finished PPE production chains exposed a severe fragility in these supply chains and posed a significant national security threat,” Glas said, adding that years of offshoring also contributed to the crisis and had “severe ramifications.”

“I come before you today with an urgent plea,” Glas said. “We must get critical policies over the finish line immediately or the very supply chains that were retooled and reconstructed will remain fragile and largely offshore,” adding that China has exponentially expanded its global dominance of PPE production.

For her full written testimony and policy recommendations please see the link here.

Another witness, Shereef Elnahal, M.D., President and CEO of University Hospital in  Newark, New Jersey, outlined the magnitude of the emergency room visits, 83,000 in total, last year and the hospital’s lack of preparedness to “address the surge of patients.”

“As the number of COVID cases in our emergency rooms and intensive care units doubled, tripled and quadrupled, we found ourselves at risk of running out of supplies for which we have never seen shortages before,” he said in opening remarks. “This includes protective equipment for our staff, and ventilators for the patients with the most severe cases of COVID-19.”

Senator Portman had a lengthy Q&A with Glas following introductory remarks.

“One of the things that we’ve talked about today and we’re trying to figure out is how to make more PPE here, but use market forces to do it, so it makes sense,” Portman said. “And, we have manufacturers here in this country who are willing to make stuff, but they need to know they’ve got a market. And if they don’t, they can’t make the significant investments, millions of dollars, to be able to convert their plants,” Portman said.

“This has particularly been tough on the textile industry, and Ms. Glas, I want to thank you for being here but also your hard work and support of the Make PPE in America Act, which you mentioned we introduced and was passed in the Committee just last week,” Portman noted.

The senator also asked Glas why long-term contracts are an effective way to spur market forces to incentivize production in the U.S.

“It provides a critical demand signal for our industry that there will be a purchaser and that they can invest in the new equipment necessary,” Glas said. We have Ohio manufacturers….who have looked at trying to invest more here in the United States, but they won’t without a strong demand signal,” she said, adding that other countries, like Canada, are issuing long-term contracts to their manufacturers to bolster production.

For more on their exchange, please see the a link to the transcript provided by the committee here.

Senator Josh Hawley (R-MO) asked Glas about the offshoring of the U.S. textile industry and the role trade policy played in it.

Glas pointed to several key trade decisions, including the accession of China to the World Trade Organization and the removal of quotes on textile and apparel imports, as key drivers behind offshoring.

“This played out on a national stage when COVID hit,” Glas said. “How many US textile manufacturers did I represent making PPE [before the pandemic?] Probably two or three. What happened during the pandemic? About 140 companies of mine retooled their production chains to help fight the crisis and now a lot of those companies simply have no orders.”

That has been compounded by an onslaught of Chinese PPE imports, which have increased 756 percent in the past year and are often dumped on the U.S. market below cost, she noted.

“We have a U.S. industry that has invested and who want to make products here but with no long-term demand signal by the federal government. And we have not solved the equation of how to get hospitals and nursing home to purchase products that are made here in the United states.”

Hawley asked Glas to explain why the “deck is still stacked” against the textile industry today.

Glas touched on the unfair playing field in competing against China, which has a long history of human rights abuse and has more recently been accused of “genocide” by U.S. officials, and imprisoning Uyghur Muslim minorities in detention camps and forcing them to make consumer products, including apparel and textiles, for global brands.

“It is hard to compete globally with subsidized industries all over the world including China. We have domestic manufacturers who can be globally competitive. We just need to send them a strong demand signal and we need to get policies over the finish line here in Congress to make sure we can be more globally competitive,” Glas said.

She stressed that it will take a “whole of government approach to trade enforcement” to address the imbalance in our trade policy as it relates to PPE textile products.

Senator Jon Ossoff (D-GA) said he never again wants to see the images of nurses sewing their own face masks and donning garbage bags as gowns that played out at a local hospital in Georgia during the pandemic.

He asked Glas if the government and country have taken the necessary steps since those early months of the crisis to ensure frontline workers never have to resort to homemade PPE again.

Glas said that while our industry was able to retool and invest in critical PPE, she is concerned that in a few months from now, those domestic supply chains will go offshore again, without long-term funding from the Defense Production Act.

“We are going to need to diversify supply chains moving forward. We need to show a demand signal to the industry,” she noted. “There needs to be incentives for hospitals like the one you have that want to purchase MADE in USA product that costs a little bit more. And there are a lot of Georgia textile manufacturers that want to respond to your local hospital systems and make these products long-term.”

The entire hearing can be viewed at the link here.

 

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

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

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

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

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

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

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

 

U.S. Textile Industry Stands to Gain from USPS Uniform Policy

Don Vavala, Director of Government Procurement, NCTO

The U.S. textile industry is poised to take advantage of a policy instituted by the United States Postal Service (USPS) in October 2018 that requires all materials, apparel, accessories, insignia and applicable findings such as thread, buttons and zippers to be produced domestically and assembled in the United States by September 30, 2020.

Federal domestic sourcing requirements have led to a significant amount of business for the U.S. textile industry. In fact, the U.S. government is the textile and apparel industry’s largest customer.

The National Council of Textile Organization’s (NCTO) membership, representing the full spectrum of the American textile industry from fiber through finished sewn products, has been a staunch supporter of the Berry Amendment, a 50-year-old provision in the law that requires most textiles and clothing purchased by the U.S. military to contain 100 percent U.S.-made fibers, yarns, and fabrics and be cut and assembled in the United States.

The Department of Defense alone purchases more than 8,000 different textile items for the U.S. military and other allied organizations, which increases to more than 31,000 line items when individual sizes are factored into one item mix. The U.S. government routinely spends more than $2 billion annually on textiles and clothing.

As part of our ongoing commitment to the men and women of our military services and working with military procurement teams at the Defense Logistics Agency (DLA) and Natick we remind them that most of the clothing and textile products that are procured by DLA are touched in some way by a NCTO member company.

Whether it is yarns fibers threads, dying finishing, laminating, knitting or weaving, the U.S. textile industry spends millions of dollars per year of its own R&D money on the quest to build the next generation of textile products for the U.S. warfighter.

Within that context, the industry has many producers that can fulfill the requirements needed to supply the USPS–an independent agency under the executive branch– domestically sourced uniforms for nearly 500,000 postal employees.

“Our members have identified able and qualified cut and sew operators to make the finished goods in the event current vendors are unable to comply,” stated NCTO President and CEO Kim Glas in a letter to the USPS earlier this month. “We are confident that other fabrication companies are ready to serve your needs.”

“…Berry Amendment-compliant fabric and yarn manufacturers, coupled with American cut and sew operators, have proven to be reliable partners to the U.S. government. Procurement officers in both the Department of Defense and the Department of Homeland Security will attest to the commitment the domestic industry has demonstrated over the decades to deliver a top-notch quality product, train exceptional technical staff, and invest for the future,” Glas noted.

We recently communicated the scope of our production capabilities to both the DLA Troop Support and the USPS and will continue to closely work with both to help the textile industry expand its government procurement business, workforce and investments.

Legislative Update: Week of November 15, 2019

Todd Ethington, Director, Government Affairs, NCTO

There are several pending legislative proposals and policies on which NCTO has been actively engaged in October and November. NCTO has consulted with members of Congress and administration officials to advance policies that will benefit the U.S. textile industry, ranging from the United States-Canada-Mexico Agreement (USMCA) to a thorough examination of de minimis shipments, which have seen a sharp increase. We could see some traction on our issues this fall and will be closely monitoring the following:

U.S.-Mexico-Canada Agreement (USMCA): Consultations between U.S. Trade Representative Robert Lighthizer and House Democrats to address concerns about the trade agreement’s provisions addressing labor, the environment, and other areas continued throughout October and into early November.  The administration has not yet submitted an implementing bill to Congress, and it is unclear when a bill is expected or whether it would receive a vote this year.

National Defense Authorization Act (NDAA): Negotiations between the House and Senate on the FY 2020 National Defense Authorization Act have broken down over differences between the chambers over topline spending numbers and funding for the administration’s border wall.  The Senate has proposed a pared down measure that would fund only necessary defense programs, but this has been essentially rejected by the House.  Negotiators are seeking a path forward with a December funding deadline and potential government shutdown looming in the coming weeks.

NCTO Letter on De Minimis: NCTO President and CEO Kim Glas sent a letter to CBP Acting Commissioner Mark Morgan highlighting the problems that U.S. de minimis policy poses for domestic manufacturers and asking for the agency’s help to better understand the scope and impact of the problem.  Currently, any direct-to-consumer shipment valued at less than $800 avoids all duties regardless of country of origin, and these shipments have increased exponentially in recent years at the expense of public health and safety, U.S. manufacturers, and American workers.

Miscellaneous Tariff Bill (MTB): In October, the U.S. International Trade Commission began accepting miscellaneous tariff bill petitions through its web portal, https://mtbps.usitc.gov/external/.  MTBs provide duty relief on manufacturing inputs not readily available from a domestic source, valued at up to $500k annually.  NCTO members are encouraged to both file petitions for inputs that will make their manufacturing processes more competitive and monitor filed petitions that would negatively impact their businesses.  The MTB portal will accept petitions through December 10.

Please contact Todd Ethington at tethington@ncto.org for further information.