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Capps: Vigilance will be needed

When it comes to sourcing in a quota-free world, said W. Lee Capps III, president of operating services, Kellwood Co., "Remember that import limits will be removed in January — kind of."

The reality is that "a sourcing strategy should be based on some restrictions continuing," added Capps.

As for prices, he said, "The story is that costs will go down, and apparel price deflation will continue." Once again, Capps hedged, "kind of."

Costs may be low in China now, he said, but they won't stay low forever. "I think you'll see increased social costs and increased inflation in China," putting upward pressure on prices.

"China may well be the factory to the world, but it won't be the only one," Capps argued, suggesting that importers should "maintain a balanced sourcing framework in 2004 and early 2005. Whatever happens next year, China doesn't take home all the marbles."

Practicing what he preaches, he noted that only about 12 percent of Kellwood's apparel products are sourced out of China. Twelve percent also comes out of Hong Kong. Other far eastern nations, 13 in all, including Bangladesh, the Philippines, Macau and South Korea, account for another 23 percent, the single biggest slice of the Kellwood sourcing pie.

Closer to home, said Capps, Central America and the Caribbean supply 16 percent of Kellwood's products, while 8 percent comes out of Mexico and 7 percent is produced in the United States. Other sources are Sri Lanka, 7 percent, and Indonesia, 8 percent. Various other countries make up the rest.

But significant diversity comes at a price, Capps pointed out, as he cautioned companies to "watch fill rates carefully in countries with historically high quota usage. And monitor economic and political stability in the countries from which you import."

Given the general level of uncertainty about what will or will not happen in 2005, Capps cautioned importers, "Stay in close contact with the trade representatives in both the U.S. and China."

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