New Questions Raised

Joan Gunin, Michele SanFilippo, November 14, 2005

Washington — Last week’s agreement to re-impose quotas on some categories of textiles and apparel imports from China left many questions unanswered.

Cotton towels and window shades/blinds were the only soft home categories included in a trade agreement signed by Chinese Commerce Minister Bo Xilai and U.S. Trade Representative Rob Portman. The fate of potential safeguard caps on curtains and drapery remains unclear. In addition, U.S. manufacturing trade and union groups said they might file additional safeguard petitions on categories not covered in the agreement.

According to Robert Leo, counsel for the Home Fashion Products Association, a petition to enact safeguard restrictions on curtains and drapery is still pending decision by the Committee for the Implementation of Textile Agreements (CITA). A decision is due by Nov. 30.

However, Leo stated for the record that the Customs-coded subheads in the Harmonized Tariff Schedule of the United States for window shades and blinds (6303.12.0000 and 6303.92.2020) technically include curtains and draperies at present, but the Commerce Department is aware of the oversight and plans to amend the situation prior to year’s end.

Last week’s agreement limits imports of Chinese textiles and apparel products in 34 categories from Jan. 1, 2006 through 2008.

Growth rates within the agreement vary slightly from category to category, but in general they are 12.5 percent in 2006 and 2007, and 16 percent in 2008. Towel imports will be allowed to grow 12.5 percent in 2007 and by 16 percent in 2008. According to preliminary data released late last week by CITA, towel imports from China jumped 309.5 percent during the fist 10 months of 2005.

In textiles categories where safeguards are currently in place, China will receive an additional 4 percent growth over the life of the agreement above what would have been allowed under the original safeguard cap. The added growth is permissible only if that safeguard reapplication was approved on Jan. 1 of the same year.

The agreement also provides flexibility in rolling unused quota into the following year (known as carryover) and in borrowing from the next year’s quota to cover quota shortfalls (carryforward). However, carryover is restricted to 2 percent of the current year’s quota, and no more than 3 percent of the following year’s quota can be carried forward into the current year. No carryforward, or “borrowing” from the future, will be allowed in 2008.

The deal also allows the United States to reapply for quotas each year through 2008 for all categories in last week’s agreement. Other non-apparel categories included combed cotton yarn, thread, knit fabric, special purpose fabric, polyester filament fabric, synthetic filament fabric and glass fiber fabric.

The United States and China also agreed to replace paper visas on shipments with a new Electronic Visa Information System (ELVIS).

Karl Spilhaus, president of the National Textile Association, a trade group involved in the filing of safeguard petitions, regarded the agreement as a victory. “The agreement vindicates the U.S. textile industry’s decision in 2003 to aggressively use the safeguard process to persuade all parties of the need for a comprehensive arrangement,” he said.

Laura Jones, executive director of the U.S. Association of Importers of Textiles and Apparel, an anti-safeguard body, countered: “The good news is that there is some certainty, because there will be an allocation and visa system, so companies will know that if they order goods, they will get them — instead of the race to the dock that prevailed this year. On the other hand, the bad news is that while we can do business, it is a limited amount of business.”

Meanwhile, Kevin Burke, president and CEO of the American Apparel & Footwear Association, commented: “While we never support restraints or quotas, particularly since there has been no evidence that U.S. imports from China have caused or threatened market disruption in the United States , this agreement is far more preferable than the disruptive safeguard regime we had previously endured.”

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