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Apparel Companies Are Making Strides to Pull Sourcing Out of China

Straddling the grey area between new tariffs or no tariffs, free trade or protectionism, has proved challenging for apparel brands and retailers across the supply chain. But many companies—both newer and more traditional—are embracing ways to work around sourcing in China.

And Vineyard Vines is one of them.

The preppy American clothier’s VP of sourcing Aparna Tewari, said speaking at the 30th Apparel Importers Trade & Transportation Conference hosted by the United States Fashion Industry Association (USFIA) in New York City Wednesday, that its efforts to pull out of China, while ongoing, have ramped up of late.

“We’ve been trying to get out of China for years,” Tewari said. “First it was the labor, then it was the athleisure trend because we couldn’t afford to pay the duties on the athleisure products from China, and now it’s the tariffs…I guess it’s becoming more imminent now.”

President Trump has levied three tranches of tariffs at China, totaling $250 billion worth of goods the United States imports from the country, and trade experts in Washington seem to be in agreement that a fourth tranche—which would target the remaining $506 billion worth of goods the U.S. takes in from China, including apparel, textiles and footwear—is impending.

Already, the most recent round of $200 billion in tariffs, which took effect on Sept. 24, put an additional 10 percent duty on some textiles and machinery, handbags, hats and apparel clothing and accessories made from leather, fur, plastic and rubber, among other things. Barring a cease fire on this tariff feud, the tariff on those goods will climb to 25 percent on Jan. 1, 2019.

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As such, the pressure on the apparel industry to either work its way out of China or brace for higher costs that will trickle down supply chains, ultimately landing in the consumer’s lap, is high. And in all of this, the sector can’t afford for speed to market to suffer.

The response across many companies? Nearshoring.

“Whatever is happening right now with speed, some of the countries closer to the United States have become more and more important to the sourcing community and the supply chain community,” Tewari said. “We have seen a lot of domestic manufacturing come into play for our business.”

It’s a sentiment many businesses share, provided they can stomach the margin squeeze that often accompanies bringing production back home, or closer to it.

For PVH Corp., which has also been working to diversify its sourcing, with a key focus on Ethiopia in particular, the general trade mood demands keeping sourcing options open.

“We are setting up our own offices around the world,” PVH VP of supply chain strategy Akiko Inui said. “If there are sourcing relationships that add value then we’ll look at that.”

Because 100 percent preparation for all that’s presently up in the air is far from possible, Inui said PVH has been focused on having a well-rounded point of view on what could happen. The company has culled a small team that’s solely focused on looking at things like commodity costs, exchange rates and energy costs on a daily and monthly basis to spot trends and make determinations about adjustments that could mitigate bottom-line damage from things like tariffs.

“We hold our supply chain teams responsible to use that data,” Inui said.

Whether that data points to looking at production outside of China or closer to home, the option remains on the table for PVH, and even though there’s as yet not a country equipped to handle the scale of manufacturing China currently does, Inui doesn’t think it will be as long of a development ramp up as it took China to become the world’s factory. And there’s hope yet for U.S. manufacturing, too, despite the dearth of skilled and willing labor, and the cost to pay those workers if the industry can drum them up.

“I do think that there will be opportunity back in the U.S. but in different ways than what we saw in the past,” Inui said, noting that automation will be the driving force in any apparel manufacturing happening stateside. “And we expect it to happen much faster than what we saw in China.”