At the Sourcing at Magic trade show in Las Vegas earlier this month, nearshoring seemed to be on everyone’s minds.
Producing close to home took on new appeal in light of fashion retail’s ongoing challenges with tariffs and supply-chain disruptions. “The window of opportunity is right there in the market,” Sebastian Echavarria, West Coast representative for industry trade group ProColombia, told Sourcing Journal.
“All these macro, external factors, like supply chain issues with Asia that increase of cost of transportation, actually triggered the interest of clients to look for nearshoring opportunities,” he said. Now, suppliers close to the U.S. market are vying to “actually transform that interest into real business.”
Echavarria, whose group represented four suppliers at the show, said he’s been “really honest with customers” about Colombia‘s limitations even while promoting its upsides. “We cannot compete with China, Vietnam or Bangladesh in terms of price points,” he said. Nor does any one country match China’s production capacity or diversity. But amid ongoing U.S.-China trade tensions, companies are looking at all of their options.
“Nowadays, you put into the equation not only the price of the product, but also the costs associated with getting it to your market, how fast you can have it, how many replenishment units you have, quality control and certifications,” he said.
Along with a handful of other suppliers and trade groups from the Americas, Echavarria pointed to proximity as one of Colombia’s big selling points. “We’re the only country in South America with access to Pacific and Atlantic, and we have ports in both oceans,” he said. A ship crossing from the Atlantic side to Miami spends a week on the water, while a Los Angeles-bound vessel sailing the Pacific takes about 10 days. However, “the internal inbound costs in Colombia are high between the cities and the ports,” he added, meaning many goods—especially smaller garments like swimwear, small leather goods, socks or intimates—are air freighted on commercial flights that can reach most U.S. states within hours.
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Low minimum order quantities (MOQs) are also a differentiator, with manufacturers willing to sign a contract for as few as 100 units or to ramp up production in the low thousands for larger brands. This gives buyers greater control over cash flow and inventory liability in a retail landscape defined by uncertainty, Echavarria added. Turn times typically range from three to four weeks.
Current Rule of Origin laws preserving duty-free status with the country require that 90 percent of materials used to create a product be made in the U.S. or Colombia, from the yarn stage forward. Certain fabrications like silk, corduroy and a number of technical materials carry exemptions because they are unable to be sourced locally. The current free trade agreement precludes Colombia from obtaining raw materials from nearby nations—even those that also enjoy duty-free relationships with the U.S. It’s an issue that Echavarria hopes will be addressed, as collaboration between Central and South American markets could reduce reliance on overseas sourcing.
In the near term, Colombia is investing in advanced technology and machinery to make its offerings more attractive to increasingly eco-conscious American brands. “We see companies use ozone instead of water for dyeing denim, reducing water consumption,” he said by way of example. Colombia is promoting the vertical integration of its factories, and encouraging brands to work with nearby mills and cut-and-sew facilities to cut carbon emissions.
“Because of the pandemic and Covid situation, not all the factories are working at full capacity,” Echavarria said, noting that Colombia’s garment sector has faced labor shortages—a factor that contributed to the smaller contingent of exhibitors from the country. Some factories fielding an influx of new business in recent months are fully booked through the first half of the year.
Producers from Mexico were also in shorter supply this winter due to capacity constraints, according to showrunner Andreu David. Mexico has seen elevated interest for months, and the show’s purpose of generating new business leads proved less of a motivating factor this time around.
Patricia Medina, owner of apparel producer Aztex Trading Co., told attendees at a panel discussion that the Central American Free Trade Agreement (CAFTA) has underscored that fruitful relationship. The duty-free law, which includes Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras and Nicaragua, includes an Accumulation of Origin provision that allows for the open sourcing of certain materials and components between countries to make a finished product. “That means that even though it’s a completely different treaty with the United States, you can actually buy fabric in Mexico, for instance, and produce it in Central America,” she said.
The ability to collaborate across country lines provides American brands with another incentive to work to “define a strategy” for Central American sourcing. Tariff Preference Levels (TPLs) also allow for the import of certain fabrics, like synthetics, from other countries, after approval of exemption, while still adhering to Rule of Origin specifications.
And amid ongoing scrutiny of cotton produced in China’s Xinjiang region, widely suspected to be tainted by forced labor, Mexico’s self-sufficiency has become an even greater selling point for Western brands. “When you’re talking about cotton, there’s a lot of vertical companies” that provide full-package solutions, from fabric to finished garment, across the country, Medina said. Small-scale manufacturers work with Mexican textile mills to provide a low-MOQ solution for startups or capsule collections.
Though Mexico lacks the “capacity of China,” the country’s “added value” stems from the ease and speed of inventory replenishment, Medina said, adding that the North American nation should work to solidify its status as a permanent trade partner, not a contingency plan. “I think that we have to change from selling product to selling service,” she said, while consistent collaboration and trusted terms of service will raise brands’ confidence in nearshoring. “I think that’s going to be really the biggest advantage that you can have by working close to home.”
“We’re in a window of opportunity right now,” echoed Mathieu St.-Arnaud Lavoie, principle director of the Montreal Metropolitan Fashion Cluster, which represented 35 Canadian manufacturers at the trade show. “Basically what’s happened during the last few months and years is that everyone is looking for other opportunities for production.”
St.-Arnaud Lavoie said he oversaw more than 100 introductions between Canadian producers and American brands, with some resulting in contracts signed on site.
In addition to sharing a border, Canada and the U.S. share commonalities that make doing business attractive, like “the language, the time zones, the understanding of the currency,” he said. The exchange rate between the two countries is easily understood, and the U.S. Mexico Canada Agreement (USMCA) allows goods to flow between them duty-free, he said.
Montreal, a hub for apparel and textile production, is 40 miles from the U.S. border, St.-Arnaud Lavoie added, making ground transport a feasible option. And when it comes to doing business, travel between brand headquarters and production facilities is more convenient than almost any other nearshoring partner outside of Mexico. “There are 250 flights weekly between Montreal and New York to give you an a perspective, and you can go back and forth within the same day,” he said. When brands are pressed to truly understand their supply chains, the ability to “see the factory with your own eyes” is key, he said.
Canada Goose remains the nation’s best-known locally produced brands, St.-Arnaud Lavoie said, and National Hockey League (NHL) jerseys and Olympic gear are also manufactured in Canada. Outerwear and cold-weather garments are suppliers specialties, he added.
“Maybe you’re fourth on the line and there are bigger companies in front of you,” he said, noting that producing overseas can be a challenge for small enterprises. Canadian suppliers are willing to work within short time frames and many require low MOQs, making the country an attractive option for both large, established brands looking to produce targeted capsule collections or smaller labels seeking small-batch production. “We could be helpful to an existing brand, or a startup,” he added.
At the Sourcing show, the Montreal Metropolitan Fashion Cluster fielded “a lot of questions” from brands preparing to launch. With higher labor rates relative to Asia, Canadian producers tend to target clients selling premium products. “If you have an entry level price point, it’s like producing domestically here in the U.S.—it won’t be a right fit,” St.-Arnaud Lavoie said.
“We might not be your best partner to dance with if you’re a large company doing large production,” he continued. “We would fit better if you are an existing brand with issues in certain other countries in the world, with language, with quality control, with duties and transport.”