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‘Now Is the Time’ to Explore Non-China Alternatives, Experts Say

Brands reliant on China imports should considering diversifying, experts at the Sourcing at Magic trade show said on Monday.

Panelists offered a look ahead at the 2023 sourcing landscape, which they expect will bring continued supply chain challenges and trade headwinds.

“If it’s coming from China, you’re going to have a problem—at least for the next year,” California Fashion Association president Ilse Metchek told attendees. “Politics be damned, there’s nothing you can do about it. So as for alternatives, now is the time to explore them.”

The passage of the Uyghur Forced Labor Prevention Act, signed into law by President Joe Biden last December and implemented June 21, could throw up unforeseen hurdles for brands doing business even outside of the Uyghur Autonomous Region of Xinjiang. “You cannot have a trace of fiber or filament, any yarns—nothing” from the region in a product being brought into the U.S. from China, said Vince Iacopella, executive vice president of growth and strategy at customs broker Alba Wheels Up.

That means that brands and suppliers sitting on cotton purchased before the law’s enforcement will be unable to use that raw material to produce finished goods for the U.S. market. “Customs has basically said, ‘That’s a private-sector problem,’” he added, noting that American companies won’t find a sympathetic ear at CBP. The agency is implementing fiber testing technology that can trace the provenance of raw cotton back to compromised regions, even if finished goods were produced in other countries. “The government has the means to lab test it, so they’ll figure it out,” he said.

Companies also continue to contend with high shipping costs. “Everybody knew there would be a correction—either a correction inventory, or correction in pricing,” Iacopella said. While ocean freight prices have come down since the same period last year—up two to three times pre-pandemic rates, as opposed to five times the cost of shipping in 2019—“bookings and orders in Asia after August 15 are up” from 2021. “As long as consumer demand is high, we’ll have a lot of pressure on transpacific pricing,” he said.

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One insider said Covid-19 presented a unique moment of time for brands in search of alternatives.

“Since the pandemic there’s been a window of opportunity—everybody is looking for other options besides Asia,” Sebastian Echavarria, West Coast trade representative for Colombian trade group ProColombia, said. Nearshoring has become more relevant to potential partners in light of supply chain slowdowns and U.S.-China trade tensions.

The U.S. is Colombia’s largest commercial partner, with 40 percent of the country’s exports destined for the American market. But Echavarria believes that number could grow exponentially with more awareness about the country’s sourcing and manufacturing capabilities, as well as its status as a free-trade partner under the Colombia Trade Promotion Agreement (TPA). The country has yarn-forward duty-free status, and specializes in performance apparel and textiles made for sport, like compression garments, shapewear, intimates, denim and uniforms, and suppliers count Nordstrom, Genesco, Columbia Sportswear and Anthropologie as clients.

While it may not benefit from proximity to the U.S. market, Egypt also represents a largely untapped sourcing market for U.S. brands, according to Sherin Hosni, executive director of the Egypt Apparel Export Council. “Egypt is a vertically integrated industry,” she said, noting that the sector has been heavily focused on enhancing production quality by soliciting international investments in building a full and robust supply chain. “We’ve been seeing a lot of investment in spinning, weaving, and opening new mills so that manufacturers are integrated” with their upstream partners, which “helps a lot for shorter lead times.”

The country also benefits from the Qualifying Industrial Zones (QIZ) Free Trade Agreement, which allows Egypt and Jordan to export products to the U.S. duty free if they contain inputs from Israel. Egyptian suppliers are well versed in the agreement and have developed relationships with Israeli partners, Hosni said.

Iacopella urged brands to explore these opportunities with the help of their partners. “If you are pricing goods from any country, you have to really proactive with your customs broker, your freight forwarder, your attorneys, your compliance, to see if you’re eligible for [trade] preference, to talk about the duty-free eligibility for direct-to-consumer, and also to be really proactive on your shipping strategy,” he said.