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Colombian Apparel Players Battle Asian Imports

Colombia’s apparel industry is demanding the government increase duties against a flood of sub-valued Asian imports that threaten additional job losses following the 120,000 operators let go in 2020.

“The government needs to decide if it wants to protect employment here or hand it to Asian countries,” Camilo Rodriguez, president of Colombia’s Apparel And Related Products Chamber (CCCyA), told Sourcing Journal.

Bowing to industry pressure, Bogota unveiled an industry-splitting decree a fortnight ago, hoping to stem Asian imports from denting local sales amid heavy losses brought on by the pandemic. Retail sales, for instance, plunged 22 percent last year.

The bill, now available for public review, slapped a 40 percent duty on clothing priced under $10 and a 15 percent plus $1.50 per kilogram tax for all apparel fetching over $10 when arriving at the country’s ports.

The CCCyA immediately countered the measure, noting the 40 percent duty should be expanded to cover clothing priced under $15 not $10. For apparel arriving at over $10 apiece, the tax should be 10 percent plus $3 per kilogram, according to Rodriguez.

“The government has not heard our pleas for more effective duties as well as our request for a dedicated politician to look at the industry as the current minister [Industry, Commerce and Tourism Minister José Manuel Restrepo] does not respond to the interests of our 1.6 million workers,” Rodriguez said.

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Colombia’s garment industry, a leading exporter of lingerie and beachwear products, is choking under sub-valued Asian merchandise, mainly T-shirts, pants and blouses which typically come in valued well below their production cost, Rodriguez claimed.

Last year, the country imported $2 billion of apparel products, compared with $574 million in exports. In 2019, that deficit stood at $2.4 billion for imports versus $734 million for exports. Clothing production, meanwhile, declined 21 percent to $4.13 billion as retail sales fell 21.7 percent.

“Everyone’s being affected,” Rodriguez continued. “It’s very difficult to fight sub-valuation when you have countries like Vietnam and Bangladesh paying $50 in minimum wages when we pay $420.”

Guillermo Criado, commercial manager of fabric and lingerie maker PatPrimo and a founding CCCyA member, said only 2 percent of Colombian imports fall under Bogota’s 40 percent duty, making it virtually worthless and requiring a more aggressive alternative. “We are losing more and more jobs every day and it’s less attractive for businesses to make new investments,” Criado said.

The Asian avalanche has meant large clothing manufacturers and specialist retailers, including Grupo Crystal and Studio F, have been forced to become net importers of Asian goods, reducing their local manufacturing presence as production costs soared during the pandemic.

 “As long as the government doesn’t do anything to increase these duties, I see things worsening,” Rodriguez added, though he conceded a vaccination campaign to fight Covid-19 should help shore up retail sales in the coming months. Still, the sector could witness additional headcount losses if Bogota does not toughen its anti-dumping measures, he warned.

Some executives said the CCCyA’s demands seemed excessive and won’t help fix the problem.

“I don’t think that is the solution,” countered Camilo Rueda of industry consultancy Raddar. “This is going to increase contraband [which already accounts for 20 percent of local fashion consumption] by affecting the legal importers. There are retail channels that sell these products legally by paying the duty. But if they have to pay higher duties, they will have to increase prices for consumers,” encouraging illegal importers to bring additional underpriced merchandise.

“What we need to do is build a more competitive local industry and bolster economies of scale,” Rueda continued. “But that is challenging because manufacturing costs in China, India, Bangladesh, Pakistan and Africa are much cheaper.”

Whatever happens, Rueda acknowledged 2021 will be another rocky year for clothing purveyors. “We don’t expect much of a recovery after a major plunge last year,” he said. “Costs have increased a lot. We still have a lot of inventory while fixed costs including retail space rentals, etc., have remained the same.”

Jose Vicente Calad, commercial vice president at Grupo Crystal, which has a full-package exporting enterprise and runs its own private labels, agreed with Rueda, noting that large importers, including itself, will be punished by a measure that won’t necessarily end illegal dumping. “They are not punishing the illegal importers by adding $1.5 per kilo to the legal ones,” Calad said, adding that Crystal is not backing the CCCyA.

“We are not going to support a tax that will distort the market and generate retaliatory measures in the external markets and hurt exporters,” Calad said. “Colombia’s duties are not low.”

Calad said Crystal has many local manufacturing plants, meaning it has a lower import reliance than other Colombian firms or foreign labels such as Zara or Mango, which would suffer from the higher duties.

In his mind, the government heard all the parties’ concerns and came up with the best solution for all involved, Rueda said.

The CCCyA “is not the only institution that should have been considered in the industry’s conversations,” Rueda added. “The government listened to all the parties. Meeting everyone’s needs is utopian.”