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USTR, Dept. of Commerce Offer Update on China Sourcing

Representatives from the U.S. Department of Commerce and the Office of the U.S. Trade Representative (USTR) were on hand at last week’s Sourcing at Magic trade show to respond to growing calls from the industry for relief from China tariffs—and to address questions about new legislation.

In a discussion with attendees, Bill Jackson, Assistant U.S. Trade Representative for Textiles, said that the Uyghur Forced Labor Prevention Act which took effect in June will affect import volumes from China. “I’ve seen some trade data that the imports of cotton-based products from China have gone down simply as a result” of the passage of the legislation, which was signed into law by President Joe Biden in December, he added.

Attendees who source from China expressed concern about how the law could compound the pressure they’re already feeling as a result of the Section 301 tariffs, which have added costs that they said they’ve been forced to pass along to their consumers. Imports from China are now subject to increased scrutiny from CBP, which is examining goods at a fiber level to determine their provenance. Any questions about compliance could result in their being detained under Withhold Release Orders (WRO).

The apparel supply chain has faced logistics hurdles over the past 18 months. Two retail brand owners said that the legislation represents a new source of concern. One asked whether the USTR recommended moving away from China altogether.

“What I would say is that my understanding from conversations with the stakeholders across the spectrum is that I haven’t heard anybody raise their hand and say, ‘I favor forced labor from China,’” he said. “I think it’s in the interest of everyone to try to cleanse the supply chain of forced labor, whether it comes from Xinjiang or anywhere else.” Jackson declined to comment on the possibility that the Section 301 tariffs could be rolled back to mitigate costs to U.S. importers, though recent comments from the Biden administration and calls from Congress indicate that such a solution is under consideration.

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Meanwhile, Jennifer Knight, Deputy Assistant Secretary for Textiles, Consumer Goods, and Materials for the U.S. Department of Commerce, said the agency is working closely with the administration to track and report on the supply chain issues facing American companies. “Because of Commerce’s role as being the face to the private sector in the United States, we’ve kind of become the de facto supply chain agency in the U.S. government,” she said.

U.S. Commerce Secretary Gina Raimondo is the co-chair of President Biden’s Supply Chain Disruption Task Force, which is “looking at what’s happened to our supply chains as a result of Covid, and what short-term things and long-term things can be done to assure supply chain resiliency going forward.” Raimondo also leads the Department’s Advisory Committee on Supply Chain Competitiveness, which calls on business leaders to share their experiences and advise on actions that the government can take to promote a healthier U.S. supply chain. “When Secretary Raimondo came in, she kind of reactivated [the committee] and got some higher quality folks participating, even at the CEO level of some of our biggest corporations,” Knight said. The next meeting will take place Oct. 12.

Complications with offshore sourcing have led to growing interest in nearshoring and the Free Trade Agreements, like Dominican Republic-Central America FTA (CAFTA-DR), that support it. Panel moderator Julia Hughes, president of the U.S. Fashion Industry Association, said that members would like to see the federal government “expand or improve some of the flexibilities” of CAFTA-DR to include more materials and inputs that aren’t available in the U.S. or in the region.

Knight said there’s “definite momentum” to the nearshoring movement, “but this administration does not have the appetite to open up the trade agreement.” The Department of Commerce is focused on encouraging companies to “maximize” their use of CAFTA-DR provisions in their current form, including petitioning to add inputs to a short-supply list if they’re unable to be sourced within the region. “We’d really like to see that more active right now,” she said, noting that the list currently contains 155 products. The Office of Textiles and Apparel (OTEXA) has only received two applications within the past four years, Knight said, with both items in question added to the list. “I’d love to see 50 more products on the list if that enables people to do more production in the region.

“I think early on in the administration, some people were advocating for changes to the rules of origin,” USTR’s Jackson added, noting that such actions would be “politically and procedurally challenging.”

The African Growth and Opportunity Act (AGOA) has also offered diversification options for the textile and apparel industries, but Ethiopia’s removal from the agreement poses new challenges for companies hoping to source from the war-torn country. Jackson said an annual eligibility exercise underway will determine whether Ethiopia will regain AGOA status. “In the last few months of this year, we will be announcing the eligibility of African countries,” he added. “It really depends on what the Ethiopian government can do to address the reasons that led to their suspension in the first place.”