U.S.-China trade agreement a start, by no means is dealing done

The textile and apparel agreement signed by U.S. and Chinese trade officials earlier this month had the snowsports industry breathing a sigh of relief, but left the Outdoor Industry Association scrambling to inform companies that the work was far from over.

The textile and apparel agreement signed by U.S. and Chinese trade officials earlier this month had the snowsports industry breathing a sigh of relief, but left the Outdoor Industry Association scrambling to inform companies that the work was far from over.

The agreement, which expires in December of 2008, stipulates that quotas be assessed against products in nearly three dozen categories, including socks, lightweight synthetic and polyester fiber and man-made fiber trousers. The agreement does not address man-made fiber jackets, nor does it cancel the petition for quotas on those jackets that is currently pending.  

A bit of history
May 18 — The Committee for the Implementation of Textile Agreements (CITA) — a working group led by the U.S. Department of Commerce — commenced a quota at the request of the domestic textiles industries on the import of textiles in several categories, including man-made fiber shirts, cotton and man-made underwear including base layers, and man-made fiber pants and shorts, specifically impacting the importation of ski pants.  

May 27 – Snowsports Industries America (SIA) sends out an “Immediate Action Needed” alert email to members regarding the CITA decision. SIA retained law firm Piper Rudnick Gray Carey to work specifically on getting man-made fiber trousers, as the category relates to the snowsports industry, exempt from quota limits.

July 1 – The SGMA sends out a legislative alert regarding quotas and the potential for harmful impact on the industry. It also provided a website link offering up-to-date status reports on import levels of targeted Chinese apparel at

Mid-July — Quotas were reached and imports from China in the categories of man-made fiber shirts, cotton and man-made underwear including base layers, and man-made fiber pants and shorts, and products have been embargoed, stranding millions of dollars of inventory at ports and on ships.

Aug. 5 – Outdoor Industry Association jumped into the fray, and following a survey of its membership, retained the services of Ron Sarini of Sandler, Travis & Rosenberg, P.A. (ST&R), an international trade and customs law firm. Sarini was the lead textile negotiator for the government under George Bush senior, so his pedigree is considered high.

Aug. 29 – The National Retail Federation issued a statement with a quote from CEO and president Tracy Mullin saying, “None of the safeguards limits that have been imposed since January have been justified. But the fact remains that they have been imposed, and often with little warning, leaving retailers gambling every time they place an order from China that it won’t be declared illegal by the time it is shipped. That’s making it impossible to make long-term business decisions and creating a nightmare for retailers.”

Sept. 21 — OIA sends a letter to James Leonard III, Deputy Assistant Secretary for Textiles and Apparel, which points out, among other things, “Products under these HTS numbers have little or no manufacturing performed in the United States and an increase in Chinese imports has not caused significant market disruption. Their inclusion in the embargoed 647/648 category has not provided substantial benefit to the domestic textile industry, but does unfairly penalize manufacturers and retailers who produce these products in China.”

Oct. 12 – OIA sends out a legislative alert announcement further underscoring the threat to member products in large part due to a new petition filed by the domestic textile industry seeking to reapply quotas on apparel products that were currently embargoed and to apply new quotas on additional apparel items. OIA points out that while the current embargos were due to expire on Dec. 31, 2005, moving the product out of customs was going to be a major headache.

Oct. 24 – SIA sends out a member announcement indicating that CITA would announce a “carve out” (initiated by SIA on behalf of its members) in the man-made fiber trousers category that allowed the release of ski and snowboard pants from an embargo that had stranded millions of outdoor apparel products at port since late summer.  

Nov. 9 – Thanks in large part to the efforts of many, including OIA, SIA and a slew of companies including Cloudveil, GoLite, Cabela’s, Columbia, VF Corp, Malden Mills, W.L. Gore, Helly Hansen, Sierra Designs, REI, EMS and Mountain Gear, CITA makes the “carve out” official. It is a good start, but no where near enough.

Sarini confirmed to SNEWS® that while that “carve out” is included in the trade agreement with China, it does not protect a substantial portion of performance outerwear pants that lack specific design features such as “a floating ski cuff or gaiter inside the garment.”  

Sarini also confirmed that the trade deal also does not exclude man-made fiber jackets from quota in 2006, 2007 or 2008. The only protection for jackets provided in the agreement is a provision that states the U.S. “shall exercise restraint” in assessing future quotas in all product categories not covered by the agreement.

When SNEWS® asked David Ingemie, executive director of SIA, why SIA had not included the OIA or non-member companies in its efforts to achieve a carve out, and why it had opted for such a narrow carve out, we were told, “We were trying to stay under the radar and what we did not want was 10 different groups all trying to go after separate carve outs.”

Nov. 15 – SNEWS® spoke with Brian Cousins, president of Cloudveil, and he told us that his company was just now catching up on a backlog of goods that were embargoed since August. “We did everything we could to speed up production, air freight some product, anything, but we missed the closing of the safeguard by hours, leaving our goods stuck in a bonded warehouse. As a result, we are two months late in shipping impounded pants to our retailers, and fortunately it was only two styles.”

Jeff Johnson, Cabela’s director of merchandising for softlines, told us that the company took a financial hit in the second and third quarter because of impounded merchandise. Worse, he said, is that as a catalog and Internet retailer, the impact of lost sales may not be felt fully for some time.

“We take great pride in having merchandise in stock 92 percent to 95 percent of the time. When we fail to serve a customer, sometimes we lose that customer for a long time, or maybe even for life. There are a lot of downstream costs to that,” said Johnson.

Where do we go from here?
While news releases from a number of organizations, including SIA, have concluded that man-made fiber jackets are now safe from quotas, Sarini tells SNEWS® that the reality is the petition is still under consideration by CITA and future petitions are possible.  

While it is unlikely that CITA would grant the current petition so soon after the signing of the agreement, no formal decision has been announced and there is nothing that precludes the petition from being filed again in the next three years. CITA has until mid-January to announce a decision on the current petition.

OIA and members of its Trade Working Group are traveling to Washington, D.C., in early December to meet with Department of Commerce officials and the U.S. Trade Representative to request a broader “carve out” definition on man-made fiber pants and a permanent rejection of the man-made fibers jackets petition.  

In light of today’s news, with the House narrowly passing a budget reduction package repealing a trade law (the Byrd Ammendment) that compensates domestic firms hurt by undervalued imports — a measure deemed illegal by the World Trade Organization – obtaining a broader “carve out” and permanent rejection of jackets becomes even more critical.

The domestic textile industry has made it very clear it opposes the elimination of the compensation provided by the Byrd Amendment law for goods dumped on the U.S. at prices below market value. The U.S. has distributed more than $1 billion in antidumping duties to companies under Byrd over the last five years. It is expected that China safeguards will be deemed even more important now until they are set to expire in 2008.  

SNEWS® View: SIA deserves credit for taking the lead shortly after the quota restrictions were announced. The carve-out that was achieved is certainly testament to SIA’s efforts on behalf of its membership. The trouble is, many of its members that sell other kinds of pants, still included in the embargo, are now left out in the cold, hoping OIA can manage to expand the carve out definition. Sarini is hopeful, he told us, that an extension of the definition can be added by year’s end.

There is no doubt OIA was late to the game on this one; however, once it got in the game, it got serious in a hurry and, we are told by Washington insiders, that it was OIA’s efforts that were largely responsible for pushing the “carve out” currently in place from a temporary one to a permanent one. Unfortunately, those same insiders tell us that had OIA come to the table earlier, or gotten in the game of its own accord sooner, the “carve out” might have been more in line with what the association is currently seeking, and SIA never saw fit to ask for.